UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q

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

                For the quarterly period ended September 30, 2004
                                               ------------------

                                       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 Number)

                             2000 Waters Edge Drive
                              Building C, Suite 12
                          Johnson City, Tennessee 37604
          (Address of principal executive offices, including zip code)

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]

As of November 5, 2004 there were 16,772,092  shares of the registrant's  common
stock, par value $0.01 per share, outstanding.





                                    NN, Inc.
                                      INDEX


                                                                        Page No.
                                                                        --------
Part I. Financial Information

Item 1.  Financial Statements:

     Consolidated  Statements of Income and  Comprehensive
      Income for the three and nine months ended September 30,
      2004 and 2003 (unaudited)...............................................2


     Condensed  Consolidated  Balance  Sheets at September 30,
      2004 (unaudited) and December 31, 2003 .................................3


     Consolidated  Statements  of Changes in  Stockholders'
      Equity for the nine months ended September 30,
      2004 and 2003 (unaudited)...............................................4


     Consolidated  Statements of Cash Flows for the nine
     months ended  September 30, 2004 and 2003 (unaudited)....................5


     Notes to Consolidated Financial Statements (unaudited)...................6


Item 2. Management's  Discussion and Analysis of Financial
         Condition and Results of Operations.................................13


Item 3. Quantitative and Qualitative Disclosures about
         Market Risk.........................................................24


Item 4. Controls and Procedures.............. ...............................26


Part II. Other Information

Item 1.  Legal Proceedings...................................................27

Item 2.  Change in Securities and Use of Proceeds............................27

Item 3.  Defaults Upon Senior Securities.....................................27

Item 4.  Other Information...................................................27

Item 5.  Exhibits and Reports on Form 8-K....................................27

Signatures...................................................................29

                                      -1-



                          PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements

                                    NN, Inc.
           Consolidated Statements of Income and Comprehensive Income
                                   (Unaudited)


                                                           Three Months Ended              Nine Months Ended
                                                             September 30,                   September 30,
Thousands of Dollars, Except Per Share Data               2004            2003           2004             2003
- ------------------------------------------------------------------------------------------------------------------
                                                                                             

Net sales                                                 $72,917         $64,612        $225,815        $ 186,415
Cost of products sold (exclusive of depreciation
     shown separately below)                               57,263          50,294         176,590          142,758
Selling, general and administrative                         7,126           5,247          22,309           15,650
Depreciation and amortization                               3,999           3,602          11,918           10,103
Restructuring and impairment costs                             --           (224)              --            2,498
                                                       -----------    -----------    ------------     ------------
  Income from operations                                    4,529           5,693          14,998           15,406

Interest expense, net                                       1,101             921           2,925            2,325
Other (income) expense, net                                 (177)            (38)           (208)              272
                                                       -----------    -----------    ------------     ------------
Income before provision for income taxes                    3,605           4,810          12,281           12,809
Provision for income taxes                                  1,453           1,646           4,926            4,630
Minority interest in consolidated subsidiaries                 --              --              --              675
                                                       -----------    -----------    ------------     ------------
  Net income                                                2,152           3,164           7,355            7,504

Other comprehensive income:
  Foreign currency translation                              1,184           1,292         (1,304)            5,460
                                                      -----------     -----------    ------------     ------------
  Comprehensive income                                    $ 3,336         $ 4,456        $  6,051        $  12,964
                                                       ===========    ===========    ============     ============
Basic income per common share:                            $  0.13         $  0.19        $   0.44        $    0.48
                                                       ===========    ===========    ============     ============
  Weighted average shares outstanding                      16,767          16,660          16,721           15,804
                                                       ===========    ===========    ============     ============
Diluted income per common share:                          $  0.13         $  0.18        $   0.43        $    0.46
                                                       ===========    ===========    ============     ============

  Weighted average shares outstanding                      17,135          17,167          17,142           16,194
                                                       ===========    ===========    ============     ============

Cash dividends per common share                           $  0.08         $  0.08       $    0.24        $    0.24
                                                       ===========    ===========    ============     ============


                             See accompanying notes.

                                      -2-



                                    NN, Inc.
                      Condensed Consolidated Balance Sheets
                                   (Unaudited)




                                                                         September 30,            December 31,
Thousands of Dollars                                                    2004 (Unaudited)               2003
- -----------------------------------------------------------------------------------------------------------------
                                                                                            

Assets
Current assets:
  Cash and cash equivalents                                             $          7,773          $         4,978
  Accounts receivable, net                                                        50,656                   40,864
  Inventories, net                                                                32,292                   36,278
  Other current assets                                                             6,092                    6,299
                                                                      ------------------       ------------------
     Total current assets                                                         96,813                   88,419

Property, plant and equipment, net                                               125,463                  128,996
Assets held for sale                                                                  --                    1,805
Goodwill, net                                                                     42,544                   42,893
Other assets                                                                       4,871                    4,304
                                                                      ------------------       ------------------
     Total assets                                                       $        269,691          $       266,417
                                                                      ==================       ==================
Liabilities and Stockholders' Equity
Current liabilities:
  Accounts payable                                                      $         37,418          $        32,867
  Accrued salaries and wages                                                      12,106                   12,032
  Short-term debt                                                                     --                    2,000
  Current maturities of long-term debt                                             6,523                   12,725
  Other current liabilities                                                        6,519                    3,070
                                                                      ------------------       ------------------
     Total current liabilities                                                    62,566                   62,694

Non-current deferred tax liability                                                14,102                   13,423
Long-term debt                                                                    70,735                   69,752
Accrued pension and other                                                         13,355                   14,080
                                                                      ------------------       ------------------
     Total liabilities                                                           160,758                  159,949

Total stockholders' equity                                                       108,933                  106,468
                                                                      ------------------       ------------------
Total liabilities and stockholders' equity                                     $ 269,691                $ 266,417
                                                                      ==================       ==================
















                             See accompanying notes.

                                      -3-




                                    NN, Inc.
           Consolidated Statements of Changes in Stockholders' Equity
                                   (Unaudited)


                                                  Common Stock                                        Accumulated
                                               Number                   Additional                       Other
                                                Of             Par       paid in        Retained      Comprehensive
                                               Shares         value       capital        Earnings     Income (Loss)          Total
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                        

Balance, January 1, 2003                        15,370         $154       $ 40,457        $ 38,984       $  (1,687)        $ 77,908
  Shares issued                                  1,330           14         12,421              --              --          12,435
  Net income                                        --           --             --           7,504              --           7,504
  Dividends declared                                --           --             --          (3,895)             --         (3,895)
  Other comprehensive income                        --           --             --              --           5,460           5,460
                                            -----------     --------    -----------    ------------   -------------    ------------
Balance, September 30, 2003                     16,700         $168       $ 52,878        $ 42,593       $   3,773        $ 99,412
                                            ===========     ========    ===========    ============   =============    ============
Balance, January 1, 2004                        16,712         $168       $ 52,960        $ 43,931       $   9,409        $106,468
  Shares issued                                     60           --            430              --              --             430
  Net income                                        --           --             --           7,355              --           7,355
  Dividends declared                                --           --             --          (4,016)             --          (4,016)
  Other comprehensive (loss)                        --           --             --              --          (1,304)         (1,304)
                                            -----------     -------     ----------     -----------    ------------     -----------
Balance, September 30, 2004                     16,772         $168       $ 53,390        $ 47,270       $   8,105        $108,933
                                            ===========     ========    ===========    ============   =============    ============




























                             See accompanying notes.

                                      -4-




                                    NN, Inc.
                      Consolidated Statements of Cash Flows
                                   (Unaudited)



                                                                                       Nine Months Ended
                                                                                         September 30,
Thousands of Dollars                                                                  2004            2003
- -------------------------------------------------------------------------------------------------------------
                                                                                              
Operating Activities:
  Net income                                                                         $   7,355      $   7,504
  Adjustments to reconcile net income to net cash provided (used) by operating
      activities:
    Depreciation and amortization                                                       11,918         10,103
    Amortization of debt issue costs                                                       106            128
    Write-off of unamortized debt issue costs                                              260            455
    Gain (loss) on disposal of property, plant and equipment                                30          (145)
    Interest income on note receivable                                                      77             61
    Minority interest in consolidated subsidiary                                            --            675
    Restructuring costs and impairment costs                                                --          2,742
    Changes in operating assets and liabilities:
      Accounts receivable                                                               (9,609)       (14,506)
      Inventories                                                                        3,587         (3,736)
      Other current assets                                                                (717)          (594)
      Other assets                                                                        (306)        (3,056)
      Accounts payable                                                                   4,897          6,653
      Income taxes payable                                                               2,079           (128)
      Other liabilities                                                                  2,299          2,015
                                                                                   ------------    -----------
         Net cash provided by operating activities                                      21,976          8,171
                                                                                   ------------    -----------
Investing Activities:
 Acquisition of Veenendaal, The Netherlands                                                 --        (17,933)
 Purchase of minority interest                                                              --        (15,583)
 Acquisition of property, plant, and equipment                                          (7,999)        (7,100)
 Proceeds from disposals of property, plant and equipment                                   51            145
                                                                                   ------------    -----------
         Net cash used by investing activities                                          (7,948)       (40,471)
                                                                                   ------------    -----------
Financing Activities:
 Proceeds from long-term debt                                                           40,000         89,745
 Proceeds from short-term debt                                                              --          2,000
 Book overdraft                                                                             --            (37)
 Debt issue costs paid                                                                    (771)          (823)
 Repayment of long-term debt                                                           (44,642)       (60,962)
 Repayment of short-term debt                                                           (2,000)            --
 Proceeds from issuance of stock                                                           431          5,498
 Dividends paid                                                                         (4,016)        (3,895)
                                                                                   ------------    -----------
         Net cash provided (used) by financing activities                              (10,998)        31,526
                                                                                   ------------    -----------
Effect of exchange rate changes on cash and cash equivalents                              (235)           420

Net Change in Cash and Cash Equivalents                                                  2,795           (354)
Cash and Cash Equivalents at Beginning of Period                                         4,978          5,144
                                                                                   ------------    -----------
Cash and Cash Equivalents at End of Period                                           $   7,773      $   4,790
                                                                                   ============    ===========
Supplemental schedule of non-cash investing and financing activities:
Stock issued related to acquisition on Veenendaal                                    $      --      $   6,937
                                                                                   ============    ===========


                             See accompanying notes.

                                      -5-




                                    NN, Inc.
                   Notes To Consolidated Financial Statements
                                   (unaudited)

Note 1.  Interim Financial Statements

The accompanying  consolidated  financial statements of NN, Inc. (the "Company")
have not been audited by our  independent  registered  public  accounting  firm,
except that the balance sheet at December 31, 2003 is derived from the Company's
audited financial statements.  In the opinion of the Company's  management,  the
financial  statements  reflect all  adjustments  necessary to present fairly the
results of operations  for the three and nine month periods ended  September 30,
2004 and 2003,  the  Company's  financial  position  at  September  30, 2004 and
December 31, 2003, and the cash flows for the nine month periods ended September
30, 2004 and 2003.  These  adjustments are of a normal recurring nature and are,
in the opinion of management,  necessary for fair  presentation of the financial
position  and  operating  results  for  the  interim  periods.  As  used in this
Quarterly  Report on Form 10-Q, the terms "NN", "the Company",  "we",  "our", or
"us" mean NN, Inc. and its subsidiaries.

Certain information and footnote  disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting  principles
have been condensed or omitted from the interim financial  statements  presented
in this Quarterly Report on Form 10-Q. These Condensed, Consolidated,  Unaudited
Financial Statements should be read in conjunction with our audited Consolidated
Financial  Statements  and the Notes thereto  included in our most recent annual
report on Form 10-K which we filed with the Securities  and Exchange  Commission
on March 15, 2004.

The results for the first, second and third quarters of 2004 are not necessarily
indicative of future results.

Certain  2003  amounts  have  been   reclassified   to  conform  with  the  2004
presentation.

Note 2. Derivative Financial Instruments

We have an interest  rate swap  accounted for in  accordance  with  Statement of
Financial  Accounting  Standards  (SFAS) No.  133,  "Accounting  for  Derivative
Instruments  and Hedging  Activities",  effective  January 1, 2001.  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,  our
subsidiary,  NN Europe ApS  (formerly  known as NN Euroball ApS) entered into an
interest  rate swap with a notional  amount of 12.5 million Euro for the purpose
of fixing the  interest  rate on a portion of its 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  initially  established
principal  payments  on the  underlying  debt  over the life of the  swap.  This
original debt was repaid in May 2003, however,  the swap remains pursuant to its
original terms.

As of September 30, 2004, the fair value of the swap was approximately $264,000,
which is recorded as a component of other non-current liabilities. The change in
fair value during the nine month periods ended September 30, 2004 and 2003 was a
gain of approximately $73,000 and a loss of $63,000, respectively, which have
been included as a component of other (income) expense.

                                      -6-


Note 3. Inventories

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

Inventories are comprised of the following (in thousands):

                                              September 30,       December 31,
                                                   2004                2003
                                         ------------------    -----------------
Raw materials                                  $ 8,392             $  8,492
Work in process                                  6,160                6,808
Finished goods                                  19,012               22,128
Less inventory reserves                         (1,272)              (1,150)
                                         ------------------    -----------------
                                              $ 32,292             $ 36,278
                                         ==================    =================

Inventories on  consignment  at customer  locations as of September 30, 2004 and
December 31, 2003 were $4,341 and $3,046, respectively.

Note 4.  Net Income Per Share



                                                             Three months ended                  Nine months ended
                                                               September 30,                       September 30,

Thousands of Dollars, Except Share and Per Share           2004              2003              2004              2003
Data
- ---------------------------------------------------    -------------     -------------     -------------     ------------
                                                                                                  
Net income                                               $     2,152       $     3,164       $     7,355      $     7,504
                                                       =============     =============     =============     ============
Weighted average basic shares                             16,767,092        16,660,350        16,720,515       15,804,069
Effect of dilutive stock options                             367,414           506,293           421,633          389,831
                                                       -------------     -------------     -------------     ------------
Weighted average dilutive shares outstanding              17,134,506        17,166,643        17,142,148       16,193,900
                                                       =============     =============     =============     ============
Basic net income per share                               $      0.13       $      0.19       $      0.44      $      0.48
                                                       =============     =============     =============     ============
Diluted net income per share                             $      0.13       $      0.18       $      0.43      $      0.46
                                                       =============     =============     =============     ============


Excluded from the shares outstanding for each of the periods ended September 30,
2004 and 2003 were 438,000 and 0 antidilutive options,  respectively,  which had
an exercise price of $12.62 as of September 30, 2004.

Note 5.  Segment Information

During 2004 and 2003, the Company's reportable segments are based on differences
in product lines and  geographic  locations and are divided among  Domestic Ball
and Roller, European operations ("NN Europe") and Plastic and Rubber Components.
The  Domestic  Ball  and  Roller  Segment  is  comprised  of  two  manufacturing
facilities in the eastern United  States.  The NN Europe Segment is comprised of
precision ball manufacturing facilities located in Kilkenny,  Ireland,  Eltmann,
Germany,  Pinerolo,  Italy, Kysucke Nove Mesto, Slovakia, which began production
in the second quarter of 2004, and Veenendaal,  The  Netherlands  ("Veenendaal")
which is a tapered roller and metal cage manufacturing operation acquired in May
2003. See Note 6,  "Acquisitions  and Joint Ventures".  All of the facilities in
the Domestic Ball and Roller  Segment are engaged in the production of precision
balls and rollers used primarily in the bearing industry.  All of the facilities
in the NN Europe Segment are engaged in the  production of precision  balls used
primarily in the bearing  industry except for Veenendaal which is engaged in the
production  of  tapered  rollers  and cages  for use  primarily  in the  bearing
industry.  The  Plastic  and  Rubber  Components  Segment  is  comprised  of the
Industrial Molding Corporation ("IMC") business,  located in Lubbock,  Texas and
The Delta Rubber Company ("Delta") business, located in Danielson,  Connecticut.
IMC is engaged in the production of plastic  injection  molded  products for the
bearing,  automotive,   instrumentation,  fiber  optic  and  general  industrial
markets.  Delta is engaged  principally in the production of engineered  bearing
seals used  principally  in  automotive,  industrial,  agricultural,  mining and
aerospace applications.

                                      -7-



The accounting  policies of each segment are the same as those  described in the
summary of  significant  accounting  policies in the Company's  Annual Report on
Form 10-K for the fiscal year ended December 31, 2003,  including those policies
as discussed in Note 1. We evaluate segment  performance based on profit or loss
from  operations  before  income  taxes and  minority  interest.  We account for
inter-segment sales and transfers at current market prices;  however, we did not
have any  material  inter-segment  transactions  during  the three or nine month
periods ended September 30, 2004 or 2003.



                                                          Three Months Ended September 30,
                                                 2004                                          2003
                              -----------------------------------------------------------------------------------------
                                                            Plastic and      Domestic                     Plastic and
                              Domestic Ball  NN Europe         Rubber         Ball &       NN Europe         Rubber
Thousands of Dollars           & Roller       Segment        Components       Roller        Segment        Components
- -----------------------------------------------------------------------------------------------------------------------
                                                                                             
Revenues from external
  customers                      $ 14,440        $ 45,485        $ 12,992      $ 14,414        $ 37,784        $ 12,414
Pretax profit (loss)                  233           3,874           (502)         1,090           2,897             823
Assets                             51,818         160,594          57,279        53,077         144,560          57,989

                                                           Nine Months Ended September 30,
                                                 2004                                          2003
                              -----------------------------------------------------------------------------------------
                                                            Plastic and       Domestic                     Plastic and
                              Domestic Ball  NN Europe         Rubber         Ball &       NN Europe         Rubber
Thousands of Dollars           & Roller       Segment        Components       Roller        Segment        Components
- -----------------------------------------------------------------------------------------------------------------------
Revenues from external
  customers                      $ 43,417        $143,926        $ 38,472      $ 42,588        $104,829        $ 38,998
Pretax profit (loss)                  862          10,752             667         3,469           9,871           (531)
Assets                             51,818         160,594          57,279        53,077         144,560          57,989



Note 6.  Acquisitions and Joint Ventures

On May 2, 2003 we  acquired  the 23  percent  interest  in NN  Europe,  ApS ("NN
Europe")  (formerly  known as NN Euroball ApS) held by SKF. On March 12, 2004 we
changed the name of our primary  European  entity  from NN  Euroball,  ApS to NN
Europe ApS. To avoid confusion between the entity and the segment, we will refer
to the  segment as the NN Europe  Segment  and the entity as NN Europe.  We paid
approximately 13.8 million Euros ($15.6 million) for SKF's interest in Euroball.
Upon consummation of this transaction, we became the sole owner of NN Europe.

On May 2, 2003 we  acquired  100  percent of the  tapered  roller and metal cage
manufacturing operations of SKF in Veenendaal,  The Netherlands.  The results of
Veenendaal's  operations  have  been  included  in  the  consolidated  financial
statements since that date. We paid  consideration of approximately 23.0 million
Euros ($25.7  million) and incurred other costs of  approximately  $1.0 million,
for the  Veenendaal  net assets  acquired  from SKF.  The  Veenendaal  operation
manufactures  rollers  for  tapered  roller  bearings  and metal  cages for both
tapered roller and spherical  roller bearings  allowing us to expand our bearing
component offering.  The results of the Veenendaal operation are included in the
NN Europe Segment.

In  connection  with  the  acquisition  of  SKF's  Veenendaal,  The  Netherlands
operations,  SKF  purchased  from us 700,000  shares of our common  stock for an
aggregate  fair value of  approximately  $6.9  million  which was applied to the
purchase  of SKF's  Veenendaal,  The  Netherlands  operations.  For  purposes of
valuing  the  700,000  common  shares  issued  in  our  Consolidated   Financial
Statements,  the value was  determined  based on the average market price of NN,
Inc.'s common shares over the two-day period before, the day of, and the two-day
period after the terms of the acquisition were agreed to, April 14, 2003.

The following unaudited pro-forma summary presents the financial information for
the nine month period ended September 30, 2003 as if our Veenendaal  acquisition
had  occurred  as of the  beginning  of the  period  presented.  These pro forma
results  have been  prepared for  comparative  purposes and do not purport to be
indicative of what would have occurred had the  acquisition  been made as of the
beginning of each of the periods  presented,  nor are they  indicative of future
results.

                                      -8-




                                                             Nine months ended
                                                             September 30, 2003
        (In thousands, except per share data)             (unaudited)
        ------------------------------------------------------------------------
        Net sales                                                     $197,209
        Net income                                                       8,168
        Basic earnings per share                                          0.52
        Diluted earnings per share                                        0.50

Note 7.  New Accounting Pronouncements

On March 31, 2004,  the FASB issued an Exposure  Draft,  "Share-Based  Payment",
that addresses the accounting for share-based  payment  transactions in which an
enterprise  receives employee services in exchange for (a) equity instruments of
the  enterprise  or (b)  liabilities  that are  based  on the fair  value of the
enterprise's  equity  instruments or that may be settled by the issuance of such
equity  instruments.  The  proposed  Statement  would  eliminate  the ability to
account  for  share-based  compensation  transactions  using APB Opinion No. 25,
"Accounting for Stock Issued to Employees",  and generally would require instead
that such  transactions be accounted for using a fair-value  method.  On October
13, 2004, the FASB announced the final  Statement for public  companies would be
effective for any interim or annual period beginning after June 15, 2005. We are
currently  evaluating  the  impacts  of this  Exposure  Draft  on the  Company's
consolidated financial statements.

On May 19, 2004, the Financial  Accounting  Standards Board ("FASB") issued FASB
Staff Position (FSP) No. 106-2,  "Accounting and Disclosure Requirements Related
to the Medicare  Prescription Drug,  Improvement and Modernization Act of 2003",
which supersedes FSP No. 106-1,  "Accounting and Disclosure Requirements Related
to the Medicare  Prescription Drug,  Improvement and Modernization Act of 2003,"
(the Act). FSP No. 106-2 permits a sponsor of a postretirement  health care plan
that provides a prescription  drug benefit to make a one-time  election to defer
accounting for the effects of the Act until authoritative guidance on accounting
for subsidies  provided by the Act is issued.  The Act introduces a prescription
drug benefit under Medicare as well as a federal  subsidy to sponsors of retiree
health care benefit  plans.  The Company does not  anticipate  that the Act will
have an effect on the Company's Financial Statements.

In  December  2003,  the  FASB  issued  Financial   Interpretation   No.  46(R),
"Consolidation   of   Variable   Interest   Entities,"   ("FIN   46(R)").   This
interpretation  addresses  consolidation  by  business  enterprises  of variable
interest entities with certain defined  characteristics  and replaces  Financial
Interpretation  No. 46. The  interpretation  was  effective  January 1, 2004 for
variable  interest  entities  existing prior to February 2003. FIN 46(R) did not
have a significant impact on the Company's consolidated financial statements.

In  December  2003 the FASB  issued  SFAS No. 132  (revised  2003),  "Employers'
Disclosures  about Pensions and Other  Postretirement  Benefits".  SFAS No. 132R
revises  employers'  disclosures  about pension  plans and other  postretirement
benefit plans.  It does not change the measurement or recognition of those plans
required by FASB Statements No. 87,  "Employers'  Accounting for Pensions",  No.
88,  "Employers'  Accounting for Settlements and Curtailments of Defined Benefit
Pensions Plans and for Termination Benefits, and No. 106, "Employers' Accounting
for  Postretirement  Benefits  Other  Than  Pensions".  SFAS No.  132R  requires
additional  disclosures to those in the original Statement 132 about the assets,
obligations,  cash  flows,  and net  periodic  benefit  cost of defined  benefit
pension  plans and other  defined  benefit  postretirement  plans.  With certain
exceptions,  principally  related to disclosure  requirements  of foreign plans,
SFAS No. 132R is effective  for  financial  statements  with fiscal years ending
after  December 15, 2003.We have complied with the  disclosure  requirements  of
SFAS No. 132R.

We have a defined  benefit  pension plan  covering the employees at our Eltmann,
Germany  facility.  The  benefits  are based on the  expected  years of  service
including the rate of compensation increase. The plan is unfunded.

                                      -9-



                    Components of Net Periodic Pension Cost:


                               Three months ended              Nine months ended
                                    September 30,                   September 30,
(in thousands of dollars)          2004            2003            2004           2003
- -----------------------------------------------------------     -----------    ------------
                                                                      
  Service cost                      $26            $29            $ 78            $ 86
  Interest cost                      58             52             174             156
  Amortization of net gain           --              2              --               7
                                ------------    -----------     -----------    ------------
  Net periodic pension cost         $84            $83            $252            $249
                                ============    ===========     ===========    ============


We expect to contribute  approximately $0.3 million to our pension plan in 2004.
As of September 30, 2004,  approximately $0.3 million of contributions have been
made.



















                                      -10-


Note 8. Long-Term Debt and Short-Term Debt

On May 1, 2003 in  connection  with the purchase of SKF's  Veenendaal  component
manufacturing  operations and SKF's 23 percent interest in Euroball,  we entered
into a $90 million  syndicated  credit facility with AmSouth Bank ("AmSouth") as
the  administrative  agent  and  Suntrust  Bank as the Euro  loan  agent for the
lenders  under which we borrowed  $60.4  million and 26.3  million  Euros ($29.6
million)  (the  "$90  million  credit  facility").  This  financing  arrangement
replaced our prior credit facility with AmSouth and Hypo Vereinsbank Luxembourg,
S.A. The credit facility as originally entered into consisted of a $30.0 million
revolver  ("$30.0 million  revolver")  expiring on March 15, 2005,  subsequently
extended to March 31, 2006  bearing  interest at a floating  rate equal to LIBOR
(2.02% at September 30, 2004) plus an applicable  margin of 1.25 to 2.0, a $30.4
million term loan expiring on May 1, 2008,  bearing  interest at a floating rate
equal to LIBOR (2.02% at September 30, 2004) plus an applicable  margin of 1.25%
to 2.0% and a 26.3 million Euro ($29.6  million)  term loan ("26.3  million Euro
term  loan")  expiring on May 1, 2008 which  bears  interest at a floating  rate
equal to Euro LIBOR (2.15% at September 30, 2004) plus an  applicable  margin of
1.25% to 2.0%.  All  amounts  owed under the $30.4  million  term loan were paid
during the second  quarter of 2004 with the proceeds  from our $40 million notes
and we no longer have  borrowing  capacity under that portion of the $90 million
credit  facility.  The terms of the $30.0 million  revolver and the 26.3 million
Euro term loan remain unchanged. The loan agreement contains customary financial
and  non-financial  covenants.  Such  covenants  specify  that we must  maintain
certain  liquidity   measures.   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 the
Company's  business.  The credit agreement is  un-collateralized  except for the
pledge of stock of certain foreign subsidiaries.  We were in compliance with all
such covenants as of September 30, 2004.

In connection with the acquisition of KLF's operations in Slovakia, on September
23, 2003 we entered into a $2.0 million  short-term  unsecured  promissory  note
(the "$2.0 million note") with AmSouth as the lender. This note bore interest at
the prime  rate.  All  amounts  owed under this note were paid during the second
quarter of 2004 with the proceeds from our $40 million notes.

On March 23, 2004 we entered into a $2.7 million short-term promissory note (the
"$2.7 million note") with AmSouth Bank ("AmSouth") as the lender. This note bore
interest at the prime rate.  This  agreement was entered into to fund short term
operating  capital  requirements.  All  amounts  owed  under this note were paid
during the second quarter of 2004 with the proceeds from our $40 million notes.

On April 26, 2004 we issued $40.0 million  aggregate  principal amount of senior
notes in a private  placement  (the  "$40  million  notes").  These  notes  bear
interest at a fixed rate of 4.89% and mature on April 26, 2014. Interest is paid
semi-annually.  As of September 30, 2004,  $40.0 million  remained  outstanding.
Annual principal  payments of approximately $5.7 million begin on April 26, 2008
and extend through the date of maturity. Proceeds from this credit facility were
used to repay our existing US dollar  denominated  term loan,  $24 million,  and
repay a portion,  of our borrowings  under our US dollar  denominated  revolving
credit  facility,  $13  million,  which are both  components  of our $90 million
credit facility,  and to repay borrowings  remaining under our $2.0 million note
and our $2.7  million  note of $2  million  and $1  million,  respectively.  The
agreement  contains  customary  financial  and  non-financial  covenants.   Such
covenants  specify  that  we  must  maintain  certain  liquidity  measures.  The
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.  No event of default  had  occurred as of
September 30, 2004.  The notes are not  collateralized  except for the pledge of
stock of certain foreign subsidiaries. We incurred $0.7 million of related costs
as a result of issuing  these notes which have been  recorded as a component  of
other non-current  assets and are being amortized over the term of the notes. In
connection with the issuance of the $40 million notes,  capitalized costs in the
amount of  approximately  $0.3 million  associated  with  structuring of the $90
million credit  facility were written off during the three months ended June 30,
2004 and are included as a component of other (income) expense.

                                      -11-


Note 9. Goodwill

The changes in the  carrying  amount of  goodwill  for the twelve and nine month
periods ended  December 31, 2003 and September  30, 2004,  respectively,  are as
follows:


In thousands of dollars               Plastic and Rubber
                                      Components Segment   NN Europe Segment        Total
                                      ------------------- ------------------- ----------------
                                                                       
Balance as of January 1, 2003              $ 26,712            $ 12,662         $ 39,374
Goodwill acquired                                --               2,151            2,151
Impairment losses                            (1,285)                 --           (1,285)
Currency impacts/reclassification               328               2,325            2,653
                                      ------------------- ------------------- ----------------
Balance as of December 31, 2003            $ 25,755            $ 17,138         $ 42,893
                                      =================== =================== ================

                                     Plastic and Rubber
In thousands of dollars              Components Segment    NN Europe Segment        Total
                                      ------------------- ------------------- ----------------
Balance as of January 1, 2004              $ 25,755            $ 17,138         $ 42,893
Currency impacts                                 --                (349)            (349)
                                      ------------------- ------------------- ----------------
Balance as of September 30, 2004           $ 25,755            $ 16,789         $ 42,544
                                      =================== =================== ================


Note 10. Stock Compensation

We have  adopted  the  provisions  of SFAS 123,  which  encourages  but does not
require a fair value based method of accounting for stock compensation plans. We
have elected to continue  accounting for our stock  compensation  plan using the
intrinsic value based method under Auditing  Practices Board ("APB") Opinion No.
25 and,  accordingly,  have not recorded  compensation expense for the three and
nine month  periods ended  September 30, 2004 and September 30, 2003,  except as
related to stock options  accounted for under the variable method of accounting.
Had compensation  cost for our stock  compensation plan been determined based on
the fair value at the option grant dates,  our net income and earnings per share
would have been changed to the pro-forma amounts indicated below:


                                                          Three months ended             Nine months ended
                                                            September 30,                  September 30,
In Thousands, Except per Share Data                       2004            2003           2004            2003
- --------------------------------------------------    ------------    -----------    ------------    -----------
                                                                                          
Net income - as reported                               $   2,152       $  3,164       $   7,355       $   7,504
 Stock based compensation costs (income), net of
     income tax, included in net income as
     reported                                                (98)            (5)            (86)            195
 Stock based compensation costs, net of income
     tax, that would have been included in net
     income if the fair value method had been
     applied                                                (388)          (424)           (442)           (494)
                                                      ------------    -----------    ------------    -----------
Net income - pro-forma                                 $   1,666       $  2,735       $   6,827       $   7,205
                                                      ============    ===========    ============    ===========

Basic earnings per share - as reported                 $    0.13       $   0.19       $    0.44       $    0.48
 Stock based compensation costs (income), net of
     income tax, included in net income as
     reported                                              (0.01)            --              --            0.01
 Stock based compensation costs, net of income
     tax, that would have been included in net
     income if the fair value method had been
     applied                                               (0.02)         (0.03)          (0.03)          (0.03)
                                                      ------------    -----------    ------------    -----------
Basic earnings per share - pro-forma                   $    0.10          $0.16       $    0.41       $    0.46
                                                      ============    ===========    ============    ===========


                                      -12-



                                                                                          
Earnings per share-assuming dilution - as
reported                                               $    0.13       $   0.18       $    0.43       $    0.46

 Stock based compensation costs (income), net of
     income tax, included in net income as
     reported                                              (0.01)             --          (0.01)           0.01
 Stock based compensation costs, net of income
     tax, that would have been included in net
     income if the fair value method had been
     applied                                               (0.02)         (0.02)          (0.02)          (0.03)
                                                      ------------    -----------    ------------    -----------
Earnings per share - assuming dilution-pro-forma       $    0.10       $   0.16       $    0.40       $    0.44
                                                      ============    ===========    ============    ===========


The fair value of each option grant was  estimated  based on actual  information
available   through  September  30,  2004  and  2003  using  the  Black  Scholes
option-pricing model with the following assumptions:


Term                      Vesting period
- ----                      --------------
                       
Risk free interest rate   3.50% and 3.28% at September 30, 2004 and 2003, respectively
Dividend yield            2.79% and 3.66% at September 30, 2004 and 2003, respectively
Volatility                48.88% and 50.62% at September 30, 2004 and 2003, respectively


Note 11. Lease Commitment

On June 1, 2004,  our wholly owned  subsidiary,  NN Precision  Bearing  Products
Company  LTD,  entered into a twenty year lease  agreement  with Kunshan Tian Li
Steel  Structure  Co.  LTD for the  lease  of land and  building  (approximately
110,000 square feet) in the Kunshan  Economic and Technology  Development  Zone,
Jiangsu,  The People's Republic of China. The building will be newly constructed
and we expect to begin usage of the leased property during the second quarter of
2005.  The land and  building  remain under the control of the lessor until such
time as usage of the leased  property  commences.  The  agreement  satisfies the
requirements of a capital lease at June 1, 2004 and we anticipate  recording the
lease as a capital lease in our Consolidated  Financial Statements when usage of
the leased property begins. Accordingly, as of September 30, 2004, no amount has
been recorded related to the asset and corresponding  obligation associated with
the lease agreement in our Consolidated  Financial  Statements.  We estimate the
fair  value  of the land and  building  to be  approximately  $2.0  million  and
undiscounted annual lease payments of approximately $0.2 million  (approximately
$4.1 million aggregate non-discounted lease payments over the twenty year term).
The lease terms include fair value buy-out provisions and we maintain the option
to extend the lease term.

Note 12. Subsequent Event

On October 27, 2004 we  completed  the sale of our idle  warehouse  in Kilkenny,
Ireland for approximately 1.6 million euro ($2.0 million),  net of selling costs
incurred.  As a result of this  transaction,  we anticipate  recording a loss on
sale of fixed assets of approximately 0.1 million euro ($0.1 million) during the
fourth quarter which will be recorded as a component of Other (income)  expense,
net.  As of  December  31,  2003 and  September  30,  2004  this  asset has been
classified  as a component  of  Property,  plant and  equipment,  net.  Proceeds
received  from the sale of this asset will be used to repay a portion of our $90
million credit facility.

                                      -13-





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

Overview and Management Focus

     Our strategy and  management  focus is based upon the  following  long-term
     objectives:

     o    Captive growth,  providing a competitive and attractive alternative to
          the operations of our global customers

     o    Expansion of our bearing product offering, and

     o    Global  expansion  of our  manufacturing  base to better  address  the
          global requirements of our customers

     Management   generally   focuses  on  these  trends  and  relevant   market
     indicators:

     o    Global industrial growth and economics

     o    Global automotive production rates

     o    Costs subject to the global inflationary  environment,  including, but
          not limited to:

          o    Raw material

          o    Wages and benefits, including health care costs

          o    Energy

     o    Trends related to manufacturing's  geographic migration of competitive
          manufacturing

     o    Regulatory environment for United States public companies

     o    Currency and exchange rate movements and trends

     o    Interest rate levels and expectations

     Management  generally  focuses on the following key indicators of operating
     performance:

     o    Sales growth

     o    Cost of products sold levels

     o    Selling, general and administrative expense levels

     o    Net income

     o    Cash flow from operations and capital spending

Our core business is the manufacture  and sale of high quality,  precision steel
balls  and  rollers.   In  2003,  sales  of  balls  and  rollers  accounted  for
approximately  76% of the  Company's  total net sales  with 63% and 13% of sales
from balls and rollers, respectively. Sales of metal bearing retainers accounted
for 4% and sales of precision  molded plastic and rubber parts accounted for the
remaining 20%.

Since our formation in 1980 we have grown primarily  through the displacement of
captive ball  manufacturing  operations  of domestic and  international  bearing
manufacturers  resulting in increased  sales


                                      -14-




of high precision balls for quiet bearing applications. Management believes that
our core  business  sales growth since our formation has been due to our ability
to capitalize on opportunities in global markets and provide precision  products
at competitive  prices,  as well as our emphasis on product quality and customer
service.

Results of Operations

Three  Months  Ended  September  30,  2004  Compared to the Three  Months  Ended
September 30, 2003

Net Sales. Net Sales increased by  approximately  $8.3 million,  or 12.9%,  from
$64.6  million  for the third  quarter  of 2003 to $72.9  million  for the third
quarter of 2004. By segment,  sales  increased $7.7 million and $0.6 million for
the  NN  Europe  Segment  and  the  Plastic  and  Rubber   Components   Segment,
respectively.  Within the NN Europe  Segment,  $4.4  million of the  increase is
related to increases in product demand and $3.2 million is related to the impact
of currency exchange rates.  Within the Plastic and Rubber  Components  Segment,
the total  increase of $0.6 million is related to  increases in product  demand.
Net Sales  remained  approximately  unchanged  for the Domestic  Ball and Roller
Segment.

Cost of Products  Sold.  Cost of products sold increased by  approximately  $7.0
million,  or 13.9%,  from $50.3  million for the third  quarter of 2003 to $57.3
million  for the third  quarter  of 2004.  By  segment,  cost of  products  sold
increased  $5.7  million  and $1.3  million  for the NN Europe  Segment  and the
Plastic  and  Rubber  Components  Segment,  respectively.  Within  the NN Europe
Segment, $3.2 million of the increase is related to increases in product demand,
increased material costs and the impact of inventory reductions and $2.5 million
is related to the impact of  currency  exchange  rates.  Within the  Plastic and
Rubber  Components  Segment,  the total  increase of $1.3  million is related to
increases  in product  demand and the impact of  inventory  reductions.  Cost of
products sold remained approximately  unchanged for the Domestic Ball and Roller
Segment.  As a percentage  of net sales,  cost of products sold  increased  from
77.8%  during  the third  quarter of 2003 to 78.5%  during the third  quarter of
2004.

The price of steel has risen over the last twelve to eighteen months with fourth
quarter of 2004 and  possibly  2005  prices  expected  to reflect  even  greater
increases. The increase is principally due to general increases in global demand
and, more recently,  due to China's increased consumption of steel. This has had
the impact of increasing  scrap  surcharges  we pay in procuring our steel.  Our
contracts  with key  customers  allow us to pass a majority  of the steel  price
increases we incur on to those customers.  However, by contract,  material price
changes in any given year are typically  passed along with price  adjustments in
January of the following year. Until the current increases can be passed through
to our  customers,  income  from  operations,  net  income  and cash  flow  from
operations will be adversely affected.

Selling,   General   and   Administrative   Expenses.   Selling,   general   and
administrative  expenses increased by approximately $1.9 million, or 35.8%, from
$5.2 million for the third quarter of 2003 to $7.1 million for the third quarter
of 2004. By segment, selling, general and administrative expenses increased $0.9
million, $0.6 million and $0.3 million for the NN Europe Segment,  Domestic Ball
and Roller Segment and the Plastic and Rubber Components Segment,  respectively.
Within the NN Europe  Segment,  $0.6  million of the  increase is related to the
start-up  of our  previously  announced  Level 3 program  which  integrates  the
principles of Lean Enterprise,  Six Sigma and Total Productive  Maintenance (the
"Level 3  Program"),  expenses  associated  with our  Slovakia  ball  production
facility  and  severance  costs,  and,  $0.3 million is related to the impact of
currency  exchange  rates.  Within the  Domestic  Ball and Roller  Segment,  the
increase of $0.6 million is  principally  related to  Sarbanes-Oxley  compliance
efforts in the area of  internal  controls  and the Level 3 Program.  Within the
Plastic and Rubber Components Segment,  the $0.3 million increase is principally
related to employee severance.  As a percentage of net sales,  selling,  general
and administrative expenses increased from 8.1% during the third quarter of 2003
to 9.8% during the third quarter of 2004.

Depreciation and Amortization.  Depreciation and amortization expenses increased
by  approximately  $0.4 million or 11.0% from $3.6 million for the third quarter
of 2003 to $4.0 million for the third  quarter of 2004.  Principally  all of the
$0.4 million  increase is attributable  to the NN Europe Segment.  Within the NN
Europe Segment,  $0.2 million of the increase is related to capital  investments
in  machinery,  equipment  and  processes  and $0.2  million of the  increase is
related to the impact of foreign currency exchange rates. As a percentage of net
sales,  depreciation  and  amortization  expense  decreased from 5.6% during the
third

                                      -15-



quarter of 2003 to 5.5% during the third quarter of 2004.

Restructuring and Impairment Costs. Restructuring and impairment costs increased
by $0.2  million from ($0.2  million) in the third  quarter of 2003 to $0 in the
third  quarter of 2004.  The  increase is related to gains  recorded  during the
third quarter of 2003  associated  with the  disposition  of certain  previously
impaired NN Arte assets. Restructuring and impairment charges were (0.4%) of net
sales in the third  quarter of 2003 and 0% of net sales in the third  quarter of
2004.

Interest Expense.  Interest expense increased by approximately $0.2 million from
$0.9 million in the third  quarter of 2003 to $1.1 million in the third  quarter
of 2004. The increase is  principally  related to our April 26, 2004 issuance of
our $40.0  million  aggregate  principal  amount  of  senior  notes in a private
placement.  These notes bear interest at a fixed rate of 4.89%.  See  "Liquidity
and Capital Resources".

Net Income. Net income decreased by approximately  $1.0 million,  or 32.0%, from
$3.2 million in the third  quarter of 2003 to $2.2 million in the third  quarter
of 2004. As a percentage of net sales, net income decreased from 4.9% during the
third quarter of 2003 to 3.0% during the third quarter of 2004.

Nine Months Ended September 30, 2004 Compared to the Nine Months Ended September
30, 2003

Net Sales. Net Sales increased by approximately  $39.4 million,  or 21.1%,  from
$186.4 million for the first nine months of 2003 to $225.8 million for the first
nine months of 2004.  By segment,  Net Sales  increased  $39.1  million and $0.8
million for the NN Europe  Segment  and the  Domestic  Ball and Roller  Segment,
respectively.  Net Sales  decreased  by $0.5  million for the Plastic and Rubber
Components Segment.  Within the NN Europe Segment, $17.2 million of the increase
is related to our May 2, 2003  acquisition  of Veenendaal and a full nine months
of its results  included  in 2004 versus five months of its results  included in
the first  nine  months of 2003,  $11.6  million  is  related  to the  impact of
currency  exchange  rates and $10.3  million is related to  increases in product
demand.  Within the  Domestic  Ball and Roller  Segment,  the  increase  of $0.8
million is principally  related to increases in product demand.  The decrease of
$0.5 million in the Plastic and Rubber Components Segment is principally related
increases in product  demand of  approximately  $1.1 million offset by decreased
net sales of  approximately  $1.6 million  resulting  from to the closure of our
Guadalajara, Mexico injection molding facility in 2003.

Cost of Products Sold.  Cost of products sold increased by  approximately  $33.8
million,  or 23.7%,  from  $142.8  million  for the first nine months of 2003 to
$176.6  million for the first nine months of 2004. By segment,  cost of products
sold increased  $32.9  million,  $0.6 million and $0.3 million for the NN Europe
Segment,  the  Domestic  Ball and  Roller  Segmet  and the  Plastic  and  Rubber
Components Segment, respectively. Within the NN Europe Segment, $14.4 million of
the increase is related to our May 2, 2003  acquisition of Veenendaal and a full
nine  months of its  results  included in 2004 versus five months of its results
included in the first nine months of 2003, $9.2 million is related to the impact
of currency  exchange  rates and $9.3 million is related to increases in product
demand and the impact of inventory  reductions.  The increase of $0.3 million in
the Plastic and Rubber  Components  Segment is principally  related increases in
product  demand and the impact of inventory  reductions  of  approximately  $2.3
million offset by decreased cost of products sold of approximately  $2.1 million
resulting from the closure of our Guadalajara, Mexico injection molding facility
in 2003. As a percentage  of net sales,  cost of products  sold  increased  from
76.6% during the first nine months of 2003 to 78.2% during the first nine months
of 2004.

Selling,   General   and   Administrative   Expenses.   Selling,   general   and
administrative  expenses increased by approximately $6.7 million, or 42.6%, from
$15.6  million for the first nine months of 2003 to $22.3  million for the first
nine months of 2004. By segment,  selling,  general and administrative  expenses
increased $3.8 million, $2.4 million and $0.5 million for the NN Europe Segment,
Domestic Ball and Roller Segment and the Plastic and Rubber Components  Segment,
respectively.  Within the NN Europe  Segment,  $1.6  million of the  increase is
related to our May 2, 2003  acquisition  of Veenendaal and a full nine months of
its results  included in 2004 versus five months of its results  included in the
first nine months of 2003,  $1.3 million is related to the start-up of our Level
3 Program,  expenses  associated with our Slovakia ball production  facility and
employee  severance  and $0.9  million  is  related  to the  impact of  currency
exchange rates. Within the Domestic Ball and Roller Segment,  approximately $1.4
million is principally related to Sarbanes-Oxley  compliance efforts in the area
of  internal  controls,  approximately  $0.7  million  is related to our Level 3
Program and  approximately  $0.3 million is related to the start-up of our China
operation.

                                      -16-




Within the Plastic and Rubber Components  Segment,  $0.3 million of the increase
is related to employee severance. As a percentage of net sales, selling, general
and administrative  expenses increased from 8.4% during the first nine months of
2003 to 9.9% during the first nine months of 2004.

Depreciation and Amortization.  Depreciation and amortization expenses increased
by  approximately  $1.8  million or 18.0% from $10.1  million for the first nine
months of 2003 to $11.9  million for the first nine months of 2004.  Principally
all of the $1.8  million  increase  is  attributable  to the NN Europe  Segment.
Within the NN Europe Segment, $1.0 million of the increase is related to our May
2, 2003 acquisition of Veenendaal and a full nine months of its results included
in 2004 versus  five months of its results  included in the first nine months of
2003,  $0.2  million  of the  increase  is related  to  capital  investments  in
machinery,  equipment  and processes and $0.6 million of the increase is related
to the impact of foreign currency  exchange rates. As a percentage of net sales,
depreciation and amortization  expense decreased from 5.4% during the first nine
months of 2003 to 5.3% during the first nine months of 2004.

Interest Expense.  Interest expense increased by approximately $0.6 million from
$2.3  million in the first nine months of 2003 to $2.9 million in the first nine
months of 2004.  Approximately  $0.4  million  of the  increase  is  related  to
increased debt levels due to the May 2003  acquisition of Veenendaal and the May
2003 purchase of the 23% interest in NN Europe held by SKF.  Effective  with the
completion  of  this  transaction,  we  own  100%  of NN  Europe.  Additionally,
approximately  $0.2  million of the  increase  is related to our April 26,  2004
issuance  of $40.0  million  aggregate  principal  amount of  senior  notes in a
private  placement.  These  notes bear  interest  at a fixed rate of 4.89%.  See
"Liquidity and Capital Resources".

Net Income.  Net income decreased by approximately  $0.1 million,  or 2.0%, from
$7.5  million in the first nine months of 2003 to $7.4 million in the first nine
months of 2004. As a percentage  of net sales,  net income  decreased  from 4.0%
during the first  nine  months of 2003 to 3.3%  during the first nine  months of
2004.

Liquidity and Capital Resources

On May 1, 2003 in  connection  with the purchase of SKF's  Veenendaal  component
manufacturing  operations and SKF's 23 percent interest in NN Europe, we entered
into a $90 million syndicated credit facility with AmSouth as the administrative
agent and  Suntrust  Bank as the Euro loan agent for the lenders  under which we
borrowed $60.4 million and 26.3 million Euros ($29.6  million) (the "$90 million
credit facility") This financing  arrangement replaced our prior credit facility
with AmSouth and NN Europe's credit facility with Hypo  Vereinsbank  Luxembourg,
S.A. The credit  facility,  as  originally  entered  into,  consisted of a $30.0
million revolver expiring on March 15, 2005,  subsequently extended to March 31,
2006, bearing interest at a floating rate equal to LIBOR (2.02% at September 30,
2004)  plus an  applicable  margin  of 1.25 to 2.0,  a $30.4  million  term loan
expiring  on May 1, 2008,  bearing  interest  at a floating  rate equal to LIBOR
(2.02% at  September  30, 2004) plus an  applicable  margin of 1.25 to 2.0 and a
26.3 million Euro ($29.6  million) term loan expiring on May 1, 2008 which bears
interest at a floating  rate equal to Euro LIBOR (2.15% at  September  30, 2004)
plus an  applicable  margin of 1.25 to 2.0.  All  amounts  owed  under the $30.4
million term loan were paid during the second  quarter of 2004 with the proceeds
from our $40 million notes and we no longer have  borrowing  capacity under that
portion  of the $90  million  credit  facility.  The terms of the $30.0  million
revolver  and the  26.3  million  Euro  term  loan  remain  unchanged.  The loan
agreement  contains  customary  financial  and  non-financial  covenants.   Such
covenants  specify that we must maintain certain  liquidity  measures.  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 credit facility is not collateralized
except  for the  pledge of stock of certain  foreign  subsidiaries.  No event of
default had occurred as of September 30, 2004.

On March 23, 2004 we entered  into a $2.7  million  short-term  promissory  note
("the $2.7  million  note")  with  AmSouth  Bank as the  lender.  This note bore
interest at the prime rate.  This  agreement was entered into to fund short term
operating  capital  requirements.  All  amounts  owed  under this note were paid
during the second  quarter of 2004 with the proceeds from our $40 million notes.
See Note 8 of the Notes to Consolidated Financial Statements.

                                      -17-




In connection with the acquisition of KLF's operations in Slovakia, on September
23, 2003 we entered into a $2.0 million  short-term  promissory  note ("the $2.0
million note") with AmSouth as the lender.  This note bore interest at the prime
rate.  All amounts owed under this note were paid during the second quarter 2004
with  the  proceeds  from our $40  million  notes.  See  Note 8 of the  Notes to
Consolidated Financial Statements.

On April 26, 2004 we issued $40.0 million  aggregate  principal amount of senior
notes in a private  placement  (the  "$40  million  notes").  These  notes  bear
interest at a fixed rate of 4.89% and mature on April 26, 2014. Interest is paid
semi-annually.  As of September 30, 2004,  $40.0 million  remained  outstanding.
Annual principal  payments of approximately $5.7 million begin on April 26, 2008
and extend through the date of maturity. Proceeds from this credit facility were
used to repay our existing US dollar  denominated  term loan,  $24 million,  and
repay a portion  of our  borrowings  under our US dollar  denominated  revolving
credit  facility,  $13  million,  which are both  components  of our $90 million
credit facility,  and to repay borrowings  remaining under our $2.0 million note
and our $2.7  million  note of $2  million  and $1  million,  respectively.  The
agreement  contains  customary  financial  and  non-financial  covenants.   Such
covenants  specify  that  we  must  maintain  certain  liquidity  measures.  The
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.  No event of default  had  occurred as of
September 30, 2004.  The notes are not  collateralized  except for the pledge of
stock of certain foreign subsidiaries. We incurred $0.7 million of related costs
as a result of issuing  these notes which have been  recorded as a component  of
other non-current  assets and are being amortized over the term of the notes. In
connection with the issuance of the $40 million notes,  capitalized costs in the
amount of  approximately  $0.3 million  associated  with  structuring of the $90
million credit  facility were written off during the three months ended June 30,
2004 and are included as a component of other  (income)  expense.  See Note 8 of
the Notes to Consolidated Financial Statements.

Our arrangements with our domestic customers typically provide that payments are
due  within  30 days  following  the date of  shipment  of  goods  by us,  while
arrangements  with certain export  customers  (other than export  customers that
have entered into an inventory  management  program with the Company)  generally
provide that payments are due within either 90 or 120 days following the date of
shipment.  Our net sales have  historically been of a seasonal nature due to our
relative percentage of European business coupled with slower European production
during the month of August.

We bill and receive payment from some of our customers in Euros as well as other
currencies.  To date, we have not been materially adversely affected by currency
fluctuations.  Nonetheless,  as a result of these  sales,  our 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 September 30, 2004, no currency  hedges
were in place.  In addition,  a  strengthening  of the U.S.  dollar  and/or Euro
against   foreign   currencies   could   impair  our  ability  to  compete  with
international competitors for foreign as well as domestic sales.

Working  capital,   which  consists   principally  of  accounts  receivable  and
inventories,  was $34.2  million at  September  30,  2004 as  compared  to $25.7
million at December 31, 2003. The ratio of current assets to current liabilities
increased from 1.41:1 at December 31, 2003 to 1.55:1 at September 30, 2004. Cash
flow from operations  increased to $22.0 million during the first nine months of
2004 from $8.2 million during the first nine months of 2003. Contributing to the
improvement in cash flow from operations for the nine months ended September 30,
2004 was a reduction in inventory levels of approximately $3.6 million.

During 2004, we plan to spend approximately $9.0 million on capital expenditures
related  primarily  to  equipment  and process  upgrades  and  replacements  and
approximately $2.5 million  principally  related to geographic  expansion of our
manufacturing  base. Of these amounts  approximately $8.0 million has been spent
through  September  30, 2004. We intend to finance  these  activities  with cash
generated  from  operations  and funds  available  under the  credit  facilities
described  above. We believe that funds generated from operations and borrowings
from the credit  facilities  will be sufficient  to finance our working  capital
needs and projected capital expenditure requirements through September 2005.

On October 27, 2004 we  completed  the sale of our idle  warehouse  in Kilkenny,
Ireland for approximately


                                      -18-



1.6 million euro ($2.0 million),  net of selling costs incurred.  As a result of
this  transaction,  we  anticipate  recording a loss on sale of fixed  assets of
approximately  0.1 million euro ($0.1  million)  during the fourth quarter which
will be recorded as a component of Other (income)  expense,  net. As of December
31, 2003 and September 30, 2004 this asset has been classified as a component of
Property,  plant and  equipment,  net.  Proceeds  received from the sale of this
asset will be used to repay a portion of our $90 million credit facility.

During  the  fourth  quarter of 2004 we  anticipate  selling  our idled land and
building  assets located in  Walterboro,  South Carolina in an auction sale. The
approximate  $1.1  million  carrying  value of these assets is  classified  as a
component of Property,  plant and equipment,  net and is based  principally upon
fair market value appraisals. While the net selling price of these assets is not
known,  amounts we ultimately  recover may differ from the assets carrying value
resulting in the recording of a gain or loss. No such amounts have been recorded
as of September  30, 2004.  Any proceeds  received from the sale of these assets
will be used to repay a portion of our $90 million credit facility.

New Accounting Pronouncements

On March 31, 2004,  the FASB issued an Exposure  Draft,  "Share-Based  Payment",
that addresses the accounting for share-based  payment  transactions in which an
enterprise  receives employee services in exchange for (a) equity instruments of
the  enterprise  or (b)  liabilities  that are  based  on the fair  value of the
enterprise's  equity  instruments or that may be settled by the issuance of such
equity  instruments.  The  proposed  Statement  would  eliminate  the ability to
account  for  share-based  compensation  transactions  using APB Opinion No. 25,
"Accounting for Stock Issued to Employees",  and generally would require instead
that such  transactions be accounted for using a fair-value  method.  On October
13, 2004, the FASB announced the final  Statement for public  companies would be
effective for any interim or annual period beginning after June 15, 2005. We are
currently  evaluating  the  impacts  of this  Exposure  Draft  on the  Company's
consolidated financial statements.

On May 19, 2004, the Financial  Accounting  Standards Board ("FASB") issued FASB
Staff Position (FSP) No. 106-2,  "Accounting and Disclosure Requirements Related
to the Medicare  Prescription Drug,  Improvement and Modernization Act of 2003",
which supersedes FSP No. 106-1,  "Accounting and Disclosure Requirements Related
to the Medicare  Prescription Drug,  Improvement and Modernization Act of 2003,"
(the Act). FSP No. 106-2 permits a sponsor of a postretirement  health care plan
that provides a prescription  drug benefit to make a one-time  election to defer
accounting for the effects of the Act until authoritative guidance on accounting
for subsidies  provided by the Act is issued.  The Act introduces a prescription
drug benefit under Medicare as well as a federal  subsidy to sponsors of retiree
health care benefit  plans.  The Company does not  anticipate  that the Act will
have an effect on the Company's Financial Statements.

In  December  2003,  the  FASB  issued  Financial   Interpretation   No.  46(R),
"Consolidation   of   Variable   Interest   Entities,"   ("FIN   46(R)").   This
interpretation  addresses  consolidation  by  business  enterprises  of variable
interest entities with certain defined  characteristics  and replaces  Financial
Interpretation  No. 46. The  interpretation  was  effective  January 1, 2004 for
variable  interest  entities  existing prior to February 2003. FIN 46(R) did not
have a significant impact on the Company's consolidated financial statements.

In  December  2003,  the FASB issued SFAS No. 132  (revised  2003),  "Employers'
Disclosures  about Pensions and Other  Postretirement  Benefits".  SFAS No. 132R
revises  employers'  disclosures  about pension  plans and other  postretirement
benefit plans.  It does not change the measurement or recognition of those plans
required by FASB Statements No. 87,  "Employers'  Accounting for Pensions",  No.
88,  "Employers'  Accounting for Settlements and Curtailments of Defined Benefit
Pensions Plans and for Termination Benefits, and No. 106, "Employers' Accounting
for  Postretirement  Benefits  Other  Than  Pensions".  SFAS No.  132R  requires
additional  disclosures to those in the original Statement 132 about the assets,
obligations,  cash  flows,  and net  periodic  benefit  cost of defined  benefit
pension  plans and other  defined  benefit  postretirement  plans.  With certain
exceptions,  principally  related to disclosure  requirements  of foreign plans,
SFAS No. 132R is effective  for  financial  statements  with fiscal years ending
after  December 15, 2003.  As of September  30, 2004,  we have complied with the
disclosure requirements of SFAS No. 132R.

                                      -19-


The Euro

We currently have operations in Italy,  Germany,  Ireland,  and The Netherlands,
all of which are Euro participating  countries, and sell product to customers in
many of the participating countries. The Euro has been adopted as the functional
currency at these locations.

Seasonality and Fluctuation in Quarterly Results

Our net sales  historically  have been of a seasonal nature due to a significant
portion of our sales to  European  customers  that cease or  significantly  slow
production during the month of August.

Inflation and Changes in Prices

While the  Company's  operations  have not been  materially  affected by general
inflation  during recent  years,  prices for 52100 Steel and other steel related
raw materials have increased significantly during the past twelve months. In the
Company's U.S. operations our typical pricing  arrangements with steel suppliers
are subject to adjustment once every six months. The Company's NN Europe Segment
has entered into long-term  agreements  with its primary steel  supplier,  which
provide for standard terms and conditions,  annual unit price  adjustments,  and
quarterly pricing adjustments in the form of scrap surcharges.  In both our U.S.
and  European  operations,  the steel price  increases we have  experienced  are
related to  increasing  global  demand  for scrap and other  steel  related  raw
materials,  principally  from  China.  While we  reserve  the right to  increase
product prices periodically in the event of increases in its raw material costs,
our current  contracts  in effect with SKF and INA/FAG call for  adjustments  in
selling  prices for raw material  inflation to occur in January of the following
year. As such,  the majority of the inflation we are currently  experiencing  in
raw material  pricing will not be passed  through until January 2005.  For other
customers,  we are  currently  in the  process of  adjusting  pricing  levels to
reflect the increases in steel pricing.

Critical Accounting Policies

Our  significant  accounting  policies,  including the assumptions and judgments
underlying  them, are disclosed in the Company's Annual Report on Form 10-K, for
the fiscal year ended December 31, 2003 including those policies as discussed in
Note 1. These policies,  which have not significantly changed since December 31,
2003 have been  consistently  applied in all material  respects and 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  served  markets:  bearing  manufacturers,  automotive
industry, electronics,  industrial,  agricultural and aerospace. In establishing
allowances for doubtful accounts, the Company 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.   Accounts   receivable  are  written  off  when   considered  to  be
uncollectible.  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.

                                      -20-



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-lived 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 as
of December 31, 2003, appraisals are relied upon to assess the fair market value
of those  assets.  The assets held for sale of $1.8  million as of December  31,
2003 have been  reclassified  as held for use  effective  March  31,  2004.  The
amounts  reclassified are carried at fair value which is lower than the carrying
amount  before  the  assets  were  classified  as held  for  sale  adjusted  for
depreciation  expense.  The  reclassification  of  these  assets  did not have a
material  impact to our  income  from  operations,  net income or cash flow from
operations  for the three and nine  months  ended  September  30,  2004.  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.

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.  Statements  regarding  capital  expenditures,
future borrowings,  and financial  commitments are  forward-looking  statements.
Readers  can  identify  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 quarterly
report on Form 10-Q, 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.

                                      -21-




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 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  42%  of
consolidated net sales in 2003, and sales to INA/FAG accounted for approximately
16% of consolidated  net sales in 2003.  During 2003, our ten largest  customers
accounted for approximately 77% of our consolidated net sales. None of our other
customers  individually accounted for more than 5% of our consolidated net sales
for 2003. 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.




























                                      -22-




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:

     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  could  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.

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 NN
Europe 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 NN Europe and on May 2, 2003 we acquired  SKF's
minority interest in NN Europe, to become the sole owner at NN Europe. On May 2,
2003 we acquired SKF's tapered roller and metal cage manufacturing operations in
Veenendaal,  The Netherlands.  On October 9, 2003 we acquired the precision ball
producing assets of  KLF-Gulickaren in Kysucke Nove Mesto,  Slovakia.  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.


                                      -23-



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 NN Europe  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.

                                      -24-




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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to changes in financial market conditions in the normal course of
our  business  due to our  use of  certain  financial  instruments  as  well  as
transacting  in various  foreign  currencies.  To mitigate our exposure to these
market risks, we have established  policies,  procedures and internal  processes
governing our management of financial market risks. We are exposed to changes in
interest rates primarily as a result of our borrowing  activities.  At September
30, 2004, we had $14.4 million outstanding under the domestic credit facilities,
$40.0 million  aggregate  principal  amount of senior notes  outstanding  and NN
Europe had 18.4 million  Euro ($22.8  million)  outstanding  under the Euro term
loan. See Note 8 of the Notes to Consolidated Financial Statements. At September
30, 2004, a one-percent increase in the interest rate charged on our outstanding
borrowings under our credit  facilities,  that are subject to variable  interest
rates,  would result in interest  expense  increasing  annually by approximately
$0.4 million.  In connection with a variable EURIBOR rate debt financing in July
2000 our majority owned subsidiary, NN Europe 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 us 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.  This  original  debt was  repaid in May 2003,
however,  the swap remains  pursuant to its original  terms.  On May 1, 2003, we
entered into the $90 million  credit  facility.  This new financing  arrangement
replaces our prior credit  facility with AmSouth and NN Europe's credit facility
with Hypo  Vereinsbank  Luxembourg,  S.A.  On April 26,  2004,  we issued  $40.0
million of aggregate  principal amounts of senior notes in a private  placement,
replacing  a portion  of our $90  million  credit  facility,  see  "Management's
Discussion  and  Analysis of  Financial  Condition  and Results of  Operations -
Liquidity and Capital  Resources".  The nature and amount of our  borrowings may
vary as a result of future business  requirements,  market  conditions and other
factors.

                                      -25-




Translation  of our operating cash flows  denominated  in foreign  currencies is
impacted by changes in foreign exchange rates. Our NN Europe Segment,  bills and
receives payments from some of its foreign  customers in their own currency.  To
date, we have 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 has periodically
used foreign currency  hedges.  These currency hedging programs allow management
to hedge  currency  exposures when these  exposures  meet certain  discretionary
levels.  We did not hold a position in any foreign currency hedging  instruments
as of September 30, 2004.

Item 4. Controls and Procedures

As of September 30, 2004, 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.

There have been no  changes in this  fiscal  quarter 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.













                                      -26-


Part II. Other Information

Item 1. Legal Proceedings

All legal  proceedings and actions  involving the Company 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 2. Change in Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Other Information

None

Item 5. Exhibits and Reports on Form 8-K.

     a.   Exhibits Required by Item 601 of Regulation S-K

          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.

                                      -27-


     Reports on Form 8-K

     The  Company  furnished  a Form 8-K, in response to Item 5, on July 9, 2004
     announcing  its expected date of release of second  quarter 2004  financial
     results and conference call, and that increased  Sarbanes-Oxley  compliance
     costs and  additional  inventory  reduction  would  impact  results for the
     second quarter and full year.

     The Company furnished a Form 8-K, in response to Items 5 and 7, on July 29,
     2004 announcing its financial results for the second quarter ended June 30,
     2004.




































                                      -28-



                                   SIGNATURES

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


                                         NN, Inc.
                                        ----------------------------------------
                                             (Registrant)


Date:    November 9, 2004               /s/ Roderick R. Baty
         ----------------               ----------------------------------------
                                            Roderick R. Baty,
                                            Chairman, President and
                                            Chief Executive Officer
                                            (Duly Authorized Officer)


Date:    November 9, 2004               /s/ David L. Dyckman
         ----------------               ----------------------------------------
                                            David L. Dyckman
                                            Vice President-Corporate Development
                                            Chief Financial Officer
                                            (Principal Financial Officer)
                                            (Duly Authorized Officer)


Date:    November 9, 2004              /s/  William C. Kelly, Jr.
         ----------------              -----------------------------------------
                                            William C. Kelly, Jr.,
                                            Treasurer, Secretary and
                                            Chief Administrative Officer
                                            (Duly Authorized Officer)