<PAGE>
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended MARCH 31, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number 0-23486
NN BALL & ROLLER, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 62-1096725
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
800 TENNESSEE ROAD
ERWIN, TENNESSEE 37650
(Address of principal executive offices, including zip code)
(423) 743-9151
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
As of May 7, 1999 there were 14,804,271 shares of the registrant's common stock,
par value $0.01 per share, outstanding.
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<PAGE>
NN BALL & ROLLER, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Statements of Income and Comprehensive Income for the three
months ended March 31, 1999 and 1998 2
Condensed Balance Sheets at March 31, 1999 and December 31, 1998 3
Condensed Statements of Changes in Stockholders' Equity
for the three months ended March 31, 1999 and 1998 4
Condensed Statements of Cash Flows for the three months
ended March 31, 1999 and 1998 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
NN BALL & ROLLER, INC.
CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
THOUSANDS OF DOLLARS, EXCEPT SHARE AND 1999 1998
PER SHARE DATA
- --------------------------------------------------------------------------------
<S> <C> <C>
Net sales $ 17,912 $ 20,886
Cost of goods sold 12,523 14,177
------------ ------------
Gross profit 5,389 6,709
Selling, general and administrative 1,218 1,304
Depreciation 1,244 1,159
------------ ------------
Income from operations 2,927 4,246
Interest expense 1 15
------------ ------------
Income before provision for income taxes 2,926 4,231
Provision for income taxes 964 1,564
------------ ------------
Net income $ 1,962 $ 2,667
Other comprehensive income:
Foreign currency translation adjustments (861) (261)
------------ ------------
Comprehensive income $ 1,101 $ 2,406
------------ ------------
------------ ------------
Net income per common share $ 0.13 $ 0.18
------------ ------------
------------ ------------
Weighted average number of
shares outstanding 14,804,244 14,804,244
------------ ------------
------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES.
2
<PAGE>
NN BALL & ROLLER, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
THOUSANDS OF DOLLARS (UNAUDITED)
- -------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 3,515 $ 1,430
Accounts receivable, net 13,305 11,643
Inventories, net (Note 2) 13,015 14,425
Other current assets 1,328 1,073
------- -------
Total current assets 31,163 28,571
Property, plant and equipment, net 37,020 38,289
------- -------
Total assets $68,183 $66,860
------- -------
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,316 $ 4,451
Accrued vacation payable 532 431
Accrued bonuses payable 393 --
Deferred income 752 828
Income taxes payable 1,663 786
Other current liabilities 1,388 1,142
------- -------
Total current liabilities 9,044 7,638
Deferred income taxes 2,980 2,980
------- -------
Total liabilities 12,024 10,618
Total stockholders' equity 56,159 56,242
------- -------
Total liabilities and stockholders' equity $68,183 $66,860
------- -------
------- -------
</TABLE>
SEE ACCOMPANYING NOTES.
3
<PAGE>
NN BALL & ROLLER, INC.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL RETAINED OTHER
NUMBER PAR PAID IN EARNINGS COMPREHENSIVE
THOUSANDS OF DOLLARS OF SHARES VALUE CAPITAL (DEFICIT) INCOME TOTAL
- -------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1998 14,804 $ 149 $ 27,902 $ 25,387 $ (467) $ 52,971
Net income 0 0 0 2,667 0 2,667
Dividends 0 0 0 (1,186) 0 (1,186)
Other comprehensive income 0 0 0 0 (261) (261)
-------- -------- -------- -------- -------- --------
Balance, March 31, 1998 14,804 $ 149 $ 27,902 $ 26,868 $ (728) $ 54,191
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Balance, January 1, 1999 14,804 $ 149 $ 27,902 $ 28,306 $ (115) $ 56,242
Net income 0 0 0 1,962 0 1,962
Dividends 0 0 0 (1,184) 0 (1,184)
Other comprehensive income 0 0 0 0 (861) (861)
-------- -------- -------- -------- -------- --------
Balance, March 31, 1999 14,804 $ 149 $ 27,902 $ 29,084 $ (976) $ 56,159
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
</TABLE>
SEE ACCOMPANYING NOTES.
4
<PAGE>
NN BALL & ROLLER, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
THOUSANDS OF DOLLARS 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,962 $ 2,667
Adjustments to reconcile net income:
Depreciation 1,244 1,159
Changes in operating assets and liabilities:
Accounts receivable (1,662) (4,140)
Inventories 1,410 (324)
Other current assets (255) 432
Accounts payable (135) 1,352
Income taxes payable 877 1,018
Other liabilities 664 1,024
------- -------
Net cash provided by operations 4,105 3,188
------- -------
INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (40) (941)
Proceeds from disposals of property, plant and equipment 65 --
------- -------
Net cash provided (used) by investing activities 25 (941)
------- -------
FINANCING ACTIVITIES:
Net payments under revolving line of credit -- (970)
Foreign Currency Translation (861) (261)
Dividends (1,184) (1,186)
------- -------
Net cash used by financing activities (2,045) (2,417)
------- -------
NET CHANGE IN CASH AND CASH EQUIVALENTS 2,085 (170)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,430 366
------- -------
CASH AND CASH EQUIVALENTS AT PERIOD-END $ 3,515 $ 196
------- -------
------- -------
</TABLE>
SEE ACCOMPANYING NOTES.
5
<PAGE>
NN BALL & ROLLER, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1. INTERIM FINANCIAL STATEMENTS
The accompanying condensed financial statements of NN Ball & Roller, Inc. have
not been audited by independent accountants, except for the balance sheet at
December 31, 1998. In the opinion of the Company's management, the financial
statements reflect all adjustments necessary to present fairly the results of
operations for the three-month periods ended March 31, 1999 and 1998, the
Company's financial position at March 31, 1999 and December 31, 1998, and the
cash flows for the three-month periods ended March 31, 1999 and 1998. These
adjustments are of a normal recurring nature and are, in the opinion of
management, necessary for fair presentation of the financial position and
operating results for the interim periods.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted from the interim financial statements presented
in this Quarterly Report on Form 10-Q.
The results for the first quarter of 1999 are not necessarily indicative of
future results.
NOTE 2. INVENTORIES
Inventories are stated at the lower of cost or market, with cost being
determined by the first-in, first-out method.
Inventories are comprised of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
(UNAUDITED)
----------- -----------
<S> <C> <C>
Raw materials $ 3,151 $ 3,611
Work in process 2,242 2,850
Finished goods 7,682 8,024
------- -------
13,075 14,485
Less - Reserve for excess and obsolete inventory 60 60
------- -------
$13,015 $14,425
------- -------
------- -------
</TABLE>
6
<PAGE>
NOTE 3. NET INCOME PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
THOUSANDS OF DOLLARS, EXCEPT 1999 1998
SHARE AND PER SHARE DATA
- ----------------------------------------------------------------------------- -------------- -- --------------
<S> <C> <C>
Net income $ 1,962 $ 2,667
Adjustments to net income -- --
---------- -----------
Net income $ 1,962 $ 2,667
---------- -----------
---------- -----------
Basic shares outstanding 14,804,244 14,804,244
Effect of dilutive stock options -- --
---------- -----------
Dilutive shares outstanding 14,804,244 14,804,244
---------- -----------
---------- -----------
Basic net income per share $ 0.13 $ 0.18
---------- -----------
---------- -----------
Diluted net income per share $ 0.13 $ 0.18
---------- -----------
---------- -----------
</TABLE>
Excluded from the shares outstanding at March 31, 1999 were 501,625 of
antidilutive options to purchase common shares at an exercise price of $6.38 to
$15.50. Excluded from shares outstanding at March 31, 1998 were 426,500
antidilutive options to purchase common shares at an exercise price of $11.92 to
$15.50.
NOTE 4. SEGMENT INFORMATION
The Company's reportable segments represent geographic business units that offer
similar products. They are managed seperately due to logistics and differences
in business cultures. The Company's United States operations are distributed
among two manufacturing facilities in Tennessee and one manufacturing facility
in South Carolina. All of these facilities are engaged in the production of
precision balls and rollers used primarily in the bearing industry. The
Company's European operations are centralized in one manufacturing facility
located in Kilkenny, Ireland. The facility is also engaged in the production of
precision balls used primarily in the bearing industry.
The accounting policies of the segments do not differ from those of the
consolidated entity. The Company evaluates segment performance based on profit
or loss from operations before income taxes not including non-recurring gains or
losses. The Company accounts for intersegment sales and transfers at current
market prices; however, the Company did not have any material intersegment
transactions in the 1999 or 1998 first quarters.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1999 1998
THOUSANDS OF DOLLARS U.S. EUROPE U.S. EUROPE
- -------------------- ---- ------ ---- ------
<S> <C> <C> <C> <C>
Revenues from external customers $15,613 $ 2,299 $19,852 $ 1,034
Segment profit/(loss) 2,584 342 4,351 (120)
Segment assets 55,243 12,940 58,770 8,147
</TABLE>
Segment assets for U.S. and Europe at December 31, 1998 were $53.5 million and
$13.4 million, respectively.
7
<PAGE>
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
NET SALES. Net sales decreased by approximately $3.0 million, or 14.2%, from
$20.9 million for the first quarter of 1998 to $17.9 million for the first
quarter of 1999. Foreign sales decreased $2.4 million, or 23.8%, from $10.1
million in the first quarter of 1998 to $7.7 million during the first quarter of
1999. The decrease in foreign net sales was due primarily to decreased sales
volumes and to a lessor degree decreased selling prices to exisiting customers,
largely due to general economic conditions in Asia and South America. Domestic
sales decreased $0.6 million, or 4.7%, from $10.8 million in the first quarter
of 1998 to $10.2 million in the first quarter of 1999. This decrease was due
primarily to decreased volumes to existing customers.
GROSS PROFIT. Gross profit decreased $1.3 million, or 19.7%, from $6.7 million
for the first quarter of 1998 to $5.4 million for the first quarter of 1999. As
a percentage of net sales, gross profit decreased from 32.1% in the first
quarter of 1998 to 30.1% for the same period in 1999. The decrease in gross
profit and gross profit as a percentage of sales was due to decreased sales of
14.2% and to decreased levels of production volume and capacity utilization for
the first quarter of 1999 as compared to the first quarter of 1998.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses decreased $86,000 from $1.3 million for the first quarter of 1998 to
$1.2 million in 1999. As a percentage of net sales, selling, general and
administrative expenses increased from 6.2% for the first quarter of 1998 to
6.8% for the same period in 1999.
DEPRECIATION. Depreciation expense increased from $1.16 million for the first
quarter of 1998 to $1.24 million for the same period in 1999. This increase was
due primarily to purchases of capital equipment. As a percentage of net sales,
depreciation expense increased from 5.5% for the first quarter of 1998 to 6.9%
for the same period in 1999.
INTEREST EXPENSE. Interest expense decreased slightly from $15,000 in the first
quarter of 1998 to $1,000 during the same period in 1999.
NET INCOME. Net income decreased from $2.7 million for the first quarter of 1998
to $2.0 million for the same period in 1999. As a percentage of net sales, net
income decreased from 12.8% in the first quarter of 1998 to 11.0% for the first
quarter of 1999. This decrease in net income as a percentage of net sales was
due primarily to decreased gross profits due to capacity utilization and
increased depreciation expense as described above .
LIQUIDITY AND CAPITAL RESOURCES
In July 1997, the Company entered into a loan agreement with First American
National Bank ("First American") which provides for a revolving credit facility
of up to $25 million, expiring on June 30, 2000. Amounts outstanding under the
revolving facility are unsecured and bear interest at a floating rate equal to,
at the Company's option, either LIBOR plus 0.65% or the Fed Funds effective rate
plus 1.5%. The loan agreement contains customary financial and operating
restrictions on the Company, including covenants, restricting the Company,
without First American's consent, from incurring additional indebtedness from,
or pledging any of its assets to, other lenders and from disposing of a
substantial portion of its assets. In addition, the Company is prohibited from
declaring any dividend if a default exists under the revolving credit facility
at the time of, or would occur as a result of, such declaration. The loan
agreement also prohibits sales of property outside of the ordinary course of
business. The loan agreement also
8
<PAGE>
contains customary financial covenants with respect to the Company, including a
covenant that the Company's earnings will not decrease in any year by more than
fifty percent of earnings in the Company's immediately preceding fiscal year.
The Company, as of May 3, 1999 was in compliance with all such covenants.
The Company's arrangements with its domestic customers typically provide that
payments are due within 30 days following the date of the Company's shipment of
goods, while arrangements with foreign customers (other than foreign customers
that have entered into an inventory management program with the Company)
generally provide that payments are due within either 90 or 120 days following
the date of shipment. Under the Company's inventory management program, payments
typically are due within 30 days after the product is used by the customer. The
Company's net sales historically have not been of a seasonal nature. However, as
foreign sales have increased as a percentage of total sales, seasonality has
become a factor for the Company in that many foreign customers cease production
during the month of August.
In the fourth quarter of 1997, upon the commencement of production in its
Kilkenny, Ireland facility, the Company began to bill and receive payment from
some of its foreign customers in their own currency. To date, the Company has
not been materially adversely affected by currency fluctuations or foreign
exchange restrictions. Nonetheless, as a result of these sales, the Company's
foreign exchange risk has increased. Various strategies to manage this risk are
under development and implementation, including a hedging program. In addition,
a strengthening of the U.S. dollar against foreign currencies could impair the
ability of the Company to compete with international competitors for foreign as
well as domestic sales.
Working capital, which consists principally of accounts receivable and
inventories was $22.1 million at March 31, 1999 as compared to $20.9 million at
December 31, 1998. The ratio of current assets to current liabilities decreased
from 3.7:1 at December 31, 1998 to 3.4:1 at March 31, 1999. Cash flow from
operations increased from $3.2 million during the first quarter 1998 to $4.1
million during the first quarter 1999. This increase was primarily attributed to
an increase of $1.7 million in accounts receivable for the first quarter of 1999
as compared to an increase of $4.1million for the first quarter of 1998.
During 1999, the Company plans to spend approximately $3.0 million on capital
expenditures (of which approximately $700,000 has been spent through March 31,
1999) including the purchase of additional machinery and equipment for all three
of the Company's U.S. facilities as well as the Ireland facility. The Company
intends to finance these activities with cash generated from operations and
funds available under the credit facility described above. The Company believes
that funds generated from operations and borrowings from the credit facility
will be sufficient to finance the Company's working capital needs and projected
capital expenditure requirements through December 1999.
YEAR 2000
The Year 2000 issue is the result of computer programs written using two digits
rather than four digits to identify a particular year. Without corrective
action, programs with time-sensitive software could potentially act as if a date
ending in "00" is the year 1900 rather than the year 2000. This could cause
computer applications to create erroneous results or cause a system failure.
The Company has conducted a comprehensive evaluation of both its information
technology systems and non-information technology systems to determine if there
would be a Year 2000 problem with these systems. Prior to that evaluation,
however, the Company had decided to upgrade its information technology systems.
The systems the Company intends to install have been certified by the vendor to
be Year 2000 compliant. The Company also evaluated its non-information
technology systems and received certification by the manufacturers of that
equipment that they are Year 2000 compliant.
9
<PAGE>
The Company expects that it will have implemented these system upgrades by
mid-1999. The Company has also developed contingency plans that it believes
would permit it to continue operating without causing any material harm to the
results of operations.
The Company expects to spend approximately $800,000 to replace its information
technology systems and train personnel. As of March 31, 1999, the Company had
spent approximately $600,000 on this project. The Company's expenditures for
evaluating the Year 2000 issue have not been material. The Company has assigned
one employee to coordinate its Year 2000 efforts, and has relied on existing
personnel to evaluate its Year 2000 readiness.
The Company relies on third party suppliers for raw materials and a variety of
goods and services. Among its most important suppliers are those that provide
the steel necessary to make quality balls and rollers. The Company has obtained
written representation from approximately 70 percent of its suppliers and
vendors and expects to receive responses from its remaining suppliers and
vendors by the end of the year. So far, no supplier or vendor has indicated that
the Year 2000 issue will affect its ability to provide goods and services to the
Company. Despite these assurances, if the Company's suppliers are unable to meet
its needs, there could be a material adverse effect on the results of
operations, liquidity and financial condition of the Company.
The Company believes it is taking the necessary steps to resolve the Year 2000
issue in a comprehensive and timely manner. Nonetheless, should any unforeseen
circumstance arise that would delay the replacement of its systems, the
Company's ability to manufacture and ship its products, take orders, invoice
customers, and collect payment could be adversely affected. This could have a
material adverse effect on the Company's results of operations, liquidity and
financial condition to a degree the Company has not determined.
THE EURO
The treaty on European Union provided that an economic and monetary union be
established in Europe whereby a single European currency, the euro, was
introduced to replace the currencies of participating member states. The euro
was introduced on January 1, 1999, at which time the value of participating
member state currencies were irrevocably fixed against the euro and the European
Currency Unit. For the three year transitional period ending December 31, 2001,
the national currencies of member states will continue to circulate but be in
subunits of the euro. At the end of the transitional period, euro banknotes and
coins will be issued, and the national currencies of the member states will
cease to be legal tender no later than June 30, 2002.
The Company currently has operations in Ireland, which is one of the euro
participating countries, and sells product to customers in many of the
participating countries. The functional currency of the Company's Ireland
operations will remain unchanged until December 31, 2001, when it will switch to
the euro. The Company is in the process of reviewing and making changes required
for euro readiness and does not anticipate the costs associated with the
implementation of the euro to be significant.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities" which establishes accounting and reporting
standards for derivative instruments and hedging activities and is effective for
the Company's 2000 reporting cycle. The adoption of this standard by the Company
is not expected to result in significant adjustments to existing accounting
practices.
Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use," was issued by the American
Institute if Certified Public Accountants in March 1998 and requires
capitalization of certain internal-use computer software costs. The Company has
begun
10
<PAGE>
to comply with the requirements of this SOP effective for its 1999 financial
reporting. The standard has not had a material effect on the Company's results
of operations.
CAUTIONARY STATEMENTS FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Company wishes to caution readers that this report contains, and future
filings by the Company, press releases and oral statements made by the Company's
authorized representatives may contain, forward looking statements that involve
certain risks and uncertainties. The Company's actual results could differ
materially from those expressed in such forward looking statements due to
important factors bearing on the Company's business, many of which already have
been discussed in this filing and in the Company's prior filings.
The following paragraphs discuss the risk factors the Company regards as the
most significant, although the Company wishes to caution that other factors that
are currently not considered significant or that currently cannot be foreseen
may in the future prove to be important in affecting the Company's results of
operations. The Company undertakes no obligation to publicly update or revise
any forward looking statements, whether as a result of new information, future
events or otherwise.
INDUSTRY RISKS. The precision ball and roller industry is cyclical and tends to
decline in response to overall declines in industrial production. The Company's
sales in the past have been negatively affected, and in the future very likely
would be negatively affected, by adverse conditions in the industrial production
sector of the economy or by adverse global or national economic conditions.
COMPETITION. The precision ball and roller market is highly competitive, and
many of the ball and roller manufacturers in the market are larger and have
substantially greater resources than the Company. The Company's competitors are
continuously exploring and implementing improvements in technology and
manufacturing processes in order to improve product quality, and the Company's
ability to remain competitive will depend, among other things, on whether it is
able, in a cost effective manner, to keep apace with such quality improvements.
In addition, the Company competes with many of its customers that, in addition
to producing bearings, also internally produce balls and rollers for sale to
third parties. The Company also faces a risk that its customers will decide to
produce balls and rollers internally rather than outsourcing their needs to the
Company.
RAPID GROWTH. The Company has significantly expanded its production facilities
and capacity over the last several years. The Company currently is not operating
at full capacity and faces risks of further underutilization or inefficient
utilization of its production facilities in future years. The Company also faces
risks associated with start-up expenses, inefficiencies, delays and increased
depreciation costs associated with its plant expansions.
RAW MATERIAL SHORTAGES. Because the balls and rollers manufactured by the
Company have highly-specialized applications, their production requires the use
of very particular types of steel. Due to quality constraints, the Company
obtains the majority of its steel from overseas suppliers. Steel shortages or
transportation problems, particularly with respect to 52100 Steel, could have a
detrimental effect on the Company's business.
RISKS ASSOCIATED WITH INTERNATIONAL TRADE. Because the Company obtains a
majority of its raw materials from overseas suppliers and sells to a large
number of international customers, the Company faces risks associated with (i)
adverse foreign currency fluctuations, (ii) changes in trade, monetary and
fiscal policies, laws and regulations, and other activities of governments,
agencies and similar organizations, (iii) the imposition of trade restrictions
or prohibitions, (iv) the imposition of import or other changes or taxes, and
(v) unstable governments or legal systems in countries in which the Company's
suppliers and customers are located.
11
<PAGE>
DEPENDENCE ON MAJOR CUSTOMERS. During 1998, the Company's ten largest customers
accounted for approximately 76% of its net sales. Sales to various U.S. and
foreign divisions of SKF, which is one of the largest bearing manufacturers in
the world, accounted for approximately 37% of net sales in 1998, and sales to
FAG accounted for approximately 11% of net sales. The Company currently
negotiates and contracts with various purchasing units within SKF and believes
that, in certain respects, such units operate independently with respect to
purchasing decisions. There can be no assurance, however, that SKF will not
centralize purchasing decisions in the future. None of the Company's other
customers accounted for more than 10% of its net sales in 1998, but sales to two
of its customers each represented more than 5% of the Company's 1998 net sales.
the loss of all or a substantial portion of sales to these customers would have
a material adverse effect on the Company's business.
12
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Exhibit 27 - financial Data Schedules (For Information of SEC Only)
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NN Ball & Roller, Inc.
-------------------------------------
(Registrant)
May 7, 1999 /s/ Roderick R. Baty
Date: -------------- -------------------------------------
Roderick R. Baty, President and Chief
Executive Officer
(Duly Authorized Officer)
May 7, 1999 /s/ David L. Dyckman
Date: -------------- -------------------------------------
David L. Dyckman
Chief Financial Officer and
Vice President
(Principal Financial Officer)
(Duly Authorized Officer)
May 7, 1999 /s/ William C. Kelly, Jr.
Date: -------------- -------------------------------------
William C. Kelly, Jr.,
Treasurer, Assistant Secretary and
Chief Accounting Officer
(Principal Accounting Officer)
(Duly Authorized Officer)
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000918541
<NAME> NN BALL & ROLLER
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 3,515
<SECURITIES> 0
<RECEIVABLES> 13,305
<ALLOWANCES> 588
<INVENTORY> 13,015
<CURRENT-ASSETS> 31,163
<PP&E> 63,397
<DEPRECIATION> 26,377
<TOTAL-ASSETS> 68,183
<CURRENT-LIABILITIES> 9,044
<BONDS> 0
0
0
<COMMON> 149
<OTHER-SE> 68,034
<TOTAL-LIABILITY-AND-EQUITY> 68,183
<SALES> 17,912
<TOTAL-REVENUES> 17,912
<CGS> 12,523
<TOTAL-COSTS> 12,523
<OTHER-EXPENSES> 2,462
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1
<INCOME-PRETAX> 2,926
<INCOME-TAX> 964
<INCOME-CONTINUING> 1,962
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,962
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.13
</TABLE>
