NN INC

Previous wording

Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader understand the results of operations and financial condition of NN, Inc. and its consolidated subsidiaries for the three months ended March 31, 2025. The financial information as of March 31, 2025, should be read in conjunction with the consolidated financial statements for the year ended December 31, 2024, contained in our 2024 Annual Report, and the Condensed Consolidated Financial Statements included in this Quarterly Report.

Current wording

Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader understand the results of operations and financial condition of NN, Inc. and its consolidated subsidiaries for the three and six months ended June 30, 2025. The financial information as of June 30, 2025, should be read in conjunction with the consolidated financial statements for the year ended December 31, 2024, contained in our 2024 Annual Report, and the Condensed Consolidated Financial Statements included in this Quarterly Report.

Previous wording

This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with these safe harbor provisions. 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 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,” “growth,” “guidance,” “intend,” “may,” “will,” “possible,” “potential,” “predict,” “project,” “trajectory” 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 on our financial condition, business operations and liquidity; the potential impacts of tariffs on the U.S. economy, the economy of other countries in which we conduct operations and our industry, as well as the potential implications and ramifications of tariffs on our business and the local and global supply chains supporting the same, and our ability to mitigate any adverse impacts of such; 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, military conflict, 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, the availability of labor and labor disruptions along the supply chain; 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, as well as expansion of end markets and product offerings; 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; our ability to secure, maintain or enforce patents or other appropriate protections for our intell…

Excerpt shortened here; the source contains the full paragraph.

Current wording

This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with these safe harbor provisions. 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 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,” “growth,” “guidance,” “intend,” “may,” “will,” “possible,” “potential,” “predict,” “project,” “trajectory” 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 on our financial condition, business operations and liquidity; the potential impacts of tariffs on the U.S. economy, the economy of other countries in which we conduct operations and our industry, as well as the potential implications and ramifications of tariffs on our business and the local and global supply chains supporting the same, and our ability to mitigate any adverse impacts of such; 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, military conflict, 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, the availability of labor and labor disruptions along the supply chain; 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, as well as expansion of end markets and product offerings; 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; our ability to secure, maintain or enforce patents or other appropriate protections for our intell…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

We continue to monitor the ongoing impacts of current macroeconomic and geopolitical events, including changing conditions from ongoing military conflicts, tariffs, inflationary cost pressures, elevated interest rates, supply chain disruptions, and labor shortages and disruptions.

Current wording

We continue to monitor the ongoing impacts of current macroeconomic and geopolitical events, including changing conditions from global trade negotiations and tariffs, inflationary cost pressures on metal, raw materials, and other manufacturing inputs, elevated interest rates, supply chain disruptions, and ongoing military conflicts.

Previous wording

The U.S. economy has experienced inflationary increases and elevated interest rates, as well as supply issues in materials, services, and labor due to economic policy and military conflicts. We cannot predict the future impact on our end-markets or input costs, including tariffs and their potential implications and ramifications, nor our ability to recover cost increases through pricing.

Current wording

Global trade negotiations continue to create volatility in the marketplace. New trade restrictions and/or increases in tariffs could have a material impact on our business, financial condition, or results of operations by increasing our input costs and decreasing demand, although the nature of those trade restrictions and tariffs remains unclear. Additionally, tariffs may increase the risk for elevated inflation more generally, which may drive an increase in other input costs. We cannot predict the future impact on our end-markets or input costs, including tariffs and their potential implications and ramifications, nor our ability to recover all cost increases through pricing or the timing of such recoveries.

Previous wording

We have taken specific steps to consolidate our footprint by identifying less profitable end markets and focusing our strategic growth initiatives in markets where we believe we will be able to maximize profitability. During the second half of 2024, we identified two manufacturing facilities to close due to volume rationalization which will reduce costs and improve operational efficiency. During the first quarter of 2025, we ceased production activities at our Mobile Solutions plants in Juarez, Mexico and Dowagiac, Michigan. Additionally, we continue to evaluate our global footprint, which may result in further consolidation actions to further improve our overall cost structure.

Current wording

During the second half of 2024, we identified two manufacturing facilities to close due to volume rationalization which will reduce costs and improve operational efficiency. During the first quarter of 2025, we ceased production activities at our Mobile Solutions plants in Juarez, Mexico and Dowagiac, Michigan. Additionally, we continue to evaluate our global footprint, which may result in further consolidation actions to further improve our overall cost structure.

Previous wording

Net Sales. Net sales decreased by $15.5 million, or 12.8%, during the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily due to the rationalization of underperforming business and plants, the sale of our Lubbock operations in 2024, lower volumes and unfavorable foreign exchange effects of $2.8 million. These decreases were partially offset by higher precious metals pass-through pricing.

Current wording

Net Sales. Net sales decreased by $15.1 million, or 12.3%, during the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily due to the rationalization of underperforming business and plants, the sale of our Lubbock operations in 2024, lower volumes and unfavorable foreign exchange effects of $0.7 million. These decreases were partially offset by contribution of new business launches and higher precious metals pass-through pricing.

Previous wording

Cost of Sales. Cost of sales decreased by $9.4 million, or 9.3%, during the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily due to the decrease in sales.

Current wording

Cost of Sales. Cost of sales decreased by $11.6 million, or 11.4%, during the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily due to the decrease in sales.

Previous wording

Selling, General, and Administrative Expense. Selling, general, and administrative expense decreased by $2.2 million during the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily due to lower incentive compensation expense.

Current wording

Selling, General, and Administrative Expense. Selling, general, and administrative expense decreased by $1.4 million during the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily due to lower compensation expense related to lower headcount.

Previous wording

Depreciation and amortization. Depreciation and amortization decreased by $3.8 million during the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily due to impact of historical purchase accounting step-up basis becoming fully depreciated.

Current wording

Depreciation and amortization. Depreciation and amortization decreased by $2.8 million during the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily due to impact of historical purchase accounting step-up basis becoming fully depreciated in the second half of 2024.

Previous wording

Interest Expense. Interest expense decreased by $0.2 million during the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily due to lower average debt balances and lower interest rates. These reductions were partially offset by a decrease in the gain recognized on interest rate swap and an increase in the amortization of debt issuance costs and a lower amount of capitalized interest.

Current wording

Interest Expense. Interest expense decreased by $0.2 million during the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily due to lower average debt balances, lower interest rates and lower amortization of debt issuance costs. These reductions were partially offset by the gain recognized on interest rate swap in 2024.

Previous wording

Other Expense (Income), Net. Other expense (income), net changed favorably by $6.3 million during the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily due to noncash derivative mark-to-market gains recognized during the current quarter compared to derivative losses recognized in the first quarter of 2024.

Current wording

Other Income, Net. Other income, net decreased by $2.8 million during the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily due to lower noncash derivative mark-to-market losses recognized during the current quarter compared to the second quarter of 2024.

Previous wording

Provision For Income Taxes. Our effective tax rate was (16.8)% for the three months ended March 31, 2025, compared to (3.5)% for the three months ended March 31, 2024. The rate for the three months ended March 31, 2025 was unfavorably impacted due to the accrual of tax on non-permanently reinvested unremitted earnings of foreign subsidiaries and by the limitation of the amount of tax benefit recorded for losses in certain jurisdictions where we believe it is more likely than not that a future tax benefit may not be realized.

Current wording

Benefit (Provision) For Income Taxes. Our effective tax rate was (8.1)% for the three months ended June 30, 2025, compared to 4.7% for the three months ended June 30, 2024. The rate for the three months ended June 30, 2025 was unfavorably impacted due to the accrual of tax on non-permanently reinvested unremitted earnings of foreign subsidiaries and by the limitation of the amount of tax benefit recorded for losses in certain jurisdictions where we believe it is more likely than not that a future tax benefit may not be realized.

Previous wording

Share of Net Income from Joint Venture. Share of net income from the JV increased by $0.2 million during the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily due to higher sales. The JV, in which we own a 49% investment, recognized net sales of $32.7 million and $31.1 million for the three months ended March 31, 2025 and 2024, respectively.

Current wording

Share of Net Income from Joint Venture. Share of net income from the JV was unchanged during the three months ended June 30, 2025, compared to the three months ended June 30, 2024. The JV, in which we own a 49% investment, recognized net sales of $31.6 million and $31.6 million for the three months ended June 30, 2025 and 2024, respectively.

Previous wording

Loss from operations increased by $0.5 million during the three months ended March 31, 2025, compared to the same period in the prior year, primarily due to the lower revenue, partially offset by lower depreciation expense.

Current wording

Loss from operations decreased by $0.5 million during the three months ended June 30, 2025, compared to the same period in the prior year, primarily due to lower depreciation expense partially offset by lower revenue.

Previous wording

Income from operations decreased by $1.0 million during the three months ended March 31, 2025 compared to the same period in the prior year, primarily due to the lower revenues and unfavorable product mix, partially offset by lower operating costs due to the sale of the Lubbock operations in 2024.

Current wording

Income from operations increased by $0.5 million during the three months ended June 30, 2025 compared to the same period in the prior year, primarily due to the lower compensation costs due to headcount reduction, partially offset by lower revenues and the sale of the Lubbock operations in 2024.

Previous wording

From December 31, 2024 to March 31, 2025, total assets increased by $3.8 million primarily due to increases in accounts receivable, prepaid assets and our investment in a joint venture. These increases were partially offset by decreases in intangible assets due to amortization.

Current wording

From December 31, 2024 to June 30, 2025, total assets increased by $3.9 million primarily due to increases in accounts receivable, property, plant and equipment and our investment in a joint venture. These increases were partially offset by decreases in intangible assets due to amortization.

Previous wording

From December 31, 2024 to March 31, 2025, total liabilities increased by $6.6 million, primarily due to increases in accounts payable, other current liabilities and long-term debt. These increases were partially offset by the decrease other noncurrent liabilities due to a decrease in the fair value of outstanding warrants.

Current wording

From December 31, 2024 to June 30, 2025, total liabilities increased by $9.8 million, primarily due to increases in accounts payable, other current liabilities and long-term debt. These increases were partially offset by a decrease in accrued salaries, wages and benefits due to reduced compensation costs.

Previous wording

Working capital, which consists of current assets less current liabilities, was $82.9 million as of March 31, 2025, compared to $83.7 million as of December 31, 2024. The decrease in working capital was primarily due to increases in accounts payable and other current liabilities, partially offset by increases in accounts receivable and prepaid assets.

Current wording

Working capital, which consists of current assets less current liabilities, decreased by $0.8 million, from December 31, 2024 to June 30, 2025. The change was primarily due to an increase in accounts receivable and a decrease in accrued salaries, wages and benefits, partially offset by increases in accounts payable and other current liabilities.

Previous wording

Cash used in operations was $3.3 million for the three months ended March 31, 2025, compared with cash provided of $0.7 million for the three months ended March 31, 2024. The unfavorable change is primarily due to lower gross margin contributions due to lower sales, and an increase in working capital.

Current wording

Cash used in operations was $4.0 million for the six months ended June 30, 2025, compared with $0.6 million for the six months ended June 30, 2024. The unfavorable change is primarily due to lower gross margin contributions due to lower sales, and an increase in working capital.

Previous wording

Cash used in investing activities decreased by $1.6 million during the three months ended March 31, 2025, compared with the same period in 2024, due to lower expenditures for property, plant and equipment.

Current wording

Cash used in investing activities decreased by $1.6 million during the six months ended June 30, 2025, compared with the same period in 2024, due to lower purchases of property, plant and equipment in 2025.

Previous wording

Cash provided by financing activities decreased by $3.0 million during the three months ended March 31, 2025 compared with the same period in 2024, primarily due to proceeds from the sale-leaseback transactions in 2024, partially offset by lower repayments of long-term debt.

Current wording

Cash provided by financing activities was unchanged at $1.6 million during the six months ended June 30, 2025 and 2024. The increase in proceeds from the new term loan in 2025 was offset by the proceeds from the sale-leaseback transactions in 2024.

Previous wording

The principal amount outstanding under our 2021 Term Loan Facility as of March 31, 2025, was $114.3 million, without regard to unamortized debt issuance costs and discount. As of March 31, 2025, we had $8.0 million outstanding borrowings under the ABL Facility and $18.3 million available for future borrowings under the ABL Facility. This amount of borrowing capacity is net of $10.4 million of outstanding letters of credit at March 31, 2025, which are considered as usage of the ABL Facility.

Current wording

The principal amount outstanding under our Term Loan Facility as of June 30, 2025, was $118.9 million, without regard to unamortized debt issuance costs and discount. As of June 30, 2025, we had $5.0 million outstanding borrowings under the ABL Facility and $24.2 million available for future borrowings under the ABL Facility. This amount of borrowing capacity is net of $10.9 million of outstanding letters of credit at June 30, 2025, which are considered as usage of the ABL Facility.

Previous wording

The ABL Facility bears interest on a variable borrowing rate based on either: 1) the one, three or six month SOFR plus 1.50%, plus an adjustment of 0.10% (“Term SOFR Rate”); or 2) the highest of the base commercial lending rate of the lender or various benchmark rates plus an applicable margin of 0.50% or 1.0%, depending on the benchmark. We pay a commitment fee of 0.25% for unused capacity under the ABL Facility.

Current wording

The ABL Facility bears interest on a variable borrowing rate based on either: 1) the one, three or six month SOFR plus 1.50%, plus an adjustment of 0.10%; or 2) the highest of the base commercial lending rate of the lender or various benchmark rates plus an applicable margin of 0.50% or 1.00%, depending on the benchmark. We pay a commitment fee of 0.25% for unused capacity under the ABL Facility.

Previous wording

We were in compliance with all requirements under our 2021 Term Loan Facility and ABL Facility as of March 31, 2025. Both credit facilities allow for optional expansion of available borrowings, subject to certain terms and conditions.

Current wording

We were in compliance with the financial covenants of the Term Loan Facility and ABL Facility as of June 30, 2025. Both credit facilities allow for optional expansion of available borrowings, subject to certain terms and conditions.

Previous wording

During 2024, we entered into several sale-leaseback transactions. We received $16.9 million from the sale and leaseback of three properties, with the net proceeds used to repay a portion of the outstanding borrowings under the 2021 Term Loan Facility. This financing obligation has an effective fixed interest rate of 9.715%, requires monthly payments and terminates in 2044. In addition, we received $8.3 million from the sale and leaseback of equipment, with $3.4 million of the net proceeds used to repay a portion of the outstanding borrowings under the 2021 Term Loan Facility and the balance used for ongoing operational investments. These financing obligations have a weighted average effective interest rate of 10.540%, require monthly payments and have a weighted average remaining term of 3.6 years.

Current wording

During 2024 and 2025, we entered into several sale-leaseback transactions and received a total of $21.2 million from the sale and leaseback of several properties. These financing obligations have a weighted average effective fixed interest rate of 9.500%, requires monthly payments and terminate in 2044. In addition, we received $10.6 million from the sale and leaseback of equipment. These financing obligations have a weighted average effective interest rate of 9.170%, require monthly payments and have a weighted average remaining term of 3.8 years.

Previous wording

We participate in programs established by our customers which allows us to sell certain receivables from that customer on a non-recourse basis to a third-party financial institution. In exchange, we receive payment on the receivables, less a discount, sooner than under the customary credit terms we have extended to that customer. These programs allow us to improve working capital and cash flows at the same or lower interest rates as available on our ABL Facility. Our access to these programs is dependent on our customers’ ongoing agreements with the third-parties. Our participation in these programs is based on our specific cash needs throughout the year, the discount charged to receive payment earlier, the length of the payment terms with our customers, as well being subject to limits in our ABL Facility and 2021 Term Loan Facility agreements.

Current wording

We participate in programs established by our customers which allows us to sell certain receivables from that customer on a non-recourse basis to a third-party financial institution. In exchange, we receive payment on the receivables, less a discount, sooner than under the customary credit terms we have extended to that customer. These programs allow us to improve working capital and cash flows at the same or lower interest rates as available on our ABL Facility. Our access to these programs is dependent on our customers’ ongoing agreements with the third-parties. Our participation in these programs is based on our specific cash needs throughout the year, the discount charged to receive payment earlier, the length of the payment terms with our customers, as well being subject to limits in our ABL Facility and Term Loan Facility agreements.

Previous wording

In 2021, we filed a refund claim with the IRS as a result of the Coronavirus Aid, Relief, and Economic Security Act. Including interest accrued on the initial refund amount, we have a $12.4 million tax refund receivable at March 31, 2025, which is in the process of IRS review. The timing of the receipt of the refund is expected in the first half of 2025.

Current wording

In 2021, we filed a refund claim with the IRS as a result of the Coronavirus Aid, Relief, and Economic Security Act. Including interest accrued on the initial refund amount, we have a $12.6 million tax refund receivable at June 30, 2025, which is being processed for refund at the IRS service center. The timing of the receipt of the refund is expected in 2025.

Previous wording

Our significant accounting policies, including the assumptions and judgments underlying them, are disclosed in Note 1 of the Notes to Consolidated Financial Statements included in the 2024 Annual Report. Our most critical accounting estimates are discussed in the Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2024 Annual Report. There have been no material changes to our significant accounting policies or critical accounting estimates during the three months ended March 31, 2025.

Current wording

Our significant accounting policies, including the assumptions and judgments underlying them, are disclosed in Note 1 of the Notes to Consolidated Financial Statements included in the 2024 Annual Report. Our most critical accounting estimates are discussed in the Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2024 Annual Report. There have been no material changes to our significant accounting policies or critical accounting estimates during the six months ended June 30, 2025.