JOHNSON CITY, Tenn.,
Nov. 6, 2013 /PRNewswire/
-- NN, Inc. (Nasdaq: NNBR) today reported its financial
results for the third quarter and nine months ended September 30, 2013. Net sales for the third
quarter of 2013 were $93.0 million,
an increase of $6.4 million or 7.4%
compared to net sales of $86.6
million for the third quarter of 2012. This
increase was due primarily to improved demand from North American
and Asian automotive markets, better market penetration of our
existing European customers and increased demand from European
heavy truck markets. Offsetting these positive effects were
continued low demand in the European automotive and industrial
markets and the strategic deemphasizing of non-core, non-strategic
business and unfavorable price and mix issues.
Net income for the third quarter was $5.1
million, or $0.29 per diluted
share compared to $3.1 million, or
$0.18 per diluted share for the same
period last year. The increase of $2.0
million was mainly due to favorable benefits from higher
sales volumes and improving incremental profitability.
Partially offsetting the positive effect of these items was the
recording of higher taxes in the third quarter of 2013 compared to
the third quarter of 2012. The higher taxes are the result of
the use of an effective tax rate of 32% for the third quarter of
2013 compared to an effective tax rate of 24% for the third quarter
of 2012. This difference is due to the utilization of net
operating losses, with full valuation allowances, in 2012 that
completely offset U.S. based taxable income for the quarter.
These allowances were reversed as of December 31, 2012.
Net sales for the first nine months of 2013 were $283.1 million, a decrease of $6.8 million, or 2.3% compared to net sales of
$289.9 million for the first nine
months of 2012. Approximately $6.6
million of the decrease was attributable to lower demand for
the Company's products in European automotive and industrial
markets occurring primarily in the first quarter of the year.
Net income for the first nine months of 2013 was $12.7 million, or $0.74 per diluted share, compared to net income
of $16.1 million, or $0.94 per diluted share, for the comparable
period last year. The reduction of $3.4 million was mainly due to the effect of the
recording of approximately $2.6
million in higher taxes in the first nine months of 2013
compared to the first nine months of 2012. The higher taxes
were the result of the use of an effective tax rate of 34% for the
first nine months of 2013 compared to an effective rate of 19% for
the first nine months of 2012. This rate difference is due to
the utilization of net operating losses, with full valuation
allowances, in 2012 that completely offset U.S. based taxable
income for the nine months ended September 2012. These
allowances were reversed as of December 31,
2012. The remainder of the reduction was attributed to
the effect of lower sales.
As a percentage of net sales, cost of products sold for the
quarter decreased to 78.5% from 79.0% for last year's third
quarter. Cost of products sold for the first nine months of
this year was 78.9% as compared to 79.1% for the same period last
year. This reflects the improving operational performance of
our divisions.
Debt, net of cash, was $34.2
million at September 30, 2013,
a decrease of $16.3 million compared
to $50.5 million at December 31, 2012. As of September 30, 2013, approximately $9.1 million, or 54% of the planned capital
budget of $17.0 million for the full
year had been utilized.
Richard D. Holder, President and
Chief Executive Officer commented, "Despite being affected by
generally weak economic conditions in Europe during the quarter, we continued to
benefit from the positive revenue momentum that we experienced in
the first half of the year. Our quarter over quarter revenues
improved, increasing by $6.4 million,
as compared to the same period in the prior year.
Additionally, our third quarter has traditionally been the weakest
of the year due to the normal seasonality in our business,
particularly in Europe. This accounted for the sequential
decrease in sales from the second quarter, however improved market
penetration allowed us to dampen the normal impact of seasonality
particularly in our European businesses. Further, we have
continued to strategically shed non-core and non-strategic
business. As previously mentioned, this strategy while
having a short term negative impact on revenues, improves our
profitability and better positions us for continued future, long
term profitable growth.
"The positive revenue trend combined with our ability to
leverage strong incremental profits for each additional dollar of
revenue is encouraging. We continue to be sensitive to the
prolonged general economic uncertainty hanging over the markets as
well as the weakness in European automotive markets and in
particular European industrial markets."
Mr. Holder concluded, "We previously announced that we are
currently revising and enhancing our business strategy. This
strategy will include, among other components and initiatives,
plans to more aggressively pursue acquisitive and organic growth
opportunities in our core and adjacent markets. Everyone on
the management team and the Board of Directors is excited about the
new opportunities this process has identified and we are extremely
eager to begin executing on the initiatives once complete. We
will be sharing the details of this strategy early in 2014."
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 10 manufacturing plants in the United States, Western Europe, Eastern Europe and China. NN, Inc. had
sales of US $370 million in 2012.
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 Form 10-K for the fiscal
year ended December 31, 2012.
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,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
Net sales
|
$
93,023
|
|
$
86,586
|
|
$
283,125
|
|
$
289,929
|
Cost of products sold
(exclusive of
depreciation
shown separately below)
|
73,020
|
|
68,426
|
|
223,288
|
|
229,243
|
Selling, general and
administrative
|
8,099
|
|
7,886
|
|
25,544
|
|
24,266
|
Depreciation and
amortization
|
4,110
|
|
4,357
|
|
12,935
|
|
13,203
|
Loss (Gain) on
disposal of assets
|
--
|
|
--
|
|
5
|
|
(8)
|
Income from
operations
|
7,794
|
|
5,917
|
|
21,353
|
|
23,225
|
|
|
|
|
|
|
|
|
Interest
expense
|
655
|
|
1,061
|
|
2,149
|
|
3,388
|
Other expense
(income), net
|
(281)
|
|
765
|
|
84
|
|
(36)
|
Income before
provision for income taxes
|
7,420
|
|
4,091
|
|
19,120
|
|
19,873
|
Provision for income
taxes
|
2,368
|
|
976
|
|
6,427
|
|
3,811
|
|
|
|
|
|
|
|
|
Net income
|
$
5,052
|
|
$
3,115
|
|
$
12,693
|
|
$
16,062
|
|
|
|
|
|
|
|
|
Diluted income per
common share
|
$
0.29
|
|
$
0.18
|
|
$
0.74
|
|
$
0.94
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares
|
17,450
|
|
17,150
|
|
17,180
|
|
17,105
|
|
|
|
|
|
|
|
|
|
NN,
Inc.
|
Condensed Balance
Sheets
|
(In
thousands)
|
(Unaudited)
|
|
|
September
30,
2013
|
|
December
31,
2012
|
Assets
|
|
|
|
|
Current
Assets:
|
|
|
|
Cash
|
$
4,468
|
|
$
18,990
|
Accounts receivable,
net
|
65,783
|
|
51,628
|
Inventories
|
48,109
|
|
46,150
|
Other current
assets
|
8,411
|
|
10,528
|
Total
current assets
|
126,771
|
|
127,296
|
|
|
|
|
Property, plant and
equipment, net
|
117,488
|
|
119,687
|
Goodwill and
intangible assets, net
|
9,337
|
|
9,154
|
Other non-current
assets
|
7,834
|
|
9,206
|
Total
assets
|
$
261,430
|
|
$
265,343
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
43,172
|
|
$
37,000
|
Accrued salaries,
wages and benefits
|
11,716
|
|
10,174
|
Current maturities of
long-term debt
|
5,714
|
|
5,801
|
Income taxes
payable
|
2,194
|
|
543
|
Other current
liabilities
|
6,438
|
|
5,240
|
Total
current liabilities
|
69,234
|
|
58,758
|
|
|
|
|
Non-current deferred
tax liabilities
|
3,975
|
|
3,850
|
Long-term debt, net
of current portion
|
33,000
|
|
63,715
|
Other non-current
liabilities
|
10,368
|
|
10,460
|
Total
liabilities
|
116,577
|
|
136,783
|
|
|
|
|
Total stockholders'
equity
|
144,853
|
|
128,560
|
|
|
|
|
Total liabilities and
stockholders' equity
|
$
261,430
|
|
$
265,343
|
NN,
Inc.
|
Reconciliation of
Non-GAAP to GAAP Financial Measures
|
(Unaudited)
|
|
|
|
Three Months
Ended
September 30,
2013
|
|
Three Months
Ended
September 30,
2012
|
|
In
Thousands
|
|
Diluted
Earnings
Per
Share
|
|
In
Thousands
|
|
Diluted
Earnings
Per
Share
|
Net Income
|
$
5,052
|
|
$
0.29
|
|
$
3,115
|
|
$
0.18
|
Foreign exchange
(gain) loss on intercompany
loans
|
(44)
|
|
(0.00)
|
|
659
|
|
0.04
|
|
|
|
|
|
|
|
|
Net Income from
normal operations
|
$
5,008
|
|
$
0.29
|
|
$
3,774
|
|
$
0.22
|
|
|
|
|
|
|
|
|
|
Nine Months
Ended
September 30,
2013
|
|
Nine Months
Ended
September 30,
2012
|
|
In
Thousands
|
|
Diluted
Earnings
Per
Share
|
|
In
Thousands
|
|
Diluted
Earnings
Per
Share
|
Net Income
|
$
12,693
|
|
$
0.74
|
|
$
16,062
|
|
$
0.94
|
Foreign exchange loss
on intercompany
loans
|
168
|
|
0.01
|
|
284
|
|
0.02
|
After-tax restructuring and other non-
recurring
item
|
399
|
|
0.02
|
|
--
|
|
--
|
|
|
|
|
|
|
|
|
Net Income from
normal operations
|
13,260
|
|
$
0.77
|
|
$
16,346
|
|
$
0.96
|
The Company's management evaluates operating performance
excluding unusual and/or nonrecurring items. The Company
believes excluding such items provides a more effective and
comparable measure of performance and a clearer view of underlying
trends. Since net income excluding these items is not a measure
calculated in accordance with GAAP, this should not be considered
as a substitute for other GAAP measures, including net income, as
an indicator of performance. Accordingly, net income/loss
excluding the above items is reconciled to net income/loss on a
GAAP basis.
SOURCE NN, Inc.