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The eBearing News
October 30, 2006
NN Reports Third Quarter 2006 Results
copyright © 2006 eBearing Inc.
NN Inc. (USA; NASDAQ:
NNBR)
announced fiscal third quarter 2006 results, for the period ending September 30, 2006.
NN is the world's largest dedicated manufacturer of bearing components -- antifriction bearing
balls, rolls, seals and retainers -- for a wide variety of bearing manufacturers worldwide. The
company also produces highly engineered plastic components to customer specification.
Because it is considered a bellwether for the international bearing industry as a whole, NN's third
quarter results were disappointing news.
Several industry observers, however, said they believe NN's performance represents only a short-lived
downturn as the company pursues growth strategies, and not indicative of the bearing industry as a whole
or NN's future prospects.
Sales in third quarter were essentially flat in 2006, at $74.9 million from 2005's $75.0 million.
Slight relative increases in COGS and depreciation / amortization set third quarter net income
back to $4.8 million from 2005's $5.6 million.
Net income was also essentially flat, at $2.63 million from 2005's $2.56 million.
James Dorton, NN's VP and CFO, said: "Decreases in volume of approximately $3.1 million were
offset by selling price increases of $0.8 million and the positive effect of currently translation
of $2.2 million."
"Although our Level 3 initiatives have continued to produce excellent results in 2006, volume
reductions, particularly in our U.S. operations, impacted margins for the third quarter of 2006," continued
Mr. Dorton.
Chairman, President, and CEO, Rock Baty, said: "While weakening automotive sales in the U.S. market
created difficult economic conditions for our U.S. business units, our overall exposure to the Big Three
North American automotive business is only 14% of total global sales. These reductions affected our
U.S. operations by approximately $2.5 million in the third quarter of this year and we expect a similar
impact on our fourth quarter. This will result in a total revenue shortfall of approximately $5 million
for the year, compared to our original guidance."
Mr. Baty continued: "We have made excellent progress regarding the execution of our long-term growth
strategy during the first nine months of 2006. Recall that our plans call for growing our business in
three specific areas: future geographic expansion of existing bearing component products; acquisitive
growth of both captive and independent businesses within bearing components; and identified acquisition
opportunities that leverage our competencies in related high-precision metal component manufacturing."
NN's actual run rate through the third quarter remains in line with guidance issued back in February, projecting
2006 sales of $325 million, flat from 2005. The flat sales and earnings, it said in February, will track the
currency exchange rate translation of NN Europe earnings, 2006 stock option award expenses, increased
energy costs, and startup expenses associated with a new manufacturing facility in China.
The second half's $5 million dropoff in sales to the North American Big Three accounts for the
difference between February's $325 million guidance for 2006, and the new projection of $320 million.
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- by Bruce A. Carr
from individual research,
tips and commercial sources.
Unauthorized reproduction is prohibited.
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Entire contents Copyright 1999-2008, eBearing Inc. All rights reserved.
eBearing.com and "... for everything that moves" are registered
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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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