NN Inc. purchases SunTrust building, plans to add up to 200 corporate positions in Johnson City
By Jeff Keeling
Manufacturer NN Inc. will keep its headquarters in Johnson City as it expands home office headcount to around 200, officials announced this morning.
“To support our aggressive global growth plan, we must expand our corporate infrastructure with people, systems and brick and mortar,” NN CEO Rich Holder said while standing in front of the five-story 60,000-square-foot former SunTrust building just off North Roan Street. “We have purchased the SunTrust building to be our new corporate headquarters.”
Flanked by dignitaries ranging from First District Congressman Phil Roe and Tennessee Lt. Gov. Ron Ramsey to Johnson City and Washington County mayors Ralph Van Brocklin and Dan Eldridge, Holder said the move “enables us to execute our growth plan and enhances our position as a corporate citizen of Johnson City, Washington County and the great state of Tennessee.”
NN, whose legacy manufacturing plant is in Erwin, has already consummated two deals this year, expanding its footprint in the U.S., Mexico and Europe. Feb. 4 it purchased V-S Industries, which has manufacturing sites in Wheeling, Ill. and Juarez, Mexico. SEC filings show that deal, which added $16 million in current annual revenues, cost NN $5,580,000. Last week, the company announced its purchase of a company in Bosnia, RFK, which will help it increase market share in several European sectors. Those deals pushed NN’s total employment to more than 2,000 and are early examples of a growth strategy NN unveiled last year, through which it aims to double revenues to $800 million and triple earnings per share by 2018.
The new headquarters, which should house workers by early 2015, marks the first major white-collar expansion for the maker of bearing and metal components, industrial plastic and rubber products that started in Erwin in 1980. NN, which went public in the mid-1990s, still employs nearly 300 at its legacy plants in Erwin and Mountain City but has a total of 12 manufacturing facilities on three continents. The company will invest more than $9 million to purchase and renovate the building, and the job growth from NN’s current 20-plus corporate employees could boost local payrolls up to $17 million.
The transition from NN’s small, leased headquarters on Sunset Drive is the biggest local signal yet that the company is serious about its growth plans. Holder has said that consolidating white collar workers from previously and yet-to-be-acquired companies, and ramping up shared services as the company grows, will create 150 to 200 jobs. Including benefits, the average compensation for the new jobs, which Holder said will phase in over the next five years, is around $85,000.
That job-growth projection helped net NN a $2 million cash grant from Tennessee’s Department of Economic and Community Development, contingent on NN creating a certain number of jobs here. The company also sought, and received, a tax incentive deal from the City of Johnson City that could net it an additional $773,000 over 10 years. The local deal is contingent to some extent upon job creation, as is another with the Tennessee Valley Authority that could yield another $400,000, according to NN.
“We’re certainly pleased that they feel we offer the things to their employees that make this an attractive community for a corporate headquarters,” Van Brocklin said. “We believe we will be able to utilize their decision to help encourage others to do the same. One of the things we’ll look at very critically is the quality of life issue and what we provide to our citizens.”
While not a sure thing, the decision by the global maker of precision metal and plastic components had been long anticipated. Holder began talking growth strategies immediately upon taking the company’s reins in June 2013. He told the investment community NN planned to double revenues through organic growth and acquisitions in the markets it serves in North America, Europe and Asia.
By late fall, with NN’s stock price rising and deals in the making, Holder was telling the Business Journal that the company needed to support its manufacturing growth plan with more corporate jobs. His preference, he said, was to stay local, but Holder added that “we need the support to do it. There’s lots of folks elsewhere offering lots and lots of support.”
In the end, along with the financial support, Holder said a commitment by local leaders to continue investing in the metro area’s attractive quality of life helped NN leaders make their decision.
“We considered many options, one of which was moving to a larger metropolitan area,” Holder said. “But we had a focused desire to stay local.”
“We believe that the focus on growth that has been displayed by Johnson City, Washington County and the Tri-Cities at large allows us to offer a unique blend of amenities and an exceptional quality of life for our current workforce, as well as enabling us to attract future talent,” he added.
Washington County Mayor Dan Eldridge said the decision by NN – what he called “a rapidly growing, dynamic, international public corporation” – marks a major coup for the metro.
“What I hope is that Rich can help us demonstrate just what a great business environment that we have in this community,” Eldridge said. He said he anticipates the success of the NN deal to spawn others like it. He added that Ramsey and State Sen. Rusty Crowe, of Johnson City, “were both knee deep in this helping us work with State ECD, working with the Governor, insuring that the very significant incentive package that was put together to make this thing happen actually happened.”
Holder said NN, which is ready to hire for several positions, initially will occupy two floors of the building and expand into a third during its initial five-year growth plan. The company will lease other portions of the building, one of the most prominent along Johnson City’s main commercial strip on North Roan.
With demand for the products originating in the flagship factory and the Mountain City plant strong and expected to grow, Holder said company leaders are into the due diligence phase about possible expansion at both locations.
“We are actively exploring our opportunities to expand our local facilities,” Holder told the Business Journal in May, less than a week after a positive first-quarter earnings report that sent NN stock to new highs. “We are in discussion with the local municipalities and the state around how do we do that.”
“We have the same physical constraints taking place because of the growth plan in both facilities.
“For Erwin, we actually have three scenarios that we’ve drawn up and we’re talking to state and local officials about that.”
Such private-public partnerships will be key to maintaining and growing jobs in Northeast Tennessee, First District Congressman Phil Roe said during the announcement.
“Our workers are having to ramp up and compete with areas around the world,” Roe said. “The hours and hours of coordination between the private and public sector (exemplifies) what we’re going to have to do to compete in the world is the private-public partnerships.”
Said Washington County Economic Development Council Chairwoman Lottie Ryans: “I think it shows that we have a great workforce and great support from our local and state governments. It’s very exciting to have this level of commitment and the types of jobs that are going to be coming in really take us to a new level. It says this is a great place to do business, but it’s a great place to raise your family, too.”
A personal meeting with Holder convinced Ramsey and Crowe that the state needed to get on board: “Rusty Crowe and I met with Rich, and the vision he has for NN and what he’s done at other companies, Rusty and I just said, ‘this is the real deal, we’ve got to make sure that this happens,’” Ramsey said. “We understand in Tennessee that government does not create jobs, period. Businesses create jobs. All we can do is create an environment where jobs can grow and prosper.”
NN saw its profits nearly double in the first quarter compared to the same period of 2013. The company released its first quarter earnings report May 6. Net earnings were up 82 percent, from $2.9 million to $5.2 million, with sales up more than 9 percent to $102.5 million. Importantly, Holder said, NN’s “cost of goods sold” decreased from 79.4 percent to 78.3 percent, creating a healthier profit margin. That combination of sales growth and efficiency is helping NN begin moving toward its growth targets, Holder said.
“What we’ve been saying for the better part of a year is, as we execute better in new markets and as our existing markets come back, the work we’ve been doing internal to the organization will allow us to get better incrementals. That is exactly what we’re seeing happen.”