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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) November 1, 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 November 1, 2002, the Company issued a press release announcing its
third 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 November 1, 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: November 1, 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
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
November 1, 2002
NN, INC. THIRD QUARTER REVENUES AND NET INCOME UP 11% AND 185% RESPECTIVELY
FOR THE 2002 THIRD QUARTER
Johnson City, Tenn., November 1, 2002 - NN, Inc. (Nasdaq: NNBR) today
reported its financial results for the third quarter ended September 30, 2002.
Net sales for the third quarter of 2002 were $47.5 million, up 11.5% from $42.6
million for the same period of 2001. Net income for the third quarter of 2002
totaled $2.1 million, or $0.14 per share, compared to net income of $744,000, or
$0.05 per share, for the third quarter of 2001. Earnings per share of $0.05 for
the third quarter of 2001 reflect an after-tax charge of $480,000 for
restructuring costs associated with the closing of the Company's Walterboro,
South Carolina facility in September of 2001 and an after-tax gain of $870,000
resulting from insurance proceeds from the fire in NN's Erwin, Tennessee
facility in March 2000. Additionally, 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 are
periodically evaluated for impairment. The third quarter of 2001 included
goodwill amortization expenses of $273,000 net of tax and minority interest.
Excluding the gain on insurance proceeds, the restructuring charge and the
goodwill amortization, net income totaled $627,000, or earnings per share of
$0.04, for the third quarter of 2001.
Net sales for the first nine months of 2002 were $143.8 million, up 2.6%
compared to $140.2 million for the same period of 2001. Net sales in the first
nine months of 2001 reflect approximately 7 1/2 months of revenue contribution
from Delta Rubber Company, which was acquired on February 16, 2001 in a
transaction using the purchase method of accounting.
Net income for the first nine months of 2002 totaled $6.4 million, or $0.40 per
share, compared to $5.7 million, or $0.37 per share, for the same period of
2001. Excluding the
aforementioned gain on insurance proceeds, the restructuring costs, and the goodwill amortization expenses for the first nine months of 2001, net income totaled $4.5 million, or $0.29 per share. David L. Dyckman, Chief Financial Officer, commented, "We are very pleased with our performance when you consider that the third quarter has traditionally been our weakest as manufacturing activity in Europe typically slows during August. Revenue levels grew approximately $4.9 million or 11.5% from the third quarter in 2001, driven by better than expected revenues from our ball and roller operations as well as favorable currency translation rates. "Net income for the third quarter rose 238.0%, after adjusting for the impact of the restructuring costs, the after-tax gain on insurance proceeds and the adoption of SFAS 142. Our earnings improvement reflects the ongoing benefit of the cost structure programs we initiated last year as well as tax rate improvements and a 35.1% reduction in interest expense resulting from aggressive debt reduction. We also experienced a 3.8% decline in selling, general and administrative expenses. "As a percentage of net sales, the gross profit margin was 24.9% in the third quarter of 2002 versus 23.0% in the third quarter of 2001. This improvement reflects the continuing benefit of the initiatives to lower our cost structure, including the consolidation of our domestic ball and roller operations in the fourth quarter of 2001 as well as increased efficiencies associated with higher volume levels recorded in the current year's third quarter as compared to the prior year. "Selling, general and administrative expenses for the third quarter of 2002 declined to 8.6% as a percentage of net sales as compared to 10.0% in the prior year's third quarter and 9.8% in the second quarter of this year. The decline from the second quarter of 2002 of $743,000 or 15.4% reflected a reversal of previously recognized non-cash compensation charges associated with a portion of the employee stock options and a decrease in the level of spending of advisory services expenses associated with the pursuit of certain strategic alternatives. In the future, we expect that our SG&A levels of spending will return to historical rates of approximately 8.5% of net sales." Roderick R. Baty, Chairman and Chief Executive Officer, stated, "We continue to see incremental improvements in our revenue in comparison to 2001. However, 2002 revenues still reflect what we consider to be below normal levels of demand in both Europe and the North America. In the third quarter, we realized double-digit revenue gains versus the third quarter of 2001 and continued to make significant progress in reducing our total debt. Since the beginning of the year we reduced debt by $11.0 million, reflecting our continuing focus on cost reduction programs, balance sheet management and the maximization of cash flows. As a result, we are likely to exceed our full year debt reduction goal of $12 million. We are forecasting earnings per share for the full year to be in the range of $0.53 to $0.54. Earnings per share for the fourth quarter of this year are forecasted to be in the range of $0.13 to $0.14 on revenues of approximately $48.0 million.
With respect to our outlook for 2003, given the continuing uncertainty of the
current global economic environment, we expect earnings per share to be in the
range of $0.62 to $0.65, an increase of approximately 19% from 2002, on revenues
of approximately $200 million. We see improvements in our financial performance
in 2003 driven by reduced levels of interest expense, SG&A spending, and
continuing improvements in cost and quality. Our 1,300 worldwide employees
remain focused on serving the needs of our customers. As such, we remain
optimistic regarding our long-term opportunities to add increasing value as a
supply partner to our global bearing customers."
NN, Inc. manufactures and supplies high precision bearing components consisting
of balls, rollers, seals, and retainers for leading bearing manufacturers on a
global basis. In addition, the Company manufactures a variety of other plastic
components. NN, Inc. had sales of US $180 million in 2001.
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.
(Financial Tables Follow)
NN, Inc.
Condensed Statements of Income
(In Thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
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Net sales $47,451 $42,576 143,836 $140,153
Cost of goods sold 35,631 32,797 107,301 106,116
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Gross profit 11,820 9,779 36,535 34,037
Selling, general and administrative 4,076 4,239 13,311 12,324
Depreciation and amortization 2,881 3,474 8,443 10,170
Restructuring and impairment costs - 750 78 750
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Income from operations 4,863 1,316 14,703 10,793
Interest expense, net 597 920 1,876 3,214
Equity in (earnings) loss of
unconsolidated affiliate - 13 - (13)
Net gain on involuntary conversion - (1,359) - (3,901)
Other (income) expense (20) 15 (516) (461)
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Income before provision for income taxes 4,286 1,727 13,343 11,954
Provision for income taxes 1,612 806 4,957 4,879
Minority interest in consolidated subsidiary 555 177 2,009 1,279
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Income before cumulative effect of change in
accounting principle 2,119 744 6,377 5,796
Cumulative effect of change in accounting
principle, net of income tax benefit of $112
and related minority interest impact of $84 - - - 98
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Net income $2,119 $744 $6,377 $5,698
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Diluted income per common share $0.14 $0.05 $0.40 $0.37
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NN, Inc.
Condensed Balance Sheets
(In Thousands)
September 30, December 31,
2002 2001
(Unaudited)
Assets
Current assets:
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Cash $4,607 $3,024
Accounts receivable, net 30,705 24,832
Inventories, net 22,618 23,418
Other current assets 4,277 4,343
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Total current assets 62,207 55,617
Property, plant and equipment, net 84,483 82,770
Assets held for sale 3,599 4,348
Goodwill, net 41,192 40,282
Other non-current assets 5,013 5,118
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Total assets $196,494 $188,135
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Liabilities and Stockholder's Equity
Current liabilities:
Accounts payable $18,753 $15,693
Accrued salaries and wages 5,688 3,813
Income taxes payable 4,261 2,377
Payable to affiliates 633 1,277
Short-term portion of long-term notes 7,000 7,000
Other current liabilities 9,800 7,576
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Total current liabilities 46,135 37,736
Minority interest in consolidated subsidiaries 36,421 30,932
Deferred income taxes 6,643 6,499
Long-term notes payable 36,660 47,661
Other 4,307 3,268
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Total liabilities 130,166 126,096
Total stockholders' equity 66,328 62,039
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Total liabilities and stockholders' equity $196,494 $188,135
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