What changed in this filing

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Item 1. Financial Statements

2023-08-04 compared with 2023-05-05 · 208 added, 99 removed, 370 unchanged (45% of the section changed)

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(in thousands, except per share data) 2023 2022 2023 2022

3 unchanged sentences

Depreciation and amortization 11,550 11,340 23,066 22,769

Other operating expense, net 1,061 2,026

Other operating expense (income), net ( 956 ) ( 147 ) 105 1,879

Loss from operations ( 4,047 ) ( 4,514 ) ( 11,122 ) ( 7,934 )

Interest expense 5,457 3,488 9,745 6,927

Other income, net ( 2,208 ) ( 2,996 )

Other expense (income), net 5,641 ( 67 ) 3,433 ( 3,063 )

Loss before provision for income taxes and share of net income from joint venture ( 15,145 ) ( 7,935 ) ( 24,300 ) ( 11,798 )

2 unchanged sentences

Net loss $ ( 14,377 ) $ ( 8,567 ) $ ( 24,552 ) $ ( 11,869 )

Other comprehensive income:

Foreign currency translation gain $ 1,840 $ 2,600

Other comprehensive loss:

Foreign currency translation loss $ ( 2,374 ) $ ( 8,490 ) $ ( 534 ) $ ( 5,890 )

Interest rate swap:

1 unchanged sentence

Reclassification adjustment for losses (gains) included in net loss, net of tax ( 449 ) 31 ( 917 ) 65

Other comprehensive income $ 1,142 $ 3,821

Comprehensive income (loss) $ ( 9,033 ) $ 519

Basic and diluted net loss per common share $ ( 0.29 ) $ ( 0.13 )

Weighted average common shares outstanding 45,309 44,594

Other comprehensive loss $ ( 2,823 ) $ ( 8,086 ) $ ( 1,681 ) $ ( 4,265 )

Comprehensive loss $ ( 17,200 ) $ ( 16,653 ) $ ( 26,233 ) $ ( 16,134 )

Basic and diluted net loss per share $ ( 0.38 ) $ ( 0.25 ) $ ( 0.67 ) $ ( 0.38 )

Shares used to calculate basic and diluted net loss per share 46,357 44,708 45,836 44,649

See notes to condensed consolidated financial statements (unaudited).

Condensed Consolidated Balance Sheets

(in thousands, except per share data) March 31,

(in thousands, except per share data) June 30,

2023 December 31,

1 unchanged sentence

Cash and cash equivalents $ 14,337 $ 12,808

Accounts receivable, net of allowances of $ 1,572 and $ 1,469 at March 31, 2023 and December 31, 2022

Accounts receivable, net of allowances of $ 1,495 and $ 1,469 at June 30, 2023 and December 31, 2022

79,302 74,129

4 unchanged sentences

Total current assets 197,417 191,700

Property, plant and equipment, net of accumulated depreciation of $ 232,086 and $ 225,046 at March 31, 2023 and December 31, 2022

Property, plant and equipment, net of accumulated depreciation of $ 239,032 and $ 225,046 at June 30, 2023 and December 31, 2022

192,241 197,637

10 unchanged sentences

Income tax payable 485 926

Current maturities of long-term debt 6,258 3,321

Short-term debt and current maturities of long-term debt 6,810 3,321

Current portion of operating lease liabilities 5,361 5,294

7 unchanged sentences

Commitments and contingencies (Note 9)

Series D perpetual preferred stock - $ 0.01 par value per share, 65 shares authorized, issued and outstanding at March 31, 2023 and December 31, 2022

Series D perpetual preferred stock - $ 0.01 par value per share, 65 shares authorized, issued and outstanding at June 30, 2023 and December 31, 2022

70,948 64,701

Stockholders' equity:

Common stock - $ 0.01 par value per share, 90,000 shares authorized, 43,772 and 43,856 shares issued and outstanding at March 31, 2023 and December 31, 2022

Common stock - $ 0.01 par value per share, 90,000 shares authorized, 47,019 and 43,856 shares issued and outstanding at June 30, 2023 and December 31, 2022

Additional paid-in capital 462,525 468,143

5 unchanged sentences

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Three Months Ended March 31, 2023 and 2022

Common Stock Accumulated deficit Accumulated other comprehensive income (loss)

(in thousands) Number

value Additional

capital Total

Balance as of December 31, 2022 43,856 $ 439 $ 468,143 $ ( 245,198 ) $ ( 37,120 ) $ 186,264

Three Months Ended June 30, 2023 and 2022

Common Stock Additional

capital Accumulated deficit Accumulated other comprehensive income (loss) Total

(in thousands) Number of shares Par

Balance as of March 31, 2023 43,772 $ 438 $ 465,377 $ ( 255,373 ) $ ( 35,978 ) $ 174,464

Net loss — — — ( 14,377 ) — ( 14,377 )

Dividends accrued for preferred stock — — ( 3,196 ) — — ( 3,196 )

Shares issued under stock incentive plans, net of forfeitures 3,306 33 ( 54 ) ( 21 )

Share-based compensation expense — — 470 — — 470

Restricted shares forgiven for taxes ( 59 ) ( 1 ) ( 72 ) — — ( 73 )

Other comprehensive income — — — — 1,142 1,142

Other comprehensive loss — — — — ( 2,823 ) ( 2,823 )

Balance as of June 30, 2023 47,019 $ 470 $ 462,525 $ ( 269,750 ) $ ( 38,801 ) $ 154,444

Common Stock Additional

capital Accumulated deficit Accumulated other comprehensive income (loss) Total

(in thousands) Number of shares Par

Balance as of March 31, 2022 43,890 $ 439 $ 473,072 $ ( 222,402 ) $ ( 28,081 ) $ 223,028

Common Stock Accumulated deficit Accumulated other comprehensive income (loss)

(in thousands) Number

value Additional

capital Total

Net loss — — — ( 8,567 ) — ( 8,567 )

Dividends accrued for preferred stock — — ( 2,658 ) — — ( 2,658 )

Shares issued under stock incentive plans, net of forfeitures ( 5 ) — — — — —

Share-based compensation expense — — 2,606 — — 2,606

Restricted shares forgiven for taxes ( 1 ) — ( 1 ) — — ( 1 )

Other comprehensive loss — — — — ( 8,086 ) ( 8,086 )

Balance as of June 30, 2022 43,884 $ 439 $ 473,019 $ ( 230,969 ) $ ( 36,167 ) $ 206,322

See notes to condensed consolidated financial statements (unaudited).

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Six Months Ended June 30, 2023 and 2022

Common Stock Additional

capital Accumulated deficit Accumulated other comprehensive income (loss) Total

(in thousands) Number of shares Par

Balance as of December 31, 2022 43,856 $ 439 $ 468,143 $ ( 245,198 ) $ ( 37,120 ) $ 186,264

1 unchanged sentence

Dividends accrued for preferred stock — — ( 6,247 ) — — ( 6,247 )

Shares issued under stock incentive plans 893 9 ( 9 ) — — —

Shares issued under stock incentive plans, net of forfeitures 3,306 33 ( 54 ) — — ( 21 )

Share-based compensation expense — — 851 — — 851

Restricted shares forgiven for taxes ( 143 ) ( 2 ) ( 168 ) — — ( 170 )

Other comprehensive income — — — — 3,821 3,821

Balance as of March 31, 2022 43,890 $ 439 $ 473,072 $ ( 222,402 ) $ ( 28,081 ) $ 223,028

Other comprehensive loss — — — — ( 1,681 ) ( 1,681 )

Balance as of June 30, 2023 47,019 $ 470 $ 462,525 $ ( 269,750 ) $ ( 38,801 ) $ 154,444

Common Stock Additional

capital Accumulated deficit Accumulated other comprehensive income (loss) Total

(in thousands) Number of shares Par

Balance as of December 31, 2021 43,027 $ 430 $ 474,757 $ ( 219,100 ) $ ( 31,902 ) $ 224,185

Net loss ( 11,869 ) ( 11,869 )

Dividends accrued for preferred stock ( 5,196 ) ( 5,196 )

Shares issued under stock incentive plans, net of forfeitures 888 9 ( 9 ) —

Share-based compensation expense 3,555 3,555

Restricted shares forgiven for taxes ( 31 ) — ( 88 ) ( 88 )

Other comprehensive loss ( 4,265 ) ( 4,265 )

Balance as of June 30, 2022 43,884 $ 439 $ 473,019 $ ( 230,969 ) $ ( 36,167 ) $ 206,322

See notes to condensed consolidated financial statements (unaudited).

Condensed Consolidated Statements of Cash Flows

Three Months Ended

Six Months Ended

(in thousands) 2023 2022

4 unchanged sentences

Amortization of debt issuance costs and discount 880 662

Impairments of property, plant and equipment — 233

Paid-in-kind interest 744 —

Total derivative loss (gain), net of cash settlements 5,691 ( 3,237 )

27 unchanged sentences

Notes to Condensed Consolidated Financial Statements

March 31, 2023

June 30, 2023

Interim Financial Statements

2 unchanged sentences

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

As of June 30, 2023, we had 27 facilities in North America, Europe, South America, and Asia.

Basis of Presentation

2 unchanged sentences

Securities and Exchange Commission (the “SEC”) on March 10, 2023.

In management’s opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments necessary to fairly state our results of operations for the three months ended March 31, 2023 and 2022;

financial position as of March 31, 2023 and December 31, 2022;

and cash flows for the three months ended March 31, 2023 and 2022, on a basis consistent with our audited consolidated financial statements.

financial position as of June 30, 2023 and December 31, 2022;

and cash flows for the six months ended June 30, 2023 and 2022, on a basis consistent with our audited consolidated financial statements.

These adjustments are of a normal recurring nature and are, in the opinion of management, necessary to state fairly the Company’s financial position and operating results for the interim periods.

3 unchanged sentences

These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and accompanying notes included in the 2022 Annual Report.

The results for the three months ended March 31, 2023, are not necessarily indicative of results for the year ending December 31, 2023, or any other future periods.

The results for the three and six months ended June 30, 2023, are not necessarily indicative of results for the year ending December 31, 2023, or any other future periods.

Except for per share data or as otherwise indicated, all U.S.

2 unchanged sentences

We participate in programs established by our customers which allows us to sell certain receivables from that customer on a non-recourse basis to a third-party financial institution.

During the three months ended March 31, 2023, we incurred fees of $ 0.2 million related to the sale of receivables which is recorded in the Other income, net line item on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

Assets Held For Sale

Due to a strategic shift to focus on growth opportunities and ongoing efforts to optimize the Company’s manufacturing footprint, we plan to cease manufacturing operations at several facilities during 2023, including our Irvine and Taunton locations.

We are in the process of selling machinery and equipment from these locations, which are a part of our Power Solutions segment, and recognized a $ 0.5 million loss on sales during the three months ended March 31, 2023, which is included in the Other operating expense, net line item on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

In addition, there is machinery and equipment with a net book value of $ 0.8 million which we sold in the second quarter of 2023 that is classified as held for sale as of March 31, 2023 and is included in the Other current assets line item on the Condensed Consolidated Balance Sheets.

During the six months ended June 30, 2023, we incurred fees of $ 0.5 million, related to the sale of receivables which is recorded in the Other expense (income), net line item on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

Facility Closures

Due to ongoing efforts to optimize the Company’s manufacturing footprint, we ceased manufacturing operations at several facilities during the six months ended June 30, 2023, including at our Irvine and Taunton locations.

We sold machinery and equipment from these locations and recognized a gain (loss) on sales of $ 0.3 million and $( 0.2 ) million during the three and six months ended June 30, 2023, respectively.

The gains (losses), which are primarily reported within our Power Solutions segment, are included in the Other operating expense (income), net line item on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

Segment Information

Our business is aggregated into the following two reportable segments:

• Mobile Solutions, which is focused on growth in the automotive and general industrial end markets;

• Mobile Solutions, which is focused on growth in the automotive, general industrial, and medical end markets;

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

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Mobile Solutions $ 77,153 $ 73,350 $ 155,171 $ 149,420

8 unchanged sentences

Inventories are comprised of the following amounts:

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Raw materials $ 29,904 $ 32,146

8 unchanged sentences

Amortization ( 1,677 ) ( 5,449 ) ( 7,126 )

Balance as of March 31, 2023 $ 21,517 $ 47,810 $ 69,327

Balance as of June 30, 2023 $ 20,679 $ 45,086 $ 65,765

Intangible assets are reviewed for impairment when changes in circumstances indicate the carrying value of those assets may not be recoverable.

As of March 31, 2023, our market capitalization was at a level that was less than the net book value of our stockholders’ equity, which was deemed a triggering event that caused us to perform impairment analyses on our long-lived assets.

Based on our analyses, the carrying values of the long-lived assets were recoverable and no impairment charge was recorded during the three months ended March 31, 2023.

There were no indicators of impairment at June 30, 2023.

Investment in Joint Venture

5 unchanged sentences

Share of earnings 1,374

Foreign currency translation gain 129

Balance as of March 31, 2023 $ 32,212

Our effective tax rate was ( 14.2 )% and ( 39.6 )% for the three months ended March 31, 2023 and 2022, respectively.

The effective tax rates for the three months ended March 31, 2023 differ from the U.S.

federal statutory tax rate of 21 % primarily due to the accrual of tax on non-permanently reinvested unremitted earnings of foreign subsidiaries and by limitation on the amount of tax benefit recorded for loss carryforwards in certain jurisdictions where we believe it is more likely than not that a

portion of the future tax benefit may not be realized.

Foreign currency translation loss ( 1,606 )

Balance as of June 30, 2023 $ 31,570

Our effective tax rate was ( 2.1 )% and ( 6.7 )% for the three and six months ended June 30, 2023, respectively, and ( 13.2 )% and ( 21.9 )% for the three and six months ended June 30, 2022, respectively.

The effective tax rates for the three and six months ended June 30, 2023 differ from the U.S.

In addition, the effective tax rate was unfavorably impacted by the U.S.

3 unchanged sentences

The following table presents the outstanding debt balances.

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Term Loan Facility $ 147,369 $ 147,375

2 unchanged sentences

Total principal 161,776 157,104

Less-current maturities of long-term debt 6,258 3,321

Principal, net of current portion 153,032 153,783

Less-unamortized debt issuance costs and discount (1) 6,804 4,394

short-term debt and current maturities of long-term debt 6,810 3,321

Principal of long-term debt, net of current portion 154,966 153,783

unamortized debt issuance costs and discount (1) 6,330 4,394

Long-term debt, net of current portion $ 148,636 $ 149,389

_______________________________

(1) In addition to this amount, costs of $ 0.6 million and $ 0.6 million related to the ABL Facility were recorded in other non-current assets as of March 31, 2023 and December 31, 2022, respectively.

(1) In addition to this amount, costs of $ 0.6 million and $ 0.6 million related to the ABL Facility were recorded in other non-current assets as of June 30, 2023 and December 31, 2022, respectively.

Term Loan Facility

Effective March 31, 2023, outstanding borrowings under the Term Loan Facility bear interest at either 1) one-month, three-month, or six-month SOFR with a duration adjustment (“Adjusted SOFR”), subject to a 1.000 % floor, plus an applicable margin of 6.875 %, or 2) the greater of various benchmark rates plus an applicable margin of 5.875 %.

At March 31, 2023, the Term Loan Facility bore interest, based on one-month Adjusted SOFR, at 11.782 %.

Beginning with the second quarter of 2023, interest is increased on a paid-in-kind basis at a rate between 0.50 % and 2.00 % (“PIK interest”), dependent on the Company’s leverage ratio and whether the Company completes a qualifying junior equity raise by June 30, 2023.

Beginning in the second quarter of 2023, interest was increased on a paid-in-kind basis at a rate between 1.00 % and 2.00 % (“PIK interest”), dependent on the Company’s leverage ratio.

The PIK interest is payable on the loan maturity date of September 22, 2026.

At June 30, 2023, the Term Loan Facility bore interest, including PIK interest, based on one-month Adjusted SOFR, at 14.077 %.

The Term Loan Facility requires quarterly principal payments of $ 0.4 million with the remaining unpaid principal amount due at the loan maturity date.

2 unchanged sentences

The Term Loan Facility has a first lien on all domestic assets other than accounts receivable and inventory and has a second lien on domestic accounts receivable and inventory.

We were in compliance with all requirements under the Term Loan Facility as of March 31, 2023.

We were in compliance with all requirements under the Term Loan Facility as of June 30, 2023.

The Term Loan Facility was issued at a $ 3.8 million discount and we have capitalized an additional $ 5.3 million in debt issuance costs.

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We may elect whether to use one-month, three-month, or six-month Adjusted SOFR.

At March 31, 2023, using one-month Adjusted SOFR plus a 2.00 % margin, the weighted average interest rate on outstanding borrowings under the ABL

Facility was 6.89 %.

At June 30, 2023, using one-month Adjusted SOFR plus a 2.00 % margin, the weighted average interest rate on outstanding borrowings under the ABL Facility was 7.246 %.

We pay a commitment fee of 0.375 % for unused capacity under the ABL Facility and a 2.125 % fee on the amount of letters of credit outstanding.

The final maturity date of the ABL Facility is March 22, 2026.

As of March 31, 2023, we had $ 1.0 million of outstanding borrowings under the ABL Facility, $ 10.9 million of outstanding letters of credit, and $ 32.5 million available for future borrowings under the ABL Facility.

As of June 30, 2023, we had $ 3.0 million of outstanding borrowings under the ABL Facility, $ 10.9 million of outstanding letters of credit, and $ 29.7 million available for future borrowings under the ABL Facility.

The ABL Facility has a first lien on domestic accounts receivable and inventory.

We were in compliance with all requirements under the ABL Facility as of March 31, 2023.

We were in compliance with all requirements under the ABL Facility as of June 30, 2023.

The following table contains supplemental cash flow information related to leases.

Three Months Ended

Six Months Ended

Cash paid for amounts included in the measurement of lease liabilities:

21 unchanged sentences

Management believes the indemnification would include amounts owed for the tax, interest, and penalties related to this matter.

Accordingly, we do not expect to incur a loss related to this matter even in the event of an unfavorable decision and, therefore, have not accrued an amount for the remaining matters as of March 31, 2023.

Other Legal Matters

4 unchanged sentences

Series D Perpetual Preferred Stock

On March 22, 2021, we completed a private placement of 65,000 shares of newly designated Series D Perpetual Preferred Stock, with a par value of $ 0.01 per share (the “Series D Preferred Stock”), at a price of $ 1,000 per share, together with detachable warrants (the “2021 Warrants”) to purchase up to 1.9 million shares of our common stock at an exercise price of $ 0.01 per share.

detachable warrants (the “2021 Warrants”) to purchase up to 1.9 million shares of our common stock at an exercise price of $ 0.01 per share.

The Series D Preferred Stock has an initial liquidation preference of $ 1,000 per share and is redeemable at our option in cash at a redemption price equal to the liquidation preference then in effect.

9 unchanged sentences

Note 15 discusses the accounting for these features.

As of March 31, 2023, the carrying value of the Series D Preferred Stock shares was $ 67.8 million, which included $ 21.1 million of accumulated unpaid and deemed dividends.

The following table presents the change in the Series D Preferred Stock carrying value during the three months ended March 31, 2023.

As of June 30, 2023, the carrying value of the Series D Preferred Stock shares was $ 70.9 million, which included $ 24.3 million of accumulated unpaid and deemed dividends.

The following table presents the change in the Series D Preferred Stock carrying value during the six months ended June 30, 2023.

Balance as of December 31, 2022 $ 64,701

1 unchanged sentence

Amortization 1,354

Balance as of March 31, 2023 $ 67,752

Balance as of June 30, 2023 $ 70,948

Revenue from Contracts with Customers

2 unchanged sentences

The following tables summarize revenue by customer geographical region.

Three Months Ended March 31, 2023 Mobile

Three Months Ended June 30, 2023 Mobile

Solutions Power

9 unchanged sentences

Total net sales $ 77,153 $ 48,062 $ ( 9 ) $ 125,206

Three Months Ended March 31, 2022 Mobile

Three Months Ended June 30, 2022 Mobile

Solutions Power

9 unchanged sentences

Total net sales $ 73,350 $ 52,049 $ ( 37 ) $ 125,362

Six Months Ended June 30, 2023 Mobile

Solutions Power

Solutions Intersegment

Eliminations Total

United States and Puerto Rico $ 75,802 $ 79,138 $ ( 11 ) $ 154,929

China 25,300 2,809 — 28,109

Brazil 23,436 264 — 23,700

Mexico 7,885 6,688 — 14,573

Germany 3,478 231 — 3,709

Poland 3,628 9 — 3,637

Other 15,642 7,995 — 23,637

Total net sales $ 155,171 $ 97,134 $ ( 11 ) $ 252,294

Six Months Ended June 30, 2022 Mobile

Solutions Power

Solutions Intersegment

Eliminations Total

United States and Puerto Rico $ 73,764 $ 80,863 $ ( 51 ) $ 154,576

China 21,316 2,477 — 23,793

Brazil 22,013 657 — 22,670

Mexico 13,151 9,099 — 22,250

Germany 2,404 135 — 2,539

Poland 2,498 5 — 2,503

Other 14,274 10,824 — 25,098

Total net sales $ 149,420 $ 104,060 $ ( 51 ) $ 253,429

The following tables summarize revenue by customer industry.

1 unchanged sentence

Our products in the general industrial industry include high-precision metal and plastic components for a variety of industrial applications including diesel industrial motors, heating and cooling systems, fluid power systems, power tools, and more.

While many of the industries we serve include electrical components, our products in the residential/commercial electrical industry category in the following tables include components used in smart meters, charging stations, circuit breakers, transformers, electrical contact assemblies, precision stampings, welded contact assemblies, and specification plating and surface finishing.

Three Months Ended March 31, 2023 Mobile

Three Months Ended June 30, 2023 Mobile

Solutions Power

6 unchanged sentences

Total net sales $ 77,153 $ 48,062 $ ( 9 ) $ 125,206

Three Months Ended March 31, 2022 Mobile

Three Months Ended June 30, 2022 Mobile

Solutions Power

6 unchanged sentences

Total net sales $ 73,350 $ 52,049 $ ( 37 ) $ 125,362

Six Months Ended June 30, 2023 Mobile

Solutions Power

Solutions Intersegment

Eliminations Total

Automotive $ 108,765 $ 17,918 $ — $ 126,683

General Industrial 39,441 28,115 — 67,556

Residential/Commercial Electrical — 32,193 — 32,193

Other 6,965 18,908 ( 11 ) 25,862

Total net sales $ 155,171 $ 97,134 $ ( 11 ) $ 252,294

Six Months Ended June 30, 2022 Mobile

Solutions Power

Solutions Intersegment

Eliminations Total

Automotive $ 99,446 $ 19,806 $ — $ 119,252

General Industrial 42,337 32,975 — 75,312

Residential/Commercial Electrical — 35,956 — 35,956

Other 7,637 15,323 ( 51 ) 22,909

Total net sales $ 149,420 $ 104,060 $ ( 51 ) $ 253,429

Deferred Revenue

Deferred revenue relates to payments received in advance of performance under the contract and recognized as revenue as (or when) we perform under the contract.

The balance of deferred revenue was $ 1.2 million and $ 0.7 million as of March 31, 2023 and December 31, 2022, respectively.

Revenue recognized for performance obligations satisfied or partially satisfied during the three months ended March 31, 2023 included $ 0.3 million that was included in deferred revenue as of December 31, 2022.

The balance of deferred revenue was $ 1.1 million and $ 0.7 million as of June 30, 2023 and December 31, 2022, respectively.

Revenue recognized for performance obligations satisfied or partially satisfied during the six months ended June 30, 2023 included $ 0.7 million that was included in deferred revenue as of December 31, 2022.

Transaction Price Allocated to Future Performance Obligations

We are required to disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of March 31, 2023, unless our contracts meet one of the practical expedients.

We are required to disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of June 30, 2023, unless our contracts meet one of the practical expedients.

Our contracts met the practical expedient for a performance obligation that is part of a contract that has an original expected duration of one year or less.

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Restricted stock $ 612 2,158 779 2,762

3 unchanged sentences

Restricted Stock

The following table presents the status of unvested restricted stock awards as of March 31, 2023 and changes during the three months then ended.

The following table presents the status of unvested restricted stock awards as of June 30, 2023 and changes during the six months then ended.

Shares Weighted Average Grant-Date

Unvested at January 1, 2023 1,038 $ 4.03

Granted 3,381 1.17

Vested ( 849 ) 4.15

Unvested at March 31, 2023 396 $ 3.55

Total grant date fair value of restricted stock that vested in the three months ended March 31, 2023, was $ 2.8 million.

Forfeited ( 123 ) 1.56

Unvested at June 30, 2023 3,447 $ 1.28

During the six months ended June 30, 2023, we granted 1,881,000 shares of restricted stock to non-executive directors, officers and certain other employees under the NN, Inc.

2022 Omnibus Incentive Plan (“2022 Omnibus Plan”).

The shares of restricted stock vest pro-rata generally over three years for employees and over one year for non-executive directors.

During the six months ended June 30, 2023, we granted 1,500,000 shares of restricted stock to our new CEO as an inducement award, which vests pro-rata over five years .

Total grant date fair value of restricted stock that vested in the six months ended June 30, 2023, was $ 3.5 million.

Performance Share Units

Performance Share Units (“PSUs”) are a form of long-term incentive compensation awarded to executive officers and certain other key employees designed to directly align the interests of employees to the interests of our stockholders, and to create long-term stockholder value.

The following table presents the status of unvested PSUs as of June 30, 2023 and activity during the six months then ended.

Nonvested PSU Awards Weighted Average Grant-Date

Nonvested at January 1, 2023 1,031 $ 3.80

Granted 3,061 0.97

Vested ( 67 ) 4.63

Forfeited ( 634 ) 2.47

Nonvested at June 30, 2023 3,391 $ 1.48

During the six months ended June 30, 2023, we granted 561,000 PSUs to certain executive officers.

These units vest, if at all, upon our achieving a specified relative total shareholder return, which will be measured against the total shareholder return of a specified index during the three-year performance period that ends December 31, 2025.

During the six months ended June 30, 2023, we granted 2,500,000 PSUs to our new CEO as an inducement award.

These units cliff-vest after five years and are contingent on the Company’s stock price meeting specified thresholds.

We estimated the grant date fair value of the PSU awards using the Monte Carlo simulation model, as the total shareholder return metric and changes in stock price are considered market conditions under ASC Topic 718, Compensation – stock compensation .

During the six months ended June 30, 2023, 67,000 PSUs were subject to accelerated vesting upon a participant’s termination that was a qualifying event under the terms of the PSU award agreements.

Total grant date fair value of PSUs that vested in the six months ended June 30, 2023, was $ 0.3 million.

Accumulated Other Comprehensive Income

1 unchanged sentence

Foreign Currency Translation Interest rate swap Income taxes (1) Total

Balance as of December 31, 2022 $ ( 40,172 ) $ 3,149 $ ( 97 ) $ ( 37,120 )

Balance as of March 31, 2023 $ ( 38,332 ) $ 2,354 $ — $ ( 35,978 )

Other comprehensive income (loss) before reclassifications ( 2,374 ) — — ( 2,374 )

1 unchanged sentence

Net other comprehensive income (loss) ( 2,374 ) ( 449 ) — ( 2,823 )

Balance as of June 30, 2023 $ ( 40,706 ) $ 1,905 $ — $ ( 38,801 )

Balance as of March 31, 2022 $ ( 29,416 ) $ 1,698 $ ( 363 ) $ ( 28,081 )

Other comprehensive income (loss) before reclassifications ( 8,490 ) 471 ( 98 ) ( 8,117 )

Amounts reclassified from AOCI to interest expense (2) — 38 ( 7 ) 31

Net other comprehensive income (loss) ( 8,490 ) 509 ( 105 ) ( 8,086 )

Balance as of June 30, 2022 $ ( 37,906 ) $ 2,207 $ ( 468 ) $ ( 36,167 )

Foreign Currency Translation Interest rate swap Income taxes (1) Total

Balance as of December 31, 2022 $ ( 40,172 ) $ 3,149 $ ( 97 ) $ ( 37,120 )

2 unchanged sentences

Net other comprehensive income (loss) ( 534 ) ( 1,244 ) 97 ( 1,681 )

Balance as of March 31, 2022 $ ( 29,416 ) $ 1,698 $ ( 363 ) $ ( 28,081 )

Balance as of June 30, 2023 $ ( 40,706 ) $ 1,905 $ — $ ( 38,801 )

Balance as of December 31, 2021 $ ( 32,016 ) $ 151 $ ( 37 ) ( 31,902 )

Other comprehensive income (loss) before reclassifications ( 5,890 ) 1,974 ( 414 ) ( 4,330 )

Amounts reclassified from AOCI to interest expense (2) — 82 ( 17 ) 65

Net other comprehensive income (loss) ( 5,890 ) 2,056 ( 431 ) ( 4,265 )

Balance as of June 30, 2022 $ ( 37,906 ) $ 2,207 $ ( 468 ) $ ( 36,167 )

______________________

(1) Income tax effect of changes in interest rate swap.

(2) Represents interest rate swap settlements of effective hedge.

(2) Represents (gain) loss recognized in interest expense on effective interest rate swap.

Net Loss Per Common Share

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Net loss $ ( 14,377 ) $ ( 8,567 ) $ ( 24,552 ) $ ( 11,869 )

11 unchanged sentences

Three Months Ended

Options 516 600

June 30, Six Months Ended

2023 2022 2023 2022

Stock Options 392 546 454 573

2019 Warrants 1,500 1,500 1,500 1,500

Stock options excluded from the calculations of diluted net loss per share had a per share exercise price ranging from $ 7.93 to $ 25.16 for the three and three months ended March 31, 2023.

1,892 2,046 1,954 2,073

Stock options excluded from the calculations of diluted net loss per share had a per share exercise price ranging from $ 7.93 to $ 25.16 for the three and six months ended June 30, 2023.

The 2019 Warrants excluded from the calculation of diluted net loss per share had a per share exercise price of $ 11.03 .

4 unchanged sentences

In accordance with ASC 815-15, Derivatives and Hedging - Embedded Derivatives , certain features of our preferred stock and long term debt were bifurcated and accounted for as derivatives separately.

In conjunction with the Term Loan Amendment, we issued detachable warrants to purchase up to 1.0 million shares of our comment stock at an exercise price of $ 0.01 per share (the “2023 Warrants”).

The 2023 Warrants are exercisable, in full or in part, at any time prior to March 3, 2033.

In conjunction with the Term Loan Amendment, we issued warrants to purchase up to 2.0 million shares of our common stock at an exercise price of $ 0.01 per share (the “2023 Warrants”).

The 2023 Warrants are exercisable, in full or in part, at any time up to ten years after issuance.

The 2023 Warrants include anti-dilution adjustments in the event of certain future equity issuances, stock splits, stock dividends, combinations or similar events.

In addition, we are obligated to issue 1.0 million warrants in the second quarter of 2023, subject to a contingency that expires June 30, 2023.

The contingently issuable warrants would have the same terms and conditions as the 2023 Warrants.

In conjunction with our placement of the Series D Preferred Stock, we issued the 2021 Warrants to purchase up to 1.9 million shares of our common stock.

5 unchanged sentences

The 2019 Warrants, are exercisable, in full or in part, at any time prior to December 11, 2026 and are subject to anti-dilution adjustments in the event of future below market issuances, stock splits, stock dividends, combinations or similar events.

The following table presents the change in the liability balance of the embedded derivatives during the three months ended March 31, 2023.

Due to the dilutive impact of subsequent issuances of warrants, the exercise price of the 2019 Warrants has been adjusted to $ 11.03 per share.

The following table presents the change in the liability balance of the embedded derivatives during the six months ended June 30, 2023.

Balance as of December 31, 2022 $ 2,959

1 unchanged sentence

Change in fair value (1) 3,745

Balance as of March 31, 2023 $ 3,662

Balance as of June 30, 2023 $ 9,416

_______________________________

(1) Changes in the fair value are recognized in the “Other income, net” line in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

(1) Changes in the fair value are recognized in the “Other expense (income), net” line in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

The following tables show the fair values of the embedded derivatives within the fair value hierarchy.

March 31, 2023 Quoted Prices in Active Markets for Identical Assets

June 30, 2023 Quoted Prices in Active Markets for Identical Assets

(Level 1) Significant Other Observable Inputs

5 unchanged sentences

Derivative liability - other non-current liabilities $ 2,831 $ — $ 128

The fair value of the 2019 Warrants is determined using a valuation model that utilizes unobservable inputs to determine the probability that the 2019 Warrants will remain outstanding for future periods.

The probabilities resulted in a weighted average term of 2.9 years as of March 31, 2023 and December 31, 2022.

The fair value of the 2023 Warrants and 2021 Warrants is determined using the observable market price of a share of our common stock, less the $ 0.01 per share exercise price.

The fair value of the change-in-control put feature utilizes unobservable inputs based on the Company’s assessment of the probability of a change-in-control event occurring in a future period.

The probability of a change-in-control event ranged from 3 % to 10 % as of March 31, 2023 and December 31, 2022.

The probability of a change-in-control event ranged from 3 % to 5 % as of June 30, 2023 and from 3% to 10% as of December 31, 2022.

The probabilities resulted in a weighted average term of 2.9 years as of June 30, 2023 and December 31, 2022.

Interest Rate Swap

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Interest expense (benefit) (1) $ ( 449 ) $ 38 $ ( 917 ) $ 82

_______________________________

(1) Represents settlements on the interest rate swap.

(1) Represents (gain) loss recognized in interest expense on effective interest rate swap.

The following table shows the fair value of the interest rate swap within the fair value hierarchy.

9 unchanged sentences

Our financial instruments that are subject to fair value disclosure consist of cash and cash equivalents, accounts receivable, accounts payable, and debt.

As of March 31, 2023 and December 31, 2022, the carrying values of these financial instruments, except for debt, approximated fair value.

The fair value of our debt was $ 156.0 million and $ 155.2 million, with a carrying amount of $ 152.5 million and $ 152.7 million, as of March 31, 2023 and December 31, 2022, respectively.

As of June 30, 2023 and December 31, 2022, the carrying values of these financial instruments, except for debt, approximated fair value.

The fair value of our debt was $ 164.2 million and $ 155.2 million, with a carrying amount of $ 155.4 million and $ 152.7 million, as of June 30, 2023 and December 31, 2022, respectively.

The fair value of debt was calculated by discounting the future cash flows to its present value using prevailing market interest rates for debt with similar creditworthiness, terms and maturities and is considered a Level 3 fair value measurement.

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-Q

Item 1. Financial Statements