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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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) July 18, 2002
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NN, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 0-23486 62-1096725
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
2000 Waters Edge Drive, Johnson City, Tennessee 37604
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (423) 743-9151
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Not applicable
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(Former name or former address, if changed since last report)
Item 5. Other Events.
On July 18, 2002, the Company issued a press release announcing its
second quarter earnings. A copy of the press release is attached as Exhibit 99.1
hereto and incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
(c) EXHIBITS. The following exhibits are filed herewith:
99.1 Press Release dated July 18, 2002.
SIGNATURE
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: July 18, 2002
NN, INC.
By: /s/ William C. Kelly, Jr.
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William C. Kelly, Jr.,
Treasurer, Secretary and Chief
Accounting Officer
RE: NN Inc.
2000 Waters Edge Drive
Johnson City, TN 37604
FOR FURTHER INFORMATION:
AT THE COMPANY: AT FRB|WEBER SHANDWICK
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Will Kelly Kerry Thalheim Susan Garland
Treasurer & Manager of Investor Relations (General info) (Analyst info)
(423) 743-9151 212-445-8437 212-445-8458
FOR IMMEDIATE RELEASE
July 18, 2002
NN, INC. REPORTS 2002 SECOND QUARTER RESULTS
Johnson City, Tenn., July 18, 2002 - NN, Inc. (Nasdaq: NNBR) today reported its
financial results for the second quarter ended June 30, 2002. Results for the
first half of 2002 reflect a full six months of the operations of Delta Rubber
Company ("Delta") acquired on February 16, 2001 in a transaction using the
purchase method of accounting.
Net sales for the second quarter of 2002 were $49.2 million, up 3.9% from $47.3
million for the same period of 2001. Net income for the second quarter of 2002
totaled $2.4 million, or $0.15 per share, compared to net income of $3.5
million, or $0.23 per share, for the second quarter of 2001. Earnings per share
of $0.23 for the second quarter of 2001 reflect an after-tax gain on insurance
proceeds from the fire in NN's Erwin, Tennessee facility in March 2000 and
goodwill amortization expenses. Excluding this gain and the goodwill
amortization, net income totaled $2.2 million, or earnings per share of $0.14,
for the second quarter of 2001.
Net sales for the first half of 2002 were $96.4 million compared to $97.6
million for the same period of 2001. Net sales in the first half of 2001 reflect
approximately 4 1/2 months of revenue contribution from Delta. Net income for
the first half of 2002 totaled $4.3 million, or $0.27 per share, compared to
$5.0 million, or $0.32 per share, for the first half of 2001. Excluding the
aforementioned gain on insurance proceeds and goodwill amortization expenses for
the first and second quarters, net income for the first half of 2001 totaled
$3.8 million, or $0.25 per share.
Effective January 1, 2002, the company adopted Statement of Financial Accounting
Standard No.142 ("SFAS 142") "Goodwill and Other Intangible Assets," which
states that goodwill and intangible assets deemed to have indefinite lives are
no longer subject to amortization, but rather are periodically evaluated for
impairment. The first half of 2001 included goodwill amortization expenses of
approximately $490,000 net of tax and
minority interest or $0.03 per share. The second quarter of 2001 included goodwill amortization, net of tax and minority interest, of $270,000 or $0.02 per share. David L. Dyckman, Chief Financial Officer, commented, "We are both pleased with and encouraged by our second quarter performance as our results exceeded our forecasts. We experienced increased revenue levels of approximately $1.8 million or 3.9% from the same period in 2001 while earnings per share rose 9.1%, after adjusting for the impact of the after-tax gain on insurance proceeds and the adoption of SFAS 142. On the revenue side, we benefited from on-going program initiatives at our bearing retainer and seal businesses. These increases were offset by the improving, yet still soft, economic environment. Volume levels at the domestic ball and roller division were approximately 4% below prior year levels, while Euroball revenues remained relatively flat, despite the favorable movement of currency exchange rates. Additionally, our earnings improvement reflects the significant impact of the cost structure programs we initiated last year. Further significant contributions to our earnings improvement included reduced interest expense due to improved interest rates as well as decreased debt levels and tax rate improvements. "As a percentage of net sales, the gross profit margin was 26.5% in the second quarter of 2002 versus 25.4% in the second quarter of 2001 and 24.7% in the first quarter of this year. This improvement reflects the continuing benefit of the initiatives to lower our cost structure last year including the consolidation of our domestic ball and roller operations in the fourth quarter of 2001. "Selling, general and administrative expenses for the second quarter of 2002 increased $933,000 to 9.8% as a percentage of net sales as compared to 8.2% in the prior year's second quarter. This increase was due primarily to three expense categories: 1) advisory services associated with the pursuit of certain strategic alternatives; 2) initiatives to continue the integration of the Euroball operations; and 3) non-cash compensation charges associated with a portion of the employee stock options. Selling, general and administrative expenses for the first half of 2002 increased $1.4 million to 9.7% as a percentage of net sales as compared to 8.1% in the same period of 2001. Given the majority of these items are non-repetitive in nature and were primarily incurred in the first two quarters, we anticipate the balance of the year to see SG&A levels closer to 9%. Further, as a more typical economic environment returns, SG&A levels should return to our 8.0% to 8.5% historic average." Roderick R. Baty, Chairman and Chief Executive Officer, stated, "We are particularly pleased with the performance of our global management team and employees from an operating and financial perspective. Our team continues to be successful in serving the quality and service needs of our global customers. Our focus on cost reduction programs, balance sheet management and the maximization of cash flows has enabled us to achieve an aggressive debt reduction of $9.7 million since the beginning of the year. At this pay down rate,we will likely exceed our full year reduction goal of $12 million.
"Although we are cautious regarding the unpredictable nature of our current economic environment, we are continuing to forecast an on-going modest recovery in the domestic economy and a level European economy. Our earnings per share guidance for the full year remains unchanged at $0.47 to $0.52. It is important to note that this represents an increase in net income of approximately $700,000 from our previous guidance. We have assumed the completion of our previously announced follow-on offering which would increase our outstanding shares by 2,600,000. We expect revenues for the third and fourth quarter of 2002 to be approximately $45.0 million and $47.0 million, respectively and earnings per share to be in the range of $0.10 to $0.11 for each quarter. "In summary, given the current environment, we believe NN is well positioned to achieve improving results. The successful implementation of initiatives to lower our cost structure, combined with our unique position as an integrated supplier of bearing components to our global customers positions us well in today's uncertain economic environment. More importantly, these initiatives have established a foundation for future improvements when the economy rebounds to more normal conditions," concluded Mr. Baty. With the exception of the historical information contained in the release, the matters described herein contain forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve a number of risks and uncertainties that may cause actual results to be materially different from such forward-looking statements. Such factors include, among others, general economic conditions and economic conditions in the industrial sector, competitive influences, risks that current customers will commence or increase captive production, risks of capacity underutilization, quality issues, availability of raw materials, currency and other risks associated with international trade, the Company's dependence on certain major customers, and other risk factors and cautionary statements listed from time to time in the Company's periodic reports filed with the Securities and Exchange Commission, including, but not limited to, the Company's Annual Report on 10-K for the fiscal year ended December 31, 2001. NN, Inc. manufacturers and supplies high precision bearing components, consisting of balls, rollers, seals and retainers, for leading bearing manufacturers on a global basis and had sales of US $180 million in 2001.
NN, Inc.
Condensed Statements of Income
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
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Net sales $ 49,186 $ 47,350 $ 96,386 $ 97,577
Cost of goods sold 36,139 35,320 71,680 73,504
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Gross profit 13,047 12,030 24,706 24,073
Selling, general and administration 4,819 3,886 9,308 7,900
Depreciation and amortization 2,795 3,386 5,620 6,696
Restructuring and impairment costs -- -- 78 --
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Income from operations 5,433 4,758 9,700 9,477
Interest expense, net 539 1,112 1,140 2,273
Equity in (earnings) loss of unconsolidated
affiliate -- 23 -- (26)
Net gain on involuntary conversion -- (2,542) -- (2,542)
Other income (141) (344) (496) (455)
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Income before provision for income taxes 5,035 6,509 9,056 10,227
Provision for income taxes 1,840 2,437 3,345 4,073
Minority interest in consolidated subsidiary 787 566 1,454 1,102
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Income before cumulative effect of change in 2,408 3,506 4,257 5,052
accounting principle
Cumulative effect of change in accounting
principle, net of income tax benefit of $112 -- -- -- 98
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Net income $ 2,408 $ 3,506 $ 4,257 $ 4,954
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Diluted Income per common share $ 0.15 $ 0.23 $ 0.27 $ 0.32
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NN, Inc.
Condensed Balance Sheets
(In thousands)
June 30, December 31,
2002 2001
(Unaudited)
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Assets
Current assets:
Cash $ 3,443 $ 3,024
Accounts receivable, net 31,600 24,832
Inventories, net 21,897 23,418
Other current assets 3,599 3,034
Net current deferred tax asset 1,356 1,309
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Total current assets 61,895 55,617
Property, plant and equipment, net 84,756 82,770
Assets held for sale 3,628 4,348
Goodwill, net 40,876 39,805
Other non-current assets 4,683 4,862
Non-current deferred tax asset 733 733
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Total assets $196,571 $188,135
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Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 19,855 $ 15,693
Accrued salaries and wages 5,757 3,813
Income taxes payable 3,121 2,377
Payable to affiliates 1,027 1,277
Short-term portion of long term notes 7,000 7,000
Other liabilities 9,430 7,576
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Total current liabilities 46,190 37,736
Minority interest in consolidated subsidiaries 36,104 30,932
Deferred income taxes 6,651 6,499
Long-term notes payable 37,957 47,661
Other 4,167 3,268
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Total liabilities 131,069 126,096
Total stockholders' equity 65,502 62,039
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Total liabilities and stockholders' equity $196,571 $188,135
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