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Press Release

NN, Inc. Reports Second Quarter 2017 Results

JOHNSON CITY, Tenn., Aug. 2, 2017 /PRNewswire/ -- NN, Inc., (NASDAQ: NNBR), a diversified industrial company, today reported its financial results for the second quarter ended June 30, 2017. 

GAAP Results

Net sales for the second quarter of 2017 increased $11.6 million, or 5%, to $225.9 million, compared to $214.3 million for the second quarter of 2016.  Organic growth in the medical, aerospace and CAFE end markets accounted for the increase.

On a GAAP basis, income from operations for the second quarter of 2017 was $20.6 million, compared to $16.7 million for the same period in 2016. Net loss on a GAAP basis for second quarter of 2017 was $21.5 million, or ($0.78) per diluted share. This compares to a net income of $2.0 million, or $0.07 per diluted share in the second quarter of 2016. The loss was driven by cost related to the refinance and retirement of the senior notes during the quarter.

On a GAAP basis, income from operations for second quarter 2017 in the Autocam Precision Components Group was $10.7 million compared to $7.8 million for the same period in 2016.

On a GAAP basis, income from operations for second quarter 2017 in the Precision Bearing Components Group was $8.4 million compared to $6.5 million for the same period in 2016.

On a GAAP basis, income from operations for second quarter 2017 in the Precision Engineered Products Group was $10.6 million compared to $10.8 million for the same period in 2016.

Adjusted Results

Adjusted income from operations for the second quarter of 2017 was $28.1 million, compared to $28.7 million for the same period in 2016. Adjusted net income was $13.9 million, or $0.51 per diluted share, compared to $12.4 million, or $0.46 per diluted share for the same period in 2016.

Richard Holder, President and Chief Executive Officer, commented, "Overall operating performance in the quarter was in line with our expectations and our plan for the quarter. Sales were slightly ahead of plan as we continue to see new business wins in our medical and aerospace end markets.  Adjusted earnings per share of $0.51 was also better than expected."

Business Group Results

Autocam Precision Components

Net sales for the second quarter of 2017 were $86.7 million, compared to $83.0 million in the second quarter of 2016, an increase of 4% or $3.7 million.  Growth related to our CAFE automotive business accounted for the increase. Adjusted income from operations for the quarter increased $0.9 million to $11.6 million, compared to $10.7 million in the second quarter of 2016. 

Mr. Holder commented, "The APC Group continues to perform well.  Our CAFE technology platform continues to drive growth and margins continue to expand as we reap the benefits of the NN Operating System."

Precision Bearing Components

Net sales for the second quarter of 2017 were $67.9 million, compared to $65.2 million in the second quarter of 2016, an increase of $2.7 million or 4%.  Adjusted income from operations for the second quarter was $8.7 million, compared to $8.2 million in the second quarter of 2016.

Mr. Holder commented, "The PBC Group continued to see improved performance in the second quarter, and sales and operating profit were better than the prior year, meeting our expectations for the quarter. Regarding the divestiture of PBC, we remain on track and we expect to close the transaction before year-end."

Precision Engineered Products

Net sales for the second quarter of 2017 were $71.3 million, compared to $66.1 million in the second quarter of 2016, an increase of $5.2 million, or 8%.  Volume increases related to our medical and aerospace end markets were the primary drivers.  Adjusted income from operations for the quarter was $15.6 million, compared to $16.3 million in 2016.

Mr. Holder commented, "We continue to experience new program wins in both our medical and aerospace end markets and are pleased with the top line performance of the PEP Group. As these new programs reach normal production levels in the second half and we gain the benefits of the NN Operating System, we expect margins to return to normal."

Mr. Holder concluded, "We are pleased with the performance of the business in the second quarter and first half of the year. Our strategy continues to pay dividends as we have now seen growth in all of our segments in three consecutive quarters."

The full set of financial guidance for the second quarter and full year 2017 can be found in our supplemental presentation posted in the Investor Relations section of our website at www.nninc.com.

NN will discuss its results during its quarterly investor conference call tomorrow morning starting 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 1-888-452-4004 or 1-719-325-2108 Conference ID: 4928092. For those who are unavailable to listen to the live broadcast, a replay will be available shortly after the call for 90 days.

NN discloses in this press release the non-GAAP financial measures of adjusted income from operations, adjusted net income and adjusted diluted earnings per share.  Each of adjusted income from operations and adjusted net income provide supplementary information about the impacts of acquisition related expenses, foreign-exchange and other non-operating impacts on our business. 

The financial tables found later in this press release include a reconciliation of adjusted income from operations, adjusted net income and adjusted diluted earnings per share to the U.S. GAAP financial measures of income from operations, net income and diluted earnings per share.

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 Johnson City, Tennessee, NN has 40 manufacturing plants in North America, Western Europe, Eastern 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, 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 or the possibility that the Company will be unable to execute on the intended redeployment of proceeds from a divestiture, whether due to a lack of favorable investment opportunities or otherwise.

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, 2016. 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.

Condensed Consolidated Statement of Income (Loss)

(Unaudited)



Three Months Ended


Six Months Ended


June 30,


June 30,

(in thousands, except per share data)

2017

2016


2017

2016







Net sales

$225,875

$214,272


$452,189

$426,498

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

166,040

156,794


332,994

316,548

Selling, general and administrative expense

23,036

21,592


44,530

42,304

Depreciation and amortization

15,900

15,136


31,468

32,484

Restructuring and integration expense

306

4,047


446

6,585

Income from operations

20,593

16,703


42,751

28,577







Interest expense

12,409

16,165


27,365

32,587

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

39,639

-


39,639

-

Derivative loss on change in interest rate swap fair value

101

-


13

-

Other (income) expense, net

645

(824)


(79)

(1,953)

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

(32,201)

1,362


(24,187)

(2,057)

Provision (benefit) for income taxes

(9,428)

674


(7,128)

(46)

Share of net income from joint venture

1,244

1,343


2,937

2,743

Net income (loss)

$(21,529)

$2,031


$(14,122)

$732







Basic net income (loss) per share:






Net income (loss) per share

$(0.78)

$0.08


$(0.52)

$0.03

Weighted average shares outstanding

27,468

27,024


27,358

26,923







Diluted net income (loss) per share:






Net income (loss) per share

$(0.78)

$0.07


$(0.52)

$0.03

Weighted average shares outstanding

27,468

27,187


27,358

27,050







 Cash dividends per common share

$0.07

$0.07


$0.14

$0.14

 

 

NN, Inc.

June 30,

December 31,

Condensed Consolidated Balance Sheet (Unaudited)

2017

2016

Cash

$19,166

$14,405

Current maturities of long-term debt

24,748

12,751

Current portion of obligation under capital lease

3,523

3,762

Long-term debt, net of current portion

827,390

785,713

Obligation under capital lease, net of current portion

4,691

5,851

 

 

NN, Inc.






Reconciliation of Income from Operations to
Adjusted Income from Operations

For the Period Ending:

June 30,

June 30,

NN, Inc. Consolidated

2017

2016

GAAP Income from Operations

$20,593

$16,703

Restructuring & impairment charges

306

4,745

Acquisition & integration expenses

1,279

1,178

Amortization of intangibles

5,893

6,101

Non-GAAP Adjusted Income from Operations (a)

$28,071

$28,727




Non-GAAP Adjusted Operating Margin (a)

12.4%

13.4%

GAAP Sales

225,875

214,272







Autocam Precision Components

2017

2016

GAAP Income from Operations

$10,688

$7,770

Restructuring & impairment charges

6

2,085

Acquisition & integration expenses

-


Amortization of intangibles

874

885

Non-GAAP Adjusted Income from Operations

$11,568

$10,740

JV Contribution

1,244

1,343

Non-GAAP Adjusted Income from Operations (a)

12,812

12,083




Non-GAAP Adjusted Operating Margin (a)

14.8%

14.6%

GAAP Sales

86,658

82,991







Precision Bearing Components

2017

2016

GAAP Income from Operations

$8,351

$6,474

Restructuring & impairment charges

300

1,651

Acquisition & integration expenses

-


Amortization of intangibles

53

57

Non-GAAP Adjusted Income from Operations (a)

$8,704

$8,182




Non-GAAP Adjusted Operating Margin (a)

12.8%

12.6%

GAAP Sales

67,928

65,157







Precision Engineered Products

2Q17

2Q16

GAAP Income from Operations

$10,600

$10,782

Restructuring & impairment charges

-


Acquisition & integration expenses

-

311

Amortization of intangibles

4,966

5,159

Non-GAAP Adjusted Income from Operations (a)

$15,566

$16,252




Non-GAAP Adjusted Operating Margin (a)

21.8%

24.6%

GAAP Sales

71,289

66,124

 

NN, Inc.



Reconciliation of Net Income to Adjusted Net Income



For the Period Ending:

June 30,

GAAP Net Income to Adjusted Net Income

2017

2016

GAAP Net Income

$(21,529)

$2,031

Pre-tax acquisition and integration costs

1,279

1,178

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

770

(643)

Pre-tax reorganization and impairment charges

306

4,745

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

39,740

-

Pre-tax write-off interest rate swap

-

-

Pre-tax amortization of intangibles & deferred financing
costs

6,920

7,254

Tax effect of all adjustment reflected above (c)

(13,548)

(2,133)

Non-GAAP Adjusted Net Income (b)

$13,938

$12,432







Reconciliation of Diluted Earnings per Share to
Adjusted Diluted Earnings per Share

2017

2Q16

GAAP Net Income per Share

$(0.78)

$0.07

Pre-tax acquisition and integration costs

0.05

0.04

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

0.03

(0.02)

Pre-tax reorganization and impairment charges

0.01

0.18

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

1.45

-

Pre-tax write-off interest rate swap

-

-

Pre-tax amortization of intangibles & deferred financing
costs

0.25

0.27

Tax effect of all adjustment reflected above (c)

(0.49)

(0.08)

Non-GAAP Adjusted Net Income per Share (b)

$0.51

$0.46

 Diluted Shares O/S

27,468

27,100

 

 

The Company discloses in this presentation the non-GAAP financial measures of adjusted income from operations, adjusted net income and adjusted diluted earnings per share.  Each of these non-GAAP financial measures provide supplementary information about the impacts of acquisition and integration related expenses, foreign-exchange impacts on inter-company loans reorganizational and impairment charges.  Over the past three years, we have completed six acquisitions, two of which were transformative for the Company. The costs we incurred in completing such acquisitions, including the amortization of intangibles and deferred financing costs, 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 such as, the write-off of our interest rate swap, are excluded as the charges on not indicative of our ongoing operating cost. We believe the presentation of adjusted income from operations, adjusted net income and adjusted diluted earnings per share provide 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 net 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 non-cash  impairment 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), one-time charges related to acquisition and integration costs,  intangible amortization costs for fair value step-up in values related to acquisitions, 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 net income and adjusted diluted earnings per share, represents GAAP net income, adjusted to exclude the tax-affected effects of restructuring and impairment 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), one-time charges related to acquisition and integration costs,  amortization of intangibles costs for fair value step-up in values related to acquisitions and amortization of deferred financing costs, loss on extinguishment of debt and write-off of unamortized debt issuance costs and foreign exchange gain (loss) on inter-company loans. 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 net income and Non-GAAP adjusted diluted earnings per share, 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 net income.

(c) This line item reflects the aggregate tax effect of all nontax adjustments reflected in the table above. In addition, the footnotes above indicate the after-tax amount of each individual adjustment item.  NN, Inc. estimates the tax effect of the adjustment items identified in the reconciliation schedule above by applying NN, Inc's. overall estimated effective tax rate to the pretax amount, 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.

View original content:http://www.prnewswire.com/news-releases/nn-inc-reports-second-quarter-2017-results-300498720.html

SOURCE NN, Inc.

FOR FURTHER INFORMATION: AT THE COMPANY, Robbie Atkinson, VP, Strategy & Investor Relations, (423) 434-8398; AT ABERNATHY MACGREGOR, Claire Walsh, (General info), (212) 371-5999