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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 September 30, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number 000-23486
 nnlogoa20.jpg
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 classTrading symbolName of each exchange on which registered
Common Stock, par value $0.01NNBRThe 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 October 31, 2023, there were 47,352,810 shares of the registrant’s common stock, par value $0.01 per share, outstanding.


NN, Inc.
INDEX
 
Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

2

PART I. FINANCIAL INFORMATION 
Item 1.     Financial Statements
NN, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
 Three Months Ended
September 30,
Nine Months Ended
September 30,
(in thousands, except per share data)2023202220232022
Net sales$124,443 $127,297 $376,737 $380,726 
Cost of sales (exclusive of depreciation and amortization shown separately below)104,543 108,033 320,648 316,500 
Selling, general, and administrative expense11,693 10,205 35,833 38,453 
Depreciation and amortization11,577 11,193 34,643 33,962 
Other operating expense (income), net(631)(17)(526)1,862 
Loss from operations(2,739)(2,117)(13,861)(10,051)
Interest expense5,739 3,746 15,484 10,673 
Other expense (income), net(1,463)(1,156)1,970 (4,219)
Loss before benefit (provision) for income taxes and share of net income from joint venture(7,015)(4,707)(31,315)(16,505)
Benefit (provision) for income taxes245 1,068 (1,381)(1,514)
Share of net income from joint venture1,713 1,424 3,087 3,935 
Net loss$(5,057)$(2,215)$(29,609)$(14,084)
Other comprehensive loss:
Foreign currency translation loss$(3,072)$(7,653)$(3,606)$(13,543)
Interest rate swap:
Change in fair value, net of tax 904 (230)2,464 
Reclassification adjustments included in net loss, net of tax(449)(116)(1,366)(51)
Other comprehensive loss$(3,521)$(6,865)$(5,202)$(11,130)
Comprehensive loss$(8,578)$(9,080)$(34,811)$(25,214)
Basic and diluted net loss per share$(0.18)$(0.11)$(0.84)$(0.49)
Shares used to calculate basic and diluted net loss per share47,539 44,711 46,410 44,670 

See notes to condensed consolidated financial statements (unaudited).
3

NN, Inc.
Condensed Consolidated Balance Sheets
(Unaudited) 
(in thousands, except per share data)September 30,
2023
December 31,
2022
Assets
Current assets:
Cash and cash equivalents$21,790 $12,808 
Accounts receivable, net of allowances of $1,210 and $1,469 at September 30, 2023 and December 31, 2022
73,229 74,129 
Inventories70,917 80,682 
Income tax receivable12,182 12,164 
Prepaid assets3,800 2,794 
Other current assets11,339 9,123 
Total current assets193,257 191,700 
Property, plant and equipment, net of accumulated depreciation of $243,638 and $225,046 at September 30, 2023 and December 31, 2022
185,707 197,637 
Operating lease right-of-use assets43,549 46,713 
Intangible assets, net62,202 72,891 
Investment in joint venture29,131 31,802 
Deferred tax assets164 102 
Other non-current assets6,688 5,282 
Total assets$520,698 $546,127 
Liabilities, Preferred Stock, and Stockholders’ Equity
Current liabilities:
Accounts payable$49,347 $45,871 
Accrued salaries, wages and benefits13,243 11,671 
Income tax payable340 926 
Short-term debt and current maturities of long-term debt6,699 3,321 
Current portion of operating lease liabilities5,407 5,294 
Other current liabilities13,483 11,723 
Total current liabilities88,519 78,806 
Deferred tax liabilities4,137 5,596 
Long-term debt, net of current portion145,892 149,389 
Operating lease liabilities, net of current portion47,841 51,411 
Other non-current liabilities16,288 9,960 
Total liabilities302,677 295,162 
Commitments and contingencies (Note 9)
Series D perpetual preferred stock - $0.01 par value per share, 65 shares authorized, issued and outstanding at September 30, 2023 and December 31, 2022
74,295 64,701 
Stockholders’ equity:
Common stock - $0.01 par value per share, 90,000 shares authorized, 47,311 and 43,856 shares issued and outstanding at September 30, 2023 and December 31, 2022
473 439 
Additional paid-in capital460,382 468,143 
Accumulated deficit(274,807)(245,198)
Accumulated other comprehensive loss(42,322)(37,120)
Total stockholders’ equity143,726 186,264 
Total liabilities, preferred stock, and stockholders’ equity$520,698 $546,127 
See notes to condensed consolidated financial statements (unaudited).
4

NN, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
Three Months Ended September 30, 2023 and 2022
(Unaudited) 
Common StockAdditional
paid-in
capital
Accumulated deficitAccumulated other comprehensive lossTotal
(in thousands)Number of sharesPar
value
Balance as of June 30, 202347,019 $470 $462,525 $(269,750)$(38,801)$154,444 
Net loss— — — (5,057)— (5,057)
Dividends accrued for preferred stock— — (3,347)— — (3,347)
Shares issued under stock incentive plans, net of forfeitures292 3 (3)— —  
Share-based compensation expense— — 1,207 — — 1,207 
Other comprehensive loss— — — — (3,521)(3,521)
Balance as of September 30, 202347,311 $473 $460,382 $(274,807)$(42,322)$143,726 


Common StockAdditional
paid-in
capital
Accumulated deficitAccumulated other comprehensive lossTotal
(in thousands)Number of sharesPar
value
Balance as of June 30, 202243,884 $439 $473,019 $(230,969)$(36,167)$206,322 
Net loss— — — (2,215)— (2,215)
Dividends accrued for preferred stock— — (2,783)— — (2,783)
Shares forfeited under stock incentive plans(2)  — —  
Share-based compensation expense— — 307 — — 307 
Other comprehensive loss— — — — (6,865)(6,865)
Balance as of September 30, 202243,882 $439 $470,543 $(233,184)$(43,032)$194,766 

See notes to condensed consolidated financial statements (unaudited).

5

NN, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
Nine Months Ended September 30, 2023 and 2022
(Unaudited) 
Common StockAdditional
paid-in
capital
Accumulated deficitAccumulated other comprehensive lossTotal
(in thousands)Number of sharesPar
value
Balance as of December 31, 202243,856 $439 $468,143 $(245,198)$(37,120)$186,264 
Net loss— — (29,609)— (29,609)
Dividends accrued for preferred stock— — (9,594)— — (9,594)
Shares issued under stock incentive plans, net of forfeitures3,598 36 (57)— — (21)
Share-based compensation expense— — 2,058 — — 2,058 
Restricted shares forgiven for taxes(143)(2)(168)— — (170)
Other comprehensive loss— — — — (5,202)(5,202)
Balance as of September 30, 202347,311 $473 $460,382 $(274,807)$(42,322)$143,726 

Common StockAdditional
paid-in
capital
Accumulated deficitAccumulated other comprehensive lossTotal
(in thousands)Number of sharesPar
value
Balance as of December 31, 202143,027 $430 $474,757 $(219,100)$(31,902)$224,185 
Net loss— — — (14,084)— (14,084)
Dividends accrued for preferred stock— — (7,979)— — (7,979)
Shares issued under stock incentive plans, net of forfeitures886 9 (9)— —  
Share-based compensation expense— — 3,862 — — 3,862 
Restricted shares forgiven for taxes(31) (88)— — (88)
Other comprehensive loss(11,130)(11,130)
Balance as of September 30, 202243,882 $439 $470,543 $(233,184)$(43,032)$194,766 
See notes to condensed consolidated financial statements (unaudited).

6

NN, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
September 30,
(in thousands)20232022
Cash flows from operating activities
Net loss$(29,609)$(14,084)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization34,643 33,962 
Amortization of debt issuance costs and discount1,409 1,021 
Paid-in-kind interest1,491  
Total derivative loss (gain), net of cash settlements3,139 (4,858)
Share of net income from joint venture, net of cash dividends received851 2,310 
Share-based compensation expense2,058 3,862 
Deferred income taxes(1,531)(1,831)
Other(776)(3,096)
Changes in operating assets and liabilities:
Accounts receivable335 (15,667)
Inventories9,692 (11,314)
Accounts payable5,240 9,827 
Income taxes receivable and payable, net(576)(403)
Other(2,476)(2,400)
Net cash provided by (used in) operating activities23,890 (2,671)
Cash flows from investing activities
Acquisition of property, plant and equipment(16,292)(14,011)
Proceeds from sale of property, plant, and equipment2,876 460 
Net cash used in investing activities(13,416)(13,551)
Cash flows from financing activities
Proceeds from long-term debt52,000 32,000 
Repayments of long-term debt(55,522)(28,158)
Cash paid for debt issuance costs(55)(136)
Proceeds from short-term debt3,648  
Other(1,276)(2,265)
Net cash provided by (used in) financing activities(1,205)1,441 
Effect of exchange rate changes on cash flows(287)(1,324)
Net change in cash and cash equivalents8,982 (16,105)
Cash and cash equivalents at beginning of period12,808 28,656 
Cash and cash equivalents at end of period$21,790 $12,551 
See notes to condensed consolidated financial statements (unaudited).
7

NN, Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 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. As of September 30, 2023, we had 27 facilities in North America, Europe, South America, and Asia.
Basis of Presentation
The accompanying condensed consolidated financial statements have not been audited. The Condensed Consolidated Balance Sheet as of December 31, 2022, was derived from the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Annual Report”), which we filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 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 nine months ended September 30, 2023 and 2022; financial position as of September 30, 2023 and December 31, 2022; and cash flows for the nine months ended September 30, 2023 and 2022, 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 2022 Annual Report. The results for the three and nine months ended September 30, 2023, are not necessarily indicative of results for the year ending December 31, 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.
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. During the nine months ended September 30, 2023, we incurred fees of $0.8 million, related to the sale of receivables which is recorded in the Other expense (income), net line item on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).
Facility Closures
Due to ongoing efforts to optimize the Company’s manufacturing footprint, we ceased manufacturing operations at several facilities during the nine months ended September 30, 2023, including at our Irvine and Taunton locations. We sold machinery and equipment from these locations and recognized a loss on sales of $0.2 million during the nine months ended September 30, 2023. The loss, which is primarily reported within our Power Solutions segment, is included in the Other operating expense (income), net line item on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). In June 2023, we began subleasing our Irvine and Taunton facilities under subleases that terminate in 2034 and 2035, respectively.
Note 2. Segment Information
Our business is aggregated into the following two reportable segments:
Mobile Solutions, which is focused on growth in the automotive, general industrial, and medical end markets; and
Power Solutions, which is focused on growth in the electrical, general industrial, automotive, and medical end markets.
These divisions are considered our two 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.
8

The following table presents our financial performance by reportable segment.
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Net sales:
Mobile Solutions$78,961 $76,122 $234,132 $225,542 
Power Solutions45,484 51,124 142,618 155,184 
Intersegment sales eliminations(2)51 (13) 
Total$124,443 $127,297 $376,737 $380,726 
Income (loss) from operations:
Mobile Solutions$(1,283)$(474)$(6,063)$3,224 
Power Solutions3,936 2,582 8,266 4,376 
Corporate(5,392)(4,225)(16,064)(17,651)
Total$(2,739)$(2,117)$(13,861)$(10,051)
Note 3. Inventories
Inventories are comprised of the following amounts:
September 30, 2023December 31, 2022
Raw materials$26,780 $32,146 
Work in process23,317 24,610 
Finished goods20,820 23,926 
Total inventories$70,917 $80,682 
Note 4. Intangible Assets
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, 2022$22,356 $50,535 $72,891 
Amortization(2,515)(8,174)(10,689)
Balance as of September 30, 2023$19,841 $42,361 $62,202 
Intangible assets are reviewed for impairment when changes in circumstances indicate the carrying value of those assets may not be recoverable. There were no indicators of impairment at September 30, 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, 2022$31,802 
Share of earnings3,087 
Dividends paid by joint venture(3,938)
Foreign currency translation loss(1,820)
Balance as of September 30, 2023$29,131 
Note 6. Income Taxes
Our effective tax rate was 3.5% and (4.4)% for the three and nine months ended September 30, 2023, respectively, and 22.7% and (9.2)% for the three and nine months ended September 30, 2022, respectively. The effective tax rates for the three and nine months ended September 30, 2023 and September 30, 2022 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 portion of the future tax benefit may not be realized. In addition, the effective tax rate for the three and nine months ended September 30,
9

2023 was favorably impacted by a net valuation allowance release based on management’s reassessment of the amount of its deferred tax assets that are more likely than not to be realized.
Note 7. Debt
On March 22, 2021, we entered into a new $150.0 million term loan facility (as amended from time to time, the “Term Loan Facility”) and a new $50.0 million asset backed credit facility (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.
September 30, 2023December 31, 2022
Term Loan Facility$147,741 $147,375 
ABL Facility 1,000 
International loans10,704 8,729 
Total principal158,445 157,104 
Less: short-term debt and current maturities of long-term debt6,699 3,321 
Principal of long-term debt, net of current portion151,746 153,783 
Less: unamortized debt issuance costs and discount (1)5,854 4,394 
Long-term debt, net of current portion$145,892 $149,389 
_______________________________
(1) In addition to this amount, costs of $0.5 million and $0.6 million related to the ABL Facility were recorded in other non-current assets as of September 30, 2023 and December 31, 2022, respectively.
Term Loan Facility
Effective March 31, 2023, outstanding borrowings under the Term Loan Facility bear interest at either 1) one-month, three-month, or six-month SOFR with a duration adjustment (“Adjusted SOFR”), subject to a 1.000% floor, plus an applicable margin of 6.875%, or 2) the greater of various benchmark rates plus an applicable margin of 5.875%. Beginning in the second quarter of 2023, interest was increased on a paid-in-kind basis at a rate between 1.00% and 2.00% (“PIK interest”), dependent on the Company’s leverage ratio. The PIK interest is payable on the loan maturity date of September 22, 2026. At September 30, 2023, the Term Loan Facility bore interest, including PIK interest, based on one-month Adjusted SOFR, at 14.291%.
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 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. We were in compliance with all requirements under the Term Loan Facility as of September 30, 2023.
The Term Loan Facility was issued at a $3.8 million discount and we have capitalized an additional $5.3 million in 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. Effective March 3, 2023, the variable borrowing rate is either 1) 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 Adjusted SOFR. At September 30, 2023, using one-month Adjusted SOFR plus a 2.00% margin, the interest rate on outstanding borrowings under the ABL Facility was 7.429%. We pay a commitment fee of 0.375% for unused capacity under the ABL Facility and a 2.125% fee on the amount of letters of credit outstanding. The final maturity date of the ABL Facility is March 22, 2026.
10

As of September 30, 2023, we had no outstanding borrowings under the ABL Facility, $10.9 million of outstanding letters of credit, and $28.7 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 September 30, 2023.
Note 8. Leases
The following table contains supplemental cash flow information related to leases.
Nine Months Ended
September 30,
20232022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used in finance leases$258 $262 
Operating cash flows used in operating leases10,533 10,865 
Financing cash flows used in finance leases1,084 2,177 
Right-of-use assets obtained in exchange for new finance lease liabilities1,619 908 
Right-of-use assets obtained in exchange for new operating lease liabilities (1)477 3,835 
_______________________________
(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 September 30, 2023.
Other Legal Matters
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.
Note 10. Preferred Stock and Stockholders' Equity
Series D Perpetual Preferred Stock
On March 22, 2021, we completed a private placement of 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
11

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. Beginning 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 September 30, 2023, the carrying value of the Series D Preferred Stock shares was $74.3 million, which included $27.6 million of accumulated unpaid and deemed dividends. The following table presents the change in the Series D Preferred Stock carrying value during the nine months ended September 30, 2023.
Balance as of December 31, 2022$64,701 
Accrual of in-kind dividends7,451 
Amortization2,143 
Balance as of September 30, 2023$74,295 
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.
The following tables summarize revenue by customer geographical region.
Three Months Ended September 30, 2023Mobile
Solutions
Power
Solutions
Intersegment
Sales
Eliminations
Total
United States and Puerto Rico$37,048 $36,433 $(2)$73,479 
China12,414 1,671 — 14,085 
Brazil13,936 215 — 14,151 
Mexico3,221 3,204 — 6,425 
Germany2,139 98 — 2,237 
Poland1,397 2 — 1,399 
Other8,806 3,861 — 12,667 
Total net sales$78,961 $45,484 $(2)$124,443 

Three Months Ended September 30, 2022Mobile
Solutions
Power
Solutions
Intersegment
Sales
Eliminations
Total
United States and Puerto Rico$35,419 $39,579 $51 $75,049 
China12,839 1,378 — 14,217 
Brazil14,109 137 — 14,246 
Mexico5,185 4,769 — 9,954 
Germany1,432 84 — 1,516 
Poland1,100 2 — 1,102 
Other6,038 5,175 — 11,213 
Total net sales$76,122 $51,124 $51 $127,297 
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Nine Months Ended September 30, 2023Mobile
Solutions
Power
Solutions
Intersegment
Sales
Eliminations
Total
United States and Puerto Rico$112,850 $115,571 $(13)$228,408 
China37,714 4,480 — 42,194 
Brazil37,372 479 — 37,851 
Mexico11,106 9,892 — 20,998 
Germany5,617 329 — 5,946 
Poland5,025 11 — 5,036 
Other24,448 11,856 — 36,304 
Total net sales$234,132 $142,618 $(13)$376,737 

Nine Months Ended September 30, 2022Mobile
Solutions
Power
Solutions
Intersegment
Sales
Eliminations
Total
United States and Puerto Rico$109,183 $120,442 $ $229,625 
China34,155 3,855 — 38,010 
Brazil36,122 794 — 36,916 
Mexico18,336 13,868 — 32,204 
Germany3,836 219 — 4,055 
Poland3,598 7 — 3,605 
Other20,312 15,999 — 36,311 
Total net sales$225,542 $155,184 $ $380,726 
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, specification plating, and surface finishing.
Three Months Ended September 30, 2023Mobile
Solutions
Power
Solutions
Intersegment
Sales
Eliminations
Total
Automotive$55,933 $8,641 $— $64,574 
General Industrial17,284 12,351 — 29,635 
Residential/Commercial Electrical 17,802 — 17,802 
Other5,744 6,690 (2)12,432 
Total net sales$78,961 $45,484 $(2)$124,443 

Three Months Ended September 30, 2022Mobile
Solutions
Power
Solutions
Intersegment
Sales
Eliminations
Total
Automotive$51,388 $10,822 $— $62,210 
General Industrial19,546 14,751 — 34,297 
Residential/Commercial Electrical 17,025 — 17,025 
Other5,188 8,526 51 13,765 
Total net sales$76,122 $51,124 $51 $127,297 

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Nine Months Ended September 30, 2023Mobile
Solutions
Power
Solutions
Intersegment
Sales
Eliminations
Total
Automotive$164,698 $26,559 $— $191,257 
General Industrial56,725 40,466 — 97,191 
Residential/Commercial Electrical 49,995 — 49,995 
Other12,709 25,598 (13)38,294 
Total net sales$234,132 $142,618 $(13)$376,737 

Nine Months Ended September 30, 2022Mobile
Solutions
Power
Solutions
Intersegment
Sales
Eliminations
Total
Automotive$150,834 $30,628 $— $181,462 
General Industrial61,883 47,726 — 109,609 
Residential/Commercial Electrical 52,981 — 52,981 
Other12,825 23,849  36,674 
Total net sales$225,542 $155,184 $ $380,726 
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 $1.1 million and $0.7 million as of September 30, 2023 and December 31, 2022, respectively. Revenue recognized for performance obligations satisfied or partially satisfied during the nine months ended September 30, 2023 included $0.7 million that was included in deferred revenue as of December 31, 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 September 30, 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.
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
September 30,
Nine Months Ended
September 30,
 2023202220232022
Restricted stock$1,001 471 1,780 3,233 
Performance share units206 (201)264 505 
Stock options $37 $14 $124 
Share-based compensation expense$1,207 $307 $2,058 $3,862 
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Restricted Stock
The following table presents the status of unvested restricted stock awards as of September 30, 2023 and changes during the nine months then ended.
Nonvested
Restricted
Shares
Weighted Average Grant-Date
Fair Value
Unvested at January 1, 20231,038 $4.03 
Granted3,711 1.37 
Vested(1,130)3.65 
Forfeited(160)1.51 
Unvested at September 30, 20233,459 $1.41 
During the nine months ended September 30, 2023, we granted 1,881,000 shares of restricted stock to non-executive directors, officers and certain other employees under the NN, Inc. 2022 Omnibus Incentive Plan (“2022 Omnibus Plan”). The shares of restricted stock vest pro-rata generally over three years for employees and over one year for non-executive directors.
During the nine months ended September 30, 2023, we granted 1,830,000 shares of restricted stock to new executive officers as inducement awards, which vest pro-rata over five years.
Total grant date fair value of restricted stock that vested in the nine months ended September 30, 2023, was $4.1 million.
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. The following table presents the status of unvested PSUs as of September 30, 2023 and activity during the nine months then ended.
 Nonvested PSU AwardsWeighted Average Grant-Date
Fair Value
Nonvested at January 1, 20231,031 $3.80 
Granted3,621 1.14 
Vested(67)4.63 
Forfeited(634)2.47 
Nonvested at September 30, 20233,951 $1.56 
During the nine months ended September 30, 2023, we granted 561,000 PSUs to certain executive officers. These units 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 the three-year performance period that ends December 31, 2025.
During the nine months ended September 30, 2023, we granted 3,060,000 PSUs to new executive officers as inducement awards. These units cliff-vest after five years and are contingent on the Company’s stock price meeting specified thresholds.
We estimated the grant date fair value of the PSU awards using the Monte Carlo simulation model, as the total shareholder return metric and changes in stock price are considered market conditions under ASC Topic 718, Compensation – stock compensation.
During the nine months ended September 30, 2023, 67,000 PSUs were subject to accelerated vesting upon a participant’s termination that was a qualifying event under the terms of the PSU award agreements. Total grant date fair value of PSUs that vested in the nine months ended September 30, 2023, was $0.3 million.
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Note 13. Accumulated Other Comprehensive Income
The following tables present the components of accumulated other comprehensive income (loss) (“AOCI”).
Foreign Currency TranslationInterest rate swapIncome taxes (1)Total
Balance as of June 30, 2023$(40,706)$1,905 $ $(38,801)
Other comprehensive income (loss) before reclassifications(3,072)  (3,072)
Amounts reclassified from AOCI to interest expense (2) (449) (449)
Net other comprehensive income (loss)(3,072)(449) (3,521)
Balance as of September 30, 2023$(43,778)$1,456 $ $(42,322)
Balance as of June 30, 2022$(37,906)$2,207 $(468)$(36,167)
Other comprehensive income (loss) before reclassifications(7,653)1,145 (241)(6,749)
Amounts reclassified from AOCI to interest expense (2) (146)30 (116)
Net other comprehensive income (loss)(7,653)999 (211)(6,865)
Balance as of September 30, 2022$(45,559)$3,206 $(679)$(43,032)

Foreign Currency TranslationInterest rate swapIncome taxes (1)Total
Balance as of December 31, 2022$(40,172)$3,149 $(97)$(37,120)
Other comprehensive income (loss) before reclassifications(3,606)(327)97 (3,836)
Amounts reclassified from AOCI to interest expense (2) (1,366) (1,366)
Net other comprehensive income (loss)(3,606)(1,693)97 (5,202)
Balance as of September 30, 2023$(43,778)$1,456 $ $(42,322)
Balance as of December 31, 2021$(32,016)$151 $(37)(31,902)
Other comprehensive income (loss) before reclassifications(13,543)3,119 (655)(11,079)
Amounts reclassified from AOCI to interest expense (2) (64)13 (51)
Net other comprehensive income (loss)(13,543)3,055 (642)(11,130)
Balance as of September 30, 2022$(45,559)$3,206 $(679)$(43,032)
______________________
(1) Income tax effect of changes in interest rate swap.
(2) Represents (gain) loss recognized in interest expense on effective interest rate swap.
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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
September 30,
Nine Months Ended
September 30,
 2023202220232022
Numerator:
Net loss$(5,057)$(2,215)$(29,609)$(14,084)
Adjustment for preferred stock cumulative dividends and deemed dividends(3,347)(2,783)(9,594)(7,979)
Numerator for basic and diluted net loss per common share$(8,404)$(4,998)$(39,203)$(22,063)
Denominator:
Weighted average common shares outstanding47,186 43,884 45,793 43,695 
Adjustment for participating securities(3,496)(1,065)(2,365)(918)
Adjustment for warrants outstanding (1)3,849 1,892 2,982 1,893 
Shares used to calculate basic and diluted net loss per share47,539 44,711 46,410 44,670 
Basic and diluted net loss per common share$(0.18)$(0.11)$(0.84)$(0.49)
Cash dividends declared per common share$ $ $ $ 
_______________________________
(1)     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 (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
September 30,
Nine Months Ended
September 30,
2023202220232022
Stock Options315 542 407 563 
2019 Warrants1,500 1,500 1,500 1,500 
1,815 2,042 1,907 2,063 
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 and nine months ended September 30, 2023. The 2019 Warrants excluded from the calculation of diluted net loss per share had a per share exercise price of $11.03.
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 2022 Annual Report.
Embedded Derivatives
In accordance with ASC 815-15, Derivatives and Hedging - Embedded Derivatives, certain features of our preferred stock and long term debt were bifurcated and accounted for as derivatives separately.
In conjunction with the Term Loan Amendment, we issued warrants to purchase up to 2.0 million shares of our common stock at an exercise price of $0.01 per share (the “2023 Warrants”). The 2023 Warrants are exercisable, in full or in part, at any time up to ten years after issuance. The 2023 Warrants include anti-dilution adjustments in the event of certain future equity issuances, stock splits, stock dividends, combinations or similar events.
In conjunction with our placement of the Series D Preferred Stock, we issued the 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, 2027, at an
17

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.
In conjunction with our placement of the Series B Preferred Stock, we issued detachable warrants to purchase up to 1.5 million shares of our common stock at an exercise price of $12.00 per share (the “2019 Warrants”). The 2019 Warrants, are exercisable, in full or in part, at any time prior to December 11, 2026 and are subject to anti-dilution adjustments in the event of future below market issuances, stock splits, stock dividends, combinations or similar events. Due to the dilutive impact of subsequent issuances of warrants, the exercise price of the 2019 Warrants has been adjusted to $11.03 per share.
The following table presents the change in the liability balance of the embedded derivatives during the nine months ended September 30, 2023.
Balance as of December 31, 2022