nnbr-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 000-23486

NN, Inc.

(Exact name of registrant as specified in its charter)


Delaware						62-1096725
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

6210 Ardrey Kell Road, Suite 600

Charlotte, North Carolina 28277

(Address of principal executive offices, including zip code)

(980) 264-4300

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol

Name of each exchange on which registered

Common Stock, par value $0.01

NNBR

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☒

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 24, 2023, there were 45,653,704 shares of the registrant’s common stock, par value $0.01 per share, outstanding.

Table of Contents

NN, Inc.

INDEX


		Page
PART I. FINANCIAL INFORMATION		3

Item 1.	Financial Statements	3

	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)	3
	Condensed Consolidated Balance Sheets (Unaudited)	4
	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows (Unaudited)	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
	Note 1. Interim Financial Statements	7
	Note 2. Segment Information	7
	Note 3. Inventories	8
	Note 4. Intangible Assets, Net	8
	Note 5. Investment in Joint Venture	8
	Note 6. Income Taxes	8
	Note 7. Debt	9
	Note 8. Leases	10
	Note 9. Commitments and Contingencies	10
	Note 10. Preferred Stock and Stockholders' Equity	11
	Note 11. Revenue from Contracts with Customers	11
	Note 12. Share-Based Compensation	13
	Note 13. Accumulated Other Comprehensive Income	13
	Note 14. Net Loss Per Common Share	14
	Note 15. Fair Value Measurements	14

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21

Item 4.	Controls and Procedures	21

PART II. OTHER INFORMATION		22

Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 3.	Defaults Upon Senior Securities	22
Item 4.	Mine Safety Disclosures	22
Item 5.	Other Information	23
Item 6.	Exhibits	23
SIGNATURES		24

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NN, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(Unaudited)


	Three Months Ended March 31,
(in thousands, except per share data)	2023		2022
Net sales	$	127,088	$	128,067
Cost of sales (exclusive of depreciation and amortization shown separately below)	108,421		104,578
Selling, general, and administrative expense	13,165		13,454

Depreciation and amortization	11,516		11,429

Other operating expense, net	1,061		2,026
Loss from operations	(7,075)		(3,420)
Interest expense	4,288		3,439



Other income, net	(2,208)		(2,996)
Loss before provision for income taxes and share of net income from joint venture	(9,155)		(3,863)
Provision for income taxes	(1,301)		(1,531)
Share of net income from joint venture	281		2,092


Net loss	$	(10,175)	$	(3,302)
Other comprehensive income:
Foreign currency translation gain	$	1,840	$	2,600
Interest rate swap:
Change in fair value, net of tax	(230)		1,187
Reclassification adjustment for losses (gains) included in net loss, net of tax	(468)		34
Other comprehensive income	$	1,142	$	3,821
Comprehensive income (loss)	$	(9,033)	$	519





Basic and diluted net loss per common share	$	(0.29)	$	(0.13)
Weighted average common shares outstanding	45,309		44,594

See notes to condensed consolidated financial statements (unaudited).

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NN, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)


(in thousands, except per share data)	March 31, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	10,545	$	12,808
Accounts receivable, net of allowances of $1,572 and $1,469 at March 31, 2023 and December 31, 2022	80,003		74,129
Inventories	81,778		80,682
Income tax receivable	12,087		12,164
Prepaid assets	7,076		2,794
Other current assets	9,016		9,123
Total current assets	200,505		191,700
Property, plant and equipment, net of accumulated depreciation of $232,086 and $225,046 at March 31, 2023 and December 31, 2022	194,513		197,637
Operating lease right-of-use assets	46,280		46,713
Intangible assets, net	69,327		72,891
Investment in joint venture	32,212		31,802
Deferred tax assets	102		102
Other non-current assets	4,334		5,282
Total assets	$	547,273	$	546,127
Liabilities, Preferred Stock, and Stockholders’ Equity
Current liabilities:
Accounts payable	$	49,975	$	45,871
Accrued salaries, wages and benefits	14,251		11,671
Income tax payable	560		926
Current maturities of long-term debt	6,258		3,321
Current portion of operating lease liabilities	5,008		5,294
Other current liabilities	15,288		11,723
Total current liabilities	91,340		78,806
Deferred tax liabilities	6,064		5,596

Long-term debt, net of current portion	146,228		149,389
Operating lease liabilities, net of current portion	50,710		51,411
Other non-current liabilities	10,715		9,960
Total liabilities	305,057		295,162
Commitments and contingencies (Note 9)
Series D perpetual preferred stock - $0.01 par value per share, 65 shares authorized, issued and outstanding at March 31, 2023 and December 31, 2022	67,752		64,701
Stockholders' equity:
Common stock - $0.01 par value per share, 90,000 shares authorized, 43,772 and 43,856 shares issued and outstanding at March 31, 2023 and December 31, 2022	438		439
Additional paid-in capital	465,377		468,143
Accumulated deficit	(255,373)		(245,198)
Accumulated other comprehensive loss	(35,978)		(37,120)
Total stockholders’ equity	174,464		186,264
Total liabilities, preferred stock, and stockholders’ equity	$	547,273	$	546,127

See notes to condensed consolidated financial statements (unaudited).

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NN, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Three Months Ended March 31, 2023 and 2022

(Unaudited)


	Common Stock					Accumulated deficit		Accumulated other comprehensive income (loss)
(in thousands)	Number of shares	Par value		Additional paid-in capital						Total
Balance as of December 31, 2022	43,856	$	439	$	468,143	$	(245,198)	$	(37,120)	$	186,264
Net loss	—	—		—		(10,175)		—		(10,175)

Dividends accrued for preferred stock	—	—		(3,051)		—		—		(3,051)

Share-based compensation expense	—	—		381		—		—		381
Restricted shares forgiven for taxes	(84)	(1)		(96)		—		—		(97)

Other comprehensive income	—	—		—		—		1,142		1,142


Balance as of March 31, 2023	43,772	$	438	$	465,377	$	(255,373)	$	(35,978)	$	174,464


	Common Stock					Accumulated deficit		Accumulated other comprehensive income (loss)
(in thousands)	Number of shares	Par value		Additional paid-in capital						Total
Balance as of December 31, 2021	43,027	$	430	$	474,757	$	(219,100)	$	(31,902)	$	224,185
Net loss	—	—		—		(3,302)		—		(3,302)

Dividends accrued for preferred stock	—	—		(2,538)		—		—		(2,538)
Shares issued under stock incentive plans	893	9		(9)		—		—		—
Share-based compensation expense	—	—		949		—		—		949
Restricted shares forgiven for taxes	(30)	—		(87)		—		—		(87)

Other comprehensive income	—	—		—		—		3,821		3,821


Balance as of March 31, 2022	43,890	$	439	$	473,072	$	(222,402)	$	(28,081)	$	223,028

See notes to condensed consolidated financial statements (unaudited).

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NN, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended March 31,
(in thousands)	2023		2022
Cash flows from operating activities
Net loss	$	(10,175)	$	(3,302)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	11,516		11,429
Amortization of debt issuance costs and discount	353		332
Impairments of property, plant and equipment	—		233

Total derivative loss (gain), net of cash settlements	386		(2,543)
Share of net income from joint venture, net of cash dividends received	(281)		1,934
Share-based compensation expense	381		949
Deferred income taxes	480		(42)
Other	(287)		(826)
Changes in operating assets and liabilities:
Accounts receivable	(5,506)		(17,633)
Inventories	(447)		(5,536)
Accounts payable	2,813		11,416
Income taxes receivable and payable, net	(283)		(631)
Other	1,276		(1,003)
Net cash provided by (used in) operating activities	226		(5,223)
Cash flows from investing activities
Acquisition of property, plant and equipment	(4,997)		(4,262)
Proceeds from sale of property, plant, and equipment	1,035

SEC Form 10-Q filed by NN Inc.