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SEC Filings

10-Q
NN INC filed this Form 10-Q on 08/14/2017
Entire Document
 


Table of Contents

Changes in Internal Control Over Financial Reporting

Except as noted above in the “Remediation Plan for Material Weaknesses” section above, there were no changes in the fiscal quarter ended June 30, 2017 in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings

Brazil ICMS Tax Matter

Prior to our acquisition of Autocam, Autocam’s Brazilian subsidiary received notification from the Brazilian tax authorities regarding ICMS (state value added tax or VAT) tax credits claimed on intermediary materials (tooling and perishable items) used in the manufacturing process. The Brazilian tax authority notification disallowed state ICMS 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. While we believe a loss is not probable, we estimate the range of possible losses related to this assessment is from $0 to $6.0 million. No amount was accrued at June 30, 2017 for this matter. There was no material change in the status of this matter from December 31, 2016 to June 30, 2017.

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 our acquisition of Autocam. Management believes the indemnification would include amounts owed for the tax, interest and penalties related to this matter.

All 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.

 

Item 1A. Risk Factors

Except as noted below, there have been no material changes to the risk factors disclosed in our 2016 Annual Report on Form 10-K for the fiscal year ended December 31, 2016, which was filed with the SEC on March 16, 2017 under Item 1A. “Risk Factors.”

The pending sale of the Precision Bearing Components Group to Tsubaki may not be completed within the currently contemplated time frame or at all, or may be completed on different terms.

We can provide no assurance that the pending sale of the Precision Bearing Components Group to Tsubaki will be completed or completed on a timely basis. Unforeseen developments outside of our control, including possible delays in obtaining applicable regulatory consents and approvals, could delay or prevent the proposed transaction, or cause them to occur on terms and conditions that are less favorable, or at a higher cost, than expected.

Any failure to complete the proposed transaction could have a negative impact on our business, financial results and stock price, as well as on our relationships with our customers, suppliers and employees. Moreover, after the closing of the proposed transaction, we will be smaller and less diversified, with a narrower business focus and may be more vulnerable to changing market conditions, which could adversely affect our business, results of operations or financial condition.

Our business and financial results could be adversely impacted during the pendency of the sale of the Precision Bearing Components Group to Tsubaki, particularly if there is a delay in the completion of the proposed transaction.

The pending sale of the Precision Bearing Components Group to Tsubaki may cause disruptions to our business or business relationships, and may create uncertainty surrounding our ongoing business operations, which could materially and adversely affect our business, results of operations or financial condition, regardless of whether the proposed transaction is completed, including as a result of the following:

 

    the attention of our management may be directed to transaction-related considerations and may be diverted from the day-to-day operations of our business;

 

    uncertainty regarding the future of our organization may adversely affect our ability to hire, retain and motivate key personnel and other employees; and

 

    customers, suppliers or other parties which we maintain business relationships may experience uncertainty prior to the closing of the proposed transaction and seek alternative relationships with third parties or seek to terminate or renegotiate their relationships with us.

 

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