CAPS Rating: 3 out of 5

The Company manufactures and supplies bearing components, consisting of balls, cylindrical rollers, tapered rollers, seals, and plastic and metal retainers, for bearing manufacturers on a global basis.


Player Avatar rd80 (97.11) Submitted: 5/3/2008 12:30:03 PM : Outperform Start Price: $10.41 NNBR Score: +29.16

Returning to a crash site on this one. I had picked this last year as an outperform. Shortly after picking it, they ran into real problems getting production on line at a new plant in China and a recent acquisition, Whirlaway, wasn’t performing well. I also bought a little of the stock. Long story short – lost both money and CAPS points. If you’re interested in that saga, you can find it by expanding the pitch for the 6/12/07 pick on my closed picks page.

NN, Inc. (NNBR) is a small $175 M market cap company that makes bearing components and precision metal and plastic parts. They pay a dividend with a yield of 3.0% based on Friday’s closing price. The stats page shows $114M of debt and $13M cash, a little more debt than I'd like to see, but not excessive. Those figures are as of 31 Dec 07. During the conference call they stated debt was $111 million at the end of March and they plan on paying down about $20 million of debt over the rest of the year.

An interesting thing happened last week. NNBR reported actual earnings. When I closed this last year, I thought it was a good investment IF they turned the business around.

Revenues for the quarter ended 31 March were $121.5 million. Annualized, that puts the company selling at about a third of sales. Earnings for the quarter were $5.1 million or 0.32 per share. Annualizing that rate gives a PE of 8.6.

According to the conference call, about 70% of the revenues come from outside the US and their customers have strong business forecasts. Also key, they are able to pass higher material costs along to their customers.

NNBR is still seeing weakness in their plastics division, which sells to the automotive industry. But that’s in their forecasts. Key quote from the earnings release – Roderick R. Baty, Chairman and Chief Executive Officer commented, “In the latter part of 2007, we began to see evidence of improvements in three operations – Whirlaway, Slovakia and China. During the first quarter of 2008, we experienced improved profitability and operating margins at each of these locations as compared to the prior year, due mainly to higher capacity utilization resulting from new business awards at all three operations.”

If they’ve turned the poor performing business segments around, the stock could easily double over the next year. If the last quarter was just a blip and they return to poor performance, my CAPS score will suffer again. I haven’t bought any again in real life – yet.

Report this Post 5 Replies
Member Avatar ikkyu2 (99.14) Submitted: 5/15/2008 11:49:05 PM
Recs: 0

Are they still borrowing to pay a dividend?

Member Avatar rd80 (97.11) Submitted: 5/16/2008 8:27:25 PM
Recs: 0

Hey there, good to hear from you again.Earnings were more than enough to cover the payout and they paid down $3 million of debt last quarter. According to the conference call, they plan on paying down $20 million this year. One of the analysts asked about the buyback on the call and they said they opted to pay down debt rather than repurchase shares last quarter - hip, hip, hurray.I'd love to find another GHM, but think there's too much debt here to do that well. Hope you held on to that one to catch the run over the past couple months. I only bought a handful of shares and have taken a little profit - but wow. Also hope you were smart enough to stay away from RUBO.I want to see at least one more quarter or other evidence showing 'back on track' before committing any real $ to NNBR.

Member Avatar ikkyu2 (99.14) Submitted: 6/17/2008 11:27:33 AM
Recs: 0

I did grab some GHM at 37 or so, and I did avoid the RUBO. I didn't think this was going to be another GHM but boy was I wrong :)

Member Avatar rd80 (97.11) Submitted: 6/17/2008 9:07:48 PM
Recs: 0

Not sure NNBR will be another Graham, but it has been going strong lately.Both NNBR and GHM will be added to the Russell 3000 / 2000 at the end of the month. That could explain some of the strength in a soft market.http://www.russell.com/indexes/membership/Reconstitution/Recon_3000_Additions.asp

Member Avatar rd80 (97.11) Submitted: 6/17/2013 7:26:46 PM
Recs: 0

Dividend has been reinstated.

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