What changed in this filing

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Item 1. Business

2022-03-11 compared with 2021-03-15 · 90 added, 55 removed, 170 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 components and assemblies primarily for the electrical, automotive, general industrial, aerospace and defense, and medical markets.

is a diversified industrial company that combines in-depth materials science expertise with advanced engineering and production capabilities to design and manufacture high-precision metal and plastic components and assemblies for a variety of end markets on a global basis.

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.

We have 31 facilities in North America, Europe, South America, and Asia.

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 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.

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

Business Segments and Products

Mobile Solutions

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

We have developed an expertise in manufacturing highly complex, system critical components for fuel systems, engines and transmissions, power steering systems, and electromechanical motors on a high-volume basis.

This expertise has been gained through investment in technical capabilities, processes and systems, and skilled program management and product launch capabilities.

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

We have developed an expertise in manufacturing highly complex, tight tolerance, system critical components.

Our technical capabilities can be utilized in numerous applications including for use in battery electric, hybrid electric, and internal combustion engine vehicles.

The group currently manufactures components on a high-volume basis for use in power steering, braking, transmissions, and gasoline fuel system applications, along with components utilized in heating, ventilation and air conditioning and diesel injection and diesel emissions treatment applications.

This expertise has been gained through investment in technical capabilities, processes and systems, and allows us to provide skilled program management and product launch capabilities.

Power Solutions

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

Power Solutions is focused on growth in the electrical, general industrial, automotive, aerospace, defense, 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.

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.

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 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.

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Precision parts are difficult to manufacture and achieve premium pricing in the marketplace as the high cost of failure motivates our customers to focus on quality.

Our products are developed for specific uses within critical systems and are typically designed in conjunction with the system designer.

Our products are developed for specific uses within critical systems

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and are typically designed in conjunction with the system designer.

Our parts are often qualified for, or specified in, customer designs, reducing the ability for customers to change suppliers.

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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.

We continue to realize synergy effects between Mobile Solutions and Power Solutions by pairing our experienced engineering resources and wide-ranging portfolio of process technologies from each business to serve our customers’ ever evolving needs.

Recent solutions developed in the electrical, electric vehicle, aerospace, defense, and general industrial markets leveraged the deep experience and expertise from each business to respond to tight, stringent requirements - all of which in a custom and innovative manner to meet each customer’s unique demand requirements.

In addition, we continue to experience customer demand that utilizes multiple facilities from both business, on a global basis, due to our track record of quality and strong performance.

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Proven and experienced management team

Our management team has significant experience in precision manufacturing and the diversified industrial sector.

Warren Veltman was named President and Chief Executive Officer in September 2019 and previously served as Executive Vice President of Mobile Solutions.

Veltman joined us in 2014 as part of the Autocam acquisition, a business at which he had 30 years of experience in financial and operational leadership roles.

Thomas DeByle joined NN and was named Senior Vice President and Chief Financial Officer in August 2019.

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.

Warren Veltman has served as our President and Chief Executive Officer since September 2019 after serving as Executive Vice President of Mobile Solutions for two years.

Veltman has over 30 years of experience in financial and operational leadership roles at NN and Autocam, which the Company acquired in 2014.

Michael Felcher joined us in 2018 and was named Senior Vice President and Chief Financial Officer in July 2021.

Felcher has extensive experience in finance leadership roles at JELD-WEN, Inc.

and Goodrich Corporation.

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.

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In 2021, our top ten customers accounted for approximately 43% of our net sales.

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.

In 2021, 70% of our products were sold to customers in North America, 7% to customers in Europe, 16% to customers in Asia, and 7% to customers in South America.

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

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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.

Core Principles

Our success depends 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 in the communities in which we operate.

As of December 31, 2021, we employed a total of 3,172 full and part-time employees and 247 temporary workers, which includes approximately 1,431 employees in the U.S.

and approximately 1,988 employees in other countries employed by our international subsidiaries.

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

Of our total employment, approximately 16% are management/staff employees and 84% 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.

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.

Diversity, Equity, and Inclusion

Diversity, equity, 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.

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

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Compensation, Benefits, and Employee Health and Safety

Our compensation programs are based on a strong alignment between pay and performance, and are designed to reward both financial and operational successes and support actions that drive stockholder value creation at all organizational levels.

We use a combination of programs (which vary by geography and level) to attract and retain our employees, including annual performance bonuses, quarterly gainsharing bonuses, and equity awards.

We also provide our employees and their families access to a range of benefits, including health insurance benefits, employer-paid life and disability insurance, health savings and flexible spending accounts, 401(k) match, vacation and paid time off, wellness offerings, education assistance, and an employee assistance program.

The health and safety of our employees and anyone who conducts business on our behalf is very important to us.

Our commitment to safety starts at the top levels of our organization.

We believe a safe and secure workplace is fundamental to our success.

We are also committed to engaging our employees to continually improve health and safety by acting upon opportunities to reduce risk and improve our safety and health performance, and offer training programs on a regular basis.

We maintain comprehensive safety programs focused on identifying hazards and eliminating risks that can lead to work-place injuries.

In addition to the strong safety focus we maintain within our operations, our emphasis during the COVID-19 pandemic has been on protecting the health and safety of our employees and the communities in which we operate.

Our team monitors country, state, and local guidance, and uses these to implement best practice guidelines for employees and visitors.

Throughout the pandemic, NN has increased communications, including the addition of virtual “town hall” style meetings at the group and organizational level.

This has helped employees across our global footprint stay connected, whether working from home or at one of our manufacturing sites.

Talent Development

We invest resources in professional development to improve employee motivation, performance and engagement.

Our annual talent management program helps identify needs at multiple levels, enabling us to provide employees with the resources they need to help achieve their career goals, build skills and lead their organizations.

Further, annual goal-setting and development opportunities for employees and leaders helps our people align their professional experience with the Company’s business objectives and encourages them to take ownership of their development and career paths.

NN uses regular talent management and performance evaluation processes to inform the Company’s internal development processes and to calibrate assessment of individual performance organizationally.

These activities form the basis for succession planning activities, up to and including the senior leadership level.

NN also has apprenticeships, internships, and cooperative education programs in place at certain locations, which we intend to expand more broadly across the company.

These programs allow us to provide a combination of education and employment options that deliver depth and context and help them build a long-term career path.

Mobile Solutions

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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.

We believe that we generally win new business on the basis of our technical competence, proven track record of successful product development and global platform, as well as on quality, price, and service.

Power Solutions

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With these strengths, we have built our reputation in the marketplace as a quality producer of technically difficult products.

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Raw Materials

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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.

Cost Pressures

In each of our segments, we have historically been affected by upward price pressure on steel principally due to general increases in global demand.

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Most of the raw materials we use are purchased from various suppliers and are typically available from numerous sources, some of which are located in China and Europe.

The recent coronavirus outbreak has impacted our suppliers in China and other affected regions.

We are monitoring the effect of these impacts on our supply chain in order to maintain regular and timely supply of raw materials to our business segments.

The ongoing COVID-19 pandemic has impacted our suppliers, and we continue to monitor the effect of these impacts on our supply chain in order to maintain regular and timely supply of raw materials to our business segments.

Patents, Trademarks and Licenses

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However, as a whole, we are not materially impacted by seasonality.

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.

Under such laws and regulations, we are required to obtain permits from governmental authorities for some of our operations.

If we violate or fail to comply with these laws, regulations or permits, we could be fined or otherwise sanctioned by regulators.

Under some environmental laws and regulations, we could also be held responsible for all the costs relating to any contamination at our past or present facilities and at third-party waste disposal sites.

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

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

Government Regulations and Environmental Matters

Our operations and products are subject to extensive federal, state, local, and foreign regulatory requirements, including those intended to protect public health and the environment.

many of our products and operations are regulated by the FDA and the Environmental Protection Agency.

Similar regulations have been adopted by authorities in foreign countries where we sell our products, and by state and local authorities in the U.S.

In order to conduct our operations in compliance with these laws and regulations we must obtain and maintain numerous permits, approvals and certificates from various federal, state, local, and foreign governmental authorities.

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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.

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

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.

We are also required to comply with increasingly complex and changing laws and regulations enacted to protect business and personal data in the U.S.

and other jurisdictions regarding privacy, data protection, and data security, including those related to the collection, storage, use, transmission, and protection of personal information and other customer, supplier or employee data.

Such privacy and data protection laws and regulations, and the interpretation and enforcement of such laws and regulations, are continuously developing and evolving and there is significant uncertainty with respect to how compliance with these laws and regulations may evolve and the costs and complexity of future compliance.

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

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.”

The potential impact of climate change on our operations is unclear.

Climate change could result in an increase in severe weather events, such as hurricanes, tropical storms, blizzards and ice storms, which often results in delays or other negative consequences for our manufacturing operations, which could negatively impact our financial results.

We have not identified any, and we do not believe there to be in the near term, material impacts on our business, financial condition or results of operations as a result of compliance with legislation or regulatory rules regarding climate change or from the known physical effects of climate change.

Increased regulation and other climate change concerns, however, could subject us to additional costs and restrictions and could negatively affect our business, operations and financial results.

Information about our Executive Officers

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Veltman 60 President and Chief Executive Officer

DeByle 61 Senior Vice President and Chief Financial Officer

Felcher 49 Senior Vice President – Chief Financial Officer

Buchan 60 Executive Vice President – Mobile Solutions and Power Solutions

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Gail Nixon 51 Senior Vice President and Chief Human Resources Officer

Andrew Wall 43 Senior Vice President and Chief Commercial 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.

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Veltman was an Audit Manager with Deloitte & Touche LLP.

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.

DeByle served as Chief Financial Officer, Vice President, and Treasurer of Standex International from March 2008 to August 2019.

Prior to joining Standex International, Mr.

DeByle held a variety of leadership positions at Ingersoll Rand, a leading diversified industrial firm, culminating in his appointment as Chief Financial Officer for the Compact Vehicle Technology Sector.

Prior to joining Ingersoll Rand, Mr.

DeByle held a variety of leadership positions at Actuant Corporation, a publicly held diversified industrial company, Milwaukee-based Johnson Controls, and two regional public accounting firms.

Felcher was appointed Senior Vice President and Chief Financial Officer in July 2021 having previously served as Vice President, Chief Accounting Officer since June 2018.

Prior to joining the Company, Mr.

Felcher served as the Vice President, North America Chief Financial Officer for JELD-WEN, Inc., a publicly held, global manufacturer of doors and windows, from 2013 to 2017.

Before assuming his role at JELD-WEN, Inc., Mr.

Felcher served as a Director of Finance for United Technologies Corp.

following its acquisition of Goodrich Corporation in 2012.

Previously, Mr.

Felcher served in a variety of finance roles at Goodrich.

Felcher began his career at PricewaterhouseCoopers in Boston and is a licensed CPA.

Buchan was appointed Executive Vice President of Mobile Solutions in September 2019 and Executive Vice President of Mobile Solutions and Power Solutions in November 2019 having previously served as Vice President of Operations of Mobile Solutions.

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from May 1996 to December 1999 and from July 2002 to July 2015, where he served as chairman of the firm’s Securities and Corporate Governance Practice Group.

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From January 2000 to July 2002, Mr.

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Nixon previously served as our Vice President of Human Resources as well as Corporate Human Resources Manager.

Nixon is a member of the Society for Human Resource Management and World at Work and has earned her Senior Professional in Human Resources designation.

Nixon is a member of the Society for Human Resource Management (“SHRM”) and has earned her Senior Professional in Human Resources and SHRM – Senior Certified Professional designations.

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.

Andrew Wall joined us in January 2022 as Senior Vice President and Chief Commercial Officer.

Prior to joining NN, he served in numerous management positions for ABB, Ltd., a publicly held, global manufacturer of heavy electrical equipment and automation technology.

Most recently, Mr.

Wall served as Vice President, Product Marketing and Sales, Electrification U.S., where he was responsible for leading the creation and implementation of ABB's U.S.

product marketing strategy.

Before that, Mr.

Wall served as Vice President and General Manager, Power Products Services U.S., where he was in charge of all functional aspects of the business, including marketing and sales, project management, factory manufacturing operations, field service operations, and engineering.

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

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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