NN, Inc. Reports Strong Sales Growth And Improved Operating Margins For First Quarter 2021
NN, Inc. (NASDAQ: NNBR) reported a strong performance for Q1 2021, with net sales increasing by 9.1% to $126.8 million, driven largely by Mobile Solutions' growth of 11.3%. The company improved its income from operations to $1 million from a loss of $103.9 million year-over-year, aided by cost-reduction strategies. Adjusted net income reached $2.2 million, or $0.05 per diluted share. Free cash flow improved to $2.4 million. CEO Warren Veltman highlighted growth in North America and China, despite challenges in the Power Solutions segment due to external market pressures.
- Net sales increased by 9.1% to $126.8 million.
- Income from operations improved to $1 million from a loss of $103.9 million.
- Adjusted net income was $2.2 million, or $0.05 per diluted share, compared to a loss of $6.6 million.
- Free cash flow turned positive at $2.4 million.
- Strong performance in Mobile Solutions, with an 11.3% sales increase.
- Net loss of $4.9 million was reported despite operational improvements.
- Power Solutions segment faced challenges with decreased demand in electrical and medical markets, impacting profitability.
CHARLOTTE, N.C., May 6, 2021 /PRNewswire/ -- NN, Inc. (NASDAQ: NNBR), a diversified industrial company, today reported its financial results for the first quarter ended March 31, 2021.
GAAP Results
Net sales for the first quarter of 2021 increased
On a GAAP basis, income from operations for the first quarter of 2021 was
On a GAAP basis, income from operations for first quarter 2021 in the Mobile Solutions segment was
Net loss on a GAAP basis for the first quarter of 2021 was
Adjusted Results
Adjusted income from operations for the first quarter of 2021 was
Warren Veltman, President and Chief Executive Officer, said, "We are encouraged by the strong sequential and year-over-year growth we saw across our Mobile Solutions and Power Solutions businesses in the first quarter. We experienced strong growth in North America and our wholly owned China operations, driven by improved customer demand across our end markets. Our China joint venture also showed strong profitability during the quarter contributing to a
Mobile Solutions
Net sales for the first quarter of 2021 were
Power Solutions
Net sales for the first quarter of 2021 were
Mr. Veltman concluded, "Throughout the first quarter of 2021, we continued to make progress in executing our strategic plan by successfully completing our refinancing, providing us a long-term runway to achieve our 2025 goals for revenue and profitability growth. We also added new directors to our Board who possess specific experience and skill sets to assist our management team in shaping our strategy to leverage growth opportunities created by the evolution of the power grid and electric vehicles. Looking forward, we will continue to maintain our focus on end market penetration to drive growth and cost discipline to improve profitability, while remaining judicious in our capital investments."
Conference Call
NN will discuss its results during its quarterly investor conference call on May 7, 2021, 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: 10155479. For those who are unavailable to listen to the live broadcast, a replay will be available shortly after the call until May 7, 2022.
NN discloses in this press release the non-GAAP financial measures of adjusted income from operations, adjusted EBITDA, adjusted net income (loss), adjusted net income per diluted 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 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 from operations, net income (loss), net income (loss) per diluted 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 32 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, 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, the impacts of the coronavirus (COVID-19) pandemic on the Company's financial condition, business operations and liquidity, 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.
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, and, when filed, the Company's Quarterly Report on Form 10-Q for the three months ended March 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:
Mike Danehy, CPA
Investor Relations Contact
Mike.Danehy@nninc.com
(980) 264-4312
Financial Tables Follow
NN, Inc. | ||||
Consolidated Statements of Operations and Comprehensive Income (Loss) | ||||
(Unaudited) | ||||
Three Months Ended | ||||
(in thousands, except per share data) | 2021 | 2020 | ||
Net sales | $ 126,804 | $ 116,213 | ||
Cost of sales (exclusive of depreciation and amortization shown separately below) | 99,688 | 94,478 | ||
Selling, general, and administrative expense | 14,575 | 16,160 | ||
Depreciation and amortization | 11,568 | 11,357 | ||
Goodwill impairment | - | 92,942 | ||
Other operating expense (income), net | (5) | 5,126 | ||
Income (loss) from operations | 978 | (103,850) | ||
Interest expense | 2,024 | 3,807 | ||
Loss on extinguishment of debt and write-off of debt issuance costs | 2,390 | - | ||
Derivative payments on interest rate swap | 1,717 | - | ||
Loss on interest rate swap | 2,033 | - | ||
Other expense (income), net | (122) | 1,544 | ||
Loss from continuing operations before benefit (provision) for income taxes and share of net income (loss) from joint venture | (7,064) | (109,201) | ||
Benefit (provision) for income taxes | 756 | 1,395 | ||
Share of net income (loss) from joint venture | 1,395 | (271) | ||
Loss from continuing operations | (4,913) | (108,077) | ||
Loss from discontinued operations, net of tax | - | (140,114) | ||
Net loss | $ (4,913) | $ (248,191) | ||
Other comprehensive loss: | ||||
Foreign currency translation loss | (3,347) | (14,342) | ||
Interest rate swap: | ||||
Change in fair value, net of tax | - | (11,209) | ||
Reclassification adjustment for losses included in net loss, net of tax | 2,851 | 1,052 | ||
Other comprehensive loss | $ (496) | $ (24,499) | ||
Comprehensive loss | $ (5,409) | $ (272,690) | ||
Basic net loss per common share: | ||||
Loss from continuing operations per common share | $ (0.46) | $ (2.64) | ||
Loss from discontinued operations per common share | - | (3.32) | ||
Net loss per common share | $ (0.46) | $ (5.96) | ||
Weighted average common shares outstanding | 42,672 | 42,111 | ||
Diluted net loss per common share: | ||||
Loss from continuing operations per common share | $ (0.46) | $ (2.64) | ||
Loss from discontinued operations per common share | - | (3.32) | ||
Net loss per common share | $ (0.46) | $ (5.96) | ||
Weighted average common shares outstanding | 42,672 | 42,111 | ||
NN, Inc. | ||||
Consolidated Balance Sheets | ||||
(Unaudited) | ||||
(in thousands) | March 31, | December 31, | ||
Assets | ||||
Current assets: | ||||
Cash and cash equivalents | $ 43,033 | $ 48,138 | ||
Accounts receivable, net | 90,545 | 84,615 | ||
Inventories | 67,531 | 62,517 | ||
Income tax receivable | 8,956 | 8,800 | ||
Other current assets | 12,431 | 11,148 | ||
Total current assets | 222,496 | 215,218 | ||
Property, plant and equipment, net | 218,057 | 223,690 | ||
Operating lease right-of-use assets | 49,545 | 50,264 | ||
Intangible assets, net | 99,479 | 103,065 | ||
Investment in joint venture | 28,207 | 26,983 | ||
Other non-current assets | 4,532 | 5,742 | ||
Total assets | $ 624,962 | |||
Liabilities, Preferred Stock, and Stockholders' Equity | ||||
Current liabilities: | ||||
Accounts payable | $ 43,232 | $ 37,435 | ||
Accrued salaries, wages and benefits | 24,613 | 21,296 | ||
Income tax payable | 3,376 | 3,557 | ||
Current maturities of long-term debt | 4,844 | 4,885 | ||
Current portion of operating lease liabilities | 4,963 | 4,797 | ||
Other current liabilities | 17,042 | 31,261 | ||
Total current liabilities | 98,070 | 103,231 | ||
Deferred tax liabilities | 10,326 | 11,178 | ||
Long-term debt, net of current portion | 151,551 | 79,025 | ||
Operating lease liabilities, net of current portion | 54,780 | 55,053 | ||
Other non-current liabilities | 25,976 | 17,237 | ||
Total liabilities | 340,703 | 265,724 | ||
Commitments and contingencies | ||||
Series D perpetual preferred stock - | 46,858 | - | ||
Series B convertible preferred stock - | - | 105,086 | ||
Stockholders' equity: | ||||
Common stock - | 430 | 427 | ||
Additional paid-in capital | 479,341 | 493,332 | ||
Accumulated deficit | (210,788) | (205,875) | ||
Accumulated other comprehensive loss | (34,228) | (33,732) | ||
Total stockholders' equity | 234,755 | 254,152 | ||
Total liabilities, preferred stock, and stockholders' equity | $ 624,962 | |||
NN, Inc. | |||
Consolidated Statements of Cash Flows | |||
(Unaudited) | |||
Three Months Ended | |||
(in thousands) | 2021 | 2020 | |
Cash flows from operating activities | |||
Net loss | |||
Adjustments to reconcile net loss to net cash provided by operating activities: | |||
Depreciation and amortization of continuing operations | 11,568 | 11,357 | |
Depreciation and amortization of discontinued operations | - | 11,827 | |
Amortization of debt issuance costs | 405 | 1,652 | |
Goodwill impairment of continuing operations | - | 92,942 | |
Goodwill impairment of discontinued operations | - | 146,757 | |
Loss on extinguishment of debt and write-off of debt issuance costs | 2,390 | - | |
Total derivative loss, net of cash settlements | 3,750 | - | |
Share of net income (loss) from joint venture, net of cash dividends received | (1,395) | 271 | |
Compensation expense from issuance of share-based awards | 886 | 1,296 | |
Deferred income taxes | (1,605) | (3,923) | |
Other | (1,081) | 614 | |
Changes in operating assets and liabilities: | |||
Accounts receivable | (6,684) | 1,760 | |
Inventories | (5,589) | (2,507) | |
Accounts payable | 7,094 | 3,584 | |
Income taxes receivable and payable, net | (344) | (12,676) | |
Other | 3,402 | 5,461 | |
Net cash provided by operating activities | 7,884 | 10,224 | |
Cash flows from investing activities | |||
Acquisition of property, plant and equipment | (5,468) | (11,260) | |
Proceeds from sale of property, plant, and equipment | 11 | 82 | |
Cash settlements of interest rate swap | (15,420) | - | |
Net cash used in investing activities | (20,877) | (11,178) | |
Cash flows from financing activities | |||
Cash paid for debt issuance costs | (6,856) | (286) | |
Proceeds from issuance of preferred stock | 61,918 | - | |
Redemption of preferred stock | (122,434) | - | |
Proceeds from long-term debt | 150,000 | 60,012 | |
Repayments of long-term debt | (70,721) | (4,527) | |
Repayments of short-term debt, net | (1,090) | (411) | |
Other | (1,189) | (888) | |
Net cash provided by financing activities | 9,628 | 53,900 | |
Effect of exchange rate changes on cash flows | (1,740) | (5,435) | |
Net change in cash and cash equivalents | (5,105) | 47,511 | |
Cash and cash equivalents at beginning of period (1) | 48,138 | 31,703 | |
Cash and cash equivalents at end of period (1) | $ 79,214 | ||
(1) Cash and cash equivalents include |
Reconciliation of GAAP Income from Operations to Non-GAAP Adjusted Income from Operations | ||||||
Three Months Ended | Three Months Ended | |||||
March 31, | March 31, | |||||
NN, Inc. Consolidated | 2021 | 2020 | Mobile Solutions | 2021 | 2020 | |
GAAP income (loss) from operations | $ 978 | GAAP income (loss) from operations | $ 6,090 | $ 264 | ||
Acquisition and transition expense* | 1,789 | 8,625 | Acquisition and transition expense | 162 | 383 | |
Amortization of intangibles | 3,587 | 3,587 | Amortization of intangibles | 838 | 838 | |
Impairments (Goodwill and fixed assets) | - | 92,948 | Impairments (Goodwill and fixed assets) | - | - | |
Non-GAAP adjusted income from operations (a) | $ 6,353 | $ 1,310 | Non-GAAP adjusted income from operations (a) | $ 7,090 | $ 1,486 | |
Non-GAAP adjusted operating margin (1) | Share of net income from joint venture | 1,395 | (271) | |||
GAAP net sales | $ 116,213 | Non-GAAP adjusted income from operations with JV | 8,485 | 1,215 | ||
Three Months Ended | Non-GAAP adjusted operating margin (1) | |||||
March 31, | GAAP net sales | |||||
Power Solutions | 2021 | 2020 | ||||
GAAP income (loss) from operations | $ 2,432 | $ (90,334) | Three Months Ended | |||
Acquisition and transition expense | 298 | 1,621 | March 31, | |||
Amortization of intangibles | 2,748 | 2,748 | Elimination | 2021 | 2020 | |
Impairments (Goodwill and fixed assets) | - | 92,948 | GAAP net sales | $ (47) | $ (72) | |
Non-GAAP adjusted income from operations (a) | $ 5,478 | $ 6,983 | ||||
Non-GAAP adjusted operating margin (1) | ||||||
GAAP net sales | $ 49,075 | $ 46,401 | ||||
(1) Non-GAAP adjusted operating margin = Non-GAAP adjusted income from operations/ GAAP net sales | ||||||
* 2021 Includes Capacity & Capabilities Dev - | ||||||
* 2020 Includes Capacity & Capabilities Dev - | ||||||
Reconciliation of Net Income (Loss) to Non-GAAP Adjusted EBITDA | |||
Three Months Ended | |||
March 31, | |||
2021 | 2020 | ||
GAAP net income (loss) | $ (4,913) | ||
Provision (benefit) for income taxes | (756) | (1,395) | |
Interest expense | 2,024 | 3,807 | |
Write-off of unamortized debt issuance cost | 2,390 | - | |
Interest rate swap payments and change in fair value | 3,750 | - | |
Change in fair value of preferred stock derivatives and warrants | (449) | (57) | |
Depreciation and amortization | 11,568 | 11,357 | |
Acquisition and transition expense | 1,789 | 8,536 | |
Non-cash stock compensation | 887 | 1,095 | |
Non-cash foreign exchange (gain) loss on inter-company loans | 619 | 1,912 | |
Loss from discontinued operations | - | 140,114 | |
Impairments (Goodwill, JV and fixed assets) | - | 92,948 | |
Non-GAAP adjusted EBITDA (b) | $ 16,908 | $ 10,127 | |
Non-GAAP adjusted EBITDA margin (2) | |||
GAAP net sales | $ 116,213 | ||
(2) Non-GAAP adjusted EBITDA margin = Non-GAAP adjusted EBITDA / GAAP net sales |
Reconciliation of Net Income (Loss) to Non-GAAP Adjusted Net Income (Loss) and Net Income (Loss) | |||
Three Months Ended | |||
March 31, | |||
2021 | 2020 | ||
GAAP net income (loss) | $ (4,913) | $ (248,191) | |
Pre-tax acquisition and transition expense | 1,789 | 8,625 | |
Pre-tax foreign exchange (gain) loss on inter-company loans | 619 | 1,912 | |
Pre-tax write-off of unamortized debt issuance costs | 2,390 | - | |
Pre-tax change in fair value of preferred stock derivatives and warrants | (449) | (57) | |
Pre-tax amortization of intangibles and deferred financing costs | 3,992 | 4,014 | |
Pre-tax interest rate swap payments and change in fair value | 3,750 | - | |
Pre-tax impairments of fixed asset costs | - | 7 | |
Tax effect of adjustments reflected above (c) | (2,564) | (2,972) | |
Non-GAAP discrete tax adjustments | (2,382) | (3,036) | |
Impairments (Goodwill and JV) | - | 92,942 | |
Loss from discontinued operations | - | 140,114 | |
Non-GAAP adjusted net income (loss) (d) | $ 2,232 | $ (6,642) | |
Three Months Ended | |||
March 31, | |||
Amounts per share, diluted | 2021 | 2020 | |
GAAP net income (loss) per diluted share | $ (0.46) | $ (5.96) | |
Pre-tax acquisition and transition expense | 0.04 | 0.20 | |
Pre-tax foreign exchange (gain) loss on inter-company loans | 0.01 | 0.05 | |
Pre-tax write-off of unamortized debt issuance costs | 0.06 | - | |
Pre-tax change in fair value of preferred stock derivatives and warrants | (0.01) | (0.00) | |
Pre-tax amortization of intangibles and deferred financing costs | 0.09 | 0.10 | |
Pre-tax interest rate swap payments and change in fair value | 0.09 | - | |
Pre-tax impairments of fixed asset costs | - | 0.00 | |
Tax effect of adjustments reflected above (c) | (0.06) | (0.07) | |
Non-GAAP discrete tax adjustments | (0.06) | (0.07) | |
Impairments (Goodwill and JV) | - | 2.21 | |
Loss from discontinued operations | - | 3.33 | |
Preferred stock cumulative dividends and deemed dividends | 0.34 | 0.07 | |
Non-GAAP adjusted net income (loss) per diluted share (d) | $ 0.05 | $ (0.16) | |
Weighted average shares outstanding, diluted | 42,672 | 42,111 | |
Reconciliation of Operating Cash Flow to Free Cash Flow | |||
Three Months Ended | |||
March 31, | |||
2021 | 2020 | ||
Net cash provided (used) by operating activities | $ 7,884 | $ 10,224 | |
Acquisition of property, plant and equipment | (5,468) | (11,260) | |
Free Cash Flow | $ 2,417 | $ (1,036) | |
The Company discloses in this presentation the non-GAAP financial measures of adjusted income from operations, adjusted EBITDA, adjusted net income (loss), adjusted net income per diluted share, free cash flow and net debt. 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, two of which were transformative for the Company, and sold three 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 from operations, adjusted EBITDA, adjusted net income (loss), adjusted net income per diluted share, free cash flow and net debt 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 from operations represents GAAP income 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 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 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, 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 nontax 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. 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.
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SOURCE NN, Inc.
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