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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) February 25, 2003
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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 and Regulation FD Disclosure.
On February 25, 2003, the Company issued a press release announcing its
financial results for the fourth quarter and the fiscal year ended December 31,
2002. 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 February 25, 2003.
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: February 25, 2003
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 Julie Tu
Treasurer & Manager of Investor Relations (General info) (Analyst info)
(423) 743-9151 212-445-8437 212-445-8456
FOR IMMEDIATE RELEASE
February 25, 2003
NN, INC. REPORTS REVENUE IMPROVEMENTS OF 22.9%
IN THE 2002 FOURTH QUARTER AND 7.1% FOR THE FULL YEAR
Full Year 2002 Adjusted Earnings Per Share
Increased 100% From $0.27 to $0.54
Johnson City, Tenn., February 25, 2003 - NN, Inc. (Nasdaq: NNBR) today
reported its financial results for the fourth quarter ended December 31, 2002.
Net sales for the fourth quarter of 2002 were $49.1 million, up 22.9% from $40.0
million for the same period of 2001. Net income for the fourth quarter of 2002
totaled $7.3 million, or $0.46 per share compared to a net loss of $1.0 million
or $0.07 loss per share for the fourth quarter of 2001. Earnings per share of
$0.46 for the fourth quarter of 2002 include a non-taxable gain of $5.9 million,
or $0.38 per share, associated with the previously announced purchase of
INA/FAG's 23 % interest in NN Euroball on December 20, 2002. Additionally,
recorded in the 2002 fourth quarter was an after-tax charge of $767,000, or
$0.05 per share. This charge was associated with an additional impairment charge
related to the Walterboro, South Carolina facility, which was closed in
September of 2001. Adjusting for these items, net income was $2.2 million or
$0.14 per share for the 2002 fourth quarter.
The fourth quarter of 2001 net loss includes approximately $1.2 million in net
after-tax charges to earnings, or $0.08 per share as well as $300,000 of NN Arte
minority interest losses included in NN's financial statements. The details of
the approximately $1.2 million of after-tax charges to earnings are as follows:
$766,000 associated with the closing of the Company's Walterboro, South Carolina
manufacturing facility, including a charge related to the impairment of the
facility at lower than book value; a loss of $140,000 associated with the 2001
divestiture of NN's 30% interest in the joint venture ball company in China; an
additional reserve of approximately $270,000 in the fourth
quarter for the remaining balance of a trade account receivable associated with a previously announced customer that had filed for Chapter 7 bankruptcy protection; approximately $145,000 in charges associated with Euroball corporate organizational and structuring charges; and finally, earnings of approximately $100,000 associated with the receipt of insurance proceeds from the demutualization of an insurance carrier. Additionally, effective January 1, 2002, the Company adopted Statement of Financial Accounting Standard No. 142 (SFAS142) "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 fourth quarter of 2001 included goodwill amortization expense of $279,000 net of tax and minority interest. Adjusting for these items, net income for the fourth quarter of 2001 was $464,000 or $0.03 per share. Net sales for the full year of 2002 were $193.0 million, up 7.1% compared to $180.2 million in 2001. Net sales in 2001 reflect approximately 10 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 full year of 2002 totaled $13.7 million, or $0.87 per share, compared to $4.7 million or $0.30 per share, for the same period of 2001. Excluding the aforementioned non-taxable gain on the purchase of INA/FAG's 23% interest in NN Euroball of $5.9 million and an after-tax charge of $767,000 reflecting the impairment associated with the Walterboro closing, net income totaled $8.5 million, or $0.54 per share. Adjusting for the aforementioned items recorded in the fourth quarter as well as a full year of goodwill amortization, net income for 2001 totaled $4.2 million, or $0.27 per share. David L. Dyckman, Chief Financial Officer, commented, "This was the third consecutive quarter in which we reported year-over-year improvement in revenues and operating results when compared to 2001. Revenues for the fourth quarter of 2002 of $49.1 million grew by approximately 22.9% over fourth quarter 2001. We experienced good demand associated with strong automotive sales throughout 2002. However, sales to the general industrial segment continued to remain at depressed levels throughout 2002. Adjusted EPS of $0.54 per share for 2002 increased 100% from the adjusted $0.27 per share earned in 2001. "As a percentage of net sales, the gross profit margin was 24.8% in the fourth quarter of 2002 versus 22.2% in the fourth quarter of 2001. For the full year of 2002, the gross profit margin was 25.2% as compared to 23.8% for the full year of 2001. This improvement over the prior year reflects the continuing benefit of the initiatives to lower our cost structure, the consolidation of our domestic ball and roller operations in the fourth quarter of 2001 and increased efficiencies associated with higher volume levels. "Selling, general and administrative expenses for the fourth quarter of 2002 declined to 8.0% as a percentage of net sales compared to 11.1% in the prior year. For the full year of
2002, selling, general and administrative expenses as a percentage of sales were 8.9% compared to 9.3% in 2001. Roderick R. Baty, Chairman and Chief Executive Officer, stated, "We are especially pleased to report positive results for both the fourth quarter and full year despite the fact that economies in both Europe and North America remain uncertain. "During 2002, we focused on prudent balance sheet management as evidenced by our strong cash flow and debt reduction results. Excluding the impact of purchasing INA/FAG's interest in NN Euroball in December 2002, the Company reduced debt by $15.3 million for the year, exceeding our goal of reducing debt by $12 million. "Looking forward into 2003, we believe NN is well positioned to achieve solid results despite the continuing uncertainty of the current global economic environment. Accordingly, we anticipate earnings per share for the first quarter of 2003 to be in the range of $0.16 per share to $0.18 per share. After considering the earnings accretion of the purchase of INA/FAG's 23% share in NN Euroball, we are raising our full year earnings per share guidance to $0.68 to $0.71, on revenues of approximately $200 million. While we will continue to focus on debt reduction and maximizing cash flow, we anticipate increasing our capital expenditures from $6.6 million in 2002 to $9.4 million in 2003. "We are continuing our due diligence process regarding the acquisition of SKF's Veenendaal, the Netherlands, tapered roller and metal cage manufacturing operation. Pending successful negotiations, we would anticipate closing in the first quarter of 2003. In addition, we are currently in discussions with SKF regarding their right to sell NN their 23% ownership interest in NN Euroball. We believe these pending transactions would expand NN's bearing component product offering while at the same time would provide additional value to our global bearing customers. Assuming the completion of the above transactions, our debt profile will still be at relatively conservative levels, approximately two times debt-to-EBITDA." "Our shelf registration filed with the Securities and Exchange Commission on September 26, 2002 was declared effective on February 11, 2003. The registration provides for the sale of 3.7 million selling stockholder shares and up to $36.0 million of company shares." 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 $193 million in 2002. 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 Twelve Months Ended
December 31, December 31,
2002 2001 2002 2001
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Net sales $ 49,144 $ 39,997 $ 192,981 $ 180,151
Cost of goods sold 36,972 31,105 144,274 137,221
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Gross profit 12,172 8,892 48,707 42,930
Selling, general and administrative 3,947 4,428 17,259 16,752
Depreciation and amortization 2,769 3,169 11,212 13,340
Restructuring and impairment costs 1,199 1,562 1,277 2,312
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Income from operations 4,257 (267) 18,959 10,526
Interest expense, net 574 792 2,451 4,006
Equity in (earnings) loss of
unconsolidated affiliate - 13 - -
Net gain on involuntary conversion - - - (3,901)
Net gain on purchase of minority interest (5,904) - (5,904) -
Other income 29 275 (487) (186)
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Income before provision for income
taxes 9,558 (1,347) 22,899 10,607
Provision for income taxes 1,500 (786) 6,457 4,094
Minority interest in consolidated
subsidiary 769 474 2,778 1,753
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Income before cumulative effect of
change in accounting principle 7,289 (1,035) 13,664 4,760
Cumulative effect of change in
accounting principle, net of income
tax benefit of $112 - - - 98
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Net income $ 7,289 $ (1,035) $ 13,664 $ 4,662
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Diluted income (loss) per common share $ 0.46 $ (0.07) $ 0.87 $ 0.30
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Weighted average diluted shares 15,709 15,679 15,714 15,540
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NN, Inc.
Condensed Balance Sheets
(In Thousands)
(Unaudited)
December 31, December 31,
2002 2001
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Assets
Current assets:
Cash $ 5,144 $ 3,024
Accounts receivable, net 28,966 24,832
Inventories, net 23,402 23,418
Other current assets 4,359 4,343
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Total current assets 61,871 55,617
Property, plant and equipment, net 88,199 82,770
Assets held for sale 2,213 4,348
Goodwill, net 42,166 40,282
Other assets 4,016 5,118
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Total assets $ 198,465 $ 188,135
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Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $23,020 $15,693
Accrued salaries and wages 6,354 3,813
Income taxes payable 620 2,377
Payable to affiliates 566 1,277
Short-term portion of long-term notes payable 7,000 7,000
Other liabilities 2,675 3,237
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Total current liabilities 40,235 33,397
Minority interest in consolidated subsidiaries 19,706 30,932
Deferred income taxes 9,791 6,499
Long-term notes payable 46,135 47,661
Other 9,319 7,607
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Total Liabilities 125,186 126,096
Total stockholders' equity 73,279 62,039
Total liabilities and stockholders' equity $ 198,465 $ 188,135
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