RBC Bearings INC (RBC) FY 2023 MD&A

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

The financial and business
analysis below provides information which 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.”

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General

We are a well-known international
manufacturer of highly engineered precision bearings, components and essential systems for the industrial, defense and aerospace 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 52 facilities in 10 countries,
of which 37 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
year 2023 had 52 weeks and fiscal year 2022 had 52 weeks. We currently operate under two reportable business segments – Aerospace/Defense
and Industrial:

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:

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 27 acquisitions, which have broadened our end markets, products, customer base and geographic reach.

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Outlook

Our net sales increased
55.8% year over year due to an increase of 85.0% in Industrial segment sales and an increase of 12.8% in Aerospace and Defense
segment sales. Approximately $743.1 of the Industrial segment sales were from the Dodge business. Excluding those sales, Industrial
segment sales increased 9.8% year over year, reflecting sustained growth across many different areas, including in the
semiconductor, energy, mining, and the general industrial markets.

Aerospace and Defense segment
sales increased 12.8% year over year. Commercial aerospace increased 25.4%, reliably demonstrating the continued recovery and early stages
of a growth cycle that we anticipate to continue into the next fiscal year. Defense sales, which represent approximately 31.8% of segment
sales during the year, were down more than 7.0% for the year. Defense sales were negatively impacted by the timing of shipments associated
with our marine business. This is not expected to continue, as our backlog in this end market is significant and deliveries are expected
to accelerate in the coming years.

For the fiscal year
ended April 1, 2023, approximately 70.7% of our net sales were attributable to the Industrial segment while the Aerospace/Defense
segment contributed approximately 29.3% of our net sales. For the fourth quarter of fiscal 2023, approximately 69.1% of our net
sales were attributable to the Industrial segment compared to approximately 30.9% for the Aerospace/Defense segment. Approximately
68.1% of Industrial segment sales in the fourth quarter were to distribution and aftermarket while approximately 31.9% were made
directly to OEMs. Approximately 28.3% of our Aerospace/Defense segment sales were to the defense market in the fourth quarter of fiscal 2023. The Company expects net
sales to be approximately $380.0 to $390.0 in the first quarter of fiscal 2024, compared to $354.1 in the first quarter of fiscal
2023, which represents a growth rate of 7.3% to 10.1%.

We ended fiscal 2023 with
a backlog of $663.8 compared to $603.1 for the same period last year, representing a 10.1% increase year over year. This increase reflects
the continued growth in all of our end markets, especially in our commercial aerospace and marine defense end markets.

We experienced solid operating
cash flow generation during fiscal 2023 (as discussed in the section “Liquidity and Capital Resources” below). We believe
that operating cash flows and available credit under the Revolving Credit Facility and New Foreign Revolver will provide adequate resources
to fund internal growth initiatives for the foreseeable future, including at least the next 12 months. For further discussion regarding
the funding of the Dodge acquisition, refer to Part II, Item 8 – Notes 9, 12 and 17. As of April 1, 2023, we had cash and cash
equivalents of $65.4, of which, approximately $34.0 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.

Approximately 98% and 97%
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 April 1, 2023 and April 2, 2022, respectively. During fiscal 2023, approximately 2% of the Company’s revenue
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, compared to approximately 3% for fiscal 2022.

Refer to Note 2 – “Summary
of Significant Accounting Policies” 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.

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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 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 2023 Compared to Fiscal 2022

Results of Operations

(dollars in millions)

Net sales for the fiscal year
ended April 1, 2023 increased $526.4, or 55.8%, for fiscal 2023 compared to fiscal 2022. This increase in net sales was the result of
an 85.0% increase in our Industrial segment, while sales in our Aerospace/Defense segment increased 12.8% year over year. Included in
the increase in our Industrial segment was the impact of the Dodge acquisition, which contributed $743.1 of sales during the year. Excluding
the impact of Dodge, total net sales increased 11.5%, and Industrial sales increased 9.8% year over year. The increase in Industrial segment
sales reflects a pattern of sustained growth during the year, led by results in semiconductor, mining, energy, and general industrial
markets. Within Aerospace/Defense, total commercial aerospace increased 25.4% and defense decreased 7.1% year over year. The commercial
aerospace increase reflects the recovery in the market over the last year, and the start of a growth cycle as aircraft build rates at
large OEMs escalate in coming years.

Net income attributable to common stockholders
increased by $101.1 to $143.8 for fiscal 2023 compared to fiscal 2022. The net income attributable to common stockholders of $143.8 in
fiscal 2023 was impacted by $8.8 of transition service agreement (TSA) costs associated with the Dodge acquisition, $2.7 of restructuring
and consolidation charges incurred at some of our plants located in South Carolina, $76.7 of interest expense, $22.9 of preferred stock
dividends and $43.0 of income tax expense. The net income attributable to common stockholders of $42.7 in fiscal 2022 was impacted by
$13.8 of inventory purchase accounting adjustments associated with the Dodge acquisition, $30.6 of other costs associated with the Dodge
acquisition, $41.5 of interest expense, $12.0 of preferred stock dividends and $24.0 of income tax expense.

Gross Margin

Gross margin was 41.2% of sales for fiscal 2023
compared to 37.9% for the same period last year. Gross margin during fiscal 2023 included $0.2 of inventory rationalization costs associated
with consolidation efforts at one of our facilities located in South Carolina. Gross margin in fiscal 2022 included the unfavorable impact
of $13.8 of purchase accounting adjustments associated with the Dodge acquisition and $0.9 of other inventory rationalization costs associated
with consolidation efforts at one of our facilities. The expansion in margin during fiscal 2023 reflects the combination of continued
cost efficiencies achieved through integration, product mix, pricing and the ability to maintain appropriate pricing levels while facing
an inflationary environment both as it relates to manufacturing costs and human capital.

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Selling, General and Administrative

SG&A expenses increased
by $62.1 to $229.7 for fiscal 2023 compared to fiscal 2022. Included in the fiscal 2023 result is $97.9 of costs from the Dodge business,
while fiscal 2022 only included five months of costs. As a percentage of sales, SG&A decreased more than 200 basis points, which was
driven by efficiencies achieved through the integration of Dodge as well as a decrease of $18.9 of stock-based compensation year over
year.

Other, Net

Other operating expenses
for fiscal 2023 totaled $82.1 compared to $68.4 for fiscal 2022. For fiscal 2023, other operating expenses were comprised of $8.9 of
TSA costs and other costs associated with the Dodge acquisition, $69.1 of amortization expense, $2.5 of plant consolidation and
restructuring costs, $0.8 of bad debt expense, $0.3 of asset impairments, $0.3 of losses on disposal of assets, and $0.2 of other
items. For fiscal 2022, other operating expenses were comprised of $30.6 of costs associated with the Dodge acquisition, $34.7 of
amortization expense, $1.1 of plant consolidation and restructuring costs, $0.5 of bad debt expense, $0.3 of losses on disposal of
assets, and $1.2 of other items.

Interest Expense, Net

Interest expense, net, generally
consists of interest charged on our debt and amortization of debt issuance costs offset by interest income (see “Liquidity and
Capital Resources – Liquidity” below). Interest expense, net was $76.7 for fiscal 2023 compared to $41.5 for fiscal 2022.
This included amortization of debt issuance costs of $7.2 for fiscal 2023 and $18.9 for fiscal 2022. Included in the debt issuance cost
amortization in fiscal 2022 was $16.6 associated with the fees for a $2,800.0 bridge commitment obtained in connection with the Dodge
acquisition. The increase in interest expense is primarily attributable to the Company now having a full twelve months of interest expense
associated with the financing secured to acquire Dodge on November 1, 2021 as well as the impact of rising interest rates over the last
twelve months.

Other Non-Operating Expense

Other non-operating
expense for fiscal 2023 totaled $6.6, consisting primarily of costs associated with post-retirement benefit plans led by a $4.3
settlement loss related to the derecognition of $15.6 of pension liabilities and $15.6 of pension assets resulting from an annuity
contract executed in March 2023. Refer to Part II, Item 8, Note 15 for further details of this transaction.

Income Taxes

Income tax expense for
fiscal 2023 was $43.0 compared to $24.0 for fiscal 2022. Our effective income tax rate for fiscal 2023 was 20.5% compared to 30.5%
for fiscal 2022. 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. Further, in fiscal 2022, the effective tax rate was negatively impacted by tax impacts
associated with acquisition costs and increases in tax reserves associated with Section 162(m) of the Internal Revenue Code. The
effective income tax rate for fiscal 2023 of 20.5% included discrete items of $5.1 of benefit comprised substantially of a benefit
associated with stock-based compensation and a reduction in unrecognized tax benefits partially due to the expiration of the
statute of limitations. The effective income tax rate for fiscal 2023 without these discrete items would have been 22.9%. The effective income
tax rate for fiscal 2022 of 30.5% included discrete items of $1.5 benefit which are comprised substantially of a benefit associated
with stock-based compensation and unrecognized tax benefits associated with the expiration of statutes of limitations, partially
offset by tax expense arising from an increase in the valuation allowance on a capital loss carryforward. The effective income tax
rate for fiscal 2022 without these discrete items would have been 32.4%.

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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 $48.8,
or 12.8%, for fiscal 2023 compared to fiscal 2022. Commercial aerospace increased 25.4% year over year. Commercial
aerospace OEM sales increased 25.2% while commercial distribution and aftermarket increased approximately 26.0% year over year. During
the year, we saw improvement in the sales and orders to our commercial aerospace customers as aircraft build rates continued to grow.
Our backlog and recent results reflect the early stages of this process which we expect to continue to see in upcoming quarters. Our
defense markets, which represented about 31.8% of sales, decreased by approximately 7.1% during the period. Orders in the defense end
market have been steady, however, the timing of shipments on orders for some of our marine customers has shifted into future quarters
which negatively impacted our sales for fiscal 2023. Overall distribution and aftermarket sales, which represent 18.3% of segment sales,
were up 16.4% year over year.

Gross margin was $171.0,
or 39.7% of sales, in fiscal 2023 compared to $155.1, or 40.7% of sales, for the same period in fiscal 2022. Gross margin for fiscal
2022 was impacted by approximately $0.9 of inventory rationalization costs associated with consolidation efforts at one of our
facilities. We anticipate margin expansion in the next year as the increasing orders on commercial products add volume through our
plants driving cost efficiencies.

Industrial Segment:

Net sales increased
$477.6, or 85.0%, during fiscal 2023 compared to the same period last year. The increase was primarily due to the inclusion of a
full twelve months of Dodge sales in fiscal 2023 and continued strong performance across the majority of our industrial markets.
Excluding Dodge sales of $743.1, net sales increased by $26.3, or 9.8%, period over period. This increase was driven by performance
in semiconductor, energy, mining, and the general industrial markets. Sales to distribution and the aftermarket reflected more than
66.0% of our industrial sales during the year. These distribution and aftermarket sales increased 113.9% compared to the same period
in the prior year, and 4.5% on an organic basis.

Gross margin was $433.8, or 41.8% of sales, in
fiscal 2023 compared to $202.0, or 36.0% of sales, for the same period in fiscal 2022. The gross margin for the fiscal 2023 included the
unfavorable impact of $0.2 associated with inventory rationalization costs at one of our plants in South Carolina. The gross margin for
the fiscal 2022 included the unfavorable impact of $13.8 of inventory purchase accounting adjustments associated with the Dodge acquisition.
The expansion in margin year over year was led by cost efficiencies achieved through integration, product mix, pricing and the ability
to maintain appropriate pricing levels while facing an inflationary environment both as it relates to manufacturing costs and human capital.

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Corporate:

Corporate SG&A decreased
$3.9 or 4.9% for fiscal 2023 compared to fiscal 2022 due to decreases in stock-based compensation partially offset by increases in personnel-related
costs.

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, including the Dodge acquisition completed on November 1, 2021. 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 the Revolving Credit Facility and New Foreign Revolver will provide adequate resources to fund internal growth initiatives for
the foreseeable future. For further discussion regarding the funding of the Dodge acquisition, refer to Part II, Item 8 –
Notes 9, 12 and 17.

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 April 1, 2023, we had cash and cash equivalents
of $65.4, of which, approximately $34.0 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. As discussed in
further detail below, we also have the ability to borrow money from our existing credit facilities.

Domestic Credit Facility

On November 1, 2021, RBC
Bearings Incorporated, our top holding company, and our Roller Bearing Company of America, Inc. subsidiary (“RBCA”)
entered into a Credit Agreement (the “New 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, and terminated the Company’s prior Credit Agreement, which was entered into with Wells Fargo in 2015 (the “2015
Credit Agreement”). The New Credit Agreement provides the Company with (a) a $1,300.0 term loan facility (the “Term Loan
Facility”), which was used to fund a portion of the cash purchase price for the acquisition of Dodge 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 Facility, the “Facilities”). Debt issuance costs associated with the New Credit Agreement totaled $14.9 and are
being amortized over the life of the New Credit Agreement. When the 2015 Credit Agreement was terminated the Company wrote off
$0.9 of previously unamortized debt issuance costs.

Prior to December 2022, 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 1/2 of 1.00% and (iii) the one-month
LIBOR rate plus 1.00% or (b) the LIBOR rate plus a specified margin, depending on the type of borrowing being made. The applicable margin
is based on the Company’s consolidated ratio of total net debt to consolidated EBITDA (as defined within the New Credit Agreement) from
time to time. In December 2022 the New Credit Agreement was amended to replace LIBOR with the secured overnight financing rate administered
by the Federal Reserve Bank of New York (“SOFR”) so that borrowings under the Facilities denominated in U.S. dollars bear
interest at a rate per annum equal to Term SOFR (as defined in the New Credit Agreement) 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. The
Facilities are subject to a SOFR floor of 0.00%. As of April 1, 2023, the Company’s margin was 1.25% for SOFR loans; and the commitment
fee rate was 0.20% and the letter of credit fee rate was 1.25%. A portion of the Term Loan Facility is subject to a fixed- rate interest
swap as discussed below under “Interest Rate Swap.”

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The Term Loan Facility will
mature 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 Facility are $0 for fiscal 2024, $0 for fiscal
2025, $0 for fiscal 2026, and approximately $900.0 for fiscal 2027. The Revolving Credit Facility will expire in November 2026, at which
time all amounts outstanding under the Revolving Credit Facility will be payable.

The New 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 New Credit Agreement) of 5.50:1.00, which maximum Total Net Leverage Ratio shall decrease during certain
subsequent test periods as set forth in the New 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 April 1, 2023, the Company was
in compliance with all debt covenants.

The New Credit Agreement
allows the Company to, among other things, make distributions to shareholders, 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 New Credit Agreement.

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

As of April 1, 2023, $900.0
was outstanding under the Term Loan Facility and approximately $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, and the Company had the ability to borrow
up to an additional $496.3 under the Revolving Credit Facility.

Senior Notes

On October 7, 2021, 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. On November 1, 2021, the Company used the proceeds to fund a portion of the cash 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 New 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. In addition, at any time prior to October 15, 2024, the Company may redeem some or all of the Senior Notes at a price equal to
100% of the principal amount, plus a “make–whole” premium, 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 (“Schaublin”), entered into two separate credit agreements in 2019 with Credit Suisse (Switzerland) Ltd. (the
“Foreign Credit Agreements”) to (i) finance the acquisition of our Swiss Tool business unit, and (ii) provide future working
capital. The Foreign Credit Agreements provided Schaublin with a CHF 15.0 (approximately $15.4) term loan, which was extinguished in
February 2022, and a CHF 15.0 (approximately $15.4) revolving credit facility, which was terminated in October 2022. Schaublin now has
a separate CHF 5.0 (approximately $5.4 USD) revolving credit facility (the “New Foreign Revolver”) with Credit Suisse to
provide future working capital, if necessary. As of April 1, 2023, $0.1 had been borrowed from the New Foreign Revolver. Fees associated
with the New Foreign Revolver are nominal.

Interest Rate Swap

On October 28, 2022, the
Company entered into a three-year USD-denominated interest rate swap (“the Swap”) from a third-party financial counterparty
under the New Credit Agreement. The Swap was executed to protect the Company from interest rate volatility on our variable-rate Term
Loan Facility. The 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%. As of April 1, 2023, approximately 78.5% of our debt bears interest
at a fixed rate. The notional on the Swap will amortize as follows:

Year 1: $600.0

Year 2: $400.0

Year 3: $100.0

The 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.

Cash Flows

Fiscal 2023 Compared to Fiscal 2022

The following table summarizes our
cash flow activities:

During fiscal 2023 we
generated cash of $220.6 from operating activities compared to $180.3 for fiscal 2022. The increase of $40.3 for fiscal 2023 was
mainly the result of a $112.0 increase in net income, partially offset by a $2.0 decrease in non-cash activity and a net unfavorable
change in operating assets and liabilities of $69.7. The unfavorable change in operating assets and liabilities is detailed in the
table below. The change in non-cash activity was primarily driven by $49.9 more depreciation and amortization and $1.4 more noncash
operating lease expense, partially offset by $18.9 less stock-based compensation, $21.6 less in deferred taxes, $11.7 less
amortization of deferred financing costs, $1.0 less in debt extinguishment costs, and $0.1 decrease in
consolidation and restructuring charges.

The following chart summarizes the unfavorable
change in operating assets and liabilities of $69.7 for fiscal 2023 versus fiscal 2022 and the favorable change of $1.4 for fiscal 2022
versus fiscal 2021.

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During fiscal 2023, we used
$14.0 for investing activities as compared to $2,847.5 for fiscal 2022. This decrease in cash used was attributable to $2,935.7 less
cash used for acquisitions, $30.0 less purchases of marketable securities and $0.5 more proceeds from the sale of assets, partially offset
by a $12.2 increase in capital expenditures and $120.5 less in proceeds from the sale of marketable securities.

During fiscal 2023, we used
cash of $322.8 for financing activities compared to $2,698.5 cash generated in fiscal 2022. This decrease from cash generated to cash
used was primarily attributable to proceeds received during fiscal 2022 of $605.5 from the issuance of common stock, $445.3 from the issuance
of preferred stock, $1,285.8 from the Term Loan Facility, and $494.2 from the Senior Notes. During fiscal 2023 there were $187.0 more
payments made on outstanding debt, $15.8 more cash dividends paid on preferred stock, $6.4 fewer exercises of stock-based awards, and
$1.6 more in principal payments made on finance lease obligations, partially offset by $19.4 less in finance fees paid in connection with
credit facilities and senior notes and $0.9 fewer repurchases of common stock.

Capital Expenditures

Our capital expenditures
in fiscal 2023 were $42.0 compared to $29.8 in fiscal 2022. We expect to make capital expenditures of approximately 3.0% to 3.5% of net
sales during fiscal 2024 in connection with our existing business. We funded our fiscal 2023 capital expenditures, and expect to fund
fiscal 2024 capital expenditures, principally through existing cash and internally generated funds. We may also make substantial additional
capital expenditures in connection with acquisitions.

Quarterly Results of Operations

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 doubtful accounts, 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.

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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 year ended April 1, 2023 compared to approximately
97% for the year ended April 2, 2022.

The Company has determined
performance obligations are satisfied over time for customer contracts where RBC provides services to customers and also for a limited
number of product sales. RBC has determined revenue recognition over time is appropriate for our service revenue contracts as they create
or enhance an asset that the customer controls throughout the duration of the contract. Approximately 2% of the Company’s revenue
was recognized in this manner based on sales for the year ended April 1, 2023 compared to approximately 3% for the year ended April 2,
2022. Revenue recognition over time is appropriate for customer contracts with product sales in which the product sold has no alternative
use to RBC without significant economic loss and an enforceable right to payment exists, including a normal profit margin from the customer,
in the event of contract termination. These types of contracts comprised less than 1% of total sales for the year ended April 1, 2023
and the year ended April 2, 2022. For both of these types of contracts, revenue is recognized over time based on the extent of progress
towards completion of the performance obligation. The Company utilizes the cost-to-cost measure of progress for over-time revenue recognition
contracts as we believe this measure best depicts the transfer of control to the customer, which occurs as we incur costs on contracts.
Revenues, including profits, are recorded proportionally as costs are incurred. Costs to fulfill include labor, materials, subcontractors’
costs, and other direct and indirect costs.

Pursuant to the
over-time revenue recognition model, revenue may be recognized prior to the customer being invoiced. An unbilled receivable is
recorded to reflect revenue that is recognized when (1) the cost-to-cost method is applied and (2) such revenue exceeds the amount
invoiced to the customer. Contract assets are included within prepaid expenses and other current assets or other noncurrent assets
on the consolidated balance sheets.

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. We completed a quantitative test of impairment on the indefinite lived intangible assets with
no impairment noted in the current year. 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 any 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 assumptions used in
the discounted cash flow method used to estimate fair value include discount rates, revenue growth rates, terminal growth rates and cash
flow projections. Discount rates, revenue growth rates and cash flow projections are the most sensitive and susceptible to change as they
require significant management judgment. Discount rates are determined by using a weighted average cost of capital (“WACC”).
The WACC considers market and industry data as well as Company-specific risk factors for each reporting unit in determining the appropriate
discount rate to be used. The discount rate utilized for each reporting unit for our fiscal 2023 test was 10.0% and is indicative of the
return an investor would expect to receive for investing in such a business. Terminal growth rate determination follows common methodology
of capturing the present value of perpetual cash flow estimates beyond the last projected period assuming a constant WACC and long-term
growth rates. The terminal growth rate used for our fiscal 2023 test was 2.5%. The Company has determined that, to date, no impairment
of goodwill exists and the aggregate fair value of the reporting units exceeded the carrying value in total by approximately 42.5%. The
fair value of the reporting units exceeds the carrying value by a minimum of 13.1% at each of the two reporting units. A decrease of 1.0%
in our terminal growth rate would not result in impairment of goodwill for any of our reporting units. An increase of 1.0% in our discount
rate would not result in impairment of goodwill for any of our reporting units. The Company performs the annual impairment testing during
the fourth quarter of each fiscal year. 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.

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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 cash flow projections. 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.

Recent Accounting Pronouncements

For a discussion of recent
accounting pronouncements, see Note 2 – “Summary of Significant Accounting Policies – Recent Accounting Pronouncements.”

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Impact of Inflation and Changes in Prices of
Raw Materials

In fiscal 2023, the economy
experienced inflation. We purchase steel at market prices, which fluctuate as a result of supply and demand in the marketplace. To date,
we have managed price increases by changing our buying patterns, expanding our vendor network, and passing increases on to our customers
through price increases on our products, the assessment of steel surcharges on our customers, or entry into long-term agreements with
our customers containing escalator provisions tied to our invoiced price of steel. However, even if we are able to pass these steel surcharges
or price increases to our customers, there may be a time lag of several months between the time a price increase goes into effect and
our ability to implement surcharges or price increases, particularly for orders already in our backlog. As a result, our gross margin
percentage may decline.

Competitive pressures and
the terms of certain of our long-term contracts may require us to absorb at least part of these cost increases, particularly during periods
of high inflation. Our principal raw materials are stainless and 52100 wire and rod steel (types of high alloy steel), which have historically
been readily available. We have never experienced a work stoppage due to a supply shortage. We maintain multiple sources for raw materials
including steel and have various supplier agreements. Through sole-source arrangements, supplier agreements and pricing, we have been
able to minimize our exposure to fluctuations in raw material prices.

Our suppliers and sources
of raw materials are based in the U.S., Europe and Asia. We believe that our sources are adequate for our needs in the foreseeable
future, that there exist alternative suppliers for our raw materials and that in most cases readily available alternative materials can
be used for most of our raw materials.

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 also have a contractual obligation for licenses related
to the implementation and upgrade of an enterprise resource planning (“ERP”) system for Dodge. These license costs of $10.5
will be incurred over a five-year period.

Other than the items noted
above, we had no significant off-balance sheet arrangements as of April 1, 2023.