NN, Inc. Reports Record Second Quarter 2008 Results

- Second Quarter 2008 Revenues Increased 13.9% to $122.2 million

JOHNSON CITY, Tenn., July 31 /PRNewswire-FirstCall/ -- NN, Inc.
(Nasdaq: NNBR) today reported its financial results for the second quarter
ended June 30, 2008. Net income for the second quarter and first half of 2008
includes a gain on the sale of surplus land and a one time adjustment to taxes
related to a change in Italian tax laws. Results for the second quarter and
first six months of 2007 include certain restructuring and other one time
charges. Additionally, the financial statements for the second quarter and
first six months of 2007 reflect the restatement of the Company's June 30,
2007 financial statements. These statements were restated in February of 2008
to correct an error in assumptions used to test the impairment of a customer
contract intangible asset under SFAS 144. Refer to the Company's filed June
30, 2007 and September 30, 2007 10-Q/A's for further discussion.
Net sales for the second quarter of 2008 were $122.2 million, an increase
of $14.9 million, or 13.9% from net sales of $107.3 million for the same
period of 2007. The increase was primarily due to the positive effect of
currency exchange of $10.4 million (+9.7%). Net volume gains of $4.5 million
(+4.2%) in the core metal bearing components business also contributed to the
increase in net sales.
Net income for the 2008 second quarter was $9.2 million or $0.57 per
diluted share as compared to a net loss for the second quarter of 2007 of
$10.4 million, or $0.61 per diluted share. Net income for the second quarter
of 2008 includes approximately $3.0 million, or $0.19 per diluted share, in
after-tax gains on the sale of surplus land in The Netherlands and a one-time
adjustment to taxes of approximately $1.1 million, or $0.07 per diluted share
that relates to a change in Italian tax law. Excluding these items, net
income from operations for the second quarter of 2008 was $5.0 million or
$0.31 per diluted share, up 61% and 72%, respectively from the $3.1 million
and $0.18 per diluted share from operations in the second quarter 2007. The
2007 second quarter results include the recording of approximately $13.4
million, or $0.79 per diluted share in after-tax restructuring and other one
time charges. Excluding these charges, net income from operations for the
2007 second quarter was $3.1 million or $0.18 per diluted share.
Net sales for the first six months of 2008 were $243.8 million, up $28.5
million, or 13.2% as compared to $215.2 million for the same period of 2007.
This increase is mainly due to the positive effect of currency translation of
$18.7 (+ 8.7%) million and net volume increases of $10.2 million (+ 4.8%) that
were partially offset by unfavorable price/mix issues of $0.4 million (-0.2%).
Net income for the first six months of 2008 was $14.3 million, or $0.89
per diluted share compared to a net loss of $6.6 million, or $0.39 per diluted
share for the same period of 2007. The results of the first six months of
2008 include the recording of approximately $3.0 million, or $0.19 per diluted
share, in after-tax gains on the sale of surplus land in The Netherlands.
Additionally, net income includes the recording of a one-time, after-tax
adjustment related to a change in Italian tax law of approximately $1.1
million or $0.07 per diluted share. Excluding the recording of these two
items, net income from operations for the first half of 2008 was $10.1 million
or $0.63 per diluted share, up 48% and 58% respectively from the same period
of 2007. The first six months of 2007 results include approximately $13.4
million, or $0.79 per diluted share in after-tax restructuring and other one
time charges. Excluding the restructuring and other one time charges, net
income for the first six months of 2007 was $6.8 million or $0.40 per diluted
share.
As a percentage of net sales, cost of products sold for the second quarter
of 2008 was 79.6% compared to 80.0% recorded in the prior year. The 2008
year-to-date cost of products sold of 79.5% was flat as compared to the same
period last year. For both the quarter and the first six months of 2008,
significant inflation cost increases in manufacturing costs, labor and energy
have been more than offset by cost reductions associated with our Level 3
program.
Selling, general and administrative expenses were $10.0 million or 8.2% of
net sales for the second quarter of 2008 as compared to $9.6 million, or 8.9%
of net sales for the second quarter of 2007. Selling, general and
administrative expenses for the first six months of 2008 of 8.3% of net sales
decreased as compared to 8.8% of net sales for the same period in 2007.
James H. Dorton, Vice President and Chief Financial Officer, commented,
"During the second quarter we continued to benefit from improved performance
at three operations, Whirlaway, Slovakia and China, that experienced
profitability problems in 2007. Each of these operations recorded improved
operating margins and profitability as compared to the prior year. This
improvement has resulted mainly from operational improvements at all three
locations as well as increases in production volumes in Slovakia and China.
Additionally, our core Metal Bearing Components operations continue to perform
well and are running slightly ahead of our business plan through the first
half of the year. Our Plastics and Rubber operations had lower than expected
sales and earnings due to the continued reduction in North American automotive
demand."
Mr. Dorton continued, "In the second quarter, we continued to focus on
specific working capital improvement initiatives. We have made good progress
on reaching our goals and believe these initiatives will further strengthen
our balance sheet and improve cash flow. During the first half of the year,
we did not repurchase any of the Company's shares under our previously
announced stock repurchase plan."
Roderick R. Baty, Chairman and Chief Executive Officer, commented, "Given
the current global economic uncertainty, we are encouraged by the strong
results from our operations in both the second quarter and the first six
months of 2008. The demand from our customers for the second quarter continued
to reflect strong global industrial end markets in both North America and
Europe. Automotive demand in Europe was at healthy levels and essentially
consistent with the first quarter of the year. As a result, our core Metal
Bearing Components operations in both the U.S. and Europe experienced good
performance, exceeding our beginning of the year forecast for both revenue and
earnings. Our Level 3 program continued to deliver excellent results,
offsetting significant global inflation we experienced in energy and steel
related costs. In North America, our Rubber, Plastics and Precision Metal
operations were negatively impacted by the continuing reductions in North
American automotive demand during the second quarter."
Mr. Baty concluded, "Looking forward, we anticipate overall good levels of
industrial end market demand in North America and Europe continuing for the
remainder of 2008. However, we will experience the impact of a significant
acceleration of reduced North American automotive demand for the last half of
2008. In addition, European automotive demand is forecasted to weaken over the
last half of 2008, although not at the current rate of decline seen in North
America. Given these global economic factors combined with our normal
seasonality during the third quarter, we anticipate lower results than we
experienced in the first half of the year, but total year results that exceed
our previously communicated guidance of $0.90 to $0.95 per diluted share."
NN, Inc. manufacturers and supplies high precision metal bearing
components, industrial plastic and rubber products and precision metal
components to a variety of markets on a global basis. Headquartered in
Johnson City, Tennessee, NN has 14 manufacturing plants in the United States,
Western Europe, Eastern Europe and China. NN, Inc. had sales of US $421
million in 2007.
Except for specific historical information, many of the matters discussed
in this press release may express or imply projections of revenues or
expenditures, statements of plans and objectives or future operations or
statements of future economic performance. These, and similar statements are
forward-looking statements concerning matters that involve risks,
uncertainties and other factors which may cause the actual performance of NN,
Inc. and its subsidiaries to differ materially from those expressed or implied
by this discussion. All forward-looking information is provided by the
Company pursuant to the safe harbor established under the Private Securities
Litigation Reform Act of 1995 and should be evaluated in the context of these
factors. Forward-looking statements generally can be identified by the use of
forward-looking terminology such as "assumptions", "target", "guidance",
"outlook", "plans", "projection", "may", "will", "would", "expect", "intend",
"estimate", "anticipate", "believe", "potential" or "continue" (or the
negative or other derivatives of each of these terms) or similar terminology.
Factors which could materially affect actual results include, but are not
limited to: general economic conditions and economic conditions in the
industrial sector, inventory levels, regulatory compliance costs and the
Company's ability to manage these costs, start-up costs for new operations,
debt reduction, competitive influences, risks that current customers will
commence or increase captive production, risks of capacity underutilization,
quality issues, availability and price of raw materials, currency and other
risks associated with international trade, the Company's dependence on certain
major customers, the successful implementation of the global growth plan
including development of new products and consummation of potential
acquisitions and other risk factors and cautionary statements listed from time
to time in the Company's periodic reports filed with the Securities and
Exchange Commission, including, but not limited to, the Company's Annual
Report on 10-K for the fiscal year ended December 31, 2007.
Financial Tables Follow

NN, Inc. Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)

Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007

Net sales $ 122,240 $ 107,302 $ 243,781 $ 215,246
Cost of products sold
(exclusive of depreciation
shown separately below) 97,248 85,929 193,741 171,010
Selling, general and
administrative 10,011 9,558 20,220 18,983
Depreciation and amortization 6,387 5,658 12,650 11,180
Restructuring and asset
impairment charges -- 13,336 -- 13,336
Loss (gain) on disposal of
assets (4,018) (6) (4,159) (11)
Income (loss) from operations 12,612 (7,173) 21,329 748

Interest expense, net 1,268 1,630 2,810 3,325
Other (income) expense, net (284) (22) (419) 3
Income (loss) before provision
for income taxes 11,628 (8,781) 18,938 (2,580)
Provision for income taxes 2,455 1,584 4,665 4,030
Net income (loss) $9,173 $(10,365) $ 14,273 $(6,610)

Diluted income per common share $0.57 $(0.61) $0.89 $(0.39)

Weighted average diluted
shares 16,054 17,028 15,978 17,031

NN, Inc.
Condensed Balance Sheets
(In thousands)
(Unaudited)

June 30, December 31,
2008 2007

Assets
Current Assets:
Cash $14,273 $13,029
Accounts receivable, net 82,390 65,566
Inventories, net 56,454 51,821
Other current assets 8,406 7,608
Total current assets 161,523 138,024

Property, plant and equipment, net 167,075 161,008
Goodwill and intangible assets, net 40,436 39,471
Other assets 10,469 11,575
Total assets $ 379,503 $ 350,078

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $53,306 $51,124
Accrued salaries and wages 16,807 15,087
Current portion of long-term debt 7,624 11,851
Other liabilities 7,520 6,194
Total current liabilities 85,257 84,256

Deferred income taxes 17,579 18,682
Long-term notes payable and related party debt 103,172 100,193
Other 17,995 16,904
Total liabilities 224,003 220,035

Total stockholders' equity 155,500 130,043

Total liabilities and stockholders' equity $ 379,503 $ 350,078

NN, Inc.
Reconciliation of Non-GAAP to GAAP Financial Measures
(Unaudited)

Three Months Ended Six Months Ended
June 30, 2008 June 30, 2008

Diluted Diluted
In Earnings In Earnings
Thousands Per Share Thousands Per Share

Net Income $9,173 $0.57 $14,273 $0.89
After-tax gain related
to sale of land (2,995) (0.19) (2,995) (0.19)
Italian tax adjustment, net (1,142) (0.07) (1,142) (0.07)
Net income excluding
restructuring and other
one time charges $5,036 $0.31 $10,136 $0.63

Three Months Ended Six Months Ended
June 30, 2007 June 30, 2007

Diluted Diluted
In Earnings In Earnings
Thousands Per Share Thousands Per Share

Net Loss $ (10,365) $(0.61) $ (6,610) $ (0.39)
After-tax restructuring
and other one time charges 13,420 0.79 13,420 0.79
Net income excluding
restructuring and other
one time charges $3,055 $0.18 $6,810 $0.40

SOURCE NN, Inc.

Will Kelly, Vice President and Chief Administrative Officer, NN, Inc.,
+1-423-743-9151; General Info: Marilynn Meek, Financial Relations Board,
+1-212-827-3773, for NN, Inc.