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RBC Bearings Inc. (RBC, USA) has filed a form S-1 with the U.S. Securities and Exchange Commission, announcing its intention to make the company's stock publicly traded via an initial public offering,
RBC operates 16 manufacturing facilities in 3 countries. It manufactures plain bearings, roller bearings, ball bearings, and related specialty products which include precision ball screws and machine tool collets.
While RBC bearings cover a wide variety of designs and applications, the company's business units focus on, "highly technical or regulated bearing products for specialized markets that require sophisticated design, testing and manufacturing capabilities."
Focusing on those highly specialized niche markets, the company said overall, it estimates two-thirds of fiscal 2004's sales were generated by bearings for which it holds the number one or two market position.
RBC operates as four reporting segments, with example target markets given for each:
RBC divides its target markets into three general categories: diversified industrial (62% of FY2004 sales), aerospace (25%), and defense (13%).
Over 60% of RBC's bearing sales are aftermarket and replacement. That position, more profitable than original equipment sales, results in large part from its growing OEM base of specialty applications. As the original supplier for a specialty bearing, particularly in aerospace applications, RBC then becomes the long-term preferred replacement bearing vendor. For example, RBC claims approval for over 32,000 applications, many expected to be in service for several decades.
In its Preliminary Prospectus, RBC said the IPO would raise as much as $144 million, but the company did not publicly reveal how many shares it might offer, or a price range for those shares.
A relatively small, privately-held manufacturer deciding to pursue an IPO is extremely rare in the current regulatory climate -- in fact, virtually all of the effort has been for publicly-traded companies to go private or seek out ways to "go dark," avoiding high costs inherent in being a publicly-traded entity. General Bearing, for example, recently filed to delist, citing the high costs of compliance among other negatives of being publicly traded.
Analysts contacted by eBearing said they believe RBC may have been forced into an IPO by what was termed an "overwhelming" debt load. RBC shoulders over $222 million in debt (or almost $237 million with leases) against only $227 million in projected sales this fiscal year. The most recent nine months' operating income was $22 million, but $14 million went to debt service, leaving only $517,000 net income after taxes and minor adjustments. Shareholder equity stood at negative $14 million as of January 1, 2005.
Further, they point out, RBC has lost money in seven of its last eleven quarters, with only 4Q2003, 4Q2004, and 2Q2005 and 3Q2005 profitable. The grand total net income earned over the past eleven quarters was only $1.2 million.
RBC did say what it would do with at least some of the funds: pay down that $222 million debt. It would repay $38.6 million of 13% Senior Subordinated Discount Debentures due 2009, repay the outstanding balance of its $45 million Second Lien Term Loan, redeem its Class C stock for an unspecified amount, and repurchase 50% of the Class D stock for $4 million.
The Second Lien Term Loan is particularly onerous as it limits RBC's CapEx to under $10 million
| Product Model | Inside Diameter | Outside Diameter | Thickness |
| PASE7/8 bearing | 22.225 | 139.7 | 71.4 |
| PASE3/4 bearing | 19.05 | 130 | 64.3 |