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SEC Filings

10-Q
NN INC filed this Form 10-Q on 11/09/2017
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Table of Contents

Working capital, which consists principally of cash, accounts receivable, inventories and other current assets offset by accounts payable, accrued payroll costs, income taxes payable current maturities of long-term debt and other current liabilities, was $377.4 million as of September 30, 2017, compared to $141.9 million as of December 31, 2016. The increase in working capital was due primarily to $387.6 million of cash proceeds from the sale of the PBC business and increases in accounts receivable and inventories, as discussed above, slightly offset by increases in accounts payable and taxes payable, also discussed above. The repayment of approximately $33.2 million of principal outstanding on our Senior Secured Revolver in August 2017 resulted in a reduction of working capital. Current assets of discontinued operations of $106.7 as of December 31, 2016, have the effect of decreasing working capital at September 30, 2017, compared to December 31, 2016, because they were sold in the sale of the PBC business and are no longer a component of our current assets. Current liabilities of discontinued operations of $45.4 as of December 30, 2016, have the effect of increasing working capital at September 30, 2017, compared to December 31, 2016, because they were assumed by the acquirer in the sale of the PBC business and are no longer a component of our current liabilities.

Cash provided by operations was $0.3 million for the nine months ended September 30, 2017, compared with cash provided by operations of $46.3 million for the nine months ended September 30, 2016. The difference was primarily due to $31.6 million paid for the call premium on the redemption of the Senior Notes in April 2017, partially offset by increased operating income. Cash provided by operating activities for discontinued operations was $17.1 million and $14.4 million for the nine-month periods ended September 30, 2017 and 2016, respectively.

Cash provided by investing activities was $332.4 million for the nine months ended September 30, 2017, compared with cash used by investing activities of $30.2 million for the nine months ended September 30, 2016. The difference was primarily due to proceeds from the sale of the PBC business in August 2017. Cash used by investing activities for discontinued operations was $9.8 million and $14.0 million for the nine-month periods ended September 30, 2017 and 2016, respectively.

Cash used by financing activities was $1.1 million for the nine months ended September 30, 2017, compared with cash used by financing activities of $15.1 million for the nine months ended September 30, 2016. The difference was primarily due to net proceeds of debt to fund the Senior Notes call premium in 2017.

Liquidity and Capital Resources

Aggregate principal amounts outstanding under the Senior Secured Term Loan and Incremental Term Loan as of September 30, 2017, were $833.3 million (without regard to debt issuance costs). We had no amounts outstanding on the Senior Secured Revolver at that time. As of September 30, 2017, we could borrow up to $89.7 million under the Senior Secured Revolver, subject to certain limitations. This amount of availability is net of $10.3 million of outstanding letters of credit at September 30, 2017, which are considered as usage of the Senior Secured Revolver.

The Senior Secured Term Loan requires quarterly principal payments of $1.4 million through September 30, 2022, with the remaining principal amount due on the maturity date. If one-month LIBOR is less than 0.75%, then we pay 5.00% per annum in interest. If one-month LIBOR exceeds 0.75%, then we pay the variable one-month LIBOR rate plus an applicable margin of 4.25%. Based on the outstanding balance at September 30, 2017, annual interest payments would have been $29.6 million.

The Incremental Term Loan requires quarterly principal payments of $3.0 million through March 31, 2021, with the remaining principal amount due on the maturity date. If one-month LIBOR is less than 0.75%, then we pay 4.50% per annum in interest. If one-month LIBOR exceeds 0.75%, then we pay the variable one-month LIBOR rate plus an applicable margin of 3.75%. Based on the outstanding balance at September 30, 2017, annual interest payments would have been $14.6 million.

The Senior Secured Revolver bears interest at a rate of one-month LIBOR plus an applicable margin of 3.50%. We had no outstanding balance at September 30, 2017.

The Senior Notes bore interest at 10.25% payable semi-annually in arrears on May 1 and November 1 of each year. Upon redemption of the Senior Notes, we paid interest of $10.8 million for the period November 1, 2016 through April 3, 2017.

We believe that funds generated from our consolidated continuing operations and existing cash will provide sufficient cash flow to service the required debt and interest payments under these facilities. The absence of cash flows from discontinued operations is not expected to significantly affect our ability to service our debt.

Our arrangements with customers typically provide that payments are due within 30 to 60 days following the date of shipment. We invoice and receive payment from many of our customers in euros as well as other currencies. Additionally, we are party to various third party and intercompany loans, payables and receivables denominated in currencies other than the U.S. dollar. As a result of these sales, loans, payables and receivables, our foreign exchange transaction and translation risk has increased. Various strategies to manage this risk are available to management, including producing and selling in local currencies and hedging programs. As of September 30, 2017, no currency hedges were in place. In addition, a strengthening of the U.S. dollar and/or euro against foreign currencies could impair our ability to compete with international competitors for foreign as well as domestic sales.

 

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