NN Inc Report Second Quarter 2006 Results

NN, Inc. (Nasdaq: NNBR) today reported its financial results for the second quarter ended June 30, 2006.Net sales for the second quarter of 2006 decreased slightly to $83.6 million from $83.8 million for the same period of 2005.Net income for the second quarter of 2006 totaled $3.5 million, or $0.20 per diluted share, compared to $3.3 million, or $0.19 per diluted share for the second quarter of 2005, an increase of 6.1% and 5.3%, respectively. Net sales for the first half of 2006 were $169.6 million, compared to $170.5 million for the same period of 2005.Net income for the first half of 2006 totaled $8.7 million, or $0.50 per diluted share, compared to $7.3 million, or $0.43 per diluted share for the same period of 2005, an increase of 19.2% and 16.3%, respectively.Net income for the first half of 2006 includes an after-tax gain on the sale of excess land of $1.5 million or $0.08 per diluted share and an after-tax write-off of certain unused equipment of $667,000 or $0.04 per diluted share, both recorded in the first quarter. James H. Dorton, Vice President and Chief Financial Officer, commented, revenues of $169.6 million for the first half of 2006 were down compared to $170.5 million for the same period in 2005.Increased revenues from our global business units for the six month period were offset by the negative effects of currency translation.In the absence of this currency movement during the first half of the year, revenues would have been approximately $175.0 million, an increase of 2.6% over the same period in 2005. As a percentage of net sales, 2006 second quarter cost of products sold was 77.7% compared to 78.8% recorded in the prior year.Year-to-date cost of products sold was 77.2% in 2006 as compared to 78.4% for the same period last year.The improvement inour cost of products sold relative to sales was the result of the timing of material price pass through to certain customers and Level 3 cost reduction and efficiency initiatives. Selling, general and administrative expenses were $7.1 million or 8.5% of net sales for the second quarter of 2006 as compared to $7.3 million, or 8.7% of net sales for the second quarter of 2005.Selling, general and administrative expenses for the first half of 2006 remained on plan at 8.7% of net sales as compared to 8.7% of net sales for the same period in 2005. Mr. Dorton continued, during the second quarter we purchased 36,347 shares under our previously announced stock repurchase plan which brings the total shares purchased through the end of June 2006 to 56,821 shares.The program allows for the purchase of up to $10.0 million of the Company outstanding stock.This program commenced in mid-March of 2006 and will continue for 18 months thereafter. We have paid down debt by $3.7 million during the first half of the year.At this rate, we are running slightly behind our debt reduction goal of approximately $10.0 million for the full year of 2006.This was due to traditionally higher working capital needs for the first half of the year; however, we remain committed to our goal and will take measures in the second half of the year to more aggressively manage our working capital needs.The $10.0 million debt reduction goal assumes the full funding of the stock repurchase plan of up to $10.0 million and excludes the impact of any potential new acquisitions that may occur during the year. Mr. Dorton concluded, at the end of the quarter, the remaining balance of our variable rate revolving credit facility was $18.9 million.On June 30, 2007, this credit facility matures; therefore, we have begun the process of negotiating with a bank group a new syndicated five year, $90.0 million loan agreement.This new credit facility will provide us with the necessary capital structure to execute our strategic growth plan.We anticipate the completion of this new credit facility in the third quarter of this year. Roderick R. Baty, Chairman and Chief Executive Officer, commented, or the remainder of 2006, we expect similar economic conditions to those we have experienced in the U.S. and Europe for the first six months of this year.Therefore, our guidance for the full year remains unchanged with estimated total year revenues at approximately $325 million and full year earnings to be in the range of $0.86 to $0.92 per diluted share. Mr. Baty further commented, while we remain focused on the disciplined management of our current operations, we are pursuing new opportunities to grow our business which are consistent with our recently developed five year strategic growth plan.To execute this plan, we will focus on three major areas of potential growth: further geographic expansion of existing bearing component products; acquisitive growth of both captive and independent businesses within bearing components, and identified acquisition opportunities that leverage our competencies in related high precision steel component manufacturing. Mr. Baty concluded, our five year objectives are to grow revenues and earnings at a compound annual rate which would double the size of the Company over the five year planning horizon.We believe the current plan provides a clear strategic direction to achieve our objectives and to create long-term value for our customers, employees and shareholders.? NN, Inc. manufacturers and supplies high precision bearing components consisting of balls, rollers, seals, and retainers for leading bearing manufacturers on a global basis.In addition, the company manufactures a variety of other plastic components.NN, Inc. had sales of US $321 million in 2005.