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NN Inc. growing through acquisition

JEFF KEELING • Mar 5, 2007 at 11:21 AM

JOHNSON CITY - The leader of Johnson City-based bearing manufacturer NN Inc. said the company successfully weathered a stagnant market in 2006 and expects to spend 2007 integrating operations from its recent $44 million acquisition of a related business.

Net income for 2006 was just over $14.4 million compared to $15 million for 2005, and CEO Rock Baty said those figures met estimates made at the beginning of 2006. They also included a small loss for the one month that NN owned Whirlaway, its new company - without that figured in, net income figures were even at $15 million each year, or 87 cents per share.

The 2006 income came on sales of $330 million, an amount more than triple the company's sales from just five years ago, and Whirlaway's 2006 sales put the company in line for more than $400 million in business this year. The company is anticipating net income of 98 cents to $1.04 per share this year, an increase of 13 percent to 20 percent.

Despite what the company described as weak demand in the industry, NN managed to return to Forbes magazine's 200 Best Small Companies list (163rd) for the fourth time after an absence of several years.

NN employs about 300 people at plants in Erwin and Mountain City but has experienced its high rate of growth by acquiring other companies that contribute to the bearings used in the automotive and other industries, and worldwide employment is nearly 2,500. Baty said operations are now in five European countries and China, while the purchase of Whirlaway, based in Ohio, is a departure from traditional bearings that poises the company for growth.

"We really saw the growth slowing, the ability for additional acquisitions slowing beginning in late '05 into '06," Baty said. "We'd really kind of done all we could with existing customers and in bearing components ... and as a public company it's really more exciting to grow than to flatten out."

Whirlaway, which earned $80 million in 2006, is a departure from the traditional bearing market, and Baty said it will be a linchpin as the company seeks to reach $700 million in sales by the end of 2010. Whirlaway's customer base is about 40 percent automotive, compared to 65 percent for NN. Among other production, it makes parts for anti-lock brake systems and emission control systems in vehicles.

"It's a departure from bearing components, but it's not a departure from our core manufacturing competencies to make the rolling elements in particular in metal cages. It's highly engineered metal components, but Whirlaway serves a very diverse, totally different group of end markets as well as customers."

Baty said the company will strive for moderate growth in its bearing business while looking to expand its presence in the customer base served by Whirlaway through further acquisitions.

"We envision this new platform and the new end markets it can achieve to grow to about 40 percent of the total company by the end of 2010, so that would make it about a $280 million piece and the balance would come from our other components."

A publicly traded company since 1994, NN Inc. is listed on the Nasdaq Exchange under NNBR.

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