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 and nine months ended September 30, 2025. The financial information as of September 30, 2025, should be read in conjunction with the consolidated financial statements for the year ended December 31, 2024, contained in our Form 10-K for the year ended December 31, 2024 (“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 months ended March 31, 2026. The financial information as of March 31, 2026, should be read in conjunction with the consolidated financial statements for the year ended December 31, 2025, contained in our Form 10-K for the year ended December 31, 2025 (“2025 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. 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 the negative of those terms, and similar expressions that convey uncertainty of future events or outcomes. 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; competitive influences; risks that current customers will commence or increase captive production; risks of capacity underutilization; quality issues; inflationary pressures and material changes in the cost or availability of raw 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 restrictions contained in our debt agreements; the level of our indebtedness and our ability to obtain financing at favorable rates, if at all, or to refinance existing debt as it matures; our ability to secure, maintain or enforce patents or other appropriate protections for our intellectual property; the impact of climate change on our operations; economic, social, political and geopolitical instability, military conflict, currency fluctuation, and other risks of doing business outside of the United States; uncertainty of government policies and actions in respect to global trade and tariffs, including the potential impacts of tariffs on the United States economy, the economy of other countries in which we conduct operations and our industry, cyber liability or potential liability for breaches of our or our service providers’ information technology systems or business operations disruptions; and other risks and uncertainties set forth in documents filed, or to be filed, with the Securities and Exchange Commission (the “SEC”). For the reasons described above, the Company cautions against relying on any forward-looking statements, which should be read in conjunction with the sections entitled “Risk Factors” and “Management…

Excerpt shortened here; the source contains the full paragraph.

Previous 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.

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 and have made it more difficult to procure precious metals. In particular, prices for commodities and certain metals, including, but not limited to, steel, copper, and precious metals, have recently shown increased volatility. Significant price increases for these commodities and precious metals have, and could continue to have, an adverse effect on our liquidity and operating profits if we cannot timely mitigate the price increases by successfully sourcing lower cost commodities or precious metals or by passing the increased costs on to customers.

Previous 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.

Current wording

During the second half of 2024, we identified two manufacturing facilities to close due to volume rationalization which have reduced costs and improved operational efficiency. During the first quarter of 2025, we ceased production activities at our Mobile Solutions plants in Juarez, Mexico and Dowagiac, Michigan. In addition, we implemented operational and cost optimization actions to reduce indirect and overhead costs. 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 $9.7 million, or 8.5%, during the three months ended September 30, 2025, compared to the three months ended September 30, 2024, primarily due to the rationalization of underperforming business and plants and lower volumes. These decreases were partially offset by contribution of new business launches, higher precious metals pass-through pricing and favorable foreign exchange effects of $0.8 million.

Current wording

Net Sales. Net sales increased by $12.8 million, or 12.1%, during the three months ended March 31, 2026, compared to the three months ended March 31, 2025, primarily due to the contribution of new business launches, higher precious metals pass-through pricing, higher volumes in certain areas and favorable foreign exchange effects of $3.1 million.

Previous wording

Cost of Sales. Cost of sales decreased by $10.7 million, or 11.0%, during the three months ended September 30, 2025, compared to the three months ended September 30, 2024, primarily due to the decrease in sales.

Current wording

Cost of Sales. Cost of sales increased by $7.4 million, or 8.1%, during the three months ended March 31, 2026, compared to the three months ended March 31, 2025, primarily due to the increase in sales.

Previous wording

Selling, General, and Administrative Expense. Selling, general, and administrative expense increased by $0.8 million during the three months ended September 30, 2025, compared to the three months ended September 30, 2024, primarily due to payroll and benefits compensation expense related to increase in expected bonus payments in our Power segment.

Current wording

Selling, General, and Administrative Expense. Selling, general, and administrative expense increased by $2.1 million during the three months ended March 31, 2026, compared to the three months ended March 31, 2025, primarily due to payroll and benefits compensation expense related to an increase in bonus expense and medical benefits.

Previous wording

Interest Expense. Interest expense increased by $0.3 million during the three months ended September 30, 2025, compared to the three months ended September 30, 2024, primarily due to average debt balances, interest rates and amortization of debt issuance costs.

Current wording

Interest Expense. Interest expense increased by $0.6 million during the three months ended March 31, 2026, compared to the three months ended March 31, 2025, primarily due to an increase in average debt balances and interest rates. The increases are partially offset by a decrease in amortization of debt issuance costs and discount.

Previous wording

Other Income, Net. Other income, net decreased by $5.2 million during the three months ended September 30, 2025, compared to the three months ended September 30, 2024, primarily due to lower noncash derivative mark-to-market losses recognized during the current quarter compared to the third quarter of 2024.

Current wording

Other Expense (Income), Net. Other expense (income), net decreased by $2.7 million during the three months ended March 31, 2026, compared to the three months ended March 31, 2025, primarily due to noncash derivative mark-to-market loss recognized during the first quarter of 2026 compared to noncash derivative mark-to-market gain the first quarter of 2025.

Previous wording

Provision For Income Taxes. Our effective tax rate was (10.4)% for the three months ended September 30, 2025, compared to (23.5)% for the three months ended September 30, 2024. The rate for the three months ended September 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.

Current wording

Provision for Income Taxes. Our effective tax rate was (8.6)% for the three months ended March 31, 2026, compared to (16.8)% for the three months ended March 31, 2025. The rate for the three months ended March 31, 2026 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 was decreased during the three months ended September 30, 2025, compared to the three months ended September 30, 2024. The JV, in which we own a 49% investment, recognized net sales of $33.3 million and $32.4 million for the three months ended September 30, 2025 and 2024, respectively.

Current wording

Share of Net Income from Joint Venture. Share of net income from the Wuxi Weifu Autocam Precision Machinery Company, Ltd. joint venture (the “JV”) decreased during the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The JV, in which we own a 49% investment, recognized net sales of $32.2 million and $32.7 million for the three months ended March 31, 2026 and 2025, respectively.

Previous wording

Net sales increased by $2.0 million, or 4.7%, during the three months ended September 30, 2025 compared to the three months ended September 30, 2024, due to increase in precious metals pass-through pricing offset by lower volumes and favorable foreign exchange effects of $0.1 million.

Current wording

Net sales increased by $11.9 million, or 27.3%, during the three months ended March 31, 2026 compared to the three months ended March 31, 2025, due to sales mix, an increase in precious metals pass-through pricing, higher volumes in certain areas and favorable foreign exchange effects of $0.5 million.

Previous wording

Income from operations increased by $2.9 million during the three months ended September 30, 2025 compared to the same period in the prior year, primarily due improved margins and lower compensation costs due to headcount reductions.

Current wording

Income from operations increased by $3.3 million during the three months ended March 31, 2026 compared to the same period in the prior year, primarily due to a better sales mix and operating performance.

Previous wording

From December 31, 2024 to September 30, 2025, total assets decreased by $5.9 million, primarily due to decrease in property, plant and equipment, right-of-use assets, intangible assets offset by increases in accounts receivable and inventories.

Current wording

From December 31, 2025 to March 31, 2026, total assets increased by $12.6 million, primarily due to increases in accounts receivable, inventories and prepaid assets. The increases are partially offset by decreases in cash and cash equivalents, property, plant and equipment, right-of-use assets, and intangible assets.

Previous wording

From December 31, 2024 to September 30, 2025, total liabilities increased by $5.2 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.

Current wording

From December 31, 2025 to March 31, 2026, total liabilities increased by $15.1 million, primarily due to increases in accrued salaries, wages and benefits, other current liabilities and long-term debt due to $10.0 million of proceeds from the Delayed Draw Term Loan (as described below). These increases were partially offset by a decrease in operating lease liabilities and other non-current liabilities.

Previous wording

Working capital, which consists of current assets less current liabilities, decreased by $4.6 million, from December 31, 2024 to September 30, 2025. The change was primarily due to a decrease in cash and accrued salaries, wages and benefits offset by an increase in accounts payable and other current portion of debt.

Current wording

Working capital, which consists of current assets less current liabilities, increased by $9.4 million, from December 31, 2025 to March 31, 2026. The change was primarily due to an increase in accounts receivable offset by increases in accounts payable, other current liabilities and accrued salaries, wages, and benefits.

Previous wording

Cash used in investing activities decreased by $11.1 million during the nine months ended September 30, 2025, compared with the same period in 2024, due to sale of business in 2024 and fewer purchases of property, plant and equipment in 2025.

Current wording

Cash used in investing activities decreased by $0.5 million during the three months ended March 31, 2026, compared with the three months ended March 31, 2025, due to a decrease in purchases of property, plant and equipment in 2026.

Previous wording

On April 16, 2025, we entered into a Term Loan Credit Agreement by and among the Company, the lenders from time to time party thereto and Alter Domus (US) LLC, as administrative agent for the Lenders. The Term Loan Credit Agreement establishes a new, $128.0 million senior secured Term Loan Facility consisting of (i) $118.0 million of term loans funded in full on the Closing Date and (ii) $10.0 million of delayed draw term loan commitments. The Term Loans mature on April 16, 2030. We used the net proceeds from the Closing Date Term Loan to repay all of our outstanding obligations under our previous 2021 Term Loan Facility.

Current wording

On April 16, 2025 (the “Closing Date”), we entered into a Term Loan Credit Agreement by and among the Company, the lenders from time to time party thereto (collectively, the “Lenders”) and Alter Domus (US) LLC, as administrative agent (the “Term Loan Agent”) for the Lenders (the “Term Loan Credit Agreement”). The Term Loan Credit Agreement establishes a new $128.0 million senior secured Term Loan Facility (the “Term Loan Facility”) consisting of (i) a $118.0 million of term loan funded in full on the Closing Date (the “Closing Date Term Loans”) and (ii) $10.0 million of delayed draw term loan commitments (any delayed draw term loans funded thereunder, the “Delayed Draw Term Loans”, and together, with the Closing Date Term Loans, the “Term Loans”). As of March 31, 2026, we had $11.4 million of outstanding letters of credit issued under the ABL Facility and $30.7 million in undrawn commitments. The Term Loans mature on April 16, 2030. We used the proceeds from the Closing Date Term Loan to repay all of our outstanding obligations under our outstanding term loan facility (see Note 9 to the Consolidated Financial Statements in our 2025 Annual Report).

Previous wording

Outstanding borrowings under the Term Loan Facility currently bear interest at either: 1) one-month, three-month, or six-month term secured overnight finance rate with a duration adjustment, subject to a 2.00% floor, plus an applicable margin of 9.25%; or 2) the greater of various benchmark rates, with certain adjustments, plus an applicable margin of 8.25%. For interest payments due before April 16, 2027, we may elect to pay a portion of interest in-kind, subject to a minimum cash interest of 5.25% for Adjusted Term SOFR Rate Loans and 4.25%% for Base Rate Loans. The applicable margin increases by 0.50% on borrowings to which the PIK Election is made. Subject to certain exceptions, we are required to make principal payments (i) annually that are calculated as a percentage, based on our Consolidated Net Leverage Ratio, of our Excess Cash Flow (as defined in the Term Loan Credit Agreement), (ii) Net Cash Proceeds (as defined in the Term Loan Credit Agreement) of certain non-ordinary course Dispositions (as defined in the Term Loan Credit Agreement) within 10 business days of receipt thereof, and (iii) Net Cash Proceeds from certain insurance events.

Current wording

Under the Term Loan Credit Agreement, interest rates on the Term Loans are determined based on the type of Term Loan, the length of the interest period, and our Consolidated Net Leverage Ratio (as defined in the Term Loan Credit Agreement). The Term Loans currently bear interest at either: 1) one-month, three-month, or six-month term secured overnight finance rate (“SOFR”) with a credit spread adjustment, subject to a 2.00% floor, plus an applicable margin ranging from 8.75% to 9.75% based on our Consolidated Net Leverage Ratio (as defined therein) (“Adjusted Term SOFR Rate Loans”); or 2) the greater of various benchmark rates, with certain adjustments, plus an applicable margin ranging from 7.75% to 8.75% based on our Consolidated Net Leverage Ratio (“Base Rate Loans”). For interest payments due before April 16, 2027, we may elect to pay a portion of interest in-kind (“PIK Election”), subject to a minimum cash interest of 5.25% for Adjusted Term SOFR Rate Loans and 4.25% for Base Rate Loans. The applicable margin increases by 0.50% on borrowings to which the PIK Election is made. At March 31, 2026, the Term Loans bore interest, including amounts we have elected to pay as PIK interest, based on one-month Adjusted Term SOFR, at 13.52%.

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%; 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.

Current wording

Under the ABL Facility, Revolving Loans bear interest as either 1) 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 1.00%, depending on the benchmark (“Alternative Base Rate”). At March 31, 2026, based on an Alternative Base Rate, the interest rate on outstanding borrowings under the ABL Facility was 7.25%. We incur a commitment fee of 0.25% for unused capacity under the ABL Facility and a 1.85% fee on the amount of letters of credit outstanding. We capitalized a total of $1.2 million in new debt issuance costs related to the ABL Facility.

Previous wording

The principal amount outstanding under our Term Loan Facility as of September 30, 2025, was $119.8 million, without regard to unamortized debt issuance costs and discount. As of September 30, 2025, there were no outstanding borrowings under the ABL Facility and $29.3 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 September 30, 2025, which are considered as usage of the ABL Facility.

Current wording

As of March 31, 2026, we had $5.0 million outstanding borrowings under the ABL Facility, $11.4 million of outstanding letters of credit, and $30.7 million available for future borrowings under the ABL Facility.

Previous 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 9.100%, require monthly payments and have a weighted average remaining term of 3.5 years.

Current wording

During 2025 and 2024, we entered into several sale-leaseback tran sactions 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 9.17%, requires monthly payments and terminate in 2044. In addition, we received $11.0 million from the sale and leaseback of equipment. These financing obligations have a weighted average effective interest rate of 8.26%, require monthly payments and have a weighted average remaining term of 3.0 years.

Previous wording

We participate in programs established by our customers and financial institutions which allow us to sell certain receivables from customers 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 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 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.

Current wording

We participate in programs established by our customers and financial institutions which allow us to sell certain receivables from customers 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 customers. 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 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 (the “CARES Act”). Including interest accrued on the initial refund amount, we have a $12.7 million tax refund receivable at September 30, 2025, which is being processed for refund at the IRS service center.

Current wording

In 2021, we filed a refund claim with the IRS as a result of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). Including interest accrued on the initial refund amount, we have a $13.1 million tax refund receivable at March 31, 2026, which is being processed for refund at the IRS service center.

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 nine months ended September 30, 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 2025 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 2025 Annual Report. There have been no material changes to our significant accounting policies or critical accounting estimates during the three months ended March 31, 2026.