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May 4, 2016

NN, Inc. Reports First Quarter 2016 Results In Line With Company Guidance

JOHNSON CITY, Tenn., May 4, 2016 /PRNewswire/ —

  • Net sales of $212.2 million, an increase of $48.5 million
  • Adjusted income from operations increased $9.1 million to $24 million
  • Adjusted net income of $7.1 million or $0.27 per diluted share

NN, Inc., (NASDAQ: NNBR), a diversified industrial company, today reported its financial results for the first quarter ended March 31, 2016. 

First Quarter 2016 Results

Net sales for the first quarter of 2016 increased $48.5 million, or 30% to $212.2 million, compared to $163.7 million for the first quarter of 2015.  Acquisitions added $55.6 million in revenue.  Negative currency and price/mix impacts reduced reported net sales by $7.1 million versus the first quarter of last year.

Adjusted income from operations for the first quarter of 2016 was $24.0 million, an increase of 61%, compared to $14.9 million for the same period in 2015. Adjusted net income was $7.1 million, or $0.27 per diluted share, compared to $8.0 million, or $0.41 per diluted share for the same period in 2015.

Richard Holder, President and Chief Executive Officer, commented, “Our performance for the quarter was in line with our expectations as we continue to see the positive effects of the NN Operating System. The first quarter also marked our first full period post the acquisition of PEP. We are very pleased with where we are in our integration efforts as we continue to find more opportunities to deliver engineered solutions to our customers.”

Business Group Results

Autocam Precision Components

Net sales for the first quarter of 2016 were $84.0 million, compared to $82.6 million in the first quarter of 2015, an increase of $1.4 million.  Adjusted income from operations for the quarter increased $1.1 million to $9.7 million, compared to $8.6 million in the first quarter of 2015. 

Holder commented, “The Autocam Group continues to perform well with the continued adoption of CAFE technologies driving our performance, and we are pleased with the margin expansion the team has achieved.”

Precision Bearing Components

Net sales for the first quarter of 2016 were $64.7 million, compared to $73.2 million in the first quarter of 2015, a decrease of $8.5 million.  Negative currency impacts of $1.4 million and a soft industrial market accounted for the decline.  Adjusted income from operations for the first quarter was $7.1 million, compared to $9.2 million in the first quarter of 2015.

Holder commented, “The Group rebounded in the first quarter from the challenges during the fourth quarter of 2015. Operating performance returned to our expectations, and we continue to drive margin expansion throughout 2016.”

Precision Engineered Products

Net sales for the first quarter of 2016 were $63.5 million, compared to $7.9 million in the first quarter of 2015, an increase of $55.6 million.  The acquisition of PEP accounted for $56.0 million of the increase.  Adjusted income from operations for the quarter was $13.2 million, compared to $0.2 million in 2015.

Holder commented, “The integration of PEP is off to a good start.  The strong operating performance in the quarter met our expectations.  We expect to see improvements throughout the year as we implement the NN Operating System.”

Guidance

Holder continued, “Our businesses have performed to our expectations thus far in 2016.  We are encouraged by the positive trends in the macro back drop and reaffirm our guidance for the year.” 

The full set of financial guidance for the second quarter and full year 2016 can be found in our supplemental presentation posted in the Investor Relations section of our website at www.nninc.com.

Holder concluded, “We are pleased with our performance to start the year.  The team continues to focus on the disciplined execution of the NN Operating System.”

GAAP Results

On a GAAP basis, income from operations for the first quarter of 2016 was $11.9 million, compared to $13.9 million for the same period in 2015. Net loss on a GAAP basis for first quarter of 2016 was $1.3 million, or ($0.05) per diluted share. This compares to net income of $6.0 million, or $0.31 per diluted share in the first quarter of 2015.

On a GAAP basis, income from operations for first quarter 2016 in the Autocam Precision Components Group was $6.5 million compared to $7.7 million for the same period in 2015.

On a GAAP basis, income from operations for first quarter 2016 in the Precision Bearing Components Group was $6.3 million compared to $9.1 million for the same period in 2015.

On a GAAP basis, income from operations for first quarter 2016 in the Precision Engineered Products Group was $5.4 million compared to $0.2 million for the same period in 2015.

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 888-505-4368 or 719-325-2281 Conference ID: 9964576. For those who are unavailable to listen to the live broadcast, a replay will be available shortly after the call for 90 days.

The Company discloses in this press release the non-GAAP financial measures of adjusted income from operations and adjusted net income.  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 attached financial tables include a reconciliation of adjusted income from operations and adjusted net income to the U.S. GAAP financial measures of income from operations and net income.

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 42 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 Income (Loss)
(Unaudited)
Three Months ended
March 31,
(in thousands, except per share data)20162015
Net sales$      212,226$      163,746
Cost of products sold (exclusive of depreciation and amortization shown separately below)159,754129,317
Selling, general and administrative20,71212,001
Depreciation and amortization17,3488,494
Restructuring and impairment charges2,538
Income from operations11,87413,934
Interest expense16,4225,938
Other (income) expense, net(1,129)1,400
Income (loss) before provision (benefit) for income taxes and share of net income from joint venture(3,419)6,596
Provision (benefit) expense for income taxes(720)1,456
Share of net income from joint venture1,400861
Net (loss) income$        (1,299)$          6,001
Basic income (loss) per share:
Net income (loss)$          (0.05)$            0.32
Weighted average shares outstanding26,86918,996
Diluted income (loss) per share:
Net income (loss)$          (0.05)$            0.31
Weighted average shares outstanding26,86919,380
 Cash dividends per common share$            0.07$            0.07
NN, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except per share data)March 31,December 31,
Assets20162015
Current assets:
Cash$              15,079$              15,087
Accounts receivable, net143,323123,005
Inventories120,119119,836
Income tax receivable3,9893,989
Current deferred tax assets6,696
Other current assets13,12511,568
Total current assets295,635280,181
Property, plant and equipment, net325,222318,968
Goodwill, net450,190449,898
Intangible assets, net273,807282,169
Non-current deferred tax assets742
Investment in joint venture39,86238,462
Other non-current assets10,90110,147
Total assets$         1,395,617$         1,380,567
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$              70,292$              69,101
Accrued salaries, wages and benefits24,34121,125
Income taxes payable3,5255,350
Current maturities of long-term debt11,94711,714
Current portion of obligation under capital lease4,4404,786
Other current liabilities26,93821,275
Total current liabilities141,483133,351
Non-current deferred tax liabilities111,050117,459
Long-term debt, net of current portion804,672795,400
Accrued post-employment benefits6,1776,157
Obligation under capital lease, net of current portion8,6469,573
Other6,2574,746
Total liabilities1,078,2851,066,686
Total stockholders’ equity317,332313,881
Total liabilities and stockholders’ equity$         1,395,617$         1,380,567
Reconciliation of income from operations to adjusted income from operations:
NN, Inc – Total CompanyThree Months Ended March 31,
20162015
$’000% of Sales$’000% of Sales
Income from operations$11,8745.6%$13,9348.5%
Restructuring & impairment charges2,9631.4%0.0%
Acquisition & integration expenses3,2631.5%0.0%
Amortization of intangibles5,9262.8%9830.6%
Adjusted income from operations$24,02611.3%$14,9179.1%
Total Sales$212,226$163,746
Reconciliation of income from operations to adjusted income from operations:
NN, Inc – Autocam Precision Components GroupThree Months Ended March 31,
20162015
$’000% of Sales$’000% of Sales
Income from operations$6,5277.8%$7,7189.3%
Restructuring & impairment Charges2,2742.7%0.0%
Acquisition & integration expenses0.0%0.0%
Amortization of intangibles8851.1%9101.1%
Adjusted income from operations$9,68611.5%$8,62810.4%
China JV Contribution1,400861
Adjusted income from operations$11,08613.2%$9,48911.5%
Total Sales$83,990$82,622
Reconciliation of income from operations to adjusted income from operations:
NN, Inc – Precision Bearing Components GroupThree Months Ended March 31,
20162015
$’000% of Sales$’000% of Sales
Income from operations$6,3269.8%$9,08912.4%
Restructuring & impairment Charges6891.1%0.0%
Amortization of intangibles580.1%730.1%
Adjusted income from operations$7,07310.9%$9,16212.5%
Total Sales$64,745$73,236
Reconciliation of income from operations to adjusted income from operations:
NN, Inc – Precision Engineered Products GroupThree Months Ended March 31,
20162015
$’000% of Sales$’000% of Sales
Income from operations$5,4218.5%$2132.7%
Restructuring & impairment Charges0.0%0.0%
Acquisition & integration expenses2,7774.4%0.0%
Amortization of intangibles4,9837.8%0.0%
Adjusted income from operations$13,18120.8%$2132.7%
Total Sales$63,491$7,888
Reconciliation of net income to adjusted net income:
NN, Inc – Total CompanyThree Months Ended March 31, 2016Three Months Ended March 31, 2015
In ThousandsDiluted Earnings Per ShareIn ThousandsDiluted Earnings Per Share
Net income($1,299)(0.05)6,001$  0.31
After-tax acquisition and integration costs2,4220.09
After-tax foreign exchange loss on inter-company loans(654)(0.02)8860.04
Restructuring & impairment charges2,1980.08
Amortization of intangibles & deferred financing costs4,4590.171,1400.06
Adjusted net income $  7,126$  0.27$  8,027$  0.41

The Company discloses in this press release the non-GAAP financial measures of adjusted income from operations and adjusted net income.  Each of adjusted income from operations and adjusted net income provide supplementary information about the impacts of acquisition related expenses and foreign-exchange impacts on inter-company loans.  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. We believe the presentation of adjusted income from operations and adjusted net income provides 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.

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/nn-inc-reports-first-quarter-2016-results-in-line-with-company-guidance-300262973.html

SOURCE NN, Inc.

AT THE COMPANY: Robbie Atkinson, VP, Corporate Treasurer & Investor Relations, (423) 434-8398; AT FINANCIAL RELATIONS BOARD: Marilynn Meek, (General info), 212-827-3773