nnbr-20240331

SEC Form 10-Q filed by NN Inc.

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, 2024


☐			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 001-39268

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 120

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 30, 2024, there were 50,004,845 shares of the registrant’s common stock, par value $0.01 per share, outstanding.


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

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20

Item 4.	Controls and Procedures	20

PART II. OTHER INFORMATION		21

Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3.	Defaults Upon Senior Securities	21
Item 4.	Mine Safety Disclosures	21
Item 5.	Other Information	21
Item 6.	Exhibits	22
SIGNATURES		23


	Three Months Ended March 31,
(in thousands, except per share data)	2024		2023
Net sales	$	121,198	$	127,088
Cost of sales (exclusive of depreciation and amortization shown separately below)	101,086		108,421
Selling, general, and administrative expense	13,348		13,165
Depreciation and amortization	12,547		11,516

Other operating expense (income), net	(1,000)		1,061
Loss from operations	(4,783)		(7,075)
Interest expense	5,366		4,288



Other expense (income), net	4,153		(2,208)
Loss before provision for income taxes and share of net income from joint venture	(14,302)		(9,155)
Provision for income taxes	(506)		(1,301)
Share of net income from joint venture	2,271		281


Net loss	$	(12,537)	$	(10,175)
Other comprehensive income (loss):
Foreign currency translation gain (loss)	$	(2,346)	$	1,840
Interest rate swap:
Change in fair value, net of tax	—		(230)
Reclassification adjustments included in net loss, net of tax	(449)		(468)
Other comprehensive income (loss)	$	(2,795)	$	1,142
Comprehensive loss	$	(15,332)	$	(9,033)












Basic and diluted net loss per share	$	(0.34)	$	(0.29)
Shares used to calculate basic and diluted net loss per share	47,724		45,309


(in thousands, except per share data)	March 31, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	20,610	$	21,903
Accounts receivable, net of allowances of $1,626 and $1,241 at March 31, 2024 and December 31, 2023	71,862		65,545
Inventories	72,718		71,563
Income tax receivable	11,952		11,885
Prepaid assets	5,957		2,464
Other current assets	10,439		9,194
Total current assets	193,538		182,554
Property, plant and equipment, net of accumulated depreciation of $260,340 and $254,013 at March 31, 2024 and December 31, 2023	179,647		185,812
Operating lease right-of-use assets	42,141		43,357
Intangible assets, net	55,268		58,724
Investment in joint venture	34,409		32,701
Deferred tax assets	734		734
Other non-current assets	7,087		7,003
Total assets	$	512,824	$	510,885
Liabilities, Preferred Stock, and Stockholders’ Equity
Current liabilities:
Accounts payable	$	50,786	$	45,480
Accrued salaries, wages and benefits	16,920		15,464
Income tax payable	431		524
Short-term debt and current maturities of long-term debt	7,014		3,910
Current portion of operating lease liabilities	5,177		5,735
Other current liabilities	14,464		10,506
Total current liabilities	94,792		81,619
Deferred tax liabilities	4,739		4,988

Long-term debt, net of current maturities	151,531		149,369
Operating lease liabilities, net of current portion	45,803		47,281
Other non-current liabilities	18,349		24,827
Total liabilities	315,214		308,084
Commitments and contingencies (Note 10)
Series D perpetual preferred stock - $0.01 par value per share, 65 shares authorized, issued and outstanding at March 31, 2024 and December 31, 2023	81,469		77,799
Stockholders’ equity:
Common stock - $0.01 par value per share, 90,000 shares authorized, 49,520 and 47,269 shares issued and outstanding at March 31, 2024 and December 31, 2023	495		473
Additional paid-in capital	464,081		457,632
Accumulated deficit	(307,885)		(295,348)
Accumulated other comprehensive loss	(40,550)		(37,755)
Total stockholders’ equity	116,141		125,002
Total liabilities, preferred stock, and stockholders’ equity	$	512,824	$	510,885


	Three Months Ended March 31,
(in thousands)	2024		2023
Cash flows from operating activities
Net loss	$	(12,537)	$	(10,175)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	12,547		11,516
Amortization of debt issuance costs and discount	544		353
Paid-in-kind interest	730		—


Total derivative loss, net of cash settlements	3,331		386
Share of net income from joint venture, net of cash dividends received	(2,271)		(281)
Share-based compensation expense	846		381
Deferred income taxes	(260)		480
Other	(666)		(287)
Changes in operating assets and liabilities:
Accounts receivable	(6,888)		(5,506)
Inventories	(1,554)		(447)
Accounts payable	6,130		2,813
Income taxes receivable and payable, net	(163)		(283)
Other	923		1,276
Net cash provided by operating activities	712		226
Cash flows from investing activities
Acquisition of property, plant and equipment	(5,460)		(4,997)
Proceeds from sale of property, plant, and equipment	98		1,035



Net cash used in investing activities	(5,362)		(3,962)
Cash flows from financing activities
Proceeds from long-term debt	13,001		17,000
Repayments of long-term debt	(29,808)		(17,832)

Cash paid for debt issuance costs	(646)		(55)


Proceeds from sale-leaseback of equipment	4,910		—
Proceeds from sale-leaseback of land and buildings	16,863		—
Repayments of financing obligations	(99)		—
Proceeds from short-term debt	—		2,923
Other	(651)		(785)
Net cash provided by financing activities	3,570		1,251
Effect of exchange rate changes on cash flows	(213)		222
Net change in cash and cash equivalents	(1,293)		(2,263)
Cash and cash equivalents at beginning of period	21,903		12,808
Cash and cash equivalents at end of period	$	20,610	$	10,545


	Common Stock			Additional paid-in capital		Accumulated deficit		Accumulated other comprehensive loss		Total
(in thousands)	Number of shares	Par value
Balance as of December 31, 2023	47,269	$	473	$	457,632	$	(295,348)	$	(37,755)	$	125,002
Net loss	—	—		—		(12,537)		—		(12,537)

Dividends accrued for preferred stock	—	—		(3,670)		—		—		(3,670)
Shares issued for warrants exercised	1,896	19		9,367						9,386
Shares issued under stock incentive plans, net of forfeitures	374	4		(4)		—		—		—
Share-based compensation expense	—	—		846		—		—		846
Restricted shares surrendered for tax withholdings under stock incentive plans	(19)	(1)		(90)		—		—		(91)

Other comprehensive loss	—	—		—		—		(2,795)		(2,795)

Balance as of March 31, 2024	49,520	$	495	$	464,081	$	(307,885)	$	(40,550)	$	116,141


Three Months Ended March 31, 2024	Mobile Solutions		Power Solutions		Intersegment Sales Eliminations		Total
Automotive	$	48,975	$	8,256	$	—	$	57,231
General Industrial	18,713		13,138		—		31,851
Residential/Commercial Electrical	—		20,232		—		20,232



Other	5,372		6,612		(100)		11,884

Total net sales	$	73,060	$	48,238	$	(100)	$	121,198


Three Months Ended March 31, 2023	Mobile Solutions		Power Solutions		Intersegment Sales Eliminations		Total
Automotive	$	55,804	$	8,803	$	—	$	64,607
General Industrial	20,213		14,605		—		34,818
Residential/Commercial Electrical	—		14,585		—		14,585



Other	2,001		11,079		(2)		13,078

Total net sales	$	78,018	$	49,072	$	(2)	$	127,088


	March 31, 2024		December 31, 2023
Raw materials	$	25,940	$	25,456
Work in process	24,446		22,942
Finished goods	22,332		23,165
Total inventories	$	72,718	$	71,563


Balance as of December 31, 2023	$	32,701
Share of earnings	2,271

Foreign currency translation loss	(563)
Balance as of March 31, 2024	$	34,409


	March 31, 2024		December 31, 2023
Term Loan Facility	$	132,513	$	148,114

Financing obligations from sale-leaseback transactions	21,673		—
International loans	9,983		10,655
Unamortized debt issuance costs and discount (1)	(5,624)		(5,490)
Total debt	$	158,545	$	153,279


	Three Months Ended March 31,
	2024	2023
Stock Options	257	516
2019 Warrants	1,500	1,500
Performance share units	268	—
Total antidilutive securities	2,025	2,016


	Nonvested Restricted Shares	Weighted Average Grant-Date Fair Value
Unvested at January 1, 2024	3,405	$	1.41
Granted	374	5.02
Vested	(70)	3.90

Unvested at March 31, 2024	3,709	$	1.73


	Nonvested PSU Awards	Weighted Average Grant-Date Fair Value
Nonvested at January 1, 2024	3,789	$	1.29
Granted	143	6.42



Nonvested at March 31, 2024	3,932	$	1.48


Balance as of December 31, 2023	$	77,799



Accrual of in-kind dividends	2,714
Amortization	956

Balance as of March 31, 2024	$	81,469


	Foreign Currency Translation		Interest rate swap		Income taxes (1)		Total
Balance as of December 31, 2023	$	(38,762)	$	1,007	$	—	$	(37,755)
Other comprehensive income (loss) before reclassifications	(2,346)		—		—		(2,346)
Amounts reclassified from AOCI to interest expense (2)	—		(449)		—		(449)

Net other comprehensive income (loss)	(2,346)		(449)		—		(2,795)
Balance as of March 31, 2024	$	(41,108)	$	558	$	—	$	(40,550)

Balance as of December 31, 2022	$	(40,172)	$	3,149	$	(97)	$	(37,120)
Other comprehensive income (loss) before reclassifications	1,840		(327)		97		1,610
Amounts reclassified from AOCI to interest expense (2)	—		(468)		—		(468)

Net other comprehensive income (loss)	1,840		(795)		97		1,142
Balance as of March 31, 2023	$	(38,332)	$	2,354	$	—	$	(35,978)


Balance as of December 31, 2023	$	16,556

Change in fair value (1)	3,780
Settlements	(9,386)

Balance as of March 31, 2024	$	10,950


	Three Months Ended March 31,
	2024		2023		$ Change
Net sales	$	121,198	$	127,088	$	(5,890)
Cost of sales (exclusive of depreciation and amortization shown separately below)	101,086		108,421		$	(7,335)
Selling, general, and administrative expense	13,348		13,165		183

Depreciation and amortization	12,547		11,516		1,031

Other operating expense (income), net	(1,000)		1,061		(2,061)
Loss from operations	(4,783)		(7,075)		2,292
Interest expense	5,366		4,288		1,078

March 31, 2024

Quoted Prices in Active Markets for Identical Assets
(Level 1)

Significant Other Observable Inputs
(Level 2)

Significant Unobservable Inputs
(Level 3)

Derivative liability - other non-current liabilities