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): February 28, 2005
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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.
reporting results for the year ended December 31, 2004, which was issued on
February 28, 2005.
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 February 28, 2005
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: February 28, 2005 By: /s/ William C. Kelly, Jr.
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William C. Kelly, Jr.
Secretary, Treasurer and
Chief Administrative Officer
EXHIBIT 99.1
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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 Marilynn Meek Susan Garland
Treasurer & Manager of Investor Relations (General info) (Analyst info)
(423) 743-9151 212-827-3773 212-827-3775
FOR IMMEDIATE RELEASE
February 28, 2005
NN, INC. REPORTS 2004 FOURTH QUARTER AND FULL YEAR RESULTS
PROVIDES GUIDANCE FOR 2005
Johnson City, Tenn, February 28, 2005 - NN, Inc. (Nasdaq: NNBR) today reported
its financial results for the fourth quarter and year ended December 31, 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 the
Company's 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 fourth quarter of 2004 were $78.3 million, up 16.7% from $67.0
million for the same period of 2003. Net loss for the fourth quarter totaled
$(253,000), or $(0.01) per diluted share, compared to net income of $2.7
million, or $0.16 per diluted share for the fourth quarter of 2003. The Company
had earlier indicated in prior guidance that it expected to report earnings for
the fourth quarter between $0.05 and $0.08 per diluted share. The net loss in
the fourth quarter is a result of four charges, three of which relate to the
long-term global rationalization of manufacturing operations. The charges
totaling $2.5 million after-tax, or $0.15 per diluted share, include the
following:
o The previously disclosed sale, at a loss, in December of 2004 of the
idle manufacturing facility in Walterboro, South Carolina which was
closed in 2001 ($0.03 per diluted share).
o The consolidation of administrative office space in Veenendaal, The
Netherlands in the fourth quarter which resulted in the early exit of
a lease ($0.02 per diluted share).
o Severance charges associated with the previously announced
rationalization of global capacity in 2005 ($0.08 per diluted share).
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o Notification late in the fourth quarter of unanticipated audit fee
overruns from the Company's accounting firm, PricewaterhouseCoopers,
LLP. ($0.02 per diluted share).
Net sales for the year 2004 were $304.1 million, up $50.6 million or 20.0%
compared to $253.5 million for 2003. Of the 20% increase in year over year
sales, sales growth and market share gains account for approximately 8.0%,
inclusion of a full year of revenues from our Veenendaal, The Netherlands
facility, acquired in May of 2003, accounts for 6.0% of the increase and
currency exchange rates account for the remaining 6.0%. Net income for 2004
totaled $7.1 million, or $0.41 per diluted share, compared to $10.2 million, or
$0.62 per diluted share for 2003. The $0.41 per diluted share for 2004 includes
the negative impact of the aforementioned fourth quarter rationalization charges
of $0.13 per diluted share. In addition, the following items negatively impacted
full year earnings by $0.19 per diluted share:
o Costs associated with the private placement of debt ($0.03 per diluted
share).
o The negative earnings impact of inventory reductions ($0.05 per
diluted share).
o The Company's Sarbanes-Oxley compliance efforts and related costs
($0.09 per diluted share).
o Costs associated with the start-up of the new facilities in Slovakia
and China ($0.02 per diluted share).
Roderick R. Baty, Chairman and Chief Executive Officer commented, "Although 2004
was a challenging year, operationally, our businesses continued to perform well.
We began the year with expectations of net earnings from our global operations
of approximately $0.77 per diluted share. The charges incurred in the fourth
quarter of $0.13 per diluted share combined with the majority of the remaining
one time expenses totaling $0.19 per diluted share (private debt placement,
inventory reduction, Sarbanes-Oxley, Slovakia/China start up) will not carry
forward into 2005. While resulting in a difficult year from an earnings
perspective, the majority of the one time expenses incurred during 2004 were a
direct result of actions taken to further strengthen our global operations for
continued growth and profitability in the future."
Mr. Baty continued, "As a percentage of net sales, cost of products sold was
81.8% in the fourth quarter of 2004 compared to 78.9% in the fourth quarter of
2003. For full year 2004 and 2003, cost of goods sold as a percentage of net
sales was 79.1% and 77.2%, respectively. In both comparisons, the majority of
the change was due to material price inflation, Level 3 implementation costs and
the negative impact of inventory reductions.
"Selling, general and administrative expenses for the fourth quarter of 2004
were 9.5% as a percentage of net sales compared to 9.0% for the same period in
2003. The increase was primarily due to Sarbanes-Oxley compliance costs. For the
full year, selling, general and administrative expenses as a percent of net
sales were 9.8% compared to 8.6% in 2003. This increase was due primarily to
Sarbanes-Oxley costs, Level 3 implementation costs and start-up expenses in
China and Slovakia.
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"We continued to generate solid cash flow and made significant progress in
reducing our debt in 2004. As of December 31, 2004, total debt minus cash was
$63.9 million compared to $79.5 million at December 31, 2003, a reduction of
$15.6 million."
Anticipated 2005 Results
Mr. Baty, concluded, "Looking forward into 2005, we face both exciting
opportunities and challenges. The start-up of our facilities in Slovakia in 2004
and China in the second half of 2005 will provide us opportunities to both
better service our worldwide customers and to realize greater operating
efficiencies and additional cost reductions.
"For 2005, we are forecasting relatively flat economics in the U.S. and Europe
(automotive down and improving industrial) but overall good capacity utilization
Company-wide at current levels of demand. We anticipate total year revenues for
2005 to approximately $337.0 million, up $33.0 million or 11.0% from 2004
levels. Of the total 11.0% forecasted increase in year over year revenue,
currency accounts for 4.4%, market share improvements 3.6% and price increases
associated with raw material pass through 3.0%.
"Concerning full year earnings, as we have mentioned previously, we do not
anticipate many of the one time expenses we incurred in 2004 to continue into
2005. Given the elimination of these expenses coupled with our increasing cost
improvement outlook associated with our Level 3 program, our business plan
anticipates full year earnings to be in the range of $0.90 to $0.94 per diluted
share, up from $0.41 per diluted share in 2004. These earnings projections
include provisions for continuing pass through of significant material inflation
in our U.S. operations and scrap surcharge pricing levels trending downward in
Europe for the balance of 2005. We continue to have ongoing concerns regarding
the availability of steel, particularly in our U.S. operations, where steel
supplies look to be sufficient for the balance of 2005, but remain both tight
and volatile.
"We plan on investing approximately $17.0 million in capital for 2005. This is
an increase of $5.0 million from 2004 levels and is a result of our need to fund
approximately $8.0 million of capital for the continuing expansion of our
Slovakian facility and the start-up of the facility in China. The remaining $9.0
million is related to the ongoing capital requirements of our existing U.S. and
European facilities. Excluding the impact of any potential acquisitions in the
current year, we are targeting further debt reduction of $12.0 million to $13.0
million for 2005 while maintaining our dividend at $0.32 per diluted share
annually."
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 $304 million in 2004.
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Except for specific historical information, many of the matters discussed in
this press release may express or imply projections of revenues or expenditures,
statements of plans and objectives or future operations or statements of future
economic performance. These, and similar statements are forward-looking
statements concerning matters that involve risks, uncertainties and other
factors which may cause the actual performance of NN, Inc. and its subsidiaries
to differ materially from those expressed or implied by this discussion. All
forward-looking information is provided by the Company pursuant to the safe
harbor established under the Private Securities Litigation Reform Act of 1995
and should be evaluated in the context of these factors. Forward-looking
statements generally can be identified by the use of forward-looking terminology
such as "assumptions", "target", "guidance", "outlook", "plans", "projection",
"may", "will", "would", "expect", "intend", "estimate", "anticipate", "believe",
"potential" or "continue" (or the negative or other derivatives of each of these
terms) or similar terminology. Factors which could materially affect actual
results include, but are not limited to: general economic conditions and
economic conditions in the industrial sector, inventory levels, regulatory
compliance costs and the Company's ability to manage these 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
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NN, Inc.
Condensed Statements of Income
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2004 2003 2004 2003
Net Sales $78,275 $67,046 $ 304,089 $ 253,462
Cost of goods sold (exclusive of depreciation
shown separately below) 63,991 52,890 240,580 195,658
Selling, general and administrative 7,445 6,050 29,755 21,700
Depreciation and amortization 4,176 3,588 16,133 13,691
Loss (gain) on disposal of fixed asset 935 (147) 964 (147)
Restructuring and impairment costs 2,290 -- 2,290 2,490
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Income (loss)from operations (562) 4,665 14,367 20,070
Interest expense, net 1,144 1,067 4,029 3,392
Other (income) expense (616) (172) (853) 99
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Income before provision (benefit)for income taxes (1,090) 3,770 11,191 16,579
Provision (benefit) for income taxes (837) 1,096 4,089 5,726
Minority interest in consolidated subsidiary -- -- -- 675
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Net income (loss) $ (253) $ 2,674 $ 7,102 $ 10,178
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Diluted income (loss) per common share $(0.01) $ 0.16 $ 0.41 $ 0.62
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Weighted average diluted shares 17,226 17,181 17,151 16,379
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NN, Inc,
Condensed Balance Sheets
(In thousands)
(Unaudited)
December 31, December 31,
2004 2003
Assets
Current Assets:
Cash $ 10,772 $ 4,978
Accounts receivable, net 51,597 40,864
Inventories, net 35,629 36,278
Other current assets 10,339 7,781
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Total current assets 108,337 89,901
Property, plant and equipment, net 131,169 128,996
Assets held for sale -- 1,805
Goodwill, net 44,457 42,893
Other assets 5,906 4,304
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Total assets $ 289,869 $ 267,899
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Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 45,217 $ 32,867
Accrued salaries and wages 16,331 12,032
Income taxes payable 1,599 1,332
Short-term portion of long-term debt 7,160 14,725
Other liabilities 4,123 3,220
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Total current liabilities $ 74,430 $ 64,176
Deferred income taxes 17,857 13,423
Long-term notes payable 67,510 69,752
Accrued Pension and other 14,932 14,080
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Total liabilities $ 174,729 $ 161,431
Minority interest in consolidated subsidiaries -- --
Total stockholders' equity $ 115,140 $ 106,468
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Total liabilities and stockholders' equity $ 289,869 $ 267,899
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