What changed in this filing

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Item 1. Financial Statements

2020-11-05 compared with 2020-08-06 · 187 added, 158 removed, 715 unchanged (33% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Assets (in thousands, except share and per share data)

2 unchanged sentences

Restricted cash 7,998 17,576

Accounts receivable, net 56,394 67,399

Accounts receivable, net of allowance for credit losses of $ 546 and $ 353 , respectively

62,195 67,399

Income tax receivable 3,914 772

20 unchanged sentences

Accounts payable 16,038 11,759

Dividends payable 9,930 —

Accrued liabilities 45,468 44,269

6 unchanged sentences

Preferred stock, $ .001 par value, 5,000,000 shares authorized, no shares issued

Common stock, $ .004 par value, 100,000,000 shares authorized, 52,234,119 and 52,078,515 issued and outstanding at June 30, 2020 and December 31, 2019, respectively

Common stock, $ .004 par value, 100,000,000 shares authorized, 52,264,801 and 52,078,515 issued and outstanding at September 30, 2020 and December 31, 2019, respectively

Additional paid-in capital 8,175 3,631

7 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

22 unchanged sentences

Consolidated Statements of Stockholders' Equity

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Common Stock Paid-in Retained

8 unchanged sentences

Dividends — — — ( 9,910 ) ( 9,910 )

Balances at June 30, 2020 52,234 $ 209 $ 6,451 $ 316,035 $ 322,695

Three Months Ended June 30, 2020

Balances at September 30, 2020 52,265 $ 209 $ 8,175 $ 336,508 $ 344,892

Three Months Ended September 30, 2020

Common Stock Paid-in Retained

1 unchanged sentence

(in thousands)

Balances at March 31, 2020 52,044 $ 208 $ — $ 306,115 $ 306,323

Balances at June 30, 2020 52,234 $ 209 $ 6,451 $ 316,035 $ 322,695

Net income — — — 20,460 20,460

4 unchanged sentences

Dividends — — — 13 13

Balances at June 30, 2020 52,234 $ 209 $ 6,451 $ 316,035 $ 322,695

Six Months Ended June 30, 2019

Balances at September 30, 2020 52,265 $ 209 $ 8,175 $ 336,508 $ 344,892

Nine Months Ended September 30, 2019

Common Stock Paid-in Retained

8 unchanged sentences

Dividends — — — ( 8,303 ) ( 8,303 )

Balances at June 30, 2019 52,118 $ 209 $ 4,299 $ 263,003 $ 267,511

Three Months Ended June 30, 2019

Balances at September 30, 2019 52,119 $ 209 $ 4,676 $ 277,370 $ 282,255

Three Months Ended September 30, 2019

Common Stock Paid-in Retained

1 unchanged sentence

(in thousands)

Balances at March 31, 2019 52,099 $ 208 $ 4,346 $ 257,992 $ 262,546

Balances at June 30, 2019 52,118 $ 209 $ 4,299 $ 263,003 $ 267,511

Net income — — — 14,290 14,290

4 unchanged sentences

Dividends — — — 77 77

Balances at June 30, 2019 52,118 $ 209 $ 4,299 $ 263,003 $ 267,511

Balances at September 30, 2019 52,119 $ 209 $ 4,676 $ 277,370 $ 282,255

The accompanying notes are an integral part of these consolidated financial statements.

1 unchanged sentence

Consolidated Statements of Cash Flows

Six Months Ended

Nine Months Ended

September 30,

Operating Activities (in thousands)

3 unchanged sentences

Amortization of debt issuance cost 31 —

Provision for losses on accounts receivable, net of adjustments 76 128

Provision for credit losses on accounts receivable, net of adjustments 193 91

Provision for excess and obsolete inventories 1,776 1,003

24 unchanged sentences

Employee taxes paid by withholding shares ( 1,130 ) ( 1,023 )

Cash dividends paid to stockholders ( 9,910 ) ( 8,303 )

Net cash used in financing activities ( 13,911 ) ( 13,480 )

32 unchanged sentences

Department of Homeland Security, as such, the decrees issued by national, state, and local governments in response to the COVID-19 pandemic have had minimal impact on our operations except for higher employee absenteeism in our manufacturing facilities.

We had continuous operations during the six months ended June 30, 2020.

We had continuous operations during the nine months ended September 30, 2020.

For the most part, our workers are able to socially distance themselves during the manufacturing process.

Additional precautions have been taken to social distance workers that work in close environments.

The Company utilizes sanitation stations, requires the use of a facial covering, performs daily temperature scanning, and performs additional cleaning and sanitation throughout the day and deep cleaning overnight.

The Company utilizes sanitation stations, requires the use of a facial covering when unable to socially distance, performs daily temperature scanning, and performs additional cleaning and sanitation throughout the day and deep cleaning overnight.

The Company did see significant employee absenteeism in the latter part of June 2020.

These unexpected employee absences resulted in reduced shipments and longer lead times.

The magnitude of the impact of COVID-19 remains unpredictable and we, therefore, continue to anticipate potential supply chain disruptions, employee absenteeism and additional health and safety costs related to the COVID-19 pandemic that could unfavorably impact our business.

These unexpected employee absences resulted in reduced shipments and longer lead times in the second quarter 2020.

During the third quarter 2020, employee attendance levels were stronger than previously anticipated.

Additionally, our work force has adapted well to school and childcare related issues.

The magnitude of the impact of COVID-19 remains unpredictable and we, therefore, continue to anticipate potential supply chain disruptions, increased employee absenteeism and additional health and safety costs related to the COVID-19 pandemic that could unfavorably impact our business.

Although these disruptions and costs are expected to be temporary, there is significant uncertainty around the duration and overall impact to our business operations.

We believe it is possible that the impact of the COVID-19 pandemic could have a material adverse effect on the results of our operations, financial position and cash flows as of and for the year ended December 31, 2020.

We do not believe that the impact of the COVID-19 pandemic will have a material adverse effect on the results of our operations, financial position and cash flows as of and for the year ended December 31, 2020.

However, we are monitoring the progression of the pandemic and its potential effect on our financial position, results of operations and cash flows.

22 unchanged sentences

Goodwill represents the excess of the consideration paid for the acquired businesses, in our February 2018 business combination, over the fair value of the individual assets acquired, net of liabilities assumed.

Goodwill at June 30, 2020 is deductible for income tax purposes.

Goodwill at September 30, 2020 is deductible for income tax purposes.

Goodwill is not amortized, but instead is evaluated for impairment at least annually.

12 unchanged sentences

Disaggregated net sales by major source:

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

Three Months Ended Nine Months Ended

September 30,

2020 September 30,

2019 September 30,

2020 September 30,

(in thousands)

8 unchanged sentences

Disaggregated units sold by major source:

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

Three Months Ended Nine Months Ended

September 30,

2020 September 30,

2019 September 30,

2020 September 30,

Rooftop units 4,372 3,520 12,179 11,079

12 unchanged sentences

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.

Sales of our products are moderately seasonal with the peak period being May-October of each year.

We are responsible for billings and collections resulting from all sales transactions, including those initiated by 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.

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.

6 unchanged sentences

The Company is considered the principal for the equipment we design and manufacture and records that revenue gross.

The Company has no control over the Third Party Products to the end customer and the Company is under no obliagtion related to the Third Party Products.

Amounts related to Third Party Products are not recognized as revenue but are recorded as a liabilitiy and are included in accrued liabilities on the consolidated balance sheet.

The Company has no control over the Third Party Products to the end customer and the Company is under no obligation related to the Third Party Products.

Amounts related to Third Party Products are not recognized as revenue but are recorded as a liability and are included in accrued liabilities on the consolidated balance sheet.

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 were $ 14.9 million and $ 10.2 million for the three months ended June 30, 2020 and 2019, respectively.

The amount of payments to our Representatives were $ 27.5 million and $ 21.7 million for the six months ended June 30, 2020 and 2019, respectively.

The amount of payments to our Representatives were $ 11.5 million and $ 12.7 million for the three months ended September 30, 2020 and 2019, respectively.

The amount of payments to our Representatives were $ 39.0 million and $ 34.4 million for the nine months ended September 30, 2020 and 2019, respectively.

The Company also sells extended warranties on parts for various lengths of time ranging from six months to 10 years.

4 unchanged sentences

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.

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.

3 unchanged sentences

The standard did not materially impact our consolidated net earnings or cash flows.

As of June 30, 2020, our right of use assets and lease liabilities are approximately $ 1.7 million.

As of September 30, 2020, our right of use assets and lease liabilities are approximately $ 1.6 million.

Accounts Receivable

Accounts receivable and the related allowance for doubtful accounts are as follows:

Accounts receivable and the related allowance for credit losses are as follows:

September 30,

2020 December 31, 2019

1 unchanged sentence

Accounts receivable $ 62,741 $ 67,752

Allowance for doubtful accounts ( 429 ) ( 353 )

Allowance for credit losses ( 546 ) ( 353 )

$ 62,195 $ 67,399

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

Allowance for doubtful accounts:

Three Months Ended Nine Months Ended

September 30,

2020 September 30,

2019 September 30,

2020 September 30,

Allowance for credit losses:

(in thousands)

Balance, beginning of period $ 429 $ 392 $ 353 $ 264

Provisions (recoveries) for losses on accounts ( 218 ) 13 76 128

receivables, net of adjustments

Provisions (recoveries) for expected credit 117 ( 37 ) 193 91

losses, net of adjustments

Accounts receivable written off, net of recoveries

— ( 2 ) — ( 2 )

Balance, end of period $ 546 $ 353 $ 546 $ 353

3 unchanged sentences

The components of inventories and related changes in the allowance for excess and obsolete inventories account are as follows:

September 30,

2020 December 31, 2019

6 unchanged sentences

$ 78,819 $ 73,601

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

Three Months Ended Nine Months Ended

September 30,

2020 September 30,

2019 September 30,

2020 September 30,

Allowance for excess and obsolete inventories:

7 unchanged sentences

Our intangible assets consist of the following:

September 30,

2020 December 31, 2019

4 unchanged sentences

Amortization expense recorded in cost of sales is as follows:

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

Three Months Ended Nine Months Ended

September 30,

2020 September 30,

2019 September 30,

2020 September 30,

(in thousands)

1 unchanged sentence

Supplemental Cash Flow Information

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

Three Months Ended Nine Months Ended

September 30,

2020 September 30,

2019 September 30,

2020 September 30,

Supplemental disclosures:

3 unchanged sentences

Non-cash capital expenditures $ ( 4,421 ) $ ( 116 ) $ 625 $ ( 280 )

Dividends declared 9,930 $ 8,355 $ 9,930 $ 8,355

The Company has product warranties with various terms ranging from one year from the date of first use or 18 months for parts to 25 years for certain heat exchangers.

2 unchanged sentences

Changes in the warranty accrual are as follows:

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

Three Months Ended Nine Months Ended

September 30,

2020 September 30,

2019 September 30,

2020 September 30,

Warranty accrual:

8 unchanged sentences

Accrued liabilities were comprised of the following:

September 30,

2020 December 31, 2019

7 unchanged sentences

Customer prepayments 2,151 4,627

Employee 401(k) profit sharing 2,870 —

Donations 604 354

5 unchanged sentences

Under the line of credit, there is one standby letter of credit totaling $ 1.7 million.

Borrowings available under the revolving credit facility at June 30, 2020 were $ 28.3 million.

Borrowings available under the revolving credit facility at September 30, 2020 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.

We had no outstanding balance under the revolving credit facility at June 30, 2020 and December 31, 2019.

We had no outstanding balance under the revolving credit facility at September 30, 2020 and December 31, 2019.

The revolving credit facility expires on July 26, 2021.

As of June 30, 2020, we were in compliance with our financial covenants.

As of September 30, 2020, 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 June 30, 2020, our tangible net worth was $ 322.7 million and met the requirement of being at or above $ 175.0 million.

At September 30, 2020, our tangible net worth was $ 344.9 million and met the requirement of being at or above $ 175.0 million.

Our total liabilities to tangible net worth ratio was 0.3 to 1, and met the requirement of not being above 2 to 1.

The provision (benefit) for income taxes consists of the following:

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

Three Months Ended Nine Months Ended

September 30,

2020 September 30,

2019 September 30,

2020 September 30,

(in thousands)

4 unchanged sentences

The reconciliation of the Federal statutory income tax rate to the effective income tax rate is as follows:

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

Three Months Ended Nine Months Ended

September 30,

2020 September 30,

2019 September 30,

2020 September 30,

Federal statutory rate 21.0 % 21.0 % 21.0 % 21.0 %

State income taxes, net of Federal benefit 2.3 1.3 4.0 4.2

Amended Oklahoma tax returns — ( 4.5 ) — ( 2.0 )

Excess tax benefits ( 2.3 ) ( 1.7 ) ( 3.3 ) ( 3.1 )

Return to provision adjustments 0.5 ( 7.1 ) 0.2 ( 2.1 )

Other 0.3 ( 4.1 ) ( 0.8 ) ( 1.2 )

Effective tax rate 21.8 % 4.9 % 21.1 % 16.8 %

During the three months ended September 2019, upon completion of the Company's 2018 tax return, the Company recorded an additional benefit due to higher than expected research and development credit of $ 0.6 million.

Historically, the Company has taken advantage of the Oklahoma Investment/New Jobs Credit ("OK Credit").

This OK Credit allows the Company to take a credit equal to 1 % of eligible investments each year for five years , beginning with the year of investment.

The Company determined it could take advantage of an additional 1 % tax credit 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 $ 0.3 million for 2018 and $ 0.9 million for our 2015, 2016 and 2017 amended returns, combined.

The Company's estimated annual 2020 effective tax rate, excluding discrete events, is approximately 24 %.

8 unchanged sentences

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted on March 27, 2020, and includes a retroactive correction to the 2017 Tax Cuts and Jobs Act that allows for much faster depreciation of qualified improvement property that is placed in service after December 31, 2017.

The retroactive correction allows for 100 % first-year bonus depreciation for qualified improvement property placed in service in the tax years ended 2018 to 2022.

Alternatively, companies can depreciate qualified improvement property placed in service during the tax year ended 2018 and beyond over 15 years using the straight-line method.

Amending a prior period return to claim 100 % first-year bonus depreciation for qualified improvement property placed in service in those years could result in a net operating loss that can be carried back to a prior tax year to recover taxes paid in that prior year.

As the Company collects and prepares necessary data and interprets the CARES Act and any additional guidance issued by the U.S.

Treasury Department, the IRS, and other standard-setting bodies, additional adjustments to the financial statements may be made.

We don't expect these additional adjustments to materially impact the provision for income taxes and effective tax rate in the period in which the adjustments are made.

We expect the final accounting for the tax effects of the CARES Act to be completed by the third quarter in 2020.

Under current rules, the calculation of depreciation or repair deductions for prior years can be recomputed and a one-time catch-up adjustment is allowed in the current tax year for missed deductions.

The adjustment is the difference between depreciation or repair deductions claimed versus depreciation or repair deductions that could have been claimed by the end of the prior tax year and does not require amending any prior year tax returns.

Share-Based Compensation

7 unchanged sentences

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 will determine the persons to whom awards are to be made, determine the type, size and terms of awards, interpret the 2016 Plan, establish and revise rules and regulations relating to the 2016 Plan and make any other determinations that it believes necessary for the administration of the 2016 Plan.

The total pre-tax compensation cost related to unvested stock options not yet recognized as of June 30, 2020 is $ 26.5 million and is expected to be recognized over a weighted average period of 3.4 years.

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 the six months ended June 30, 2020 and 2019 using a Black Scholes-Merton Model:

Six months ended

June 30, 2020 June 30, 2019

The Committee may delegate certain duties to one or more officers of the Company as provided in the 2016 Plan.

The total pre-tax compensation cost related to unvested stock options not yet recognized as of September 30, 2020 is $ 23.4 million and is expected to be recognized over a weighted average period of 3.1 years.

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 the nine months ended September 30, 2020 and 2019 using a Black Scholes-Merton Model:

Nine months ended

September 30, 2020 September 30, 2019

Directors and Officers:

11 unchanged sentences

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 June 30, 2020:

The following is a summary of stock options vested and exercisable as of September 30, 2020:

Prices Number

7 unchanged sentences

Total 738,709 6.28 $ 31.90 $ 20,940

The following is a summary of stock options vested and exercisable as of June 30, 2019:

The following is a summary of stock options vested and exercisable as of September 30, 2019:

Prices Number

15 unchanged sentences

( 214,838 ) 40.48

Outstanding at June 30, 2020

Outstanding at September 30, 2020

3,902,943 $ 38.71

Exercisable at June 30, 2020

Exercisable at September 30, 2020

738,709 $ 31.90

The total intrinsic value of options exercised during the six months ended June 30, 2020 and 2019 was $ 8.8 million and $ 5.0 million, respectively.

The cash received from options exercised during the six months ended June 30, 2020 and 2019 was $ 14.2 million and $ 7.7 million, respectively.

The total intrinsic value of options exercised during the nine months ended September 30, 2020 and 2019 was $ 12.1 million and $ 7.0 million, respectively.

The cash received from options exercised during the nine months ended September 30, 2020 and 2019 was $ 18.5 million and $ 11.3 million, respectively.

The impact of these cash receipts is included in financing activities in the accompanying Consolidated Statements of Cash Flows.

2 unchanged sentences

common stock on the respective grant dates, reduced for the present value of dividends.

At June 30, 2020, unrecognized compensation cost related to unvested restricted stock awards was approximately $ 6.2 million, which is expected to be recognized over a weighted average period of 3.2 years.

At September 30, 2020, unrecognized compensation cost related to unvested restricted stock awards was approximately $ 5.3 million, which is expected to be recognized over a weighted average period of 2.9 years.

A summary of the unvested restricted stock awards is as follows:

4 unchanged sentences

( 8,216 ) 39.88

Unvested at June 30, 2020

Unvested at September 30, 2020

227,201 $ 38.17

1 unchanged sentence

A summary of share-based compensation is as follows:

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

Three Months Ended Nine Months Ended

September 30,

2020 September 30,

2019 September 30,

2020 September 30,

Grant date fair value of awards during the period:

15 unchanged sentences

Forfeitures are accounted for as they occur.

Historically, if the employee or director is retirement eligible (as defined by the respective LTIP) or becomes retirement eligible during service period of the related share-based compensation award, the service period (and compensation expense recognition) 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.

Historically, if the employee or director is retirement eligible (as defined by the applicable LTIP or 2016 Plan) or becomes retirement eligible during service period of the related share-based compensation award, the service period (and compensation expense recognition) 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.

All share-based compensation awards granted on or after March 1, 2020 to retirement eligible employees or directors contain a one -year employment requirement (minimum service period) or the entire award is forfeited.

7 unchanged sentences

Administrative expenses are paid for by Plan participants.

The Company paid no administrative expenses during the three and six months ended June 30, 2020 and 2019.

The Company paid no administrative expenses during the three and nine months ended September 30, 2020 and 2019.

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.

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

Three Months Ended Nine Months Ended

September 30,

2020 September 30,

2019 September 30,

2020 September 30,

(in thousands)

3 unchanged sentences

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.

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

Three Months Ended Nine Months Ended

September 30,

2020 September 30,

2019 September 30,

2020 September 30,

(in thousands)

6 unchanged sentences

In addition, the Company matches 175 % of a participating employee's allowed contributions to a qualified health saving account to assist employees with our health insurance plan deductibles.

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

Three Months Ended Nine Months Ended

September 30,

2020 September 30,

2019 September 30,

2020 September 30,

(in thousands)

Medical claim payments $ 2,985 $ 1,650 $ 6,843 $ 4,500

Health saving account payments 899 900 1,773 1,620

Health saving account contributions 890 790 2,663 2,410

Earnings Per Share

3 unchanged sentences

The following table sets forth the computation of basic and diluted earnings per share:

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

Three Months Ended Nine Months Ended

September 30,

2020 September 30,

2019 September 30,

2020 September 30,

(in thousands, except share and per share data)

34 unchanged sentences

Our repurchase activity is as follows:

Six Months Ended

June 30, 2020 June 30, 2019

Nine Months Ended

September 30, 2020 September 30, 2019

(in thousands, except share and per share data)

5 unchanged sentences

Our repurchase activity since Company inception, including our current authorized stock repurchase programs, are as follows:

Inception to June 30, 2020

Inception to September 30, 2020

(in thousands, except share and per share data)

4 unchanged sentences

13,980,690 $ 231,835 $ 16.58

Subsequent to June 30, 2020 and through August 4, 2020, the Company repurchased 45,615 shares for $ 2.6 million from our 401(k) savings and investment plan.

Subsequent to September 30, 2020 and through November 3, 2020, the Company repurchased 52,646 shares for $ 3.3 million from our 401(k) savings and investment plan.

At the discretion of the Board, we pay semi-annual cash dividends.

30 unchanged sentences

These contracts are not accounted for as derivative instruments because they meet the normal purchase and normal sales exemption.

We had no material contractual purchase obligations as of June 30, 2020.

We had no material contractual purchase obligations as of September 30, 2020.

Related Parties

5 unchanged sentences

The following is a summary of transactions and balance with affiliates:

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

Three Months Ended Nine Months Ended

September 30,

2020 September 30,

2019 September 30,

2020 September 30,

(in thousands)

1 unchanged sentence

Payments to affiliates 110 32 207 225

September 30,

2020 December 31,

9 unchanged sentences

As such, this information is not included below.

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

Three Months Ended Nine Months Ended

September 30,

2020 September 30,

2019 September 30,

2020 September 30,

(in thousands)

12 unchanged sentences

Error Correction

We have corrected herein our consolidated financial statements as of June 30, 2019 and for the three and six months ended June 30, 2019, in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 250, Accounting Changes and Error Corrections .

We have corrected herein our consolidated financial statements as of September 30, 2019 and for the three and nine months ended September 30, 2019, in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 250, Accounting Changes and Error Corrections .

Error Correction Background

4 unchanged sentences

Description of Tables

The following tables represent our corrected consolidated statements of income and statements of stockholders' equity for the three and six months ended June 30, 2019 and statements of cash flows for the six months ended June 30, 2019, as well as our corrected consolidated balance sheet data at June 30, 2019.

The values as previously reported for June 30, 2019 were derived from our Quarterly Report on Form 10-Q for the three and six month ended June 30, 2019 filed on August 1, 2019.

The following tables represent our corrected consolidated statements of income and statements of stockholders' equity for the three and nine months ended September 30, 2019 and statements of cash flows for the nine months ended September 30, 2019, as well as our corrected consolidated balance sheet data at September 30, 2019.

The values as previously reported for September 30, 2019 were derived from our Quarterly Report on Form 10-Q for the three and nine month ended September 30, 2019 filed on October 31, 2019.

Consolidated Statements of Income

Three Months Ended June 30, 2019 Six Months Ended June 30, 2019

Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019

Previously Reported Corrections As Corrected Previously Reported Corrections As Corrected

25 unchanged sentences

Total stockholders' equity $ 279,567 $ 2,688 (e) $ 282,255

(a) The share-based compensation correction to cost of sales for the three and six months ended June 30, 2019 was approximately $ 0.1 million and $ 0.3 million, respectively.

(b) The share-based compensation correction to selling, general and administrative expenses for the three and six months ended June 30, 2019 was approximately $ 0.6 million and $ 2.4 million, respectively.

Included in the correction to selling, general and administrative expenses is a correction to reduce our employee profit sharing bonus plan (Note 13) of approximately $ 0.1 million and $ 0.3 million for the three and six months ended June 30, 2019, respectively.

(a) The share-based compensation correction to cost of sales for the three and nine months ended September 30, 2019 was approximately $ 0.1 million and $ 0.3 million, respectively.

(b) The share-based compensation correction to selling, general and administrative expenses for the three and nine months ended September 30, 2019 was approximately $ 0.7 million and $ 1.7 million, respectively.

Included in the correction to selling, general and administrative expenses is a correction to our employee profit sharing bonus plan (Note 13) of approximately $ 0.1 million and $ 0.2 million for the three and nine months ended September 30, 2019, respectively.

(c) The corrections to income tax receivable and deferred tax liability are the tax effect of the share-based compensation correction.

2 unchanged sentences

(e) This is the cumulative effect on stockholders' equity as a result of the share-based compensation correction.

See table below for a description of the changes in stockholders' equity in the consolidated statements of stockholders' equity for the three and six months ended June 30, 2019, respectively.

See table below for a description of the changes in stockholders' equity in the consolidated statements of stockholders' equity for the three and nine months ended September 30, 2019, respectively.

Consolidated Statements of Stockholders’ Equity

Six Months Ended June 30, 2019

Nine Months Ended September 30, 2019

Common Stock Paid-in Retained

8 unchanged sentences

Dividends — — — ( 8,303 ) ( 8,303 )

Balances at June 30, 2019 52,118 209 1,586 262,774 264,569

Balances at September 30, 2019 52,119 209 2,680 276,678 279,567

Correction Impacts

6 unchanged sentences

Dividends — — — — —

Balances at June 30, 2019 — — 2,713 229 2,942

Balances at September 30, 2019 — — 1,996 692 2,688

Balances at December 31, 2018 51,991 $ 208 $ — $ 249,235 $ 249,443

5 unchanged sentences

Dividends — — — ( 8,303 ) ( 8,303 )

Balances at June 30, 2019 52,118 $ 209 $ 4,299 $ 263,003 $ 267,511

See descriptions of changes to net income in the consolidated statement of income for the six months ended June 30, 2019 in the table above.

Balances at September 30, 2019 52,119 $ 209 $ 4,676 $ 277,370 $ 282,255

See descriptions of changes to net income in the consolidated statement of income for the nine months ended September 30, 2019 in the table above.

Consolidated Statements of Stockholders’ Equity

Three Months Ended June 30, 2019

Three Months Ended September 30, 2019

Common Stock Paid-in Retained

1 unchanged sentence

As Previously Reported (in thousands)

Balances at March 31, 2019 52,099 $ 208 $ 969 $ 258,193 $ 259,370

Balances at June 30, 2019 52,118 $ 209 $ 1,586 $ 262,774 $ 264,569

Net income — — — 13,827 13,827

4 unchanged sentences

Dividends — — — 77 77

Balances at June 30, 2019 52,118 209 1,586 262,774 264,569

Balances at September 30, 2019 52,119 209 2,680 276,678 279,567

Correction Impacts

Balances at March 31, 2019 — — 3,377 ( 201 ) 3,176

Balances at June 30, 2019 — — 2,713 229 2,942

Net income — — — 463 463

4 unchanged sentences

Dividends — — — — —

Balances at September 30, 2019 — — 1,996 692 2,688

Balances at June 30, 2019 52,118 $ 209 $ 4,299 $ 263,003 $ 267,511

Balances at March 31, 2019 52,099 $ 208 $ 4,346 $ 257,992 $ 262,546

Net income — — — 14,290 14,290

4 unchanged sentences

Dividends — — — 77 77

Balances at June 30, 2019 52,118 $ 209 $ 4,299 $ 263,003 $ 267,511

See descriptions of changes to net income in the consolidated statement of income for the three months ended June 30, 2019 in the table above.

Balances at September 30, 2019 52,119 $ 209 $ 4,676 $ 277,370 $ 282,255

See descriptions of changes to net income in the consolidated statement of income for the three months ended September 30, 2019 in the table above.

Consolidated Statements of Cash Flows

Six Months Ended June 30, 2019

Nine Months Ended September 30, 2019

Previously Reported Corrections As Corrected

3 unchanged sentences

Depreciation and amortization 17,627 — 17,627

Provision for losses on accounts receivable, net of adjustments 128 — 128

Provision for credit losses on accounts receivable, net of adjustments 91 — 91

Provision for excess and obsolete inventories 1,003 — 1,003

24 unchanged sentences

Employee taxes paid by withholding shares ( 1,023 ) — ( 1,023 )

Cash dividends paid to stockholders ( 8,303 ) — ( 8,303 )

Net cash used in financing activities ( 13,480 ) — ( 13,480 )

Net decrease in cash and cash equivalents 11,689 — 11,689

Net increase in cash and cash equivalents 26,379 — 26,379

Cash and cash equivalents, beginning of year 1,994 — 1,994

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements