RBC Bearings INC (RBC) FY 2025 MD&A

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The financial and business
analysis below provides information that we believe is relevant to an assessment and understanding of our consolidated financial position,
results of operations and cash flows. This financial and business analysis should be read in conjunction with the consolidated financial
statements and related notes. All references to “Notes” in this Item 7 refer to the “Notes to Consolidated Financial
Statements” included in Item 8 of this Annual Report on Form 10-K.

The following discussion contains statements reflecting
our views about our future performance that constitute “forward-looking statements” within the meaning of the safe harbor
provisions of the U.S. Private Securities Litigation Reform Act of 1995. See the information provided in Part I, Item 1A. “Risk
Factors” of this Annual Report on Form 10-K under the heading “Cautionary Statement as to Forward-Looking Information.”

General

We are a well-known international manufacturer of
highly engineered precision bearings, components and essential systems for the aerospace, defense and industrial industries. Our precision
solutions are integral to the manufacture and operation of most machines and mechanical systems, reduce wear to moving parts, facilitate
proper power transmission, and reduce damage and energy loss caused by friction. While we manufacture products in all major bearing categories,
we focus primarily on the higher end of the bearing market where we believe our value-added manufacturing and engineering capabilities
enable us to differentiate ourselves from our competitors and enhance profitability. We believe our unique expertise has enabled us to
garner leading positions in many of the product markets in which we primarily compete. With 54 facilities in 11 countries, of which 38
are manufacturing facilities, we have been able to significantly broaden our end markets, products, customer base and geographic reach.
We have a fiscal year consisting of 52 or 53 weeks, ending on the Saturday closest to March 31. Based on this policy, fiscal 2025
had 52 weeks and fiscal 2024 had 52 weeks.

We currently operate under two reportable business
segments – Aerospace/Defense and Industrial:

We use gross margin as the primary measurement to
assess the financial performance of each reportable segment. End market and channel sales within our segments are based on internal definitions
and metrics considered by management and are periodically reviewed and updated prospectively. For fiscal year 2024, we estimate approximately
$6.9 of sales classified as industrial distribution for fiscal year 2024 would now be classified as industrial OEM. Fiscal year 2024 was
not recast to reflect this change.

The markets for our products
are cyclical, and we have endeavored to mitigate this cyclicality by entering into single and sole-source relationships and long-term
purchase agreements, through diversification across multiple market segments within the Aerospace/Defense and Industrial segments, by
increasing sales to the aftermarket, and by focusing on developing highly customized solutions.

Currently, our strategy is
built around maintaining our role as a leading manufacturer of highly engineered bearings and precision components through the following
efforts:

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We have demonstrated expertise in acquiring
and integrating bearing and precision engineered component manufacturers that have complementary products or distribution channels and
have provided significant margin enhancement. We have consistently increased the profitability of acquired businesses through a process
of methods and systems improvement coupled with the introduction of complementary and proprietary new products. Since 1992 we have completed
29 acquisitions, which have broadened our end markets, products, customer base and geographic reach.

Outlook

For the fiscal year ended
March 29, 2025, 63.8% of our net sales were attributable to the Industrial segment while the Aerospace/Defense segment contributed 36.2% of our net sales. Our net sales increased 4.9% year over year due to an increase of 14.1% in Aerospace and Defense
segment sales and a 0.2% increase in Industrial segment sales.

Aerospace and Defense segment
sales increased 14.1% year over year. Commercial aerospace increased 13.3%, demonstrating the continued recovery and early stages of a
growth cycle. Defense sales, which represent approximately 32.4% of segment sales during the year, were up 15.9% for the year. Our backlog
in this market is significant and deliveries are expected to continue to grow in the coming years.

Industrial segment sales increase
0.2% year over year, led by a 1.4% increase in distribution and aftermarket sales. Sales to OEMs were down 2.1% year over year,
primarily driven by softness in the energy and semicon markets.

For the fourth quarter
of fiscal 2025, 64.1% of our net sales was attributable to the Industrial segment compared to approximately 35.9% for the
Aerospace/Defense segment. Approximately $191.5 of Industrial segment sales in the fourth quarter of fiscal 2025 were to
distribution and aftermarket compared to approximately $186.8 in the prior year while approximately $88.9 were made directly to OEMs
in the fourth quarter of fiscal 2025 compared to approximately $84.5 in the prior year. Net sales in the Aerospace/Defense segment
increased $14.9, or 10.6%, for the fourth quarter of fiscal 2025 compared to the same period last fiscal year. Commercial aerospace
net sales, which consisted of $85.9 of OEM and $23.3 of distribution and aftermarket, increased by 11.6% compared to the fourth quarter of
fiscal 2024 when OEM net sales were $78.2 and distribution and aftermarket net sales were $19.7. This was driven by a continuing
recovery as build rates and orders grew in the OEM market and aftermarket demand remained strong. Our defense markets net sales,
which consisted of $38.1 of OEM and $10.0 of distribution and aftermarket, increased 8.2% compared to the fourth quarter of
fiscal 2024 when OEM net sales were $34.2 and distribution and aftermarket net sales were $10.3.

The Company forecasts net
sales to be approximately $424.0 to $434.0 in the first quarter of fiscal 2026, compared to $406.3 in the first quarter of fiscal 2025,
which represents a growth rate of 4.4% to 6.8%.

Our backlog as of March 29,
2025 was $940.7 compared to $821.5 as of March 30, 2024. This increase reflects continued growth, most notably in our commercial aerospace
and marine defense end markets

We experienced solid operating cash flow
generation during fiscal 2025 (as discussed in the “Liquidity and Capital Resources” section below). We believe that operating
cash flows and available credit under our revolving bank credit facilities will provide adequate resources to fund internal growth initiatives
for the foreseeable future, including at least the next 12 months. As of March 29, 2025, we had cash of $36.8, of which, $23.7 was cash
held by our foreign operations.

Sources of Revenue

A contract with a customer
exists when there is commitment and approval from both parties involved, the rights of the parties are identified, payment terms are defined,
the contract has commercial substance and collectability of consideration is probable. The Company has determined that the contract with
the customer is established when the customer purchase order is accepted or acknowledged. Long-term agreements (“LTAs”) are
used by the Company and certain of its customers to reduce their supply uncertainty for a period of time, typically multiple years. While
these LTAs define commercial terms including pricing, termination rights and other contractual requirements, they do not represent the
contract with the customer for revenue recognition purposes.

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Approximately 98% of the Company’s
revenue was generated from the sale of products to customers in the Industrial and Aerospace/Defense markets for each of the years ended
March 29, 2025 and March 30, 2024. The remaining 2% of the Company’s revenue for each of the last two fiscal years was derived from
services performed for customers, which included repair and refurbishment work performed on customer-controlled assets as well as design
and test work.

Refer to Note 2 for further
discussion regarding the Company’s revenue policy.

Cost of Sales

Cost of sales includes employee
compensation and benefits, raw materials, outside processing, depreciation of manufacturing machinery and equipment, supplies and manufacturing
overhead.

Less than half of our factory
costs, depending on product mix, are attributable to raw materials, purchased components and outside processing. When we experience raw
material inflation, we attempt to offset these cost increases by changing our buying patterns, expanding our vendor network and passing
through price increases when possible. Although we experienced cost inflation on raw material, labor and overhead for this fiscal year,
we were able to mitigate it through pricing and strategic sourcing efforts.

We monitor gross margin performance
through a process of monthly operation reviews with all our divisions. We develop new products to target certain markets allied to our
strategies by first understanding volume levels and product pricing and then constructing manufacturing strategies to achieve defined
margin objectives. We only pursue product lines where we believe that the developed manufacturing process will yield the targeted margins.
Management monitors gross margins of all product lines on a monthly basis to determine which manufacturing processes or prices should
be adjusted.

Fiscal 2025 Compared to Fiscal 2024

Results of Operations

(amounts in millions, except share and per
share data)

Net sales for the fiscal
year ended March 29, 2025 increased $76.0, or 4.9%, compared to fiscal 2024. This increase was the result of a 0.2% increase in our
Industrial segment, while net sales in our Aerospace/Defense segment increased 14.1% year over year. Industrial segment sales experienced the strongest contribution to
growth in the metals and mining, warehousing and logistics, and food and beverage markets. Within Aerospace/Defense, total commercial
aerospace net sales increased 13.3% and defense net sales increased 15.9% year over year. The commercial aerospace increase reflects the
continued recovery in the market over the last year.

Net income attributable to
common stockholders increased by $46.9 to $233.8 for fiscal 2025 compared to fiscal 2024. The net income attributable to common stockholders
of $233.8 in fiscal 2025 was impacted by $1.5 of restructuring and consolidation charges, $59.8 of interest expense, $12.4 of
preferred stock dividends, and $65.7 of income tax expense. The net income attributable to common stockholders of $186.9 in fiscal 2024
was impacted by $3.0 of restructuring and consolidation charges, $78.7 of interest expense, $23.0 of preferred stock dividends,
and $51.9 of income tax expense.

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Gross Margin

Gross margin was 44.4%
of sales for fiscal 2025 compared to 43.0% for the same period last year. Gross margin of $670.5 in fiscal 2024 included $0.3 of
inventory rationalization costs associated with consolidation efforts at one of our facilities located in California. The expansion
in margin during fiscal 2025 reflects the combination of product mix, pricing and continued cost efficiencies and synergies achieved
through integration.

Selling, General and Administrative

SG&A expenses increased
by $25.8 to $279.3 for fiscal 2025 compared to fiscal 2024. The increase in SG&A was primarily driven by personnel costs, IT costs
and other professional fees.

Other, Net

Other operating expenses for
fiscal 2025 totaled $76.9 compared to $74.8 for fiscal 2024. For fiscal 2025, other operating costs consisted primarily of $71.8 of amortization
expense, $1.5 of plant consolidation and restructuring costs, $1.2 of bad debt expense and $2.4 of other items. For fiscal 2024, other
operating expenses consisted primarily of $70.4 of amortization expense, $2.7 of plant consolidation and restructuring costs, $0.2 of
bad debt expense, $0.3 of acquisition costs, $0.6 of losses on disposal of assets, and $0.6 of other items.

Interest Expense, Net

Interest expense, net, consists
of interest charged on the Company’s debt agreements and amortization of deferred financing fees, offset by interest income. Interest
expense, net was $59.8 for fiscal 2025 compared to $78.7 for fiscal 2024. The decrease in interest expense is primarily related to our
debt reduction efforts, as well as the Interest Rate Swap and the Cross Currency Swap, which have enabled us to manage interest costs.

Other Non-Operating (Income)/Expense

Other non-operating income
for fiscal 2025 totaled $1.8, consisting primarily of a $4.0 legal settlement partially offset by post-retirement benefit costs and foreign
exchange gains and losses. Non-operating costs incurred during fiscal 2024 were $1.7, consisting primarily of post-retirement benefit
costs.

Income Taxes

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Income tax expense for fiscal
2025 was $65.7 compared to $51.9 for fiscal 2024. Our effective income tax rate for fiscal 2025 was 21.1% compared to 19.8% for fiscal
2024. The effective income tax rates are different from the U.S. statutory rate due to the U.S. credits for increasing research activities
and foreign-derived intangible income provision, which decrease the rate, and differences in foreign and state income taxes, which increase
the rate. The effective income tax rate for fiscal 2025 of 21.1% included discrete items totaling a benefit of $7.6 which is substantially
related to a benefit associated with stock-based compensation, a reduction in unrecognized tax benefits due to the expiration of the statute
of limitations, and benefits related to the release of a valuation allowance and an adjustment related to state remeasurements. The effective
income tax rate for fiscal 2025 without these discrete items would have been 23.5%. The effective income tax rate for fiscal 2024 of 19.8%
included discrete items totaling a benefit of $8.2 which is substantially related to a benefit associated with stock-based compensation,
a reduction in unrecognized tax benefits due to the expiration of the statute of limitations, and the accrual of deferred tax assets related
to state tax modifications. The effective income tax rate for fiscal 2024 without these discrete items would have been 22.9%.

Global Minimum Tax

In October 2021, the Organisation
for Economic Co-operation and Development (“OECD”) announced an Inclusive Framework on Base Erosion and Profit Shifting including
Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large multinational corporations at a minimum
rate of 15%. Subsequently multiple sets of administrative guidance have been issued. Many non-US tax jurisdictions have either recently
enacted legislation to adopt certain components of the Pillar Two Model Rules beginning in 2024 with the adoption of additional components
in later years or announced their plans to enact legislation in future years. The Company has performed an assessment of the potential
impact to its income taxes as a result of Pillar Two. Based on the results of the assessment, the Company believes that it can avail itself
of the transitional safe harbor rules in all jurisdictions in which the Company operates. We will continue to monitor both the U.S. and
international legislative developments related to Pillar Two to assess for any potential impacts. We are continuing to evaluate the impacts
of enacted legislation and pending legislation to enact Pillar Two Model Rules in the non-US tax jurisdictions in which we operate.

Segment Information

We report our financial results
under two operating segments: Aerospace/Defense and Industrial. We use gross margin as the primary measurement to assess the financial
performance of each reportable segment.

Aerospace/Defense Segment:

Net sales increased
$73.4, or 14.1%, for fiscal 2025 compared to fiscal 2024. Commercial aerospace net sales, which consisted of $317.8 of OEM and $83.1 of
distribution and aftermarket, increased by 13.3% compared to fiscal 2024 when OEM net sales were $278.5 and distribution and
aftermarket net sales were $75.3. This was driven by a continuing recovery as build rates and orders grew in the OEM markets
and aftermarket demand remained strong. Our defense markets net sales, which consisted of $146.3 of OEM and $45.6 of distribution and
aftermarket, increased by 15.9% compared to fiscal 2024 when OEM net sales were $135.3 and distribution and aftermarket net sales
were $30.3.

Our backlog and recent
results reflect continued growth in demand which we expect to continue in upcoming quarters. Our defense markets, which represented
about 32.4% of sales, increased by approximately 15.9% during the period, driven by increased sales and order volume in the marine, fixed wing, and missiles and guided munitions end markets. Distribution and aftermarket sales, which represent 21.7% of segment sales, were up 21.7% year
over year.

Gross margin was $243.1,
or 41.0% of net sales, in fiscal 2025 compared to $208.8, or 40.2% of sales, for the same period in fiscal 2024. We anticipate
additional margin expansion in the upcoming year as the growing orders for commercial products are expected to increase volumes
flowing through our manufacturing facilities driving cost efficiencies.

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Industrial Segment:

Net sales increased $2.6,
or 0.2%, during fiscal 2025 compared to the same period last year. The continued strong performance was driven by the mining and general
industrial markets. Sales to distribution and the aftermarket were $717.4 in fiscal 2025 compared to $707.6 in the prior year, a 1.4%
year over year increase. OEM sales were $326.1 for fiscal 2025 compared to $333.3 in the prior year. The 2.1% decrease in OEM sales compared
to the prior year was primarily due to softness in the machinery, oil and gas, and semiconductor equipment end markets.

Gross margin was $483.0, or
46.3% of net sales, in fiscal 2025 compared to $461.7, or 44.4% of sales, for the same period in fiscal 2024. The expansion in margin
year over year was attributable to manufacturing efficiencies and product mix.

Corporate:

Corporate SG&A for
fiscal 2025 increased $17.3 or 20.8% compared to fiscal 2024 due to increased spending in IT and personnel-related
costs. As a percentage of net sales, Corporate SG&A was relatively flat year over year.

Liquidity and Capital Resources

Our business is capital-intensive.
Our capital requirements include manufacturing equipment and materials. In addition, we have historically fueled our growth, in part,
through acquisitions. We have historically met our working capital, capital expenditure requirements and acquisition funding needs through
our net cash flows provided by operations, various debt arrangements and sale of equity to investors. We believe that operating cash flows
and available credit under our revolving bank credit facilities will provide adequate resources to fund internal growth initiatives for
the foreseeable future.

Our ability to meet future
working capital, capital expenditures and debt service requirements will depend on our future financial performance, which will be affected
by a range of economic, competitive and business factors, particularly interest rates, cyclical changes in our end markets and prices
for steel and our ability to pass through price increases on a timely basis, many of which are outside of our control. In addition, future
acquisitions could have a significant impact on our liquidity position and our need for additional funds.

From time to time, we evaluate
our existing facilities and operations and their strategic importance to us. If we determine that a given facility or operation does not
have future strategic importance, we may sell, relocate, consolidate or otherwise dispose of those operations. Although we believe our
operations would not be materially impaired by such dispositions, relocations or consolidations, we could incur significant cash or non-cash
charges in connection with them.

Liquidity

As of March 29, 2025, we
had cash of $36.8, of which, approximately $23.7 was cash held by our foreign operations. We expect that our undistributed foreign
earnings will be re-invested indefinitely for working capital, internal growth and acquisitions for and by our foreign subsidiaries,
with the exception of our Canadian operations as there are no current plans to expand on the sales operations within that jurisdiction. As discussed in further detail below, we also have the ability to borrow money from
our existing credit facilities.

Domestic Credit Facility

In fiscal 2022, RBC Bearings
Incorporated, our top holding company, and our Roller Bearing Company of America, Inc. subsidiary (“RBCA”) entered into a
Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association (“Wells Fargo”), as Administrative
Agent, Collateral Agent, Swingline Lender and Letter of Credit Issuer and the other lenders party thereto. The Credit Agreement provides
the Company with (a) a $1,300.0 term loan (the “Term Loan”), which was used to fund a portion of the cash purchase price for
the acquisition of Dodge Industrial and to pay related fees and expenses, and (b) a $500.0 revolving credit facility (the “Revolving
Credit Facility” and together with the Term Loan, the “Facilities”). Debt issuance costs associated with the Credit
Agreement totaled $14.9 and are being amortized over the life of the Credit Agreement.

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Amounts outstanding under
the Facilities generally bear interest at either, at the Company’s option, (a) a base rate determined by reference to the higher
of (i) Wells Fargo’s prime lending rate, (ii) the federal funds effective rate plus 0.50% and (iii) Term SOFR (as defined in the
Credit Agreement based on SOFR, the secured overnight financing rate administered by the Federal Reserve Bank of New York) plus 1.00%
or (b) Term SOFR plus a credit spread adjustment of 0.10% plus a margin ranging from 0.75% to 2.00% depending on the Company’s consolidated
ratio of total net debt to consolidated EBITDA (as defined within the Credit Agreement) from time to time. The Facilities are subject
to a SOFR floor of 0.00%. As of March 29, 2025, the Company’s margin was 1.00% for SOFR loans, the commitment fee rate was 0.175%,
and the letter of credit fee rate was 1.00%. A portion of the Term Loan is subject to a fixed-rate interest swap as discussed in Note
12.

The Term Loan matures in November
2026 and amortizes in quarterly installments with the balance payable on the maturity date. The Company can elect to prepay some or all
of the outstanding balance from time to time without penalty, which will offset future quarterly amortization installments. Due to prepayments
previously made, the required future principal payments on the Term Loan are $0 for fiscal 2026 and $413.0 for fiscal 2027. The Revolving
Credit Facility expires in November 2026, at which time all amounts outstanding under the Revolving Credit Facility will be payable.

The Credit Agreement requires
the Company to comply with various covenants, including the following financial covenants: (a) a maximum Total Net Leverage Ratio (as
defined within the Credit Agreement) of 5.00:1.00, which maximum Total Net Leverage Ratio shall decrease during certain subsequent test
periods as set forth in the Credit Agreement (provided that, no more than once during the term of the Facilities, such maximum ratio applicable
at such time may be increased by the Company by 0.50:1.00 for a period of twelve (12) months after the consummation of a material acquisition);
and (b) a minimum Interest Coverage Ratio of 2.00:1.00. As of March 29, 2025 the Company was in compliance with all debt covenants.

The Credit Agreement allows
the Company to, among other things, make distributions to stockholders, repurchase its stock, incur other debt or liens, or acquire or
dispose of assets provided that the Company complies with certain requirements and limitations of the Credit Agreement.

The Company’s domestic
subsidiaries have guaranteed the Company’s obligations under the Credit Agreement, and the Company’s obligations and the domestic
subsidiaries’ guaranty are secured by a pledge of substantially all of the assets of the Company and its domestic subsidiaries.

As of March 29, 2025, $413.0 was outstanding
under the Term Loan, $5.0 was outstanding under the Revolving Credit Facility and $3.7 of the Revolving Credit Facility was being utilized
to provide letters of credit to secure the Company’s obligations relating to certain insurance programs. The Company had the ability
to borrow up to an additional $491.3 under the Revolving Credit Facility as of March 29, 2025.

Senior Notes

In fiscal 2022, RBCA issued
$500.0 aggregate principal amount of 4.375% Senior Notes due 2029 (the “Senior Notes”). The net proceeds from the issuance
of the Senior Notes were approximately $492.0, after deducting initial purchasers’ discounts and commissions and offering expenses,
and were used to fund a portion of the purchase price for the acquisition of Dodge.

The Senior Notes were issued
pursuant to an indenture with Wilmington Trust, National Association, as trustee (the “Indenture”). The Indenture contains
covenants limiting the ability of the Company to (i) incur additional indebtedness or guarantee indebtedness, (ii) declare or pay dividends,
redeem stock or make other distributions to stockholders, (iii) make investments, (iv) create liens or use assets as security in other
transactions, (v) merge or consolidate, or sell, transfer, lease or dispose of substantially all of its assets, (vi) enter into transactions
with affiliates, and (vii) sell or transfer certain assets. These covenants contain various exceptions, limitations and qualifications.
At any time that the Senior Notes are rated investment grade, certain of these covenants will be suspended.

The Senior Notes are guaranteed
jointly and severally on a senior unsecured basis by RBC Bearings and certain of RBCA’s existing and future wholly-owned domestic
subsidiaries that also guarantee the Credit Agreement.

Interest on the Senior Notes
accrues at a rate of 4.375% and is payable semi–annually in cash in arrears on April 15 and October 15 of each year.

The Senior Notes will mature
on October 15, 2029. The Company may redeem some or all of the Senior Notes at any time on or after October 15, 2024 at the redemption
prices set forth in the Indenture, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. The Company may also
redeem up to 40% of the Senior Notes using the proceeds of certain equity offerings completed before October 15, 2024, at a redemption
price equal to 104.375% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.
If the Company sells certain of its assets or experiences specific kinds of changes in control, the Company must offer to purchase the
Senior Notes.

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Foreign Borrowing Arrangements

One of our foreign subsidiaries,
Schaublin SA, has a CHF 5.0 (approximately $5.5 USD) credit line (the “Foreign Credit Line”) with Credit Suisse (Switzerland)
Ltd. to provide future working capital, if necessary. As of March 29, 2025, $0.1 was being utilized to provide a bank guarantee. Fees
associated with the Foreign Credit Line are nominal.

In July 2024, Swiss Tool Systems,
one of our foreign subsidiaries, purchased the building where it operates for CHF 7.1 (approximately $8.4 USD) and took out a 10-year
fixed-rate mortgage on the building for CHF 4.0 (approximately $4.5 USD).

Interest Rate Swap

In fiscal 2023, the Company
entered into a three-year U.S. dollar-denominated interest rate swap (“the Interest Rate Swap”) from a third-party financial
counterparty under the Credit Agreement. The Interest Rate Swap was executed to protect the Company from interest rate volatility on our
variable-rate Term Loan. The Interest Rate Swap became effective December 30, 2022 and is comprised of a $600.0 notional with a maturity
of three years. We receive a variable rate based on one-month Term SOFR and pay a fixed rate of 4.455%. The notional on the Interest Rate
Swap will amortize as follows:

Year 1: $600.0

Year 2: $400.0

Year 3: $100.0

The Interest Rate Swap has
been designated as a cash flow hedge of the variability of the first unhedged interest payments (the hedged transactions) paid over the
hedging relationship’s specified time period of three years attributable to the borrowing’s contractually specified interest
index on the hedged principal of its general borrowing program or replacement or refinancing thereof.

Cross Currency Swap

The Company is exposed to foreign
exchange rate fluctuations as some of our subsidiaries operate in various countries.

On August 12, 2024, the Company
entered into the Cross Currency Swap with a third-party financial counterparty. The objective of the Cross Currency Swap is to economically
hedge the Company’s net investment in its lower-tier European subsidiary, Schaublin, against adverse changes in the Swiss franc/U.S.
dollar exchange rate. The Cross Currency Swap is based upon a net investment of CHF 69.4 ($80.0 USD) notional amount with a three-year
maturity date. RBC receives a fixed U.S. dollar amount on a month-to-month basis based upon a fixed annual rate of 2.77% of the notional
amount. At maturity, RBC will net-settle the principal of the Cross Currency Swap in cash with the counterparty. The Cross Currency Swap
has been designated as a net investment hedge on an after-tax basis.

Preferred Stock

Prior to October 15, 2024,
the Company had outstanding 4,600,000 shares of 5.00% Series A Mandatory Convertible Preferred Stock (“MCPS”) to which we
paid a quarterly dividend aggregating $5.75, but on that date each then-outstanding share of the MCPS converted into 0.4413 shares of
common stock, resulting in the retirement of the MCPS and the issuance of 2,029,955 shares of common stock. Because the MCPS is no longer
outstanding, the Company will not pay MCPS dividends in the future, resulting in a cash savings of $23.0 per year.

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Cash Flows

Fiscal 2025 Compared to Fiscal 2024

The following table summarizes our cash
flow activities:

During fiscal 2025, we generated
cash of $293.6 from operating activities compared to $274.7 for fiscal 2024. The increase of $18.9 was mainly the result of a $36.3 increase
in net income partially offset by a $6.2 unfavorable change in non-cash activity and net unfavorable change in operating assets and liabilities
of $11.2. The unfavorable change in operating assets and liabilities is detailed in the table below. The change in non-cash activity was
primarily driven by $0.7 more depreciation and amortization and $11.0 more stock-based compensation partially offset by $0.6 less amortization
of deferred financing costs, a $14.5 unfavorable change in deferred taxes, $0.5 less non-cash operating lease expense, $0.2 less losses
on the disposition of assets, and $2.1 less in restructuring and other non-cash charges.

The following chart summarizes
the impact on cash flow from operating assets and liabilities for fiscal 2025 versus fiscal 2024.

During fiscal 2025, we used
$49.8 for investing activities as compared to $52.2 for fiscal 2024. This decrease in cash used was primarily attributable to $19.3 less
cash used for acquisitions in fiscal 2025. This was partially offset by $16.6 more capital expenditures and $0.3 less proceeds from the
sale of assets in fiscal 2025 compared to fiscal 2024.

During fiscal 2025, we
used cash of $270.4 for financing activities compared to $223.5 in fiscal 2024. This change was primarily due to $82.4 more
repayments on our revolving credit facilities and $37.0 more repayments on the Term Loan partially offset by $46.7 more proceeds
from our revolving credit facilities, $14.5 more proceeds from the exercise of employee stock options, $4.5 proceeds from a mortgage,
and $5.8 less preferred stock dividends paid.

Capital Expenditures

Our capital expenditures in
fiscal 2025 were $49.8 compared to $33.2 in fiscal 2024. We expect to make capital expenditures of approximately 3.0% to 3.5% of net sales
during fiscal 2026 in connection with our existing business. We funded our fiscal 2025 capital expenditures, and expect to fund fiscal
2026 capital expenditures, principally through existing cash and internally generated funds. We may also make substantial additional capital
expenditures in connection with acquisitions.

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Critical Accounting Policies and Estimates

Our discussion and analysis
of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in
accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates
and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets
and liabilities. We evaluate our estimates on an on-going basis. Estimates are used for, but not limited to, the accounting for the allowance
for credit losses, valuation of inventories, goodwill and intangible assets, depreciation and amortization, income taxes and tax reserves,
the valuation of options and the valuation of business combinations. We base our estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from other sources. We believe our judgments related to these
accounting estimates are appropriate. Actual results may differ from these estimates under different assumptions or conditions.

Revenue Recognition.
The performance obligations for the majority of RBC’s product sales are satisfied at the point in time in which the products are
shipped. The Company has determined that the customer obtains control upon shipment of the product based on the shipping terms (i.e. when
it ships from RBC’s dock or when the product arrives at the customer’s dock) and recognizes revenue when control has transferred
to the customer. Once a customer has obtained control, the customer is able to direct the use of, and obtain substantially all of the
remaining benefits from, the asset. Approximately 98% of the Company’s revenue was recognized in this manner based on sales for
the fiscal years ended March 29, 2025 and March 30, 2024.

Inventory. Inventory
is stated at the lower of cost or net realizable value. Cost is determined by the first-in, first-out method. We account for inventory
under a full absorption method. We record adjustments to the value of inventory based upon past sales history and forecasted plans to
sell our inventories. The physical condition, including age and quality, of the inventories is also considered in establishing its valuation.
These adjustments are estimates, which could vary significantly, either favorably or unfavorably, from actual requirements if future economic
conditions, customer inventory levels or competitive conditions differ from our expectations.

Goodwill and Indefinite-Lived
Intangible Assets. Goodwill (representing the excess of the amount paid to acquire a company over the estimated fair value of the
net assets acquired) and indefinite-lived intangible assets are not amortized but instead are tested for impairment annually, or when
events or circumstances indicate that the carrying value of such asset may not be recoverable. Separate tests are performed for goodwill
and indefinite lived intangible assets. The Company performs the annual impairment testing during the fourth quarter of each fiscal year.
We completed a quantitative test of impairment on the indefinite lived intangible assets with no impairment noted in fiscal year 2025.
The determination of any goodwill impairment is made at the reporting unit level. The Company determines the fair value of a reporting
unit and compares it to its carrying amount. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss is
recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. The Company applies the income approach
(discounted cash flow method) in testing goodwill for impairment. The key assumption used in the discounted cash flow method used to estimate
fair value is gross margin, which is affected by expectations about future market or economic conditions. The fair value of the reporting
units exceeds the carrying value by a minimum of 13.8% at each of the two reporting units. Assuming no growth in gross margin within the
model would not result in impairment of goodwill for any of our reporting units. Although no changes are expected, if the actual results
of the Company are less favorable than the assumptions the Company makes regarding estimated cash flows, the Company may be required to
record an impairment charge in the future.

Valuation of Business Combinations.
We allocate the amounts we pay for each acquisition to the assets we acquire and liabilities we assume based on their estimated fair values
at the date of acquisition, including identifiable intangible assets, which either arise from a contractual or legal right or are separable
from goodwill. We base the fair value of identifiable intangible assets acquired in a business combination on detailed valuations which
are prepared with the assistance of a specialist and consider our best estimates of inputs and assumptions that a market participant would
use. We utilize a specialist for these valuations due to the complexity and estimation uncertainty involved in determining the fair value
given the significant assumptions involved. Significant assumptions utilized in the valuation models include discount rates, revenue growth
rates and EBITDA margins. We allocate to goodwill any excess purchase price over the fair value of the net tangible and identifiable intangible
assets acquired. Transaction costs associated with these acquisitions are expensed as incurred through other, net on the consolidated
statements of operations.

Income Taxes. As part of the process
of preparing the consolidated financial statements, we are required to estimate the income taxes in each jurisdiction in which we operate.
This process involves estimating the actual current tax liabilities together with assessing temporary differences resulting from the differing
treatment of items for tax and financial reporting purposes. These differences result in deferred tax assets and liabilities, which are
included in the consolidated balance sheets. We must then assess the likelihood that the deferred tax assets will be recovered, and to
the extent that we believe that recovery is not more than likely, we are required to establish a valuation allowance. If a valuation allowance
is established or increased during any period, we are required to include this amount as an expense within the tax provision in the consolidated
statements of operations. Significant judgment is required in determining our provision for income taxes, deferred tax assets and liabilities,
accrual for uncertain tax positions and any valuation allowance recognized against net deferred tax assets.

28

Recent Accounting Pronouncements

For a discussion of recent
accounting pronouncements, refer to Note 2.

Off-Balance Sheet Arrangements

The Company has $3.7 of outstanding
standby letters of credit, all of which are under the Revolving Credit Facility. We had no significant off-balance sheet arrangements
as of March 29, 2025.