Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 000-23486 NN, Inc. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation o ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 000-23486 (980) 264-4300 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 000-23486 NN, Inc. (Exact name of registrant as specified in its charter) Delaware 62-1096725 (State or other jurisdiction of ...

Part I [Business](index=4&type=section&id=Item%201.%20Business) NN, Inc. is a global diversified industrial company manufacturing high-precision components across three segments: Life Sciences, Mobile Solutions, and Power Solutions Business Segments Overview | Segment | Focus End Markets | Key Products | | :--- | :--- | :--- | | **Life Sciences** | Medical (Orthopaedics, Medical/Surgical) | Surgical knives, bioresorbable implants, orthopaedic implants and tools, drug delivery devices | | **Mobile Solutions** | General Industrial, Automotive | Components for fuel systems, engines, transmissions, power steering, and electromechanical motors | | **Power Solutions** | Electrical, Aerospace & Defense | Electrical contacts, connectors, precision stampings, and high-precision products for flight control and military devices | - The company's competitive strengths are rooted in its ability to produce high-precision parts with tolerances of less than one micron, its focus on system-critical components with high costs of failure, and its engagement with customers throughout the entire product lifecycle, from design to post-production[21](index=21&type=chunk)[22](index=22&type=chunk)[24](index=24&type=chunk) - In 2019, the top ten customers accounted for approximately **52%** of net sales. Sales to affiliates of Johnson & Johnson were **$93.1 million**, representing **11.0%** of consolidated net sales, primarily within the Life Sciences and Power Solutions segments[30](index=30&type=chunk) - As of December 31, 2019, the company employed **5,418** full and part-time employees and **369** temporary workers. A minority of employees in France, Brazil, Mexico, and one U.S. plant are unionized[33](index=33&type=chunk) Executive Officers | Name | Age | Position | | :--- | :--- | :--- | | Warren A. Veltman | 58 | President and Chief Executive Officer | | Thomas D. DeByle | 60 | Senior Vice President and Chief Financial Officer | | John R. Buchan | 58 | Executive Vice President – Mobile Solutions and Power Solutions | | Christopher J. Qualters | 52 | Executive Vice President – Life Sciences | | Matthew S. Heiter | 59 | Senior Vice President and General Counsel | | D. Gail Nixon | 49 | Senior Vice President and Chief Human Resources Officer | [Risk Factors](index=10&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant operational, legal, financial, and internal control risks, including customer concentration, pandemic disruptions, substantial debt, and material weaknesses in financial reporting - The company is heavily dependent on a few major customers, with the ten largest accounting for about **52%** of consolidated net sales in 2019. The loss of a major customer would materially harm revenue and profitability[56](index=56&type=chunk) - Operations are exposed to disruptions from health pandemics, such as the coronavirus, which has impacted facilities in China and suppliers in Italy, potentially harming the global economy and demand for the company's products[58](index=58&type=chunk)[59](index=59&type=chunk) - The company's strategic review, initiated in November 2019 to evaluate options for reducing leverage, carries risks such as management distraction, difficulty retaining key employees, and potential negative market reactions[69](index=69&type=chunk) - Management identified material weaknesses in internal control over financial reporting as of December 31, 2019. If not remediated, these weaknesses could lead to future material misstatements in financial statements[76](index=76&type=chunk) - As of December 31, 2019, the company had approximately **$793.2 million** of indebtedness outstanding. This high degree of leverage increases vulnerability to adverse economic conditions and restricts financial flexibility[79](index=79&type=chunk) [Unresolved Staff Comments](index=18&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the Securities and Exchange Commission - There are no unresolved staff comments[105](index=105&type=chunk) [Properties](index=18&type=section&id=Item%202.%20Properties) As of December 31, 2019, the company operated 50 owned or leased facilities across seven countries, segmented by business group - The company operates **50** owned or leased facilities in seven countries as of December 31, 2019[106](index=106&type=chunk) Facility Count by Segment | Segment | Number of Facilities | | :--- | :--- | | Life Sciences Group | 17 | | Mobile Solutions Group | 17 | | Power Solutions Group | 15 | | Joint Venture | 1 | [Legal Proceedings](index=19&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in a pre-acquisition tax dispute in Brazil and a class-action lawsuit related to a 2018 stock offering, both of which it intends to vigorously defend - A pre-acquisition tax matter in Brazil regarding ICMS (VAT) tax credits has a potential loss range of **$0 to $6.0 million**. The company believes a loss is not probable and is entitled to indemnification from the former shareholders of Autocam[110](index=110&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk) - A class-action complaint was filed in November 2019 alleging violations of the Securities Act of 1933 related to the company's September 2018 public stock offering. The company believes the allegations are without merit and intends to defend itself vigorously[114](index=114&type=chunk) [Mine Safety Disclosures](index=20&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[116](index=116&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=20&type=section&id=Item%205.%20Market%20for%20the%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) NN, Inc.'s common stock trades on Nasdaq under "NNBR", with its five-year cumulative total return significantly underperforming both the S&P SmallCap 600 and a peer group - The company's common stock is traded on the Nasdaq Stock Market under the symbol **"NNBR"**[118](index=118&type=chunk) Five-Year Cumulative Total Shareholder Return Comparison | Year | NN, Inc. | Peer Group | S&P SmallCap 600 | | :--- | :--- | :--- | :--- | | 2014 | $100.00 | $100.00 | $100.00 | | 2015 | $78.47 | $84.96 | $98.03 | | 2016 | $95.48 | $99.66 | $124.07 | | 2017 | $139.88 | $125.83 | $140.48 | | 2018 | $34.67 | $103.12 | $128.57 | | 2019 | $48.99 | $147.11 | $157.86 | [Selected Financial Data](index=21&type=section&id=Item%206.%20Selected%20Financial%20Data) This section provides a five-year financial summary (2015-2019) highlighting net sales growth, significant losses from continuing operations due to goodwill impairment, and changes in assets and long-term obligations Selected Financial Data (Years Ended December 31, in thousands) | Metric | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $847,451 | $770,657 | $619,793 | $584,954 | $405,443 | | **Goodwill impairment** | $— | $182,542 | $— | $— | $— | | **Income (loss) from operations** | $9,889 | $(179,864) | $31,780 | $34,779 | $58 | | **Income (loss) from continuing operations** | $(46,741) | $(262,987) | $24,549 | $(9,490) | $(24,375) | | **Total assets** | $1,541,984 | $1,500,902 | $1,473,709 | $1,358,274 | $1,388,337 | | **Long-term obligations** | $769,477 | $817,549 | $792,499 | $788,953 | $802,011 | - In 2018, the company recognized goodwill impairment charges of **$182.5 million**[126](index=126&type=chunk) - In 2017, the company completed the sale of its global precision bearing components (PBC) business, recording an after-tax gain of **$127.7 million**, which is reflected in income from discontinued operations[127](index=127&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section discusses 2019 financial performance, including sales growth driven by acquisitions, a reduced net loss, strategic focus on growth and debt reduction, and liquidity management efforts amid restrictive debt covenants and potential coronavirus impacts - Management's long-term objectives include organic growth, improved operating margins, cost reduction, efficient capital deployment, and debt reduction[131](index=131&type=chunk) - In December 2019, the company issued **$100 million** of Series B convertible preferred stock and warrants, receiving net proceeds of **$95.7 million** used for debt repayment and general corporate purposes[150](index=150&type=chunk)[151](index=151&type=chunk) - The coronavirus outbreak led to temporary closures of production facilities in China in early 2020. While most employees have returned, the company warns that a worsening situation could have a material adverse effect on results[152](index=152&type=chunk) - In November 2019, the company initiated a strategic review to evaluate options to reduce leverage and enhance shareholder value, including the potential sale of part or all of the company[184](index=184&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) In 2019, net sales increased by **$76.8 million** (10.0%) to **$847.5 million**, driven by acquisitions and Life Sciences growth, resulting in a net loss of **$46.7 million**, a significant improvement from the **$263.0 million** loss in 2018 Consolidated Results of Operations Comparison (2019 vs. 2018, in thousands) | Line Item | 2019 | 2018 | $ Change | | :--- | :--- | :--- | :--- | | **Net sales** | $847,451 | $770,657 | $76,794 | | **Cost of sales** | $641,639 | $589,181 | $52,458 | | **Goodwill impairment** | $— | $182,542 | $(182,542) | | **Income (loss) from operations** | $9,889 | $(179,864) | $189,753 | | **Net loss** | $(46,741) | $(262,987) | $216,246 | Segment Performance (2019 vs. 2018, in thousands) | Segment | 2019 Net Sales | 2018 Net Sales | 2019 Income from Ops | 2018 Income (Loss) from Ops | | :--- | :--- | :--- | :--- | :--- | | **Life Sciences** | $359,732 | $248,173 | $28,157 | $19,136 | | **Mobile Solutions** | $297,749 | $335,037 | $9,553 | $(55,079) | | **Power Solutions** | $192,100 | $189,778 | $13,881 | $(95,115) | - The Life Sciences segment's net sales increased by **$111.6 million**, driven by **$71.4 million** from acquisitions (Paragon Medical and Bridgemedica) and a **$41.4 million** increase in organic growth[170](index=170&type=chunk) - The Mobile Solutions segment's net sales decreased by **$37.3 million** due to lower demand in North American and European automotive markets and unfavorable foreign exchange effects[173](index=173&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) The company manages liquidity through cash from operations and its Senior Secured Revolver, having amended its credit facility with more restrictive covenants, and implemented a mitigation plan including expense reductions and preferred stock issuance to manage debt - Cash provided by operations was **$49.2 million** in 2019, compared to **$40.9 million** in 2018, primarily due to improved gross margin[180](index=180&type=chunk) - The company amended its Credit Agreement in December 2019, extending the revolver maturity to July 2022 and the Incremental Term Loan to October 2022, but also establishing more restrictive leverage ratio covenants[185](index=185&type=chunk) - Management has a plan to mitigate the risk of noncompliance with financial covenants, which includes cost reductions, repatriating cash from overseas, managing working capital, and selling underutilized properties[186](index=186&type=chunk) Contractual Obligations as of December 31, 2019 (in thousands) | Obligation | Total | Less than 1 year | 1-3 years | 3-5 years | After 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | **Long-term debt** | $793,247 | $19,160 | $767,939 | $2,347 | $3,801 | | **Expected interest payments** | $162,496 | $60,639 | $101,447 | $195 | $215 | | **Operating leases** | $109,212 | $12,229 | $22,174 | $18,535 | $56,274 | | **Total** | **$1,083,198** | **$96,335** | **$900,110** | **$26,191** | **$60,562** | [Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to interest rate and foreign currency risks, having hedged **$700.0 million** of variable-rate debt with a fixed-rate swap, while holding no currency derivatives as of December 31, 2019 - In February 2019, the company entered into a **$700.0 million** fixed-rate interest rate swap agreement to convert a portion of its variable-rate debt to a fixed rate of **2.4575%** through October 19, 2022[202](index=202&type=chunk) - As of December 31, 2019, **$700.0 million** of the company's outstanding principal was hedged. A one-percent increase in the interest rate on the remaining unhedged variable rate borrowings would increase annualized interest expense by **$0.8 million**[204](index=204&type=chunk) - The company is exposed to foreign currency transaction and translation risk due to its international operations. As of December 31, 2019, no currency derivatives were in place to hedge this exposure[205](index=205&type=chunk) [Financial Statements and Supplementary Data](index=35&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited consolidated financial statements for 2017-2019, noting the auditor's adverse opinion on internal controls due to material weaknesses, despite an unqualified opinion on the financial statements, which show significant net losses in 2018 and 2019 - The independent auditor, PricewaterhouseCoopers LLP, issued an opinion that the company did not maintain effective internal control over financial reporting as of December 31, 2019, due to multiple material weaknesses[212](index=212&type=chunk)[213](index=213&type=chunk) - The material weaknesses identified by the auditor relate to an ineffective control environment, inadequate monitoring controls over the Paragon Medical business, deficiencies in IT general controls, and intentional override of inventory controls at a foreign subsidiary[212](index=212&type=chunk) Consolidated Statement of Operations Highlights (in thousands) | Line Item | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | **Net sales** | $847,451 | $770,657 | $619,793 | | **Income (loss) from operations** | $9,889 | $(179,864) | $31,780 | | **Income (loss) from continuing operations** | $(46,741) | $(262,987) | $24,549 | | **Net income (loss)** | $(46,741) | $(262,987) | $162,237 | Consolidated Balance Sheet Highlights (in thousands) | Line Item | Dec 31, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | **Total current assets** | $302,980 | $296,203 | | **Total assets** | $1,541,984 | $1,500,902 | | **Total current liabilities** | $139,481 | $145,030 | | **Long-term debt, net of current portion** | $757,440 | $811,471 | | **Total liabilities** | $1,095,695 | $1,081,631 | | **Total stockholders' equity** | $353,277 | $419,271 | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=80&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[466](index=466&type=chunk) [Controls and Procedures](index=80&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective as of December 31, 2019, due to material weaknesses in internal control over financial reporting, for which remediation plans are underway - The CEO and CFO concluded that disclosure controls and procedures were not effective as of December 31, 2019, due to material weaknesses in internal control over financial reporting[467](index=467&type=chunk) - Material weaknesses identified include: an ineffective control environment (lack of sufficient qualified personnel), ineffective monitoring controls over the Paragon Medical business, and ineffective IT general controls at Paragon Medical[471](index=471&type=chunk)[472](index=472&type=chunk) - A material weakness was identified at a smaller foreign subsidiary where employees intentionally circumvented inventory controls, resulting in unsupported inventory counts and adjustments, which led to a revision of prior period financial statements[473](index=473&type=chunk) - Management has begun remediation efforts, which include hiring qualified finance professionals, reorganizing teams at Paragon Medical, and providing enhanced training on inventory procedures[477](index=477&type=chunk)[478](index=478&type=chunk) [Other Information](index=82&type=section&id=Item%209B.%20Other%20Information) The company reports no other information under this item - None[481](index=481&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=82&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the company's definitive proxy statement - Information required by this item is incorporated by reference from the company's definitive proxy statement[483](index=483&type=chunk) [Executive Compensation](index=83&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's definitive proxy statement - Information required by this item is incorporated by reference from the company's definitive proxy statement[486](index=486&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=83&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership is incorporated by reference from the company's definitive proxy statement, detailing outstanding equity compensation and securities available for future issuance - Information on security ownership is incorporated by reference from the company's definitive proxy statement[487](index=487&type=chunk) Equity Compensation Plan Information (in thousands) | Plan Category | Securities to be issued upon exercise | Weighted-average exercise price | Securities remaining available for future issuance | | :--- | :--- | :--- | :--- | | **Approved by security holders** | 775 | $13.24 | 3,635 | | **Not approved by security holders** | — | — | — | | **Total** | **775** | **$13.24** | **3,635** | [Certain Relationships and Related Transactions, and Director Independence](index=83&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding related party transactions and director independence is incorporated by reference from the company's definitive proxy statement - Information required by this item is incorporated by reference from the company's definitive proxy statement[489](index=489&type=chunk)[490](index=490&type=chunk) [Principal Accountant Fees and Services](index=83&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the company's definitive proxy statement - Information required by this item is incorporated by reference from the company's definitive proxy statement[491](index=491&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=84&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements and exhibits filed as part of the Form 10-K, with schedules included in the Notes to Consolidated Financial Statements - This section lists the financial statements and exhibits filed with the report[493](index=493&type=chunk) [Form 10-K Summary](index=84&type=section&id=Item%2016.%20Form%2010-K%20Summary) No Form 10-K summary is provided - None[494](index=494&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 000-23486 NN, Inc. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended Septem ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Commission File Number 000-23486 NN, Inc. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) 6210 Ardrey Kell Road Charlotte, North Carolina 28277 (Address of principal executive offices, including zip code) ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FORM 10-Q OR For the transition period from to ☒ QUARTER ...

PART I. FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) NN, Inc. reported a 26% increase in net sales to $213.3 million for Q1 2019, driven by acquisitions, yet net loss widened to $18.6 million, and total assets expanded to $1.58 billion with negative operating cash flow Condensed Consolidated Statements of Operations | Metric | Three Months Ended March 31, 2019 (in thousands) | Three Months Ended March 31, 2018 (in thousands) | | :--- | :--- | :--- | | Net sales | $213,256 | $169,148 | | Income from operations | $601 | $3,693 | | Net loss | $(18,600) | $(5,983) | | Net loss per share (Basic & Diluted) | $(0.44) | $(0.22) | Condensed Consolidated Balance Sheet Summary | Metric | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | | :--- | :--- | :--- | | Total current assets | $314,450 | $296,871 | | Total assets | $1,580,993 | $1,501,570 | | Total current liabilities | $165,112 | $145,030 | | Total liabilities | $1,186,084 | $1,083,275 | | Total stockholders' equity | $394,909 | $418,295 | Condensed Consolidated Statements of Cash Flows | Metric | Three Months Ended March 31, 2019 (in thousands) | Three Months Ended March 31, 2018 (in thousands) | | :--- | :--- | :--- | | Net cash used by operating activities | $(2,712) | $(974) | | Net cash used by investing activities | $(3,679) | $(32,818) | | Net cash provided by (used by) financing activities | $8,876 | $(6,261) | | Net change in cash and cash equivalents | $2,281 | $(39,491) | [Note 1. Interim Financial Statements](index=8&type=section&id=Note%201.%20Interim%20Financial%20Statements) NN, Inc. is a global diversified industrial company manufacturing high-precision components, and its Q1 2019 interim financial statements reflect the adoption of the new ASC 842 lease accounting standard - NN, Inc. is a global diversified industrial company with 51 facilities, manufacturing high-precision components for medical, aerospace, defense, electrical, automotive, and general industrial markets[25](index=25&type=chunk) - On January 1, 2019, the company adopted the new lease accounting standard, **ASC 842**, using the modified retrospective transition approach, resulting in recording lease-related assets and liabilities on the balance sheet for leases with terms greater than twelve months[29](index=29&type=chunk) [Note 2. Acquisitions](index=9&type=section&id=Note%202.%20Acquisitions) This note details 2018 acquisitions, notably Paragon Medical, which significantly expanded the Life Sciences portfolio and impacted financial comparability - On May 7, 2018, the company acquired **Paragon Medical**, a medical device manufacturer, to expand its Life Sciences portfolio[35](index=35&type=chunk) - Unaudited pro forma net sales for the three months ended March 31, 2018, including the Paragon Medical acquisition, would have been **$209.8 million**, with a pro forma net loss of **$8.1 million**[37](index=37&type=chunk)[39](index=39&type=chunk) - Other 2018 acquisitions included **Bridgemedica, LLC** (medical device solutions) and **Southern California Technical Arts, Inc.** (aerospace and defense components)[40](index=40&type=chunk)[41](index=41&type=chunk) [Note 3. Segment Information](index=10&type=section&id=Note%203.%20Segment%20Information) The company operates through Mobile Solutions, Power Solutions, and Life Sciences segments, with Life Sciences becoming the largest by revenue in Q1 2019 due to acquisitions Segment Results for Three Months Ended March 31, 2019 vs 2018 (in thousands) | Segment | Net Sales 2019 (in thousands) | Net Sales 2018 (in thousands) | Income from Operations 2019 (in thousands) | Income from Operations 2018 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Mobile Solutions | $78,075 | $89,794 | $4,107 | $9,785 | | Power Solutions | $49,657 | $48,682 | $3,824 | $5,233 | | Life Sciences | $86,008 | $31,200 | $3,846 | $4,204 | Total Assets by Segment (in thousands) | Segment | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | | :--- | :--- | :--- | | Mobile Solutions | $392,100 | $356,387 | | Power Solutions | $311,771 | $297,947 | | Life Sciences | $824,891 | $802,770 | [Note 5. Goodwill](index=11&type=section&id=Note%205.%20Goodwill) Goodwill totaled $440.2 million as of March 31, 2019, with market capitalization below book value indicating potential future impairment, especially for the Power Solutions segment - Total goodwill was **$440.2 million** as of March 31, 2019, with the majority allocated to Life Sciences (**$345.5 million**) and Power Solutions (**$94.7 million**)[54](index=54&type=chunk) - The company's market capitalization was below its net book value as of March 31, 2019, a potential indicator of goodwill impairment[54](index=54&type=chunk) - The Power Solutions segment, which had a significant goodwill impairment in 2018, is at risk of further material impairment charges if its performance does not meet expectations[55](index=55&type=chunk) [Note 9. Debt](index=13&type=section&id=Note%209.%20Debt) Total principal debt outstanding reached $873.4 million as of March 31, 2019, and the company entered a $700 million interest rate swap to manage variable-rate debt risk Debt Balances (in thousands) | Debt Instrument | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | | :--- | :--- | :--- | | Senior Secured Term Loan | $530,625 | $532,063 | | Incremental Term Loan | $276,000 | $279,000 | | Senior Secured Revolver | $56,184 | $38,720 | | **Total principal** | **$873,410** | **$859,593** | - In February 2019, the company entered into a **$700.0 million** notional amount fixed-rate interest rate swap to manage interest rate risk on its variable-rate debt until 2022[73](index=73&type=chunk) - The company was in compliance with all debt covenants as of March 31, 2019[71](index=71&type=chunk) [Note 10. Leases](index=13&type=section&id=Note%2010.%20Leases) Adoption of ASC 842 on January 1, 2019, led to the recognition of $81.3 million in right-of-use assets and $83.2 million in total lease liabilities on the balance sheet - Adopted **ASC 842** on January 1, 2019, resulting in the recognition of right-of-use assets and lease liabilities on the balance sheet[74](index=74&type=chunk) Lease Assets and Liabilities as of March 31, 2019 (in thousands) | Category | Financial Statement Line Item | Amount (in thousands) | | :--- | :--- | :--- | | **Assets** | | | | Operating lease assets | Operating lease right-of-use assets | $68,458 | | Finance lease asset | Finance lease right-of-use assets | $12,886 | | **Total lease assets** | | **$81,344** | | **Liabilities** | | | | Operating lease liabilities | Current & Non-current | $74,605 | | Finance lease liabilities | Current & Non-current | $8,551 | | **Total lease liabilities** | | **$83,156** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes Q1 2019's 26% revenue growth primarily to 2018 acquisitions, offset by organic volume decline in automotive, and believes current liquidity is sufficient for the next year Key Changes in Results of Operations (Q1 2019 vs Q1 2018, in thousands) | Item | 2019 (in thousands) | 2018 (in thousands) | $ Change (in thousands) | | :--- | :--- | :--- | :--- | | Net sales | $213,256 | $169,148 | $44,108 | | Cost of sales | $161,269 | $126,444 | $34,825 | | Selling, general and administrative expense | $28,125 | $22,177 | $5,948 | | Depreciation and amortization | $23,425 | $14,281 | $9,144 | | Income from operations | $601 | $3,693 | $(3,092) | - Net sales increase of **$44.1 million** was primarily due to **$55.2 million** from 2018 acquisitions, offset by an **$8.0 million** decrease in volume (mainly automotive) and **$2.8 million** in unfavorable foreign exchange effects[138](index=138&type=chunk) - The company's market capitalization declined below book value as of March 31, 2019, but management concluded it was not an indication of additional goodwill impairment due to a subsequent increase in market cap and factoring in a control premium[164](index=164&type=chunk) [Results by Segment](index=26&type=section&id=Results%20by%20Segment) Mobile Solutions sales declined due to automotive market weakness, Power Solutions saw a slight increase from acquisition, and Life Sciences sales surged significantly from acquisitions - **Mobile Solutions:** Net sales decreased by **$11.7 million** to **$78.1 million**, and income from operations fell by **$5.7 million**, primarily due to reduced automotive demand in North America and China[151](index=151&type=chunk)[152](index=152&type=chunk) - **Power Solutions:** Net sales increased by **$1.0 million** to **$49.7 million**, driven by the Technical Arts acquisition (**$1.6 million**); income from operations decreased by **$1.4 million** due to higher SG&A expenses[153](index=153&type=chunk)[154](index=154&type=chunk) - **Life Sciences:** Net sales grew by **$54.8 million** to **$86.0 million**, with **$53.6 million** attributable to the Paragon Medical and Bridgemedica acquisitions; income from operations decreased slightly by **$0.4 million** due to integration costs and investments for future growth[155](index=155&type=chunk)[156](index=156&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2019, the company had $20.3 million in cash and $56.7 million in unused borrowing capacity, deemed sufficient for future operations and debt service - As of March 31, 2019, liquidity consisted of **$20.3 million** in cash and **$56.7 million** of unused borrowing capacity under the Senior Secured Revolver[165](index=165&type=chunk) - Total outstanding principal under the credit facility was **$862.8 million** as of March 31, 2019[171](index=171&type=chunk) - A **$700 million** fixed-rate interest rate swap was executed in February 2019 to change a portion of variable-rate debt to a fixed rate of **2.4575%** (plus margin), reducing exposure to interest rate fluctuations[170](index=170&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces interest rate risk from variable-rate debt, with a 1% rate increase raising annual interest expense by $8.7 million, partially mitigated by a $700 million interest rate swap - A **one-percent increase** in interest rates on the company's variable rate debt would increase annual interest expense by approximately **$8.7 million** (**$5.3 million** from Term Loan, **$2.8 million** from Incremental Loan, **$0.6 million** from Revolver)[183](index=183&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk) - To manage interest rate risk, the company entered into a **$700 million** fixed-rate interest rate swap in February 2019, converting a portion of its variable-rate debt to a fixed rate[186](index=186&type=chunk) - The company is exposed to foreign currency risk through its international operations and various intercompany transactions but did not hold any foreign currency derivatives as of March 31, 2019[187](index=187&type=chunk) [Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective as of March 31, 2019, due to a material weakness in financial reporting personnel, with remediation efforts ongoing - The CEO and CFO concluded that disclosure controls and procedures were **not effective** as of March 31, 2019[189](index=189&type=chunk) - The ineffectiveness is due to a **material weakness** in internal control over financial reporting related to a lack of sufficient, adequately trained personnel in the finance function[191](index=191&type=chunk) - Remediation efforts are in progress, primarily through the hiring of qualified finance personnel in 2018[193](index=193&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=31&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in a Brazilian tax matter with a possible loss range of $0 to $6.0 million, for which it is entitled to indemnification from former Autocam shareholders - The company is defending a tax matter in Brazil regarding **ICMS tax credits** claimed by its subsidiary, Autocam Brazil, prior to its acquisition[197](index=197&type=chunk) - While a loss is not considered probable, the estimated range of possible losses is from **$0 to $6.0 million**; no amount was accrued for this matter as of March 31, 2019[198](index=198&type=chunk) - The company is entitled to indemnification from the former shareholders of Autocam for potential losses related to this tax matter[199](index=199&type=chunk) [Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred to the risk factors previously disclosed in the company's 2018 Annual Report on Form 10-K - No material changes to the risk factors disclosed in the 2018 Annual Report on Form 10-K have occurred[201](index=201&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=31&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In March 2019, the company withheld 18,311 shares at an average price of $7.71 per share to satisfy tax obligations for employees upon restricted stock vesting - During the quarter, **18,311 shares** were withheld at an average price of **$7.71** to pay for tax obligations due upon the vesting of restricted stock for certain employees[202](index=202&type=chunk) [Defaults upon Senior Securities](index=31&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) The company reported no defaults upon senior securities - The company reported no defaults upon senior securities[202](index=202&type=chunk) [Mine Safety Disclosures](index=32&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not applicable[203](index=203&type=chunk) [Other Information](index=32&type=section&id=Item%205.%20Other%20Information) The company reported no other information under this item - The company reported no other information under this item[204](index=204&type=chunk) [Exhibits](index=33&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including separation agreements, officer certifications, and XBRL interactive data files - Exhibits filed include separation agreements, CEO and CFO certifications, and XBRL data files[205](index=205&type=chunk) [Signatures](index=34&type=section&id=SIGNATURES)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 000-23486 NN, Inc. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organiz ...