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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Amendment No. 1 to Form 10-Q)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2002
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OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________ to _________
Commission File Number 0-23486
NN, Inc.
(Exact name of registrant as specified in its charter)
Delaware 62-1096725
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2000 Waters Edge Drive
Building C, Suite 12
Johnson City, Tennessee 37604
(Address of principal executive offices, including zip code)
(423) 743-9151
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No | |
As of August, 13, 2002 there were 15,367,773 of the registrant's common stock,
par value $0.01 per share, outstanding.
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Amendment No. 1
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its quarterly report on Form 10-Q, by
restating such portions in their entirety as set forth in the pages attached
hereto:
1. Part I, Item 2, Management's Discussion and Analysis of Financial Condition
and Results of Operations.
2. Part II, Item 1, Legal Proceedings.
3. Part II, Item 6, Exhibits and Reports on Form 8-K.
Part I. FINANCIAL INFORMATION
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three Months Ended June 30, 2002 Compared to the Three Months Ended June 30, 2001
Net Sales. Net sales increased by approximately $1.8 million, or 3.9%, from
$47.4 million for the second quarter of 2001 to $49.2 million for the second
quarter of 2002. By segment, sales decreased $0.5 million or 3.5% for the
Company's Domestic Ball and Roller segment from $14.2 million during the second
quarter of 2001 to $13.7 million for the same period in 2002. The Domestic Ball
and Roller segment's sales decrease was due mainly to decreased demand for the
Company's products as a result of the economic environment. Offsetting this
decrease, the Plastics segment's sales increased $1.7 million or 15.7% from
$10.6 million for the second quarter of 2001 to $12.3 million for the same
period in 2002. The Plastics segment's sales increase was principally driven by
new growth programs. Additionally, the Euroball segment's sales increased $0.7
million or 2.9% from $22.5 million for the second quarter of 2001 to $23.2
million for the same period in 2002. The Euroball segment's sales increase was
principally due to favorable currency impacts.
Gross Profit. Gross profit increased approximately $0.9 million or 7.6%, from
$12.1 million for the second quarter of 2001 to $13.0 million for the second
quarter of 2002. Sales volume increases in the Euroball segment, in addition to
cost reduction efforts, netted a $0.4 million increase. Additionally,
improvements from IMC and NN Arte contributed $0.6 million and $0.1 million,
respectively. Offsetting these increases was a $0.2 million decrease in the
Domestic Ball & Roller segment due to increased insurance costs and sales volume
decreases offset by cost savings associated with the closing of the South
Carolina ball manufacturing facility. As a percentage of net sales, gross profit
increased from 25.6% in the second quarter of 2001 to 26.5% for the same period
in 2002.
Selling, General and Administrative. Selling, general and administrative
expenses increased by approximately $0.8 million or 21.1% from $4.0 million in
the second quarter of 2001 to $4.8 million in the second quarter of 2002.
Advisory service expenses associated with the previously announced desire of
certain original founders of the Company to liquidate their holdings in the
Company's stock contributed $0.3 million of the increase. Additionally, non-cash
compensation charges associated with a portion of certain employee stock options
contributed $0.3 million of the increase. As a percentage of net sales, selling,
general and administrative expenses increased from 8.4% for the second quarter
of 2001 to 9.8% for the same period in 2002.
1
Depreciation and Amortization. Depreciation and amortization expense decreased
by approximately $0.6
million or 17.5% from $3.4 million for the second quarter of 2001 to $2.8
million for the same period in 2002. The adoption of Statement No. 142
eliminated the amortization of goodwill and contributed $0.5 million of the
decrease. Additionally, the assets held for sale as a result of the closing of
the Walterboro, South Carolina ball facility contributed $0.3 million of the
decrease. Currency impacts accounted for $0.1 million of the increase. As a
percentage of net sales, depreciation and amortization expense decreased from
7.2% in the second quarter of 2001 to 5.7% in the second quarter of 2002.
Interest Expense. Interest expense, decreased by approximately $0.6 million from
$1.1 million in the second quarter of 2001 to $0.5 million during the same
period in 2002. This was due to decreased interest rates on the Company's credit
facilities as well as decreased amounts outstanding on the debt. Total debt
decreased from $64.8 million at June 30, 2001 to $45.0 million at June 30, 2002.
As a percentage of net sales, interest expense, decreased from 2.3% in the
second quarter of 2001 to 1.1% for the same period in 2002.
Equity in Earnings of Unconsolidated Affiliates. Equity in earnings of
unconsolidated affiliates increased from a loss of $23,000 in the second quarter
of 2001 to $0 during the same period of 2002. The decrease is due to the
Company's sale of its minority interest in Jiangsu General Ball & Roller
Company, Ltd. effective December 21, 2001.
Net Gain on Involuntary Conversion. Net gain on involuntary conversion decreased
$2.5 million from $2.5 million for the second quarter of 2001 to $0 for the
second quarter of 2002. The Company realized a net gain on involuntary
conversion of $2.5 million in the second quarter of 2001. The gain is due to
insurance proceeds received over the net book value of assets destroyed in the
March 12, 2000 fire at the Erwin, Tennessee facility.
Minority Interest of Consolidated Subsidiaries. Minority interest of
consolidated subsidiaries increased $0.2 million from $0.6 million for the
second quarter of 2001 to $0.8 million for the second quarter of 2002. This
increase is due to increased earnings at the Company's Euroball joint venture.
The Company is required to consolidate this joint venture due to its majority
ownership and ability to exercise control. The Company owns 54% of the shares of
Euroball. Minority interest of consolidated subsidiary represents the combined
interest of the minority partners of Euroball at 46%.
Net Income. Net income decreased by $1.1 million or 31.3%, from $3.5 million
for the second quarter of 2001 to $2.4 million for the same period in 2002. The
net gain on involuntary conversion recorded during the first quarter of 2001
contributed $1.6 million of the decrease, net of tax. As a percentage of net
sales, net income decreased from 7.4% in the second quarter of 2001 to 4.9% for
the second quarter of 2002.
Six Months Ended June 30, 2002 Compared to the Six Months Ended June 30, 2001
Net Sales. Net sales decreased by approximately $1.2 million, or 1.2%, from
$97.6 million for the first six months of 2001 to $96.4 million for the first
six months of 2002. By segment, the Domestic Ball and Roller segment's sales
decreased $3.1 million or 10.3% from $30.0 million for the first six months of
2001 to $26.9 million for the same period in 2002. The Euroball segment's sales
decreased $3.0 million or 6.2% from $47.9 million for the first six months of
2001 to $44.9 million for the same period in 2002. These decreases in the
Domestic Ball and Roller segments and the Euroball segment were due mainly to
decreased demand for the Company's products as a result of the economic
environment. Offsetting this decrease, the Plastics segment's sales were $4.9
million higher or 24.6%. The Plastics segment's sales increased from $19.7
million for the first six months of 2001 to $24.6 million for the same period in
2002 principally due to the acquisition of Delta (incremental $2.9 million) as
well as sales increases at NN Arte (incremental $0.8 million) and at IMC
(incremental $1.2 million).
Gross Profit. Gross profit increased approximately $0.5 million or 1.9%, from
$24.3 million for the first six months of 2001 to $24.7 million for the first
six months of 2002. This increase in gross profit as a percentage of sales was
due primarily to cost savings associated with the closing of the South Carolina
ball manufacturing facility as well as other cost reduction and containment
programs initiated during 2001. During the first six months of 2002, sales
volume decreases and insurance increases in the Domestic Ball and Roller segment
were partially offset by cost savings associated with the closing of the South
Carolina
2
ball manufacturing facility netting a $0.8 million decrease in gross profit.
During the same period, sales volume decreases in the Euroball segment were
similarly partially offset by cost reductions, netting a $0.5 million decrease
in gross profit. Within the Plastics segment were improvements from IMC and NN
Arte of $0.9 million and $0.4 million, respectively, while the inclusion of a
full six months of Delta results in 2002 versus approximately 4.5 months in 2001
contributed $0.5 million of increases in 2002. As a percentage of net sales,
gross profit increased from 24.9% in the first six months of 2001 to 25.6% for
the same period in 2002.
Selling, General and Administrative. Selling, general and administrative
expenses increased by approximately $1.2 million or 15.2% from $8.1 million in
the first six months of 2001 to $9.3 million in the first six months of 2002.
The acquisition of Delta contributed $0.3 million of the increase. Advisory
service expenses principally associated with the previously announced desire of
certain original founders of the Company to liquidate their holdings in the
Company's stock contributed $0.5 million of the increase. Strategic planning and
information technology initiatives at Euroball contributed $0.2 million of the
increase. Additionally, non-cash compensation charges associated with a portion
of the employee stock options contributed $0.3 million of the increase. As a
percentage of net sales, selling, general and administrative expenses increased
from 8.3% for the first six months of 2001 to 9.7% for the same period in 2002.
Depreciation and Amortization. Depreciation and amortization expense decreased
by approximately $1.1 million or 16.1% from $6.7 million for the first six
months of 2001 to $5.6 million for the same period in 2002. The adoption of
Statement No. 142 eliminated the amortization of goodwill and contributed $0.9
million of the decrease. Additionally, the assets held for sale as a result of
the closing of the Walterboro, South Carolina ball facility, which are no longer
depreciated, contributed $0.6 million of the decrease. This was offset in part
by a full six months of Delta in 2002 as compared to 4.5 months in 2001 due to
the February 2001 acquisition, which resulted in a $0.1 million increase. As a
percentage of net sales, depreciation and amortization expense decreased from
6.9% in the first six months of 2001 to 5.8% for the same period in 2002.
Restructuring costs. The Company recorded a restructuring charge of $0.1 million
in the first six months of 2002, all of which was recorded in the first quarter
of 2002. The restructuring costs principally pertain to the Company's decision
and announcement to close the Walterboro, South Carolina ball facility in 2001.
The $0.1 million charge primarily represents the accrual for additional
severance costs related to the closing of this facility. As a percentage,
restructuring costs represent 0.1% of net sales in the first six months of 2002.
There were no charges during the first six months of 2001.
Interest Expense. Interest expense, decreased by approximately $1.2
million from $2.3 million in the first six months of 2001 to $1.1 million during
the same period in 2002. This was due to decreased interest rates on the
Company's credit facilities as well as decreased amounts outstanding on the
debt. Total debt decreased from $64.8 million at June 30, 2001 to $45.0 million
at June 30, 2002. As a percentage of net sales, interest expense decreased from
2.4% in the first six months of 2001 to 1.2% for the same period in 2002.
Equity in Earnings of Unconsolidated Affiliates. Equity in earnings of
unconsolidated affiliates decreased from earnings of $26,000 in the first six
months of 2001 to $0 during the same period of 2002. The decrease is due to the
Company's sale of its minority interest in Jiangsu General Ball & Roller
Company, Ltd. effective December 21, 2001.
Net Gain on Involuntary Conversion. Net gain on involuntary conversion decreased
$2.5 million from $2.5 million for the first six months of 2001 to $0 for the
first six months of 2002. The Company realized a net gain on involuntary
conversion of $2.5 million in the second quarter of 2001. The gain is due to
insurance proceeds over the net book value of assets destroyed in the March 12,
2000 fire at the Erwin, Tennessee facility.
Minority Interest of Consolidated Subsidiaries. Minority interest of
consolidated subsidiaries increased $0.4 million from $1.1 million for the first
six months of 2001 to $1.5 million for the first six months of 2002. This
increase is due to increased earnings at the Company's Euroball joint venture.
The Company is required to consolidate this joint venture due to its majority
ownership and ability to exercise control. The
3
Company owns 54% of the shares of Euroball. Minority interest of consolidated
subsidiary represents the combined interest of the minority partners of Euroball
at 46%.
Net Income. Net income decreased by $0.7 million or 14.0%, from $5.0 million for
the first six months of 2001 to $4.3 million for the same period in 2002. The
net gain on involuntary conversion recorded during the first quarter of 2001
contributed $1.6 million of the decrease, net of tax. As a percentage of net
sales, net income decreased from 5.1% in the first six months of 2001 to 4.4%
for the first six months of 2002.
Liquidity and Capital Resources
The Company has a $25 million senior non-secured revolving credit facility with
AmSouth Bank ("AmSouth"), as the administrative agent for the lenders, expiring
on July 25, 2003 and a senior non-secured term loan for $35 million expiring on
July 1, 2006. Amounts outstanding under the revolving facility and the term loan
facility bear interest at a floating rate equal to LIBOR (1.86% at June 30,
2002) plus an applicable margin of 0.75% to 2.00% based upon calculated
financial ratios. The loan agreement contains customary financial and
non-financial covenants. Such covenants specify that the Company must maintain a
minimum fixed charge coverage ratio, a minimum funded indebtedness to EBITDA
ratio and a maximum funded indebtedness to capitalization ratio and limits the
amount of capital expenditures we may make in any fiscal year. The loan
agreement also contains customary restrictions on, among other things,
additional indebtedness, liens on our assets, sales or transfers of assets,
investments, restricted payments (including payment of dividends and stock
repurchases), issuance of equity securities, and mergers, acquisitions and other
fundamental changes in our business. The Company was in compliance with all such
covenants as of June 30, 2002. Amounts available for borrowing under this term
loan facility will be reduced by $7.0 million per annum and the facility will
expire on July 1, 2006. On July 12, 2002, the Company amended its U.S. credit
facility to convert the term loan portion into a reducing revolving credit line
providing initial availability equivalent to the balance of the term loan prior
to the amendment. Amounts available for borrowing under this facility will be
reduced by $7.0 million per annum and the facility will expire on July 1, 2006.
Additionally, on July 31, 2002, the Company amended the credit facility again to
extend the $25 million senior non-secured revolving credit facility to July 25,
2004.
In July 2000, NN Euroball ApS, and its subsidiaries entered into a senior
secured revolving credit facility of Euro 5.0 million, expiring on July 15, 2006
and a senior secured term loan of Euro 36.0 million, expiring on July 15, 2006
with HypoVereinsbank Luxembourg S.A. as agent for Bayerische Hypo-und
Vereinsbank AG of Munich, Germany. On July 31, 2000, upon closing of the joint
venture, NN Euroball ApS borrowed a total of Euro 31.5 million against these
facilities for acquisition financing. Additional working capital and capital
expenditure financing are provided for under the facility. Amounts outstanding
under the facilities accrue interest at a floating rate equal to EURIBOR (3.44%
at June 30, 2002) plus an applicable margin of 1.125% to 2.25% based upon
calculated financial ratios. The loan agreement contains various restrictive
covenants that specify, among other things, restrictions on the incurrence of
indebtedness and the maintenance of certain financial ratios. These facilities
also include certain negative pledges. Euroball was in compliance with all such
covenants as of June 30, 2002.
The Company's arrangements with its domestic customers typically provide that
payments are due within 30 days following the date of the Company's shipment of
goods, while arrangements with foreign customers generally provide that payments
are due within 90 to 120 days following the date of shipment. The Company's net
sales and receivables can be influenced by seasonality due to the Company's
relative percentage of European business coupled with many foreign customers
ceasing or significantly slowing production during the month of August.
The Company bills and receives payment from some of its foreign customers in
Euro or other currencies. To date, the Company has not been materially adversely
affected by currency fluctuations or foreign exchange restrictions. To manage
risks associated with currency fluctuations and foreign exchange restrictions,
the Company has strategies in place, including a hedging program, which allows
management to hedge foreign currencies when exposures reach certain levels.
However, the Company has not entered into any currency hedges in 2001 or during
the current year. Strengthening of the U.S. dollar against foreign currencies
could impair the ability of the Company to compete with international
competitors for foreign as well as domestic sales. Working capital, which
consists principally of accounts receivable and
4
inventories, was $15.7 million at June 30, 2002 as compared to $17.9 million at
December 31, 2001. The ratio of current assets to current liabilities decreased
from 1.47:1 at December 31, 2001 to 1.34:1 at June 30, 2002. Cash flow from
operations increased from $13.1 million during the six months of 2001 to $15.0
million during the first six months of 2002.
During 2002, the Company plans to spend approximately $6.8 million on capital
expenditures (of which approximately $1.8 million has been spent through June
30, 2002) including the purchase of additional machinery and equipment for all
of the Company's domestic and international ball facilities. The Company intends
to finance these activities with cash generated from operations and funds
available under the credit facilities described above. The Company believes that
funds generated from operations and borrowings from the credit facilities will
be sufficient to finance the Company's working capital needs and projected
capital expenditure requirements through at least December 2002.
In addition, FAG and SKF have the right to require the Company to purchase their
interests in Euroball beginning in January 2003, based on a formula using
Euroball's historical net income and cash flow. As a result, the exact amount of
the purchase price cannot be determined until the put right is exercised. The
Company anticipates that if such purchase becomes necessary, it may need to
borrow additional funds.
The Euro
The Company currently has operations in Italy, Germany and Ireland, all of which
are Euro participating countries, and sells product to customers in many of the
participating countries. The Euro has been adopted as the functional currency at
these locations.
Seasonality and Fluctuation in Results of Operations
The Company's net sales historically have been of a seasonal nature, and as
foreign sales have increased as a percentage of total sales, seasonality has
become a more significant factor for the Company in that many foreign customers
cease production during the month of August.
Inflation and Changes in Prices
While the Company's operations have not been affected by inflation during recent
years, prices for 52100 chrome steel and other raw materials are subject to
change. For example, during 1995, due to an increase in worldwide demand for
52100 chrome steel and the decrease in the value of the United States dollar
relative to foreign currencies, the Company experienced an increase in the price
of 52100 chrome steel and some difficulty in obtaining an adequate supply of
52100 chrome steel from its existing suppliers. In our U.S. operations, the
Company's typical pricing arrangements with its steel suppliers are subject to
adjustment once every six months. In an effort to limit its exposure to
fluctuations in steel prices, the Company has generally avoided the use of
long-term, fixed price contracts with its customers. Instead, the Company
typically reserves the right to increase product prices periodically in the
event of increases in its raw material costs. The Company was able to minimize
the impact on its operations resulting from the 52100 chrome steel price
increases by taking such measures.
Cautionary Statements for Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995
The Company wishes to caution readers that this report contains, and future
filings by the Company, press releases and oral statements made by the Company's
authorized representatives may contain forward looking statements that involve
certain risks and uncertainties. The Company's actual results could differ
materially from those expressed in such forward looking statements due to
important factors bearing on the Company's business, many of which already have
been discussed in this filing and in the Company's prior filings.
The following paragraphs discuss the risk factors the Company regards as the
most significant as of the date of this report. The Company undertakes no
obligation to publicly update or revise any forward looking statements, whether
as a result of new information, future events or otherwise.
5
The demand for the Company's products is cyclical, which could adversely
impact its revenues. The end markets for fully assembled bearings are
cyclical and tend to decline in response to overall declines in industrial
production. As a result, the market for bearing components is also cyclical and
impacted by overall levels of industrial production. The Company's sales in the
past have been negatively affected, and in the future very likely will be
negatively affected, by adverse conditions in the industrial production sector
of the economy or by adverse global or national economic conditions generally.
The Company depends on a very limited number of foreign sources for its primary
raw material and is subject to risks of shortages and price fluctuation. The
steel that the Company uses to manufacture precision balls and rollers is of an
extremely high quality and is available from a limited number of producers on a
global basis. Due to quality constraints in the U.S. steel industry, the Company
obtains substantially all of the steel used in its U.S. ball and roller
production from overseas suppliers. If the Company had to obtain steel from
sources other than its current suppliers, particularly in the case of its
European operations, it could face higher prices and transportation costs,
increased duties or taxes, and shortages of steel. Problems in obtaining steel,
and particularly 52100 chrome steel, in the quantities that it requires and on
commercially reasonable terms, could increase our costs, negatively impact our
ability to operate our business efficiently and have a material adverse effect
on the operating and financial results of the Company.
The Company operates in and sells products to customers outside of the U.S. and
is subject to several related risks. Because the Company obtains a majority of
its raw materials from overseas suppliers, actively participates in overseas
manufacturing operations and sells to a large number of international customers,
it faces risks associated with the following:
o adverse foreign currency fluctuations;
o changes in trade, monetary and fiscal policies, laws and regulations,
and other activities of governments, agencies and similar
organizations;
o the imposition of trade restrictions or prohibitions;
o high tax rates that discourage the repatriation of funds to the U.S.;
o the imposition of import or other duties or taxes; and
o unstable governments or legal systems in countries in which our
suppliers, manufacturing operations, and customers are located.
The Company does not have a hedging program in place to help limit the risk
associated with consolidating the operating results of our foreign businesses
into U.S. dollars. An increase in the value of the U.S. dollar and/or the Euro
related to other currencies may adversely affect its ability to compete with its
foreign-based competitors for international, as well as domestic, sales. Also, a
decline in the value of the Euro relative to the U.S. dollar will negatively
impact the Company's consolidated financial results, which are denominated in
U.S. dollars.
In addition, due to the typical slower summer manufacturing season in Europe, we
expect that revenues in the third fiscal quarter will reflect lower sales, as
our sales to foreign customers have increased as a percentage of net sales.
The Company is heavily dependent on a relatively few number of customers and the
loss of any major customer would have a material adverse effect on its business.
Sales to various U.S. and foreign divisions of SKF, which is one of the largest
bearing manufacturers in the world, accounted for approximately 35% of net sales
in 2001, and sales to INA/FAG accounted for approximately 19% of net sales.
During 2001, the Company's ten largest customers accounted for approximately 73%
of its consolidated net sales. None of the Company's other customers accounted
for more than 5% of its net sales for 2001. The loss of all or a substantial
portion of sales to these customers would have a material adverse effect on our
financial position, results of operations and cash flows.
6
The costs and difficulties of integrating acquired businesses could impede the
Company's future growth.
The Company cannot give assurances that any future acquisition will enhance its
financial performance. The Company's ability to effectively integrate any future
acquisitions will depend on, among other things, the adequacy of its
implementation plans, the ability of its management to oversee and operate
effectively the combined operations and its ability to achieve desired operating
efficiencies and sales goals. If the Company is not able to integrate the
operations of acquired companies successfully into its business, the Company's
future earnings and profitability could be materially and adversely affected.
The Company may not be able to continue to make the acquisitions necessary for
it to realize its growth strategy. Acquiring businesses that complement or
expand the Company's operations has been and continues to be an important
element of its business strategy. This strategy calls for growth through
acquisitions constituting approximately two-thirds of our future growth, with
the remainder resulting from internal growth and market penetration. The Company
bought its plastic bearing component business in 1999, formed Euroball in 2000
and acquired its bearing seal operations in 2001. The Company cannot give
assurances that it will be successful in identifying attractive acquisition
candidates or completing acquisitions on favorable terms in the future. In
addition, the Company may borrow funds to acquire other businesses, increasing
its interest expense and debt levels. The Company's inability to acquire
businesses, or to operate them profitably once acquired, could have a material
adverse effect on its business, financial position, results of operations and
cash flows.
The Company's growth strategy depends on outsourcing, and if the industry trend
toward outsourcing does not continue, its business could be adversely affected.
The Company's growth strategy depends in significant part on major bearing
manufacturers continuing to outsource components, and expanding the number of
components being outsourced. This requires manufacturers to depart significantly
from their traditional methods of operations. If major bearing manufacturers do
not continue to expand outsourcing efforts or determine to reduce their use of
outsourcing, our ability to grow our business could be materially adversely
affected.
The Company's markets are highly competitive. The global market for bearing
components is highly competitive with a majority of production represented by
the captive production operations of certain large bearing manufacturers and the
balance represented by independent manufacturers. Captive manufacturers make
components for internal use and sale to third parties. All of the captive
manufacturers, and many independent manufacturers, are significantly larger and
have greater resources than the Company does. The Company's competitors are
continuously exploring and implementing improvements in technology and
manufacturing processes in order to improve product quality, and the Company's
ability to remain competitive will depend, among other things, on whether the
Company is able to keep pace with such quality improvements in a cost effective
manner.
The production capacity that the Company has added over the last several years
has at times resulted in its having more capacity than it needs, causing its
operating costs to be higher than expected. The Company has significantly
expanded its ball and roller production facilities and capacity over the last
several years. During 1997, it built an additional manufacturing plant in
Kilkenny, Ireland, and it continued this expansion in 2000 through the formation
of Euroball with SKF and INA/FAG. The Company's ball and roller facilities
currently are not operating at full capacity and its results of operations for
2001 were adversely affected by the under-utilization of its production
facilities, and it faces risks of further under-utilization or inefficient
utilization of its production facilities in future years.
Part II. Other Information
Item 1. Legal Proceedings
The Company is involved in various legal proceedings that are of an ordinary and
routine nature and are incidental to the operations of the Company. Management
believes that such proceedings should not, individually or in the aggregate,
have a material adverse effect on the Company's business or financial condition
or on the results of operations.
7
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits Required by Item 601 of Regulation S-K
10.1 Amendment No. 3 dated July 31, 2002 to Credit Agreement among NN,
Inc.,as the Borrower, the Lenders identified therein, Bank One,
Kentucky, NA, as Co-Agent, and AmSouth Bank as Administrative Agent
(incorporated by reference to Exhibit 10.1 of the Company's Form 10-Q
filed August 13, 2002).
10.2 Amendment No. 2 dated July 12, 2002 to Credit Agreement among NN, Inc.
as the Borrower, the Lenders identified therein, Bank One, Kentucky,
NA, as Co-Agent, and AmSouth Bank, as Administrative Agent
(incorporated by reference to Exhibit 10.9 of the Company's
Registration Statement on Form S-3/A filed July 15, 2002).
99.1 Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
(b) Reports on Form 8-K
The Company filed a Form 8-K on June 7, 2002 announcing it filed a
registration statement with the Securities and Exchange Commission on
June 6, 2002.
8
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 thereunto duly authorized.
Date: November 22, 2002 /s/ William C. Kelly, Jr.
------------------------------------------
William C. Kelly, Jr.,
Treasurer, Secretary and Chief Accounting Officer
9
CERTIFICATIONS
I, Roderick R. Baty, certify that:
1. I have reviewed this quarterly report on Form 10-Q/A of NN, Inc.; and
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report.
[Item 3 omitted because financial statements are neither contained nor
amended in this report. Items 4, 5 and 6 omitted pursuant to the transition
provisions of Release No. 34-46427.]
Date: November 22, 2002
/s/ Roderick R. Baty
---------------------------
Roderick R. Baty
Chairman, President and Chief
Executive Officer
10
I, David L. Dyckman, certify that:
1. I have reviewed this quarterly report on Form 10-Q/A of NN, Inc.; and
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report.
[Item 3 omitted because financial statements are neither contained nor
amended in this report. Items 4, 5 and 6 omitted pursuant to the transition
provisions of Release No. 34-46427.]
Date: November 22, 2002
/s/ David L. Dyckman
---------------------------
David L. Dyckman
Chief Financial Officer
11
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of NN, Inc. (the "Company") on Form
10-Q/A for the quarterly period ended June 30, 2002, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), the
undersigned, in the capacities and dates indicated below, hereby certify
pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002, that, to our knowledge: (1) The Report fully
complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and (2) The information contained in the Report fairly
presents, in all material respects, the financial condition and results of
operations of the Company.
/s/ Roderick R. Baty
---------------------------------------
Roderick R. Baty
Chairman, President and Chief Executive
Officer
/s/ David L. Dyckman
---------------------------------------
David L. Dyckman
Chief Financial Officer