NN, Inc. Reports Financial Results For Fourth Quarter and Full Year 2021
NN, Inc. (NASDAQ: NNBR) reported Q4 and full-year 2021 results. Q4 net sales decreased by 7.3% to $110.4 million, attributed to lower Mobile Solutions sales due to semiconductor shortages, while Power Solutions showed growth. The company recorded a net income of $0.5 million in Q4, significantly down from $147.4 million in 2020 due to prior year's gains. For 2021, sales increased by 11.7% to $477.6 million, with adjusted EBITDA at $52.1 million. Looking ahead, 2022 revenue is projected between $515 million and $540 million, assuming normal semiconductor supply.
- 2021 net sales increased by 11.7% to $477.6 million.
- Successful adjustment of debt covenants with no interest rate increase.
- Free cash flow of $6.2 million in Q4 2021, compared to a cash use of $7.1 million in Q4 2020.
- 2022 revenue forecast of $515 million to $540 million.
- Q4 net sales declined by 7.3% compared to Q4 2020.
- Operating loss of $3.8 million in Q4, worsening from a loss of $1.0 million in Q4 2020.
- Significant decrease in net income from $147.4 million in Q4 2020 to $0.5 million in Q4 2021.
Provides Outlook for Full Year 2022
CHARLOTTE, N.C., March 10, 2022 (GLOBE NEWSWIRE) -- NN, Inc. (NASDAQ: NNBR), a diversified industrial company, today reported its financial results for the fourth quarter and full year ended December 31, 2021.
Warren Veltman, President and Chief Executive Officer, said, “Our team made meaningful progress towards achieving our long-term goals during fiscal year 2021. Despite the ongoing challenges facing our Company and the industries we serve, we are optimistic given the trends in our businesses, including the continued growth in our sales pipeline and in new business wins heading into the new year. In January 2022, we welcomed Andrew Wall as our Chief Commercial Officer who will be responsible for advancing our business growth strategy and capturing additional market share driven by end market megatrends. Our sales pipeline includes several new programs of meaningful size that utilize capabilities across Mobile and Power Solutions in strategic growth areas such as electric vehicles and the power grid. Subsequent to year-end, we successfully adjusted our debt covenants with no increase in interest rate and announced the closure of our Taunton facility to rationalize our manufacturing footprint and cost structure. We are confident that these actions provide the platform we need to achieve growth and deliver increased shareholder value during 2022.”
Fourth Quarter GAAP Results
Net sales were
Loss from operations was
Income from operations in the Mobile Solutions segment was
Net income was
Fourth Quarter Adjusted Results
Adjusted income from operations for the fourth quarter of 2021 was
Adjusted EBITDA was
Adjusted net loss was
Free cash flow was
"Sales in our Power Solutions business increased year over year on top of a strong rebound from COVID-19 that occurred in the fourth quarter of 2020. Our Mobile Solutions business was adversely impacted by the ongoing semiconductor chip shortages reducing our customers’ production schedules. We are in the process of implementing price increases to mitigate cost increases which we expect to be in place for most of 2022. We generated
Mobile Solutions
Net sales for the fourth quarter of 2021 were
Power Solutions
Net sales for the fourth quarter of 2021 were
Full Year Results
Key highlights from the year include:
Net sales increased
GAAP operating loss was
Income from operations for 2021 in Mobile Solutions was
On an adjusted basis, income from operations for 2021 was
Mike Felcher, NN Senior Vice President and CFO, commented, “We are pleased with the progress we made during 2021 and look forward to building on the momentum in our operations during 2022. Our successfully completed financing strengthens our balance sheet and provides us with a solid foundation to pursue opportunistic initiatives that will drive long-term growth. While our team faced several challenges during the second half of fiscal 2021, the recovery in Mobile Solutions and continued momentum in Power Solutions reinforces our confidence in our 2025 sales growth targets.”
Mobile Solutions
Net sales for 2021 were
Power Solutions
Net sales for 2021 were
2022 Outlook
- Revenue in the range of
$515 million to$540 million - Adjusted EBITDA in the range of
$57 million to$63 million - Free cash flow in the range of
$14 million to$20 million - Free cash flow guidance does not include CARES Act tax refund of ~
$10 million due to uncertain timing
The 2022 Outlook assumes normal supply of semiconductor chips in the second half of 2022 and that we will not experience significant production or supply disruptions as a result of the Russia-Ukraine conflict or COVID-19.
Conference Call
NN will discuss its results during its quarterly investor conference call on March 11, 2022, 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 1-877-317-6789 or 1-412-317-6789, Conference ID: 10155662. For those who are unavailable to listen to the live broadcast, a replay will be available shortly after the call until March 11, 2023.
NN discloses in this press release the non-GAAP financial measures of adjusted income (loss) from operations, adjusted EBITDA, adjusted net income (loss), adjusted net income (loss) per diluted common share, and free cash flow. Each of these non-GAAP financial measures provides supplementary information about the impacts of restructuring and integration expense, acquisition and transition expenses, foreign exchange impacts on inter-company loans, amortization of intangibles and deferred financing costs, and other non-operating impacts on our business.
The financial tables found later in this press release include a reconciliation of adjusted income (loss) from operations, adjusted operating margin, adjusted EBITDA, adjusted EBITDA margin, adjusted net income (loss), adjusted net income (loss) per diluted share, and free cash flow to the U.S. GAAP financial measures of income (loss) from operations, net income (loss), net income (loss) per diluted common share, and cash provided (used) by operating activities.
About NN, Inc.
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 Charlotte, North Carolina, NN has 31 facilities in North America, 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 statements may discuss goals, intentions and expectations as to future trends, plans, events, results of operations or financial condition, or state other information relating to NN, Inc. (“the Company”), based on current beliefs of management as well as assumptions made by, and information currently available to, management. Forward-looking statements generally will be accompanied by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “guidance,” “intend,” “may,” “possible,” “potential,” “predict,” “project” or other similar words, phrases or expressions. Forward-looking statements involve a number of risks and uncertainties that are outside of management’s control and that may cause actual results to be materially different from such forward-looking statements. Such factors include, among others, general economic conditions and economic conditions in the industrial sector; the impacts of the COVID-19 pandemic on the Company’s financial condition, business operations and liquidity; competitive influences; risks that current customers will commence or increase captive production; risks of capacity underutilization; quality issues; material changes in the costs and availability of raw materials; economic, social, and political instability, currency fluctuation, and other risks of doing business outside of the United States; our dependence on certain major customers, some of whom are not parties to long-term agreements (and/or are terminable on short notice); the impact of acquisitions and divestitures; the level of our indebtedness; the restrictions contained in our debt agreements; our ability to obtain financing at favorable rates, if at all, and to refinance existing debt as it matures; unanticipated difficulties integrating acquisitions; new laws and governmental regulations; the impact of climate change on our operations; cyber liability or potential liability for breaches of our or our service providers’ information technology systems or business operations disruptions; and other risk factors and cautionary statements listed from time-to-time in our periodic reports filed with the Securities and Exchange Commission. We disclaim any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements included herein or therein to reflect future events or developments.
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, 2020, , the Company’s Quarterly Report on Form 10-Q for the three months ended September 30, 2021, and, when filed, the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021. 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.
FOR FURTHER INFORMATION:
Jeff Tryka, CFA
Investor Relations Contact
jtryka@lambert.com
(616) 258-5766
Financial Tables Follow
NN, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| (in thousands, except per share data) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Net sales | $ | 110,379 | $ | 119,028 | $ | 477,584 | $ | 427,534 | ||||||||
| Cost of sales (exclusive of depreciation and amortization shown separately below) | 91,868 | 93,982 | 389,995 | 343,594 | ||||||||||||
| Selling, general, and administrative expense | 11,148 | 13,877 | 51,489 | 58,055 | ||||||||||||
| Depreciation and amortization | 11,335 | 11,561 | 46,195 | 45,680 | ||||||||||||
| Goodwill impairment | — | — | — | 92,942 | ||||||||||||
| Other operating expense (income), net | (190 | ) | 582 | (1,091 | ) | 4,720 | ||||||||||
| Loss from operations | (3,782 | ) | (974 | ) | (9,004 | ) | (117,457 | ) | ||||||||
| Interest expense | 3,489 | 1,862 | 12,664 | 18,898 | ||||||||||||
| Loss on extinguishment of debt and write-off of debt issuance costs | — | — | 2,390 | 144 | ||||||||||||
| Derivative payments on interest rate swap | — | 4,133 | 1,717 | 4,133 | ||||||||||||
| Loss on interest rate swap | — | 11,669 | 2,033 | 11,669 | ||||||||||||
| Other expense (income), net | (2,578 | ) | (280 | ) | (5,366 | ) | (213 | ) | ||||||||
| Loss from continuing operations before benefit (provision) for income taxes and share of net income from joint venture | (4,693 | ) | (18,358 | ) | (22,442 | ) | (152,088 | ) | ||||||||
| Benefit (provision) for income taxes | 1,144 | 1,037 | 1,756 | 8,972 | ||||||||||||
| Share of net income from joint venture | 2,805 | 1,834 | 6,261 | 3,626 | ||||||||||||
| Loss from continuing operations | (744 | ) | (15,487 | ) | (14,425 | ) | (139,490 | ) | ||||||||
| Income (loss) from discontinued operations, net of tax (Note 2) | 1,200 | 162,864 | 1,200 | 38,898 | ||||||||||||
| Net loss | $ | 456 | $ | 147,377 | $ | (13,225 | ) | $ | (100,592 | ) | ||||||
| Other comprehensive income (loss): | ||||||||||||||||
| Reclassification adjustment for discontinued operations | $ | — | $ | 5,961 | $ | — | $ | 5,961 | ||||||||
| Foreign currency translation loss | 415 | 4,953 | (1,135 | ) | (1,683 | ) | ||||||||||
| Interest rate swap: | ||||||||||||||||
| Change in fair value, net of tax | 235 | — | 59 | (12,443 | ) | |||||||||||
| Reclassification adjustment for losses included in net loss, net of tax | 33 | 12,149 | 2,906 | 18,987 | ||||||||||||
| Other comprehensive income (loss) | $ | 683 | $ | 23,063 | $ | 1,830 | $ | 10,822 | ||||||||
| Comprehensive loss | $ | 1,139 | $ | 170,440 | $ | (11,395 | ) | $ | (89,770 | ) | ||||||
| Basic net loss per common share: | ||||||||||||||||
| Loss from continuing operations per common share | $ | (0.07 | ) | $ | (0.44 | ) | $ | (0.82 | ) | $ | (3.60 | ) | ||||
| Income (loss) from discontinued operations per common share | 0.03 | 3.85 | 0.03 | 0.92 | ||||||||||||
| Net loss per common share | $ | (0.04 | ) | $ | 3.41 | $ | (0.79 | ) | $ | (2.68 | ) | |||||
| Weighted average common shares outstanding | 44,454 | 42,285 | 44,011 | 42,199 | ||||||||||||
| Diluted net loss per common share: | ||||||||||||||||
| Loss from continuing operations per common share | $ | (0.07 | ) | $ | (0.44 | ) | $ | (0.82 | ) | $ | (3.60 | ) | ||||
| Income (loss) from discontinued operations per common share | 0.03 | 3.85 | 0.03 | 0.92 | ||||||||||||
| Net loss per common share | $ | (0.04 | ) | $ | 3.41 | $ | (0.79 | ) | $ | (2.68 | ) | |||||
| Weighted average common shares outstanding | 44,454 | 42,285 | 44,011 | 42,199 | ||||||||||||
NN, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
| (in thousands, except per share data) | December 31, 2021 | December 31, 2020 | ||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 28,656 | $ | 48,138 | ||||
| Accounts receivable, net | 71,419 | 84,615 | ||||||
| Inventories | 75,027 | 62,517 | ||||||
| Income tax receivable | 11,808 | 8,800 | ||||||
| Other current assets | 9,372 | 11,148 | ||||||
| Total current assets | 196,282 | 215,218 | ||||||
| Property, plant and equipment, net | 209,105 | 223,690 | ||||||
| Operating lease right-of-use assets | 46,443 | 50,264 | ||||||
| Intangible assets, net | 88,718 | 103,065 | ||||||
| Investment in joint venture | 34,045 | 26,983 | ||||||
| Deferred tax assets | 314 | — | ||||||
| Other non-current assets | 4,194 | 5,742 | ||||||
| Total assets | $ | 579,101 | $ | 624,962 | ||||
| Liabilities, Preferred Stock, and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 36,710 | $ | 37,435 | ||||
| Accrued salaries, wages and benefits | 17,739 | 21,296 | ||||||
| Income tax payable | 2,072 | 3,557 | ||||||
| Current maturities of long-term debt | 3,074 | 4,885 | ||||||
| Current portion of operating lease liabilities | 5,704 | 4,797 | ||||||
| Other current liabilities | 8,718 | 31,261 | ||||||
| Total current liabilities | 74,017 | 103,231 | ||||||
| Deferred tax liabilities | 7,456 | 11,178 | ||||||
| Long-term debt, net of current portion | 151,052 | 79,025 | ||||||
| Operating lease liabilities, net of current portion | 51,295 | 55,053 | ||||||
| Other non-current liabilities | 17,289 | 17,237 | ||||||
| Total liabilities | 301,109 | 265,724 | ||||||
| Commitments and contingencies | ||||||||
| Series D perpetual preferred stock - | 53,807 | — | ||||||
| Series B convertible preferred stock - | — | 105,086 | ||||||
| Stockholders' equity: | ||||||||
| Common stock - | 430 | 427 | ||||||
| Additional paid-in capital | 474,757 | 493,332 | ||||||
| Accumulated deficit | (219,100 | ) | (205,875 | ) | ||||
| Accumulated other comprehensive loss | (31,902 | ) | (33,732 | ) | ||||
| Total stockholders’ equity | 224,185 | 254,152 | ||||||
| Total liabilities, preferred stock, and stockholders’ equity | $ | 579,101 | $ | 624,962 | ||||
NN, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Twelve Months Ended December 31, | ||||||||
| (in thousands) | 2021 | 2020 | ||||||
| Cash flows from operating activities | ||||||||
| Net (loss) | $ | (13,225 | ) | $ | (100,592 | ) | ||
| Adjustments to reconcile net (loss) to net cash provided by operating activities: | ||||||||
| Depreciation and amortization of continuing operations | 46,195 | 45,680 | ||||||
| Depreciation and amortization of discontinued operations | — | 35,731 | ||||||
| Amortization of debt issuance costs and discount | 1,381 | 15,692 | ||||||
| Goodwill impairment of continuing operations | — | 92,942 | ||||||
| Goodwill impairment of discontinued operations | — | 146,757 | ||||||
| Other impairments | — | 4,148 | ||||||
| Loss on extinguishment of debt and write-off of debt issuance costs | 2,390 | 1,532 | ||||||
| Total derivative loss (gain), net of cash settlements | (3,259 | ) | 15,309 | |||||
| Share of net income from joint venture | (6,261 | ) | (3,626 | ) | ||||
| Gain on disposal of discontinued operations, net of tax and cost to sell | (1,200 | ) | (233,824 | ) | ||||
| Compensation expense from issuance of share-based awards | 3,216 | 4,226 | ||||||
| Deferred income taxes | (4,845 | ) | (21,697 | ) | ||||
| Other | (2,611 | ) | (4,730 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 13,698 | 10,831 | ||||||
| Inventories | (12,959 | ) | 5,114 | |||||
| Accounts payable | 343 | (8,606 | ) | |||||
| Income taxes receivable and payable, net | (4,516 | ) | (633 | ) | ||||
| Other | (2,761 | ) | 11,295 | |||||
| Net cash provided by operating activities | 15,586 | 15,549 | ||||||
| Cash flows from investing activities | ||||||||
| Acquisition of property, plant and equipment | (18,221 | ) | (23,773 | ) | ||||
| Proceeds from sale of property, plant, and equipment | 1,418 | 3,317 | ||||||
| Proceeds from (cash paid for post-closing adjustments on) sale of business, net of cash sold | (3,880 | ) | 743,178 | |||||
| Cash settlements of interest rate swap | (15,420 | ) | (4,133 | ) | ||||
| Other | — | 695 | ||||||
| Net cash provided by (used in) investing activities | (36,103 | ) | 719,284 | |||||
| Cash flows from financing activities | ||||||||
| Cash paid for debt issuance costs | (7,360 | ) | (661 | ) | ||||
| Proceeds from issuance of preferred stock | 61,793 | — | ||||||
| Redemption of preferred stock | (122,434 | ) | — | |||||
| Proceeds from long-term debt | 171,000 | 66,195 | ||||||
| Repayments of long-term debt | (93,729 | ) | (776,331 | ) | ||||
| Repayments of short-term debt, net | (1,563 | ) | (924 | ) | ||||
| Other | (5,150 | ) | (3,133 | ) | ||||
| Net cash provided by (used in) financing activities | 2,557 | (714,854 | ) | |||||
| Effect of exchange rate changes on cash flows | (1,522 | ) | (3,544 | ) | ||||
| Net change in cash and cash equivalents | (19,482 | ) | 16,435 | |||||
| Cash and cash equivalents at beginning of period (1) | 48,138 | 31,703 | ||||||
| Cash and cash equivalents at end of period | $ | 28,656 | $ | 48,138 | ||||
_______________________________
(1) Cash and cash equivalents include
Reconciliation of GAAP Income (Loss) from Operations to Non-GAAP Adjusted Income (Loss) from Operations
| Three Months Ended December 31, | |||||||
| NN, Inc. Consolidated | 2021 | 2020 | |||||
| GAAP income (loss) from operations | $ | (3,782 | ) | $ | (974 | ) | |
| Acquisition and transition expense* | 1,030 | 3,694 | |||||
| Amortization of intangibles | 3,587 | 3,587 | |||||
| Fixed asset impairments | — | 1,019 | |||||
| Non-GAAP adjusted income (loss) from operations (a) | $ | 835 | $ | 7,326 | |||
| Non-GAAP adjusted operating margin | 0.8 | % | 6.2 | % | |||
| GAAP net sales | $ | 110,379 | $ | 119,028 | |||
| Three Months Ended December 31, | |||||||
| Power Solutions | 2021 | 2020 | |||||
| GAAP income (loss) from operations | $ | (66 | ) | $ | 1,754 | ||
| Acquisition and transition expense | — | 592 | |||||
| Amortization of intangibles | 2,749 | 2,748 | |||||
| Non-GAAP adjusted income (loss) from operations (a) | $ | 2,683 | $ | 5,094 | |||
| Non-GAAP adjusted operating margin | 6.0 | % | 11.6 | % | |||
| GAAP net sales | $ | 44,774 | $ | 43,962 | |||
| Three Months Ended December 31, | |||||||
| Mobile Solutions | 2021 | 2020 | |||||
| GAAP income (loss) from operations | $ | 697 | $ | 4,603 | |||
| Acquisition and transition expense | — | 359 | |||||
| Amortization of intangibles | 838 | 838 | |||||
| Fixed asset impairments | — | 1,019 | |||||
| Non-GAAP adjusted income (loss) from operations (a) | 1,535 | 6,819 | |||||
| Share of net income from joint venture | 2,805 | 1,834 | |||||
| Non-GAAP adjusted income (loss) from operations with JV | $ | 4,340 | $ | 8,653 | |||
| Non-GAAP adjusted operating margin (1) | 6.6 | % | 11.5 | % | |||
| GAAP net sales | $ | 65,615 | $ | 75,068 | |||
| Three Months Ended December 31, | |||||||
| Elimination | 2021 | 2020 | |||||
| GAAP net sales | $ | (10 | ) | $ | (2 | ) | |
(1) Non-GAAP adjusted operating margin = Non-GAAP adjusted income (loss) from operations / GAAP net sales
*2021 expense includes
Reconciliation of GAAP Income (Loss) from Operations to Non-GAAP Adjusted Income (Loss) from Operations
| Twelve Months Ended December 31, | |||||||
| NN, Inc. Consolidated | 2021 | 2020 | |||||
| GAAP income (loss) from operations | (9,004 | ) | (117,457 | ) | |||
| Acquisition and transition expense* | 4,802 | 16,939 | |||||
| Amortization of intangibles | 14,348 | 14,348 | |||||
| Impairments (Goodwill and fixed assets) | — | 93,967 | |||||
| Non-GAAP adjusted income (loss) from operations (a) | $ | 10,146 | $ | 7,797 | |||
| Non-GAAP adjusted operating margin | 2.1 | % | 1.8 | % | |||
| GAAP net sales | 477,584 | 427,534 | |||||
| Twelve Months Ended December 31, | |||||||
| Power Solutions | 2021 | 2020 | |||||
| GAAP income (loss) from operations | 6,493 | (85,983 | ) | ||||
| Acquisition and transition expense | 386 | 4,235 | |||||
| Amortization of intangibles | 10,994 | 10,993 | |||||
| Impairments (Goodwill and fixed assets) | — | 92,948 | |||||
| Non-GAAP adjusted income (loss) from operations (a) | $ | 17,873 | $ | 22,193 | |||
| Non-GAAP adjusted operating margin | 9.3 | % | 13.0 | % | |||
| GAAP net sales | 191,800 | 171,269 | |||||
| Twelve Months Ended December 31, | |||||||
| Mobile Solutions | 2021 | 2020 | |||||
| GAAP income (loss) from operations | 9,039 | 5,229 | |||||
| Acquisition and transition expense | 566 | 1,594 | |||||
| Amortization of intangibles | 3,353 | 3,352 | |||||
| Impairments (Goodwill and fixed assets) | — | 1,019 | |||||
| Non-GAAP adjusted income (loss) from operations (a) | $ | 12,958 | $ | 11,194 | |||
| Share of net income from joint venture | 6,261 | 3,627 | |||||
| Non-GAAP adjusted income (loss) from operations with JV | $ | 19,219 | $ | 14,821 | |||
| Non-GAAP adjusted operating margin | 6.7 | % | 5.8 | % | |||
| GAAP net sales | 285,863 | 256,360 | |||||
| Twelve Months Ended December 31, | |||||||
| Elimination | 2021 | 2020 | |||||
| GAAP net sales | (79 | ) | (95 | ) | |||
(1) Non-GAAP adjusted operating margin = Non-GAAP adjusted income (loss) from operations / GAAP net sales
*2021 expense includes
| Reconciliation of Net Income (Loss) to Non-GAAP Adjusted EBITDA | |||||||
| Three Months Ended December 31, | |||||||
| 000's | 2021 | 2020 | |||||
| GAAP net income (loss) | $ | 456 | $ | 147,377 | |||
| Benefit for income taxes | (1,144 | ) | (1,037 | ) | |||
| Interest expense | 3,489 | 1,862 | |||||
| Pre-tax derivative loss, net of cash settlements | — | 15,802 | |||||
| Change in fair value of preferred stock derivatives and warrants | (2,403 | ) | (338 | ) | |||
| Depreciation and amortization | 11,335 | 11,561 | |||||
| Acquisition and transition expense | 1,030 | 3,694 | |||||
| Non-cash stock compensation | 635 | 56 | |||||
| Non-cash foreign exchange (gain) loss on inter-company loans | (117 | ) | (534 | ) | |||
| Costs related to divested businesses and litigation settlement | — | 247 | |||||
| (Income) loss from discontinued operations, net of tax | (1,200 | ) | (162,864 | ) | |||
| Fixed asset impairments | — | 1,019 | |||||
| Non-GAAP adjusted EBITDA (b) | $ | 12,081 | $ | 16,845 | |||
| Non-GAAP adjusted EBITDA margin (2) | 10.9 | % | 14.2 | % | |||
| GAAP net sales | $ | 110,379 | $ | 119,028 | |||
(2) Non-GAAP adjusted EBITDA margin = Non-GAAP adjusted EBITDA / GAAP net sales
| Twelve Months Ended December 31, | |||||||
| 000's | 2021 | 2020 | |||||
| GAAP net income (loss) | $ | (13,225 | ) | $ | (100,592 | ) | |
| Benefit for income taxes | (1,756 | ) | (8,972 | ) | |||
| Interest expense | 12,664 | 18,898 | |||||
| Write-off of unamortized debt issuance cost | 2,390 | 144 | |||||
| Pre-tax derivative loss, net of cash settlements | 3,750 | 15,802 | |||||
| Change in fair value of preferred stock derivatives and warrants | (7,009 | ) | (499 | ) | |||
| Depreciation and amortization | 46,195 | 45,680 | |||||
| Acquisition and transition expense | 4,802 | 16,850 | |||||
| Non-cash stock compensation | 3,529 | 3,581 | |||||
| Non-cash foreign exchange (gain) loss on inter-company loans | 474 | 274 | |||||
| Costs related to divested businesses and litigation settlement | 1,500 | 247 | |||||
| (Income) loss from discontinued operations, net of tax | (1,200 | ) | (38,898 | ) | |||
| Fixed asset and goodwill impairments | — | 93,967 | |||||
| Non-GAAP adjusted EBITDA (b) | $ | 52,114 | $ | 46,482 | |||
| Non-GAAP adjusted EBITDA margin (2) | 10.9 | % | 10.9 | % | |||
| GAAP net sales | 477,584 | 427,534 | |||||
(2) Non-GAAP adjusted EBITDA margin = Non-GAAP adjusted EBITDA / GAAP net sales
| Reconciliation of Net Income (Loss) to Non-GAAP Adjusted Net Income and Net Income (Loss) per |
| Diluted Common Share to Non-GAAP Adjusted Net Income (Loss) per Diluted Common Share |
| Three Months Ended December 31, | |||||||
| 000's | 2021 | 2020 | |||||
| GAAP net income (loss) | $ | 456 | $ | 147,377 | |||
| Pre-tax acquisition and transition expense | 1,030 | 3,694 | |||||
| Pre-tax foreign exchange (gain) loss on inter-company loans | (117 | ) | (534 | ) | |||
| Pre-tax change in fair value of preferred stock derivatives and warrants | (2,403 | ) | (338 | ) | |||
| Pre-tax amortization of intangibles and deferred financing costs | 3,919 | 4,000 | |||||
| Pre-tax derivative loss, net of cash settlements | — | 15,802 | |||||
| Pre-tax impairments of fixed asset costs | — | 1,019 | |||||
| Pre-tax costs related to divested businesses and litigation settlement | — | 247 | |||||
| Tax effect of adjustments reflected above (c) | (510 | ) | (5,019 | ) | |||
| Non-GAAP discrete tax adjustments | (2,000 | ) | 3,629 | ||||
| (Income) loss from discontinued operations, net of tax | (1,200 | ) | (162,864 | ) | |||
| Non-GAAP adjusted net income (loss) (d) | $ | (825 | ) | $ | 7,013 | ||
| Three Months Ended December 31, | |||||||
| Per diluted common share | 2021 | 2020 | |||||
| GAAP net income (loss) per diluted common share | $ | (0.04 | ) | $ | 3.41 | ||
| Pre-tax acquisition and transition expense | 0.02 | 0.09 | |||||
| Pre-tax foreign exchange (gain) loss on inter-company loans | — | (0.01 | ) | ||||
| Pre-tax change in fair value of preferred stock derivatives and warrants | (0.05 | ) | (0.01 | ) | |||
| Pre-tax amortization of intangibles and deferred financing costs | 0.09 | 0.09 | |||||
| Pre-tax interest rate swap payments and change in fair value | — | 0.37 | |||||
| Pre-tax impairments of fixed asset costs | — | 0.02 | |||||
| Pre-tax costs related to divested businesses and litigation settlement | — | 0.01 | |||||
| Tax effect of adjustments reflected above (c) | (0.01 | ) | (0.12 | ) | |||
| Non-GAAP discrete tax adjustments | (0.04 | ) | 0.09 | ||||
| (Income) loss from discontinued operations, net of tax | (0.03 | ) | (3.85 | ) | |||
| Preferred stock cumulative dividends and deemed dividends | 0.05 | 0.08 | |||||
| Non-GAAP adjusted net income (loss) per diluted common share (d) | $ | (0.01 | ) | $ | 0.17 | ||
| Weighted average common shares outstanding | 44,454 | 42,285 | |||||
| Reconciliation of Net Income (Loss) to Non-GAAP Adjusted Net Income and Net Income (Loss) per |
| Diluted Common Share to Non-GAAP Adjusted Net Income (Loss) per Diluted Common Share |
| Twelve Months Ended December 31, | |||||||
| 000's | 2021 | 2020 | |||||
| GAAP net income (loss) | $ | (13,225 | ) | $ | (100,592 | ) | |
| Pre-tax acquisition and transition expense | 4,802 | 16,939 | |||||
| Pre-tax foreign exchange (gain) loss on inter-company loans | 474 | 274 | |||||
| Pre-tax write-off of unamortized debt issuance costs | 2,390 | 144 | |||||
| Pre-tax change in fair value of preferred stock derivatives and warrants | (7,009 | ) | (499 | ) | |||
| Pre-tax amortization of intangibles and deferred financing costs | 15,729 | 16,056 | |||||
| Pre-tax derivative loss, net of cash settlements | 3,750 | 15,802 | |||||
| Pre-tax impairments of fixed asset costs | — | 1,026 | |||||
| Pre-tax costs related to divested businesses and litigation settlement | 1,500 | 247 | |||||
| Tax effect of adjustments reflected above (c) | (4,569 | ) | (10,432 | ) | |||
| Non-GAAP discrete tax adjustments | (913 | ) | 31 | ||||
| (Income) loss from discontinued operations, net of tax | (1,200 | ) | (38,898 | ) | |||
| Goodwill impairments | — | 92,942 | |||||
| Non-GAAP adjusted net income (loss) (d) | $ | 1,729 | $ | (6,960 | ) | ||
| Twelve Months Ended December 31, | |||||||
| Per diluted common share | 2021 | 2020 | |||||
| GAAP net income (loss) per diluted common share | $ | (0.79 | ) | $ | (2.68 | ) | |
| Pre-tax acquisition and transition expense | 0.11 | 0.42 | |||||
| Pre-tax foreign exchange (gain) loss on inter-company loans | 0.01 | 0.01 | |||||
| Pre-tax write-off of unamortized debt issuance costs | 0.05 | — | |||||
| Pre-tax change in fair value of preferred stock derivatives and warrants | (0.16 | ) | (0.01 | ) | |||
| Pre-tax amortization of intangibles and deferred financing costs | 0.36 | 0.38 | |||||
| Pre-tax interest rate swap payments and change in fair value | 0.09 | 0.37 | |||||
| Pre-tax impairments of fixed asset costs | — | 0.02 | |||||
| Pre-tax costs related to divested businesses and litigation settlement | 0.03 | 0.01 | |||||
| Tax effect of adjustments reflected above (c) | (0.10 | ) | (0.25 | ) | |||
| Non-GAAP discrete tax adjustments | (0.02 | ) | — | ||||
| (Income) loss from discontinued operations, net of tax | (0.03 | ) | (0.92 | ) | |||
| Goodwill impairments | — | 2.20 | |||||
| Preferred stock cumulative dividends and deemed dividends | 0.49 | 0.29 | |||||
| Non-GAAP adjusted net income (loss) per diluted common share (d) | $ | 0.04 | $ | (0.16 | ) | ||
| Weighted average common shares outstanding | 44,011 | 42,199 | |||||
Reconciliation of Operating Cash Flow to Free Cash Flow
| Three Months Ended December 31, | |||||||
| 000’s | 2021 | 2020 | |||||
| Net cash provided by (used in) operating activities | 9,895 | (3,795 | ) | ||||
| Acquisition of property, plant and equipment | (3,665 | ) | (3,255 | ) | |||
| Free cash flow | $ | 6,230 | $ | (7,050 | ) | ||
| Twelve Months Ended December 31, | |||||||
| 000’s | 2021 | 2020 | |||||
| Net cash provided by (used in) operating activities | 15,586 | $ | 15,549 | ||||
| Acquisition of property, plant and equipment | (18,221 | ) | (23,773 | ) | |||
| Free cash flow | $ | (2,635 | ) | $ | (8,224 | ) | |
The Company discloses in this presentation the non-GAAP financial measures of adjusted income (loss) from operations, adjusted EBITDA, adjusted net income (loss), adjusted net income (loss) per diluted common share, and free cash flow. Each of these non-GAAP financial measures provides 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 five years, we have completed several acquisitions, one of which was 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 are excluded as the charges are not indicative of our ongoing operating cost. We believe the presentation of adjusted income (loss) from operations, adjusted EBITDA, adjusted net income (loss), adjusted net income (loss) per diluted common share, and free cash flow 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 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 (loss) from operations represents GAAP income (loss) from operations, adjusted to exclude the effects of restructuring and integration expense; non-operational charges related to acquisition and transition expense, intangible amortization costs for fair value step-up in values related to acquisitions, non-cash impairment charges, 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 (loss) 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 (loss) from operations.
(b) Non-GAAP adjusted EBITDA represents GAAP net income (loss), adjusted to include income taxes, interest expense, write-off of unamortized debt issuance costs, interest rate swap payments and change in fair value that was recognized in earnings, change in fair value of preferred stock derivatives and warrants, depreciation and amortization, charges related to acquisition and transition costs, non-cash stock compensation expense, foreign exchange gain (loss) on inter-company loans, restructuring and integration expense, costs related to divested businesses and litigation settlements, income from discontinued operations, and non-cash impairment charges, to the extent applicable. 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 EBITDA 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 non-tax adjustments reflected in the respective table. NN, Inc. estimates the tax effect of the adjustment items identified in the reconciliation schedule above by applying the applicable statutory rates by tax jurisdiction 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.
(d) Non-GAAP adjusted net income (loss) represents GAAP net income (loss) adjusted to exclude the tax-affected effects of charges related to acquisition and transition costs, foreign exchange gain (loss) on inter-company loans, restructuring and integration charges, amortization of intangibles costs for fair value step-up in values related to acquisitions and amortization of deferred financing costs, non-cash impairment charges, write-off of unamortized debt issuance costs, interest rate swap payments and change in fair value, change in fair value of preferred stock derivatives and warrants, costs related to divested businesses and litigation settlements, income (loss) from discontinued operations, and preferred stock cumulative dividends and deemed dividends. 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.
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