Business Context and Reporting Period
Company: NN, Inc. (NNBR)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended December 31, 2025
Business Overview: NN, Inc. is a diversified industrial company manufacturing high-precision components and assemblies for automotive, electrical, general industrial, medical, and aerospace/defense markets. Operations are organized into two segments: Mobile Solutions (automotive, industrial, medical) and Power Solutions (electrical, industrial, automotive, medical). The company operates 27 facilities across North America, South America, Europe, and China.
Key Financial Metrics
| Metric (in thousands) | 2025 | 2024 |
|---|---|---|
| Net Sales | $422,207 | $464,290 |
| Cost of Sales | $362,848 | $394,812 |
| Operating Loss | $(18,915) | $(27,548) |
| Net Loss | $(34,004) | $(38,273) |
| Cash from Operations | $5,671 | $11,070 |
| Total Debt (Principal) | $159,549 | $148,630 |
| Working Capital | $74,212 | $83,650 |
| Series D Preferred Stock (Carrying Value) | $112,409 | $93,497 |
Note: Net Loss includes a $3.0 million loss on extinguishment of debt and $8.9 million share of net income from a joint venture.
Material Changes vs. Prior Period
- Revenue Decline: Net sales decreased 9.1% ($42.1 million) primarily due to the rationalization of underperforming plants (Juarez, Mexico and Dowagiac, Michigan), the sale of Lubbock operations (IMC), lower volumes, and unfavorable foreign exchange effects ($0.6 million).
- Operating Loss Improvement: Operating loss narrowed by $8.6 million to $18.9 million. This improvement was driven by the absence of a $6.5 million impairment charge recorded in 2024 for machinery at a plant closed in 2025, and reduced depreciation expense as historical purchase accounting step-up basis became fully depreciated.
- Segment Performance:
- Mobile Solutions: Sales down 14.1% ($39.9 million); Operating loss improved by $10.1 million due to the lack of prior-year impairment charges.
- Power Solutions: Sales down 1.1% ($1.9 million); Operating income decreased by $2.8 million due to the sale of IMC and lower volumes.
- Debt Refinancing: In April 2025, the company entered a new $128.0 million Term Loan Facility to replace the 2021 facility, resulting in a $3.0 million loss on extinguishment of debt.
Guidance, Outlook, Risks, and Unusual Items
- Management Focus: Executing an enterprise transformation plan including footprint optimization, cost improvement, and shifting the portfolio to targeted growth markets (EV, electrical distribution, defense).
- Unusual Items:
- Plant Optimization: Incurred $13.4 million in cumulative charges related to facility closures and organizational changes (recognized in 2024 and 2025), with expected annual benefits of $5.4 million.
- Divestiture: Sold Lubbock operations (IMC) in 2024 for $17.0 million, recognizing a $7.2 million gain.
- Key Risks:
- Customer Concentration: Top 10 customers accounted for 49% of 2025 sales; one customer represented 11% of sales.
- Debt and Liquidity: High indebtedness ($159.5 million) and Series D Preferred Stock ($112.4 million carrying value, including $65.7 million accrued unpaid dividends). Cash interest payments on Term Loans are approx. $10.9 million annually, plus $5.4 million paid-in-kind (PIK) interest.
- Supply Chain & Commodities: Exposure to raw material price volatility (steel, copper, precious metals) and geopolitical trade risks (tariffs, conflicts).
- Joint Venture: 49% investment in a Chinese JV; sales to the JV were $0 in 2025.
Investor Verification Checklist
- Debt Service Capacity: Verify the company's ability to service $159.5 million in debt and $112.4 million in preferred stock obligations given the current operating loss and reliance on PIK interest.
- Preferred Stock Dividends: Confirm the status of the $65.7 million in accumulated unpaid Series D Preferred Stock dividends and the impact of the escalating dividend rate (12.0% accruing, increasing to 12.5%+ in 2026).
- Customer Concentration: Assess the risk associated with the top 10 customers representing 49% of revenue and the specific 11% concentration in one Mobile Solutions customer.
- Restructuring Benefits: Monitor the realization of the projected $5.4 million annual cost savings from plant closures and footprint optimization.
- Tax Refund Timing: Track the processing of the $12.9 million CARES Act tax refund receivable, expected in 2026.