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NN, Inc. (Nasdaq: NNBR) today reported its financial results for the third quarter and nine months ended September 30, 2006. Net sales of $74.9 million for the third quarter of 2006 were flat compared to net sales of $75.0 million for the same period of 2005. Net income and earnings per share for the third quarter of 2006 and for the same period of 2005 totaled $2.6 million and $0.15 per diluted share, respectively.
Net sales of $244.4 million for the first nine months of 2006 were essentially unchanged as compared to net sales of $245.5 million for the same period of 2005. The Company achieved net income of $11.3 million for the first nine months of 2006, an increase of $1.4 million, or 14.0% over net income of $9.9 million recorded for the same period of 2005. Earnings for the first nine months of 2006 were $0.65 per diluted share, an increase of 14.0% compared to $0.57 per diluted share for the same period of 2005.
James H. Dorton, Vice President and Chief Financial Officer, commented, revenues of $74.9 million in the third quarter of 2006 were down slightly compared to revenues of $75.0 million recorded in the third quarter of the prior year. Decreases in volume of approximately $3.1 million were offset by selling price increases of $0.8 million and the positive effect of currency translation of $2.2 million. For the first nine months of 2006, revenues of $244.4 million were down slightly by $1.1 million. Decreases in volume of $3.5 million as well as the negative effects of currency translation of $2.7 million were offset by selling price increases of $5.1 million.
As a percentage of net sales, cost of products sold was 78.4% in the third quarter of 2006 versus 77.6% in the third quarter of 2005. For the first nine months of 2006, as a percentage of net sales, cost of product sold was 77.6% as compared to 78.1% for the same period in the prior year. Although our Level 3 initiatives have continued to produce excellent results in 2006, volume reductions particularly in our U.S. operations impacted margins for the third quarter of 2006.
Selling, general and administrative expenses of $7.2 million, or 9.6% as a percentage of net sales for the third quarter of 2006 were comparable to the same period in 2005 of $7.2 million, or 9.6% as a percentage of net sales. Selling, general and administrative expenses for the first nine months of 2006 were $21.9 million, or 9.0% of net sales and compared with $22.0 million, or 8.9% of net sales recorded in the same period of 2005.
Mr. Dorton continued, during the third quarter, we purchased 156,715 shares of our common stock pursuant to our previously announced stock repurchase plan. This brings the total amount purchased under this plan to 213,536 shares. This program, which we began in mid March of this year and will continue for 18 months thereafter, allows for the purchase of up to $10.0 million of the Company outstanding stock.
Mr. Dorton concluded, in September 21, 2006, we completed negotiations with a bank group led by KeyBank and entered into a new syndicated five year $90.0 million credit facility. This new credit facility, along with the existing $40.0 million in private placement notes will provide us with the capital structure we feel is necessary to execute our strategic growth plan. Additionally, subsequent to September 30, 2006, we paid down approximately $8.0 million in debt; therefore, we remain committed to our previously stated debt reduction goal of $10.0 million for the full year of 2006.
Roderick R. Baty, Chairman and Chief Executive Officer, commented, while weakening automotive sales in the U.S. market created difficult economic conditions for our U.S. business units, our overall exposure to the big three North American automotive business is only 14% of total global sales. These reductions effected our U.S. operations by approximately $2.5 million in the third quarter of this year and we expect a similar impact in our fourth quarter. This will result in a total revenue shortfall of approximately $5.0 million for the year compared to our original guidance. Therefore, our guidance for the full year of 2006 has been lowered to $320 million in revenues and full year earnings to $0.81 to $0.85 per diluted share.
Mr. Baty concluded, we have made excellent progress regarding the execution of our long term growth strategy during the first nine months of 2006. Recall that our plans call for growing our business in three specific areas: future geographic expansion of existing bearing component products; acquisitive growth of both captive and independent businesses within bearing components, and identified acquisition opportunities that leverage our competencies in related high precision metal component manufacturing.
NN, Inc. manufacturers and supplies high precision bearing components consisting of balls, rollers, seals, and retainers for leading bearing manufacturers on a global basis. In addition, the company manufactures a variety of other plastic components. NN, Inc. had sales of US $321 million in 2005.
| Product Model | Inside Diameter | Outside Diameter | Thickness |
| PAP0203P10 bearing | |||
| PAP2415P10 bearing | 24 | 27 | 15 |