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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) October 30, 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 7. Financial Statements and Exhibits.
(c) EXHIBITS. The following exhibits are filed herewith:
99.1 Press Release dated October 30, 2003.
Item 12. Results of Operations and Financial Condition.
On October 30, 2003 the Company issued a press release announcing its
earnings for the third quarter of 2003. A copy of the press release is furnished
under Item 12 of this Form 8-K as Exhibit 99.1.
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: October 30, 2003
NN, INC.
By: /s/ William C. Kelly, Jr.
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William C. Kelly, Jr.,
Secretary, Treasurer and Chief
Administrative Officer
Exhibit 99.1
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 Alison Ziegler Susan Garland
Treasurer & Manager of Investor Relations (General info) (Analyst info)
(423) 743-9151 212-445-8432 212-445-8458
FOR IMMEDIATE RELEASE
October 30, 2003
NN, INC. REPORTS REVENUE AND NET INCOME UP 36% AND 51% RESPECTIVELY IN
THE THIRD QUARTER OF 2003
Johnson City, Tenn., October 30, 2003 - NN, Inc. (Nasdaq: NNBR) today reported
its financial results for the third quarter ended September 30, 2003. Results
for the third quarter of 2003 include the operations of NN Netherlands
(Veenendaal) a component manufacturing operation in Veenendaal, The Netherlands,
which was acquired from the SKF Group (SKF) on May 2, 2003. Additionally, net
income includes 100% ownership interest in NN Euroball (Euroball) due to the
purchase of SKF's 23% minority interest on May 2, 2003.
Net sales for the third quarter of 2003 were $64.6 million, up 36.2% from $47.5
million for the same period of 2002. Net income for the third quarter of 2003
totaled $3.2 million, or $0.18 per diluted share, compared to $2.1 million, or
$0.14 per diluted share, for the third quarter of 2002. Diluted earnings per
share of $0.18 for the third quarter of 2003 includes a $0.01 gain on the sale
of assets related to NN's plastic production facility, NN Arte, which was closed
in the second quarter. Excluding the gain, adjusted net income was $2.9 million
and adjusted diluted earnings per share were $0.17 per share.
Net sales for the first nine months of 2003 were $186.4 million, up 29.6%
compared to $143.8 million for the same period of 2002. Net income for the first
nine months of 2003 totaled $14.1 million, or $0.87 per diluted share, compared
to $6.4 million, or $0.40 per diluted share, for the same period of 2002.
Diluted earnings per share of $0.87 for the first nine months of 2003 include a
non-cash, non-taxable gain of $6.6 million, or $0.41 per diluted share,
associated with the purchase of SKF's 23% minority interest in Euroball; an
after-tax impairment charge of $1.7 million, or $0.11 per diluted share related
to the closing of NN's plastic production facility, NN Arte; a non-cash,
after-tax charge of $291,000, or $0.02 per diluted share, relating to the
write-off of unamortized loan costs associated with the refinancing of the
former credit facility; a non-cash, after
tax charge of $200,000, or $0.01 per diluted share, for compensation charges associated with a portion of employee stock options accounted for under the variable accounting method. Adjusting for these items, adjusted net income was $9.7 million and adjusted diluted earnings per share were $0.60 per share. David L. Dyckman, Chief Financial Officer, commented, "This is the sixth consecutive quarter that we have experienced year-over-year improvement in revenues and earnings. Revenue growth of 36.2% over the third quarter of 2002 was almost entirely attributable to the $12.5 million in revenue contribution from the recently acquired Veenendaal operation and approximately $3.2 million in favorable currency fluctuations. Excluding the impact from Veenendaal and currency, NN's underlying revenues grew approximately 4%. Looking at earnings, the accretion from Veenendaal and our purchase of SKF Group's remaining 23% ownership in Euroball contributed $0.05 to diluted earnings per share for the quarter. "As a percentage of net sales, the gross profit margin was 22.2% in the third quarter of 2003 versus 24.9% in third quarter of 2002 and 22.5% in the second quarter of 2003. The third quarter margins primarily reflect lower margins associated with our recently acquired Veenendaal facility and unfavorable product mix factors. For the first nine months of 2003 and 2002, gross profit margin as a percentage of sales was 23.4% and 25.4% respectively. "Selling, general and administrative expenses for the third quarter of 2003 declined to 8.1% as a percentage of net sales compared to 8.6% for the same period in 2002, within our historical target range of 8.0% to 8.5%." Roderick R. Baty, Chairman and Chief Executive Officer, stated, "During October we announced that we had entered into an asset purchase agreement with KLF - Gulickaren, based in Kysucke Nove Mesto, Slovakia to acquire their precision ball operations for approximately 1.7 million Euros. The assets of this operation are being utilized in the formation of a new manufacturing facility which will better allow us to serve our worldwide bearing customers, many of whom have already established Eastern European operations. We are optimistic about the outlook for this operation and believe that it will provide new opportunities to create value for our customers. We anticipate that this facility will be operational in early 2004 and contribute approximately $2.0 to $3.0 million in revenues for the first year of operation. "Additionally, in the fourth quarter we are initiating a company wide program in all nine of our global manufacturing operations that will continue NN's history of being in the forefront of low cost, high quality component manufacturing companies. This program integrates the principles of Lean Enterprise, Six Sigma and Total Productive Maintenance and will provide our employees with the tools to excel in an increasingly demanding and competitive global market place. Mr. Baty, concluded, "Looking forward into the fourth quarter of 2003 and into 2004, we continue to remain cautious on the outlook of economies around the world. The addition of Veenendaal and the purchase of the remaining SKF minority interest will benefit
fourth quarter results and continue into 2004. With this being said, we
currently expect to report fourth quarter revenue in a range of $64 to $65
million and earnings per diluted share from underlying operations of $0.17 to
$0.18."
Adjusted Net Income and Diluted Earnings Per Share
In accordance with generally accepted accounting principles, reported net income
and diluted earnings per share include the after-tax effect of: the gain from
the purchase of SKF's interest in Euroball; impairment charges and gain on the
sale of assets related to the planned closing of NN Arte; the write-off of
unamortized loan costs of the former credit facility; and the non-cash
compensation charges associated with a portion of employee stock options. The
Company's management believes that by adjusting reported net income and diluted
earnings per share to exclude the effects of these items, the resulting earnings
better represent the operating results of the Company. The Company's management
uses adjusted earnings to evaluate operating performance of consolidated
business units from one period to another. The reconciliation of adjusted net
income and diluted earnings per share is provided below:
Three Months Nine Months
Ended Ended
September 30, 2003 September 30, 2003
Net Income Diluted Net Income Diluted
(Millions) EPS (Millions) EPS
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As Reported $3.2 $0.18 $14.1 $0.87
Add:
Restructuring and Impairment Charges - - 2.0 0.12
Unamortized Loan Costs - - 0.3 0.02
Non-cash Compensation Charges - - 0.2 0.01
Less:
Gain on Purchase of Minority Interest - - 6.6 0.41
Gain on Sales of Impaired Assets 0.3 0.01 0.3 0.01
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Adjusted $2.9 $0.17 $9.7 $0.60
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NN, Inc. manufacturers 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.
The comments by Mr. Baty regarding the fourth quarter and full year 2003 and
the 2004 revenues of the Slovakian facility are forward looking statements 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, 2002.
(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,
2003 2002 2003 2002
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Net sales $64,612 $ 47,451 $ 186,415 $ 143,836
Cost of goods sold 50,294 35,631 142,758 107,302
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Gross profit 14,318 11,820 43,657 36,534
Selling, general and adminstrative 5,247 4,076 15,650 13,311
Depreciation and amortization 3,642 2,881 10,203 8,443
Restructuring and impairment costs/(gain) (224) - 2,498 78
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Income from operations 5,653 4,863 15,306 14,702
Interest expense, net 881 597 2,225 1,876
Net gain on involuntary conversion - - (6,600) -
Other (income) expense (38) (20) 272 (516)
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Income before provision for income taxes 4,810 4,286 19,409 13,342
Provision for income taxes 1,646 1,612 4,630 4,957
Minority interest in consolidated subsidiary - 555 675 2,010
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Net income $ 3,164 $ 2,119 $ 14,104 $ 6,375
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Diluted income per common share $ 0.18 $ 0.14 $ 0.87 $ 0.40
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Weighted average shares outstanding 17,167 15,584 16,194 15,505
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NN, Inc.
Condensed Balance Sheet
(In Thousands, Except Per Share Amounts)
(Unaudited)
Assets Consolidated Consolidated
09/30/03 12/31/02
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Current assets:
Cash and cash equivalents $ 4,790 $ 5,144
Accounts receivable, net 45,431 28,965
Inventories, net 34,391 23,402
Other current assets 5,860 3,901
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Total current assets 90,472 61,412
Property, plant and equipment, net 105,621 88,199
Assets held for sale 1,805 2,214
Goodwill, net 54,090 42,166
Other assets 4,667 4,016
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Total assets $ 256,655 $ 198,007
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Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 32,139 $ 23,020
Accrued wages 11,453 6,354
Income taxes payable 1,755 620
Short term portion of long term debt 12,206 7,000
Other liabilities 4,270 3,240
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Total current liabilities 61,823 40,234
Minority interest in consolidated subsidiaries - 19,706
Deferred income taxes 10,732 9,334
Long-term debt 73,191 46,135
Other 10,468 9,319
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Total liabilites 156,214 124,728
Total stockholders' equity 100,441 73,279
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Total liabilities and stockholders' equity $ 256,655 $ 198,007
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