UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2022~~March 31, 2023


☐			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 000-23486

NN, Inc.

(Exact name of registrant as specified in its charter)


Delaware						62-1096725
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

6210 Ardrey Kell Road, Suite 600

Charlotte, North Carolina 28277

(Address of principal executive offices, including zip code)

(980) 264-4300

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol

Name of each exchange on which registered

Common Stock, par value $0.01

NNBR

The Nasdaq Stock Market LLC

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☒

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~July 29, 2022,~~April 24, 2023, there were ~~43,884,408~~45,653,704 shares of the registrant’s common stock, par value $0.01 per share, outstanding.

Table of Contents

NN, Inc.

INDEX


		Page
PART I. FINANCIAL INFORMATION		3

Item 1.	Financial Statements	3

	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)	3
	Condensed Consolidated Balance Sheets (Unaudited)	4
	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows (Unaudited)	76
	Notes to Condensed Consolidated Financial Statements (Unaudited)	87
	Note 1. Interim Financial Statements	87
	Note 2. Segment Information	97
	Note 3. Inventories	108
	Note 4. Intangible Assets, Net	108
	Note 5. Investment in Joint Venture	108
	Note 6. Income Taxes	108
	Note 7. Debt	119
	Note 8. Leases	1210
	Note 9. Commitments and Contingencies	1210
	Note 10. Preferred Stock and Stockholders' Equity	1311
	Note 11. Revenue from Contracts with Customers	1311
	Note 12. Share-Based Compensation	1613
	Note 13. Accumulated Other Comprehensive Income	1813
	Note 14. Net ~~Income (Loss)~~Loss Per Common Share	1814
	Note 15. Fair Value Measurements	2014

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2317

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2921

Item 4.	Controls and Procedures	3021

PART II. OTHER INFORMATION		3122

Item 1.	Legal Proceedings	3122
Item 1A.	Risk Factors	3122
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3122
Item 3.	Defaults Upon Senior Securities	3222
Item 4.	Mine Safety Disclosures	3222
Item 5.	Other Information	3223
Item 6.	Exhibits	3223
SIGNATURES		3324

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NN, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(Unaudited)

Three Months Ended
June 30, Six Months Ended
June 30,
(in thousands, except per share data) 2022 2021 2022 2021
Net sales $ 125,362 $ 123,157 $ 253,429 $ 249,961
Cost of sales (exclusive of depreciation and amortization shown separately below) 103,889 99,797 208,467 199,485
Selling, general, and administrative expense 14,794 13,585 28,248 28,160
Depreciation and amortization 11,340 11,687 22,769 23,255
Other operating expense (income), net (147) (324) 1,879 (329)
Loss from operations (4,514) (1,588) (7,934) (610)
Interest expense 3,488 3,573 6,927 5,597
Loss on extinguishment of debt and write-off of debt issuance costs — — — 2,390
Derivative payments on interest rate swap — — — 1,717
Loss on interest rate swap — — — 2,033
Other expense (income), net (67) 1,680 (3,063) 1,558
Loss before benefit (provision) for income taxes and share of net income from joint venture (7,935) (6,841) (11,798) (13,905)
Benefit (provision) for income taxes (1,051) 231 (2,582) 987
Share of net income from joint venture 419 1,219 2,511 2,614
Net loss $ (8,567) $ (5,391) $ (11,869) $ (10,304)
Other comprehensive income (loss):
Foreign currency translation gain (loss) $ (8,490) $ 4,409 $ (5,890) $ 1,062
Interest rate swap:
Change in fair value, net of tax 373 — 1,560 —
Reclassification adjustment for losses included in net loss, net of tax 31 — 65 2,851
Other comprehensive income (loss) $ (8,086) $ 4,409 $ (4,265) $ 3,913
Comprehensive loss $ (16,653) $ (982) $ (16,134) $ (6,391)
Basic net loss per common share:
Net loss per common share $ (0.25) $ (0.17) $ (0.38) $ (0.62)
Weighted average common shares outstanding 44,708 44,440 44,649 43,561
Diluted net loss per common share:
Net loss per common share $ (0.25) $ (0.17) $ (0.38) $ (0.62)
Weighted average common shares outstanding 44,708 44,440 44,649 43,561


	Three Months Ended March 31,
(in thousands, except per share data)	2023		2022
Net sales	$	127,088	$	128,067
Cost of sales (exclusive of depreciation and amortization shown separately below)	108,421		104,578
Selling, general, and administrative expense	13,165		13,454

Depreciation and amortization	11,516		11,429

Other operating expense, net	1,061		2,026
Loss from operations	(7,075)		(3,420)
Interest expense	4,288		3,439



Other income, net	(2,208)		(2,996)
Loss before provision for income taxes and share of net income from joint venture	(9,155)		(3,863)
Provision for income taxes	(1,301)		(1,531)
Share of net income from joint venture	281		2,092


Net loss	$	(10,175)	$	(3,302)
Other comprehensive income:
Foreign currency translation gain	$	1,840	$	2,600
Interest rate swap:
Change in fair value, net of tax	(230)		1,187
Reclassification adjustment for losses (gains) included in net loss, net of tax	(468)		34
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

See notes to condensed consolidated financial statements (unaudited).

Table of Contents

NN, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except per share data) June 30,
2022 December 31, 2021
Assets
Current assets:
Cash and cash equivalents $ 15,186 $ 28,656
Accounts receivable, net of allowances of $1,762 and $1,352 at June 30, 2022 and December 31, 2021, respectively 82,621 71,419
Inventories 84,726 75,027
Income tax receivable 10,931 11,808
Other current assets 13,267 9,372
Total current assets 206,731 196,282
Property, plant and equipment, net of accumulated depreciation of $210,618 and $197,936 at June 30, 2022 and December 31, 2021, respectively 202,239 209,105
Operating lease right-of-use assets 46,042 46,443
Intangible assets, net 81,545 88,718
Investment in joint venture 30,875 34,045
Deferred tax assets 375 314
Other non-current assets 5,350 4,194
Total assets $ 573,157 $ 579,101
Liabilities, Preferred Stock, and Stockholders’ Equity
Current liabilities:
Accounts payable $ 47,859 $ 36,710
Accrued salaries, wages and benefits 15,217 17,739
Income tax payable 687 2,072
Current maturities of long-term debt 3,139 3,074
Current portion of operating lease liabilities 5,103 5,704
Other current liabilities 12,439 8,718
Total current liabilities 84,444 74,017
Deferred tax liabilities 8,141 7,456
Long-term debt, net of current portion 151,317 151,052
Operating lease liabilities, net of current portion 50,899 51,295
Other non-current liabilities 13,031 17,289
Total liabilities 307,832 301,109
Commitments and contingencies (Note 9) 0 0
Series D perpetual preferred stock - $0.01 par value per share, 65 shares authorized, issued and outstanding at June 30, 2022 and December 31, 2021, respectively 59,003 53,807
Stockholders' equity:
Common stock - $0.01 par value per share, 90,000 shares authorized, 43,884 and 43,027 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively 439 430
Additional paid-in capital 473,019 474,757
Accumulated deficit (230,969) (219,100)
Accumulated other comprehensive loss (36,167) (31,902)
Total stockholders’ equity 206,322 224,185
Total liabilities, preferred stock, and stockholders’ equity $ 573,157 $ 579,101


(in thousands, except per share data)	March 31, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	10,545	$	12,808
Accounts receivable, net of allowances of $1,572 and $1,469 at March 31, 2023 and December 31, 2022	80,003		74,129
Inventories	81,778		80,682
Income tax receivable	12,087		12,164
Prepaid assets	7,076		2,794
Other current assets	9,016		9,123
Total current assets	200,505		191,700
Property, plant and equipment, net of accumulated depreciation of $232,086 and $225,046 at March 31, 2023 and December 31, 2022	194,513		197,637
Operating lease right-of-use assets	46,280		46,713
Intangible assets, net	69,327		72,891
Investment in joint venture	32,212		31,802
Deferred tax assets	102		102
Other non-current assets	4,334		5,282
Total assets	$	547,273	$	546,127
Liabilities, Preferred Stock, and Stockholders’ Equity
Current liabilities:
Accounts payable	$	49,975	$	45,871
Accrued salaries, wages and benefits	14,251		11,671
Income tax payable	560		926
Current maturities of long-term debt	6,258		3,321
Current portion of operating lease liabilities	5,008		5,294
Other current liabilities	15,288		11,723
Total current liabilities	91,340		78,806
Deferred tax liabilities	6,064		5,596

Long-term debt, net of current portion	146,228		149,389
Operating lease liabilities, net of current portion	50,710		51,411
Other non-current liabilities	10,715		9,960
Total liabilities	305,057		295,162
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	67,752		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	438		439
Additional paid-in capital	465,377		468,143
Accumulated deficit	(255,373)		(245,198)
Accumulated other comprehensive loss	(35,978)		(37,120)
Total stockholders’ equity	174,464		186,264
Total liabilities, preferred stock, and stockholders’ equity	$	547,273	$	546,127

See notes to condensed consolidated financial statements (unaudited).

Table of Contents

NN, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Three Months Ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~

(Unaudited)


		Common Stock					Accumulated deficit				Accumulated other comprehensive income (loss)									Common Stock							Accumulated deficit				Accumulated other comprehensive income (loss)
(in thousands)	(in thousands)	Number of shares	Par value		Additional paid-in capital								Total		(in thousands)		Number of shares				Par value			Additional paid-in capital					Total
Balance at March 31, 2022		43,890	$	439	$	473,072			$	(222,402)			$	(28,081)				$	223,028
Balance as of December 31, 2022																		Balance as of December 31, 2022		43,856		$	439		$	468,143			$	(245,198)			$	(37,120)			$	186,264
Net loss	Net loss	—	—		—		(8,567)				—				(8,567)			Net loss		—		—			—		(10,175)				—				(10,175)

Dividends accrued for preferred stock	Dividends accrued for preferred stock	—	—		(2,658)		—				—				(2,658)			Dividends accrued for preferred stock		—		—			(3,051)		—				—				(3,051)

Share-based compensation expense	Share-based compensation expense	(5)	—		2,606		—				—				2,606			Share-based compensation expense		—		—			381		—				—				381
Restricted shares forgiven for taxes	Restricted shares forgiven for taxes	(1)	—		(1)		—				—				(1)			Restricted shares forgiven for taxes		(84)		(1)			(96)		—				—				(97)

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

Change in fair value of interest rate swap, net of tax of $98		—	—		—		—				373				373
Reclassification of interest rate swap settlement to net loss, net of tax of $8		—	—		—		—				31				31
Foreign currency translation loss		—	—		—		—				(8,490)				(8,490)

Balance at June 30, 2022		43,884	$	439	$	473,019	$	(230,969)			$	(36,167)			$	206,322
Balance as of March 31, 2023																		Balance as of March 31, 2023		43,772		$	438		$	465,377	$	(255,373)			$	(35,978)			$	174,464


		Common Stock					Accumulated deficit				Accumulated other comprehensive income (loss)									Common Stock							Accumulated deficit				Accumulated other comprehensive income (loss)
(in thousands)	(in thousands)	Number of shares	Par value		Additional paid-in capital								Total		(in thousands)		Number of shares				Par value			Additional paid-in capital					Total
Balance at March 31, 2021		43,049	$	430	$	479,341			$	(210,788)			$	(34,228)				$	234,755
Balance as of December 31, 2021																		Balance as of December 31, 2021		43,027		$	430		$	474,757			$	(219,100)			$	(31,902)			$	224,185
Net loss	Net loss	—	—		—		(5,391)				—				(5,391)			Net loss		—		—			—		(3,302)				—				(3,302)

Dividends accrued for preferred stock	Dividends accrued for preferred stock	—	—		(2,211)		—				—				(2,211)			Dividends accrued for preferred stock		—		—			(2,538)		—				—				(2,538)

Shares issued for option exercises		6	—		48		—				—				48
Shares issued under stock incentive plans																		Shares issued under stock incentive plans		893		9			(9)		—				—				—
Share-based compensation expense	Share-based compensation expense	(19)	—		1,100		—				—				1,100			Share-based compensation expense		—		—			949		—				—				949
Restricted shares forgiven for taxes	Restricted shares forgiven for taxes	(2)	—		(18)		—				—				(18)			Restricted shares forgiven for taxes		(30)		—			(87)		—				—				(87)
Change in estimate of share-based award vesting		—	—		(337)		—				—				(337)

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

Foreign currency translation gain		—	—		—		—				4,409				4,409

Balance at June 30, 2021		43,034	$	430	$	477,923	$	(216,179)			$	(29,819)			$	232,355
Balance as of March 31, 2022																		Balance as of March 31, 2022		43,890		$	439		$	473,072	$	(222,402)			$	(28,081)			$	223,028

See notes to condensed consolidated financial statements (unaudited).

~~Table of Contents~~

~~NN, Inc.~~

~~Condensed Consolidated Statements of Changes in Stockholders’ Equity~~

~~Six Months Ended June 30, 2022 and 2021~~

~~(Unaudited)~~

Common Stock Accumulated deficit Accumulated other comprehensive income (loss)
(in thousands) Number
of
shares Par
value Additional
paid-in
capital Total
Balance at 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)
Share-based compensation expense 888 9 3,546 — — 3,555
Restricted shares forgiven for taxes (31) — (88) — — (88)
Change in fair value of interest rate swap, net of tax of $414 — — — — 1,560 1,560
Reclassification of interest rate swap settlement to net loss, net of tax of $17 — — — — 65 65
Foreign currency translation loss — — — — (5,890) (5,890)
Balance at June 30, 2022 43,884 $ 439 $ 473,019 $ (230,969) $ (36,167) $ 206,322

Common Stock Accumulated deficit Accumulated other comprehensive income (loss)
(in thousands) Number
of
shares Par
value Additional
paid-in
capital Total
Balance at December 31, 2020 42,686 $ 427 $ 493,332 $ (205,875) $ (33,732) $ 254,152
Net loss — — — (10,304) — (10,304)
Dividends accrued for preferred stock — — (16,740) — — (16,740)
Shares issued for option exercises 6 — 48 — — 48
Share-based compensation expense 394 4 1,982 — — 1,986
Restricted shares forgiven for taxes (52) (1) (362) — — (363)
Change in estimate of share-based award vesting — — (337) — — (337)
Reclassification of interest rate swap settlement to net loss, net of tax of $861 — — — — 2,851 2,851
Foreign currency translation gain — — — — 1,062 1,062
Balance at June 30, 2021 43,034 $ 430 $ 477,923 $ (216,179) $ (29,819) $ 232,355

~~See notes to condensed consolidated financial statements (unaudited).~~

Table of Contents

NN, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


		Six Months Ended June 30,					Three Months Ended March 31,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022
Cash flows from operating activities	Cash flows from operating activities					Cash flows from operating activities
Net loss	Net loss	$	(11,869)	$	(10,304)	Net loss	$	(10,175)	$	(3,302)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:	Adjustments to reconcile net loss to net cash provided by (used in) operating activities:					Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	Depreciation and amortization	22,769		23,255		Depreciation and amortization	11,516		11,429
Amortization of debt issuance costs and discount						Amortization of debt issuance costs and discount	353		332
Impairments of property, plant and equipment						Impairments of property, plant and equipment	—		233

Amortization of debt issuance costs and discount		662		718

Loss on extinguishment of debt and write-off of debt issuance costs		—		2,390
Total derivative loss (gain), net of cash settlements	Total derivative loss (gain), net of cash settlements	(3,237)		3,973		Total derivative loss (gain), net of cash settlements	386		(2,543)
Share of net income from joint venture, net of cash dividends received	Share of net income from joint venture, net of cash dividends received	1,515		(2,614)		Share of net income from joint venture, net of cash dividends received	(281)		1,934
Compensation expense from issuance of share-based awards		3,555		1,649
Share-based compensation expense						Share-based compensation expense	381		949
Deferred income taxes	Deferred income taxes	94		(3,050)		Deferred income taxes	480		(42)
Other	Other	(2,763)		(1,154)		Other	(287)		(826)
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	(13,264)		2,685		Accounts receivable	(5,506)		(17,633)
Inventories	Inventories	(10,586)		(12,052)		Inventories	(447)		(5,536)
Accounts payable	Accounts payable	11,960		9,441		Accounts payable	2,813		11,416
Income taxes receivable and payable, net	Income taxes receivable and payable, net	(475)		(6,326)		Income taxes receivable and payable, net	(283)		(631)
Other	Other	(905)		(2,713)		Other	1,276		(1,003)
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	(2,544)		5,898		Net cash provided by (used in) operating activities	226		(5,223)
Cash flows from investing activities	Cash flows from investing activities					Cash flows from investing activities
Acquisition of property, plant and equipment	Acquisition of property, plant and equipment	(9,703)		(11,015)		Acquisition of property, plant and equipment	(4,997)		(4,262)
Proceeds from sale of property, plant, and equipment	Proceeds from sale of property, plant, and equipment	422		74		Proceeds from sale of property, plant, and equipment	1,035		36
Cash paid for post-closing adjustments on sale of business		—		(3,880)
Cash settlements of interest rate swap		—		(15,420)

Net cash used in investing activities	Net cash used in investing activities	(9,281)		(30,241)		Net cash used in investing activities	(3,962)		(4,226)
Cash flows from financing activities	Cash flows from financing activities					Cash flows from financing activities
Cash paid for debt issuance costs		—		(6,981)
Dividends paid		—		—
Proceeds from issuance of preferred stock		—		61,793
Redemption of preferred stock		—		(122,434)
Proceeds from long-term debt	Proceeds from long-term debt	20,000		156,000		Proceeds from long-term debt	17,000		8,000
Repayments of long-term debt	Repayments of long-term debt	(19,482)		(77,442)		Repayments of long-term debt	(17,832)		(8,729)
Repayments of short-term debt, net		—		(1,321)

Cash paid for debt issuance costs						Cash paid for debt issuance costs	(55)		—

Proceeds from short-term debt, net						Proceeds from short-term debt, net	2,923		—
Other	Other	(1,528)		(2,685)		Other	(785)		(787)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	(1,010)		6,930		Net cash provided by (used in) financing activities	1,251		(1,516)
Effect of exchange rate changes on cash flows	Effect of exchange rate changes on cash flows	(635)		818		Effect of exchange rate changes on cash flows	222		2,936
Net change in cash and cash equivalents	Net change in cash and cash equivalents	(13,470)		(16,595)		Net change in cash and cash equivalents	(2,263)		(8,029)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	28,656		48,138		Cash and cash equivalents at beginning of period	12,808		28,656
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	15,186	$	31,543	Cash and cash equivalents at end of period	$	10,545	$	20,627

See notes to condensed consolidated financial statements (unaudited).

Table of Contents

NN, Inc.

Notes to Condensed Consolidated Financial Statements

~~June 30, 2022~~March 31, 2023

(Unaudited)

Note 1. Interim Financial Statements

Nature of Business

NN, Inc. is a global diversified industrial company that combines advanced engineering and production capabilities with in-depth materials science expertise to design and manufacture high-precision components and assemblies primarily for the automotive, general industrial, electrical, aerospace, defense, and medical markets. 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.

Basis of Presentation

The accompanying condensed consolidated financial statements have not been audited. The Condensed Consolidated Balance Sheet as of December 31, ~~2021,~~2022, was derived from the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 (the ~~“2021~~“2022 Annual Report”), which we filed with the U.S. Securities and Exchange Commission (the “SEC”) on March ~~11, 2022.~~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 ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~2021;~~2022; financial position as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021;~~2022; and cash flows for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ 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. Certain prior period amounts have been reclassified to conform to the current year’s presentation.

Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted from the unaudited condensed consolidated financial statements presented in this Quarterly Report. These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and accompanying notes included in the ~~2021~~2022 Annual Report. The results for the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023, are not necessarily indicative of results for the year ending December 31, ~~2022,~~2023, or any other future periods.

Except for per share data or as otherwise indicated, all U.S. dollar amounts and share counts presented in the tables in these Notes to Condensed Consolidated Financial Statements are in thousands.

~~Accounting Standards Recently Adopted~~Accounts Receivable Sales Programs

~~In August 2020,~~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 ~~FASB issued ASU 2020-06,~~ ~~Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity~~ (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. Specifically, ASU 2020-06 simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. In addition, ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for the exception. Further, for the diluted earnings-per-share calculation, the new guidance requires entities to use the if-converted method for all convertible instruments and generally requires entities to include the effect of share settlement for instruments that may be settled in cash or shares, among other things. The adoption of ASU 2020-06 effective January 1, 2022 did not have a material impact on our consolidated financial statements and related disclosures.

~~In May 2021, the FASB issued ASU 2021-04,~~ ~~Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options~~ (“ASU 2021-04”), which clarifies the accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange. Specifically, ASU 2021-04 requires the issuer to treat a modification of an equity-classified warrant as an exchange of the original warrant. The difference between the fair value of the modified warrant and the fair value of the warrant immediately before modification is then recognized as an issuance cost or discount of the related transaction. Since we do not have any equity-classified written call options that would be subject to this guidance, the adoption of ASU 2021-04 did not have any impact on our consolidated financial statements and related disclosures during the sixthree months ended ~~June 30, 2022.~~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).

~~Accounting Standards Not Yet Adopted~~Assets Held For Sale

~~In November 2021,~~Due to a strategic shift to focus on growth opportunities and ongoing efforts to optimize the ~~FASB issued ASU 2021-10,~~ ~~Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance~~ ~~(“ASU 2021-10”), which requires business entities~~Company’s manufacturing footprint, we plan to ~~provide certain annual disclosures when~~

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~~they have received government assistance~~cease manufacturing operations at several facilities during 2023, including our Irvine and use a grant or contribution accounting model by analogy to other accounting guidance. Such disclosures include the nature of the transactions, significant terms and conditions, accounting policies, and affected financial statement line items. ASU 2021-10 may be applied either prospectively or retrospectively.Taunton locations. We are in the process of ~~assessing~~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 ~~impact ASU 2021-10 may have~~three months ended March 31, 2023, which is included in the Other operating expense, net line item on ~~our annual disclosures~~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 ~~year ending December 31, 2022.~~

Other current assets line item on the Condensed Consolidated Balance Sheets.

Note 2. Segment Information

Our business is aggregated into the following 2two reportable segments:

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

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

These divisions are considered our 2two operating segments as each engages in business activities for which it earns revenues and incurs expenses, discrete financial information is available for each, and this is the level at which the chief operating decision maker reviews discrete financial information for purposes of allocating resources and assessing performance.

~~The following tables present results of operations by reportable segment.~~

Mobile
Solutions Power
Solutions Corporate
and
Consolidations Total
Three Months Ended June 30, 2022
Net sales $ 73,350 $ 52,049 $ (37) (a) $ 125,362
Income (loss) from operations 1,729 1,430 (7,673) (4,514)
Interest expense (3,488)
Other 67
Loss from operations before income taxes and share of net income from joint venture $ (7,935)
Three Months Ended June 30, 2021
Net sales $ 73,886 $ 49,271 $ — $ 123,157
Income (loss) from operations 2,509 2,875 (6,972) (1,588)
Interest expense (3,573)
Other (1,680)
Loss from operations before income taxes and share of net income from joint venture $ (6,841)

Mobile
Solutions Power
Solutions Corporate
and
Consolidations Total
Six Months Ended June 30, 2022
Net sales $ 149,420 $ 104,060 $ (51) (a) $ 253,429
Income (loss) from operations 3,698 1,794 (13,426) (7,934)
Interest expense (6,927)
Other 3,063
Loss from operations before income taxes and share of net income from joint venture $ (11,798)
Six Months Ended June 30, 2021
Net sales $ 151,662 $ 98,346 $ (47) (a) $ 249,961
Income (loss) from operations 8,599 5,307 (14,516) (610)
Interest expense (5,597)
Other (7,698)
Loss from operations before income taxes and share of net income from joint venture $ (13,905)

~~(a)Includes elimination of intersegment transactions occurring during the ordinary course of business.~~

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The following table presents our financial performance by reportable segment.


	Three Months Ended March 31,
	2023		2022
Net sales:
Mobile Solutions	$	78,018	$	76,070
Power Solutions	49,072		52,011
Intersegment sales eliminations	(2)		(14)
Total	$	127,088	$	128,067
Income (loss) from operations:
Mobile Solutions	$	(3,319)	$	1,969
Power Solutions	1,747		364
Corporate	(5,503)		(5,753)
Total	$	(7,075)	$	(3,420)

Note 3. Inventories

Inventories are comprised of the following amounts:

June 30, 2022 December 31, 2021
Raw materials $ 32,305 $ 27,221
Work in process 29,653 24,960
Finished goods 22,768 22,846
Total inventories $ 84,726 $ 75,027


	March 31, 2023		December 31, 2022
Raw materials	$	31,462	$	32,146
Work in process	25,433		24,610
Finished goods	24,883		23,926
Total inventories	$	81,778	$	80,682

Note 4. Intangible Assets ~~Net~~

The following table shows changes in the carrying amount of intangible assets, net, by reportable segment.

Mobile
Solutions Power
Solutions Total
Balance as of December 31, 2021 $ 25,709 $ 63,009 $ 88,718
Amortization (1,677) (5,496) (7,173)
Balance as of June 30, 2022 $ 24,032 $ 57,513 $ 81,545


	Mobile Solutions		Power Solutions		Total
Balance as of December 31, 2022	$	22,356	$	50,535	$	72,891
Amortization	(839)		(2,725)		(3,564)




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

Intangible assets are reviewed for impairment when changes in circumstances indicate the carrying value of those assets may not be recoverable. ~~At June 30, 2022,~~As of March 31, 2023, our market capitalization ~~declined to~~was at a level that was less than the net book value of our stockholders’ ~~equity. The decline in market capitalization~~equity, which was deemed a triggering event that caused us to perform an impairment ~~analysis~~analyses on our long-lived ~~assets as of June 30, 2022.~~assets. Based on our ~~analysis,~~analyses, the carrying values of the long-lived assets were recoverable and no impairment charge was recorded during the ~~six~~three months ended ~~June 30, 2022.~~

March 31, 2023.

Note 5. Investment in Joint Venture

We own a 49% investment in Wuxi Weifu Autocam Precision Machinery Company, Ltd. (the “JV”), a joint venture located in Wuxi, China. The JV is jointly controlled and managed, and we account for it under the equity method.

The following table shows changes in our investment in the JV.


Balance as of December 31, ~~2021~~2022	$	~~34,045~~31,802
Share of earnings	~~2,511~~281
~~Dividends paid by joint venture~~	~~(4,026)~~
Foreign currency translation ~~loss~~gain	~~(1,655)~~129
Balance as of ~~June 30, 2022~~March 31, 2023	$	~~30,875~~32,212

Note 6. Income Taxes

Our effective tax rate was ~~(13.2)~~(14.2)% and ~~(21.9)~~(39.6)% for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~respectively, and 3.4% and 7.1% for the three and six months ended June 30, 2021,~~ respectively. The effective tax ~~rate~~rates for the three ~~and six~~ months ended ~~June 30, 2022 differs~~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

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portion of the future tax benefit may not be realized. In addition, the effective tax rate was unfavorably impacted by the U.S. tax on the earnings of foreign subsidiaries under the global intangible low-taxed income regime.

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Note 7. Debt

On March 22, 2021, we entered into a new $150.0 million term loan facility ~~(the~~(as amended from time to time, the “Term Loan Facility”) and a new $50.0 million asset backed credit facility ~~(the~~(as amended from time to time, the “ABL Facility”). On March 3, 2023, we amended the Term Loan Facility (the “Term Loan Amendment”) and ABL Facility to adjust certain covenants under the agreements, as well as to replace references to LIBOR with secured overnight finance rate (“SOFR”) for interest rate calculations. The following table presents the outstanding debt ~~balances as of June 30, 2022 and December 31, 2021.~~balances.


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Term Loan Facility	Term Loan Facility	$	148,125	$	148,875	Term Loan Facility	$	147,000	$	147,375
ABL Facility	ABL Facility	2,000		—		ABL Facility	1,000		1,000
International lines of credit and other loans		9,306		10,930
International loans						International loans	11,290		8,729
Total principal	Total principal	159,431		159,805		Total principal	159,290		157,104
Less-current maturities of long-term debt	Less-current maturities of long-term debt	3,139		3,074		Less-current maturities of long-term debt	6,258		3,321
Principal, net of current portion	Principal, net of current portion	156,292		156,731		Principal, net of current portion	153,032		153,783
Less-unamortized debt issuance costs and discount (1)	Less-unamortized debt issuance costs and discount (1)	4,975		5,679		Less-unamortized debt issuance costs and discount (1)	6,804		4,394
Long-term debt, net of current portion	Long-term debt, net of current portion	$	151,317	$	151,052	Long-term debt, net of current portion	$	146,228	$	149,389

(1) In addition to this amount, costs of $0.6 million and ~~$0.7~~$0.6 million related to the ABL Facility were recorded in other non-current assets as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

Term Loan Facility

~~Outstanding~~Effective March 31, 2023, outstanding borrowings under the Term Loan Facility bear interest at either 1) one-month, ~~LIBOR (subject~~three-month, or six-month SOFR with a duration adjustment (“Adjusted SOFR”), subject to a 1.000% ~~floor)~~floor, plus an applicable margin of 6.875%, or 2) the greater of various benchmark rates plus an applicable margin of 5.875%. At ~~June 30, 2022,~~March 31, 2023, the Term Loan Facility bore interest, based on one-month ~~LIBOR,~~Adjusted SOFR, at ~~8.541%~~11.782%. ~~We have an~~Beginning with the second quarter of 2023, interest is increased on a paid-in-kind basis at a rate ~~swap that changes~~between 0.50% and 2.00% (“PIK interest”), dependent on the ~~one-month LIBOR to~~Company’s leverage ratio and whether the Company completes a ~~fixed rate~~qualifying junior equity raise by June 30, 2023. The PIK interest is payable on the loan maturity date of ~~1.291% on $60.0 million of the outstanding balance of the Term Loan Facility.~~September 22, 2026.

The Term Loan Facility requires quarterly principal payments of $0.4 million with the remaining unpaid principal amount due at the loan maturity date. We may be required to make additional principal payments annually that are calculated as a percentage of our excess cash flow, as defined by the lender, based on ~~the final maturity date of September 22, 2026.~~our net leverage ratio. The Term Loan Facility is collateralized by all of our assets. 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. ~~On March 3, 2022, we amended our Term Loan Facility, which increases the quarterly maximum consolidated net leverage ratio.~~ We were in compliance with all requirements under the Term Loan Facility as of ~~June 30, 2022.~~March 31, 2023.

The Term Loan Facility was issued at a $3.8 million discount and we have capitalized an additional ~~$2.8~~$5.3 million in ~~new~~ debt issuance costs. These costs are recorded as a direct reduction to the carrying amount of the associated long-term debt and amortized over the term of the debt.

We had an interest rate swap that changed the one-month LIBOR to a fixed rate of 1.291% on $60.0 million of the outstanding balance of the Term Loan Facility. During the first quarter of 2023, we terminated the interest rate swap and received cash proceeds of $2.5 million which was equal to its fair value.

ABL Facility

The ABL Facility provides for a senior secured revolving credit facility in the amount of $50.0 million, of which $30.0 million is available in the form of letters of credit and $5.0 million is available for the issuance of short-term swingline loans. The availability of credit under the ABL Facility is limited by a borrowing base calculation derived from accounts receivable and inventory held in the United States. Outstanding borrowings under the ABL Facility bear interest on a variable rate structure plus an interest rate spread that is based on the average amount of aggregate revolving commitment available. ~~The~~Effective March 3, 2023, the variable borrowing rate is either 1) ~~LIBOR~~Adjusted SOFR plus an applicable margin of 1.75% or 2.00%, depending on availability, or 2) the greater of the federal funds rate or prime, plus an applicable margin of 0.75% or 1.00%, depending on availability. We may elect whether to use one-month, three-month, or six-month ~~LIBOR, subject to a 0.50% floor. Interest payments are due monthly on borrowings that utilize one-month LIBOR and quarterly on borrowings that utilize three-month or six-month LIBOR.~~Adjusted SOFR. At ~~June 30, 2022,~~March 31, 2023, using one-month ~~LIBOR~~Adjusted SOFR plus a ~~1.75% spread,~~2.00% margin, the weighted average interest rate on outstanding borrowings under the ABL

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Facility was ~~3.00%~~6.89%. We pay a commitment fee of 0.375% for unused capacity under the ABL Facility and a ~~1.875%~~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 ~~June 30, 2022,~~March 31, 2023, we had ~~$2.0~~$1.0 million of outstanding borrowings under the ABL Facility, ~~$11.1~~$10.9 million of outstanding letters of credit, and ~~$36.9~~$32.5 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 ~~June 30, 2022.~~March 31, 2023.

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Note 8. Leases

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


		Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021			2023		2022
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:					Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used in finance leases	Operating cash flows used in finance leases	$	172	$	113	Operating cash flows used in finance leases	$	84	$	80
Operating cash flows used in operating leases	Operating cash flows used in operating leases	7,543		7,221		Operating cash flows used in operating leases	4,056		4,204
Financing cash flows used in finance leases	Financing cash flows used in finance leases	1,440		2,370		Financing cash flows used in finance leases	689		700
Right-of-use assets obtained in exchange for new finance lease liabilities	Right-of-use assets obtained in exchange for new finance lease liabilities	395		636		Right-of-use assets obtained in exchange for new finance lease liabilities	—		395
Right-of-use assets obtained in exchange for new operating lease liabilities (1)	Right-of-use assets obtained in exchange for new operating lease liabilities (1)	2,178		—		Right-of-use assets obtained in exchange for new operating lease liabilities (1)	477		1,305

(1) Includes new leases, renewals, and modifications.

Note 9. Commitments and Contingencies

Brazil ICMS Tax Matter

Prior to the acquisition of Autocam Corporation (“Autocam”) in 2014, Autocam’s Brazilian subsidiary (“Autocam Brazil”) received notification from the Brazilian tax authority regarding ICMS (state value added tax) tax credits claimed on intermediary materials (e.g., tooling and perishable items) used in the manufacturing process. The Brazilian tax authority notification disallowed state ICMS tax credits claimed on intermediary materials based on the argument that these items are not intrinsically related to the manufacturing processes. Autocam Brazil filed an administrative defense with the Brazilian tax authority arguing, among other matters, that it should qualify for an ICMS tax credit, contending that the intermediary materials are directly related to the manufacturing process.

We believe that we have substantial legal and factual defenses, and we plan to defend our interests in this matter vigorously. The matter encompasses several lawsuits filed with the Brazilian courts requesting declaratory actions that no tax is due or seeking a stay of execution on the collection of the tax. In 2018, we obtained a favorable decision in one of the declaratory actions for which the period for appeal has expired. We have filed actions in each court requesting dismissal of the matter based on the earlier court action. In May 2020, we received an unfavorable decision in one of the lawsuits, and as a result have recorded a liability to the Brazilian tax authorities and a receivable from the former shareholders of Autocam for the same amount. Although we anticipate a favorable resolution to the remaining matters, we can provide no assurances that we will be successful in achieving dismissal of all pending cases. The U.S. dollar amount that would be owed in the event of an unfavorable decision is subject to interest, penalties, and currency impacts and therefore is dependent on the timing of the decision. For the remaining open lawsuits, we currently believe the cumulative potential liability in the event of unfavorable decisions on all matters will be less than $5.0 million, inclusive of interest and penalties.

We are entitled to indemnification from the former shareholders of Autocam, subject to the limitations and procedures set forth in the agreement and plan of merger relating to the Autocam acquisition. 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 ~~June 30, 2022.~~

~~Securities Offering Matter~~

As previously disclosed, Erie County Employees’ Retirement System, on behalf of a purported class of plaintiffs, filed a complaint in the Supreme Court of the State of New York, County of New York against us, certain of our current and former officers and directors, and each of the underwriters involved in our public offering and sale of 14.4 million shares of our common stock pursuant to a preliminary prospectus supplement, dated September 10, 2018, a final prospectus supplement, dated September 13, 2018, and a base prospectus, dated April 19, 2017, relating to our effective shelf registration statement on Form S-3 (File No. 333-216737) (the “Offering”). The amended complaint alleges violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 in connection with the Offering.

On July 25, 2022, the parties filed a Stipulation of Settlement, which is subject to court approval, to settle the securities offering action. Under the terms of the Stipulation of Settlement, the Company and/or its insurance carrier will make a cash payment to the plaintiff in the amount $9.5 million (the “Settlement Amount”), in exchange for which the Company and the other named defendants will be released from all claims related to the securities offering action. As of June 30, 2022, we have previously

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paid covered expenses totaling $1.0 million meeting our directors' and officers' retention requirement and therefore the Settlement Amount will be covered and paid by our directors' and officers' insurance carrier.March 31, 2023.

Other Legal Matters

On April 25, 2022, we reached an agreement to settle breach of contract claims brought by a former customer regarding the sale of products by us in 2016. Under the agreement, we will pay $1.8 million to the customer in specified installments through July 2023. The $1.8 million settlement is included in the Other operating expense (income), net line in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

All other legal proceedings are of an ordinary and routine nature and are incidental to our operations. Management believes that such proceedings should not, individually or in the aggregate, have a material adverse effect on our business, financial condition, results of operations, or cash flows. In making that determination, we analyze the facts and circumstances of each case at least quarterly in consultation with our attorneys and determine a range of reasonably possible outcomes.

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Note 10. Preferred Stock and Stockholders' Equity

Series D Perpetual Preferred Stock

On March 22, 2021, we completed a private placement of ~~65 thousand~~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. 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. Series D Preferred Stock shares earn cash dividends at a rate of 10.0% per year, payable quarterly in arrears, accruing whether or not earned or declared. If no cash dividend is paid, then the liquidation preference per share effective on the dividend date increases by 12.0% per year. OnBeginning March 22, 2026, the cash dividend rate and in-kind dividend rate increase by 2.5% per year. Cash dividends are required beginning on September 30, 2027.

The Series D Preferred Stock is classified as mezzanine equity, between liabilities and stockholders’ equity, because certain features of the Series D Preferred Stock could require redemption of the Series D Preferred Stock upon a change of control event that is considered not solely within our control. For initial recognition, the Series D Preferred Stock was recognized at a discounted value, net of issuance costs and allocation to warrants and a bifurcated embedded derivative. The aggregate discount is amortized as a deemed dividend through March 22, 2026, which is the date the dividend rate begins to increase by 2.5% per year. Deemed dividends adjust retained earnings (or in the absence of retained earnings, additional paid-in capital).

In accordance with ASC 815-15, Derivatives and Hedging - Embedded Derivatives, certain features of the Series D Preferred Stock were bifurcated and accounted for as derivatives separately. Note 15 discusses the accounting for these features.

As of ~~June 30, 2022,~~March 31, 2023, the carrying value of the Series D Preferred Stock shares was ~~$59.0~~$67.8 million, which included ~~$12.3~~$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 ~~six~~three months ended ~~June 30, 2022.~~March 31, 2023.


	Six Months Ended June 30,Balance as of December 31, 2022
~~Beginning balance~~	$	~~53,807~~64,701



Accrual of in-kind dividends	~~4,348~~2,410
Amortization	~~848~~641

~~Ending balance~~Balance as of March 31, 2023	$	~~59,003~~67,752

Note 11. Revenue from Contracts with Customers

Revenue is recognized when control of the good or service is transferred to the customer either at a point in time or, in limited circumstances, as our services are rendered over time. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or services. ~~During the six months ended June 30, 2022, we received equipment from a~~

The following tables summarize revenue by customer ~~as part of the selling price of goods transferred. This noncash consideration was recognized as revenue equal to the fair value of the equipment received.~~geographical region.


Three Months Ended March 31, 2023	Mobile Solutions		Power Solutions		Intersegment Sales Eliminations		Total
United States and Puerto Rico	$	37,206	$	40,222	$	(2)	$	77,426
China	13,812		749		—		14,561
Brazil	11,611		110		—		11,721
Mexico	4,279		3,488		—		7,767
Germany	1,732		74		—		1,806
Poland	1,856		5		—		1,861
Other	7,522		4,424		—		11,946
Total net sales	$	78,018	$	49,072	$	(2)	$	127,088

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~~The following tables summarize revenue by customer geographical region.~~

Three Months Ended June 30, 2022
Mobile
Solutions Power
Solutions Intersegment
Sales
Eliminations Total
United States and Puerto Rico $ 35,954 $ 40,377 $ (37) $ 76,294
China 8,764 1,233 — 9,997
Brazil 11,293 312 — 11,605
Mexico 8,087 4,358 — 12,445
Germany 1,121 73 — 1,194
Poland 1,158 1 — 1,159
Other 6,973 5,695 — 12,668
Total net sales $ 73,350 $ 52,049 $ (37) $ 125,362

Three Months Ended June 30, 2021
Mobile
Solutions Power
Solutions Intersegment
Sales
Eliminations Total
United States and Puerto Rico $ 35,284 $ 39,424 $ — $ 74,708
China 13,219 1,282 — 14,501
Brazil 9,985 343 — 10,328
Mexico 4,829 4,349 — 9,178
Germany 1,369 96 — 1,465
Poland 904 3 — 907
Other 8,296 3,774 — 12,070
Total net sales $ 73,886 $ 49,271 $ — $ 123,157

Six Months Ended June 30, 2022
Mobile
Solutions Power
Solutions Intersegment
Sales
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

Six Months Ended June 30, 2021
Mobile
Solutions Power
Solutions Intersegment
Sales
Eliminations Total
United States and Puerto Rico $ 72,722 $ 79,230 $ (47) $ 151,905
China 27,633 2,788 — 30,421
Brazil 19,653 535 — 20,188
Mexico 9,844 7,746 — 17,590
Germany 3,136 260 — 3,396
Poland 2,084 7 — 2,091
Other 16,590 7,780 — 24,370
Total net sales $ 151,662 $ 98,346 $ (47) $ 249,961

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Three Months Ended March 31, 2022	Mobile Solutions		Power Solutions		Intersegment Sales Eliminations		Total
United States and Puerto Rico	$	37,810	$	40,486	$	(14)	$	78,282
China	12,552		1,244		—		13,796
Brazil	10,720		345		—		11,065
Mexico	5,064		4,741		—		9,805
Germany	1,283		62		—		1,345
Poland	1,340		4		—		1,344
Other	7,301		5,129		—		12,430
Total net sales	$	76,070	$	52,011	$	(14)	$	128,067

The following tables summarize revenue by customer industry. Our products in the automotive industry include high-precision components and assemblies for electric power steering systems, electric braking, electric motors, fuel systems, emissions control, transmissions, moldings, stampings, sensors, and electrical contacts. 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 June 30, 2022
		Mobile Solutions		Power Solutions		Intersegment Sales Eliminations		Total
Three Months Ended March 31, 2023										Three Months Ended March 31, 2023	Mobile Solutions		Power Solutions		Intersegment Sales Eliminations		Total
Automotive	Automotive	$	48,850	$	9,728	$	—	$	58,578	Automotive	$	55,804	$	8,803	$	—	$	64,607
General Industrial	General Industrial	20,532		16,640		—		37,172		General Industrial	20,213		14,605		—		34,818
Residential/Commercial Electrical	Residential/Commercial Electrical	—		18,757		—		18,757		Residential/Commercial Electrical	—		14,585		—		14,585
Other	Other	3,968		6,924		(37)		10,855		Other	2,001		11,079		(2)		13,078
Total net sales	Total net sales	$	73,350	$	52,049	$	(37)	$	125,362	Total net sales	$	78,018	$	49,072	$	(2)	$	127,088

Three Months Ended June 30, 2021
Mobile
Solutions Power
Solutions Intersegment
Sales
Eliminations Total
Automotive $ 46,247 $ 9,657 $ — $ 55,904
General Industrial 24,449 15,057 — 39,506
Residential/Commercial Electrical — 16,219 — 16,219
Other 3,190 8,338 — 11,528
Total net sales $ 73,886 $ 49,271 $ — $ 123,157

Six Months Ended June 30, 2022
Mobile
Solutions Power
Solutions Intersegment
Sales
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


		Six Months Ended June 30, 2021
		Mobile Solutions		Power Solutions		Intersegment Sales Eliminations		Total
Three Months Ended March 31, 2022										Three Months Ended March 31, 2022	Mobile Solutions		Power Solutions		Intersegment Sales Eliminations		Total
Automotive	Automotive	$	96,391	$	20,082	$	—	$	116,473	Automotive	$	50,596	$	10,078	$	—	$	60,674
General Industrial	General Industrial	48,759		30,431		—		79,190		General Industrial	21,805		16,335		—		38,140
Residential/Commercial Electrical	Residential/Commercial Electrical	—		31,573		—		31,573		Residential/Commercial Electrical	—		17,199		—		17,199
Other	Other	6,512		16,260		(47)		22,725		Other	3,669		8,399		(14)		12,054
Total net sales	Total net sales	$	151,662	$	98,346	$	(47)	$	249,961	Total net sales	$	76,070	$	52,011	$	(14)	$	128,067

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 ~~$0.6~~$1.2 million and ~~$0.5~~$0.7 million as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. Revenue recognized for performance obligations satisfied or partially satisfied during the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 included ~~$0.5~~$0.3 million that was included in deferred revenue as of December 31, ~~2021.~~

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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 ~~June 30, 2022,~~March 31, 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.

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Note 12. Share-Based Compensation

The following table lists the components of share-based compensation expense by type of award, which is recognized in the “Selling, general, and administrative expense” line in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

Three Months Ended
June 30, Six Months Ended
June 30,
2022 2021 2022 2021
Stock options $ 31 $ 59 $ 87 $ 148
Restricted stock 2,158 591 2,762 1,139
Performance share units 417 450 706 699
Change in estimate of share-based award vesting (1) — (337) — (337)
Share-based compensation expense $ 2,606 $ 763 $ 3,555 $ 1,649

~~_______________________________~~

~~(1)Amounts reflect the decrease in share-based compensation expense based on the change in estimate of the probability of vesting of share-based awards.~~

~~Stock Options~~

~~The following table presents stock option activity for the six months ended June 30, 2022.~~

Number of Options
(in thousands) Weighted-
Average
Exercise
Price
(per share) Weighted-
Average
Remaining
Contractual
Term Aggregate
Intrinsic
Value
Outstanding at January 1, 2022 621 $ 12.24
Expired (79) 9.71
Outstanding at June 30, 2022 542 $ 12.61 4.1 years $ — (1)
Exercisable at June 30, 2022 515 $ 12.77 3.9 years $ — (1)

~~_______________________________~~

~~(1)~~The aggregate intrinsic value is the sum of intrinsic values for each exercisable individual option grant. The intrinsic value is the amount by which the closing market price of our stock at June 30, 2022, was greater than the exercise price of any individual option grant.


	Three Months Ended March 31,
	2023		2022
Restricted stock	$	167	604
Performance share units	200		289
Stock options	14		$	56
Share-based compensation expense	$	381	$	949

Restricted Stock

During the six months ended June 30, 2022, we granted 897,000 shares of restricted stock to non-executive directors, officers and certain other key employees under the NN, Inc. 2019 Omnibus Incentive Plan (“2019 Omnibus Plan”). The shares of restricted stock granted during the six months ended June 30, 2022, vest pro-rata generally over three years for employees and over one year for non-executive directors. We determined the fair value of the shares awarded by using the closing price of our common stock as of the date of grant. The weighted average grant date fair value of restricted stock granted in the six months ended June 30, 2022, was $3.31 per share. Total grant date fair value of restricted stock that vested in the six months ended June 30, 2022, was $2.1 million.

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The following table presents the status of unvested restricted stock awards as of ~~June 30, 2022~~March 31, 2023 and changes during the ~~six~~three months then ended.

Nonvested
Restricted
Shares
(in thousands) Weighted
Average
Grant-Date
Fair Value
(per share)
Unvested at January 1, 2022 469 $ 7.28
Granted 897 3.31
Vested (291) 7.05
Forfeited (9) 4.73
Unvested at June 30, 2022 1,066 $ 4.02


	Nonvested Restricted Shares	Weighted Average Grant-Date Fair Value
Unvested at January 1, 2023	1,038	$	4.03

Vested	(642)	4.33

Unvested at March 31, 2023	396	$	3.55

~~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. Some PSUs are based on total shareholder return (“TSR Awards”), and other PSUs are based on return on invested capital (“ROIC Awards”). TSR Awards granted in 2022 were made pursuant to the 2019 Omnibus Plan and a Performance Share Unit Agreement (the “2019 Omnibus Agreement”). ROIC Awards granted in 2022 were made pursuant to the NN, Inc. 2022 Omnibus Incentive Plan and a Performance Share Unit Agreement.

The TSR Awards 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 specified performance periods as defined in the 2019 Omnibus Agreement. The ROIC Awards vest, if at all, upon our achieving a specified average return on invested capital during the performance periods. Each performance period generally begins on January 1 of the year of grant and ends 3 years later on December 31.

We recognize compensation expense over the performance period in which the performance and market conditions are measured. If the PSUs do not vest at the end of the performance periods, then the PSUs will expire automatically. Upon vesting, the PSUs will be settled by the issuance of shares of our common stock, subject to the award recipient’s continued employment. The actual number of shares of common stock to be issued to each award recipient at the end of the performance periods will be interpolated between a threshold and maximum payout amount based on actual performance results. No dividends will be paid on outstanding PSUs during the performance period; however, dividend equivalents will be paid based on dividends declared and the number of shares of common stock that are ultimately earned at the end of the performance periods.

~~The following table presents the goals with respect to PSUs granted in 2022.~~

Threshold
Performance
(25% of Shares) Target Performance
(100% of Shares) Maximum Performance
(150% of Shares)
TSR Awards 25th Percentile 55th Percentile 75th Percentile
Threshold
Performance
(50% of Shares) Target Performance
(100% of Shares) Maximum Performance
(150% of Shares)
ROIC Awards 6.4% 8.6% 10.0%

~~We estimate the~~Total grant date fair value of ~~TSR Awards using~~restricted stock that vested in the ~~Monte Carlo simulation model, as the total shareholder return metric is considered a market condition under ASC Topic 718,~~ ~~Compensation – stock compensation. The grant date fair value of ROIC Awards is based on the closing price of a share of our common stock on the date of grant.~~

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~~The following table presents the status of unvested PSUs as of June 30, 2022 and changes during the six~~three months ~~then ended.~~

Nonvested TSR Awards Nonvested ROIC Awards
Shares
(in thousands) Weighted
Average
Grant-Date
Fair Value
(per share) Shares
(in thousands) Weighted
Average
Grant-Date
Fair Value
(per share)
Nonvested at January 1, 2022 194 $ 9.59 228 $ 8.14
Granted 382 2.53 408 2.62
Nonvested at June 30, 2022 576 $ 4.90 636 $ 4.60

ended March 31, 2023, was $2.8 million.

Note 13. Accumulated Other Comprehensive Income

The following tables present the components of accumulated other comprehensive income (loss) (“AOCI”).

Foreign Currency Translation Interest rate swap Income taxes (1) Total
Balance at 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 at June 30, 2022 $ (37,906) $ 2,207 $ (468) $ (36,167)
Balance at March 31, 2021 $ (34,228) $ — $ — $ (34,228)
Net other comprehensive income (loss) 4,409 — — 4,409
Balance at June 30, 2021 $ (29,819) $ — $ — $ (29,819)


		Foreign Currency Translation		Interest rate swap		Income taxes (1)		Total			Foreign Currency Translation		Interest rate swap		Income taxes (1)		Total
Balance at December 31, 2021		$	(32,016)	$	151	$	(37)	$	(31,902)
Balance as of December 31, 2022										Balance as of December 31, 2022	$	(40,172)	$	3,149	$	(97)	$	(37,120)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	(5,890)		1,974		(414)		(4,330)		Other comprehensive income (loss) before reclassifications	1,840		(327)		97		1,610
Amounts reclassified from AOCI to interest expense (2)	Amounts reclassified from AOCI to interest expense (2)	—		82		(17)		65		Amounts reclassified from AOCI to interest expense (2)	—		(468)		—		(468)

Net other comprehensive income (loss)	Net other comprehensive income (loss)	(5,890)		2,056		(431)		(4,265)		Net other comprehensive income (loss)	1,840		(795)		97		1,142
Balance at June 30, 2022		$	(37,906)	$	2,207	$	(468)	$	(36,167)
Balance as of March 31, 2023										Balance as of March 31, 2023	$	(38,332)	$	2,354	$	—	$	(35,978)

Balance at December 31, 2020		$	(30,881)	$	(3,712)	$	861	$	(33,732)
Balance as of December 31, 2021										Balance as of December 31, 2021	$	(32,016)	$	151	$	(37)	$	(31,902)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	1,062		—		—		1,062		Other comprehensive income (loss) before reclassifications	2,600		1,503		(316)		3,787
Amounts reclassified from AOCI to interest expense (2)										Amounts reclassified from AOCI to interest expense (2)	—		44		(10)		34

Amounts reclassified from AOCI to loss on interest rate swap (3)		—		3,712		(861)		2,851
Net other comprehensive income (loss)	Net other comprehensive income (loss)	1,062		3,712		(861)		3,913		Net other comprehensive income (loss)	2,600		1,547		(326)		3,821
Balance at June 30, 2021		$	(29,819)	$	—	$	—	$	(29,819)
Balance as of March 31, 2022										Balance as of March 31, 2022	$	(29,416)	$	1,698	$	(363)	$	(28,081)

______________________

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

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

~~(3) Represents reclassification of derivative loss and settlements after discontinuation of hedge accounting.~~

~~Note 14. Net Income (Loss) Per Common Share~~

~~In accordance with ASC 260,~~ ~~Earnings Per Share,~~ ~~a company that has participating securities is required to utilize the two-class~~

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method for calculating earnings per share (“EPS”) unless the treasury stock method results in lower EPS. The two-class method is an allocation of earnings between the holders of common stock and a company’s participating securities. Basic EPS is calculated by dividing income or loss attributable to common stockholders by the weighted average number of shares of common stock outstanding. To calculate diluted EPS, basic EPS is further adjusted to include the effect of potentially dilutive stock options, warrants, and convertible preferred stock. Note 14. Net Loss Per Common Share

The following table summarizes the computation of basic and diluted net loss per common share.


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
Numerator:	Numerator:									Numerator:
Net loss	Net loss	$	(8,567)	$	(5,391)	$	(11,869)	$	(10,304)	Net loss	$	(10,175)	$	(3,302)
Less: Preferred stock cumulative dividends and deemed dividends		(2,658)		(2,211)		(5,196)		(16,740)
Adjustment for preferred stock cumulative dividends and deemed dividends										Adjustment for preferred stock cumulative dividends and deemed dividends	(3,051)		(2,538)

Numerator for basic and diluted net loss per common share										Numerator for basic and diluted net loss per common share	$	(13,226)	$	(5,840)

Denominator:										Denominator:
Weighted average common shares outstanding										Weighted average common shares outstanding	43,847		43,308
Adjustment for participating securities										Adjustment for participating securities	(742)		(608)
Adjustment for warrants outstanding (1)										Adjustment for warrants outstanding (1)	2,204		1,894

Shares used to calculate basic and diluted net loss per share										Shares used to calculate basic and diluted net loss per share	45,309		44,594

Numerator for basic and diluted undistributed net loss per common share (1)		$	(11,225)	$	(7,602)	$	(17,065)	$	(27,044)

Denominator:
Weighted average common shares outstanding		43,885		43,067		43,599		42,952
Adjustment for unvested restricted common stock		(1,070)		(524)		(844)		(450)
Adjustment for 2021 Warrants outstanding (2)		1,893		1,897		1,894		1,059
Shares used to calculate net loss per share, basic and diluted		44,708		44,440		44,649		43,561

Per common share net loss:

Basic and diluted net loss per common share	Basic and diluted net loss per common share	$	(0.25)	$	(0.17)	$	(0.38)	$	(0.62)	Basic and diluted net loss per common share	$	(0.29)	$	(0.13)
Cash dividends declared per common share	Cash dividends declared per common share	$	—	$	—	$	—	$	—	Cash dividends declared per common share	$	—	$	—

(1) ~~Preferred Stock does not participate in losses.~~

~~(2) Weighted average 2021 Warrants outstanding~~Outstanding warrants that are exercisable at an exercise price of $0.01 per share, are included in shares outstanding for calculation of basic earnings per share ~~because they are exercisable at an exercise price of $0.01 per share, subject to certain adjustments~~ (see Note 15).

The following table presents securities that could be potentially dilutive in the future that were excluded from the calculation of diluted net loss per common share because they had an anti-dilutive effect.


		Three Months Ended June 30,		Six Months Ended June 30,			Three Months Ended March 31,
		2022	2021	2022	2021		2023	2022
Options	Options	546	825	573	843	Options	516	600
2019 Warrants	2019 Warrants	1,500	1,500	1,500	1,500	2019 Warrants	1,500	1,500

		2,046	2,325	2,073	2,343		2,016	2,100

We have elected to allocate undistributed income to participating securities based on year-to-date results. As there was no undistributed income for the six months ended June 30, 2022, no such allocation was necessary. In addition, given the undistributed loss in the three and six months ended June 30, 2022 and 2021, options and the 2019 Warrants are considered anti-dilutive and were excluded from the calculation of diluted net loss per share. 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 ~~months ended June 30, 2022,~~ and ~~$7.93 to $25.16 for~~ three months ended June 30, 2021. 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 six months ended June 30, 2022, and $7.93 to $25.16 for six months ended June 30, 2021.March 31, 2023. The 2019 Warrants excluded from the calculation of diluted net loss per share ~~for the three and six months ended June 30, 2022 and 2021,~~ had a per share exercise price of $11.49.

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Note 15. Fair Value Measurements

Fair value is an exit price representing the expected amount that an entity would receive to sell an asset or pay to transfer a liability in an orderly transaction with market participants at the measurement date. We followed consistent methods and assumptions to estimate fair values as more fully described in the ~~2021~~2022 Annual Report.

Fair value principles prioritize valuation inputs across three broad levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assetsEmbedded Derivatives

In accordance with ASC 815-15, Derivatives and ~~liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full~~Hedging - Embedded Derivatives, certain features of our preferred stock and long term of the financial instrument. Level 3 inputs are unobservable inputs based on the assumptions used to measure assets and liabilities at fair value. An asset or liability’s classification within the various levels is determined based on the lowest level input that is significant to the fair value measurement.

Our financial instruments that are subject to fair value disclosure consist of cash and cash equivalents, accounts receivable, accounts payable, derivatives, and long-term debt. As of June 30, 2022, the carrying values of these financial instruments approximated fair value.

~~Derivative Financial Instruments~~

~~Certain features~~debt were bifurcated and accounted for ~~separately from the Series B Preferred Stock, which was redeemed in March 2021. The following feature was recorded~~ as ~~a derivative.~~derivatives separately.

•~~Warrants.~~ In conjunction with ~~our placement of~~ the ~~Series B Preferred Stock in December 2019,~~Term Loan Amendment, we issued detachable warrants to purchase up to ~~1.5~~1.0 million shares of our ~~common~~comment stock at an exercise price of $0.01 per share (the ~~“2019~~“2023 Warrants”)~~, which~~. The 2023 Warrants are exercisable, in full or in part, at any time prior to ~~December 11, 2026, at an exercise price~~March 3, 2033. The 2023 Warrants include anti-dilution adjustments in the event of ~~$11.49 per share.~~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.

~~Certain features were bifurcated and accounted for separately from~~In conjunction with our placement of the Series D Preferred Stock, ~~that was~~we issued onthe 2021 Warrants to purchase up to 1.9 million shares of our common stock. The 2021 Warrants are exercisable, in full or in part, at any time prior to March 22, ~~2021. The following features were recorded as derivatives.~~2027, at an

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•
~~Change-in-control put feature.~~

exercise price of $0.01 per share, subject to anti-dilution adjustments in the event of certain future equity issuances, stock splits, stock dividends, combinations or similar events.

The Series D Preferred Stock includes a put feature that allows the holder to redeem the Series D Preferred Stock upon a change in control at the greater of 1) the liquidation preference plus accrued dividends or 2) 140% of the liquidation preference. The put feature is considered a redemption right at a premium and is not clearly and closely related to the debt host.

•~~Warrants.~~In conjunction with our placement of the Series DB Preferred Stock, we issued detachable warrants to purchase up to ~~1.9~~1.5 million shares of our common ~~stock.~~stock at an exercise price of $11.49 per share (the “2019 Warrants”). The ~~2021~~2019 Warrants, are exercisable, in full or in part, at any time prior to ~~March 22, 2027, at an exercise price of $0.01 per share,~~December 11, 2026 and are subject to anti-dilution adjustments in the event of ~~certain~~ future ~~equity~~below market issuances, stock splits, stock dividends, combinations or similar events.

~~The following tables show the liabilities measured at fair value for the Preferred Stock derivatives as of June 30, 2022 and December 31, 2021.~~

Fair Value Measurements as of June 30, 2022
Description Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs
(Level 3)
Derivative liability - other non-current liabilities 4,788 — 199

Fair Value Measurements as of December 31, 2021
Description Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs
(Level 3)
Derivative liability - other non-current liabilities 7,771 — 453

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The following table presents the change in the ~~Preferred Stock~~liability balance of the embedded derivatives during the ~~six~~three months ended ~~June 30, 2022.~~March 31, 2023.


	~~Six Months Ended June 30,~~Balance as of December 31, 2022
~~Beginning balance~~	$	~~8,224~~2,959
Issuances	2,712
Change in fair value (1)	~~(3,237)~~(2,009)


~~Ending balance~~Balance as of March 31, 2023	$	~~4,987~~3,662

(1) Changes in the fair value are recognized in the “Other ~~expense (income),~~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 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 June 30, 2022.hierarchy.

March 31, 2023

Quoted Prices in Active Markets for Identical Assets
(Level 1)

Significant Other Observable Inputs
(Level 2)

Significant Unobservable Inputs
(Level 3)

Derivative liability - other non-current liabilities

3,055

—

607

December 31, 2022

Quoted Prices in Active Markets for Identical Assets
(Level 1)

Significant Other Observable Inputs
(Level 2)

Significant Unobservable Inputs
(Level 3)

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 ~~June 30, 2022,~~March 31, 2023 and ~~3.6 years as of~~ December 31, ~~2021.~~2022.

The fair value of the 2021 Warrants and 2023 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.

Interest Rate ~~Swaps~~

We manage our exposure to fluctuations in interest rates using a mix of fixed and variable rate debt. We utilize fixed-rate interest rate swap agreements to change the variable interest rate to a fixed rate on a portion of our variable rate debt.Swap

On July 22, 2021, we entered into a fixed-rate interest rate swap agreement to change the LIBOR-based component of the interest rate on a portion of our variable rate debt to a fixed rate of 1.291% (the “2021 Swap”). The 2021 Swap ~~has~~had a notional amount of $60.0 million and a maturity date of July 31, 2024. The objective of the 2021 Swap is to eliminate the variability of cash flows in interest payments on the first $60.0 million of variable rate debt attributable to changes in benchmark one-month LIBOR interest rates. The hedged risk is the interest rate risk exposure to changes in interest payments, attributable to changes in benchmark one-month LIBOR interest rates over the interest rate swap term. The changes in cash flows of the interest rate swap are expected to exactly offset changes in cash flows of the variable rate debt. We designated the 2021 Swap as a cash flow hedge at ~~inception. Cash~~inception with cash settlements recognized in interest expense. During the first quarter of 2023, we terminated the 2021 Swap ~~are recognized in interest expense.~~

~~On February 8, 2019, we entered into a $700.0~~and received cash proceeds of $2.5 million ~~fixed-rate interest rate swap agreement that changed~~which was the LIBOR-based portion of the interest rate on a portion of our variable rate debt to a fixed rate of 2.4575% (the “2019 Swap”). On March 22, 2021, we terminated the 2019 Swap with a $13.7 million cash payment in connection with the extinguishment of our previously outstanding long-term variable-rate debt. The 2019 Swap was designated as a cash flow hedge at inception. However, in the fourth quarter of 2020, the 2019 Swap no longer qualified as an effective hedge, and subsequent changes in fair value of the ~~2019~~2021 Swap. Since the 2021 Swap ~~were~~was an effective cash flow hedge and the forecasted interest payments remaining probable of occurring, the gain will be recognized ~~in earnings. Amounts recognized in earnings related~~as a reduction to interest expense through the ~~2019 Swap are recorded in the “Loss on interest rate swap” line on the Condensed Consolidated Statements~~original maturity date of Operations and Comprehensive Income (Loss) except that cash settlements prior to termination are recognized in “Derivative payments on interest rate swap.” Cash settlements during 2021 are presented in investing activities on the Condensed Consolidated StatementsJuly 31, 2024.

Table of ~~Cash Flows.~~Contents

The following table presents the ~~effect~~effects of the interest rate ~~swaps~~swap on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

Three Months Ended
June 30, Six Months Ended
June 30,
2022 2021 2022 2021
Interest expense (1) $ 38 $ — $ 82 $ —
Derivative payments on interest rate swap (2) — — — 1,717
Loss on interest rate swap (2) — — — 2,033


	Three Months Ended March 31,
	2023		2022
Interest expense (benefit) (1)	$	(468)	$	44

(1) Represents settlements on the interest rate ~~swaps while the hedges are effective.~~

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~~(2) Represents settlements and changes in fair value on the 2019 Swap.~~swap.

The following ~~tables present~~table shows the ~~assets and liabilities measured at~~ fair value ~~on a recurring basis for~~of the interest rate ~~swaps as of June 30, 2022 and December 31, 2021.~~swap within the fair value hierarchy.


	~~Fair Value Measurements as of June 30,~~December 31, 2022
~~Description~~	Quoted Prices in Active Markets for Identical Assets ~~(Level~~ (Level 1)		Significant Other Observable Inputs ~~(Level~~ (Level 2)		Significant Unobservable Inputs (Level 3)
Derivative asset - other current assets	$	—	$	~~1,078~~2,130	$	—
Derivative asset - other non-current assets	$	—	~~1,133~~$	1,023	$	—


Total	$	—	$	~~2,211~~	$	—

~~Fair Value Measurements as of December 31, 2021~~

~~Description~~

~~Quoted Prices in Active Markets for Identical Assets (Level 1)~~

~~Significant Other Observable Inputs (Level 2)~~

Significant Unobservable Inputs
(Level 3)

~~Derivative asset - other non-current assets~~

—

~~284~~

—

~~Derivative liability - other current liabilities~~

—

~~(129)~~

—

~~Total~~

—

~~155~~3,153

—

The ~~inputs for determining~~ fair value of the interest rate ~~swaps are classified as Level 2 inputs. Level 2 fair value~~swap is ~~based on estimates using standard pricing models. These~~calculated through standard pricing models which use inputs ~~which are~~ derived from or corroborated by observable market data such as interest rate yield curves, index forward curves, discount curves, and volatility surfaces. ~~Counterparty~~The counterparty to ~~this~~these derivative ~~contract~~contracts is a highly rated financial institution which we believe carries only a minimal risk of nonperformance.

~~Fixed Rate Debt~~Fair Value Disclosures

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 ~~outstanding fixed-rate~~ debt ~~included in the “International lines~~was $156.0 million and $155.2 million, with a carrying amount of ~~credit~~$152.5 million and ~~other loans” line item within Note 7 to these Notes to Condensed Consolidated Financial Statements approximated carrying value~~$152.7 million, as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. ~~These~~The fair ~~values represent Level 2 under the three-tier hierarchy described above. The carrying~~ value of ~~this fixed-rate~~ debt was ~~$9.3 million~~calculated by discounting the future cash flows to its present value using prevailing market interest rates for debt with similar creditworthiness, terms and ~~$10.9 million as of June 30, 2022~~maturities and ~~December 31, 2021, respectively.~~

is considered a Level 3 fair value measurement.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader understand the results of operations and financial condition of NN, Inc. and its consolidated subsidiaries for the three months ended March 31, 2023. The financial information as of March 31, 2023, should be read in conjunction with the consolidated financial statements for the year ended December 31, 2022, contained in our Annual Report on Form 10-K for the year ended December 31, 2022, and the Condensed Consolidated Financial Statements included in this Quarterly Report.

Overview

NN, Inc. is a global diversified industrial company that combines advanced engineering and production capabilities with in-depth materials science expertise to design and manufacture high-precision components and assemblies primarily for the electrical, automotive, general industrial, aerospace, defense, and medical markets. As used in this Quarterly Report, the terms “NN,” the “Company,” “we,” “our,” or “us” refer to NN, Inc. and its subsidiaries.

Forward-Looking Statements

This Quarterly Report contains forward-looking statements ~~that~~within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended ( the “Exchange Act”), which are ~~made pursuant~~intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of ~~1995.~~1995 and include this statement for purposes of complying with these safe harbor provisions. These statements may discuss goals, intentions and expectations as to future trends, plans, events, results of operations or financial condition, or state other information relating to ~~NN, Inc.,~~the Company, based on current beliefs of management as well as assumptions made by, and information currently available to, management. Forward-looking statements generally will be accompanied by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “guidance,” “intend,” “may,” “possible,” “potential,” “predict,” “project” or other similar words, phrases or expressions. Forward-looking statements involve a number of risks and uncertainties that are outside of management’s control and that may cause actual results to be materially different from such forward-looking statements. Such factors include, among others, general economic conditions and economic conditions in the industrial sector; the impacts of pandemics, epidemics, disease outbreaks and other public health crises, including the COVID-19 pandemic, on our financial condition, business operations and liquidity; competitive influences; risks that current customers will commence or increase captive production; risks of capacity underutilization; quality issues; material changes in the costs and availability of raw materials; economic, social, political and geopolitical instability, currency fluctuation, and other risks of doing business outside of the United States; inflationary pressures and changes in the cost or availability of materials, supply chain shortages and disruptions, and the availability of labor; our dependence on certain major customers, some of whom are not parties to long-term agreements (and/or are terminable on short notice); the impact of acquisitions and divestitures; our ability to hire or retain key personnel; the level of our indebtedness; the restrictions contained in our debt agreements; our ability to obtain financing at favorable rates, if at all, and to refinance existing debt as it matures; unanticipated difficulties integrating acquisitions; new laws and governmental regulations; the impact of climate change on our operations; and cyber liability or potential liability for breaches of our or our service providers’ information technology systems or business operations ~~disruptions;~~disruptions. Any forward-looking statement speaks only as of the date of this Quarterly Report, and ~~other risk factors and cautionary statements listed from time-to-time in our periodic reports filed with~~ the ~~Securities and Exchange Commission. We disclaim any~~Company undertakes no obligation to publicly update or review any ~~such factors or to publicly announce the~~forward-looking statement, whether as a result of ~~any revisions~~new information, future developments or otherwise, except as required by law. New risks and uncertainties may emerge from time to ~~any of~~time, and it is not possible for the Company to predict their occurrence or how they will affect the Company. The Company qualifies all forward-looking statements ~~included herein or therein to reflect future events or developments.~~by these cautionary statements.

For additional information concerning such risk factors and cautionary statements, please see the sections titled “Item 1A. Risk Factors” in the ~~2021~~2022 Annual Report and this Quarterly Report.

Results of Operations

Factors That May Influence Results of Operations

The following paragraphs describe factors that have influenced results of operations for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, that management believes are important to provide an understanding of the business and results of operations or that may influence operations in the future.

~~Global~~Macroeconomic Conditions

We continue to monitor the ongoing impacts of current macroeconomic and geopolitical events, including changing conditions from the COVID-19 ~~Pandemic~~pandemic, the ongoing Russia-Ukraine conflict, inflationary cost pressures, rising interest rates, supply chain disruptions, and labor shortages.

The COVID-19 pandemic ~~continues~~and governmental responses thereto, including COVID-19 lockdowns in China, continue to impact our business operations and our customers' and suppliers' ability to operate at normal levels. Disruptions in normal operating

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levels continue to create supply chain disruptions and inflationary cost pressures within our end-markets. We anticipate that supply chain constraints and the inflationary environment, ~~will continue during 2022.~~

The spread of COVID-19 and the responses thereto have created, and could continue to create, a disruption in the manufacturing, delivery, and overall supply chain of automobile manufacturers and suppliers, as ~~well as disruption within the power industry. During the first half of 2022, production continued to be~~ impacted by disruptions of global supply chains, which have caused challenges in obtaining raw materials we use in the manufacture of some of our products. In addition, power shortages in China have resulted in widespread blackouts, often without any or little notice. These blackouts caused us and other manufacturers in the region to shut down production until power was restored. Supply chain and COVID-19 related disruptions are expected to continue during 2022.

~~Inflation triggered by the unprecedented economic impact of~~ the COVID-19 pandemic, will continue throughout 2023.

The Russia-Ukraine conflict also continues to create volatility in global financial and ~~current geopolitical instability~~energy markets, creating energy and supply chain shortages, which has ~~increased our manufacturing costs, particularly labor and materials, in 2022 and is expected~~added to ~~continue into future periods.~~

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~~We have undertaken a number of permanent and temporary actions to manage~~ the ~~evolving situation.~~inflationary pressures experienced by the global economy. We continue to ~~streamline facilities and implement cost savings initiatives. Capital expenditures and travel costs remain at relatively low levels.~~

~~We are focused~~actively work with our suppliers to minimize impacts of supply shortages on our manufacturing capabilities. Although our business has not been materially impacted by the ~~health and safety~~ongoing Russia-Ukraine conflict as of the date of this filing, we cannot reasonably predict the extent to which our operations, or those of our ~~employees,~~ customers ~~and~~or suppliers, and have implemented processes to ensure a safe environment for our employees and any visitors to our facilities, including providing personal protective equipment and establishing social distancing protocols.

~~These processes include recommendations based on guidelines from~~will be impacted in the ~~Centers for Disease Control and Prevention and~~future, or the ~~World Health Organization. The health and safety of our employees remains our top priority. While we are actively promoting vaccination among our employees, vaccination status~~ways in which the conflict may affect workforce availability ranging from absences for vaccinations, booster shots, and recovery from side-effects. We have implemented training and recruiting programs to address labor shortages, but, significant workforce availability challenges could have a material effect on our business operations, financial results, liquidity, and financial position.

~~COVID-19 and its impacts are unprecedented and continuously evolving, and the long-term impacts to~~impact our business, financial condition, results of operations and cash ~~flows~~flows.

The U.S. economy is experiencing broad and rapid inflation and rising interest rates, as well as supply issues in materials, services, and labor due to economic policy, the COVID-19 pandemic and, more recently, the Russia-Ukraine conflict. These impacts are ~~still uncertain.~~likely to persist in 2023 and beyond. We cannot predict the impact on the Company’s end-markets or input costs nor the ability of the Company to recover cost increases through pricing.

Footprint Optimization

In 2022, we took specific steps to consolidate our footprint by exiting less profitable end markets and focusing our strategic growth initiatives in markets where we believe we will be able to maximize profitability. We made the decision to close our Taunton and Irvine sites, effectively exiting the Aerospace and Defense business for precision machined components, with both sites expected to close in the first half of 2023. We also expect to close three Mobile Solutions sites in 2023, which will further reduce operating costs in future years. Additionally, we plan to reduce indirect labor costs to decrease fixed manufacturing costs.

Three Months Ended ~~June 30, 2022~~March 31, 2023 compared to the Three Months Ended ~~June 30, 2021~~March 31, 2022

Consolidated Results


		Three Months Ended June 30,									Three Months Ended March 31,
		2022		2021		$ Change					2023		2022		$ Change
Net sales	Net sales	$	125,362	$	123,157	$	2,205			Net sales	$	127,088	$	128,067	$	(979)
Organic growth								$	2,700
Foreign exchange effects								$	(495)

Cost of sales (exclusive of depreciation and amortization shown separately below)	Cost of sales (exclusive of depreciation and amortization shown separately below)	103,889		99,797		$	4,092			Cost of sales (exclusive of depreciation and amortization shown separately below)	108,421		104,578		$	3,843
Selling, general, and administrative expense	Selling, general, and administrative expense	14,794		13,585		1,209				Selling, general, and administrative expense	13,165		13,454		(289)

Depreciation and amortization	Depreciation and amortization	11,340		11,687		(347)				Depreciation and amortization	11,516		11,429		87

Other operating income, net		(147)		(324)		177
Other operating expense, net										Other operating expense, net	1,061		2,026		(965)
Loss from operations	Loss from operations	(4,514)		(1,588)		(2,926)				Loss from operations	(7,075)		(3,420)		(3,655)
Interest expense	Interest expense	3,488		3,573		(85)				Interest expense	4,288		3,439		849

Other expense (income), net		(67)		1,680		(1,747)
Loss before benefit (provision) for income taxes and share of net income from joint venture		(7,935)		(6,841)		(1,094)
Benefit (provision) for income taxes		(1,051)		231		(1,282)
Other income, net										Other income, net	(2,208)		(2,996)		788
Loss before provision for income taxes and share of net income from joint venture										Loss before provision for income taxes and share of net income from joint venture	(9,155)		(3,863)		(5,292)
Provision for income taxes										Provision for income taxes	(1,301)		(1,531)		230
Share of net income from joint venture	Share of net income from joint venture	419		1,219		(800)				Share of net income from joint venture	281		2,092		(1,811)

Net loss	Net loss	$	(8,567)	$	(5,391)	$	(3,176)			Net loss	$	(10,175)	$	(3,302)	$	(6,873)

Net Sales. Net sales ~~increased~~decreased by ~~$2.2~~$1.0 million, or ~~1.8%~~(0.8)%, during the three months ended ~~June 30, 2022,~~March 31, 2023, compared to the three months ended ~~June 30, 2021,~~March 31, 2022, primarily due to increased pricing to recover certain inflationary costs and underutilized fixed costs caused by lower-than-expected customer demand. These increases were partially offset by lower demand in Mobile Solutions which was impacted by the war in Ukraine, COVID disruptions in China, continued supply chain disruptionsreduced volume and unfavorable foreign exchange effects of ~~$0.5 million.~~$1.4 million, partially offset by higher customer pricing and premium pricing on a certain customer project.

Cost of Sales. Cost of sales increased by ~~$4.1~~$3.8 million, or ~~4.1%~~3.7%, during the three months ended ~~June 30, 2022,~~March 31, 2023, compared to the three months ended ~~June 30, 2021,~~March 31, 2022, primarily due to ~~inflationary~~higher material and labor costs due to inefficient manufacturing processes associated with product launches, partially offset by lower sales ~~volume.~~volume and favorable foreign exchange effects. In addition, the prior year cost of sales benefited from favorable overhead absorption.

Selling, General, and Administrative Expense. Selling, general, and administrative expense ~~increased~~decreased by ~~$1.2~~$0.3 million during the three months ended ~~June 30, 2022,~~March 31, 2023, compared to the three months ended ~~June 30, 2021,~~March 31, 2022, primarily due to ~~legal fees related to litigation, higher~~lower stock compensation expense ~~and~~partially offset by higher professional fees. ~~These increases were partially offset by the reduction in severance and retention costs incurred in the prior year.~~

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~~Interest Expense.~~Other Operating Expense, Net. ~~Interest~~Other operating expense, net decreased by ~~$0.1~~$1.0 million during the three months ended ~~June 30, 2022,~~March 31, 2023, compared to the three months ended ~~June 30, 2021,~~March 31, 2022, primarily due to a legal settlement reached during the first quarter of 2022, partially offset by losses on sales of machinery and equipment during the first quarter of 2023.

Interest Expense. Interest expense increased by $0.8 million during the three months ended March 31, 2023, compared to the three months ended March 31, 2022, primarily due to higher interest rates, partially offset by favorable interest rate swap settlements and a higher amount of interest expense that was capitalized in the current quarter compared with the ~~second~~first quarter of ~~2021.~~2022.


		Three Months Ended June 30,					Three Months Ended March 31,
		2022		2021			2023		2022
Interest on debt	Interest on debt	$	3,109	$	3,110	Interest on debt	$	4,619	$	3,071
Interest rate swap settlements	Interest rate swap settlements	38		—		Interest rate swap settlements	(468)		44
Amortization of debt issuance costs and discount	Amortization of debt issuance costs and discount	330		313		Amortization of debt issuance costs and discount	353		332
Capitalized interest	Capitalized interest	(175)		(80)		Capitalized interest	(330)		(125)
Other	Other	186		230		Other	114		117
Total interest expense	Total interest expense	$	3,488	$	3,573	Total interest expense	$	4,288	$	3,439

Other ~~Expense,~~Income, Net. Other ~~expense (income),~~income, net ~~changed favorably~~decreased by ~~$1.7~~$0.8 million during the three months ended ~~June 30, 2022,~~March 31, 2023, compared to the three months ended ~~June 30, 2021,~~March 31, 2022, due to lower noncash derivative mark-to-market gains ~~during 2022 and the impact of a litigation settlement reached~~recognized during the ~~second~~current quarter compared with the first quarter of ~~2021. These impacts were partially offset by unfavorable foreign exchange effects associated with intercompany borrowings.~~2022.

Benefit (Provision) For Income Taxes. Our effective tax rate was ~~(13.2)~~(14.2)% for the three months ended ~~June 30, 2022,~~March 31, 2023, compared to ~~3.4%~~(39.6)% for the three months ended ~~June 30, 2021.~~March 31, 2022. The rate for the three months ended ~~June 30, 2022~~March 31, 2023 was unfavorably impacted due to the accrual of tax on non-permanently reinvested unremitted earnings of foreign subsidiaries and by the 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. The effective tax rate was unfavorably impacted by the U.S. tax on the earnings of foreign subsidiaries under the global intangible low-taxed income regime.

Share of Net Income from Joint Venture. Share of net income from the JV decreased during the three months ended ~~June 30, 2022,~~March 31, 2023, compared to the three months ended ~~June 30, 2021,~~March 31, 2022, primarily due to ~~decreased profits resulting from~~ lower sales and ~~inflationary~~higher operating costs in the current quarter. The JV, in which we own a 49% investment, recognized net sales of ~~$22.9~~$20.6 million and ~~$22.3~~$26.5 million for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

Results by Segment

MOBILE SOLUTIONS

Three Months Ended June 30,
2022 2021 $ Change
Net sales $ 73,350 $ 73,886 $ (536)
Organic decline $ (75)
Foreign exchange effects (461)
Income from operations $ 1,729 $ 2,509 $ (780)



	Three Months Ended March 31,
	2023		2022		$ Change
Net sales	$	78,018	$	76,070	$	1,948


Income (loss) from operations	$	(3,319)	$	1,969	$	(5,288)

Net sales ~~decreased~~increased by ~~$0.5~~$1.9 million, or ~~(0.7)%~~2.6%, during the three months ended ~~June 30, 2022,~~March 31, 2023, compared to the three months ended ~~June 30, 2021,~~March 31, 2022, primarily due to higher customer pricing, partially offset by lower sales of diesel components due to lower European demand which is impacted by the war in Ukraine, pandemic interruptions in China, lost sales associated with certain fuel systems reaching end of production,volume and unfavorable foreign exchange effects of ~~$0.5~~$1.7 million. ~~These unfavorable impacts were partially offset by increased pricing to recover certain inflationary costs and underutilized fixed costs caused by lower-than-expected customer demand.~~

Income (loss) from operations ~~decreased~~changed unfavorably by ~~$0.8~~$5.3 million during the three months ended ~~June 30, 2022,~~March 31, 2023, compared to the same period in the prior year, primarily due to lower sales volume, production challenges in two facilities associated with new business launches, and inflationary costs not fully recovered in customer pricing.

POWER SOLUTIONS


	Three Months Ended March 31,
	2023		2022		$ Change
Net sales	$	49,072	$	52,011	$	(2,939)


Income from operations	$	1,747	$	364	$	1,383

Net sales decreased by $2.9 million, or (5.7)%, during the three months ended March 31, 2023 compared to the three months ended March 31, 2022. The decrease in sales was primarily due to lower volume, partially offset by premium pricing on a certain customer project, and ~~variable cost inefficiencies associated with supply chain interruptions, uneven customer ordering patterns, and labor constraints caused by pandemic interruptions.~~favorable foreign exchange effects of $0.2 million.

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~~POWER SOLUTIONS~~

Three Months Ended June 30,
2022 2021 $ Change
Net sales $ 52,049 $ 49,271 $ 2,778
Organic growth $ 2,812
Foreign exchange effects (34)
Income from operations $ 1,430 $ 2,875 $ (1,445)

Net sales increased by $2.8 million, or 5.6%, during the three months ended June 30, 2022 compared to the three months ended June 30, 2021. The increase in sales was the result of increased electric component sales, which were up 15.6% compared with the second quarter of 2021, primarily due to higher customer pricing to recover inflationary costs and improved volume, offset by lower sales to automotive and aerospace and defense customers.

Income from operations ~~decreased~~increased by $1.4 million during the three months ended ~~June 30, 2022~~March 31, 2023 compared to the same period in the prior year, primarily due to ~~inflationary costs which were not fully recovered from~~premium pricing ~~variable cost inefficiencies associated with supply chain interruptions and uneven~~on a certain customer ~~ordering patterns.~~

~~Six Months Ended June 30, 2022, compared to the Six Months Ended June 30, 2021~~

~~Consolidated Results~~

Six Months Ended June 30,
2022 2021 $ Change
Net sales $ 253,429 $ 249,961 $ 3,468
Organic growth $ 3,804
Foreign exchange effects $ (336)
Cost of sales (exclusive of depreciation and amortization shown separately below) 208,467 199,485 $ 8,982
Selling, general, and administrative expense 28,248 28,160 88
Depreciation and amortization 22,769 23,255 (486)
Other operating expense (income), net 1,879 (329) 2,208
Loss from operations (7,934) (610) (7,324)
Interest expense 6,927 5,597 1,330
Loss on extinguishment of debt and write-off of debt issuance costs — 2,390 (2,390)
Derivative payments on interest rate swap — 1,717 (1,717)
Loss on interest rate swap — 2,033 (2,033)
Other expense (income), net (3,063) 1,558 (4,621)
Loss before benefit (provision) for income taxes and share of net income from joint venture (11,798) (13,905) 2,107
Benefit (provision) for income taxes (2,582) 987 (3,569)
Share of net income from joint venture 2,511 2,614 (103)
Net loss $ (11,869) $ (10,304) $ (1,565)

~~Net Sales~~. Net sales increased by $3.5 million, or 1.4%, during the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to increased pricing to recover certain inflationary costs and underutilized fixed costs caused by lower-than-expected customer demand. These increases were partially offset by lower demand in Mobile Solutions which was impacted by the war in Ukraine, COVID disruptions in China, continued supply chain disruptions and unfavorable foreign exchange effects $0.3 million.

~~Cost of Sales.~~ Cost of sales increased by $9.0 million, or 4.5%, during the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to inflationary costs, partially offset by lower sales volume.

~~Selling, General, and Administrative Expense.~~ Selling, general, and administrative expense increased by $0.1 million during the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to legal fees related to litigation, higher stock compensation expense and higher professional fees. These increases were partially offset by the reduction in severance and retention costs incurredproject in the ~~prior year.~~

~~Table~~first quarter of ~~Contents~~

~~Other Operating Expense (Income), Net.~~ ~~Other operating expense (income), net changed unfavorably by $2.2 million primarily due to~~2023 and a legal settlement reached during the first quarter of 2022.

~~Interest Expense.~~ ~~Interest expense increased~~ These increases were partially offset by ~~$1.3 million during the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to higher interest rates~~lower sales volume and ~~a larger average debt balance as a result of the credit facility and preferred stock refinance~~an unfavorable change in overhead absorption during the first quarter of ~~2021.~~
Six Months Ended June 30,
2022 2021
Interest on debt $ 6,180 $ 4,549
Interest rate swap settlements 82 —
Amortization of debt issuance costs and discount 662 718
Capitalized interest (300) (111)
Other 303 441
Total interest expense $ 6,927 $ 5,597

~~Loss on Extinguishment of Debt and Write-off of Debt Issuance Costs.~~ ~~We recognized $2.4 million in~~2023 compared to the first quarter of ~~2021 for the write-off of unamortized debt issuance costs associated with the credit facility that was terminated in March 2021.~~

~~Derivative Payments on Interest Rate Swap.~~ Derivative payments on interest rate swap represent cash settlements of an interest rate swap which was terminated in the first quarter of 2021. We entered into a new interest rate swap in the third quarter of 2021, which is designated as a cash flow hedge with the impact of settlements recognized in interest expense.

~~Loss on Interest Rate Swap. We recognized a $2.0 million loss in the first quarter of 2021 related to the termination of the previous interest rate swap in March 2021.~~

~~Other Expense (Income), Net.~~ Other expense (income), net changed favorably by $4.6 million during the six months ended June 30, 2022, compared to the six months ended June 30, 2021, due to noncash derivative mark-to-market gains during 2022 and the impact of a litigation settlement reached during the second quarter of 2021.

~~Benefit (Provision) for Income Taxes.~~ Our effective tax rate was (21.9)% for the six months ended June 30, 2022, compared to 7.1% for the six months ended June 30, 2021. The rate for the six months ended June 30, 2022 was unfavorably impacted by the accrual of tax on non-permanently reinvested unremitted earnings of foreign subsidiaries and by the 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. The rate for the six months ended June 30, 2021 was favorably impacted by the change in assertion and reduction in the accrual of tax on non-permanently reinvested unremitted earnings of foreign subsidiaries.

~~Share of Net Income from Joint Venture.~~ Share of net income from the JV decreased during the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to decreased profits resulting from inflationary costs partially offset by higher sales volume. The JV, in which we own a 49% investment, recognized net sales of $49.4 million and $45.7 million for the six months ended June 30, 2022 and 2021, respectively.

~~Results by Segment~~

~~MOBILE SOLUTIONS~~

Six Months Ended June 30,
2022 2021 $ Change
Net sales $ 149,420 $ 151,662 $ (2,242)
Organic decline $ (1,940)
Foreign exchange effects (302)
Income from operations $ 3,698 $ 8,599 $ (4,901)

Net sales decreased by $2.2 million, or (1.5)%, during the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to lower sales of diesel components due to lower European demand which was impacted by the war in Ukraine, pandemic interruptions in China, lost sales associated with certain fuel systems reaching end of production, and unfavorable foreign exchange effects of $0.3 million. These unfavorable impacts were partially offset by increased pricing to recover certain inflationary costs and underutilized fixed costs caused by lower-than-expected customer demand.

Income from operations decreased by $4.9 million during the six months ended June 30, 2022 compared to the same period in the prior year, primarily due to inflationary costs not fully recovered in customer pricing and variable cost inefficiencies

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~~associated with supply chain interruptions, uneven customer ordering patterns, and labor constraints caused by pandemic interruptions.~~

~~POWER SOLUTIONS~~

Six Months Ended June 30,
2022 2021 $ Change
Net sales $ 104,060 $ 98,346 $ 5,714
Organic growth $ 5,748
Foreign exchange effects (34)
Income from operations $ 1,794 $ 5,307 $ (3,513)

Net sales increased by $5.7 million, or 5.8%, during the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to higher customer pricing to recover inflationary costs.

Income from operations decreased by $3.5 million during the six months ended June 30, 2022 compared to the same period in the prior year, primarily due to a $1.8 million litigation settlement to settle claims from 2016, inflationary costs which were not fully recovered from pricing, variable cost inefficiencies associated with supply chain interruptions, uneven customer ordering patterns, and labor constraints caused by pandemic interruptions.2022.

Changes in Financial Condition from December 31, ~~2021~~2022 to ~~June 30, 2022~~March 31, 2023

Overview

From December 31, ~~2021~~2022 to ~~June 30, 2022,~~March 31, 2023, total assets ~~decreased~~increased by ~~$5.9~~$1.1 million primarily due to increases in accounts receivable, inventory and prepaid assets, partially offset by normal depreciation and amortization of fixed assets ~~lease right-of-use assets,~~ and intangible assets. ~~These decreases were partially offset by increases in accounts receivable and inventories during the six months ended June 30, 2022.~~ The increase in accounts receivable is due to higher sales during the end of the current quarter compared with the end of the fourth quarter of ~~2021. The value of inventory increased due to higher material costs as well as higher quantities to maintain customer safety stock due to ongoing supply chain interruptions, especially in China.~~2022.

From December 31, ~~2021~~2022 to ~~June 30, 2022,~~March 31, 2023, total liabilities increased by ~~$6.7~~$9.9 million, primarily due to increases in accounts payable, ~~attributed to higher inventory balances at June 30, 2022.~~accrued salaries and benefits and other current liabilities.

Working capital, which consists of current assets less current liabilities, was ~~$122.3~~$109.2 million as of ~~June 30, 2022 and~~March 31, 2023, compared to $112.9 million as of December 31, ~~2021.~~2022. The ~~balance of~~decrease in working capital ~~remained constant as an increase~~was primarily due to increases in accounts ~~receivable~~payable and ~~inventory was~~other current liabilities, partially offset by an increase in accounts ~~payable and other current liabilities.~~receivable.

Cash Flows

Cash ~~used in~~provided by operations was ~~$2.5~~$0.2 million for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, compared with cash ~~provided~~used by operations of ~~$5.9~~$5.2 million for the ~~six~~three months ended ~~June 30, 2021.~~March 31, 2022. The difference was primarily due to an increase in accounts receivable related to higher sales during the current quarter compared with the fourth quarter of ~~2021.~~2022.

Cash used in investing activities decreased by $0.2 million primarily due to higher expenditures for property, plant and equipment in the first quarter of 2023, partially offset by the proceeds from the sale of equipment at the Irvine facility.

Cash provided by financing activities was ~~$9.3~~$1.3 million for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, compared with cash used ~~in investing~~by financing activities of ~~$30.2~~$1.5 million for the ~~six~~three months ended ~~June 30, 2021.~~March 31, 2022. The difference was primarily due to ~~cash paid to settle the interest rate swap~~proceeds from new international loans for working capital needs in the first quarter of ~~2021.~~

Cash used in financing activities was $1.0 million for the six months ended June 30, 2022, compared with cash provided by financing activities of $6.9 million for the six months ended June 30, 2021. The difference was primarily due to the debt and preferred stock refinancing in the first quarter of 2021.2023.

Liquidity and Capital Resources

Credit Facilities

The principal amount outstanding under our Term Loan Facility as of ~~June 30, 2022,~~March 31, 2023, was ~~$148.1~~$147.0 million, without regard to unamortized debt issuance costs and discount. As of ~~June 30, 2022,~~March 31, 2023, we had ~~$36.9~~$32.5 million available for future borrowings under the ABL Facility. This amount of borrowing capacity is net of ~~$2.0~~$1.0 million of outstanding borrowings and ~~$11.1~~$10.9 million of outstanding letters of credit at ~~June 30, 2022,~~March 31, 2023, which are considered as usage of the ABL Facility.

The Term Loan Facility requires quarterly principal payments of $0.4 million with the remaining unpaid principal amount due on the final maturity date of September 22, 2026. ~~Outstanding~~Effective March 31, 2023, outstanding borrowings under the Term Loan Facility bear interest at either 1) one-month, ~~LIBOR (subject~~three-month, or six-month Adjusted SOFR, subject to a 1.000% ~~floor)~~floor, plus an applicable margin of 6.875% or 2) the greater of various benchmark

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rates plus an applicable margin of 5.875%. 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%, dependent on the Company’s leverage ratio and whether the Company completes a qualifying junior equity raise by June 30, 2023. Based on the interest rate in effect at ~~June 30, 2022, and the fixed rate on the 2021 interest rate swap,~~March 31, 2023, annual cash interest payments would be approximately ~~$12.4~~$17.2 million.

The ABL Facility bears interest on a variable borrowing rate ~~structure with borrowings bearing interest at one-month LIBOR~~based on either 1) Adjusted SOFR plus an applicable margin of 1.75%~~. The interest~~ or 2.00%, depending on availability, or 2) the greater of the federal funds rate ~~in effect at June 30, 2022, was 3.00%.~~or prime, plus an applicable margin of 0.75% or 1.00%, depending on availability. We pay a commitment fee of 0.375% for unused capacity under the ABL Facility.

We were in compliance with all requirements under our Term Loan Facility and ABL Facility as of ~~June 30, 2022.~~March 31, 2023. Both credit facilities allow for optional expansion of available borrowings, subject to certain terms and conditions.

Accounts Receivable Sales Programs

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. In exchange, we receive payment on the receivables, less a discount, sooner than under the customary credit terms we have extended to that customer. These programs allow us to improve working capital and cash flows. Our access to these programs is dependent on our customers ongoing agreements with the third-parties. Our participation in these programs is based on our specific cash needs throughout the year, the discount charged to receive payment earlier, the length of the payment terms with our customers, as well being subject to limits in our ABL Facility and Term Loan Facility agreements.

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Seasonality and Fluctuation in Quarterly Results

General economic conditions impact our business and financial results, and certain businesses experience seasonal and other trends related to the industries and end markets that they serve. For example, European sales are often weaker in the summer months as customers slow production and sales to original equipment manufacturers are often stronger immediately preceding and following the launch of new products. However, as a whole, we are not materially impacted by seasonality.

Critical Accounting Estimates

Our critical accounting policies, including the assumptions and judgments underlying them, are disclosed in the ~~2021~~2022 Annual Report, including those policies as discussed in Note 1 to the Notes to Consolidated Financial Statements included in the ~~2021~~2022 Annual Report. There have been no material changes to these policies during the ~~six~~three months ended ~~June 30, 2022.~~

March 31, 2023.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

We are exposed to changes in financial market conditions in the normal course of business due to use of certain financial instruments as well as transacting business in various foreign currencies. To mitigate the exposure to these market risks, we have established policies, procedures, and internal processes governing the management of financial market risks. We are exposed to changes in interest rates primarily as a result of borrowing activities.

Interest Rate Risk

Our policy is to manage interest expense using a mixture of fixed and variable rate debt. To manage this mixture of fixed and variable rate debt effectively and mitigate interest rate risk, we may use interest rate swap agreements. The nature and amount of borrowings may vary as a result of future business requirements, market conditions, and other factors.

On July 22, 2021, we entered into a fixed-rate interest rate swap agreement to change the LIBOR-based component of the interest rate on ~~a portion~~$60.0 million of our variable rate debt to a fixed rate of 1.291% (the “2021 Swap”). ~~The 2021 Swap has a notional amount of $60.0 million and a maturity date of July 31, 2024. The objective of the 2021 Swap is to eliminate the variability of cash flows in interest payments on~~During the first ~~$60.0 million~~quarter of variable rate debt attributable to changes in benchmark one-month LIBOR interest rates. The hedged risk is the interest rate risk exposure to changes in interest payments, attributable to changes in benchmark one-month LIBOR interest rates over2023, we terminated the interest rate swap ~~term. The changes in~~and received cash ~~flows~~proceeds of ~~the interest rate swap are expected~~$2.5 million which was equal to ~~exactly offset changes in cash flows of the variable rate debt. We designated the 2021 Swap as a cash flow hedge at inception. Cash settlements of the 2021 Swap are recognized in interest expense.~~

its fair value. Refer to Note 15 in the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report for further discussion about the interest rate swap.

At ~~June 30, 2022,~~March 31, 2023, we had ~~$148.1~~$147.0 million of principal outstanding under the Term Loan Facility without regard to capitalized debt issuance costs. A one-percent increase in one-month LIBOR would have resulted in a net increase in interest expense of ~~$0.9~~$1.5 million on an annualized ~~basis due to the fact that the Term Loan Facility is subject to a LIBOR floor of 1.00% and one-month LIBOR was below the floor as of June 30, 2022.~~basis.

At ~~June 30, 2022,~~March 31, 2023, using ~~one-month LIBOR~~Adjusted SOFR plus a ~~1.75%~~2.00% spread, the interest rate on the ~~$2.0~~$1.0 million of outstanding borrowings under the ABL Facility was ~~3.00%~~6.89%.

Foreign Currency Risk

Translation of our operating cash flows denominated in foreign currencies is impacted by changes in foreign exchange rates. We participate in various third party and intercompany loans, payables, and receivables denominated in currencies other than the U.S. dollar. To help reduce exposure to foreign currency fluctuation, we have incurred debt in euros in the past. From time to time, we may use foreign currency derivatives to hedge currency exposures when these exposures meet certain discretionary levels. We did not hold a position in any foreign currency derivatives as of ~~June 30, 2022.~~

March 31, 2023.

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Item 4. Controls and Procedures

Disclosure Controls and Procedures

Under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the ~~Securities~~ Exchange ~~Act of 1934, as amended (the “Exchange Act”))~~Act). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of ~~June 30, 2022,~~March 31, 2023, to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the fiscal quarter ended ~~June 30, 2022,~~March 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3021

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

As disclosed in Note 9 in the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report, we are engaged in certain legal proceedings, and the disclosure set forth in Note 9 relating to legal proceedings is incorporated herein by reference.

Item 1A. Risk Factors

Except as noted below, there have been no material changes to the risk factors disclosed in the ~~2021~~2022 Annual Report under Item 1A, “Risk Factors.”

~~Our international~~We currently, and may in the future, have assets held at financial institutions that may exceed the insurance coverage offered by the Federal Deposit Insurance Corporation (“FDIC”), and the loss of such assets could have a severe negative affect on our operations and ~~business, financial condition, and prospects may be adversely affected~~liquidity.

On March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the ~~current military conflict between Russia~~California Department of Financial Protection and ~~Ukraine, other~~Innovation, which appointed the FDIC as receiver. Similarly, on March 12, 2023, Signature Bank and Silvergate Capital Corp. were each swept into receivership. A statement by the Department of the Treasury, the Federal Reserve and the FDIC stated that all depositors of SVB would have access to all of their money after only one business day of closure, including funds held in uninsured deposit accounts. Although we do not have any funds deposited with SVB or Signature Bank, we currently have our cash and cash equivalents held in deposit in accounts at certain FDIC-insured financial institutions, some of which include amounts in excess of the insurance coverage offered by the FDIC. In the future, ~~social~~we may maintain our cash and ~~geopolitical instability and resulting domestic and foreign economic instability.~~

~~We are exposed to the risk of changes~~cash equivalents at financial institutions in social, geopolitical, legal, and economic conditions. The global economy has been, and may continue to be, negatively impacted by Russia’s invasion of Ukraine. As a result of Russia’s invasion of Ukraine, the United States in amounts that may be in excess of the ~~European Union,~~FDIC insurance limit of $250,000. In the ~~United Kingdom, and other G7 countries, among other countries, have imposed substantial~~event of a failure of any of these financial and economic sanctions on certain industry sectors and parties in Russia. Broad restrictions on exports to Russia have also been imposed. These measures include: (i) comprehensive financial sanctions against major Russian banks; (ii) additional designations of Russian individuals with significant business interests and government connections; (iii) designations of individuals and entities involved in Russian military activities; and (iv) enhanced export controls and trade sanctions limiting Russia’s ability to import various goods. The negative impacts arising from the conflict and these sanctions and export restrictions, including those imposed by Russia, may include reduced consumer demand, supply chain disruptions and increased costs for transportation, energy, and raw materials. Although none of our operations are physically located in Russia or Ukraine, further escalation of geopolitical tensions could have a broader impact that expands into other marketsinstitutions where we ~~do business, which~~maintain our deposits or other assets, we may ~~adversely affect our business, financial condition, results of operations and prospects. For example, the prices of oil and other commodities have increased significantly, and, in response~~incur a loss to the ~~sanctions imposed on Russia by Western countries, Russia has reduced~~extent such loss exceeds the volume of natural gas it sends to European countries. As a result of of increased oil prices and Russia’s decision to reduce the volume of natural gas sold to European countries, utility costs in Europe have increased dramatically. Our facilities in Poland and France have been negatively impacted by rising energy costs,FDIC insurance limitation, which could have a material adverse effect onupon our ~~European operations~~liquidity, financial condition and our ~~business as a whole.~~

results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information about purchases we made during the quarter ended ~~June 30, 2022.~~March 31, 2023.

Period
Total Number of
Shares Purchased (1)
Average Price Paid
Per Share
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs (1)
Maximum Number (or
Approximate Dollar Value)
of Shares That May Yet
Be Purchased Under the
Plan or Programs (1)
April 2022 — $ — — —
May 2022 — — — —
June 2022 671 2.85 — —
Total 671 $ 2.85 — —


Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plan or Programs (1)
January 2023	—	$	—	—	—
February 2023	10,005	2.19		—	—
March 2023	73,721	1.02		—	—
Total	83,726	$	1.16	—	—

(1)Shares were withheld to pay for tax obligations due upon the vesting of restricted stock held by certain employees granted under the 2019 Omnibus Plan. The Plan provides for the withholding of shares to satisfy tax obligations. It does not specify a maximum number of shares that can be withheld for this purpose. These shares may be deemed to be “issuer purchases” of shares that are required to be disclosed pursuant to this Item.

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Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

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Item 5. Other Information

None.

Item 6. Exhibits


Exhibit Number						Description of Exhibit

3.1						Amended and Restated By-Laws of NN, Inc. (Filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on January 20, 2023 and incorporated herein by reference).

4.1						Common Stock Purchase Warrant (Filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on March 7, 2023 and incorporated herein by reference).

10.1						~~2022 Omnibus Incentive Plan (incorporated~~Amendment No. 2 to Term Loan Credit Agreement, dated as of March 3, 2023, by ~~reference~~and among NN, Inc., certain subsidiaries of NN, Inc., the lenders party thereto and Oaktree Fund Administration, LLC, as administrative agent (Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 7, 2023 and incorporated herein by reference).

10.2						~~Appendix~~ AAmendment No. 1 to Credit Agreement, dated as of March 3, 2023, by and among NN, Inc.~~’s Definitive Proxy Statement~~, certain subsidiaries of NN, Inc., the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (Filed as Exhibit 10.2 to the Registrant’s Current Report on ~~Schedule 14A~~Form 8-K filed ~~with~~on March 7, 2023 and incorporated herein by reference).

10.3						Warrant Letter Agreement, dated as of March 3, 2023, by and between NN, Inc. and the ~~Securities~~affiliates of Oaktree Capital Management, L.P. party thereto (Filed as Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on March 7, 2023 and ~~Exchange Commission on April 15, 2022)~~incorporated herein by reference).

31.1						Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.

31.2						Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.

32.1						Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2						Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS						XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

101.SCH						XBRL Taxonomy Extension ~~Service~~Schema Document

101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB						XBRL Taxonomy Extension Label Linkbase Document

101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF						XBRL Taxonomy Extension Definition Linkbase Document

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

3223

Table of Contents

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, Inc.
			(Registrant)

Date: ~~August~~May 5, ~~2022~~2023			/s/ Warren A. Veltman
			Warren A. Veltman
			President, Chief Executive Officer and Director
			(Principal Executive Officer)
			(Duly Authorized Officer)

Date: ~~August~~May 5, ~~2022~~2023			/s/ Michael C. Felcher
			Michael C. Felcher
			Senior Vice President - Chief Financial Officer
			(Principal Financial and Accounting Officer)
			(Duly Authorized Officer)

3324


(in thousands, except per share data)	June 30, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	15,186	$	28,656
Accounts receivable, net of allowances of $1,762 and $1,352 at June 30, 2022 and December 31, 2021, respectively	82,621		71,419
Inventories	84,726		75,027
Income tax receivable	10,931		11,808

Other current assets	13,267		9,372
Total current assets	206,731		196,282
Property, plant and equipment, net of accumulated depreciation of $210,618 and $197,936 at June 30, 2022 and December 31, 2021, respectively	202,239		209,105
Operating lease right-of-use assets	46,042		46,443

Intangible assets, net	81,545		88,718
Investment in joint venture	30,875		34,045
Deferred tax assets	375		314

Other non-current assets	5,350		4,194
Total assets	$	573,157	$	579,101
Liabilities, Preferred Stock, and Stockholders’ Equity
Current liabilities:
Accounts payable	$	47,859	$	36,710
Accrued salaries, wages and benefits	15,217		17,739
Income tax payable	687		2,072
Current maturities of long-term debt	3,139		3,074
Current portion of operating lease liabilities	5,103		5,704

Other current liabilities	12,439		8,718
Total current liabilities	84,444		74,017
Deferred tax liabilities	8,141		7,456

Long-term debt, net of current portion	151,317		151,052
Operating lease liabilities, net of current portion	50,899		51,295

Other non-current liabilities	13,031		17,289
Total liabilities	307,832		301,109
Commitments and contingencies (Note 9)	0		0
Series D perpetual preferred stock - $0.01 par value per share, 65 shares authorized, issued and outstanding at June 30, 2022 and December 31, 2021, respectively	59,003		53,807
Stockholders' equity:
Common stock - $0.01 par value per share, 90,000 shares authorized, 43,884 and 43,027 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively	439		430
Additional paid-in capital	473,019		474,757
Accumulated deficit	(230,969)		(219,100)
Accumulated other comprehensive loss	(36,167)		(31,902)
Total stockholders’ equity	206,322		224,185
Total liabilities, preferred stock, and stockholders’ equity	$	573,157	$	579,101


	Mobile Solutions		Power Solutions		Corporate and Consolidations			Total
Three Months Ended June 30, 2022
Net sales	$	73,350	$	52,049	$	(37)	(a)	$	125,362
Income (loss) from operations	1,729		1,430		(7,673)			(4,514)
Interest expense								(3,488)
Other								67
Loss from operations before income taxes and share of net income from joint venture								$	(7,935)
Three Months Ended June 30, 2021
Net sales	$	73,886	$	49,271	$	—		$	123,157
Income (loss) from operations	2,509		2,875		(6,972)			(1,588)
Interest expense								(3,573)
Other								(1,680)
Loss from operations before income taxes and share of net income from joint venture								$	(6,841)


	Six Months Ended June 30, 2022
	Mobile Solutions		Power Solutions		Intersegment Sales 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


	Number of Options (in thousands)	Weighted- Average Exercise Price (per share)		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2022	621	$	12.24



Expired	(79)	9.71
Outstanding at June 30, 2022	542	$	12.61	4.1 years	$	—	(1)
Exercisable at June 30, 2022	515	$	12.77	3.9 years	$	—	(1)


	Nonvested Restricted Shares (in thousands)	Weighted Average Grant-Date Fair Value (per share)
Unvested at January 1, 2022	469	$	7.28
Granted	897	3.31
Vested	(291)	7.05
Forfeited	(9)	4.73
Unvested at June 30, 2022	1,066	$	4.02


	Nonvested TSR Awards			Nonvested ROIC Awards
	Shares (in thousands)	Weighted Average Grant-Date Fair Value (per share)		Shares (in thousands)	Weighted Average Grant-Date Fair Value (per share)
Nonvested at January 1, 2022	194	$	9.59	228	$	8.14
Granted	382	2.53		408	2.62


Nonvested at June 30, 2022	576	$	4.90	636	$	4.60


	Six Months Ended June 30,
	2022		2021		$ Change
Net sales	$	253,429	$	249,961	$	3,468
Organic growth							$	3,804
Foreign exchange effects							$	(336)
Cost of sales (exclusive of depreciation and amortization shown separately below)	208,467		199,485		$	8,982
Selling, general, and administrative expense	28,248		28,160		88

Depreciation and amortization	22,769		23,255		(486)


Other operating expense (income), net	1,879		(329)		2,208
Loss from operations	(7,934)		(610)		(7,324)
Interest expense	6,927		5,597		1,330
Loss on extinguishment of debt and write-off of debt issuance costs	—		2,390		(2,390)
Derivative payments on interest rate swap	—		1,717		(1,717)
Loss on interest rate swap	—		2,033		(2,033)
Other expense (income), net	(3,063)		1,558		(4,621)
Loss before benefit (provision) for income taxes and share of net income from joint venture	(11,798)		(13,905)		2,107
Benefit (provision) for income taxes	(2,582)		987		(3,569)
Share of net income from joint venture	2,511		2,614		(103)


Net loss	$	(11,869)	$	(10,304)	$	(1,565)