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 $29,848 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 Consolidated Financial Statements).

During the fourth quarter of 2014, we finalized our valuation related to the assets acquired and liabilities assumed of Autocam. The facts and circumstances existed at the date of acquisition (August 29, 2014) and, if known would have affected the measurement of the amounts recognized at the date. As a result, we adjusted the preliminary allocation of the purchase price initially recorded at the Autocam acquisition date to reflect these measurement period adjustments.

The following table summarizes the purchase price allocation for the Autocam merger:


Fair value of assets acquired and liabilities assumed on August 29, 2014	September 30, 2014		2014 adjustments to fair value			December 31, 2014
Current assets	$	88,529	$	(1,182	)	$	87,347
Property, plant, and equipment		146,120		7,065			153,185
Intangible assets subject to amortization		51,098		562			51,660
Investment in joint venture		35,595		—			35,595
Other non-current assets		2,170		3,898			6,068
Goodwill		77,548		(3,556	)		73,992

Total assets acquired	$	401,060	$	6,787			407,847

Current liabilities	$	34,320	$	6,963		$	41,283
Current maturities of long-term debt		6,547		—			6,547
Non-current deferred tax liabilities		46,998		(486	)		46,512
Obligations under capital lease		18,350		—			18,350
Long-term debt, net of current portion		4,263		—			4,263
Other non-current liabilities		2,028		310			2,338

Total liabilities assumed	$	112,506	$	6,787		$	119,293

Net asset acquired	$	288,554	$	—		$	288,554

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 and trade names. We have finished our analysis of the Autocam opening balance sheet and consider the purchase price allocation final.

In connection with the acquisition of Autocam, 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. 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 include leasehold improvements were acquired. Property, plant and equipment has been valued using the cost approach supported where available by observable market data which includes consideration of obsolescence. Intangible assets have been 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, during 2014 we recognized $6,912 in transaction costs. During 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 Consolidated Statements of Income and Comprehensive Income (Loss). As required by purchase accounting, the acquired inventories were recorded at their estimated fair value. These inventories were sold in the third quarter 2014 resulting in a one-time $1,158 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 $80,821 and net income of $3,686 (including the $1,158 for the one-time increase in cost of goods sold) has been included in NN’s financial statements.

The unaudited pro forma financial results for the years ended December 31, 2014 and 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 fair value step-up and estimated useful lives of Autocam depreciable fixed assets and definite-life amortizable assets acquired in the transaction. The provision for income taxes has also been adjusted for all periods, based upon the foregoing adjustments to historical results.


	Year ended December 31,
	2014		2013
Pro forma sales	$	659,652	$	606,690
Pro forma net income	$	19,573	$	3,307

The pro forma net income for the year ended December 31, 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 $9,433 and $3,846, net of tax, respectively during 2014 and reported in the year ended December 31, 2013 pro forma net income above.

Other Acquisitions

We made three other acquisitions during 2014 that aggregated to $20,995 in net assets acquired. Related to the acquisitions, we incurred transactions costs of $1,242 from third parties during 2014, which were expensed as incurred in acquisition related costs excluded from selling, general and administrative within the Consolidated Statements of Income and Comprehensive Income (Loss).

We have finalized the purchase price allocation for these three acquisitions during our year end closing process.

The following table summarizes the fair values of assets acquired and liabilities assumed at the date of acquisition with any adjustments to fair value since September 30, 2014.


Assets acquired and liabilities assumed	September 30, 2014		2014 adjustments to fair value			December 31, 2014
Current assets	$	5,688	$	(123	)	$	5,565
Property, plant, and equipment		15,367		(31	)		15,336
Intangible assets subject to amortization		2,705		—			2,705
Goodwill		2,038		456			2,494

Total assets acquired	$	25,798	$	302		$	26,100

Current liabilities	$	4,803	$	302		$	5,105

Total liabilities assumed	$	4,803	$	302		$	5,105

Net asset acquired	$	20,995	$	—		$	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 11 years. Goodwill of $2,494 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 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 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 $1,100 from the date of acquisition to December 31, 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 outstanding shares of RFK during the third quarter of 2014 for an additional $2,527 in cash. RFK has contributed revenues and net income of approximately $5,100 and $165, respectively, from the date of acquisition to December 31, 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 $32 for RFK representing the fair value of the 0.30% of the shares outstanding we do not own as of December 31, 2014.

VS Asset 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. This was accounted for as business combination. VS has contributed revenues and net loss of approximately $14,742 and $(1,011), including integration costs of $503 net of tax, respectively, from the date of acquisition to December 31, 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, and 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.

The cash paid to acquire all four businesses totaled $277,832 ($256,837 for Autocam and $20,995 for the others) less cash acquired of $17,640 for a net amount of $260,192. A portion of this amount ($2,528) was reported in cash flows from financing activities as that amount related to acquiring a non-controlling interest in RFK.