What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2021-03-15 compared with 2020-03-16 · 62 added, 79 removed, 163 unchanged (46% of the section changed)

is a global diversified industrial company that combines advanced engineering and production capabilities with in-depth materials science expertise to design and manufacture high-precision solutions, components and assemblies for the medical, aerospace and defense, electrical, automotive and general industrial markets.

As used in this Annual Report on Form 10-K (this “Annual Report”), the terms “NN,” the “Company,” “we,” “our,” or “us” refer to NN, Inc.

and its subsidiaries.

We have 50 facilities in North America, Europe, South America, and Asia.

is a global 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 primarily for the electrical, automotive, general industrial, aerospace and defense, and medical markets.

As used in this Annual Report on Form 10-K (this “Annual Report”), the terms “NN,” the “Company,” “we,” “our,” or “us” refer to NN, Inc., and its subsidiaries.

We have 32 facilities in North America, Europe, South America, and China.

On October 6, 2020, we completed the sale of our Life Sciences business (the “Life Sciences business”) to affiliates of American Securities LLC for approximately $753.3 million.

The proceeds from the sale of the Life Sciences business were used to prepay $700.0 million in the aggregate on the Senior Secured Term Loan and the Incremental Term Loan immediately following the sale.

We also paid in full the outstanding balance on the Senior Secured Revolver.

The sale of the Life Sciences business furthers management’s strategy to improve liquidity and creates the financial flexibility to pursue key growth areas in the Mobile Solutions and Power Solutions segments.

Our enterprise and management structure is designed to accelerate growth and further balance our portfolio by aligning our strategic assets and businesses.

Our businesses are organized into the Life Sciences, Mobile Solutions, and Power Solutions groups and are based principally on the end markets they serve.

Life Sciences is focused on growth in the medical end market, primarily in the orthopaedics and medical/surgical end markets.

Our businesses are organized into the Mobile Solutions and Power Solutions groups and are based principally on the end markets they serve.

Mobile Solutions is focused on growth in the general industrial and automotive end markets.

1 unchanged sentence

Business Segments and Products

Life Sciences

Life Sciences is focused on growth in the medical end market, primarily in the orthopaedics and medical/surgical end markets.

Within this group we combine advanced engineering and production capabilities to design and manufacture a broad range of high-precision metal and plastic components, assemblies, and finished devices.

We manufacture a variety of components, assemblies, and instruments, such as surgical knives, bioresorbable implants, surgical staples, cases and trays, orthopaedic implants and tools, laparoscopic devices, and drug delivery devices for the orthopaedics and medical/surgical end markets.

Mobile Solutions

3 unchanged sentences

Power Solutions

Power Solutions is focused on growth in the electrical and aerospace and defense end markets.

Power Solutions is focused on growth in the electrical and aerospace and defense end markets, while also serving the automotive and medical end markets.

Within this group we combine materials science expertise with advanced engineering and production capabilities to design and manufacture a broad range of high-precision metal and plastic components, assemblies, and finished devices used in applications ranging from power control to flight control and for military devices.

We manufacture a variety of products including electrical contacts, connectors, contact assemblies, and precision stampings for the electrical end market and high precision products for the aerospace and defense end markets utilizing our extensive process technologies for optical grade plastics, thermally conductive plastics, titanium, Inconel, magnesium, and electroplating.

manufacture a variety of products including electrical contacts, connectors, contact assemblies, and precision stampings for the electrical end market and high precision products for the aerospace and defense end market utilizing our extensive process technologies for optical grade plastics, thermally conductive plastics, titanium, Inconel, magnesium, and electroplating.

Our medical business includes the production of a variety of tools and instruments for the orthopaedics and medical/surgical end markets.

Competitive Strengths

2 unchanged sentences

Our technology platform consists of high precision machining, progressive stamping, injection molding, laser welding, material science, assembly, and design optimization.

Unique specialty machine building capabilities, in-house tool design and process know-how create trade secrets that enable consistent production tolerances of less than one micron while producing millions of parts per day.

In-house tool design and process know-how create trade secrets that enable consistent production tolerances of less than one micron while producing millions of parts per day.

Parts are manufactured to application-specific customer design and co-design standards that are developed for a specific use.

40 unchanged sentences

The Asian and South American facilities, we believe, have significant growth potential as local customer bases expand and the markets for high-precision products grow in those regions.

We are well-positioned to take advantage of synergies between our Mobile Solutions and Power Solutions businesses as we expand new technologies in the electric vehicle, hybrid vehicle, and aerospace and defense markets.

Proven and experienced management team

4 unchanged sentences

DeByle has extensive experience in finance leadership roles at global manufacturers and most recently served as Chief Financial Officer, Vice President and Treasurer of Standex International since 2008.

Christopher Qualters was named Executive Vice President of Life Sciences in November 2019, having previously served as Executive Vice President of Power Solutions since 2018.

Qualters joined us in 2014 as part of the Autocam acquisition, a business at which he had 10 years of experience in sales and marketing.

John Buchan was named Executive Vice President of Mobile Solutions in September 2019 and Executive Vice President of Mobile Solutions and Power Solutions in November 2019.

Buchan joined us in 2014 as part of the Autocam acquisition, a business at which he had 18 years of experience in operations.

We believe that our current management team has the necessary talent and experience to lead our previously announced evaluation of strategic alternatives while profitably operating and growing the business.

Research and Development and Product Engineering

Our research and development and product engineering efforts focus on enhancing our existing products and developing patented products, particularly in the medical industry, that can be presented to and sold by our customers.

Our Life Sciences business has developed a portfolio of patented and branded medical products that we manufacture for customers and that are sold through their channels.

Our engineering teams focus on working closely with our customers to develop engineered solutions to improve our customers’ products.

Our products are supplied primarily to manufacturers for use in a broad range of industrial applications, including medical;

We believe that our current management team has the necessary talent and experience to profitably operate and grow the business.

Our products are supplied primarily to manufacturers for use in a broad range of industrial applications, including automotive;

agricultural;

3 unchanged sentences

heating, ventilation, and air conditioning;

fluid power and diesel engines.

and fluid power and diesel engines.

Sales to each of our top ten customers are made to multiple customer locations and divisions throughout the world.

1 unchanged sentence

In 2020, 70% of our products were sold to customers in North America, 8% to customers in Europe, 15% to customers in Asia, and the remaining 7% to customers in South America.

During the year ended December 31, 2019 , we recognized sales to affiliates of Johnson & Johnson of $93.1 million , or 11.0% of consolidated net sales.

Revenues from this customer are in our Life Sciences and Power Solutions groups.

We sell our products to most of our largest customers under either sales contracts or agreed upon commercial terms.

6 unchanged sentences

This strategy focuses on relationships with key customers that require the production of technically difficult parts and assemblies, enabling us to take advantage of our strengths in custom product development, equipment and tool design, component assembly, and machining processes.

As of December 31, 2019 , we employed a total of 5,418 full and part-time employees and 369 temporary workers.

Of our total employment, 20% are management employees and 80% are production employees.

The employees of the France, Brazil, and Brainin de Mexico plants are unionized.

A small group of employees at our Bridgeport, Connecticut, plant is also unionized.

Human Capital Management

Our business results depend in part on our ability to successfully manage our human capital resources, including attracting, identifying, and retaining key talent.

Factors that may affect our ability to attract and retain qualified employees include employee morale, our reputation, competition from other employers, and availability of qualified individuals.

As of December 31, 2020, we employed a total of 3,081 full and part-time employees and 409 temporary workers, which includes approximately 1,460 employees in the U.S.

and approximately 2,030 employees in other countries employed by our international subsidiaries.

Of our total employment, approximately 14% are management employees and 86% are production employees.

Our employees in the France, Brazil, and Brainin de Mexico plants are subject to labor council relationships that vary due to the diverse countries in which we operate.

We believe we have a good working relationship with our employees and the unions that represent them.

Life Sciences

Life Sciences operates in intensely competitive but very fragmented supply chains.

Our primary competitors t are AIP Precision Machining;

Avalign Technologies, Inc.;

Cretex Companies, Inc.;

EPTAM Precision Solutions;

MTD Micro Molding;

Orchid Orthopedic Solutions;

Tecomet, Inc.;

and Viant Medical, Inc.

We compete against other companies depending on the type of product offered or the geographic area served as well as our customers with in-house manufacturing capabilities.

Customers will choose manufacturers based on reputation, quality, delivery, responsiveness, breadth of capabilities, including design and engineering support, price, and relationships.

We believe that our ability to assist customers through all phases of the product life cycle differentiates us from most of our competitors.

In response to the COVID-19 pandemic, we implemented significant changes that we determined were in the best interest of our employees and which comply with government orders in all the states and countries where we operate.

In an effort to keep our employees safe and to maintain operations during the COVID-19 pandemic, we implemented a number of new health-related measures, including the requirement to wear face-masks at all times while on company property, temperature-taking protocols, increased hygiene, cleaning and sanitizing procedures at all locations, social-distancing protocols, restrictions on visitors to our facilities, and limiting in-person meetings and other gatherings.

We believe diversity and inclusion are at the core of our values and strategic business priorities.

Throughout our business, we champion equality, supporting parity for women and under-represented groups as we work to create ethical, safe, and supportive workplaces where our employees thrive.

We believe a diverse and inclusive workplace results in business growth and encourages increased innovation, retention of talent, and a more engaged workforce.

Respect for human rights is fundamental to our business and its commitment to ethical business conduct.

Mobile Solutions

In the market in which Mobile Solutions operates, internal production of components by our customers can impact our business as the customers weigh the risk of outsourcing strategically critical components or producing in-house.

Our primary competitors are Anton Häring KG, A.

Our primary competitors are:

Anton Häring KG;

Berger Holding GmbH & Co.

KG, Brovedani Group, Burgmaier Technologies GmbH & Co.

KG, CIE Automotive, S.A., IMS Companies, and MacLean-Fogg Component Solutions.

Brovedani Group, Burgmaier Technologies GmbH & Co.

CIE Automotive, S.A.;

IMS Companies;

and MacLean-Fogg Component Solutions.

We believe that we generally win new business on the basis of technical competence and our proven track record of successful product development.

2 unchanged sentences

We must compete with numerous companies in each industry market segment.

Our primary competitors are Checon Corporation;

Our primary competitors are:

Checon Corporation;

Deringer-Ney, Inc.;

9 unchanged sentences

Raw Materials

Life Sciences

Due to the technically challenging requirements of our customers products, we purchase our raw materials from a limited number of suppliers.

Many of the raw materials that are used in our products are subject to fluctuations in market price, particularly titanium and precious metals such as platinum.

Generally, raw material prices are passed through to our customers to offset market fluctuations.

Because of the lengthy process required to qualify raw materials with our customers, we cannot change suppliers easily.

However, we have not experienced any significant interruptions or delays in obtaining critical raw materials.

Mobile Solutions

8 unchanged sentences

Generally, we do not enter into written supply contracts with our suppliers or commit to maintain minimum monthly purchases of materials.

However, we carefully manage raw material price volatility, particularly with respect to precious metals, through the use of consignment agreements.

However, we carefully manage raw material price volatility, particularly with respect to precious metals, through the use of

consignment agreements.

In effect, we contract the precious metals for our own stock and buy the raw materials on the same day customer shipments are priced, thereby eliminating speculation.

15 unchanged sentences

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, medical device sales are often stronger in the third calendar quarter, and sales to original equipment manufacturers are often stronger immediately preceding and following the launch of new products.

For example, European sales are often weaker in the summer months as customers slow production, automotive sales tend to slow in July and December, 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.

Environmental Compliance

Our operations and products are subject to extensive federal, state and local regulatory requirements both domestically and abroad relating to pollution control and protection of the environment.

Government Regulations

Our operations and products are subject to extensive federal, state and local regulatory requirements both domestically and abroad.

For example, our business activities are subject to various laws and regulations relating to pollution control and protection of the environment.

These laws and regulations govern, among other things, discharges to air or water, the generation, storage, handling, and use of automotive hazardous materials and the handling and disposal of hazardous waste generated at our facilities.

3 unchanged sentences

We maintain a compliance program to assist in preventing and, if necessary, correcting environmental problems.

Based on information compiled to date, management believes that our current operations are in substantial compliance with applicable environmental laws and regulations, the violation of which could have a material adverse effect on our business and financial condition.

We cannot assure that currently unknown matters, new laws and regulations, or stricter interpretations of existing laws and regulations will not materially affect our business or operations in the future.

More specifically, although we believe that we dispose of waste in material compliance with applicable environmental laws and regulations, we cannot be certain that we will not incur significant liabilities in the future in connection with the clean-up of waste disposal sites.

FDA Compliance

As a manufacturer of medical devices, certain of our subsidiaries and facilities are required to register as such with the FDA.

To maintain our registration, we deploy a robust quality management system across all of our Life Sciences manufacturing facilities.

With respect to medical and life sciences products that we are specifically developing to sell to our customers, before these devices can be marketed, we will seek to obtain a marketing clearance from the FDA under Section 510(k) of the United States Federal Food, Drug, and Cosmetic Act.

As a manufacturer of medical devices, our Taunton, Massachusetts, facility is required to register as such with the FDA.

With respect to medical and products that we may specifically develop to sell to our customers, before these devices can be marketed, we will seek to obtain a marketing clearance from the FDA under Section 510(k) of the United States Federal Food, Drug, and Cosmetic Act.

The FDA typically grants a 510(k) clearance if the applicant can establish that the device is substantially equivalent to a predicate device.

Clearance under Section 510(k) typically takes about four months from the date of submission.

Executive Officers of the Registrant

As of the date hereof, compliance with these laws and regulations has not had a material effect on our capital expenditures, results of operations, and competitive position.

For additional information, see “Item 1A - Risk Factors.”

Information about our Executive Officers

Our executive officers are:

President and Chief Executive Officer

Senior Vice President and Chief Financial Officer

Executive Vice President – Mobile Solutions and Power Solutions

Christopher J.

Executive Vice President – Life Sciences

Senior Vice President and General Counsel

Senior Vice President and Chief Human Resources Officer

Name Age Position

Veltman 59 President and Chief Executive Officer

DeByle 61 Senior Vice President and Chief Financial Officer

Buchan 59 Executive Vice President – Mobile Solutions and Power Solutions

Heiter 60 Senior Vice President and General Counsel

Gail Nixon 50 Senior Vice President and Chief Human Resources Officer

Veltman was appointed President and Chief Executive Officer in September 2019 having previously served as Executive Vice President of Mobile Solutions since January 2018.

5 unchanged sentences

DeByle joined us as Senior Vice President and Chief Financial Officer in September 2019.

Since 2019, Mr.

DeByle has been on the board of directors of Chase Corporation (NYSE:

He is also their Audit Committee Chair.

Prior to joining NN, Mr.

9 unchanged sentences

Buchan has spent his entire career in operations roles, beginning with General Motors Central Foundry and Rochester Products Divisions.

Christopher J.

Qualters was appointed Executive Vice President of Life Sciences in November 2019, having previously served as Executive Vice President of Power Solutions since January 2018.

Prior to his appointment in January 2018, Mr.

Qualters served as the Company’s Vice President and Chief Commercial Officer.

Qualters joined NN as part of the Autocam acquisition in 2014, where he served as Vice President of Sales and Marketing.

Prior to joining Autocam in 2008, Mr.

Qualters held several leadership positions in sales, marketing, and product management at Robert Bosch.

From 1990 to 2000, Mr.

Qualters held the position of sales engineer at The Torrington Company, where he was responsible for anti-friction bearing solutions for the general industrial and automotive industries.

Heiter joined us as Senior Vice President and General Counsel in July 2015.

8 unchanged sentences

From 2000 to 2007, she held various accounting and human resources positions with a multi-state healthcare organization, ultimately serving as its corporate human resources director.

Available Information - Securities and Exchange Commission (“SEC”) Filings

We make available free of charge, in the “Investor Relations” section of our website (www.nninc.com), our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after electronically filing such material with, or furnishing it to, the SEC.

The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business