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SEC Filings

10-Q
NN INC filed this Form 10-Q on 08/14/2017
Entire Document
 


Table of Contents

Six Months Ended June 30, 2017 Compared to the Six Months Ended June 30, 2016

 

     Consolidated NN, Inc.
Six Months Ended June 30,
 
     2017     2016     Change        

Net sales

   $ 452,189     $ 426,498     $ 25,691    

Volume

           26,969  

Foreign exchange effects

           (4,067

Price/material inflation pass-through/mix

           2,789  

Cost of products sold (exclusive of depreciation and amortization shown separately below)

     332,994       316,548       16,446    

Volume

           17,857  

Foreign exchange effects

           (2,887

Mix

           5,048  

Inflation

           3,402  

Cost reduction projects/other

           (6,974

Selling, general and administrative expense

     44,530       41,795       2,735    

Foreign exchange effects

           (38

Infrastructure and staffing costs

           2,773  

Depreciation and amortization

     31,468       32,484       (1,016  

Foreign exchange effects

           (14

Backlog/unfavorable leasehold

           (2,488

Increase in expense

           1,486  

Restructuring and integration expense

     446       6,585       (6,139  
  

 

 

   

 

 

   

 

 

   

Income from operations

     42,751       29,086       13,665    

Interest expense

     27,365       33,053       (5,688  

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

     39,639       —         39,639    

Derivative losses on change in interest rate swap fair value

     13       —         13    

Other (income) expense, net

     (79     (1,953     1,874    
  

 

 

   

 

 

   

 

 

   

Income (loss) before provision (benefit) for income taxes and share of net income from joint venture

     (24,187     (2,014     (22,173  

Provision (benefit) for income taxes

     (7,128     (31     (7,097  

Share of net income from joint venture

     2,937       2,743       194    
  

 

 

   

 

 

   

 

 

   

Net income (loss)

   $ (14,122   $ 760     $ (14,882  
  

 

 

   

 

 

   

 

 

   

Net Sales. Net sales increased during the first half of 2017 from the first half of 2016 by $25.7 million, principally due to higher volumes. The higher volumes were primarily due to demand improvements within the industrial end market, medical end market, and the automotive market. Overall, sales were ahead of prior year by $6.8 million, $6.1 million and $12.8 million for PBC, APC and PEP, respectively. These increases were partially offset by the impact of devaluation of the euro and other foreign currency denominated sales.

Cost of Products Sold. The increase in cost of products sold was primarily due to the increase in demand and production volumes as well as changes in product mix. These increases were partially offset by the impact of the devaluation of the euro and other foreign currency denominated costs. Additionally, increases were partially offset by cost savings from production process improvement projects.

Selling, General and Administrative. The majority of the increase during the first half of 2017 from the first half of 2016 was due to the infrastructure and staffing costs incurred related to our strategic initiatives.

Depreciation and Amortization. The decrease in depreciation and amortization during the first half of 2017 from the first half of 2016 is principally due to the amortization of backlog and unfavorable leasehold intangibles during the first half of 2016. Expected increases in expense consistent with additions to property, plant and equipment partially offset the overall decrease in depreciation and amortization.

Restructuring and Integration Expense. The decrease in restructuring and integration expense was primarily due to limited spending on restructuring in the first half of 2017 compared to the first half of 2016. The first half of 2016 included $3.6 million of cost incurred to close the Wheeling Plant and $2.4 million of cost for headcount reduction in PBC.

Interest Expense. Interest expense decreased by $5.7 million due to the redemption of the Senior Notes at the beginning of second quarter of 2017 with the proceeds of the Incremental Term Loan, which bears a lower interest rate based on LIBOR. Further interest savings resulted from the refinancing of the Senior Secured Term Loan and Senior Secured Revolver in the third quarter of 2016.

 

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