Form 10-K/A

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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                              ____________________

                                   FORM 10-K/A

|X|      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2002
                                       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 0-23486
                              ____________________

                                    NN, INC.
             (Exact name of registrant as specified in its charter)
           Delaware                                        62-1096725
(State or other jurisdiction of                         (I.R.S. Employer
incorporation or organization)                         Identification No.)

            2000 Waters Edge Drive
            Johnson City, Tennessee                           37604
    (Address of principal executive offices)               (Zip Code)

       Registrant's telephone number, including area code: (423) 743-9151
                              ____________________

           Securities registered pursuant to Section 12(b) of the Act:

               Title of                           Name of each exchange
              each class                           on which registered
              ----------                          ---------------------

                 None                                     None

           Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, par value $.01
                                (Title of class)

         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 and 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    |X|       No    | |


         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |X|

         Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).

Yes    |X|       No    |_|

         The number of shares of the registrant's common stock outstanding on
March 28, 2003 was 15,372,841.

         The aggregate market value of the voting stock held by non-affiliates
of the registrant at March 28, 2003, based on the closing price on the NASDAQ
National Market System on that date was approximately $139,739,125.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the Proxy Statement with respect to the 2003 Annual Meeting
of Stockholders are incorporated by reference in Part III of this Form 10-K.

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                                     PART I

Explanatory Statement

        This Amendment on Form 10-K/A amends the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 2002, and is being filed solely
to amend the financial reporting of certain transactions related to the
formation of NN Euroball, ApS ("Euroball") on July 31, 2000, and the subsequent
purchase on December 20, 2002 of the 23% interest in Euroball held by FAG
Kugelfischer George Schaefer AG, which was subsequently acquired by INA -
Schaeffler KG (collectively, "INA/FAG"). These restatements had no material effect on
the Company's reported net sales, gross profit, income from operations or cash
flows for the fiscal years ended December 31, 2002, 2001 or 2000.

        We have revised the valuation of the original purchase price associated
with the formation of Euroball in July 2000. This revision resulted in a
reduction of goodwill of approximately 4.1 million Euro ($3.8 million). Further,
we have increased stockholders' equity by approximately 10.0 million Euro ($9.3
million) to reflect the amount by which the Company's proportionate interest in
Euroball exceeded the book value of the net assets exchanged by the Company. As
a result of these two adjustments, minority interest in consolidated
subsidiaries has been reduced by approximately $7.4 million, $12.6 million and
$13.3 million, at December 31, 2002, 2001 and 2000, respectively, goodwill has
been reduced $4.3 million, $3.7 million and $3.9 million, at December 31, 2002,
2001 and 2000, respectively, and paid in capital increased $9.3 million at
December 31, 2002, 2001 and 2000 from amounts previously reported. Comprehensive
income has also been restated for the foreign currency translation effects of
these adjustments.

        In the previously issued December 31, 2002 Consolidated Financial
Statements, when the Company acquired the 23% interest in Euroball held by
INA/FAG in December 2002, the excess of minority interest in consolidated
subsidiaries over the purchase price was recorded as a non-taxable gain in the
amount of approximately $5.9 million. As restated, in the accompanying
Consolidated Financial Statements, the non-taxable gain has been excluded and
the excess of the purchase price over the fair value of INA/FAG's 23% interest
in the net assets of Euroball was allocated to goodwill. The resulting impact to
the Consolidated Financial Statements is an increase to goodwill of
approximately $1.5 million and a decrease in retained earnings of $5.9 million as of
December 31, 2002 and reversal of the $5.9 million gain previously recorded in
the Consolidated Statement of Income and Comprehensive Income for the year ended
December 31, 2002.

       Additionally, the Company has reclassified minority interest in
consolidated subsidiaries from a component of total liabilities to a separate
line item in the Consolidated Balance Sheets at December 31, 2002, 2001 and
2000.

         Items amended include Item 1, Item 6, Item 7, Item 8 and Item 15. In
addition, in connection with the filing of this Amendment and pursuant to the
rules of the Securities and Exchange Commission, the Registrant is including
with this Amendment certain currently dated certifications in Item 15. Other
than those described in Note 1 to the Consolidated Financial Statements, no
other material changes have been made to this Annual Report on Form 10-K/A. This
Form 10-K/A does not modify or update the disclosure contained in the Annual
Report in any way other than as required to reflect the amendments discussed
above.


Item 1.           Business Overview

         NN, Inc. manufactures and supplies high precision bearing components,
consisting of balls, rollers, seals and retainers, for leading bearing
manufacturers on a global basis. We are the leading independent manufacturer of
precision steel bearing balls for the North American and European markets. In
1998, we began implementing a strategic plan designed to position us as a
worldwide supplier of a broad line of bearing components and other precision
plastic components. Through a series of acquisitions executed as part of that
plan, we have built on our strong core ball business and greatly expanded our
bearing component product offering. Today, we offer among the industry's most
complete line of bearing components. We emphasize engineered products that take
advantage of our competencies in product design and tight tolerance
manufacturing processes. Our bearing customers use our components in fully
assembled ball and roller bearings, which serve a wide variety of industrial
applications in the transportation, electrical, agricultural, construction,
machinery, mining and aerospace markets. As used in this Annual Report on Form
10-K/A, the terms "NN", "the Company", "we", "our", or "us" mean NN, Inc. and
its subsidiaries.

                                       2


         For managerial and financial analysis purposes, management views the
Company's operations in three segments: the domestic ball and roller operations
of Erwin, Tennessee and Mountain City, Tennessee ("Domestic Ball and Roller
Segment"), the Euroball facilities of Kilkenny, Ireland, Eltmann, Germany and
Pinerolo, Italy ("Euroball Segment") and the operations of Industrial Molding
Corporation ("IMC"), The Delta Rubber Company ("Delta") and NN Arte ("Plastics
Segment"). Financial information about the Domestic Ball and Roller Segment, the
Euroball Segment and the Plastics Segment are set forth in our Consolidated
Financial Statements beginning on page 28.

Recent Developments

         On December 20, 2002, we acquired the 23 percent interest in NN
Euroball, ApS ("Euroball") held by INA/FAG. Euroball was formed in 2000 by the
Company, FAG Kugelfischer George Schaefer AG, which was subsequently acquired by
INA - Schaeffler KG (collectively, "INA/FAG"), and AB SKF ("SKF"). INA/FAG is a
global bearing manufacturer and one of our largest customers. We paid
approximately 13.4 million Euros ($13.8 million) for INA/FAG's interest in
Euroball. Following the closing of the transaction, we own 77 percent of the
outstanding shares of Euroball and SKF owns the remaining 23 percent. SKF
consented to our purchase of INA/FAG's interest pursuant to the terms of the
Euroball Shareholder Agreement. SKF has the right, beginning January 1, 2003 to
require us to purchase its interest in Euroball, based on a formula price
detailed in the Euroball Shareholder Agreement. SKF has informed us that it
intends to exercise its right and we expect to purchase its interest during the
second quarter of 2003.

         On December 9, 2002, we announced that we had signed a letter of intent
to acquire certain component manufacturing operations of SKF in Veenendaal, The
Netherlands. SKF, a Swedish corporation, is a global bearing manufacturer and
one of our major customers. The transaction, which is expected to close in the
second quarter of 2003, is subject to a number of conditions, including the
execution of a definitive asset acquisition agreement, completion of due
diligence, approval of NN's and SKF's boards of directors and any necessary
approval of relevant government agencies.

         On January 24, 2003, we exercised our call right to purchase the
remaining 49 percent interest in NN Mexico, LLC. The transaction, which is
expected to close in the second quarter of 2003, is subject to a number of
conditions, including the approval of NN's board of directors. The transaction
is not expected to materially impact our financial condition or results of
operations. Based on the purchase price formula contained in the principal
agreement between the parties, the purchase price for such interest is
anticipated to be zero.

Corporate Information

NN, originally organized in October, 1980, is incorporated in Delaware, with our
principal executive offices located at 2000 Water's Edge Drive, Johnson City,
Tennessee 37604 and our telephone number is (423) 743-9151. Our web site address
is www.nnbr.com. Information contained on our web site is not part of this
Annual Report. Our annual report on Form 10-K/A, quarterly reports on Form
10-Q/A, current reports on Form 8-K and amendments thereto are available on our
web site under "SEC Reports." Prior to February 5, 2003, these reports were
available through a hyperlink to a third-party service which provided limited
free access to such reports. We believed that such hyperlink provided unlimited
free access to our filings with the Commission, however, this hyperlink did not
provide unlimited free access to the reports. Therefore, the amendments to our
Form 10-Q and Form 10-K filed on November 22, 2002 and our Forms 8-K filed
December 9, 2002 and December 20, 2002 were not available free of charge to all
viewers through our web site. After February 5, 2003, our hyperlink provides
unlimited free access to our filings with the Commission on our web site under
"SEC Reports".


                                       3



Products

         Precision Steel Balls. At our Erwin, Tennessee and Mountain City,
Tennessee facilities and our Euroball facilities, we manufacture and sell high
quality, precision steel balls in sizes ranging in diameter from 1/8 of an inch
to 12 1/2 inches. We produce and sell balls in grades ranging from grade 3 to
grade 1000, as established by the American Bearing Manufacturers Association.
The grade number for a ball or a roller indicates the degree of spherical or
cylindrical precision of the ball or roller; for example, grade 3 balls are
manufactured to within three-millionths of an inch of roundness and grade 50
rollers are manufactured to within fifty-millionths of an inch of roundness. Our
steel balls are used primarily by manufacturers of anti-friction bearings where
precise spherical, tolerance and surface finish accuracies are required. At our
Domestic Ball and Roller Segment, sales of steel balls accounted for
approximately 88%, 89% and 92% of the segment's net sales in 2002, 2001 and
2000, respectively.

         Steel Rollers. We manufacture cylindrical rollers at our Erwin,
Tennessee facility. These cylindrical rollers are produced in a wide variety of
sizes, ranging from grade 50 to grade 1000. Rollers are used in place of balls
in anti-friction bearings that are subjected to heavy load conditions. Our
roller products are used primarily for applications similar to those of our ball
product lines, plus certain non-bearing applications such as hydraulic pumps and
motors.

         Bearing Seals and Retainers. We manufacture and sell a wide range of
precision bearing seals produced through a variety of compression and injection
molding processes and adhesion technologies to create rubber-to-metal bonded
bearing seals. The seals are used in applications for automotive, industrial,
agricultural, mining and aerospace markets. We also manufacture and sell high
precision plastic retainers for ball and roller bearings used in a wide variety
of industrial applications. Retainers are used to separate and space balls or
rollers within a fully assembled bearing.

         Precision Plastic Components. We also manufacture and sell a wide range
of specialized plastic products including automotive under-the-hood components,
electronic instrument cases and precision electronic connectors and lenses, as
well as a variety of other specialized parts.

         Research and Development. The amounts spent on research and development
activities by us during each of the last three fiscal years are not material.

Customers

         Our bearing component products are supplied primarily to bearing
manufacturers for use in a broad range of industrial applications, including
transportation, electrical, agricultural, construction, machinery, mining and
aerospace. We supply over 500 customers; however, our top 10 customers account
for approximately 73% of our revenue. These top 10 customers include SKF,
INA/FAG, Timken, Torrington, GKN, SNR, Iljin, NTN,, Delphi, and NSK. In 2002,
44% of our products were sold to customers in North America, 47% to customers in
Europe, and the remaining 9% to customers located throughout the rest of the
world, primarily Asia. Sales to various U.S. and foreign divisions of SKF
accounted for approximately 33% of net sales in 2002 and sales to INA/FAG
accounted for approximately 19% of net sales in 2002, demonstrating our
long-term, strategic relationships with these key customers. Historically, we
have increased our supply to SKF and INA/FAG on an annual basis and we have
almost tripled our sales to these two companies since 1999. These gains are
directly attributed to the success of Euroball and our efforts to develop a
closer partnering relationship with our global bearing customers. None of the
Company's other customers accounted for more than 5% of its net sales in 2002.

         Certain customers have contracted to purchase all or a majority of
their bearing component requirements from us, although only a few are
contractually obligated to purchase any specific amounts. While firm orders are
generally received on a monthly basis, we are normally aware of future order
levels well in advance of the placement of a firm order. For our domestic ball
and roller operations, we maintain a computerized, bar coded inventory
management system with most of our major customers that enables us to determine
on a day-to-day basis the amount of these components remaining in a customer's
inventory. When such inventories fall below certain levels, we automatically
ship additional product.

         Euroball has entered into six-year supply agreements with SKF and
INA/FAG providing for the purchase of Euroball products in amounts and at prices
that are subject to adjustment on an annual basis. The agreements contain
provisions obligating Euroball to maintain specified quality standards and
comply with various ordering and delivery procedures, as well as other customary
provisions. SKF may terminate its agreement if, among other things, Euroball

                                       4




acquires or becomes acquired by a competitor of SKF. INA/FAG may terminate its
agreement if, among other things, Euroball assigns its rights under the
agreement, whether voluntarily or by operation of law. These agreements expire
during 2006.

         During 2002, the Domestic Ball and Roller Segment sold its products to
more than 500 customers located in more than 25 different countries.
Approximately 47% of ball and roller net sales in 2002 were to customers outside
the United States. Sales to the Domestic Ball & Roller Segment's top ten
customers accounted for approximately 73% of the segment's net sales in 2002.
Sales to SKF and INA/FAG accounted for approximately 32% and 14% of the
segment's net sales in 2002, respectively.

         During 2002, the Euroball Segment sold its products to more than 30
customers located in more than 25 different countries. Approximately 92% of its
net sales in 2002 were to customers within Europe. Sales to the segment's top
ten customers accounted for approximately 95% of the segment's net sales in
2002. Sales to SKF and INA/FAG accounted for approximately 51% and 25% of the
segment's net sales in 2002, respectively. Sales to SKF and INA/FAG are made
pursuant to the terms of supply agreements which expire in 2006.

         During 2002, the Plastics Segment sold its products to more than 100
customers located in more than 16 different countries. Approximately 18% of the
Plastics Segment's net sales were to customers outside the United States. Sales
to the segment's top ten customers accounted for approximately 62% of the
Plastics Segment's net sales in 2002.

         See Note 12 of the Notes to Consolidated Financial Statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations" for additional segment financial
information. In both the foreign and domestic markets, the Company principally
sells its products directly to manufacturers and not to distributors.

         We ordinarily ship our products directly to customers within 60 days,
and in some cases, during the same calendar month, of the date on which a sales
order is placed. Accordingly, we generally have an insignificant amount of open
(backlog) orders from customers at month end. Certain of our customers have
entered into contracts with us pursuant to which they have agreed to purchase
all of their requirements of specified balls and rollers and plastic molded
products from us, although only a few are contractually obligated to purchase
any specific amounts. While firm orders generally are received only monthly, we
are normally aware of reasonably anticipated future orders well in advance of
the placement of a firm order. Certain agreements are in effect with some of our
largest customers, which provide for targeted, annual price adjustments that may
be offset by material cost fluctuations.

         The following table presents a breakdown of our net sales for fiscal
years 2000 through 2002:


      (In Thousands)

                                            2002             2001            2000
                                         ------------    ------------    ------------
      Domestic Ball and Roller
           Segment                          $ 52,634        $ 52,692         $67,637
                                               27.3%           29.3%           51.2%

      Euroball Segment                        90,653          86,719          33,988
                                               47.0%           48.1%           25.7%

      Plastics Segment                        49,568          40,740          30,504
                                               25.7%           22.6%           23.1%
                                         ------------    ------------    ------------

      Total                                $ 192,856       $ 180,151       $ 132,129
                                         ============    ============    ============
                                                100%            100%            100%
                                         ============    ============    ============

Sales and Marketing

         A primary emphasis of our marketing strategy is to expand key customer
relationships by offering them the value of a single supply chain partner for a
wide variety of components. As a result, we have progressed toward integrating
our sales organization on a global basis across all of our product lines. Our
sales organization includes seven direct sales and 12

                                       5



customer service representatives. Due to the technical nature of many of our
products, our engineers and manufacturing management personnel also provide
technical sales support functions, while internal sales employees handle
customer orders and other general sales support activities.

         Our bearing component marketing strategy focuses on increasing our
outsourcing relationships with global bearing manufacturers that maintain
captive bearing component manufacturing operations. Our marketing strategy for
our other precision plastic products is to offer custom manufactured, high
quality, precision parts to niche markets with high value-added characteristics
at competitive price levels. This strategy focuses on relationships with key
customers that require the production of technically difficult parts, enabling
us to take advantage of our strengths in custom product development, tool
design, and precision molding processes.

         As shown in the chart below, the addition of the retainer and seal
product lines have further enhanced many of our key customer relationships,
making us a more complete and integrated supplier of bearing component parts.

                                                                                  Products
                                                                                  --------
Name              Country        Description                       Balls & Rollers     Seals     Retainers
----              -------        -----------                       ---------------     -----     ---------
SKF               Sweden         Global bearing manufacturer              X              X           X
INA/FAG           Germany        Global bearing manufacturer              X              X           X
Torrington        USA            Global bearing manufacturer              X              X           X
NTN               Japan          Global bearing manufacturer              X              X           X
SNR               France         Global bearing manufacturer              X
Timken            USA            Global bearing manufacturer                             X           X
Delphi            USA            Automotive component supplier            X              X           X
Iljin             Korea          Global bearing manufacturer              X
NSK               Japan          Global bearing manufacturer              X                          X
Koyo              Japan          Global bearing manufacturer              X              X           X


         Our arrangements with our domestic customers typically provide that
payments are due within 30 days following the date of shipment of goods. With
respect to foreign customers, payments generally are due within 90 to 120 days
following the date of shipment in order to allow for additional freight time and
customs clearance. For customers that participate in our Domestic Ball and
Roller Segments inventory management program, sales are recorded when the
customer uses the product. See "Business -- Customers" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."

Manufacturing Process

         We have become a leading independent bearing component manufacturer
through exceptional service and high quality manufacturing processes and are
recognized throughout the industry as a low-cost producer. Because our ball and
roller manufacturing processes incorporate the use of standardized tooling, load
sizes, and process technology, we are able to produce large volumes of products
while maintaining high quality standards.

         The key to our low-cost, high quality production of seals and retainers
is the incorporation of customized engineering into our manufacturing processes,
metal to rubber bonding competency and experience with a broad range of
engineered resins. We employ 20 skilled engineers who design and customize the
tooling necessary to meet the needs of each customer's product. This design
process includes the testing and quality assessment of each product.

Employees

         As of December 31, 2002, we employed a total of 1,350 full-time
employees. Our Domestic Ball and Roller Segment employed 226 workers, the
Euroball Segment employed 654 workers, our Plastics Segment employed 465
workers, and there were five employees at the Company's corporate headquarters.
Of our total employment, 19% are management/staff employees and 81% are
production employees. We believe we are able to attract and retain high quality
employees because of our quality reputation, technical expertise, history of
financial and operating stability, attractive employee benefit programs, and our
progressive, employee-friendly working environment. Only the employees in the
Eltmann, Germany and Pinerolo, Italy plants are unionized and we have never
experienced any involuntary work stoppages. We consider our relations with our
employees to be excellent.

                                       6



Competition

         The precision ball and roller industry is intensely competitive, and
many of our competitors have greater financial resources than we do. Our primary
domestic competitor is Hoover Precision Products, Inc., a division of
Tsubakimoto Precision Products Co. Ltd. Our primary foreign competitors are
Amatsuji Steel Ball Manufacturing Company, Ltd. and Tsubakimoto Precision
Products Co. Ltd.

         We believe that competition within the precision ball and roller market
is based principally on quality, price and the ability to consistently meet
customer delivery requirements. Management believes that our competitive
strengths are our precision manufacturing capabilities, our reputation for
consistent quality and reliability, and the productivity of our workforce.

         The markets for the Plastic Segment's products are also intensely
competitive. Since the plastic injection molding industry is currently very
fragmented, IMC and NN Arte must compete with numerous companies in each of
their marketing segments. Many of these companies have substantially greater
financial resources than we do and many currently offer competing products
nationally and internationally. IMC's primary competitor in the bearing retainer
segment is Nakanishi Manufacturing Corporation. Domestically, Nypro, Inc. and
Key Plastics are the main competitors in the automotive segment. NN Arte
primarily competes with various plastic injection molders in Mexico.

         We believe that competition within the plastic injection molding
industry is based principally on quality, price, design capabilities and speed
of responsiveness and delivery. Management believes that IMC's competitive
strengths are product development, tool design, fabrication, and tight tolerance
molding processes. With these strengths, IMC has built its reputation in the
marketplace as a quality producer of technically difficult products.

         While intensely competitive, the markets for Delta's products are less
fragmented than IMC and NN Arte's. The bearing seal market is comprised of
approximately six major competitors that range from small privately held
companies to Fortune 500 global enterprises. Bearing seal manufacturers compete
on the design, service, quality and price. Delta's primary competitors in the
United States bearing seal market are Freudenburg-NOK, Chicago Rawhide
Industries, Trostel, LTD, and Uchiyama.

Raw Materials

         The primary raw material used in our Domestic Ball and Roller Segment
and Euroball Segment is 52100 Steel. During 2002, approximately 98% and 99% of
the steel used by these two segments, respectively, was 52100 Steel in rod and
wire form. Our other steel requirements include type 440C stainless steel and
type S2 rock bit steel.

         The Domestic Ball and Roller Segment purchases substantially all of its
52100 Steel requirements from foreign mills in Europe and Japan because of the
lack of domestic producers of such steel in the form we require. The principal
suppliers of 52100 Steel to the Domestic Ball and Roller Segment are Daido Steel
(America) Inc., Lucchini USA Inc. (affiliate of Ascometal France) and Ohio Star
Forge Co. The Euroball Segment purchases all of its 52100 Steel requirements
from European mills. The principal supplier of 52100 Steel to the Euroball
Segment is Ascometal France. (See Note 15 of the Notes to Consolidated Financial
Statements) Our other steel requirements are purchased principally from foreign
steel manufacturers. There are a limited number of suppliers of the 52100 Steel
that we use in our Domestic Ball and Roller and Euroball Segments. We believe
that if any of our current suppliers were unable to supply 52100 Steel to us, we
would be able to obtain our 52100 Steel requirements from alternate sources. We
cannot provide assurances that we would not face higher costs or production
interruptions as a result of obtaining 52100 Steel from alternate sources.

         We allocate steel purchases among suppliers on the basis of price and,
more significantly, composition and quality. The pricing arrangements with our
suppliers are typically subject to adjustment once every six months for the
Domestic Ball and Roller Segment. In general, we do not enter into written
supply agreements with suppliers or commit to maintain minimum monthly purchases
of steel except for the supply arrangements between Ascometal and Euroball (see
Note 15 of the Notes to Consolidated Financial Statements). For the Domestic
Ball and Roller and Euroball Segments, the average price of 52100 Steel
decreased approximately 2.5% in 2002, increased approximately 1.9% in 2001, and
decreased approximately 1% in 2000.

         Because 52100 Steel is principally produced by foreign manufacturers,
the Company's operating results would be negatively affected in the event that
the U.S. or European governments imposes any significant quotas, tariffs or
other duties

                                       7


or restrictions on the import of such steel or if the U.S. dollar decreases in
value relative to foreign currencies. On March 6, 2002, the U.S. government
adopted legislation that imposed certain tariffs on the import of certain
foreign produced steel into the United States. Because the vast majority of the
52100 Steel we use has been exempted from recent U.S. tariffs on imported steel,
we have not been materially affected by import regulations.

         In 2001, we established a supply alliance with The Torrington Company,
which was acquired by the Timken Company in February 2003, to leverage our
combined supply requirements. The purchasing entity is empowered to negotiate
and execute supply agreements for both companies. Because we both use similar
raw materials from many common sources, we believe the potential synergies in
raw material procurement will be of significant value.

         The primary raw materials used by IMC and NN Arte are engineered
resins. Injection grade nylon is utilized in bearing retainers, gears,
automotive and other industrial products. We purchase substantially all of our
resin requirements from domestic manufacturers and suppliers. The majority of
these suppliers are international companies with resin manufacturing facilities
located throughout the world. We experienced price decreases for engineered
resins of approximately 2.5% in 2002, price increases of approximately 4.3% in
2001, and price increases of approximately 3.0% in 2000.

         Delta uses certified vendors to provide a customer mix of proprietary
rubber compounds. Delta also procures metal stampings from several domestic
suppliers. We experienced price increases for Delta's raw materials of
approximately 2.5% in 2002 and 2.5% in 2001.

         We base purchase decisions on price, quality and service. Generally, we
do not enter into written supply contracts with our suppliers or commit to
maintain minimum monthly purchases of resins. The pricing arrangements with our
suppliers typically can be adjusted at anytime.

Patents, Trademarks and Licenses

         We do not own any U.S. or foreign patents, trademarks or licenses that
are material to our business. We do rely on certain data and processes,
including trade secrets and know-how, and the success of our business depends,
to some extent, on such information remaining confidential. Each executive
officer is subject to a non-competition and confidentiality agreement that seeks
to protect this information.

Seasonal Nature of Business

         Historically, due to a substantial portion of sales to European
customers, seasonality has been a factor for our business in that some European
customers typically cease their production activities during the month of
August.

Environmental Compliance

         Our operations and products are subject to extensive federal, state and
local regulatory requirements both domestically and abroad relating to pollution
control and protection of the environment. We maintain a compliance program to
assist in preventing and, if necessary, correcting environmental problems. Based
on information compiled to date, management believes that our current operations
are in substantial compliance with applicable environmental laws and
regulations, the violation of which would have a material adverse effect on our
business and financial condition. There can be no assurance, however, that
currently unknown matters, new laws and regulations, or stricter interpretations
of existing laws and regulations will not materially affect our business or
operations in the future. More specifically, although we believe that we dispose
of wastes in material compliance with applicable environmental laws and
regulations, there can be no assurance that we will not incur significant
liabilities in the future in connection with the clean-up of waste disposal
sites.

         In the past, we have incurred certain expenses in complying with
applicable environmental laws associated with the removal of four underground
storage tanks containing kerosene and waste oil, the remediation of soil and
groundwater contamination resulting from a leak in one of the tanks, and the
closing of a sludge disposal area at one of our ball and roller facilities. The
remediation project is now complete, but we have certain ongoing monitoring
responsibilities. The amounts we have expended in connection with this
remediation project have not been material, and based upon information currently
available to us, we do not believe that the future costs associated with the
project will have a material adverse effect on our results of operations or
financial condition.


                                       8



Executive Officers of the Registrant

         Our executive officers are:

         Name                       Age     Position
         ----                       ---     --------

         Roderick R. Baty           49      Chairman of the Board, Chief Executive Officer, President and
                                            Director

         Frank T. Gentry, III       47      Vice President - Manufacturing

         Robert R. Sams             45      Vice President - Market Services

         David L. Dyckman           38      Vice President - Corporate Development and Chief Financial Officer

         William C. Kelly, Jr.      44      Treasurer, Secretary and Chief Administrative Officer

Set forth below is certain additional information with respect to each of our
executive officers.

         Roderick R. Baty was elected Chairman of the Board in September 2001
and continues to serve as Chief Executive Officer and President. He has served
as President and Chief Executive Officer since July 1997. He joined NN in July
1995 as Vice President and Chief Financial Officer and was elected to the Board
of Directors in 1995. Prior to joining NN, Mr. Baty served as President and
Chief Operating Officer of Hoover Precision Products from 1990 until January
1995, and as Vice President and General Manager of Hoover Group from 1985 to
1990.

         Frank T. Gentry, III, was originally appointed Vice President -
Manufacturing in August 1995. Mr. Gentry is responsible for the global
operations of the Ball and Roller and Euroball Segments. Mr. Gentry's
responsibilities include purchasing, inventory control and transportation. Mr.
Gentry joined NN in 1981 and held various production control positions within NN
from 1981 to August 1995.

         Robert R. Sams joined NN in 1996 as Plant Manager of the Mountain City,
Tennessee facility. In 1997, Mr. Sams served as Managing Director of the
Kilkenny facility and in 1999 was elected to the position of Vice President -
Market Services. Prior to joining NN, Mr. Sams held various positions with
Hoover Precision Products from 1980 to 1994 and most recently as Vice President
of Production for Blum, Inc. from 1994 to 1996.

         David L. Dyckman was appointed Vice President of Corporate Development
and Chief Financial Officer in April 1998. Prior to joining NN, Mr. Dyckman
served from January 1997 until April 1998 as Vice President--Marketing and
International Sales for the Veeder-Root Division of the Danaher Corporation.
From 1987 until 1997, Mr. Dyckman held various positions with Emerson Electric
Company including General Manager and Vice President of the Gearing Division of
Emerson's Power Transmission subsidiary.

         William C. Kelly, Jr. joined NN in 1993 as Assistant Treasurer and
Manager of Investor Relations. In March, 2003, Mr. Kelly was elected to serve as
NN's Chief Administrative Officer. In July 1994, Mr. Kelly was elected to serve
as NN's Chief Accounting Officer, and served in that capacity through March
2003. In February 1995, was elected Treasurer and Assistant Secretary. In March
1999 he was elected Secretary of NN and still serves in that capacity as well as
that of Treasurer. Prior to joining NN, Mr. Kelly served from 1988 to 1993 as a
Staff Accountant and as a Senior Auditor with the accounting firm of
PricewaterhouseCoopers LLP.

Item 2.  Properties

         The Company has two operating domestic ball manufacturing facilities
located in Erwin, Tennessee and Mountain City, Tennessee. Rollers are produced
only at the Erwin, Tennessee facility. Production began in early 1996 at the
Mountain City facility. During December 2001, we ceased production and closed
our facility in Walterboro, South Carolina. The Walterboro, South Carolina
facility is classified as held for sale at December 31, 2002 and 2001.

                                       9



         The Erwin and Mountain City plants currently have approximately 125,000
and 86,400 square feet of manufacturing space, respectively. The Erwin plant is
located on a 12 acre tract of land owned by the Company and the Mountain City
plant is located on an eight acre tract of land owned by the Company.

         Through Euroball we manufacture high precision steel balls in three
manufacturing facilities located in Kilkenny, Ireland, Eltmann, Germany and
Pinerolo, Italy. The facilities currently have approximately 125,000, 175,000
and 330,000 square feet of manufacturing space, respectively. The Kilkenny
facility is located on a two acre tract owned by Euroball, the Eltmann facility
is leased from FAG and the Pinerolo facility is located on a nine acre tract
owned by Euroball.

         IMC manufactures a wide range of plastic molded products through two
facilities located in Lubbock, Texas. The Slaton facility, located on a six and
one half acre tract of land owned by the Company, contains approximately 193,000
square feet of manufacturing, warehouse and office space. The Cedar facility is
situated on a two and one half acre tract of land which is also owned by the
Company and contains approximately 35,000 square feet of manufacturing and
warehouse space.

         NN Arté leases a single 18,000 square foot facility in Guadalajara,
Mexico.

         Delta's operations are located in two facilities on a 12-acre site in
Danielson, Connecticut, owned by the Company. The two facilities encompass over
50,000 square feet of rubber seal manufacturing and administrative functions.

         During 2002, the Company added new machinery and equipment at all of
its facilities. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources."

Item 3.  Legal Proceedings

         From time to time the Company is subject to legal actions related to
its operations, most of which are of an ordinary and routine nature and are
incidental to the operations of the Company. Management believes that such
proceedings should not, individually or in the aggregate, have a material
adverse effect on the Company's business or financial condition or on the
results of operations.

Item 4.  Submission of Matters to a Vote of Security Holders

         No matters were submitted for a vote of stockholders during the fourth
quarter of 2002.

                                       10




                                     Part II

Item 5.  Market for the Registrant's Common Equity and Related Stockholder Matters

         Since the Company's initial public offering in 1994, the Common Stock
has been traded on the Nasdaq National Market under the trading symbol "NNBR."
Prior to such time there was no established market for the Common Stock. As of
March 28, 2003, there were approximately 1,800 holders of the Common Stock.

         The following table sets forth the high and low sales prices of the
Common Stock, as reported by Nasdaq, and the dividends paid per share on the
Common Stock during each calendar quarter of 2002, 2001 and 2000.

                               Price
                               -----
                           High           Low     Dividend
                           ----           ---     --------
2002
----
First Quarter            $11.00         $9.15           $0.08
Second Quarter            12.80          9.68            0.08
Third Quarter             12.45          8.08            0.08
Fourth Quarter            10.10          6.98            0.08

2001
----
First Quarter            $ 9.17         $6.53           $0.08
Second Quarter            10.81          6.50            0.08
Third Quarter             10.84          7.25            0.08
Fourth Quarter            11.30          7.75            0.08

2000
----
First Quarter            $10.88         $6.75           $0.08
Second Quarter            11.38          8.03            0.08
Third Quarter             10.50          7.50            0.08
Fourth Quarter             9.50          7.13            0.08

         The declaration and payment of dividends are subject to the sole
discretion of the Board of Directors of the Company and depend upon the
Company's profitability, financial condition, capital needs, future prospects
and other factors deemed relevant by the Board of Directors. The terms of the
Company's revolving credit facility restrict the payment of dividends by
prohibiting the Company from declaring or paying any dividend if an event of
default exists at the time of, or would occur as a result of, such declaration
or payment. Additionally, the terms of the Company's revolving credit facility
restrict the declaration and payment of dividends in excess of $5.5 million in
any fiscal year. The amount of consolidated retained earnings which represents
undistributed earnings of 50 percent or less owned persons accounted for by the
equity method is zero at December 31, 2002, 2001 and 2000. For further
description of the Company's revolving credit facility, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources" herein.

Item 6.  Selected Financial Data

         The following selected financial data of the Company are qualified by
reference to and should be read in conjunction with the Consolidated Financial
Statements and the Notes thereto included as Item 8. The data set forth below as
of December 31, 2002, 2001 and 2000 and for the periods then ended have been
derived from the Consolidated Financial Statements of the Company, revised to
reflect the restatement thereof as more fully discussed in Note 1 to the
Consolidated Financial Statements, which have been audited by KPMG LLP,
independent accountants, whose report thereon is included as part of Item 8. The
data below as of December 31, 1999 and 1998 and for the periods then ended have
been derived from the Consolidated Financial Statements of the Company, which
have been audited by PricewaterhouseCoopers LLP, independent accountants. These
historical results are not necessarily indicative of the results to be expected
in the future. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

                                       11




(In Thousands, Except Per Share Data)                                            Year Ended December 31,
                                                                                 -----------------------
                                                        Restated
                                                        --------
                                                          2002              2001            2000            1999            1998
                                                          ----              ----            ----            ----            ----

Statement of Income Data:
Net sales                                                 $192,856          $180,151        $132,129         $85,294         $73,006
Cost of products sold                                      144,274           137,221          93,926          59,967          50,353
                                                      -------------     -------------    ------------    ------------    ------------
Gross profit                                                48,582            42,930          38,203          25,327          22,653
Selling, general and administrative expenses                17,134            16,752          11,571           6,854           5,896
Depreciation and amortization                               11,212            13,150           9,165           6,131           4,557
Restructuring and impairment costs                           1,277             2,312              --              --              --
                                                      -------------     -------------    ------------    ------------    ------------
Income from operations                                      18,959            10,716          17,467          12,342          12,200
Interest expense                                             2,451             4,196           1,773             523              64
Equity in earnings of unconsolidated affiliate                  --                --            (48)              --              --
Net gain on involuntary conversion                              --           (3,901)           (728)              --              --
Other income                                                 (487)             (186)           (136)              --              --
                                                      -------------     -------------    ------------    ------------    ------------
Income before provision for income taxes                    16,995            10,607          16,606          11,819          12,136
Provision for income taxes                                   6,457             4,094           5,959           4,060           4,480
Minority interest in income of consolidated
   subsidiary                                                2,778             1,753             660              --              --
                                                      -------------     -------------    ------------    ------------    ------------
Income before cumulative effect of change in                 7,760             4,760           9,987           7,759           7,656
   accounting principle

Cumulative effect of change in accounting
   principle, net of income tax benefit of $112
   and related minority interest impact of $84                  --                98              --              --              --
                                                      -------------     -------------    ------------    ------------    ------------
Net income                                                 $ 7,760           $ 4,662         $ 9,987         $ 7,759         $ 7,656
                                                      =============     =============    ============    ============    ============

Basic income per share:
Income before cumulative effect of change in
   accounting principle                                    $ 0. 51            $ 0.31          $ 0.66          $ 0.52          $ 0.52
Cumulative effect of change in accounting
    principle                                                   --            (0.01)              --              --              --
                                                      -------------     -------------    ------------    ------------    ------------
   Net income                                              $ 0. 51            $ 0.31          $ 0.66          $ 0.52          $ 0.52
                                                      =============     =============    ============    ============    ============

Diluted income per share:
Income before cumulative effect of change in
   accounting principle                                     $ 0.49            $ 0.31          $ 0.64          $ 0.52          $ 0.52
Cumulative effect of change in accounting
    principle                                                   --            (0.01)              --              --              --
                                                      -------------     -------------    ------------    ------------    ------------
   Net income                                               $ 0.49           $  0.30         $  0.64         $  0.52          $ 0.52
                                                      =============     =============    ============    ============    ============
Dividends declared                                          $ 0.32           $  0.32         $  0.32         $  0.32         $  0.32
                                                      =============     =============    ============    ============    ============
Weighted average number of shares
   outstanding - Basic                                      15,343            15,259          15,247          15,021          14,804
                                                      =============     =============    ============    ============    ============
Weighted average number of shares                           15,714            15,540          15,531          15,038          14,804
   outstanding - Diluted                              =============     =============    ============    ============    ============



                                       12




(In Thousands, Except Per Share Data)

                                                                    Year Ended December 31,
                                                                    -----------------------
                                          Restated        Restated         Restated
                                          --------        --------         --------
                                            2002            2001             2000             1999             1998
                                            ----            ----             ----             ----             ----
Balance Sheet Data:
Current assets                           $ 61,412        $ 55,617         $ 63,866         $ 34,397         $ 28,571
Current liabilities                        40,234          32,534           33,840           10,478            7,638
Total assets                              195,215         184,477          183,951           91,363           66,860
Long-term debt                             46,135          47,661           50,515           17,151               --
Stockholders' equity                       77,908          70,982           74,675           60,128           56,242

         On December 20, 2002 we completed the purchase of the 23% interest in
Euroball held by INA/FAG. As a result of this transaction, we own 77% of the
shares of NN Euroball, ApS.

         Effective January 1, 2002 we adopted the provision of Statement of
Financial Accounting Standards (SFAS) No. 142. SFAS No. 142 requires that
goodwill and intangible assets with indefinite useful lives no longer be
amortized.

         On February 16, 2001 we completed the acquisition of all of the
outstanding stock of The Delta Rubber Company.

         On July 31, 2000 we completed the formation of Euroball. As a result of
this transaction, we owned 54% of the shares of NN Euroball ApS.

         On July 4, 1999 we acquired all of the assets and assumed certain
liabilities of Earsley Capital Corporation, formerly known as Industrial Molding
Corporation.


Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

         The following discussion should be read in conjunction with, and is
qualified in its entirety by, the Consolidated Financial Statements and the
Notes thereto and Selected Financial Data included elsewhere in this Form
10-K/A. Historical operating results and percentage relationships among any
amounts included in the Consolidated Financial Statements are not necessarily
indicative of trends in operating results for any future period.

Restatement

        This Amendment on Form 10-K/A amends the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 2002, and is being filed solely
to amend the financial reporting of certain transactions related to the
formation of NN Euroball, ApS ("Euroball") on July 31, 2000, and the subsequent
purchase on December 20, 2002 of the 23% interest in Euroball held by FAG
Kugelfischer George Schaefer AG, which was subsequently acquired by INA -
Schaeffler KG (collectively, "INA/FAG"). These restatements had no material
effect on the Company's reported net sales, gross profit, income from operations
or cash flows for the fiscal years ended December 31, 2002, 2001 or 2000.

        We have revised the valuation of the original purchase price associated
with the formation of Euroball in July 2000. This revision resulted in a
reduction of goodwill of approximately 4.1 million Euro ($3.8 million). Further,
we have increased stockholders' equity by approximately 10.0 million Euro ($9.3
million) to reflect the amount by which the Company's proportionate interest in
Euroball exceeded the book value of the net assets exchanged by the Company. As
a result of these two adjustments, minority interest in consolidated
subsidiaries has been reduced by approximately $7.4 million, $12.6 million and
$13.3 million, at December 31, 2002, 2001 and 2000, respectively, goodwill has
been reduced $4.3 million, $3.7 million and $3.9 million, at December 31, 2002,
2001 and 2000, respectively, and paid in capital increased $9.3 million at
December 31, 2002, 2001 and 2000 from amounts previously reported. Comprehensive
income has also been restated for the foreign currency translation effects of
these adjustments.

         In the previously issued December 31, 2002 Consolidated Financial
Statements, when the Company acquired the 23% interest in Euroball held by
INA/FAG in December 2002, the excess of minority interest in consolidated
subsidiaries over the December 2002 purchase price was recorded as a non-taxable
gain in the amount of approximately $5.9 million. As


                                       13



restated in the accompanying Consolidated Financial Statements, the non-taxable
gain has been excluded and the excess of the purchase price over the fair value
of INA/FAG's 23% interest in the net assets of Euroball was allocated to
goodwill. The resulting impact to the Consolidated Financial Statements is an
increase to goodwill of approximately $1.5 million and a decrease in retained
earnings of approximately $5.9 million as of December 31, 2002 and reversal of
the $5.9 million gain previously recorded in the Consolidated Statement of
Income and Comprehensive Income for the year ended December 31, 2002.

         Additionally, the Company has reclassified minority interest in
consolidated subsidiaries from a component of total liabilities to a separate
line item in the Consolidated Balance Sheets at December 31, 2002, 2001 and
2000.


Cautionary Statements for Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995

         The Company wishes to caution readers that this report contains, and
future filings by the Company, press releases and oral statements made by the
Company's authorized representatives may contain, forward-looking statements
that involve certain risks and uncertainties. Readers can identify these
forward-looking statements by the use of such verbs as expects, anticipates,
believes or similar verbs or conjugations of such verbs. The Company's actual
results could differ materially from those expressed in such forward-looking
statements due to important factors bearing on the Company's business, many of
which already have been discussed in this filing and in the Company's prior
filings. The differences could be caused by a number of factors or combination
of factors including, but not limited to, the risk factors described below.

         You should carefully consider the following risks and uncertainties,
and all other information contained in or incorporated by reference in this
annual report on Form 10-K/A, before making an investment in our common stock.
Any of the following risks could have a material adverse effect on our business,
financial condition or operating results. In such case, the trading price of our
common stock could decline and you may lose all or part of your investment.

          The demand for our products is cyclical, which could adversely impact
          our revenues.

         The end markets for fully assembled bearings are cyclical and tend to
decline in response to overall declines in industrial production. As a result,
the market for bearing components is also cyclical and impacted by overall
levels of industrial production. Our sales in the past have been negatively
affected, and in the future will be negatively affected, by adverse conditions
in the industrial production sector of the economy or by adverse global or
national economic conditions generally.

          We depend on a very limited number of foreign sources for our primary
          raw material and are subject to risks of shortages and price
          fluctuation.

         The steel that we use to manufacture precision balls and rollers is of
an extremely high quality and is available from a limited number of producers on
a global basis. Due to quality constraints in the U.S. steel industry, we obtain
substantially all of the steel used in our U.S. ball and roller production from
overseas suppliers. In addition, we obtain substantially all of the steel used
in our European ball production from a single European source. If we had to
obtain steel from sources other than our current suppliers, particularly in the
case of our European operations, we could face higher prices and transportation
costs, increased duties or taxes, and shortages of steel. Problems in obtaining
steel, and particularly 52100 chrome steel, in the quantities that we require
and on commercially reasonable terms, could increase our costs, negatively
impact our ability to operate our business efficiently and have a material
adverse effect on the operating and financial results of our Company.

          We operate in and sell products to customers outside the U.S. and are
          subject to several related risks.

         Because we obtain a majority of our raw materials from overseas
suppliers, actively participate in overseas manufacturing operations and sell to
a large number of international customers, we face risks associated with the
following:

                                      14





          o    adverse foreign currency fluctuations;

          o    changes in trade, monetary and fiscal policies, laws and
               regulations, and other activities of governments, agencies and
               similar organizations;

          o    the imposition of trade restrictions or prohibitions;

          o    high tax rates that discourage the repatriation of funds to the
               U.S.;

          o    the imposition of import or other duties or taxes; and

          o    unstable governments or legal systems in countries in which our
               suppliers, manufacturing operations, and customers are located.

We do not have a hedging program in place associated with consolidating the
operating results of our foreign businesses into U.S. dollars. An increase in
the value of the U.S. dollar and/or the Euro relative to other currencies may
adversely affect our ability to compete with our foreign-based competitors for
international, as well as domestic, sales. Also, a decline in the value of the
Euro relative to the U.S. dollar will negatively impact our consolidated
financial results, which are denominated in U.S. dollars.

         In addition, due to the typical slower summer manufacturing season in
Europe, we expect that revenues in the third fiscal quarter will reflect lower
sales, as our sales to European customers have increased as a percentage of net
sales.

          We depend heavily on a relatively limited number of customers, and the
          loss of any major customer would have a material adverse effect on our
          business.

         Sales to various U.S. and foreign divisions of SKF, which is one of the
largest bearing manufacturers in the world, accounted for approximately 33% of
consolidated net sales in 2002, and sales to INA/FAG accounted for approximately
19% of consolidated net sales in 2002. During 2002, our ten largest customers
accounted for approximately 73% of our consolidated net sales. None of our other
customers individually accounted for more than 5% of our consolidated net sales
for 2002. The loss of all or a substantial portion of sales to these customers
would cause us to lose a substantial portion of our revenue and would lower our
profit margin and cash flows from operations.

          The costs and difficulties of integrating acquired business could
          impede our future growth.

         We cannot assure you that any future acquisition will enhance our
financial performance. Our ability to effectively integrate any future
acquisitions will depend on, among other things, the adequacy of our
implementation plans, the ability of our management to oversee and operate
effectively the combined operations and our ability to achieve desired operating
efficiencies and sales goals. The integration of any acquired businesses might
cause us to incur unforeseen costs, which would lower our profit margin and
future earnings and would prevent us from realizing the expected benefits of
these acquisitions.

          We may not be able to continue to make the acquisitions necessary for
          us to realize our growth strategy.

         Acquiring businesses that complement or expand our operations has been
and continues to be an important element of our business strategy. This strategy
calls for growth through acquisitions constituting approximately two-thirds of
our future growth, with the remainder resulting from internal growth and market
penetration. We bought our plastic bearing component business in 1999, formed
Euroball with our two largest bearing customers, SKF and INA/FAG, in 2000 and
acquired our bearing seal operations in 2001. During 2002, we purchased
INA/FAG's minority interest in Euroball. See Note 3 of the Notes to Consolidated
Financial Statements. We cannot assure you that we will be successful in
identifying attractive acquisition candidates or completing acquisitions on
favorable terms in the future. In addition, we may borrow funds to acquire other
businesses, increasing our interest expense and debt levels. Our inability to
acquire businesses, or to operate them profitably once acquired, could have a
material adverse effect on our business, financial position, results of
operations and cash flows.

         Additionally, SKF, the minority shareholder in Euroball, has the right
to require us to purchase its interest beginning in January 2003. SKF has
informed us that it intends to exercise its right and we expect to purchase its
interest in

                                       15



the second quarter of 2003. The Company may need to borrow funds to pay for all
or a portion of the purchase of SKF's interest or may be required to make a
purchase at a time that is less favorable to the Company.

          Our growth strategy depends on outsourcing, and if the industry trend
          toward outsourcing does not continue, our business could be adversely
          affected.

         Our growth strategy depends in significant part on major bearing
manufacturers continuing to outsource components, and expanding the number of
components being outsourced. This requires manufacturers to depart significantly
from their traditional methods of operations. If major bearing manufacturers do
not continue to expand outsourcing efforts or determine to reduce their use of
outsourcing, our ability to grow our business could be materially adversely
affected.

          Our market is highly competitive and many of our competitors have
          significant advantages that could adversely affect our business.

         The global market for bearing components is highly competitive, with a
majority of production represented by the captive production operations of
certain large bearing manufacturers and the balance represented by independent
manufacturers. Captive manufacturers make components for internal use and for
sale to third parties. All of the captive manufacturers, and many independent
manufacturers, are significantly larger and have greater resources than do we.
Our competitors are continuously exploring and implementing improvements in
technology and manufacturing processes in order to improve product quality, and
our ability to remain competitive will depend, among other things, on whether we
are able to keep pace with such quality improvements in a cost effective manner.

          The production capacity we have added over the last several years has
          at times resulted in our having more capacity than we need, causing
          our operating costs to be higher than expected.

         We have expanded our ball and roller production facilities and capacity
over the last several years. During 1997, we built an additional manufacturing
plant in Kilkenny, Ireland, and we continued this expansion in 2000 through the
formation of Euroball with SKF and INA/FAG. Our ball and roller facilities have
not always operated at full capacity and from time to time our results of
operations have been adversely affected by the under-utilization of our
production facilities, and we face risks of further under-utilization or
inefficient utilization of our production facilities in future years.

         The price of our common stock may be volatile.

         The market price of our common stock could be subject to significant
fluctuations and may decline. Among the factors that could affect our stock
price are:

          o    our operating and financial performance and prospects;

          o    quarterly variations in the rate of growth of our financial
               indicators, such as earnings per share, net income and revenues;

          o    changes in revenue or earnings estimates or publication of
               research reports by analysts;

          o    loss of any member of our senior management team;

          o    speculation in the press or investment community;

          o    strategic actions by us or our competitors, such as acquisitions
               or restructurings;

          o    sales of our common stock by stockholders;

          o    general market conditions; and

          o    domestic and international economic, legal and regulatory factors
               unrelated to our performance.


                                       16




         The stock markets in general have experienced extreme volatility that
has often been unrelated to the operating performance of particular companies.
These broad market fluctuations may adversely affect the trading price of our
common stock.

          Provisions in our charter documents and Delaware law may inhibit a
          takeover, which could adversely affect the value of our common stock.

         Our certificate of incorporation and bylaws, as well as Delaware
corporate law, contain provisions that could delay or prevent a change of
control or changes in our management that a stockholder might consider favorable
and may prevent you from receiving a takeover premium for your shares. These
provisions include, for example, a classified board of directors and the
authorization of our board of directors to issue up to 5,000,000 preferred
shares without a stockholder vote. In addition, our restated certificate of
incorporation provides that stockholders may not call a special meeting.

         We are a Delaware corporation subject to the provisions of Section 203
of the Delaware General Corporation Law, an anti-takeover law. Generally, this
statute prohibits a publicly-held Delaware corporation from engaging in a
business combination with an interested stockholder for a period of three years
after the date of the transaction in which such person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
A business combination includes a merger, asset sale or other transaction
resulting in a financial benefit to the stockholder. We anticipate that the
provisions of Section 203 may encourage parties interested in acquiring us to
negotiate in advance with our board of directors, because the stockholder
approval requirement would be avoided if a majority of the directors then in
office approve either the business combination or the transaction that results
in the stockholder becoming an interested stockholder.

         These provisions apply even if the offer may be considered beneficial
by some of our stockholders. If a change of control or change in management is
delayed or prevented, the market price of our common stock could decline.

Overview

         The Company's core business is the manufacture and sale of high
quality, precision steel balls and rollers. In 2002, sales of balls and rollers
accounted for approximately 74% of the Company's total net sales with 71% and 3%
of sales from balls and rollers, respectively. Sales of precision molded plastic
and rubber parts accounted for the remaining 26%. See Note 12 of the Notes to
Consolidated Financial Statements.

         Since the Company was formed in 1980 it has grown primarily through the
displacement of captive ball manufacturing operations of domestic and
international bearing manufacturers resulting in increased sales of high
precision balls for quiet bearing applications. Management believes that the
Company's core business sales growth since its formation has been due to its
ability to capitalize on opportunities in global markets and provide precision
products at competitive prices, as well as its emphasis on product quality and
customer service.

         In 1997, the Company recognized changing dynamics in the marketplace,
and as a result, developed and began implementing an extensive long-term growth
strategy building upon its core business and leveraging its inherent strengths
to better serve its global customer base. As part of this strategy, the Company
sought to augment its intrinsic growth with complementary acquisitions that fit
specific criteria.

         On July 4, 1999, the Company acquired substantially all of the assets
of Earsley Capital Corporation, formerly known as Industrial Molding Corporation
("IMC"). Formed in 1947, IMC provides full-service design and manufacture of
plastic injection molded components to the bearing, automotive, electronic,
leisure and consumer markets with an emphasis on value-added products that take
advantage of its capabilities in product development, tool design and tight
tolerance molding processes. IMC operates two manufacturing facilities in
Lubbock, Texas. During 2002, IMC sold its products to more than 60 customers in
12 different countries.

         On July 31, 2000, the Company formed a majority owned stand-alone
company in Europe, NN Euroball ApS ("Euroball"), for the manufacture and sale of
chrome steel balls used for ball bearings and other products. As a result of
this transaction, the Company owned 54% of Euroball. AB SKF and FAG Kugelfisher
Georg Shafer AG, the parent companies of SKF and FAG respectively each owned 23%
of Euroball. As part of the transaction, Euroball acquired the ball factories
located in Pinerolo, Italy (previously owned by SKF), Eltmann, Germany
(previously owned by FAG), and Kilkenny, Ireland (previously owned by the
Company). Acquisition financing of approximately 31.5 million euro
(approximately $29.7 million) was drawn at closing, and the credit facility
provides for additional working capital expenditure financing. In connection
with this transaction, total equity, specifically additional paid in capital,
increased by 10.0 million Euros ($9.3


                                       17




million) to reflect the increase in the Company's proportionate interest in
Euroball as related to its 54% ownership as more fully detailed in Note 3 to the
Consolidated Financial Statements. The Company is required to consolidate
Euroball due to its majority ownership and has accounted for the acquisitions of
the Pinerolo, Italy and Eltmann, Germany ball factories using the purchase
method of accounting. On December 20, 2002 the Company completed the purchase of
the 23% interest held by INA/FAG. The Company paid approximately 13.4 million
Euros ($13.8 million) for INA/FAG's interest in Euroball. The excess of the
purchase price paid to INA/FAG for its 23% interest over the minority interest
in consolidated subsidiaries related to INA/FAG's 23% interest of approximately
$1.5 million has been recorded as goodwill (see Notes 1 and 3 of the Notes to
Consolidated Financial Statements). Following the closing of the transaction,
the Company owns 77% of the outstanding shares of Euroball and SKF owns the
remaining 23%. SKF consented to our purchase of INA/FAG's interest pursuant to
the terms of the Euroball Shareholder Agreement. Under the terms of the
Shareholder Agreement with SKF, SKF has the right, beginning January 2003, to
exercise its put option regarding its interest in Euroball to the Company on a
formula buy-out. SKF has informed us that it intends to exercise its right and
we expect to purchase its interest during the second quarter of 2003. However,
if exercised at December 31, 2002, the purchase price would have been
approximately $14.0 million versus minority interest in consolidated
subsidiaries of $12.3 million.

         On August 31, 2000, the Company acquired a 51% ownership interest in NN
Mexico, LLC ("NN Mexico"), a Delaware limited liability company. NN Mexico holds
as its sole investment a 100% ownership interest in NN Arté, a manufacturer of
plastic components located in Guadalajara, Mexico. The Company is required to
consolidate NN Mexico due to its majority ownership and has accounted for this
acquisition using the purchase method of accounting. On January 24, 2003, we
exercised our Call Right to purchase the remaining 49% interest in NN Mexico,
LLC. The transaction, which is expected to close in the second quarter of 2003,
is subject to a number of conditions, including the approval of NN's board of
directors. The transaction is not expected to materially impact our financial
condition or results of operations. Based on the purchase price formula
contained in the principal agreement between the parties the purchase price for
such interest is anticipated to be zero.

         On February 16, 2001, the Company completed the acquisition of all of
the outstanding stock of The Delta Rubber Company, a Connecticut corporation
("Delta") for $22.5 million in cash. Delta provides high quality engineered
bearing seals and other precision-molded rubber products to original equipment
manufacturers. Delta operates two manufacturing facilities in Danielson,
Connecticut. The Company's credit facility with AmSouth Bank was renegotiated to
provide financing for the transaction. The Company has accounted for this
acquisition using the purchase method of accounting.

         On September 11, 2001, the Company announced the closing of its
Walterboro, South Carolina ball manufacturing facility effective December 2001.
The closing was made as part of the Company's strategy to redistribute its
global production in order to better utilize capacity and serve the needs of its
worldwide customers. The precision ball production of the Walterboro facility
has been fully absorbed by the Company's remaining U.S. ball & roller
manufacturing facilities located in Erwin and Mountain City, Tennessee. In 2002
and 2001 the Company recorded before tax charges associated with the closing of
$1.3 million and $1.9 million, respectively. In 2001, this amount includes a
$1.1 million before-tax charge for the recording of impairment on the Company's
manufacturing facility located in Walterboro, South Carolina and $0.8 million
related to employee severance costs. In 2002, this amount includes a $0.6
million before-tax charge for the recording of an additional impairment on the
facility, a $0.6 million before-tax charge for the recording of impairment on
the machinery and equipment and a $0.1 million charge related to employee
severance costs. These amounts are reflected as restructuring and impairment
costs in the accompanying Consolidated Statements of Income. The building along
with certain machinery and equipment are held for sale as of December 31, 2002.
These assets have an aggregate carrying value of $2.2 million. The financial
results of this operation have been reflected in the Domestic Ball and Roller
Segment. See Note 11 of the Notes to Consolidated Financial Statements.

         Effective December 21, 2001, the Company sold its minority interest in
Jiangsu General Ball & Roller Company, LTD, a Chinese ball and roller
manufacturer located in Rugao City, Jiangsu Province, China. To effect the
transaction, the Company sold its 50% ownership in NN General, LLC, which owns a
60% interest in the Jiangsu joint venture to its partner, General Bearing
Corporation for cash of $0.6 million and notes of $3.3 million. In 2001, the
Company recorded a non-cash after-tax loss on sale of the investments in this
joint venture of $0.2 million.

         The implementation and successful execution of this acquisition
strategy to date has allowed the Company to expand its global presence and
positions the Company for continued global growth and expansion into core served
markets.

Critical Accounting Policies

         Our significant accounting policies, including the assumptions and
judgment underlying them, are disclosed in Note (2) to the Consolidated
Financial Statements. These policies have been consistently applied in all
material respects and

                                       18



address such matters as revenue recognition, inventory valuation, asset
impairment recognition, business combination accounting and pension and
postretirement benefits. Due to the estimation processes involved, management
considers the following summarized accounting policies and their application to
be critical to understanding the Company's business operations, financial
condition and results of operations. There can be no assurance that actual
results will not significantly differ from the estimates used in these critical
accounting policies.

Accounts Receivable. Substantially all of the Company's accounts receivable are
due primarily from the core served markets: bearing manufacturers, automotive
industry, electronics, industrial, agricultural and aerospace. Due to the
Chapter 7 voluntary bankruptcy of one IMC customer and other write-offs, the
Company experienced $1.7 million of bad debt expense during 2001 versus $0.1
million during 2002. In establishing allowances for doubtful accounts, the
Company continuously performs credit evaluations of its customers, considering
numerous inputs when available including the customers' financial position, past
payment history, relevant industry trends, cash flows, management capability,
historical loss experience and economic conditions and prospects. While
management believes that adequate allowances for doubtful accounts have been
provided in the Consolidated Financial Statements, it is possible that the
Company could experience additional unexpected credit losses.

Inventories. Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method. The Company's inventories are
not generally subject to obsolescence due to spoilage or expiring product life
cycles. The Company operates generally as a make-to-order business; however, the
Company also stocks products for certain customers in order to meet delivery
schedules. While management believes that adequate write-downs for inventory
obsolescence have been made in the Consolidated Financial Statements, the
Company could experience additional inventory write-downs in the future.

Acquisitions and Acquired Intangibles. For new acquisitions, the Company uses
estimates, assumptions and appraisals to allocate the purchase price to the
assets acquired and to determine the amount of goodwill. These estimates are
based on market analyses and comparisons to similar assets. Annual tests are
required to be performed to assess whether recorded goodwill is impaired. The
annual tests require management to make estimates and assumptions with regard to
the future operations of its reporting units, the expected cash flows that they
will generate, and their market value. These estimates and assumptions therefore
impact the recorded value of assets acquired in a business combination,
including goodwill, and whether or not there is any subsequent impairment of the
recorded goodwill and the amount of such impairment.

Impairment of Long-Lived Assets. The Company's long-lived assets include
property, plant and equipment. The recoverability of the long-term assets is
dependent on the performance of the companies which the Company has acquired, as
well as volatility inherent in the external markets for these acquisitions. In
assessing potential impairment for these assets the Company will consider these
factors as well as forecasted financial performance. For assets held for sale,
appraisals are relied upon to assess the fair market value of those assets.
Future adverse changes in market conditions or adverse operating results of the
underlying assets could result in the Company having to record additional
impairment charges not previously recognized.

Pension and Post-Retirement Obligations. The Company uses several assumptions in
determining its periodic pension and post-retirement expense and obligations
which are included in the Consolidated Financial Statements. These assumptions
include determining an appropriate discount rate, rate of compensation increase
as well as the remaining service period of active employees. The Company uses an
independent actuary to calculate the periodic pension and post-retirement
expense and obligations based upon these assumptions and actual employee census
data.





                                       19



Results of Operations

         The following table sets forth for the periods indicated selected
financial data and the percentage of the Company's net sales represented by each
income statement line item presented.

                                                                  As a percentage of Net Sales
                                                                    Year Ended December 31,
                                                             Restated
                                                               2002           2001           2000
                                                            ------------    ----------     ----------
Net sales                                                        100.0%        100.0%         100.0%
Cost of product sold                                               74.8          76.2           71.1
                                                            ------------    ----------     ----------
Gross profit                                                       25.2          23.8           28.9
Selling, general and administrative expenses                        8.9           9.3            8.8
Depreciation and amortization                                       5.8           7.3            6.9
Restructuring and impairment costs                                  0.7           1.3             --
                                                            ------------    ----------     ----------
Income from operations                                              9.8           5.9           13.2
Interest expense                                                    1.3           2.3            1.3
Equity in earnings of unconsolidated affiliates                      --            --             --
Net gain on involuntary conversion                                   --         (2.2)          (0.6)
Other income                                                      (0.2)         (0.1)          (0.1)
                                                            ------------    ----------     ----------
Income before provision for income taxes                            8.8           5.9           12.6
Provision for income taxes                                          3.4           2.3            4.5
Minority interest in income of consolidated subsidiary              1.4           1.0            0.5
                                                            ------------    ----------     ----------
Income before cumulative effect of change in accounting
   principle                                                        4.0           2.6            7.6
Cumulative effect of change in accounting principle, net
   of income tax benefit of $112 and related minority
   interest impact of $84                                   ------------    ----------     ----------
Net income                                                         4.0%          2.6%           7.6%
                                                            ============    ==========     ==========

Year Ended December 31, 2002 Compared to the Year Ended December 31, 2001

         Net Sales. The Company's net sales increased $12.7 million or 7.1% from
$180.2 million in 2001 to $192.9 million in 2002. The inclusion of a full year
of Delta contributed $2.5 million of the increase. Increased demand and new
programs within the Plastics Segment contributed $6.3 million of the increase.
Additionally, currency impacts within the Euroball Segment contributed $4.5
million of the increase. Offsetting these increases were contractual price
decreases and modest volume improvements in the Euroball Segment resulting in a
net decrease of $0.6 million.

         Gross Profit. Gross profit increased by $5.7 million or 13.2% from
$42.9 million in 2001 to $48.6 million in 2002. The inclusion of a full year of
Delta contributed $0.7 million of the increase. Cost reductions in the Domestic
Ball and Roller Segment principally related to the closing of the Company's
Walterboro, South Carolina ball production facility contributed $0.6 million of
the increase. Increased product demand, new sales programs and cost reductions
in the Plastics Segment contributed $1.8 million of the increase. Additionally,
cost reduction programs and currency impacts contributed $1.5 million and $1.0
million, respectively, in the Euroball Segment. As a percentage of net sales,
gross profit increased from 23.8% in 2001 to 25.2% in 2002.

         Restructuring and Impairment Costs. Restructuring and impairment costs
decreased by $1.0 million from $2.3 million in 2001 to $1.3 million in 2002. The
Company incurred a charge for the recording of impairment on the Company's

                                       20




manufacturing facility and equipment in Walterboro, South Carolina of $1.2
million and $1.1 million in 2002 and 2001, respectively. A charge of $0.1
million and $0.8 million was recorded in 2002 and 2001, respectively, associated
with employee severance costs related to the closing of the Walterboro, South
Carolina facility. Additionally, charges related to Euroball of $0 million and
$0.4 million were recorded in 2002 and 2001, respectively. Restructuring and
impairment charges were 0.7% of sales in 2002 and 1.3% of sales in 2001.

         Selling, General and Administrative Expenses. Selling, general and
administrative costs increased by $0.4 million, or 2.3%, from $16.8 million in
2001 to $17.1 million in 2002. The inclusion of a full year of Delta contributed
$0.1 million of the increase. Advisory services principally associated with the
previously announced desire of certain original founders of the Company to
liquidate their holdings in the Company's stock contributed $0.3 million of the
increase. Other increases totaling $0.5 million are primarily attributable to
incentive based compensation throughout the Company and strategic planning
technology initiatives at Euroball. Offsetting these increases were decreased
spending of approximately $0.8 million related to bad debt expense primarily
related to the bankruptcy filing of a major Plastics Segment customer in 2001.
As a percentage of net sales, selling, general and administrative expenses
decreased from 9.3% in 2001 to 8.9% in 2002.

         Depreciation and Amortization. Depreciation and amortization expenses
decreased by $2.0 million from $13.2 million in 2001 to $11.2 million in 2002.
The adoption of FASB Statement No. 142 eliminated the amortization of goodwill
and contributed $1.8 million of the decrease. The assets held for sale as a
result of the closing of the Walterboro, South Carolina ball production
facility, which are no longer depreciated, contributed $0.9 million of the
decrease. Offsetting these decreases, were a full year of depreciation of Delta
assets contributing $0.3 million and currency impacts at Euroball contributing
$0.3 million. As a percentage of sales, depreciation and amortization decreased
from 7.3% in 2001 to 5.8% in 2002.

         Interest Expense. Interest expense decreased by $1.7 million from $4.2
million in 2001 to $2.5 million in 2002. The decrease is principally attributed
to the decrease in interest rates and decreased average debt levels in 2002. As
a percentage of net sales, interest expense decreased from 2.3% in 2001 to 1.3%
in 2002. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources".

         Net Gain on Involuntary Conversion. The Company had a gain on
involuntary conversion of $0.0 million and $3.9 million in 2002 and 2001,
respectively, related to insurance proceeds as a result of the March 12, 2000
fire at the Erwin production facility.

         Minority Interest in Consolidated Subsidiary. Minority interest of
consolidated subsidiary increased $1.0 million from $1.8 million in 2001 to $2.8
million in 2002. This increase is due entirely to the Euroball joint venture
which has been consolidated since its formation, August 1, 2000. The Company is
required to consolidate Euroball in its Consolidated Financial Statements due to
its majority ownership. The Company owns 77% of the shares of the joint venture
with the remaining minority partner owning the remaining 23%. Minority interest
in consolidated subsidiary represents the combined interest in Euroball's
earnings of the minority partners and the 49% interest in NN Arte's earnings of
the minority partner (the 49% interest in NN Arte's earning is zero in 2002 and
2001). See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Overview".

         Net Income. Net income increased $3.1 million, or 66.5% from $4.7 in
2001 to $7.8 million in 2002. As a percentage of net sales, net income increased
from 2.6% in 2001 to 4.0% in 2002.

Year Ended December 31, 2001 Compared to the Year Ended December 31, 2000

         Net Sales. The Company's net sales increased $48.0 million or 36.3%,
from $132.1 million in 2000 to $180.2 million in 2001. The inclusion of a full
year of Euroball sales contributed $46.1 million of the increase, excluding the
performance of the Ireland facility, which was consolidated into the results of
the Company prior to the formation of Euroball. Additionally, the inclusion of
10.5 months of Delta's net sales in 2001 contributed $14.0 million. Offsetting
this increase were decreased sales in the Domestic Ball and Roller and Plastics
Segments in the last half of the year due to slowing demand related to the
overall economic environment in the United States. Decreased sales during the
year for the Plastics Segment were due to the economic environment as well as
significantly decreased sales to one customer.

         Gross Profit. Gross profit increased by $4.7 million, or 12.4% from
$38.2 million in 2000 to $42.9 million in 2001. Adjusting for the performance of
the Ireland facility, the Euroball joint venture contributed an additional $10.4
million of gross profit. The inclusion of 10.5 months of Delta's results
contributed an additional $3.3 million in gross profit, while the sales volume
deterioration in the Domestic Ball and Roller and Plastics Segments decreased
gross profit $9.0 million. Gross profit decreased from 28.9% of net sales in
2000 to 23.8% of net sales in 2001.


                                       21



         Restructuring and Impairment Costs. Restructuring and impairment costs
increased by $2.3 million from $0.0 million in 2000 to $2.3 million in 2001. The
increase includes a $1.1 million charge for the recording of impairment on the
Company's manufacturing facility located in Walterboro, South Carolina, a $0.8
million charge related to employee severance costs related to the closing of the
Walterboro, South Carolina facility and a $0.4 million charge related to
Euroball. Restructuring and impairment costs were 1.3% of net sales during 2001.

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $5.2 million, or 44.8% from $11.6 million
in 2000 to $16.8 million in 2001. The inclusion of a full year of Euroball
results, adjusting for the Ireland facility, accounted for $3.5 million of the
increase. The inclusion of 10.5 months of Delta's results accounted for $1.2
million of the increase. Additionally, bad debt expense related primarily to the
bankruptcy filing of a major Plastics Segment customer contributed $0.8 million.
Offsetting these increases were decreased spending related to cost reduction and
cost containment efforts throughout the Company. As a percentage of net sales,
selling, general and administrative expenses increased from 8.8% in 2000 to 9.3%
in 2001.

         Depreciation and Amortization. Depreciation and amortization expenses
increased $4.0 million, or 43.5% from $9.2 million in 2000 to $13.2 million in
2001. The inclusion of a full year of Euroball results, adjusting for the
Ireland facility, accounted for $2.8 million of the increase. The inclusion of
10.5 months of Delta's results accounted for $1.1 million of the increase. As a
percentage of net sales, depreciation and amortization increased from 6.9% in
2000 to 7.3% in 2001.

         Interest Expense. Interest expense increased by $2.4 million from $1.8
million in 2000 to $4.2 million in 2001. Interest expense related to the
purchase of Delta accounted for $1.0 million of the increase. Additionally, the
inclusion of a full year of interest expense related to the debt incurred by
Euroball accounted for approximately $1.2 million of the increase. As a
percentage of net sales, interest expense increased from 1.3% in 2000 to 2.3% in
2001. See "Management's Discussion and Analysis of Financial Condition -
Liquidity and Capital Resources."

         Equity in Earnings of Unconsolidated Affiliates. Equity in earnings of
unconsolidated affiliates decreased $0.05 million from $0.05 million in 2000 to
$0. The decrease is due to the Company's share of earnings from the NN General
joint venture with General Bearing Corporation. Effective December 21, 2001, the
Company sold its minority interest in Jiangsu General Ball & Roller Company,
LTD, a Chinese ball and roller manufacturer located in Rugao City, Jiangsu
Province, China. To effect the transaction, the Company sold its 50% ownership
in NN General, LLC, which owns a 60% interest in the Jiangsu joint venture to
its partner, General Bearing Corporation for cash of $0.6 million and notes of
$3.3 million. In 2001, the Company recorded a non-cash after-tax loss on the
sale of its investment in this joint venture of $144,000. See Note 5 of the
Notes to Consolidated Financial Statements for additional financial information.

         Net Gain on Involuntary Conversion. The Company had a net gain on
involuntary conversion of $3.9 million in 2001 related to insurance proceeds as
a result of the March 12, 2000 fire at the Erwin facility.

         Minority Interest in Consolidated Subsidiary. Minority interest of
consolidated subsidiary increased $1.1 million from $0.7 million in 2000 to $1.8
million in 2001. This increase is due entirely to the Euroball joint venture
which has been consolidated since its formation, August 1, 2000. The Company is
required to consolidate Euroball in its Consolidated Financial Statements due to
its majority ownership. The Company owns 54% of the shares of the joint venture
with the minority partners owning the remaining 46%. Minority interest in
consolidated subsidiary represents the combined 46% interest in Euroball's
earnings of the minority partners and the 49% interest in NN Arte's earnings of
the minority partners (the 49% interest in NN Arte's earning is zero in 2001 and
2000).

         Net Income. Net income decreased $5.3 million, or 53.3%, from $10.0
million in 2000 to $4.7 million in 2001. As a percentage of net sales, net
income decreased from 7.6% in 2000 to 2.6% in 2001.




                                       22



         Liquidity and Capital Resources

         In July 2000, NN Euroball ApS, and its subsidiaries entered into a loan
agreement with HypoVereinsbank Luxembourg S.A. as agent for Bayerische Hypo-und
Vereinsbank AG of Munich, Germany for a senior secured revolving credit facility
of Euro 5.0 million, expiring on July 15, 2006 and a senior secured term loan
facility of Euro 36.0 million, expiring on July 15, 2006. On July 31, 2000, upon
closing of the joint venture, NN Euroball ApS borrowed a total of Euro 31.5
million against these facilities for acquisition financing. Additional working
capital and capital expenditure financing are provided for under the facility.
Amounts outstanding under the facilities accrue interest at a floating rate
equal to EURIBOR (2.87% at December 31, 2002) plus an applicable margin of
between 0.8% to 2.25% based upon calculated financial ratios. The loan agreement
contains various restrictive financial and non financial covenants. Restrictive
covenants which specify, among other things, restrictions on the incurrence of
indebtedness and the maintenance of certain financial ratios. These facilities
also include certain negative pledges. Amounts outstanding under the Facility
Agreement are secured by the stock, inventory and accounts receivable of
Euroball ApS. Euroball was in compliance with all such covenants at December 31,
2002. At December 31, 2002, Euro 9.8 million was available to Euroball under
these facilities.

         On July 20, 2001, the Company entered into a syndicated loan agreement
with AmSouth Bank ("AmSouth") as the administrative agent for the lenders, for a
senior non-secured revolving credit facility of up to $25 million, expiring on
July 25, 2003 and a senior non-secured term loan for $35 million expiring on
July 1, 2006. On July 12, 2002, the Company amended this credit facility to
convert the term loan portion in to a reducing revolving credit line providing
initial availability equivalent to the balance of the term loan prior to the
amendment. Amounts available for borrowing under this facility will be reduced
by $7.0 million per annum and the facility will expire on July 1, 2006.
Additionally, on July 31, 2002, the Company amended the credit facility again to
extend the $25 million senior non-secured revolving credit facility to July 25,
2004. Amounts outstanding under the revolving facility and term loan facility
bear interest at a floating rate equal to LIBOR (1.38% at December 31, 2002)
plus an applicable margin of 0.75% to 2.00% based upon calculated financial
ratios. The loan agreement contains customary financial and non-financial
covenants. Such covenants specify that the Company must maintain a minimum fixed
charge coverage ratio, a minimum funded indebtedness to EBITDA ratio and a
maximum funded indebtedness to capitalization ratio and limits the amount of
capital expenditures we may make in any fiscal year. The loan agreement also
contains customary restrictions on, among other things, additional indebtedness,
liens on our assets, sales or transfers of assets, investments, restricted
payments (including payment of dividends and stock repurchases), issuance of
equity securities, and mergers, acquisitions and other fundamental changes in
our business. The Company's ownership in NN Euroball ApS has been pledged as
collateral. The Company was in compliance with all such covenants as of December
31, 2002.

         We are in the process of renegotiating our existing credit facilities.
We expect to have the new facilities in place early during the second quarter of
2003. Prior to entering into the new loan agreements, we expect to obtain
short-term working capital financing from our existing lender of approximately
$3.5 million.

         To date, cash generated by Euroball and its subsidiaries has been used
exclusively for general Euroball-specific purposes including investments in
property, plant and equipment and prepayment of the Euroball senior secured term
loan, which is secured by Euroball and its subsidiaries. Accordingly, no
dividends have been declared or paid that may have been used by the Company to
pay down our domestic credit facilities. While the Company controls the
declaration of such dividends, we would only receive cash distributed in
accordance with our ownership percentage in Euroball.

         The Company's arrangements with its domestic customers typically
provide that payments are due within 30 days following the date of the Company's
shipment of goods, while arrangements with foreign customers (other than foreign
customers that have entered into an inventory management program with the
Company) generally provide that payments are due within 90 or 120 days following
the date of shipment. Under the Domestic Ball and Roller Segments inventory
management program with certain European customers, payments typically are due
within 30 days after the customer uses the product. The Company's sales and
receivables can be influenced by seasonality due to the Company's relative
percentage of European business coupled with many foreign customers ceasing
production during the month of August. For information concerning the Company's
quarterly results of operations for the years ended December 31, 2002 and 2001,
see Note 16 of the Notes to Consolidated Financial Statements.

         The Company bills and receives payment from some of its foreign
customers in Euro as well as other currencies. To date, the Company has not been
materially adversely affected by currency fluctuations or foreign exchange
restrictions. Nonetheless, as a result of these sales, the Company's foreign
exchange transaction and translation risk has increased. Various strategies to
manage this risk are available to management including producing and selling in
local currencies and hedging programs. As of December 31, 2002, no currency
hedges were in place. In addition, a strengthening of the U.S.

                                       23



dollar and/or Euro against foreign currencies could impair the ability of the
Company to compete with international competitors for foreign as well as
domestic sales.

         Working capital, which consists principally of accounts receivable and
inventories, was $21.2 million at December 31, 2002 as compared to $23.1 million
at December 31, 2001 and $30.0 million at December 31, 2000. The ratio of
current assets to current liabilities decreased from 1.89:1 at December 31, 2000
to 1.71:1 at December 31, 2001 and to 1.53:1 at December 31, 2002. Cash flow
from operations increased to $31.1 million during 2002 from $24.6 million during
2001 and $26.9 million during 2000.

         During 2003, the Company plans to spend approximately $9.4 million on
capital expenditures related primarily to equipment and process upgrades and
replacements. The Company intends to finance these activities with cash
generated from operations and funds available under our credit facilities, which
are in the process of renegotiation. The Company believes that funds generated
from operations and borrowings from the renegotiated credit facilities will be
sufficient to finance the Company's working capital needs and projected capital
expenditure requirements through December 2003.

         Beginning in January 2003 SKF may exercise its right under the
Shareholders Agreement to cause the Company to purchase its interest in Euroball
based on the Put Formula in the Shareholders Agreement. The Company anticipates
that if such purchase becomes necessary, it may need to borrow additional funds.
Because the purchase price is based on a formula using Euroball's historical
earnings and cash flow, the exact amount of the put cannot be determined until
the put right is exercised. SKF has informed us that it intends to exercise its
right and we expect to purchase its interest during the second quarter of 2003.

         The table below sets forth certain of the Company's contractual
obligations and commercial commitments as of December 31, 2002:

=========================== ================================================================================
         Certain                                        Payments Due by Period
 Contractual Obligations
=========================== ================ ============== ================ =============== ===============
                                 Total        Less than 1      1-3 years       4-5 years     After 5 years
                                                 year
=========================== ================ ============== ================ =============== ===============
Long-Term Debt                     $ 46,135         $   --          $39,063          $7,072          $   --
=========================== ================ ============== ================ =============== ===============
Operating Leases                   $ 17,772        $ 1,422          $ 2,486          $1,952         $11,912
=========================== ================ ============== ================ =============== ===============
Other Long-Term
Obligations                        $ 62,180        $21,615          $40,565           $  --          $   --
=========================== ================ ============== ================ =============== ===============
Total Contractual Cash
Obligations                       $ 126,087        $23,037          $82,114          $9,024        $ 11,912
=========================== ================ ============== ================ =============== ===============

         Other Long-Term Obligations consist principally of steel purchase
commitments at the Euroball Segment (See Note 15 of the Notes to Consolidated
Financial Statements.)

The Euro

         The Company currently has operations in Ireland, Germany and Italy, all
of which are Euro participating countries, and, each facility sells product to
customers in many of the participating countries. The Euro has been adopted as
the functional currency at all of Euroball's locations.

Seasonality and Fluctuation in Quarterly Results

         The Company's net sales historically have been seasonal in nature, due
to a significant portion of the Company's sales being to European customers that
cease or significantly slow production during the month of August. For
information concerning the Company's quarterly results of operations for the
years ended December 31, 2002 and 2001, see Note 16 of the Notes to Consolidated
Financial Statements.

Inflation and Changes in Prices

         While the Company's operations have not been materially affected by
inflation during recent years, prices for 52100 Steel, engineered resins and
other raw materials purchased by the Company are subject to material change. For
example, during 1995, due to an increase in worldwide demand for 52100 Steel and
the decrease in the value of the United States dollar relative to foreign
currencies, the Company experienced an increase in the price of 52100 Steel and
some difficulty in obtaining an adequate supply of 52100 Steel from its existing
suppliers. In the Company's U.S. operations our

                                       24



typical pricing arrangements with steel suppliers are subject to adjustment once
every six months. The Company's Euroball Segment has entered into long term
agreements with its primary steel supplier which provide for standard terms and
conditions and annual pricing adjustments to offset material price fluctuations
in steel. The Company typically reserves the right to increase product prices
periodically in the event of increases in its raw material costs. In the past,
the Company has been able to minimize the impact on its operations resulting
from the 52100 Steel price fluctuations by taking such measures. Certain sales
agreements are in effect with SKF and INA/FAG, which provide for minimum
purchase quantities and specified, annual sales price adjustments that may be
modified up or down for changes in material costs. These agreements expire
during 2006.

Recently Issued Accounting Standards

         In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Certain Hedging Activities." In June 2000, the FASB
issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activity, an Amendment of SFAS 133." SFAS No. 133 and SFAS No. 138
require that derivative instruments be recorded on the balance sheet at their
respective fair values. SFAS No. 133 and SFAS No. 138 are effective for all
fiscal quarters of all fiscal years beginning after June 30, 2000, which for the
Company was effective January 1, 2001.

         In June 2001, the FASB issued Statement of Financial Accounting
Standards No. 141, "Business Combinations" (Statement No. 141), and Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets"
(Statement No. 142). Statement No. 141 requires that the purchase method of
accounting be used for all business combinations initiated after June 30, 2001.
Statement No. 141 also specifies criteria that intangible assets acquired in a
purchase method business combination must meet to be recognized and reported
apart from goodwill. Statement No. 142 requires that goodwill and intangible
assets with indefinite useful lives no longer be amortized, but rather,
periodically tested for impairment. The effective date of Statement No. 142 is
January 1, 2002. As of the date of adoption, the Company had unamortized
goodwill of approximately $36.6 million, which is subject to the provisions of
Statement No. 142.

         As a result of adopting these standards in the first quarter of 2002,
the Company no longer amortizes goodwill. The Company estimates that
amortization expense for goodwill would have been approximately $1.6 million (or
$0.9 million net of tax and minority interest) for the twelve-month period ended
December 31, 2002.

         In July 2001, the FASB issued Statement of Financial Accounting
Standards No. 143, "Accounting For Asset Retirement Obligations." This Statement
requires capitalizing any retirement costs as part of the total cost of the
related long-lived asset and subsequently allocating the total expense to future
periods using a systematic and rational method. Adoption of the Statement is
required for fiscal years beginning after June 15, 2002. Management believes
that, as of December 31, 2002, it is not materially affected by SFAS No. 143.

         In October 2001, The FASB issued Statement of Financial Accounting
Standards No. 144, "Accounting For The Impairment or Disposal of Long-lived
Assets." This Statement supercedes Statement No. 121 but retains many of its
fundamental provisions. Additionally, this Statement expands the scope of
discontinued operations to include more disposal transactions. The provisions of
this Statement are effective for financial statements issued for fiscal years
beginning after December 15, 2001. The adoption of SFAS 144 did not have a
material impact on the Company's financial condition.

         In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections". SFAS No. 4 had required all gains and losses from extinguishment
of debt to be aggregated and, if material, classified as an extraordinary item,
net of related income tax effect. SFAS No. 145 rescinds SFAS No. 4 and the
related required classifications gains and losses from extinguishment of debt as
extraordinary items. Additionally, the SFAS No. 145 amends SFAS No. 13 to
require that certain lease modifications that have economic effects similar to
sale-leaseback transactions be accounted for in the same manner as
sale-leaseback transactions. SFAS No. 145 is applicable for the Company at the
beginning of fiscal year 2003, with the provisions related to SFAS No. 13 are
effective for transactions occurring after May 15, 2002. Management believes
that, as of December 31, 2002, it is not materially affected by SFAS No. 145.

         In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities". SFAS No. 146 requires costs
associated with exit or disposal activities to be recognized when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
SFAS No. 146 is to be applied prospectively to exit or disposal activities
initiated after December 31, 2002.


                                       25



         In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure - an amendment of FASB
Statement No. 123". SFAS No. 148 provides alternative methods of transition for
a voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, SFAS No. 148 amends the disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The Company has adopted the provisions of SFAS 123, which encourages
but does not require a fair value based method of accounting for stock
compensation plans. The Company has elected to continue accounting for its stock
compensation plan using the intrinsic value based method under APB Opinion No.
25. See Note 11 of the Notes to Consolidated Financial Statements.

         In November 2002, the FASB issued FASB Interpretation ("FIN") No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others," an interpretation of FASB
Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34. This
interpretation elaborates the disclosures to be made by a guarantor in its
interim and annual financial statements about its obligations under certain
guarantees that it has issued. It also clarifies that a guarantor is required to
recognize, at the inception of a guarantee, a liability for the fair value of
the obligation undertaken in issuing the guarantee. The initial recognition and
initial measurement provisions of this interpretation are applicable on a
prospective basis to guarantees issued or modified after December 31, 2002 and
are not expected to have a material effect on the Company's consolidated results
of operations, financial position or cash flows.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

         The Company is exposed to changes in financial market conditions in the
normal course of its business due to its use of certain financial instruments as
well as transacting in various foreign currencies. To mitigate its exposure to
these market risks, the Company has established policies, procedures and
internal processes governing its management of financial market risks. The
Company is exposed to changes in interest rates primarily as a result of its
borrowing activities. Domestically, these borrowings which include a $25 million
senior, non-secured floating rate revolving credit facility which is used to
maintain liquidity and fund its business operations domestically as well as a
reducing revolving credit line facility. In Europe, Euroball has a 5.0 million
euro floating rate credit facility, and a 6.0 million euro floating rate secured
term loan. At December 31, 2002, the Company had $48.1 million outstanding under
the domestic revolving credit facility and Euroball had 5.0 million euro
outstanding under the Euroball credit facility. A one-percent increase in the
interest rate charged on the Company's outstanding borrowings under both credit
facilities would result in interest expense increasing by approximately $531,000
during 2002 and $547,000 during 2001. In connection with a variable EURIBOR rate
debt financing in July 2000 the Company's majority owned subsidiary, NN Euroball
ApS entered into an interest rate swap with a notional amount of Euro 12.5
million for the purpose of fixing the interest rate on a portion of their debt
financing. The interest rate swap provides for the Company to receive variable
Euribor interest payments and pay 5.51% fixed interest. The interest rate swap
agreement expires in July 2006 and the notional amount amortizes in relation to
principal payments on the underlying debt over the life of the swap. The nature
and amount of the Company's borrowings may vary as a result of future business
requirements, market conditions and other factors.

         Translation of the Company's operating cash flows denominated in
foreign currencies is impacted by changes in foreign exchange rates. The
Company, mainly at its Euroball Segment, bills and receives payment from some of
its foreign customers in their own currency. To date, the Company has not been
materially adversely affected by currency fluctuations of foreign exchange
restrictions. However, to help reduce exposure to foreign currency fluctuation,
management has incurred debt in Euros and periodically used foreign currency
hedges. These currency hedging programs allow management to hedge currency
exposures when these exposures meet certain discretionary levels. The Company
did not hold a position in any foreign currency hedging instruments as of
December 31, 2002.




                                       26




Item 8.           Financial Statements and Supplementary Data

Index to Financial Statements

Financial Statements                                                                                   Page

         Report of Independent Auditors for the years ended December 31, 2002, 2001 and 2000...........28

         Consolidated Balance Sheets at December 31, 2002, 2001 and 2000 (Restated)....................29

         Consolidated Statements of Income and Comprehensive Income for the
         three years ended December 31, 2002 (Restated)................................................30

         Consolidated Statements of Changes in Stockholders' Equity for the three
         years ended December 31, 2002 (Restated)......................................................31

         Consolidated Statements of Cash Flows for the three years ended
         December 31, 2002 (Restated)..................................................................32

         Notes to Consolidated Financial Statements....................................................33






                                       27





                          Independent Auditors' Report

The Board of Directors
NN, Inc.:

We have audited the accompanying consolidated balance sheets of NN, Inc. as of
December 31, 2002, 2001 and 2000 and the related consolidated statements of
income and comprehensive income, consolidated statements of changes in
stockholders' equity, and consolidated statements of cash flows for each of the
years in the three year period ended December 31, 2002. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of NN, Inc. as of
December 31, 2002, 2001 and 2000 and the results of their operations and their
cash flows for each of the years in the three year period ended December 31,
2002 in conformity with accounting principles generally accepted in the United
States of America.

As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for goodwill and other intangible assets in
2002 and changed its method of accounting for derivative instruments and hedging
activities in 2001.

As discussed in Note 1 to the consolidated financial statements, the Company has
restated its consolidated financial statements as of and for the years ended
December 31, 2002, 2001 and 2000.



                                            /s/ KPMG LLP

Charlotte, North Carolina
February 24, 2003, except as to Note 1,
which is as of January 29, 2004


                                       28




                                    NN, Inc.
                           Consolidated Balance Sheets
                        December 31, 2002, 2001 and 2000
                      (In thousands, except per share data)

                                                                              Restated          Restated          Restated
Assets                                                                          2002              2001              2000
                                                                            -------------    ---------------    --------------
Current assets:
        Cash and cash equivalents                                                $ 5,144            $ 3,024           $ 8,273
        Accounts receivable, net                                                  28,965             24,832            29,549
        Inventories, net                                                          23,402             23,418            23,742
        Other current assets                                                       2,501              3,034             1,512
        Current deferred tax asset                                                 1,400              1,309               790
                                                                            -------------    --------------- -- --------------
                Total current assets                                              61,412             55,617            63,866

Property, plant and equipment, net                                                88,199             82,770            91,693
Assets held for sale                                                               2,214              4,348                --
Goodwill                                                                          39,374             36,624            24,008
Other non-current assets                                                           4,016              4,385             4,212
Non-current deferred tax asset                                                        --                733               172
                                                                            -------------    ---------------    --------------
Total assets                                                                   $ 195,215          $ 184,477         $ 183,951
                                                                            =============    ===============    ==============
Liabilities and Stockholders' Equity

Current liabilities:
        Accounts payable                                                        $ 22,983           $ 14,552          $ 16,883
        Bank overdraft                                                                37              1,141               454
        Accrued salaries, wages and benefits                                       6,354              3,813             2,248
        Income taxes payable                                                         620              1,514             1,341
        Payable to affiliates                                                        566              1,277             1,762
        Short term loans                                                              --                 --             2,000
        Current maturities of long-term debt                                       7,000              7,000                --
        Other liabilities                                                          2,674              3,187             9,038
        Current deferred tax liability                                                --                 50               114
                                                                            ------------     --------------      ------------
                Total current liabilities                                         40,234             32,534            33,840


Non-current deferred tax liability                                                 9,334              7,362             5,239
Long-term debt                                                                    46,135             47,661            50,515
Accrued pension and other                                                          9,319              7,607             2,711
                                                                            -------------    ---------------    --------------
                Total liabilities                                                105,022             95,164            92,305
                                                                            -------------    ---------------    --------------

Minority interest in consolidated subsidiaries                                    12,285             18,331            16,971
                                                                            -------------    ---------------    --------------
Stockholders' equity:
        Common stock - $0.01 par value, authorized
          45,000 shares, issued and outstanding
          15,370 shares in 2002, 15,317 shares in 2001,
          and 15,247 shares in 2000                                                  154                154               153
        Additional paid-in capital                                                40,457             40,111            39,684
        Retained earnings                                                         38,984             36,139            36,364
        Accumulated other comprehensive loss                                     (1,687)            (5,422)           (1,526)
                                                                            -------------    ---------------    --------------
                 Total stockholders' equity                                       77,908             70,982            74,675
                                                                            -------------    ---------------    --------------
                 Total liabilities and stockholders' equity                     $195,215           $184,477          $183,951
                                                                            =============    ===============    ==============


                  See accompanying notes to consolidated financial statements


                                       29



                                    NN, Inc.
           Consolidated Statements of Income and Comprehensive Income
                  Years ended December 31, 2002, 2001 and 2000
                      (In thousands, except per share data)

                                                                 Restated          Restated         Restated
                                                                   2002              2001             2000
                                                               -------------     -------------     ------------

Net sales                                                          $192,856          $180,151         $132,129
Cost of products sold                                               144,274           137,221           93,926
                                                               -------------     -------------     ------------
      Gross profit                                                   48,582            42,930           38,203

Selling, general and administrative                                  17,134            16,752           11,571
Depreciation and amortization                                        11,212            13,150            9,165
Restructuring and impairment costs                                    1,277             2,312               --
                                                               -------------     -------------     ------------
Income from operations                                               18,959            10,716           17,467

Interest expense                                                      2,451             4,196            1,773
Equity in earnings of unconsolidated affiliates                          --                --             (48)
Net gain on involuntary conversion                                       --           (3,901)            (728)
Other income                                                          (487)             (186)            (136)
                                                               -------------     -------------     ------------
Income before provision for income taxes                             16,995            10,607           16,606
Provision for income taxes                                            6,457             4,094            5,959
Minority interest in consolidated subsidiaries                        2,778             1,753              660
                                                               -------------     -------------     ------------
      Income before cumulative effect of change
         in accounting principle                                      7,760             4,760            9,987
      Cumulative effect of change in accounting
         principle, net of income tax benefit of $112
         and related minority interest impact of $84                     --                98               --
                                                               -------------     -------------     ------------
Net income                                                            7,760             4,662            9,987

Other comprehensive income (loss):
      Additional minimum pension liability, net of tax                 (28)              (53)               --
      Foreign currency translation                                    3,763           (3,843)              152
                                                               -------------     -------------     ------------
         Comprehensive income                                      $ 11,495             $ 766         $ 10,139
                                                               =============     =============     ============

Basic income per share:
      Income before cumulative effect of change
         in accounting principle                                    $  0.51           $  0.31          $  0.66
      Cumulative effect of change in accounting
         principle                                                       --            (0.01)               --
                                                               -------------     -------------     ------------
      Net income                                                    $  0.51           $  0.31          $  0.66
                                                               =============     =============     ============
      Weighted average shares outstanding                            15,343            15,259           15,247
                                                               =============     =============     ============

Diluted income per share:
      Income before cumulative effect of change
         in accounting principle                                    $  0.49           $  0.31          $  0.64
      Cumulative effect of change in accounting
         principle                                                       --            (0.01)               --
                                                               -------------     -------------     ------------
      Net income                                                    $  0.49           $  0.30          $  0.64
                                                               =============     =============     ============
Weighted average shares outstanding                                  15,714            15,540           15,531
                                                               =============     =============     ============


       See accompanying notes to consolidated financial statements

                                       30




                                    NN, Inc.
           Consolidated Statements of Changes in Stockholders' Equity
                  Years ended December 31, 2002, 2001 and 2000
                                 (In thousands)


                                                    Common Stock                                                 Accumulated
                                              --------------------------     Additional                             Other
                                                Number           Par           Paid-In         Retained         Comprehensive
                                               of shares        Value          Capital         Earnings             Loss               Total
                                              ------------    ----------    --------------    ------------    ------------------     -----------

Balance, December 31, 1999                         15,244          $153           $30,398         $31,255             $ (1,678)         $60,128
      Shares Issued                                     3            --                16              --                    --              16
      Net income                                       --            --                --           9,987                    --           9,987
      Dividends paid                                   --            --                --         (4,878)                    --         (4,878)
      Increase in paid-in capital for the
        amount by which the Company's
        proportionate interest in Euroball
        exceeded its carrying value of the
        net assets exchanged by the Company
        (Note 3, Restated)                             --            --             9,270              --                    --           9,270
      Cumulative translation gain, Restated            --            --                --              --                   152             152
                                              ------------    ----------    --------------    ------------    ------------------     -----------

Balance, December 31, 2000, Restated               15,247          $153           $39,684         $36,364             $ (1,526)         $74,675
      Shares Issued                                    70             1               427              --                    --             428
      Net income                                       --            --                --           4,662                    --           4,662
      Dividends paid                                   --            --                --         (4,887)                    --         (4,887)
      Additional minimum pension liability             --            --                --              --                  (53)            (53)
      Cumulative translation loss, Restated            --            --                --              --               (3,843)         (3,843)
                                              ------------    ----------    --------------    ------------    ------------------     -----------

Balance, December 31, 2001, Restated               15,317          $154           $40,111         $36,139             $ (5,422)         $70,982
      Shares Issued                                    53            --               346              --                    --             346
      Net income, Restated                             --            --                --           7,760                    --           7,760
      Dividends paid                                   --            --                --         (4,915)                    --         (4,915)
      Additional minimum pension liability             --            --                --              --                  (28)            (28)
      Cumulative translation gain, Restated            --            --                --              --                 3,763           3,763
                                              ------------    ----------    --------------    ------------    ------------------     -----------


Balance, December 31, 2002, Restated               15,370          $154           $40,457         $38,984             $ (1,687)         $77,908
                                              ============    ==========    ==============    ============    ==================     ===========







           See accompanying notes to consolidated financial statements


                                       31




                                    NN, Inc.
                      Consolidated Statements of Cash Flows
                  Years Ended December 31, 2002, 2001 and 2000
                                 (In Thousands)
                                                                                         Restated
                                                                                           2002                2001            2000
                                                                                       ------------    ------------    ------------
Cash flows from operating activities:
      Net Income                                                                            $ 7,760         $ 4,662         $ 9,987
      Adjustments to reconcile net income to net cash provided by operating
      activities:
      Depreciation and amortization                                                          11,212          13,150           9,165
      Cumulative effect of change in accounting principle                                        --              98              --
      Loss on disposals of property, plant and equipment                                       (25)              --           1,194
      Loss on sale of NNG                                                                        --             222              --
      Equity in earnings of unconsolidated affiliates                                            --              --            (48)
      Deferred income tax                                                                     2,564             433           1,185
      Interest income on receivable from unconsolidated affiliates                               --           (104)           (159)
      Minority interest in consolidated subsidiary                                            2,778           1,753             660
      Restructuring costs and impairment costs                                                1,277           2,312              --
      Changes in operating assets and liabilities:
               Accounts receivable                                                          (3,590)           6,838           1,955
               Inventories                                                                    1,479           1,175         (3,021)
               Other current assets                                                           4,795         (1,461)           (106)
               Other assets                                                                      35           (618)         (1,719)
               Accounts payable                                                               5,535         (2,846)           5,544
               Other liabilities                                                            (2,733)           (997)           2,227
                                                                                        ------------    ------------    ------------
                    Net cash provided by operating activities                                31,087          24,617          26,864
                                                                                        ------------    ------------    ------------

Cash flows from investing activities:
      Acquisition of businesses, net of cash acquired                                            --        (23,496)        (57,788)
      Purchase of minority interest                                                        (13,802)              --              --
      Acquisition of property, plant and equipment                                          (7,591)         (6,314)        (17,910)
      Sale of NNG                                                                                --             622              --
      Long-term note receivable                                                                 200              --         (3,440)
      Investment in unconsolidated affiliates                                                    --              --           (172)
      Proceeds from disposals of property, plant and equipment                                   65             106              --
                                                                                        ------------    ------------    ------------
                 Net cash used by investing activities                                     (21,128)        (29,082)        (79,310)
                                                                                        ------------    ------------    ------------

Cash flows from financing activities:
      Net proceeds under revolving line of credit                                                --              --           7,547
      Minority shareholders contributions                                                        --              --          29,600
      Proceeds from long-term debt                                                           13,802          71,430          25,817
      Bank overdrafts                                                                       (1,103)             687           (785)
      Repayment of long-term debt                                                          (16,708)        (65,946)              --
      Proceeds (repayment) of short-term debt                                                    --         (2,000)           2,000
      Proceeds from issuance of stock                                                           346             428              16
      Cash dividends                                                                        (4,915)         (4,887)         (4,878)
                                                                                        ------------    ------------    ------------
                 Net cash provided (used) by financing activities                           (8,578)           (288)          59,317
                                                                                        ------------    ------------    ------------

      Effect of exchange rate changes                                                           739           (496)             (7)

      Net change in cash and cash equivalents                                                 2,120         (5,249)           6,864
      Cash and cash equivalents at beginning of period                                        3,024           8,273           1,409
                                                                                        ------------    ------------    ------------
      Cash and cash equivalents at end of period                                            $ 5,144         $ 3,024         $ 8,273
                                                                                        ============    ============    ============

Supplemental schedule of non-cash investing and financing activities:
      Note received related to sale of NNG                                                   $   --         $ 3,300          $   --

     Cash paid for interest and income taxes was as follows:
           Interest                                                                         $ 1,965         $ 3,596         $ 1,917
           Income taxes                                                                       4,774           2,845           5,207
                                                                                        ============    ============    ============
           See accompanying notes to consolidated financial statements


                                       32



                                    NN, Inc.
                   Notes to Consolidated Financial Statements
                        December 31, 2002, 2001 and 2000
                      (In thousands, except per share data)

1)       Restatement

     The accompanying Consolidated Financial Statements for the fiscal years
     ended December 31, 2002, 2001 and 2000 have been restated to amend the
     financial reporting of certain transactions related to the formation of NN
     Euroball, ApS ("Euroball") on July 31, 2000, and the subsequent purchase on
     December 20, 2002 of the 23% interest in Euroball held by FAG Kugelfischer
     George Schaefer AG, which was subsequently acquired by INA - Schaeffler KG
     (collectively, "INA/FAG"). These restatements had no material effect on the
     Company's reported net sales, gross profit, income from operations or cash
     flows for the fiscal years ended December 31, 2002, 2001 or 2000. Refer to
     Note 3 as related to the formation of Euroball and the purchase of the
     minority interest held by INA/FAG.


     We have revised the valuation of the original purchase price associated
     with the formation of Euroball in July 2000. This revision resulted in a
     reduction of goodwill of approximately 4,108 Euro ($3,792). Further, we
     have increased stockholders' equity by approximately 10,044 Euro ($9,270) to
     reflect the amount by which the Company's proportionate interest in
     Euroball, exceeded the book value of the net assets exchanged by the
     Company. As a result of these two adjustments, minority interest in
     consolidated subsidiaries has been reduced by approximately $7,421,
     $12,601 and $13,286, at December 31, 2002, 2001 and 2000, respectively,
     goodwill has been reduced $4,308, $3,658 and $3,857, at December
     31, 2002, 2001 and 2000, respectively, and paid in capital increased $9,270
     at December 31, 2002, 2001 and 2000 from amounts previously reported.
     Comprehensive income has also been restated for the foreign currency
     translation effects of these adjustments.

     In the previously issued December 31, 2002 Consolidated Financial
     Statements, when the Company acquired the 23% interest in Euroball held by
     INA/FAG in December 2002, the excess of minority interest in consolidated
     subsidiaries over the purchase price was recorded as a non-taxable gain in
     the amount of approximately $5,904. As restated, in the accompanying
     Consolidated Financial Statements, the non-taxable gain has been excluded
     and the excess of the purchase price over the fair value of INA/FAG's 23%
     interest in the net assets of Euroball was allocated to goodwill. The
     resulting impact to the Consolidated Financial Statements is an increase to
     goodwill of approximately $1,517 and a decrease in retained earnings of
     $5,904 as of December 31, 2002 and reversal of the gain previously recorded
     in the Consolidated Statement of Income and Comprehensive Income for the
     year ended December 31, 2002.

     Additionally, the Company has reclassified minority interest in
     consolidated subsidiaries from a component of total liabilities to a
     separate line item in the Consolidated Balance Sheets at December 31, 2002,
     2001 and 2000.



                                       33





                                    NN, Inc.
                   Notes to Consolidated Financial Statements
                        December 31, 2002, 2001 and 2000
                      (In thousands, except per share data)



Effect on selected Consolidated Balance Sheet data as of December 31, 2002, 2001
and 2000:

                                 Selected Consolidated Balance Sheet Data
                                             December 31, 2002
                                              (In thousands)

                                                               As Previously
                                                                   Reported             As Restated
                                                               -----------------       ---------------
      Goodwill                                                         $ 42,166              $ 39,374
      Total assets                                                      198,007               195,215
      Total liabilities                                                 124,728               105,022
      Minority interest in consolidated subsidiaries                     19,706                12,285
      Additional paid-in capital                                         31,187                40,457
      Retained earnings                                                  44,888                38,984
      Accumulated other comprehensive loss                              (2,950)               (1,687)
      Total stockholders' equity                                         73,279                77,908
      Total liabilities and stockholders' equity                        198,007               195,215



                                 Selected Consolidated Balance Sheet Data
                                             December 31, 2001
                                              (In thousands)
                                                                As Previously
                                                                     Reported           As Restated
                                                               -----------------       ---------------
      Goodwill                                                         $ 40,282              $ 36,624
      Total assets                                                      188,135               184,477
      Total liabilities                                                 126,096                95,164
      Minority interest in consolidated subsidiaries                     30,932                18,331
      Additional paid-in capital                                         30,841                40,111
      Retained earnings                                                  36,139                36,139
      Accumulated other comprehensive loss                              (5,095)               (5,422)
      Total stockholders' equity                                         62,039                70,982
      Total liabilities and stockholders' equity                        188,135               184,477


                                Selected Consolidated Balance Sheet Data
                                            December 31, 2000
                                             (In thousands)

                                                                As Previously
                                                                    Reported           As Restated
                                                               ----------------       --------------
      Goodwill                                                        $ 27,865             $ 24,008
      Total assets                                                     187,808              183,951
      Total liabilities                                                122,562               92,305
      Minority interest in consolidated subsidiaries                    30,257               16,971
      Additional paid-in capital                                        30,414               39,684
      Retained earnings                                                 36,364               36,364
      Accumulated other comprehensive loss                             (1,685)              (1,526)
      Total stockholders' equity                                        65,246               74,675
      Total liabilities and stockholders' equity                       187,808              183,951



                                       34




                                    NN, Inc.
                   Notes to Consolidated Financial Statements
                        December 31, 2002, 2001 and 2000
                      (In thousands, except per share data)

         Effect on selected Consolidated Statement of Income and Comprehensive
         Income Data for the twelve months ended December 31, 2002, 2001 and
         2000

              Selected Consolidated Statement of Income and Comprehensive Income Data
                                    Year ended December 31, 2002
                               (In thousands, except per share data)

                                                               As Previously
                                                                 Reported             As Restated
                                                             ------------------    ------------------
Gain on purchase of minority interest                                 $(5,904)                $   --
Income before provision for income taxes                                22,899                16,995
Net income                                                              13,664                 7,760
Foreign currency translation                                             2,173                 3,763
Comprehensive income                                                    15,809                11,495
Basic income per share                                                    0.89                  0.51
Diluted income per share                                                  0.87                  0.49

              Selected Consolidated Statement of Income and Comprehensive Income Data
                                    Year ended December 31, 2001
                                           (In thousands)

                                                               As Previously
                                                                   Reported           As Restated
                                                             ------------------    ------------------
Foreign currency translation                                          $(3,357)              $(3,843)
Comprehensive income                                                     1,252                   766

              Selected Consolidated Statement of Income and Comprehensive Income Data
                                    Year ended December 31, 2000
                                           (In thousands)

                                                               As Previously
                                                                   Reported           As Restated
                                                             ------------------    ------------------
Foreign currency translation                                            $  (7)                $  152
Comprehensive income                                                     9,980                10,139

Effect on selected Consolidated Statement of Cash Flows Data for the year ended
December 31, 2002

                         Selected Consolidated Statement of Cash Flows Data
                                    Year ended December 31, 2002
                                           (In thousands)

                                                               As Previously
                                                                   Reported           As Restated
                                                             ------------------    ------------------
Net Income                                                             $13,664                $7,760
Gain on purchase of minority interest                                  (5,904)                    --



                                                                       Continued
                                       35



                                    NN, Inc.
                   Notes to Consolidated Financial Statements
                        December 31, 2002, 2001 and 2000
                      (In thousands, except per share data)

2)  Summary of Significant Accounting Policies and Practices

       (a)    Description of Business

              NN, Inc. (the "Company") is a manufacturer of precision balls,
              rollers, plastic injection molded products, and precision bearing
              seals. The Company's balls, rollers, and bearing seals are used
              primarily in the domestic and international anti-friction bearing
              industry. The Company's plastic injection molded products are used
              in the bearing, automotive, instrumentation and fiber optic
              industries. The Domestic Ball and Roller Segment is comprised of
              two manufacturing facilities located in the eastern United States.
              The Company's Euroball Segment, which was acquired in July 2000,
              (see Note 3) is comprised of manufacturing facilities located in
              Kilkenny, Ireland, Eltmann, Germany, and Pinerolo, Italy. All of
              the facilities in the Euroball Segment are engaged in the
              production of precision balls. The Plastics Segment consists of
              IMC, acquired in July 1999, NN Arte, formed in August 2000 and
              Delta Rubber, acquired in February 2001. IMC has two production
              facilities in Texas, NN Arte has one production facility in
              Guadalajara, Mexico and Delta Rubber has two production facilities
              in Connecticut (see Note 3). All of the Company's segments sell to
              foreign and domestic customers.

       (b)    Cash and Cash Equivalents

              The Company considers all highly liquid investments with an
              original maturity of three months or less as cash equivalents.

       (c)    Inventories

              Inventories are stated at the lower of cost or market. Cost is
              determined using the first-in, first-out method.

       (d)    Property, Plant and Equipment

              Property, plant and equipment are stated at cost less accumulated
              depreciation. Assets held for sale are stated at lower of cost or
              fair market value less selling cost. Expenditures for maintenance
              and repairs are charged to expense as incurred. Major renewals and
              betterments are capitalized. When a major property item is
              retired, its cost and related accumulated depreciation or
              amortization are removed from the property accounts and any gain
              or loss is recorded in income or expense, respectively. The
              Company reviews the carrying values of long-lived assets for
              impairment whenever events or changes in circumstances indicate
              the carrying amount of an asset may not be recoverable. During the
              years ended December 31, 2002 and 2001, the Company incurred an
              impairment charge of $1,199 and $1,083 respectively, to write-down
              the land, building and equipment at the Walterboro, SC production
              facility to its net realizable value, which was principally based
              upon fair market value appraisals and valuations. As of December
              31, 2002 and 2001, the carrying value of this land, building
              and equipment was classified as a component of assets held for
              sale in the accompanying financial statements at $2,214 and $4,348,
              respectively. During the year ended December 31, 2000, the
              Company did not incur any impairment charges.

              Depreciation is provided principally on the straight-line method
              over the estimated useful lives of the depreciable assets for
              financial reporting purposes. Accelerated depreciation methods are
              used for income tax purposes.

       (e)    Revenue Recognition

              The Company generally recognizes a sale when goods are shipped and
              ownership is assumed by the customer. The Company has an inventory
              management program for certain major ball and roller customers
              whereby sales are recognized when products are used by the
              customer from consigned stock, rather than at the time of
              shipment. Under both circumstances, revenue is recognized when
              persuasive evidence of an arrangement exists, delivery has
              occurred, the sellers' price is determinable and collectibility is
              reasonably assured.

       (f)    Income Taxes

              Income taxes are accounted for under the asset and liability
              method. Deferred tax assets and liabilities are recognized for the
              future tax consequences attributable to differences between the
              financial statement carrying amounts of existing assets and
              liabilities and their respective tax bases and operating loss and
              tax credit carryforwards. Deferred tax assets and liabilities are
              measured using enacted tax rates expected to apply to


                                                                       Continued
                                       36





                                    NN, Inc.
                   Notes to Consolidated Financial Statements
                        December 31, 2002, 2001 and 2000
                      (In thousands, except per share data)


              taxable income in the years in which those temporary differences
              are expected to be recovered or settled. The effect on deferred
              tax assets and liabilities of a change in tax rates is recognized
              in income in the period that includes the enactment date.

       (g)    Net Income Per Common Share

              Basic earnings per share reflect reported earnings divided by the
              weighted average number of common shares outstanding. Diluted
              earnings per share include the effect of dilutive stock options
              outstanding during the year.

       (h)    Stock Incentive Plan

              The Company applies the intrinsic value-based method of accounting
              prescribed by Accounting Principles Board ("APB") Opinion No. 25,
              "Accounting for Stock Issued to Employees," and related
              interpretations including Financial Accounting Standards Board
              (FASB) Interpretation No. 44, "Accounting for Certain Transactions
              involving Stock Compensation (an interpretation of APB Opinion No.
              25)" issued in March 2000, to account for its fixed plan stock
              options. Under this method, compensation expense is recorded on
              the date of grant only if the current market price of the
              underlying stock exceeds the exercise price. The Company also
              applies the provision of APB Opinion No. 25 to its variable stock
              options. Statement of Financial Accounting Standards (SFAS) No.
              123, "Accounting for Stock-Based Compensation," established
              accounting and disclosure requirements using a fair value-based
              method of accounting for stock-based employee compensation plans.
              As allowed by SFAS No. 123, the Company has elected to continue to
              apply the intrinsic value-based method of accounting described
              above, and has adopted the disclosure requirements of SFAS No. 123
              and SFAS No. 148.

       (i)    Principles of Consolidation

              The Company's consolidated financial statements include the
              accounts of NN, Inc. and subsidiaries in which the Company owns
              more than 50% voting interest. Unconsolidated subsidiaries and
              investments where ownership is between 20% and 50% are accounted
              for under the equity method. All significant intercompany profits,
              transactions, and balances have been eliminated in consolidation.
              The ownership interests of other shareholders in companies that
              are more than 50% owned, but less than 100% owned by the Company,
              are reflected as minority interests. Minority interest represents
              the minority shareholders interest of NN Euroball ApS and NN Arte.

       (j)    Foreign Currency Translation

              Assets and liabilities of the Company's foreign subsidiary are
              translated at current exchange rates, while revenue and expenses
              are translated at average rates prevailing during the year.
              Translation adjustments are reported as a component of other
              comprehensive income.

       (k)      Goodwill

              In June 2001, the FASB issued Statement of Financial Accounting
              Standards No. 141, "Business Combinations" (Statement No. 141),
              and Statement of Financial Accounting Standards No. 142,
              "Goodwill and Other Intangible Assets" (Statement No. 142).
              Statement No. 141 requires that the purchase method of accounting
              be used for all business combinations initiated after June 30,
              2001. Statement No. 141 also specifies criteria that intangible
              assets acquired in a purchase method business combination must
              meet to be recognized and reported apart from goodwill. Statement
              No. 142 requires that goodwill and intangible assets with
              indefinite useful lives no longer be amortized, but rather,
              periodically tested for impairment. The effective date of
              Statement No. 142 is January 1, 2002. As of the date of adoption,
              the Company had unamortized goodwill of approximately $36.6
              million, which is subject to the provisions of Statement No. 142.

              As a result of adopting these new standards, the Company's
              accounting policies for goodwill and other intangibles changed on
              January 1, 2002, as described below:

              Goodwill: The Company recognized the excess of the purchase price
              of an acquired entity over the fair value of the net identifiable
              assets as goodwill. Goodwill is tested for impairment on an annual
              basis and between annual tests in certain circumstances.
              Impairment losses are recognized whenever the implied fair value
              of

                                                                       Continued

                                       37



                                    NN, Inc.
                   Notes to Consolidated Financial Statements
                        December 31, 2002, 2001 and 2000
                      (In thousands, except per share data)


              goodwill is less than its carrying value. Prior to January 1,
              2002, goodwill was amortized over a twenty-year period using the
              straight-line method. Beginning January 1, 2002, goodwill is no
              longer amortized.

              Other Acquired Intangibles: The Company recognizes an acquired
              intangible asset apart from goodwill whenever the asset arises
              from contractual or other legal rights, or whenever it is capable
              of being divided or separated from the acquired entity or sold,
              transferred, licensed, rented, or exchanged, whether individually
              or in combination with a related contract, asset or liability. An
              intangible asset other than goodwill is amortized over its
              estimated useful life unless that life is determined to be
              indefinite. The Company will review the lives of intangible assets
              each reporting period and, if necessary, recognize impairment
              losses if the carrying amount of an intangible asset subject to
              amortization is not recoverable from expected future cash flows
              and its carrying amount exceeds its fair value.

              The Company completed the transitional goodwill impairment reviews
              required by the new standards during the first six months of 2002
              and the annually required goodwill impairment review during the
              fourth quarter of 2002. In performing the impairment reviews, the
              Company estimated the fair values of the reporting units using a
              method that incorporates valuations derived from EBITDA multiples
              based upon market multiples and recent capital market transactions
              and also incorporates valuations determined by each segment's
              discounted future cash flows. As of January 1, 2002, the
              transition day and as of October 1, 2002, the annual review date,
              there was no impairment to goodwill as the fair values exceeded
              the carrying values of the reporting units. As of December 31,
              2002, the carrying amounts of goodwill by reporting units are as
              follows: $26.1 million for the Plastics Segment and $13.3 million
              for the Euroball Segment. Since the transition date, January 1,
              2002, approximately $1.3 million of the increase in goodwill is
              due to foreign currency translation adjustments at the Euroball
              Segment.

              The table below describes the impact of the amortization of
              goodwill for the three month and twelve month period ended
              December 31, 2002, 2001 and 2000:


                                                       For the Three Months                           For the Twelve Months
                                                        Ended December 31,                             Ended December 31,
                                              Restated                                                 2
                                                2002             2001           2000        Restated200       2001           2000
                                            -------------     -----------     ----------    -----------     ----------    ------------
            Reported net income                  $ 1,384       $ (1,036)        $ 3,192         $7,760        $ 4,662          $9,987
            Add back:  Goodwill
               amortization, net of tax
               and minority interest                  --            272             138             --            983             484
                                            -------------     ----------- --- ----------    -----------     ----------    ------------
            Pro-forma net income                 $ 1,384         $ (764)        $ 3,330         $7,760        $ 5,645        $ 10,471
                                            =============     =============== ==========    ===========     ==========    ============

            Basic earnings per share:
               Reported net income                $ 0.09         $(0.07)         $ 0.21         $ 0.51         $ 0.31          $ 0.66

               Goodwill amortization                  --           0.02            0.01             --           0.06            0.03
                                            -------------     -----------     ----------    -----------     ----------    ------------
               Pro-forma net income               $ 0.09        $ (0.05)         $ 0.22         $ 0.51         $ 0.37          $ 0.69
                                            =============     ===========     ==========    ===========     ==========    ============

            Diluted earnings per share:
               Reported net income                $ 0.09        $ (0.07)         $ 0.21         $ 0.49         $ 0.30          $ 0.64

               Goodwill amortization                  --           0.02            0.01             --           0.06            0.03
                                            -------------     -----------     ----------    -----------     ----------    ------------
               Pro-forma net income               $ 0.09        $ (0.05)         $ 0.21         $ 0.49         $ 0.36          $ 0.67
                                            =============     ===========     ==========    ===========     ==========    ============


        (l)   Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of

              The Company accounts for long-lived assets in accordance with the
              provisions of SFAS No. 144, "Accounting for the Impairment of or
              Disposal of Long-Lived Assets." This Statement supercedes
              Statement No. 121 but retains many of its fundamental provisions.
              Additionally, this Statement expands the scope of discontinued
              operations to include more disposal transactions. The provisions
              of this Statement are effective for financial statements issued
              for fiscal years beginning after December 15, 2001. The Company
              has adopted Statement
                                                                       Continued

                                       38



                                    NN, Inc.
                   Notes to Consolidated Financial Statements
                        December 31, 2002, 2001 and 2000
                      (In thousands, except per share data)



              No. 144 effective January 1, 2002. Assets to be held and used are
              tested for recoverability when indications of impairment are
              evident. If the reviewed carrying value of the asset is not
              recoverable the asset is written down to the lesser of
              recoverable value or carrying value. Assets held for sale are
              carried at the lesser of carrying value or fair value less costs
              of disposal.

       (m)    Use of Estimates in the Preparation of Financial Statements

              The preparation of financial statements in conformity with
              generally accepted accounting principles requires management to
              make estimates and assumptions that affect the reported amounts of
              assets and liabilities and disclosure of contingent assets and
              liabilities at the date of the financial statements and the
              reported amounts of revenues and expenses during the reporting
              period. Actual results could differ from those estimates.

       (n)    Reclassifications

              Certain 2001 and 2000 amounts have been reclassified to conform
              with the 2002 presentation.

       (o)    Derivative Financial Instruments

              In June 1998, the Financial Accounting Standards Board (FASB)
              issued Statement of Financial Accounting Standards (SFAS) No. 133,
              "Accounting for Derivative Instruments and Certain Hedging
              Activities." In June 2000, the FASB issued SFAS No. 138,
              "Accounting for Certain Derivative Instruments and Certain Hedging
              Activity, an Amendment of SFAS 133." SFAS No. 133 and SFAS No. 138
              require that all derivative instruments be recorded on the balance
              sheet at their respective fair values. SFAS No. 133 and SFAS No.
              138 are effective for all fiscal quarters of all fiscal years
              beginning after June 30, 2000, which for the Company was effective
              January 1, 2001.

              The Company has an interest rate swap accounted for in accordance
              with Statement of Financial Accounting Standards (SFAS) No. 133,
              "Accounting for Derivative Instruments and Hedging Activities".
              The Company adopted SFAS No. 133 on January 1, 2001, which
              establishes accounting and reporting standards for derivative
              instruments and for hedging activities. The Standard requires the
              recognition of all derivative instruments on the balance sheet at
              fair value. The Standard allows for hedge accounting if certain
              requirements are met including documentation of the hedging
              relationship at inception and upon adoption of the Standard.

              In connection with a variable EURIBOR rate debt financing in July
              2000 the Company's majority owned subsidiary, NN Euroball ApS
              entered into an interest rate swap with a notional amount of Euro
              12.5 million for the purpose of fixing the interest rate on a
              portion of their debt financing. The interest rate swap provides
              for the Company to receive variable Euribor interest payments and
              pay 5.51% fixed interest. The interest rate swap agreement expires
              in July 2006 and the notional amount amortizes in relation to
              principal payments on the underlying debt over the life of the
              swap.

              The cumulative effect of a change in accounting principle for the
              adoption of SFAS No. 133 effective January 1, 2001 resulted in a
              transition adjustment net loss of $98 which is net of an income
              tax benefit of $112 and the related minority interest impact of
              $84. The interest rate swap does not qualify for hedge accounting
              under the provisions of SFAS No. 133; therefore, the transition
              adjustment for adoption of SFAS No. 133 and any subsequent
              periodic changes in fair value of the interest rate swap are
              recorded in earnings.

              As of December 31, 2002 and 2001, the fair value of the swap is a
              before tax loss of approximately $485 and $374, respectively,
              which is recorded in other non-current liabilities. The change in
              fair value during the years ended December 31, 2002 and 2001 was
              a loss of approximately $51 and $80 (excluding the impact of
              foreign currency), respectively, which has been included as a
              component of other income.

       (p)    Recently Issued Accounting Standards

              In July 2001, the FASB issued Statement of Financial Accounting
              Standards No. 143, "Accounting For Asset Retirement Obligations."
              This Statement requires capitalizing any retirement costs as part
              of the total cost of the related long-lived asset and subsequently
              allocating the total expense to future periods using a systematic

                                                                       Continued
                                       39



                                    NN, Inc.
                   Notes to Consolidated Financial Statements
                        December 31, 2002, 2001 and 2000
                      (In thousands, except per share data)


              and rational method. Adoption of the Statement is required for
              fiscal years beginning after June 15, 2002. Management believes
              that, as of December 31, 2002, it is not materially affected by
              SFAS No. 143.

              In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
              Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13,
              and Technical Corrections". SFAS No. 4 had required all gains and
              losses from extinguishment of debt to be aggregated and, if
              material, classified as an extraordinary item, net of related
              income tax effect. SFAS No. 145 rescinds SFAS No. 4 and the
              related required classifications gains and losses form
              extinguishment of debt as extraordinary items. Additionally, the
              SFAS No. 145 amends SFAS No. 13 to require that certain lease
              modifications that have economic effects similar to sale-leaseback
              transactions be accounted for in the same manner as sale-leaseback
              transactions. SFAS No. 145 is applicable for the Company at the
              beginning of fiscal year 2003, with the provisions related to SFAS
              No. 13 for transactions occurring after May 15, 2002. Management
              believes that, as of December 31, 2002, it is not materially
              affected by SFAS No. 145.

              In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
              Associated with Exit or Disposal Activities". SFAS No. 146
              requires costs associated with exit or disposal activities to be
              recognized when they are incurred rather than at the date of a
              commitment to an exit or disposal plan. SFAS No. 146 is to be
              applied prospectively to exit or disposal activities initiated
              after December 31, 2002.

              In December 2002, the FASB issued SFAS No. 148, "Accounting for
              Stock-Based Compensation - Transition and Disclosure - an
              amendment of FASB Statement No. 123". SFAS No. 148 provides
              alternative methods of transition for a voluntary change to the
              fair value based method of accounting for stock-based employee
              compensation. In addition, SFAS No. 148 amends the disclosures in
              both annual and interim financial statements about the method of
              accounting for stock-based employee compensation and the effect of
              the method used on reported results. The Company has adopted the
              provisions of SFAS 123, which encourages but does not require a
              fair value based method of accounting for stock compensation
              plans. The Company has elected to continue accounting for its
              stock compensation plan using the intrinsic value based method
              under APB Opinion No. 25. See Note 11 of the Notes to Consolidated
              Financial Statements.






                                                                       Continued
                                       40







                                    NN, Inc.
                   Notes to Consolidated Financial Statements
                        December 31, 2002, 2001 and 2000
                      (In thousands, except per share data)

              The Company has elected to continue accounting for its stock
              compensation plan using the intrinsic value based method under APB
              Opinion No. 25 and, accordingly, has not recorded compensation
              expense for each of the three years ended December 31, 2002,
              except as discussed above. Had compensation cost for the Company's
              stock compensation plan been determined based on the fair value at
              the option grant dates, the Company's net income and earnings per
              share would have been reduced to the proforma amounts indicated
              below:

                                                                               Year ended December 31,
                                                                          Restated
                                                                            2002          2001          2000
                                                                        ------------  -----------   ------------
              Net income - as reported                                      $7,760      $  4,662        $  9,987
                 Stock based compensation costs, net of income
                  tax, included in net income as reported                       --            --             --
                 Stock based compensation costs, net of income
                  tax, that would have been included in net
                  income if the fair value method had been
                  applied                                                       488          315            183
                                                                        ------------  -----------   -----------
              Net income - proforma                                         $ 7,272     $  4,347       $  9,804
                                                                        ============  ===========   ===========

              Earnings per share - as reported                              $ 0.51     $    0.31       $   0.66
                 Stock based compensation costs, net of income
                  tax, included in net income as reported                       --            --             --
                 Stock based compensation costs, net of income
                  tax, that would have been included in net
                  income if the fair value method had been
                  applied                                                     0.03          0.03           0.02
                                                                       ------------  -----------   ------------
              Earnings per share - proforma                            $      0.48     $    0.28       $   0.64
                                                                       ============  ===========   ============



              Earnings per share-assuming dilution - as reported       $      0.49     $    0.30      $   0.64
              Stock based compensation costs, net of income tax,
                  included in net income as reported                            --           --             --
              Stock based compensation costs, net of income tax,
                  that would have been included in net income if
                  the fair value method had been applied                      0.03          0.02          0.01
                                                                       ------------  -----------   -----------
              Earnings per share - assuming dilution-proforma          $      0.46     $    0.28      $   0.63
                                                                       ============  ===========   ===========


              The fair value of each option grant was estimated based on actual
              information available through December 31, 2002, 2001 and 2000
              using the Black Scholes option-pricing model with the following
              assumptions:

Term                            Vesting period
Risk free interest rate         3.28%, 4.75% and 5.1% for 2002, 2001 and 2000, respectively
Dividend yield                  3.2%, 2.8%, and 3.6% annually for 2002, 2001 and 2000, respectively
Volatility                      50.11%, 40.7% and 39.5% for 2002, 2001 and 2000, respectively


       In November 2002, the FASB issued FASB Interpretation ("FIN") No. 45,
       "Guarantor's Accounting and Disclosure Requirements for Guarantees,
       Including Indirect Guarantees of Indebtedness of Others," an
       interpretation of FASB Statements No. 5, 57, and 107 and rescission of
       FASB Interpretation No. 34. This interpretation elaborates the
       disclosures to be made by a guarantor in its interim and annual financial
       statements about its obligations under certain

                                                                       Continued

                                       41




                                    NN, Inc.
                   Notes to Consolidated Financial Statements
                        December 31, 2002, 2001 and 2000
                      (In thousands, except per share data)




       guarantees that it has issued. It also clarifies that a guarantor is
       required to recognize, at the inception of a guarantee, a liability
       for the fair value of the obligation undertaken in issuing the
       guarantee. The initial recognition and initial measurement provisions
       of this interpretation are applicable on a prospective basis to
       guarantees issued or modified after December 31, 2002 and are not
       expected to have a material effect on the Company's consolidated
       results of operations, financial position or cash flows.



3)     Acquisitions and Purchase of Minority Interest (Restated)

       On December 20, 2002 the Company completed the purchase of the 23%
       interest in NN Euroball, ApS ("Euroball") held by INA/FAG. Euroball was
       formed in 2000 by the Company, FAG Kugelfischer George Schaefer AG, which
       was subsequently acquired by INA - Schaeffler KG (collectively,
       "INA/FAG"), and AB SKF ("SKF"). INA/FAG is a global bearing manufacturer
       and one of our largest customers. The Company paid approximately 13,400
       Euro ($13,800) for INA/FAG's interest in Euroball. The excess of the
       purchase price paid to INA/FAG for its 23% interest over the fair value
       of INA/FAG's 23% interest in the net assets of Euroball of approximately
       $1,517 has been recorded as goodwill (see Note 1).  Following the closing
       of the transaction, the Company owns 77% of the outstanding shares of
       Euroball and SKF owns the remaining 23%. SKF consented to our purchase
       of INA/FAG's interest pursuant to the terms of the Euroball Shareholder
       Agreement. SKF has informed us that it intends to exercise its right and
       we expect to purchase its interest during the second quarter of 2003.

       On February 16, 2001, the Company completed the acquisition of all of the
       outstanding stock of The Delta Rubber Company, ("Delta") a Connecticut
       corporation for $22,500 in cash, of which $500 was to be held in escrow
       for one year from the date of closing. Delta provides high quality
       engineered bearing seals and other precision-molded rubber products to
       original equipment manufacturers. The Company plans to continue the
       operation of the Delta business, which operates a manufacturing facility
       in Danielson, Connecticut. The excess of the purchase price over the fair
       value of the net identifiable assets acquired of $14,107 has been
       recorded as goodwill.

       Effective July 31, 2000, the Company completed its Euroball transaction.
       Completion of the transaction required the Company to start a majority
       owned stand-alone company in Europe, NN Euroball ApS, for the manufacture
       and sale of precision steel balls used for ball bearings and other
       products. As a result of this transaction the Company owned 54% of the
       shares of NN Euroball, ApS, AB SKF (SKF), a Swedish Company, and FAG
       Kugelfischer Georg Schager AG (FAG), a German Company, owned 23% each. NN
       Euroball ApS subsequently acquired the steel ball manufacturing facilities
       located in Pinerolo, Italy (previously owned by SKF), Eltmann, Germany
       (previously owned by FAG) and Kilkenny, Ireland (previously owned by the
       Company). NN Euroball ApS paid approximately $47,433 for the net assets
       originally acquired from SKF and FAG. The acquisitions of the Pinerolo,
       Italy and Eltmann, Germany ball manufacturing facilities have been
       accounted for by the purchase method of accounting and, accordingly, the
       results of operations of Euroball have been included in the Company's
       consolidated financial statements from July 31, 2000. The excess of the
       purchase price over the fair value of the net identifiable assets acquired
       of $8,761 has been recorded as goodwill. The Company recorded a $9,270
       increase in stockholders' equity to reflect the amount by which the
       Company's proportionate interest in Euroball exceeded the book value of the
       net assets exchanged by the Company. See Note 1, "Restatement".

       Under the terms of a Shareholder Agreement between the Company and SKF,
       at any time after December 31, 2002, SKF can require the Company to
       purchase its shares of NN Euroball ApS. The purchase price of the shares
       is to be calculated based on a formula price detailed in the Euroball
       Shareholder Agreement.

       The following unaudited pro forma summary presents the financial
       information as if the Company's Euroball transaction and Delta
       acquisition had occurred on January 1, 2001 and 2000. These proforma
       results have been prepared for comparative purposes and do not purport to
       be indicative of what would have occurred had the acquisitions been made
       on January 1, 2001 and 2000, nor is it indicative of future results.


                                                                       Continued

                                       42



                                    NN, Inc.
                   Notes to Consolidated Financial Statements
                        December 31, 2002, 2001 and 2000
                      (In thousands, except per share data)



                                                         (Unaudited)          (Unaudited)
                                                      December 31, 2001    December 31, 2000
                                                      ------------------   ------------------

       Net sales                                              $ 182,700            $ 200,500
       Net income                                                 4,800               11,800
       Basic earnings per share                                    0.31                 0.77
       Diluted earnings per share                                  0.31                 0.76


4)     Restructuring and Impairment Charges

       In September 2001, the Company announced the closure of its Walterboro,
       South Carolina ball manufacturing facility as a part of its ongoing
       strategy to locate manufacturing capacity in closer proximity to its
       customers. This facility is included in the Company's Domestic Ball and
       Roller Segment (see Note 12). The closure was substantially completed by
       December 31, 2001.

       Prior to December 31, 2001, production capacity and certain machinery and
       equipment was transferred from the Walterboro facility to the Company's
       two domestic ball facilities in Erwin, Tennessee and Mountain City,
       Tennessee. The plant closing resulted in the termination of approximately
       80 full time hourly and salaried employees located at the Walterboro
       facility. The Company has recorded restructuring costs of $62 and $750
       during the years ended December 31, 2002 and 2001, respectively, for the
       related severance payments. Additionally, prior to December 31, 2001, the
       Company decided to sell the Walterboro land, building and certain
       machinery. The Company incurred an impairment charge of $564 and $1,083
       during 2002 and 2001, respectively, to write-down the land and building
       at the Walterboro facility to its net realizable value of $1,128 at
       December 31, 2002 and $1,692 at December 31, 2001, which were based upon
       fair market value appraisals. Additionally, the Company incurred an
       impairment charge of $635 during 2002 to write down the equipment to its
       net realizable value of $1,086. The amounts the Company will ultimately
       realize upon disposition of these assets could differ materially from the
       amounts assumed in arriving at the 2002 and 2001 impairment losses. The
       land, building, and equipment assets with a recorded book value of $2,214
       are held for sale. The Company is attempting to sell the land, building
       and machinery during 2003. Approximately $522 and $290 of the severance
       payments were paid in 2002 and 2001, respectively.

       The Company has charged expenses for moving machinery, equipment and
       inventory to other production facilities and other costs to close the
       facility, which will benefit future operations, in the period they are
       incurred.

       In addition to this restructuring charge, the Company's Euroball
       subsidiary incurred restructuring charges of $16 and $479 for severance
       payments as a result of the termination of 15 hourly employees and 3
       salaried employees at its Italy production facility during 2002 and 2001,
       respectively. Approximately $69 and $426 of the severance payments were
       paid during 2002 and 2001, respectively.

       The following summarizes the 2002 restructurings:

                                                                                                      Reserve
                                                                  Non-Cash          Paid in           Balance
                                               Charges           Writedowns          2002           at 12/31/02
                                            ---------------    ---------------    ------------     --------------

      Asset impairments                         $    1,199             $1,199           $  --               $ --
      Severance and other employee costs                78                 --             591                 --
                                            ---------------    ---------------    ------------     --------------
      Total                                     $    1,277             $1,199           $ 591               $ --
                                            ===============    ===============    ============     ==============


                                                                      Continued

                                       43



                                    NN, Inc.
                   Notes to Consolidated Financial Statements
                        December 31, 2002, 2001 and 2000
                      (In thousands, except per share data)

       The following summarizes the 2001 restructurings:
                                                                                                            Reserve
                                                                        Non-Cash          Paid in           Balance
                                                      Charges          Writedowns          2001           at 12/31/01
                                                  ---------------    ---------------    ------------     --------------

      Asset impairments                               $    1,083             $1,083           $  --              $  --
      Severance and other employee costs                   1,229                 --             716                513
                                                  ---------------    ---------------    ------------     --------------
      Total                                           $    2,312             $1,083           $ 716              $ 513
                                                  ===============    ===============    ============     ==============
5)     Investments in Affiliated Companies

       Investments in affiliated companies at December 31, 2000 consists of 50%
       of the member interest of NN General, LLC and 33% of the member interest
       of NNA, LLC.

       NN General, LLC was formed in March 2000 between the Company and General
       Bearing Corporation. NN General, LLC owns 60% of the Jiangsu General Ball
       and Roller, Company, Ltd., a Chinese precision ball and roller
       manufacturer located in Rugao City, Jiangsu Province, China. The
       Company's investment in NN General, LLC includes $215 of member equity
       and a note receivable of $3,440 at December 31, 2000 which are included
       in other non-current assets in the accompanying consolidated balance
       sheet. The note receivable bears interest at variable rates (6.24% at
       December 31, 2000) and is due December 31, 2020. Accrued interest income
       on this note is $159 at December 31, 2000 and is included in other
       current assets in the accompanying consolidated balance sheet.

       Effective December 21, 2001, the Company sold its 50% ownership in NN
       General, LLC to its partner, General Bearing Corporation for cash of $622
       and notes of $3,300. The notes are due in annual installments of $200
       with the balance due on December 21, 2006. The notes bear interest at an
       average LIBOR (1.38% at December 31, 2002) plus 1.5%. In 2001, the
       Company recorded a non-cash loss on the sale of its investment in this
       joint venture of $144. Interest income on this note of $109 was recorded
       during 2002 and has been included as a component of other income in the
       accompanying consolidated statement of income. Payments totaling $309
       were received during 2002 which include $200 of principal and $109 of
       interest payments. At December 31, 2002, the note receivable balance is
       $3,100 and is included as a component of other non-current assets.

6)     Accounts Receivable

                                                December 31,
                                           2002      2001     2000
                                           ----      ----     ----

Trade                                    $30,631   $26,613   $29,028
Other                                       --          10     1,297
                                         -------   -------   -------

                                          30,631    26,623    30,325
Less - Allowance for doubtful accounts     1,666     1,791       776
                                         -------   -------   -------

                                         $28,965   $24,832   $29,549
                                         =======   =======   =======

       Allowance for doubtful accounts is as follows:

             Description              Balance at                                          Balance at end
                                   beginning of year      Additions         Write-offs        of year
                                   ------------------  -----------------  ---------------  ----------------

      December 31, 2000
      Allowance for doubtful
          accounts                         $     906      $          --          $   130         $     776
                                   ==================  =================  ===============  ================

                                                                       Continued

                                       44



                                    NN, Inc.
                   Notes to Consolidated Financial Statements
                        December 31, 2002, 2001 and 2000
                      (In thousands, except per share data)

      December 31, 2001
      Allowance for doubtful
          accounts                         $    776           $   1,668          $  653          $   1,791
                                   ==================  =================  ===============  ================

      December 31, 2002
      Allowance for doubtful
          accounts                          $ 1,791           $     138         $   263          $   1,666
                                   ==================  =================  ===============  ================

       On November 6, 2001, a customer of IMC filed for voluntary Chapter 7
       bankruptcy. As of December 31, 2002 and 2001, the Company had a trade
       accounts receivable balance of approximately $829 with this customer. For
       the years ended December 31, 2002 and 2001, the Company recorded sales of
       approximately $0 and $1,900 to this customer. As of December 31, 2001,
       the Company increased its allowance for doubtful accounts by
       approximately $829 as a result of this bankruptcy filing. This receivable
       is fully reserved as of December 31, 2001.

7)     Inventories


                                    December 31,
                            2002        2001       2000
                            ----        ----       ----

Raw materials            $  5,400    $  5,494    $  4,431
Work in process             5,139       5,016       5,265
Finished goods             13,065      13,065      14,106
Less-inventory reserve       (202)       (157)        (60)
                         --------    --------    --------
                         $ 23,402    $ 23,418    $ 23,742
                         ========    ========    ========

       Inventory on consignment at December 31, 2002, 2001 and 2000 was
       approximately $ 3,093, $2,908, and $4,083 respectively.

8)     Property, Plant and Equipment


                                  Estimated                    December 31,
                                 Useful Life            2002      2001        2000
                                 -----------            ----      ----        ----
Land                                                 $  2,058   $  1,830   $  2,202
Buildings and improvements        10-25 years          23,877     20,286     26,463
Machinery and equipment           3-10 years          113,197    103,363     92,810
Construction in process                                 3,958      1,577      6,138
                                                     --------   --------   --------
                                                      143,090    127,056    127,613
Less - accumulated depreciation                        54,891     44,286     35,920
                                                     --------   --------   --------
                                                     $ 88,199   $ 82,770   $ 91,693
                                                     ========   ========   ========

       On September 11, 2001, the Company announced the closing of its
       Walterboro, South Carolina ball manufacturing facility effective December
       2001. As a result of that closing, land and building was classified as a
       component of assets held for sale in the accompanying consolidated
       financial statements with a carrying value of $1,128 and $1,692 as
       of December 31, 2002 and 2001, respectively. Certain machinery and
       equipment assets are also held for sale with a carrying value of $1,086
       and $2,656, as of December 31, 2002 and 2001, respectively.

                                                                       Continued

                                       45



                                    NN, Inc.
                   Notes to Consolidated Financial Statements
                        December 31, 2002, 2001 and 2000
                      (In thousands, except per share data)



9)      Debt


     a)   Short-term


     At December 31, 2000, the Company had outstanding $2,000 of unsecured
     notes, payable to banks bearing interest at 7.29%. The notes were repaid
     during 2001.

     b)   Long-term debt at December 31, 2002, 2001 and 2000 consists of the
          following:

                                                                                     2002            2001          2000
                                                                                 -------------   ------------  ------------

       Borrowings under a revolving credit facility bearing interest at variable
           rates (2.92% - 4.25% at December 31, 2002 and 3.24% -
           4.75% at December 31, 2001) due July 25, 2004                             $ 24,270         $9,805            --

       Borrowings under a revolving credit facility bearing interest at
           variable rates (7.29% at December 31, 2000) due July 25, 2003                   --             --      $ 24,698

       Reducing, revolving credit facility bearing interest at variable rates
           (2.92% at December 31, 2002 and 3.24% at December 31, 2001) payable
           in quarterly installments of $1,750 beginning September
           19, 2001 through July 1, 2006                                               23,878         31,500            --

       Borrowings under a Euro revolving credit facility bearing interest at
           variable rates (6.63% at December 31, 2000) due July 15, 2006                   --             --           942

       Euroterm loans bearing interest at variable rates (3.75% at December 31,
           2002 ,4.55% at December 31, 2001 and 6.63% at December 31, 2000)
           payable in quarterly installments of $2,097
           beginning March 15, 2002 through June 15, 2006                               4,987         13,356        24,875
                                                                                 -------------   ------------  ------------

             Total long-term debt                                                    $ 53,135       $ 54,661       $50,515

             Less current maturities of long-term debt                                  7,000          7,000            --
                                                                                 -------------   ------------  ------------

             Long-term debt, excluding current maturities of long-term debt          $ 46,135       $ 47,661       $50,515
                                                                                 =============   ============  ============

       On July 20, 2001, the Company entered into a syndicated loan agreement
       with AmSouth Bank ("AmSouth") as the administrative agent for the
       lenders, for a senior non-secured revolving credit facility of up to
       $25,000, expiring on July 25, 2003 and a senior non-secured term loan for
       $35,000 expiring on July 1, 2006. On July 12, 2002, the Company amended
       this credit facility to convert the term loan portion into a reducing
       revolving credit line providing initial availability equivalent to the
       balance of the term loan prior to the amendment. Amounts available for
       borrowing under this facility will be reduced by $ 7.0 million per annum
       and the facility will expire on July 1, 2006. Additionally, on July 31,
       2002, the Company amended the credit facility again to extend the $25
       million senior non-secured revolving credit facility to July 25, 2004.
       Amounts outstanding under the revolving facility and term loan facility
       bear interest at a floating rate equal to LIBOR (1.38% at December 31,
       2002) plus an applicable margin of 0.75% to 2.00% based upon calculated
       financial ratios. The loan agreement contains customary financial and
       non-financial covenants. Such covenants specify that the Company must
       maintain a minimum fixed charge coverage ratio, must not exceed a maximum
       funded indebtedness to EBITDA ratio as well as a maximum funded
       indebtedness to capitalization ratio and limits the amount of capital
       expenditures we may make in any fiscal year. The loan agreement also
       contains customary restrictions on, among other things, additional
       indebtedness, liens on the Company's assets, sales or transfers of
       assets, investments, restricted payments (including payment of dividends
       and

                                                                       Continued

                                       46



                                    NN, Inc.
                   Notes to Consolidated Financial Statements
                        December 31, 2002, 2001 and 2000
                      (In thousands, except per share data)


       stock repurchases), issuance of equity securities, and mergers,
       acquisitions and other fundamental changes in the Company's business.
       Additionally, the terms of the Company's loan agreement restrict the
       declaration and payment of dividends in excess of $5.5 million in any
       fiscal year. The Company's ownership in NN Euroball ApS has been pledged
       as collateral. The Company was in compliance with all such covenants as
       of December 31, 2002.

       In connection with the Euroball transaction (see Note 3) the Company and
       NN Euroball ApS, entered into a Facility Agreement with a bank to provide
       up to Euro 36,000 in Term Loans and Euro 5,000 in revolving credit loans.
       The Company borrowed Euro 30,500 ($28,755) under the term loan facility
       and Euro 1,000 ($943) under the revolving credit facility. Amounts
       outstanding under the Facility Agreement are secured by inventory and
       accounts receivable and bear interest at EURIBOR (2.87% at December 31,
       2002) plus an applicable margin between 0.8% and 2.25% based upon
       financial ratios. The shareholders of NN Euroball ApS have provided
       guarantees for the Facility Agreement. The Facility Agreement contains
       restrictive covenants, which specify, among other things, restrictions on
       the incurrence of indebtedness and the maintenance of certain financial
       ratios. Euroball was in compliance with all such covenants at December
       31, 2002. Amounts outstanding under the Facility Agreement are secured by
       the stock, inventory and accounts receivable of NN Euroball ApS. At
       December 31, 2002, Euro 9.8 million was available to Euroball under these
       facilities.

       At December 31, 2000, the Company had a revolving line of credit with
       AmSouth Bank under which the Company can borrow up to $25,000.
       Outstanding borrowings bore interest at the rate of LIBOR plus 0.65% or
       the Federal Funds effective rate plus 1.5%, at the Company's option. The
       revolving line of credit was unsecured and all outstanding amounts were
       due July 25, 2003. In February 2001, the Company extended and restated
       the revolving credit facility to increase the facility to $50,000. The
       Company borrowed $23,000 under the facility to finance the acquisition of
       Delta Rubber Company (see note 3). Amounts outstanding under the amended
       revolving credit facility were unsecured and bore interest at LIBOR plus
       an applicable margin of between 0.65% and 2.15% based upon financial
       ratios. The line of credit agreement contained restrictive covenants,
       which specified, among other things, restrictions on the incurrence of
       indebtedness and the maintenance of certain working capital requirements.

       The aggregate maturities of long-term debt for each of the five years
       subsequent to December 31, 2002 are as follows:

                           2003                    $7,000
                           2004                    31,270
                           2005                     7,793
                           2006                     7,072
                                              ------------

                           Total                  $53,135
                                              ============

10)    Employee Benefit Plans 

       The Company has three defined contribution 401(k) profit sharing plans
       covering substantially all employees of the Domestic Ball and Roller and
       Plastics Segments. The plan in place for the Domestic Ball and Roller
       Segment covers all employees who have one year of service, have attained
       age twenty-one and have elected to participate in the plan. A participant
       may elect to contribute from 1% to 20% of his or her compensation to the
       Plan, subject to a maximum deferral set forth in the Internal Revenue
       Code. The Company provides a matching contribution of the higher of $500
       or 50% of the first 4% of eligible compensation per participant. The
       employer matching contribution is fully vested at all times. The
       contributions by the Company for the Domestic Ball and Roller Segment
       plan were $126, $152 and $106 in 2002, 2001 and 2000, respectively.

       The plan in place for IMC covers all employees who have completed six
       months of service and have elected to participate in the plan. A
       participant may elect to contribute from 1% to 15% of his or her
       compensation to the plan, subject to a maximum deferral set forth in the
       Internal Revenue Code. The Company matches 25% of the first 6% of each
       employee's contribution to the plan and provides for a discretionary
       contribution at the end of each plan year. The contributions by the
       Company for the IMC plan were $22 in 2002, $58 in 2001,and $70 in 2000.
       Vesting occurs in equal increments over a period of five years.

                                                                       Continued

                                       47



                                    NN, Inc.
                   Notes to Consolidated Financial Statements
                        December 31, 2002, 2001 and 2000
                      (In thousands, except per share data)



       The plan in place for Delta covers all employees who have one year of
       service, have attained age twenty-one and have elected to participate in
       the plan. A participant may elect to contribute from 1% to 20% of his or
       her compensation to the Plan, subject to a maximum deferral set forth in
       the Internal Revenue Code. The Company matches 50% of the first 6% of
       each employee's contribution to the plan. The employee has 100% immediate
       vesting on all contributions made to his or her account. The
       contributions by the Company for the Delta plan were $78 in 2002 and $67
       since acquisition in February 2001.

       The Company has a defined benefit pension plan covering its Eltmann,
       Germany facility employees (a Euroball division). The benefits are based
       on the expected years of service including the rate of compensation
       increase. The plan is unfunded.

       Following is a summary of the changes in the projected benefit obligation
       for the defined benefit pension plan during 2002, 2001 and 2000:

                                                                               2002              2001            2000
                                                                          ----------------   --------------  -------------

      Change in projected benefit obligation:
          Benefit obligation at beginning of year                                  $2,390           $2,133         $1,886
          Service cost                                                                 95               77             33
          Interest cost                                                               161              116             62
          Benefits paid                                                               (6)              (5)             --
          Effect of currency translation                                              430            (196)             --
          Actuarial loss                                                             (11)              265            152
                                                                          ----------------   --------------  -------------
           Benefit obligation at December 31                                        $3,059           $2,390         $2,133
                                                                          ================   ==============  =============


                                                                                  2002              2001            2000
                                                                          ----------------   --------------  -------------

      Weighted-average assumptions as of December 31:
          Discount rate                                                              5.5%             5.5%        6.0%
          Rate of compensation increase                                       1.5% - 2.1%      1.5% - 2.1%        2.0%


                                                                                  2002              2001            2000
                                                                          ----------------   --------------  -------------

      Components of net periodic benefit cost:
          Service cost                                                               $ 95             $ 77           $ 33
          Interest cost on projected benefit obligation                               161              116             62
          Amortization of net gain                                                      9               --             --
                                                                          ----------------   -----------------------------
          Net periodic pension cost                                                  $265            $ 193           $ 95
                                                                          ================   ==============  =============

       Amounts recognized in the Consolidated Balance Sheets consist of:

                                                                                 2002               2001             2000
                                                                           --------------     --------------   --------------
          Accrued benefit liability                                               $3,059             $2,390        $ 2,133
          Accumulated other comprehensive loss, net of tax                          (81)               (53)        --
                                                                           --------------     --------------   --------------
            Net amount recognized in other non-current liabilities                $2,978             $2,337        $ 2,133
                                                                           ==============     ==============   ==============

Accumulated other comprehensive loss is shown net of tax of $47 and $31 at
December 31, 2002 and 2001, respectively.


                                       48



                                    NN, Inc.
                   Notes to Consolidated Financial Statements
                        December 31, 2002, 2001 and 2000
                      (In thousands, except per share data)


11)     Stock Incentive Plan


       The Company has a Stock Incentive Plan under which 2,450 shares of the
       Company's Common Stock were reserved for issuance to officers and key
       employees of the Company. Awards or grants under the plan may be made in
       the form of incentive and nonqualified stock options, stock appreciation
       rights and restricted stock. The stock options and stock appreciation
       rights must be issued with an exercise price not less than the fair
       market value of the Common Stock on the date of grant. The awards or
       grants under the plan may have various vesting and expiration periods as
       determined at the discretion of the committee administering the plan.

       A summary of the status of the Company's stock option plan as described
       above as of December 31, 2002, 2001 and 2000, and changes during the
       years ending on those dates is presented below:

                                           2002                          2001                             2000
                                ----------------------------  ----------------------------   -------------------------------
                                             Weighted-average              Weighted-average                  Weighted-average
                                             exercise price                exercise price                    exercise price
                                  Shares       per share        Shares       per share          Shares         per share
                                -----------  ---------------  -----------  ---------------   --------------  ---------------

      Outstanding at beginning
          of year                   1,373        $   7.25         1,091        $   6.87              1,049            $8.53

      Granted                          37            9.39           396            8.09                555             7.63

      Exercised                       (53)           6.61           (70)           6.09                (2)             5.87

      Forfeited                       (39)           7.65           (44)           6.78              (511)            10.95
                                -----------                   -----------                    --------------

      Outstanding at end of
          year                      1,318            7.33         1,373            7.25              1,091             6.87
                                ===========                   ===========                    ==============

      Options exercisable at
         year-end                     887        $   7.01           528        $   6.59                290            $6.09

       The following table summarizes information about stock options
outstanding at December 31, 2002:

                                                Options outstanding                            Options exercisable
                               ------------------------------------------------------   -----------------------------------
                                                     Weighted-
                                                      average          Weighted-                             Weighted-
                                    Number           remaining          average            Number        average exercise
        Range of exercise       outstanding at      contractual      exercise price      exercisable           price
        prices per share          12/31/2002           life            per share        at 12/31/2002        per share
                               -----------------  ----------------  -----------------   ---------------  ------------------

      $5.63 - $6.50                  382                  6.5 years      $  5.98              377             $  5.98

      $7.63 - $10.26                 936                  8.3 years      $  7.79              510             $  7.79

       All options granted in the period January 1, 1999 through December 31,
       2002 vest ratably over three years, beginning one year from date of
       grant. The exercise price of each option equals the market price of the
       Company's stock on the date of grant, and an option's maximum term is 10
       years. All options granted in the period January 1, 1995 through December
       31, 1998, vest 20% - 33% annually beginning one year from date of grant.
       The exercise price of each option equals the market price of the
       Company's stock on the date of grant, and an option's maximum term is 10
       years. Certain options granted in July 1999 were deemed to be repriced
       options under the applicable accounting

                                                                       Continued

                                       49



                                    NN, Inc.
                   Notes to Consolidated Financial Statements
                        December 31, 2002, 2001 and 2000
                      (In thousands, except per share data)



       requirements. These options, which were fully vested as of the
       effective date of FASB Interpretation No. 44, are treated under
       variable accounting. Accordingly, compensation expense will be
       recognized, to the extent the market price of the Company's stock
       exceeds $10.50. The Company recognized a reduction of compensation
       expense of $108 during 2002 and an increase to compensation expense of
       $108 during 2001 related to these options.

       On August 4, 1998 the Company's Board of Directors authorized the
       repurchase of up to 740 shares of its Common Stock, equaling 5% of the
       company's issued and outstanding shares as of August 4, 1998. The program
       may be extended or discontinued at any time, and there is no assurance
       that the Company will purchase any or all of the full amount authorized.
       The Company has not repurchased any shares under this program through
       December 31, 2002.


12)    Segment Information (Restated)


       The Company determined its reportable segments under the provisions of
       SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
       Information". The Company's reportable segments are based on differences
       in product lines and geographic locations and are divided among Domestic
       Ball and Roller, Euroball and Plastics. The Domestic Ball and Roller
       Segment is comprised of two manufacturing facilities in the eastern
       United States. The Euroball Segment acquired in July 2000, is comprised
       of manufacturing facilities located in Kilkenny, Ireland, Eltmann,
       Germany and Pinerolo, Italy. All of the facilities in the Domestic Ball
       and Roller and Euroball Segments are engaged in the production of
       precision balls and rollers used primarily in the bearing industry. The
       Plastics Segment is comprised of five facilities: two located in Lubbock,
       Texas, which represents the IMC business acquired in July 1999; two
       facilities located in Danielson, Connecticut, which represents the Delta
       business acquired in February 2001, and one facility located in
       Guadalajara, Mexico, which represents the NN-Arte business. These
       facilities are engaged in the production of plastic injection molded
       products for the bearing, automotive, instrumentation and fiber optic
       markets and precision rubber bearing seals for the bearing, automotive,
       industrial, agricultural and aerospace markets.

       The accounting policies of the segments are the same as those described
       in the summary of significant accounting policies. The Company evaluates
       segment performance based on profit or loss from operations after income
       taxes not including nonrecurring gains and losses. The Company accounts
       for intersegment sales and transfers at current market prices; however,
       the Company did not have any material intersegment transactions during
       2002, 2001 or 2000.

                               December 31, 2002                 December 31, 2001                  December 31, 2000
                      ----------------------------------- ----------------------------------------------------------------------
                        Restated
                        Domestic                          Domestic                           Domestic
                        Ball and     Restated             Ball and    Restated               Ball and   Restated
                         Roller      Euroball  Plastics    Roller     Euroball    Plastics    Roller    Euroball      Plastics
                      ----------------------------------- ---------- -----------------------------------------------------------
       Net sales            $52,634     $90,653  $49,569    $52,692     $86,719    $40,740  $  67,637      $33,988      $30,504
       Interest expense         109         923    1,419        237       1,765      2,194        385          622          766
       Depreciation &
           amortization       3,732       4,780    2,700      4,439       5,236      3,475      4,796        2,123        2,246
       Income tax
           expense            2,595       3,855        7      2,435       2,474      (815)      4,284        1,408          267
       Segment profit
           (loss)             2,272       3,313    2,175      4,498       1,962    (1,798)      8,314          775          898
       Segment assets        58,825      78,846   57,544     62,978      65,778     55,721     62,574       87,535       33,842
       Expenditures for
           long- lived
           assets             1,778       3,452    2,361      1,117       3,537      1,660      9,319        3,737        4,854


                                                                       Continued

                                       50



                                    NN, Inc.
                   Notes to Consolidated Financial Statements
                        December 31, 2002, 2001 and 2000
                      (In thousands, except per share data)


       Sales to external customers and long-lived assets utilized by the Company
       were concentrated in the following geographical regions:



                                       December 31, 2002                December 31, 2001              December 31, 2000
                                 -------------------------------   -----------------------------  ----------------------------
                                                    Long-lived                      Long-lived                    Long-lived
                                      Sales           assets           Sales          assets         Sales          assets
                                 ----------------  -------------   --------------  -------------  -------------  -------------

      United States                      $68,485        $35,582      $ 59,813          $38,900        $62,094        $44,137

      Europe                              89,750         51,674        88,649           42,799         46,697         46,216

      Canada                              10,598             --         8,278               --          6,449             --

      Latin/S.America                      8,450            943         8,157            1,071          6,100          1,340

      Other export                        15,573             --        15,254               --         10,789             --
                                 ----------------  -------------   --------------  -------------  -------------  -------------

      All foreign countries              124,371         52,617       120,338           43,870         70,035         47,556
                                 ----------------  -------------   --------------  -------------  -------------  -------------
      Total                            $ 192,856        $88,199     $ 180,151          $82,770      $ 132,129        $91,693
                                 ================  =============   ==============  =============  =============  =============


       For the years ended December 31, 2002, 2001 and 2000 sales to SKF
       amounted to $64,235, $62,539 and $44,647, respectively, or 33.3%, 34.7%
       and 33.8% of consolidated revenues, respectively. For the years ended
       December 31, 2002, 2001 and 2000, sales to INA/FAG amounted to $36,502,
       $36,436 and $21,107, respectively or 18.9%, 20.2% and 16.0% of
       consolidated revenues, respectively. None of the Company's other
       customers accounted for more than 5% of its net sales in 2002. Accounts
       receivable concentrations as of December 31, 2002, 2001 and 2000 are
       generally reflective of sales concentrations during the years then ended.


13)    Income Taxes (Restated)

       Total income taxes (benefits) for the years ended December 31, 2002,
       2001, and 2000 are allocated as follows:

                                                                                Year ended December 31,
                                                                   2002                   2001                   2000
                                                            -------------------    -------------------    -------------------

      Income from continuing operations:                            $  6,457               $  4,094               $  5,959
      Cumulative effect of change in accounting
          principle                                                       --                   (112)                    --
      Accumulated other comprehensive income                             (47)                   (31)                    --
                                                            -------------------    -------------------    -------------------
                                                                    $  6,410               $  3,951               $  5,959
                                                            ===================    ===================    ===================



                                                                       Continued

                                       51



                                    NN, Inc.
                   Notes to Consolidated Financial Statements
                        December 31, 2002, 2001 and 2000
                      (In thousands, except per share data)




       Income tax expense attributable to income from continuing operations
consists of:

                                                                                Year ended December 31,
                                                                   2002                   2001                   2000
                                                            -------------------    -------------------    -------------------
      Current:
          U.S. Federal                                              $  1,753               $  1,025               $  3,496
          State                                                          249                    146                    452
          Non-U.S.                                                     1,891                  1,627                    826
                                                            -------------------    -------------------    -------------------
                                                                    $  3,893               $  2,798               $  4,774
                                                            -------------------    -------------------    -------------------

      Deferred:
          U.S. Federal                                              $    533               $    557              $     496
          State                                                           66                     57                     63
          Non-U.S.                                                     1,965                    682                    626
                                                            -------------------    -------------------    -------------------

                    Total deferred expense                             2,564                  1,296                  1,185
                                                            -------------------    -------------------    -------------------
                                                                    $  6,457               $  4,094               $  5,959
                                                            ===================    ===================    ===================

       A reconciliation of taxes based on the U.S. federal statutory rate of 34%
       for the years ended December 31, 2002, 2001 and 2000 is summarized as
       follows:

                                                                                Year ended December 31,
                                                                 Restated
                                                                   2002                   2001                   2000
                                                            -------------------    -------------------    -------------------

      Income taxes at the federal statutory rate                    $  5,778               $  3,606               $  5,646
      State income taxes, net of federal benefit                         208                    134                    340
      Foreign sales corporation benefit, net of
          liability                                                       --                    (95)                  (183)
      Non-US earnings taxed at different rates                           624                    395                    337
      Other, net                                                        (153)                    54                   (181)
                                                            -------------------    -------------------    -------------------
                                                                    $  6,457               $  4,094               $  5,959
                                                            ===================    ===================    ===================


                                                                       Continued
                                       52



                                    NN, Inc.
                   Notes to Consolidated Financial Statements
                        December 31, 2002, 2001 and 2000
                      (In thousands, except per share data)




       The tax effects of the temporary differences are as follows:

                                                                                Year ended December 31,

                                                                     2002                   2001               2000
                                                              -------------------    -------------------  ----------------

       Deferred income tax liability
           Tax in excess of book depreciation                         $  7,523               $  6,360               $5,050
           Duty drawback receivable                                         48                     37                   69
           Goodwill                                                      1,582                    688                  210
           Flow through loss from pass through entity                      437                     81                   --
           Other deferred tax liabilities                                   48                     31                  123
                                                              -------------------    -------------------  ----------------

             Gross deferred income tax liability                      $  9,638               $  7,197             $  5,452
                                                              -------------------    -------------------  ----------------

       Deferred income tax assets
           Inventories                                                     351                    337                  182
           Allowance for bad debts                                         710                    632                  279
           Vacation accrual                                                244                    264                  287
           Health insurance accrual                                        139                    103                   83
           Other working capital accruals                                  235                    358                  230
           Euroball net operating loss carryforward                         25                    133                   --
                                                              -------------------    -------------------  ----------------
             Gross deferred income tax assets                            1,704                  1,827                1,061
                                                              -------------------    -------------------  ----------------
           Net deferred income tax liability                          $  7,934               $  5,370             $  4,391
                                                              ===================    ===================  ================

       Deferred income tax expense differs from the change in the net deferred
       income tax liability due to the following:

                                                                   2002          2001           2000
                                                               -------------  ------------   ------------

       Change in net deferred income tax liability                  $ 2,564         $  979        $ 1,780
       Other comprehensive income adjustment                             16             31             --
       Cumulative effect of a change in accounting principle             --            112             --
       Acquisition of deferred tax asset (liability)
           recorded  under purchase accounting                           --            229           (595)
       Effect of currency translation and other                         (16)           (55)            --
                                                               -------------  ------------   ------------

                     Deferred income tax expense                     $ 2,564      $  1,296       $  1,185
                                                               =============  ============   ============

       Although realization of deferred tax assets is not assured, management
       believes that it is more likely than not that all of the deferred tax
       assets will be realized. However, the amount of the deferred tax assets
       considered realizable could be reduced based on changing conditions.

       The Company has not recognized a deferred tax liability for the
       undistributed earnings of its non-U.S. subsidiaries and non-U.S.
       corporate joint ventures. The Company expects to reinvest these
       undistributed earnings indefinitely and does not expect such earnings to
       become subject to U.S. taxation in the foreseeable future. A deferred tax
       liability will be recognized when the Company expects that it will
       recover these undistributed earnings in a taxable manner, such as through
       the receipt of dividends or sale of the investments. It is not
       practicable to determine the U.S. income tax liability, if any, that
       would be payable if such earnings were not reinvested indefinitely.


                                                                       Continued

                                       53




                                    NN, Inc.
                   Notes to Consolidated Financial Statements
                        December 31, 2002, 2001 and 2000
                      (In thousands, except per share data)



14)      Reconciliation of Net Income Per Share (Restated)

                                                                         Year ended December 31,
                                                             Restated
                                                               2002               2001                2000
                                                         -----------------  ------------------  ------------------
       Net income                                                $  7,760           $  4,662            $  9,987

       Weighted average shares outstanding                         15,343             15,259              15,247
       Effective of dilutive stock options                            371                281                 284
                                                         -----------------  ------------------  ------------------
       Dilutive shares outstanding                                 15,714             15,540              15,531

       Basic net income per share                              $     0.51           $   0.31           $    0.66
                                                         =================  ==================  ==================
       Diluted net income per share                            $     0.49           $   0.30           $    0.64
                                                         =================  ==================  ==================

       Excluded from the shares outstanding for the years ended December 31,
       2002, 2001 and 2000 were 7, 7 and 10 antidilutive options, respectively,
       which had an exercise price of $10.26 during 2002, and $10.26 during 2001
       and exercise prices ranging from $9.75 to $11.50 during 2000.


15)      Commitments and Contingencies

       The Company has operating lease commitments for machinery, office
       equipment, manufacturing and office space which expire on varying dates.
       Rent expense for 2002, 2001 and 2000 was $1,855, $1,650 and $767,
       respectively. The following is a schedule by year of future minimum lease
       payments as of December 31, 2002 under operating leases that have initial
       or remaining noncancelable lease terms in excess of one year.

        
                    Year ended December 31,
        -------------------------------------------------

                2003                                       $     1,422
                2004                                             1,347
                2005                                             1,138
                2006                                               975
                2007                                               977
                Thereafter                                      11,913
                                                           -------------
                      Total minimum lease payments           $  17,772
                                                           =============

       The Kilkenny operation of the Euroball Segment has received certain
       grants from the Ireland government. These grants are based upon the
       Kilkenny facility hiring and retaining certain employment levels by the
       measurement date. At December 31, 2002, actual employment levels are less
       than those required by certain grant covenants. During 2002, the grant
       agreement measurement date was amended to extend the measurement date.
       The Company anticipates that, if necessary, the grant agreement
       measurement date and /or employment level thresholds would again be
       adjusted. As of December 31, 2002, 2001 and 2000, the grant is recorded
       as a component of other non-current liabilities in the amount of $506,
       $497, and $578 respectively.

       The Euroball Segment has entered into a supply contract with Ascometal
       France ("Ascometal") for the purchase of steel for ball production. The
       contract terms specify that Ascometal provide Euroball 90%, 90%, 85% and
       85% of its

                                                                       Continued

                                       54




                                    NN, Inc.
                   Notes to Consolidated Financial Statements
                        December 31, 2002, 2001 and 2000
                      (In thousands, except per share data)


       steel requirements for the years ending December 31, 2002,
       2003, 2004 and 2005, respectively. The contract, among other things,
       stipulates that Ascometal achieve certain performance targets related to
       quality, reliability and service. The contract provisions include annual
       price adjustments based upon published indexes in addition to annual
       productivity improvement factor multiples. In 2002 Euroball purchased
       approximately $19,600 under the terms of this contract. Annual purchase
       commitments for the remaining term of the contract are approximately
       $21,600, $19,900 and $20,700 for 2003, 2004 and 2005, respectively. The
       contract expires December 31, 2005, however, is automatically renewed for
       one year periods thereafter unless notice is provided by either Euroball
       or Ascometal.

       Beginning in January 2003, SKF may exercise its right under The
       Shareholders Agreement to cause the Company to purchase its interest in
       Euroball based on the Put Formula in the Shareholders Agreement. The
       Company anticipates that if such purchase becomes necessary, it may need
       to borrow additional funds. Because the purchase price is based on a Euro
       based formula using Euroball's historical cash flow and earnings, the
       exact amount of the put cannot be determined until the put right is
       exercised. However, if exercised at December 31, 2002, the purchase price
       would have been approximately $14,000 versus minority interest in
       consolidated subsidiaries of $12,285.

16)      Quarterly Results of Operations (Unaudited) (Restated)

       The following summarizes the unaudited quarterly results of operations
       for the years ended December 31, 2002 and 2001.

                                    Year ended December 31, 2002
                                                             Restated
                               March 31   June 30  Sept. 30   Dec. 31
                               --------   -------  --------   -------
Net sales                       $47,200   $49,186   $47,451   $49,019
Gross profit                     11,668    13,047    11,820    12,047
Net income                        1,848     2,409     2,119     1,384(1)
Basic net income per share         0.12      0.16      0.14      0.09(1)
Dilutive net income per share      0.12      0.15      0.14      0.09(1)
Weighted average shares
    outstanding:
    Basic number of shares       15,341    15,359    15,368    15,368
    Effect of dilutive stock
      options                       394       509       280       341
                                -------   -------   -------   -------
Diluted number of shares         15,735    15,868    15,648    15,709
                                =======   =======   =======   =======



                                           Year ended December 31, 2001
                                    March 31   June 30   Sept. 30     Dec. 31
                                    --------   -------   --------     -------
Net sales                           $ 50,227   $ 47,350   $ 42,576   $ 39,998
Gross profit                          12,043     12,030      9,687      9,170
Net income (loss)                      1,448      3,506        744     (1,036)
Basic net income (loss) per share       0.10       0.23       0.05      (0.07)
Dilutive net income (loss) per
    share                               0.09       0.23       0.05      (0.07)
Weighted average shares
    outstanding:
    Basic number of shares            15,247     15,253     15,286     15,302
    Effect of dilutive stock
      options                            149        279        298        377
                                    --------   --------   --------   --------
Diluted number of shares              15,396     15,532     15,584     15,679
                                    ========   ========   ========   ========

      (1)  Restated from originally reported amounts of $7,288, $0.47 and $0.46
           for net income, basic net income per share and diluted income per
           share, respectively. See Note 1.

       Fourth quarter results in 2002 include a pre-tax charge of $1,199 ($767
       after-tax) related to asset write downs on the Company's Walterboro, SC
       production facility.

                                                                       Continued
                                       55



                                    NN, Inc.
                   Notes to Consolidated Financial Statements
                        December 31, 2002, 2001 and 2000
                      (In thousands, except per share data)



       Fourth quarter results in 2001 include pre-tax charges of $1,405 ($913
       after-tax) related to $1,086 of asset write downs on the Company's
       Walterboro, SC production facility and $319 of NN Arte minority interest
       losses absorbed by the Company.

17)    Fair Value of Financial Instruments

       Management believes the fair value of financial instruments approximate
       their carrying value due to the short maturity of these instruments or in
       the case of the Company's notes receivable and debt, due to the variable
       interest rates.


18)    Involuntary Conversion

       On March 12, 2000, a fire damaged a portion of the Company's
       manufacturing plant in Erwin, Tennessee. The fire was contained to
       approximately 30% of the productions area and did not result in serious
       injury to any employee. Affected production was shifted to the Company's
       other facilities as possible as well as the use of other certain
       suppliers to protect product supply to customers. Insurance coverage for
       the loss provided for reimbursement of the replacement value of property
       and equipment damaged in the fire. As of December 31, 2001 the Company
       has settled the insurance claim. For the years ended December 31, 2002,
       2001 and 2000, the net gain on involuntary conversion of $0, $3,901 and
       $728, respectively, represents insurance proceeds received in excess of
       costs incurred.

19)    Related Party Transactions

       The minority shareholder of NN Euroball ApS, SKF, is a significant
       customer of the Company. For the years ended December 31, 2002, 2001 and
       2000 sales to SKF amounted to $64,235, $62,539 and $44,647, respectively.
       At December 31, 2002, 2001 and 2000 accounts receivable from SKF amounted
       to $9,768, $ 7,534 and $3,320, respectively.

       In connection with the Euroball transaction described in note 3, SKF
       provided administrative services to NN Euroball ApS. Charges for these
       services amounted to approximately $1,768, $1,700 and $864 for the years
       ended December 31, 2002, 2001 and 2000, respectively. At December 31,
       2002, 2001 and 2000, amounts payable to SKF amounted to $773, $522 and
       $1,173, respectively.

       Certain sales agreements are in effect with SKF and INA/FAG, which
       provide for minimum purchase quantities and specified, annual sales price
       adjustments that may be modified up or down for changes in material
       costs. These agreements expire during 2006.

       The Company leases the Eltmann, Germany facility of the Euroball
       division, from INA/FAG. Annual minimum lease payments are Euro 944
       ($893). The lease expires in 2020.

20)    Accumulated Other Comprehensive Income (Restated)

       For the years ended December 31, 2002, 2001 and 2000, the Company
       included in accumulated other comprehensive loss an unrealized loss due
       to foreign currency translation of ($1,606), ($5,369) and ($1,526),
       respectively. Income taxes on the foreign currency translation adjustment
       in other comprehensive income (loss) were not recognized because the
       earnings are intended to be indefinitely reinvested in those operations.
       Also included in accumulated other comprehensive loss as of December 31,
       2002, 2001 and 2000 were additional minimum pension liability, net of tax
       of ($81), ($53) and $0, respectively.


                                       56




Item 9. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure

         None.

                                    Part III

Item 10. Directors and Executive Officers of the Registrant

         Directors. The information required by Item 401 of Regulation S-K
concerning the Company's directors is contained in the section entitled
"Election of Directors -- Information about the Directors" of the Company's
definitive Proxy Statement (to be filed with the Securities and Exchange
Commission within 120 days after December 31, 2002, in accordance with General
Instruction G to Form 10-K, is hereby incorporated herein by reference.

         Executive Officers. Information required by Item 401 of Regulation S-K
concerning the Company's executive officers is set forth in Item 1 hereof under
the caption "Executive Officers of the Registrant."

         Compliance with Section 16(a) of the Securities Exchange Act. The
information required by Item 405 of Regulation S-K concerning compliance with
Section 16(a) of the Securities Exchange Act by the Company's directors and
executive officers and any 10% beneficial owners is contained in the section
entitled "Section 16(a) Beneficial Ownership Reporting Compliance" of the
Company's definitive Proxy Statement and, in accordance with General Instruction
G to Form 10-K, is hereby incorporated herein by reference.

Item 11. Executive Compensation

         The information required by Item 402 of Regulation S-K is contained in
the sections entitled "Information about the Election of Directors --
Compensation of Directors" and "Executive Compensation" of the Company's
definitive Proxy Statement and, in accordance with General Instruction G to Form
10-K, is hereby incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

         The information required by Items 201(d) and 403 of Regulation S-K is
contained in the section entitled "Beneficial Ownership of Common Stock" of the
Company's definitive Proxy Statement and, in accordance with General Instruction
G to Form 10-K, is hereby incorporated herein by reference.

Item 13. Related Party Relationships

         None.

Item 14. Controls and Procedures

         a) As of December 31, 2002, we carried out an evaluation, under the
supervision and with the participation of the Company's management, including
the Company's Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures pursuant to Rule 13a-14 and 15d-14 of the Securities Exchange Act
of 1934 (the "Exchange Act"). Based upon that evaluation, the Company's
management, including the Chief Executive Officer and Chief Financial Officer,
concluded that the Company's disclosure controls and procedures are effective in
timely alerting them to material information relating to the Company (including
its consolidated subsidiaries) required to be included in the Company's Exchange
Act filings.

         b) There have been no changes in the Company's internal control over
financial reporting or in other factors that have materially affected, or are
reasonably likely to materially affect, the registrant's internal control over
financial reporting.



                                       57




                                     Part IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) List of Documents Filed as Part of this Report

     1. Financial Statements
         The financial statements of the Company filed as part of this Annual
Report on Form 10-K/A begin on the following pages hereof:

                                                                                                               Page

         Report of Independent Auditors for the years ended December 31, 2002, December 31, 2001 and
         December 31, 2000......................................................................................28

         Consolidated Balance Sheets at December 31, 2002, 2001 and 2000 (Restated).............................29

         Consolidated Statements of Income and Comprehensive Income for the Three Years
         ended December 31, 2002 (Restated).....................................................................30

         Consolidated Statements of Changes in Stockholders' Equity for the Three Years
         Ended December 31, 2002 (Restated).....................................................................31

         Consolidated Statements of Cash Flows for the Three Years Ended December 31, 2002 (Restated)...........32

         Notes to Consolidated Financial Statements.............................................................33

     2. Financial Statement Schedules

         Not applicable.

     3. See Index to Exhibits (attached hereto)

(b) Reports on Form 8-K

         The Company filed a Form 8-K on November 1, 2002 announcing its third
         quarter earnings.

         The Company filed a Form 8-K on November 5, 2002 announcing its payment
         of a regular quarterly cash dividend.

         The Company filed a Form 8-K on December 9, 2002 announcing its
         intention to acquire SKF's manufacturing operation in Veenendaal, The
         Netherlands.

         The Company filed a Form 8-K on December 20, 2002 announcing it
         purchased FAG Kugelfischer George-Schaefer AG's interest in NN
         Euroball, ApS, a joint venture company.

(c) Exhibits: See Index to Exhibits (attached hereto).

         The Company will provide without charge to any person, upon the written
         request of such person, a copy of any of the Exhibits to this Form
         10-K/A.



                                       58



         SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) 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.



                                   By:   /S/ RODERICK R. BATY
                                      --------------------------------
                                         Roderick R. Baty
                                       Chairman and Director

                                         Dated: January 30, 2004

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.

               Name and Signature                                    Title                           Date
               ------------------                                    -----                           ----


                                                   Chairman, Chief Executive Officer,
                                                     President and Director (Principal
              /S/ RODERICK R. BATY                   Executive Officer)                       January 30, 2004
--------------------------------------------------
                Roderick R. Baty
                                                   Treasurer, Secretary and Chief
                                                     Administrative Officer (Principal
            /S/ WILLIAM C. KELLY, JR.                Accounting Officer)                      January 30, 2004
--------------------------------------------------
              William C. Kelly, Jr.
                                                   Vice President - Corporate Development
                                                     and Chief Financial Officer (Principal
              /S/ DAVID L. DYCKMAN                   Financial Officer)                       January 30, 2004
--------------------------------------------------
                David L. Dyckman

               /S/ MICHAEL D. HUFF                 Director                                   January 30, 2004
--------------------------------------------------
                 Michael D. Huff

                                                   Director                                   January 30, 2004
--------------------------------------------------
                G. Ronald Morris

              /S/ MICHAEL E. WERNER                Director                                   January 30, 2004
--------------------------------------------------
                Michael E. Werner

              /S/ STEVEN T. WARSHAW                Director                                   January 30, 2004
--------------------------------------------------
                Steven T. Warshaw

              /S/ JAMES L. EARSLEY                 Director                                   January 30, 2004
--------------------------------------------------
                James L. Earsley

            /S/ ROBERT M. AIKEN, JR..              Director                                   January 30, 2004
--------------------------------------------------
              Robert M. Aiken, Jr.



                                       59



 Index to Exhibits

          3.1 Restated Certificate of Incorporation of the Company (incorporated
          by reference to Exhibit 3.1 of the Company's Registration Statement
          No. 333-89950 on Form S-3 filed June 6, 2002)

          3.2 Restated By-Laws of the Company (incorporated by reference to
          Exhibit 3.2 of the Company's Registration Statement No. 333-89950 on
          Form S-3 filed June 6, 2002)

          4.1 The specimen stock certificate representing the Company's Common
          Stock, par value $0.01 per share (incorporated by reference to Exhibit
          4.1 of the Company's Registration Statement No. 333-89950 on Form S-3
          filed June 6, 2002)

          4.2 Article IV, Article V (Sections 3 through 6), Article VI (Section
          2) and Article VII (Sections 1 and 3) of the Restated Certificate of
          Incorporation of the Company (included in Exhibit 3.1)

          4.3 Article II (Sections 7 and 12), Article III (Sections 2 and 15)
          and Article VI of the Restated By-Laws of the Company (included in
          Exhibit 3.2)

          10.1 NN, Inc. Stock Incentive Plan and Form of Incentive Stock Option
          Agreement pursuant to the Plan (incorporated by reference to Exhibit
          10.1 of the Company's Registration Statement No. 333-89950 on Form
          S-3/A filed July 15, 2002)*

          10.2 Amendment No. 1 to the NN, Inc. Stock Incentive Plan
          (incorporated by reference to Exhibit 4.6 of the Company's
          Registration Statement No. 333-50934 on Form S-8 filed on November 30,
          2000)*

          10.3 Amendment No. 2 to the NN, Inc. Stock Incentive Plan
          (incorporated by reference to Exhibit 4.7 of the Company's
          Registration Statement No. 333-69588 on Form S-8 filed on September
          18, 2001)*

          10.4 Form of Non-Competition and Confidentiality Agreement for
          Executive Officers of the Company (incorporated by reference to
          Exhibit 10.4 of the Company's Registration Statement No. 333-89950 on
          Form S-3/A filed July 15, 2002)*

          10.5 Stockholders Agreement dated February 22, 1994, among certain
          stockholders of the Company (incorporated by reference to Exhibit 10.5
          of the Company's Registration Statement No. 333-89950 on Form S-3/A
          filed July 15, 2002)

          10.6 Form of Indemnification Agreement (incorporated by reference to
          Exhibit 10.6 of the Company's Registration Statement No. 333-89950 on
          Form S-3/A filed July 15, 2002)

          10.7 Credit Agreement dated as of July 20, 2001 among NN, Inc., as the
          Borrower, the Lenders identified therein, Bank One, Kentucky, NA, as
          Co-Agent and AmSouth Bank, as Administrative Agent (incorporated by
          reference to Exhibit 10.7 of the Company's Registration Statement No.
          333-89950 on Form S-3/A filed July 15, 2002)

          10.8 First Amendment to Credit Agreement, dated October 4, 2001
          (incorporated by reference to Exhibit 10.8 of the Company's
          Registration Statement No. 333-89950 on Form S-3/A filed July 15,
          2002)

          10.9 Second Amendment to Credit Agreement, dated July 12, 2002
          (incorporated by reference to Exhibit 10.9 of the Company's
          Registration Statement No. 333-89950 on Form S-3/A filed July 15,
          2002)

          10.10 Third Amendment to Credit Agreement dated July 31, 2002
          (incorporated by reference to Exhibit 10.1 of the Company's Form 10-Q
          filed August 13, 2002).

          10.11 Form of Stock Option Agreement, dated December 7, 1998, between
          the Company and the non-employee directors of the Company
          (incorporated by reference to Exhibit 10.15 of the Company's Annual
          Report on Form 10-K filed March 31, 1999)*

          10.12 Elective Deferred Compensation Plan, dated February 26, 1999
          (incorporated by reference to Exhibit 10.16 of the Company's Annual
          Report on Form 10-K filed March 31, 1999)*


                                       60




          10.13 Employment Agreement, dated August 1, 1997, between the Company
          and Roderick R. Baty (incorporated by reference to Exhibit 10.14 of
          the Company's Form 10-Q filed November 14, 1997)*

          10.14 Amendment No. 1 to Employment Agreement between the Company and
          Roderick R. Baty, dated January 21, 2002 (incorporated by reference to
          Exhibit 10.18 of the Company's Annual Report on Form 10-K filed March
          29, 2002)*

          10.15 Change of Control and Noncompetition Agreement dated January 21,
          2002 between the Company and Roderick R. Baty (incorporated by
          reference to Exhibit 10.19 of the Company's Annual Report on Form 10-K
          filed March 29, 2002)*

          10.16 Employment Agreement, dated May 7, 1998, between the Company and
          Frank T. Gentry (incorporated by reference to Exhibit 10.14 of the
          Company's Annual Report on Form 10-K filed March 31, 1999)*

          10.17 Amendment No. 1 to Employment Agreement between the Company and
          Frank T. Gentry, dated January 21, 2002 (incorporated by reference to
          Exhibit 10.16 of the Company's Annual Report on Form 10-K filed March
          29, 2002)*

          10.18 Change of Control and Noncompetition Agreement dated January 21,
          2002 between the Company and Frank T. Gentry (incorporated by
          reference to Exhibit 10.17 to the Company's Annual Report on Form 10-K
          filed March 29, 2002)*

          10.19 Employment Agreement, dated January 21, 2002, between the
          Company and Robert R. Sams (incorporated by reference to Exhibit 10.20
          of the Company's Annual Report on Form 10-K filed March 29, 2002)*

          10.20 Change of Control and Noncompetition Agreement dated January 21,
          2002 between the Company and Robert R. Sams (incorporated by reference
          to Exhibit 10.21 of the Company's Annual Report on Form 10-K filed
          March 29, 2002)*

          10.21 Employment Agreement, dated January 21, 2002, between the
          Company and David L. Dyckman (incorporated by reference to Exhibit
          10.22 of the Company's Annual Report on Form 10-K filed March 29,
          2002)*

          10.22 Change of Control and Noncompetition Agreement, dated January
          21, 2002, between the Company and David L. Dyckman (incorporated by
          reference to Exhibit 10.25 of the Company's Annual Report on Form 10-K
          filed March 29, 2002)*

          10.23 Employment Agreement dated January 21, 2002, between the Company
          and William C. Kelly, Jr. (incorporated by reference to Exhibit 10.22
          of the Company's Annual Report on Form 10-K filed March 29, 2002)*

          10.24 Change of Control and Noncompetition Agreement, dated January
          21, 2002, between the Company and William C. Kelly, Jr. (incorporated
          by reference to Exhibit 10.23 of the Company's Annual Report on Form
          10-K filed March 29, 2002)*

          10.25 NN Euroball, ApS Shareholder Agreement dated April 6, 2000 among
          NN, Inc., AB SKF and FAG Kugelfischer Georg Shafer AG (incorporated by
          reference to Exhibit 10.26 of the Company's Annual Report on Form 10-K
          filed March 29, 2002)*

          10.26. Frame Supply Agreement between Euroball S.p.A., Kugelfertigung
          Eltmann GmbH, NN Euroball Ireland Ltd. and Ascometal effective January
          1, 2002 (We have omitted certain information from the Agreement and
          filed it separately with the Securities and Exchange Commission
          pursuant to our request for confidential treatment under Rule 24b-2.
          We have identified the omitted confidential information by the
          following statement, "Confidential portions of material have been
          omitted and filed separately with the Securities and Exchange
          Commission," as indicated throughout the document with an asterisk in
          brackets ([*])).

          21.1 List of Subsidiaries of the Company.

          23.1 Consent of KPMG, LLP, Independent Auditors

          31.1 Certification of Chief Executive Officer pursuant to Section 302
          of Sarbanes-Oxley Act

          31.2 Certification of Chief Financial Officer pursuant to Section 302
          of Sarbanes-Oxley Act

          32.1 Certification of Chief Executive Officer pursuant to Section 906
          of Sarbanes-Oxley Act

          32.2 Certification of Chief Financial Officer pursuant to Section 906
          of Sarbanes-Oxley Act

--------------
*        Management contract or compensatory plan or arrangement.


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