Notes to Condensed Consolidated Financial Statements
September 30, 2017
thousands of dollars and shares, except per share data
Note 1. Interim Financial Statements
Nature of Business
NN, Inc., a diversified industrial
company, combines advanced engineering and production capabilities with in-depth materials science expertise to design and manufacture high-precision components and assemblies for a variety of markets on a
global basis. As used in this Quarterly Report on Form 10-Q, the terms NN, the Company, we, our, or us refer to NN, Inc., and its subsidiaries. We
have historically reported results of operations in three reportable segments: the Precision Bearing Components Group (PBC), the Precision Engineered Products Group (PEP), and the Autocam Precision Components Group
(APC). On August 17, 2017, we sold our PBC business. Note 2 in these Notes to Condensed Consolidated Financial Statements provides further information on the sale of the PBC business. After the sale of the PBC business, we had 33
manufacturing facilities in North America, Europe, South America and China. We added three more North American manufacturing facilities in October 2017 (see Note 16 for information about our acquisition subsequent to September 30, 2017).
Basis of Presentation
The accompanying condensed
consolidated financial statements have not been audited, except that the Condensed Consolidated Balance Sheet as of December 31, 2016, was derived from the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016 (the 2016 Annual Report), which we filed with the U.S. Securities and Exchange Commission (the SEC), on March 16, 2017. Historical periods
presented reflect reclassifications to reflect discontinued operations (see Note 2). Historical periods also reflect revisions that we disclosed in our Quarterly Report on Form 10-Q for the quarter ended
June 30, 2017 (see Note 15). In managements opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments necessary to fairly state our results of operations for the three-month and nine-month
periods ended September 30, 2017 and 2016; financial position as of September 30, 2017, and December 31, 2016; and cash flows for the nine months ended September 30, 2017 and 2016, 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 present fairly the Companys financial position and operating results for the interim periods.
Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with U.S. generally accepted
accounting principles have been condensed or omitted from the interim financial statements presented in this Quarterly Report on Form 10-Q. These unaudited condensed consolidated financial statements should be
read in conjunction with our audited consolidated financial statements and accompanying notes included in the 2016 Annual Report. The results for the nine months ended September 30, 2017, are not necessarily indicative of results for the year
ending December 31, 2017, or any other future periods. Certain prior year amounts have been reclassified to conform to the current years presentation.
Except for per share data or as otherwise indicated, all dollar amounts presented in the tables in these Notes to Condensed Consolidated Financial Statements
are in thousands.
Prior Periods Financial Statement Revision
In connection with the preparation of condensed consolidated financial statements as of and for the three-month and
six-month periods ended June 30, 2017, we identified misstatements in our previously issued financial statements related to the foreign currency translation of our investment in a China joint venture. We
acquired a 49% investment in the joint venture as part of the acquisition of Autocam Corporation (Autocam) on August 29, 2014. We remeasured the investment in the joint venture to fair value at the time of the acquisition, and we
have accounted for the investment under the equity method of accounting. Following the completion of the Autocam acquisition, we accounted for the investment in the joint venture in U.S. dollars whereas it should have been accounted for in the joint
ventures functional currency of the Chinese Renminbi in accordance with Accounting Standards Codification (ASC) Topic 830, Foreign Currency Matters. As a result, we did not correctly account for the investment in the joint
venture and the related currency translation adjustment impacts.
We previously corrected as out-of-period adjustments certain immaterial misstatements and reflected them in the prior period financial statements, where applicable. These immaterial previously recorded out-of-period adjustments were primarily due to misstatements related to the initial recording of deferred tax assets and liabilities and corresponding adjustments to goodwill as part of the purchase price
allocations of the Autocam and PEP acquisitions in 2014 and 2015, the accounting for the goodwill balances from those acquisitions for multi-currency reporting through other comprehensive income, and the mark-to-market adjustments on our interest rate hedge, net of tax, through other comprehensive income.