Notes to Condensed Consolidated Financial Statements
September 30, 2017
(Unaudited)
Amounts in
thousands of dollars and shares, except per share data
Note 1. Interim Financial Statements
Nature of Business
NN, Inc., a diversified industrial
company, combines advanced engineering and production capabilities with
in-depth
materials science expertise to design and manufacture high-precision components and assemblies for a variety of markets on a
global basis. As used in this Quarterly Report on Form
10-Q,
the terms NN, the Company, we, our, or us refer to NN, Inc., and its subsidiaries. We
have historically reported results of operations in three reportable segments: the Precision Bearing Components Group (PBC), the Precision Engineered Products Group (PEP), and the Autocam Precision Components Group
(APC). On August 17, 2017, we sold our PBC business. Note 2 in these Notes to Condensed Consolidated Financial Statements provides further information on the sale of the PBC business. After the sale of the PBC business, we had 33
manufacturing facilities in North America, Europe, South America and China. We added three more North American manufacturing facilities in October 2017 (see Note 16 for information about our acquisition subsequent to September 30, 2017).
Basis of Presentation
The accompanying condensed
consolidated financial statements have not been audited, except that the Condensed Consolidated Balance Sheet as of December 31, 2016, was derived from the audited consolidated financial statements included in our Annual Report on Form
10-K
for the year ended December 31, 2016 (the 2016 Annual Report), which we filed with the U.S. Securities and Exchange Commission (the SEC), on March 16, 2017. Historical periods
presented reflect reclassifications to reflect discontinued operations (see Note 2). Historical periods also reflect revisions that we disclosed in our Quarterly Report on Form
10-Q
for the quarter ended
June 30, 2017 (see Note 15). In managements opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments necessary to fairly state our results of operations for the three-month and nine-month
periods ended September 30, 2017 and 2016; financial position as of September 30, 2017, and December 31, 2016; and cash flows for the nine months ended September 30, 2017 and 2016, on a basis consistent with our audited
consolidated financial statements. These adjustments are of a normal recurring nature and are, in the opinion of management, necessary to present fairly the Companys financial position and operating results for the interim periods.
Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with U.S. generally accepted
accounting principles have been condensed or omitted from the interim financial statements presented in this Quarterly Report on Form
10-Q.
These unaudited condensed consolidated financial statements should be
read in conjunction with our audited consolidated financial statements and accompanying notes included in the 2016 Annual Report. The results for the nine months ended September 30, 2017, are not necessarily indicative of results for the year
ending December 31, 2017, or any other future periods. Certain prior year amounts have been reclassified to conform to the current years presentation.
Except for per share data or as otherwise indicated, all dollar amounts presented in the tables in these Notes to Condensed Consolidated Financial Statements
are in thousands.
Prior Periods Financial Statement Revision
In connection with the preparation of condensed consolidated financial statements as of and for the three-month and
six-month
periods ended June 30, 2017, we identified misstatements in our previously issued financial statements related to the foreign currency translation of our investment in a China joint venture. We
acquired a 49% investment in the joint venture as part of the acquisition of Autocam Corporation (Autocam) on August 29, 2014. We remeasured the investment in the joint venture to fair value at the time of the acquisition, and we
have accounted for the investment under the equity method of accounting. Following the completion of the Autocam acquisition, we accounted for the investment in the joint venture in U.S. dollars whereas it should have been accounted for in the joint
ventures functional currency of the Chinese Renminbi in accordance with Accounting Standards Codification (ASC) Topic 830,
Foreign Currency Matters
. As a result, we did not correctly account for the investment in the joint
venture and the related currency translation adjustment impacts.
We previously corrected as
out-of-period
adjustments certain immaterial misstatements and reflected them in the prior period financial statements, where applicable. These immaterial previously recorded
out-of-period
adjustments were primarily due to misstatements related to the initial recording of deferred tax assets and liabilities and corresponding adjustments to goodwill as part of the purchase price
allocations of the Autocam and PEP acquisitions in 2014 and 2015, the accounting for the goodwill balances from those acquisitions for multi-currency reporting through other comprehensive income, and the
mark-to-market
adjustments on our interest rate hedge, net of tax, through other comprehensive income.
7
We assessed the materiality of the misstatements on prior periods financial statements in accordance with
SEC Staff Accounting Bulletin (SAB) Topic 1.M,
Materiality
, codified in ASC Topic 250,
Accounting Changes and Error Corrections
, (ASC 250) and concluded that the misstatements were not material to any prior
annual or interim periods. In accordance with ASC 250 (SAB Topic 1.N,
Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements
), we have corrected these misstatements for all
prior periods presented by revising the condensed consolidated financial statements and other consolidated financial information included herein. We have revised, and will revise for annual and interim periods in future filings, certain amounts in
the consolidated financial statements to correct these misstatements. See Note 15 for additional information on the revision.
Newly Adopted Accounting
Standards
In March 2016, the Financial Accounting Standards Board (the FASB) issued Accounting Standards Update (ASU)
2016-09,
Improvements to Employee Share-Based Payment Accounting.
The new standard changes how companies account for certain aspects of share-based payments to employees. Entities must recognize the income
tax effects of awards in the statement of operations when the awards vest or are settled (i.e., additional
paid-in
capital pools were eliminated). The guidance changed regarding employers accounting for
an employees use of shares to satisfy the employers statutory income tax withholding obligation and for forfeitures. The guidance was effective for public business entities for fiscal years beginning after December 15, 2016, and
interim periods within those fiscal years. As of January 1, 2017, we adopted ASU
2016-09,
and the effects of the standard are reflected in the three-month and nine-month periods ended September 30,
2017, balances. Upon adoption, we reclassified $0.7 million in historical tax benefits from deferred taxes to retained earnings. We will recognize prospective tax benefits in income tax expense. Tax payments in respect of shares withheld for
taxes are now classified in the financing section of the statement of cash flows. The calculation of diluted earnings per share now excludes tax benefits that would have generated more dilutive shares. The effects of the adoption were not material
to the financial statements.
Issuance of New Accounting Standards
Revenue Recognition.
In May 2014, the FASB issued a new standard that provides a single, comprehensive revenue recognition model for all contracts with
customers and supersedes most of the existing revenue recognition requirements. Under the new guidance, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity
expects to receive in exchange for those goods or services. The standard also requires disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Factors that will affect
pre-and
post-implementation include, but are not limited to, identifying all the contracts that exist and whether incidental obligations or marketing incentives included in some of those contracts are performance
obligations. Additionally, we are evaluating the transfer of control of certain consignment contracts which may impact the timing of revenue recognition under the new standard.
The standard will be effective for us beginning January 1, 2018. We intend to adopt the standard utilizing the modified retrospective transition method.
Under this transition method, we will recognize the cumulative effect of initially applying the new standard as an adjustment to the opening balance of retained earnings as of January 1, 2018, and will apply the new standard beginning with the
most current period presented to contracts that are not completed at the date of initial application. We continue to evaluate the adoption method throughout each phase of implementation.
While our ability to adopt the standard using the modified retrospective method depends on system readiness and completing our analysis of information
necessary to present required footnote disclosures in the consolidated financial statements, the implementation project remains on schedule. We have completed a diagnostic accounting assessment, including an analysis of a representative sample of
contracts, to identify areas that will be most significantly impacted by implementation of the new standard. We have also completed initial training to educate contract managers of the technical aspects of the new standard. We are in the process of
concluding on and documenting our assessments related to the standard as well as potential system and procedural changes. We are evaluating the impact the new standard will have on our financial condition, results of operations and cash flows. We
expect to complete our final evaluation of the impact of adopting the new standard during 2017.
Leases.
In February 2016, the FASB issued ASU
2016-02,
Leases
. ASU
2016-02
creates Topic 842,
Leases,
in the ASC and supersedes ASC 840,
Leases.
Entities that hold numerous equipment and real estate
leases, in particular those with numerous operating leases, will be most affected by the new guidance. The lease accounting standard is effective for NN beginning January 1, 2019, with modified retrospective adoption required and early adoption
permitted. The amendments in ASU
2016-02
are expected to impact balance sheets at many companies by adding lease-related assets and liabilities. This may affect compliance with contractual agreements and loan
covenants. We have performed inquiries within segment locations and compiled information on operating and capital leases. We are currently evaluating the impacts of the lease accounting standard on our financial position, results of operations, and
related disclosures.
8
Statement of Cash Flows.
In August 2016, the FASB issued ASU
2016-15,
Classification of Certain Cash Receipts and Cash Payments
. This standard provides clarification on how certain cash receipts and cash payments are presented and classified on the statement of
cash flows. The standard is effective for NN beginning January 1, 2018, and is required to be adopted using a retrospective approach if practicable, with early adoption permitted. We are in the process of assessing the effects of the standard
on prior periods. We expect to complete our final evaluation of the impact of adopting the new standard during 2017. Although our analysis of the effects on prior periods is not yet complete, we have identified $31.6 million of cash paid for
debt prepayment in April 2017 that is currently classified as an operating cash outflow. Under the new guidance, this $31.6 million will be classified as a financing cash outflow.
Goodwill.
In January 2017, the FASB issued ASU
2017-04,
Intangibles Goodwill and Other (Topic 350):
Simplifying the Test for Goodwill Impairment,
that eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of the current goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will
record an impairment charge based on the excess of a reporting units carrying amount over its fair value (i.e., measure the charge based on the current Step 1 test). The standard is effective for NN beginning with impairment tests performed on
or after January 1, 2020, with early adoption permitted. We are currently evaluating the impact this new guidance is expected to have on our financial position or results of operations and related disclosures.
Note 2. Discontinued Operations
On August 17, 2017,
we completed the sale of our PBC business to Tsubaki Nakashima, Co, Ltd. for a base purchase price of $375.0 million in cash, subject to certain adjustments. We expect to finalize purchase price adjustments in accordance with the purchase
agreement. The PBC business included all our facilities that were engaged in the production of precision steel balls, steel rollers, and metal retainers and automotive specialty products used primarily in the bearing industry. The sale of the PBC
business furthers managements long-term strategy to build a diversified industrial business with a comprehensive geographic footprint in attractive high-growth market segments. The PBC business represented all of the PBC reportable segment
disclosed in our historical financial statements. Under the terms of a transition services agreement, we will provide certain support services for twelve months from the closing date of the sale.
We received cash proceeds of $387.6 million and recorded an estimated
after-tax
gain on sale of
$129.4 million, which is included in the Income from discontinued operations, net of tax line on the Condensed Consolidated Statements of Operations and Comprehensive Income for the three-month and nine-month periods ended
September 30, 2017. The net amount of cash proceeds and gain are subject to change due to the finalization of working capital adjustments. The gain includes the effects of $9.3 million in cumulative foreign currency translation gain and
non-controlling
interest attributable to the PBC business as of August 17, 2017.
In accordance with ASC
205-20,
Presentation of Financial Statements Discontinued Operations,
the operating results of PBC are classified as discontinued operations. The presentation of discontinued operations includes
revenues and expenses of the discontinued operations and gain on the disposition of the business, net of tax, as one line item on the Condensed Consolidated Statements of Operations and Comprehensive Income. All Condensed Consolidated Statements of
Operations and Comprehensive Income presented have been revised to reflect this presentation. Accordingly, results of the PBC business have been excluded from continuing operations and segment results for all periods presented in the condensed
consolidated financial statements and the accompanying notes unless otherwise stated.
9
The following table summarizes the major line items included in the results of operations of the discontinued
operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Net sales
|
|
$
|
31,600
|
|
|
$
|
58,247
|
|
|
$
|
168,287
|
|
|
$
|
188,149
|
|
Cost of products sold (exclusive of depreciation and amortization shown separately below)
|
|
|
26,070
|
|
|
|
45,353
|
|
|
|
130,554
|
|
|
|
145,426
|
|
Selling, general and administrative expense
|
|
|
2,466
|
|
|
|
4,146
|
|
|
|
11,589
|
|
|
|
13,211
|
|
Depreciation and amortization
|
|
|
1,611
|
|
|
|
2,956
|
|
|
|
7,723
|
|
|
|
8,766
|
|
Restructuring and integration expense
|
|
|
|
|
|
|
50
|
|
|
|
427
|
|
|
|
2,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
1,453
|
|
|
|
5,742
|
|
|
|
17,994
|
|
|
|
18,356
|
|
Gain on disposal of discontinued operations
|
|
|
215,280
|
|
|
|
|
|
|
|
215,280
|
|
|
|
|
|
Other income (expense)
|
|
|
(59
|
)
|
|
|
(98
|
)
|
|
|
(265
|
)
|
|
|
(325
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations before provision (benefit) for income taxes
|
|
|
216,674
|
|
|
|
5,644
|
|
|
|
233,009
|
|
|
|
18,031
|
|
Provision for income taxes
|
|
|
(80,849
|
)
|
|
|
(1,981
|
)
|
|
|
(86,430
|
)
|
|
|
(5,467
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations, net of tax
|
|
|
135,825
|
|
|
|
3,663
|
|
|
|
146,579
|
|
|
|
12,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
The following table summarizes the carrying amounts of major classes of assets and liabilities of discontinued
operations for each of the periods presented.
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Cash
|
|
$
|
|
|
|
$
|
8,134
|
|
Accounts receivable, net
|
|
|
|
|
|
|
46,114
|
|
Inventories
|
|
|
|
|
|
|
47,714
|
|
Other current assets
|
|
|
|
|
|
|
4,755
|
|
|
|
|
|
|
|
|
|
|
Total current assets of discontinued operations
|
|
|
|
|
|
|
106,717
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
|
|
|
|
92,373
|
|
Goodwill, net
|
|
|
|
|
|
|
8,909
|
|
Intangible assets, net
|
|
|
|
|
|
|
1,718
|
|
Other
non-current
assets
|
|
|
|
|
|
|
290
|
|
|
|
|
|
|
|
|
|
|
Total
non-current
assets of discontinued
operations
|
|
|
|
|
|
|
103,290
|
|
|
|
|
|
|
|
|
|
|
Total assets of discontinued operations
|
|
$
|
|
|
|
$
|
210,007
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
|
|
|
$
|
31,014
|
|
Accrued salaries, wages and benefits
|
|
|
|
|
|
|
9,234
|
|
Income taxes payable
|
|
|
|
|
|
|
2,997
|
|
Other current liabilities
|
|
|
|
|
|
|
2,176
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities of discontinued operations
|
|
|
|
|
|
|
45,421
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
3,522
|
|
Accrued post-employment benefits
|
|
|
|
|
|
|
4,707
|
|
Other
non-current
liabilities
|
|
|
|
|
|
|
3,731
|
|
|
|
|
|
|
|
|
|
|
Total
non-current
liabilities of discontinued
operations
|
|
|
|
|
|
|
11,960
|
|
|
|
|
|
|
|
|
|
|
Total liabilities of discontinued operations
|
|
$
|
|
|
|
$
|
57,381
|
|
|
|
|
|
|
|
|
|
|
The following table presents the significant noncash items and cash paid for capital expenditures of discontinued operations
for each period presented.
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
Depreciation and amortization
|
|
$
|
7,723
|
|
|
$
|
8,766
|
|
Acquisition of property, plant and equipment
|
|
$
|
10,024
|
|
|
$
|
14,015
|
|
11
Note 3. Inventories
Inventories are comprised of the following amounts:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Raw materials
|
|
$
|
35,253
|
|
|
$
|
36,081
|
|
Work in process
|
|
|
24,535
|
|
|
|
22,644
|
|
Finished goods
|
|
|
16,853
|
|
|
|
8,412
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
$
|
76,641
|
|
|
$
|
67,137
|
|
|
|
|
|
|
|
|
|
|
Inventories are stated at the lower of cost or net realizable value. Cost is determined using the average cost method. The
inventory valuations above were developed using normalized production capacities for each manufacturing location. Any costs from abnormal excess capacity or underutilization of fixed production overheads are expensed in the period incurred and are
not included as a component of inventory valuation.
Note 4. Net Income (Loss) Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Income (loss) from continuing operations
|
|
$
|
(2,930
|
)
|
|
$
|
792
|
|
|
$
|
(28,018
|
)
|
|
$
|
(7,349
|
)
|
Income from discontinued operations, net of tax
|
|
|
135,825
|
|
|
|
3,663
|
|
|
|
146,579
|
|
|
|
12,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
132,895
|
|
|
$
|
4,455
|
|
|
$
|
118,561
|
|
|
$
|
5,215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
27,544
|
|
|
|
27,159
|
|
|
|
27,403
|
|
|
|
26,973
|
|
Effect of dilutive stock options
|
|
|
|
|
|
|
163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted shares outstanding
|
|
|
27,544
|
|
|
|
27,322
|
|
|
|
27,403
|
|
|
|
26,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) from continuing operations per share
|
|
$
|
(0.11
|
)
|
|
$
|
0.03
|
|
|
$
|
(1.02
|
)
|
|
$
|
(0.27
|
)
|
Basic income from discontinued operations per share
|
|
|
4.93
|
|
|
|
0.13
|
|
|
|
5.35
|
|
|
|
0.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share
|
|
$
|
4.82
|
|
|
$
|
0.16
|
|
|
$
|
4.33
|
|
|
$
|
0.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income (loss) from continuing operations per share
|
|
$
|
(0.11
|
)
|
|
$
|
0.03
|
|
|
$
|
(1.02
|
)
|
|
$
|
(0.27
|
)
|
Diluted income from discontinued operations per share
|
|
|
4.93
|
|
|
|
0.13
|
|
|
|
5.35
|
|
|
|
0.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share
|
|
$
|
4.82
|
|
|
$
|
0.16
|
|
|
$
|
4.33
|
|
|
$
|
0.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The calculations of diluted income from continuing operations per share for the three-month periods ended September 30,
2017 and 2016, exclude 0.8 million and 0.6 million potentially dilutive stock options, which had the effect of being anti-dilutive. The calculations of diluted income from continuing operations per share for the nine-month periods ended
September 30, 2017 and 2016, exclude 0.8 million and 0.8 million potentially dilutive stock options, which had the effect of being anti-dilutive. Given the loss from continuing operations for the three-month and nine-month periods
ended September 30, 2017, and for the nine-month period ended September 30, 2016, all options are considered anti-dilutive and were excluded from the calculation of diluted loss from continuing operations per share.
Note 5. Segment Information
The segment information and
the accounting policies of each segment are the same as those described in the Notes to Consolidated Financial Statements entitled Segment Information and Summary of Significant Accounting Policies and Practices,
respectively, included in our 2016 Annual Report. Our business has historically been aggregated into three reportable segments: PBC, APC, and PEP. See Note 2 for information regarding the sale of the PBC business on August 17, 2017. The results
of the PBC business are classified as discontinued operations for all periods in the condensed consolidated financial statements and accompanying notes unless otherwise stated. Accordingly, results of the PBC business are not included in the tabular
presentation below.
Within our APC segment, we manufacture highly engineered,
difficult-to-manufacture
precision metal components and
sub-assemblies
for the automotive and industrial end markets.
12
Within our PEP segment, we combine materials science expertise with advanced engineering and production
capabilities to design and manufacture a broad range of high-precision metal and plastic components, assemblies, and finished devices for the medical, electrical, automotive and aerospace end markets.
The following table presents results of continuing operations for each reportable segment. There were no significant inter-segment transactions during the
three-month and nine-month periods ended September 30, 2017 and 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Autocam
Precision
Components
Group
|
|
|
Precision
Engineered
Products
Group
|
|
|
Corporate
and
Consolidations
|
|
|
Total
Continuing
Operations
|
|
Three Months Ended September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
$
|
81,664
|
|
|
$
|
66,492
|
|
|
$
|
|
|
|
$
|
148,156
|
|
Income (loss) from operations
|
|
$
|
6,799
|
|
|
$
|
7,922
|
|
|
$
|
(8,425
|
)
|
|
$
|
6,296
|
|
Nine Months Ended September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
$
|
254,768
|
|
|
$
|
208,890
|
|
|
$
|
|
|
|
$
|
463,658
|
|
Income (loss) from operations
|
|
$
|
28,088
|
|
|
$
|
29,436
|
|
|
$
|
(25,230
|
)
|
|
$
|
32,294
|
|
Three Months Ended September 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
$
|
80,492
|
|
|
$
|
66,222
|
|
|
$
|
|
|
|
$
|
146,714
|
|
Income (loss) from operations
|
|
$
|
8,464
|
|
|
$
|
9,913
|
|
|
$
|
(5,392
|
)
|
|
$
|
12,985
|
|
Nine Months Ended September 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
$
|
247,473
|
|
|
$
|
195,837
|
|
|
$
|
|
|
|
$
|
443,310
|
|
Income (loss) from operations
|
|
$
|
22,761
|
|
|
$
|
26,116
|
|
|
$
|
(19,420
|
)
|
|
$
|
29,457
|
|
13
Note 6. Debt
The following table presents debt balances as of September 30, 2017, and December 31, 2016.
|
|
|
|
|
|
|
|
|
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
$545.0 million Senior Secured Term Loan B (Senior Secured Term Loan) bearing
interest at the greater of 0.75% or
one-month
LIBOR (1.23% at September 30, 2017), plus an applicable margin of 4.25% at September 30, 2017, expiring October 19, 2022
|
|
$
|
539,250
|
|
|
$
|
543,563
|
|
$300.0 million Incremental Term Loan (Incremental Term Loan) bearing interest at
the greater of 0.75% or
one-month
LIBOR (1.23% at September 30, 2017), plus an applicable margin of 3.75% at September 30, 2017, expiring April 3, 2021
|
|
|
294,000
|
|
|
|
|
|
$143.0 million Senior Secured Revolver (Senior Secured Revolver) bearing interest
at
one-month
LIBOR (1.23% at September 30, 2017) plus an applicable margin of 3.5% at September 30, 2017, expiring October 19, 2020
|
|
|
|
|
|
|
27,977
|
|
$250.0 million Senior Notes (Senior Notes) bearing interest at 10.25%
|
|
|
|
|
|
|
250,000
|
|
French Safeguard Obligations
|
|
|
401
|
|
|
|
358
|
|
Brazilian lines of credit and equipment notes
|
|
|
327
|
|
|
|
573
|
|
Chinese line of credit, bearing interest
|
|
|
3,014
|
|
|
|
2,619
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
836,992
|
|
|
|
825,090
|
|
Less current maturities of long-term debt
|
|
|
21,090
|
|
|
|
12,751
|
|
|
|
|
|
|
|
|
|
|
Principal, net of current portion
|
|
|
815,902
|
|
|
|
812,339
|
|
Less unamortized debt issuance costs
|
|
|
21,903
|
|
|
|
26,626
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, net of current portion
|
|
$
|
793,999
|
|
|
$
|
785,713
|
|
|
|
|
|
|
|
|
|
|
On April 3, 2017, we redeemed the Senior Notes for $281.6 million resulting in a loss on debt extinguishment of
$36.3 million, including $31.6 million cash paid for the call premium and a $4.7 million
non-cash
write-off
of unamortized debt issuance costs. The Senior
Notes were redeemed and the call premium was paid with the proceeds of a new $300.0 million Incremental Term Loan that was added by amendment to the existing credit facility. The Incremental Term Loan bears interest at the lower of 0.75% or the
one-month
London Interbank Offered Rate (LIBOR), plus 3.75%, and matures on April 3, 2021, with payments of $3.0 million due quarterly. The amendment also reduced the Senior Secured
Revolver from $143.0 million to $100.0 million until such time as a leverage ratio covenant threshold has been met for four consecutive fiscal quarters. Upon satisfaction of the ratio threshold, the Senior Secured Revolver may be restored
to $143.0 million. In connection with the amendment, we paid $6.5 million in debt issuance costs of which we recorded $4.0 million as a direct reduction to the carrying amount of the associated debt and $2.5 million as a loss on
modification of the Senior Secured Term Loan. Debt issuance costs related to the amendment were paid with proceeds from the Incremental Term Loan. Also in connection with the amendment, we wrote off $0.8 million of unamortized debt issuance
costs related to the modification of the Senior Secured Revolver.
We used cash generated from operations and a portion of the cash proceeds from the sale
of the PBC business to pay down the Senior Secured Revolver on August 17, 2017, which had a $33.2 million outstanding balance at that time. We continue to utilize the Senior Secured Revolver for daily working capital needs.
We assumed certain foreign credit facilities as part of the Autocam acquisition. These facilities relate to local borrowings in France, Brazil, and China.
These facilities are with financial institutions in the countries in which foreign plants operate and are used to fund working capital and equipment purchases in those countries. Our 2016 Annual Report includes descriptions of these foreign credit
facilities.
14
Note 7. Goodwill, Net
The following table shows changes in the carrying amount of goodwill, net, for the nine months ended September 30, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Autocam
Precision
Components
Group
|
|
|
Precision
Engineered
Products
Group
|
|
|
Total
|
|
Balance as of December 31, 2016
|
|
$
|
70,717
|
|
|
$
|
370,685
|
|
|
$
|
441,402
|
|
Currency impacts
|
|
|
736
|
|
|
|
1,358
|
|
|
|
2,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of September 30, 2017
|
|
$
|
71,453
|
|
|
$
|
372,043
|
|
|
$
|
443,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill is tested for impairment on an annual basis during the fourth quarter and more often if a triggering event occurs. As
of September 30, 2017, there were no indications of impairment at the reporting units with goodwill balances.
Note 8. Intangible Assets, Net
The following table shows changes in the carrying amount of intangible assets, net, for the nine months ended September 30, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Autocam
Precision
Components
Group
|
|
|
Precision
Engineered
Products
Group
|
|
|
Total
|
|
Balance as of December 31, 2016
|
|
$
|
42,928
|
|
|
$
|
211,335
|
|
|
$
|
254,263
|
|
Amortization
|
|
|
(2,616
|
)
|
|
|
(14,900
|
)
|
|
|
(17,516
|
)
|
Currency impacts
|
|
|
5
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of September 30, 2017
|
|
$
|
40,317
|
|
|
$
|
196,435
|
|
|
$
|
236,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets are tested for impairment when changes in circumstances indicate the carrying value of those assets may not
be recoverable. As of September 30, 2017, there were no indications of impairment at the reporting units with intangible asset balances.
Note 9.
Shared-Based Compensation
The following table lists the components of share-based compensation expense for the three-month and nine-month periods
ended September 30, 2017 and 2016, by type of award.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Stock options
|
|
$
|
527
|
|
|
$
|
185
|
|
|
$
|
1,102
|
|
|
$
|
679
|
|
Restricted stock
|
|
|
773
|
|
|
|
425
|
|
|
|
1,628
|
|
|
|
2,120
|
|
Performance share units
|
|
|
467
|
|
|
|
294
|
|
|
|
1,255
|
|
|
|
760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
$
|
1,767
|
|
|
$
|
904
|
|
|
$
|
3,985
|
|
|
$
|
3,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior to the sale of the PBC business, our board of directors approved the acceleration of vesting of share-based awards to 19
members of PBC executive management in recognition of their service to the Company. The vesting date was accelerated to August 17, 2017, and the term was changed to two years for 58,094 option awards. The vesting date for 25,564 restricted
stock awards was accelerated to August 17, 2017. We accounted for the acceleration of vesting as a modification of share-based awards. Accordingly, we recognized in discontinued operations approximately $0.8 million of incremental
share-based compensation expense.
15
Stock Options
During the nine months ended September 30, 2017, we granted 125,700 option awards to officers and certain other key employees. The weighted average grant
date fair value of options granted during the nine months ended September 30, 2017, was $11.84 per share. The fair value of these options cannot be determined by market value because the options are not traded in an open market. Accordingly, we
utilized the Black Scholes financial pricing model to estimate the fair value. The following table shows the weighted average assumptions relevant to determining the fair value of the 2017 stock option grants.
|
|
|
|
|
|
|
2017
Stock Option
Awards
|
|
Expected term
|
|
|
6 years
|
|
Risk free interest rate
|
|
|
2.03
|
%
|
Dividend yield
|
|
|
1.16
|
%
|
Expected volatility
|
|
|
56.56
|
%
|
Expected forfeiture rate
|
|
|
3.00
|
%
|
The following table provides a reconciliation of option activity for the nine months ended September 30, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Exercise
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
Price
|
|
|
Contractual
|
|
|
Intrinsic
|
|
Options
|
|
Shares (000)
|
|
|
(per share)
|
|
|
Term (years)
|
|
|
Value
|
|
Outstanding at January 1, 2017
|
|
|
897
|
|
|
$
|
12.22
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
126
|
|
|
|
24.20
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(250
|
)
|
|
|
11.79
|
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
(6
|
)
|
|
|
7.72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2017
|
|
|
767
|
|
|
$
|
14.32
|
|
|
|
6.5
|
|
|
$
|
11,246
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at September 30, 2017
|
|
|
583
|
|
|
$
|
12.71
|
|
|
|
5.7
|
|
|
$
|
9,500
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The intrinsic value is the amount by which the market price of our stock was greater than the exercise price of any individual option grant at September 30, 2017.
|
Restricted Stock
During the nine months ended
September 30, 2017, we granted 85,393 restricted stock awards to
non-executive
directors, officers and certain other key employees. The shares of restricted stock granted during the nine months ended
September 30, 2017, vest
pro-rata
over three years for officers and certain other key employees and over one year for
non-executive
directors. We determined the
fair value of the shares issued by using the closing price of our common stock as of the date of grant. The weighted average grant date value of restricted stock granted in the nine months ended September 30, 2017, was $24.29 per share.
Performance Share Units
During the nine months ended
September 30, 2017, we granted 98,618 performance share units to officers and certain other key employees. The performance share units granted will be satisfied in the form of shares of common stock during 2020 if certain performance and/or
market conditions are met. We recognize the compensation expense over the three-year period in which the performance and market conditions are measured. We determined the fair value per share of the performance share units issued by using the grant
date closing price of our common stock for the units with a performance condition, or $24.20, and a Monte Carlo valuation model for the units that have a market condition, or $29.84.
16
Note 10. Income Taxes
Our effective tax rate from continuing operations was 26% and 31% for the three-month and nine-month periods ended September 30, 2017, respectively, and
93% and 51% for the three-month and nine-month periods ended September 30, 2016, respectively. The loss on extinguishment of Senior Notes impacted the 2017 tax rate and was treated as a discrete item during the second quarter of 2017. The 2016
effective rate was impacted by changes in forecasted income and loss and driven by the application of the three- and nine-month results against the permanent book to tax differences. The effective tax rates for 2017 and 2016 differ from the U.S.
federal statutory tax rate of 35% due primarily to earnings outside the United States that are indefinitely reinvested and taxed at rates lower than the U.S. federal statutory rate.
Management believes that it is reasonably possible that the amount of unrecognized income tax benefits and interest may decrease during the next 12 months by
approximately $0.6 million related to the expiration of the statutes of limitations, of which $0.5 million would reduce income tax expense.
During the third quarter of 2017, the Internal Revenue Service commenced an examination of the federal tax return for the
pre-acquisition
period of January 1, 2015 through October 19, 2015 for Precision Engineered Products.
Note 11. Commitments and Contingencies
Brazil ICMS
Tax Matter
Prior to the Autocam acquisition, Autocams Brazilian subsidiary received notification from the Brazilian tax authorities regarding
ICMS (state value added tax or VAT) tax credits claimed on intermediary materials (tooling and perishable items) used in the manufacturing process. The Brazilian tax authority notification disallowed state ICMS credits claimed on intermediary
materials based on the argument that these items are not intrinsically related to the manufacturing processes. Autocam Brazil filed an administrative defense with the Brazilian tax authority arguing, among other matters, that it should qualify for
an ICMS tax credit, contending that the intermediary materials are directly related to the manufacturing process.
We believe that we have substantial
legal and factual defenses, and we plan to defend our interests in this matter vigorously. While we believe a loss is not probable, we estimate the range of possible losses related to this assessment is from $0 to $6.0 million. No amount was
accrued at September 30, 2017, for this matter. There was no material change in the status of this matter from December 31, 2016 to September 30, 2017.
We are entitled to indemnification from the former shareholders of Autocam, subject to the limitations and procedures set forth in the agreement and plan of
merger relating to the Autocam acquisition. Management believes the indemnification would include amounts owed for the tax, interest and penalties related to this matter.
All Other Legal Matters
All other legal proceedings are
of an ordinary and routine nature and are incidental to our operations. Management believes that such proceedings should not, individually or in the aggregate, have a material adverse effect on our business, financial condition, results of
operations or cash flows. In making that determination, we analyze the facts and circumstances of each case at least quarterly in consultation with our attorneys and determine a range of reasonably possible outcomes.
Note 12. Investment in Joint Venture
We own a 49%
investment in a joint venture located in Wuxi, China, with an unrelated entity called Wuxi Weifu Autocam Precision Machinery Company, Ltd. (the JV). The JV is jointly controlled and managed, and we account for it under the equity method.
The following table summarizes activity related to our investment in the JV for the nine months ended September 30, 2017.
|
|
|
|
|
Balance as of December 31, 2016
|
|
$
|
36,008
|
|
Our share of cumulative earnings
|
|
|
4,481
|
|
Dividends declared and paid by joint venture
|
|
|
(4,156
|
)
|
Accretion of basis difference from purchase accounting
|
|
|
(342
|
)
|
Foreign currency translation gain
|
|
|
1,748
|
|
|
|
|
|
|
Balance as of September 30, 2017
|
|
$
|
37,739
|
|
|
|
|
|
|
17
The following table summarizes balance sheet information of the JV itself.
|
|
|
|
|
|
|
|
|
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
Current assets
|
|
$
|
41,367
|
|
|
$
|
31,295
|
|
Non-current
assets
|
|
|
29,176
|
|
|
|
22,522
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
70,543
|
|
|
$
|
53,817
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
26,746
|
|
|
$
|
13,549
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
26,746
|
|
|
$
|
13,549
|
|
|
|
|
|
|
|
|
|
|
We recognized sales to the JV of less than $0.1 million and approximately $0.2 million during the three-month and
nine-month periods ended September 30, 2017. Amounts due to us from the JV were less than $0.1 million as of September 30, 2017, and are included in accounts receivable.
Note 13. Fair Value Measurements
Fair value is an exit
price representing the expected amount that an entity would receive to sell an asset or pay to transfer a liability in an orderly transaction with market participants at the measurement date. We followed consistent methods and assumptions to
estimate fair values as more fully described in the 2016 Annual Report.
Our financial instruments that are subject to fair value disclosure consist of
cash and cash equivalents, accounts receivable, accounts payable, derivatives and long-term debt. As of September 30, 2017, the carrying values of these financial instruments approximated fair value. The fair value of floating-rate debt
approximates the carrying amount because the interest rates paid are based on short-term maturities. As of September 30, 2017, we had no fixed-rate debt outstanding.
Fair value principles prioritize valuation inputs across three broad levels. Level 1 inputs are quoted prices (unadjusted) in active markets for
identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for
substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the assumptions used to measure assets and liabilities at fair value. An asset or liabilitys classification within the various levels
is determined based on the lowest level input that is significant to the fair value measurement.
The following table summarizes assets and liabilities
measured at fair value on a recurring basis for the interest rate swap derivative financial instrument:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at September 30, 2017
|
|
Description
|
|
September 30,
2017
|
|
|
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
|
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs (Level 3)
|
|
Derivative asset - current
|
|
$
|
10
|
|
|
|
|
|
|
$
|
10
|
|
|
|
|
|
Derivative asset - noncurrent
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability - current
|
|
|
(1,479
|
)
|
|
|
|
|
|
|
(1,479
|
)
|
|
|
|
|
Derivative liability - noncurrent
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1,469
|
)
|
|
|
|
|
|
$
|
(1,469
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2016
|
|
Description
|
|
December 31,
2016
|
|
|
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
|
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs (Level 3)
|
|
Derivative asset - current
|
|
$
|
69
|
|
|
$
|
|
|
|
$
|
69
|
|
|
$
|
|
|
Derivative asset - noncurrent
|
|
|
6
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
Derivative liability - current
|
|
|
(1,903
|
)
|
|
|
|
|
|
|
(1,903
|
)
|
|
|
|
|
Derivative liability - noncurrent
|
|
|
(1,028
|
)
|
|
|
|
|
|
|
(1,028
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(2,856
|
)
|
|
$
|
|
|
|
$
|
(2,856
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our policy is to manage interest expense using a mix of fixed and variable rate debt. To manage this mix effectively, we may
enter into interest rate swaps to exchange the difference between fixed and variable interest amounts.
The inputs for determining fair value of the
interest rate swap are classified as Level 2 inputs. Level 2 fair value is based on estimates using standard pricing models. These standard pricing models use inputs which are derived from or corroborated by observable market data such as
interest rate yield curves, index forward curves, discount curves, and volatility surfaces. Counterparties to these derivative contracts are highly rated financial institutions which management believes carry only a minimal risk of nonperformance.
We have elected to present the derivative contracts on a gross basis in the Condensed Consolidated Balance Sheets included within other current assets,
other
non-current
assets, other current liabilities and other
non-current
liabilities. If the derivative contract were presented on a net basis, the derivative would
reflect in a net liability position of $1.5 million as of September 30, 2017. We do not have any cash collateral due under such agreements.
As
of September 30, 2017, we had no gains or losses in accumulated other comprehensive income related to the interest rate swap. Additionally, during the nine months ended September 30, 2016, when the interest rate swap was accounted for in
accordance with hedge accounting, the periodic settlements and related reclassification of other comprehensive income was $1.4 million of net hedging losses on the interest rate swap in the interest expense line on the Condensed Consolidated
Statements of Operations and Comprehensive Income. The Derivative loss (gain) on change in interest rate swap fair value line on the Condensed Consolidated Statements of Operations and Comprehensive Income includes interest rate swap
settlements of $0.3 million and $1.3 million for the three-month and nine-month periods ended September 30, 2017, and $0.6 million for the three-month and nine-month periods ended September 30, 2016. Effective October 27,
2017, we terminated our interest rate swap with a cash payment of $1.3 million. Therefore, we classified all amounts related to the interest rate swap as current assets and current liabilities on our balance sheet as of September 30, 2017.
Note 14. Restructuring and Integration
We
recognized restructuring and integration costs totaling $0.3 million and $0.4 million in the three-month and nine-month periods ended September 30, 2017. We recognized restructuring and integration costs totaling $0.6 million and
$4.9 million in the three-month and nine-month periods ended September 30, 2016.
Within APC, certain restructuring programs that included the
closure of one facility, the Wheeling Plant, resulted in a charge of $0.3 million and $0.4 million for the three-month and nine-month periods ended September 30, 2017, and $0.3 million and $3.9 million for the three-month
and nine-month periods ended September 30, 2016.
Within PEP, initiatives resulted in integration, site closure and employee costs of
$0.3 million and $1.0 million for the three-month and nine-month periods ended September 30, 2016. There were no charges in the three-month and nine-month periods ended September 30, 2017.
19
The following table summarizes restructuring and integration activity related to actions incurred for the
three-month and nine-month periods ended September 30, 2017 and 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Severance and other costs
|
|
$
|
|
|
|
$
|
228
|
|
|
$
|
17
|
|
|
$
|
1,535
|
|
Site closure and other associated costs
|
|
$
|
345
|
|
|
$
|
378
|
|
|
$
|
345
|
|
|
$
|
3,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
345
|
|
|
$
|
606
|
|
|
$
|
362
|
|
|
$
|
4,851
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve
Balance at
December 31, 2016
|
|
|
Charges
|
|
|
Paid in
2017
|
|
|
Reserve
Balance at
September 30, 2017
|
|
Severance and other costs
|
|
$
|
1,000
|
|
|
$
|
17
|
|
|
$
|
(1,017
|
)
|
|
$
|
|
|
Site closure and other associated costs
|
|
|
1,625
|
|
|
|
345
|
|
|
|
(730
|
)
|
|
|
1,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,625
|
|
|
$
|
362
|
|
|
$
|
(1,747
|
)
|
|
$
|
1,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We are still identifying restructuring and impairment costs at our segments; therefore, we are not able to estimate the
ultimate costs at this time. Future filings will include updates to these activities along with a reconciliation of beginning and ending liabilities. We expect to pay $1.0 million of the reserve balance remaining at September 30, 2017,
within the next twelve months. The remaining reserve of $0.2 million is expected to be paid in 2018 and 2019.
Note 15. Prior Periods
Financial Statement Revision
As described in Note 1 in these Notes to Condensed Consolidated Financial Statements, we corrected misstatements for all
prior periods presented by revising the Condensed Consolidated Financial Statements and other financial information included herein. We have not revised Consolidated Statements of Cash Flows for any periods. The amounts presented below for prior
periods were reported before the PBC business qualified as discontinued operations and therefore include the results of the PBC business.
The following
tables present the effect of the revision on the Condensed Consolidated Statements of Operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2016
|
|
|
|
As Previously
Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
Selling, general and administrative expense
|
|
$
|
80,266
|
|
|
$
|
(37
|
)
|
|
$
|
80,229
|
|
Income from operations
|
|
|
59,400
|
|
|
|
37
|
|
|
|
59,437
|
|
Write-off
of unamortized debt issuance costs
|
|
|
3,089
|
|
|
|
(500
|
)
|
|
|
2,589
|
|
Income (loss) before provision (benefit) for income
taxes and share of net income from joint
venture
|
|
|
(7,309
|
)
|
|
|
537
|
|
|
|
(6,772
|
)
|
Provision (benefit) for income taxes
|
|
|
(9,313
|
)
|
|
|
1,180
|
|
|
|
(8,133
|
)
|
Net income (loss)
|
|
|
7,942
|
|
|
|
(643
|
)
|
|
|
7,299
|
|
Basic net income (loss) per share
|
|
$
|
0.29
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.27
|
|
Diluted net income (loss) per share
|
|
$
|
0.29
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.27
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30, 2016
|
|
|
September 30, 2016
|
|
|
|
As Previously
Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
|
As Previously
Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
Selling, general and administrative expense
|
|
$
|
18,347
|
|
|
$
|
|
|
|
|
18,347
|
|
|
$
|
60,651
|
|
|
$
|
(509
|
)
|
|
$
|
60,142
|
|
Income from operations
|
|
|
18,727
|
|
|
|
|
|
|
|
18,727
|
|
|
|
47,304
|
|
|
|
509
|
|
|
|
47,813
|
|
Interest expense
|
|
|
16,337
|
|
|
|
(466
|
)
|
|
|
15,871
|
|
|
|
48,924
|
|
|
|
|
|
|
|
48,924
|
|
Income (loss) before provision (benefit) for income taxes and share of net income from joint
venture
|
|
|
(3,703
|
)
|
|
|
466
|
|
|
|
(3,237
|
)
|
|
|
(5,760
|
)
|
|
|
509
|
|
|
|
(5,251
|
)
|
Provision (benefit) for income taxes
|
|
|
(6,423
|
)
|
|
|
158
|
|
|
|
(6,265
|
)
|
|
|
(6,469
|
)
|
|
|
173
|
|
|
|
(6,296
|
)
|
Net income
|
|
|
4,147
|
|
|
|
308
|
|
|
|
4,455
|
|
|
|
4,879
|
|
|
|
336
|
|
|
|
5,215
|
|
Basic net income per share
|
|
$
|
0.15
|
|
|
$
|
0.01
|
|
|
$
|
0.16
|
|
|
$
|
0.18
|
|
|
$
|
0.01
|
|
|
$
|
0.19
|
|
Diluted net income per share
|
|
$
|
0.15
|
|
|
$
|
0.01
|
|
|
$
|
0.16
|
|
|
$
|
0.18
|
|
|
$
|
0.01
|
|
|
$
|
0.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31, 2016
|
|
|
|
As Previously
Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
Selling, general and administrative expense
|
|
$
|
20,712
|
|
|
$
|
90
|
|
|
$
|
20,802
|
|
Income (loss) from operations
|
|
|
11,874
|
|
|
|
(90
|
)
|
|
|
11,784
|
|
Loss before benefit for income taxes and share of net income from joint venture
|
|
|
(3,419
|
)
|
|
|
(90
|
)
|
|
|
(3,509
|
)
|
Benefit for income taxes
|
|
|
(720
|
)
|
|
|
(31
|
)
|
|
|
(751
|
)
|
Net loss
|
|
|
(1,299
|
)
|
|
|
(59
|
)
|
|
|
(1,358
|
)
|
Basic net loss per share
|
|
$
|
(0.05
|
)
|
|
$
|
|
|
|
$
|
(0.05
|
)
|
Diluted net loss per share
|
|
$
|
(0.05
|
)
|
|
$
|
|
|
|
$
|
(0.05
|
)
|
|
|
|
|
Year Ended December 31, 2015
|
|
|
|
As Previously
Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
Selling, general and administrative expense
|
|
$
|
51,745
|
|
|
$
|
37
|
|
|
$
|
51,782
|
|
Income (loss) from operations
|
|
|
26,797
|
|
|
|
(37
|
)
|
|
|
26,760
|
|
Write-off
of unamortized debt issuance costs
|
|
|
18,673
|
|
|
|
500
|
|
|
|
19,173
|
|
Income (loss) before provision (benefit) for income taxes and share of net income from joint
venture
|
|
|
(22,950
|
)
|
|
|
(537
|
)
|
|
|
(23,487
|
)
|
Provision (benefit) for income taxes
|
|
|
(10,518
|
)
|
|
|
(1,180
|
)
|
|
|
(11,698
|
)
|
Net income (loss)
|
|
|
(7,431
|
)
|
|
|
643
|
|
|
|
(6,788
|
)
|
Basic net income (loss) per share
|
|
$
|
(0.35
|
)
|
|
$
|
0.03
|
|
|
$
|
(0.32
|
)
|
Diluted net income (loss) per share
|
|
$
|
(0.35
|
)
|
|
$
|
0.03
|
|
|
$
|
(0.32
|
)
|
21
The following tables present the effect of the revision on the Condensed Consolidated Statements of Comprehensive
Income (Loss).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31, 2017
|
|
|
|
As Previously
Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
Net income
|
|
$
|
7,407
|
|
|
$
|
|
|
|
$
|
7,407
|
|
Foreign currency translation gain
|
|
|
4,706
|
|
|
|
298
|
|
|
|
5,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
4,706
|
|
|
|
298
|
|
|
|
5,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
12,113
|
|
|
$
|
298
|
|
|
$
|
12,411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2016
|
|
|
|
As Previously
Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
Net income (loss)
|
|
$
|
7,942
|
|
|
$
|
(643
|
)
|
|
$
|
7,299
|
|
Change in fair value of interest rate hedge
|
|
|
3,015
|
|
|
|
(1,105
|
)
|
|
|
1,910
|
|
Foreign currency translation loss
|
|
|
(8,984
|
)
|
|
|
(743
|
)
|
|
|
(9,727
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
(5,969
|
)
|
|
|
(1,848
|
)
|
|
|
(7,817
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
$
|
1,973
|
|
|
$
|
(2,491
|
)
|
|
$
|
(518
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30, 2016
|
|
|
September 30, 2016
|
|
|
|
As Previously
Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
|
As Previously
Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
Net income
|
|
$
|
4,147
|
|
|
$
|
308
|
|
|
$
|
4,455
|
|
|
$
|
4,879
|
|
|
$
|
336
|
|
|
$
|
5,215
|
|
Change in fair value of interest rate hedge
|
|
|
4,211
|
|
|
|
(1,967
|
)
|
|
|
2,244
|
|
|
|
3,130
|
|
|
|
(1,105
|
)
|
|
|
2,025
|
|
Foreign currency translation gain (loss)
|
|
|
382
|
|
|
|
(760
|
)
|
|
|
(378
|
)
|
|
|
4,176
|
|
|
|
(2,402
|
)
|
|
|
1,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
4,593
|
|
|
|
(2,727
|
)
|
|
|
1,866
|
|
|
|
7,306
|
|
|
|
(3,507
|
)
|
|
|
3,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
$
|
8,740
|
|
|
$
|
(2,419
|
)
|
|
$
|
6,321
|
|
|
$
|
12,185
|
|
|
$
|
(3,171
|
)
|
|
$
|
9,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31, 2016
|
|
|
|
As Previously
Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
Net income
|
|
$
|
(1,299
|
)
|
|
$
|
(59
|
)
|
|
$
|
(1,358
|
)
|
Change in fair value of interest rate hedge
|
|
|
(1,002
|
)
|
|
|
367
|
|
|
|
(635
|
)
|
Foreign currency translation gain
|
|
|
6,719
|
|
|
|
504
|
|
|
|
7,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
5,717
|
|
|
|
871
|
|
|
|
6,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
4,418
|
|
|
$
|
812
|
|
|
$
|
5,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2015
|
|
|
|
As Previously
Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
Net income (loss)
|
|
$
|
(7,431
|
)
|
|
$
|
643
|
|
|
$
|
(6,788
|
)
|
Change in fair value of interest rate hedge
|
|
|
(2,584
|
)
|
|
|
947
|
|
|
|
(1,637
|
)
|
Foreign currency translation loss
|
|
|
(21,936
|
)
|
|
|
(3,075
|
)
|
|
|
(25,011
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
(24,520
|
)
|
|
|
(2,128
|
)
|
|
|
(26,648
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
$
|
(31,951
|
)
|
|
$
|
(1,485
|
)
|
|
$
|
(33,436
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2014
|
|
|
|
As Previously
Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
Net income
|
|
$
|
8,217
|
|
|
$
|
|
|
|
$
|
8,217
|
|
Change in fair value of interest rate hedge
|
|
|
(431
|
)
|
|
|
158
|
|
|
|
(273
|
)
|
Foreign currency translation loss
|
|
|
(17,731
|
)
|
|
|
(868
|
)
|
|
|
(18,599
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
(18,162
|
)
|
|
|
(710
|
)
|
|
|
(18,872
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
$
|
(9,945
|
)
|
|
$
|
(710
|
)
|
|
$
|
(10,655
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following tables present the effect of the revision on the Condensed Consolidated Balance Sheets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2017
|
|
|
|
As Previously
Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
Investment in joint venture
|
|
$
|
42,387
|
|
|
$
|
(4,388
|
)
|
|
$
|
37,999
|
|
Total assets
|
|
|
1,391,043
|
|
|
|
(4,388
|
)
|
|
|
1,386,655
|
|
Accumulated other comprehensive loss
|
|
|
(20,416
|
)
|
|
|
(4,388
|
)
|
|
|
(24,804
|
)
|
Total stockholders equity
|
|
|
327,879
|
|
|
|
(4,388
|
)
|
|
|
323,491
|
|
Total liabilities and stockholders equity
|
|
|
1,391,043
|
|
|
|
(4,388
|
)
|
|
|
1,386,655
|
|
|
|
|
|
As of December 31, 2016
|
|
|
|
As Previously
Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
Investment in joint venture
|
|
$
|
40,694
|
|
|
$
|
(4,686
|
)
|
|
$
|
36,008
|
|
Total assets
|
|
|
1,360,386
|
|
|
|
(4,686
|
)
|
|
|
1,355,700
|
|
Accumulated other comprehensive income
|
|
|
(25,122
|
)
|
|
|
(4,686
|
)
|
|
|
(29,808
|
)
|
Total stockholders equity
|
|
|
315,199
|
|
|
|
(4,686
|
)
|
|
|
310,513
|
|
Total liabilities and stockholders equity
|
|
|
1,360,386
|
|
|
|
(4,686
|
)
|
|
|
1,355,700
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2015
|
|
|
|
As Previously
Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
Current deferred tax assets
|
|
$
|
6,696
|
|
|
$
|
3,707
|
|
|
$
|
10,403
|
|
Total current assets
|
|
|
280,181
|
|
|
|
3,707
|
|
|
|
283,888
|
|
Property, plant and equipment, net
|
|
|
318,968
|
|
|
|
(329
|
)
|
|
|
318,639
|
|
Goodwill, net
|
|
|
449,898
|
|
|
|
5,072
|
|
|
|
454,970
|
|
Investment in joint venture
|
|
|
38,462
|
|
|
|
(2,212
|
)
|
|
|
36,250
|
|
Total assets
|
|
|
1,380,567
|
|
|
|
6,238
|
|
|
|
1,386,805
|
|
Accrued salaries, wages and benefits
|
|
|
21,125
|
|
|
|
(300
|
)
|
|
|
20,825
|
|
Income taxes payable
|
|
|
5,350
|
|
|
|
44
|
|
|
|
5,394
|
|
Total current liabilities
|
|
|
133,351
|
|
|
|
(256
|
)
|
|
|
133,095
|
|
Non-current
deferred tax liabilities
|
|
|
117,459
|
|
|
|
8,176
|
|
|
|
125,635
|
|
Other liabilities
|
|
|
4,746
|
|
|
|
178
|
|
|
|
4,924
|
|
Total liabilities
|
|
|
1,066,686
|
|
|
|
8,098
|
|
|
|
1,074,784
|
|
Additional
paid-in
capital
|
|
|
277,582
|
|
|
|
335
|
|
|
|
277,917
|
|
Retained earnings
|
|
|
55,151
|
|
|
|
643
|
|
|
|
55,794
|
|
Accumulated other comprehensive income
|
|
|
(19,153
|
)
|
|
|
(2,839
|
)
|
|
|
(21,992
|
)
|
Total stockholders equity
|
|
|
313,881
|
|
|
|
(1,861
|
)
|
|
|
312,020
|
|
Total liabilities and stockholders equity
|
|
|
1,380,567
|
|
|
|
6,238
|
|
|
|
1,386,805
|
|
The following tables present the effect of the revision on our Condensed Consolidated Statements of Changes in
Stockholders Equity.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Previously
Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
As of and for the year ended December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of interest rate hedge
|
|
$
|
(431
|
)
|
|
$
|
158
|
|
|
$
|
(273
|
)
|
Foreign currency translation loss
|
|
|
(17,731
|
)
|
|
|
(868
|
)
|
|
|
(18,599
|
)
|
Accumulated other comprehensive income (loss)
|
|
|
5,367
|
|
|
|
(710
|
)
|
|
|
4,657
|
|
Total stockholders equity
|
|
|
173,699
|
|
|
|
(710
|
)
|
|
|
172,989
|
|
As of and for the year ended December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(7,431
|
)
|
|
$
|
643
|
|
|
$
|
(6,788
|
)
|
Change in fair value of interest rate hedge
|
|
|
(2,584
|
)
|
|
|
947
|
|
|
|
(1,637
|
)
|
Foreign currency translation loss
|
|
|
(21,936
|
)
|
|
|
(3,075
|
)
|
|
|
(25,011
|
)
|
Accumulated other comprehensive loss
|
|
|
(19,153
|
)
|
|
|
(2,839
|
)
|
|
|
(21,992
|
)
|
Additional
paid-in
capital
|
|
|
277,582
|
|
|
|
335
|
|
|
|
277,917
|
|
Total stockholders equity
|
|
|
313,881
|
|
|
|
(1,861
|
)
|
|
|
312,020
|
|
As of and for the year ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
7,942
|
|
|
$
|
(643
|
)
|
|
$
|
7,299
|
|
Change in fair value of interest rate hedge
|
|
|
3,015
|
|
|
|
(1,105
|
)
|
|
|
1,910
|
|
Foreign currency translation loss
|
|
|
(8,984
|
)
|
|
|
(743
|
)
|
|
|
(9,727
|
)
|
Accumulated other comprehensive loss
|
|
|
(25,122
|
)
|
|
|
(4,686
|
)
|
|
|
(29,808
|
)
|
Total stockholders equity
|
|
|
315,199
|
|
|
|
(4,686
|
)
|
|
|
310,513
|
|
As of and for the three months ended March 31, 2017
|
|
|
|
|
|
|
|
|
|
Foreign currency translation gain
|
|
$
|
4,706
|
|
|
|
298
|
|
|
$
|
5,004
|
|
Accumulated other comprehensive loss
|
|
|
(20,416
|
)
|
|
|
(4,388
|
)
|
|
|
(24,804
|
)
|
Total stockholders equity
|
|
|
327,879
|
|
|
|
(4,388
|
)
|
|
|
323,491
|
|
24
Note 16. Subsequent Events
DRT Medical Acquisition
On October 2, 2017, we
acquired 100% of the membership interests of DRT Medical, LLC, (DRT Medical) for $38.6 million in cash, subject to certain post-closing adjustments. DRT Medical is a supplier of precision manufactured medical instruments and
orthopedic implants with locations in Ohio and Pennsylvania. Operating results of DRT Medical will be reported prospectively in our PEP segment. The effects of this acquisition are not reflected in the condensed consolidated financial statements
presented in this Quarterly Report on Form
10-Q
because the acquisition occurred subsequent to September 30, 2017. We are in the process of analyzing the opening balance sheet and purchase price
allocation. We incurred approximately $0.6 million in acquisition related costs, primarily with respect to DRT Medical, during the three-month and nine-month periods ended September 30, 2017.
Interest Rate Swap
Effective October 27, 2017, we
terminated our interest rate swap with a cash payment of $1.3 million.
25