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SEC Filings

10-Q
NN INC filed this Form 10-Q on 11/09/2017
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The increase in net sales contributed to the increase in income from operations. Cost reduction projects resulted in savings in cost of products sold of approximately $1.2 million over the first nine months of 2017 compared to the same period in 2016. Overall, cost of products sold increased by $3.2 million. Restructuring costs decreased by $3.6 million compared to the first nine months of 2016, primarily related to the closure of the Wheeling Plant in the prior year. These factors that increased income from operations were slightly offset by start-up costs for new products and a $1.7 million increase in depreciation and amortization consistent with recent capital expenditure activity.

PRECISION ENGINEERED PRODUCTS GROUP

 

     Nine Months Ended September 30,  
     2017      2016      $ Change  

Net sales

   $ 208,890      $ 195,837      $ 13,053     

Volume

            $ 12,793  

Foreign exchange effects

              (641

Price/material inflation pass-through/mix

              901  

Income from operations

   $ 29,436      $ 26,116      $ 3,320     

Net sales increased during the first nine months of 2017 from the first nine months of 2016 primarily due to the overall improvement in demand across the medical end market and sales to new customers within the aerospace market. In addition to overall medical market improvement, we have achieved increases in market share for certain medical devices. We have also benefited from the introduction of new products for the aerospace end market.

The increase in net sales contributed to the increase in income from operations. Cost of products sold increased at a rate consistent with net sales. We also experienced a shift in product mix toward higher cost raw materials and incurred new program setup costs for certain products sold into the aerospace end market. Additionally, during the first quarter of 2016 we recognized $2.5 million of amortization expense related to backlog and unfavorable leasehold intangibles which was fully amortized in 2016 and therefore did not impact 2017. Likewise, $0.9 million of restructuring cost was incurred in 2016 related to restructuring after the 2015 acquisition of PEP.

Changes in Financial Condition from December 31, 2016 to September 30, 2017

From December 31, 2016 to September 30, 2017, total assets increased by $160.9 million. Cash proceeds of $387.6 million from the sale of the PBC business was the primary contributor to the increase in assets. We also experienced increases in accounts receivable at APC and PEP as sales grew. Days inventory outstanding increased slightly by approximately four days due to normal seasonal inventory building activity as we prepare for fourth quarter sales. The increases in cash, accounts receivable, and inventory were partially offset by the carrying value of current assets of discontinued operations and noncurrent assets of discontinued operations as of December 31, 2016, which were sold in the sale of the PBC business and are therefore no longer a component of total assets as of September 30, 2017. Accordingly, current assets decreased by $106.7 million and noncurrent assets decreased by $103.3 million compared to December 31, 2016, due to the sale of the PBC business. Also offsetting the increase in cash was a $17.5 million decrease in intangible assets due to normal amortization. Foreign exchange translation impacted total assets in comparing changes in account balances from December 31, 2016, to September 30, 2017, by increasing total assets by $7.0 million, of which $2.5 million related to current assets.

From December 31, 2016 to September 30, 2017, total liabilities increased by $30.1 million. Total debt increased by $16.6 million as a result of the redemption of our Senior Notes with the proceeds of a new $300.0 million Incremental Term Loan in April 2017, net of the effect of paying down the Senior Secured Revolver using cash generated from operations and a portion of the cash proceeds from the sale of the PBC business. Income taxes payable increased by $66.0 million, primarily due to taxes on the gain on sale of the PBC business. We also experienced increases in accounts payable at APC and PEP as sales grow. The increases in debt, income taxes payable, and accounts payable were partially offset by the carrying value of current liabilities of discontinued operations and noncurrent liabilities of discontinued operations as of December 31, 2016, which were assumed by the acquirer in the sale of the PBC business and are therefore no longer a component of total liabilities as of September 30, 2017. Accordingly, current liabilities decreased by $45.4 million and noncurrent liabilities decreased by $12.0 million compared to December 31, 2016, due to the sale of the PBC business. Foreign exchange translation impacted total liabilities in comparing changes in account balances from December 31, 2016, to September 30, 2017, by increasing total liabilities by $3.0 million, of which $1.3 million related to current liabilities.

 

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