NN, Inc. Reports Fourth Quarter And Full Year 2019 Results

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NN, Inc. Reports Fourth Quarter And Full Year 2019 Results
Full Year Net Sales Increase 10% to $847.5M Driven by Sales from Acquired Businesses and Organic Growth in Life Sciences

CHARLOTTE, N.C., March 12, 2020  /PRNewswire/ -- NN, Inc., (NASDAQ: NNBR), a diversified industrial company, today reported its financial results for the fourth quarter and the year ended December 31, 2019.

GAAP Results

Fourth Quarter 2019

GAAP net sales were $198.6 million, compared to $199.5 million for the fourth quarter of 2018. Life Sciences net sales increased by $8.9 million during the quarter due to increased core volumes, which were offset by lower demand in the automotive and general industrial end markets.

Fourth quarter 2019 GAAP loss from operations was $4.7 million, compared to a GAAP loss of $188.4 million for the same period in 2018. The loss from operations in the fourth quarter 2018 was largely driven by a goodwill impairment charge of $182.5 million and a fixed asset impairment charge of $5.2 million. Gross profit increased in the fourth quarter of 2019 by $1.8 million, offset by higher depreciation and amortization expenses and SG&A expenses.

Fourth quarter 2019 GAAP net loss was $14.1 million, compared to a GAAP net loss of $217.4 million in the fourth quarter of 2018. The higher GAAP net loss in 2018 was primarily due to the goodwill impairment charges and fixed asset impairment charges taken in 2018 and an impairment charge of $16.6 million taken against the investment in NN's China joint venture.

Full Year 2019

Net sales in 2019 increased $76.8 million to $847.5 million, or 10%, compared to $770.7 million in 2018, attributable to $75.3 million in sales from businesses acquired in 2018, as well as organic growth of $9.8 million, driven by higher core volume in the Life Sciences group. This was partially offset by lower demand within the automotive end market in NN's Mobile Solutions group as well as unfavorable foreign exchange effects of $8.4 million in Europe, South America and Asia.

GAAP income from operations was $9.9 million, compared to a $179.9 million GAAP loss for the same period in 2018. The 2018 loss was driven by certain one-time charges including a goodwill impairment of $182.5 million, fixed asset impairment of $5.2 million and acquisition expenses of $5.9 million. Gross profit grew by $24.3 million in 2019 from increased sales, offset by higher SG&A costs of $9.6 million, including $7.4 million related to 2018 acquisition costs, and a depreciation and amortization increase of $20.7 million.

GAAP net loss in 2019 was $46.7 million, compared to GAAP net loss of $263.0 million in 2018.  GAAP net loss in 2018 was primarily driven by the aforementioned impairment charges.

Adjusted Results – Fourth Quarter 2019

Fourth quarter 2019 adjusted EBITDA was $33.2 million, or 16.7% of sales, versus $34.4 million, or 17.3% of sales, in the same prior year period. Adjusted income from operations for the fourth quarter of 2019 was $19.8 million, compared to $23.6 million for the same period in 2018. Fourth quarter 2019 adjusted net income was $5.7 million, or $0.14 per diluted share, compared to $12.3 million, or $0.29 per diluted share, for the same period in 2018. Free cash flow for the fourth quarter 2019 was $2.3 million.

Warren Veltman, President and Chief Executive Officer, stated, "In the fourth quarter, we enhanced our financial flexibility by issuing preferred stock, paying off our revolver, and extending our revolver and term B loans.  In addition to these actions, we continue to find new ways to reduce corporate overhead and streamline costs, such as consolidating NN's senior management leadership of the Mobile Solutions and Power Solutions business groups under the leadership of John Buchan and naming Chris Qualters as Executive Vice President of our Life Sciences segment.  These combined initiatives have helped us make real progress in reducing the overall leverage of the company as we look to continue improving our capital structure and determine the best way to generate value for our shareholders."

Life Sciences

Net sales for the fourth quarter of 2019 were $88.4 million, compared to $79.5 million in the fourth quarter of 2018, an increase of 11.2% or $8.9 million. Adjusted income from operations for the fourth quarter of 2019 was $17.9 million, compared to $15.7 million in the fourth quarter of 2018.  Performance was driven primarily by increased core volumes in the orthopedic and medical/surgical end markets along with realization of synergy capture initiatives.

Mobile Solutions

Net sales for the fourth quarter of 2019 were $67.2 million, compared to $75.4 million in the fourth quarter of 2018, a decrease of $8.2 million or 10.9%. Adjusted income from operations for the fourth quarter of 2019 was $1.5 million, compared to $4.5 million in the fourth quarter of 2018. Lower demand within the automotive market, impact of the United Auto Workers strike against General Motors and an unfavorable tariff environment drove the decline.

Power Solutions

Net sales for the fourth quarter of 2019 were $43.6 million, compared to $45.2 million in the fourth quarter of 2018, a decrease of $1.6 million or 3.5%, driven by lower demand in the electrical products end market in China, primarily as a result of increased tariffs. Adjusted income from operations for the quarter was $5.8 million, consistent with the fourth quarter of 2018.  

Adjusted Results – Full Year 2019

Adjusted EBITDA was $146.6 million or 17.3% of sales versus 2018 adjusted EBITDA of $136.0 million, or 17.6% of sales. Adjusted income from operations for 2019 was $97.0 million, compared to $91.9 million in 2018. Adjusted net income was $35.0 million in 2019, or $0.83 per diluted share, compared to $39.0 million, or $1.23 per diluted share, for the same period in 2018. Free cash flow for 2019 was negative $4.8 million. Net debt decreased by $75.7 million in 2019 to $757.6 million from $833.4 million in the same period a year ago.

Mr. Veltman continued, "NN has fundamentally solid businesses, strong relationships with our customers and suppliers as well as a passionate global workforce.  I am proud to lead this company and as our financial position continues to gradually improve, I believe we are better-positioned to continue advancing a number of our strategic initiatives in 2020.

"While I am disappointed in our overall free cash flow generation for the year, it was in part impacted by our strategic decision to continue to pay our accounts payable on time in order to maintain good relationships with our suppliers. By reducing our 2019 year-end accounts payable balance, we expect to see a free cash flow benefit in the first quarter compared to last year. 

"Looking ahead, we expect the global automotive slowdown and uncertainty caused by the coronavirus to adversely impact our results.  To offset these factors, we will continue to pull levers that are in our control, including looking for more ways to enhance our commercial performance, improve our cost structure, reduce our inventory levels and accelerate accounts receivable collections."

Life Sciences

Net sales were $359.7 million in 2019, compared to $248.2 million in 2018, an increase of $111.6 million or 45.0%.  Adjusted income from operations in 2019 was $76.0 million, compared to $51.6 million in 2018.  Sales growth in 2019 was driven by $71.4 million of net sales attributable to the Paragon Medical and Bridgemedica acquisitions as well as a $41.4 million increase in organic growth as a result of an increase in core volume primarily within the orthopedic and medical/surgical end markets.

Mobile Solutions

Net sales for 2019 were $297.7 million, compared to $335.0 million in 2018, a decrease of $37.3 million or 11.1%. Adjusted income from operations in 2019 was $17.9 million, compared to $30.5 million in 2018. Lower demand within the automotive markets and delays in new product launches drove the decline in both net sales and adjusted income from operations.

Power Solutions

Net sales for 2019 were $192.1 million, compared to $189.8 million in 2018, an increase of $2.3 million or 1.2%. Adjusted income from operations in 2019 was $32.8 million, compared to $33.6 million in 2018. Lower demand in the electrical products end market due to an unfavorable tariff environment drove the margin decline.

NN will discuss its results during its quarterly investor conference call on March 13, 2020 at 9:00 a.m. ET.  The call and supplemental presentation may be accessed via NN's website, www.nninc.com. The conference call can also be accessed by dialing 1-800-353-6461 or 1-334-323-0501 Conference ID: 3273655. For those who are unavailable to listen to the live broadcast, a replay will be available shortly after the call for 30 days.

NN discloses in this press release the non-GAAP financial measures of adjusted income from operations, adjusted EBITDA, adjusted net income (loss), adjusted net income per diluted share, free cash flow and net debt.  Each of adjusted income from operations, adjusted EBITDA, adjusted net income (loss), adjusted net income per diluted share and free cash flow provides supplementary information about the impacts of restructuring and integration expense, acquisition and transition expenses, foreign exchange impacts on inter-company loans, amortization of intangibles and deferred financing costs, and other non-operating impacts on our business. Net debt is defined as debt and finance leases less cash.

The financial tables found later in this press release include a reconciliation of adjusted income from operations, adjusted EBITDA, adjusted net income (loss), adjusted net income (loss) per diluted share and free cash flow to the U.S. GAAP financial measures of income from operations, net income (loss), net income (loss) per diluted share and net cash provided by (used in) operating activities.

NN, Inc., a diversified industrial company combines advanced engineering and production capabilities with in-depth materials science expertise to design and manufacture high-precision components and assemblies for a variety of markets on a global basis. Headquartered in Charlotte, North Carolina, NN has 50 facilities in North America, Europe, South America and China.

Except for specific historical information, many of the matters discussed in this press release may express or imply projections of revenues or expenditures, statements of plans and objectives or future operations or statements of future economic performance. These, and similar statements, are forward-looking statements concerning matters that involve risks, uncertainties and other factors which may cause the actual performance of NN, Inc. and its subsidiaries to differ materially from those expressed or implied by this discussion. All forward-looking information is provided by the Company pursuant to the safe harbor established under the Private Securities Litigation Reform Act of 1995 and should be evaluated in the context of these factors. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "assumptions", "target", "guidance", "outlook", "plans", "projection", "may", "will", "would", "expect", "intend", "estimate", "anticipate", "believe", "potential" or "continue" (or the negative or other derivatives of each of these terms) or similar terminology. Factors which could materially affect actual results include, but are not limited to: general economic conditions and economic conditions in the industrial sector, disruptions in the Company's businesses and global economies and other impacts from further spread of the coronavirus outbreak, inventory levels, regulatory compliance costs and the Company's ability to manage these costs, start-up costs for new operations, debt reduction, competitive influences, risks that current customers will commence or increase captive production, risks of capacity underutilization, quality issues, availability and price of raw materials, currency and other risks associated with international trade, the Company's dependence on certain major customers, and the successful implementation of the global growth plan including development of new products. Similarly, statements made herein and elsewhere regarding pending and completed transactions are also forward-looking statements, including statements relating to the future performance and prospects of an acquired business, the expected benefits of an acquisition on the Company's future business and operations and the ability of the Company to successfully integrate recently acquired businesses.

For additional information concerning such risk factors and cautionary statements, please see the section titled "Risk Factors" in the Company's periodic reports filed with the Securities and Exchange Commission, including, but not limited to, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019. Except as required by law, we undertake no obligation to update or revise any forward-looking statements we make in our press releases, whether as a result of new information, future events or otherwise.

Financial Tables Follow

NN, Inc.

Consolidated Statements of Operations and Comprehensive Income (Loss)

(Unaudited)












Three Months Ended
December 31,


Twelve Months Ended
December 31,



2019


2018


2019


2018

Net sales


$      198,632


$      199,477


$      847,451


$      770,657

Cost of sales (exclusive of depreciation and amortization shown separately below)


154,279


156,923


641,639


589,181

Gross profit (loss)


44,353


42,554


205,812


181,476

Selling, general and administrative expense


24,312


22,285


103,223


93,583

Acquisition related costs excluded from selling, general and administrative expense


-


61


-


5,871

Depreciation and amortization


22,876


19,330


91,846


71,128

Restructuring and integration expense, net


-


(10)


(12)


2,127

Goodwill impairment


-


182,542


-


182,542

Other operating (income) expense, net


1,885


6,726


866


6,089

Income (loss) from operations


(4,720)


(188,380)


9,889


(179,864)

Interest expense


14,663


14,651


57,155


61,243

Loss on extinguishment of debt and write-off of debt issuance costs


594


-


3,293


19,562

Derivative (gain) loss on change in interest rate swap fair value


-


-


-


-

Other (income) expense, net


256


(541)


1,140


1,341

Loss before benefit for income taxes and share of net income from joint venture


(20,233)


(202,490)


(51,699)


(262,010)

Benefit for income taxes


4,812


1,200


3,277


13,413

Share of net income from joint venture


1,336


(16,134)


1,681


(14,390)

Income (loss) from continuing operations


$      (14,085)


$    (217,424)


$      (46,741)


$    (262,987)

Income from discontinued operations, net of tax (Note 2)


-


-


-


-

Net income (loss)


$      (14,085)


$    (217,424)


$      (46,741)


$    (262,987)

Other comprehensive loss:









Reclassification adjustment for discontinued operations


-


-


-


-

Foreign currency translation gain (loss)


7,509


(4,248)


(3,845)


(13,609)

Interest rate swap:









Change in fair value of interest rate swap, net of tax


1,520


-


(10,479)


-

Less: reclassification adjustment for (gains) losses included in net income, net of tax


846


-


1,084


-

Other comprehensive income (loss)


$          9,875


$        (4,248)


$      (13,240)


$      (13,609)

Comprehensive income (loss)


$         (4,210)


$    (221,672)


$      (59,981)


$    (276,596)

Basic net income (loss) per common share:









Income (loss) from continuing operations per common share


$           (0.35)


$          (5.18)


$          (1.13)


$          (8.30)

Income from discontinued operations per common share


$                  -


$                 -


$                 -


$                 -

Net income (loss) per common share


$           (0.35)


$          (5.18)


$          (1.13)


$          (8.30)

Weighted average common shares outstanding


42,078


28,688


42,030


31,678

Diluted net income (loss) per common share:









Income (loss) from continuing operations per common share


$          (0.35)


$          (5.18)


$          (1.13)


$          (8.30)

Income from discontinued operations per common share


$                 -


$                 -


$                 -


$                 -

Net income (loss) per common share


$          (0.35)


$          (5.18)


$          (1.13)


$          (8.30)

Weighted average common shares outstanding


42,078


41,959


42,030


31,678

Cash dividends declared per common share


$                 -


$            0.07


$            0.21


$            0.28

 

 

NN, Inc.

Consolidated Balance Sheets

(Unaudited)



December 31,
2019


December 31,
2018

Assets





Current assets:





Cash and cash equivalents


$               31,703


$               17,988

Accounts receivable, net


131,558


133,421

Inventories


118,722


120,925

Income tax receivable


5,973


2,277

Other current assets


15,024


21,592

Total current assets


302,980


296,203

Property, plant and equipment, net


374,513


361,028

Operating lease right-of-use assets


65,496


-

Goodwill


439,095


439,452

Intangible assets, net


329,260


376,248

Investment in joint venture


21,755


20,364

Other non-current assets


8,885


7,607

Total assets


$       1,541,984


$       1,500,902

Liabilities and Stockholders' Equity





Current liabilities:





Accounts payable


$               57,340


$               65,694

Accrued salaries, wages and benefits


30,428


24,636

Income tax payable


1,028


-

Current maturities of long-term debt


19,160


31,280

Current portion of operating lease liabilities


6,652


-

Other current liabilities


24,873


23,420

Total current liabilities


139,481


145,030

Deferred tax liabilities


85,799


91,838

Non-current income tax payable


1,272


3,875

Long-term debt, net of current portion


757,440


811,471

Operating lease liabilities, net of current portion


66,980


-

Other non-current liabilities


44,723


29,417

Total liabilities


1,095,695


1,081,631

Commitments and contingencies





Redeemable, convertible preferred stock


93,012


-

Common stock


423


421

Additional paid-in capital


501,615


508,655

Warrants


1,076


-

Accumulated deficit


(105,283)


(58,491)

Accumulated other comprehensive loss


(44,554)


(31,314)

Total stockholders' equity


353,277


419,271

Total liabilities, preferred stock, and stockholders' equity


$       1,541,984


$       1,500,902

 

 

NN, Inc.

Consolidated Statements of Cash Flows

(Unaudited)


Twelve Months Ended
December 31,


2019


2018

Cash flows from operating activities




Net income (loss)

$             (46,741)


$           (262,987)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:




Depreciation and amortization of continuing operations

91,846


71,128

Depreciation and amortization of discontinued operations

-


-

Amortization of debt issuance costs

4,789


4,845

Goodwill impairment

-


182,542

Other impairments

643


21,825

Loss on extinguishment of debt and write-off of debt issuance costs

3,293


19,562

Total derivative mark-to-market loss (gain), net of cash settlements

-


-

Share of net income from joint venture, net of cash dividends received

(1,681)


642

Gain on disposal of discontinued operations, net of tax and cost to sell

-


-

Compensation expense from issuance of share-based awards

2,822


2,416

Deferred income taxes

(3,142)


(22,402)

Other

3,169


1,290

Changes in operating assets and liabilities, excluding acquisitions:




Accounts receivable

1,265


(3,543)

Inventories

1,426


(16,208)

Accounts payable

(7,900)


2,693

Income taxes receivable and payable, net

(5,292)


39,615

Other

4,029


(479)

Net cash provided by (used in) operating activities

48,526


40,939

Cash flows from investing activities




Acquisition of property, plant and equipment, net of acquisitions

(53,321)


(64,036)

Short-term investment

8,000


-

Cash paid to acquire businesses, net of cash received

-


(399,009)

Proceeds from sale of property, plant, and equipment

7,287


1,434

Proceeds from sale of business, net of cash sold

-


838

Other

(711)


(517)

Net cash provided by (used in) investing activities

(38,745)


(461,290)

Cash flows from financing activities




Cash paid for debt issuance or prepayment costs

(11,336)


(20,726)

Dividends paid

(8,879)


(8,826)

Proceeds from issuance of common stock

-


217,312

Proceeds from issuance of preferred stock

95,741


-

Proceeds from long-term debt

54,209


311,841

Repayment of long-term debt

(108,157)


(290,687)

Proceeds from (repayments of) short-term debt, net

(12,564)


10,305

Other

(3,715)


(4,126)

Net cash provided by (used in) financing activities

5,299


215,093

Effect of exchange rate changes on cash flows

(1,365)


(1,200)

Net change in cash and cash equivalents

13,715


(206,458)

Cash and cash equivalents at beginning of period (1)

17,988


224,446

Cash and cash equivalents at end of period

$               31,703


$               17,988

 

 








Reconciliation of GAAP Income from Operations to Non-GAAP Adjusted Income from Operations










Three Months Ended 



Three Months Ended 

$000s

December 31,


$000s

December 31,

NN, Inc. Consolidated

2019

2018


Power Solutions

2019

2018

GAAP income from operations

$     (4,720)

$ (188,380)


GAAP income from operations

$      1,024

$ (109,054)

Restructuring and integration expense

-

(10)


Restructuring and integration expense

-

-

Acquisition and transition expense*

13,012

15,822


Acquisition and transition expense

1,823

3,524

Amortization of intangibles

11,253

8,439


Amortization of intangibles

2,748

2,193

Impairments (Goodwill and fixed assets) 

244

187,778


Impairments (Goodwill and fixed assets) 

244

109,100

Non-GAAP adjusted income from operations (a) 

$    19,790

$    23,649


Non-GAAP adjusted income from operations (a) 

$      5,839

$      5,763








Non-GAAP adjusted operating margin (1)

10.0%

11.9%


Non-GAAP adjusted operating margin (1)

13.4%

12.8%

GAAP net sales

$  198,632

$  199,477


GAAP net sales

$    43,621

$    45,194









Three Months Ended 



Three Months Ended 

$000s

December 31,


$000s

December 31,

Mobile Solutions

2019

2018


Life Sciences

2019

2018

GAAP income from operations

$        (564)

$   (76,134)


GAAP income from operations

$      5,605

$      6,174

Restructuring and integration expense

-

(10)


Restructuring and integration expense

-

-

Acquisition and transition expense

1,177

1,747


Acquisition and transition expense

4,667

4,122

Amortization of intangibles

838

885


Amortization of intangibles

7,666

5,361

Impairments (Goodwill and fixed assets) 

-

78,054


Impairments (Goodwill and fixed assets) 

-

-

Non-GAAP adjusted income from operations (a) 

$      1,451

$      4,542


Non-GAAP adjusted income from operations (a) 

$    17,938

$    15,657








Share of net income from joint venture

1,336

(16,134)


Non-GAAP adjusted operating margin (1)

20.3%

19.7%

Impairment of joint venture

-

16,589


GAAP net sales

$    88,381

$    79,457

Non-GAAP adjusted income from operations with JV

$      2,788

$      4,997












Non-GAAP adjusted operating margin (1)

4.2%

6.6%





GAAP net sales

$    67,159

$    75,359













Three Months Ended 





$000s

December 31,





Elimination

2019

2018





GAAP net sales

$        (528)

$        (533)














(1) Non-GAAP adjusted operating margin = Non-GAAP adjusted income from operations/ GAAP net sales

2019 Includes Capacity & Capabilities Dev - $2.0 / Prof Fees - $2.7 / Integration & Transformation - $8.4 / Acq Transaction Costs - $0.0 / Asset Write-Downs/Inventory Step-Up - $0.0

   2018 Includes Capacity & Capabilities Dev - $3.1 / Prof Fees - $3.2 / Integration & Transformation - $8.7 / AcqTransaction Costs - $0.1 / Asset Write-Downs/Inventory Step-Up - $0.8

 

 








Reconciliation of GAAP Income from Operations to Non-GAAP Adjusted Income from Operations










Twelve Months Ended



Twelve Months Ended

$000s

December 31,


$000s

December 31,

NN, Inc. Consolidated

2019

2018


Power Solutions

2019

2018

GAAP income from operations

$      9,889

$ (179,864)


GAAP income from operations

$    13,881

$   (95,115)

Restructuring and integration expense

(12)

2,127


Restructuring and integration expense

-

-

Acquisition and transition expense*

39,463

49,262


Acquisition and transition expense

7,725

8,698

Amortization of intangibles

46,998

32,553


Amortization of intangibles

10,994

10,939

Impairments (Goodwill and fixed assets) 

644

187,778


Impairments (Goodwill and fixed assets) 

244

109,100

Non-GAAP adjusted income from operations (a) 

$    96,982

$    91,856


Non-GAAP adjusted income from operations (a) 

$    32,843

$    33,622








Non-GAAP adjusted operating margin (1)

11.4%

11.9%


Non-GAAP adjusted operating margin (1)

17.1%

17.7%

GAAP net sales

$  847,451

$  770,657


GAAP net sales

$  192,100

$  189,778









Twelve Months Ended



Twelve Months Ended

$000s

December 31,


$000s

December 31,

Mobile Solutions

2019

2018


Life Sciences

2019

2018

GAAP income from operations

$      9,553

$   (55,079)


GAAP income from operations

$    28,157

$    19,136

Restructuring and integration expense

(12)

63


Restructuring and integration expense

-

1,336

Acquisition and transition expense

4,884

3,877


Acquisition and transition expense

15,353

13,064

Amortization of intangibles

3,479

3,540


Amortization of intangibles

32,526

18,074

Impairments (Goodwill and fixed assets) 

-

78,054


Impairments (Goodwill and fixed assets) 

-

-

Non-GAAP adjusted income from operations (a) 

$    17,904

$    30,456


Non-GAAP adjusted income from operations (a) 

$    76,036

$    51,610








Share of net income from joint venture

1,681

(14,390)


Non-GAAP adjusted operating margin (1)

21.1%

20.8%

Impairment of joint venture

-

16,589


GAAP net sales

$  359,732

$  248,173

Non-GAAP adjusted income from operations with JV

$    19,585

$    32,655












Non-GAAP adjusted operating margin (1)

6.6%

9.7%





GAAP net sales

$  297,749

$  335,037













Twelve Months Ended





$000s

December 31,





Elimination

2019

2018





GAAP net sales

$     (2,130)

$     (2,331)












(1) Non-GAAP adjusted operating margin = Non-GAAP adjusted income from operations/ GAAP net sales



* 2019 Includes Capacity & Capabilities Dev - $9.1 / Prof Fees - $4.5 / Integration & Transformation - $25.5 / Acq Transaction Costs - $0.0 / Asset Write-Downs/Inventory Step-Up - $0.4

  2018 Includes Capacity & Capabilities Dev - $8.2 / Prof Fees - $10.7 / Integration & Transformation - $19.8 / AcqTransaction Costs - $5.9 / Asset Write-Downs/Inventory Step-Up - $4.7

 

 

Reconciliation of Net Income (Loss) to Non-GAAP Adjusted EBITDA












Three Months Ended 





December 31,



$000s


2019

2018



GAAP net income (loss)


$   (14,085)

$ (217,424)









Provision (benefit) for income taxes


(4,811)

(1,200)



Interest expense


14,663

14,651



Write-off of unamortized debt issuance cost


594

-



Depreciation and amortization


22,876

19,330



Acquisition and transition expense


12,656

15,482



Non-cash stock compensation


962

(210)



Non-cash foreign exchange (gain) loss on inter-company loans


(157)

(547)



Restructuring and integration expense


-

(10)



Costs related to divested businesses


260

-



Impairments (Goodwill, JV and fixed assets) 


244

204,367



Non-GAAP adjusted EBITDA (b)


$    33,202

$    34,439









Non-GAAP adjusted EBITDA margin (2)


16.7%

17.3%



GAAP net sales


$  198,632

$  199,477









(2) Non-GAAP adjusted EBITDA margin = Non-GAAP adjusted EBITDA / GAAP net sales


 

Reconciliation of Net Income (Loss) to Non-GAAP Adjusted EBITDA












Twelve Months Ended





December 31,



$000s


2019

2018



GAAP net income (loss)


$   (46,741)

$ (262,987)









Provision (benefit) for income taxes


(3,277)

(13,413)



Interest expense


57,155

61,243



Write-off of unamortized debt issuance cost


3,293

19,562



Depreciation and amortization


91,846

71,128



Acquisition and transition expense


38,504

48,922



Non-cash stock compensation


3,885

2,413



Non-cash foreign exchange (gain) loss on inter-company loans


307

2,620



Restructuring and integration expense


(12)

2,127



Costs related to divested businesses


960

-



Impairments (Goodwill, JV and fixed assets) 


644

204,367



Non-GAAP adjusted EBITDA (b)


$  146,564

$  135,983









Non-GAAP adjusted EBITDA margin (2)


17.3%

17.6%



GAAP net sales


$  847,451

$  770,657









(2) Non-GAAP adjusted EBITDA margin = Non-GAAP adjusted EBITDA / GAAP net sales


 

 

Reconciliation of Net Income (Loss) to Non-GAAP Adjusted Net Income (Loss) and Net Income (Loss) per Diluted Share to Non-GAAP Adjusted Net Income (Loss) per Diluted Share










Three Months Ended 





December 31,



$000s


2019

2018



GAAP net income (loss)


$       (14,085)

$     (217,424)









Pre-tax acquisition and transition expense


13,012

15,822



Pre-tax foreign exchange (gain) loss on inter-company loans


(157)

(547)



Pre-tax restructuring and integration expense


-

(10)



Pre-tax write-off of unamortized debt issuance costs


594

-



Pre-tax amortization of intangibles and deferred financing costs


12,506

9,653



Pre-tax interest expense on cash held from divestiture


-

-



Pre-tax impairments of fixed asset costs


244

5,236



Pre-tax costs related to divested businesses


260

-



Tax effect of adjustments reflected above (c)


(5,444)

(6,368)



Non-GAAP discrete tax adjustments


(1,221)

(403)



Impairments (Goodwill and JV) 


-

199,131



Divestiture of Business Segment, exclusive of tax reform


-

7,198



Non-GAAP adjusted net income (loss) (d)


$          5,710

$        12,287











Three Months Ended 





December 31,



Amounts per share, diluted


2019

2018



GAAP net income (loss) per diluted share


$           (0.35)

$           (5.18)









Pre-tax acquisition and transition expense


0.31

0.38



Pre-tax foreign exchange (gain) loss on inter-company loans


(0.00)

(0.01)



Pre-tax restructuring and integration expense


-

(0.00)



Pre-tax write-off of unamortized debt issuance costs


0.01

-



Pre-tax amortization of intangibles and deferred financing costs


0.30

0.23



Pre-tax interest expense on cash held from divestiture


-

-



Pre-tax impairments of fixed asset costs


0.01

0.12



Pre-tax costs related to divested businesses


0.01

-



Tax effect of adjustments reflected above (c)


(0.13)

(0.15)



Non-GAAP discrete tax adjustments


(0.03)

(0.01)



Impairments (Goodwill and JV) 


-

4.75



Divestiture of Business Segment, exclusive of tax reform


-

0.17



Preferred stock cumulative dividends and deemed dividends 


0.02

-



Non-GAAP adjusted net income (loss) per diluted share (d)


$            0.14

$            0.29



Weighted average shares outstanding, diluted


42,078

41,959


 

Reconciliation of Net Income (Loss) to Non-GAAP Adjusted Net Income (Loss) and Net Income (Loss) per Diluted Share to Non-GAAP Adjusted Net Income (Loss) per Diluted Share










Twelve Months Ended





December 31,



$000s


2019

2018



GAAP net income (loss)


$       (46,741)

$     (262,987)









Pre-tax acquisition and transition expense


39,463

49,262



Pre-tax foreign exchange (gain) loss on inter-company loans


307

2,620



Pre-tax restructuring and integration expense


(12)

2,127



Pre-tax write-off of unamortized debt issuance costs


3,293

19,562



Pre-tax amortization of intangibles and deferred financing costs


51,788

37,741



Pre-tax interest expense on cash held from divestiture


-

3,607



Pre-tax impairments of fixed asset costs


644

5,236



Pre-tax costs related to divested businesses


960

-



Tax effect of adjustments reflected above (c)


(19,433)

(25,094)



Non-GAAP discrete tax adjustments


4,779

570



Impairments (Goodwill and JV) 


-

199,131



Divestiture of Business Segment, exclusive of tax reform


-

7,198



Non-GAAP adjusted net income (loss) (d)


$        35,049

$        38,974











Twelve Months Ended





December 31,



Amounts per share, diluted


2019

2018



GAAP net income (loss) per diluted share


$           (1.13)

$           (8.30)









Pre-tax acquisition and transition expense


0.94

1.56



Pre-tax foreign exchange (gain) loss on inter-company loans


0.01

0.08



Pre-tax restructuring and integration expense


(0.00)

0.07



Pre-tax write-off of unamortized debt issuance costs


0.08

0.62



Pre-tax amortization of intangibles and deferred financing costs


1.23

1.19



Pre-tax interest expense on cash held from divestiture


-

0.11



Pre-tax impairments of fixed asset costs


0.02

0.17



Pre-tax costs related to divested businesses


0.02

-



Tax effect of adjustments reflected above (c)


(0.46)

(0.79)



Non-GAAP discrete tax adjustments


0.11

0.02



Impairments (Goodwill and JV) 


-

6.29



Divestiture of Business Segment, exclusive of tax reform


-

0.23



Preferred stock cumulative dividends and deemed dividends 


0.02

-



Non-GAAP adjusted net income (loss) per diluted share (d)


$            0.83

$            1.23



Weighted average shares outstanding, diluted


42,030

31,678


 

 

Reconciliation of Operating Cash Flow to Free Cash Flow












Three Months Ended 





December 31,



$000s


2019

2018



Net cash provided (used) by operating activities


$    14,920

$        54,154



Acquisition of property, plant and equipment


(12,601)

(17,038)



Free Cash Flow


$      2,319

$        37,116

















Twelve Months Ended 





December 31,



$000s


2019

2018



Net cash provided (used) by operating activities


$    48,526

$        40,939



Acquisition of property, plant and equipment


(53,321)

(64,036)



Free Cash Flow


$     (4,795)

$      (23,097)


 

Reconciliation of Net Debt







December 31,

December 31,

$000s


2019

2018

Short term debt & finance lease liability


$               22,830

$               33,828

Long term debt and finance lease liability (ex- issuance costs)


766,521

817,549

Funded debt


789,351

851,377

Cash and cash equivalents


31,703

17,988

Net debt


$             757,648

$             833,389

The Company discloses in this presentation the non-GAAP financial measures of adjusted income from operations, adjusted EBITDA, adjusted net income (loss), adjusted net income per diluted share, free cash flow and net debt.  Each of these non-GAAP financial measures provides supplementary information about the impacts of acquisition, divestiture and integration related expenses, foreign-exchange impacts on inter-company loans, reorganizational and impairment charges.  Over the past five years, we have completed seven acquisitions, two of which were transformative for the Company, and sold two of our businesses.  The costs we incurred in completing such acquisitions, including the amortization of intangibles and deferred financing costs, and these divestitures have been excluded from these measures because their size and inconsistent frequency are unrelated to our commercial performance during the period, and which we believe are not indicative of our ongoing operating costs. We exclude the impact of currency translation from these measures because foreign exchange rates are not under management's control and are subject to volatility. Other non-operating charges are excluded as the charges are not indicative of our ongoing operating cost. We believe the presentation of adjusted income from operations, adjusted EBITDA, adjusted net income (loss), adjusted net income per diluted share, free cash flow and net debt provides useful information in assessing our underlying business trends and facilitates comparison of our long-term performance over given periods.

The non-GAAP financial measures provided herein may not provide information that is directly comparable to that provided by other companies in the Company's industry, as other companies may calculate such financial results differently. The Company's non-GAAP financial measures are not measurements of financial performance under GAAP and should not be considered as alternatives to actual income growth derived from income amounts presented in accordance with GAAP. The Company does not consider these non-GAAP financial measures to be a substitute for, or superior to, the information provided by GAAP financial results.

(a) Non-GAAP adjusted income from operations represents GAAP income from operations, adjusted to exclude the effects of restructuring and integration expense; non-operational charges related to acquisition and transition expense, intangible amortization costs for fair value step-up in values related to acquisitions, non-cash impairment charges, and when applicable, our share of income from joint venture operations. We believe this presentation is commonly used by investors and professional research analysts in the valuation, comparison, rating and investment recommendations of companies in the industrial industry. We use this information for comparative purposes within the industry. Non-GAAP adjusted income from operations is not a measure of financial performance under GAAP and should not be considered as a measure of liquidity or as an alternative to GAAP income from operations.

(b) Non-GAAP adjusted EBITDA represents GAAP net income (loss), adjusted to include income taxes, interest expense, Interest rate swaps and write-offs, depreciation and amortization, charges related to acquisition and transition costs, non-cash stock compensation expense, foreign exchange gain (loss) on inter-company loans, restructuring and integration expense, income from discontinued operations, and non-cash impairment charges, to the extent applicable. We believe this presentation is commonly used by investors and professional research analysts in the valuation, comparison, rating and investment recommendations of companies in the industrial industry. We use this information for comparative purposes within the industry. Non-GAAP adjusted EBITDA is not a measure of financial performance under GAAP and should not be considered as a measure of liquidity or as an alternative to GAAP income (loss) from continuing operations.

(c) This line item reflects the aggregate tax effect of all nontax adjustments reflected in the respective table. NN, Inc. estimates the tax effect of the adjustment items identified in the reconciliation schedule above by applying the applicable statutory rates by tax jurisdiction unless the nature of the item and/or the tax jurisdiction in which the item has been recorded requires application of a specific tax rate or tax treatment.

(d) Non-GAAP adjusted net income (loss) represents GAAP  net income (loss) adjusted to exclude the tax-affected effects of restructuring and integration charges (related to plant closures and other charges incurred to implement our strategic goals that do not necessarily represent a major strategic shift in operations), charges related to acquisition and transition costs,  amortization of intangibles costs for fair value step-up in values related to acquisitions and amortization of deferred financing costs,  foreign exchange gain (loss) on inter-company loans, estimated interest expense on cash held from divestiture, non-cash impairment charges, the impact of enactment of the Tax Cut and Jobs Act and income from discontinued operations. We believe this presentation is commonly used by investors and professional research analysts in the valuation, comparison, rating and investment recommendations of companies in the industrial industry. We use this information for comparative purposes within the industry. Non-GAAP adjusted income (loss) from segment operations is not a measure of financial performance under GAAP and should not be considered as a measure of liquidity or as an alternative to GAAP income (loss) from continuing operations.

Cision View original content:http://www.prnewswire.com/news-releases/nn-inc-reports-fourth-quarter-and-full-year-2019-results-301022719.html

SOURCE NN, Inc.

AT ABERNATHY MACGREGOR, Claire Walsh, (General info), (212) 371-5999