NN, Inc. (NASDAQ: NNBR), a global diversified industrial company
that manufactures high-precision components and assemblies, today
reported its financial results for the second quarter ended June
30, 2023.
Financial and
Strategic Highlights
- Net sales of $125.2 million flat versus prior year period;
- Operating loss of $4.0 million and
Adjusted EBITDA of $10.5 million;
- Free cash flow results of $3.0
million with positive free cash flow generation over the trailing
year;
- Key program wins including attractive
wins in EV electric power steering markets;
- Revised second half forecast based on
softening market conditions;
- New leadership executing strategic
transformation;
- Announced streamlining of Board of
Directors;
- Integration of sales and operations
teams to accelerate growth and utilize existing capacity;
- Addressing three underperforming
facilities and several unprofitable customer agreements; and
- Prioritizing free cash flow
generation through operations and cost management.
Harold Bevis, President and Chief Executive
Officer, commented, “Our team has embraced the need for meaningful
change and is taking aggressive action to transform the company.
Multiple transformation initiatives are underway and are being led
by an experienced NN team which has been supplemented by additional
talent. The goal is to improve performance faster in both the
short-term and long-term. Over the second half of 2023 we are
focused on the following:1) delivering higher rates of
new business wins by leveraging existing open capacity and targeted
new capacity; 2) containing and eliminating operating losses at a
few select plants and within certain customer agreements; 3)
installing an evergreen cost productivity and margin expansion
regimen; and, lastly 4) investing into the business and delivering
net free cash flow.”
Bevis continued, “NN has unique precision
machining and stamping capabilities and a huge global installed
base of machinery. We are experts at what we do and a member of a
select set of companies that can deliver precision components at a
sub-micron level. We have historically been focused on a few
long-cycle markets but are expanding our
commercial aperture to include multiple other
markets that our machines and people can serve including medical,
electrification, and next-generation vehicles. Our focus is clear,
and we have the right team, platform and capabilities to
significantly accelerate our growth and profitability.”
Michael Felcher, Senior Vice President and Chief
Financial Officer, commented, “While our sales were flat compared
to last year’s second quarter, the impact of softer, macro-driven
volumes was offset by pricing secured by our commercial teams. The
impact of facility closures and other cost reductions was evident
in our results as our operating income performance improved versus
both the prior year period and this year’s first quarter. We
delivered $10.5 million of Adjusted EBITDA in the quarter, helping
drive solid cash flows from operations. Our strategic
transformation efforts are helping position the Company for
stronger structural profitability and improved cash returns, as
demonstrated through converting our improved operating cash flows
into $3.0 million of free cash flow. Encouragingly, we have now
generated positive free cash flow over the trailing year and remain
focused on incrementally improving these results as we move
forward.”
Second Quarter
GAAP Results
Net sales were $125.2 million, a decrease of 0.1% from the
second quarter of 2022, primarily due to reduced volume and
unfavorable foreign exchange effects, partially offset by higher
customer pricing.
Loss from operations was $4.0 million compared to a loss from
operations of $4.5 million in the second quarter of 2022. The
decrease in loss from operations was primarily driven by labor cost
reductions and facility closures, offset by lower volumes.
Income from operations for Power Solutions was $2.6 million
compared to income from operations of $1.4 million for the same
period in 2022. Loss from operations for Mobile Solutions was $1.5
million compared to income from operations of $1.7 million for the
same period in 2022.
Net loss was $14.4 million compared to net loss of $8.6 million
for the same period in 2022. The increase in net loss is due to
reduced sales volume and unfavorable warrant revaluations,
partially offset by pricing in excess of inflation.
Second Quarter
Adjusted Results
Adjusted income from operations for the second quarter of 2023
was $1.3 million compared to adjusted income from operations of
$0.1 million for the same period in 2022. Adjusted EBITDA was $10.5
million, or 8.4% of sales, compared to $10.9 million, or 8.7% of
sales, for the same period in 2022. Adjusted net loss was $3.3
million, or $0.08 per diluted share, compared to adjusted net loss
of $3.6 million, or $0.09 per diluted share, for the same period in
2022.Free cash flow was a generation of cash of $3.0 million
compared to a use of cash of $2.4 million for the same period in
2022.
Power Solutions
Net sales for the second quarter of 2023 were $48.1 million
compared to $52.0 million in the second quarter of 2022, a decrease
of 7.7% or $4.0 million. The decrease in sales was primarily due to
lower volume, partially offset by higher pricing and favorable
foreign exchange effects. Adjusted income from operations was $5.6
million compared to adjusted income from operations of $4.6 million
in the second quarter of 2022. The increase in adjusted income from
operations was primarily due to facility closure savings, partially
offset by lower volumes.
Mobile Solutions
Net sales for the second quarter of 2023 were $77.2 million
compared to $73.4 million in the second quarter of 2022, an
increase of 5.2% or $3.8 million. The increase in sales was
primarily due to higher customer pricing, partially offset by lower
volume and unfavorable foreign exchange effects. Adjusted income
from operations was $0.2 million compared to
adjusted income from operations of $2.6 million in the second
quarter of 2022. The decrease in adjusted income from operations
was primarily driven by volume reductions and a favorable customer
settlement in the prior year.
2023 Outlook
Based on results for the first half of the year, as well as
expectations for the remainder of the year, the Company has revised
its expectations for financial results for the full year as
follows:
- Revenue in the range of $485 million
to $505 million;
- Adjusted EBITDA in the range of $40
million to $46 million; and
- Free cash flow in the range of $7 to
$13 million.
Free cash flow outlook does not include the CARES Act tax refund
of ~$11 million due to uncertain timing.
Michael Felcher, Senior Vice President and Chief
Financial Officer commented, “While our second quarter results
showed encouraging signs of improvement, we are revising our
previous full-year 2023 financial outlook in line with year-to-date
performance and our expectations and assumptions for the back half
of the year. Our sales and Adjusted EBITDA outlook reflects our
expectation that overall demand levels will remain consistent with
the first half of the year, compared to the prior expectation of
increasing demand. Our free cash flow outlook reflects the impact
of lower volume and disciplined cash management.”
Conference Call
NN will discuss its results during its quarterly investor
conference call on August 4, 2023, 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. For those who are unavailable to
listen to the live broadcast, a replay will be available shortly
after the call until August 4, 2024.
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,
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 global 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 facilities in North America, Europe, South America, and Asia.
For more information about the company and its products, please
visit www.nninc.com.
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. 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,”, “will” “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 pandemics, epidemics, disease
outbreaks and other public health crises, including the COVID-19
pandemic, on our 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,
political and geopolitical instability, currency fluctuation, and
other risks of doing business outside of the United States;
inflationary pressures and changes in the cost or availability of
materials, supply chain shortages and disruptions, and the
availability of labor; 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; our ability to hire or retain key personnel; 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; and
cyber liability or potential liability for breaches of our or our
service providers’ information technology systems or business
operations disruptions. The foregoing factors should not be
construed as exhaustive and should be read in conjunction with the
sections entitled “Risk Factors” and “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” included
in the Company’s filings made with the Securities and Exchange
Commission. Any forward-looking statement speaks only as of the
date of this press release, and the Company undertakes no
obligation to publicly update or review any forward-looking
statement, whether as a result of new information, future
developments or otherwise, except as required by law. New risks and
uncertainties may emerge from time to time, and it is not possible
for the Company to predict their occurrence or how they will affect
the Company. The Company qualifies all forward-looking statements
by these cautionary statements.
Investor &
Media Contacts:Joe Caminiti or
Alec Steinberg, Investors Tim Peters, MediaNNBR@alpha-ir.com
312-445-2870
Financial Tables Follow
NN,
Inc.Condensed
Consolidated Statements
of Operations
and Comprehensive
Income (Loss)
(Unaudited)
|
Three Months Ended June
30, |
|
Six Months Ended June
30, |
|
(in
thousands, except
per share
data) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Net sales |
$ |
125,206 |
|
$ |
125,362 |
|
$ |
252,294 |
|
$ |
253,429 |
|
Cost of sales (exclusive of depreciation and amortization shown
separately below) |
|
107,684 |
|
|
103,889 |
|
|
216,105 |
|
|
208,467 |
|
Selling, general, and administrative expense |
|
10,975 |
|
|
14,794 |
|
|
24,140 |
|
|
28,248 |
|
Depreciation and amortization |
|
11,550 |
|
|
11,340 |
|
|
23,066 |
|
|
22,769 |
|
Other operating expense (income), net |
|
(956 |
) |
|
(147 |
) |
|
105 |
|
|
1,879 |
|
Loss from operations |
|
(4,047 |
) |
|
(4,514 |
) |
|
(11,122 |
) |
|
(7,934 |
) |
Interest expense |
|
5,457 |
|
|
3,488 |
|
|
9,745 |
|
|
6,927 |
|
Other expense (income), net |
|
5,641 |
|
|
(67 |
) |
|
3,433 |
|
|
(3,063 |
) |
Loss before provision for income
taxes and share of net income from joint venture |
|
(15,145 |
) |
|
(7,935 |
) |
|
(24,300 |
) |
|
(11,798 |
) |
Provision for income taxes |
|
(325 |
) |
|
(1,051 |
) |
|
(1,626 |
) |
|
(2,582 |
) |
Share of net income from joint venture |
|
1,093 |
|
|
419 |
|
|
1,374 |
|
|
2,511 |
|
Net
loss |
$ |
(14,377 |
) |
$ |
(8,567 |
) |
$ |
(24,552 |
) |
$ |
(11,869 |
) |
Other comprehensive loss: |
|
|
|
|
Foreign currency transaction loss |
|
(2,374 |
) |
|
(8,490 |
) |
|
(534 |
) |
|
(5,890 |
) |
Interest rate swap: |
|
|
|
|
Change in fair value, net of tax |
|
— |
|
|
373 |
|
|
(230 |
) |
|
1,560 |
|
Reclassification adjustment for losses (gains) included in net
loss, net of tax |
|
(449 |
) |
|
31 |
|
|
(917 |
) |
|
65 |
|
Other comprehensive loss |
$ |
(2,823 |
) |
$ |
(8,086 |
) |
$ |
(1,681 |
) |
$ |
(4,265 |
) |
Comprehensive
loss |
$ |
(17,200 |
) |
$ |
(16,653 |
) |
$ |
(26,233 |
) |
$ |
(16,134 |
) |
Basic
net loss per
common share: |
|
|
|
|
Net loss per common share |
$ |
(0.38 |
) |
$ |
(0.25 |
) |
$ |
(0.67 |
) |
$ |
(0.38 |
) |
Weighted average common shares outstanding |
|
46,357 |
|
|
44,708 |
|
|
45,836 |
|
|
44,649 |
|
Diluted
net loss per
common share: |
|
|
|
|
Net loss per common share |
$ |
(0.38 |
) |
$ |
(0.25 |
) |
$ |
(0.67 |
) |
$ |
(0.38 |
) |
Weighted average common shares outstanding |
|
46,357 |
|
|
44,708 |
|
|
45,836 |
|
|
44,649 |
|
|
NN, Inc.Condensed
Consolidated Balance
Sheets(Unaudited)
(in
thousands, except
per share
data) |
|
June30,2023 |
December31,2022 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
|
$ |
14,337 |
|
$ |
12,808 |
|
Accounts receivable, net |
|
|
79,302 |
|
|
74,129 |
|
Inventories |
|
|
77,386 |
|
|
80,682 |
|
Income tax receivable |
|
|
12,496 |
|
|
12,164 |
|
Prepaid assets |
|
|
4,653 |
|
|
2,794 |
|
Other current assets |
|
|
9,243 |
|
|
9,123 |
|
Total current assets |
|
|
197,417 |
|
|
191,700 |
|
Property, plant and equipment, net |
|
|
192,241 |
|
|
197,637 |
|
Operating lease right-of-use assets |
|
|
44,924 |
|
|
46,713 |
|
Intangible assets, net |
|
|
65,765 |
|
|
72,891 |
|
Investment in joint venture |
|
|
31,570 |
|
|
31,802 |
|
Deferred tax assets |
|
|
102 |
|
|
102 |
|
Other non-current assets |
|
|
6,395 |
|
|
5,282 |
|
Total assets |
$ |
538,414 |
|
$ |
546,127 |
|
Liabilities, Preferred
Stock, and
Stockholders’ Equity |
|
|
Current liabilities: |
|
|
Accounts payable |
$ |
51,416 |
|
$ |
45,871 |
|
Accrued salaries, wages and benefits |
|
13,317 |
|
|
11,671 |
|
Income tax payable |
|
485 |
|
|
926 |
|
Current maturities of long-term debt |
|
6,810 |
|
|
3,321 |
|
Current portion of operating lease liabilities |
|
5,361 |
|
|
5,294 |
|
Other current liabilities |
|
13,630 |
|
|
11,723 |
|
Total current liabilities |
|
91,019 |
|
|
78,806 |
|
Deferred tax liabilities |
|
5,728 |
|
|
5,596 |
|
Long-term debt, net of current portion |
|
148,636 |
|
|
149,389 |
|
Operating lease liabilities, net of current portion |
|
49,149 |
|
|
51,411 |
|
Other non-current liabilities |
|
18,490 |
|
|
9,960 |
|
Total liabilities |
|
313,022 |
|
|
295,162 |
|
Commitments and contingencies |
|
|
Series D perpetual preferred stock - $0.01 par value per share, 65
shares authorized, issued and outstanding at June 30, 2023 and
December 31, 2022 |
|
70,948 |
|
|
64,701 |
|
Stockholders' equity: |
|
|
Common stock - $0.01 par value per share, 90,000 shares authorized,
47,019 and 43,856 shares issued and outstanding at June 30, 2023
and December 31, 2022 |
|
470 |
|
|
439 |
|
Additional paid-in capital |
|
462,525 |
|
|
468,143 |
|
Accumulated deficit |
|
(269,750 |
) |
|
(245,198 |
) |
Accumulated other comprehensive loss |
|
(38,801 |
) |
|
(37,120 |
) |
Total stockholders’ equity |
|
154,444 |
|
|
186,264 |
|
Total liabilities,
preferred stock, and stockholders’ equity |
$ |
538,414 |
|
$ |
546,127 |
|
|
|
NN,
Inc.Condensed
Consolidated Statements
of Cash Flows
(Unaudited)
|
Six Months Ended June
30, |
(in thousands) |
|
2023 |
|
|
2022 |
|
Cash
flows from
operating activities |
|
|
Net loss |
$ |
(24,552 |
) |
$ |
(11,869 |
) |
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities: |
|
|
Depreciation and amortization |
|
23,066 |
|
|
22,769 |
|
Amortization of debt issuance costs and discount |
|
880 |
|
|
662 |
|
Paid-in-kind interest |
|
744 |
|
|
— |
|
Total derivative loss (gain), net of cash settlements |
|
5,691 |
|
|
(3,237 |
) |
Share of net income from joint venture |
|
(1,374 |
) |
|
1,515 |
|
Compensation expense from issuance of share-based awards |
|
851 |
|
|
3,555 |
|
Deferred income taxes |
|
110 |
|
|
94 |
|
Other |
|
(721 |
) |
|
(2,763 |
) |
Changes in operating assets and liabilities: |
|
|
Accounts receivable |
|
(5,078 |
) |
|
(13,264 |
) |
Inventories |
|
3,920 |
|
|
(10,586 |
) |
Accounts payable |
|
6,927 |
|
|
11,960 |
|
Income taxes receivable and payable, net |
|
(730 |
) |
|
(475 |
) |
Other |
|
(1,091 |
) |
|
(905 |
) |
Net cash provided by (used in) operating activities |
|
8,643 |
|
|
(2,544 |
) |
Cash
flows from
investing activities |
|
|
Acquisition of property, plant and equipment |
|
(12,196 |
) |
|
(9,703 |
) |
Proceeds from sale of property, plant, and equipment |
|
2,777 |
|
|
422 |
|
Net cash used in investing activities |
|
(9,419 |
) |
|
(9,281 |
) |
Cash
flows from
financing activities |
|
|
Proceeds from long-term debt |
|
35,000 |
|
|
20,000 |
|
Repayments of long-term debt |
|
(34,725 |
) |
|
(19,482 |
) |
Cash paid for debt issuance costs |
|
(55 |
) |
|
— |
|
Repayments of short-term debt, net |
|
3,648 |
|
|
— |
|
Other |
|
(1,610 |
) |
|
(1,528 |
) |
Net cash provided by (used in) financing activities |
|
2,258 |
|
|
(1,010 |
) |
Effect of exchange rate changes on cash flows |
|
47 |
|
|
(635 |
) |
Net change in cash and cash equivalents |
|
1,529 |
|
|
(13,470 |
) |
Cash and cash equivalents at beginning of period |
|
12,808 |
|
|
28,656 |
|
Cash and cash equivalents at end of period |
$ |
14,337 |
|
$ |
15,186 |
|
Reconciliation of GAAP Income (Loss) from
Operations to Non-GAAP Adjusted Income (Loss) from
Operations
|
Three Months Ended June 30, |
(in
thousands) |
NN, Inc. Consolidated |
|
2023 |
|
|
|
2022 |
|
GAAP income (loss) from
operations |
$ |
(4,047 |
) |
|
$ |
(4,514 |
) |
Professional fees |
|
119 |
|
|
|
678 |
|
Personnel costs (1) |
|
622 |
|
|
|
17 |
|
Facility costs (2) |
|
1,022 |
|
|
|
333 |
|
Amortization of
intangibles |
|
3,563 |
|
|
|
3,586 |
|
Fixed asset impairments |
|
— |
|
|
|
(14 |
) |
Non-GAAP adjusted income
(loss) from operations (a) |
$ |
1,279 |
|
|
$ |
86 |
|
|
|
|
|
Non-GAAP adjusted operating
margin (3) |
|
1.0 |
% |
|
|
0.1 |
% |
GAAP net sales |
$ |
125,206 |
|
|
$ |
125,362 |
|
|
|
|
|
|
Three Months Ended June 30, |
(in
thousands) |
Power
Solutions |
|
2023 |
|
|
|
2022 |
|
GAAP income (loss) from
operations |
$ |
2,583 |
|
|
$ |
1,430 |
|
Professional fees |
|
— |
|
|
|
165 |
|
Facility costs (2) |
|
244 |
|
|
|
274 |
|
Amortization of
intangibles |
|
2,724 |
|
|
|
2,747 |
|
Non-GAAP adjusted income
(loss) from operations (a) |
$ |
5,551 |
|
|
$ |
4,616 |
|
|
|
|
|
Non-GAAP adjusted operating
margin (3) |
|
11.5 |
% |
|
|
8.9 |
% |
GAAP net sales |
$ |
48,062 |
|
|
$ |
52,049 |
|
|
Three Months Ended June 30, |
(in
thousands) |
Mobile Solutions |
|
2023 |
|
|
|
2022 |
|
GAAP income (loss) from operations |
$ |
(1,461 |
) |
|
$ |
1,729 |
|
Personnel costs (1) |
|
40 |
|
|
|
— |
|
Facility costs (2) |
|
778 |
|
|
|
59 |
|
Amortization of
intangibles |
|
838 |
|
|
|
839 |
|
Fixed asset impairments |
|
— |
|
|
|
(14 |
) |
Non-GAAP adjusted income
(loss) from operations (a) |
|
195 |
|
|
|
2,613 |
|
|
|
|
|
Share of net income from joint
venture |
|
1,093 |
|
|
|
419 |
|
Non-GAAP adjusted income
(loss) from operations with JV |
$ |
1,288 |
|
|
$ |
3,032 |
|
|
|
|
|
Non-GAAP adjusted operating
margin (3) |
|
1.7 |
% |
|
|
4.1 |
% |
GAAP net sales |
$ |
77,153 |
|
|
$ |
73,350 |
|
|
|
|
|
|
Three Months Ended June 30, |
(in
thousands) |
Elimination |
|
2023 |
|
|
|
2022 |
|
GAAP net sales |
$ |
(9 |
) |
|
$ |
(37 |
) |
|
|
|
|
(1) Personnel costs include recruitment,
retention, relocation, and severance
costs(2) Facility costs include costs associated
with opening or closing facilities and equipment
relocation(3) Non-GAAP adjusted operating margin =
Non-GAAP adjusted income (loss) from operations / GAAP net
sales
Reconciliation
of GAAP Net
Income (Loss) to
Non-GAAP Adjusted
EBITDA
|
Three Months
Ended June
30, |
(in thousands) |
|
2023 |
|
|
2022 |
|
GAAP net income (loss) |
$ |
(14,377 |
) |
$ |
(8,567 |
) |
|
|
|
Provision for income taxes |
|
325 |
|
|
1,051 |
|
Interest expense |
|
5,457 |
|
|
3,488 |
|
Change in fair value of preferred
stock derivatives and warrants |
|
5,754 |
|
|
(694 |
) |
Depreciation and
amortization |
|
11,550 |
|
|
11,340 |
|
Professional fees |
|
119 |
|
|
678 |
|
Personnel costs (1) |
|
622 |
|
|
17 |
|
Facility costs (2) |
|
1,022 |
|
|
333 |
|
Non-cash stock compensation |
|
471 |
|
|
2,607 |
|
Non-cash foreign exchange (gain)
loss on inter-company loans |
|
(445 |
) |
|
654 |
|
Fixed asset impairments |
|
— |
|
|
(14 |
) |
Non-GAAP adjusted EBITDA (b) |
$ |
10,498 |
|
$ |
10,893 |
|
|
|
|
Non-GAAP adjusted EBITDA margin
(4) |
|
8.4 |
% |
|
8.7 |
% |
GAAP net sales |
$ |
125,206 |
|
$ |
125,362 |
|
(4) Non-GAAP adjusted EBITDA margin = Non-GAAP
adjusted EBITDA / GAAP net sales
Reconciliation
of GAAP Net
Income (Loss) to
Non-GAAP Adjusted
Net Income and
GAAP Net Income
(Loss) per Diluted Common Share to Non-GAAP Adjusted Net
Income (Loss) per Diluted Common Share
|
Three Months Ended
June 30, |
(in thousands) |
|
2023 |
|
|
2022 |
|
GAAP net income (loss) |
$ |
(14,377 |
) |
$ |
(8,567 |
) |
|
|
|
Pre-tax professional fees |
|
119 |
|
|
678 |
|
Pre-tax personnel costs |
|
622 |
|
|
17 |
|
Pre-tax facility costs |
|
1,022 |
|
|
333 |
|
Pre-tax foreign exchange (gain)
loss on inter-company loans |
|
(445 |
) |
|
654 |
|
Pre-tax change in fair value of
preferred stock derivatives and warrants |
|
5,754 |
|
|
(694 |
) |
Pre-tax amortization of
intangibles and deferred financing costs |
|
4,090 |
|
|
3,916 |
|
Pre-tax impairments of fixed
asset costs |
|
— |
|
|
(14 |
) |
Tax effect of adjustments
reflected above (c) |
|
(64 |
) |
|
(1,027 |
) |
Non-GAAP discrete tax
adjustments |
|
— |
|
|
1,098 |
|
Non-GAAP adjusted net income
(loss) (d) |
$ |
(3,279 |
) |
$ |
(3,606 |
) |
|
|
Three Months
Ended June
30, |
(per
diluted common share) |
|
2023 |
|
|
2022 |
|
GAAP net income (loss) per
diluted common share |
$ |
(0.38 |
) |
$ |
(0.25 |
) |
|
|
|
Pre-tax professional fees |
|
— |
|
|
0.01 |
|
Pre-tax personnel costs |
|
0.01 |
|
|
— |
|
Pre-tax facility costs |
|
0.02 |
|
|
0.01 |
|
Pre-tax foreign exchange (gain)
loss on inter-company loans |
|
(0.01 |
) |
|
0.01 |
|
Pre-tax change in fair value of
preferred stock derivatives and warrants |
|
0.12 |
|
|
(0.02 |
) |
Pre-tax amortization of
intangibles and deferred financing costs |
|
0.09 |
|
|
0.09 |
|
Tax effect of adjustments
reflected above (c) |
|
— |
|
|
(0.02 |
) |
Non-GAAP discrete tax
adjustments |
|
— |
|
|
0.02 |
|
Preferred stock cumulative
dividends and deemed dividends |
|
0.07 |
|
|
0.06 |
|
Non-GAAP adjusted net income
(loss) per diluted common share (d) |
$ |
(0.08 |
) |
$ |
(0.09 |
) |
Weighted average common shares
outstanding |
|
46,357 |
|
|
44,708 |
|
|
Reconciliation
of Operating
Cash Flow to
Free Cash
Flow
|
Three Months Ended June
30, |
(in thousands) |
|
2023 |
|
|
2022 |
|
Net cash provided (used) by
operating activities |
$ |
8,417 |
|
$ |
2,661 |
|
Acquisition of property, plant,
and equipment |
|
(7,199 |
) |
|
(5,441 |
) |
Proceeds from sale of property,
plant, and equipment |
|
1,742 |
|
|
386 |
|
Free cash flow |
$ |
2,960 |
|
$ |
(2,394 |
) |
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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