JOHNSON CITY, Tenn.,
Nov. 2, 2016 /PRNewswire/ -- NN,
Inc., (NASDAQ: NNBR), a diversified industrial company, today
reported its financial results for the third quarter ended
September 30, 2016.
GAAP Results
Net sales for the third quarter of 2016 increased $50.2 million, or 32.4% to $205.0 million, compared to $154.8 million for the third quarter of
2015. Acquisitions, net of divestitures added $55.2 million in revenue. Sales in the
legacy business were negatively impacted by $5.0 million due to weakness in the industrial
end market.
On a GAAP basis, income from operations for the third quarter of
2016 was $18.7 million, compared to
$10.1 million for the same period in
2015. Net income on a GAAP basis for third quarter of 2016 was
$4.1 million, or $0.15 per diluted share. This compares to net
income of $4.6 million, or
$0.17 per diluted share in the third
quarter of 2015.
On a GAAP basis, income from operations for third quarter 2016
in the Autocam Precision Components Group was $8.5 million compared to $10.9 million for the same period in 2015.
On a GAAP basis, income from operations for third quarter 2016
in the Precision Bearing Components Group was $5.8 million compared to $6.6 million for the same period in 2015.
On a GAAP basis, income from operations for third quarter 2016
in the Precision Engineered Products Group was $9.9 million compared to $0.6 million for the same period in 2015.
Adjusted Third Quarter 2016 Results
Adjusted income from operations for the third quarter of 2016
was $25.7 million, an increase of
58%, compared to $16.3 million for
the same period in 2015. Adjusted net income was $10.3 million, or $0.38 per diluted share, compared to $9.5 million, or $0.35 per diluted share for the same period in
2015.
Richard Holder, President and
Chief Executive Officer, commented, "We continue to drive solid
operating performance and margin expansion aided by the NN
Operating System despite ongoing weakness in the industrial market.
Our focus throughout 2016 has been to optimize our business
operations to lay a solid foundation for future long term growth,
and our continuing margin improvement is evidence of the power of
our diversified portfolio and the benefits derived from strong
operating discipline."
Business Group Results
Autocam Precision Components
Net sales for the third quarter of 2016 were $80.5 million, compared to $83.2 million in the third quarter of 2015, a
decrease of $2.7 million.
Weakness in the industrial end market primarily accounted for
the decline. Adjusted income from operations for the quarter
declined $2.2 million to $9.6 million, compared to $11.8 million in the third quarter of
2015.
Mr. Holder commented, "While the challenging industrial market
continued to affect the APC Group in the third quarter, our focus
on maximizing operations produced positive flex productivity and
the group performed admirably despite market weakness."
Precision Bearing Components
Net sales for the third quarter of 2016 were $58.2 million, compared to $60.5 million in the third quarter of 2015, a
decrease of $2.3 million. Soft
industrial market demand accounted for the decline. Adjusted
income from operations for the third quarter was $5.9 million, compared to $6.7 million in the third quarter of 2015.
Mr. Holder commented, "The PBC team continues to achieve
operating improvements driven by the NN Operating System, with
margins flexing in line with expectations despite the ongoing
industrial market challenges."
Precision Engineered Products
Net sales for the third quarter of 2016 were $66.2 million, compared to $11.0 million in the third quarter of 2015, an
increase of $55.2 million. The
acquisition of PEP, net of divestitures accounted for $55.2 million of the increase. Adjusted
income from operations for the quarter was $15.2 million, compared to $0.7 million in 2015.
Mr. Holder commented, "We are pleased with the performance of
our PEP group. Our integration efforts are on track, and we
continue to see the benefits of the execution of the NN Operating
System."
Mr. Holder concluded, "Our results this quarter continue to
support our strategic priorities of strong free cash flow
generation and paying down debt. We believe our focus on driving
continuous operating improvements and flex productivity across our
balanced portfolio will produce solid performance into the future
and offset continued industrial weakness."
The full set of financial guidance for the fourth quarter and
full year 2016, as well as full year 2017 can be found in our
supplemental presentation posted in the Investor Relations section
of our website at www.nninc.com.
NN will discuss its results during its quarterly investor
conference call tomorrow morning starting at 9:00 a.m. ET. The call and supplemental
presentation may be accessed via NN's website, www.nninc.com. The
conference call can also be accessed by dialing 888-297-0353 or
719-325-2159 Conference ID: 7773200. For those who are
unavailable to listen to the live broadcast, a replay will be
available shortly after the call for 90 days.
NN discloses in this press release the non-GAAP financial
measures of adjusted income from operations, adjusted net income
and adjusted diluted earnings per share. Each of adjusted
income from operations and adjusted net income provide
supplementary information about the impacts of acquisition related
expenses, foreign-exchange and other non-operating impacts on our
business.
The financial tables found later in this press release include a
reconciliation of adjusted income from operations, adjusted net
income and adjusted diluted earnings per share to the U.S. GAAP
financial measures of income from operations, net income and
diluted earnings per share.
NN, Inc., a diversified industrial company combines advanced
engineering and production capabilities with in-depth materials
science expertise to design and manufacture high-precision
components and assemblies for a variety of markets on a global
basis. Headquartered in Johnson
City, Tennessee, NN has 41 manufacturing plants in
North America, Western Europe, Eastern Europe, South America and China.
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 the successful implementation of the global growth
plan including development of new products. Similarly, statements
made herein and elsewhere regarding completed acquisitions are also
forward-looking statements, including statements relating to the
future performance and prospects of an acquired business, the
expected benefits of an acquisition on the Company's future
business and operations and the ability of the Company to
successfully integrate recently acquired businesses.
For additional information concerning such risk factors and
cautionary statements, please see the section titled "Risk Factors"
in the Company's periodic reports filed with the Securities and
Exchange Commission, including, but not limited to, the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2015. Except as required by law, we
undertake no obligation to update or revise any forward-looking
statements we make in our press releases, whether as a result of
new information, future events or otherwise.
Financial Tables Follow
NN,
Inc.
|
Condensed
Consolidated Statements of Net Income and Comprehensive Income
(Loss)
|
(Unaudited)
|
|
Three Months
ended
|
|
Nine Months
ended
|
|
September
30,
|
|
September
30,
|
(in thousands, except
per share data)
|
2016
|
2015
|
|
2016
|
2015
|
|
|
|
|
|
|
Net sales
|
$204,961
|
$154,824
|
|
$631,459
|
$483,425
|
Cost of products sold
(exclusive of depreciation and amortization shown
separately below)
|
152,538
|
120,195
|
|
469,086
|
378,220
|
Selling, general and
administrative
|
18,347
|
11,949
|
|
60,651
|
37,910
|
Acquisition related
costs excluded from selling, general and administrative
|
-
|
3,948
|
|
-
|
3,948
|
Depreciation and
amortization
|
14,693
|
8,610
|
|
47,177
|
25,702
|
Restructuring and
impairment charges
|
656
|
-
|
|
7,241
|
-
|
Income from
operations
|
18,727
|
10,122
|
|
47,304
|
37,645
|
|
|
|
|
|
|
Interest
expense
|
16,337
|
4,584
|
|
48,924
|
16,543
|
Write-off of
unamortized debt issuance costs
|
2,589
|
-
|
|
2,589
|
-
|
Derivative payments
(receipts) on interest rate swap
|
609
|
-
|
|
609
|
-
|
Derivative (gains)
losses on change in interest rate swap fair value
|
3,130
|
-
|
|
3,130
|
-
|
Other (income)
expense, net
|
(235)
|
593
|
|
(2,188)
|
2,012
|
Income (loss) before
provision (benefit) for income taxes and share of net income
from joint venture
|
(3,703)
|
4,945
|
|
(5,760)
|
19,090
|
Provision (benefit)
expense for income taxes
|
(6,423)
|
936
|
|
(6,469)
|
4,009
|
Share of net income
from joint venture
|
1,427
|
621
|
|
4,170
|
2,503
|
Net income
|
$4,147
|
$4,630
|
|
$4,879
|
$17,584
|
|
|
|
|
|
|
Basic income per
share:
|
|
|
|
|
|
Net income
|
$0.15
|
$0.17
|
|
$0.18
|
$0.87
|
Weighted average
shares outstanding
|
27,159
|
26,839
|
|
26,973
|
20,122
|
|
|
|
|
|
|
Diluted income per
share:
|
|
|
|
|
|
Net income
|
$0.15
|
$0.17
|
|
$0.18
|
$0.86
|
Weighted average
shares outstanding
|
27,322
|
27,167
|
|
27,103
|
20,467
|
|
|
|
|
|
|
Cash dividends
per common share
|
$0.07
|
$0.07
|
|
$0.21
|
$0.21
|
NN,
Inc.
|
Condensed
Consolidated Balance Sheets
|
(Unaudited)
|
|
(in thousands, except
per share data)
|
September
30,
|
December
31,
|
Assets
|
2016
|
2015
|
Current
assets:
|
|
|
Cash
|
$14,788
|
$15,087
|
Accounts receivable,
net
|
147,427
|
123,005
|
Inventories
|
118,834
|
119,836
|
Income tax
receivable
|
682
|
3,989
|
Current deferred tax
assets
|
-
|
6,696
|
Other current
assets
|
13,758
|
11,568
|
Total current
assets
|
295,489
|
280,181
|
|
|
|
Property, plant and
equipment, net
|
325,969
|
318,968
|
Goodwill,
net
|
449,004
|
449,898
|
Intangible assets,
net
|
261,953
|
282,169
|
Non-current deferred
tax assets
|
-
|
742
|
Investment in joint
venture
|
38,925
|
38,462
|
Other non-current
assets
|
11,058
|
10,147
|
Total
assets
|
$1,382,398
|
$1,380,567
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$69,730
|
$69,101
|
Accrued salaries,
wages and benefits
|
26,181
|
21,125
|
Income taxes
payable
|
1,327
|
5,350
|
Current maturities of
long-term debt
|
8,621
|
11,714
|
Current portion of
obligation under capital lease
|
3,933
|
4,786
|
Other current
liabilities
|
27,910
|
21,275
|
Total current
liabilities
|
137,702
|
133,351
|
|
|
|
Non-current deferred
tax liabilities
|
104,555
|
117,459
|
Long-term debt, net
of current portion
|
795,692
|
795,400
|
Accrued
post-employment benefits
|
6,091
|
6,157
|
Obligation under
capital lease, net of current portion
|
6,792
|
9,573
|
Other
|
5,223
|
4,746
|
Total
liabilities
|
1,056,055
|
1,066,686
|
Total stockholders'
equity
|
326,343
|
313,881
|
Total liabilities and
stockholders' equity
|
$1,382,398
|
$1,380,567
|
Reconciliation of
GAAP net income to Non-GAAP adjusted net income & GAAP Diluted
Income Per Share to Non-
GAAP Adjusted Diluted Earnings Per Share:
|
|
NN, Inc - Total
Company
|
Three Months
Ended
September 30, 2016
|
|
Three Months
Ended
September 30,
2015
|
|
|
|
|
(in thousands, except
per share data)
|
Amount
|
|
Diluted
Earnings
Per Share
|
|
Amount
|
|
Diluted
Earnings
Per Share
|
GAAP Net
income
|
$4,147
|
|
0.15
|
|
$4,630
|
|
0.17
|
Pre-tax acquisition
and integration costs
|
757
|
|
0.03
|
|
3,948
|
|
0.15
|
Pre-tax foreign
exchange loss on inter-company loans
|
94
|
|
0.00
|
|
434
|
|
0.02
|
Pre-tax
reorganization and impairment charges
|
336
|
|
0.01
|
|
1,190
|
|
0.04
|
Pre-tax write-off of
unamortized debt issuance costs
|
2,589
|
|
0.10
|
|
|
|
|
Pre-tax write-off of
interest rate swap
|
3,900
|
|
0.14
|
|
|
|
|
Pre-tax Amortization
of intangibles & deferred financing costs
|
7,062
|
|
0.26
|
|
1,627
|
|
0.06
|
Tax effect of all
adjustment reflected above (c)
|
(8,582)
|
|
(0.31)
|
|
(2,328)
|
|
(0.09)
|
Non- GAAP Adjusted
net income & Non-GAAP Adjusted
Diluted Earnings Per Share (b)
|
$10,303
|
|
$0.38
|
|
$9,501
|
|
$0.35
|
Reconciliation of
GAAP income from operations to Non-GAAP
adjusted income from operations:
|
|
NN, Inc - Total
Company
|
Three Months Ended
September 30,
|
|
|
|
2016
|
|
2015
|
(in thousands, except
per share data)
|
Amount
|
% of
Sales
|
|
Amount
|
% of
Sales
|
GAAP Income from
operations
|
$18,727
|
9.2%
|
|
$10,122
|
6.5%
|
Restructuring &
impairment charges
|
336
|
0.1%
|
|
1,190
|
0.8%
|
Acquisition &
integration expenses
|
757
|
0.4%
|
|
3,948
|
2.5%
|
Amortization of
intangibles
|
5,922
|
2.9%
|
|
999
|
0.6%
|
Non-GAAP Adjusted
income
from operations (a)
|
$25,742
|
12.6%
|
|
$16,259
|
10.5%
|
|
|
|
|
|
|
GAAP Total
Sales
|
$204,961
|
|
$154,824
|
Reconciliation of
GAAP income from operations to Non-GAAP
adjusted income from operations:
|
|
NN, Inc - Autocam
Precision
Components Group
|
Three Months Ended
September 30,
|
|
|
|
2016
|
|
2015
|
(in thousands, except
per share data)
|
Amount
|
% of
Sales
|
|
Amount
|
% of
Sales
|
GAAP Income
from
operations
|
$8,464
|
10.5%
|
|
$10,894
|
13.1%
|
Restructuring &
impairment
Charges
|
286
|
0.4%
|
|
-
|
0.0%
|
Acquisition &
integration
expenses
|
-
|
0.0%
|
|
-
|
0.0%
|
Amortization of
intangibles
|
885
|
1.1%
|
|
885
|
1.1%
|
Non-GAAP
Adjusted
income from operations
|
$9,635
|
12.0%
|
|
$11,779
|
14.2%
|
|
|
|
|
|
|
China JV
Contribution
|
1,427
|
|
|
621
|
|
Non-GAAP
Adjusted
income from operations
|
$11,062
|
13.7%
|
|
$12,400
|
14.9%
|
|
|
|
|
|
|
GAAP Total
Sales
|
$80,492
|
|
$83,243
|
Reconciliation of
GAAP income from operations to Non-GAAP
adjusted income from operations:
|
|
NN, Inc -
Precision Bearing
Components Group
|
Three Months Ended
September 30,
|
|
|
|
2016
|
|
2015
|
(in thousands, except
per share data)
|
Amount
|
% of
Sales
|
|
Amount
|
% of
Sales
|
GAAP Income
from
operations
|
$5,840
|
10.1%
|
|
$6,633
|
11.0%
|
Restructuring &
impairment
Charges
|
50
|
0.1%
|
|
-
|
0.0%
|
Amortization of
intangibles
|
57
|
0.1%
|
|
57
|
0.1%
|
Non-GAAP
Adjusted
income from operations (a)
|
$5,947
|
10.2%
|
|
$6,690
|
11.0%
|
|
|
|
|
|
|
GAAP Total
Sales
|
$58,246
|
|
$60,545
|
Reconciliation of
GAAP income from operations to Non-GAAP
adjusted income from operations:
|
|
NN, Inc -
Precision Engineered
Components Group
|
Three Months Ended
September 30,
|
|
|
|
2016
|
|
2015
|
(in thousands, except
per share data)
|
Amount
|
% of
Sales
|
|
Amount
|
% of
Sales
|
GAAP Income from
operations
|
$9,913
|
15.0%
|
|
$595
|
5.4%
|
Acquisition &
integration
expenses
|
320
|
0.5%
|
|
-
|
0.0%
|
Amortization of
intangibles
|
4,980
|
7.5%
|
|
57
|
0.5%
|
Non-GAAP Adjusted
income
from operations
(a)
|
$15,213
|
23.0%
|
|
$652
|
5.9%
|
|
|
|
|
|
|
GAAP Total
Sales
|
$66,222
|
|
$11,036
|
The Company discloses in this presentation the non-GAAP
financial measures of adjusted income from operations, adjusted net
income and adjusted diluted earnings per share. Each of these
non-GAAP financial measures provide supplementary information about
the impacts of acquisition and integration related expenses,
foreign-exchange impacts on inter-company loans reorganizational
and impairment charges. Over the past three years, we have
completed six acquisitions, two of which were transformative for
the Company. The costs we incurred in completing such acquisitions,
including the amortization of intangibles and deferred financing
costs, have been excluded from these measures because their size
and inconsistent frequency are unrelated to our commercial
performance during the period, and which we believe are not
indicative of our ongoing operating costs. We exclude the impact of
currency translation from these measures because foreign exchange
rates are not under management's control and are subject to
volatility. Other non-operating charges such as, the write-off of
our interest rate swap, are excluded as the charges on not
indicative of our ongoing operating cost. We believe the
presentation of adjusted income from operations, adjusted net
income and adjusted diluted earnings per share provide useful
information in assessing our underlying business trends and
facilitates comparison of our long-term performance over given
periods
The non-GAAP financial measures provided herein may not
provide information that is directly comparable to that provided by
other companies in the Company's industry, as other companies may
calculate such financial results differently. The Company's
non-GAAP financial measures are not measurements of financial
performance under GAAP, and should not be considered as
alternatives to actual net income growth derived from income
amounts presented in accordance with GAAP. The Company does not
consider these non-GAAP financial measures to be a substitute for,
or superior to, the information provided by GAAP financial
results.
(a) Non-GAAP Adjusted income from operations, represents GAAP
income from operations, adjusted to exclude the effects of
restructuring and non-cash impairment charges (related to
plant closures and other charges incurred to implement our
strategic goals, that do not necessarily represent a major
strategic shift in operations), one-time charges related to
acquisition and integration costs, intangible amortization
costs for fair value step-up in values related to acquisitions, and
when applicable, our share of income from joint venture operations.
We believe this presentation is commonly used by investors and
professional research analysts in the valuation, comparison, rating
and investment recommendations of companies in the industrial
industry. We use this information for comparative purposes within
the industry. Non-GAAP adjusted income from operations, is not a
measure of financial performance under GAAP and should not be
considered as a measure of liquidity or as an alternative to GAAP
income from operations.
(b) Non-GAAP adjusted net income and adjusted diluted earnings
per share, represents GAAP net income, adjusted to exclude the
tax-affected effects of restructuring and impairment charges
(related to plant closures and other charges incurred to implement
our strategic goals, that do not necessarily represent a major
strategic shift in operations), one-time charges related to
acquisition and integration costs, amortization of
intangibles costs for fair value step-up in values related to
acquisitions and amortization of deferred financing costs, and
foreign exchange gain (loss) on inter-company loans. We believe
this presentation is commonly used by investors and professional
research analysts in the valuation, comparison, rating and
investment recommendations of companies in the industrial industry.
We use this information for comparative purposes within the
industry. Non-GAAP adjusted net income and Non-GAAP adjusted
diluted earnings per share, is not a measure of financial
performance under GAAP and should not be considered as a measure of
liquidity or as an alternative to GAAP net income.
(c) This line item reflects the aggregate tax effect of all
nontax adjustments reflected in the table above. In addition, the
footnotes above indicate the after-tax amount of each individual
adjustment item. NN, Inc. estimates the tax effect of the
adjustment items identified in the reconciliation schedule above by
applying NN, Inc's. overall estimated effective tax rate to the
pretax amount, unless the nature of the item and/or the tax
jurisdiction in which the item has been recorded requires
application of a specific tax rate or tax treatment.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/nn-inc-reports-third-quarter-2016-results-300356378.html
SOURCE NN, Inc.