Description of Tables
The following tables represent our corrected consolidated statements of income, statements of stockholders' equity, and statements of cash flows for the years ended December 31, 2018 and December 31, 2017, as well as our corrected consolidated balance sheet at December 31, 2018. The values as previously reported for years ended 2018 and 2017 were derived from our Annual Report on Form 10-K for the year ended December 31, 2018 filed on February 28, 2019.
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Consolidated Statements of Income
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Year Ended December 31, 2018
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Year Ended December 31, 2017
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Previously Reported
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Corrections
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As Corrected
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Previously Reported
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Corrections
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As Corrected
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(in thousands, except per share data)
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Net sales
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$
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433,947
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$
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—
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$
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433,947
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$
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405,232
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$
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—
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$
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405,232
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Cost of sales
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330,414
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—
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(a)
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330,414
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281,835
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(254)
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(a)
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281,581
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Gross profit
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103,533
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—
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103,533
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123,397
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254
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123,651
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Selling, general and administrative expenses
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47,755
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439
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(b)
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48,194
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49,249
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122
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(b)
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49,371
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(Gain) loss on disposal of assets
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(12)
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—
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(12)
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45
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—
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45
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Income from operations
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55,790
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(439)
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55,351
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74,103
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132
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74,235
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Interest income, net
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196
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—
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196
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298
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—
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298
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Other (expense) income, net
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(47)
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—
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(47)
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91
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—
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91
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Income before taxes
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55,939
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(439)
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55,500
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74,492
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132
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74,624
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Income tax provision
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13,367
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(196)
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(c)
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13,171
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19,994
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800
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(c)
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20,794
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Net income
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$
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42,572
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$
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(243)
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$
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42,329
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$
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54,498
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$
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(668)
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$
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53,830
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Earnings per share:
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Basic
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$
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0.81
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$
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—
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$
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0.81
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$
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1.04
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$
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(0.02)
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$
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1.02
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Diluted
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$
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0.81
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$
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(0.01)
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$
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0.80
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$
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1.03
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$
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(0.02)
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$
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1.01
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Cash dividends declared per common share:
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$
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0.32
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$
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—
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$
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0.32
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$
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0.26
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$
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—
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$
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0.26
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Weighted average shares outstanding:
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Basic
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52,284,616
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—
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52,284,616
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52,572,496
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—
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52,572,496
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Diluted
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52,667,939
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—
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52,667,939
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53,078,734
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—
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53,078,734
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(a) The share-based compensation correction to cost of sales for the year ended December 31, 2017 was approximately$0.3 million. There was no correction required for the year ended December 31, 2018 for cost of sales.
(b) The share-based compensation correction to selling, general and administrative expenses for the years ended December 31, 2018 and 2017 was approximately $0.5 million and $0.1 million, respectively. Included in the correction to selling, general and administrative expenses is a correction to our employee profit sharing bonus plan (Note 17) of approximately $0.1 million and $0.1 million for the years ended December 31, 2018 and 2017, respectively.
(c) The correction to income taxes is the tax affect of the share-based compensation correction discussed above.
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Consolidated Balance Sheets
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December 31, 2018
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Previously Reported
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Corrections
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As Corrected
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Assets
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(in thousands, except share and per share data)
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Current assets:
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Cash and cash equivalents
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$
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1,994
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$
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—
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$
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1,994
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Accounts receivable, net
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54,078
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—
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54,078
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Income tax receivable
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6,104
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(203)
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(a)
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5,901
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Note receivable
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27
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—
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27
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Inventories, net
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77,612
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—
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77,612
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Prepaid expenses and other
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1,046
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—
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1,046
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Total current assets
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140,861
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(203)
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140,658
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Property, plant and equipment:
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Land
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3,114
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—
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3,114
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Buildings
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97,393
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—
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97,393
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Machinery and equipment
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212,779
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—
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212,779
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Furniture and fixtures
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16,597
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—
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16,597
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Total property, plant and equipment
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329,883
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—
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329,883
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Less: Accumulated depreciation
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166,880
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—
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166,880
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Property, plant and equipment, net
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163,003
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—
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163,003
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Intangible assets, net
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506
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—
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506
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Goodwill
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3,229
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—
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3,229
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Note receivable, long-term
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598
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—
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598
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Total assets
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$
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308,197
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$
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(203)
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$
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307,994
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Liabilities and Stockholders’ Equity
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Current liabilities:
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Revolving credit facility
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$
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—
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$
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—
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$
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—
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Accounts payable
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10,616
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—
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10,616
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Accrued liabilities
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37,455
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(580)
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(b)
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36,875
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Total current liabilities
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48,071
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(580)
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47,491
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Deferred tax liabilities
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10,826
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(1,567)
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(a)
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9,259
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Other long-term liabilities
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1,801
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—
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1,801
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Commitments and contingencies
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Stockholders’ equity:
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Preferred stock, $.001 par value, 5,000,000 shares authorized, no shares issued
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—
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—
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—
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Common stock, $.004 par value, 100,000,000 shares authorized, 51,991,242 and 52,422,801 issued and outstanding at December 31, 2018 and 2017, respectively
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208
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—
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208
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Additional paid-in capital
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—
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—
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—
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Retained earnings
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247,291
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1,944
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(c)
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249,235
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Total stockholders’ equity
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247,499
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1,944
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249,443
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Total liabilities and stockholders’ equity
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$
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308,197
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$
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(203)
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$
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307,994
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(a) The correction to income tax receivable and deferred tax liability are the tax effect of the share-based compensation corrections.
(b) This is the cumulative reduction of our employee profit sharing bonus plan (Note 17) liability as a result of the share-based compensation correction. The prior period costs will be recovered through our estimated 2019 fourth quarter payment which will be paid in early 2020.
(c) See descriptions of the stockholders' equity in the consolidated statements of stockholders' equity for the year ended December 31, 2018 in sections below.
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Consolidated Statements of Stockholders’ Equity
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Common Stock
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Paid-in
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Retained
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Shares
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Amount
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Capital
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Earnings
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Total
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As Previously Reported
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(in thousands)
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Balance at December 31, 2017
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52,422
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$
|
210
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$
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—
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$
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237,016
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$
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237,226
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Net income
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—
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—
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—
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42,572
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42,572
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Stock options exercised and restricted
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353
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1
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4,986
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—
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4,987
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stock awards granted
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Share-based compensation
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—
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—
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7,374
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—
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7,374
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Stock repurchased and retired
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(784)
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(3)
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(12,360)
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(15,580)
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(27,943)
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Dividends
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—
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—
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—
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(16,717)
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(16,717)
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Balance at December 31, 2018
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51,991
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|
208
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—
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247,291
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|
247,499
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Correction Impacts
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Balance at December 31, 2017
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—
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—
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|
—
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|
1,699
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|
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1,699
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Net income
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—
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—
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—
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(243)
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(243)
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Stock options exercised and restricted
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—
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—
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—
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—
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—
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stock awards granted
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Share-based compensation
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—
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—
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|
488
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—
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|
488
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Stock repurchased and retired
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—
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|
—
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(488)
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|
488
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|
|
—
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Dividends
|
—
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—
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—
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—
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—
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Balance at December 31, 2018
|
—
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|
|
—
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|
|
—
|
|
|
1,944
|
|
|
1,944
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As Corrected
|
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|
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|
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|
—
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Balance at December 31, 2017
|
52,422
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|
|
210
|
|
|
—
|
|
|
238,715
|
|
|
238,925
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|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
42,329
|
|
|
42,329
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|
|
Stock options exercised and restricted
|
353
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|
|
1
|
|
|
4,986
|
|
|
—
|
|
|
4,987
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|
|
stock awards granted
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
—
|
|
|
—
|
|
|
7,862
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|
|
—
|
|
|
7,862
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|
|
Stock repurchased and retired
|
(784)
|
|
|
(3)
|
|
|
(12,848)
|
|
|
(15,092)
|
|
|
(27,943)
|
|
|
Dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(16,717)
|
|
|
(16,717)
|
|
|
Balance at December 31, 2018
|
51,991
|
|
|
$
|
208
|
|
|
$
|
—
|
|
|
$
|
249,235
|
|
|
$
|
249,443
|
|
See descriptions of net income in the consolidated statement of income for the year ended December 31, 2018 in the section above.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
Paid-in
|
|
Retained
|
|
|
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Earnings
|
|
Total
|
As Previously Reported
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
52,651
|
|
|
$
|
211
|
|
|
$
|
—
|
|
|
$
|
205,687
|
|
|
$
|
205,898
|
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
54,498
|
|
|
54,498
|
|
|
Stock options exercised and restricted
|
293
|
|
|
1
|
|
|
2,258
|
|
|
—
|
|
|
2,259
|
|
|
stock awards granted
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
—
|
|
|
—
|
|
|
6,458
|
|
|
—
|
|
|
6,458
|
|
|
Stock repurchased and retired
|
(522)
|
|
|
(2)
|
|
|
(8,716)
|
|
|
(9,516)
|
|
|
(18,234)
|
|
|
Dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(13,653)
|
|
|
(13,653)
|
|
|
Balance at December 31, 2017
|
52,422
|
|
|
210
|
|
|
—
|
|
|
237,016
|
|
|
237,226
|
|
Correction Impacts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
—
|
|
|
—
|
|
|
—
|
|
|
2,512
|
|
|
2,512
|
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
(668)
|
|
|
(668)
|
|
|
Stock options exercised and restricted
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
stock awards granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
—
|
|
|
—
|
|
|
(145)
|
|
|
—
|
|
|
(145)
|
|
|
Stock repurchased and retired
|
—
|
|
|
—
|
|
|
145
|
|
|
(145)
|
|
|
—
|
|
|
Dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Balance at December 31, 2017
|
—
|
|
|
—
|
|
|
—
|
|
|
1,699
|
|
|
1,699
|
|
As Corrected
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
52,651
|
|
|
211
|
|
|
—
|
|
|
208,199
|
|
|
208,410
|
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
53,830
|
|
|
53,830
|
|
|
Stock options exercised and restricted
|
293
|
|
|
1
|
|
|
2,258
|
|
|
—
|
|
|
2,259
|
|
|
stock awards granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
—
|
|
|
—
|
|
|
6,313
|
|
|
—
|
|
|
6,313
|
|
|
Stock repurchased and retired
|
(522)
|
|
|
(2)
|
|
|
(8,571)
|
|
|
(9,661)
|
|
|
(18,234)
|
|
|
Dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(13,653)
|
|
|
(13,653)
|
|
|
Balance at December 31, 2017
|
52,422
|
|
|
$
|
210
|
|
|
$
|
—
|
|
|
$
|
238,715
|
|
|
$
|
238,925
|
|
See descriptions of net income in the consolidated statement of income for the year ended December 31, 2017 in the section above.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2018
|
|
|
|
|
|
Year Ended December 31, 2017
|
|
|
|
|
|
Previously Reported
|
|
Corrections
|
|
As Corrected
|
|
Previously Reported
|
|
Corrections
|
|
As Corrected
|
Operating Activities
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
42,572
|
|
|
$
|
(243)
|
|
|
$
|
42,329
|
|
|
$
|
54,498
|
|
|
$
|
(668)
|
|
|
$
|
53,830
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
17,655
|
|
|
—
|
|
|
17,655
|
|
|
15,007
|
|
|
—
|
|
|
15,007
|
|
Amortization of bond premiums
|
13
|
|
|
—
|
|
|
13
|
|
|
47
|
|
|
—
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for losses on accounts receivable, net of adjustments
|
174
|
|
|
—
|
|
|
174
|
|
|
179
|
|
|
—
|
|
|
179
|
|
Provision for excess and obsolete inventories
|
152
|
|
|
—
|
|
|
152
|
|
|
264
|
|
|
—
|
|
|
264
|
|
Share-based compensation
|
7,374
|
|
|
488
|
|
|
7,862
|
|
|
6,458
|
|
|
(145)
|
|
|
6,313
|
|
(Gain) loss on disposition of assets
|
(12)
|
|
|
—
|
|
|
(12)
|
|
|
45
|
|
|
—
|
|
|
45
|
|
Foreign currency transaction loss (gain)
|
55
|
|
|
—
|
|
|
55
|
|
|
(59)
|
|
|
—
|
|
|
(59)
|
|
Interest income on note receivable
|
(27)
|
|
|
—
|
|
|
(27)
|
|
|
(25)
|
|
|
—
|
|
|
(25)
|
|
Deferred income taxes
|
2,849
|
|
|
(208)
|
|
|
2,641
|
|
|
(1,554)
|
|
|
805
|
|
|
(749)
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
(2,832)
|
|
|
—
|
|
|
(2,832)
|
|
|
(7,516)
|
|
|
—
|
|
|
(7,516)
|
|
Income tax receivable
|
(4,461)
|
|
|
13
|
|
|
(4,448)
|
|
|
4,596
|
|
|
(5)
|
|
|
4,591
|
|
Inventories
|
(5,598)
|
|
|
—
|
|
|
(5,598)
|
|
|
(23,698)
|
|
|
—
|
|
|
(23,698)
|
|
Prepaid expenses and other
|
(528)
|
|
|
—
|
|
|
(528)
|
|
|
98
|
|
|
—
|
|
|
98
|
|
Accounts payable
|
(1,176)
|
|
|
—
|
|
|
(1,176)
|
|
|
3,043
|
|
|
—
|
|
|
3,043
|
|
Deferred revenue
|
412
|
|
|
—
|
|
|
412
|
|
|
258
|
|
|
—
|
|
|
258
|
|
Accrued liabilities and donations
|
(1,766)
|
|
|
(50)
|
|
|
(1,816)
|
|
|
6,353
|
|
|
13
|
|
|
6,366
|
|
Net cash provided by operating activities
|
54,856
|
|
|
—
|
|
|
54,856
|
|
|
57,994
|
|
|
—
|
|
|
57,994
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
(37,268)
|
|
|
—
|
|
|
(37,268)
|
|
|
(41,713)
|
|
|
—
|
|
|
(41,713)
|
|
Cash paid in business combination
|
(6,377)
|
|
|
—
|
|
|
(6,377)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Proceeds from sale of property, plant and equipment
|
13
|
|
|
—
|
|
|
13
|
|
|
10
|
|
|
—
|
|
|
10
|
|
Investment in certificates of deposits
|
(7,200)
|
|
|
—
|
|
|
(7,200)
|
|
|
(5,280)
|
|
|
—
|
|
|
(5,280)
|
|
Maturities of certificates of deposits
|
10,080
|
|
|
—
|
|
|
10,080
|
|
|
7,912
|
|
|
—
|
|
|
7,912
|
|
Purchases of investments held to maturity
|
(9,001)
|
|
|
—
|
|
|
(9,001)
|
|
|
(13,241)
|
|
|
—
|
|
|
(13,241)
|
|
Maturities of investments held to maturity
|
14,570
|
|
|
—
|
|
|
14,570
|
|
|
19,700
|
|
|
—
|
|
|
19,700
|
|
Proceeds from called investments
|
495
|
|
|
—
|
|
|
495
|
|
|
1,500
|
|
|
—
|
|
|
1,500
|
|
Principal payments from note receivable
|
53
|
|
|
—
|
|
|
53
|
|
|
60
|
|
|
—
|
|
|
60
|
|
Net cash used in investing activities
|
(34,635)
|
|
|
—
|
|
|
(34,635)
|
|
|
(31,052)
|
|
|
—
|
|
|
(31,052)
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options exercised
|
4,987
|
|
|
—
|
|
|
4,987
|
|
|
2,259
|
|
|
—
|
|
|
2,259
|
|
Repurchase of stock
|
(26,846)
|
|
|
—
|
|
|
(26,846)
|
|
|
(16,620)
|
|
|
—
|
|
|
(16,620)
|
|
Employee taxes paid by withholding shares
|
(1,097)
|
|
|
—
|
|
|
(1,097)
|
|
|
(1,614)
|
|
|
—
|
|
|
(1,614)
|
|
Cash dividends paid to stockholders
|
(16,728)
|
|
|
—
|
|
|
(16,728)
|
|
|
(13,663)
|
|
|
—
|
|
|
(13,663)
|
|
Net cash used in financing activities
|
(39,684)
|
|
|
—
|
|
|
(39,684)
|
|
|
(29,638)
|
|
|
—
|
|
|
(29,638)
|
|
Net decrease in cash and cash equivalents
|
(19,463)
|
|
|
—
|
|
|
(19,463)
|
|
|
(2,696)
|
|
|
—
|
|
|
(2,696)
|
|
Cash and cash equivalents, beginning of year
|
21,457
|
|
|
—
|
|
|
21,457
|
|
|
24,153
|
|
|
—
|
|
|
24,153
|
|
Cash and cash equivalents, end of year
|
$
|
1,994
|
|
|
$
|
—
|
|
|
$
|
1,994
|
|
|
$
|
21,457
|
|
|
$
|
—
|
|
|
$
|
21,457
|
|
No corrections impacted the classifications between net operating, net investing, or net financing cash flow activities.
3. Summary of Significant Accounting Policies
Principles of Consolidation
These financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All inter-company accounts and transactions have been eliminated.
Our financial statements consolidate all of our affiliated entities in which we have a controlling financial interest. Because we hold certain rights that give us the power to direct the activities of two variable interest entities ("VIEs") (Note 18) that most significantly impact the VIEs economic performance, combined with a variable interest that gives us the right to receive potentially significant benefits or the obligation to absorb potentially significant losses, we have a controlling financial interest in those VIEs.
Cash and Cash Equivalents
We consider all highly liquid temporary investments with original maturity dates of three months or less to be cash equivalents. Cash and cash equivalents consist of bank deposits and highly liquid, interest-bearing money market funds.
The Company’s cash and cash equivalents are held in a few financial institutions in amounts that exceed the insurance limits of the Federal Deposit Insurance Corporation. However, management believes that the Company’s counterparty risks are minimal based on the reputation and history of the institutions selected.
Restricted Cash
Restricted cash held at December 31, 2019 consist of bank deposits and highly liquid, interest-bearing money market funds held for the purpose of the Company's qualified New Markets Tax Credit program (Note 19) to benefit an investment in plant and equipment to facilitate the expansion of our Longview, Texas manufacturing operations.
The Company’s restricted cash is held in a financial institutions in amounts that exceed the insurance limits of the Federal Deposit Insurance Corporation. However, management believes that the Company’s counterparty risks are minimal based on the reputation and history of the institutions selected.
Certificates of Deposit
We held no certificates of deposit at December 31, 2019 and 2018.
Investments Held to Maturity
At December 31, 2019 and 2018, we held no investments. We record the amortized cost basis and accrued interest of the corporate notes and bonds in the Consolidated Balance Sheets. We record the interest and amortization of bond premium to interest income in the Consolidated Statements of Income.
Accounts and Note Receivable
Accounts and note receivable are stated at amounts due from customers, net of an allowance for doubtful accounts. We generally do not require that our customers provide collateral. The Company determines its allowance for doubtful accounts by considering a number of factors, including the credit risk of specific customers, the customer’s ability to pay current obligations, historical trends, economic and market conditions and the age of the receivable. Accounts are considered past due when the balance has been outstanding for ninety days past negotiated credit terms. Past due accounts are generally written-off against the allowance for doubtful accounts only after all collection attempts have been exhausted.
Concentration of Credit Risk
Our customers are concentrated primarily in the domestic commercial and industrial new construction and replacement markets. To date, our sales have been primarily to the domestic market, with foreign sales accounting for approximately 3%, 3% and 4% of revenues for the years ended December 31, 2019, 2018, and 2017, respectively. One customer, Texas AirSystems, accounted for approximately 10% of our sales during 2019, 2018 and 2017. No other customer accounted for more than 5% of our sales during 2019, 2018 and 2017. One customer, Texas AirSystems, accounted for approximately 10% of our accounts receivable balance at December 31, 2019. No other customer accounted for 5% or more of our accounts receivable balance at December 31, 2019 and 2018.
Inventories
Inventories are valued at the lower of cost or net realizable value using the first-in, first-out (“FIFO”) method. Cost in inventory includes purchased parts and materials, direct labor and applied manufacturing overhead. We establish an allowance for excess and obsolete inventories based on product line changes, the feasibility of substituting parts and the need for supply and replacement parts.
Property, Plant and Equipment
Property, plant and equipment, including significant improvements, are recorded at cost, net of accumulated depreciation. Repairs and maintenance and any gains or losses on disposition are included in operations.
Depreciation is computed using the straight-line method over the following estimated useful lives:
|
|
|
|
|
|
Buildings
|
3 - 40 years
|
Machinery and equipment
|
3 - 15 years
|
Furniture and fixtures
|
3 - 7 years
|
Business Combinations
We record the assets acquired and liabilities assumed in a business combination at their acquisition date fair values.
Fair Value Financial Instruments and Measurements
The carrying amounts of cash and cash equivalents, receivables, accounts payable and accrued liabilities approximate fair value because of the short-term maturity of the items. The carrying amount of the Company’s revolving line of credit, and other payables, approximate their fair values either due to their short term nature, the variable rates associated with the debt or based on current rates offered to the Company for debt with similar characteristics.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. Fair value is based upon assumptions that market participants would use when pricing an asset or liability. We use the following fair value hierarchy, which prioritizes valuation technique inputs used to measure fair value into three broad levels:
•Level 1: Quoted prices in active markets for identical assets and liabilities that we have the ability to access at the measurement date.
•Level 2: Inputs (other than quoted prices included within Level 1) that are either directly or indirectly observable for the asset or liability, including (i) quoted prices for similar assets or liabilities in active markets, (ii) quoted prices for identical or similar assets or liabilities in inactive markets, (iii) inputs other than quoted prices that are observable for the asset or liability, and (iv) inputs that are derived from observable market data by correlation or other means.
•Level 3: Unobservable inputs for the asset or liability including situations where there is little, if any, market activity for the asset or liability. Items categorized in Level 3 include the estimated business combination fair values of property, plant and equipment, intangible assets and goodwill.
The fair value hierarchy gives the highest priority to quoted prices in active markets (Level 1) and the lowest priority to unobservable inputs (Level 3). In some cases, the inputs used to measure fair value might fall into different levels of the fair value hierarchy. The lowest level input that is significant to a fair value measurement determines the applicable level in the fair value hierarchy. Assessing the significance of a particular input to a fair value measurement requires judgment, considering factors specific to the asset or liability.
Intangible Assets
Our intangible assets include various trademarks, service marks and technical knowledge acquired in our February 2018 business combination (Note 5). We amortize our intangible assets on a straight-line basis over the estimated useful lives of the assets. We evaluate the carrying value of our amortizable intangible assets for potential impairment when events and circumstances warrant such a review.
Goodwill
Goodwill represents the excess of the consideration paid for the acquired businesses over the fair value of the individual assets acquired, net of liabilities assumed. Goodwill at December 31, 2019 is deductible for income tax purposes.
Goodwill is not amortized, but instead is evaluated for impairment at least annually. We perform our annual assessment of impairment during the fourth quarter of our fiscal year, and more frequently if circumstances warrant.
To perform this assessment, we first consider qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit exceeds its carrying amount. If we conclude that it is more likely than not that the fair value of a reporting unit does not exceed its carrying amount, we calculate the fair value for the reporting unit and compare the amount to its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired. If the carrying amount of a reporting unit exceeds its fair value, goodwill is considered to be impaired and the goodwill balance is reduced by the difference between the fair value and carrying amount of the reporting unit.
We performed a qualitative assessment as of December 31, 2019 to determine whether it was more likely than not that the fair value of the reporting unit was greater than the carrying value of the reporting unit. Based on these qualitative assessments, we determined that the fair value of the reporting unit was more likely than not greater than the carrying value of the reporting unit.
Estimates and assumptions used to perform the impairment evaluation are inherently uncertain and can significantly affect the outcome of the analysis. The estimates and assumptions we use in the annual goodwill impairment assessment included market participant considerations and future forecasted operating results. Changes in operating results and other assumptions could materially affect these estimates.
Impairment of Long-Lived Assets
We review long-lived assets for possible impairment when events or changes in circumstances indicate, in management’s judgment, that the carrying amount of an asset may not be recoverable. Recoverability is measured by a comparison of the carrying amount of an asset or asset group to its estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the undiscounted cash flows are less than the carrying amount of the asset or asset group, an impairment loss is recognized for the amount by which the carrying amount of the asset or asset group exceeds its fair value.
Research and Development
The costs associated with research and development for the purpose of developing and improving new products are expensed as incurred. For the years ended December 31, 2019, 2018, and 2017 research and development costs amounted to approximately $14.8 million, $13.5 million, and $13.0 million, respectively.
Advertising
Advertising costs are expensed as incurred. Advertising expense for the years ended December 31, 2019, 2018, and 2017 was approximately $0.8 million, $0.8 million, and $1.7 million, respectively.
Shipping and Handling
We incur shipping and handling costs in the distribution of products sold that are recorded in cost of sales. Shipping charges that are billed to the customer are recorded in revenues and as an expense in cost of sales. For the years ended December 31, 2019, 2018, and 2017 shipping and handling fees amounted to approximately $14.4 million, $12.6 million, and $11.4 million, respectively.
Income Taxes
Income taxes are accounted for under the asset and liability method. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the book carrying amounts and the tax basis of assets and liabilities. Excess tax benefits and deficiencies are reported as an income tax benefit or expense on the statement of income and are treated as discrete items to the income tax provision in the reporting period in which they occur. We establish accruals for unrecognized tax positions when it is more likely than not that our tax return positions may not be fully sustained. The Company records a valuation allowance for deferred tax assets when, in the opinion of management, it is more likely than not that deferred tax assets will not be realized.
Share-Based Compensation
The Company recognizes expense for its share-based compensation based on the fair value of the awards that are granted. The Company’s share-based compensation plans provide for the granting of stock options and restricted stock. The fair values of stock options are estimated at the date of grant using the Black-Scholes-Merton option valuation model. The use of the Black-Scholes-Merton option valuation model requires the input of subjective assumptions. The fair value of restricted stock awards is based on the fair market value of AAON common stock on the respective grant dates, reduced for the present value of dividends.
Compensation expense is recognized on a straight-line basis over the service period of the related share-based compensation award. Stock options and restricted stock awards, granted to employees, vest at a rate of 20% per year. Restricted stock awards granted to directors historically vest one-third each year or, if granted on or after May 2019, vest over the shorter of directors' remaining elected term or one-third each year. If the employee or director is retirement eligible (as defined by the Long Term Incentive Plans) or becomes retirement eligible during service period of the related share-based compensation award, the service period is the lesser of 1) the grant date, if retirement eligible on grant date, or 2) the period between grant date and retirement eligible date. Forfeitures are accounted for as they occur.
Derivative Instruments
In the course of normal operations, the Company occasionally enters into contracts such as forward priced physical contracts for the purchase of raw materials that qualify for and are designated as normal purchase or normal sale contracts. Such contracts are exempted from the fair value accounting requirements and are accounted for at the time product is purchased or sold under the related contract. The Company does not engage in speculative transactions, nor does the Company hold or issue financial instruments for trading purposes.
Revenue Recognition
On January 1, 2018, we adopted the new accounting standard FASB ASC Topic 606, Revenue from Contracts with Customers, and all the related amendments to all contracts using the retrospective method. The impact at adoption was not material to the consolidated financial statements. The new accounting policy provides results substantially consistent with prior revenue recognition policies.
The Company recognizes revenue when it satisfies the performance obligation in its contracts. Most of the Company’s products are highly customized, cannot be resold to other customers and the cost of rework to be resold is not economical. The Company has a formal cancellation policy and generally does not accept returns on these units. As a result, many of the Company’s products do not have an alternative use and therefore, for these products
we recognize revenue over the time it takes to produce the unit. For all other products that are part sales or standardized units, we satisfy the performance obligation when the control is passed to the customer, generally at time of shipment. Final sales prices are fixed based on purchase orders. Sales allowances and customer incentives are treated as reductions to sales and are provided for based on historical experiences and current estimates. Sales of our products are moderately seasonal with the peak period being July - November of each year.
In addition, the Company presents revenues net of sales tax and net of certain payments to our independent manufacturer representatives (“Representatives”). Representatives are national companies that are in the business of providing HVAC units and other related products and services to customers. The end user customer orders a bundled group of products and services from the Representative and expects the Representative to fulfill the order. Only after the specifications are agreed to by the Representative and the customer, and the decision is made to use an AAON HVAC unit, will we receive notice of the order. We establish the amount we must receive for our HVAC unit (“minimum sales price”), but do not control the total order price that is negotiated by the Representative with the end user customer.
We are responsible for billings and collections resulting from all sales transactions, including those initiated by our Representatives. The Representatives submit the total order price to us for invoicing and collection. The total order price includes our minimum sales price and an additional amount which may include both the Representatives’ fee and amounts due for additional products and services required by the customer. These additional products and services may include controls purchased from another manufacturer to operate the unit, start-up services, and curbs for supporting the unit (“Third Party Products”). All are associated with the purchase of a HVAC unit but may be provided by the Representative or another third party. The Company is under no obligation related to Third Party Products.
The Representatives’ fee and Third Party Products amounts (“Due to Representatives”) are paid only after all amounts associated with the order are collected from the customer. The amount of payments to our representatives was $46.1 million, $47.8 million, and $51.8 million for each of the years ended December 31, 2019, 2018, and 2017, respectively.
The Company also sells extended warranties on parts for various lengths of time ranging from six months to 10 years. Revenue for these separately priced warranties is deferred and recognized on a straight-line basis over the separately priced warranty period.
Insurance Reserves
Under the Company’s insurance programs, coverage is obtained for significant liability limits as well as those risks required to be insured by law or contract. It is the policy of the Company to self-insure a portion of certain expected losses related primarily to workers’ compensation and medical liability. Provisions for losses expected under these programs are recorded based on the Company’s estimates of the aggregate liabilities for the claims incurred.
Product Warranties
A provision is made for the estimated cost of maintaining product warranties to customers at the time the product is sold based upon historical claims experience by product line. The Company records a liability and an expense for estimated future warranty claims based upon historical experience and management’s estimate of the level of future claims. Changes in the estimated amounts recognized in prior years are recorded as an adjustment to the liability and expense in the current year.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Because these estimates and assumptions require significant judgment, actual results could differ from those estimates and could have a significant impact on our results of operations, financial position and cash flows. We reevaluate our estimates and assumptions as needed, but at a minimum on a quarterly basis. The most significant estimates include, but are not limited to, the allowance for doubtful accounts, inventory reserves,
warranty accrual, workers compensation accrual, medical insurance accrual, share-based compensation and income taxes. Actual results could differ materially from those estimates.
4. Revenue Recognition
Disaggregated net sales by major source:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
|
(in thousands)
|
|
|
|
|
Rooftop Units
|
$
|
349,427
|
|
|
$
|
333,105
|
|
|
$
|
317,414
|
|
Condensing Units
|
18,475
|
|
|
18,282
|
|
|
19,276
|
|
Air Handlers
|
24,265
|
|
|
21,905
|
|
|
22,570
|
|
Outdoor Mechanical Rooms
|
1,643
|
|
|
2,408
|
|
|
3,238
|
|
Water Source Heat Pumps
|
25,447
|
|
|
14,660
|
|
|
9,911
|
|
Part Sales
|
33,331
|
|
|
26,732
|
|
|
20,756
|
|
Other
|
16,745
|
|
|
16,855
|
|
|
12,067
|
|
Net Sales
|
$
|
469,333
|
|
|
$
|
433,947
|
|
|
$
|
405,232
|
|
Other sales include freight, extended warranties and miscellaneous revenue.
Disaggregated units sold by major source:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
Rooftop Units
|
14,448
|
|
|
15,273
|
|
|
16,003
|
|
Condensing Units
|
1,738
|
|
|
2,007
|
|
|
2,252
|
|
Air Handlers
|
2,372
|
|
|
2,500
|
|
|
2,577
|
|
Outdoor Mechanical Rooms
|
33
|
|
|
38
|
|
|
64
|
|
Water Source Heat Pumps
|
7,716
|
|
|
5,334
|
|
|
2,485
|
|
Total Units
|
26,307
|
|
|
25,152
|
|
|
23,381
|
|
5. Business Combination
On February 28, 2018, we closed on the purchase of substantially all of the assets of WattMaster Controls, Inc. (“WattMaster”). The assets acquired consisted primarily of intellectual property, receivables, inventory and fixed assets. The Company also hired substantially all of the WattMaster employees. These assets and workforce will allow us to accelerate the development of our own electronic controllers for air distribution systems. We funded the business combination with available cash of $6.0 million. In May 2018, we paid the final working capital settlement of $0.4 million with available cash. We have included the results of WattMaster’s operations in our consolidated financial statements beginning March 1, 2018.
The following table presents the allocation of the consideration paid to the assets acquired and liabilities assumed, based on their fair values, in the acquisition of WattMaster described above:
|
|
|
|
|
|
|
(in thousands)
|
|
Accounts receivable
|
$
|
1,082
|
|
Inventories
|
1,380
|
|
Property, plant and equipment
|
340
|
|
Intellectual property
|
700
|
|
Goodwill
|
3,229
|
|
Assumed current liabilities
|
(354)
|
|
Consideration paid
|
$
|
6,377
|
|
Goodwill represents the excess of the consideration paid for the acquired businesses over the fair value of the individual assets acquired, net of liabilities assumed. Goodwill represents a premium paid to acquire the skilled workforce of the business acquired and is deductible for federal income tax purposes.
6. Leases
We adopted ASU No. 2016-02, Leases (Topic 842), as amended, as of January 1, 2019, using the transition method, which becomes effective upon the date of adoption. The transition method allows entities to initially apply the new leases standard at the adoption date (January 1, 2019) and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification. We have also elected the short-term lease measurement and recognition exemption which does not require balance sheet presentation for short-term leases. The Company historically does not enter into numerous or material lease agreements to support its manufacturing operations. Furthermore, any lease agreements entered into are usually less than a year and for leases on non material assets such as warehouse vehicles and office equipment.
Adoption of the new standard resulted in the recording of additional lease right of use assets and lease liabilities of approximately $1.8 million as of January 1, 2019, which mostly relates to the multi-year facility lease assumed in the 2018 WattMaster acquisition (Note 5). The cumulative-effect adjustment to the opening balance was immaterial to the consolidated financial statements as a whole. The standard did not materially impact our consolidated net earnings or cash flows.
7. Accounts Receivable
Accounts receivable and the related allowance for doubtful accounts are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2019
|
|
2018
|
|
(in thousands)
|
|
|
Accounts receivable
|
$
|
67,752
|
|
|
$
|
54,342
|
|
Less: Allowance for doubtful accounts
|
(353)
|
|
|
(264)
|
|
Total, net
|
$
|
67,399
|
|
|
$
|
54,078
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
Allowance for doubtful accounts:
|
(in thousands)
|
|
|
|
|
Balance, beginning of period
|
$
|
264
|
|
|
$
|
119
|
|
|
$
|
90
|
|
Provisions for losses on accounts receivable, net of adjustments
|
91
|
|
|
174
|
|
|
179
|
|
Accounts receivable written off, net of recoveries
|
(2)
|
|
|
(29)
|
|
|
(150)
|
|
Balance, end of period
|
$
|
353
|
|
|
$
|
264
|
|
|
$
|
119
|
|
8. Inventories
The components of inventories and the related changes in the allowance for excess and obsolete inventories are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2019
|
|
2018
|
|
(in thousands)
|
|
|
Raw materials
|
$
|
68,842
|
|
|
$
|
67,995
|
|
Work in process
|
1,825
|
|
|
4,060
|
|
Finished goods
|
5,578
|
|
|
6,767
|
|
|
76,245
|
|
|
78,822
|
|
Less: Allowance for excess and obsolete inventories
|
(2,644)
|
|
|
(1,210)
|
|
Total, net
|
$
|
73,601
|
|
|
$
|
77,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
Allowance for excess and obsolete inventories:
|
(in thousands)
|
|
|
|
|
Balance, beginning of period
|
$
|
1,210
|
|
|
$
|
1,118
|
|
|
$
|
1,382
|
|
Provisions for excess and obsolete inventories
|
1,454
|
|
|
152
|
|
|
102
|
|
Inventories written off
|
(20)
|
|
|
(60)
|
|
|
(366)
|
|
Balance, end of period
|
$
|
2,644
|
|
|
$
|
1,210
|
|
|
$
|
1,118
|
|
9. Intangible Assets
Our intangible assets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2019
|
|
2018
|
|
(in thousands)
|
|
|
Intellectual property
|
$
|
700
|
|
|
$
|
700
|
|
Less: Accumulated amortization
|
(428)
|
|
|
(194)
|
|
Total, net
|
$
|
272
|
|
|
$
|
506
|
|
Amortization expense recorded in cost of sales is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
|
(in thousands)
|
|
|
|
|
Amortization expense
|
$
|
234
|
|
|
$
|
194
|
|
|
$
|
—
|
|
10. Note Receivable
In connection with the closure of our Canadian facility on May 18, 2009, we sold land and a building in September 2010 and assumed a note receivable from the borrower secured by the property. The C$1.1 million, 15 year note has an interest rate of 4.0% and is payable to us monthly, and has a C$0.6 million balloon payment due in October 2025. Interest payments are recognized in interest income.
We evaluate the note for impairment on a quarterly basis. We determine the note receivable to be impaired if we are uncertain of its collectability based on the contractual terms. At December 31, 2019 and 2018, there was no impairment.
11. Supplemental Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
Supplemental disclosures:
|
(in thousands)
|
|
|
|
|
Interest paid
|
$
|
—
|
|
|
$
|
6
|
|
|
$
|
—
|
|
Income taxes paid, net
|
2,172
|
|
|
14,979
|
|
|
16,951
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
Non-cash capital expenditures
|
863
|
|
|
481
|
|
|
832
|
|
|
|
|
|
|
|
12. Warranties
The Company has warranties with various terms from 18 months for parts to 25 years for certain heat exchangers. The Company has an obligation to replace parts if conditions under the warranty are met. A provision is made for estimated warranty costs at the time the related products are sold based upon the warranty period, historical trends, new products and any known identifiable warranty issues.
Changes in the warranty accrual are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
Warranty accrual:
|
(in thousands)
|
|
|
|
|
Balance, beginning of period
|
$
|
11,421
|
|
|
$
|
10,483
|
|
|
$
|
7,936
|
|
Payments made
|
(6,816)
|
|
|
(7,869)
|
|
|
(8,686)
|
|
Provisions
|
8,047
|
|
|
9,669
|
|
|
11,233
|
|
Change in estimate
|
—
|
|
|
(862)
|
|
|
—
|
|
Balance, end of period
|
$
|
12,652
|
|
|
$
|
11,421
|
|
|
$
|
10,483
|
|
|
|
|
|
|
|
Warranty expense:
|
$
|
8,047
|
|
|
$
|
8,807
|
|
|
$
|
11,233
|
|
The change in estimate relates to the Company’s failure rate calculation. During 2018, in reviewing claims data, the Company noted specific claims that were the result of an isolated incident and not representative of the Company’s historical performance or representative of expected future claims. As such, these claims were accounted for as a specific accrual for warranty liability and excluded from our failure rate that the Company utilizes in estimating future claims.
13. Accrued Liabilities
At December 31, accrued liabilities were comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2019
|
|
2018
|
|
(in thousands)
|
|
|
Warranty
|
$
|
12,652
|
|
|
$
|
11,421
|
|
Due to representatives
|
11,538
|
|
|
11,024
|
|
Payroll
|
5,058
|
|
|
4,182
|
|
Profit sharing
|
1,721
|
|
|
1,255
|
|
Workers' compensation
|
522
|
|
|
567
|
|
Medical self-insurance
|
707
|
|
|
1,207
|
|
Customer prepayments
|
4,627
|
|
|
2,367
|
|
Donations
|
354
|
|
|
150
|
|
Employee vacation time
|
3,804
|
|
|
3,173
|
|
Other
|
3,286
|
|
|
1,529
|
|
Total
|
$
|
44,269
|
|
|
$
|
36,875
|
|
14. Revolving Credit Facility
Our revolving credit facility (“BOK Revolver”), as amended, provides for maximum borrowings of $30.0 million which is provided by BOKF, NA dba Bank of Oklahoma (“Bank of Oklahoma”). Under the line of credit, there was one standby letter of credit totaling $1.7 million as of December 31, 2019. Borrowings available under the revolving credit facility at December 31, 2019, were $28.3 million. Interest on borrowings is payable monthly at LIBOR plus 2.0%. No fees are associated with the unused portion of the committed amount. As of December 31, 2019 and 2018, we had no balance outstanding under our revolving credit facility. The revolving credit facility expires on July 26, 2021. At December 31, 2019 and 2018, the weighted average interest rate of our revolving credit facility was 4.3% and 4.2%, respectively.
At December 31, 2019, we were in compliance with our financial covenants. These covenants require that we meet certain parameters related to our tangible net worth and total liabilities to tangible net worth ratio. At December 31, 2019 our tangible net worth was $290.1 million, which meets the requirement of being at or above $175.0 million. Our total liabilities to tangible net worth ratio was 0.3 to 1.0, which meets the requirement of not being above 2 to 1.
On October 24, 2019 we amended the BOK Revolver to allow for the occurrence of transactions associated with the New Markets Tax Credit transaction (Note 19). This amendment also removed section 8.1.4 which required our Chief Executive Officer, Norman Asbjornson, to maintain ownership of 25% of the Company. As Mr. Norman Asbjornson does not currently, and has not for several years maintained this level of ownership, a limited waiver of default was also added to the amendment.
15. Income Taxes
The provision (benefit) for income taxes consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
|
(in thousands)
|
|
|
|
|
Current
|
$
|
7,282
|
|
|
$
|
10,530
|
|
|
$
|
21,543
|
|
Deferred
|
6,038
|
|
|
2,641
|
|
|
(749)
|
|
Total
|
$
|
13,320
|
|
|
$
|
13,171
|
|
|
$
|
20,794
|
|
The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate before the provision for income taxes.
The reconciliation of the federal statutory income tax rate to the effective income tax rate is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
|
|
|
|
|
|
Federal statutory rate
|
21
|
%
|
|
21
|
%
|
|
35
|
%
|
State income taxes, net of federal benefit
|
5
|
%
|
|
6
|
%
|
|
5
|
%
|
Remeasurement of deferred taxes
|
—
|
%
|
|
—
|
%
|
|
(5)
|
%
|
Domestic manufacturing deduction
|
—
|
%
|
|
—
|
%
|
|
(3)
|
%
|
Excess tax benefits
|
(3)
|
%
|
|
(2)
|
%
|
|
(3)
|
%
|
Return to provision
|
(1)
|
%
|
|
—
|
%
|
|
—
|
%
|
Oklahoma amended tax returns
|
(1)
|
%
|
|
—
|
%
|
|
—
|
%
|
Other
|
(1)
|
%
|
|
(1)
|
%
|
|
(1)
|
%
|
|
20
|
%
|
|
24
|
%
|
|
28
|
%
|
The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. Major changes under the Act include the following:
•Reducing the corporate rate to 21 percent
•Doubling bonus depreciation to 100 percent for five years
•Further limitations on executive compensation deductions
•Eliminating the domestic manufacturing deduction
As a result of these changes, the Company adjusted its deferred tax assets and liabilities in 2017 using the newly enacted rates for the periods when they are expected to be realized. The remeasurement in 2017 resulted in a benefit to income taxes of $3.7 million. The new bonus depreciation provisions resulted in the Company taking $3.2 million of bonus depreciation in 2017. The Company also has historically taken the domestic manufacturing deduction. The Company will no longer receive the benefit of this deduction which typically has lowered our effective tax rate by 3.0%.
The Company sometimes has executive compensation that exceeds the $1.0 million limitation. Typically the limit is exceeded due to the volume of stock activity performed by the executives during the year. The limit could also be exceeded by the Chief Executive Officer receiving the maximum amount under our executive annual cash incentive bonus plan. Any compensation that exceeded this limitation in 2018 and in the future will be a permanent difference and cause an increase to our income tax provision.
Upon completion of the Company's 2018 tax return in 2019, the Company recorded additional benefit due to higher than expected research and development credit of $0.6 million. Additionally in 2019, the Company determined it could take advantage of an additional 1% tax credit in Oklahoma for years in which the Company's location was deemed to be within an enterprise zone. The additional OK Credit for being in an enterprise zone, or otherwise allowable under Oklahoma law, resulted in a benefit of $1.2 million.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for income tax purposes.
The significant components of the Company’s deferred tax assets and liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2019
|
|
2018
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax assets (liabilities):
|
|
|
|
Accounts receivable and inventory reserves
|
$
|
835
|
|
|
$
|
401
|
|
Warranty accrual
|
3,523
|
|
|
3,105
|
|
Other accruals
|
1,919
|
|
|
2,445
|
|
Share-based compensation
|
3,906
|
|
|
3,264
|
|
Donations
|
194
|
|
|
80
|
|
Other, net
|
2,140
|
|
|
851
|
|
Total deferred income tax assets
|
12,517
|
|
|
10,146
|
|
Property & equipment
|
(27,814)
|
|
|
(19,405)
|
|
Total deferred income tax liabilities
|
$
|
(27,814)
|
|
|
$
|
(19,405)
|
|
Net deferred income tax liabilities
|
$
|
(15,297)
|
|
|
$
|
(9,259)
|
|
We file income tax returns in the U.S., state and foreign income tax returns jurisdictions. We are subject to U.S. examinations for tax years 2016 to present, and to non-U.S. income tax examinations for the tax years 2015 to present. In addition, we are subject to state and local income tax examinations for tax years 2015 to present. The Company continues to evaluate its need to file returns in various state jurisdictions. Any interest or penalties would be recognized as a component of income tax expense.
16. Share-Based Compensation
On May 22, 2007, our stockholders adopted a Long-Term Incentive Plan (“LTIP”) which provided an additional 3.3 million shares that could be granted in the form of stock options, stock appreciation rights, restricted stock awards, performance units and performance awards, in addition to the shares from the previous plan, the 1992 Plan. Since inception of the LTIP, non-qualified stock options and restricted stock awards have been granted with a five year vesting schedule. Under the LTIP, the exercise price of shares granted may not be less than 100% of the fair market value at the date of the grant.
On May 24, 2016, our stockholders adopted the 2016 Long-Term Incentive Plan (“2016 Plan”) which provides for approximately 6.4 million shares, comprised of 3.4 million new shares provided for under the 2016 Plan, approximately 0.4 million shares that were available for issuance under the previous LTIP that are now authorized for issuance under the 2016 Plan, and an additional 2.6 million shares that were approved by the stockholders on May 15, 2018. Under the 2016 Plan, shares can be granted in the form of stock options, stock appreciation rights, restricted stock awards, performance awards, dividend equivalent rights, and other awards. Under the 2016 Plan, the exercise price of shares granted may not be less than 100% of the fair market value at the date of the grant. The 2016 Plan is administered by the Compensation Committee of the Board of Directors or such other committee of the Board of Directors as is designated by the Board of Directors (the “Committee”). Membership on the Committee is limited to independent directors. The Committee may delegate certain duties to one or more officers of the Company as provided in the 2016 Plan. The Committee determines the persons to whom awards are to be made, determines the type, size and terms of awards, interprets the 2016 Plan, establishes and revises rules and regulations relating to the 2016 Plan and makes any other determinations that it believes necessary for the administration of the 2016 Plan.
The following weighted average assumptions were used to determine the fair value of the stock options granted on the original grant date for expense recognition purposes for options granted during December 31, 2019, 2018, and 2017 using a Black Scholes-Merton Model:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
|
|
|
|
|
|
Director and Officers:
|
|
|
|
|
|
Expected dividend yield
|
$
|
0.32
|
|
|
$
|
0.26
|
|
|
$
|
0.26
|
|
Expected volatility
|
29.54
|
%
|
|
29.73
|
%
|
|
30.81
|
%
|
Risk-free interest rate
|
2.40
|
%
|
|
2.20
|
%
|
|
1.90
|
%
|
Expected life (in years)
|
5.00
|
|
5.00
|
|
5.00
|
Employees:
|
|
|
|
|
|
Expected dividend yield
|
$
|
0.32
|
|
|
$
|
0.26
|
|
|
$
|
0.26
|
|
Expected volatility
|
29.54
|
%
|
|
29.82
|
%
|
|
30.67
|
%
|
Risk-free interest rate
|
2.38
|
%
|
|
2.51
|
%
|
|
1.89
|
%
|
Expected life (in years)
|
5.00
|
|
5.00
|
|
5.00
|
The expected term of the options is based on evaluations of historical and expected future employee exercise behavior. The risk-free interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected life at the grant date. Volatility is based on historical volatility of our stock over time periods equal to the expected life at grant date.
The following is a summary of stock options vested and exercisable as of December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average
|
|
Weighted
|
|
|
Range of
|
|
Number
|
|
Remaining
|
|
Average
|
|
|
Exercise
|
|
of
|
|
Contractual
|
|
Exercise
|
|
Intrinsic
|
Prices
|
|
Shares
|
|
Life
|
|
Price
|
|
Value
|
|
|
|
|
|
|
|
|
(in thousands)
|
$7.18 - 34.10
|
|
451,077
|
|
|
5.44
|
|
$
|
23.47
|
|
|
$
|
11,702
|
|
$34.15 - 40.87
|
|
86,122
|
|
|
7.82
|
|
36.33
|
|
|
1,126
|
|
$41.37 - 50.68
|
|
1,750
|
|
|
1.81
|
|
41.59
|
|
|
14
|
|
Total
|
|
538,949
|
|
|
5.81
|
|
$
|
25.58
|
|
|
$
|
12,842
|
|
The following is a summary of stock options vested and exercisable as of December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average
|
|
Weighted
|
|
|
Range of
|
|
Number
|
|
Remaining
|
|
Average
|
|
|
Exercise
|
|
of
|
|
Contractual
|
|
Exercise
|
|
Intrinsic
|
Prices
|
|
Shares
|
|
Life
|
|
Price
|
|
Value
|
|
|
|
|
|
|
|
|
(in thousands)
|
$5.67 - 32.80
|
|
456,223
|
|
|
5.72
|
|
$
|
20.25
|
|
|
$
|
6,757
|
|
$32.85 - 34.10
|
|
42,552
|
|
|
7.47
|
|
33.95
|
|
|
47
|
|
$34.15 - 42.94
|
|
17,202
|
|
|
8.30
|
|
35.19
|
|
|
7
|
|
Total
|
|
515,977
|
|
|
5.95
|
|
$
|
21.88
|
|
|
$
|
6,811
|
|
The following is a summary of stock options vested and exercisable as of December 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average
|
|
Weighted
|
|
|
Range of
|
|
Number
|
|
Remaining
|
|
Average
|
|
|
Exercise
|
|
of
|
|
Contractual
|
|
Exercise
|
|
Intrinsic
|
Prices
|
|
Shares
|
|
Life
|
|
Price
|
|
Value
|
|
|
|
|
|
|
|
|
(in thousands)
|
$4.54 - 22.76
|
|
424,130
|
|
|
4.36
|
|
$
|
12.41
|
|
|
$
|
10,303
|
|
$23.57 - 32.85
|
|
107,456
|
|
|
8.31
|
|
30.10
|
|
|
709
|
|
$32.90 - 37.30
|
|
25,725
|
|
|
9.19
|
|
34.07
|
|
|
68
|
|
Total
|
|
557,311
|
|
|
5.35
|
|
$
|
16.82
|
|
|
$
|
11,080
|
|
A summary of option activity under the plans is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average
Exercise
|
Options
|
Shares
|
|
Price
|
|
|
|
|
Outstanding at December 31, 2018
|
2,445,849
|
|
|
$
|
30.77
|
|
Granted
|
1,975,820
|
|
|
41.50
|
|
Exercised
|
(444,389)
|
|
|
28.40
|
|
Forfeited or Expired
|
(350,233)
|
|
|
36.78
|
|
Outstanding at December 31, 2019
|
3,627,047
|
|
|
$
|
36.32
|
|
Exercisable at December 31, 2019
|
538,949
|
|
|
$
|
25.58
|
|
The total pre-tax compensation cost related to unvested stock options not yet recognized as of December 31, 2019 is $19.4 million and is expected to be recognized over a weighted-average period of 3.58 years.
The total intrinsic value of options exercised during the years ended December 31, 2019, 2018, and 2017 was $8.1 million, $5.4 million, and $4.5 million, respectively. The cash received from options exercised during the year ended December 31, 2019, 2018, and 2017 was $12.6 million, $5.0 million, and $2.3 million, respectively. The impact of these cash receipts is included in financing activities in the accompanying Consolidated Statements of Cash Flows.
A summary of the unvested restricted stock awards is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average
Grant date
|
Restricted stock
|
Shares
|
|
Fair Value
|
|
|
|
|
Unvested at December 31, 2018
|
292,450
|
|
|
$
|
28.54
|
|
Granted
|
113,018
|
|
|
40.98
|
|
Vested
|
(122,278)
|
|
|
26.38
|
|
Forfeited
|
(15,706)
|
|
|
34.71
|
|
Unvested at December 31, 2019
|
267,484
|
|
|
$
|
34.42
|
|
At December 31, 2019, unrecognized compensation cost related to unvested restricted stock awards was approximately $4.6 million which is expected to be recognized over a weighted average period of 2.64 years.
A summary of share-based compensation is as follows for the years ended December 31, 2019, 2018, and 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
Grant date fair value of awards during the period:
|
(in thousands)
|
|
|
|
|
Options
|
$
|
20,442
|
|
|
$
|
12,932
|
|
|
$
|
3,699
|
|
Restricted stock
|
4,631
|
|
|
3,609
|
|
|
4,217
|
|
Total
|
$
|
25,073
|
|
|
$
|
16,541
|
|
|
$
|
7,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
Share-based compensation expense:
|
(in thousands)
|
|
|
|
|
|
Options
|
$
|
9,145
|
|
|
$
|
5,344
|
|
|
$
|
3,095
|
|
Restricted stock
|
2,654
|
|
|
2,518
|
|
|
3,218
|
|
Total
|
$
|
11,799
|
|
|
$
|
7,862
|
|
|
$
|
6,313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
Income tax benefit related to share-based compensation:
|
(in thousands)
|
|
|
|
|
|
Options
|
$
|
1,197
|
|
|
$
|
980
|
|
|
$
|
1,413
|
|
Restricted stock
|
575
|
|
|
353
|
|
|
1,051
|
|
Total
|
$
|
1,772
|
|
|
$
|
1,333
|
|
|
$
|
2,464
|
|
17. Employee Benefits
Defined Contribution Plan - 401(k)
We sponsor a defined contribution plan (the “Plan”). Eligible employees may make contributions in accordance with the Plan and IRS guidelines. In addition to the traditional 401(k), eligible employees are given the option of making an after-tax contribution to a Roth 401(k) or a combination of both. The Plan provides for automatic enrollment and for an automatic increase to the deferral percentage at January 1st of each year and each year thereafter. Eligible employees are automatically enrolled in the Plan at a 6% deferral rate and currently contributing employees deferral rates will be increased to 6% unless their current rate is above 6% or the employee elects to decline the automatic enrollment or increase. Administrative expenses are paid for by Plan participants. The Company paid no administrative expenses for the years ended 2019, 2018 and 2017.
The Company matches 175% up to 6% of employee contributions of eligible compensation. Additionally, Plan participant forfeitures are used to reduce the cost of the Company contributions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
|
(in thousands)
|
|
|
|
|
Contributions made to the defined contribution plan
|
$
|
7.0
|
|
|
$
|
8.1
|
|
|
$
|
6.1
|
|
Profit Sharing Bonus Plan
We maintain a discretionary profit sharing bonus plan under which approximately 10% of pre-tax profit is paid to eligible employees on a quarterly basis in order to reward employee productivity. Eligible employees are regular full-time employees who are actively employed and working on the first and last days of the calendar quarter and who were employed full-time for at least three full months prior to the beginning of the calendar quarter, excluding the Company's senior leadership team.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
|
(in thousands)
|
|
|
|
|
Profit sharing bonus plan expense
|
$
|
7.4
|
|
|
$
|
6.2
|
|
|
$
|
8.4
|
|
Employee Medical Plan
We self-insure for our employee's health insurance. Eligible employees are regular full-time employees who are actively employed and working. Participants are expected to pay a portion of the premium costs for coverage of the benefits provided under the Plan. We estimate our self-insurance liabilities using an analysis provided by our claims administrator and our historical claims experience. In addition, the Company matches 175% of a participating employee's allowed contributions to a qualified health saving account to assist employees with our heath insurance plan deductibles.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
|
(in thousands)
|
|
|
|
|
Medical claim payments
|
$
|
5.9
|
|
|
$
|
5.9
|
|
|
$
|
4.8
|
|
Heath saving account payments
|
3.3
|
|
|
2.9
|
|
|
2.5
|
|
18. Stockholders’ Equity
Stock Repurchase
The Board has authorized three stock repurchase programs for the Company. The Company may purchase shares on the open market from time to time, up to a total of 5.7 million shares. The Board must authorize the timing and amount of these purchases and all repurchases are in accordance with the rules and regulations of the SEC allowing the Company to repurchase shares from the open market.
Our open market repurchase programs are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agreement Execution Date
|
|
Authorized Repurchase $
|
|
Expiration Date
|
June 2, 2016
|
|
$25 million
|
|
|
April 15, 2017
|
May 16, 2018
|
|
$15 million
|
|
|
March 1, 2019
|
March 5, 2019
|
|
$20 million
|
|
|
March 4, 2020
|
The Company also has a stock repurchase arrangement by which employee-participants in our 401(k) savings and investment plan are entitled to have shares in AAON, Inc. stock in their accounts sold to the Company. The maximum number of shares to be repurchased is contingent upon the number of shares sold by employee-participants.
Lastly, the Company repurchases shares of AAON, Inc. stock from certain of its directors and employees for payment of statutory tax withholdings on stock transactions. All other repurchases from directors or employees are contingent upon Board approval. All repurchases are done at current market prices.
Our repurchase activity is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
2018
|
|
|
|
2017
|
|
|
|
|
(in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
Program
|
|
Shares
|
Total $
|
$ per share
|
|
Shares
|
Total $
|
$ per share
|
|
Shares
|
Total $
|
$ per share
|
Open market
|
|
5,799
|
|
$
|
200
|
|
$
|
34.46
|
|
|
252,272
|
|
$
|
8,374
|
|
$
|
33.19
|
|
|
8,676
|
|
$
|
284
|
|
$
|
32.69
|
|
401(k)
|
|
419,963
|
|
19,386
|
|
46.16
|
|
|
497,753
|
|
18,472
|
|
37.11
|
|
|
467,580
|
|
16,336
|
|
34.94
|
|
Directors & employees
|
|
28,668
|
|
1,207
|
|
42.11
|
|
|
33,751
|
|
1,097
|
|
32.49
|
|
|
45,878
|
|
1,614
|
|
35.19
|
|
Total
|
|
454,430
|
|
$
|
20,793
|
|
$
|
45.76
|
|
|
783,776
|
|
$
|
27,943
|
|
$
|
35.65
|
|
|
522,134
|
|
$
|
18,234
|
|
$
|
34.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inception to Date
|
|
|
|
|
(in thousands, except share and per share data)
|
|
|
Program
|
|
Shares
|
Total $
|
$ per share
|
Open market
|
|
4,101,566
|
|
$
|
69,806
|
|
$
|
17.02
|
|
401(k)
|
|
7,467,739
|
|
119,927
|
|
16.06
|
|
Directors & employees
|
|
1,981,929
|
|
19,582
|
|
9.88
|
|
Total
|
|
13,551,234
|
|
$
|
209,315
|
|
$
|
15.45
|
|
Dividends
At the discretion of the Board of Directors, we pay semi-annual cash dividends. Board approval is required to determine the date of declaration and amount for each semi-annual dividend payment.
Our recent dividends are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Declaration Date
|
Record Date
|
Payment Date
|
Dividend per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 16, 2017
|
June 9, 2017
|
July 7, 2017
|
$0.13
|
|
November 7, 2017
|
November 30, 2017
|
December 21, 2017
|
$0.13
|
|
May 18, 2018
|
June 8, 2018
|
July 6, 2018
|
$0.16
|
|
November 8, 2018
|
November 29, 2018
|
December 20, 2018
|
$0.16
|
|
May 20, 2019
|
June 3, 2019
|
July 1, 2019
|
$0.16
|
|
November 6, 2019
|
November 27, 2019
|
December 18, 2019
|
$0.16
|
|
We paid cash dividends of $16.6 million, $16.7 million, and $13.7 million in 2019, 2018, and 2017, respectively.
19. New Markets Tax Credit
On October 24, 2019, the Company entered into a transaction with a subsidiary of an unrelated third-party financial institution (the “Investor”) and a certified Community Development Entity under a qualified New Markets Tax Credit (“NMTC”) program pursuant to Section 45D of the Internal Revenue Code of 1986, as amended, related to an investment in plant and equipment to facilitate the expansion of our Longview, Texas manufacturing operations (the “Project”). In connection with the NMTC transaction, the Company received a $23.0 million NMTC allocation for the Project and secured low interest financing and the potential for future debt forgiveness related to the Project.
Upon closing of the NMTC transaction, the Company provided an aggregate of approximately $15.9 million to the Investor, in the form of a loan receivable, with a term of twenty-five years, bearing an interest rate of 1.0%. This $15.9 million in proceeds plus capital contributed from the Investor was used to make an aggregate $22.5 million loan to a subsidiary of the Company. This financing arrangement is secured by equipment at the Company's Longview, Texas facilities and a guarantee from the Company, including an unconditional guarantee of NMTCs.
This transaction also includes a put/call feature that either of which can be exercised at the end of the seven-year compliance period. The Investor may exercise its put option or the Company can exercise the call, both of which could serve to trigger forgiveness of a portion of the debt. The value attributable to the put/call is nominal. The
Investor's interest of $6.3 million is recorded in New market tax credit obligation on the consolidated balance sheet. The Company incurred approximately $0.3 million of debt issuance costs related to the above transactions, which are being amortized over the life of the transaction.
The Investor is subject to 100 percent recapture of the NMTC it receives for a period of seven years, as provided in the Internal Revenue Code and applicable U.S. Treasury regulations in the event that the financing facility of the Borrower under the transaction (AAON Coil Products, Inc.) becomes ineligible for NMTC treatment per the Internal Revenue Code requirements. The Company is required to be in compliance with various regulations and contractual provisions that apply to the NMTC arrangement. Noncompliance with applicable requirements could result in the Investor’s projected tax benefits not being realized and, therefore, require the Company to indemnify the Investor for any loss or recapture of the NMTC related to the financing until such time as the recapture provisions have expired under the applicable statute of limitations. The Company does not anticipate any credit recapture will be required in connection with this financing arrangement.
The Investor and its majority owned community development entity are considered VIEs and the Company is the primary beneficiary of the VIEs. This conclusion was reached based on the following:
•the ongoing activities of the VIEs--collecting and remitting interest and fees and NMTC compliance--were all considered in the initial design and are not expected to significantly affect performance throughout the life of the VIE;
•contractual arrangements obligate the Company to comply with NMTC rules and regulations and provide various other guarantees to the Investor and community development entity;
•the Investor lacks a material interest in the underling economics of the project; and
•the Company is obligated to absorb losses of the VIEs.
Because the Company is the primary beneficiary of the VIEs, they have been included in the consolidated financial statements. There are no other assets, liabilities or transaction in these VIEs outside of the financing transactions executed as part of the NMTC arrangement.
20. Commitments and Contingencies
We are subject to various claims and legal actions that arise in the ordinary course of business. We closely monitor these claims and legal actions and frequently consult with our legal counsel to determine whether they may, when resolved, have a material adverse effect on our financial position, results of operations or cash flows and we accrue and/or disclose loss contingencies as appropriate. We have concluded that the likelihood is remote that the ultimate resolution of any pending litigation or claims will be material or have a material adverse effect on the Company’s business, financial position, results of operations or cash flows.
We are occasionally party to short-term, cancellable and occasionally non-cancellable, fixed price contracts with major suppliers for the purchase of raw material and component parts. We expect to receive delivery of raw materials for use in our manufacturing operations. These contracts are not accounted for as derivative instruments because they meet the normal purchase and normal sales exemption. At December 31, 2019, we had one material contractual purchase obligation for approximately $2.5 million that expires in December 2020.
21. New Accounting Pronouncements
Changes to U.S. GAAP are established by the FASB in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification.
We consider the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial statements and notes thereto.
In December 2019, the FASB issued ASU 2019-12, Income Taxes: Simplifying the Accounting for Income Taxes. The ASU includes simplification of accounting for income taxes for franchise taxes, step up in tax basis for goodwill as part of a business combination and interim reporting of enacted changes in tax laws. The ASU is effective for the
Company beginning after December 15, 2020. We do not expect ASU 2019-12 will have a material effect on our consolidated financial statements and notes thereto.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurements: Changes to the Disclosure Requirement for Fair Value Measurements. The ASU includes additional disclosure requirements for unrealized gains and losses for Level 3 fair value measurement and significant observable inputs used to develop Level 3 fair value measurements. The ASU is effective for the Company beginning after December 15, 2019. We do not expect ASU 2018-13 will have a material effect on our consolidated financial statements and notes thereto.
22. Earnings Per Share
Basic net income per share is calculated by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted net income per share assumes the conversion of all potentially dilutive securities and is calculated by dividing net income by the sum of the weighted average number of shares of common stock outstanding plus all potentially dilutive securities. Dilutive common shares consist primarily of stock options and restricted stock awards.
The following table sets forth the computation of basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
Numerator:
|
(in thousands, except share and per share data)
|
|
|
|
|
Net income
|
$
|
53,711
|
|
|
$
|
42,329
|
|
|
$
|
53,830
|
|
Denominator:
|
|
|
|
|
|
Basic weighted average shares
|
52,079,865
|
|
|
52,284,616
|
|
|
52,572,496
|
|
Effect of dilutive stock options and restricted stock
|
555,550
|
|
|
383,323
|
|
|
506,238
|
|
Diluted weighted average shares
|
52,635,415
|
|
|
52,667,939
|
|
|
53,078,734
|
|
Earnings per share:
|
|
|
|
|
|
Basic
|
$
|
1.03
|
|
|
$
|
0.81
|
|
|
$
|
1.02
|
|
Dilutive
|
$
|
1.02
|
|
|
$
|
0.80
|
|
|
$
|
1.01
|
|
Anti-dilutive shares:
|
|
|
|
|
|
Shares
|
1,868,087
|
|
|
1,920,313
|
|
|
785,825
|
|
23. Related Parties
The Company purchases some supplies from an entity controlled by the Company’s CEO. The Company sometimes makes sales to the CEO for parts. Additionally, the Company sells units to an entity owned by a member of the President's immediate family. This entity is also one of the Company’s Representatives and as such, the Company makes payments to the entity for third party products.
Following is a summary of transactions and balances with affiliates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
|
2019
|
2018
|
2017
|
|
|
(in thousands)
|
|
|
Sales to affiliates
|
|
$
|
886
|
|
$
|
1,442
|
|
$
|
1,579
|
|
Payments to affiliates
|
|
332
|
|
342
|
|
432
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
2019
|
2018
|
|
|
|
(in thousands)
|
|
Due from affiliates
|
|
|
$
|
22
|
|
$
|
79
|
|
Due to affiliates
|
|
|
2
|
|
—
|
|
24. Subsequent Events
Subsequent to December 31, 2019 and through February 24, 2020, the Company repurchased 11,144 shares for $0.6 million from employees for payment of statutory tax withholdings on stock transactions and 73,780 shares for $3.9 million from our 401(k) savings and investment plan.
25. Quarterly Results (Unaudited) (As Corrected)
The following is a summary of the quarterly results of operations for the years ended December 31, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
|
|
|
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
(in thousands, except per share data)
|
|
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
Net sales
|
$
|
113,822
|
|
|
$
|
119,437
|
|
|
$
|
113,500
|
|
|
$
|
122,574
|
|
Gross profit
|
25,430
|
|
|
30,204
|
|
|
27,410
|
|
|
36,381
|
|
Net income
|
8,757
|
|
|
13,391
|
|
|
14,290
|
|
|
17,273
|
|
Earnings per share:
|
|
|
|
|
|
|
|
Basic
|
$
|
0.17
|
|
|
$
|
0.26
|
|
|
$
|
0.27
|
|
|
$
|
0.33
|
|
Diluted
|
$
|
0.17
|
|
|
$
|
0.26
|
|
|
$
|
0.26
|
|
|
$
|
0.33
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
Net sales
|
$
|
99,082
|
|
|
$
|
109,588
|
|
|
$
|
112,937
|
|
|
$
|
112,340
|
|
Gross profit
|
15,196
|
|
|
27,661
|
|
|
32,830
|
|
|
27,846
|
|
Net income
|
3,154
|
|
|
11,697
|
|
|
14,514
|
|
|
12,964
|
|
Earnings per share:
|
|
|
|
|
|
|
|
Basic
|
$
|
0.06
|
|
|
$
|
0.22
|
|
|
$
|
0.28
|
|
|
$
|
0.25
|
|
Diluted
|
$
|
0.06
|
|
|
$
|
0.22
|
|
|
$
|
0.27
|
|
|
$
|
0.25
|
|
The following tables reconcile our previously reported quarterly financial information with the corrected quarterly financial information as of and for the three months ended March 31, 2019 and 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2019
|
|
|
|
|
|
Three Months Ended March 31, 2018
|
|
|
|
|
|
Previously Reported
|
|
Corrections
|
|
As Corrected
|
|
Previously Reported
|
|
Corrections
|
|
As Corrected
|
|
(in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
113,822
|
|
|
$
|
—
|
|
|
$
|
113,822
|
|
|
$
|
99,082
|
|
|
$
|
—
|
|
|
|
$
|
99,082
|
|
Cost of sales
|
88,029
|
|
|
363
|
|
(a)
|
|
88,392
|
|
|
83,692
|
|
|
194
|
|
(a)
|
|
83,886
|
|
Gross profit
|
25,793
|
|
|
(363)
|
|
|
25,430
|
|
|
15,390
|
|
|
(194)
|
|
|
|
15,196
|
|
Selling, general and administrative expenses
|
11,001
|
|
|
2,676
|
|
(b)
|
|
13,677
|
|
|
10,219
|
|
|
1,432
|
|
(b)
|
|
11,651
|
|
Loss (gain) on disposal of assets
|
284
|
|
|
—
|
|
|
284
|
|
|
(7)
|
|
|
—
|
|
|
|
(7)
|
|
Income from operations
|
14,508
|
|
|
(3,039)
|
|
|
11,469
|
|
|
5,178
|
|
|
(1,626)
|
|
|
|
3,552
|
|
Interest income, net
|
9
|
|
|
—
|
|
|
9
|
|
|
68
|
|
|
—
|
|
|
|
68
|
|
Other (expense) income, net
|
(26)
|
|
|
—
|
|
|
(26)
|
|
|
(6)
|
|
|
—
|
|
|
|
(6)
|
|
Income before taxes
|
14,491
|
|
|
(3,039)
|
|
|
11,452
|
|
|
5,240
|
|
|
(1,626)
|
|
|
|
3,614
|
|
Income tax provision
|
3,589
|
|
|
(894)
|
|
(c)
|
|
2,695
|
|
|
980
|
|
|
(520)
|
|
(c)
|
|
460
|
|
Net income
|
$
|
10,902
|
|
|
$
|
(2,145)
|
|
|
$
|
8,757
|
|
|
$
|
4,260
|
|
|
$
|
(1,106)
|
|
|
|
$
|
3,154
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.21
|
|
|
$
|
(0.04)
|
|
|
$
|
0.17
|
|
|
$
|
0.08
|
|
|
$
|
(0.02)
|
|
|
|
$
|
0.06
|
|
Diluted
|
$
|
0.21
|
|
|
$
|
(0.04)
|
|
|
$
|
0.17
|
|
|
$
|
0.08
|
|
|
$
|
(0.02)
|
|
|
|
$
|
0.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
51,992,150
|
|
|
—
|
|
|
51,992,150
|
|
|
52,433,902
|
|
|
—
|
|
|
|
52,433,902
|
|
Diluted
|
52,369,660
|
|
|
—
|
|
|
52,369,660
|
|
|
52,910,223
|
|
|
—
|
|
|
|
52,910,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data (at end of period):
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
$
|
146,798
|
|
|
$
|
(287)
|
|
(c)
|
|
$
|
146,511
|
|
|
$
|
154,687
|
|
|
$
|
(237)
|
|
(c)
|
|
$
|
154,450
|
|
Total assets
|
319,525
|
|
|
(287)
|
|
(c)
|
|
319,238
|
|
|
306,945
|
|
|
(237)
|
|
(c)
|
|
306,708
|
|
Current liabilities
|
44,000
|
|
|
(918)
|
|
(d)
|
|
43,082
|
|
|
57,292
|
|
|
(711)
|
|
(d)
|
|
56,581
|
|
Deferred income taxes
|
12,713
|
|
|
(2,545)
|
|
(c)
|
|
10,168
|
|
|
8,397
|
|
|
(1,926)
|
|
(c)
|
|
6,471
|
|
Other long-term liabilities
|
3,442
|
|
|
—
|
|
|
3,442
|
|
|
1,645
|
|
|
—
|
|
|
1,645
|
|
Total stockholders' equity
|
$
|
259,370
|
|
|
$
|
3,176
|
|
(e)
|
|
$
|
262,546
|
|
|
$
|
239,611
|
|
|
$
|
2,400
|
|
(e)
|
|
$
|
242,011
|
|
(a) The share-based compensation correction to cost of sales for the quarters ended March 31, 2019 and 2018 was approximately $0.4 million and $0.2 million, respectively.
(b) The share-based compensation correction to selling, general and administrative expenses for the quarters ended March 31, 2019 and 2018 was approximately $3.0 million and $1.6 million, respectively. Included in the correction to selling, general and administrative expenses is a correction to our employee profit sharing bonus plan (Note 17) of approximately $0.4 million and $0.2 million for the quarters ended March 31, 2019 and 2018, respectively.
(c) The corrections to income tax receivable and deferred tax liability are the tax effect of the share-based compensation correction.
(d) This is the cumulative reduction of our employee profit sharing bonus plan (Note 17) liability as a result of the share-based compensation correction. The prior period costs will be recovered through our estimated 2019 fourth quarter payment which will be paid in early 2020.
(e) This is the cumulative effect on stockholders' equity as result of the share-based compensation correction. See Note 2, Error Correction, for a descriptions of the changes in stockholders' equity in the consolidated statements of stockholders' equity for the years ended December 31, 2019 and 2018.
The following tables reconcile our previously reported quarterly financial information with the corrected quarterly financial information as of and for the three months ended June 30, 2019 and 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2019
|
|
|
|
|
|
Three Months Ended June 30, 2018
|
|
|
|
|
|
Previously Reported
|
|
Corrections
|
|
As Corrected
|
|
Previously Reported
|
|
Corrections
|
|
As Corrected
|
|
(in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
119,437
|
|
|
$
|
—
|
|
|
|
$
|
119,437
|
|
|
|
$
|
109,588
|
|
|
$
|
—
|
|
|
|
$
|
109,588
|
|
Cost of sales
|
89,262
|
|
|
(29)
|
|
(a)
|
|
89,233
|
|
|
|
82,003
|
|
|
(76)
|
|
(a)
|
|
81,927
|
|
Gross profit
|
30,175
|
|
|
29
|
|
|
|
30,204
|
|
|
|
27,585
|
|
|
76
|
|
|
|
27,661
|
|
Selling, general and administrative expenses
|
13,481
|
|
|
(569)
|
|
(b)
|
|
12,912
|
|
|
|
13,086
|
|
|
67
|
|
(b)
|
|
13,153
|
|
Loss (gain) on disposal of assets
|
6
|
|
|
—
|
|
|
|
6
|
|
|
|
(4)
|
|
|
—
|
|
|
|
(4)
|
|
Income from operations
|
16,688
|
|
|
598
|
|
|
|
17,286
|
|
|
|
14,503
|
|
|
9
|
|
|
|
14,512
|
|
Interest income, net
|
31
|
|
|
—
|
|
|
|
31
|
|
|
|
67
|
|
|
—
|
|
|
|
67
|
|
Other (expense) income, net
|
17
|
|
|
—
|
|
|
|
17
|
|
|
|
12
|
|
|
—
|
|
|
|
12
|
|
Income before taxes
|
16,736
|
|
|
598
|
|
|
|
17,334
|
|
|
|
14,582
|
|
|
9
|
|
|
|
14,591
|
|
Income tax provision
|
3,775
|
|
|
168
|
|
(c)
|
|
3,943
|
|
|
|
2,891
|
|
|
3
|
|
(c)
|
|
2,894
|
|
Net income
|
$
|
12,961
|
|
|
$
|
430
|
|
|
|
$
|
13,391
|
|
|
|
$
|
11,691
|
|
|
$
|
6
|
|
|
|
$
|
11,697
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.25
|
|
|
$
|
0.01
|
|
|
|
$
|
0.26
|
|
|
|
$
|
0.22
|
|
|
$
|
—
|
|
|
|
$
|
0.22
|
|
Diluted
|
$
|
0.25
|
|
|
$
|
0.01
|
|
|
|
$
|
0.26
|
|
|
|
$
|
0.22
|
|
|
$
|
—
|
|
|
|
$
|
0.22
|
|
Cash dividends declared per common share:
|
$
|
0.16
|
|
|
$
|
—
|
|
|
|
$
|
0.16
|
|
|
|
$
|
0.16
|
|
|
$
|
—
|
|
|
|
$
|
0.16
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
52,120,272
|
|
|
—
|
|
|
|
52,120,272
|
|
|
|
52,383,842
|
|
|
—
|
|
|
|
52,383,842
|
|
Diluted
|
52,474,199
|
|
|
—
|
|
|
|
52,474,199
|
|
|
|
52,717,787
|
|
|
—
|
|
|
|
52,717,787
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data (at end of period):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
$
|
168,630
|
|
|
$
|
(270)
|
|
(c)
|
|
$
|
168,360
|
|
|
|
$
|
154,665
|
|
|
$
|
(237)
|
|
(c)
|
|
$
|
154,428
|
|
Total assets
|
342,251
|
|
|
(270)
|
|
(c)
|
|
341,981
|
|
|
|
320,271
|
|
|
(237)
|
|
(c)
|
|
320,034
|
|
Current liabilities
|
58,953
|
|
|
(851)
|
|
(d)
|
|
58,102
|
|
|
|
71,673
|
|
|
(711)
|
|
(d)
|
|
70,962
|
|
Deferred income taxes
|
14,938
|
|
|
(2,361)
|
|
(c)
|
|
12,577
|
|
|
|
8,415
|
|
|
(1,922)
|
|
(c)
|
|
6,493
|
|
Other long-term liabilities
|
3,791
|
|
|
—
|
|
|
|
3,791
|
|
|
|
1,746
|
|
|
—
|
|
|
|
1,746
|
|
Total stockholders' equity
|
$
|
264,569
|
|
|
$
|
2,942
|
|
(e)
|
|
$
|
267,511
|
|
|
|
$
|
238,437
|
|
|
$
|
2,396
|
|
(e)
|
|
$
|
240,833
|
|
(a) The share-based compensation correction to cost of sales for the quarters ended June 30, 2019 and 2018 was approximately $0.1 million and $0.1 million, respectively.
(b) The share-based compensation correction to selling, general and administrative expenses for the quarters ended June 30, 2019 and 2018 was approximately $0.6 million and $0.1 million, respectively. Included in the correction to selling, general and administrative expenses is a correction to our employee profit sharing bonus plan (Note 17) of approximately $0.1 million and $0.1 million for the quarters ended June 30, 2019 and 2018, respectively.
(c) The corrections to income tax receivable and deferred tax liability are the tax effect of the share-based compensation correction.
(d) This is the cumulative reduction of our employee profit sharing bonus plan (Note 17) liability as a result of the share-based compensation correction. The prior period costs will be recovered through our estimated 2019 fourth quarter payment which will be paid in early 2020.
(e) This is the cumulative effect on stockholders' equity as result of the share-based compensation correction. See Note 2, Error Correction, for a descriptions of the changes in stockholders' equity in the consolidated statements of stockholders' equity for the years ended December 31, 2019 and 2018.
The following tables reconcile our previously reported quarterly financial information with the corrected quarterly financial information as of and for the three months ended September 30, 2019 and 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2019
|
|
|
|
|
|
Three Months Ended September 30, 2018
|
|
|
|
|
|
Previously Reported
|
|
Corrections
|
|
As Corrected
|
|
Previously Reported
|
|
Corrections
|
|
As Corrected
|
|
(in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
113,500
|
|
|
$
|
—
|
|
|
|
$
|
113,500
|
|
|
|
$
|
112,937
|
|
|
$
|
—
|
|
|
|
$
|
112,937
|
|
Cost of sales
|
86,115
|
|
|
(25)
|
|
(a)
|
|
86,090
|
|
|
|
80,174
|
|
|
(67)
|
|
(a)
|
|
80,107
|
|
Gross profit
|
27,385
|
|
|
25
|
|
|
|
27,410
|
|
|
|
32,763
|
|
|
67
|
|
|
|
32,830
|
|
Selling, general and administrative expenses
|
12,994
|
|
|
(620)
|
|
(b)
|
|
12,374
|
|
|
|
13,190
|
|
|
(523)
|
|
(b)
|
|
12,667
|
|
Loss (gain) on disposal of assets
|
6
|
|
|
—
|
|
|
|
6
|
|
|
|
2
|
|
|
—
|
|
|
|
2
|
|
Income from operations
|
14,385
|
|
|
645
|
|
|
|
15,030
|
|
|
|
19,571
|
|
|
590
|
|
|
|
20,161
|
|
Interest income, net
|
9
|
|
|
—
|
|
|
|
9
|
|
|
|
36
|
|
|
—
|
|
|
|
36
|
|
Other (expense) income, net
|
(7)
|
|
|
—
|
|
|
|
(7)
|
|
|
|
5
|
|
|
—
|
|
|
|
5
|
|
Income before taxes
|
14,387
|
|
|
645
|
|
|
|
15,032
|
|
|
|
19,612
|
|
|
590
|
|
|
|
20,202
|
|
Income tax provision
|
560
|
|
|
182
|
|
(c)
|
|
742
|
|
|
|
5,527
|
|
|
161
|
|
(c)
|
|
5,688
|
|
Net income
|
$
|
13,827
|
|
|
$
|
463
|
|
|
|
$
|
14,290
|
|
|
|
$
|
14,085
|
|
|
$
|
429
|
|
|
|
$
|
14,514
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.27
|
|
|
$
|
—
|
|
|
|
$
|
0.27
|
|
|
|
$
|
0.27
|
|
|
$
|
0.01
|
|
|
|
$
|
0.28
|
|
Diluted
|
$
|
0.26
|
|
|
$
|
—
|
|
|
|
$
|
0.26
|
|
|
|
$
|
0.27
|
|
|
$
|
—
|
|
|
|
$
|
0.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
52,111,444
|
|
|
—
|
|
|
|
52,111,444
|
|
|
|
52,238,796
|
|
|
—
|
|
|
|
52,238,796
|
|
Diluted
|
52,722,127
|
|
|
—
|
|
|
|
52,722,127
|
|
|
|
52,627,541
|
|
|
—
|
|
|
|
52,627,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data (at end of period):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
$
|
170,536
|
|
|
$
|
(252)
|
|
(c)
|
|
$
|
170,284
|
|
|
|
$
|
144,696
|
|
|
$
|
(220)
|
|
(c)
|
|
$
|
144,476
|
|
Total Assets
|
352,152
|
|
|
(252)
|
|
(c)
|
|
351,900
|
|
|
|
314,024
|
|
|
(220)
|
|
(c)
|
|
313,804
|
|
Current liabilities
|
53,882
|
|
|
(779)
|
|
(d)
|
|
53,103
|
|
|
|
53,716
|
|
|
(645)
|
|
(d)
|
|
53,071
|
|
Deferred income taxes
|
15,034
|
|
|
(2,161)
|
|
(c)
|
|
12,873
|
|
|
|
8,841
|
|
|
(1,744)
|
|
(c)
|
|
7,097
|
|
Other long-term liabilities
|
3,669
|
|
|
—
|
|
|
|
3,669
|
|
|
|
1,838
|
|
|
—
|
|
|
|
1,838
|
|
Total stockholders' equity
|
$
|
279,567
|
|
|
$
|
2,688
|
|
(e)
|
|
$
|
282,255
|
|
|
|
$
|
249,629
|
|
|
$
|
2,169
|
|
(e)
|
|
$
|
251,798
|
|
(a) The share-based compensation correction to cost of sales for the quarters ended September 30, 2019 and 2018 was approximately $0.1 million and $0.1 million, respectively.
(b) The share-based compensation correction to selling, general and administrative expenses for the quarters ended September 30, 2019 and 2018 was approximately $0.7 million and $0.6 million, respectively. Included in the correction to selling, general and administrative expenses is a correction to our employee profit sharing bonus plan (Note 17) of approximately $0.1 million and $0.1 million for the quarters ended September 30, 2019 and 2018, respectively.
(c) The corrections to income tax receivable and deferred tax liability are the tax effect of the share-based compensation corrections.
(d) This is the cumulative reduction of our employee profit sharing bonus plan (Note 17) liability as a result of the share-based compensation correction. The prior period costs will be recovered through our estimated 2019 fourth quarter payment which will be paid in early 2020.
(e) This is the cumulative effect on stockholders' equity as result of the share-based compensation correction. See Note 2, Error Correction, for a descriptions of the changes in stockholders' equity in the consolidated statements of stockholders' equity for the years ended December 31, 2019 and 2018.
The following table reconciles our previously reported quarterly financial information with the corrected quarterly financial information as of and for the three months ended December 31, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, 2018
|
|
|
|
|
|
Previously Reported
|
|
Corrections
|
|
As Corrected
|
|
(in thousands, except share and per share data)
|
|
|
|
|
Net sales
|
$
|
112,340
|
|
|
$
|
—
|
|
|
|
$
|
112,340
|
|
Cost of sales
|
84,545
|
|
|
(51)
|
|
(a)
|
|
84,494
|
|
Gross profit
|
27,795
|
|
|
51
|
|
|
|
27,846
|
|
Selling, general and administrative expenses
|
11,260
|
|
|
(537)
|
|
(b)
|
|
10,723
|
|
Loss (gain) on disposal of assets
|
(3)
|
|
|
—
|
|
|
|
(3)
|
|
Income from operations
|
16,538
|
|
|
588
|
|
|
|
17,126
|
|
Interest income, net
|
25
|
|
|
—
|
|
|
|
25
|
|
Other (expense) income, net
|
(58)
|
|
|
—
|
|
|
|
(58)
|
|
Income before taxes
|
16,505
|
|
|
588
|
|
|
|
17,093
|
|
Income tax provision
|
3,969
|
|
|
160
|
|
(c)
|
|
4,129
|
|
Net income
|
$
|
12,536
|
|
|
$
|
428
|
|
|
|
$
|
12,964
|
|
Earnings per share:
|
|
|
|
|
|
Basic
|
$
|
0.24
|
|
|
$
|
0.01
|
|
|
|
$
|
0.25
|
|
Diluted
|
$
|
0.24
|
|
|
$
|
0.01
|
|
|
|
$
|
0.25
|
|
Cash dividends declared per common share:
|
$
|
0.16
|
|
|
$
|
—
|
|
|
|
$
|
0.16
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
Basic
|
52,086,247
|
|
|
—
|
|
|
|
52,086,247
|
|
Diluted
|
52,420,529
|
|
|
—
|
|
|
|
52,420,529
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data (at end of period):
|
|
|
|
|
|
|
|
|
Current assets
|
$
|
140,861
|
|
|
$
|
(203)
|
|
(c)
|
|
$
|
140,658
|
|
Total Assets
|
308,197
|
|
|
(203)
|
|
(c)
|
|
307,994
|
|
Current liabilities
|
48,071
|
|
|
(580)
|
|
(d)
|
|
47,491
|
|
Deferred income taxes
|
10,826
|
|
|
(1,567)
|
|
(c)
|
|
9,259
|
|
Other long-term liabilities
|
1,801
|
|
|
—
|
|
|
|
1,801
|
|
Total stockholders' equity
|
$
|
247,499
|
|
|
$
|
1,944
|
|
(e)
|
|
$
|
249,443
|
|
(a) The share-based compensation correction for cost of sales for the quarter ended December 31, 2018 was approximately $0.1 million.
(b) The share-based compensation correction to selling, general and administrative expenses for the quarter ended December 31, 2018 was approximately $0.6 million. Included in the correction to selling, general and administrative expenses is a correction to our employee profit sharing bonus plan (Note 17) of approximately $0.1 million for the quarter ended December 31, 2018.
(c) The corrections to income tax receivable and deferred tax liability are the tax effect of the share-based compensation corrections.
(d) This is the cumulative reduction of our employee profit sharing bonus plan (Note 17) liability as a result of the share-based compensation correction. The prior period costs will be recovered through our estimated 2019 fourth quarter payment which will be paid in early 2020.
(e) This is the cumulative effect on stockholders' equity as result of the share-based compensation correction. See Note 2, Error Correction, for a descriptions of the changes in stockholders' equity in the consolidated statements of stockholders' equity for the years ended December 31, 2018.
26. Segments
The following table summarizes certain financial data related to our segments. Transactions between segments are recorded based on prices negotiated between the segments. Sales of units represents the selling price of our units plus freight and other miscellaneous charges less any returns and allowances. Parts includes sales of purchased and fabricated parts including our coils along with the related freight and less any returns and allowances. The “Other” category in the table below includes certain sales cost and expenses that are not allocated to the reportable segments.
Asset information by segment is not easily identifiable or reviewed by the chief operating decision maker. As such, this information is not included below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
|
(in thousands)
|
|
|
|
|
Sales
|
|
|
|
|
|
Units
|
$
|
434,283
|
|
|
$
|
406,331
|
|
|
$
|
384,853
|
|
Parts - External
|
35,424
|
|
|
28,456
|
|
|
22,050
|
|
Parts - Inter-segment
|
28,053
|
|
|
29,385
|
|
|
29,293
|
|
Other
|
(374)
|
|
|
(840)
|
|
|
(1,671)
|
|
Eliminations
|
(28,053)
|
|
|
(29,385)
|
|
|
(29,293)
|
|
Net sales
|
$
|
469,333
|
|
|
$
|
433,947
|
|
|
$
|
405,232
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
|
|
|
Units
|
$
|
121,878
|
|
|
$
|
108,214
|
|
|
$
|
128,647
|
|
Parts - External
|
17,301
|
|
|
13,215
|
|
|
9,555
|
|
Parts - Inter-segment
|
985
|
|
|
865
|
|
|
426
|
|
Other
|
(19,754)
|
|
|
(17,896)
|
|
|
(14,551)
|
|
Eliminations
|
(985)
|
|
|
(865)
|
|
|
(426)
|
|
Gross profit
|
$
|
119,425
|
|
|
$
|
103,533
|
|
|
$
|
123,651
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|