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Acquisitions | 9 Months Ended
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Sep. 30, 2014
Business Combinations [Abstract] |
Acquisitions | Note 2. Acquisitions Autocam On August 29, 2014, we completed our merger with Autocam Corporation (“Autocam”), for $256,837 in cash and $31,717 in NN stock. Additionally, we assumed $29,160 in Autocam debt and capital lease obligations. Autocam is a global leader in the engineering, manufacture and assembly of highly complex, system critical components for fuel systems, engines and transmission, power steering and electric motors. With the completion of the transaction, NN becomes one of the top global manufacturers in the precision metal components space. Additionally, this acquisition will leverage NN’s and Autocam’s complementary core strengths and values and will position our Precision Metal Components business segment to outgrow its end markets by taking advantage of global market trends in fuel efficient technologies such as gasoline direct injection systems, high-pressure diesel injection systems and variable valve timing. The funding of the cash portion of the purchase price and acquisition costs was provided primarily from borrowings, including a $350,000 term loan entered into concurrent with the acquisition. (See Note 7 of the Notes to Condensed Consolidated Financial Statements). The following table summarizes the preliminary purchase price allocation for the Autocam merger: Preliminary fair value of assets acquired and liabilities assumed on August 29, 2014
Current assets |  | $ | 88,529 |
Property, plant, and equipment |  |  | 146,120 |
Intangible assets subject to amortization |  |  | 51,098 |
Investment in joint venture |  |  | 35,595 |
Other non-current assets |  |  | 2,170 |
Goodwill |  |  | 77,548 |
Total assets acquired |  | $ | 401,060 |
Current liabilities |  |  | 34,320 |
Current maturities of long-term debt |  |  | 6,547 |
Non-current deferred tax liabilities |  |  | 46,998 |
Obligations under capital lease |  |  | 18,350 |
Long-term debt, net of current portion |  |  | 4,263 |
Other non-current assets |  |  | 2,028 |
Total liabilities assumed |  | $ | 112,506 |
Net asset acquired |  | $ | 288,554 |
The combination of income, market, and cost approaches were used for the preliminary 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 and trade names. The Autocam acquisition occurred late in the third quarter, and NN is still in the process of valuing the assets acquired and liabilities assumed. The allocation of the purchase price is preliminary and subject to change. Accordingly, adjustments may be made to the values of the acquired assets and liabilities assumed as additional information is obtained about the facts and circumstances that existed at the valuation date. The final determination of the purchase price allocation is anticipated to be completed as soon as practicable and most likely by the filing of our 2014 annual report on Form 10-K in March 2015. In connection with the purchase, we recorded goodwill, which represents the excess of the purchase price over the estimated preliminary fair value of tangible and intangible assets acquired, net of liabilities assumed. The goodwill is attributed primarily to Autocam as a going concern and the fair value of expected cost synergies and revenues growth from combining the NN and Autocam businesses. The going concern element represents the ability to earn a higher return on the combined assembled collection of assets and businesses of Autocam than if those assets and businesses were to be acquired and managed separately. Other relevant elements of goodwill are the benefits of access to certain markets and the assembled work force. None of the goodwill is expected to be deducted for tax purposes. Property, plant and equipment acquired primarily included machinery and equipment for use in manufacturing operations. Additionally, a number of manufacturing sites and related facilities, land and leased manufacturing sites that include leasehold improvements were acquired. Property, plant and equipment has been preliminarily valued using the cost approach supported where available by observable market data which includes consideration of obsolescence. Intangible assets have been preliminarily valued using the relief from royalty and multi-period excess earnings methods, both forms of the income approach supported by observable market data. Related to the acquisition of Autocam, in the third quarter and first nine months of 2014, we recognized $5,316 and $5,857, respectively, in transaction costs. During the third quarter and the first nine months of 2014, we expensed $2,974 of deferred financing costs and make whole interest payments related to the acquisition. Transaction costs were expensed as incurred and are included in the “Acquisition related costs excluded from selling, general and administrative expenses” line item and deferred financing costs are included in the interest expense line items in the Unaudited Condensed Consolidated Statements of Comprehensive Income. As required by purchase accounting, the acquired inventories were recorded at their preliminary estimated fair value. These inventories were sold in the third quarter 2014 resulting in a one-time $1,992 increase in cost of sales. Beginning September 1, 2014, the consolidated results of operations of NN include the results of the acquired Autocam businesses. Since the date of the acquisition, sales revenue of $21,639 and net income of $1,382 (excluding the non-recurring $1,274 for the one-time increase in cost of goods sold, net of tax) has been included in NN’s financial statements. The unaudited pro forma financial results for three months ended September 30, 2014 and September 30, 2013 and nine months ended September 30, 2014 and September 30, 2013 combine the consolidated results of NN and Autocam giving effect to the acquisition of Autocam as if it had been completed on January 1, 2013, the beginning of the comparable prior annual reporting period presented. The unaudited pro forma financial results presented below do not include any anticipated synergies or other expected benefits of the acquisition. This unaudited pro forma financial information is presented for informational purposes only and is not indicative of future operations or results had the acquisition been completed as of January 1, 2013. The unaudited pro forma financial results include certain adjustments for additional depreciation and amortization expense based upon the preliminary fair value step-up and estimated useful lives of Autocam depreciable fixed assets and definite-life amortizable assets acquired in the transaction. The unaudited pro forma results also include adjustments to net interest expense and early debt extinguishment costs related to the transaction. The provision for income taxes has also been adjusted for all periods, based upon the foregoing adjustments to historical results.
|  | Three Months ended September 30, |  |  | Nine Months ended September 30, |
|  | 2014 |  |  | 2013 |  |  | 2014 |  |  | 2013 |
Pro forma sales |  | $ | 166,979 |  |  | $ | 152,708 |  |  | $ | 505,891 |  |  | $ | 457,466 |
Pro forma net income |  | $ | 4,867 |  |  | $ | 5,436 |  |  | $ | 19,815 |  |  | $ | (224 | )
The pro forma net income for the nine months ended September 30, 2013 includes certain items, such as financing, integration, and transaction costs historically recorded by NN and Autocam directly attributable to the acquisition, which will not have an ongoing impact. These items include transaction, integration, and financing related costs incurred by NN and Autocam of $8,509 and $8,933, net of tax, and $3,010 and $3,125, net of tax, respectively during third quarter and first nine months of 2014, respectively, and reported in the nine months ended September 30, 2013 pro forma net income above. Other Acquisitions We made three other acquisitions during the first nine months of 2014 that aggregated to $20,995 in net assets acquired. Related to the acquisitions, we incurred transactions costs of $1,179 from third parties during the nine months ended September 30, 2014, which were expensed as incurred in acquisition related costs excluded from selling, general and administrative within the Condensed Consolidated Statements of Comprehensive Income. The accounting for these business combinations is based on currently available information and is considered preliminary. We are in the process of finalizing fair market valuations of all the net assets acquired. The final determination of the purchase price allocation is anticipated to be completed as soon as practicable and most likely by the filing of our 2014 annual report on Form 10-K in March 2015. Any adjustments to such allocations are not expected to have a material impact on our financial position or results of operations. The following table summarizes the preliminary fair values of assets acquired and liabilities assumed at the date of acquisition with any adjustments to fair value since June 30, 2014.
Assets acquired and liabilities assumed |  | June 30, 2014 |  |  | Net Assets acquired in third quarter |  |  | 2014 adjustments to fair value |  |  | September 30, 2014 |
Current assets |  | $ | 5,347 |  |  | $ | 397 |  |  | $ | (56 | ) |  | $ | 5,688 |
Property, plant, and equipment |  |  | 14,750 |  |  |  | 274 |  |  |  | 343 |  |  |  | 15,367 |
Intangible assets subject to amortization |  |  | 1,815 |  |  |  | 1,140 |  |  |  | (250 | ) |  |  | 2,705 |
Goodwill |  |  | 732 |  |  |  | 1,428 |  |  |  | (122 | ) |  |  | 2,038 |
Total assets acquired |  | $ | 22,644 |  |  | $ | 3,239 |  |  | $ | (85 | ) |  | $ | 25,798 |
Current liabilities |  | $ | 4,749 |  |  | $ | 139 |  |  | $ | (85 | ) |  | $ | 4,803 |
Total liabilities assumed |  | $ | 4,749 |  |  | $ | 139 |  |  | $ | (85 | ) |  | $ | 4,803 |
Net asset acquired |  | $ | 17,895 |  |  | $ | 3,100 |  |  | $ | — |  |  | $ | 20,995 |
The intangible assets subject to amortization are for customer contracts and trade names totaling $2,705 and have weighted average useful lives of approximately 10 years. Goodwill of $2,038 arising from the acquisitions is attributable primarily to the assembled workforce of RFK and strategic market opportunities that are expected to arise from the acquisition of RFK and Chelsea. In the following paragraphs we will provide a brief description of the businesses acquired, reasons for the acquisition and relevant financial information about each business. Chelsea Grinding (Chelsea) On July 15, 2014, we purchased the assets of Chelsea Grinding for $3,100 in cash. Chelsea is a hydraulic component manufacturer. We acquired Chelsea to achieve access to the adjacent hydraulic component market. Chelsea, which has been completely integrated into our Erwin Plant of the Metal Bearing Components Segment, has contributed revenues of approximately $500 from the date of acquisition to September 30, 2014. RFK Valjcici d. d. Konjic (“RFK”) On June 20, 2014, we acquired 79.2% of the outstanding shares of RFK Valjcici d. d. Konjic (“RFK”) for $9,756 in cash. RFK is a manufacturer of tapered rollers with operations in Konjic, Bosnia & Herzegovina. Its products, while complementary to NN’s existing roller bearing components, will broaden our product offering and allow penetration into adjacent markets. NN acquired up to 99.7% of the shares of RFK during the third quarter of 2014 for an additional $2,528 in cash. RFK has contributed revenues and net income of $2,564 and $88, respectively, from the date of acquisition to September 30, 2014. RFK was a listed company on the Sarajevo Stock Exchange founded in 1984 and is expected to have sales of approximately $12.0 million in 2014. RFK currently exports all of its products, predominately to customers serving the European truck, industrial vehicle and railway markets. NN will continue operations at the existing facilities in Bosnia & Herzegovina and will roll up the operations under our Metal Bearing Components Segment. In addition, we have reported non-controlling interest of $38 for RFK representing the fair value of the 0.30% of the shares outstanding we do not own as of September 30, 2014. VS Assets Purchase On January 30, 2014, we purchased the majority of the operating assets of V-S Industries, V-S Precision, LLC and V-S Precision SA de DV (collectively referred to as “VS”) from the secured creditors of V-S Industries for $5,580 in cash and assumed certain liabilities totaling $2,968. VS has contributed revenues and net loss of approximately $10,518 and $(957), including the integration costs, respectively, from the date of acquisition to September 30, 2014. VS is a precision metal components manufacturer that supplies customers in a variety of industries including electric motors, HVAC, power tools, automotive and medical. The acquisition of VS will provide us with a complementary, but broader product offering and will allow penetration into adjacent markets. VS has two locations in Wheeling, Illinois and Juarez, Mexico and will roll up under the Precision Metal Components Segment.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1383-128463 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6996-128479 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=39739317&loc=d3e4922-128472 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=39739317&loc=d3e4934-128472 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=39739317&loc=d3e4926-128472 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7000-128479 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1392-128463 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1486-128463 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6927-128479 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1497-128463 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1490-128463 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7008-128479 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=39739317&loc=d3e4845-128472 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1500-128463 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1524-128463 + Details
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