NN Inc.
10/29/2025 | Press release | Distributed by Public on 10/29/2025 14:39
Quarterly Report for Quarter Ending September 30, 2025 (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 and nine months ended September 30, 2025. The financial information as of September 30, 2025, should be read in conjunction with the consolidated financial statements for the year ended December 31, 2024, contained in our Form 10-K for the year ended December 31, 2024 ("2024 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. These statements may discuss goals, intentions and expectations as to future trends, plans, events, results of operations or financial condition, or state other information relating to the Company, based on current beliefs of management as well as assumptions made by, and information currently available to, management. 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 other similar words, phrases or expressions. 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; the impacts of pandemics, epidemics, disease outbreaks and other public health crises on our financial condition, business operations and liquidity; the potential impacts of tariffs on the U.S. economy, the economy of other countries in which we conduct operations and our industry, as well as the potential implications and ramifications of tariffs on our business and the local and global supply chains supporting the same, and our ability to mitigate any adverse impacts of such; competitive influences; risks that current customers will commence or increase captive production; risks of capacity underutilization; quality issues; material changes in the costs and availability of raw materials; economic, social, political and geopolitical instability, military conflict, currency fluctuation, and other risks of doing business outside of the United States; inflationary pressures and changes in the cost or availability of 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 level of our indebtedness; the restrictions contained in our debt agreements; our ability to obtain financing at favorable rates, if at all, and to refinance existing debt as it matures; our ability to secure, maintain or enforce patents or other appropriate protections for our intellectual property; new laws and governmental regulations; the impact of climate change on our operations; uncertainty of government policies and actions in respect to global trade, tariffs and international trade agreements; and cyber liability or potential liability for breaches of our or our service providers' information technology systems or business operations disruptions. The foregoing factors should not be construed as exhaustive and 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 2024 Annual Report and in this Quarterly Report. Any forward-looking statement speaks only as of the date of this Quarterly Report, and we undertake 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. New risks and uncertainties may emerge from time to time, and it is not possible for us to predict their occurrence or how they will affect the Company. We qualify all forward-looking statements by these cautionary statements.
For additional information concerning such risk factors and cautionary statements, please see the sections titled "Item 1A. Risk Factors" in the 2024 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. 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 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 will reduce costs and improve operational efficiency. During the first quarter of 2025, we ceased production activities at our Mobile Solutions plants in Juarez, Mexico and Dowagiac, Michigan. Additionally, 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 September 30, 2025 compared to the Three Months Ended September 30, 2024
Consolidated Results
| Three Months Ended September 30, | |||||||||||||||||
| 2025 | 2024 | $ Change | |||||||||||||||
| Net sales | $ | 103,882 | $ | 113,587 | $ | (9,705) | |||||||||||
| Cost of sales (exclusive of depreciation and amortization shown separately below) | 86,410 | 97,131 | (10,721) | ||||||||||||||
| Selling, general, and administrative expense | 11,059 | 10,257 | 802 | ||||||||||||||
| Depreciation and amortization | 9,064 | 10,844 | (1,780) | ||||||||||||||
| Other operating income, net | (404) | (895) | 491 | ||||||||||||||
| Loss from operations | (2,247) | (3,750) | 1,503 | ||||||||||||||
| Interest expense | 5,666 | 5,404 | 262 | ||||||||||||||
| Other income, net | (70) | (5,315) | 5,245 | ||||||||||||||
| Loss before provision for income taxes and share of net income from joint venture | (7,843) | (3,839) | (4,004) | ||||||||||||||
| Provision for income taxes | (815) | (903) | 88 | ||||||||||||||
| Share of net income from joint venture | 1,979 | 2,185 | (206) | ||||||||||||||
| Net loss | $ | (6,679) | $ | (2,557) | $ | (4,122) | |||||||||||
Net Sales. Net sales decreased by $9.7 million, or 8.5%, during the three months ended September 30, 2025, compared to the three months ended September 30, 2024, primarily due to the rationalization of underperforming business and plants and lower volumes. These decreases were partially offset by contribution of new business launches, higher precious metals pass-through pricing and favorable foreign exchange effects of $0.8 million.
Cost of Sales.Cost of sales decreased by $10.7 million, or 11.0%, during the three months ended September 30, 2025, compared to the three months ended September 30, 2024, primarily due to the decrease in sales.
Selling, General, and Administrative Expense.Selling, general, and administrative expense increased by $0.8 million during the three months ended September 30, 2025, compared to the three months ended September 30, 2024, primarily due to payroll and benefits compensation expense related to increase in expected bonus payments in our Power segment.
Depreciation and amortization. Depreciation and amortization decreased by $1.8 million during the three months ended September 30, 2025, compared to the three months ended September 30, 2024, primarily due to impact of historical purchase accounting step-up basis becoming fully depreciated in the second half of 2024.
Interest Expense.Interest expense increased by $0.3 million during the three months ended September 30, 2025, compared to the three months ended September 30, 2024, primarily due to average debt balances, interest rates and amortization of debt issuance costs.
| Three Months Ended September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Interest on debt | $ | 5,724 | $ | 4,990 | |||||||
| Gain recognized on interest rate swap | - | (150) | |||||||||
| Amortization of debt issuance costs and discount | 191 | 612 | |||||||||
| Capitalized interest | (207) | (224) | |||||||||
| Other | (42) | 176 | |||||||||
| Total interest expense | $ | 5,666 | $ | 5,404 | |||||||
Other Income, Net. Other income, net decreased by $5.2 million during the three months ended September 30, 2025, compared to the three months ended September 30, 2024, primarily due to lower noncash derivative mark-to-market losses recognized during the current quarter compared to the third quarter of 2024.
Provision For Income Taxes. Our effective tax rate was (10.4)% for the three months ended September 30, 2025, compared to (23.5)% for the three months ended September 30, 2024. The rate for the three months ended September 30, 2025 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 JV was decreased during the three months ended September 30, 2025, compared to the three months ended September 30, 2024. The JV, in which we own a 49% investment, recognized net sales of $33.3 million and $32.4 million for the three months ended September 30, 2025 and 2024, respectively.
Results by Segment
MOBILE SOLUTIONS
| Three Months Ended September 30, | |||||||||||||||||
| 2025 | 2024 | $ Change | |||||||||||||||
| Net sales | $ | 59,117 | $ | 70,678 | $ | (11,561) | |||||||||||
| Loss from operations | $ | (2,854) | $ | (1,441) | $ | (1,413) | |||||||||||
Net sales decreased by $11.6 million, or 16.4%, during the three months ended September 30, 2025, compared to the three months ended September 30, 2024, primarily due to rationalization of underperforming business and plants, lower volume in North America customers and favorable foreign exchange effects of $0.8 million.
Loss from operations increased by $1.4 million or 98.1% during the three months ended September 30, 2025, compared to the same period in the prior year, primarily related to reduced revenue resulting in lower gross profits and an increase in China related operational costs.
POWER SOLUTIONS
| Three Months Ended September 30, | |||||||||||||||||
| 2025 | 2024 | $ Change | |||||||||||||||
| Net sales | $ | 44,948 | $ | 42,935 | $ | 2,013 | |||||||||||
| Income from operations | $ | 5,432 | $ | 2,505 | $ | 2,927 | |||||||||||
Net sales increased by $2.0 million, or 4.7%, during the three months ended September 30, 2025 compared to the three months ended September 30, 2024, due to increase in precious metals pass-through pricing offset by lower volumes and favorable foreign exchange effects of $0.1 million.
Income from operations increased by $2.9 million during the three months ended September 30, 2025 compared to the same period in the prior year, primarily due improved margins and lower compensation costs due to headcount reductions.
Nine Months Ended September 30, 2025 compared to the Nine Months Ended September 30, 2024
Consolidated Results
| Nine Months Ended September 30, | |||||||||||||||||
| 2025 | 2024 | $ Change | |||||||||||||||
| Net sales | $ | 317,492 | $ | 357,777 | $ | (40,285) | |||||||||||
| Cost of sales (exclusive of depreciation and amortization shown separately below) | 267,755 | 299,474 | $ | (31,719) | |||||||||||||
| Selling, general, and administrative expense | 34,325 | 37,116 | (2,791) | ||||||||||||||
| Depreciation and amortization | 26,756 | 35,152 | (8,396) | ||||||||||||||
| Other operating income, net | (2,843) | (3,285) | 442 | ||||||||||||||
| Loss from operations | (8,501) | (10,680) | 2,179 | ||||||||||||||
| Interest expense | 16,517 | 16,643 | (126) | ||||||||||||||
| Loss on extinguishment of debt | 3,007 | - | 3,007 | ||||||||||||||
| Other income, net | (2,858) | (4,623) | 1,765 | ||||||||||||||
| Loss before provision for income taxes and share of net income from joint venture | (25,167) | (22,700) | (2,467) | ||||||||||||||
| Provision for income taxes | (2,898) | (1,194) | (1,704) | ||||||||||||||
| Share of net income from joint venture | 6,599 | 6,597 | 2 | ||||||||||||||
| Net loss | $ | (21,466) | $ | (17,297) | $ | (4,169) | |||||||||||
Net Sales. Net sales decreased by $40.3 million, or 11.3%, during the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, primarily due to the rationalization of underperforming business and plants, the sale of our Lubbock operations, lower volumes and unfavorable foreign exchange effects of $2.7 million. These decreases were partially offset by contribution of new business launches and higher precious metals pass-through pricing.
Cost of Sales.Cost of sales decreased by $31.7 million, or 10.6%, during the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, primarily due to the decrease in sales.
Selling, General, and Administrative Expense.Selling, general, and administrative expense decreased by $2.8 million during the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, primarily due to lower compensation expense due to a reduction in headcount.
Depreciation and amortization. Depreciation and amortization decreased by $8.4 million during the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, primarily due to impact of historical purchase accounting step-up basis becoming fully depreciated in the second half of 2024.
Interest Expense.Interest expense decreased by $0.1 million during the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, primarily due to lower average debt balances and lower interest rates. These reductions were partially offset by the gain recognized on interest rate swap in 2024 and a lower amount of capitalized interest during 2025.
| Nine Months Ended September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Interest on debt | $ | 15,506 | $ | 16,345 | |||||||
| Gain recognized on interest rate swap | - | (1,048) | |||||||||
| Amortization of debt issuance costs and discount | 1,215 | 1,718 | |||||||||
| Capitalized interest | (614) | (960) | |||||||||
| Other | 410 | 588 | |||||||||
| Total interest expense | $ | 16,517 | $ | 16,643 | |||||||
Loss on Extinguishment of Debt. Loss on extinguishment of debt was $3.0 million during the nine months ended September 30, 2025 due to the termination of the 2021 Term Loan Facility, see Note 8 to the Condensed Consolidated Financial Statements.
Other Income, Net. Other income, net changed unfavorably by $1.8 million during the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, primarily due to noncash derivative mark-to-market gains recognized during 2025 and unfavorable foreign exchange effects associated with intercompany borrowings.
Provision for Income Taxes. Our effective tax rate was (11.5)% for the nine months ended September 30, 2025, compared to (5.3)% for the nine months ended September 30, 2024. The rate for the nine months ended September 30, 2025 was
unfavorably impacted due to the accrual of tax on non-permanently reinvested unremitted earnings of foreign subsidiaries and by the limitation on 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 JV remained unchanged during the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. The JV, in which we own a 49% investment, recognized net sales of $97.7 million and $95.1 million for the nine months ended September 30, 2025 and 2024, respectively.
Results by Segment
MOBILE SOLUTIONS
| Nine Months Ended September 30, | |||||||||||||||||
| 2025 | 2024 | $ Change | |||||||||||||||
| Net sales | $ | 184,752 | $ | 216,593 | $ | (31,841) | |||||||||||
| Loss from operations | $ | (6,651) | $ | (5,214) | $ | (1,437) | |||||||||||
Net sales decreased by $31.8 million, or 14.7%, during the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, primarily due to rationalization of underperforming business and plants, lower volume in North America customers and unfavorable foreign exchange effects of $1.5 million.
Loss from operations increased by $1.4 million or 27.6% during the nine months ended September 30, 2025 and 2024, primarily related to lower gross profits and an increase in China costs.
POWER SOLUTIONS
| Nine Months Ended September 30, | |||||||||||||||||
| 2025 | 2024 | $ Change | |||||||||||||||
| Net sales | $ | 133,096 | $ | 141,324 | $ | (8,228) | |||||||||||
| Income from operations | $ | 14,237 | $ | 11,804 | $ | 2,433 | |||||||||||
Net sales decreased by $8.2 million, or 5.8%, during the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, primarily due to the sale of our Lubbock operations in 2024, lower volumes and unfavorable foreign exchange effects of $1.2 million. These decreases were partially offset by higher precious metals pass-through pricing.
Income from operations increased by $2.4 million during the nine months ended September 30, 2025 compared to the same period in the prior year, primarily due to lower compensation costs and higher precious metals pass-through pricing. This increase was partially offset by the sale of our Lubbock operations.
Changes in Financial Condition from December 31, 2024 to September 30, 2025
Overview
From December 31, 2024 to September 30, 2025, total assets decreased by $5.9 million, primarily due to decrease in property, plant and equipment, right-of-use assets, intangible assets offset by increases in accounts receivable and inventories.
From December 31, 2024 to September 30, 2025, total liabilities increased by $5.2 million, primarily due to increases in accounts payable, other current liabilities and long-term debt. These increases were partially offset by a decrease in accrued salaries, wages and benefits due to reduced compensation costs.
Working capital, which consists of current assets less current liabilities, decreased by $4.6 million, from December 31, 2024 to September 30, 2025. The change was primarily due to a decrease in cash and accrued salaries, wages and benefits offset by an increase in accounts payable and other current portion of debt.
Cash Flows
Cash provided by operations was $7.1 million for the nine months ended September 30, 2025, compared with $4.4 million for the nine months ended September 30, 2024. The favorable change is primarily due to improved management of working capital.
Cash used in investing activities decreased by $11.1 million during the nine months ended September 30, 2025, compared with the same period in 2024, due to sale of business in 2024 and fewer purchases of property, plant and equipment in 2025.
Cash used in financing activities decreased by $10.4 million during the nine months ended September 30, 2025 and 2024. The increase in proceeds from the new term loan in 2025 resulted in a decrease in net debt payments, which was offset by the proceeds from the sale-leaseback transactions in 2024 that did not occur in 2025.
Liquidity and Capital Resources
Credit Facilities
On April 16, 2025, we entered into a Term Loan Credit Agreement by and among the Company, the lenders from time to time party thereto and Alter Domus (US) LLC, as administrative agent for the Lenders. The Term Loan Credit Agreement establishes a new, $128.0 million senior secured Term Loan Facility consisting of (i) $118.0 million of term loans funded in full on the Closing Date and (ii) $10.0 million of delayed draw term loan commitments. The Term Loans mature on April 16, 2030. We used the net proceeds from the Closing Date Term Loan to repay all of our outstanding obligations under our previous 2021 Term Loan Facility.
The principal amount outstanding under our Term Loan Facility as of September 30, 2025, was $119.8 million, without regard to unamortized debt issuance costs and discount. As of September 30, 2025, there were no outstanding borrowings under the ABL Facility and $29.3 million available for future borrowings under the ABL Facility. This amount of borrowing capacity is net of $10.4 million of outstanding letters of credit at September 30, 2025, which are considered as usage of the ABL Facility.
Outstanding borrowings under the Term Loan Facility currently bear interest at either: 1) one-month, three-month, or six-month term secured overnight finance rate with a duration adjustment, subject to a 2.00% floor, plus an applicable margin of 9.25%; or 2) the greater of various benchmark rates, with certain adjustments, plus an applicable margin of 8.25%. For interest payments due before April 16, 2027, we may elect to pay a portion of interest in-kind, 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. 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.
The ABL Facility bears interest on a variable borrowing rate based on either: 1) the one, three or six month SOFR plus 1.50%, plus an adjustment of 0.10%; 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. We pay a commitment fee of 0.25% for unused capacity under the ABL Facility.
We were in compliance with the financial covenants of the Term Loan Facility and ABL Facility as of September 30, 2025. Both credit facilities allow for optional expansion of available borrowings, subject to certain terms and conditions.
Sale Leaseback Transactions
During 2024 and 2025, 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 9.500%, requires monthly payments and terminate in 2044. In addition, we received $10.6 million from the sale and leaseback of equipment. These financing obligations have a weighted average effective interest rate of 9.100%, require monthly payments and have a weighted average remaining term of 3.5 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 customer. 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 $12.7 million tax refund receivable at September 30, 2025, 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 2024 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 2024 Annual Report. There have been no material changes to our significant accounting policies or critical accounting estimates during the nine months ended September 30, 2025.
NN Inc. published this content on October 29, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on October 29, 2025 at 20:39 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]