NN, Inc. Reports Third Quarter 2015 Results

04 Nov, 2015, 17:03 ET from NN, Inc.

JOHNSON CITY, Tenn., Nov. 4, 2015 /PRNewswire/ -- 

  • Net sales of $154.8 million, an increase of $29.2 million
  • Adjusted income from operations grew to $15.3 million
  • Adjusted net income of $8.3 million or $0.31 per diluted share

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

Third Quarter 2015 Results

Net sales for the third quarter of 2015 increased $29.2 million, or 23% to $154.8 million, compared to $125.6 million for the third quarter of 2014.  Acquisitions added $41.6 million in revenue.  Negative currency impacts reduced reported net sales by $7.8 million versus the third quarter of last year.

Adjusted income from operations for the third quarter of 2015 was $15.3 million, an increase of 44%, compared to $10.6 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 $8.3 million, or $0.31 per diluted share, compared to $6.3 million, or $0.34 per diluted share for the same period in 2014.  In the quarter the Company also issued 7.6 million shares related to the completion of the follow-on stock offering earlier this year.

On a GAAP basis, income from operations for the third quarter of 2015 was $10.1 million, compared to $2.6 million for the same period in 2014. Net income on a GAAP basis for the third quarter of 2015 was $4.6 million, or $0.17 per diluted share. This compares to a net loss $3.8 million, or $0.21 per diluted share in the third quarter of 2014.

Richard Holder, President and Chief Executive Officer, commented, "The third quarter presented a series of challenges in the broader economy that impacted our sales during the quarter. Despite these headwinds we began to see the impact of the NN Operating System as we were able to appropriately manage our business in a rapidly changing environment and deliver strong operating performance."

Business Group Results

Metal Bearing Components

Net sales for the group decreased $9.0 million to $60.5 million during the third quarter of 2015, compared to $69.6 million for third quarter 2014. Negative currency impacts of $6.7 million as well as volume and price/mix reductions of $2.3 million accounted for the decline.  Income from operations for the third quarter was $6.6 million, compared to $7.6 million in the third quarter of 2014.

"Changes in demand in Asia as well as the continued effects of negative currency translation weighed on our MBC business during the quarter as sales declined $9.0 million," said Holder. "However, the business was still able to hold operating margins on a year over year basis as we continue to drive results through the operating system."

Autocam Precision Components

Net sales for the third quarter of 2015 were $83.2 million, compared to $46.6 million in the third quarter of 2014, an increase of $36.6 million.  Acquisitions accounted for $39.7 million of the increase.  Income from operations for the quarter increased $5.4 million to $10.9 million, compared to $5.5 million in the third quarter of 2014. 

Holder commented, "The Autocam Precision Components Group continued to perform well despite the conditions in Asia and Brazil. APC's focus is on CAFE technologies that have adoption rates and growth trends not tied to normal end market cyclicality.  In accordance with our continued execution of our Autocam synergy plan we're announcing the closure of one of our APC facilities early next year."

Plastic and Rubber Components

Net sales for the third quarter increased $1.6 million to $11.0 million, compared to $9.4 million for the same period in 2014. Income from operations for the quarter was $0.6 million, compared to $0.2 million in 2014.

Precision Engineered Products (PEP) Acquisition Update

Holder commented, "As announced during the third quarter we closed the PEP acquisition in October.  Year to date PEP's sales and margins continue to be in line with our expectations.  Starting with the fourth quarter we will be reporting PEP as a segment within our portfolio.  Additionally, the PEP Group will include our existing Plastic and Rubber Components Group as part of our continued focus on properly aligning all of our businesses to address the end markets we serve.  PEP is an important part of our strategic plan and we again welcome the team to our family."

Guidance

Holder continued, "As previously committed, beginning with the fourth quarter we will initiate a more comprehensive set of financial guidance designed to help our shareholders have the appropriate information to accurately evaluate our performance.  This will include sales, adjusted EBITDA, adjusted operating margin, and adjusted earnings per share.  With the completion of the PEP acquisition we will also begin excluding non-cash amortization charges from our adjusted earnings per share. We believe removing these charges provides the shareholder with the best evaluation of the Company's performance." 

The full set of financial guidance for the fourth quarter and 2016 can be found in our supplemental deck on our website.

Holder concluded, "I am encouraged with our results in the face of an ever changing macro environment.  Our focus this year on implementing the NN Operating System and managing our organizational flex has had a significant impact on the quarter as we were able to deliver operating improvements in all of our businesses. Finally, with the announcement and subsequent close of the PEP acquisition 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, adjusted net income and adjusted earnings per share 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 43 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 and quarterly report on form 10-Q for the quarterly period ended September 30, 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.

Consolidated Statements of Income

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended

September 30,

Nine Months Ended

September 30,

(In Thousands of Dollars, Except Per Share Data)

2015

2014

2015

2014

Net sales

$    154,824

$125,632

$483,425

$334,840

Cost of products sold (exclusive of depreciation     and amortization shown separately below)

120,195

 

100,441

378,220

 

265,010

Selling, general and administrative

11,949

11,124

37,910

29,799

Acquisition related costs excluded from selling, general and administrative

 

3,948

 

5,651

 

3,948

 

7,080

Depreciation and amortization

8,610

5,864

25,702

13,824

Income from operations

10,122

2,552

37,645

19,127

Interest expense

4,584

5,622

16,543

6,737

Other expense, net

593

1,557

2,012

1,769

Income (loss) before provision (benefit) for income

     taxes and share of net income from joint venture

4,945

 

(4,627)

19,090

 

10,621

Provision (benefit) for income taxes

936

(562)

4,009

4,247

Share of net income from joint venture

621

225

2,503

225

    Net income (loss)

4,630

(3,840)

17,584

6,599

Basic income (loss) per common share:

$     0.17

$    (0.21)

$     0.87

$     0.36

Weighted average shares outstanding

26,839

17,979

20,122

17,749

Diluted income (loss) per common share:

$     0.17

$      (0.21)

$     0.86

$     0.36

Weighted average shares outstanding

27,167

17,979

20,467

18,120

Cash dividends per common share

$     0.07

$      0.07

$     0.21

$      0.21

 

 

NN, Inc.

Condensed Balance Sheets

(In thousands)

(Unaudited)

September 30,

December 31,

(In Thousands of Dollars)

2015

2014

Assets

Current assets:

  Cash

$40,102

$37,317

  Accounts receivable, net

108,144

97,510

  Inventories

92,579

91,469

  Other current assets

17,560

16,503

     Total current assets

258,385

242,799

Property, plant and equipment, net

266,562

278,442

Goodwill, net

85,447

83,941

Intangible asset, net

51,829

52,827

Investment in joint venture

37,088

34,703

Other non-current assets

20,165

20,001

     Total assets

$719,476

$712,713

Liabilities and Stockholders' Equity

Current liabilities:

  Accounts payable

$60,338

$71,094

  Accrued salaries, wages and benefits

18,362

21,148

  Current maturities of long-term debt

21,677

22,160

  Income taxes payable

4,933

3,274

  Current portion of obligations under capital lease

5,066

5,418

  Other current liabilities

10,747

14,504

     Total current liabilities

121,123

137,598

Non-current deferred tax liabilities

46,950

49,461

Long-term debt, net of current portion

184,356

328,026

Obligations under capital lease, net of current portion

10,759

14,539

Other non-current liabilities

12,584

9,390

     Total liabilities

375,772

539,014

Total stockholders' equity

343,704

173,699

Total liabilities and stockholders' equity

$719,476

$712,713

 

 

NN, Inc.

Reconciliation of Non-GAAP to GAAP Financial Measures

(Unaudited)

Reconciliation of net income to adjusted net income:

Three Months Ended September 30, 2015

Three Months Ended September 30, 2014

(In Thousands)

Diluted Earnings Per Share

(In Thousands)

Diluted Earnings Per Share

Net Income

$4,630

$0.17

$(3,840)

$(0.21)

After tax acquisition and integration expenses

3,372

0.13

9,222

0.50

After-tax foreign exchange gain on inter-company loans

284

0.01

880

0.05

Adjusted Net Income

$8,286

$0.31

$6,262

$0.34

Reconciliation of net income to adjusted net income:

Nine Months Ended September 30, 2015

Nine Months Ended September 30, 2014

(In Thousands)

Diluted Earnings Per Share

(In Thousands)

Diluted Earnings Per Share

Net Income

$17,584

$0.86

$6,599

$0.36

After tax acquisition and integration expenses

3,808

0.19

10,354

0.57

After-tax foreign exchange loss on inter-company loans

939

0.04

880

0.05

Adjusted Net Income

$22,331

$1.09

$17,833

$0.98

Reconciliation of income from operations to adjusted income from operations:

Three Months Ended September 30, 2015

Three Months Ended September 30, 2014

Nine Months Ended September 30, 2015

Nine Months Ended September 30, 2014

(In Thousands)

(In Thousands)

(In Thousands)

(In Thousands)

Income from operations

$10,122

$2,552

$37,645

$19,127

Acquisition and integration expenses

5,138

8,088

5,819

9,858

Adjusted Income from operations

$15,260

$10,640

$43,464

$28,985

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 intercompany loans. We believe the presentation of adjusted income from operations and adjusted net income provides useful information in assessing our results of operations and potential future results.  These measures should not be considered as an alternative to their comparable GAAP measures, nor should they be considered in isolation, or as a substitute for analysis of our results reported under GAAP.

SOURCE NN, Inc.