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The eBearing News
November 16, 2005
NN Reports Third Quarter 2005 Results
copyright © 2005 eBearing Inc.
NN Inc. (USA; NASDAQ:
NNBR)
reported third quarter 2005 financial results, for the period ending September 30, 2005.
NN is a key supplier of rolling elements, retainers and seals to the bearing industry worldwide;
as such, its operating and financial results are considered an industry bellwether. Approximately 65%
of the company's volume is automotive and end-market, while 35% is industrial and general.
Sales in the quarter were up slightly, 2.9%, to USD $75.0 million from 2004's $72.9 million.
Third quarter net income was also up, reaching $2.6 million from 2004's $2.2 million.
Commenting on the nine month sales figures, James Dorton, NN's new VP and CFO, said price increases
accounted for approximately 34%, the positive effects, foreign currency exchange accounted for
27%, and volume increases accounted for 39%.
COGS fell in third quarter, to 77.6% of sales from 78.5% of sales in 2004; the company cited
cost improvement associated with its Level 3 -- lean enterprise, six-sigma, and
total predictive maintenance -- system initiatives.
SG&A in the quarter were 9.6% of sales, or $7.2 million, primarily rising due to the need to set
up a $220,000 reserve for Delphi Corp.'s (now in Chapter 11 bankruptcy) A/R, and startup costs for NN's new
automotive-component manufacturing facility in Kunshan, Jiangsu Province, China.
NN supplies balls and plastic molded parts to Delphi, and continues to do business with the company.
In Jiangsu, the plant building construction is now complete, with production is expected to be underway shortly.
NN is also on the move to reduce its debt load. As of September 30, debt was $67.8
million, down $4.7 million from January 1. For 2005, NN said it expects to pay down debt by $10 million.
The company had originally expected to post better performance in third quarter, but Chairman and
CEO, Rock Baty, noted: "In mid-October we revised our previously released 2005 full-year guidance
primarily due to three factors: lower second half sales volumes in Europe, currency translation,
and an unfavorable tax rate mix. Although these negative factors will cause us to fall short of our
original guidance, our revised guidance of approximately $325 million in revenues ... show significant
improvement over the prior year."
The tax rate mix became an issue when sales in low-tax areas dropped, causing the mix to lean
more heavily toward high-tax areas.
Mr. Baty noted the outlook for the rest of 2005 is mixed: "Lower revenues in comparison to original
plan for the second half in Europe are partially offset by continuing strong demand in North America.
The longer-term global outlook for customers' demand in both our automotive and industrial served markets,
however, remains strong. Strategically, we will continue to focus on opportunities to profitably
grow our core bearing components business. In early October of this year, we announced the purchase
of SNR Roulements' internal precision ball producing equipment from its manufacturing facility in
Annecy, France. This outsourcing transaction is consistent with our strategy and further provides us with
the opportunity to add additional value to our existing customer relationships through our component
manufacturing and service competencies. Further, our investments in Slovakia and China not only position
us well for the geographic expansion of our ball manufacturing capabilities in Eastern Europe
and Asia, but provide us with the capabilities for other bearing component manufacturing as well.
In China, we will begin limited production of high volume automotive application precision balls
during the fourth quarter of this year. Finally, our Level 3 program is delivery solid results and we
expect even stronger results in 2006 and beyond."
article: SNR turns over ball production to NN
SNR's equipment is being moved primarily to NN's facility in Slovakia, where is will be brought
online in early 2006. Although the plant in Slovakia had not been meeting expected levels of
production and productivity, third quarter had seen it come up almost to plan, with further
improvement expected going forward.
Looking forward, Mr. Baty said in the earnings call that NN would not comment
specifically on the prospects for 2006 until the fiscal year-end earnings release in February.
However, he did note the outlook for automotive is flat, while industrial will continue its
strong upward trend, advancing another 3% to 4%.
As for the NN's string of recent acquisitions, Mr. Baty confirmed
the company is and will continue to seek, "acquisition-related growth opportunities."
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- by Bruce A. Carr
from individual research,
tips and commercial sources.
Unauthorized reproduction is prohibited.
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eBearing.com ... for everything that moves™
Entire contents Copyright 1999-2008, eBearing Inc. All rights reserved.
eBearing.com and "... for everything that moves" are registered
trademarks of eBearing Inc.
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eBearing.com ... for everything that moves™
Entire contents Copyright © 1999-2008, eBearing Inc. All rights reserved.
eBearing.com and "... for everything that moves" are registered trademarks of eBearing Inc.
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