NN Inc.

05/06/2026 | Press release | Distributed by Public on 05/06/2026 15:22

Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
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.
Forward-Looking Statements
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's Discussion and Analysis of Financial Condition and Results of Operations" included in our 2025 Annual Report, this Quarterly Report and any of the Company's subsequent filings made with the SEC. Any forward-looking statement speaks only as of the date of this Quarterly Report, and the Company undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.
For additional information concerning such risk factors and cautionary statements, please see the sections titled "Item 1A. Risk Factors" in the 2025 Annual Report and this Quarterly Report.
Overview
NN, Inc., a Delaware corporation, is a diversified industrial company that combines advanced engineering and production capabilities with in-depth materials science expertise to design and manufacture high-precision components and assemblies for a variety of end markets on a global basis. As used in this Quarterly Report, the terms "NN," the "Company," "we," "our," or "us" refer to NN, Inc. and its subsidiaries.
Factors That May Influence Results of Operations
We believe there are several important factors that have influenced, and we expect will continue to influence, our results of operations.
Macroeconomic Conditions
We continue to monitor the ongoing impacts of current macroeconomic and geopolitical events, including changing conditions from global trade negotiations and tariffs, inflationary cost pressures on metal, raw materials, and other manufacturing inputs, elevated interest rates, supply chain disruptions, and ongoing military conflicts.
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.
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, including the cost of raw materials, through pricing or the timing of such recoveries.
Footprint Optimization
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.
Results of Operations
Three Months Ended March 31, 2026 compared to the Three Months Ended March 31, 2025
Consolidated Results
Three Months Ended March 31,
2026 2025 $ Change
Net sales $ 118,452 $ 105,688 $ 12,764
Cost of sales (exclusive of depreciation and amortization shown separately below) 99,031 91,646 7,385
Selling, general, and administrative expense 13,294 11,170 2,124
Depreciation and amortization 9,240 8,774 466
Other operating income, net (1,055) (1,113) 58
Loss from operations (2,058) (4,789) 2,731
Interest expense 5,769 5,194 575
Other expense (income), net 502 (2,169) 2,671
Loss before provision for income taxes and share of net income from joint venture (8,329) (7,814) (515)
Provision for income taxes (717) (1,310) 593
Share of net income from joint venture 2,218 2,439 (221)
Net loss $ (6,828) $ (6,685) $ (143)
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.
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.
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.
Depreciation and amortization. Depreciation and amortization increased by $0.5 million during the three months ended March 31, 2026, compared to the three months ended March 31, 2025, primarily due to the impact of capital expenditures placed in service in the current and prior year.
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.
Three Months Ended March 31,
2026 2025
Interest on debt $ 5,516 $ 4,405
Amortization of debt issuance costs and discount 249 716
Capitalized interest (213) (211)
Other 217 284
Total interest expense $ 5,769 $ 5,194
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.
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.
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.
Results by Segment
MOBILE SOLUTIONS
Three Months Ended March 31,
2026 2025 $ Change
Net sales $ 63,113 $ 62,244 $ 869
Loss from operations $ (2,075) $ (2,687) $ 612
Net sales increased by $0.9 million, or 1.4%, during the three months ended March 31, 2026, compared to the three months ended March 31, 2025, primarily due to favorable growth in North America, South America, and Europe and foreign exchange effects of $2.6 million. These increases were partially offset by soft China volumes.
Loss from operations decreased by $0.6 million during the three months ended March 31, 2026, compared to the three months ended March 31, 2025, primarily related to improved operating performance, partially offset by increase in selling, general, and administrative costs.
POWER SOLUTIONS
Three Months Ended March 31,
2026 2025 $ Change
Net sales $ 55,400 $ 43,508 $ 11,892
Income from operations $ 6,297 $ 3,023 $ 3,274
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.
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.
Changes in Financial Condition from December 31, 2025 to March 31, 2026
Overview
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.
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.
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.
Cash Flows
Cash used in operations was $8.6 million for the three months ended March 31, 2026, compared with $3.3 million for the three months ended March 31, 2025. The unfavorable change was primarily due to an increase in accounts receivable, inventories, and other operating assets, partially offset by change in other operating liabilities.
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.
Cash provided by financing activities increased by $7.4 million during the three months ended March 31, 2026, compared with the three months ended March 31, 2025. The increase was primarily due to $10.0 million of proceeds from Delayed Draw Term Loan (as described below), offset by lower net proceeds from our asset backed credit facilities (as described below).
Liquidity and Capital Resources
Credit Facilities
Term Loan Facility
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).
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%.
On January 29, 2026, we borrowed $10.0 million on the Delayed Draw Term Loans. As a result of borrowing the Delayed Draw Term Loans, the applicable margin for all Term Loans increased by 0.50%. Through January 29, 2026, we incurred a 1.00% commitment fee on undrawn amounts under the Delayed Draw, payable quarterly in arrears.
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. We may voluntarily prepay the Term Loans, in whole or part without premium or penalty following April 16, 2027. If we would have voluntarily prepaid borrowings prior to April 16, 2026, we would have been subject to a prepayment premium equal to the present value at the prepayment date of (i) 2.00% of the outstanding principal amount of the Term Loans to be prepaid, plus (ii) all remaining scheduled interest payments due on such Term Loans through April 16, 2026 (excluding accrued but unpaid interest to, but not including, the prepayment date), computed using a discount rate equal to the Treasury Rate (determined as of the Business Day prior to such date of prepayment) plus 50 basis points. If we voluntarily prepay borrowings following April 16, 2026 and prior to April 16, 2027, we are subject to a prepayment premium equal to 2.00% of the principal amount prepaid.
The Term Loan Credit Agreement includes customary representations, warranties and covenants, including, but not limited to, certain financial covenants, such as maximum Consolidated Net Leverage Ratio and minimum Domestic Liquidity (as defined in the Term Loan Credit Agreement), subject, in the case of the Consolidated Net Leverage Ratio covenant, to certain equity cure rights. We were in compliance with the financial covenants of the Term Loan Facility as of March 31, 2026.
Our obligations under the Term Loan Credit Agreement are guaranteed by certain of our subsidiaries and are required to be guaranteed by certain of our later formed or acquired subsidiaries (collectively, the "Guarantors"). Our obligations under the Term Loan Credit Agreement are collateralized by substantially all of our and the Guarantors' assets. The Term Loan Agent, for itself and on behalf of the Lenders, has a first lien on all domestic assets, other than accounts receivable and inventory, and certain foreign assets and has a second lien on domestic accounts receivable and inventory.
The Term Loan Credit Agreement contains customary events of default relating to, among other things, payment defaults, breach of covenants, cross acceleration to material indebtedness, bankruptcy-related defaults, judgment defaults, and the occurrence of certain change of control events. If an event of default occurs, the lenders under the Term Loan Credit Agreement will be entitled to take various actions, including the termination of any undrawn commitments and the acceleration of amounts due under the Term Loan Credit Agreement.
The Term Loan Facility was issued at a $2.5 million discount and we capitalized an additional $0.7 million in debt issuance costs. In January 2026, we capitalized an additional $0.1 million in debt issuance costs as part of the borrowings under the Delayed Draw Term Loan. These costs are recorded as a direct reduction to the carrying amount of the associated long-term debt and amortized over the term of the debt.
ABL Facility
On December 30, 2024, we entered into a Revolving Credit and Security Agreement by and among the Company and PNC Bank National Association as lender and administrative agent (in such capacity, the "ABL Agent") (as amended from time to time, including by the First Amendment to Revolving Credit and Security Agreement, dated as of April 16, 2025, the "ABL Credit Agreement"). The ABL Credit Agreement established a new $50 million senior secured asset backed credit facility (the "ABL Facility") which provides for senior secured revolving loans ("Revolving Loan") in the amount of $50.0 million, and permits the issuance of letters of credit thereunder subject to a $15.0 million sublimit. The availability under the ABL Facility is limited by a borrowing base calculation derived from accounts receivable and inventory held in the United States, less customary reserves and other items. The final maturity date of the ABL Facility is the earlier of: 1) December 30, 2029; or 2) 91 days prior to the loan maturity date of the Term Loan Facility.
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.
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.
The ABL Credit Agreement includes customary representations, warranties and covenants, including, but not limited to, a financial covenant as to a minimum Fixed Charge Coverage Ratio (as defined in the ABL Credit Agreement). We were in compliance with the financial covenants of the ABL Facility as of March 31, 2026.
Our obligations under the ABL Credit Agreement are guaranteed by certain of our subsidiaries and are required to be guaranteed by certain of our later formed or acquired subsidiaries (collectively, the "Guarantors"). Our obligations under the ABL Credit Agreement are collateralized by substantially all of our and the Guarantors' assets. The ABL Agent, for itself and on behalf of the Lenders, has a first lien on accounts receivable and inventory.
The ABL Credit Agreement contains customary events of default relating to, among other things, payment defaults, breach of covenants, cross acceleration to material indebtedness, bankruptcy-related defaults, judgment defaults, and the occurrence of certain change of control events. If an event of default occurs, the lenders under the ABL Credit Agreement will be entitled to take various actions, including the termination of any undrawn commitments and the acceleration of amounts due under the ABL Credit Agreement.
Sale Leaseback Transactions
During 2025 and 2024, 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 9.17%, 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.
Working Capital Management
We manage our liquidity and working capital to fund our operations, meet debt service obligations, finance capital expenditures and fund other business initiatives. The cost of raw materials, primarily for steel, copper and precious metals is subject to price volatility due to tariffs, supply chain constraints and market supply and demand. A significant increase in the prices we pay for raw materials may cause our working capital needs to increase, which could reduce our liquidity and borrowing availability.
Accounts Receivable Sales Programs
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.
Other Receivables
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.
Seasonality and Fluctuation in Quarterly Results
General economic conditions impact our business and financial results, and certain businesses experience seasonal and other trends related to the industries and end markets that they serve. For example, European sales are often weaker in the summer months as customers slow production, and sales to original equipment manufacturers are often stronger immediately preceding and following the launch of new products. However, as a whole, we are not materially impacted by seasonality.
Critical Accounting Estimates
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.
NN Inc. published this content on May 06, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 06, 2026 at 21:22 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]