What changed in this filing

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Item 1. Business

2023-03-10 compared with 2022-03-11 · 59 added, 62 removed, 198 unchanged (38% of the section changed)

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

As used in this Annual Report, the terms “NN,” the “Company,” “we,” “our,” or “us” refer to NN, Inc., and its subsidiaries.

As of December 31, 2022, we had 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.

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Power Solutions

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.

Power Solutions is focused on growth in the electrical, general industrial, automotive, and medical end markets.

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.

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Our products are critical components to the operation and reliability of larger mechanical systems.

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

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and are typically designed in conjunction with the system designer.

Precision parts are difficult to manufacture and 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 parts are often qualified for, or specified in, customer designs, reducing the ability for customers to change suppliers.

Our ability to make products with tight-tolerance and extreme precision requirements enables our customers to satisfy the critical functionality and performance requirements of their products.

We are included in customer designs and deployed in critical systems that involve high cost of failure applications and significant regulatory certification processes, including those for the Food and Drug Administration (“FDA”), Underwriters Laboratories (“UL”), and the National Aerospace and Defense Contractors Accreditation Program (“NADCAP”).

Complete product lifecycle focus

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Prototype products are developed for testing, and process validation procedures are instituted.

In many instances, we will file for regulatory production approval and include the customer’s proprietary processes, further discouraging supplier changes.

In certain instances, we will file for regulatory production approval and include the customer’s proprietary processes, further reducing supplier changes.

We will assist the customer with continuous supply chain management and comprehensive customer support for the lifetime of the product and continuously seek to identify new operational efficiencies to reduce the product’s cost and improve its quality.

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We have significant exposure to emerging markets in Asia, South America, and Europe through these global customers as well as key local manufacturers.

The diverse nature, size, and reach of our customer base provides resistance to localized market and geographic fluctuations and help stabilizes overall product demand.

The diverse nature, size, and reach of our customer base provides resistance to localized market and geographic fluctuations and helps stabilize overall product demand.

Strategic global footprint

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Our foreign facilities are located in regional manufacturing hubs in France, Poland, China, and Brazil, and primarily serve global customers in those local markets.

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

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 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.

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 profitably operate and grow the business.

Recent solutions developed in the electrical, electric vehicle, 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 businesses on a global basis due to our track record of quality and strong performance.

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

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In 2022, our top ten customers accounted for approximately 48% of our net sales.

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.

In 2022, 70% of our products were sold to customers in North America, 13% to customers in Asia, 10% to customers in South America, and 7% to customers in Europe.

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

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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.

As of December 31, 2022, we employed a total of 3,363 full and part-time employees and 298 temporary workers, which includes 1,335 employees in the U.S.

and 2,326 employees in other countries employed by our international subsidiaries.

Of our total employment, approximately 12% are management/staff employees and 88% 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.

Our employees in the France, Brazil, and Mexico City 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.

Diversity, Equity, and Inclusion

Diversity, Equity, and Inclusion (“DE&I”)

Diversity, equity, and inclusion are at the core of our values and strategic business priorities.

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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 our commitment to ethical business conduct.

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Respect for human rights is fundamental to our business and our commitment to ethical business conduct, as is embodied by our Human Rights Policy, which sets forth our expectations related to workplace discrimination;

diversity, equity and inclusion;

workplace conditions;

and freedom of association.

Compensation, Benefits, and Employee Health and Safety

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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 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.

In addition we 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.

In addition to the strong safety focus that 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.

Throughout the COVID-19 pandemic, we 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.

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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.

We use 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.

We also have 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.

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and Precinmac Precision Machining.

We believe that competition within the electrical and aerospace and defense end markets is based principally on quality, price, design capabilities, and speed of responsiveness and delivery.

We believe that competition within the electrical end market is based principally on quality, price, design capabilities, and speed of responsiveness and delivery.

We believe that our competitive strengths are product development, tool design, fabrication, tight tolerance processes, and customer solutions.

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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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 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 risk of price changes from procurement to product shipment.

Supply and 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 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.

The COVID-19 pandemic and ongoing supply chain disruptions, resulting in supply shortages and higher shipping charges, have impacted our suppliers and could continue to impact our ability

to maintain supplies of products and the costs associated with obtaining raw materials and key components.

We continue to monitor the effects 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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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.

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

certain of our products and operations are regulated by 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.

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.

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.

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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.

On May 5, 2022, we released our 2021 Sustainability Report which established our global sustainability strategy.

We conducted a comprehensive environmental, social and governance (“ESG”) materiality assessment to identify our most significant economic, environmental and social impacts.

The material ESG topics identified during this process enable our organization to prioritize our investments and actions and provide meaningful disclosures throughout this report.

We intend to regularly review and update our ESG priorities on an ongoing basis to ensure they continue to reflect our evolving business operations.

The information provided in our 2021 Sustainability Report as well as on our website, is not part of this Annual Report, and is therefore not incorporated by reference into this Annual Report or other filings with the SEC.

Information about our Executive Officers

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Buchan 61 Executive Vice President – Mobile Solutions and Power Solutions

Heiter 61 Senior Vice President and General Counsel

Heiter 62 Senior Vice President, General Counsel and Secretary

Gail Nixon 52 Senior Vice President and Chief Human Resources Officer

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Veltman served as Chief Financial Officer of Autocam Corporation from 1990 and Secretary and Treasurer since 1991.

Veltman’s service at Autocam, Mr.

Veltman was an Audit Manager with Deloitte & Touche LLP.

As previously announced, Mr.

Veltman will retire as President and Chief Executive Officer on March 31, 2023;

however, such date may be extended in order to facilitate an orderly transition.

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.

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Felcher served in a variety of finance roles at Goodrich.

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

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

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

As previously announced, Mr.

Buchan will retire as Executive Vice President of Mobile Solutions and Power Solutions on March 31, 2023;

however, such date may be extended in order to facilitate an orderly transition.

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

Prior to joining NN, Mr.

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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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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.

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

Prior to joining NN, he served in numerous management positions for ABB, Ltd.

(“ABB”), a publicly held, global manufacturer of heavy electrical equipment and automation technology.

Wall served as ABB’s Vice President, Product Marketing and Sales, Electrification U.S.

from January 2018 through December 2021, 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

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.

Wall served as Vice President and General Manager, Power Products Services U.S.

for ABB from July 2015 through December 2017.

Available Information - 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 Exchange Act, as soon as reasonably practicable after electronically filing such material with, or furnishing it to, the SEC.

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