UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 2, 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)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition
Furnished as Exhibit 99.1 is a copy of the earnings release of NN, Inc. for the
quarter ended September 30, 2004, which was issued on November 2, 2004.
Item 9.01. Financial Statements and Exhibits
(c) Exhibits.
The following exhibit is furnished purusant to Item 2.02, is not considered
"filed" under the Securities Exchange Act of 1934, as amended, and shall not be
incorporated by reference into any of the previous or future filings of NN, Inc.
under the Securities Act of 1933, as amended, or the Exchange Act:
Exhibits:
Exhibit
Number Description of Exhibit
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99.1 Press Release of NN, Inc. dated November 2, 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: November 5, 2004 By:/s/ William C. Kelly, Jr.
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William C. Kelly, Jr.
Secretary, Treasurer and
Chief Administrative Officer
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
November 2, 2004
NN, INC. REPORTS REVENUE GAIN
FOR THE THIRD QUARTER OF 2004
Revises 2004 Full Year Estimated Earnings Per Share
Johnson City, Tenn., November 2, 2004 - NN, Inc. (Nasdaq: NNBR) today reported
its financial results for the third quarter and nine months ended September 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 third quarter of 2004 were $72.9 million, up 12.8% from $64.6
million for the same period of 2003. Net income for the third quarter of 2004
totaled $2.2 million, or $0.13 per diluted share, compared to $3.2 million, or
$0.18 per diluted share, for the third quarter of 2003. Earnings per diluted
share in the third quarter of 2003 included a $0.01 per diluted share gain on
the sales of assets related to the closing of the NN Arte facility in Mexico.
Net sales for the first nine months of 2004 were $225.8 million, up 21.1%,
compared to $186.4 million for the same period of 2003. Net income for the first
nine months of 2004 totaled $7.4 million, or $0.43 per diluted share, compared
to $7.5 million, or $0.46 per diluted share, for the same period of 2003.
Earnings per diluted share in 2003 included: an after-tax impairment charge of
$1.7 million, or $0.11 per diluted share, related to the closing of NN Arte; a
non-cash, after-tax charge of $291,000, or $0.02 per diluted share, related to
the write-off of unamortized loan costs associated with the refinancing of the
former credit facility; and 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.
David L. Dyckman, Chief Financial Officer, commented, "Revenue growth of $8.3
million, or 12.8% over the third quarter of 2003 was principally attributable to
increased demand, particularly in Europe and approximately $3.2 million related
to the impact of currency exchange rates. While revenue growth was on target,
our earnings were pressured by inventory reductions that were slightly greater
than planned, continued material price inflation and Sarbanes-Oxley compliance
costs.
"As a percentage of net sales, cost of products sold was 78.5% in the third
quarter of 2004 versus 77.8% in the third quarter of 2003. The year-over-year
increase primarily resulted from the previously mentioned 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 third quarter of 2004
increased $1.9 million to 9.8% as a percentage of net sales compared to 8.1% for
the same period in 2003. The increase was primarily due to Sarbanes-Oxley
compliance and Level 3 implementation costs."
Mr. Dyckman concluded, "Our Level 3 initiatives are well underway and these
efforts have positioned us well for 2005. Reductions in inventory levels, while
continuing to negatively impact margins in 2004, will serve to benefit asset
utilization and our return on invested capital over the long term. As of
September 30, 2004, total debt minus cash was $69.5 million versus $79.5 million
as of December 31, 2003, a reduction of $10.0 million. Also, we are in the
process of selling our idle Walterboro, South Carolina ball manufacturing
facility in an auction sale in mid November 2004. The net cash generated from
the sale of this facility, which has been idle since early 2002, will be used to
further reduce our outstanding debt. We continue to remain on track to reduce
total debt minus cash by an estimated $13 million to $14 million for the full
year."
Roderick R. Baty, Chairman and Chief Executive Officer, commented, "Although the
third quarter of 2004 was essentially on plan with our expectations, we continue
to experience volatile steel prices and, during the quarter, we saw prices for
both scrap and finished steel rise beyond what we anticipated just one quarter
ago, particularly in Europe. Due to contractual obligations, there continues to
be a delay in our ability to pass through these higher raw material prices to
our customers. As a result, we anticipate an additional negative impact to
earnings in the fourth quarter of 2004 of approximately $600,000, or $0.03 per
diluted share. Looking forward to 2005, we do anticipate recovering the majority
of the raw material increases we incurred in 2004 and are currently having
discussions with our customers regarding the elimination of the timing delay for
2005. Additionally, consistent with our strategy of rationalizing our global
manufacturing capacity, we have begun to transfer the manufacture of certain
automotive products from our facility in Eltmann, Germany to our new facility in
Kysucke Nove Mesto, Slovakia. As a result of the transfer of this production, we
will reduce our Eltmann workforce by approximately 40% in 2005. Although the
displacement of these employees is unfortunate, we feel this transfer is
necessary to best serve our customers by more efficiently balancing our global
capacity. This balancing will improve the efficiencies of our European
facilities and will provide us further opportunities for
continued cost structure improvements. We will provide a compensation package to
our affected employees that will result in the recording of an estimated
after-tax severance charge of approximately $1.4 million or $0.08 per diluted
share. We anticipate recording this charge in the fourth quarter of 2004."
Adjusting for the aforementioned material inflation and estimated severance
costs, NN currently expects earnings of $0.49 to $0.52 per diluted share for
2004, down from previous guidance of $0.60 to $0.63. This equates to estimated
earnings for the fourth quarter of between $0.05 to $0.08 per diluted share.
Mr. Baty concluded, "From an operations standpoint, business continues to
perform as expected. Slovakia is now up and running and we anticipate shipping
approximately $2.0 million of product in the fourth quarter 2004, putting us on
track to reach our forecasted levels of production for the year. Additionally,
construction has begun on our new Chinese facility and we are excited about the
prospects for new business throughout Asia. Finally, we continue to make
excellent progress in our Level 3 program with further achievements in training,
helping to position us for continued quality, margin, cash flow and earnings
improvements in 2005."
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 Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
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Net sales $ 72,917 $ 64,612 $ 225,815 $ 186,415
Cost of products sold (exclusive of 57,263 50,294 176,590 142,758
depreciation shown separately below)
Selling, general and administrative 7,126 5,247 22,309 15,650
Depreciation and amortization 3,999 3,602 11,918 10,103
Restructuring and impairment costs (gain) -- (224) -- 2,498
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Income from operations 4,529 5,693 14,998 15,406
Interest expense, net 1,101 921 2,925 2,325
Other (income) expense (177) (38) (208) 272
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Income before provision for income taxes 3,605 4,810 12,281 12,809
Provision for income taxes 1,453 1,646 4,926 4,630
Minority interest in consolidated subsidiary -- -- -- 675
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Net income $ 2,152 $ 3,164 $ 7,355 $ 7,504
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Diluted income per common share $ 0.13 $ 0.18 $ 0.43 $ 0.46
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Weighted average diluted shares 17,135 17,167 17,142 16,194
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NN, Inc.
Condensed Balance Sheets
(In Thousands)
(Unaudited)
September 30, December 31,
2004 2003
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Assets
Current Assets:
Cash $ 7,773 $ 4,978
Accounts receivable, net 50,656 40,864
Inventories, net 32,292 36,278
Other current assets 6,092 6,299
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Total current assets 96,813 88,419
Property, plant and equipment, net 125,463 128,996
Assets held for sale -- 1,805
Goodwill, net 42,544 42,893
Other assets 4,871 4,304
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Total assets $ 269,691 $ 266,417
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Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 37,418 $ 32,867
Accrued salaries and wages 12,106 12,032
Short-term note -- 2,000
Current portion of long-term debt 6,523 12,725
Other liabilities 6,519 3,070
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Total current liabilities 62,566 62,694
Deferred income taxes 14,102 13,423
Long-term notes payable 70,735 69,752
Other 13,355 14,080
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Total liabilities 160,758 159,949
Total stockholders' equity 108,933 106,468
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Total liabilities and stockholders' equity $ 269,691 $ 266,417
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