UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 5, 2015 (November 4, 2015)
NN, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 0-23486 | 62-1096725 | ||
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||
| 207 Mockingbird Lane, Johnson City, Tennessee |
37604 | |||
| (Address of principal executive offices) | (Zip Code) | |||
(423) 743-9151
(Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report)
Check the appropriate box if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d- 2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e- 4(c)) |
| ITEM 2.02 | RESULTS OF OPERATIONS AND FINANCIAL CONDITION |
On November 4, 2015, NN, Inc. (the “Company”) issued a press release announcing the Company’s results of operations and financial condition for the three months ended September 30, 2015. The full text of the press release is furnished as Exhibit 99.1 and is incorporated herein by reference.
| ITEM 7.01 | REGULATION FD DISCLOSURE |
On November 4, 2015, the Company posted a presentation regarding the Company’s results of operations and financial condition for the three months ended September 30, 2015 to the Investor Relations section of its website at www.nninc.com. A copy of the presentation is furnished as Exhibit 99.2 and is incorporated herein by reference.
On November 4, 2015, the Company also posted to its website a presentation containing a reconciliation of the non-GAAP financial measures included in Exhibit 99.2 to their nearest GAAP (as defined below) financial measures. A copy of the presentation is furnished as Exhibit 99.3 and is incorporated herein by reference.
Pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”), the information furnished pursuant to Item 2.02 and 7.01 of this Current Report on Form 8-K is deemed to have been furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. Such information shall not be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Exhibit 99.1 and Exhibit 99.2 contain certain “non-GAAP financial measures” as that term is defined by the rules and regulations of the SEC. The non-GAAP financial measures used in Exhibit 99.1 and Exhibit 99.2 have inherent limitations as performance measures and should not be considered in isolation of, as a substitute for, or superior to, financial information prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The non-GAAP financial measures contained in Exhibit 99.1 and Exhibit 99.2 may differ from similarly titled measures presented by other companies. The non-GAAP financial measures, as well as other information contained in Exhibit 99.1 and Exhibit 99.2, should be read in conjunction with the Company’s financial statements filed with the SEC.
| ITEM 9.01 | FINANCIAL STATEMENTS AND EXHIBITS |
| Exhibit No. |
Description | |
| 99.1 | Press Release of NN, Inc. dated November 4, 2015. | |
| 99.2 | Third Quarter 2015 Earnings Release Presentation of NN, Inc. dated November 4, 2015. | |
| 99.3 | Third Quarter 2015 Non-GAAP to GAAP Reconciliation Presentation of NN, Inc. dated November 4, 2015. | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: November 5, 2015
| NN, INC. | ||
| By: | /s/ Matthew S. Heiter | |
| Name: |
Matthew S. Heiter | |
| Title: |
Senior Vice President and General Counsel | |
EXHIBIT INDEX
| Exhibit No. |
Description | |
| 99.1 | Press Release of NN, Inc. dated November 4, 2015. | |
| 99.2 | Third Quarter 2015 Earnings Release Presentation of NN, Inc. dated November 4, 2015. | |
| 99.3 | Third Quarter 2015 Non-GAAP to GAAP Reconciliation Presentation of NN, Inc. dated November 4, 2015. | |
Exhibit 99.1
| RE: NN, Inc. | ||
| 207 Mockingbird Lane | ||
| 3rd Floor | ||
| Johnson City, TN 37604 | ||
| FOR FURTHER INFORMATION: | ||
| AT THE COMPANY | AT FINANCIAL RELATIONS BOARD | |
| Robbie Atkinson | Marilynn Meek | |
| Corporate Treasurer & Investor Relations | (General info) | |
| (423) 434-8398 | 212-827-3773 | |
FOR IMMEDIATE RELEASE
November 4, 2015
NN, INC. REPORTS THIRD QUARTER 2015 RESULTS
| • | Net sales of $154.8 million, an increase of $29.2 million |
| • | Adjusted income from operations grew to $15.3 million |
| • | Adjusted net income of $8.3 million or $0.31 per diluted share |
Johnson City, Tenn, November 4, 2015 –NN, Inc., (NASDAQ: NNBR) a diversified industrial company, today reported its financial results for the third quarter ended September 30, 2015.
Third Quarter 2015 Results
Net sales for the third quarter of 2015 increased $29.2 million, or 23% to $154.8 million, compared to $125.6 million for the third quarter of 2014. Acquisitions added $41.6 million in revenue. Negative currency impacts reduced reported net sales by $7.8 million versus the third quarter of last year.
Adjusted income from operations for the third quarter of 2015 was $15.3 million, an increase of 44%, compared to $10.6 million for the same period in 2014. Adjusted net income, which excludes the after-tax impact of foreign exchange on inter-company loans and after-tax acquisition and integration expenses, increased to $8.3 million, or $0.31 per diluted share, compared to $6.3 million, or $0.34 per diluted share for the same period in 2014. In the quarter the Company also issued 7.6 million shares related to the completion of the follow-on stock offering earlier this year.
On a GAAP basis, income from operations for the third quarter of 2015 was $10.1 million, compared to $2.6 million for the same period in 2014. Net income on a GAAP basis for the third quarter of 2015 was $4.6 million, or $0.17 per diluted share. This compares to a net loss $3.8 million, or $0.21 per diluted share in the third quarter of 2014.
Richard Holder, President and Chief Executive Officer, commented, “The third quarter presented a series of challenges in the broader economy that impacted our sales during the quarter. Despite these headwinds we began to see the impact of the NN Operating System as we were able to appropriately manage our business in a rapidly changing environment and deliver strong operating performance.”
Business Group Results
Metal Bearing Components
Net sales for the group decreased $9.0 million to $60.5 million during the third quarter of 2015, compared to $69.6 million for third quarter 2014. Negative currency impacts of $6.7 million as well as volume and price/mix reductions of $2.3 million accounted for the decline. Income from operations for the third quarter was $6.6 million, compared to $7.6 million in the third quarter of 2014.
“Changes in demand in Asia as well as the continued effects of negative currency translation weighed on our MBC business during the quarter as sales declined $9.0 million,” said Holder. “However, the business was still able to hold operating margins on a year over year basis as we continue to drive results through the operating system.”
Autocam Precision Components
Net sales for the third quarter of 2015 were $83.2 million, compared to $46.6 million in the third quarter of 2014, an increase of $36.6 million. Acquisitions accounted for $39.7 million of the increase. Income from operations for the quarter increased $5.4 million to $10.9 million, compared to $5.5 million in the third quarter of 2014.
Holder commented, “The Autocam Precision Components Group continued to perform well despite the conditions in Asia and Brazil. APC’s focus is on CAFE technologies that have adoption rates and growth trends not tied to normal end market cyclicality. In accordance with our continued execution of our Autocam synergy plan we’re announcing the closure of one of our APC facilities early next year.”
Plastic and Rubber Components
Net sales for the third quarter increased $1.6 million to $11.0 million, compared to $9.4 million for the same period in 2014. Income from operations for the quarter was $0.6 million, compared to $0.2 million in 2014.
Precision Engineered Products (PEP) Acquisition Update
Holder commented, “As announced during the third quarter we closed the PEP acquisition in October. Year to date PEP’s sales and margins continue to be in line with our expectations. Starting with the fourth quarter we will be reporting PEP as a segment within our portfolio. Additionally, the PEP Group will include our existing Plastic and Rubber Components Group as part of our continued focus on properly aligning all of our businesses to address the end markets we serve. PEP is an important part of our strategic plan and we again welcome the team to our family.”
Guidance
Holder continued, “As previously committed, beginning with the fourth quarter we will initiate a more comprehensive set of financial guidance designed to help our shareholders have the appropriate information to accurately evaluate our performance. This will include sales, adjusted EBITDA, adjusted operating margin, and adjusted earnings per share. With the completion of the PEP acquisition we will also begin excluding non-cash amortization charges from our adjusted earnings per share. We believe removing these charges provides the shareholder with the best evaluation of the Company’s performance.”
The full set of financial guidance for the fourth quarter and 2016 can be found in our supplemental deck on our website.
Holder concluded, “I am encouraged with our results in the face of an ever changing macro environment. Our focus this year on implementing the NN Operating System and managing our organizational flex has had a significant impact on the quarter as we were able to deliver operating improvements in all of our businesses. Finally, with the announcement and subsequent close of the PEP acquisition we remain focused on executing our strategic plan.”
NN will discuss its results during its quarterly investor conference call tomorrow morning starting at 9:00 a.m. ET. The call and an accompanying slide presentation may be accessed via NN’s website. The conference call can also be accessed by dialing 888-427-9376; conference id – 5901109. For those who are unavailable to listen to the live broadcast, a replay will be available shortly after the call for 90 days.
The attached financial tables include a reconciliation of adjusted income from operations, adjusted net income and adjusted earnings per share to the U.S. GAAP financial measures of income from operations and net income.
NN, Inc., a diversified industrial company manufactures and supplies high precision metal bearing components, industrial plastic and rubber products and precision metal components to a variety of markets on a global basis. Headquartered in Johnson City, Tennessee, NN has 43 manufacturing plants in the 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 or completed acquisitions are also forward-looking statements, including statements relating to the anticipated closing date of an acquisition, the Company’s ability to obtain required regulatory approvals or satisfy closing conditions, the costs of an acquisition and the Company’s source(s) of financing, 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, 2014 and quarterly report on form 10-Q for the quarterly period ended September 30, 2015. 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 Income
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
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| (In Thousands of Dollars, Except Per Share Data) |
2015 | 2014 | 2015 | 2014 | ||||||||||||
| Net sales |
$ | 154,824 | $ | 125,632 | $ | 483,425 | $ | 334,840 | ||||||||
| Cost of products sold (exclusive of depreciation and amortization shown separately below) |
120,195 | 100,441 | 378,220 | 265,010 | ||||||||||||
| Selling, general and administrative |
11,949 | 11,124 | 37,910 | 29,799 | ||||||||||||
| Acquisition related costs excluded from selling, general and administrative |
3,948 | 5,651 | 3,948 | 7,080 | ||||||||||||
| Depreciation and amortization |
8,610 | 5,864 | 25,702 | 13,824 | ||||||||||||
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| Income from operations |
10,122 | 2,552 | 37,645 | 19,127 | ||||||||||||
| Interest expense |
4,584 | 5,622 | 16,543 | 6,737 | ||||||||||||
| Other expense, net |
593 | 1,557 | 2,012 | 1,769 | ||||||||||||
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| Income (loss) before provision (benefit) for income taxes and share of net income from joint venture |
4,945 | (4,627 | ) | 19,090 | 10,621 | |||||||||||
| Provision (benefit) for income taxes |
936 | (562 | ) | 4,009 | 4,247 | |||||||||||
| Share of net income from joint venture |
621 | 225 | 2,503 | 225 | ||||||||||||
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| Net income (loss) |
4,630 | (3,840 | ) | 17,584 | 6,599 | |||||||||||
| Basic income (loss) per common share: |
$ | 0.17 | $ | (0.21 | ) | $ | 0.87 | $ | 0.36 | |||||||
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| Weighted average shares outstanding |
26,839 | 17,979 | 20,122 | 17,749 | ||||||||||||
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| Diluted income (loss) per common share: |
$ | 0.17 | $ | (0.21 | ) | $ | 0.86 | $ | 0.36 | |||||||
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| Weighted average shares outstanding |
27,167 | 17,979 | 20,467 | 18,120 | ||||||||||||
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| Cash dividends per common share |
$ | 0.07 | $ | 0.07 | $ | 0.21 | $ | 0.21 | ||||||||
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NN, Inc.
Condensed Balance Sheets
(In thousands)
(Unaudited)
| September 30, | December 31, | |||||||
| (In Thousands of Dollars) | 2015 | 2014 | ||||||
| Assets |
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| Current assets: |
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| Cash |
$ | 40,102 | $ | 37,317 | ||||
| Accounts receivable, net |
108,144 | 97,510 | ||||||
| Inventories |
92,579 | 91,469 | ||||||
| Other current assets |
17,560 | 16,503 | ||||||
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| Total current assets |
258,385 | 242,799 | ||||||
| Property, plant and equipment, net |
266,562 | 278,442 | ||||||
| Goodwill, net |
85,447 | 83,941 | ||||||
| Intangible asset, net |
51,829 | 52,827 | ||||||
| Investment in joint venture |
37,088 | 34,703 | ||||||
| Other non-current assets |
20,165 | 20,001 | ||||||
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| Total assets |
$ | 719,476 | $ | 712,713 | ||||
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| Liabilities and Stockholders’ Equity |
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| Current liabilities: |
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| Accounts payable |
$ | 60,338 | $ | 71,094 | ||||
| Accrued salaries, wages and benefits |
18,362 | 21,148 | ||||||
| Current maturities of long-term debt |
21,677 | 22,160 | ||||||
| Income taxes payable |
4,933 | 3,274 | ||||||
| Current portion of obligations under capital lease |
5,066 | 5,418 | ||||||
| Other current liabilities |
10,747 | 14,504 | ||||||
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| Total current liabilities |
121,123 | 137,598 | ||||||
| Non-current deferred tax liabilities |
46,950 | 49,461 | ||||||
| Long-term debt, net of current portion |
184,356 | 328,026 | ||||||
| Obligations under capital lease, net of current portion |
10,759 | 14,539 | ||||||
| Other non-current liabilities |
12,584 | 9,390 | ||||||
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| Total liabilities |
375,772 | 539,014 | ||||||
| Total stockholders’ equity |
343,704 | 173,699 | ||||||
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| Total liabilities and stockholders’ equity |
$ | 719,476 | $ | 712,713 | ||||
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NN, Inc.
Reconciliation of Non-GAAP to GAAP Financial Measures
(Unaudited)
Reconciliation of net income to adjusted net income:
| Three Months Ended September 30, 2015 |
Three Months Ended September 30, 2014 |
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| (In Thousands) | Diluted Earnings Per Share |
(In Thousands) | Diluted Earnings Per Share |
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| Net Income |
$ | 4,630 | $ | 0.17 | $ | (3,840 | ) | $ | (0.21 | ) | ||||||
| After tax acquisition and integration expenses |
3,372 | 0.13 | 9,222 | 0.50 | ||||||||||||
| After-tax foreign exchange gain on inter-company loans |
284 | 0.01 | 880 | 0.05 | ||||||||||||
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| Adjusted Net Income |
$ | 8,286 | $ | 0.31 | $ | 6,262 | $ | 0.34 | ||||||||
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Reconciliation of net income to adjusted net income:
| Nine Months Ended September 30, 2015 |
Nine Months Ended September 30, 2014 |
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| (In Thousands) | Diluted Earnings Per Share |
(In Thousands) | Diluted Earnings Per Share |
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| Net Income |
$ | 17,584 | $ | 0.86 | $ | 6,599 | $ | 0.36 | ||||||||
| After tax acquisition and integration expenses |
3,808 | 0.19 | 10,354 | 0.57 | ||||||||||||
| After-tax foreign exchange loss on inter-company loans |
939 | 0.04 | 880 | 0.05 | ||||||||||||
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| Adjusted Net Income |
$ | 22,331 | $ | 1.09 | $ | 17,833 | $ | 0.98 | ||||||||
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Reconciliation of income from operations to adjusted income from operations:
| Three Months Ended September 30, 2015 |
Three Months Ended September 30, 2014 |
Nine Months Ended September 30, 2015 |
Nine Months Ended September 30, 2014 |
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| (In Thousands) | (In Thousands) | (In Thousands) | (In Thousands) | |||||||||||||
| Income from operations |
$ | 10,122 | $ | 2,552 | $ | 37,645 | $ | 19,127 | ||||||||
| Acquisition and integration expenses |
5,138 | 8,088 | 5,819 | 9,858 | ||||||||||||
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| Adjusted Income from operations |
$ | 15,260 | $ | 10,640 | $ | 43,464 | $ | 28,985 | ||||||||
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The Company discloses in this press release the non-GAAP financial measures of adjusted income from operations and adjusted net income. Each of adjusted income from operations and adjusted net income provide supplementary information about the impacts of acquisition related expenses and foreign-exchange impacts on intercompany loans. We believe the presentation of adjusted income from operations and adjusted net income provides useful information in assessing our results of operations and potential future results. These measures should not be considered as an alternative to their comparable GAAP measures, nor should they be considered in isolation, or as a substitute for analysis of our results reported under GAAP.
Third Quarter 2015 Earnings Release November 4, 2015 Exhibit 99.2
Except for specific historical information, many of the matters discussed in this presentation 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. Factors which could materially affect actual results include, but are not limited to: general economic conditions and economic conditions in the industrial sector, deterioration of or instability in the economy, the Company’s ability to integrate the recent acquisition of Precision Engineered Products Holdings, Inc. and achieve the anticipated benefits of that transaction, inventory levels, the Company’s compliance with applicable laws and regulations (including regulations relating to medical devices and the healthcare industry) and changes in applicable laws and regulations, regulatory compliance costs and the Company’s ability to manage these costs, start-up costs for new operations, the impact of debt obligations on operations and liquidity, 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. Additional information regarding the factors that may cause actual results to differ materially from these forward-looking statements is available in the Company’s SEC filings, including its 2014 Annual Report on Form 10-K and Quarterly Report on Form 10-Q for the third quarter of 2015. These forward-looking statements speak only as of the date of this release, and the Company does not assume any obligation to update or revise any forward-looking statement, whether as a result of new information, future events and developments or otherwise. With respect to any non-GAAP financial measures included in the following presentation, the accompanying information required by SEC Regulation G can be found in the “Investor Relations” section of the Company’s web site, www.nninc.com, under the heading “News & Events” and subheading “Presentations.” In addition, in addressing various financial metrics the presentation describes certain of the more significant factors that impacted year-over-year performance. Please refer to the Company’s earnings release, Form 10-Q and the other related presentation materials supplementing today’s call for additional factors that impacted year-over-year performance, all of which are available in the “Investor Relations” section of the Company’s web site under the heading “News & Events” and subheading “Presentations.” Forward-Looking Statement and Non-GAAP Financial Information
3rd Quarter 2015
Highlights of 3rd Quarter 2015 Sales of $154.8M Acquisitions contributed $41.6M during the quarter Headwinds from Asia negatively impacted our Chinese, and European businesses in September CAFE related businesses continued to outperform Adjusted Earnings Per Share of $0.31 Includes the additional 7.6M shares raised in preparation for the PEP Acquisition Adjusted EBITDA of $25.5 million, up 46% compared to Q3 2014 Adjusted Operating Margin improved 140 bps year over year. Completed the acquisition of PEP to fill out our diversified end market strategy Foreign Currency impact for Q3: Net Sales impact of negative $7.8M compared to Q3 2014 Reduced EPS $0.02 due to translation effect
Q3 2014 Q3 2015 Adjusted Earnings Per Share Q3 2014 Q3 2015 Net Sales 23% growth year over year 3rd Quarter 2015 Financial Summary In Millions Issued 7.6M Share in Q3 2015 Adj. EPS on prior year weighted average shares = $0.40
3rd Quarter 2015 Financial Summary Q3 2014 Q3 2015 Gross Margin Q3 2014 Q3 2015 Adjusted Operating Margin Margins continue to expand as expected despite end market headwinds 230 bps improvement over Q3 2014 resulting from continued improvements in the NN Operating System Gross Margin = Gross Profit (excluding depreciation) ÷ Net Sales
3rd Quarter 2015 Financial Summary Q3 2014 Q3 2015 Adjusted EBITDA Q3 2014 Q3 2015 SG&A Prudent expense management driven by the NN Operating System Up 46% compared to Q3 2014 In Millions In Millions
Autocam Precision Components Group Q3 2014 Q3 2015 Net Sales Q3 2014 Q3 2015 Adjusted Operating Margin CAFE adoption rates continue to drive increased content and margin expansion $M
Metal Bearing Components Group Q3 2014 Q3 2015 Net Sales Adjusted Operating Margin Negative FX translation accounted for 74% of the decline in sales Q3 2014 Q3 2015 $M Despite headwinds from China and negative FX, operating margins were consistent with prior year
Plastic & Rubber Components Group Q3 2014 Q3 2015 Net Sales Adjusted Operating Margin Q3 2014 Q3 2015 $M
Third Quarter Summary Continued improvement in operating performance driven by the NN Operating System offset by China & Brazil Completed the follow-on equity raise in preparation for PEP acquisition Adjusted Operating Margin continued to expand on a year over year and sequential quarter basis CAFE related businesses continue to outperform Headwinds from Asia & Brazil created challenging top line environment Negative currency translation continues to skew year to year comparison Opened new MBC facility in Mexico Autocam synergies remain ahead of schedule, which include the closure of our Wheeling, IL facility.
PEP / Financing Update Financing Update Term Loan Senior Notes Total Amount $525M $300M $825M Rate 5.75%2 10.25% 7.39%3 Maturity 2022 2020 Repricing Opportunity April 2016 October 2017 PEP Update1 LTM 9-30-15 Sales LTM 9-30-15 EBITDA EBITDA Margin 2016 Adjusted EPS Accretion4 $240M $69M 29% $0.40 - $0.50 1: LTM period gives pro forma effect for all acquisitions completed by PEP during the 12 month period. 2: Interest Rate is the greater of 1.00% or 3 month Libor + 4.75% 3: Combined weighted average cost of debt 4: Excludes amortization of intangibles & amortization of financing charges Repricing our debt will have a positive impact on earnings per share
Guidance
Fourth Quarter Guidance – Inclusive of PEP Fourth Quarter Commentary Net Sales $180M - $190M Headwinds from Asia & Brazil create challenging top line environment Adj. Op Margin 8.3% - 9.0% Driven by lower Q4 seasonal volume Adj. EBITDA $30M - $35M Includes partial quarter of PEP Adj. EPS $0.24 - $0.28 Includes higher than anticipated interest expense on seasonally lower sales Tax Rate 23% - 25%
Give the Guidance 2015 2016 Commentary Net Sales $665M - $675M $875M - $905M Sales growth of ~30% driven by PEP acquisition Adj. Operating Margin 8.7% - 9.0% 11.0% - 12.0% Driven by improvements in the NN Operating System & PEP acquisition Adj. EBITDA $104M - $109M $162.5M - $175M Adj. EPS1 $1.37 - $1.42 $1.60 - $1.80 CAPEX $40M - $45M $40M - $50M We continue to invest in growth Adj. Tax Rate2 24% - 26% 22% - 26% Free Cash Flow3 $20M - $25M $50M - $60M Significant increase in free cash flow allows us to de-lever faster 2016 Guidance 1: Excludes the amortization of intangibles and the amortization of financing charges 2: Excludes the effects of M&A activity 3: Free Cash Flow available for debt repayment
Net Organic & Adjacent Sales growth of 4% - 5% in 2016 2016 Guidance – Revenue Waterfall Sales will grow ~30% in 2016 $875M - $905M In millions
2016 Guidance – Adjusted EPS Waterfall $1.60 - $1.80 We remain focused on hitting our strategic targets
2016 Summary Sales growth of approximately 30% Strong organic and adjacent market growth of 10% - 11% Offset by 5% - 6% of attrition, price/mix and negative currency effects Adjusted earnings per share growth of 21% at midpoint of guidance 64% of our debt can be repriced in as short as 6 months Operating margin expansion of 2% - 3% Free cash flow triples, allowing us to deleverage faster
Third Quarter 2015 Earnings Release November 4, 2015
| Exhibit 99.3
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Exhibit 99.3
Third Quarter 2015
Non-GAAP to GAAP Reconciliation
November 4, 2015
Non-GAAP to GAAP Reconciliations
Non-GAAP to GAAP Reconciliations
Non-GAAP to GAAP Reconciliations
Non-GAAP to GAAP Reconciliations
Guidance
Non-GAAP to GAAP Reconciliations
Non-GAAP to GAAP Reconciliations
Non-GAAP to GAAP Reconciliations
Third Quarter 2015
Non-GAAP to GAAP Reconciliation
November 4, 2015