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): August 2,
2007
NN,
INC.
(Exact
name of registrant as specified in its charter)
|
Delaware
|
0-23486
|
62-1096725
|
|
(State
or other jurisdiction of incorporation)
|
(Commission
File Number)
|
(IRS
Employer Identification No.)
|
|
2000
Waters Edge Drive
|
37604
|
|
|
Johnson
City, Tennessee
|
(Zip
Code)
|
|
|
(Address
of principal executive offices)
|
Registrant's
telephone number, including area code:
(423) 743-9151
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the obligation of the registrant under any of the following
provisions:
o
Written
communications pursuant to Rule 425 under the
Securities Act (17 CFT 230.425)
o
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFT
240.14a-12)
o
Pre-commencement
communications pursuant to Rule 14d-2(b)
under the Exchange Act (17 CFT 240.14d-2(b))
o
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFT
240.13e-4(c))
ITEM
2.02 Results of Operations and Financial Conditions.
Furnished
as Exhibit 99.1 is a copy of the earnings
release of NN, Inc. reporting results for the quarter ended June 30, 2007,
which
was issued on August 2, 2007.
ITEM
9.01 FINANCIAL STATEMENTS AND
EXHIBITS
The
following exhibit is furnished pursuant 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
99.1
Press Release of NN, Inc. dated August 2, 2007
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. | |||
|
Date: August
2,
2007
|
By:
|
/s/ William C. Kelly, Jr. | |
| Name: William C. Kelly, Jr. | |||
| Title: Vice President and Chief Administrative Officer | |||
EXHIBIT
99.1
news
F
I N A N C I A L
RELATIONS
BOARD
RE: NN,
Inc.
2000
Waters Edge Drive
Johnson
City, TN 37604
FOR
FURTHER INFORMATION:
|
AT
THE COMPANY
|
AT
FINANCIAL RELATIONS BOARD
|
|
| Will Kelly | Marilynn Meek | Susan Garland |
| Vice President and Chief Administrative Officer | (General info) | (Analyst info) |
| (423) 743-9151 | 212-827-3773 | 212-827-3775 |
&#
160;
FOR
IMMEDIATE RELEASE
August
2,
2007
NN,
INC. REPORTS SECOND QUARTER 2007 RESULTS
Results
Include $14.9 million, or $0.87 per Diluted Share, in Non-Cash, After-Tax
Restructuring and Other One Time Charges
Johnson
City, Tenn, August 2, 2007 – NN, Inc. (Nasdaq: NNBR) today reported its
financial results for the second quarter ended June 30, 2007. The results for
the second quarter and first half of 2007 include the operations of Whirlaway,
which was acquired on December 1, 2006 and certain restructuring and other
one
time charges.
Net
sales
for the second quarter of 2007 were $107.3 million, an increase of $23.7
million, or 28.3% from net sales of $83.6 million for the same period of
2006. The acquisition of Whirlaway contributed $17.1 million of this
increase. The remainder of the increase was due to the positive effect of
currency translation of $3.8 million and stronger than expected demand, mainly
at our European operations of $2.8 million. Net loss for the second
quarter of 2007 totaled $11.8 million, or $0.69 per diluted share, compared
to
net income of $3.5 million, or $0.20 per diluted share for the second quarter
of
2006. The 2007 second quarter results include the recording of
approximately $14.9 million, or $0.87 per diluted share, in after-tax
restructuring and other one time charges. Excluding the impact of the
results of Whirlaway’s $0.03 per diluted share loss for the quarter and the
restructuring and other one time charges, net income for the second quarter
would have been $3.6 million, or $0.21 per diluted share.
Net
sales
for the first half of 2007 were $215.2 million, up $45.6 million, or 26.9%
as
compared to $169.6 million for the same period of 2006. The
acquisition of Whirlaway contributed $35.1 million of this increase. The
positive effect of currency translation amounted to $9.3 million and volume
increases, mainly in Europe of $2.6 million were offset by unfavorable price/mix
issues of $1.4 million. Net loss for the first half of 2007 totaled $8.1
million, or $0.47 per diluted share, compared to net income of $8.7 million,
or
$0.50 per diluted share for the same period of 2006. The 2007 first
half results include the recording of approximately $14.9 million, or $0.87
per
diluted share, in after-tax restructuring and other one time
charges. Excluding the impact of results of Whirlaway’s $0.03 per
share loss and the restructuring and other one time charges, net income for
the
first six months would have been $7.3 million, or $0.43 per diluted
share.
As
a
percentage of net sales, 2007 second quarter cost of products sold was 80.1%
compared to 77.7% recorded in the prior year. Approximately 60% of
the increase of cost of goods sold as a percentage of net sales was associated
with the addition of our Whirlaway operation. The remainder of the
increased costs was due mainly to price/mix issues in our European
operations. Year-to-date cost of products sold was 79.4% in 2007 as
compared to 77.2% for the same period last year. Approximately 60% of
this increase as a percentage of net sales was also due to the addition of
our
Whirlaway operation. The remainder of the increased costs was due
mainly to price/mix issues in our European operations.
Selling,
general and administrative expenses were $9.6 million or 8.9% of net sales
for
the second quarter of 2007 as compared to $7.1 million, or 8.5% of net sales
for
the second quarter of 2006. The acquisition of Whirlaway accounted
for $1.1 million of the increase and currency translation, increased stock
option expense and legal and consulting expenses accounted for the remainder
of
the increase. Selling, general and administrative expenses for the
first half of 2007 of 8.8% of net sales were relatively flat as compared to
8.7%
of net sales for the same period in 2006.
Roderick
R. Baty, Chairman and Chief Executive Officer, commented, “On July 25, 2007, we
announced that we would be revising our original 2007 full year earnings
guidance from $0.98 to $1.04 per diluted share to $0.70 to $0.74 per diluted
share, before restructuring and other one time charges. This
reduction in guidance was due mainly to two factors: sales weakness in the
Precision Metal Components Division (Whirlaway) and lower than anticipated
revenues and profits from our manufacturing facility in China. The
sales weakness in the Precision Metal Components Division is principally a
result of negative factors in two major end markets, HVAC and diesel engine.
Sales to these end markets for the full year are now forecasted to be $12.0
million less than we originally planned for 2007. The HVAC segment has been
impacted dramatically by two factors; customer inventory build in advance of
the
compliance date of a new energy regulation (“13 SEER”) and the continuing
slowdown of new home construction. Similarly, the 2007 diesel engine highway
emissions legislation that took effect January 1, 2007, prompted a 2006 pre-buy
as fleet buyers sought to avoid the expensive technology improvements mandated
by new government regulation. Demand for products used in vehicles such as
Class
8 trucks built in 2007 has been far lower than predicted at the beginning of
the
year.”
Mr.
Baty
continued, “Although we anticipated the negative economic impact of these two
factors affecting our HVAC and diesel engine business in our original guidance,
we did not accurately forecast the magnitude of the impact on our overall
revenue for 2007. Despite the current level of unprofitable business
at Whirlaway, we feel this is a short-term situation with these two end
markets. We anticipate business levels in 2008 to return to more
normalized levels and to achieve the profitability objectives we set at the
time
of the acquisition of Whirlaway. Additionally, with the exception of
our continuing profitability problems in our China facility, our Metal Bearing
Component and Rubber and Plastics Component Divisions are performing at business
plan levels in terms of both revenues and profitability. Our cylindrical and
tapered roller products have been strong for the first half of the year, and
precision ball demand has been above our initial
expectations. However, the shift of existing and new business to our
China facility has been much slower than we had hoped and revenue in the
facility continues to fall below break even volume and our expectations that
we
set at the beginning of the year. We will continue to work diligently during
the
last half of 2007 to achieve profitable levels of production and sales at our
Chinese facility moving forward, including obtaining customer approvals and
the
integration of new business.”
Mr.
James
Dorton, Vice President and Chief Financial Officer commented, “As we previously
stated in our release on July 25, 2007, we are taking steps to appropriately
adjust our cost structure. This restructuring will occur mainly at our European
operations of the Metal Bearing Components Division as we adjust our global
precision ball manufacturing capacity to better take advantage of favorable
cost
structures at our Slovakian and Chinese ball manufacturing
facilities. This will result in our recording of restructuring and
other one time charges during the second and third quarters of
2007. During the second quarter, we recorded approximately $15.3
million ($14.9 million after-tax or $0.87 per diluted share) of non-cash
restructuring costs. These costs include the write-down of certain
excess production equipment and the impairment of goodwill and other intangible
assets to levels supported by projected cash flows after the
restructuring. Additionally, in the third quarter, we anticipate
incurring approximately $0.9 million ($0.6 million after-tax, or $0.04 per
diluted share) of cash charges for legal and employment expenses associated
with
the restructuring.”
Mr.
Baty
concluded, “We remain optimistic regarding the acquisition of Whirlaway and our
long-term growth and profitability objectives associated with our new Precision
Metal Components Division. Whirlaway is the cornerstone of a new
platform that will continue to provide us with excellent growth opportunities
in
the future. Additionally, although we will incur restructuring and
other one-time charges in 2007, we are taking the necessary steps to restructure
our European precision ball manufacturing facilities to best take advantage
of
our global capabilities and cost structure.”
NN,
Inc.
manufacturers and supplies high precision metal bearing components, industrial
plastic and rubber products and precision metal components to a variety of
markets on a global basis. Headquartered in Johnson City, Tennessee,
NN has 14 manufacturing plants in the United States, Western Europe, Eastern
Europe and China. NN, Inc. had sales of US $330 million in
2006.
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, the successful implementation of the
global growth plan including development of new products and consummation of
potential acquisitions 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, 2006.
Financial
Tables Follow
NN,
Inc. Consolidated Statements of Income
(In
thousands, except per share amounts)
(Unaudited)
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
||||||||
|
2007
|
2006
|
2007
|
2006
|
||||||
|
Net
sales
|
$
107,302
|
$ 83,554
|
$
215,246
|
$
169,571
|
|||||
|
Cost
of products sold (exclusive of
depreciation
shown separately below)
|
85,929
|
64,905
|
171,010
|
130,904
|
|||||
|
Selling,
general and administrative
|
9,558
|
7,063
|
18,983
|
14,744
|
|||||
|
Depreciation
and amortization
|
5,658
|
4,425
|
11,180
|
8,587
|
|||||
|
Restructuring
and asset impairment charges
|
15,269
|
--
|
15,269
|
--
|
|||||
|
Loss
(Gain) on disposal of assets
|
(6)
|
4
|
(11)
|
(726)
|
|||||
|
Income
(Loss) from operations
|
(9,106)
|
7,157
|
(1,185)
|
16,062
|
|||||
|
Interest
expense, net
|
1,630
|
1,021
|
3,325
|
2,007
|
|||||
|
Other
(income) expense, net
|
(22)
|
449
|
3
|
240
|
|||||
|
Income
(Loss) before provision for income taxes
|
(10,714)
|
5,687
|
(4,513)
|
13,815
|
|||||
|
Provision
for income taxes
|
1,104
|
2,234
|
3,550
|
5,100
|
|||||
|
Net
income (Loss)
|
$(11,818)
|
$ 3,453
|
$
(8,063)
|
$ 8,715
|
|||||
|
Diluted
income per common share
|
$ (0.69)
|
$ 0.20
|
$ (0.47)
|
$ 0.50
|
|||||
|
Weighted
average diluted shares
|
17,028
|
17,369
|
17,031
|
17,365
|
|||||
NN,
Inc.
Condensed
Balance Sheets
(In
thousands)
(Unaudited)
|
June
30,
2007
|
December
31,
2006
|
||
|
Assets
|
|||
|
Current
Assets:
|
|||
|
Cash
|
$ 12,820
|
$ 11,681
|
|
|
Accounts
receivable, net
|
74,267
|
63,442
|
|
|
Inventories,
net
|
45,273
|
43,538
|
|
|
Other
current assets
|
8,448
|
7,203
|
|
|
Total
current assets
|
140,808
|
125,864
|
|
|
Property,
plant and equipment, net
|
152,369
|
156,447
|
|
|
Goodwill
and intangible assets, net
|
44,327
|
56,278
|
|
|
Other
assets
|
4,884
|
4,112
|
|
|
Total
assets
|
$
342,388
|
$
342,701
|
|
|
Liabilities
and Stockholders’ Equity
|
|||
|
Current
liabilities:
|
|||
|
Accounts
payable
|
$ 49,782
|
$ 52,576
|
|
|
Accrued
salaries and wages
|
14,886
|
13,519
|
|
|
Current
portion of long-term debt
|
9,054
|
851
|
|
|
Other
liabilities
|
8,998
|
7,923
|
|
|
Total
current liabilities
|
82,720
|
74,869
|
|
|
Deferred
income taxes
|
16,926
|
16,334
|
|
|
Long-term
notes payable and Related Party Debt
|
100,160
|
102,016
|
|
|
Other
|
16,685
|
16,313
|
|
|
Total
liabilities
|
216,491
|
209,532
|
|
|
Total
stockholders’ equity
|
125,897
|
133,169
|
|
|
Total
liabilities and stockholders’ equity
|
$
342,388
|
$
342,701
|
NN,
Inc.
Reconciliation
of Non-GAAP to GAAP Financial Measures
(Unaudited)
|
Three
Months Ended
June
30, 2007
|
Six
Months Ended
June
30, 2007
|
||||||
|
In
Thousands
|
Diluted
Earnings Per Share
|
In
Thousands
|
Diluted
Earnings Per Share
|
||||
|
Net
Loss
|
$
(11,818)
|
$ (0.69)
|
$
(8,063)
|
$ (0.47)
|
|||
|
After-tax
restructuring and other one time charges
|
14,873
|
0.87
|
14,873
|
0.87
|
|||
|
After
–tax loss of Whirlaway
|
507
|
0.03
|
460
|
0.03
|
|||
|
Net
income excluding restructuring and other one time charges and Whirlaway
net loss
|
$ 3,562
|
$ 0.21
|
$ 7,270
|
$ 0.43
|
|||