United States Securities and Exchange Commission
Washington, DC 20549
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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 29, 2004
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NN, Inc.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-23486 62-1096725
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(State or Other Jurisdiction of (Commission (I.R.S. Employer
Incorporation or Organization) File Number) Identification Number)
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 July 29, 2004, the Company issued a press release announcing its
financial results for the second quarter ended June 30, 2004. The entire press
release is attached hereto as an exhibit 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 29, 2004.
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 hereunto duly authorized.
NN, Inc.
Dated: July 29, 2004 By: /s/ William C. Kelly, Jr.
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William C. Kelly, Jr.
Secretary, Treasurer and Chief Administrative
Officer
Exhibit No. Description
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99.1 Press Release of NN, Inc. dated July 29, 2004.
Exhibit 99.1
NEWS
FINANCIAL
RELATIONS BOARD
RE: NN, Inc.
2000 Waters Edge Drive
Johnson City, TN 37604
FOR FURTHER INFORMATION:
AT THE COMPANY AT FINANCIAL RELATIONS BOARD
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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
July 29, 2004
NN, INC. REPORTS REVENUE GAIN OF 17.3%
FOR THE SECOND QUARTER OF 2004
Johnson City, Tenn., July 29, 2004 - NN, Inc. (Nasdaq: NNBR) today reported its
financial results for the second quarter ended June 30, 2004. Results include
the operations of NN Netherlands (Veenendaal) a component manufacturing
operation in Veenendaal, The Netherlands since its acquisition from the SKF
Group (SKF) on May 2, 2003. Additionally, net income includes 100% ownership
interest in NN Euroball (Euroball) as a result of the purchase of SKF's 23%
minority interest on May 2, 2003.
Net sales for the second quarter of 2004 were $75.3 million, up 17.3% from $64.2
million for the same period of 2003. Net income for the second quarter of 2004
totaled $2.0 million, or $0.12 per diluted share, compared to $0.7 million, or
$0.04 per diluted share, for the second quarter of 2003. Earnings per diluted
share in 2003 included $0.12 per diluted share of closing costs associated with
the closing of the NN Arte facility in Mexico.
Net sales for the first half of 2004 were $152.9 million, up 25.5%, compared to
$121.8 million for the same period of 2003. Net income for the first half of
2004 totaled $5.2 million, or $0.30 per diluted share, compared to $4.3 million,
or $0.27 per diluted share, for the same period of 2003. Earnings per diluted
share in 2003 included the aforementioned $0.12 per diluted share of closing
costs related to the NN Arte closing.
David L. Dyckman, Chief Financial Officer, commented, "Revenue growth of $11.1
million, or 17.3% over the second quarter of 2003 was principally attributable
to a full quarter contribution from the Veenendaal operation of $6.2 million in
revenue, $2.8 million which was due to increased demand and new program
initiatives and approximately $2.1 million related to the impact of currency
exchange rates.
"Our earnings were favorably impacted by the accretion of the Veenendaal
acquisition, our purchase of SKF Group's remaining 23% ownership in Euroball and
volume and cost improvements in our second quarter and year-to-date 2004.
Offsetting these contributions were inventory reductions, material price
inflation, Sarbanes-Oxley Section 404 ("SOX 404") compliance costs and start-up
costs associated with Slovakia and China.
"As a percentage of net sales, cost of products sold was 78.3% in the second
quarter of 2004 versus 77.5% in the second quarter of 2003. The year-over-year
negative change primarily resulted from the inclusion of the results of our
recently acquired Veenendaal facility, inventory reductions and material price
inflation. These were partially offset by volume improvement leverage and cost
reduction initiatives.
"Selling, general and administrative expenses for the second quarter of 2004
increased $2.3 million to 10.7% as a percentage of net sales compared to 9.0%
for the same period in 2003. The increase was due to SOX 404 compliance costs,
the addition of Veenendaal and start-up costs in Slovakia and China. It is
important to note that while the Company continues to be positioned to comply
with the internal control regulations of SOX 404, interpretations of the
regulations continue to evolve. As announced on July 9, 2004, we increased the
cost estimates of compliance to be approximately $2.0 million ($1.3 million
after-tax) or $0.07 per diluted share."
Mr. Dyckman concluded, "We plan to continue to reduce inventory levels in the
second half of the year as part of our Level 3 initiative. Although, these
reductions negatively impact margins in the short-term, reducing inventories in
our operations to more efficient levels will contribute to the improved
utilization of our assets and enhance our return on invested capital.
Correspondingly, total debt minus cash was $73.7 million as of June 30, 2004
versus $79.5 million as of December 31, 2003 or a reduction of $5.8 million. We
anticipate that the resulting cash flow will enable us to reduce total debt by
$13 million to $14 million for the year."
Roderick R. Baty, Chairman and Chief Executive Officer, stated, "In planning for
2004, we anticipated that several factors would negatively impact our earnings
for the year. On July 9, 2004, we announced that certain of these costs,
although anticipated, had increased more than expected in the second quarter. We
therefore reduced our previously stated guidance of $0.76 to $0.78 per diluted
share to $0.60 to $0.63 per diluted share for the full year of 2004. We
anticipate that approximately 80% of the increased costs we have experienced in
2004 will not reoccur in 2005. Two notable exceptions are the potential
continuing steel inflation and SOX 404 compliance costs. We believe the
compliance costs associated with SOX 404, while lower than 2004, will again be a
major cost factor in the upcoming year. With respect to raw materials, the
current environment from both a supply and price perspective continues to be
volatile and difficult to forecast. The most recent information indicates that
prices will continue to rise for both scrap and finished steel through the
foreseeable future."
Mr. Baty concluded, "In total, our operations are performing as expected.
Looking forward to the second half of the year, we are continuing to see good
demand from our customers and with the exception of anticipated downturns in
North American light vehicle demand and production, we expect the strength of
this demand to continue in the second half of the year. Additionally, we made
excellent progress during the quarter on the Slovakian and Chinese facility
start-ups, as well as our company wide Level 3 program. We have begun limited
production in Slovakia in the second quarter of this year and anticipate
reaching our forecasted levels of production in the fourth quarter of 2004. With
respect to China, we remain on schedule to begin production in mid 2005. We have
made excellent progress in our Level 3 program with achievements in training and
improvement initiatives in both our North American and European facilities. We
believe the program will deliver exciting opportunities in earnings, cash flow
and quality improvements."
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 $253 million in 2003.
The comments by Mr. Baty regarding production schedules, forecasted demand and
revenues, earnings, and costs and by Mr. Dyckman regarding certain estimated
cost, debt reduction and earnings 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, inventory levels,
regulatory compliance costs, start-up costs for new operations, debt reduction,
competitive influences, risks that current customers will commence or increase
captive production, risks of capacity underutilization, quality issues,
availability and price 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, 2003.
(Financial Tables Follow)
NN, Inc.
Condensed Statements of Income
(In Thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
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Net sales $ 75,265 $ 64,194 $ 152,897 $ 121,803
Cost of products sold (exclusive of 58,937 49,721 119,326 92,464
depreciation shown separately below)
Selling, general and administrative 8,041 5,771 15,184 10,403
Depreciation and amortization 4,024 3,482 8,024 6,560
Restructuring costs -- 2,723 -- 2,723
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Income from operations 4,263 2,497 10,363 9,653
Interest expense, net 877 759 1,718 1,343
Other (income) expense 25 389 (31) 310
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Income before provision for income taxes 3,361 1,349 8,676 8,000
Provision for income taxes 1,375 512 3,472 2,985
Minority interest in consolidated subsidiary -- 140 -- 675
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Net income $ 1,986 $ 697 $ 5,204 $ 4,340
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Diluted income per common share $ 0.12 $ 0.04 $ 0.30 $ 0.27
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Weighted average diluted shares 17,177 16,465 17,176 15,892
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NN, Inc.
Condensed Balance Sheets
(In Thousands)
(Unaudited)
June 30, December 31,
2004 2003
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Assets
Current Assets:
Cash $ 6,644 $ 4,978
Accounts receivable, net 47,809 40,864
Inventories, net 31,866 36,278
Other current assets 5,916 6,299
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Total current assets 92,235 88,419
Property, plant and equipment, net 124,601 128,996
Assets held for sale -- 1,805
Goodwill, net 42,132 42,893
Other assets 4,892 4,304
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Total assets $ 263,860 $ 266,417
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Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $34,906 $32,867
Accrued salaries and wages 12,288 12,032
Short-term note -- 2,000
Current portion of long-term debt 6,389 12,725
Other liabilities 3,914 3,070
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Total current liabilities 57,497 62,694
Deferred income taxes 13,193 13,423
Long-term notes payable 73,971 69,752
Other 13,125 14,080
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Total liabilities 157,786 159,949
Total stockholders' equity 106,074 106,468
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Total liabilities and stockholders' equity $ 263,860 $ 266,417
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