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August 5, 2015

NN, Inc. Reports Second Quarter 2015 Results

JOHNSON CITY, Tenn., Aug. 5, 2015 /PRNewswire/ —

  • Net sales of $164.9 million, an increase of $58.2 million
  • Adjusted income from operations grew to $14.3 million
  • Adjusted net income of $7.2 million, or $0.37 per diluted share

NN, Inc., (NASDAQ: NNBR) a diversified industrial company, today reported its financial results for the second quarter ended June 30, 2015.  

Second Quarter 2015 Results

Net sales for the second quarter of 2015 increased $58.2 million, or 55%, to $164.9 million, compared to $106.7 million for the second quarter of 2014.  Acquisitions made subsequent to March 31, 2014 added $64.3 million in revenue.  Negative currency impacts reduced reported net sales by $9.3 million versus the second quarter of last year.

Adjusted income from operations for the second quarter of 2015 was $14.3 million, an increase of 51%, compared to $9.5 million for the same period in 2014. Adjusted net income, which excludes the after-tax impact of foreign exchange on inter-company loans and after-tax acquisition and integration expenses, increased to $7.2 million, or $0.37 per diluted share, compared to $6.0 million, or $0.33 per diluted share for the same period in 2014. 

On a GAAP basis, income from operations for the second quarter of 2015 was $13.6 million, compared to $8.2 million for the same period in 2014. Net income on a GAAP basis for the second quarter of 2015 was $7.0 million, or $0.36 per diluted share. This compared to $5.2 million, or $0.29 per diluted share, in the second quarter of 2014.

Richard Holder, President and Chief Executive Officer, commented, “Excluding the macro-economic challenges in Brazil our businesses along with our financial results continue to meet our expectations for the year. Our adjusted income from operations continued to improve during the quarter as the remainder of our portfolio continues to grow and hit our operating targets. The acquisitions we’ve made since 2014 remain on or ahead of our stated integration and synergy targets for 2015.”

Business Group Results

Metal Bearing Components

Net sales for the group decreased $3.7 million to $69.3 million during the second quarter of 2015, compared to $73.0 million for second quarter 2014. Negative currency impacts of $9.3 million were partially offset by volume increases of $3.0 million and the contribution of acquisition sales of $2.6 million. Income from operations for the second quarter was $9.4 million, compared to $8.7 million in the second quarter of 2014.

“The Metal Bearing Components Group continued its solid performance in 2015,” said Holder. “Excluding the negative currency impacts the business continues to grow and expand its end markets.”

Autocam Precision Components

Net sales for the second quarter of 2015 were $86.5 million, compared to $25.3 million in the second quarter of 2014, an increase of $61.2 million.  Acquisitions accounted for $60.9 million of the increase.  Income from operations for the quarter increased $6.8 million to $9.1 million, compared to $2.3 million in the second quarter of 2014. 

Holder commented, “The Autocam Precision Components Group performed well despite the conditions in Brazil. As expected, new customer programs continued to ramp in the quarter and began to hit their expected operating targets as the quarter came to a close, while the integration of the Autocam acquisition remains ahead of schedule.”

Plastic and Rubber Components

Net sales for the second quarter increased $0.7 million to $9.1 million, compared to $8.4 million for the same period in 2014. Income from operations for the quarter was $0.5 million, compared to $0.4 million in 2014.

Holder commented, “We continue to transform our plastics business as we focus on growing a diversified business that meets our operating expectations.  During the quarter we continued that process with the completion of the Caprock acquisition.”

Holder concluded, “The second quarter was an important quarter in the history of our company. We made our first acquisition in our plastics portfolio and raised $182 million in equity to prepare for future acquisitions and continued growth as we remain focused on executing our strategic plan.”

NN will discuss its results during its quarterly investor conference call tomorrow morning starting at 9:00 a.m. ET.  The call and an accompanying slide presentation may be accessed via NN’s website. The conference call can also be accessed by dialing 888-427-9376; conference id – 5901109. For those who are unavailable to listen to the live broadcast, a replay will be available shortly after the call for 90 days.

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 manufactures 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 26 manufacturing plants in the 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 or completed acquisitions are also forward-looking statements, including statements relating to the anticipated closing date of an acquisition, the Company’s ability to obtain required regulatory approvals or satisfy closing conditions, the costs of an acquisition and the Company’s source(s) of financing, 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, 2014. 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.
Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
Three Months EndedSix Months Ended
JUNE 30,JUNE 30,
2015201420152014
Net sales$164,856$106,680$328,601$209,208
Cost of products sold (exclusive of depreciation and amortization shown separately below)128,70884,285258,025164,569
Selling, general and administrative13,96210,07425,96120,104
Depreciation and amortization8,5974,08417,0917,961
Income from operations13,5898,23727,52416,574
Interest expense6,02155111,9591,115
Other expense, net191291,419212
Income before provision for income taxes and share of net income from joint venture7,5497,55714,14615,247
Provision for income taxes1,6172,3573,0734,809
Share of net income from joint venture1,0211,882
Net income$6,953$5,200$12,955$10,438
Basic income per common share:$0.36$0.29$0.68$0.59
Weighted average shares outstanding19,21517,77919,06417,700
Diluted income per common share:$0.36$0.29$0.67$0.58
Weighted average shares outstanding19,58218,17219,41618,054
Cash dividends per common share$0.07$0.07$0.14$0.14
NN, Inc.
Condensed Balance Sheets
(In thousands)
(Unaudited)
June 30,December 31,
20152014
Assets
Current assets:
  Cash$21,409$37,317
  Accounts receivable, net114,81997,510
  Inventories87,92891,469
  Other current assets16,59016,503
     Total current assets$240,746242,799
Property, plant and equipment, net$272,047278,442
Goodwill, net85,43683,941
Intangible asset, net52,92952,827
Investment in joint venture38,24034,703
Other non-current assets19,54220,001
     Total assets$708,940$712,713
Liabilities and Stockholders’ Equity
Current liabilities:
  Accounts payable$63,616$71,094
  Accrued salaries, wages and benefits19,76021,148
  Current maturities of long-term debt23,34522,160
  Income taxes payable5,0573,274
  Current portion of obligations under capital lease5,4825,418
  Other current liabilities11,48114,504
     Total current liabilities128,741137,598
Non-current deferred tax liabilities48,23849,461
Long-term debt, net of current portion335,938328,026
Obligations under capital lease, net of current portion11,82914,539
Other non-current liabilities10,6929,390
     Total liabilities$535,438539,014
Total stockholders’ equity$173,502173,699
Total liabilities and stockholders’ equity$708,940$712,713
NN, Inc.
Reconciliation of Non-GAAP to GAAP Financial Measures
(Unaudited)
Reconciliation of net income to adjusted net income:
Three Months Ended
June 30, 2015
Three Months Ended
 June 30, 2014
(In Thousands)Diluted Earnings Per Share(In Thousands)Diluted Earnings Per Share
Net Income$6,953$0.36$5,200$0.29
After tax acquisition and integration expenses4360.028180.04
After-tax foreign exchange gain on inter-company loans(232)-0.010.00
Adjusted Net Income$7,157$0.37$6,018$0.33
Reconciliation of net income to adjusted net income:
Six Months Ended
June 30, 2015
Six Months Ended
June 30, 2014
(In Thousands)Diluted Earnings Per Share(In Thousands)Diluted Earnings Per Share
Net Income$12,955$0.67$10,438$0.58
After tax acquisition and integration expenses4360.021,1320.06
After-tax foreign exchange loss on inter-company loans6550.030.00
Adjusted Net Income$14,046$0.72$11,570$0.64
Reconciliation of income from operations to adjusted income from operations:
Three Months Ended
June 30, 2015
Three Months Ended
June 30, 2014
Six Months Ended
June 30, 2015
Six Months Ended
June 30, 2014
(In Thousands)(In Thousands)(In Thousands)(In Thousands)
Income from operations$13,589$8,237$27,524$16,574
Acquisition and integration expenses6811,2796811,770
Adjusted Income from operations$14,270$9,516$28,205$18,344
Reconciliation of income from operations to adjusted income from operations
Three Months Ended
June 30, 2015
MBCAPCPRCNN Inc
Income from operations$9,403$9,095$501$13,589
Acquisition and integration expenses681
China JV Income1,0211,021
Adjusted Income from operations Including China JV$9,403$10,116$501$15,291
Three Months Ended
June 30, 2014
MBCAPCPRCNN Inc
Income from operations$8,748$2,306$414$8,237
Acquisition and integration expenses1,279
Adjusted Income from operations Including China JV$8,748$2,306$414$9,516
Reconciliation of income from operations to adjusted income from operations
Six Months Ended
June 30, 2015
MBCAPCPRCNN Inc
Income from operations$18,491$16,813$714$27,524
Acquisition and integration expenses681
China JV Income1,8821,882
Adjusted Income from operations Including China JV$18,491$18,695$714$30,087
Six Months Ended
June 30, 2014
MBCAPCPRCNN Inc
Income from operations$17,520$4,868$649$16,574
Acquisition and integration expenses1,770
Adjusted Income from operations Including China JV$17,520$4,868$649$18,344

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.

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SOURCE NN, Inc.

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