NN, Inc. (Nasdaq: NNBR) today reported its financial results for the first quarter ended March 31, 2009. Net sales for the first quarter of 2009 were $57.9 million, down $63.6 million, or 52.3% as compared to $121.5 million for the same period of 2008. Approximately $61.0 million of the decrease was attributed to the continued reduction in demand for the Company’s products caused by the extremely weak global economies and automotive and industrial end markets. Foreign currency translation accounted for an additional $4.4 million of the reduction in net sales. These decreases were slightly offset by positive pricing and the pass through of raw material price increases of $1.8 million.
Net loss for the first quarter of 2009 was $9.5 million, or $0.59 per diluted share as compared to net income of $5.1 million, or $0.32 per diluted share for the first quarter of 2008. Non-operating items included in the results for the quarter were the write-off of unamortized loan costs associated with the prior credit agreement of $0.4 million after-tax, or $0.02 per diluted share and restructuring costs associated with the previously announced closing of our Kilkenny, Ireland and Hamilton, Ohio facilities of $0.5 million after-tax, or $0.03 per diluted share.
James H. Dorton, Vice President and Chief Financial Officer commented, “The negative effects of the sudden and dramatic reductions in demand that we first felt in the fourth quarter of 2008 continued to accelerate into the first quarter of 2009. Further, we believe that in addition to an actual decline in demand of approximately 30% to 40%, our markets are experiencing a significant inventory destocking effect throughout the supply chain. This effect has resulted in an additional sales decline of 10% to 20%, which accounts for our 52% decline in revenue from the first quarter of 2008.”
Mr. Dorton continued, “As a percentage of net sales, 2009 first quarter cost of goods sold was 96.8% as compared to 79.4% for last year’s first quarter. This reflects the impact of the deleveraging of production efficiencies, mainly in fixed costs and variable labor, due to the large drop in volume we have experienced. As a percentage of net sales, selling, general and administrative expenses for the first quarter were 11.9% as compared to 8.4% for the same period in 2008, again reflecting the deleveraging effect of the volume reductions. It is important to note that SG&A expenses were actually down by approximately $3.3 million over the same period in 2008. Approximately $0.5 million of the reduction was due to the effect of foreign currency exchange rates with the remaining $2.8 million due to salary reductions and discretionary spending cuts.”
Mr. Dorton concluded, “On March 16 of this year, we announced that we had revised and amended our credit agreements. The terms of these agreements were revised to reflect the current economic and business conditions and to assure that we have sufficient credit available to us to manage through the current economic recession.”
Roderick R. Baty, Chairman and Chief Executive Officer commented, “Although we anticipate the destocking of inventory that has negatively affected demand from our customers during the last two quarters to end in the second quarter, we have seen no signs that the current economic conditions will improve in the near term. We therefore are assuming the worst case scenario, which is that the levels of demand we experienced in the first quarter will persist for the remainder of 2009. Consequently, we will continue to aggressively cut costs and maximize our cash flow to protect our liquidity situation. These steps will help to ensure that NN will emerge from this recession as a stronger and leaner Company.”
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 $425 million in 2008.
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