Good morning ladies and gentlemen and thank you for standing by. And welcome to the NN, Incorporated Second Quarter 2009 Earnings Release Conference Call. At this time, all participants are in listen-only mode. And following the formal presentation, instructions will be given for the question and answer session. (Operator Instructions). And as a reminder this conference is being recorded today, August 5th 2009. At this time, I would now like to turn the conference over to Mr. Marilynn Meek, with the Financial Relations Board. Ma'am you may now begin the call.

Thank you. Good morning. Welcome to NN's 2009 Second Quarter Results Conference Call. If anyone needs a copy of the press release, please call my office at 212-827-3777 and we will be happy to give you a copy. Before we begin, we ask to take note of the cautionary language regarding forward-statements contained in the press release. The same language applies to the comments made on today's conference call and the live webcast available at www.earnings.com. With us this morning is Rock Baty, Chairman and Chief Executive Officer and Max Mengerd (ph) of NN's management team. First, management will give an update and overview of the quarter and afterwards, we'll open up the lines for questions. With that said, I'd like to turn the call over to Rock. Rock, please go ahead.

Thank you Marilynn and good morning everyone and thanks for joining the call. With me this morning in Johnson City I have Jim Dorton, our Chief Financial Officer; Will Kelly, our Chief administrative Officer and Tom Burwell, our Corporate Controller. Today, Jim will provide our analysis and comments on the second quarter and year-to-date results through June 30th, 2009. In addition, he will conclude his comments by proving an update on our liquidity status including a decision regarding the rationale for class defying all our debts as a current liability, as well as an update on the charge we took in the second quarter with respect to differed taxes. I would conclude the call with comments regarding the latest information we have with respect to business conditions, current demand levels and provide an update on management's action associated with cost reductions and cash preservation. I would now like to turn the call over to Jim.

Thanks Rock. Good morning everyone. Regarding the results for the quarter, you can see that in that press release like Q1, sales were down 53% versus last year and its 50% reduction if you remove the currency effect. We continue to see a strong de-stocking effect during the quarter, but other related demand did strengthen in Europe for the end of the quarter. Offsetting this was weakness in industrial demand in both the U.S and Europe. So, revenues results overall did not see any pick up and Rock will comment more on the demand outlook after my comments. While sales were down in the 50% range, our cost of sales and SG&A costs have dropped 44% and 36% respectively. With such a large revenue reduction in such a short period of time, we are generating large net losses from operations although our continuing efforts at reducing costs are being affected. Looking at income from operations, before interest taxes and other income items, in the second quarter we lost 8.7 million compared with 11 million in the first quarter at about the same revenue level. And we continue to look for additional ways to bring our costs down. During the second quarter, we determined that we should price on 100% reserve against our differed tax assets from U.S. operations, and this resulted in a 5.5 million charge showing up in the provision for tax line in the income statement and this was a $0.34 per share hit. Whereas we can carry our NOLs forward for up to 20 years for tax purposes, the accounting rules are much more restricting and require us to for book purposes to look more closely at recent financial performance. So using this method and ignoring the recovery that we expect to occur over the next several…

Jim, thank you. Let me begin my comments by commenting on the second quarter and year-to-date revenue results and the underlying business conditions that we've experienced for the first half. The second quarter debt can be characterized as more of the same as it relates to revenues we experienced in the first quarter. We shipped 57.9 million in the first quarter and 57.1 million in the second quarter, essentially flat results through the first two quarters and Jim as mentioned 53% down from the corresponding periods from 2008. More than two-thirds of the 53% reduction or around 35% relates to reductions in underlying demand in both automotives and industrial end market associated with the global recessions while the remaining one-third or about 18% relates to the de-stocking in both end market. As we mentioned in the release, eliminating the results over the differed tax charge, our net loss for the quarter was eight million or 1.5 million improvements from the first quarter loss of 9.5 million. As Jim mentioned, this improvement is a reflection of achieving the full impact of our cost reduction efforts taken during the fourth quarter '08 and the first quarter of this year. The de-stocking effect, we continue to mention is both real and very significant in terms of magnitude. Although it is difficult to know the exact impact of the de-stocking, we estimate that around one-third of the revenue reductions we've experienced or 18% of our 53% reductions are associated with the issue alone. Like NN, virtually everyone in our supply chain is also reducing inventory significantly including all of our major customers which exacerbates the volume problems we face and have faced in the first half. The inventory reduction and it has been significant during the first half, $17 million or 32% from year…

Thank you. Ladies and gentlemen, at this time we will be begin question and answer session. (Operator Instructions). And our first question does come from the line of Mark Parr with KeyBanc Capital Markets. Please go ahead.

Hi, good morning Rock.

Good morning Mark.

How you are doing?

Good. How are you?

Hanging in there. And so is that in Alabama yesterday is a lot hotter and I just appeared in Cleveland?

I see. No global warming happening in Cleveland.

That was 64 degrees this morning. Actually got down to 62 on the way anyway. I don't need to -- and one thing I was curious about, you talked a little bit about the pick up in the macro environment.

Yes.

And I have may have missed some of your comments, but did you give you some color on whether you're seeing more pick up in Europe than in the U.S. or did you talk about the magnitude as it relative to the second quarter levels and what the potential impact on revenues might be for the third quarter?

Yeah, I didn't quantify, but I'm okay with quantifying by saying that we've seen around our low single-digit improvements Markin revenue in demand versus the second quarter not into the third quarter. Of course I would tell you that we don't have visibility into the month of September yes, the final month of the quarter. But as of right, if we had to give you a forecast of the third quarter, we'd say that it’s low single-digit, high -- excuse me high single-digit improvement over the first half run rate.

And normally we have -- hey Mark, this is Jim. We have a nine or 10 to 15% reductions in the third quarter due to the some of shutdowns in Europe. So, de-stocks are up it's an improvement itself.

And then the other part of your question Mark was are we seeing by region, differences and we are. Asia in particular as everybody knows is coming back very strong and the demand for facility and the Xingjian China looks to be very good for the last half versus the first half and I think that initially we saw improvement first from automotive in Europe, but that's been followed by some automotive improvement in terms of just the month of August was an example in our U.S. operations as well. Industrial is a little bit harder to track. We have a couple of parameters in the company that we look closely towards, name and the (ph) all the business in our U.S. and all other operations and that operation is trending up as well, not as much percentage wise as the automotive we've seen, but it's trending up and in fact that operation is a working of schedule, little different lower plan is working with both schedule meaning five day week, more in the month of August for the first time in essentially in 2009. So that those are all in what we would call encouraging signs.

What's driving the roll of business?

They're sort of a broad range of industrial end market Mark and there is not one specific end market that's better than the others. But it's just a very broad range in terms of the construction equipment all five ways, not all five ways stock in terms of motor vehicle, but there are just a number of segments that are all trending up.

Okay. So it does seem as if that you had first half probably represents a bottom as far as your shipment activity is concerned, at least over the near term?

Yeah, I mean it does and I felt that I really held the sense to say that there is a trend here, but everything that we're seeing at least in the last three months, namely May, June, July is quite different than what we experienced in the first five months for the year, four month of the year. So if here is what you're hearing just most recently in the last week or two with respect to GDP data, all the global and North America manufacturing and their activity indexes are up versus sequentially versus the first and second quarter. And of course the automotive is well documented.

Yeah, now that's true. In terms of your cost, your fixed cost momentum, clearly you were incrementally focused on that or got additional reductions as the second quarter progressed and probably had, could you quantify a little bit incremental reductions that you've taken in July and kind of what the third quarter fix cost number might look like relative to the second quarter?

I think that the second quarter was a pretty good reflection of what we anticipate for the third and fourth in the absence of any additional actions that both Jim and I indicated we are constantly looking at in out business. As we mentioned, both for the fourth quarter and the first quarter, the full value of both the reductions did not really start to occur until the second quarter. So I wouldn't say that there is -- we have momentum for sure, we're continuing to look at other things, other structure of potential issues as restructuring potentially as well as additional cost reduction which we always do, but quantify what the third and fourth quarter might look like and with respect to any of those things that we don't know as of yet probably don't have anything to comment on that.

Okay. Can you give us an update on steel cost?

It comes down pretty substantially as I think we mentioned in the first quarter and of course we have in place in some parts of the world, pricing that is effective of January 1st to full year of 2009 and then other pricing that's just six months in nature, but all of it comes down pretty substantially percentage wise and of course that good, it's good for us our customers from the perspective of --

Are 100% of those changes are pass through?

For all of our major customers that we have contractual agreements with or in some cases, we don't have renewed contract because of the current economic environment, but we honor of that we had in the previous written contracts, we pass it through dollar for dollar or euro for euro, and so that is the majority of our business.

Okay. Well okay, thanks for all that color good luck bringing as shots some improvement to the bottom line in the third quarter relative to the second.

Thanks Mark.

(Operator Instructions). And gentlemen at this time, there are do not appear to be any further questions in the queue, please continue with any closing comments that you may have.

Thank you. Let me summarize and conclude today's call by restating with the second quarter and our year-to-date results which are of course visible in terms of the magnitude of the revenue reductions and the resulting losses we incurred in it with reflective actions we have taken today on cost reduction on the cash side to moderate improvement in demand and revenue will produce acceleration in our rate of improvement for both earnings and cash flow moving forward. With that, I conclude the call and again thanks for joining.

Thank you. Ladies and gentlemen, this does concludes the NN, Incorporated second quarter 2009 earnings release conference call. If you would like to listen to the replay of today's conference, you may do some by dialing either 1800-406-7325 or for international participants 4303-590-3030. You will need to enter the access code of 412-86-02. Those telephone numbers once again are 1800-406-7325, 4303-590-3030 with the access code of 412-86-02. With this, we do thank you for your participation. You may now disconnect your lines.