UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-Q



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2017~~

2018



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period fromto

Commission File Number000-23486

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 Number)

~~207 Mockingbird Lane~~

~~Johnson City, Tennessee 37604~~

6210 Ardrey Kell Road

Charlotte, North Carolina 28277

(Address of principal executive offices, including zip code)

~~(423)~~

(980) 264-4300

~~434-8300~~

(Registrant’s telephone number, including area code)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-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 Rule12b-2 of the Exchange Act. (Check one):



Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐ (Do not check if a smaller reporting company)	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 Rule12b-2 of the Exchange Act). Yes ☐ No ☒

As of August ~~9, 2017,~~2, 2018, there were ~~27,540,093~~27,729,375 shares of the registrant’s common stock, par value $0.01 per share, outstanding.

~~NN, Inc.~~

~~INDEX~~



				~~Page No.~~

NN, Inc.

INDEX

~~Part I. Financial Information~~

~~Item 1.~~ PART I. FINANCIAL INFORMATION		3
~~Financial Statements~~
Item 1.	Financial Statements	3


Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
			23

Item 3.		Quantitative and Qualitative Disclosures ~~about~~About Market Risk	40

32Item 4.	Controls and Procedures	41

PART II. OTHER INFORMATION			43
~~Item 4.~~		~~Controls and Procedures~~
32Item 1.	Legal Proceedings	43


~~Part II. Other Information~~

~~Item 1.~~		~~Legal Proceedings~~		34

Item 1A.		Risk Factors		34	43

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		35	43
Item 3.	Defaults upon Senior Securities	43
~~Item 3.~~		~~Defaults Upon Senior Securities~~		35

Item 4.		Mine Safety Disclosures		35	44

Item 5.		Other Information		35	44
Item 6.	Exhibits	45
~~Item 6.~~ SIGNATURES			~~Exhibits~~46		35

~~Signatures~~				36

PART I. FINANCIAL INFORMATION


Item 1.	Financial Statements

NN, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(Unaudited)

   Three Months Ended Six Months Ended
   June 30, June 30,
(in thousands, except per share data)
   2017 2016 2017 2016
Net sales
   $ 225,875 $ 214,272 $ 452,189 $ 426,498
Cost of products sold (exclusive of depreciation and amortization shown separately below)
   166,040 156,794 332,994 316,548
Selling, general and administrative expense
   23,036 20,993 44,530 41,795
Depreciation and amortization
   15,900 15,136 31,468 32,484
Restructuring and integration expense
   306 4,047 446 6,585


Income from operations
   20,593 17,302 42,751 29,086
Interest expense
   12,409 16,631 27,365 33,053
Loss on extinguishment of debt andwrite-off of unamortized debt issuance costs
   39,639 —   39,639 —
Derivative losses on change in interest rate swap fair value
   101 —   13 —
Other (income) expense, net
   645 (824 ) (79 ) (1,953 )


Income (loss) before provision (benefit) for income taxes and share of net income from joint venture
   (32,201 ) 1,495 (24,187 ) (2,014 )
Provision (benefit) for income taxes
   (9,428 ) 719 (7,128 ) (31 )
Share of net income from joint venture
   1,244 1,343 2,937 2,743


Net income (loss)
   $ (21,529 ) $ 2,119 $ (14,122 ) $ 760


Other comprehensive income (loss):

Change in fair value of interest rate swap
   $ —   $ 416 $ —   $ (219 )
Foreign currency translation gain (loss)
   9,240 (5,071 ) 14,244 2,152


Other comprehensive income (loss):
   $ 9,240 $ (4,655 ) $ 14,244 $ 1,933


Comprehensive income (loss)
   $ (12,289 ) $ (2,536 ) $ 122 $ 2,693


Basic net income (loss) per share:

Net income (loss)
   $ (0.78 ) $ 0.08 $ (0.52 ) $ 0.03


Weighted average shares outstanding
   27,468 27,024 27,358 26,923


Diluted net income (loss) per share:

Net income (loss)
   $ (0.78 ) $ 0.08 $ (0.52 ) $ 0.03


Weighted average shares outstanding
   27,468 27,187 27,358 27,050


Cash dividends per common share
   $ 0.07 $ 0.07 $ 0.14 $ 0.14

Amounts in thousands of dollars, except per share data



	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Net sales	$	196,349		$	157,947		$	365,497		$	315,502
Cost of sales (exclusive of depreciation and amortization shown separately below)	148,640			114,514			275,084			228,994
Selling, general and administrative expense	26,641			18,004			48,818			34,645
Acquisition related costs excluded from selling, general and administrative expense	3,437			—			5,213			—
Depreciation and amortization	16,258			13,051			30,539			25,622
Other operating expense (income)	74			(270		)	96			(270		)
Restructuring and integration expense	1,591			6			2,346			17
Income (loss) from operations	(292		)	12,642			3,401			26,494
Interest expense	15,988			12,338			27,984			27,177
Loss on extinguishment of debt and write-off of debt issuance costs	12,938			39,639			12,938			39,639
Derivative loss on change in interest rate swap fair value	—			101			—			13
Other (income) expense, net	1,887			285			1,574			(437		)
Loss from continuing operations before benefit for income taxes and share of net income from joint venture	(31,105		)	(39,721		)	(39,095		)	(39,898		)
Benefit for income taxes	5,947			12,103			7,123			12,480
Share of net income from joint venture	647			1,244			1,478			2,937
Loss from continuing operations	(24,511		)	(26,374		)	(30,494		)	(24,481		)
Income from discontinued operations, net of tax (Note 2)	—			5,236			—			10,754
Net loss	$	(24,511	)	$	(21,138	)	$	(30,494	)	$	(13,727	)
Other comprehensive income (loss):
Foreign currency translation gain (loss)	$	(15,781	)	$	9,511		$	(10,316	)	$	14,616
Other comprehensive income (loss)	$	(15,781	)	$	9,511		$	(10,316	)	$	14,616
Comprehensive income (loss)	$	(40,292	)	$	(11,627	)	$	(40,810	)	$	889
Basic net loss per share:
Loss from continuing operations per share	$	(0.89	)	$	(0.96	)	$	(1.10	)	$	(0.89	)
Income from discontinued operations per share	—			0.19			—			0.39
Net loss per share	$	(0.89	)	$	(0.77	)	$	(1.10	)	$	(0.50	)
Weighted average shares outstanding	27,696			27,468			27,632			27,358
Diluted net loss per share:
Loss from continuing operations per share	$	(0.89	)	$	(0.96	)	$	(1.10	)	$	(0.89	)
Income from discontinued operations per share	—			0.19			—			0.39
Net loss per share	$	(0.89	)	$	(0.77	)	$	(1.10	)	$	(0.50	)
Weighted average shares outstanding	27,696			27,468			27,632			27,358
Cash dividends per common share	$	0.07		$	0.07		$	0.14		$	0.14

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

NN, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except per share data)
   June 30,
2017 December 31,
2016
Assets

Current assets:

Cash
   $ 19,166 $ 14,405
Accounts receivable, net
   162,363 139,547
Inventories
   123,702 114,851
Income tax receivable
   8,631 —
Other current assets
   13,766 11,752


Total current assets
   327,628 280,555
Property, plant and equipment, net
   333,160 322,953
Goodwill, net
   452,282 450,311
Intangible assets, net
   244,264 255,981
Investment in joint venture
   39,853 36,008
Othernon-current assets
   8,629 9,892


Total assets
   $ 1,405,816 $ 1,355,700


Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable
   $ 78,308 $ 75,719
Accrued salaries, wages and benefits
   23,941 24,996
Income taxes payable
   —   2,125
Current maturities of long-term debt
   24,748 12,751
Current portion of obligation under capital lease
   3,523 3,762
Other current liabilities
   16,543 19,263


Total current liabilities
   147,063 138,616
Deferred tax liabilities
   99,333 99,591
Long-term debt, net of current portion
   827,390 785,713
Accrued post-employment benefits
   5,879 5,765
Obligation under capital lease, net of current portion
   4,691 5,851
Othernon-current liabilities
   9,647 9,651


Total liabilities
   1,094,003 1,045,187


Commitments and contingencies (Note 10)

Stockholders’ equity:

Common stock - $0.01 par value, authorized 45,000 shares, issued and outstanding 27,537 in 2017 and 27,249 in 2016
   275 272
Additionalpaid-in capital
   288,903 284,508
Retained earnings
   38,167 55,509
Accumulated other comprehensive income (loss)
   (15,564 ) (29,808 )
Non-controlling interest
   32 32


Total stockholders’ equity
   311,813 310,513


Total liabilities and stockholders’ equity
   $ 1,405,816 $ 1,355,700

Amounts in thousands of dollars



	June 30, 2018		December 31, 2017
Assets
Current assets:
Cash and cash equivalents	$	23,207	$	224,446
Accounts receivable, net	147,449		108,446
Inventories	116,136		82,617
Income tax receivable	51,682		43,253
Other current assets	24,494		18,518
Total current assets	362,968		477,280
Property, plant and equipment, net	334,021		259,280
Goodwill	617,814		454,612
Intangible assets, net	394,664		237,702
Investment in joint venture	40,515		39,822
Other non-current assets	11,102		6,307
Total assets	$	1,761,084	$	1,475,003
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	55,066	$	52,990
Accrued salaries, wages and benefits	28,429		21,145
Current maturities of long-term debt	29,809		17,283
Other current liabilities	25,129		17,003
Total current liabilities	138,433		108,421
Deferred tax liabilities	117,781		71,564
Non-current income tax payable	5,327		5,593
Long-term debt, net of current portion	1,040,434		790,805
Other non-current liabilities	15,795		12,516
Total liabilities	1,317,770		988,899
Commitments and contingencies (Note 12)
Total stockholders’ equity	443,314		486,104
Total liabilities and stockholders’ equity	$	1,761,084	$	1,475,003

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

NN, Inc.

Condensed Consolidated Statement of Changes in Stockholders’ Equity

(Unaudited)

   Common Stock    Additional
paid in
capital Retained
earnings Accumulated
other
comprehensive
income (loss) Non-
controlling
interest    Total
(in thousands of dollars and shares)
   Number
of
shares Par
value
Balance, December 31, 2016
   27,249 $ 272    $ 284,508 $ 55,509 $ (29,808 ) $ 32    $ 310,513
Net income (loss)
   —   —      —   (14,122 ) —   —      (14,122 )
Dividends paid
   —   —      —   (3,960 ) —   —      (3,960 )
Stock option expense
   —   —      575 —   —   —      575
Shares issued for option exercises
   220 2    2,590 —   —   —      2,592
Restricted and performance based stock compensation expense
   85 1    1,643 —   —   —      1,644
Restricted shares forgiven for taxes and forfeited
   (17 ) —      (413 ) —   —   —      (413 )
Foreign currency translation gain
   —   —      —   —   14,244 —      14,244
Adoption of new accounting standard (see Note 1)
   —   —      —   740 —   —      740






Balance, June 30, 2017
   27,537 $ 275    $ 288,903 $ 38,167 $ (15,564 ) $ 32    $ 311,813

Amounts in thousands of dollars and shares



	Number of shares		Par value		Additional paid in capital			Retained earnings			Accumulated other comprehensive loss			Total
Balance, December 31, 2017	27,572		$	275	$	292,494		$	211,080		$	(17,745	)	$	486,104
Net loss	—		—		—			(30,494		)	—			(30,494		)
Dividends declared	—		—		—			(3,884		)	—			(3,884		)
Share-based compensation expense	165		2		2,332			—			—			2,334
Shares issued for option exercises	27		—		274			—			—			274
Restricted shares and performance shares forgiven for taxes and forfeited	(35	)	—		(720		)	—			—			(720		)
Foreign currency translation gain (loss)	—		—		—			—			(10,316		)	(10,316		)
Adoption of new accounting standard (Note 1)	—		—		—			16			—			16
Balance, June 30, 2018	27,729		$	277	$	294,380		$	176,718		$	(28,061	)	$	443,314

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

NN, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

   Six Months Ended
   June 30,
(in thousands of dollars)
   2017 2016
Cash flows from operating activities:

Net income (loss)
�� $ (14,122 ) $ 760
Adjustments to reconcile net income to net cash provided by (used by) operating activities:

Depreciation and amortization
   31,468 32,484
Amortization of debt issuance costs
   2,153 1,986
Write-off of debt issuance costs
   8,054 —
Share of net income from joint venture
   (2,937 ) (2,743 )
Gain on disposals of property, plant and equipment
   (268 ) —
Compensation expense from issuance of share-based awards
   2,218 2,485
Deferred income tax benefit
   —   1,839
Other
   638 2,048
Changes in operating assets and liabilities:

Accounts receivable
   (20,062 ) (24,048 )
Inventories
   (5,945 ) 1,713
Accounts payable
   1,339 (3,239 )
Income taxes payable (receivable)
   (10,841 ) (3,185 )
Other assets and liabilities
   (7,247 ) 1,681


Net cash provided by (used by) operating activities
   (15,552 ) 11,781


Cash flows from investing activities:

Acquisition of property, plant and equipment
   (20,658 ) (18,223 )
Proceeds from measurement period adjustments to previous acquisition
   —   1,635
Proceeds from disposals of property, plant and equipment
   356 215


Net cash used by investing activities
   (20,302 ) (16,373 )


Cash flows from financing activities:

Debt issue costs paid
   (6,545 ) —
Dividends paid
   (3,838 ) (3,773 )
Proceeds from long-term debt
   317,000 11,000
Repayment of long-term debt
   (266,874 ) (5,875 )
Proceeds from (repayment of) short-term debt, net
   (101 ) 6,580
Proceeds from issuance of stock and exercise of stock options
   2,592 1,525
Shares withheld to satisfy income tax witholding
   (413 ) (157 )
Principal payments on capital leases
   (2,059 ) (2,462 )


Net cash provided by financing activities
   39,762 6,838


Effect of exchange rate changes on cash flows
   853 (2,253 )
Net change in cash and cash equivalents
   4,761 (7 )
Cash and cash equivalents at beginning of period
   14,405 15,087


Cash and cash equivalents at end of period
   $ 19,166 $ 15,080

Amounts in thousands of dollars



	Six Months Ended June 30,
	2018			2017
Cash flows from operating activities
Net loss	$	(30,494	)	$	(13,727	)
Adjustments to reconcile net loss to net cash provided by (used by) operating activities:
Depreciation and amortization of continuing operations	30,539			25,622
Depreciation and amortization of discontinued operations	—			6,111
Amortization of debt issuance costs	2,313			2,153
Loss on extinguishment of debt and write-off of debt issuance costs	12,938			39,639
Share of net income from joint venture, net of cash dividends received	(1,478		)	(2,937		)
Compensation expense from issuance of share-based awards	2,334			2,218
Other	180			102
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	(17,256		)	(20,062		)
Inventories	(10,742		)	(5,945		)
Accounts payable	(4,653		)	1,339
Income taxes receivable	(8,695		)	(10,612		)
Other	5,589			(8,136		)
Net cash provided by (used by) operating activities	(19,425		)	15,765
Cash flows from investing activities
Acquisition of property, plant and equipment	(28,888		)	(20,658		)
Cash paid to acquire businesses, net of cash received	(393,481		)	—
Other	625			624
Net cash provided by (used by) investing activities	(421,744		)	(20,034		)
Cash flows from financing activities
Cash paid for debt issuance or prepayment costs	(16,703		)	(38,130		)
Dividends paid	(3,854		)	(3,838		)
Proceeds from long-term debt	270,000			317,000
Repayment of long-term debt	(16,000		)	(266,874		)
Proceeds from (repayments of) short-term debt, net	9,703			(101		)
Other	(2,410		)	120
Net cash provided by (used by) financing activities	240,736			8,177
Effect of exchange rate changes on cash flows	(806		)	853
Net change in cash and cash equivalents	(201,239		)	4,761
Cash and cash equivalents at beginning of period	224,446			14,405			(1)
Cash and cash equivalents at end of period	$	23,207		$	19,166		(2)


(1)	Cash and cash equivalents as of December 31, 2016, includes $8.1 million of cash and cash equivalents that were included in current assets of discontinued operations.


(2)	Cash and cash equivalents as of June 30, 2017, includes $12.1 million of cash and cash equivalents that were included in current assets of discontinued operations.

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

NN, Inc.

Notes to Condensed Consolidated Financial Statements

June 30, ~~2017~~

2018

(Unaudited)

~~(In~~

Amounts in thousands of dollars and shares, except per share ~~data)~~

data

Note 1. Interim Financial Statements

~~We are~~

Nature of Business

NN, Inc., is a global diversified industrial company that combines advanced engineering and ~~a leading global manufacturer~~production capabilities with in-depth materials science expertise to design and manufacture high-precision components and assemblies for the medical, aerospace and defense, electrical, automotive and general industrial markets. 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. As of ~~high precision bearing components, industrial plastic products and precision metal components to a variety of markets on a global basis. We have 40 manufacturing plants~~June 30, 2018, we had 51 facilities in North America, Europe, South America and ~~Asia.~~China.

In January 2018, we implemented a new enterprise and management structure designed to accelerate growth and further balance our portfolio by aligning our strategic assets and businesses. Our ~~business is aggregated~~businesses were reorganized into ~~three reportable segments-~~ the Mobile Solutions, Power Solutions, and Life Sciences groups and are based principally on the end markets they serve. The Autocam Precision ~~Bearing~~ Components Group reported in our historical financial statements was renamed as Mobile Solutions. The Mobile Solutions group is focused on growth in the general industrial and automotive end markets. The Precision Engineered Products Group ~~(“PEP”)~~reported in our historical financial statements was bifurcated into two new groups – Power Solutions and Life Sciences. The Power Solutions group is focused on growth in the ~~Autocam Precision Components Group. As used~~electrical and aerospace and defense end markets. The Life Sciences group is focused on growth in ~~this Quarterly Report onForm 10-Q, the~~ ~~terms “NN”,~~ the ~~“Company”, “we”, “our”, or “us” refer to NN, Inc. and its subsidiaries.~~

medical end market.

Basis of Presentation

The accompanying ~~Condensed Consolidated Financial Statements of NN, Inc.,~~condensed consolidated financial statements have not been audited, except that the Condensed Consolidated Balance Sheet atas of December 31, ~~2016,~~2017, was derived from ~~our~~the audited consolidated financial statements included in our Annual Report onForm 10-K for the year ended December 31, ~~2016~~2017 (the ~~“2016~~“2017 Annual Report”), which ~~was~~we filed with the U.S. Securities and Exchange Commission (the “SEC”), on ~~March 16, 2017.~~April 2, 2018. Certain prior period amounts have been reclassified to conform to the current period’s presentation. Historical periods presented reflect reclassifications to reflect discontinued operations (see Note 2). Historical periods also reflect revisions that we disclosed in our 2017 Annual Report (see Note 17). In ~~our~~management’s opinion, ~~these Condensed Consolidated Financial Statements~~the accompanying unaudited condensed consolidated financial statements reflect all adjustments necessary to fairly state ~~the~~our results of operations for the three months and six ~~month periods~~months ended June 30, ~~2017~~2018 and ~~2016, our~~2017; financial position atas of June 30, ~~2017~~2018, and December 31, ~~2016,~~2017; and ~~the~~ cash flows for the three months and six ~~month periods~~months ended June 30, ~~2017~~2018 and ~~2016,~~2017, on a basis consistent with our audited consolidated financial ~~statements.~~statements other than the adoption of new accounting standards, such as revenue recognition. These adjustments are of a normal recurring nature and are, in the opinion of management, necessary to present fairly ~~our~~the Company’s 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 (“U.S. GAAP”) have been condensed or omitted from the interim financial statements presented in this Quarterly Report on Form10-Q. These unaudited ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and ~~the~~accompanying notes ~~thereto~~ included in the ~~2016~~2017 Annual Report. The results for the three months and six months ended June 30, ~~2017,~~2018, are not necessarily indicative of results for the year ending December 31, ~~2017,~~2018, or any other future periods. ~~We have reclassified certain prior year amounts to conform to the current year’s 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~~

As disclosed in our ~~Condensed Consolidated Financial Statements as of and for the three and six months ended June 30,~~ 2017 Annual Report, we identified various misstatements in our previously issued 2016 and 2015 annual financial statements and interim periods in 2016 and 2017. These prior period errors related primarily to (i) accounting for income and franchise taxes, (ii) accounting for the gain on the disposition of a business, (iii) accounting for indemnification assets related to ~~the~~a prior acquisition, (iv) accounting for foreign currency transactions, (v) accounting for the translation of our investment in a China joint venture. We acquired a 49% investment in the joint venture as part of our acquisition of Autocam Corporation (“Autocam”) on August 29, 2014. The investment in the joint venture was remeasured to fair value at the time of the acquisitionforeign subsidiary assets and has been accounted for under the equity method of accounting. Following the completion of the Autocam acquisition, the investment in the joint venture was accounted for in U.S. dollars whereas it should have been accounted for in the joint venture’s 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 our investment in the~~ joint venture, and ~~the related currency translation adjustment impacts.~~

We(vi) other immaterial errors, including errors that had previously ~~corrected~~been adjusted for as out of period ~~adjustments certain immaterial misstatements and reflected them~~corrections 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 to record the mark to market adjustments on our interest rate hedge net of tax through Other Comprehensive Income.

periods identified. We assessed the materiality of the misstatements on prior periods’ financial statements in accordance with SEC Staff Accounting Bulletin (“SAB”) Topic 1.M,Materiality,, codified in ~~ASC~~Accounting

Standards Codification (“ASC”) Topic 250,~~Presentation of Financial Statements~~,Accounting Changes and Error Corrections, (“ASC 250”) and concluded that the misstatements were not material to any prior annual or interim periods.

In accordance with ASC 250 (SAB Topic 1.N,Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements), we ~~have corrected these misstatements for all prior periods presented by revising the Condensed Consolidated Financial Statements~~revised our previously issued 2016 and ~~other consolidated financial information included herein. We have revised, and will revise for~~2015 annual ~~and interim periods in future filings, for certain amounts in the consolidated~~ financial statements in ~~order to correct these misstatements. See Note 14~~our 2017 Annual Report. Accordingly, in ~~these Notes to~~ connection with this Quarterly Report, we are revising our Condensed Consolidated ~~Financial~~ Statements ~~for additional information.~~

~~Newly Adopted Accounting Standards~~

~~In March 2016,~~of Operations and Comprehensive Income (Loss) and our Condensed Consolidated Statement of Cash Flows, the ~~Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”)2016-09,~~ ~~Improvements to Employee Share-Based Payment Accounting.~~~~The new standard changes how companies account~~related notes, and other financial information for ~~certain aspects of share-based payments to employees. Entities must recognize the income tax effects of awards in the statement of operations when the awards vest or are settled (i.e., additionalpaid-in~~ capital pools were eliminated). The guidance changed regarding employers’ accounting for an employee’s use of shares to satisfy the employer’s statutory income tax withholding obligation and for forfeitures. The guidance was effective for public business entities for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. As of January 1, 2017, we adopted ASU~~2016-09,~~ ~~and the effects of the standard are reflected in~~ the three months and six months ended June 30, 2017, ~~balances. Upon~~to correct for those misstatements that impacted such period. We will revise the remaining 2017 previously issued quarterly financial statements in connection with future 2018 filings on our Form 10-Q. Refer to Note 17 for reconciliations between as originally reported and as revised quarterly amounts.

Accounting Standards Recently Adopted

Revenue Recognition. On January 1, 2018, we adopted ASC Topic 606, Revenue from Contracts with Customers, (“ASC 606”). We adopted ASC 606 utilizing the modified retrospective transition method. Under this transition method, we recognized the cumulative effect of initially applying the new standard as an adjustment to the opening balance of retained earnings as of January 1, 2018, and applied the new standard beginning with the most current period presented to contracts that were not completed at the date of initial application. The adoption ~~$0.7~~adjustment, which was less than $0.1 million, represents the net profit on certain contracts that were accounted for on a consignment basis under ASC Topic 605, Revenue Recognition, (“ASC 605”) Under ASC 605, a sale was not recognized under these consignment contracts until the inventory was used by our customers. Under the new standard, revenue is recognized earlier since the transfer of control to our customers occurs upon shipment from our facilities as our customers have obtained the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset. Comparative information has not been restated and continues to be reported under the accounting standards in ~~historical tax benefits were reclassified from deferred taxes~~effect for those periods. We expect the impact of the adoption of the new standard to ~~retained earnings. Prospective tax benefits will~~ be ~~recognized~~immaterial to our results of operations on an ongoing basis. See Note 13 for the required disclosures related to the impact of adopting ASC 606 and a discussion of our updated policies related to revenue recognition and accounting for costs to obtain and fulfill a customer contract.

Definition of a Business. In January 2017, the Financial Accounting Standards Board (“FASB”) issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which changes the definition of a business. The new guidance requires an entity to first evaluate whether substantially all of the fair value of the gross assets acquired is concentrated in ~~income tax expense. Tax payments in respect~~a single identifiable asset or a group of ~~shares withheld for taxes~~similar identifiable assets. If that threshold is met, the set of assets and activities is not a business. If the threshold is not met, the entity evaluates whether the set meets the definition of a business. The new definition requires a business to include at least one substantive process and narrows the definition of outputs by more closely aligning it with how outputs are ~~now classified~~described in the ~~financing section~~new revenue recognition guidance. The new guidance was effective for us beginning on January 1, 2018. We have applied the new definition of a business prospectively to any transactions occurring in 2018 or later. The new guidance will have no effect on our historical financial statements.

Statement of Cash Flows. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force). This guidance provides clarification on how certain cash receipts and cash payments are presented and classified on the statement of cash ~~flows.~~flows, with focus on eight specific areas in which cash flows have, in practice, been presented inconsistently. The ~~calculation of diluted earnings per share now excludes tax benefits~~guidance was effective for NN beginning January 1, 2018, and is required to be adopted using a retrospective approach if practicable.

The new cash flow guidance requires that ~~would have generated more dilutive shares. The effects of the adoption~~cash payments for debt prepayment costs be classified as cash outflows for financing activities. We paid $31.6 million for debt prepayment costs in April 2017. These debt prepayment costs were ~~not material to the financial statements.~~

~~Issuance of New Accounting Standards~~

~~Revenue Recognition.~~ In May 2014, the FASB issued a new standard that provides a single, comprehensive revenue recognition model for all contracts with customers and supersedes most of the existing revenue recognition requirements.previously classified as cash used by operating activities in 2017. Under the new guidance, ~~revenue is recognized~~these costs are reclassified to cash used by financing activities when ~~a customer obtains control~~these comparable periods are presented in future filings.

The new guidance also requires entities to make an accounting policy election regarding classification of ~~promised goods or services~~distributions received from equity method investees. Existing guidance does not currently address how an entity should determine which distributions represent returns on versus returns of investment. The lack of specific guidance has resulted in ~~an amount that reflects~~diversity in practice. The two allowable approaches are the ~~consideration~~“cumulative earnings” approach and the ~~entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure~~“nature of the ~~nature, amount, timing and uncertainty~~distribution” approach, as defined by ASU 2016-15. Upon adoption of ~~revenue and cash flows arising from contracts with customers. Factors that will affectpre-and~~ post-implementation include, but are not limited to, identifying all the contracts that exist and whether incidental obligations or marketing incentives included in some of those contracts are performance obligations. Additionally, we are evaluating the transfer of control of certain consignment contracts which may impact the timing of revenue recognition under the new ~~standard.~~

~~The standard will be effective for us beginning~~guidance on January 1, 2018, ~~with early adoption permitted. We believe~~we utilized the ~~most appropriate~~cumulative earnings approach for us to adopt the standard effective January 1, 2018, would be to utilize the full retrospective transition method to restate each prior reporting period presented. We continue to evaluate the adoption method as we progress through each phase of implementation.

~~While~~classifying distributions received from our ~~ability to adopt the standard using the full retrospective method depends on system readiness and completing~~joint venture investment (see Note 8). This policy election is consistent with our analysis of information necessary to restate prior period consolidated financial statements, we remain on schedule. We have completed a diagnostic accounting assessment, including an analysis of a representative sample of contracts, to identify areas that will be most significantly impacted by implementation of the new standard. We have also completed an initial training phase to educate contract managers of the technical aspects of the new standard. We are in the process of concluding on and documenting our assessments related to the standard as well as potential system and procedural changes. We are evaluating the impact the new standard will have on our financial condition, results of operations and cash flows. Our final evaluation of the impact of adopting the new standard is expected to be completed during 2017.

historical accounting.

Accounting Standards Not Yet Adopted

Leases. In February 2016, the FASB issued ASU 2016-02, ~~2016-02,~~Leases~~Leases~~. ASU2016-02 creates Topic 842,Leases, in the ASC and supersedes ASC 840,Leases. Entities that hold numerous equipment and real estate leases, in particular those with numerous operating leases, will be most affected by the new guidance. The lease accounting standard is effective for ~~public companies~~NN beginning January 1, 2019, with modified retrospective adoption required and early adoption permitted. The amendments in ASU2016-02 are expected to impact our balance ~~sheets at many companies~~sheet by adding lease-related assets and liabilities. This may affect compliance with contractual agreements and loan ~~covenants.~~covenants, if not addressed within the credit facility. We have performed inquiries within ~~segment~~group locations and compiled information on operating and capital leases. We are ~~currently evaluating~~using the results of these inquiries and compiled information to evaluate the impacts of the lease accounting standard on our financial position, results of operations, and related disclosures.

~~Statement~~ Upon adoption, we expect to recognize a right-of-use asset and a lease liability for nearly all of ~~Cash Flows.~~ ~~In August 2016, the FASB issued ASU2016-15,~~~~Classification of Certain Cash Receipts~~our leases that are currently classified as operating leases and ~~Cash Payments~~~~. This standard provides clarification on how certain cash receipts and cash payments~~ are ~~presented and classified~~therefore not recorded on the ~~statement of cash flows. The standard is effective for us beginning January 1, 2018, and is required to be adopted using a retrospective approach if practicable, with early adoption permitted.~~balance sheet. We are in the process of ~~assessing~~gathering information that will enable us to estimate the ~~effects~~amounts of ~~the standard on prior periods.~~

those assets and liabilities.

Goodwill. In January 2017, the FASB issued ASU 2017-04, ~~2017-04,~~Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, that eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of the current goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on the current Step 1 test). The standard is effective for us beginning with impairment tests performed on or after January 1, 2020, with early adoption permitted. We are currently evaluating the impact this new guidance is expected to have on our financial position or results of operations and related disclosures.

~~Note 2. Inventories~~

~~Inventories are comprised~~

Effects of Tax Reform in Other Comprehensive Income. In February 2018, the FASB issued guidance related to the impacts of the ~~following amounts:~~

   June 30,
2017    December 31,
2016
Raw materials
   $ 52,916    $ 49,205
Work in process
   34,786    31,348
Finished goods
   36,000    34,298




Inventories
   $ 123,702    $ 114,851

~~Inventories~~Tax Cuts and Jobs Act of 2017 (“Tax Act”). Under existing U.S. GAAP, the effects of changes in tax rates and laws on ~~consignment at customer locations as of June 30, 2017, and December 31, 2016 totaled $6.2 million and $5.0 million, respectively.~~

~~Inventories~~deferred tax balances are stated at the lower of cost or net realizable value. Cost is determined using the average cost method. The inventory valuations above were developed using normalized production capacities for each of our manufacturing locations. Any costs from abnormal excess capacity or underutilization of fixed production overheads are expensed in the period incurred and are not includedrecorded as a component of ~~inventory valuation.~~

income tax expense in the period in which the law was enacted. When deferred tax balances related to items originally recorded in accumulated other comprehensive income (“AOCI”) are adjusted, certain tax effects become stranded in AOCI. The FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, that permits reclassification of certain income tax effects of the Act from AOCI to retained earnings. The guidance also requires certain disclosures about stranded tax effects. ASU 2018-02 is effective for us on January 1, 2019, with early adoption in any period permitted. Entities may adopt the guidance using either at the beginning of the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Act is recognized. We are in the process of evaluating adoption method and the effects of this new guidance on our financial statements.

Note ~~3. Net Income (Loss) Per Share~~

   Three Months Ended    Six Months Ended
   June 30,    June 30,
   2017    2016    2017    2016
Net income (loss)
   $ (21,529 )    $ 2,119    $ (14,122 )    $ 760
Weighted average shares outstanding
   27,468    27,024    27,358    26,923
Effect of dilutive stock options
   —      163    —      127








Diluted shares outstanding
   27,468    27,187    27,358    27,050








Basic net income (loss) per share
   $ (0.78 )    $ 0.08    $ (0.52 )    $ 0.03








Diluted net income (loss) per share
   $ (0.78 )    $ 0.08    $ (0.52 )    $ 0.03

~~For both~~2. Discontinued Operations

On August 17, 2017, we completed the ~~three~~sale of our global precision bearing components business (the “PBC Business”). The PBC Business included all our facilities that were engaged in the production of precision steel balls, steel rollers, and metal retainers and automotive specialty products used primarily in the bearing industry. The sale of the PBC Business furthers management’s long-term strategy to build a diversified industrial business with a comprehensive geographic footprint in attractive high-growth market segments. The PBC Business represented all of the Precision Bearing Components Group reportable segment disclosed in our historical financial statements.

In accordance with ASC 205-20, Presentation of Financial Statements – Discontinued Operations, the operating results of the PBC Business for the six ~~month periods~~months ended June 30, ~~2016, approximately 0.9 million potentially dilutive stock options had~~2017, are classified as discontinued operations. The presentation of discontinued operations includes revenues and expenses of the ~~effect~~discontinued operations, net of ~~being anti-dilutive~~tax, as one line item on the Condensed Consolidated Statements of Operations and ~~were~~Comprehensive Income (Loss). All historical Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) presented have been revised to reflect this presentation. Accordingly, results of the PBC Business have been excluded from continuing operations and group results for all periods presented in the ~~calculation~~condensed consolidated financial statements and the accompanying notes unless otherwise stated. The Condensed Consolidated Statement of ~~diluted~~Cash Flows for the six months ended June 30, 2017, includes cash flows of the PBC Business in each line item unless otherwise stated.

The following table summarizes the major line items included in the results of operations of the discontinued operations.



	Three Months Ended June 30, 2017		Six Months Ended June 30, 2017
Net sales	$	67,928	$	136,687
Cost of sales (exclusive of depreciation and amortization shown separately below)	51,526		104,485
Selling, general and administrative expense	4,768		9,121
Depreciation and amortization	3,102		6,111
Restructuring and integration expense	300		429

Income from operations	8,232		16,541
Interest expense (income)	71		188
Other expense (income), net	20		18

Income from discontinued operations before provision for income taxes	8,141		16,335
Provision for income taxes	2,905		5,581

Income from discontinued operations, net of tax	$	5,236	$	10,754

The following table presents the significant noncash items and cash paid for capital expenditures of discontinued operations.



	Six Months Ended June 30, 2017
Depreciation and amortization	$	6,111
Acquisition of property, plant and equipment	$	5,208

Note 3. Acquisitions

Bridgemedica, LLC

On February 22, 2018, we completed the acquisition of 100% of the assets of Bridgemedica, LLC (“Bridgemedica”). For accounting purposes, Bridgemedica meets the definition of a business and has been accounted for as a business combination. Bridgemedica is a medical device company that provides concept to supply solutions through design, development engineering and manufacturing. Operating results of Bridgemedica are reported prospectively in our Life Sciences group after the acquisition date. We have finalized certain working capital adjustments and are in the process of completing the integration of the Bridgemedica business into our operations. Amounts recorded for preliminary goodwill and intangible assets are disclosed in Note 6 and Note 7, respectively, and are subject to completion of our integration procedures.

Paragon Medical, Inc.

On May 7, 2018, we acquired 100% of the stock of PMG Intermediate Holding Corporation, the parent company of Paragon Medical, Inc. (“Paragon Medical”) for a base purchase price of $375.0 million in cash, subject to certain adjustments. After estimated working capital and other closing adjustments, the cash purchase price was approximately $391.0 million which included $13.4 million in cash acquired. We paid cash of $392.2 million and recorded a receivable of approximately $1.3 million in other current assets for the balance. For accounting purposes, Paragon Medical meets the definition of a business and has been accounted for as a business combination. Paragon Medical is a medical device manufacturer which focuses on the orthopedic, case and tray, implant and instrument markets. This acquisition continues our strategic focus to expand our Life Sciences portfolio as well as create a balanced business by diversifying our products and finished device offerings. Operating results of Paragon Medical are reported prospectively from the date of acquisition in our Life Sciences group. We have performed a preliminary assessment of the opening balance sheet and purchase price allocation which is subject to completion of working capital adjustments and fair value estimates. Opening balance sheet deferred taxes have been recorded based on estimates made as of the acquisition date as well as information currently available to management. As estimates are refined and additional information is received throughout the measurement period, adjustments to opening deferred taxes will be recorded with an offsetting adjustment to goodwill. We incurred new debt in connection with the Paragon Medical acquisition as described in Note 10.

The following table summarizes the preliminary purchase price allocation for the Paragon Medical acquisition.



Fair value of assets acquired and liabilities assumed	May 7, 2018
Cash and cash equivalents	$	13,418
Accounts receivable	22,853
Inventories	23,606
Other current assets	937
Property, plant and equipment	69,322
Intangible assets subject to amortization	164,200
Other non-current assets	3,304
Goodwill	157,421
Total assets acquired	$	455,061
Current liabilities	$	16,767
Deferred tax liability	46,713
Other non-current liabilities	620
Total liabilities assumed	$	64,100
Net assets acquired	$	390,961

A combination of income, market, and cost approaches were used for the valuation where appropriate, depending on the asset or liability being valued. Valuation inputs in these models and analyses gave consideration to market participant assumptions. Acquired intangible assets are primarily customer relationships. As of June 30, 2018, intangible assets in connection with Paragon Medical were $163.3 million after post-acquisition amortization.

In connection with the Paragon Medical acquisition, we recorded goodwill, which represents the excess of the purchase price over the estimated fair value of tangible and intangible assets acquired, net of liabilities assumed. As of June 30, 2018, goodwill in connection with Paragon Medical was approximately $155.6 million after post-acquisition currency impacts. The goodwill is attributed primarily to Paragon Medical as a going concern, the assembled workforce, and the fair value of expected cost synergies, and revenue growth from combining the NN and Paragon Medical life sciences businesses. The going concern element represents the ability to earn a higher return on the combined assembled collection of assets and businesses of Paragon Medical than if those assets and businesses were to be acquired and managed separately. Approximately $2.8 million of the goodwill relates to prior asset acquisitions by Paragon Medical and is expected to be deducted for tax purposes.

Property, plant and equipment acquired primarily included machinery and equipment for use in manufacturing operations. Additionally, manufacturing sites and related facilities, including leasehold improvements, were acquired. We have performed a preliminary assessment of the fair value of property, plant and equipment using both the cost approach and the market approach. The preliminary assessment was supported where available by observable market data which includes consideration of obsolescence. We have performed a preliminary assessment of the fair value of intangible assets using the income ~~per share. Given~~approach, supported by market data, by using the relief from royalty and multi-period excess earnings methods.

We incurred approximately $4.9 million in acquisition related costs with respect to Paragon Medical during the six months ended June 30, 2018. Transaction costs were expensed as incurred and are included in the “Acquisition related costs excluded from selling, general and administrative expense” line item in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). We expensed $12.9 million of financing costs related to the Paragon Medical acquisition during the six months ended June 30, 2018, which are included in the "Loss on extinguishment of debt and write-off of debt issuance costs" line item in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). As required by the acquisition method of accounting, acquired inventories were recorded at their estimated fair value. Beginning May 7, 2018, our consolidated results of operations include the results of Paragon Medical. Since the date of the acquisition, net ~~loss~~sales of $27.1 million and income from operations of $1.7 million has been included in our condensed consolidated financial statements.

The unaudited pro forma financial results shown in the table below for the three and six months ended June 30, 2018 and 2017, combine the consolidated results of NN and Paragon Medical giving effect to the Paragon Medical acquisition as if it had been completed on January 1, 2017, the beginning of the comparable prior annual reporting period presented. The unaudited pro forma financial results do not give effect to any of our other acquisitions that occurred after January 1, 2017, and do not include any anticipated synergies or other assumed benefits of the Paragon Medical acquisition. This unaudited pro forma financial

information is presented for informational purposes only and is not indicative of future operations or results had the Paragon Medical acquisition been completed as of January 1, 2017.

The unaudited pro forma financial results include certain adjustments for additional depreciation and amortization expense based upon the fair value step-up and estimated useful lives of Paragon Medical depreciable fixed assets and definite-life amortizable assets acquired. The provision for income taxes has also been adjusted for all ~~options~~periods, based upon the foregoing adjustments to historical results. The impact of adopting ASC 606 has been included based on an adoption date of January 1, 2018.



	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Pro forma net sales	$	210,902		$	193,578		$	420,731		$	384,846
Pro forma income (loss) from continuing operations	$	(12,017	)	$	(29,092	)	$	(20,078	)	$	(44,238	)
Pro forma net income (loss)	$	(12,017	)	$	(23,856	)	$	(20,078	)	$	(33,484	)
Basic income (loss) from continuing operations per share	$	(0.43	)	$	(1.06	)	$	(0.73	)	$	(1.62	)
Diluted income (loss) from continuing operations per share	$	(0.43	)	$	(1.06	)	$	(0.73	)	$	(1.62	)

Unaudited pro forma results for the six months ended June 30, 2017, include $14.8 million of inventory fair value adjustments, financing, integration, and transaction costs, net of tax, directly attributable to the acquisition which will not have an ongoing impact. No such costs are ~~considered anti-dilutive and were excluded from~~present in the ~~calculation of diluted net loss per share.~~

unaudited pro forma results for the three months ended June 30, 2017.

Note 4. Segment Information

~~The~~

We determined our reportable segments under the provisions of U.S. GAAP related to disclosures about segments of an enterprise. Management has concluded that Mobile Solutions, Power Solutions, and Life Sciences each constitutes an operating segment as each engages in business activities for which it earns revenues and incurs expenses for which separate financial information is available, and this is the ~~accounting policies~~level at which the Chief Operating Decision Maker (“CODM”) reviews discrete financial information for purposes of ~~each segment are~~allocating resources and assessing performance. In making this determination, management considered the ~~same as those~~form and content of the financial information that is regularly reviewed by the CODM. As described in Note 1, in January 2018, we implemented a new enterprise and management structure and reorganized our businesses into the ~~Notes~~Mobile Solutions, Power Solutions and Life Sciences groups based principally on the end markets they serve. In the first quarter of 2018, we began reporting our financial results based on these new reportable segments. Prior year amounts have been restated to ~~Consolidated Financial Statements entitled “Segment Information”~~conform to the current year presentation.

Mobile Solutions

Mobile Solutions is focused on growth in the general industrial and ~~“Summary~~automotive end markets. We have developed an expertise in manufacturing highly complex, system critical components for fuel systems, engines and transmissions, power steering systems and electromechanical motors on a high-volume basis. This expertise has been gained through investment in technical capabilities, processes and systems, and skilled program management and product launch capabilities.

Power Solutions

Power Solutions is focused on growth in the electrical, and aerospace and defense end markets. Within this group we combine materials science expertise with advanced engineering and production capabilities to design and manufacture a broad range of ~~Significant Accounting Policies~~high-precision metal and ~~Practices,” respectively, included~~plastic components, assemblies and finished devices used in applications ranging from power control to flight control and for military devices.

We manufacture a variety of products including electrical contacts, connectors, contact assemblies and precision stampings for the electrical end market and high precision products for the aerospace and defense end markets utilizing our ~~2016 Annual Report. Our~~extensive process technologies for optical grade plastics, thermally conductive plastics, titanium, Inconel, magnesium and electroplating.

Life Sciences

Life Sciences is focused on growth in the medical end market. Within this group we combine advanced engineering and production capabilities to design and manufacture a broad range of high-precision metal and plastic components, assemblies and finished devices.

We manufacture a variety of components, assemblies and instruments, such as surgical knives, bioresorbable implants, surgical staples, cases and trays, orthopedic implants and tools, laparoscopic devices, and drug delivery devices for the medical and life sciences end market.

Segment Results

The following table presents results of continuing operations for each reportable segment.



	Mobile Solutions		Power Solutions		Life Sciences		Corporate and Consolidations				Total Continuing Operations
Three Months Ended June 30, 2018
Net sales	$	88,079	$	49,820	$	59,153	$	(703	)	(a)	$	196,349
Income (loss) from operations	$	7,380	$	6,000	$	2,041	$	(15,713	)		$	(292	)
Interest expense											(15,988		)
Other											(14,825		)
Loss from continuing operations before benefit for income taxes and share of net income from joint venture											$	(31,105	)
Six Months Ended June 30, 2018
Net sales	$	177,873	$	98,502	$	90,353	$	(1,231	)	(a)	$	365,497
Income (loss) from operations	$	17,165	$	11,233	$	6,245	$	(31,242	)		$	3,401
Interest expense											(27,984		)
Other											(14,512		)
Loss from continuing operations before benefit for income taxes and share of net income from joint venture											$	(39,095	)
Three Months Ended June 30, 2017
Net sales	$	86,658	$	48,734	$	23,114	$	(559	)		$	157,947
Income (loss) from operations	$	10,688	$	6,819	$	3,798	$	(8,663	)		$	12,642
Interest expense											(12,338		)
Other											(40,025		)
Loss from continuing operations before benefit for income taxes and share of net income from joint venture											$	(39,721	)
Six Months Ended June 30, 2017
Net sales	$	173,104	$	97,158	$	46,243	$	(1,003	)		$	315,502
Income (loss) from operations	$	21,289	$	13,614	$	7,420	$	(15,829	)		$	26,494
Interest expense											(27,177		)
Other											(39,215		)
Loss from continuing operations before benefit for income taxes and share of net income from joint venture											$	(39,898	)


(a)	Includes eliminations of intersegment transactions occurring during the ordinary course of business.



	Total Assets as of
	June 30, 2018		December 31, 2017
Mobile Solutions	$	446,111	$	428,321
Power Solutions	390,656		383,063
Life Sciences	811,299		355,703
Corporate and Consolidations	113,018		307,916
Total Continuing Operations	$	1,761,084	$	1,475,003

The Paragon Medical business ~~is aggregated into three reportable segments-~~acquired on May 7, 2018, contributed $27.1 million to net sales and $1.7 million to income from operations in the ~~Precision Bearing Components Group,~~Life Sciences group after the ~~Precision Engineered Products Group, and the Autocam Precision Components Group. We did not have any significant inter-segment transactions during the three and six month periods ended~~acquisition date through June 30, ~~2017~~2018. The Bridgemedica business acquired on February 22, 2018, contributed $3.6 million to net sales and ~~2016.~~

   Precision
Bearing
Components
Group    Autocam
Precision
Components
Group    Precision
Engineered
Products
Group    Corporate
and
Consolidations Total
Three Months ended June 30, 2017

Revenues from external customers
   $ 67,928    $ 86,658    $ 71,289    $ —   $ 225,875
Income (loss) from operations
   $ 8,351    $ 10,688    $ 10,600    $ (9,046 ) $ 20,593
Six Months ended June 30, 2017

Revenues from external customers
   $ 136,687    $ 173,104    $ 142,398    $ —   $ 452,189
Income (loss) from operations
   $ 16,752    $ 21,289    $ 21,514    $ (16,804 ) $ 42,751
Total assets
   $ 240,666    $ 427,453    $ 723,122    $ 14,575 $ 1,405,816
Three Months ended June 30, 2016

Revenues from external customers
   $ 65,157    $ 82,991    $ 66,124    $ —   $ 214,272
Income (loss) from operations
   $ 6,474    $ 7,770    $ 10,782    $ (7,724 ) $ 17,302
Six Months ended June 30, 2016

Revenues from external customers
   $ 129,902    $ 166,981    $ 129,615    $ —   $ 426,498
Income (loss) from operations
   $ 12,800    $ 14,297    $ 16,203    $ (14,214 ) $ 29,086
Total assets
   $ 226,943    $ 418,664    $ 740,475    $ 8,651 $ 1,394,733

less than $0.1 million to income from operations in the Life Sciences group after the acquisition date through June 30, 2018.

Note 5. ~~Debt~~

~~Long-term and short-term debt at June 30, 2017, and December 31, 2016, consisted~~Inventories

Inventories are comprised of the following amounts:

   June 30,
2017    December 31,
2016
$545.0 million Senior Secured Term Loan B (“Senior Secured Term Loan”) bearing interest at the greater of 0.75% or 1 month LIBOR (1.22% at June 30, 2017), plus an applicable margin of 4.25% at June 30, 2017, expiring October 19, 2022, net of debt issuance costs of $17.7 million at June 30, 2017, and $19.0 million at December 31, 2016
   $ 523,030    $ 524,539
$300.0 million Incremental Term Loan (“Incremental Term Loan”) bearing interest at the greater of 0.75% or 1 month LIBOR (1.22% at June 30, 2017), plus an applicable margin of 3.75% at June 30, 2017, expiring April 3, 2021, net of debt issuance costs of $3.0 million at June 30, 2017
   294,023    —
$143.0 million Senior Secured Revolver (“Senior Secured Revolver”) bearing interest at LIBOR (1.22% at June 30, 2017) plus an applicable margin of 3.5% at June 30, 2017, expiring October 19, 2020, net of debt issuance costs of $2.3 million at June 30, 2017, and $2.7 million at December 31, 2016
   30,999    25,298
$250.0 million Senior Notes (“Senior Notes”) bearing interest at 10.25%, net of debt issuance costs of $4.9 million at December 31, 2016
   —      245,077
French Safeguard Obligations (Autocam)
   388    358
Brazilian lines of credit and equipment notes (Autocam)
   379    573
Chinese line of credit (Autocam)
   3,319    2,619




Total debt
   852,138    798,464
Less current maturities of long-term debt
   24,748    12,751




Long-term debt, excluding current maturities of long-term debt
   $ 827,390    $ 785,713

On April 3, 2017, we redeemed our Senior Notes for $281.6 million resulting in a loss on debt extinguishment of $36.3 million, including $31.6 million cash paid for the call premium and a $4.7 million~~non-cashwrite-off~~ of unamortized debt issuance costs. The Senior Notes were redeemed and the call premium was paid with the proceeds of a new $300.0 million Incremental Term Loan that was added by amendment to our existing credit facility. The Incremental Term Loan bears interest at the lower of 0.75% or~~one-month~~ LIBOR, plus 3.75%, and matures on April 3, 2021, with payments of $3.0 million due quarterly. Concurrent with the amendment, the Senior Secured Revolver was reduced from $143.0 million to $100.0 million until such time as a certain leverage ratio covenant threshold has been met for four consecutive fiscal quarters. Upon satisfaction of the ratio threshold, the Senior Secured Revolver may be restored to $143.0 million. In connection with the amendment, we paid $6.5 million in debt issuance costs of which $4.0 million was recorded as a direct reduction to the carrying amount of the associated debt and $2.5 million was recognized as a loss on modification of the Senior Secured Term Loan. Debt issuance costs related to the amendment were paid with proceeds from the Incremental Term Loan. Also in connection with the amendment, we wrote off $0.8 million of unamortized debt issuance costs related to the modification of the Senior Secured Revolver.

The Incremental Term Loan is subject to a call premium in an amount equal to 1.0% of the aggregate principal amount outstanding at the time of any repricing event occurring prior to October 3, 2017. A repricing event is any prepayment or repayment of principal with the proceeds of any indebtedness bearing interest with an effective yield that is less than the effective yield applicable to the initial Incremental Term Loan.

As part of our acquisition of Autocam, we assumed certain foreign credit facilities. These facilities relate to local borrowings in France, Brazil, and China. These facilities are with financial institutions in the countries in which foreign plants operate and are used to fund working capital and equipment purchases in those countries. The following paragraphs describe these foreign credit facilities.

~~Our French operation (acquired with Autocam) has liabilities with certain creditors subject to Safeguard protection. The liabilities are being paid annually over a10-year~~ ~~period until 2019 and carry a zero percent interest rate. Amounts due as of June 30, 2017, to those creditors opting to be paid over a10-year~~ period totaled $0.4 million, of which $0.1 million is included in current maturities of long-term debt and $0.3 million is included in long-term debt, net of current portion, on the Condensed Consolidated Balance Sheet.

The Brazilian equipment notes represent borrowings from certain Brazilian banks to fund equipment purchases for Autocam’s Brazilian plants. These credit facilities have annual interest rates ranging from 2.5% to 6.0%.

~~The Chinese line of credit is a working capital line of credit with a Chinese bank bearing an annual interest rate of approximately 4.6%.~~



	June 30, 2018		December 31, 2017
Raw materials	$	48,895	$	37,337
Work in process	42,311		27,669
Finished goods	24,930		17,611
Inventories	$	116,136	$	82,617

Note 6. Goodwill ~~Net~~

The following table shows changes in the carrying amount of goodwill.



	Mobile Solutions			Power Solutions			Life Sciences			Total
Balance as of December 31, 2017	$	74,147		$	201,881		$	178,584		$	454,612
Currency impacts	(439		)	(384		)	(1,847		)	(2,670		)
Goodwill acquired in acquisitions	—			—			165,454			165,454
Adjustments to goodwill	—			—			418			418
Balance as of June 30, 2018	$	73,708		$	201,497		$	342,609		$	617,814

The goodwill ~~net, for~~acquired in 2018 is related to the Paragon Medical and Bridgemedica acquisitions as described in Note 3 and is derived from the value of the businesses acquired. We recorded $157.4 million of goodwill related to the Paragon Medical acquisition and $8.0 million of goodwill related to the Bridgemedica acquisition during the six months ended June 30, ~~2017,~~2018. We are in the process of analyzing the opening balance sheets and purchase price allocations for these acquisitions. The preliminary fair value of the businesses acquired was based on management business plans and future performance estimates which are subject to a high degree of management judgment and complexity. Actual results may differ from these projections and the differences may be material, leading to measurement period adjustments of this goodwill.

In the first quarter of 2018, as ~~follows:~~

   Precision
Bearing
Components
Group    Autocam
Precision
Components
Group    Precision
Engineered
Products
Group    Total
Balance as of December 31, 2016
   $ 8,909    $ 70,717    $ 370,685    $ 450,311
Currency impacts
   174    474    1,323    1,971








Balance as of June 30, 2017
   $ 9,083    $ 71,191    $ 372,008    $ 452,282

~~The~~a result of the changes in our organizational and management structure, goodwill ~~balances are tested for impairment~~was reassigned to operating segments using a relative fair value allocation. For further information on ~~an annual basis during~~ the ~~fourth quarter and more often if a triggering event occurs. As of June 30, 2017, there were no indications of impairment at the reporting units with goodwill balances.~~

organizational changes, see Note 1.

Note 7. Intangible Assets, Net

The following table shows changes in the carrying amount of intangible assets, ~~net, for~~net.



	Mobile Solutions			Power Solutions			Life Sciences			Total
Balance as of December 31, 2017	$	39,446		$	105,030		$	93,226		$	237,702
Amortization	(1,770		)	(5,725		)	(5,490		)	(12,985		)
Currency impacts	(18		)	52			—			34
Intangible assets acquired in acquisitions	—			—			169,913			169,913
Balance as of June 30, 2018	$	37,658		$	99,357		$	257,649		$	394,664

The following table shows the nature and preliminary weighted average estimated useful lives of intangible assets acquired during the six months ended June 30, ~~2017, are~~2018. Actual results may differ from these projections and the differences may be material, leading to measurement period adjustments of these intangible assets.



	Gross Carrying Value as of Acquisition Date		Weighted Average Estimated Useful Life in Years
Customer relationships	$	144,900	20
Trademark and trade name	15,400		29
Other	9,613		1
Total intangible assets acquired in current year	$	169,913	19

As of January 1, 2018, as ~~follows:~~

   Precision
Bearing
Components
Group    Autocam
Precision
Components
Group    Precision
Engineered
Products
Group    Total
Balance as of December 31, 2016
   $ 1,718    $ 42,928    $ 211,335    $ 255,981
Amortization
   (104 )    (1,748 )    (9,933 )    (11,785 )
Currency impacts
   70    (2 )    —      68








Balance as of June 30, 2017
   $ 1,684    $ 41,178    $ 201,402    $ 244,264

a result of the changes in our organizational and management structure, intangible assets were reassigned to operating segments using a relative fair value allocation. For further information on the organizational changes, see Note 1.

Note 8. ~~Shared-Based Compensation~~

~~Share-based compensation expense~~Investment in Joint Venture

We own a 49% investment in a joint venture located in Wuxi, China, called Wuxi Weifu Autocam Precision Machinery Company, Ltd. (the “JV”). The JV is jointly controlled and managed, and we account for it under the equity method.

The following table summarizes activity related to our investment in the JV.




Balance as of December 31, 2017	$	39,822
Share of cumulative earnings	1,718
Accretion of basis difference from purchase accounting	(240		)
Foreign currency translation loss	(785		)

Balance as of June 30, 2018	$	40,515

We recognized sales to the JV of $0.2 million and approximately $0.1 million during the six months ended June 30, 2018 and 2017, respectively.

The following tables show selected financial data of the JV.



	June 30, 2018		December 31, 2017
Current assets	$	52,856	$	47,600
Non-current assets	33,985		24,763
Total assets	$	86,841	$	72,363
Current liabilities	$	38,109	$	26,165
Total liabilities	$	38,109	$	26,165



	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Net sales	$	18,111	$	17,473	$	36,114	$	36,584
Cost of sales	$	15,537	$	13,724	$	30,684	$	28,160
Income from operations	$	2,157	$	3,385	$	4,665	$	7,796
Net income	$	1,552	$	2,770	$	3,504	$	6,459

Note 9. Income Taxes

On December 22, 2017, the U. S. government enacted comprehensive tax legislation. The Tax Act reduces the maximum U.S. federal corporate income tax rate from 35% to 21% and creates new taxes on certain foreign sourced earnings. In response to the Tax Act, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 (“SAB 118”) which allows issuers to recognize provisional estimates of the impact of the Tax Act in their financial statements, or in circumstances where estimates cannot be made, to disclose and recognize at a later date.

For the year ended December 31, 2017, we included in our financial statements provisional charges for the revaluation of our net domestic deferred tax assets and a one-time charge for the deemed repatriation of historic unremitted earnings. During the six months ended June 30, 2018, there were no additional changes to the provisional amounts recorded as of December 31, 2017. The accounting is expected to be completed and disclosed within the one-year measurement period as allowed by SAB 118.

Our effective tax rate from continuing operations was 19.1% and 18.2% for the three months and six months ended June 30, 2018, respectively, and 30.5% and 31.3% for the three months and six months ended June 30, 2017, ~~and 2016, consisted of the following amounts:~~

   Three Months Ended    Six Months Ended
   June 30,    June 30,
   2017    2016    2017    2016
Stock options
   $ 194    $ 292    $ 575    $ 494
Restricted stock
   395    710    855    1,358
Performance share units
   477    482    788    633








Share-based compensation
   $ 1,066    $ 1,484    $ 2,218    $ 2,485

~~Stock Options~~

During the six months ended June 30, 2017, we granted 125,700 option awards to officers and certain other key employees. The weighted average grant date fair value of options granted during the six months ended June 30, 2017, was $11.84 per share. The fair value of our options cannot be determined by market value, because our options are not traded in an open market. Accordingly, we utilized the Black Scholes financial pricing model to estimate the fair value. The weighted average assumptions relevant to determining the fair value of the 2017 stock option grants are below:


	~~2017~~ ~~Stock Option~~ ~~Awards~~
~~Term~~		~~6 years~~
~~Risk free interest rate~~		~~2.03~~	%
~~Dividend yield~~		~~1.16~~	%
~~Expected volatility~~		~~56.56~~	%
~~Expected forfeiture rate~~		~~3.00~~	%

~~The following table provides a reconciliation of option activity for the six months ended June 30, 2017:~~

Options
   Shares (000)    Weighted-
Average
Exercise
Price
(per share)    Weighted-
Average
Remaining
Contractual
Term (years)    Aggregate
Intrinsic Value
Outstanding at January 1, 2017
   897    $ 12.22
Granted
   126    24.20
Exercised
   (220 )    11.81
Forfeited or expired
   (6 )    7.72





Outstanding at June 30, 2017
   797    $ 14.22    6.6    $ 10,538 (1)








Exercisable at June 30, 2017
   555    $ 12.17    5.5    $ 8,490 (1)

⁽¹⁾	~~The intrinsic value is the amount by which the market price of our stock was greater than the exercise price of any individual option grant at June 30, 2017.~~

~~Restricted Stock~~

~~During the six months ended June 30, 2017, we granted 85,393 restricted stock awards tonon-executive~~ ~~directors, officers and certain other key employees. The shares of restricted stock granted during the six months ended June 30, 2017, vestpro-rata~~ ~~over three years for officers and certain other key employees and over one year fornon-executive~~ directors. The fair value of the shares issued was determined by using the closing price of our common stock as of the date of grant. The weighted average grant date value of restricted stock granted in the six months ended June 30, 2017, was $24.29 per share.

~~Performance Share Units~~

During the six months ended June 30, 2017, we granted 98,618 performance share units to officers and certain other key employees. The performance share units granted will be satisfied in the form of shares of common stock during 2020 if certain performance and/or market conditions are met. We are recognizing the compensation expense over the three-year period in which the performance and market conditions are measured. The fair value per share of the performance share units issued was determined by using the grant date closing price of our common stock for the units with a performance condition, or $24.20, and a Monte Carlo valuation model for the units that have a market condition, or $29.84.

~~Note 9. Income Taxes~~

respectively. Our 2018 effective tax rate was 29% for the three and six months ended June 30, 2017. Our effective tax rate was 48% and 2% for the three and six months ended June 30, 2016, respectively. The loss on extinguishment of our Senior Notes impacted the 2017 tax rate and was treated as a discrete item during the three months ended June 30, 2017. The 2016 effective rate was impacted by changes in forecasted income and loss and driven by the application of the three- and six-month results against the permanent book to tax differences. The effective tax rates ~~for 2017 and 2016~~ differ from the U.S. federal statutory tax rate of 21% due to permanent differences including certain provisions of the Tax Act, specifically the base-broadening provision which imposed a new minimum tax on global intangible low-tax income (“GILTI”). Our 2017 effective tax rates differ from the U.S. federal statutory tax rate of 34% due primarily to ~~our~~ earnings outside the ~~United States that are indefinitely reinvested and~~U.S. which were taxed at rates lower than the U.S. federal statutory rate.

~~Management believes~~

During the six months ended June 30, 2018, we finalized our accounting policy decision with respect to the new GILTI tax rules and have concluded that GILTI will be treated as a periodic charge in the year in which it arises. Therefore, we will not record deferred taxes for the basis associated with GILTI earnings.

During the third quarter of 2017, the Internal Revenue Service commenced an examination of the federal tax return for the pre-acquisition period of January 1, 2015, through October 19, 2015, for Precision Engineered Products Holdings, LLC, our wholly-owned subsidiary. The examination is ~~reasonably possible that~~ongoing as of June 30, 2018.

Note 10. Debt

The following table presents debt balances as of June 30, 2018, and December 31, 2017.



	June 30, 2018		December 31, 2017
$545.0 million Senior Secured Term Loan B (“Senior Secured Term Loan”) bearing interest at the greater of 0.75% or one-month LIBOR (2.09% at June 30, 2018), plus an applicable margin of 3.75% at June 30, 2018, expiring October 19, 2022	$	534,250	$	534,250
$300.0 million Incremental Term Loan (“Incremental Term Loan”) bearing interest at one-month LIBOR (2.09% at June 30, 2018), plus an applicable margin of 3.25% at June 30, 2018, expiring April 3, 2021	285,000		291,000
$143.0 million Senior Secured Revolver (“Senior Secured Revolver”) bearing interest at one-month LIBOR (2.09% at June 30, 2018) plus an applicable margin of 3.5% at June 30, 2018, expiring October 19, 2020	67,962		—
$200.0 million Second Lien Facility ("Second Lien") bearing interest at one-month LIBOR (2.09% at June 30, 2018), plus an applicable margin of 8.0% at June 30, 2018, expiring April 19, 2023	200,000		—
International lines of credit and other loans	4,962		3,315
Total	1,092,174		828,565
Less current maturities of long-term debt	29,809		17,283
Principal, net of current portion	1,062,365		811,282
Less unamortized debt issuance costs	21,931		20,477
Long-term debt, net of current portion	$	1,040,434	$	790,805

We capitalized interest costs amounting to $0.3 million and $0.3 million in the three months ended June 30, 2018 and 2017, and $0.5 million and $0.6 million in the six months ended June 30, 2018 and 2017, related to construction in progress.

facility agreement. The financial covenants are effective when we have outstanding amounts drawn on our Senior Secured Revolver on the last day of any fiscal quarter and become more restrictive over time. We had $68.0 million outstanding balance on the Senior Secured Revolver as of June 30, 2018, and were in compliance with all covenants under our credit facility and expect to be in compliance with all covenants through June 30, 2019.

Second Lien Credit Agreement

In connection with the Paragon Medical acquisition, we, certain of our subsidiaries named therein, SunTrust Bank, as Administrative Agent, SunTrust Robinson Humphrey, Inc. as Lead Arranger and Bookrunner, and the lenders named therein entered into a Second Lien Credit Agreement (the “Second Lien Credit Agreement”) pursuant to which SunTrust and the other lenders extended to us a $200.0 million secured second lien term loan facility (the “Second Lien Facility”). We utilized the net proceeds from the Second Lien Facility, together with cash on hand, to pay the Paragon Medical purchase price and fees and expenses related to the acquisition. The Second Lien Facility is collateralized by all of our assets. The Second Lien Facility matures on April 19, 2023, and bears interest at either (i) a base rate, plus an applicable margin, or (ii) the greater of the London Interbank Offered Rate (“LIBOR”) or 1.00%, plus an applicable margin. The initial applicable margin for all borrowings under the Second Lien Facility is 7.00% per annum with respect to base rate borrowings and 8.00% per annum with respect to LIBOR borrowings. We may voluntarily prepay outstanding loans under the Second Lien Facility, in whole or in part without premium or penalty at any time on or after May 7, 2020. We are subject to a prepayment penalty of 2% of the amount of ~~unrecognized income tax benefits~~such loans that we prepay before May 7, 2019. If we prepay any outstanding loans after May 7, 2019, but prior to May 7, 2020, we are subject to a prepayment penalty of 1% of the amount prepaid. The Second Lien Credit Agreement requires us to prepay outstanding loans, subject to certain exceptions, with: (i) a variable percentage of excess cash flow; (ii) 100% of the net cash proceeds of non-ordinary course asset sales or other dispositions of property, and ~~interest may decrease during~~100% of the ~~next 12 months~~net cash proceeds from certain insurance and condemnation events with respect to our assets, subject to customary thresholds and reinvestment rights; and (iii) 100% of the net cash proceeds from the issuance or incurrence of debt obligations for borrowed money not permitted by ~~approximately $0.6~~the Second Lien Credit Agreement.

Amendment to Credit Facility

On May 7, 2018, we entered into an amendment to our existing credit facility to permit the Paragon Medical acquisition, to permit the Second Lien Credit Agreement, and to amend certain covenants. We paid $16.7 million of debt issuance costs related to the ~~expiration~~amendment. A total of $12.9 million is included in the ~~statutes~~"Loss on extinguishment of ~~limitations,~~debt and write-off of ~~which $0.5~~debt issuance costs" line on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). The remaining $3.8 million ~~would reduce income tax expense.~~

is capitalized as a reduction of long-term debt.

Note 11. Restructuring and Integration

The following table summarizes restructuring and integration charges incurred for the three months and six months ended June 30, 2018 and 2017.



	Three Months Ended June 30, 2018
	Mobile Solutions			Power Solutions		Life Sciences		Corporate and Consolidations		Total
Severance and other employee costs	$	—		$	—	$	1,596	$	—	$	1,596
Other	(5		)	—		—		—		(5		)
Total	$	(5	)	$	—	$	1,596	$	—	$	1,591

	Six Months Ended June 30, 2018
	Mobile Solutions			Power Solutions		Life Sciences		Corporate and Consolidations		Total
Severance and other employee costs	$	—		$	—	$	1,596	$	728	$	2,324
Other	22			—		—		—		22
Total	$	22		$	—	$	1,596	$	728	$	2,346

	Three Months Ended June 30, 2017
	Mobile Solutions			Power Solutions		Life Sciences		Corporate and Consolidations		Total
Severance and other employee costs	$	6		$	—	$	—	$	—	$	6
Total	$	6		$	—	$	—	$	—	$	6

	Six Months Ended June 30, 2017
	Mobile Solutions			Power Solutions		Life Sciences		Corporate and Consolidations		Total
Severance and other employee costs	$	17		$	—	$	—	$	—	$	17
Total	$	17		$	—	$	—	$	—	$	17

The following table summarizes restructuring and integration reserve activity for the six months ended June 30, 2018.



	Reserve Balance as of December 31, 2017		Charges		Non-cash Adjustments			Cash Reductions			Reserve Balance as of June 30, 2018
Severance and other employee costs	$	—	$	2,324	$	—		$	(252	)	$	2,072
Site closure and other associated costs	1,099		22		(61		)	(740		)	320
Total	$	1,099	$	2,346	$	(61	)	$	(992	)	$	2,392

We recognized severance costs of $0.7 million in the six months ended June 30, 2018, at corporate headquarters related to the restructuring of our former Precision Engineered Products Group to form the Power Solutions and Life Sciences groups effective January 2, 2018.

We recognized severance costs of $1.6 million in the six months ended June 30, 2018, in our Life Sciences group related to the integration of Paragon Medical into our existing business after the acquisition.

The amount accrued for restructuring and integration costs represents what we expect to pay over the next 2.7 years. We expect to pay $1.1 million within the next twelve months.

Note ~~10.~~12. Commitments and Contingencies

Brazil ICMS Tax Matter

Prior to ~~our~~the acquisition of Autocam Corporation in 2014 (“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 ~~process.~~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,~~2018, for this matter. There was no material change in the status of this matter from December 31, ~~2016~~2017, to June 30, ~~2017.~~

2018.

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.~~the Autocam acquisition. 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.

Note ~~11. Investment inNon-Consolidated~~ ~~Joint Venture~~

~~As part~~13. Revenue from Contracts with Customers

We adopted ASC 606 on January 1, 2018, using the modified retrospective transition method for all contracts not completed as of the ~~Autocam acquisition,~~date of adoption. The reported results for 2018 reflect the application of ASC 606 while the reported results for 2017 were prepared under the guidance of ASC 605. The adoption of ASC 606 represents a change in accounting principle that will more closely align revenue recognition with the delivery of our goods and will provide financial statement readers with enhanced disclosures. In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods in an amount that reflects the consideration we ~~own a 49% investment~~expect to be entitled to receive in ~~a joint venture with an unrelated entity called Wuxi Weifu Autocam Precision Machinery Company, Ltd. (the “JV”), a Chinese company located~~exchange for those goods. To the extent that transaction price includes variable consideration, we estimate the amount of variable consideration that should be included in ~~Wuxi, China. The JV~~the transaction price utilizing the expected value method or the most likely amount method depending on the nature of the variable consideration. Variable consideration is ~~jointly controlled and managed, and~~included in the transaction price if, in management’s judgment, it is ~~being~~probable that a significant future reversal of cumulative revenue under the contract will not occur.

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 sales to external customers by major source.



	Six Months Ended June 30, 2018
	Mobile Solutions		Power Solutions		Life Sciences		Intersegment Sales Eliminations			Total
United States	$	97,797	$	82,052	$	78,994	$	(1,231	)	$	257,612
China	23,162		2,444		1,438		—			27,044
Mexico	14,472		6,545		339		—			21,356
Brazil	19,522		50		29		—			19,601
Poland	3,971		18		1		—			3,990
Czech Republic	3,371		—		—		—			3,371
Italy	3,139		109		137		—			3,385
Germany	3,085		7		3,817		—			6,909
Switzerland	2,700		29		1,720		—			4,449
Netherlands	—		1,907		—		—			1,907
Other	6,654		5,341		3,878		—			15,873
Total net sales	$	177,873	$	98,502	$	90,353	$	(1,231	)	$	365,497



	Three Months Ended June 30, 2018
	Mobile Solutions		Power Solutions		Life Sciences		Intersegment Sales Eliminations			Total
United States	$	48,142	$	41,924	$	48,441	$	(703	)	$	137,804
China	11,581		959		1,312		—			13,852
Mexico	7,236		3,348		167		—			10,751
Brazil	9,637		—		29		—			9,666
Poland	1,919		4		1		—			1,924
Czech Republic	1,561		—		—		—			1,561
Italy	1,562		11		137		—			1,710
Germany	1,551		—		3,816		—			5,367
Switzerland	1,294		29		1,720		—			3,043
Netherlands	—		933		—		—			933
Other	3,596		2,612		3,530		—			9,738
Total net sales	$	88,079	$	49,820	$	59,153	$	(703	)	$	196,349

Product Sales

We generally transfer control and recognize a sale when we ship the product from our manufacturing facility to our customer, at a point in time, as this is when our customer obtains the ability to direct use of, and obtain substantially all of the remaining benefits from, the goods. We have elected to recognize the cost for freight and shipping when control over products has transferred to the customer as a component of cost of sales.

We use an observable price to determine the stand-alone selling price for separate performance obligations or a cost-plus-margin approach when an observable price is not available. The expected duration of our contracts is less than one year, and we have elected to apply the practical expedient that allows entities to disregard the effects of financing when the contract length is less than one year. The amount of consideration we receive and the revenue we recognize varies with volume rebates and incentives we offer to our customers. We estimate the amount of variable consideration that should be included in the transaction price utilizing the expected value method or the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur.

We have utilized certain practical expedients allowed by the new standard. We intend to utilize the portfolio approach practical expedient to evaluate sales-related discounts on a portfolio basis to contracts with similar characteristics. The effect on our

financial statements of applying the portfolio approach would not differ materially from applying the new standard to individual contracts.

We give our customers the right to return only defective products in exchange for functioning products or rework of the product. These transactions are evaluated and accounted for under ASC Topic 460, Guarantees, and we estimate the ~~equity method.~~

~~Below~~impact to the transaction price based on an analysis of historical experience.

Other Sources of Revenue

We provide pre-production activities related to engineering efforts to develop molds, dies and machines that are owned by our customers. We may receive advance payments from customers which are deferred until satisfying our performance obligations by compliance with customer-specified milestones, recognizing revenue at a point in time. These contracts generally have an original expected duration of less than one year.

The following table provides information about contract liabilities from contracts with customers.



	Deferred Revenue
Balance at January 1, 2018	$	2,124
Balance at June 30, 2018	$	3,372

The timing of revenue recognition, billings and cash collections results in billed accounts receivable and customer advances and deposits (contract liability) on the Condensed Consolidated Balance Sheet. These contract liabilities are reported on the Condensed Consolidated Balance Sheet on a contract-by-contract basis at the end of each reporting period as 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. Changes in the contract liability balances during the three months and six months ended June 30, 2018, were not materially impacted by any other factors. Revenue recognized during the three months and six months ended June 30, 2018, from amounts included in deferred revenue at the beginning of the period for performance obligations satisfied or partially satisfied during the three months and six months ended June 30, 2018, was approximately $0.7 million and $1.0 million, respectively.

Transaction Price Allocated to Future Performance Obligations

ASC 606 requires that we disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of June 30, 2018. The guidance provides certain practical expedients that limit this requirement. Our contracts meet the following practical expedient provided by ASC 606:

The performance obligation is part of a contract that has an original expected duration of one year or less.

Costs to Obtain and Fulfill a Contract

Prior to the adoption of ASC 606, we expensed commissions paid to internal sales representatives for obtaining contracts. Under ASC 606, we adopted the practical expedient to recognize commissions paid to internal sales personnel that are incremental to obtaining customer contracts as an expense when incurred since the amortization period is less than one year. The judgments made in determining the amount of costs incurred include whether the commissions are in fact incremental and would not have occurred absent the customer contract. Costs to obtain a contract are expensed as selling, general and administrative expense.

Sales, value add, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense.

Financial Statement Impact of Adopting ASC 606

The following table presents the impact of adoption of ASC 606 on our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) and our Condensed Consolidated Balance Sheet. Differences are due to the acceleration in the recognition of revenue to the point of shipment or delivery for contracts where an unconditional obligation to purchase is present for inventory that was considered in consignment under ASC 605.



	Three Months Ended June 30, 2018									Six Months Ended June 30, 2018
	As Reported			Balances Without Adoption of ASC 606			Effect of Change			As Reported		Balances Without Adoption of ASC 606		Effect of Change
Net sales	$	196,349		$	196,367		$	(18	)	$	365,497	$	365,569	$	(72	)
Cost of sales	148,640			148,631			9			275,084		275,120		(36		)
Income (loss) from operations	(292		)	(265		)	(27		)	3,401		3,437		(36		)

	As of June 30, 2018
	As Reported			Balances Without Adoption of ASC 606			Effect of Change
Accounts receivable, net	$	147,449		$	146,913		$	536
Inventories	116,136			116,470			(334		)

Note 14. Shared-Based Compensation

The following table lists the components of share-based compensation expense by type of award.



	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Stock options	$	152	$	194	$	358	$	575
Restricted stock	397		395		856		855
Performance share units	529		477		1,120		788
Share-based compensation	$	1,078	$	1,066	$	2,334	$	2,218

Stock Options

During the six months ended June 30, 2018, we granted options to purchase 55,300 shares to certain key employees. The weighted average grant date fair value of the options granted during the six months ended June 30, 2018, was $10.68 per share. The fair value of our ~~JV investment balance~~options cannot be determined by market value because they are not traded in an open market. Accordingly, we utilized the Black Scholes financial pricing model to estimate the fair value. The following table shows the weighted average assumptions relevant to determining the fair value of stock options granted in 2018.



	2018 Stock Option Awards
Expected term	6 years
Risk free interest rate	2.65	%
Dividend yield	1.14	%
Expected volatility	47.78	%
Expected forfeiture rate	4.00	%

The expected term is derived from using the simplified method of determining stock option terms as described under the Securities and Exchange Commission’s Staff Accounting Bulletin Topic 14, Share-based payment. The simplified method was used because sufficient historical stock option exercise experience was not available.

The average risk-free interest rate is derived from United States Department of Treasury published interest rates of daily yield curves for the same time period as the expected term.

The expected dividend yield is derived by a mathematical formula which uses the expected annual dividends over the expected term divided by the fair market value of our common stock at the grant date.

The expected volatility rate is derived from our actual common stock historical volatility over the same time period as the expected term. The volatility rate is derived by mathematical formula utilizing daily closing price data.

The forfeiture rate is determined from examining the historical pre-vesting forfeiture patterns of past option issuances to key employees. While the forfeiture rate is not an input of the Black Scholes model for determining the fair value of the options, it is an important determinant of stock option compensation expense to be recorded.

The following table summarizes option activity for the six months ended June 30, ~~2017:~~

Balance as of December 31, 2016
   $ 36,008
Our share of earnings
   3,165
Accretion of basis difference from purchase accounting
   (228 )
Foreign currency translation gain
   908


Balance as of June 30, 2017
   $ 39,853

~~The following table summarizes balance sheet information for~~2018.



Options	Shares (in thousands)		Weighted- Average Exercise Price (per share)		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
Outstanding at January 1, 2018	746		$	14.33
Granted	55		24.55
Exercised	(27	)	10.15			$	274
Outstanding at June 30, 2018	774		$	15.21	6.1	$	2,861	(1)
Exercisable at June 30, 2018	625		$	13.61	5.4	$	3,304	(1)


(1)	The intrinsic value is the amount by which the market price of our stock was greater than the exercise price of any individual option grant at June 30, 2018.

Restricted Stock

During the ~~JV:~~

   June 30,    December 31,
   2017    2016
Current assets
   $ 40,712    $ 31,295
Non-current assets
   24,386    22,522




Total assets
   $ 65,098    $ 53,817




Current liabilities
   $ 16,522    $ 13,549
Non-current liabilities
   6    —




Total liabilities
   $ 16,528    $ 13,549

~~We had sales to the JV of approximately $0.1 and $0.1 million during the three and~~ six months ended June 30, ~~2017. Amounts due~~2018, we granted 86,516 restricted stock awards to ~~us from~~non-executive directors, officers and certain other key employees. The shares of restricted stock granted during the ~~JV were $0.1 million as of~~six months ended June 30, ~~2017.~~

~~Note 12. Fair Value Measurements~~

2018, vest pro-rata over three years for officers and certain other key employees and over one year for non-executive directors. We present fair value measurements and disclosures applicable to both our financial and nonfinancial assets and liabilities that are measured and reported on a fair value basis. Fair value is an exit price representingdetermined the expected amount we would receive to sell an asset or pay to transfer a liability in an orderly transaction with market participants at the measurement date. We have followed consistent methods and assumptions to estimate the fair values as more fully described in the 2016 Annual Report.

Our financial instruments that are subject to fair value disclosure consist of cash and cash equivalents, accounts receivable, accounts payable, derivatives and long-term debt. At June 30, 2017, the carrying values of all of these financial instruments approximated fair value. The fair value of ~~floating-rate debt approximates~~ the ~~carrying amount because~~shares awarded by using the ~~interest rates paid are based on short-term maturities. As~~closing price of our common stock as of the date of grant. The weighted average grant date value of restricted stock granted in the six months ended June 30, ~~2017, we had no significant fixed-rate debt outstanding.~~

Fair value principles prioritize valuation inputs across three broad levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the assumptions used to measure assets and liabilities at fair value. An asset or liability’s classification within the various levels is determined based on the lowest level input that is significant to the2018, was $24.55 per share. Total grant-date fair value ~~measurement.~~

of restricted stock that vested in the six months ended June 30, 2018, was $1.8 million.

The following table summarizes the ~~assets and liabilities measured at fair value on a recurring basis for our interest rate swap derivative financial instrument:~~

      Fair Value Measurements at June 30, 2017
Description
   June 30,
2017    Quoted Prices in
Active Markets
for Identical
Assets (Level 1)    Significant Other
Observable Inputs
(Level 2)    Significant
Unobservable
Inputs (Level 3)
Derivative asset—current
   $ 5    $ —      $ 5    $ —
Derivative asset—noncurrent
   5    —      5    —
Derivative liability—current
   (1,293 )    —      (1,293 )    —
Derivative liability—noncurrent
   (464 )    —      (464 )    —








   $ (1,747 )    $ —      $ (1,747 )    $ —








      Fair Value Measurements at December 31, 2016
Description
   December 31,
2016    Quoted Prices in
Active Markets
for Identical
Assets (Level 1)    Significant Other
Observable Inputs
(Level 2)    Significant
Unobservable
Inputs (Level 3)
Derivative asset—current
   $ 69    $ —      $ 69    $ —
Derivative asset—noncurrent
   6    —      6    —
Derivative liability—current
   (1,903 )    —      (1,903 )    —
Derivative liability—noncurrent
   (1,028 )    —      (1,028 )    —








   $ (2,856 )    $ —      $ (2,856 )    $ —

~~Our policy is to manage interest expense using a mix~~status of fixed and variable rate debt. To manage this mix effectively, we may enter into interest rate swaps in which we agree to exchange the difference between fixed and variable interest amounts calculated by reference to an agreed upon notional principal amount.

The inputs for determining fair value of the interest rate swap are classified as Level 2 inputs. Level 2 fair value is based on estimates using standard pricing models. These standard pricing models use inputs which are derived from or corroborated by observable market data such as interest rate yield curves, index forward curves, discount curves, and volatility surfaces. Counterparties to these derivative contracts are highly rated financial institutions which we believe carry only a minimal risk of nonperformance.

~~We have elected to present the derivative contracts on a gross basis in the Condensed Consolidated Balance Sheet included within other current assets, othernon-current~~ ~~assets, other current liabilities and othernon-current~~ ~~liabilities. To the extent we presented the derivative contract on a net basis, we would have a derivative in a net liability position of $1.7 million~~unvested restricted stock awards as of June 30, ~~2017.~~2018, and changes during the six months then ended.



	Nonvested Restricted Shares (in thousands)		Weighted Average Grant-Date Fair Value (per share)
Nonvested at January 1, 2018	152		$	19.21
Granted	87		$	24.55
Vested	(92	)	$	19.76
Nonvested at June 30, 2018	147		$	22.02

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. PSU awards granted in 2018 were made pursuant to the NN, Inc. 2016 Omnibus Incentive Plan and a Performance Share Unit Agreement. Some PSUs are based on total shareholder return (“TSR Awards”), and other PSUs are based on return on invested capital (“ROIC Awards”).

The TSR Awards vest, if at all, upon our achieving a specified relative total shareholder return, which will be measured against the total shareholder return of the S&P SmallCap 600 Index during specified performance periods as defined in the award agreements. Each performance period generally begins on January 1 of the year of grant and ends 36 months later on December 31. The ROIC Awards will vest, if at all, upon our achieving a specified average return on invested capital during the performance periods. We recognize compensation expense over the performance period in which the performance and market conditions are measured. If the PSUs do not ~~have any cash collateral due~~vest at the end of the performance periods, then the PSUs will expire automatically. Upon vesting, the PSUs will be settled by the issuance of shares of our common stock, subject to the executive officer’s continued employment. The actual number of shares of common stock will be issued to each award recipient at the end of the performance periods will be interpolated between a threshold and maximum payout amount based on actual performance results. No dividends will be paid on outstanding PSUs during the performance period; however, dividend equivalents will be paid based on the number of shares of common stock that are ultimately earned at the end of the Performance Periods.

With respect to the TSR Awards, a participant will earn 50% of the target number of PSUs for “Threshold Performance,” 100% of the target number of PSUs for “Target Performance,” and 150% of the target number of PSUs for “Maximum Performance.” With respect to the ROIC Awards, a participant will earn 35% of the target number of PSUs for “Threshold Performance,” 100% of the target number of PSUs for “Target Performance,” and 150% of the target number of PSUs for “Maximum Performance. For performance levels falling between the values shown below, the percentages will be determined by interpolation. The following table presents the goals with respect to TSR and ROIC for each award granted in 2018.



TSR:		Threshold Performance (50% of Shares)		Target Performance (100% of Shares)		Maximum Performance (150% of Shares)
	2018 grants	35th Percentile		50th Percentile		75th Percentile

ROIC:		Threshold Performance (35% of Shares)		Target Performance (100% of Shares)		Maximum Performance (150% of Shares)
	2018 grants	15.5	%	18	%	19.5	%

We estimate the grant date fair value of TSR Awards using the Monte Carlo simulation model, as the total shareholder return metric is considered a market condition under ~~such agreements.~~

AsASC Topic 718, Compensation – stock compensation. The grant date fair value of ROIC Awards is based on the closing price of a share of our common stock on the date of grant. The following table presents the number of awards granted and the grant date fair value of each award in the periods presented.



	TSR Awards			ROIC Awards
Award Year	Shares (in thousands)	Grant Date Fair Value (per share)		Shares (in thousands)	Grant Date Fair Value (per share)
2018	55	$	24.65	55	$	24.55

We generally recognize an expense for ROIC Awards based on the Target Performance threshold of 100% because, at the date of grant, the Target Performance is the probable level of performance achievement. All PSUs that vested on December 31, 2017, were settled in shares in May 2018.

The following table summarizes the status of unvested PSU awards as of June 30, ~~2017, we reported no gains or losses in accumulated other comprehensive income related to the interest rate swaps. Additionally,~~2018, and changes during the ~~three and~~ six months then ended.



	Nonvested TSR Awards				Nonvested ROIC Awards
	Shares (in thousands)		Weighted Average Grant-Date Fair Value (per share)		Shares (in thousands)		Weighted Average Grant-Date Fair Value (per share)
Nonvested at January 1, 2018	130		$	16.60	136		$	16.27
Granted	55		$	24.65	55		$	24.55
Forfeited	(11	)	$	15.12	(12	)	$	15.49
Nonvested at June 30, 2018	174		$	18.90	179		$	18.63

Note 15. Net Income (Loss) Per Share



	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Loss from continuing operations	$	(24,511	)	$	(26,374	)	$	(30,494	)	$	(24,481	)
Income from discontinued operations, net of tax (Note 2)	—			5,236			—			10,754
Net loss	$	(24,511	)	$	(21,138	)	$	(30,494	)	$	(13,727	)
Weighted average shares outstanding	27,696			27,468			27,632			27,358
Effect of dilutive stock options	—			—			—			—
Diluted shares outstanding	27,696			27,468			27,632			27,358
Basic loss from continuing operations per share	$	(0.89	)	$	(0.96	)	$	(1.10	)	$	(0.89	)
Basic income from discontinued operations per share	—			0.19			—			0.39
Basic net loss per share	$	(0.89	)	$	(0.77	)	$	(1.10	)	$	(0.50	)
Diluted loss from continuing operations per share	$	(0.89	)	$	(0.96	)	$	(1.10	)	$	(0.89	)
Diluted income from discontinued operations per share	—			0.19			—			0.39
Diluted net loss per share	$	(0.89	)	$	(0.77	)	$	(1.10	)	$	(0.50	)

The calculations of diluted loss from continuing operations per share for the three-month periods ended June 30, ~~2016, when the interest rate swap was accounted for in accordance with hedge accounting, the periodic settlements~~2018 and ~~related reclassification of other comprehensive income was $0.5~~2017, exclude 0.8 million and ~~$0.9~~0.9 million ~~respectively,~~potentially dilutive stock options, which had the effect of ~~net hedging losses on~~being anti-dilutive. The calculations of diluted loss from continuing operations per share for the interest rate swap in the interest expense line on the Condensed Consolidated Statements of Operations. We recognized $0.5 and $1.0 million of interest rate swap settlements during the three and six monthssix-month periods ended June 30, 2018 and 2017, inexcluded 0.8 million and 0.9 million potentially dilutive stock options, which had the ~~“Derivative losses on change in interest rate swap fair value” line on~~effect of being anti-dilutive. Given the ~~Condensed Consolidated Statements of Operations. If there are no changes in the interest rates~~loss from continuing operations for the ~~next twelve months, we expect to make $1.3 million in cash payments related to~~three-month periods and six-month periods ended June 30, 2018 and 2017, all options are considered anti-dilutive and were excluded from the ~~interest rate swap.~~

calculation of diluted loss from continuing operations per share.

Note ~~13. Restructuring~~16. 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 ~~Integration~~

~~Restructuring and integration costs totaling $0.3 million and $4.0 million were recognized~~assumptions to estimate fair values as more fully described in the ~~three months ended~~2017 Annual Report.

Our financial instruments that are subject to fair value disclosure consist of cash and cash equivalents, accounts receivable, accounts payable, and long-term debt. As of June 30, ~~2017 and 2016. Restructuring and integration costs totaling $0.4 million and $6.6 million were recognized in~~2018, the ~~six months ended~~carrying values of these financial instruments approximated fair value. The fair value of floating-rate debt approximates the carrying amount because the interest rates paid are based on short-term maturities. As of June 30, ~~2017~~2018, we had no fixed-rate debt outstanding.

~~Within the Precision Bearing Components Group, restructuring initiatives to optimize operations~~liabilities in ~~the U.S., Italy, the Netherlands, Mexico and at segment headquarters resulted in a charge of $0.3 and $1.7 million~~active markets or inputs that are observable for the ~~three months ended June 30, 2017~~asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the assumptions used to measure assets and 2016, respectively, and $0.4 and $2.4 million for the six months ended June 30, 2017 and 2016. These charges consisted primarily of severance and other employee costs relating to personnel reductions.

Within the Autocam Precision Components Group, certain restructuring programs, including the closure of one facility, the Wheeling Plant, resulted in a charge of $6 thousand and $2.1 million for the three months ended June 30, 2017 and 2016, respectively, and $16 thousand and $3.6 million for the six months ended June 30, 2017 and 2016.

Within the Precision Engineered Products Group, initiatives resulted in integration, site closure and employee costs of $0.2 million and $0.6 million for the three and six months ended June 30, 2016. There were no charges in the three and six months ended June 30, 2017.

~~The following table summarizes restructuring and integration activity related to actions incurred for the three and six months ended June 30, 2017 and 2016:~~

   Three Months Ended
June 30,    Six Months Ended
June 30,
   2017    2016    2017    2016
Severance and other employee costs
   $ 306    $ 1,814    $ 446    $ 3,390
Site closure and other associated costs
   —      2,011    —      2,938
Integration and other associated costs
   —      222    —      257








Total
   $ 306    $ 4,047    $ 446    $ 6,585

   Reserve
Balance at
December 31, 2016    Charges    Paid in
2017    Reserve
Balance at
June 30, 2017
Severance and other employee costs
   $ 3,019    $ 446    $ (1,673 )    $ 1,792
Site closure and other associated costs
   1,626    —      (614 )    1,012
Integration and other associated costs
   —      —      —      —








Total
   $ 4,645    $ 446    $ (2,287 )    $ 2,804

~~The total restructuring and impairment costs are still being identified~~liabilities at fair value. An asset or liability’s classification within the various ~~segments; therefore, we are not able~~levels is determined based on the lowest level input that is significant to ~~estimate~~ the ultimate costs at this time. We will include in future filings updates to these activities along with a reconciliation of beginning and ending liabilities recorded. The amounts recorded for the three and six months ended June 30, 2017, for restructuring charges that have been incurred are primarily expected to be paid out during 2017. Some amounts related to foreign locations extend through 2021.

fair value measurement.

Note ~~14.~~17. Prior Periods’ Financial Statement Revision

As described in Note 1 in these Notes to Condensed Consolidated Financial Statements, we have corrected misstatements for all prior periods presented by revising the Condensed Consolidated Financial Statements and other financial information included herein. We have not revised our Consolidated Statements of Cash Flows for any periods.

The following tables present the effect of the correction of misstatements that impacted each of the periods presented below, as further described in Note 1, and the related adjustments to reflect the revision on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). Also, as further described in Note 2, due to the disposition of the PBC Business and the related discontinued operations treatment, the tables below present separately the impact of the correction of the misstatements as well as the effect of recasting the prior periods for discontinued operations.



	Six Months Ended June 30, 2017
	As Originally Reported			Adjustment			Discontinued Operations			As Revised
Cost of sales (exclusive of depreciation and amortization shown separately below)	$	332,994		$	485		$	(104,485	)	$	228,994
Selling, general and administrative expense	44,530			(764		)	(9,121		)	34,645
Depreciation and amortization	31,468			265			(6,111		)	25,622
Other operating income	—			(270		)	—			(270		)
Income from operations	42,751			284			(16,541		)	26,494
Other (income) expense, net	(79		)	(340		)	(18		)	(437		)
Loss from continuing operations before benefit for income taxes and share of net income from joint venture	(24,187		)	624			(16,335		)	(39,898		)
Benefit for income taxes	7,128			(229		)	5,581			12,480
Loss from continuing operations	(14,122		)	395			(10,754		)	(24,481		)
Income from discontinued operations, net of tax (Note 2)							10,754			10,754
Net loss	$	(14,122	)	$	395					$	(13,727	)
Other comprehensive loss:
Foreign currency translation gain	14,244			372						14,616
Other comprehensive income	14,244			372						14,616
Comprehensive income	$	122		$	767					$	889
Basic net loss per share	$	(0.52	)	$	0.01					$	(0.50	)
Diluted net loss per share	$	(0.52	)	$	0.01					$	(0.50	)



	Three Months Ended June 30, 2017
	As Originally Reported			Adjustment			Discontinued Operations			As Revised
Selling, general and administrative expense	$	23,036		$	(264	)	$	(4,768	)	$	18,004
Depreciation and amortization	15,900			253			(3,102		)	13,051
Other operating income	—			(270		)	—			(270		)
Income from operations	20,593			281			(8,232		)	12,642
Other (income) expense, net	645			(340		)	(20		)	285
Loss from continuing operations before benefit for income taxes and share of net income from joint venture	(32,201		)	621			(8,141		)	(39,721		)
Benefit for income taxes	9,428			(230		)	2,905			12,103
Loss from continuing operations	(21,529		)	391			(5,236		)	(26,374		)
Income from discontinued operations, net of tax (Note 2)							5,236			5,236
Net loss	$	(21,529	)	$	391					$	(21,138	)
Other comprehensive loss:
Foreign currency translation gain	9,240			271						9,511
Other comprehensive income	9,240			271						9,511
Comprehensive loss	$	(12,289	)	$	662					$	(11,627	)
Basic net loss per share	$	(0.78	)	$	0.01					$	(0.77	)
Diluted net loss per share	$	(0.78	)	$	0.01					$	(0.77	)

The following table presents the effect of the correction of the misstatements and reclassifications to conform to the current period's presentation on our Condensed Consolidated ~~Statements~~Statement of ~~Operations:~~

   Year Ended December 31, 2016
   As Previously
Reported    Adjustment    As Revised
Selling, general and administrative expense
   $ 80,266    $ (37 )    $ 80,229
Income from operations
   59,400    37    59,437
Write-off of unamortized debt issuance costs
   3,089    (500 )    2,589
Income (loss) before provision (benefit) for income taxes and share of net income from joint venture
   (7,309 )    537    (6,772 )
Provision (benefit) for income taxes
   (9,313 )    1,180    (8,133 )
Net income (loss)
   7,942    (643 )    7,299
Basic net income (loss) per share
   $ 0.29    $ (0.02 )    $ 0.27
Diluted net income (loss) per share
   $ 0.29    $ (0.02 )    $ 0.27

   Three Months Ended Nine Months Ended
   September 30, 2016 September 30, 2016
   As Previously
Reported Adjustment As Revised As Previously
Reported Adjustment As Revised
Selling, general and administrative expense
   $ 18,347 $ —   18,347 $ 60,651 $ (509 ) $ 60,142
Income (loss) from operations
   18,727 —   18,727 47,304 509 47,813
Interest expense
   16,337 (466 ) 15,871 48,924 —   48,924
Income (loss) before provision (benefit) for income taxes and share of net income from joint venture
   (3,703 ) 466 (3,237 ) (5,760 ) 509 (5,251 )
Provision (benefit) for income taxes
   (6,423 ) 158 (6,265 ) (6,469 ) 173 (6,296 )
Net income (loss)
   4,147 308 4,455 4,879 336 5,215
Basic net income (loss) per share
   $ 0.15 $ 0.01 $ 0.16 $ 0.18 $ 0.01 $ 0.19
Diluted net income (loss) per share
   $ 0.15 $ 0.01 $ 0.16 $ 0.18 $ 0.01 $ 0.19

   Three Months Ended    Six Months Ended
   June 30, 2016    June 30, 2016
   As Previously
Reported    Adjustment As Revised    As Previously
Reported Adjustment As Revised
Selling, general and administrative expense
   $ 21,592    $ (599 ) $ 20,993    $ 42,304 $ (509 ) $ 41,795
Income from operations
   16,703    599 17,302    28,577 509 29,086
Interest expense
   16,165    466 16,631    32,587 466 33,053
Income (loss) before provision (benefit) for income taxes and share of net income from joint venture
   1,362    133 1,495    (2,057 ) 43 (2,014 )
Provision (benefit) for income taxes
   674    45 719    (46 ) 15 (31 )
Net income
   2,031    88 2,119    732 28 760
Basic net income per share
   $ 0.08    $ —   $ 0.08    $ 0.03 $ —   $ 0.03
Diluted net income per share
   $ 0.07    $ 0.01 $ 0.08    $ 0.03 $ —   $ 0.03

   Three Months Ended
   March 31, 2016
   As Previously
Reported    Adjustment    As Revised
Selling, general and administrative expense
   $ 20,712    $ 90    $ 20,802
Income (loss) from operations
   11,874    (90 )    11,784
Income (loss) before provision (benefit) for income taxes and share of net income from joint venture
   (3,419 )    (90 )    (3,509 )
Provision (benefit) for income taxes
   (720 )    (31 )    (751 )
Net income (loss)
   (1,299 )    (59 )    (1,358 )
Basic net income (loss) per share
   $ (0.05 )    $ —      $ (0.05 )
Diluted net income (loss) per share
   $ (0.05 )    $ —      $ (0.05 )

   Year Ended December 31, 2015
   As Previously
Reported    Adjustment    As Revised
Selling, general and administrative expense
   $ 51,745    $ 37    $ 51,782
Income (loss) from operations
   26,797    (37 )    26,760
Write-off of unamortized debt issuance costs
   18,673    500    19,173
Income (loss) before provision (benefit) for income taxes and share of net income from joint venture
   (22,950 )    (537 )    (23,487 )
Provision (benefit) for income taxes
   (10,518 )    (1,180 )    (11,698 )
Net income (loss)
   (7,431 )    643    (6,788 )
Basic net income (loss) per share
   $ (0.35 )    $ 0.03    $ (0.32 )
Diluted net income (loss) per share
   $ (0.35 )    $ 0.03    $ (0.32 )

~~The following tables present the effect of the revision on our Condensed Consolidated Statements of Comprehensive Income (Loss):~~

   Three Months Ended
   March 31, 2017
   As Previously
Reported    Adjustment    As Revised
Net income
   $ 7,407    $ —      $ 7,407
Foreign currency translation gain (loss)
   4,706    298    5,004






Other comprehensive income (loss)
   4,706    298    5,004






Comprehensive income (loss)
   $ 12,113    $ 298    $ 12,411

   Year Ended December 31, 2016
   As Previously
Reported    Adjustment    As Revised
Net income (loss)
   $ 7,942    $ (643 )    $ 7,299
Change in fair value of interest rate hedge
   3,015    (1,105 )    1,910
Foreign currency translation gain (loss)
   (8,984 )    (743 )    (9,727 )






Other comprehensive income (loss)
   (5,969 )    (1,848 )    (7,817 )






Comprehensive income (loss)
   $ 1,973    $ (2,491 )    $ (518 )

   Three Months Ended Nine Months Ended
   September 30, 2016 September 30, 2016
   As Previously
Reported    Adjustment As Revised As Previously
Reported    Adjustment As Revised
Net income
   $ 4,147    $ 308 $ 4,455 $ 4,879    $ 336 $ 5,215
Change in fair value of interest rate hedge
   4,211    (1,967 ) 2,244 3,130    (1,105 ) 2,025
Foreign currency translation gain (loss)
   382    (760 ) (378 ) 4,176    (2,402 ) 1,774






Other comprehensive income (loss)
   4,593    (2,727 ) 1,866 7,306    (3,507 ) 3,799






Comprehensive income (loss)
   $ 8,740    $ (2,419 ) $ 6,321 $ 12,185    $ (3,171 ) $ 9,014

   Three Months Ended Six Months Ended
   June 30, 2016 June 30, 2016
   As Previously
Reported Adjustment As Revised As Previously
Reported Adjustment As Revised
Net income
   $ 2,031 $ 88 $ 2,119 $ 732 $ 28 $ 760
Change in fair value of interest rate hedge
   (79 ) 495 416 (1,081 ) 862 (219 )
Foreign currency translation gain (loss)
   (2,925 ) (2,146 ) (5,071 ) 3,794 (1,642 ) 2,152


Other comprehensive income (loss)
   (3,004 ) (1,651 ) (4,655 ) 2,713 (780 ) 1,933


Comprehensive income (loss)
   $ (973 ) $ (1,563 ) $ (2,536 ) $ 3,445 $ (752 ) $ 2,693

   Three Months Ended
   March 31, 2016
   As Previously
Reported    Adjustment    As Revised
Net income (loss)
   $ (1,299 )    $ (59 )    $ (1,358 )
Change in fair value of interest rate hedge
   (1,002 )    367    (635 )
Foreign currency translation gain (loss)
   6,719    504    7,223






Other comprehensive income (loss)
   5,717    871    6,588






Comprehensive income (loss)
   $ 4,418    $ 812    $ 5,230

   Year Ended December 31, 2015
   As Previously
Reported    Adjustment    As Revised
Net income (loss)
   $ (7,431 )    $ 643    $ (6,788 )
Change in fair value of interest rate hedge
   (2,584 )    947    (1,637 )
Foreign currency translation gain (loss)
   (21,936 )    (3,075 )    (25,011 )






Other comprehensive income (loss)
   (24,520 )    (2,128 )    (26,648 )






Comprehensive income (loss)
   $ (31,951 )    $ (1,485 )    $ (33,436 )

   Year Ended December 31, 2014
   As Previously
Reported    Adjustment    As Revised
Net income (loss)
   $ 8,217    $ —      $ 8,217
Change in fair value of interest rate hedge
   (431 )    158    (273 )
Foreign currency translation gain (loss)
   (17,731 )    (868 )    (18,599 )






Other comprehensive income (loss)
   (18,162 )    (710 )    (18,872 )






Comprehensive income (loss)
   $ (9,945 )    $ (710 )    $ (10,655 )

~~The following tables present the effect of the revision on our Condensed Consolidated Balance Sheets:~~

   As of March 31, 2017
   As Previously
Reported    Adjustment    As Revised
Investment in joint venture
   $ 42,387    $ (4,388 )    $ 37,999
Total assets
   1,391,043    (4,388 )    1,386,655
Accumulated other comprehensive income (loss)
   (20,416 )    (4,388 )    (24,804 )
Total stockholders’ equity
   327,879    (4,388 )    323,491
Total liabilities and stockholders’ equity
   1,391,043    (4,388 )    1,386,655

   As of December 31, 2016
   As Previously
Reported    Adjustment    As Revised
Investment in joint venture
   $ 40,694    $ (4,686 )    $ 36,008
Total assets
   1,360,386    (4,686 )    1,355,700
Accumulated other comprehensive income (loss)
   (25,122 )    (4,686 )    (29,808 )
Total stockholders’ equity
   315,199    (4,686 )    310,513
Total liabilities and stockholders’ equity
   1,360,386    (4,686 )    1,355,700

   As of December 31, 2015
   As Previously
Reported    Adjustment    As Revised
Current deferred tax assets
   $ 6,696    $ 3,707    $ 10,403
Total current assets
   280,181    3,707    283,888
Property, plant and equipment, net
   318,968    (329 )    318,639
Goodwill, net
   449,898    5,072    454,970
Investment in joint venture
   38,462    (2,212 )    36,250
Total assets
   1,380,567    6,238    1,386,805
Accrued salaries, wages and benefits
   21,125    (300 )    20,825
Income taxes payable
   5,350    44    5,394
Total current liabilities
   133,351    (256 )    133,095
Non-current deferred tax liabilities
   117,459    8,176    125,635
Other liabilities
   4,746    178    4,924
Total liabilities
   1,066,686    8,098    1,074,784
Additionalpaid-in capital
   277,582    335    277,917
Retained earnings
   55,151    643    55,794
Accumulated other comprehensive income (loss)
   (19,153 )    (2,839 )    (21,992 )
Total stockholders’ equity
   313,881    (1,861 )    312,020
Total liabilities and stockholders’ equity
   1,380,567    6,238    1,386,805

~~The following tables present the effect of the revision on our Condensed Consolidated Statements of Changes in Stockholders’ Equity:~~

   As Previously
   Reported    Adjustment    As Revised
As of and for the year ended December 31, 2014

Change in fair value of interest rate hedge
   $ (431 )    $ 158    $ (273 )
Foreign currency translation gain (loss)
   (17,731 )    (868 )    (18,599 )
Accumulated other comprehensive income (loss)
   5,367    (710 )    4,657
Total stockholders’ equity
   173,699    (710 )    172,989
As of and for the year ended December 31, 2015

Net income (loss)
   (7,431 )    643    (6,788 )
Change in fair value of interest rate hedge
   (2,584 )    947    (1,637 )
Foreign currency translation gain (loss)
   (21,936 )    (3,075 )    (25,011 )
Accumulated other comprehensive income (loss)
   (19,153 )    (2,839 )    (21,992 )
Additional paid-in capital
   277,582    335    277,917
Total stockholders’ equity
   313,881    (1,861 )    312,020
As of and for the year ended December 31, 2016

Net income (loss)
   7,942    (643 )    7,299
Change in fair value of interest rate hedge
   3,015    (1,105 )    1,910
Foreign currency translation gain (loss)
   (8,984 )    (743 )    (9,727 )
Accumulated other comprehensive income (loss)
   (25,122 )    (4,686 )    (29,808 )
Total stockholders’ equity
   315,199    (4,686 )    310,513
As of and for the three-months ended March 31, 2017

Foreign currency translation gain (loss)
   4,706    298    5,004
Accumulated other comprehensive income (loss)
   (20,416 )    (4,388 )    (24,804 )
Total stockholders’ equity
   327,879    (4,388 )    323,491

~~Note 15. Subsequent Event~~

On July 10, 2017, we entered into a definitive agreement to sell our Precision Bearing Components Group for $375 million in cash, subject to certain adjustments, to TSUBAKI NAKASHIMA Co., Ltd. The transaction is expected to be completed in the second half of 2017 and is subject to regulatory and customary closing conditions. Net proceeds are expected to be approximately $270 million. Precision Bearing Components Group results will be reported as discontinued operations in our financial statements after the transaction closes.

Cash Flows.



	Six Months Ended June 30, 2017
	As Originally Reported			Adjustment			Reclasses (1)		As Revised
Cash flows from operating activities
Net loss	$	(14,122	)	$	395				$	(13,727	)
Adjustments to reconcile net loss to net cash provided by (used by) operating activities:
Depreciation and amortization	31,468			265					31,733			(2)
Gain on disposals or property, plant and equipment	(268		)				268		—
Loss on extinguishment of debt and write-off of debt issuance costs	8,054						31,585		39,639
Other	638			(268		)	(268	)	102
Changes in operating assets and liabilities:
Income taxes receivable	(10,841		)	229					(10,612		)
Other	(7,247		)	(889		)			(8,136		)
Net cash provided by (used by) operating activities	(15,552		)	(268		)	31,585		15,765
Cash flows from investing activities
Proceeds from disposals of property, plant and equipment	356			—			(356	)	—
Other	—			268			356		624
Net cash provided by (used by) investing activities	(20,302		)	268			—		(20,034		)
Cash flows from financing activities
Cash paid for debt issuance or prepayment costs	(6,545		)				(31,585	)	(38,130		)
Proceeds from issuance of stock and exercise of stock options	2,592						(2,592	)	—
Shares withheld to satisfy income tax withholding	(413		)				413		—
Principal payments on capital leases	(2,059		)				2,059		—
Other	—						120		120
Net cash provided by (used by) financing activities	39,762						(31,585	)	8,177


(1)	Includes the reclassification of prior period amounts to reflect current period presentation, including the addition of the income taxes payable (receivable) line, the adoption of ASU 2016-15, and condensing immaterial amounts.


(2)	Depreciation and amortization of $6.1 million is included in income from discontinued operations on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the six months ended June 30, 2017.


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 for the medical, aerospace and defense, electrical, automotive and general industrial markets. 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. As of June 30, 2018, we had 51 facilities in North America, Europe, South America and China.

Forward-Looking Statements

This Quarterly Report on Form10-Q contains forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements may discuss goals, intentions and expectations as to future trends, plans, events, results of operations or financial condition, or state other information relating to ~~us,~~NN, Inc., based on current beliefs of management as well as assumptions made by, and information currently available to, management. Forward-looking statements generally will be accompanied by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “guidance,” “intend,” “may,” “possible,” “potential,” “predict,” “project” or other similar words, phrases or

expressions. Forward-looking statements involve a number of risks and uncertainties that are outside of ~~our~~management’s control and that may cause actual results to be materially different from such forward-looking statements. Such factors include, among others, general economic conditions and economic conditions in the industrial sector, competitive influences, risks that current customers will commence or increase captive production, risks of capacity underutilization, quality issues, availability of raw materials, currency and other risks associated with international trade, our dependence on certain major customers, the impact of acquisitions and divestitures, unanticipated difficulties integrating acquisitions, ~~inability to consummate the proposed transaction with TSUBAKI NAKASHIMA Co. Ltd. (“Tsubaki”), on the terms contemplated, or at all, and the timing of the closing for the proposed transaction,~~ new laws and governmental regulations, and other risk factors and cautionary statements listed fromtime-to-time in our periodic reports filed with the Securities and Exchange Commission. We disclaim any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements included herein or therein to reflect future events or developments.

For additional information concerning such risk factors and cautionary statements, please see the section titled “Item 1A. Risk Factors” in our ~~2016~~2017 Annual Report on Form10-K for the fiscal year ended December 31, ~~2016,~~2017, which we filed with the SEC on ~~March 16, 2017~~April 2, 2018 (the ~~“2016~~“2017 Annual Report”).

Results of Operations

Factors That May Influence Results of Operations

The following paragraphs describe factors that have influenced results of operations for the six months ended June 30, ~~2017,~~2018, that ~~we believe~~management believes are important to provide an understanding of ~~our~~the business and results of operations.

~~Debt Refinancing~~

~~On April 3, 2017,~~

Management Structure

In January 2018, we ~~redeemed our Senior Notes for $281.6 million resulting in a loss on debt extinguishment of $36.3 million, including $31.6 million cash paid for the call premium and a $4.7 millionnon-cashwrite-off~~ ~~of unamortized debt issuance costs. The Senior Notes were redeemed and the call premium was paid with the proceeds of~~implemented a new ~~$300.0 million Incremental Term Loan that~~enterprise and management structure designed to accelerate growth and further balance our portfolio by aligning our strategic assets and businesses. Our businesses were reorganized into the Mobile Solutions, Power Solutions, and Life Sciences groups and are based principally on the end markets they serve. The Autocam Precision Components Group reported in our historical financial statements was ~~added by amendment~~renamed as Mobile Solutions. Mobile Solutions is focused on growth in the general industrial and automotive end markets. The Precision Engineered Products Group reported in our historical financial statements was bifurcated into two new groups – Power Solutions and Life Sciences. Power Solutions is focused on growth in the electrical and aerospace and defense end markets. Life Sciences is focused on growth in the medical end market. In the first quarter of 2018, we began reporting our financial results based on these new reportable segments. Prior year amounts have been revised to ~~our existing credit facility. The Incremental Term Loan bears interest at the lower of 0.75% orone-month~~ LIBOR, plus 3.75%, and matures on April 3, 2021, with payments of $3.0 million due quarterly. Concurrent with the amendment, the Senior Secured Revolver was reduced from $143.0 million to $100.0 million until such time as a certain leverage ratio covenant threshold has been met for four consecutive fiscal quarters. Upon satisfaction of the ratio threshold, the Senior Secured Revolver may be restored to $143.0 million. In connection with the amendment, we paid $6.5 million in debt issuance costs of which $4.0 million was recorded as a direct reductionconfirm to the carrying amount of the associated debt and $2.5 million was recognized as a loss on modification of the Senior Secured Term Loan. Debt issuance costs related to the amendment were paid with proceeds from the Incremental Term Loan. Also in connection with the amendment, we wrote off $0.8 million of unamortized debt issuance costs related to the modification of the Senior Secured Revolver.

current year presentation.

Prior Periods’ Financial Statement Revision

Certain prior period amounts have been revised to reflect the impact of ~~adjustments made to our joint venture investment~~corrections of misstatements and to correct the timing of previously recorded out-of-period adjustments. Refer to Note 1 and Note 1417 in the Notes to Condensed Consolidated Financial Statements for more information.

~~Subsequent Event~~

Life Sciences Acquisitions

On ~~July 10, 2017,~~May 7, 2018, we ~~entered into a definitive agreement to sell our Precision Bearing Components Group~~acquired 100% of the stock of PMG Intermediate Holding Corporation, the parent company of Paragon Medical, Inc. (“~~PBC”~~Paragon Medical”) for ~~$375~~a base purchase price of $375.0 million in cash, subject to certain adjustments. After estimated working capital and other closing adjustments, the cash purchase price was approximately $391.0 million which included $13.4 million in cash acquired. We paid cash of $392.2 million and recorded a receivable of approximately $1.3 million in other current assets for the balance. For accounting purposes, Paragon Medical meets the definition of a business and has been accounted for as a business combination. Paragon Medical is a medical device manufacturer which focuses on the orthopedic, case and tray, implant and instrument markets. This acquisition continues our strategic focus to ~~Tsubaki. The transaction is expected to be completed~~expand our Life Sciences portfolio as well as create a balanced business by diversifying our products and finished device offerings. Operating results of Paragon Medical are reported prospectively from the date of acquisition in our Life Sciences group. We have performed a preliminary assessment of the ~~second half of 2017~~opening balance sheet and purchase price allocation which is subject to ~~regulatory~~completion of working capital adjustments and ~~customary closing conditions. Net proceeds~~fair value estimates. Opening balance sheet deferred taxes have been recorded based on estimates made as of the acquisition date as well as information currently available to management. As estimates are ~~expected~~refined and additional information is received throughout the measurement period, adjustments to ~~be approximately $270 million. Precision Bearing Components Group results~~opening deferred taxes will be recorded with an offsetting adjustment to goodwill. In connection with the closing of the Paragon Medical acquisition, we entered into a Second Lien Credit Agreement (the “Second Lien Credit Agreement”) for a $200.0 million secured second lien term loan facility (the “Second Lien Facility”). We utilized the net proceeds from the Second Lien Facility, together with cash on hand, to pay the Paragon Medical purchase price and fees and expenses related to the acquisition. We also entered into an

amendment to our existing credit facility to permit the Paragon Medical acquisition, to permit the Second Lien Credit Agreement, and to amend certain covenants.

On February 22, 2018, we completed the acquisition of 100% of the assets of Bridgemedica, LLC (“Bridgemedica”). For accounting purposes, Bridgemedica meets the definition of a business and has been accounted for as a business combination. Bridgemedica is a medical device company that provides concept to supply solutions through design, development engineering and manufacturing. Operating results of Bridgemedica are reported ~~as discontinued operations~~prospectively in our ~~financial statements~~Life Sciences group after the ~~transaction closes.~~acquisition date. We have finalized certain working capital adjustments and are in the process of completing the integration of the Bridgemedica business into our operations.

As discussed in our 2017 Annual Report, on October 2, 2017, we completed the acquisition of DRT Medical, LLC, which was subsequently named NN Life Sciences – Vandalia, LLC (“Vandalia”), a supplier of precision manufactured medical instruments and orthopedic implants with locations in Ohio and Pennsylvania.

Discontinued Operations

On August 17, 2017, we completed the sale of our global precision bearing components business (the “PBC Business”). The PBC Business included all our facilities that were engaged in the production of precision steel balls, steel rollers, and metal retainers and automotive specialty products used primarily in the bearing industry. The sale of the PBC Business furthers ~~our~~management’s long-term strategy to build a diversified industrial business with a comprehensive geographic footprint in attractive high-growth market segments. ~~We intend~~The PBC Business represented all of the Precision Bearing Components Group reportable segment disclosed in our historical financial statements.

In accordance with ASC 205-20, Presentation of Financial Statements – Discontinued Operations, the operating results of the PBC Business for the three and six months ended June 30, 2017, are classified as discontinued operations. The presentation of discontinued operations includes revenues and expenses of the discontinued operations, net of tax, as one line item on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). All historical Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) presented have been revised to ~~deploy~~reflect this presentation. Accordingly, results of the ~~proceeds into higher-growth, higher-margin end markets, while also accelerating~~PBC Business have been excluded from continuing operations and group results for all periods presented in the condensed consolidated financial statements and the accompanying notes unless otherwise stated. Refer to Note 2 in the Notes to Condensed Consolidated Financial Statements for more information.

Tax Reform

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act reduces the U.S. federal corporate income tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and creates new taxes on certain foreign sourced earnings.

At December 31, 2017, we made an estimate of the effects on the one-time transition tax and included this in our ~~focus on deleveraging.~~

provisional amount. The ultimate impact could possibly differ materially from this provisional amount due to, among other things, additional analysis, changes in interpretations and assumptions we have made, and additional interpretive regulatory guidance that may be issued. In accordance with Staff Accounting Bulletin No. 118, we may record additional provisional amounts during a measurement period not to extend beyond one year of the enactment date of the Tax Act. The accounting is expected to be complete when our 2017 U.S. corporate income tax return is filed in 2018, and any measurement period adjustments will be recognized as income tax expense or benefit in 2018. As of June 30, 2018, no changes are expected to be made to this estimate.

Three Months Ended June 30, ~~2017~~2018, Compared to the Three Months Ended June 30, ~~2016~~

~~OVERALL RESULTS~~

   Consolidated NN, Inc.
Three Months Ended June 30,
   2017 2016 Change
Net sales
   $ 225,875 $ 214,272 $ 11,603
Volume
   12,837
Foreign exchange effects
   (2,033 )
Price/material inflation pass-through/mix
   799
Cost of products sold (exclusive of depreciation and amortization shown separately below)
   166,040 156,794 9,246
Volume
   9,389
Foreign exchange effects
   (1,450 )
Mix
   2,448
Inflation
   1,655
Cost reduction projects/other
   (2,796 )
Selling, general and administrative expense
   23,036 20,993 2,043
Foreign exchange effects
   (56 )
Infrastructure and staffing costs
   2,099
Depreciation and amortization
   15,900 15,136 764
Restructuring and integration expense
   306 4,047 (3,741 )


Income from operations
   20,593 17,302 3,291
Interest expense
   12,409 16,631 (4,222 )
Loss on extinguishment of debt andwrite-off of unamortized debt issuance costs
   39,639 —   39,639
Derivative losses on change in interest rate swap fair value
   101 —   101
Other (income) expense, net
   645 (824 ) 1,469


Income (loss) before provision (benefit) for income taxes and share of net income from joint venture
   (32,201 ) 1,495 (33,696 )
Provision (benefit) for income taxes
   (9,428 ) 719 (10,147 )
Share of net income from joint venture
   1,244 1,343 (99 )


Net income (loss)
   $ (21,529 ) $ 2,119 $ (23,648 )

2017

Overall Consolidated Results

Three Months Ended June 30,
2018 2017 $ Change
Net sales $ 196,349
$ 157,947
$ 38,402

Acquisitions $ 37,157
Volume 3,445
Foreign exchange effects 309
Price/mix/inflation/other (2,509 )
Cost of sales (exclusive of depreciation and amortization shown separately below) 148,640
114,514
34,126

Acquisitions $ 29,413
Volume 2,528
Foreign exchange effects 308
Cost reduction projects (1,849 )
Mix/inflation/other 3,726
Selling, general and administrative expense 26,641
18,004
8,637

Acquisition related costs excluded from selling, general and administrative expense 3,437
—
3,437

Depreciation and amortization 16,258
13,051
3,207

Other operating expense (income) 74
(270 ) 344

Restructuring and integration expense 1,591
6
1,585

Income (loss) from operations (292 ) 12,642
(12,934 )
Interest expense 15,988
12,338
3,650

Loss on extinguishment of debt and write-off of debt issuance costs 12,938
39,639
(26,701 )
Derivative loss on change in interest rate swap fair value —
101
(101 )
Other (income) expense, net 1,887
285
1,602

Loss from continuing operations before benefit for income taxes and share of net income from joint venture (31,105 ) (39,721 ) 8,616

Benefit for income taxes 5,947
12,103
(6,156 )
Share of net income from joint venture 647
1,244
(597 )
Loss from continuing operations (24,511 ) (26,374 ) 1,863

Income from discontinued operations, net of tax —
5,236
(5,236 )
Net loss $ (24,511 ) $ (21,138 ) $ (3,373 )

Net Sales. Net sales increased by $38.4 million, or 24%, in the second quarter of 2018 compared to the second quarter of 2017 primarily due to $37.2 million of net sales attributable to the Paragon Medical, Bridgemedica, and Vandalia businesses acquired in our Life Sciences group. Higher volumes contributed another $3.4 million to the increase primarily as a result of demand improvements within the automotive end market. Overall, from the three months ended June 30, 2017, to the three months ended June 30, 2018, net sales increased by $1.4 million for our Mobile Solutions group, increased by $1.1 million for our Power Solutions group, and increased by $36.0 million for our Life Sciences group, respectfully. In the three months ended June 30, 2018 and 2017, sales of $0.7 million and $0.6 million, respectively, between our Power Solutions and Life Sciences groups were eliminated in consolidation.

Cost of Sales. The increase in cost of sales was primarily due to $29.4 million in cost of sales attributable to the Paragon Medical, Bridgemedica, and Vandalia acquisitions, including $3.4 million for a one-time increase in cost of sales for inventory fair value adjustment for Paragon Medical. Higher volumes also contributed $2.5 million to the increase, consistent with the increase in sales demand. Increases were partially offset by $1.8 million in cost savings from production process improvement projects.

Selling, General and Administrative Expense. The majority of the increase in selling, general and administrative expense during the three months ended June 30, 2018, compared to the three months ended June 30, 2017, was due to infrastructure and

staffing costs incurred related to our strategic initiatives, including integration of recent acquisitions and a global implementation of an enterprise resource planning (“ERP”) system. The Paragon Medical, Bridgemedica, and Vandalia businesses contributed $1.5 million to selling, general and administrative expense during the three months ended June 30, 2018, which was not present during the three months ended June 30, 2017, prior to the acquisitions.

Acquisition Related Costs Excluded from Selling, General and Administrative. Acquisition related costs are primarily third party legal, accounting, valuation consulting and investment banking advisory fees incurred in connection with the Life Sciences acquisitions.

Depreciation and Amortization. The increase in depreciation and amortization during the three months ended June 30, 2018, compared to the three months ended June 30, 2017, was consistent with additions to intangible assets and property, plant and equipment, including $2.8 million from the Paragon Medical, Bridgemedica, and Vandalia businesses. This additional depreciation and amortization includes the related fair value adjustments to certain property, plant and equipment and the addition of intangible assets, principally for customer relationships and trade names.

Restructuring and Integration Expense. The increase in restructuring and integration expense was primarily due to employee severance costs incurred in connection with the Paragon Medical acquisition. Note 11 in the Notes to Condensed Consolidated Financial Statements provides more information regarding the effects of restructuring and integration on our operating results.

Interest Expense. Interest expense increased by $3.7 million during the three months ended June 30, 2018, compared to the three months ended June 30, 2017, primarily due to interest on the Second Lien Facility which was not in place during the three months ended June 30, 2017, and bears interest at a higher rate than our existing credit facility. This increase was partially offset by further interest savings resulting from the refinancing of the Senior Secured Term Loan and the Incremental Term Loan on November 24, 2017.



	Three Months Ended June 30,
	2018			2017
Interest on debt	$	14,875		$	11,451
Amortization of debt issuance costs	1,225			914
Interest on capital leases and other	141			256
Capitalized interest (1)	(253		)	(283		)
Total interest expense	$	15,988		$	12,338


(1)	Capitalized interest primarily relates to equipment construction efforts at various plants.

Loss on Extinguishment of Debt and Write-off of Unamortized Debt Issuance Costs. The $12.9 million write-off in 2018 resulted from costs related to the Second Lien facility and the amendment to the existing credit facility. The $39.6 million write-off in 2017 resulted from the extinguishment of our Senior Notes and modification of our credit facility on April 3, 2017.

Benefit for Income Taxes. Our effective tax rate from continuing operations was 19.1% for the three months ended June 30, 2018, compared to 30.5% for the three months ended June 30, 2017. Note 9 in the Notes to Condensed Consolidated Financial Statements describes the components of income taxes for each period presented.

Share of Net Income from Joint Venture. Our share of net income from a Chinese joint venture in our Mobile Solutions group decreased by $0.6 million. The joint venture’s net income decreased primarily due to price and volume decreases and increased raw material costs.

Results by Group

MOBILE SOLUTIONS

Mobile Solutions is focused on growth in the general industrial and automotive end markets. We have developed an expertise in manufacturing highly complex, system critical components for fuel systems, engines and transmissions, power steering systems and electromechanical motors on a high-volume basis. This expertise has been gained through investment in technical capabilities, processes and systems, and skilled program management and product launch capabilities.



	Three Months Ended June 30,
	2018		2017		$ Change
Net sales	$	88,079	$	86,658	$	1,421
Volume								$	2,363
Foreign exchange effects								263
Price/mix/inflation/other								(1,205		)

Income from operations	$	7,380	$	10,688	$	(3,308	)

Net sales increased during the second quarter of ~~2017~~2018 from the second quarter of ~~2016 by $11.6 million, principally~~2017 due to market demand improvements for our steering systems application components resulting from an industry shift from hydraulics to electric-assist steering systems technology. We are realizing the indirect benefits of our customers taking an increasing portion of market share. Also, as the Brazilian economy improves, demand for automotive products is increasing. These volume increases were partially offset by price reductions granted to our customers.

Income from operations decreased by $3.3 million compared to prior year due to various factors including higher ~~volumes. The~~start-up costs related to new product launches, lower pricing as noted above, and higher ~~volumes~~depreciation and lease expenses. These factors were partially offset by implementation of cost savings initiatives and the beneficial impact of higher production volumes.

POWER SOLUTIONS

Power Solutions is focused on growth in the electrical, and aerospace and defense end markets. Within this group we combine materials science expertise with advanced engineering and production capabilities to design and manufacture a broad range of high-precision metal and plastic components, assemblies and finished devices used in applications ranging from power control to flight control and for military devices.

We manufacture a variety of products including electrical contacts, connectors, contact assemblies and precision stampings for the electrical end market and high precision products for the aerospace and defense end markets utilizing our extensive process technologies for optical grade plastics, thermally conductive plastics, titanium, Inconel, magnesium and electroplating.



	Three Months Ended June 30,
	2018		2017		$ Change
Net sales	$	49,820	$	48,734	$	1,086
Volume								$	1,050
Foreign exchange effects								46
Price/mix/inflation/other								(10		)

Income from operations	$	6,000	$	6,819	$	(819	)

Net sales increased during the second quarter of 2018 from the second quarter of 2017 primarily due to growth in the electrical products business.

Income from operations decreased by $0.8 million primarily due to a shift in product mix toward higher cost raw materials, such as precious metals used in power control products, and investments in the development of new products that we are preparing to launch in the aerospace end market later in 2018. Higher sales volumes partially offset these increased costs.

LIFE SCIENCES



	Three Months Ended June 30,
	2018		2017		$ Change
Net sales	$	59,153	$	23,114	$	36,039
Acquisitions								$	37,157
Volume								32
Foreign exchange effects								—
Price/mix/inflation/other								(1,150		)

Income from operations	$	2,041	$	3,798	$	(1,757	)

Net sales increased during the second quarter of 2018 from the second quarter of 2017 primarily due to $37.2 million of net sales attributable to the Paragon Medical, Bridgemedica, and Vandalia acquisitions.

Income from operations decreased by $1.8 million primarily due to $3.4 million in cost of sales for inventory fair value adjustment at Paragon Medical, acquisition related restructuring and integration costs, and other costs of establishing the Life Sciences Group.

Six Months Ended June 30, 2018, Compared to the Six Months Ended June 30, 2017

Overall Consolidated Results



	Six Months Ended June 30,
	2018			2017			$ Change
Net sales	$	365,497		$	315,502		$	49,995
Acquisitions										$	46,139
Volume										4,710
Foreign exchange effects										2,522
Price/mix/inflation/other										(3,376		)
Cost of sales (exclusive of depreciation and amortization shown separately below)	275,084			228,994			46,090
Acquisitions										$	36,711
Volume										3,675
Foreign exchange effects										1,946
Cost reduction projects										(5,404		)
Mix/inflation/other										9,162
Selling, general and administrative expense	48,818			34,645			14,173
Acquisition related costs excluded from selling, general and administrative expense	5,213			—			5,213
Depreciation and amortization	30,539			25,622			4,917
Other operating expense (income)	96			(270		)	366
Restructuring and integration expense	2,346			17			2,329
Income from operations	3,401			26,494			(23,093		)
Interest expense	27,984			27,177			807
Loss on extinguishment of debt and write-off of debt issuance costs	12,938			39,639			(26,701		)
Derivative loss on change in interest rate swap fair value	—			13			(13		)
Other (income) expense, net	1,574			(437		)	2,011
Loss from continuing operations before benefit for income taxes and share of net income from joint venture	(39,095		)	(39,898		)	803
Benefit for income taxes	7,123			12,480			(5,357		)
Share of net income from joint venture	1,478			2,937			(1,459		)
Loss from continuing operations	(30,494		)	(24,481		)	(6,013		)
Income from discontinued operations, net of tax (Note 2)	—			10,754			(10,754		)
Net loss	$	(30,494	)	$	(13,727	)	$	(16,767	)

Net Sales. Net sales increased by $50.0 million, or 16%, in the six months ended June 30, 2018, compared to the six months ended June 30, 2017, primarily due to $46.1 million of net sales attributable to the Paragon Medical, Bridgemedica, and Vandalia businesses acquired in our Life Sciences group. Higher volumes contributed another $4.7 million to the increase primarily as a result of demand improvements within the automotive ~~industrial~~end market. Overall, from the six months ended June 30, 2017, to the six months ended June 30, 2018, net sales increased by $4.8 million for our Mobile Solutions group, increased by $1.3 million for our Power Solutions group, and ~~medical markets. Overall,~~increased by $44.1 million for our Life Sciences group, respectfully. In the six months ended June 30, 2018 and 2017, sales ~~were ahead~~ of ~~prior year by $2.8 million, $3.7~~$1.2 million and ~~$5.1~~$1.0 million, ~~for PBC, the Autocam Precision Components Group (“APC”),~~respectively, between our Power Solutions and ~~the Precision Engineered Products Group (“PEP”), respectively. These increases~~Life Sciences groups were ~~partially offset by the impact of devaluation of the euro and other foreign currency denominated sales.~~

eliminated in consolidation.

Cost of ~~Products Sold.~~Sales.The increase in cost of ~~products sold~~sales was primarily due to $36.7 million in cost of sales attributable to the Paragon Medical, Bridgemedica, and Vandalia acquisitions, including $3.4 million for a one-time increase in cost of sales for inventory fair value adjustment for Paragon Medical. Higher volumes also contributed $3.7 million to the increase, consistent with the increase in ~~demand and production volumes. These increases~~sales demand. Increases were partially offset by ~~the impact of the devaluation of the euro and other foreign currency denominated costs. Additionally, increases were partially offset by~~$5.4 million in cost savings from production process improvement projects.

Selling, General and Administrative Expense. The majority of the increase in selling, general and administrative expense during the ~~second quarter of~~six months ended June 30, 2018, compared to the six months ended June 30, 2017, ~~from the second quarter of 2016~~ was due to ~~the~~ infrastructure and staffing costs incurred related to our strategic ~~initiatives.~~

initiatives, including integration of recent acquisitions and a global implementation of an enterprise resource planning (“ERP”) system. The Paragon Medical, Bridgemedica, and Vandalia businesses contributed $2.0 million to selling, general and administrative expense during the six months ended June 30, 2018, which was not present during the six months ended June 30, 2017, prior to the acquisitions.

Depreciation and Amortization. The increase in depreciation and amortization during the six months ended June 30, 2018, compared to the six months ended June 30, 2017, was consistent with additions to intangible assets and property, plant and equipment, including $3.5 million from the Paragon Medical, Bridgemedica, and Vandalia businesses. This additional depreciation and amortization includes the related step-ups of certain property, plant and equipment to fair value and the addition of intangible assets, principally for customer relationships and trade names.

Restructuring and Integration Expense.The ~~decrease~~increase in restructuring and integration expense was primarily due to ~~limited spending on restructuring~~employee severance costs incurred in connection with implementing our new enterprise and management structure. Note 11 in the ~~second quarter~~Notes to Condensed Consolidated Financial Statements provides more information regarding the effects of ~~2017~~restructuring and integration on our operating results.

Interest Expense. Interest expense increased by $0.8 million during the six months ended June 30, 2018, compared to the ~~second quarter of 2016. The second quarter of 2016 included $2.1 million of cost incurred~~six months ended June 30, 2017, primarily due to ~~close~~interest on the ~~Wheeling Plant~~Second Lien Facility which was not in place during the six months ended June 30, 2017, and ~~$1.7 million of cost for headcount reduction in PBC.~~

~~Interest Expense~~~~. Interest expense decreased~~bears interest at a higher rate than our existing credit facility. This increase was partially offset by ~~$4.2 million due to~~ the redemption of ~~the~~our Senior Notes ~~at the beginning of the second quarter of~~on April 3, 2017, with the proceeds of ~~the~~our Incremental Term Loan, which bears ~~a lower~~an interest rate based on ~~LIBOR.~~

   Three Months Ended
June 30,
Source
   2017    2016
Interest on debt
   $ 11,451    $ 15,241
Interest rate swaps settlements
   —      466
Amortization of debt issuance costs
   914    1,047
Capital lease interest
   327    278
Capitalized interest (1)
   (283 )    (401 )




Total interest expense
   $ 12,409    $ 16,631

~~(1)~~

~~Capitalized interest primarily relates to the equipment construction efforts at the various plants.~~

~~Loss~~LIBOR which is lower than the 10.25% fixed interest rate on ~~Extinguishment of Debt andWrite-off~~ ~~of Unamortized Debt Issuance Cost.~~ ~~The $39.6 millionwrite-off~~ ~~resulted from the extinguishment of~~ the Senior ~~Notes and modification of the credit facility on April 3, 2017.~~

~~Other (Income) Expense, Net.~~~~The change in other income and expenses was primarily due to foreign currency exchange effects related to the Brazilian real and the euro.~~

~~Net Income (Loss).~~ ~~The $39.6 million loss on extinguishment of debt andwrite-off~~ of unamortized debt issuance cost was the primary reason for the net loss in the second quarter of 2017. This loss was partially offset by a $3.3 million increase in income from operations, a $4.2 million reduction in interest expense, and a $10.1 million decrease in income tax expense. Significant components of the changes in income from operations and interest expense were presented in the preceding paragraphs. The decrease in tax expense includes the tax effect of the loss on extinguishment of debt and~~write-off~~ ~~of unamortized debt issuance cost.~~

~~RESULTS BY SEGMENT~~

~~PRECISION BEARING COMPONENTS GROUP~~

   Three Months Ended June 30,
   2017    2016    Change
Net sales
   $ 67,928    $ 65,157    $ 2,771
Volume
            2,789
Foreign exchange effects
            (1,596 )
Price/material inflation pass-through/mix
            1,578
Income from operations
   $ 8,351    $ 6,474    $ 1,877

Net sales increased by $2.8 million during the second quarter of 2017 from the second quarter of 2016 due to higher demand volumes. The higher volumes were primarily due to demand improvements within the industrial and automotive markets.

The primary driver of the improvement in income from operations was a $1.4 million reduction in restructuring costs compared to the second quarter of 2016, primarily related to headcount reductions in the prior year. The remaining increase in income from operations was consistent with the increase in net sales.

~~AUTOCAM PRECISION COMPONENTS GROUP~~

   Three Months Ended June 30,
   2017    2016    Change
Net sales
   $ 86,658    $ 82,991    $ 3,667
Volume
            4,229
Foreign exchange effects
            (77 )
Price/material inflation pass-through/mix
            (485 )
Income from operations
   $ 10,688    $ 7,770    $ 2,918

Net sales increased by $3.7 million during the second quarter of 2017 from the second quarter of 2016 due to increased demand in the industrial market in the US and Asia and new automotive program launches in the US, Asia and Brazil.

The primary driver of the improvement in income from operations was a $2.1 million reduction in restructuring costs compared to the second quarter of 2016, primarily related to the closure of the Wheeling Plant in the prior year. The additional increase in income from operations was consistent with the increase in net sales.

~~PRECISION ENGINEERED PRODUCTS GROUP~~

   Three Months Ended June 30,
   2017    2016    Change
Net sales
   $ 71,289    $ 66,124    $ 5,165
Volume
            5,819
Foreign exchange effects
            (360 )
Price/material inflation pass-through/mix
            (294 )
Income from operations
   $ 10,600    $ 10,782    $ (182 )

Net sales increased by $5.2 million during the second quarter of 2017 from the second quarter of 2016 primarily due to the overall improvement in demand across the medical end market and sales to new customers within the aerospace market.

~~The decrease in income from operations was primarily due to a shift in product mix.~~

~~Six Months Ended June 30, 2017 Compared to the Six Months Ended June 30, 2016~~

   Consolidated NN, Inc.
Six Months Ended June 30,
   2017 2016 Change
Net sales
   $ 452,189 $ 426,498 $ 25,691
Volume
   26,969
Foreign exchange effects
   (4,067 )
Price/material inflation pass-through/mix
   2,789
Cost of products sold (exclusive of depreciation and amortization shown separately below)
   332,994 316,548 16,446
Volume
   17,857
Foreign exchange effects
   (2,887 )
Mix
   5,048
Inflation
   3,402
Cost reduction projects/other
   (6,974 )
Selling, general and administrative expense
   44,530 41,795 2,735
Foreign exchange effects
   (38 )
Infrastructure and staffing costs
   2,773
Depreciation and amortization
   31,468 32,484 (1,016 )
Foreign exchange effects
   (14 )
Backlog/unfavorable leasehold
   (2,488 )
Increase in expense
   1,486
Restructuring and integration expense
   446 6,585 (6,139 )


Income from operations
   42,751 29,086 13,665
Interest expense
   27,365 33,053 (5,688 )
Loss on extinguishment of debt andwrite-off of unamortized debt issuance costs
   39,639 —   39,639
Derivative losses on change in interest rate swap fair value
   13 —   13
Other (income) expense, net
   (79 ) (1,953 ) 1,874


Income (loss) before provision (benefit) for income taxes and share of net income from joint venture
   (24,187 ) (2,014 ) (22,173 )
Provision (benefit) for income taxes
   (7,128 ) (31 ) (7,097 )
Share of net income from joint venture
   2,937 2,743 194


Net income (loss)
   $ (14,122 ) $ 760 $ (14,882 )

~~Net Sales.~~ Net sales increased during the first half of 2017 from the first half of 2016 by $25.7 million, principally due to higher volumes. The higher volumes were primarily due to demand improvements within the industrial end market, medical end market, and the automotive market. Overall, sales were ahead of prior year by $6.8 million, $6.1 million and $12.8 million for PBC, APC and PEP, respectively. These increases were partially offset by the impact of devaluation of the euro and other foreign currency denominated sales.

~~Cost of Products Sold.~~The increase in cost of products sold was primarily due to the increase in demand and production volumes as well as changes in product mix. These increases were partially offset by the impact of the devaluation of the euro and other foreign currency denominated costs. Additionally, increases were partially offset by cost savings from production process improvement projects.

~~Selling, General and Administrative.~~ ~~The majority of the increase during the first half of 2017 from the first half of 2016 was due to the infrastructure and staffing costs incurred related to our strategic initiatives.~~

~~Depreciation and Amortization.~~ The decrease in depreciation and amortization during the first half of 2017 from the first half of 2016 is principally due to the amortization of backlog and unfavorable leasehold intangibles during the first half of 2016. Expected increases in expense consistent with additions to property, plant and equipment partially offset the overall decrease in depreciation and amortization.

~~Restructuring and Integration Expense.~~The decrease in restructuring and integration expense was primarily due to limited spending on restructuring in the first half of 2017 compared to the first half of 2016. The first half of 2016 included $3.6 million of cost incurred to close the Wheeling Plant and $2.4 million of cost for headcount reduction in PBC.

~~Interest Expense~~. Interest expense decreased by $5.7 million due to the redemption of the Senior Notes at the beginning of second quarter of 2017 with the proceeds of the Incremental Term Loan, which bears a lower interest rate based on LIBOR.Notes. Further interest savings resulted from the refinancing of the Senior Secured Term Loan and ~~Senior Secured Revolver in~~ the ~~third quarter of 2016.~~

   Six Months Ended June 30,
Source
   2017    2016
Interest on debt
   $ 25,098    $ 30,347
Interest rate swaps settlements
   —      927
Amortization of debt issuance costs
   2,153    1,986
Capital lease interest
   758    561
Capitalized interest (1)
   (644 )    (768 )




Total interest expense
   $ 27,365    $ 33,053

Incremental Term Loan on November 24, 2017.



	Six Months Ended June 30,
	2018			2017
Interest on debt	$	25,839		$	25,098
Amortization of debt issuance costs	2,313			2,153
Interest on capital leases and other	290			570
Capitalized interest (1)	(458		)	(644		)
Total interest expense	$	27,984		$	27,177


(1)	Capitalized interest primarily relates to ~~the~~ equipment construction efforts at ~~the~~ various plants.

Loss on Extinguishment of Debt andWrite-off of Unamortized Debt Issuance ~~Cost.~~Costs. The $12.9 million write-off in 2018 resulted from costs related to the Second Lien facility and the amendment to the existing credit facility. The $39.6 millionwrite-off in 2017 resulted from the extinguishment of ~~the~~our Senior Notes and modification of our credit facility on April 3, 2017.

Benefit for Income Taxes. Our effective tax rate from continuing operations was 18.2% for the ~~credit facility.~~

~~Other (Income) Expense, Net.~~~~Other income decreased $1.9 million during the first half of 2017~~six months ended June 30, 2018, compared to ~~the first half of 2016, primarily due to foreign currency exchange effects related to the Brazilian real and the euro.~~

~~Net Income (Loss).~~ ~~The $39.6 million loss on extinguishment of debt andwrite-off~~ of unamortized debt issuance cost was the primary reason for the net loss in the first half of 2017. This loss was partially offset by a $13.7 million increase in income from operations, a $5.7 million reduction in interest expense, and a $7.1 million decrease in income tax expense. Significant components of the changes in income from operations and interest expense were presented in the preceding paragraphs. The decrease in tax expense includes the tax effect of the loss on extinguishment of debt and~~write-off~~ ~~of unamortized debt issuance cost.~~

~~RESULTS BY SEGMENT~~

~~PRECISION BEARING COMPONENTS GROUP~~

   Six Months Ended June 30,
   2017    2016    Change
Net sales
   $ 136,687    $ 129,902    $ 6,785
Volume
            6,763
Foreign exchange effects
            (3,747 )
Price/material inflation pass-through/mix
            3,769
Income from operations
   $ 16,752    $ 12,800    $ 3,952

Net sales increased by $6.8 million during the first half of 2017 from the first half of 2016 due to higher demand volumes and changes to product mix. The higher volumes were primarily due to demand improvements within the industrial and automotive markets. These increases were partially offset by the effects of foreign currency exchange.

The primary driver of the improvement in income from operations was a $2.0 million reduction in restructuring costs compared to the first half of 2016, primarily related to headcount reductions in the prior year. The remaining increase in income from operations was consistent with the increase in net sales.

~~AUTOCAM PRECISION COMPONENTS GROUP~~

   Six Months Ended June 30,
   2017    2016    Change
Net sales
   $ 173,104    $ 166,981    $ 6,123
Volume
            6,678
Foreign exchange effects
            414
Price/material inflation pass-through/mix
            (969 )
Income from operations
   $ 21,289    $ 14,297    $ 6,992

Net sales increased by $6.1 million during the first half of 2017 from the first half of 2016 due to industrial market demand improvements in the US and Asia and new automotive program launches in the US Asia and Brazil.

The primary driver of the improvement in income from operations was a $3.6 million reduction in restructuring costs compared to the first half of 2016, primarily related to the closure of the Wheeling Plant in the prior year. The remaining increase in income from operations was consistent with the increase in net sales.

~~PRECISION ENGINEERED PRODUCTS GROUP~~

   Six Months Ended June 30,
   2017    2016    Change
Net sales
   $ 142,398    $ 129,615    $ 12,783
Volume
            13,528
Foreign exchange effects
            (734 )
Price/material inflation pass-through/mix
            (11 )
Income from operations
   $ 21,514    $ 16,203    $ 5,311

Net sales increased by $12.8 million during the first half of 2017 from the first half of 2016 primarily due to the overall improvement in demand across the medical end market and sales to new customers within the aerospace market.

The increase in income from operations was driven by the increase in net sales. Additionally, depreciation and amortization decreased by $2.4 million due to the amortization of backlog and unfavorable leasehold intangibles during the first quarter of 2016.

~~Changes in Financial Condition from December 31, 2016 to June 30, 2017.~~

From December 31, 2016 to June 30, 2017, total assets increased by $50.1 million, of which $47.1 million related to current assets. The increase in current assets was primarily due to increases in accounts receivable and inventories as well as an increase in income tax receivable. The increase in accounts receivable is consistent with increased sales. Despite the increase in net sales, we held inventory levels relatively flat with days inventory outstanding decreasing by approximately two days. The income tax receivable resulted from a net taxable loss31.3% for the six months ended June 30, 2017.

Note 9 in the Notes to Condensed Consolidated Financial Statements describes the components of income taxes for each period presented.

Share of Net Income from Joint Venture. Our share of net income from a Chinese joint venture in our Mobile Solutions group decreased by $1.5 million. The joint venture’s net income decreased primarily due to price decreases and increased raw material costs.

Results by Group

MOBILE SOLUTIONS

and electromechanical motors on a high-volume basis. This expertise has been gained through investment in technical capabilities, processes and systems, and skilled program management and product launch capabilities.



	Six Months Ended June 30,
	2018		2017		$ Change
Net sales	$	177,873	$	173,104	$	4,769
Volume								$	4,750
Foreign exchange effects								2,429
Price/mix/inflation/other								(2,410		)

Income from operations	$	17,165	$	21,289	$	(4,124	)

Net sales increased during the six months ended June 30, 2018, from the six months ended June 30, 2017, due to market demand improvements for our steering systems application components resulting from an industry shift from hydraulics to electric-assist steering systems technology. We are realizing the indirect benefits of our customers taking an increasing portion of market share. Also, as the Brazilian economy improves, demand for automotive products is increasing. These volume increases were partially offset by price reductions granted to our customers.

Income from operations decreased by $4.1 million compared to prior year due to higher start-up costs related to new product launches, lower pricing as noted above, and higher depreciation and lease expenses. These factors were partially offset by implementation of cost savings initiatives and the beneficial impact of higher production volumes.

POWER SOLUTIONS

Power Solutions is focused on growth in the electrical, and aerospace and defense end markets. Within this group we combine materials science expertise with advanced engineering and production capabilities to design and manufacture a broad range of high-precision metal and plastic components, assemblies and finished devices used in applications ranging from power control to flight control and for military devices.

We manufacture a variety of products including electrical contacts, connectors, contact assemblies and precision stampings for the electrical end market and high precision products for the aerospace and defense end markets utilizing our extensive process technologies for optical grade plastics, thermally conductive plastics, titanium, Inconel, magnesium and electroplating.



	Six Months Ended June 30,
	2018		2017		$ Change
Net sales	$	98,502	$	97,158	$	1,344
Volume								$	1,251
Foreign exchange effects								93
Price/mix/inflation/other								—

Income from operations	$	11,233	$	13,614	$	(2,381	)

Net sales increased during the six months ended June 30, 2018, from the six months ended June 30, 2017, primarily due to growth in the electrical products business.

Income from operations decreased by $2.4 million primarily due to a shift in product mix toward higher cost raw materials, such as precious metals used in power control products, and investments in the development of new products that we are preparing to launch in the aerospace end market later in 2018.

LIFE SCIENCES



	Six Months Ended June 30,
	2018		2017		$ Change
Net sales	$	90,353	$	46,243	$	44,110
Acquisitions								$	46,139
Volume								(1,291		)
Foreign exchange effects								—
Price/mix/inflation/other								(738		)

Income from operations	$	6,245	$	7,420	$	(1,175	)

Net sales increased during the six months ended June 30, 2018, from the six months ended June 30, 2017, primarily due to $46.1 million of net sales attributable to the Paragon Medical, Bridgemedica, and Vandalia acquisitions, partially offset by a $1.3 million reduction in core volume which was attributable to a single customer.

Income from operations decreased by $1.2 million primarily due to $3.4 million in cost of sales for inventory fair value adjustment at Paragon Medical, acquisition related restructuring and integration costs, other costs associated with establishing the Life Sciences Group, and lower core volume as noted above.

Changes in Financial Condition from December 31, 2017, to June 30, 2018

From December 31, ~~2016~~2017, to June 30, 2018, total assets increased by $286.1 million primarily due to assets acquired with the Paragon Medical and Bridgemedica businesses which had $466.4 million of total assets as of June 30, 2018. Paragon Medical and Bridgemedica contributed $165.5 million to the increase in goodwill and $169.9 million to intangible assets. Overall, accounts receivable increased consistently with sales growth. Inventories increased as our plants satisfy customer demand. Days inventory outstanding increased slightly by approximately two days due to normal seasonal inventory building activity. Partially offsetting these increases was a $201.2 million decrease in cash to fund the Paragon Medical and Bridgemedica acquisitions and capital expenditures as well as working capital needs.

From December 31, 2017, to June 30, 2018, total liabilities increased by ~~$48.8~~$328.9 million, ~~due~~primarily related to ~~a $53.7~~new debt used to partially finance the Paragon Medical acquisition. Paragon Medical and Bridgemedica contributed $63.8 million to the increase in total ~~debt. The increase in debt resulted from the redemption of our Senior Notes with the proceeds of a new $300.0 million Incremental Term Loan in April 2017.~~

liabilities.

Working capital, which consists principally of cash, accounts receivable, inventories and ~~inventories~~other current assets offset by accounts payable, accrued payroll costs, ~~and~~income taxes payable, current maturities of long-term debt, and other current liabilities, was ~~$180.6~~$224.5 million atas of June 30, ~~2017,~~2018, compared to ~~$141.9~~$368.9 million atas of December 31, ~~2016.~~2017. The ~~increase~~decrease in working capital was due primarily to the ~~increase~~decrease in ~~accounts receivable~~cash used to fund acquisitions and ~~inventories, as discussed above.~~

capital expenditures.

Cash used by operations was ~~$15.6~~$19.4 million for the six months ended June 30, 2018, compared with cash provided by operations of $15.8 million for the six months ended June 30, 2017. The difference was primarily due to the decrease in income from operations. The components of the decrease in income from operations are discussed in the “Results of Operations” section. Additionally, cash provided by operating activities for discontinued operations was $8.7 million for the six months ended June 30, 2017, ~~compared with cash provided~~and was not present in the six months ended June 30, 2018.

Cash used by ~~operations of $11.8~~investing activities was $421.7 million for the six months ended June 30, ~~2016. The difference was primarily due to $31.6 million paid for the call premium on the redemption of the Senior Notes, partially offset by increased operating income.~~

~~Cash~~2018, compared with cash used by investing activities ~~was $20.3~~of $20.0 million for the six months ended June 30, ~~2017, compared with~~2017. The difference was primarily due to cash paid for the Paragon Medical and Bridgemedica acquisitions and capital expenditures. Cash used by investing activities ~~of $16.4~~for discontinued operations was $5.2 million for the six months ended June 30, ~~2016. The primary difference was capital spending related to growth programs and China’s improvement projects.~~

2017.

Cash provided by financing activities was ~~$39.8~~$240.7 million for the six months ended June 30, ~~2017,~~2018, compared with cash provided by financing activities of ~~$6.8~~$8.2 million for the six months ended June 30, ~~2016.~~2017. The ~~driver in 2017~~difference was primarily ~~related~~due to ~~net~~ proceeds offrom the new debt facility used to ~~fund~~partially finance the ~~Senior Notes call premium.~~

Paragon Medical acquisition.

Liquidity and Capital Resources

~~On April 3, 2017, we redeemed our~~

Aggregate principal amounts outstanding under the Senior ~~Notes for $281.6 million resulting in a loss on debt extinguishment of $36.3 million, including $31.6 million cash paid for~~Secured Term Loan, the ~~call premium and $4.7 millionnon-cashwrite-off~~ ~~of unamortized debt issuance costs. The Senior Notes were redeemed and the call premium was paid with the proceeds of a new $300.0 million~~ Incremental Term Loan, ~~that was added by amendment to our existing credit facility. The Incremental Term Loan bears interest at the lower of 0.75% orone-month~~ ~~LIBOR, plus 3.75%, and matures on April 3, 2021, with payments of $3.0 million due quarterly. Concurrent with the amendment,~~ the Senior Secured Revolver, ~~was reduced from $143.0 million to $100.0 million until such time as a certain leverage ratio covenant threshold has been met for four consecutive fiscal quarters. Upon satisfaction of~~and the ratio threshold, the Senior Secured Revolver may be restored to $143.0 million. In connection with the amendment, we paid $6.5 million in debt issuance costs of which $4.0 million was recorded as a direct reduction to the carrying amount of the associated debt and $2.5 million was recognized as a loss on modification of the Senior Secured Term Loan. Debt issuance costs related to the amendment were paid with proceeds from the Incremental Term Loan. Also in connection with the amendment, we wrote off $0.8 million of unamortized debt issuance costs related to the modification of the Senior Secured Revolver.

~~Aggregate amounts outstanding under our Senior Secured Term Loan, Incremental Term Loan, and our Senior Secured Revolver~~Second Lien Facility as of June 30, ~~2017,~~2018, were ~~$871.0~~$1,087.2 million (without regard to debt issuance costs). As of June 30, ~~2017,~~2018, we could borrow up to ~~$56.2~~$29.6 million under ~~our~~the Senior Secured Revolver, subject to certain limitations. ~~The $56.2 million~~This amount of availability is net of ~~$10.4~~$2.4 million of outstanding letters of credit at June 30, ~~2017,~~2018, which are considered as usage of the Senior Secured Revolver.

Collectively, our Senior Secured Term Loan, Incremental Term Loan, and Senior Secured Revolver comprise our credit facility. Our credit facility is subject to certain financial covenants based on a consolidated net leverage ratio, as defined in the credit facility agreement. The financial covenants are effective when we have outstanding amounts drawn on our Senior Secured Revolver on the last day of any fiscal quarter and become more restrictive over time. We had $68.0 million outstanding balance on the Senior Secured Revolver as of June 30, 2018, and were in compliance with all covenants under our credit facility and expect to be in compliance with all covenants through June 30, 2019.

The Senior Secured Term Loan requires ~~us to pay~~ quarterly ~~0.25% (or~~principal payments of $1.4 ~~million) of the initial principal amount~~million through ~~September 30,~~October 19, 2022, with the remaining principal amount due on the maturity date. ~~Additionally, if LIBOR is less than 0.75%, we pay 5.00% per annum in interest.~~ If the LIBOR exceeds 0.75%, then the rate will be the variable LIBOR rate plus an applicable margin of 4.25%. Based on the outstanding balance at June 30, 2017, annual interest payments would have been $29.6 million.

~~Our Incremental Term Loan requires us to make quarterly payments of $3.0 million through March 31, 2021. If~~one-month LIBOR is less than 0.75%, then we pay 4.50% per annum in interest. If one-month LIBOR exceeds 0.75%, then we pay the variable one-month LIBOR rate plus an applicable margin of 3.75%. Based on the outstanding balance at June 30, ~~2017,~~2018, annual interest payments would have been ~~$14.8~~$31.2 million.

~~Our~~

The Incremental Term Loan requires quarterly principal payments of $3.0 million through April 3, 2021, with the remaining principal amount due on the maturity date. Based on the outstanding balance at June 30, 2018, annual interest payments would have been $15.2 million.

The Senior Secured Revolver ~~requires us to pay~~bears interest at a rate of one-month LIBOR plus an applicable margin of 3.50%. Based on the outstanding balance at June 30, ~~2017,~~2018, annual interest payments would have been ~~$1.6~~$3.8 million.

~~Our Senior Notes required~~ In connection with the closing of the Paragon Medical acquisition on May 7, 2018, we entered into an amendment to our existing credit facility to permit the Paragon Medical acquisition, to permit the Second Lien Credit Agreement, and to amend certain covenants.

We entered into the $200.0 million Second Lien Facility on May 7, 2018, to partially fund the Paragon Medical acquisition. The Second Lien Facility matures on April 19, 2023. The Second Lien Facility bears interest at a rate of one-month LIBOR plus an applicable margin of 8.00%. Based on the outstanding balance at June 30, 2018, annual interest payments would have been $20.2 million. We may voluntarily prepay outstanding loans under the Second Lien Facility, in whole or in part without premium or penalty at any time on or after May 7, 2020. We are subject to a prepayment penalty of 2% of the amount of such loans that we prepay before May 7, 2019. If we prepay any outstanding loans after May 7, 2019, but prior to May 7, 2020, we are subject to a prepayment penalty of 1% of the amount prepaid. The Second Lien Credit Agreement requires us to ~~pay annual interest~~prepay outstanding loans, subject to certain exceptions, with: (i) a variable percentage of ~~10.25% payable semi-annually in arrears on May 1 and November 1 of each year. Upon redemption~~excess cash flow; (ii) 100% of the ~~Senior Notes, we paid interest~~net cash proceeds of ~~$10.8 million~~non-ordinary course asset sales or other dispositions of property, and 100% of the net cash proceeds from certain insurance and condemnation events with respect to our assets, subject to customary thresholds and reinvestment rights; and (iii) 100% of the net cash proceeds from the issuance or incurrence of debt obligations for borrowed money not permitted by the ~~period November 1, 2016 through April 3, 2017.~~

Second Lien Credit Agreement.

We believe that funds generated from our consolidated continuing operations and existing cash will provide sufficient cash flow to service the required debt and interest payments under ~~these facilities.~~

our existing credit facility. The absence of cash flows from discontinued operations is not expected to significantly affect our ability to service our debt.

Our arrangements with ~~our domestic~~ customers typically provide that payments are due within 30 to 60 days following the date of our shipment of goods, while arrangements with foreign customers of our domestic business (other than foreign customers that have entered into an inventory management program with us) generally provide that payments are due within 60 to 120 days following the date of shipment to allow for additional transit time and customs clearance. Under the Precision Bearing Components Group’s inventory management program with certain customers, payments typically are due within 30 days after the customer uses the product. Our arrangements with European customers regarding due dates vary from 30 to 90 days following date of sale for European based customers and 60 to 120 days from customers outside of Europe to allow for additional transit time and customs clearance.

~~Our sales and receivables can be influenced by seasonality due to our relative percentage of European business coupled with many foreign customers slowing production during the month of August.~~

shipment. We invoice and receive payment from many of our customers in euros as well as other currencies. Additionally, we are party to various third party and intercompany loans, payables and receivables denominated in currencies other than the U.S. dollar. As a result of these sales, loans, payables and receivables, our foreign exchange transaction and translation risk ~~has increased.~~is elevated. Various strategies to manage this risk are available to management, including producing and selling in local currencies and hedging programs. As of June 30, ~~2017,~~2018, no currency ~~hedges~~derivatives were in place. In addition, a strengthening of the U.S. dollar and/or euro against foreign currencies could impair our ability to compete with international competitors for foreign as well as domestic sales.

For the next twelve months, we expect capital expenditures to remain relatively consistent, the majority of which relate to new or expanded ~~business.~~business or continuous improvement programs. We believe that funds generated from continuing operations and borrowings from the credit ~~facilities~~facility will be sufficient to finance ~~our~~ capital expenditures and working capital needs through this period. The absence of cash flows from discontinued operations is not expected to significantly affect our ability to finance

capital expenditures or working capital needs. We base ~~this assertion~~these assertions on ~~our~~ current availability for borrowing of up to ~~$56.2~~$29.6 million and ~~our~~ forecasted positive cash flow from continuing operations for the next twelve months.

Seasonality and Fluctuation in Quarterly Results

General economic conditions impact our business and financial results, and certain ~~of our~~ businesses experience seasonal and other trends related to the industries and end markets that they serve. For example, European sales are often weaker in the summer months as customers slow production, medical device sales are often stronger in the fourth calendar quarter, and sales to original equipment manufacturers are often stronger immediately preceding and following the launch of new products. However, as a whole, we are not ~~subject to material~~materially impacted by seasonality.

Off-Balance Sheet Arrangements

We are not a party to anyoff-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies

Our critical accounting policies, including the assumptions and judgments underlying them, are disclosed in the ~~2016~~2017 Annual Report, including those policies as discussed in Note 1 to the Notes to Consolidated Financial Statements included in the ~~2016~~2017 Annual Report. There have been no changes to these policies during the six months ended June 30, ~~2017,~~2018, except as discussed in Note 1 to the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

Recent Accounting Pronouncements

See Note 1 in the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.


Item 3.	Quantitative and Qualitative Disclosures About Market Risk

We are exposed to changes in financial market conditions in the normal course of ~~our~~ business due to use of certain financial instruments as well as transacting business in various foreign currencies. To mitigate the exposure to these market risks, we have established policies, procedures and internal processes governing ~~our~~the management of financial market risks. We are exposed to changes in interest rates primarily as a result of ~~our~~ borrowing activities.

At June 30, ~~2017,~~2018, we had ~~$33.3~~$534.3 million of principal outstanding under ~~our~~the variable rate ~~revolving credit facilities,~~Senior Secured Term Loan, without regard to debt issuance costs. At June 30, ~~2017,~~2018, aone-percent increase in the interest rate charged on ~~our outstanding variable rate borrowings under our Senior Secured Revolver would result in interest expense increasing annually by approximately $0.3 million.~~

~~At June 30, 2017, we had $540.7 million outstanding under our variable rate Senior Secured Term Loan B, without regard to debt issuance costs. At June 30, 2017, aone-percent~~ ~~increase in the interest rate charged on this~~ outstanding variable rate borrowings under the Senior Secured Term Loan B would result in interest expense increasing annually by approximately ~~$5.4~~$5.3 million.

At June 30, ~~2017,~~2018, we had ~~$297.0~~$285.0 million of principal outstanding under ~~our~~the Incremental Term Loan, without regard to debt issuance costs. At June 30, ~~2017,~~2018, aone-percent increase in the interest rate charged on ~~this~~ outstanding variable rate borrowings under the Incremental Term Loan would result in interest expense increasing annually by approximately ~~$3.0~~$2.9 million.

At June 30, 2018, we had $68.0 million of principal outstanding under the Senior Secured Revolver, without regard to debt issuance costs. At June 30, 2018, a one-percent increase in the interest rate charged on outstanding variable rate borrowings under the Senior Secured Revolver would result in interest expense increasing annually by approximately $0.7 million.

At June 30, 2018, we had $200.0 million of principal outstanding under the Second Lien Facility, without regard to debt issuance costs. At June 30, 2018, a one-percent increase in the interest rate charged on outstanding variable rate borrowings under the Second Lien Facility would result in interest expense increasing annually by approximately $2.0 million.

Our policy is to manage interest expense using a mix of fixed and variable rate debt. ~~As such,~~To manage this mix effectively, we ~~entered~~may enter into ~~a $150.0 million~~ interest rate ~~swap that went into effect on December 29, 2015, which was amended~~swaps to exchange the difference between fixed and ~~restated on September 30, 2016 to change the LIBOR indexed floor from 1.0% to 0.75%, and fix our~~variable interest ~~rate at 6.466% for a portion of our Senior Secured Term Loan B.~~amounts. The nature and amount of ~~our~~ borrowings may vary as a result of future business requirements, market conditions and other factors.

As of June 30, 2018, we had no interest rate swaps.

Translation of our operating cash flows denominated in foreign currencies is impacted by changes in foreign exchange rates. ~~Our Precision Bearing Components Group invoices and receives payment in currencies other than the U.S. dollar including the euro. Additionally, we~~We participate in various third party and intercompany loans, payables and receivables denominated in currencies other than

the U.S. dollar. To help reduce exposure to foreign currency fluctuation, we have incurred debt in euros in the ~~past and have, from~~past. From time to time, ~~used~~we may use foreign currency ~~hedges~~derivatives to hedge currency exposures when these exposures meet certain discretionary levels. We did not hold a position in any foreign currency ~~hedging instruments~~derivatives as of June 30, ~~2017.~~

2018.


Item 4.	Controls and Procedures

Disclosure Controls and Procedures

Under the supervision and with the participation of ~~our~~ management, including our Chief Executive Officer and Chief Financial Officer, we ~~conducted an evaluation of~~evaluated the effectiveness of ~~our~~ disclosure controls and procedures (as defined in Rule13a-15(e) and15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). ~~Our disclosure controls are designed to ensure that material information relating to us is made known to our Chief Executive Officer and Chief Financial Officer by others within our organization.~~ Based upon that evaluation, as a result of the material weaknesses in internal control over financial reporting described below, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of June 30, ~~2017~~2018, to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is

recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including ~~our~~the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

Previously Identified Material Weaknesses in Internal Control Over Financial Reporting

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements would not be prevented or detected on a timely basis.

We previously disclosed in ~~the 2016~~our 2017 Annual Report the following control deficiencies that constitute material weaknesses ~~which still existed as of June 30, 2017.~~ in our internal control over financial reporting:

We did not maintain an effective control environment due to a lack of a sufficient complement of personnel with an appropriate level of knowledge, experience and training commensurate with our financial reporting requirements. ~~This~~

We did not maintain effective controls over information and communication as it relates to the accounting for income taxes. Specifically, we did not implement and reinforce an adequate process for communication and information sharing necessary to support the functioning of internal control between our tax group and our corporate accounting group.

These material ~~weakness in the control environment~~weaknesses contributed to the ~~following~~ material ~~weaknesses: we~~weaknesses described below:

We did not design and maintain effective internal ~~control over: (i)~~controls over the accounting for business combinations, which specifically included not designing and maintaining effective controls over the (a) accuracy, valuation and presentation and disclosure for allocating goodwill to our international businesses and (b) completeness, accuracy and valuation of deferred income taxes recorded in connection with business combinations;

We did not design and ~~(ii)~~maintain effective internal controls over the accounting for income taxes, which specifically included not designing and maintaining controls over the completeness, accuracy, valuation and presentation and disclosure of deferred income tax accounts, income tax provision and related disclosures.

These material weaknesses resulted in immaterial errors to other current assets; property, plant and equipment, net; ~~goodwill, net;~~goodwill; investment in joint venture; other non-current assets; accounts payable; accrued salaries, wages and benefits; other current liabilities; deferred tax ~~assets~~liabilities; accumulated other comprehensive income; selling, general and ~~liabilities; provision~~administrative expense; depreciation and amortization; other operating expense/income; write-off of unamortized debt issuance costs; provision/benefit for income taxes; comprehensive income/loss; and ~~other comprehensive income~~cash flows in our consolidated financial statements for the years ended December 31, 2017, 2016 ~~2015~~ and ~~2014.~~2015. These immaterial errors resulted in a revision to previously issued financial statements as discussed in Note 1 and Note 1417 in the ~~accompanying~~ Notes to Condensed Consolidated Financial ~~Statements.~~Statements presented in Item 1 of this Quarterly Report. Management has determined that the revision was an additional effect of the material weaknesses described above. Additionally, these control deficiencies could result in a misstatement of substantially all account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

Notwithstanding such material weaknesses, our Chief Executive Officer and Chief Financial Officer have concluded that our condensed consolidated financial statements in this Quarterly Report on Form 10-Q present fairly, and in all material respects,

our financial position, results of operations and cash flows for the periods presented in conformity with ~~GAAP.~~

U.S. generally accepted accounting principles.

Remediation Plan for Material Weaknesses

Building on our efforts during 2016 and 2017, with the oversight of the Audit Committee of our ~~board~~Board of ~~directors,~~Directors, we ~~continued in the first half of 2017~~continue to dedicate significant resources and efforts to improve our control environment and to take steps to remediate the material weaknesses identified above. ~~While certain remedial actions have been~~During the second quarter, we completed our gap analysis of our business combinations and income taxes processes supporting internal control over financial reporting to identify areas where new controls are needed and where existing controls need to be enhanced. Based on that analysis, we ~~continue~~developed a comprehensive workplan for remediation of the four material weaknesses. This workplan includes detailed process by process work flows with completion dates and responsible parties. We regularly track our progress on completion of the workplan and provide periodic updates to ~~actively plan for and implement additional control procedures. The 2017 remediation efforts outlined below are intended both to~~the Audit Committee on our progress.

Ongoing Remediation Efforts

To address the ~~identified~~material weakness associated with an insufficient complement of personnel with an appropriate level of knowledge, experience, and training commensurate with our financial reporting requirements, during the second quarter, we hired a Chief Accounting Officer based in our corporate headquarters and Finance Directors in our new Life Sciences and Power Solutions groups. Each of these individuals has significant experience in technical accounting matters and internal controls commensurate with our public company reporting requirements.

To address the material weaknesses associated with the accounting for business combinations and income taxes, we completed a gap analysis of our key controls during the second quarter. Through this analysis we identified areas where new controls were needed as well as areas where control enhancements to ~~enhance~~ our ~~overall financial control environment.~~

~~Augmented the personnel within~~existing controls were necessary. We developed and implemented these controls as part of our ~~finance and accounting organization by hiring two additional tax personnel and adding two additional personnel to address SEC accounting and reporting;~~

~~Implemented automated tax software;~~

~~Instituted,~~second quarter close process and will continue to ~~provide, additional training programs~~enhance or modify these controls in future periods if needed.

To address the material weakness associated with information and communication as it relates to the accounting for income taxes and the information sharing necessary to support the functioning of internal control between our tax group and corporate accounting group, we have implemented formal, scheduled meetings which enable us to communicate and share information necessary for the appropriate accounting of income taxes and business combinations matters as well as other matters. We have also clarified roles and responsibilities within and between our finance and ~~accounting personnel;~~tax teams and

~~Strengthened~~ have included members of our ~~business combination~~tax team in the execution of certain controls that previously did not have functional tax involvement. These newly implemented formalized meetings are held before and after the finalization of our income tax accounts during the close process. We have implemented these processes and will continue to enhance or modify them as necessary to support the sharing of information between our tax group and corporate accounting group.

In addition to the items above we are working to strengthen the internal control environment for financial reporting through the use of lean office and continuous improvement tools to identify areas for improvement and optimization in our various financial workflows. We have also conducted training on policies and procedures, standardizing business practices, effective communication, strategic thinking, leadership, and process ~~with improved accounting policies, documentation standards, technical oversight and training, as well as the recent hires noted above.~~

~~These material weaknesses will not be considered remediated until the applicable remedial controls operate for~~improvement within various financial functional areas including a ~~sufficient period~~worldwide financial leaders’ summit.

Status of ~~time and management has concluded, through testing, that these controls are operating effectively.~~

Remediation Efforts

We believe the measures described above will ~~remediate~~facilitate the remediation of the control deficiencies we have identified and strengthen our internal control over financial reporting. We are committed to continuing to improve our internal control processes and will continue to review, optimize and enhance our financial reporting controls and procedures. As we continue to evaluate and work to improve our internal control over financial reporting, we may ~~determine to~~ take additional measures to address control deficiencies, or ~~determine to~~we may modify, or in appropriate circumstances not to complete, certain of the remediation measures described above.

These material weaknesses will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

Changes in Internal Control Over Financial Reporting

~~Except as noted~~

As described above in the “Remediation Plan for Material Weaknesses” section, ~~above,~~ there were no changes induring the fiscal quarter ended June 30, ~~2017~~2018, 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~~

PART II. ~~Other Information~~

OTHER INFORMATION

~~Item 1. Legal Proceedings~~

Item 1. Legal Proceedings

Brazil ICMS Tax Matter

Prior to ~~our~~the acquisition of Autocam Corporation in 2014 (“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~~2018, for this matter. There was no material change in the status of this matter from December 31, ~~2016~~2017, to June 30, ~~2017.~~

2018.

All Other Legal Matters


Item 1A.	Risk Factors

~~Except as noted below, there~~

There have been no material changes to the risk factors disclosed in our ~~2016~~2017 Annual Report on Form10-K for the fiscal year ended December 31, ~~2016,~~2017, which was filed with the SEC on ~~March 16, 2017~~April 2, 2018, 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 theday-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.

In addition, the definitive agreement restricts us from engaging in certain actions without the consent of Tsubaki, which could prevent us from pursuing business opportunities that may arise prior to the consummation of the proposed transaction.

We have incurred, and will continue to incur, transaction costs in connection with the proposed transaction, and many of these fees and costs are payable regardless of whether or not the sale is completed.


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Period
   Total Number of Shares
Purchased⁽¹⁾    Average Price Paid Per
Share    Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs⁽¹⁾    Maximum Number (or
Approximate Dollar
Value) of Shares That
May Yet Be Purchased
Under the Plan or
Programs⁽¹⁾
April 2017
   3,125    $ 27.60    —      —
May 2017
   —      $ —      —      —
June 2017
   —      $ —      —      —








Total
   3,125    $ 27.60    —      —



Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plan or Programs (1)
April 2018	18,399	$	20.30	—	—
May 2018				—	—
June 2018	—	$	—	—	—
Total	18,399	$	20.30	—	—

(1)

Shares were withheld to pay for tax obligations due upon the vesting of restricted stock held by certain employees granted under the NN, Inc. Amended and Restated 2011 Stock Incentive Plan (the “Plan”). The Plan provides for the withholding of shares to satisfy tax obligations. It does not specify a maximum number of shares that can be withheld for this purpose. These shares may be deemed to be “issuer purchases” of shares that are required to be disclosed pursuant to this Item.


Item 3.	Defaults upon Senior Securities

~~None~~

None.


Item 4.	Mine Safety Disclosures

Not ~~applicable~~

applicable.


Item 5.	Other Information

~~None~~

None.


Item 6.	Exhibits

~~The exhibits listed in the accompanying Exhibit Index are filed, furnished or incorporated by reference as part of this Quarterly Report on Form10-Q.~~



Exhibit No.		Description

2.1		Stock Purchase Agreement, dated as of April 2, 2018, by and among Precision Engineered Products LLC, NN, Inc., PMG Intermediate Holding Corporation and Paragon Equity LLC (incorporated by reference to Exhibit 2.1 to NN, Inc.’s Current Report on Form 8-K filed on April 3, 2018).

10.1		Commitment Letter, dated as of April 2, 2018, by and among NN, Inc., SunTrust Bank and SunTrust Robinson Humphrey, Inc. (incorporated by reference to Exhibit 10.1 to NN, Inc.’s Current Report on Form 8-K filed on April 3, 2018).

10.2		Amendment No. 4 to Amended and Restated Credit Agreement, dated May 7, 2018, by and among NN, Inc., the affiliated Guarantors party thereto, SunTrust Bank, SunTrust Robinson Humphrey, Inc. and the Lenders party thereto. (incorporated by reference to Exhibit 10.1 to NN, Inc.’s Current Report on Form 8-K filed on May 7, 2018).

10.3		Second Lien Credit Agreement, dated May 7, 2018, by and among NN, Inc., the affiliated Guarantors party thereto, SunTrust Bank, SunTrust Robinson Humphrey, Inc. and the Lenders party thereto (incorporated by reference to Exhibit 10.2 to NN, Inc.’s Current Report on Form 8-K filed on May 7, 2018).

31.1		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.

31.2		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.

32.1		Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Service

101.CAL		Taxonomy Calculation Linkbase

101.LAB		XBRL Taxonomy Label Linkbase

101.PRE		XBRL Presentation Linkbase Document

101.DEF		XBRL Definition Linkbase Document

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	NN, Inc.
			(Registrant)

Date: August ~~14, 2017~~		9, 2018	/s/ Richard D. Holder
			Richard D. Holder,
			President, Chief Executive Officer and Director
			(Principal Executive Officer) (Duly Authorized Officer)

Date: August ~~14, 2017~~		9, 2018	/s/ Thomas C. Burwell, Jr.
			Thomas C. Burwell, Jr.
			Senior Vice President—Chief Financial Officer
			(Principal Financial and Accounting Officer)
			(Duly Authorized Officer)

~~EXHIBIT INDEX~~


~~Exhibit~~ ~~No.~~		~~Description~~

~~2.1~~		~~Purchase Agreement, dated as of July 10, 2017, by and between NN, Inc. and TSUBAKI NAKASHIMA Co., Ltd. (incorporated by reference to Exhibit 2.1 to NN, Inc.’s Current Report on Form8-K~~ ~~filed on July 10, 2017)~~

~~31.1~~		~~Certification of Principal Executive Officer Pursuant to Rules13a-14(a)~~ ~~and15d-14(a)~~ ~~under the Securities Exchange Act of 1934, as amended.~~

~~31.2~~		~~Certification of Principal Financial Officer Pursuant to Rules13a-14(a)~~ ~~and15d-14(a)~~ ~~under the Securities Exchange Act of 1934, as amended.~~

~~32.1~~		~~Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

~~32.2~~		~~Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

~~101.INS~~		~~XBRL Instance Document~~

~~101.SCH~~		~~XBRL Taxonomy Extension Service~~

~~101.CAL~~		~~Taxonomy Calculation Linkbase~~

~~101.LAB~~		~~XBRLTaxonomy Label Linkbase~~

~~101.PRE~~		~~XBRL Presentation Linkbase Document~~

~~101.DEF~~		~~XBRL Definition Linkbase Document~~


	Three Months Ended						Six Months Ended
	June 30,						June 30,
(in thousands, except per share data)	2017			2016			2017			2016
Net sales	$	225,875		$	214,272		$	452,189		$	426,498
Cost of products sold (exclusive of depreciation and amortization shown separately below)		166,040			156,794			332,994			316,548
Selling, general and administrative expense		23,036			20,993			44,530			41,795
Depreciation and amortization		15,900			15,136			31,468			32,484
Restructuring and integration expense		306			4,047			446			6,585

Income from operations		20,593			17,302			42,751			29,086
Interest expense		12,409			16,631			27,365			33,053
Loss on extinguishment of debt andwrite-off of unamortized debt issuance costs		39,639			—			39,639			—
Derivative losses on change in interest rate swap fair value		101			—			13			—
Other (income) expense, net		645			(824	)		(79	)		(1,953	)

Income (loss) before provision (benefit) for income taxes and share of net income from joint venture		(32,201	)		1,495			(24,187	)		(2,014	)
Provision (benefit) for income taxes		(9,428	)		719			(7,128	)		(31	)
Share of net income from joint venture		1,244			1,343			2,937			2,743

Net income (loss)	$	(21,529	)	$	2,119		$	(14,122	)	$	760

Other comprehensive income (loss):
Change in fair value of interest rate swap	$	—		$	416		$	—		$	(219	)
Foreign currency translation gain (loss)		9,240			(5,071	)		14,244			2,152

Other comprehensive income (loss):	$	9,240		$	(4,655	)	$	14,244		$	1,933

Comprehensive income (loss)	$	(12,289	)	$	(2,536	)	$	122		$	2,693

Basic net income (loss) per share:
Net income (loss)	$	(0.78	)	$	0.08		$	(0.52	)	$	0.03

Weighted average shares outstanding		27,468			27,024			27,358			26,923

Diluted net income (loss) per share:
Net income (loss)	$	(0.78	)	$	0.08		$	(0.52	)	$	0.03

Weighted average shares outstanding		27,468			27,187			27,358			27,050

Cash dividends per common share	$	0.07		$	0.07		$	0.14		$	0.14


(in thousands, except per share data)	June 30, 2017			December 31, 2016
Assets
Current assets:
Cash	$	19,166		$	14,405
Accounts receivable, net		162,363			139,547
Inventories		123,702			114,851
Income tax receivable		8,631			—
Other current assets		13,766			11,752

Total current assets		327,628			280,555
Property, plant and equipment, net		333,160			322,953
Goodwill, net		452,282			450,311
Intangible assets, net		244,264			255,981
Investment in joint venture		39,853			36,008
Othernon-current assets		8,629			9,892

Total assets	$	1,405,816		$	1,355,700

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	78,308		$	75,719
Accrued salaries, wages and benefits		23,941			24,996
Income taxes payable		—			2,125
Current maturities of long-term debt		24,748			12,751
Current portion of obligation under capital lease		3,523			3,762
Other current liabilities		16,543			19,263

Total current liabilities		147,063			138,616
Deferred tax liabilities		99,333			99,591
Long-term debt, net of current portion		827,390			785,713
Accrued post-employment benefits		5,879			5,765
Obligation under capital lease, net of current portion		4,691			5,851
Othernon-current liabilities		9,647			9,651

Total liabilities		1,094,003			1,045,187

Commitments and contingencies (Note 10)
Stockholders’ equity:
Common stock - $0.01 par value, authorized 45,000 shares, issued and outstanding 27,537 in 2017 and 27,249 in 2016		275			272
Additionalpaid-in capital		288,903			284,508
Retained earnings		38,167			55,509
Accumulated other comprehensive income (loss)		(15,564	)		(29,808	)
Non-controlling interest		32			32

Total stockholders’ equity		311,813			310,513

Total liabilities and stockholders’ equity	$	1,405,816		$	1,355,700


	Common Stock					Additional paid in capital			Retained earnings			Accumulated other comprehensive income (loss)			Non- controlling interest		Total
(in thousands of dollars and shares)	Number of shares			Par value		Additional paid in capital			Retained earnings						Non- controlling interest		Total
Balance, December 31, 2016		27,249		$	272	$	284,508		$	55,509		$	(29,808	)	$	32	$	310,513
Net income (loss)		—			—		—			(14,122	)		—			—		(14,122	)
Dividends paid		—			—		—			(3,960	)		—			—		(3,960	)
Stock option expense		—			—		575			—			—			—		575
Shares issued for option exercises		220			2		2,590			—			—			—		2,592
Restricted and performance based stock compensation expense		85			1		1,643			—			—			—		1,644
Restricted shares forgiven for taxes and forfeited		(17	)		—		(413	)		—			—			—		(413	)
Foreign currency translation gain		—			—		—			—			14,244			—		14,244
Adoption of new accounting standard (see Note 1)		—			—		—			740			—			—		740

Balance, June 30, 2017		27,537		$	275	$	288,903		$	38,167		$	(15,564	)	$	32	$	311,813


		Six Months Ended
		June 30,
(in thousands of dollars)		2017			2016
Cash flows from operating activities:
Net income (loss)	��	$	(14,122	)	$	760
Adjustments to reconcile net income to net cash provided by (used by) operating activities:
Depreciation and amortization			31,468			32,484
Amortization of debt issuance costs			2,153			1,986
Write-off of debt issuance costs			8,054			—
Share of net income from joint venture			(2,937	)		(2,743	)
Gain on disposals of property, plant and equipment			(268	)		—
Compensation expense from issuance of share-based awards			2,218			2,485
Deferred income tax benefit			—			1,839
Other			638			2,048
Changes in operating assets and liabilities:
Accounts receivable			(20,062	)		(24,048	)
Inventories			(5,945	)		1,713
Accounts payable			1,339			(3,239	)
Income taxes payable (receivable)			(10,841	)		(3,185	)
Other assets and liabilities			(7,247	)		1,681

Net cash provided by (used by) operating activities			(15,552	)		11,781

Cash flows from investing activities:
Acquisition of property, plant and equipment			(20,658	)		(18,223	)
Proceeds from measurement period adjustments to previous acquisition			—			1,635
Proceeds from disposals of property, plant and equipment			356			215

Net cash used by investing activities			(20,302	)		(16,373	)

Cash flows from financing activities:
Debt issue costs paid			(6,545	)		—
Dividends paid			(3,838	)		(3,773	)
Proceeds from long-term debt			317,000			11,000
Repayment of long-term debt			(266,874	)		(5,875	)
Proceeds from (repayment of) short-term debt, net			(101	)		6,580
Proceeds from issuance of stock and exercise of stock options			2,592			1,525
Shares withheld to satisfy income tax witholding			(413	)		(157	)
Principal payments on capital leases			(2,059	)		(2,462	)

Net cash provided by financing activities			39,762			6,838

Effect of exchange rate changes on cash flows			853			(2,253	)
Net change in cash and cash equivalents			4,761			(7	)
Cash and cash equivalents at beginning of period			14,405			15,087

Cash and cash equivalents at end of period		$	19,166		$	15,080


	Precision Bearing Components Group		Autocam Precision Components Group		Precision Engineered Products Group		Corporate and Consolidations			Total
Three Months ended June 30, 2017
Revenues from external customers	$	67,928	$	86,658	$	71,289	$	—		$	225,875
Income (loss) from operations	$	8,351	$	10,688	$	10,600	$	(9,046	)	$	20,593
Six Months ended June 30, 2017
Revenues from external customers	$	136,687	$	173,104	$	142,398	$	—		$	452,189
Income (loss) from operations	$	16,752	$	21,289	$	21,514	$	(16,804	)	$	42,751
Total assets	$	240,666	$	427,453	$	723,122	$	14,575		$	1,405,816
Three Months ended June 30, 2016
Revenues from external customers	$	65,157	$	82,991	$	66,124	$	—		$	214,272
Income (loss) from operations	$	6,474	$	7,770	$	10,782	$	(7,724	)	$	17,302
Six Months ended June 30, 2016
Revenues from external customers	$	129,902	$	166,981	$	129,615	$	—		$	426,498
Income (loss) from operations	$	12,800	$	14,297	$	16,203	$	(14,214	)	$	29,086
Total assets	$	226,943	$	418,664	$	740,475	$	8,651		$	1,394,733


	June 30, 2017		December 31, 2016
$545.0 million Senior Secured Term Loan B (“Senior Secured Term Loan”) bearing interest at the greater of 0.75% or 1 month LIBOR (1.22% at June 30, 2017), plus an applicable margin of 4.25% at June 30, 2017, expiring October 19, 2022, net of debt issuance costs of $17.7 million at June 30, 2017, and $19.0 million at December 31, 2016	$	523,030	$	524,539
$300.0 million Incremental Term Loan (“Incremental Term Loan”) bearing interest at the greater of 0.75% or 1 month LIBOR (1.22% at June 30, 2017), plus an applicable margin of 3.75% at June 30, 2017, expiring April 3, 2021, net of debt issuance costs of $3.0 million at June 30, 2017		294,023		—
$143.0 million Senior Secured Revolver (“Senior Secured Revolver”) bearing interest at LIBOR (1.22% at June 30, 2017) plus an applicable margin of 3.5% at June 30, 2017, expiring October 19, 2020, net of debt issuance costs of $2.3 million at June 30, 2017, and $2.7 million at December 31, 2016		30,999		25,298
$250.0 million Senior Notes (“Senior Notes”) bearing interest at 10.25%, net of debt issuance costs of $4.9 million at December 31, 2016		—		245,077
French Safeguard Obligations (Autocam)		388		358
Brazilian lines of credit and equipment notes (Autocam)		379		573
Chinese line of credit (Autocam)		3,319		2,619

Total debt		852,138		798,464
Less current maturities of long-term debt		24,748		12,751

Long-term debt, excluding current maturities of long-term debt	$	827,390	$	785,713


	Precision Bearing Components Group		Autocam Precision Components Group		Precision Engineered Products Group		Total
Balance as of December 31, 2016	$	8,909	$	70,717	$	370,685	$	450,311
Currency impacts		174		474		1,323		1,971

Balance as of June 30, 2017	$	9,083	$	71,191	$	372,008	$	452,282


Options	Shares (000)			Weighted- Average Exercise Price (per share)		Weighted- Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at January 1, 2017		897		$	12.22
Granted		126			24.20
Exercised		(220	)		11.81
Forfeited or expired		(6	)		7.72

Outstanding at June 30, 2017		797		$	14.22		6.6	$	10,538	(1)

Exercisable at June 30, 2017		555		$	12.17		5.5	$	8,490	(1)


Balance as of December 31, 2016	$	36,008
Our share of earnings		3,165
Accretion of basis difference from purchase accounting		(228	)
Foreign currency translation gain		908

Balance as of June 30, 2017	$	39,853


	June 30,		December 31,
	2017		2016
Current assets	$	40,712	$	31,295
Non-current assets		24,386		22,522

Total assets	$	65,098	$	53,817

Current liabilities	$	16,522	$	13,549
Non-current liabilities		6		—

Total liabilities	$	16,528	$	13,549


	Reserve Balance at December 31, 2016		Charges		Paid in 2017			Reserve Balance at June 30, 2017
Severance and other employee costs	$	3,019	$	446	$	(1,673	)	$	1,792
Site closure and other associated costs		1,626		—		(614	)		1,012
Integration and other associated costs		—		—		—			—

Total	$	4,645	$	446	$	(2,287	)	$	2,804


	Year Ended December 31, 2016
	As Previously Reported			Adjustment			As Revised
Selling, general and administrative expense	$	80,266		$	(37	)	$	80,229
Income from operations		59,400			37			59,437
Write-off of unamortized debt issuance costs		3,089			(500	)		2,589
Income (loss) before provision (benefit) for income taxes and share of net income from joint venture		(7,309	)		537			(6,772	)
Provision (benefit) for income taxes		(9,313	)		1,180			(8,133	)
Net income (loss)		7,942			(643	)		7,299
Basic net income (loss) per share	$	0.29		$	(0.02	)	$	0.27
Diluted net income (loss) per share	$	0.29		$	(0.02	)	$	0.27


	Three Months Ended									Nine Months Ended
	September 30, 2016									September 30, 2016
	As Previously Reported			Adjustment			As Revised			As Previously Reported			Adjustment			As Revised
Selling, general and administrative expense	$	18,347		$	—			18,347		$	60,651		$	(509	)	$	60,142
Income (loss) from operations		18,727			—			18,727			47,304			509			47,813
Interest expense		16,337			(466	)		15,871			48,924			—			48,924
Income (loss) before provision (benefit) for income taxes and share of net income from joint venture		(3,703	)		466			(3,237	)		(5,760	)		509			(5,251	)
Provision (benefit) for income taxes		(6,423	)		158			(6,265	)		(6,469	)		173			(6,296	)
Net income (loss)		4,147			308			4,455			4,879			336			5,215
Basic net income (loss) per share	$	0.15		$	0.01		$	0.16		$	0.18		$	0.01		$	0.19
Diluted net income (loss) per share	$	0.15		$	0.01		$	0.16		$	0.18		$	0.01		$	0.19


	Three Months Ended							Six Months Ended
	June 30, 2016							June 30, 2016
	As Previously Reported		Adjustment			As Revised		As Previously Reported			Adjustment			As Revised
Selling, general and administrative expense	$	21,592	$	(599	)	$	20,993	$	42,304		$	(509	)	$	41,795
Income from operations		16,703		599			17,302		28,577			509			29,086
Interest expense		16,165		466			16,631		32,587			466			33,053
Income (loss) before provision (benefit) for income taxes and share of net income from joint venture		1,362		133			1,495		(2,057	)		43			(2,014	)
Provision (benefit) for income taxes		674		45			719		(46	)		15			(31	)
Net income		2,031		88			2,119		732			28			760
Basic net income per share	$	0.08	$	—		$	0.08	$	0.03		$	—		$	0.03
Diluted net income per share	$	0.07	$	0.01		$	0.08	$	0.03		$	—		$	0.03


	Three Months Ended
	March 31, 2016
	As Previously Reported			Adjustment			As Revised
Selling, general and administrative expense	$	20,712		$	90		$	20,802
Income (loss) from operations		11,874			(90	)		11,784
Income (loss) before provision (benefit) for income taxes and share of net income from joint venture		(3,419	)		(90	)		(3,509	)
Provision (benefit) for income taxes		(720	)		(31	)		(751	)
Net income (loss)		(1,299	)		(59	)		(1,358	)
Basic net income (loss) per share	$	(0.05	)	$	—		$	(0.05	)
Diluted net income (loss) per share	$	(0.05	)	$	—		$	(0.05	)


	Year Ended December 31, 2015
	As Previously Reported			Adjustment			As Revised
Selling, general and administrative expense	$	51,745		$	37		$	51,782
Income (loss) from operations		26,797			(37	)		26,760
Write-off of unamortized debt issuance costs		18,673			500			19,173
Income (loss) before provision (benefit) for income taxes and share of net income from joint venture		(22,950	)		(537	)		(23,487	)
Provision (benefit) for income taxes		(10,518	)		(1,180	)		(11,698	)
Net income (loss)		(7,431	)		643			(6,788	)
Basic net income (loss) per share	$	(0.35	)	$	0.03		$	(0.32	)
Diluted net income (loss) per share	$	(0.35	)	$	0.03		$	(0.32	)


	Three Months Ended
	March 31, 2017
	As Previously Reported		Adjustment		As Revised
Net income	$	7,407	$	—	$	7,407

Foreign currency translation gain (loss)		4,706		298		5,004

Other comprehensive income (loss)		4,706		298		5,004

Comprehensive income (loss)	$	12,113	$	298	$	12,411


	Year Ended December 31, 2014
	As Previously Reported			Adjustment			As Revised
Net income (loss)	$	8,217		$	—		$	8,217

Change in fair value of interest rate hedge		(431	)		158			(273	)
Foreign currency translation gain (loss)		(17,731	)		(868	)		(18,599	)

Other comprehensive income (loss)		(18,162	)		(710	)		(18,872	)

Comprehensive income (loss)	$	(9,945	)	$	(710	)	$	(10,655	)


	As of March 31, 2017
	As Previously Reported			Adjustment			As Revised
Investment in joint venture	$	42,387		$	(4,388	)	$	37,999
Total assets		1,391,043			(4,388	)		1,386,655
Accumulated other comprehensive income (loss)		(20,416	)		(4,388	)		(24,804	)
Total stockholders’ equity		327,879			(4,388	)		323,491
Total liabilities and stockholders’ equity		1,391,043			(4,388	)		1,386,655


	As of December 31, 2016
	As Previously Reported			Adjustment			As Revised
Investment in joint venture	$	40,694		$	(4,686	)	$	36,008
Total assets		1,360,386			(4,686	)		1,355,700
Accumulated other comprehensive income (loss)		(25,122	)		(4,686	)		(29,808	)
Total stockholders’ equity		315,199			(4,686	)		310,513
Total liabilities and stockholders’ equity		1,360,386			(4,686	)		1,355,700


	As of December 31, 2015
	As Previously Reported			Adjustment			As Revised
Current deferred tax assets	$	6,696		$	3,707		$	10,403
Total current assets		280,181			3,707			283,888
Property, plant and equipment, net		318,968			(329	)		318,639
Goodwill, net		449,898			5,072			454,970
Investment in joint venture		38,462			(2,212	)		36,250
Total assets		1,380,567			6,238			1,386,805
Accrued salaries, wages and benefits		21,125			(300	)		20,825
Income taxes payable		5,350			44			5,394
Total current liabilities		133,351			(256	)		133,095
Non-current deferred tax liabilities		117,459			8,176			125,635
Other liabilities		4,746			178			4,924
Total liabilities		1,066,686			8,098			1,074,784
Additionalpaid-in capital		277,582			335			277,917
Retained earnings		55,151			643			55,794
Accumulated other comprehensive income (loss)		(19,153	)		(2,839	)		(21,992	)
Total stockholders’ equity		313,881			(1,861	)		312,020
Total liabilities and stockholders’ equity		1,380,567			6,238			1,386,805


	As Previously
	Reported			Adjustment			As Revised
As of and for the year ended December 31, 2014

Change in fair value of interest rate hedge	$	(431	)	$	158		$	(273	)
Foreign currency translation gain (loss)		(17,731	)		(868	)		(18,599	)
Accumulated other comprehensive income (loss)		5,367			(710	)		4,657
Total stockholders’ equity		173,699			(710	)		172,989

As of and for the year ended December 31, 2015

Net income (loss)		(7,431	)		643			(6,788	)
Change in fair value of interest rate hedge		(2,584	)		947			(1,637	)
Foreign currency translation gain (loss)		(21,936	)		(3,075	)		(25,011	)
Accumulated other comprehensive income (loss)		(19,153	)		(2,839	)		(21,992	)
Additional paid-in capital		277,582			335			277,917
Total stockholders’ equity		313,881			(1,861	)		312,020

As of and for the year ended December 31, 2016

Net income (loss)		7,942			(643	)		7,299
Change in fair value of interest rate hedge		3,015			(1,105	)		1,910
Foreign currency translation gain (loss)		(8,984	)		(743	)		(9,727	)
Accumulated other comprehensive income (loss)		(25,122	)		(4,686	)		(29,808	)
Total stockholders’ equity		315,199			(4,686	)		310,513

As of and for the three-months ended March 31, 2017

Foreign currency translation gain (loss)		4,706			298			5,004
Accumulated other comprehensive income (loss)		(20,416	)		(4,388	)		(24,804	)
Total stockholders’ equity		327,879			(4,388	)		323,491


	Three Months Ended June 30,
Source	2017			2016
Interest on debt	$	11,451		$	15,241
Interest rate swaps settlements		—			466
Amortization of debt issuance costs		914			1,047
Capital lease interest		327			278
Capitalized interest (1)		(283	)		(401	)

Total interest expense	$	12,409		$	16,631


Period	Total Number of Shares Purchased⁽¹⁾		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽¹⁾		Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plan or Programs⁽¹⁾
April 2017		3,125	$	27.60		—		—
May 2017		—	$	—		—		—
June 2017		—	$	—		—		—

Total		3,125	$	27.60		—		—