JOHNSON CITY, Tenn.,
March 8, 2018 /PRNewswire/
-- NN, Inc., (NASDAQ: NNBR), a diversified industrial company,
today reported its financial results for the fourth quarter and the
year ended December 31,
2017.
GAAP Results
Fourth Quarter
Net sales for the fourth quarter of 2017 increased $14.5 million, or 10%, to $156 million, compared to $142 million for the fourth quarter of
2016. Growth in the medical, aerospace and automotive end
markets accounted for the increase.
On a GAAP basis, income from operations for the fourth quarter
of 2017 was $4.0 million, compared to
$6.4 million for the same period in
2016. Income (loss) from continuing operations on a GAAP basis for
fourth quarter of 2017 was $54.3
million. This compares to Income (loss) from continuing
operations on a GAAP basis of $(2.1)
million in the fourth quarter of 2016. Income (loss)
from continuing operations in 2017 was favorably impacted by
$52.3 million of tax benefit due to
the Tax Cuts and Jobs Act.
On a GAAP basis, income from operations for fourth quarter 2017
in the Autocam Precision Components segment was $6.3 million compared to $6.7 million for the same period in 2016.
On a GAAP basis, income from operations for fourth quarter 2017
in the Precision Engineered Products segment (PEP) was $8.6 million compared to $8.1 million for the same period in 2016.
Full Year
Net sales for 2017 increased $34.8
million, or 6%, to $620
million, compared to $585
million for the fourth quarter of 2016. Growth in the
medical, aerospace and automotive end markets accounted for the
increase.
On a GAAP basis, income from operations for 2017 was
$33.5 million, compared to
$35.7 million for 2016. Income (loss)
from continuing operations on a GAAP basis for 2017 was
$26.0 million. This compares to
Income (loss) from continuing operations on a GAAP basis of
$(9.6) million in 2016. Income
(loss) from continuing operations in 2017 was favorably impacted by
$52.3 million of tax benefit due to
the Tax Cuts and Jobs Act.
On a GAAP basis, income from operations for 2017 in the Autocam
Precision Components segment was $34.4
million compared to $29.5
million for 2016.
On a GAAP basis, income from operations for 2017 in the
Precision Engineered Products segment (PEP) was $36.8 million compared to $34 million for the same period in 2016.
Adjusted Results
Fourth Quarter
Adjusted income from operations for the fourth quarter of 2017
was $15.5 million, compared to
$13.8 million for the same period in
2016. Adjusted net income increased to $8.2 million or $0.30 per diluted share from $5.7 million or $0.21 per diluted share for the same period in
2016.
Richard Holder, President and
Chief Executive Officer, commented, "During the quarter, we
continued to execute on our strategy toward building a diversified
industrial company. We had strong organic growth of 6% over
the prior year and completed the acquisition of DRT Medical.
Overall operating performance in the quarter was as expected.
Operating margins were negatively impacted by substantial
growth-oriented investments. Additionally, the fourth quarter is
our lowest margin quarter of the year due to fewer production
days."
Business Group Results
Autocam Precision Components
Net sales for the fourth quarter of 2017 were $82.1 million, compared to $78.7 million in the fourth quarter of 2016, an
increase of 4.3% or $3.4 million.
Growth in our Corporate Average Fuel Economy (CAFE)
automotive business accounted for the increase. Adjusted income
from operations for the quarter decreased $0.6 million to $7.4
million, compared to $8.0
million in the fourth quarter of 2016.
Mr. Holder commented, "Autocam continues to win new business and
outgrow its CAFE related end market. During the fourth
quarter, Autocam was preparing to launch several multi-year
programs, which required substantial up-front investment. While
these investments had negative impact on its profitability, they
are expected to drive enhanced growth over the long term."
Precision Engineered Products
Net sales for the fourth quarter of 2017 were $74.0 million, compared to $63.0 million in the fourth quarter of 2016, an
increase of $11.0 million.
Adjusted income from operations for the quarter was $15.2 million, compared to $14.0 million in 2016.
Mr. Holder commented, "Like Autocam, the PEP group is in the
process of executing launches on several large scale multi-year
programs primarily in our Aerospace and Defense end market.
Many of these costs are being incurred ahead of anticipated future
revenues and therefore negatively impact overall margins in the
short-term."
FULL YEAR
Adjusted income from operations for 2017 was $67.8 million, compared to $70.9 million for 2016. Adjusted Net
income increased to $42.8 million or
$1.55 per diluted share from
$33.8 million or $1.24 per diluted share for 2016.
Business Group Results
Autocam Precision Components
Net sales for 2017 were $336.9
million, compared to $326.1
million in 2016, an increase of 3.3% or $10.8 million. Growth in our Corporate
Average Fuel Economy (CAFE) automotive business accounted for the
increase. Adjusted income from operations for 2017 increased
$1.6 million to $39.0 million, compared to $37.4 million in 2016.
Precision Engineered Products
Net sales for 2017 were $282.9
million, compared to $258.8
million in 2016, an increase of $24.1
million. Adjusted income from operations for 2017 was
$58.8 million, compared to
$58.4 million in 2016.
Mr. Holder concluded, "The fourth quarter was a transitional
quarter as we continued to lay the foundations for growth in 2018
and beyond through the initial execution of several large
multi-year new sales programs across the enterprise.
Additionally, we completed the acquisition of DRT Medical which
further enhanced our Life Sciences portfolio. All of these
initiatives underpin our strategic goal to strengthen our position
as a global diversified industrial company."
The full set of financial guidance for the fourth quarter and
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 this 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 1-800-289-0438 or
1-323-794-2423 Conference ID: 6831722. 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 income (loss)
from continuing operations and adjusted diluted earnings per
share. Each of adjusted income from operations, adjusted
income (loss) from continuing operations and adjusted diluted
earnings per share 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 income
(loss) from continuing operations to the U.S. GAAP financial
measures of income from operations, and income (loss) from
continuing operations.
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 44 facilities 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 pending and completed
transactions 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
or the possibility that the Company will be unable to execute on
the intended redeployment of proceeds from a divestiture, whether
due to a lack of favorable investment opportunities or
otherwise.
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, 2016. 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.
|
|
|
|
|
NN
Inc.
|
Condensed
Consolidated Statements of Operations
|
|
|
|
|
|
|
Three Months
Ended
|
Twelve Months
Ended
|
|
December 31,
2017
|
December 31,
2016
|
December 31,
2017
|
December 31,
2016
|
|
|
|
|
|
Net sales
|
$
156,135
|
$
141,644
|
$
619,793
|
$
584,954
|
Cost of products
sold
(exclusive of
depreciation and
amortization
shown separately below)
|
118,364
|
104,824
|
458,629
|
428,862
|
Selling, general and
administrative
|
20,743
|
16,416
|
73,757
|
63,239
|
Acquisition related
costs excluded from SG&A
|
344
|
-
|
344
|
-
|
Depreciation and
amortization
|
13,775
|
12,357
|
52,783
|
50,636
|
(Gain) loss on
disposal of assets
|
(1,108)
|
809
|
351
|
809
|
Restructuring and
impairment charges
|
24
|
807
|
386
|
5,658
|
Income from
operations
|
3,993
|
6,431
|
33,543
|
35,750
|
|
|
|
|
|
Interest
expense
|
12,169
|
14,162
|
52,085
|
62,870
|
Write-off of
unamortized debt issuance costs
|
2,448
|
-
|
42,087
|
2,589
|
Derivative payments
(receipts) on interest rate swap
|
-
|
-
|
-
|
609
|
Derivative (gains)
losses on change in interest rate swap fair value
|
(87)
|
(682)
|
(101)
|
2,448
|
Other (income)
expense, net
|
(1,023)
|
(580)
|
(2,215)
|
(2,945)
|
Continuing income
(loss) before provision (benefit) for income taxes and JV
NI
|
(9,514)
|
(6,469)
|
(58,313)
|
(29,821)
|
Provision (benefit)
expense for income taxes
|
(62,818)
|
(2,600)
|
(79,214)
|
(14,275)
|
Share of net income
from joint venture
|
987
|
1,768
|
5,126
|
5,938
|
Income (loss) from
continuing operations
|
$
54,291
|
$
(2,101)
|
$
26,027
|
$
(9,608)
|
|
|
|
|
|
|
Reconciliation of
GAAP Income from Operations to Non-GAAP Adjusted Income from
Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
Three Months
Ended
|
|
$000s
|
December
31,
|
|
$000s
|
December
31,
|
|
NN, Inc.
Consolidated
|
2017
|
2016
|
|
Autocam Precision
Components
|
2017
|
2016
|
|
GAAP income from
operations
|
$
3,993
|
$
6,431
|
|
GAAP income from
operations
|
$
6,318
|
$
6,729
|
|
Restructuring and
integration expense
|
24
|
807
|
|
Restructuring and
integration expense
|
24
|
409
|
|
Acquisition and
transition expense
|
5,527
|
744
|
|
Acquisition and
transition expense
|
195
|
-
|
|
Amortization of
intangibles
|
5,940
|
5,837
|
|
Amortization of
intangibles
|
859
|
885
|
|
Non-GAAP adjusted
income from operations (a)
|
$
15,484
|
$
13,819
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjusted
income from operations (a)
|
$
7,396
|
$
8,023
|
|
|
|
|
|
|
|
|
|
GAAP net
sales
|
$
156,135
|
$
141,644
|
|
|
|
|
|
|
|
|
|
GAAP net
sales
|
$
82,084
|
$
78,665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
$000s
|
December
31,
|
|
|
|
|
Precision
Engineered Products
|
2017
|
2016
|
|
|
|
|
|
GAAP income from
operations
|
$
8,574
|
$
8,061
|
|
|
|
|
|
Restructuring and
integration expense
|
-
|
398
|
|
|
|
|
|
Acquisition and
transition expense
|
1,548
|
600
|
|
|
|
|
|
Amortization of
intangibles
|
5,081
|
4,952
|
|
|
|
|
|
Non-GAAP adjusted
income from operations (a)
|
$
15,203
|
$
14,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net
sales
|
$
74,051
|
$
62,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
GAAP Income from Operations to Non-GAAP Adjusted Income from
Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months
Ended
|
|
|
Twelve Months
Ended
|
|
$000s
|
December
31,
|
|
$000s
|
December
31,
|
|
NN, Inc.
Consolidated
|
2017
|
2016
|
|
Autocam
Precision
Components
|
2017
|
2016
|
|
GAAP income from
operations
|
$
33,544
|
$
35,750
|
|
GAAP income from
operations
|
$
34,406
|
$
29,490
|
|
Restructuring and
integration expense
|
386
|
5,658
|
|
Restructuring and
integration expense
|
386
|
4,340
|
|
Acquisition and
transition expense
|
10,401
|
3,455
|
|
Acquisition and
transition expense
|
695
|
-
|
|
Amortization of
intangibles
|
23,460
|
25,998
|
|
Amortization of
intangibles
|
3,481
|
3,533
|
|
Non-GAAP adjusted
income from operations (a)
|
$
67,791
|
$
70,861
|
|
Share of net income
from joint venture
|
5,126
|
5,938
|
|
|
|
|
|
Non-GAAP adjusted
income from operations (a)
|
$
38,968
|
$
37,363
|
|
|
|
|
|
|
|
|
|
GAAP net
sales
|
$
619,793
|
$
584,954
|
|
|
|
|
|
|
|
|
|
GAAP net
sales
|
$
336,852
|
$
326,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months
Ended
|
|
|
|
|
$000s
|
December
31,
|
|
|
|
|
Precision
Engineered
Products
|
2017
|
2016
|
|
|
|
|
|
GAAP income from
operations
|
$
36,785
|
$
33,966
|
|
|
|
|
|
Restructuring and
integration expense
|
-
|
1,318
|
|
|
|
|
|
Acquisition and
transition expense
|
2,048
|
718
|
|
|
|
|
|
Amortization of
intangibles
|
19,980
|
22,465
|
|
|
|
|
|
Non-GAAP adjusted
income from operations (a)
|
$
58,813
|
$
58,467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net
sales
|
$
282,941
|
$
258,816
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Income (Loss) from Continuing Operations to Non-GAAP Adjusted
Income (Loss) from Continuing Operations and Income (Loss)
from Continuing Operations per diluted share to Adjusted Income
(Loss) from Continuing Operations per diluted Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
|
|
|
December
31,
|
|
December
31,
|
|
|
$000s
|
|
2017
|
2016
|
|
2017
|
2016
|
|
|
Income (loss) from
continuing operations
|
|
$
54,291
|
$
(2,301)
|
|
$
26,027
|
$
(9,608)
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax acquisition
and transition expense
|
|
5,527
|
744
|
|
10,401
|
3,455
|
|
|
Pre-tax foreign
exchange (gain)/loss on inter-company loans
|
559
|
(14)
|
|
258
|
(1,310)
|
|
|
Pre-tax restructuring
and integration expense
|
|
24
|
807
|
|
386
|
5,658
|
|
|
Pre-tax write-off
unamortized debt issuance costs
|
|
2,448
|
-
|
|
42,087
|
2,589
|
|
|
Pre-tax write-off
interest rate swap
|
|
(87)
|
(682)
|
|
(101)
|
2,448
|
|
|
Pre-tax amortization
of intangibles and deferred financing costs
|
6,779
|
7,014
|
|
27,894
|
30,712
|
|
|
Pre-tax interest
expense on cash held from divestiture
|
3,720
|
-
|
|
6,160
|
-
|
|
|
Tax effect of
adjustment reflected above (c)
|
|
(5,691)
|
(3,502)
|
|
(22,947)
|
(16,201)
|
|
|
Earnings from
Precision Bearing Components group (4)
|
-
|
3,629
|
|
12,085
|
16,072
|
|
|
Impact due to Tax
Cuts and Jobs Act
|
|
(59,393)
|
-
|
|
(59,393)
|
-
|
|
|
Non-GAAP
adjusted income (loss) from continuing operations
(b)
|
$
8,177
|
$
5,695
|
|
$
42,858
|
$
33,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
|
|
|
December
31,
|
|
December
31,
|
|
|
Amounts per
share, diluted
|
|
2017
|
2016
|
|
2017
|
2016
|
|
|
Income (loss) from
continuing operations
|
|
$
1.97
|
$
(0.08)
|
|
$
0.94
|
$
(0.35)
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax acquisition
and transition expense
|
|
0.20
|
0.03
|
|
0.38
|
0.13
|
|
|
Pre-tax foreign
exchange (gain)/loss on inter-company loans
|
|
0.02
|
(0.00)
|
|
0.01
|
(0.05)
|
|
|
Pre-tax restructuring
and integration expense
|
|
0.00
|
0.03
|
|
0.01
|
0.21
|
|
|
Pre-tax write-off
unamortized debt issuance costs
|
|
0.09
|
-
|
|
1.53
|
0.10
|
|
|
Pre-tax write-off
interest rate swap
|
|
(0.00)
|
(0.03)
|
|
(0.00)
|
0.09
|
|
|
Pre-tax amortization
of intangibles and deferred financing costs
|
|
0.25
|
0.26
|
|
1.01
|
1.13
|
|
|
Pre-tax interest
expense on cash held from divestiture
|
|
0.13
|
-
|
|
0.22
|
-
|
|
|
Tax effect of
adjustment reflected above (c)
|
|
(0.21)
|
(0.13)
|
|
(0.83)
|
(0.59)
|
|
|
Earnings from
Precision Bearing Components group (4)
|
|
-
|
0.13
|
|
0.44
|
0.59
|
|
|
Impact due to Tax
Cuts and Jobs Act
|
|
(2.15)
|
-
|
|
(2.15)
|
-
|
|
|
Non-GAAP
adjusted income (loss) from continuing operations per share
(b)
|
|
$
0.30
|
$
0.21
|
|
$
1.55
|
$
1.24
|
|
|
Weighted average
shares outstanding, diluted
|
|
27,572
|
27,241
|
|
27,572
|
27,241
|
|
|
|
|
|
|
|
|
|
|
|
(4) Reflects
Precision Bearing Components group earnings for the period January
1 - August 16, 2017 and actual 2016 earnings
|
The Company discloses in this presentation the non-GAAP
financial measures of adjusted income from operations and Non-GAAP
adjusted operating margin. Each of these non-GAAP financial
measures provide supplementary information about the impacts of
acquisition, divestiture and integration related expenses,
foreign-exchange impacts on inter-company loans reorganizational
and impairment charges. Over the past four years, we have
completed seven acquisitions, two of which were transformative for
the Company, and sold two of our businesses. The costs we
incurred in completing such acquisitions, including the
amortization of intangibles and deferred financing costs, and these
divestitures 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 and adjusted
operating margin 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 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 integration expense, non-operational charges
related to acquisition, divestiture and restructuring 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 income (loss) from continuing operations ,
represents GAAP income (loss) from continuing operations,
adjusted to exclude the tax-affected effects of restructuring and
integration 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), charges related
to acquisition, and transition 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 income(loss) from segment 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 (loss) from continuing operations.
(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.
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SOURCE NN, Inc.