NN(NNBR) - 2021 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed consolidated financial statements for Q1 2021, including operations, balance sheets, equity, and cash flows Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) The company reported increased net sales and significantly reduced losses from continuing and total operations in Q1 2021 Condensed Consolidated Statements of Operations (in thousands) | | Three Months Ended March 31, | | :--- | :--- | :--- | | | 2021 | 2020 | | Net sales | $126,804 | $116,213 | | Income (loss) from operations | $978 | $(103,850) | | Loss from continuing operations | $(4,913) | $(108,077) | | Loss from discontinued operations, net of tax | — | $(140,114) | | Net loss | $(4,913) | $(248,191) | | Net loss per common share | $(0.46) | $(5.96) | Condensed Consolidated Balance Sheets (Unaudited) Total assets slightly decreased, while liabilities significantly increased due to debt refinancing, impacting stockholders' equity as of March 31, 2021 Condensed Consolidated Balance Sheets (in thousands) | | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total current assets | $222,496 | $215,218 | | Total assets | $622,316 | $624,962 | | Total current liabilities | $98,070 | $103,231 | | Total liabilities | $340,703 | $265,724 | | Total stockholders' equity | $234,755 | $254,152 | Condensed Consolidated Statement of Changes in Stockholders' Equity (Unaudited) Total stockholders' equity decreased in Q1 2021, primarily due to net loss and accrued preferred stock dividends - The main drivers for the change in stockholders' equity during Q1 2021 were the net loss of $4.9 million and accrued preferred stock dividends of $14.5 million[18] Condensed Consolidated Statements of Cash Flows (Unaudited) Net cash provided by operations, used in investing, and provided by financing activities resulted in a decrease in cash and cash equivalents for Q1 2021 Condensed Consolidated Statements of Cash Flows (in thousands) | | Three Months Ended March 31, | | :--- | :--- | :--- | | | 2021 | 2020 | | Net cash provided by operating activities | $7,884 | $10,224 | | Net cash used in investing activities | $(20,877) | $(11,178) | | Net cash provided by financing activities | $9,628 | $53,900 | | Net change in cash and cash equivalents | $(5,105) | $47,511 | | Cash and cash equivalents at end of period | $43,033 | $79,214 | Notes to Condensed Consolidated Financial Statements (Unaudited) This section provides detailed explanations for financial statement line items, covering business divestiture, debt refinancing, and preferred stock issuance - In October 2020, the company sold its Life Sciences business for $753.3 million in cash, with a potential earnout of up to $70 million[30] - In March 2021, the company entered into a new $150.0 million Term Loan Facility and a $50.0 million ABL Facility, using the proceeds to terminate its previous credit facility[54] - In March 2021, the company issued 65,000 shares of Series D Perpetual Preferred Stock for $65 million and used the proceeds to redeem all outstanding Series B Convertible Preferred Stock[78][83] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2021 operational and financial results, highlighting increased net sales, debt and preferred stock refinancing, and ongoing COVID-19 impacts - Net sales increased by $10.6 million (9%) in Q1 2021 compared to Q1 2020, primarily due to a $11.2 million increase in organic volume from the recovering automotive industry[156] - The company refinanced its credit facility and preferred stock in Q1 2021, entering a new $150.0 million term loan and a $50.0 million ABL facility, and issuing new Series D Preferred Stock to redeem the existing Series B[148][149][153] - The COVID-19 pandemic continues to create disruptions, including a worldwide semiconductor chip shortage affecting customer volumes[145] Segment Performance - Q1 2021 vs Q1 2020 (in thousands) | Segment | Net Sales Q1 2021 | Net Sales Q1 2020 | Income from Ops Q1 2021 | Income (Loss) from Ops Q1 2020 | | :--- | :--- | :--- | :--- | :--- | | Mobile Solutions | $77,776 | $69,884 | $6,090 | $264 | | Power Solutions | $49,075 | $46,401 | $2,432 | $(90,334)* | *Includes $92.9M goodwill impairment Quantitative and Qualitative Disclosures About Market Risk The company is exposed to interest rate and foreign currency risks, managing interest rate risk through debt structure and having terminated its interest rate swap - The company terminated its fixed-rate interest rate swap agreement on March 22, 2021, in conjunction with its debt refinancing[185] - At March 31, 2021, the company had $150.0 million of principal outstanding under its new Term Loan Facility, with a 1.00% LIBOR floor limiting interest expense increase to $0.2 million for a one-percent LIBOR rise[187] - The company is exposed to foreign currency risk from its international operations but did not hold any foreign currency derivatives as of March 31, 2021[188] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during Q1 2021 - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2021[189] - No changes occurred during the quarter ended March 31, 2021, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[190] PART II. OTHER INFORMATION Legal Proceedings This section incorporates by reference disclosures on legal proceedings, including tax disputes and lawsuits related to business transactions - The company is engaged in certain legal proceedings, which are detailed in Note 11 of the Notes to Condensed Consolidated Financial Statements[193] Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's 2020 Annual Report on Form 10-K - No material changes to the risk factors disclosed in the 2020 Annual Report have occurred[194] Unregistered Sales of Equity Securities and Use of Proceeds During the quarter, the company withheld shares to satisfy tax obligations related to the vesting of restricted stock for employees Issuer Purchases of Equity Securities (Q1 2021) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | January 2021 | — | $ — | | February 2021 | 43,473 | $6.81 | | March 2021 | 6,188 | $7.82 | | Total | 49,661 | $6.94 | - Shares were withheld to pay for tax obligations due upon the vesting of restricted stock under the NN, Inc. 2019 Omnibus Incentive Plan[194] Defaults Upon Senior Securities There were no defaults upon senior securities during the reporting period - None[195] Mine Safety Disclosures This section is not applicable to the company's operations - Not applicable[196] Other Information No other material information is reported in this section - None[197] Exhibits This section lists exhibits filed with the Form 10-Q, including documents related to preferred stock, credit agreements, and officer certifications - Key exhibits filed include the Certificate of Designation for Series D Preferred Stock, the new Term Loan Credit Agreement, the new ABL Credit Agreement, and certifications by the CEO and CFO[200] Signatures