What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-03-15 compared with 2020-03-16 · 906 added, 746 removed, 725 unchanged (69% of the section changed)

1 unchanged sentence

Index to Financial Statements

Report of Independent Registered Public Accounting Firm

Report s of Independent Registered Public Accounting Firm s

Consolidated Statements of Operations and Comprehensive Income (Loss)

3 unchanged sentences

Notes to Consolidated Financial Statements

Significant Accounting Policies

Discontinued Operations

Segment Information

Accounts Receivable

Property, Plant and Equipment

Intangible Assets, Net

Investment in Joint Venture

Restructuring and Integration

Commitments and Contingencies

Preferred Stock and Stockholders' Equity

Revenue from Contracts with Customers

Share-Based Compensation

Accumulated Other Comprehensive Income

Net Income (Loss) Per Common Share

Fair Value Measurements

Quarterly Results of Operations (Unaudited)

Reports of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

Opinion on internal control over financial reporting

We have audited the internal control over financial reporting of NN, Inc.

(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2020, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2020, and our report dated March 15, 2021 expressed an unqualified opinion on those consolidated financial statements.

Basis for opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and limitations of internal control over financial reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ GRANT THORNTON LLP

Charlotte, North Carolina

March 15, 2021

Board of Directors and Stockholders

Opinion on the consolidated financial statements

We have audited the accompanying consolidated balance sheet of NN Inc.

(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2020, the related consolidated statements of operations and comprehensive income (loss), changes in stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 15, 2021 expressed an unqualified opinion.

Basis for opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical audit matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Goodwill Valuation – Power Solutions

As described in Note 8 to the consolidated financial statements, the Company’s market capitalization declined to a level that was less than the net book value of the stockholders’ equity during the first quarter of 2020.

The decline in market capitalization was a triggering event that resulted in the Company performing an interim quantitative goodwill impairment analysis as of March 31, 2020.

As a result of the interim goodwill impairment analysis, it was determined that the carrying value of the Power Solutions reporting unit exceeded its estimated fair value resulting in an impairment charge of $92.9 million.

We identified goodwill valuation as a critical audit matter because of the significant judgements made by management to estimate the fair value of goodwill.

Estimates of future performance and market conditions used to arrive at the net present value of future cash flows, which is used within the goodwill impairment analysis, are subjective in nature.

In particular, the Company’s fair value estimate was sensitive to assumptions including the revenue growth rate and discount rate used by the Company, which are affected by expectations about future market or economic conditions.

These assumptions proved more subjective during the March 31, 2020 goodwill impairment analysis as a result of the uncertainty surrounding the immediate and long-term impact of the COVID-19 pandemic.

Our audit procedures related to the goodwill impairment analysis included the following, among others:

• We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls related to the accounting for the March 31, 2020 goodwill impairment, which included the Company’s review over revenue growth rates and discount rate used to determine the fair value estimate of the Power Solutions reporting unit.

• We tested the reasonableness of the revenue growth rates by (1) comparing projected amounts to prior historical periods and trends and (2) obtaining an understanding of drivers underlying projected amounts, including consideration of industry information and economic trends.

• We utilized valuation specialists to assess the Company’s methodologies and assess the appropriateness of the discount rate used in the March 31, 2020 goodwill impairment analysis.

Our specialists calculated a range of rates using market participant inputs and performed analysis to test sensitivity to changes in the discount rate.

Valuation of Power Solutions Segment for Tax Distribution

As described further in Note 11 to the consolidated financial statements, prior to the sale of the Life Sciences business, the Company completed a tax restructuring in which Precision Engineered Products Holdings, Inc., a wholly owned U.S.

domestic subsidiary, distributed to NN, Inc., all of its assets and equity holdings related to the Power Solutions segment.

The restructuring process created a deferred gain, required to be realized upon the sale of Life Sciences, equal to the fair market value of the distributed assets over tax basis.

We identified the valuation of the Power Solutions segment as a critical audit matter because of the significant judgements made by management to estimate the fair value.

The distribution resulted in a step-up in tax basis and a taxable gain, both of which were directly impacted by the valuation.

Estimates of future performance and market conditions used to arrive at the net present value of future cash flows, which is used in the valuation of Power Solutions segment, are subjective in nature.

Our audit procedures related to the valuation of the Power Solutions segment included the following, among others:

• We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company’s controls related to the valuation of the Power Solutions segment, including the Company’s review over revenue growth rates and discount rate used to determine the fair value estimate.

• We tested the reasonableness of the growth rates by (1) comparing projected amounts to prior historical periods and trends, and (2) obtaining an understanding of drivers underlying projected amounts, including consideration of industry information and economic trends.

• We utilized valuation specialists to assess the Company’s methodologies and assess the appropriateness of the discount rate used in the valuation.

Our specialists calculated a range of rates using market participant inputs and performed analysis to test sensitivity to changes in the discount rate.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2020.

Charlotte, North Carolina

March 15, 2021

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of NN, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of NN, Inc.

and its subsidiaries (the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of operations and comprehensive income (loss), of changes in stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2019, including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because the following material weaknesses in internal control over financial reporting existed as of that date.

The Company (i) did not maintain an effective control environment due to a lack of a sufficient complement of personnel with an appropriate level of knowledge, experience and training commensurate with the Company’s financial reporting requirements and (ii) did not design and maintain effective monitoring controls over its Paragon Medical business as the Company did not maintain personnel and systems that were sufficient to ensure the adequate monitoring of control activities for certain processes.

These material weaknesses contributed to additional material weaknesses, as the Company did not design and maintain effective internal control (iii) over the accounting for transactions within the revenue and receivables business process within the Company’s Paragon Medical business to determine whether the transactions occurred and were complete and accurate and (iv) within the Paragon Medical business over certain information technology general controls that are relevant to the preparation of the Company’s financial statements.

The Company also (v) did not maintain effective control activities at one of its smaller foreign subsidiaries in which certain employees intentionally did not operate the controls related to inventory quantities as designed that resulted in the creation of unsupported physical inventory counts and inventory quantity adjustments.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

The material weaknesses referred to above are described in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A.

We considered these material weaknesses in determining the nature, timing, and extent of audit tests applied in our audit of the 2019 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of NN, Inc.

and its subsidiaries (the “Company”) as of December 31, 2019, and the related consolidated statements of operations and comprehensive income (loss), of changes in stockholders’ equity and of cash flows for each of the two years in the period ended December 31, 2019, including the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 1, the Company changed the manner in which it accounts for leases in 2019.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in management's report referred to above.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,

whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

We believe that our audits provide a reasonable basis for our opinion.

Emphasis of Matter

As disclosed in Note 1 to the consolidated financial statements, the Company is required to comply with a financial ratio covenant pursuant to its Credit Agreement which becomes more restrictive over time and will require the Company to improve financial performance or take other measures to maintain compliance with its debt agreements.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

As disclosed in Note 1 (not presented herein) to the consolidated financial statements appearing under Item 8 of the Company’s 2019 Annual Report on Form 10-K, the Company is required to comply with a financial ratio covenant pursuant to its Credit Agreement which becomes more restrictive over time and will require the Company to improve financial performance or take other measures to maintain compliance with its debt agreements.

/s/ PricewaterhouseCoopers LLP

Atlanta, Georgia

March 16, 2020

We have served as the Company’s auditor since 2003.

March 16, 2020, except for the effect of discontinued operations discussed in Note 2 to the consolidated financial statements, as to which the date is March 15, 2021.

We served as the Company's auditor from 2003 to 2020.

Consolidated Statements of Operations and Comprehensive Income (Loss)

For the Years Ended December 31,

Years Ended December 31,

(in thousands, except per share data) 2020 2019 2018

Net sales $ 427,534 $ 489,514 $ 524,194

Cost of sales (exclusive of depreciation and amortization shown separately below) 343,594 392,482 413,394

Selling, general, and administrative expense 58,055 68,895 72,764

Acquisition related costs excluded from selling, general and administrative expense

Depreciation and amortization 45,680 44,896 43,026

Goodwill impairment

Restructuring and integration expense, net — ( 12 ) 689

Other operating (income) expense, net

Income (loss) from operations

Goodwill impairment 92,942 — 182,542

Other operating expense, net 4,720 846 6,826

Loss from operations ( 117,457 ) ( 17,593 ) ( 195,047 )

Interest expense 18,898 13,030 11,315

Loss on extinguishment of debt and write-off of debt issuance costs 144 540 —

Derivative (gain) loss on change in interest rate swap fair value

Other (income) expense, net

Loss before benefit for income taxes and share of net income from joint venture

Benefit for income taxes

Derivative payments on interest rate swap 4,133 — —

Loss on interest rate swap 11,669 — —

Other expense (income), net ( 213 ) 962 2,016

Loss from continuing operations before benefit (provision) for income taxes and share of net income (loss) from joint venture ( 152,088 ) ( 32,125 ) ( 208,378 )

Benefit (provision) for income taxes 8,972 ( 305 ) 1,548

Share of net income (loss) from joint venture 3,626 1,681 ( 14,390 )

Income (loss) from continuing operations

Income from discontinued operations, net of tax (Note 2)

Net income (loss)

Other comprehensive loss:

Loss from continuing operations ( 139,490 ) ( 30,749 ) ( 221,220 )

Income (loss) from discontinued operations, net of tax (Note 2) 38,898 ( 15,992 ) ( 41,767 )

Net loss $ ( 100,592 ) $ ( 46,741 ) $ ( 262,987 )

Other comprehensive income (loss):

Reclassification adjustment for discontinued operations $ 5,961 $ — $ —

Foreign currency translation gain (loss)

Foreign currency translation loss ( 1,683 ) ( 3,845 ) ( 13,609 )

Interest rate swap:

Change in fair value of interest rate swap, net of tax

reclassification adjustment for (gains) losses included in net income, net of tax

Change in fair value, net of tax ( 12,443 ) ( 10,479 ) —

Reclassification adjustment for losses included in net loss, net of tax 18,987 1,084 —

Other comprehensive income (loss) $ 10,822 $ ( 13,240 ) $ ( 13,609 )

Comprehensive income (loss)

Basic net income (loss) per common share:

Income (loss) from continuing operations per common share

Income from discontinued operations per common share

Net income (loss) per common share

Comprehensive loss $ ( 89,770 ) $ ( 59,981 ) $ ( 276,596 )

Basic net loss per common share:

Loss from continuing operations per common share $ ( 3.60 ) $ ( 0.75 ) $ ( 6.98 )

Income (loss) from discontinued operations per common share 0.92 ( 0.38 ) ( 1.32 )

Net loss per common share $ ( 2.68 ) $ ( 1.13 ) $ ( 8.30 )

Weighted average common shares outstanding 42,199 42,030 31,678

Diluted net income (loss) per common share:

Income (loss) from continuing operations per common share

Income from discontinued operations per common share

Net income (loss) per common share

Diluted net loss per common share:

Loss from continuing operations per common share $ ( 3.60 ) $ ( 0.75 ) $ ( 6.98 )

Income (loss) from discontinued operations per common share 0.92 ( 0.38 ) ( 1.32 )

Net loss per common share $ ( 2.68 ) $ ( 1.13 ) $ ( 8.30 )

Weighted average common shares outstanding 42,199 42,030 31,678

5 unchanged sentences

Accounts receivable, net 84,615 83,240

Inventories 62,517 67,078

Income tax receivable 8,800 5,973

Current assets of discontinued operations — 117,000

Other current assets 11,148 11,778

2 unchanged sentences

Operating lease right-of-use assets 50,264 45,452

Goodwill — 94,779

Intangible assets, net 103,065 117,413

Investment in joint venture 26,983 21,755

Non-current assets of discontinued operations — 695,054

Other non-current assets 5,742 8,574

Liabilities and Stockholders’ Equity

Total assets $ 624,962 $ 1,541,984

Liabilities, Preferred Stock, and Stockholders’ Equity

Current liabilities:

4 unchanged sentences

Current portion of operating lease liabilities 4,797 4,288

Current liabilities of discontinued operations — 41,546

Other current liabilities 31,261 17,300

4 unchanged sentences

Operating lease liabilities, net of current portion 55,053 48,575

Non-current liabilities of discontinued operations — 84,199

Other non-current liabilities 17,237 40,457

1 unchanged sentence

Commitments and contingencies (Note 15)

Series B convertible preferred stock - $0.01 par value per share, 100 shares authorized, 100 and 0 shares issued and outstanding in 2019 and 2018, respectively

Series B convertible preferred stock - $ 0.01 par value per share, 100 shares authorized, 100 shares issued and outstanding at December 31, 2019, and December 31, 2020

105,086 93,012

Stockholders’ equity:

Common stock - $0.01 par value per share, authorized 90,000 shares, 42,313 and 42,104 shares issued and outstanding in 2019 and 2018, respectively

Common stock - $ 0.01 par value per share, 90,000 shares authorized, 42,313 and 42,686 shares issued and outstanding at December 31, 2019, and December 31, 2020, respectively

Additional paid-in capital 493,332 501,615

Warrants — 1,076

Accumulated deficit ( 205,875 ) ( 105,283 )

4 unchanged sentences

Consolidated Statements of Changes in Stockholders’ Equity

Retained earnings (Accumulated deficit)

Accumulated other comprehensive income

(in thousands)

Balance, December 31, 2016

Dividends declared or accrued for common stock

Share-based compensation expense

Shares issued for option exercises

Sale of discontinued operations

Restricted shares and performance shares forgiven for taxes and forfeited compensation expense

Foreign currency translation gain

Adoption of new accounting standard

Common Stock Retained earnings (Accumulated deficit) Accumulated other comprehensive income (loss)

(in thousands) Number

value Additional

capital Warrants Total

Balance, December 31, 2017 27,572 $ 275 $ 292,494 $ — $ 210,265 $ ( 17,705 ) $ 485,329

Net loss — — — — ( 262,987 ) — ( 262,987 )

Dividends declared or accrued for common stock — — ( 2,968 ) — ( 5,835 ) — ( 8,803 )

Shares issued 14,375 144 217,168 — — — 217,312

Share-based compensation expense

Shares issued for option exercises 27 — 274 — — — 274

Share-based compensation expense 165 2 4,382 — — — 4,384

Restricted shares and performance shares forgiven for taxes and forfeited ( 35 ) — ( 805 ) — — — ( 805 )

Change in estimate of performance share vesting

Change in estimate of share-based award vesting — — ( 1,890 ) — 50 — ( 1,840 )

Foreign currency translation loss — — — — — ( 13,609 ) ( 13,609 )

1 unchanged sentence

Balance, December 31, 2018 42,104 $ 421 $ 508,655 $ — $ ( 58,491 ) $ ( 31,314 ) $ 419,271

Net loss — — — — ( 46,741 ) — ( 46,741 )

Dividends declared or accrued for common stock — — ( 8,933 ) — — — ( 8,933 )

Dividends accrued for preferred stock — — ( 642 ) — — — ( 642 )

Share-based compensation expense

Shares issued for option exercises 5 — 21 — — — 21

Restricted shares forgiven for taxes and forfeited

Share-based compensation expense 248 2 3,931 — — — 3,933

Restricted shares forgiven for taxes ( 44 ) — ( 365 ) — — — ( 365 )

Change in estimate of share-based award vesting — — ( 1,052 ) — — — ( 1,052 )

1 unchanged sentence

Change in fair value of interest rate swap, net of tax of $ 3,166

Reclassification of interest rate swap settlement to income, net of tax of $327

— — — — — ( 10,479 ) ( 10,479 )

Reclassification of interest rate swap settlement to net loss, net of tax of $ 327

— — — — — 1,084 1,084

Foreign currency translation loss — — — — — ( 3,845 ) ( 3,845 )

Adoption of new accounting standard (Note 1)

Adoption of new accounting standard — — — — ( 51 ) — ( 51 )

Balance, December 31, 2019 42,313 $ 423 $ 501,615 $ 1,076 $ ( 105,283 ) $ ( 44,554 ) $ 353,277

Net loss — — — — ( 100,592 ) — ( 100,592 )

Dividends accrued for preferred stock — — ( 12,373 ) — — — ( 12,373 )

Share-based compensation expense 417 4 4,965 — — — 4,969

Restricted shares forgiven for taxes ( 44 ) — ( 157 ) — — — ( 157 )

Change in estimate of share-based award vesting — — ( 718 ) — — — ( 718 )

Reclassification of warrants to liabilities (Note 21) — — — ( 1,076 ) — — ( 1,076 )

Change in fair value of interest rate swap, net of tax of $ 3,764

— — — — — ( 12,443 ) ( 12,443 )

Reclassification of interest rate swap to net loss, net of tax of $ 5,742

— — — — — 18,987 18,987

Foreign currency translation loss — — — — — ( 1,683 ) ( 1,683 )

Sale of discontinued operations — — — — — 5,961 5,961

Balance, December 31, 2020 42,686 $ 427 $ 493,332 $ — $ ( 205,875 ) $ ( 33,732 ) $ 254,152

See Notes to Consolidated Financial Statements.

3 unchanged sentences

Cash flows from operating activities

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Net loss $ ( 100,592 ) $ ( 46,741 ) $ ( 262,987 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization of continuing operations 45,680 44,896 43,026

1 unchanged sentence

Amortization of debt issuance costs 15,692 4,789 4,845

Goodwill impairment

Goodwill impairment of continuing operations 92,942 — 182,542

Goodwill impairment of discontinued operations 146,757 — —

Other impairments 4,148 643 21,825

Loss on extinguishment of debt and write-off of debt issuance costs 1,532 3,293 19,562

Total derivative mark-to-market loss (gain), net of cash settlements

Share of net income from joint venture, net of cash dividends received

Total derivative loss, net of cash settlements 15,802 — —

Share of net income (loss) from joint venture, net of cash dividends received ( 3,626 ) ( 1,681 ) 642

Gain on disposal of discontinued operations, net of tax and cost to sell ( 233,824 ) — —

1 unchanged sentence

Deferred income taxes ( 21,697 ) ( 3,142 ) ( 22,402 )

Changes in operating assets and liabilities, excluding acquisitions:

Other ( 4,730 ) 3,169 1,290

Changes in operating assets and liabilities:

Accounts receivable 10,831 1,265 ( 3,543 )

Inventories 5,114 1,426 ( 16,208 )

Accounts payable ( 8,606 ) ( 7,900 ) 2,693

Income taxes receivable and payable, net ( 633 ) ( 5,292 ) 39,615

Net cash provided by (used in) operating activities

Other 10,802 4,711 ( 479 )

Net cash provided by operating activities 15,549 49,208 40,939

Cash flows from investing activities

Acquisition of property, plant and equipment, excluding assets acquired in business combinations

Acquisition of property, plant and equipment ( 23,773 ) ( 54,003 ) ( 64,036 )

Proceeds from liquidation of short-term investment — 8,000 —

2 unchanged sentences

Proceeds from sale of property, plant, and equipment 3,317 7,287 1,434

Cash settlements of interest rate swap ( 4,133 ) — —

Other 695 ( 711 ) ( 517 )

Net cash provided by (used in) investing activities 719,284 ( 39,427 ) ( 461,290 )

Cash flows from financing activities

Cash paid for debt issuance or prepayment costs

Cash paid for debt issuance costs ( 661 ) ( 11,336 ) ( 20,726 )

Dividends paid — ( 8,879 ) ( 8,826 )

2 unchanged sentences

Proceeds from long-term debt 66,195 54,209 311,841

Repayment of long-term debt

Repayments of long-term debt ( 776,331 ) ( 108,157 ) ( 290,687 )

Proceeds from (repayments of) short-term debt, net ( 924 ) ( 12,564 ) 10,305

Other ( 3,133 ) ( 3,715 ) ( 4,126 )

Net cash provided by (used in) financing activities ( 714,854 ) 5,299 215,093

4 unchanged sentences

Supplemental schedule of non-cash operating, investing and financing activities:

Dividends accrued (reversed) for performance share units, net

Non-cash additions to property, plant and equipment 9,644 23,281 26,605

3 unchanged sentences

Cash paid (received) for income taxes 2,241 6,428 ( 32,582 )

Cash and cash equivalents as of December 31, 2016 , includes $8.1 million of cash and cash equivalents that was included in current assets of discontinued operations.

_______________________________

(1) Cash and cash equivalents include $ 13.8 million, $ 10.2 million, and $ 0.2 million of cash and cash equivalents that were included in current assets of discontinued operations as of December 31, 2019;

December 31, 2018;

and December 31, 2017, respectively.

See Notes to Consolidated Financial Statements.

2 unchanged sentences

Nature of Business

is a global diversified industrial company that combines advanced engineering and production capabilities with in-depth materials science expertise to design and manufacture high-precision components and assemblies for the medical, aerospace and defense, electrical, automotive, and general industrial markets.

As used in this Annual Report on Form 10-K (this “Annual Report”), the terms “ NN ,” the “Company,” “we,” “our,” or “us” refer to NN, Inc.

, and its subsidiaries.

is a global diversified industrial company that combines advanced engineering and production capabilities with in-depth materials science expertise to design and manufacture high-precision components and assemblies primarily for the electrical, automotive, general industrial, aerospace and defense, and medical markets.

As used in this Annual Report on Form 10-K (this “Annual Report”), the terms “NN,” the “Company,” “we,” “our,” or “us” refer to NN, Inc., and its subsidiaries.

We have 32 facilities in North America, Europe, South America, and China.

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Certain prior period amounts have been reclassified to conform to the current year’s presentation.

Historical periods presented reflect reclassifications for discontinued operations (see Note 2).

Except for per share data or as otherwise indicated, all U.S.

dollar amounts presented in the tables in these Notes to Consolidated Financial Statements are in thousands.

In November 2019, we initiated a strategic review to evaluate a broad range of operational, financial, and strategic options to reduce leverage and enhance shareholder value, and we retained external advisors to assist in this effort.

The strategic options we are evaluating include further cost savings and cash generation initiatives, more efficient capital deployment, changes to our debt and equity structure to improve financial flexibility and liquidity, and the sale of part or all of NN, among others.

As discussed in Note 13 and Note 17 , on December 11, 2019, we issued preferred stock for net proceeds of $95.7 million and used a portion of the proceeds to repay amounts due at that time on our Senior Secured Revolver.

In December 2019 we amended our Credit Agreement which, in turn, extended the due date of our Senior Secured Revolver to July 20, 2022 , and reduced the total available borrowing amount to $75.0 million and extended our Incremental Term Loan to October 19, 2022 , matching the date of our longer-dated Senior Secured Term Loan.

Additionally, as part of this amendment our debt covenants were amended to establish more restrictive leverage ratios that also become more restrictive over time.

Our Consolidated Net Leverage Ratio covenant (the “financial leverage ratio covenant”) is required to be complied with on a quarterly basis at the end of each of our quarterly reporting periods.

Our financial leverage ratio covenant is based upon our consolidated net indebtedness at each quarter end and our trailing twelve-month Adjusted EBITDA as defined in our Credit Agreement.

In order to maintain compliance with the financial leverage ratio covenant, our operational and financial performance must continue to improve in line with our expectations.

In accordance with Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the Consolidated Financial Statements are issued.

The Company relies on cash flow generated from operations and available borrowings under its Senior Secured Revolver to fund our working capital and other operating and investing needs.

Our ability to borrow under our Senior Secured Revolver is based on our continued compliance with our financial leverage ratio covenant, as defined, which becomes more restrictive in the second quarter of 2020 and the first quarter of 2021.

If our operational and financial performance does not improve in line with our expectations, and as a result we are unable to comply with our financial ratio covenant, then the revolving credit lenders, the Senior Secured Term Loan lenders, and the Incremental Term Loan lenders could take action to cause amounts due under our credit facilities to become due and payable unless we are able to amend such covenants or otherwise refinance our debt.

Our ability to amend our covenants or refinance our debt is dependent upon several factors, and therefore there can be no assurance that we would be successful in these efforts.

If we would be unable to access future borrowings or be required to pay amounts due under our credit facilities prior to their normal maturity dates, this would have a material impact to the Company’s financial position.

We have developed a plan to mitigate the risk of noncompliance with our financial covenants, if necessary, which would include the implementation of a series of specific and identified cost reductions in both our corporate and business groups, including reducing our direct and indirect labor costs and benefits.

In addition, our plans also include, as deemed necessary, repatriating cash from certain overseas businesses, managing our working capital more efficiently through usage of our customers’ available supply chain finance programs and other means, and the sale or sublease of certain underutilized properties.

Going Concern

In July 2020, we amended our Credit Agreement to waive compliance with our Consolidated Net Leverage Ratio (the “financial leverage ratio”) covenant for the second and third quarters of 2020.

During this period, we were required to maintain minimum liquidity levels, provide certain financial and other information, and take certain other action as specified in the amendment.

Failure to maintain the required minimum liquidity levels or satisfy other requirements set forth in the amendment would allow the revolving credit lenders, the Senior Secured Term loan lenders, and the Incremental Term Loan lenders to cause amounts outstanding under our credit facility to become immediately due and payable and would have a material, adverse impact on our financial position.

In August 2020, we entered into an agreement to sell our Life Sciences business (see Note 2).

The sale closed on October 6, 2020, at which time we received cash proceeds of $ 757.2 million.

We immediately prepaid $ 700.0 million in the aggregate on the Senior Secured Term Loan and the Incremental Term Loan.

We also paid in full the outstanding balance on the Senior Secured Revolver.

Additionally, in August 2020, we amended our Credit Agreement to obtain the lenders’ consent to the sale of the Life Sciences business, subject to certain terms and conditions.

The full extent of the effect of the COVID-19 pandemic on our customers, our supply chain, and our business cannot be reasonably assessed at this time.

We have developed a plan to mitigate the impact of COVID-19, which includes the implementation of a series of specific and identified cost reductions in both our corporate and business groups, in addition to actions already taken, including further reducing our direct and indirect labor costs and benefits.

The impact of COVID-19 on our operating results will depend on future developments, which are highly uncertain and cannot be predicted, including governmental and business reactions to the pandemic.

We have made appropriate accounting estimates based on the facts and circumstances available as of the reporting date.

If there are differences between these estimates and actual results, our consolidated financial statements may be materially affected.

In accordance with Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), we have evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the Consolidated Financial Statements are issued.

We rely on cash flow generated from operations and available borrowings under our Senior Secured Revolver to fund our working capital and other operating and investing needs.

Our ability to borrow under our Senior Secured Revolver is based on our continued compliance with the minimum liquidity requirements and, for periods beginning in the fourth quarter of 2020, the financial leverage ratio covenant, as defined, which became more restrictive upon the occurrence of a qualified sale transaction, which closed on October 6, 2020.

Based on available borrowing capacity of the Senior Secured Revolver, the reduction in debt service costs as a result of the debt prepayment with net proceeds from the sale of the Life Sciences business in October 2020, and cash flows expected to be generated from operations and investing activities, we anticipate that our cash and cash equivalents are sufficient to support our operations and meet our obligations, and that we will be able to maintain compliance with the existing financial leverage ratio covenant for the next twelve months from issuance of these consolidated financial statements.

Principles of Consolidation

Our consolidated financial statements include the accounts of NN, Inc.

, and its wholly owned subsidiaries.

Our consolidated financial statements include the accounts of NN, Inc., and its wholly owned subsidiaries.

We own a 49 % interest in a joint venture which we account for using the equity method (see Note 10).

All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in accordance with U.S.

Use of Estimates in the Preparation of Consolidated Financial Statements

The preparation of consolidated financial statements in accordance with U.S.

GAAP requires management to use estimates and assumptions that affect the reported amounts of certain assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses.

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Accounting Standards Recently Adopted

On January 1, 2019 , we adopted ASC 842, Leases , which superseded ASC 840, Leases .

We adopted ASC 842 utilizing the modified retrospective transition approach;

therefore, historical financial information and disclosures do not reflect the new standard and will continue to be presented under the previous lease accounting guidance.

Under the modified retrospective transition method, the cumulative effect of the initial adoption adjustment of less than $0.1 million was recognized to the opening balance of accumulated deficit as of January 1, 2019 .

As part of the adoption, we elected the package of practical expedients, the short-term lease exemption, and the practical expedient to not separate lease and non-lease components.

We recorded lease-related assets and liabilities to our balance sheet for leases with terms greater than twelve months that were classified as operating leases and not previously recorded on our balance sheet.

See Note 14 for the required disclosures related to ASC 842.

Derivatives and Hedging .

In August 2017 , the Financial Accounting Standards Board (“FASB”) issued ASU 2017-12, Derivatives and Hedging (Topic 815):

Targeted Improvements to Accounting for Hedging Activities , (“ASU 2017-12”).

ASU 2017-12 provides new rules that expand the hedging strategies that qualify for hedge accounting.

The new rules also allow additional time to complete hedge effectiveness testing and allow qualitative assessments subsequent to initial quantitative tests if there is a supportable expectation that the hedge will remain highly effective.

We adopted the guidance on January 1, 2019 .

We have applied the new rules to 2019 hedging activities as disclosed in Note 22 to these condensed consolidated financial statements.

The new guidance has no effect on our historical financial statements.

Effects of Tax Reform in Other Comprehensive Income.

In February 2018 , the FASB issued guidance related to the impacts of the U.S.

Tax Cuts and Jobs Act of 2017 (“Tax Act”).

Under existing U.S.

GAAP, the effects of changes in tax rates and laws on deferred tax balances are recorded as a component of income tax expense in the period in which the law was enacted.

When deferred tax balances related to items originally recorded in accumulated other comprehensive income (“AOCI”) are adjusted, certain tax effects become stranded in AOCI.

The FASB issued ASU 2018-2, Income Statement – Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, that permits reclassification of certain income tax effects of the Tax Act from AOCI to retained earnings.

The guidance also requires certain disclosures about stranded tax effects.

The new guidance was effective for us on January 1, 2019 .

We adopted the new guidance at the beginning of the period of adoption.

The new guidance had no effect on our financial statements.

Accounting Standards Not Yet Adopted

Financial Instruments - Credit Losses .

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which modifies the measurement of expected credit losses on certain financial instruments and the timing of when such losses are recorded.

In November 2019, the SEC issued Staff Accounting Bulletin (“SAB”) No.

119, codified in Accounting Standards Codification (“ASC”) Topic 326, Financial Instruments-Credit Losses, which provides guidance on accounting of credit losses.

We adopted ASU 2016-13 on January 1, 2020, using the modified retrospective transition method, which resulted in no material impact on our consolidated financial statements.

Fair Value Disclosures.

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Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”) , that modifies fair value disclosure requirements.

The new guidance could impact us by streamlining disclosures of Level 3 fair value measurements.

The modified disclosures are effective for us beginning in the first quarter of 2020 , with early adoption allowed.

ASU 2018-13 changes disclosures only and does not impact our financial condition, results of operations, or cash flows.

We are in the process of evaluating the effects of this guidance on our fair value disclosures.

The new guidance streamlines disclosures of Level 3 fair value measurements.

The modified disclosures were effective for us beginning in the first quarter of 2020.

ASU 2018-13 changes disclosures only and does not impact our consolidated financial statements.

Internal-Use Software.

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Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force) (“ASU 2018-15”) , that provides guidance on a customer’s accounting for implementation, set-up, and other upfront costs incurred in a cloud computing arrangement that is hosted by the vendor.

Under the new guidance, customers will apply the same criteria for capitalizing implementation costs as they would for an arrangement that has a software license.

ASU 2018-15 is effective for us on January 1, 2020 , using either a prospective or retrospective approach and with early adoption permitted.

We are in the process of evaluating the effects of this guidance on our financial statements, but we do not expect the adoption to have a material impact.

Financial Instruments - Credit Losses .

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

In November 2019, the SEC issued SAB No.

119, codified in ASC Topic 326, Financial Instruments-Credit Losses , which provides guidance on accounting of credit losses.

ASU 2016-13 is effective for us on January 1, 2020 , using a modified retrospective approach, with early adoption permitted.

We are in the process of evaluating the effects of this guidance on our financial statements, but we do not expect the adoption to have a material impact.

Income Taxes.

Under the new guidance, customers apply the same criteria for capitalizing implementation costs as they would for an arrangement that has a software license.

We adopted ASU 2018-15 as of January 1, 2020, prospectively.

We have had no such costs after the adoption date, and we do not expect the new guidance to have a material impact on our consolidated financial statements.

Reference Rate Reform.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions for applying U.S.

GAAP to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform.

Among other things, for all types of hedging relationships, the guidance allows an entity to change the reference rate and other critical terms related to reference rate reform without having to remeasure the value or reassess a previous accounting determination.

The amendments in this guidance should be applied on a prospective basis and, for companies with a fiscal year ending December 31, are effective from January 1, 2020, through December 31, 2022.

We adopted this guidance effective January 1, 2020.

When the transition occurs, we expect to apply this expedient to new transactions that reference LIBOR or another reference rate that is discontinued, through December 31, 2022.

The adoption of this ASU is not expected to have a material impact on our consolidated financial statements.

Accounting Standards Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes, (“ASU 2019-12”) as part of its initiative to reduce complexity in accounting standards.

ASU 2019-12 removes

certain exceptions and provides simplification to specific tax items to improve consistent application.

ASU 2019-12 removes certain exceptions and provides simplification to specific tax items to improve consistent application.

This standard is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

Early adoption is permitted, including adoption in any interim period for which financial statements have not yet been issued.

Early adoption is permitted, including adoption in any interim period for which consolidated financial statements have not yet been issued.

Adoption methods vary based on the specific items impacted.

We are currently evaluating the impact on our financial statements and related disclosures.

We are currently evaluating the impact on our consolidated financial statements and related disclosures.

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, (“ASU 2020-06”) which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity.

Specifically, ASU 2020-06 simplifies accounting for convertible instruments by removing major separation models required under current U.S.

In addition, ASU 2020-06 removes certain settlement conditions that are required for

equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for the exception.

Further, for the diluted earnings-per-share calculation, the new guidance requires entities to use the if-converted method for all convertible instruments and generally requires entities to include the effect of share settlement for instruments that may be settled in cash or shares, among other things.

ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years.

Early adoption is permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

Either the full or modified retrospective adoption method is allowed.

We are currently evaluating the impact on our consolidated financial statements and related disclosures.

Cash and Cash Equivalents

Cash and cash equivalents include cash and highly liquid investments with original maturities of three months or less.

We maintain cash balances in transaction accounts with various financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”).

Although we maintain balances that exceed the federally insured limit, we have not experienced any losses related to these balances, and we believe credit risk to be minimal.

We had approximately $ 17.0 million and $ 12.7 million in cash and cash equivalents as of December 31, 2020 and 2019, respectively, held at foreign financial institutions.

Fair Value Measurements

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An asset or liability’s classification within the various levels is determined based on the lowest level input that is significant to the fair value measurement.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts Receivable and Allowance for Credit Losses

Trade accounts receivable are recorded at their net realizable value.

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments.

The allowances are based on the number of days an individual receivable is past the invoice due date and on regular credit evaluations of our customers.

In evaluating the credit worthiness of our customers, we consider numerous inputs including but not limited to the customers’ financial position, past payment history, relevant industry trends, cash flows, management capability, historical loss experience, and economic conditions and prospects.

Allowances are established when customer accounts are at risk of being uncollectible.

We maintain allowances for estimated losses resulting from the inability of our customers to make required payments.

The allowances are based on the amount that we ultimately expect to collect from our customers.

We evaluate the collectability of accounts receivable based on a combination of factors including number of days receivables are past due, historical collection experience, current market conditions, and forecasted direction of economic and business environment.

Accounts receivable are written off at the time a customer receivable is deemed uncollectible.

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Expenditures for maintenance and repairs are charged to expense as incurred.

Major renewals and betterments are capitalized.

Major renewals and improvements are capitalized.

When a property item is retired, its cost and related accumulated depreciation are removed from the property accounts and any gain or loss is recorded in the Consolidated Statements of Operations and Comprehensive Income (Loss).

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Depreciation is calculated based on historical cost using the straight-line method over the estimated useful lives of the depreciable assets.

Estimated useful lives for buildings generally range from 15 to 40 years.

Estimated useful lives for buildings and land improvements generally range from 10 to 40 years.

Estimated useful lives for machinery and equipment generally range from 3 to 12 years.

Estimated useful lives for leasehold improvements are based on the life of the lease.

Goodwill and Other Indefinite Lived Intangible Assets

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Assets to be held and used are tested for recoverability when indications of impairment are evident.

Recoverability of a long-lived tangible or intangible asset is

evaluated by comparing its carrying value to the future estimated undiscounted cash flows expected to be generated by the asset or asset group.

Recoverability of a long-lived tangible or intangible asset is evaluated by comparing its carrying value to the future estimated undiscounted cash flows expected to be generated by the asset or asset group.

If the asset is not recoverable, then the asset is considered impaired and adjusted to fair value which is then depreciated or amortized over its remaining useful life.

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Equity Method Investments

The Company’s equity method investment is subject to a review for impairment if, and when, circumstances indicate that a decline in value below its carrying amount may have occurred.

Our equity method investment is subject to a review for impairment if, and when, circumstances indicate that a decline in value below its carrying amount may have occurred.

Examples of such circumstances include, but are not limited to, a significant deterioration in the earnings performance or business prospects of the investee;

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and recurring negative cash flows from operations.

If management considers the decline to be other than temporary, the Company would write down the investment to its estimated fair market value.

If management considers the decline to be other than temporary, we would write down the investment to its estimated fair market value.

Income taxes are accounted for under the asset and liability method.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

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We treat global intangible low-taxed income (“GILTI”) as a periodic charge in the year in which it arises and therefore do not record deferred taxes for basis differences associated with GILTI.

We eliminate disproportionate tax effects from accumulated other comprehensive income (loss) when the circumstances upon which they are premised cease to exist.

Revenue Recognition

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Share Based Compensation

The cost of stock options, restricted stock, and performance share units are recognized as compensation expense over the vesting periods based on the grant date fair value, net of expected forfeitures.

The cost of stock options, restricted stock, and performance share units is recognized as compensation expense over the vesting periods based on the grant date fair value, net of expected forfeitures.

We determine grant date fair value using the Black Scholes financial pricing model for stock options and a Monte Carlo simulation for performance share units that include a market condition for vesting because these awards are not traded in open markets.

We determine grant date fair value using the closing price of our common stock on the date of grant for restricted stock and performance share units that include performance conditions for vesting.

We recognize excess tax benefits in income tax expense prospectively beginning in 2017 .

Excess tax benefits are presented in cash flows from operating activities in the statement of cash flows prospectively beginning in 2017 .

Tax payments in respect of shares withheld for taxes are classified in cash flows from financing activities in the statement of cash flows retrospectively for all periods presented.

Common Stock and Preferred Stock Dividends

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Revenue, costs, and expenses are translated at average rates prevailing during each reporting period.

Translation adjustments arising from the translation of foreign subsidiary financial statements are reported as a component of other comprehensive income and accumulated other comprehensive income within stockholders’ equity.

Translation adjustments arising from the translation of foreign subsidiary financial statements are reported as a component of other comprehensive income (loss) and accumulated other comprehensive income (loss) within stockholders’ equity.

Transactions denominated in foreign currencies, including intercompany transactions, are initially recorded at the current exchange rate at the date of the transaction.

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Transaction gains or losses, excluding intercompany loan transactions, are expensed as incurred in either cost of sales or selling, general and administrative expense in the Consolidated Statements of Operations and Comprehensive Income (Loss) and were immaterial to the years ended December 31, 2020, 2019, and 2018.

Transaction gains or losses on intercompany loan transactions are

recognized as incurred in the “ Other (income) expense, net ” line in the Consolidated Statements of Operations and Comprehensive Income (Loss) .

Transaction gains or losses on intercompany loan transactions are recognized as incurred in the “Other expense (income), net” line in the Consolidated Statements of Operations and Comprehensive Income (Loss).

For the years ended December 31, 2020, 2019, and 2018, transaction gains or losses on intercompany loan transactions were $ 0.8 million, $ 0.4 million, and $ 3.6 million, respectively.

Net Income (Loss) Per Common Share

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We refine these estimates over a measurement period not to exceed one year to reflect new information obtained surrounding facts and circumstances existing at the acquisition date.

Prior Periods' Financial Statement Revisions

As a result of misstatements identified by the Company during 2019, we are revising our previously issued financial statements as of and for the years ended December 31, 2018 and 2017, as well as the interim periods in 2018 and the first three quarters of 2019.

During the fourth quarter of 2019, we identified intentional misstatements in the accounting for inventory at one of our smaller foreign subsidiaries.

This inappropriate accounting resulted in the understatement of previously reported cost of sales by $0.7 million and $1.3 million in 2018 and 2017, respectively, and the overstatement of previously reported inventories by $1.7 million as of December 31, 2018 .

In addition, and as previously reported in our Form 10-Q for the three and nine-months ended September 30, 2019, we identified certain prior period tax misstatements, primarily related to tax accounting associated with the 2018 impairment of our joint venture, as well as other immaterial tax accounting misstatements.

These tax misstatements resulted in an understatement of previously reported benefit for income taxes of $2.5 million and $0.5 million in 2018 and 2017, respectively.

We assessed the materiality of these inventory and tax misstatements on prior periods’ financial statements in accordance with Securities and Exchange Commission (the” SEC”) Staff Accounting Bulletin (“SAB”) Topic 1.M, Materiality , codified in

Accounting Standards Codification (“ASC”) Topic 250, Accounting Changes and Error Corrections , (“ASC 250”) and concluded that the misstatements were not material to the prior annual or interim periods.

However, the Company has determined it to be appropriate to revise its accompanying 2018 and 2017 consolidated financial statements to correct for these misstatements.

In connection with such revision, the Company is also correcting for other immaterial misstatements, including the incorrect classification of certain dividend payments in the fourth quarter of 2018 within the Consolidated Statements of Changes in Stockholders’ Equity .

The accompanying notes to the consolidated financial statements reflect the impact of this revision.

We have also reflected the impact of the revision in the applicable unaudited quarterly financial results presented in Note 23 .

The following tables present the effect of the correction of the misstatements and the resulting revision on the Consolidated Statements of Operations and Comprehensive Income (Loss).

Year Ended December 31, 2017

As Originally Reported

Cost of sales (exclusive of depreciation and amortization)

Income (loss) from operations

Loss before (provision) benefit for income taxes and share of net income from joint venture

Income tax benefit (expense)

Income (loss) from continuing operations

Net income (loss)

Foreign currency translation gain (loss)

Comprehensive income (loss)

Basic net income (loss) per share

Diluted net income (loss) per share

Year Ended December 31, 2018

As Originally Reported

Cost of sales (exclusive of depreciation and amortization)

Income (loss) from operations

Loss before (provision) benefit for income taxes and share of net income from joint venture

Income tax benefit (expense)

Income (loss) from continuing operations

Net income (loss)

Foreign currency translation gain (loss)

Comprehensive income (loss)

Basic net income (loss) per share

Diluted net income (loss) per share

The following table presents the effect of the correction of the misstatements on the Consolidated Balance Sheet as of December 31, 2018.

As of December 31, 2018

As Originally Reported

Income tax receivable

Other current assets

Total current assets

Deferred tax liabilities

Total liabilities

Additional paid-in capital

Accumulated deficit

Accumulated other comprehensive income (loss)

Total stockholders' equity

Total liabilities and stockholders' equity

The following table presents the effect of the correction of the misstatements on the Consolidated Statements of Stockholders’ Equity.

As Originally Reported

As of and for the year ended December 31, 2017

Net income (loss)

Retained earnings

Foreign currency translation gain (loss)

Accumulated other comprehensive income (loss)

Total stockholders' equity

As of and for the year ended December 31, 2018

Additional paid-in capital

Net income (loss)

Accumulated deficit

Foreign currency translation gain (loss)

Accumulated other comprehensive income (loss)

Total stockholders' equity

The following table presents the effect of the correction of the misstatements on the Consolidated Statements of Cash Flows.

Year Ended December 31, 2017

As Originally Reported

Net income (loss)

Changes in operating assets and liabilities, net of acquisitions:

Year Ended December 31, 2018

As Originally Reported

Net income (loss)

Deferred income taxes

Changes in operating assets and liabilities, net of acquisitions:

Income taxes receivable and payable, net

Discontinued Operations

In August 2017 , we sold our global precision bearing components business (the “PBC Business”) and received cash proceeds at closing of $387.6 million and recorded a $0.8 million receivable, which was received in 2018 .

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.

We recorded an after-tax gain on sale of $127.7 million , which is included in the “Income from discontinued operations, net of tax” line on the Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 31, 2017 .

The gain includes the effects of reclassifying $9.3 million in cumulative foreign currency translation gain from accumulated comprehensive income and eliminating the non-controlling interest attributable to the PBC Business as of August 17, 2017 .

The operating results of the PBC Business are classified as discontinued operations and presented, net of tax, as one line item on the Consolidated Statements of Operations and Comprehensive Income (Loss).

The Consolidated Statements of Cash Flows for the year ended December 31, 2017, include cash flows of the PBC Business in each line item unless otherwise stated.

We had no discontinued operations in the years ended December 31, 2019 and 2018 .

In August 2020, we entered into a Stock Purchase Agreement (the “SPA”) with affiliates of American Securities LLC for the sale of our Life Sciences business for an aggregate purchase price of up to $ 825 million, which includes a $ 755 million cash base purchase price and a potential earnout payment of up to $ 70 million.

The cash base purchase price was subject to certain adjustments and was payable at the closing of the transaction, which occurred on October 6, 2020.

The earnout payment is subject to the performance of the Life Sciences business during the year ending December 31, 2022, measured by Adjusted EBITDA targets, as defined by the SPA.

The Life Sciences business includes facilities that are engaged in the production of a variety of components, assemblies, and instruments, such as surgical knives, bioresorbable implants, surgical staples, cases and trays, orthopaedic implants and tools, laparoscopic devices, and drug delivery devices for the orthopaedics and medical/surgical end markets.

The sale of the Life Sciences business furthers management’s strategy to improve liquidity and creates the financial flexibility to pursue key growth areas in the Mobile Solutions and Power Solutions segments.

After working capital and other closing adjustments, the final cash purchase price was approximately $ 753.3 million.

We received cash proceeds at closing of $ 757.2 million and recorded a $ 3.9 million payable at December 31, 2020, for the balance.

We prepaid $ 700.0 million in the aggregate on the Senior Secured Term Loan and the Incremental Term Loan immediately following the sale.

We also paid in full the outstanding balance on the Senior Secured Revolver.

We recognized a gain on sale of $ 214.9 million, net of income taxes.

Under the terms of a transition services agreement, we are providing certain support services for up to 180 days from the closing date of the sale.

In accordance with the terms of the SPA, we agreed to indemnify the buyer for certain tax liabilities on its consolidated federal income tax return related to the Life Sciences business during the portion of the year ended December 31, 2020, prior to the change in ownership on October 6, 2020.

We estimate that the tax indemnification will result in a payment of approximately $ 1.2 million to the buyer during the year ending December 31, 2021, and we have recorded this estimated obligation in the “Other current liabilities” line item on the Consolidated Balance Sheets at December 31, 2020.

In accordance with ASC 205-20, Presentation of Financial Statements - Discontinued Operations, the operating results of the Life Sciences business are classified as discontinued operations.

The presentation of discontinued operations includes revenues and expenses of the discontinued operations and will also include any gain on the disposition of the business, all net of tax, as one line item on the Consolidated Statements of Operations and Comprehensive Income (Loss).

The Consolidated Statements of Operations and Comprehensive Income (Loss) for all periods presented have been revised to reflect this presentation.

Accordingly, the results of the Life Sciences business have been excluded from continuing operations and segment results for all periods presented in the consolidated financial statements and the accompanying notes unless otherwise stated.

The Consolidated Statements of Cash Flows include cash flows of the Life Sciences business in each line item unless otherwise stated.

The following table presents the results of operations of the discontinued operations.

Year Ended December 31, 2017 (1)

Cost of products sold (exclusive of depreciation and amortization shown separately below)

Years Ended December 31,

2020 2019 2018

Net sales $ 225,255 $ 357,937 $ 246,463

Cost of sales (exclusive of depreciation and amortization shown separately below) 160,464 249,157 175,787

Selling, general, and administrative expense 20,779 34,328 20,927

Acquisition related costs excluded from selling, general and administrative expense — — 5,763

Depreciation and amortization 35,731 46,950 28,102

Restructuring and integration expense

Income from operations

Restructuring and integration expense, net — — 1,438

Goodwill impairment 146,757 — —

Other operating expense (income), net 41 20 ( 737 )

Income (loss) from operations ( 138,517 ) 27,482 15,183

Interest expense 48,893 44,125 49,928

Other income (expense), net

Income from discontinued operations before gain on disposal and provision for income taxes

Provision for income taxes on discontinued operations

Income from discontinued operations before gain on disposal

Loss on extinguishment of debt and write-off of debt issuance costs 1,388 2,753 19,562

Other expense (income), net ( 322 ) 178 ( 675 )

Loss from discontinued operations before costs of disposal and benefit for income taxes ( 188,476 ) ( 19,574 ) ( 53,632 )

Benefit for income taxes 12,468 3,582 11,865

Loss from discontinued operations before gain on disposal ( 176,008 ) ( 15,992 ) ( 41,767 )

Gain on disposal of discontinued operations 212,319 — —

Provision for income taxes on gain on disposal

Income from discontinued operations, net of tax

Benefit for income taxes on gain on disposal 2,587 — —

Income (loss) from discontinued operations, net of tax $ 38,898 $ ( 15,992 ) $ ( 41,767 )

During the first quarter of 2020, our market capitalization declined to a level that was less than the net book value of our stockholders’ equity.

The decline in market capitalization was a triggering event that caused us to perform a goodwill

impairment analysis as of March 31, 2020.

The carrying value of the Life Sciences reporting unit exceeded its estimated fair value as of March 31, 2020.

As a result of our analysis, we recorded an impairment loss on goodwill of $ 146.8 million for Life Sciences.

The judgments, assumptions, and estimates involved in the goodwill impairment analysis for the Life Sciences reporting unit are consistent with those discussed in Note 8.

Our credit facility required us to use proceeds from the sale of the Life Sciences business to prepay a portion of our existing debt.

We paid $ 700 million in the aggregate on our term loans as described in Note 12.

The prepayment was applied to debt in accordance with the prepayment provisions of the Credit Agreement immediately after the transaction closed on October 6, 2020.

Average quarterly interest rates were multiplied by the required prepayment amounts to calculate interest expense to be reclassified to discontinued operations for all periods presented.

Write-offs of credit facility debt issuance costs were allocated to discontinued operations by multiplying the ratio of the required prepayment amounts as a percentage of total outstanding principal by the total write-off charges in each period.

Write-offs of credit facility debt issuance costs that have been allocated to discontinued operations are presented in the “Loss on extinguishment of debt and write-off of debt issuance costs” line the table above.

The following table summarizes the amount of interest expense related to the credit facility that has been reclassified to discontinued operations.

Years Ended December 31,

2020 2019 2018

Includes the results of operations of the PBC Business from January 1, 2017 to the sale completion date of August 17, 2017 .

Interest on debt $ 35,147 $ 40,996 $ 46,406

Amortization of debt issuance costs 13,990 3,368 3,571

Capitalized interest and other ( 244 ) ( 239 ) ( 49 )

Total interest expense of discontinued operations $ 48,893 $ 44,125 $ 49,928

The following table summarizes the carrying amounts of major classes of assets and liabilities of discontinued operations for each of the periods presented.

December 31, 2020 December 31, 2019

Cash and cash equivalents $ — $ 13,792

Accounts receivable, net — 48,318

Inventories — 51,644

Other current assets — 3,246

Total current assets of discontinued operations — 117,000

Property, plant and equipment, net — 118,536

Operating lease right-of-use assets — 20,044

Goodwill — 344,316

Intangible assets, net — 211,847

Other non-current assets — 311

Total non-current assets of discontinued operations — 695,054

Total assets of discontinued operations $ — $ 812,054

Accounts payable $ — $ 16,367

Accrued salaries, wages and benefits — 14,844

Income tax payable — 344

Current portion of operating lease liabilities — 2,364

Other current liabilities — 7,627

Total current liabilities of discontinued operations — 41,546

Deferred tax liabilities — 61,338

Operating lease liabilities, net of current portion — 18,405

Other non-current liabilities — 4,456

Total non-current liabilities of discontinued operations — 84,199

Total liabilities of discontinued operations $ — $ 125,745

The following table presents the significant noncash items and cash paid for capital expenditures of discontinued operations for each period presented.

Year Ended December 31, 2017

Years Ended December 31,

2020 2019 2018

Depreciation and amortization $ 35,731 $ 46,950 $ 28,102

Goodwill impairment 146,757 — —

Amortization of debt issuance costs 13,990 3,368 3,571

Loss on extinguishment of debt and write-off of debt issuance costs 1,388 2,753 19,562

Acquisition of property, plant and equipment 8,416 21,834 14,759

Right-of-use assets obtained in exchange for new finance lease liabilities 695 5,321 —

Right-of-use assets obtained in exchange for new operating lease liabilities (1) 6,174 51 —

_______________________________

(1) Includes new leases, renewals, and modifications after the adoption of ASC Topic 842, Leases, on January 1, 2019.

Paragon Medical, Inc.

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(“Paragon Medical”).

For accounting purposes, Paragon Medical meets the definition of a business and has been accounted for as a business combination.

For accounting purposes, Paragon Medical met the definition of a business and was accounted for as a business combination.

Paragon Medical is a medical device manufacturer which focuses on the orthopaedic, case and tray, implant, and instrument markets.

We finalized the purchase price allocation and recorded measurement period adjustments to the initial allocation as disclosed in our 2018 Annual Report.

Operating results of Paragon Medical are included in the Company’s consolidated financial statements since the date of acquisition and are reported as part of our Life Sciences group.

The unaudited pro forma financial results shown in the table below for the years ended December 31, 2018 and 2017 , combine the consolidated results of NN and Paragon Medical giving effect to the Paragon Medical acquisition as if it had been completed on January 1, 2017 .

The unaudited pro forma financial results do not give effect to any of our other acquisitions that occurred after January 1, 2017 , and do not include any anticipated synergies or other assumed benefits of the Paragon Medical acquisition.

This unaudited pro forma financial information is presented for informational purposes only and is not indicative of future operations or results had the Paragon Medical acquisition been completed as of January 1, 2017 .

The unaudited pro forma financial results include certain adjustments for debt service costs and additional depreciation and amortization expense based upon the fair value step-up and estimated useful lives of Paragon Medical depreciable fixed assets and definite-life amortizable assets acquired.

The provision for income taxes has also been adjusted for all periods, based upon the foregoing adjustments to historical results.

Year Ended December 31,

Pro forma net sales

Pro forma income (loss) from continuing operations

Pro forma net income (loss)

Basic income (loss) from continuing operations per share

Diluted income (loss) from continuing operations per share

Unaudited pro forma results for the year ended December 31, 2017 , include $15.0 million of inventory fair value adjustments, financing, integration, and transaction costs, net of tax, directly attributable to the acquisition which will not have an ongoing impact.

Other Acquisitions

We made other acquisitions during the year ended December 31, 2018 .

Transaction costs were expensed as incurred and are included in the “ Acquisition related costs excluded from selling, general and administrative expense ” line item in the Consolidated Statements of Operations and Comprehensive Income (Loss) .

Operating results of Paragon Medical were included in our historical consolidated financial statements after the date of acquisition as part of our Life Sciences business.

The Life Sciences business was subsequently sold on October 6, 2020, and is included in discontinued operations as discussed in Note 2.

Bridgemedica, LLC

On February 22, 2018, we completed the acquisition of 100 % of the assets of Bridgemedica, LLC (“Bridgemedica”).

For accounting purposes, Bridgemedica meets the definition of a business and has been accounted for as a business combination.

For accounting purposes, Bridgemedica met the definition of a business and was accounted for as a business combination.

Bridgemedica is a medical device company that provides concept to supply solutions through design, development engineering, and manufacturing.

Operating results of Bridgemedica are reported in our Life Sciences group after the acquisition date.

We finalized our valuation related to the assets acquired and liabilities assumed during 2019 with no material changes to the initial allocation.

Operating results of Bridgemedica were included in our historical consolidated financial statements report after the acquisition date as part of our Life Sciences business.

The Life Sciences business was subsequently sold on October 6, 2020, and is included in discontinued operations as discussed in Note 2.

Southern California Technical Arts, Inc.

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(“Technical Arts”).

For accounting purposes, Technical Arts meets the definition of a business and has been accounted for as a business combination.

For accounting purposes, Technical Arts met the definition of a business and was accounted for as a business combination.

Technical Arts is an industrial machining company that manufactures tight tolerance metal components and assemblies.

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Segment Information

Management has concluded that Life Sciences, Mobile Solutions, and Power Solutions constitute our operating segments.

Life Sciences, Mobile Solutions, and Power Solutions are considered operating segments as each engages in business activities for

which it earns revenues and incurs expenses, discrete financial information is available for each, and this is the level at which the Chief Operating Decision Maker (“CODM”) reviews discrete financial information for purposes of allocating resources and assessing performance.

Life Sciences

Life Sciences is focused on growth in the medical end market, primarily in the orthopaedics and medical/surgical end markets.

Within this group we combine advanced engineering and production capabilities to design and manufacture a broad range of high-precision metal and plastic components, assemblies, and finished devices.

We manufacture a variety of components, assemblies, and instruments, such as surgical knives, bioresorbable implants, surgical staples, cases and trays, orthopaedic implants and tools, laparoscopic devices, and drug delivery devices for the orthopaedics and medical/surgical end markets.

Our business has historically been aggregated into the following three reportable segments.

• Mobile Solutions.

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• Power Solutions.

Power Solutions is focused on growth in the electrical and aerospace and defense end markets.

Power Solutions is focused on growth in the electrical and aerospace and defense end markets, while

also serving the automotive and medical end markets.

Within this group 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 used in applications ranging from power control to flight control and for military devices.

We manufacture a variety of products including electrical contacts, connectors, contact assemblies, and precision stampings for the electrical end market and high precision products for the aerospace and defense end markets utilizing our extensive process technologies for optical grade plastics, thermally conductive plastics, titanium, Inconel, magnesium, and electroplating.

Segment Results

The following tables present certain operations information by reportable segment.

Consolidations

We manufacture a variety of products including electrical contacts, connectors, contact assemblies, and precision stampings for the electrical end market and high precision products for the aerospace and defense end market utilizing our extensive process technologies for optical grade plastics, thermally conductive plastics, titanium, Inconel, magnesium, and electroplating.

Our medical business includes the production of a variety of tools and instruments for the orthopaedics and medical/surgical end markets.

• Life Sciences.

Life Sciences was focused on growth in the medical end market, primarily in the orthopaedics and medical/surgical end markets.

Within this group we combined advanced engineering and production capabilities to design and manufacture a broad range of high-precision metal and plastic components, assemblies, and finished devices.

We manufactured a variety of components, assemblies, and instruments, such as surgical knives, bioresorbable implants, surgical staples, cases and trays, orthopaedic implants and tools, laparoscopic devices, and drug delivery devices for the orthopaedics and medical/surgical end markets.

These divisions have historically been considered our three operating segments as each has engaged in business activities for which it earns revenues and incurs expenses, discrete financial information is available for each, and this is the level at which the chief operating decision maker reviews discrete financial information for purposes of allocating resources and assessing performance.

See Note 2 for information regarding the sale of the Life Sciences business on October 6, 2020.

The results of the Life Sciences business are classified as discontinued operations for all periods in the consolidated financial statements and accompanying notes unless otherwise stated.

Accordingly, results of the Life Sciences business are not included in the tabular presentation below.

The following tables present results of continuing operations by reportable segment.

Solutions Power

Solutions Corporate

Consolidations Total

Year Ended December 31, 2020

Net sales $ 256,360 $ 171,269 $ ( 95 ) (a) $ 427,534

Depreciation and amortization 28,298 15,730 1,652 45,680

Goodwill impairment — 92,942 — 92,942

Income (loss) from operations 5,228 ( 85,983 ) ( 36,702 ) $ ( 117,457 )

Interest expense ( 18,898 )

Loss before provision for income taxes and share of net income from joint venture

Other ( 15,733 )

Loss from continuing operations before income taxes and share of net income from joint venture $ ( 152,088 )

Share of net income from joint venture $ 3,626 $ — $ — $ 3,626

Expenditures for long-lived assets 12,400 2,754 203 15,357

Consolidations

Total assets 370,985 (b) 197,348 56,629 624,962

Solutions Power

Solutions Corporate

Consolidations Total

Year Ended December 31, 2019

Net sales $ 297,749 $ 192,100 $ ( 335 ) (a) $ 489,514

Depreciation and amortization 27,146 15,301 2,449 44,896

Goodwill impairment

Income (loss) from operations 9,553 13,881 ( 41,027 ) $ ( 17,593 )

Interest expense ( 13,030 )

Loss before benefit for income taxes and share of net income from joint venture

Other ( 1,502 )

Loss from continuing operations before income taxes and share of net income from joint venture $ ( 32,125 )

Share of net income from joint venture $ 1,681 $ — $ — $ 1,681

Expenditures for long-lived assets 24,969 4,457 2,743 32,169

Consolidations

Total assets 373,256 (b) 310,545 858,183 (c) 1,541,984

Solutions Power

Solutions Corporate

Consolidations Total

Year Ended December 31, 2018

Net sales $ 335,037 $ 189,778 $ ( 621 ) (a) $ 524,194

Depreciation and amortization 26,217 14,753 2,056 43,026

Income (loss) from operations

Goodwill impairment 73,442 109,100 — 182,542

Loss from operations ( 55,079 ) ( 95,115 ) ( 44,853 ) $ ( 195,047 )

Interest expense ( 11,315 )

Loss before benefit for income taxes and share of net income from joint venture

Share of net income from joint venture

Other ( 2,016 )

Loss from continuing operations before income taxes and share of net loss from joint venture $ ( 208,378 )

Share of net loss from joint venture $ ( 14,390 ) $ — $ — $ ( 14,390 )

Expenditures for long-lived assets 36,660 6,459 6,158 49,277

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(b) Total assets in Mobile Solutions includes $ 27.0 million and $ 21.8 million as of December 31, 2020 and 2019, respectively, related to the investment in our 49 % owned joint venture (Note 10).

The following table summarizes the net sales and income (loss) from operations from acquisitions in the Life Sciences and Power Solutions groups for the years ended December 31, 2018 and 2017 .

Year Ended December 31,

Paragon Medical

Income (loss) from operations

Paragon Medical

The following table summarizes long-lived tangible assets by geographical region.

2 unchanged sentences

United States $ 130,077 $ 158,444

All foreign countries

Europe $ 40,663 $ 38,082

Asia 33,854 33,058

Mexico 1,230 1,388

South America 17,866 25,005

All foreign locations $ 93,613 $ 97,533

Total $ 223,690 $ 255,977

Accounts Receivable

1 unchanged sentence

As of December 31,

Less—allowance for doubtful accounts

Trade $ 86,659 $ 85,284

Less—allowance for credit losses 2,044 2,044

Accounts receivable, net $ 84,615 $ 83,240

The following table presents changes in allowance for doubtful accounts.

The following table presents changes in allowance for credit losses.

Year Ended December 31,

2020 2019 2018

Balance at beginning of year $ 2,044 $ 2,517 $ 2,339

Additions 505 231 628

Write-offs ( 562 ) ( 692 ) ( 400 )

Currency impact 57 ( 12 ) ( 50 )

Balance at end of year $ 2,044 $ 2,044 $ 2,517

As of December 31, 2020, one customer represented 11 % of consolidated accounts receivable from continuing operations.

As of December 31, 2019, another customer represented 10 % of consolidated accounts receivable from continuing operations.

Amounts due from these customers are primarily related to Mobile Solutions.

Inventories are comprised of the following amounts:

11 unchanged sentences

Construction in progress 1,270 25,416

Total 398,834 403,748

Accumulated depreciation 175,144 147,771

1 unchanged sentence

We monitor property, plant and equipment for any indicators of potential impairment.

We recognized an impairment charge of $0.6 million and $5.2 million for the years ended December 31, 2019 and 2018 , respectively, related to the early retirement of identified fixed assets.

The impairment charge was recorded to the “ Other operating (income) expense, net ,” line item on the Consolidated Statements of Operations and Comprehensive Income (Loss) .

The impairment charge was determined by writing the assets down to the estimated salvage value, less disposal costs.

We recorded no impairment charge for the year ended December 31, 2017 .

We recognized impairment charges of $ 4.1 million, $ 0.6 million, and $ 5.2 million for the years ended December 31, 2020, 2019, and 2018, respectively, related to the early retirement of identified fixed assets.

The impairment charges were recorded to the “Other operating expense, net,” line item on the Consolidated Statements of Operations and Comprehensive Income (Loss).

The impairment charges were determined by writing the assets down to the estimated salvage value, less disposal costs.

For the years ended December 31, 2020, 2019, and 2018, we recorded depreciation expense of $ 31.3 million, $ 30.4 million, and $ 28.5 million, respectively.

The following table presents changes in the carrying amount of goodwill for the years ended December 31, 2019 , and 2018 .

Life Sciences

Mobile Solutions

Power Solutions

All of our net goodwill is recorded in the Power Solutions reportable segment, and no goodwill is recorded in the Mobile Solutions reportable segment.

The following table shows changes in the carrying amount of Power Solutions goodwill.

Balance as of December 31, 2018 $ 94,505

Currency impact and other 274

Goodwill acquired in acquisitions

Measurement period adjustments

Balance as of December 31, 2019 94,779

Currency impact and other ( 1,837 )

Impairments ( 92,942 )

Balance as of December 31, 2020 $ —

The following table presents the gross carrying amount of goodwill and accumulated impairment charges as of December 31, 2020, and 2019.

December 31, 2019

December 31, 2018

Gross Carrying Amount

Accumulated Impairment Charges

Net Book Value

Gross Carrying Amount

Accumulated Impairment Charges

Net Book Value

Life Sciences

December 31, 2020 December 31, 2019

Gross Carrying Amount Accumulated Impairment Charges Net Book Value Gross Carrying Amount Accumulated Impairment Charges Net Book Value

Mobile Solutions 78,254 ( 78,254 ) — 77,458 ( 77,458 ) —

1 unchanged sentence

Total goodwill $ 292,045 $ ( 292,045 ) $ — $ 293,086 $ ( 198,307 ) $ 94,779

We review goodwill for impairment on a reporting unit basis annually during the fourth quarter of each year, using a measurement date of October 1 st , and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable.

Reporting units for the purpose of goodwill impairment testing are the same as our operating segments (Life Sciences, Mobile Solutions and Power Solutions).

Based on the results of the quantitative measurement performed, which indicated a fair value in excess of carrying amount for each of our designated reporting units, we concluded there was no impairment of goodwill for the year ended December 31, 2019 .

The fair value of the Power Solutions reporting unit exceeds the carrying value by approximately 5% as of the date of our annual impairment test.

If our assessment of the relevant facts and circumstances changes, or the actual performance falls short of the expected results, impairment charges may be required.

During the first quarter of 2020, our market capitalization declined to a level that was less than the net book value of our stockholders’ equity.

The decline in market capitalization was a triggering event that caused us to perform a goodwill impairment analysis as of March 31, 2020.

The goodwill impairment analysis required significant judgments to calculate the fair value for the Power Solutions reporting unit, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term growth rate for each operating segment, and determination of weighted average cost of capital.

Our forecasts used in the goodwill impairment analysis reflected our expectations of declines in sales resulting from COVID-19.

Significant assumptions and estimates are involved in the application of the discounted cash flow model to forecast operating cash flows, including market growth and market share, sales volumes and prices, costs to produce, discount rate, and estimated capital needs.

Management considers historical experience and all available information at the time the fair values of its reporting units are estimated.

Assumptions in estimating future cash flows are subject to a high degree of judgment and complexity.

The carrying value of the Power Solutions reporting unit exceeded the estimated fair value as of the March 31, 2020, analysis.

As a result of our analysis, we recorded an impairment loss on goodwill of $ 92.9 million to the “Goodwill impairment” line on the Consolidated Statements of Operations and Comprehensive Income (Loss).

As of December 31, 2020, there is no remaining goodwill balance.

During the fourth quarter of 2018, our market capitalization declined to a level that was less than the net book value of our stockholders’ equity.

2 unchanged sentences

As a result of our analysis, we recorded an impairment loss on goodwill in 2018 of $ 73.4 million and $ 109.1 million for Mobile Solutions and Power Solutions, respectively, to the “Goodwill impairment” line on the Consolidated Statements of Operations and Comprehensive Income (Loss).

In addition, goodwill in Power Solutions was reduced by $1.6 million related to adjusting deferred tax liabilities for tax deductible goodwill, which is reflected in “Currency impact and other” in the above table.

No goodwill impairment loss was recorded at Life Sciences in 2018 .

Goodwill acquired in 2018 is related to the acquisitions as described in Note 4 and is derived from the value of the businesses acquired.

During 2018 , we recorded $161.8 million of goodwill related to the Paragon Medical acquisition, $8.0 million related to the Bridgemedica acquisition, and $2.8 million related to the Technical Arts acquisition.

We finalized our valuations related to the 2018 acquisitions in 2019 with no material changes to the initial purchase price allocation.

As noted above, it was determined under a quantitative assessment that there was no impairment of goodwill in 2019 .

However, if we become aware of indicators of impairment in future periods, we may be required to perform an interim assessment for some or all of our reporting units before the next annual assessment.

Examples of such indicators may include a decrease in expected net earnings, adverse equity market conditions, a decline in current market multiples, a decline in our common stock price, a significant adverse change in legal factors or business climates, an adverse action or assessment by a regulator, unanticipated competition, strategic decisions made in response to economic or competitive conditions, or a more likely than not expectation that a reporting unit or a significant portion of a reporting unit will be sold or disposed of.

In the event of significant adverse changes of the nature described above, we may have to recognize a non-cash impairment of goodwill, which could have a material adverse effect on our consolidated financial condition and results of operations.

Based on the closing sales price of a share of our common stock as of December 31, 2019 , our market capitalization exceeded the $353.3 million net book value of our stockholders’ equity.

Subsequent to December 31, 2019 , our market capitalization declined to a level that is less than the net book value of our stockholders’ equity.

A prolonged or significant decline in market capitalization could be an indicator of possible goodwill impairment.

We will continue to monitor the market capitalization relative to net book value in subsequent periods.

Intangible Assets, Net

The following table presents changes in the carrying amount of intangible assets, net.

Life Sciences

Mobile Solutions

Power Solutions

The following table shows changes in the carrying amount of intangible assets, net, by reportable segment.

Mobile Solutions Power Solutions Total

Balance as of December 31, 2018 $ 35,892 $ 95,991 $ 131,883

Currency impacts and other

Intangible assets acquired in acquisitions

Amortization ( 3,479 ) ( 10,994 ) ( 14,473 )

Balance as of December 31, 2019 32,416 84,997 117,413

Amortization ( 3,354 ) ( 10,994 ) ( 14,348 )

Balance as of December 31, 2020 $ 29,062 $ 74,003 $ 103,065

The following table shows the cost and accumulated amortization of our intangible assets as of December 31, 2020 and 2019.

December 31, 2019

December 31, 2018

Life in Years

December 31, 2020 December 31, 2019

Life in Years Gross

Date Accumulated

Amortization Net

Date Accumulated

Amortization Net

Customer relationships 12 - 20

$ 173,746 $ ( 74,250 ) $ 99,496 $ 173,746 $ ( 60,603 ) $ 113,143

Trademark and trade name 8 - 15

7,527 ( 3,958 ) 3,569 7,527 ( 3,257 ) 4,270

Total identified intangible assets $ 181,273 $ ( 78,208 ) $ 103,065 $ 181,273 $ ( 63,860 ) $ 117,413

Intangible assets that are fully amortized are removed and no longer represented in the gross carrying value or accumulated amortization.

The following table presents estimated future amortization expense for the next five years and thereafter.

The following table shows estimated future amortization expense for the next five years and thereafter.

Year Ending December 31,

2021 $ 14,347

Thereafter 32,271

Total $ 103,065

Intangible assets are reviewed for impairment when changes in circumstances indicate the carrying value of those assets may not be recoverable.

4 unchanged sentences

The JV is jointly controlled and managed, and we account for it under the equity method.

The following table presents changes in our investment in the JV.

The following table shows changes in our investment in the JV.

Balance as of December 31, 2019 $ 21,755

Share of earnings 3,626

Foreign currency translation loss

Foreign currency translation gain 1,602

Balance as of December 31, 2020 $ 26,983

During the fourth quarter of 2018 , as a result of changing market conditions, the fair value of the JV was assessed, and we recorded an impairment charge of $16.6 million against our investment in the JV.

During the fourth quarter of 2018, as a result of changing market conditions, the fair value of the JV was assessed, and we recorded an impairment of $ 16.6 million against our investment in the JV.

The fair value assessment was significantly affected by changes in our assessment of future growth rates.

It is reasonably possible that material deviation of future performance from the estimates used in the 2018 valuation could result in additional impairment to our investment in the JV in subsequent periods.

During the fourth quarter of 2019 , we assessed the JV for triggering events that would signify the need to perform an impairment test and concluded there were no triggering events during the period.

For the year ended December 31, 2019 , no impairment charges were recorded against our investment in the JV.

The following table summarizes the loss from continuing operations before benefit for income taxes and share of net income from joint venture.

During the first quarter of 2020, the goodwill impairment testing trigger caused us to test the JV for impairment as well.

Based on our analysis, no impairment charge was deemed necessary.

It is reasonably possible that material deviation of future performance from the estimates used in the March 31, 2020, impairment test could result in additional impairment to our investment in the JV in subsequent periods.

The following table summarizes the loss from continuing operations before benefit (provision) for income taxes and share of net income (loss) from joint venture.

Year Ended December 31,

Loss before (provision) benefit for income taxes and share of net income from joint venture

2020 2019 2018

United States $ ( 146,963 ) $ ( 31,760 ) $ ( 200,164 )

The following table summarizes total income tax benefit recognized in each year.

Foreign ( 5,125 ) ( 365 ) ( 8,214 )

Loss from continuing operations before benefit (provision) for income taxes and share of net income (loss) from joint venture $ ( 152,088 ) $ ( 32,125 ) $ ( 208,378 )

The following table summarizes total income tax expense (benefit) recognized in each year.

Year Ended December 31,

2020 2019 2018

Current taxes:

Federal $ ( 299 ) $ ( 5,948 ) $ 5,684

State 4,599 1,656 58

Foreign 2,250 2,247 2,271

Total current tax expense (benefit) 6,550 ( 2,045 ) 8,013

Deferred taxes:

Deferred tax valuation allowance

Federal $ ( 10,368 ) $ ( 1,430 ) $ ( 6,028 )

State ( 5,368 ) 3,850 ( 214 )

federal and foreign valuation allowance 2,066 ( 592 ) 2,263

Foreign ( 1,852 ) 522 ( 5,582 )

Total deferred tax expense (benefit) ( 15,522 ) 2,350 ( 9,561 )

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Year Ended December 31,

2020 2019 2018

U.S federal statutory income tax rate 21.0 % 21.0 % 21.0 %

Change in valuation allowance, exclusive of state ( 1.3 ) % 1.8 % ( 1.1 ) %

Foreign tax credits, exclusive of tax reform

State taxes, net of federal taxes, exclusive of tax reform 0.2 % ( 13.6 ) % 0.1 %

earnings taxed at different rates 1.4 % 3.0 % 0.3 %

Non-deductible mergers and acquisitions costs

GILTI ( 0.1 ) % — % — %

Goodwill impairment ( 12.7 ) % — % ( 17.7 ) %

5 unchanged sentences

Remeasurement of deferred taxes pursuant to tax reform — % — % ( 1.2 ) %

Tax reform impact on divestiture of business segment

Impact of 2019 Treasury regulations — % ( 18.4 ) % — %

Section 199 domestic production deduction

CARES Act 2.7 % — % — %

Divestiture of business segment, exclusive of tax reform — % — % ( 1.1 ) %

Return to provision ( 0.5 ) % ( 0.2 ) % ( 1.0 ) %

Taxes on unremitted foreign earnings ( 3.9 ) % ( 2.2 ) % — %

Restructuring gain ( 2.6 ) % — % — %

Other adjustments, net ( 0.9 ) % 3.3 % 0.1 %

Effective tax rate 5.9 % ( 1.0 ) % 0.7 %

The 2019 effective tax rate of 6.3% differs from the U.S.

federal statutory income tax rate of 21.0% primarily due to the effects of final tax regulations published by the Department of the Treasury and Internal Revenue Service on February 5, 2019, as well as the minimum tax on GILTI.

Based upon analysis of the final regulations, we recognized additional tax expense of $5.9 million for the year ended December 31, 2019 , which significantly impacted the effective tax rate.

The 2018 effective tax rate of 5.1% differs from the U.S.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted.

Among other provisions, the CARES Act allows for the carryback of certain tax losses and favorably impacts the deductibility of interest expense and depreciation.

The CARES Act had a material impact on our consolidated financial statements, primarily due to enacted federal rate difference in the carryback periods, and has been accounted for in the benefit for income taxes for the twelve months ended December 31, 2020.

On October 6, 2020, we sold our Life Sciences business via a sale of our equity interest in Precision Engineered Products Holdings, Inc., a wholly owned U.S.

domestic subsidiary.

Prior to the sale, we completed tax restructuring in which Precision Engineered Products Holdings, Inc., distributed to NN, Inc., all of its asset and equity holdings related to the Power Solutions segment.

The restructuring process created a deferred gain, required to be realized upon the third party equity sale, equal to the fair market value of the distributed assets over tax basis.

The associated U.S.

federal, state and foreign tax impacts are reflected in the tables within this footnote.

The tax impacts of the sale of the Life Sciences business are included in income from discontinued operations and excluded from the tables presented within this footnote.

For comparative purposes, the prior period information contained in the tables in this footnote have been adjusted to exclude the Life Sciences business, unless otherwise noted.

Our effective tax rate for continuing operations was 5.9 % for 2020.

The 2020 effective tax rate for continuing operations differs from the U.S.

federal statutory tax rate of 21 % primarily due to (1) the impact of the impairment of nondeductible goodwill which is treated as a permanent difference and (2) the company’s accrual of taxes on unremitted earnings of foreign subsidiaries which may be repatriated.

Our effective tax rate for continuing operations was ( 1.0 )% for 2019.

The 2019 effective tax rate for continuing operations differs from the U.S.

federal statutory tax rate of 21 % principally due to a discrete tax charge of $ 6.0 million related to final tax regulations published by the Department of the Treasury and Internal Revenue Service on February 4, 2019.

The tax rate was also impacted by valuation of its state tax attributes.

Our effective tax rate for continuing operations was 0.7 % for 2018.

The 2018 effective tax rate for continuing operations differs from the U.S.

federal statutory income tax rate of 21 % primarily due to the impact of goodwill impairment which was nondeductible for tax purposes.

In 2018, we recognized an adjustment to the estimated net tax benefit from tax reform, which resulted in additional tax expense of $0.8 million .

This adjustment was primarily related to the one-time transition tax on deferred foreign income, the change in valuation of deferred tax assets associated with tax law changes, and the remeasurement of deferred taxes.

The 2017 effective tax rate of 132.1% was heavily influenced by the Tax Act which reduced the U.S.

federal corporate income tax rate from 35% to 21% , required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and created new taxes on certain foreign sourced earnings.

As a result of the Tax Act, we recognized a $51.8 million net tax benefit in 2017 , which included the estimate of transition tax and the remeasurement of our domestic deferred taxes from 35% to 21% .

The 2017 tax rate was also impacted by the divestiture of the PBC Business.

The following table summarizes the principal components of the deferred tax assets and liabilities.

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Intangible assets 23,695 26,474

Operating lease liabilities

Operating leases 11,149 12,697

Taxes on unremitted foreign earnings 6,601 —

Other deferred tax liabilities 533 2,178

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Interest expense limitation 3,811 14,073

Goodwill 25,653 386

Inventories 3,224 2,447

Interest rate swap 3,611 2,838

Pension/Personnel accruals 2,909 1,669

Operating lease right-of-use assets

Net operating loss carry forwards

foreign tax credit carryforwards

Operating leases 13,209 14,438

Net operating loss carryforwards 18,659 15,486

R&D credit carryforwards — 2,463

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Net deferred income tax liabilities $ 11,178 $ 24,461

As of December 31, 2019 , we had $1.5 million of U.S.

federal net operating loss (“NOL”) carryover and $225.4 million of state NOL carryovers.

The federal NOL has an indefinite life, but utilization within any tax year is limited to 80% of taxable income.

As of December 31, 2020, we had no U.S.

federal net operating loss (“NOL”) carryover, $ 3.8 million of consolidated state NOL carryovers, and $ 234.8 million of separate state NOL carryovers.

The state NOLs begin to expire in 2030.

Management believes that certain of the state NOL carryovers will more likely than not expire prior to utilization.

As such, a valuation allowance of $10.8 million has been established to reduce the state attribute balance to the amount expected to be utilized before expiration.

We also have $14.1 million of foreign NOL carryovers at December 31, 2019 .

As such, a valuation allowance of $ 12.6 million (net of federal benefit) has been established to reduce the state attribute balance to the amount

expected to be utilized before expiration.

We also have $ 6.1 million, tax-effected, of foreign NOL carryovers at December 31, 2020.

The foreign NOLs have an indefinite life;

however, management believes that benefit for certain of the foreign NOLs may not be realized.

Therefore, the Company has established a valuation allowance of $1.0 million to reduce the carrying value of the asset related to foreign NOLs to the amount that has been determined to be more likely than not realized.

We have credit carryforwards for U.S.

federal income tax purposes of $5.8 million at December 31, 2019 .

Of this amount, $3.4 million relates to foreign tax credit carryforwards which will begin to expire in 2026 , and $2.4 million relates to research and development tax credit carryforwards.

Management believes that the U.S.

foreign tax credits will more likely than not expire before utilization and therefore has established a full valuation allowance against the credits.

We have $0.2 million of state credit carryforwards for which we believe realization is more likely than not.

In addition, we have $3.3 million of tax credits in other foreign jurisdictions at December 31, 2019 .

The tax credits in these other foreign jurisdictions begin to expire in 2026 .

We have established a valuation allowance of $3.3 million to offset the full carrying value of the asset related to the foreign jurisdictions’ tax credits.

Therefore, we have established a valuation allowance of $ 3.1 million to reduce the carrying value of the asset related to foreign NOLs to the amount that has been determined to be more likely than not realized.

We have $ 0.2 million of state credit carryforwards and $ 0.7 million of other consolidated state deferred tax assets for which we believe recognition is not appropriate.

In addition, we have $ 3.4 million of tax credits in other foreign jurisdictions as of December 31, 2020.

The tax credits in these jurisdictions begin to expire in 2026.

Valuation allowances have been recorded for these state and foreign items accordingly.

We have a U.S.

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During 2020, the state valuation allowance increased by approximately $ 3.1 million, primarily due to a valuation allowance recorded to offset the current year generation of separate state loss carryforwards that management does not believe are realizable given anticipated changes in state nexus.

In the current year, the U.S.

federal valuation allowance decreased by $1.5 million primarily due to previously unanticipated utilization of foreign tax credits upon implementation of the final IRS regulations related to the 2017 transition tax.

The foreign valuation allowance increased by $0.9 million in 2019 to offset current year loss generation in jurisdictions where realization of the asset is not more likely than not.

During 2018 , the valuation allowance increased by approximately $6.9 million to $14.5 million , as a result of an increase in foreign and state NOLs and U.S.

foreign tax credits.

During 2017 , the valuation allowance increased by approximately $3.5 million to $7.6 million , as a result of a $2.3 million increase due to the uncertainty of realizing certain state NOL carryforwards, and a $1.2 million increase for foreign NOLs.

As a result of the deemed mandatory repatriation provisions in the Tax Act, we included undistributed earnings in income subject to U.S.

tax at reduced tax rates in 2017.

Subsequently, we have recognized in income GILTI as part of the changes from the Tax Act.

Therefore, we do not have material basis differences related to cumulative unremitted earnings for U.S.

The federal valuation allowance increased by approximately $ 1.0 million, to offset current year changes in unrealized exchange losses on intercompany loans.

The foreign valuation allowance increased by $ 2.2 million in 2020 primarily to offset current year loss generation in jurisdictions where realization of the asset is not more likely than not.

As a result of the deemed mandatory repatriation provisions in the Tax Act and our recognition in income of GILTI as part of the changes from the Tax Act, we do not have material basis differences related to cumulative unremitted earnings for U.S.

income tax purposes.

However, we continue to evaluate quarterly the impact that repatriation of foreign earnings would have on withholding and other taxes.

As of December 31, 2019 , we have recorded a liability of $2.3 million for the anticipated withholding taxes which would be due upon repatriation of the unremitted earnings of those subsidiaries for which management does not intend to permanently reinvest all earnings.

As of December 31, 2020, we have recorded a liability of $ 6.6 million for the anticipated withholding taxes that would be due upon repatriation of the unremitted earnings of those subsidiaries for which management does not intend to permanently reinvest all earnings.

We are subject to U.S.

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federal examination for periods before 2017.

We are currently working with tax authorities in France to complete an audit for the 2016 tax year.

During 2020 we concluded, with no material findings, an audit by French tax authorities for the 2016 tax year.

We regularly assess the outcomes of both ongoing and future examinations for the current or prior years to ensure our provision for income taxes is sufficient.

We recognize liabilities based on estimates of whether additional taxes will be due, and we believes our reserves are adequate in relation to any potential assessments.

We recognize liabilities based on estimates of whether additional taxes will be due, and we believe our reserves are adequate in relation to any potential assessments.

The outcome of any one examination, some of which may conclude during the next twelve months, is not expected to have a material impact on our financial position or results of operations.

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Year Ended December 31,

2020 2019 2018

Balance at beginning of year $ 2,589 $ 4,609 $ 5,655

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Balance at end of year $ 247 $ 2,589 $ 4,609

In addition to settlements, the reduction to unrecognized tax benefits in 2019 is primarily related to expiring statutes of limitations in certain U.S.

state jurisdictions.

The reduction to unrecognized tax benefits in 2020 is related to (1) expiring statutes of limitations in certain U.S.

state and foreign jurisdictions and (2) the remeasurement of previously unrecognized tax benefits.

As of December 31, 2020, the unrecognized tax benefits would, if recognized, impact our effective tax rate by $ 0.8 million, inclusive of the impact of interest and penalties.

Management believes that it is reasonably possible that the amount of unrecognized income benefits, including interest and penalties, may decrease during the next twelve months by approximately $1.4 million , related to the expiration of the statutes of limitations.

Management believes that it is reasonably possible that the amount of unrecognized income tax benefits, including interest and penalties, may not decrease during the next twelve months as no statutes are expected to lapse within the period.

We operate under tax holidays in other countries, which are effective through December 31, 2026, and may be extended if certain additional requirements are satisfied.

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The impact of these tax holidays decreased foreign taxes by $ 0.2 million for 2020.

The benefit of the tax holidays on net income per share (diluted) was $0.03 for 2017 .

The tax holidays had no impact on our 2019 and 2018 foreign taxes.

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Incremental Term Loan 22,716 257,111

Senior Secured Revolver

International lines of credit and other loans 14,418 9,579

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_______________________________

(1) In addition to this amount, costs of $3.0 million related to the Senior Secured Revolver are recorded in other non-current assets as of December 31, 2019 .

(1) In addition to this amount, costs of $ 1.8 million and $ 3.0 million related to the Senior Secured Revolver are recorded in other non-current assets as of December 31, 2020, and December 31, 2019, respectively.

We capitalized interest costs of $ 0.2 million, $ 1.5 million, and $ 1.1 million in the years ended December 31, 2020, 2019, and 2018, respectively, related to construction in progress.

In August 2020, we entered into an agreement to sell our Life Sciences business (see Note 2).

The sale closed on October 6, 2020, at which time we received cash proceeds of $ 757.2 million.

We immediately prepaid $ 700.0 million in the aggregate on the Senior Secured Term Loan and the Incremental Term Loan.

We also paid in full the outstanding balance on the Senior Secured Revolver.

The prepayment was applied to debt in accordance with the prepayment provisions of the credit agreement immediately after the transaction closed on October 6, 2020.

See Note 2 for a description of the methodology for allocating debt-related costs in historical periods to discontinued operations.

Senior Secured Term Loan

Outstanding borrowings under the Senior Secured Term Loan bear interest at the greater of 0.75% or one-month London Interbank Offered Rate (“LIBOR”) plus an applicable margin.

In December 2019, we amended our existing credit facility (the “December 2019 amendment”) to increase the applicable margin from 3.75% to 5.25% .

Outstanding borrowings under the Senior Secured Term Loan bear interest at one-month LIBOR (subject to a 0.75 % floor) plus an applicable margin of 5.75 %.

At December 31, 2020, the Senior Secured Term Loan bore interest at 6.50 %.

Incremental Term Loan

Outstanding borrowings under the Incremental Term Loan bear interest at one-month LIBOR plus an applicable margin.

The December 2019 amendment increased the applicable margin from 3.25% to 5.25% and extended the maturity date of the Incremental Term Loan from April 3, 2021 , to October 19, 2022 .

Outstanding borrowings under the Incremental Term Loan bear interest at one-month LIBOR plus an applicable margin of 5.75 %.

At December 31, 2020, the Incremental Term Loan bore interest at 5.90 %.

Second Lien Credit Agreement

In May 2018 , we entered into a $200.0 million Second Lien Credit Agreement to fund the Paragon Medical acquisition.

In September 2018 , a significant portion of net proceeds from a registered public offering of shares of our common stock was used to voluntarily prepay in full the $200.0 million outstanding principal balance.

There were no outstanding borrowings under the Second Lien Credit Agreement at December 31, 2019 and 2018 .

Senior Secured Revolver

Outstanding borrowings under the Senior Secured Revolver bear interest on a variable rate structure with borrowings bearing interest at either one-month LIBOR plus an applicable margin of 4.00% or the prime lending rate plus an applicable margin of 3.00% .

Outstanding borrowings under the Senior Secured Revolver bear interest on a variable rate structure at either 1) one-month LIBOR plus an applicable margin of 4.00 % or 2) the prime lending rate plus an applicable margin of 3.00 %.

We pay a commitment fee of 0.50 % for unused capacity under the Senior Secured Revolver.

In March 2019 , we amended our existing credit facility (the “March 2019 amendment”) to amend the defined terms within the credit facility.

In June 2019, we amended our existing credit facility (the “June 2019 amendment”) to reduce the maximum capacity under the Senior Secured Revolver to $110.0 million , reduce the total available capacity to $100.0 million , and modify the consolidated net leverage ratio, as defined in the credit facility agreement, which is utilized for certain financial covenants.

The December 2019 amendment extended the maturity date of the Senior Secured Revolver from October 19, 2020 , to July 20, 2022 , reduced the total available capacity to $75.0 million , and increased the applicable one-month LIBOR margin to a range of 3.00% to 4.00% dependent on the consolidated net leverage ratio.

We had no outstanding borrowings under the Senior Secured Revolver at December 31, 2019 .

Total available capacity under the Senior Secured Revolver was $75.0 million as of December 31, 2019 , with $63.9 million available for future borrowings after reductions for outstanding letters of credit and outstanding borrowings as of December 31, 2019 .

We had no outstanding borrowings under the Senior Secured Revolver at December 31, 2020 or 2019.

Total capacity under the Senior Secured Revolver was $ 60.0 million as of December 31, 2020, with $ 45.4 million available for future borrowings after reductions for outstanding letters of credit of $ 14.6 million.

Our credit facility is subject to certain financial covenants based on a consolidated net leverage ratio, becoming more restrictive over time.

If our operational or financial performance does not improve in line with our expectations, we may be required to take actions to further reduce expenditures and decrease our net indebtedness to maintain compliance in future periods.

We were in compliance with all covenants under our credit facility at December 31, 2020.

Unamortized Debt Issuance Costs

We incurred a total of $10.8 million for debt issuance costs related to the March 2019 amendment, June 2019 amendment, and December 2019 amendment.

Debt Amendments

In July 2020, we amended our Credit Agreement to waive compliance with the financial leverage ratio covenant for the second and third quarters of 2020.

During this period, we were required to maintain minimum liquidity levels, provide certain financial and other information, and take certain other action as specified in the amendment.

Failure to maintain the required minimum liquidity levels or satisfy other requirements set forth in the amendment would allow the revolving credit lenders, the Senior Secured Term loan lenders, and the Incremental Term Loan lenders to cause amounts outstanding under our credit facility to become immediately due and payable and could have a material, adverse impact on our financial position.

In August 2020, we amended our Credit Agreement to obtain the lenders’ consent to the sale of the Life Sciences business, subject to certain terms and conditions.

The amendment required a minimum of $ 675.0 million in cash proceeds from the sale.

All cash proceeds, less certain allowable costs, were required by the amendment to be used to prepay the Senior Secured Term Loan and the Incremental Term Loan.

The amendment also required a minimum $ 15.0 million payment on the Senior Secured Revolver and reduced total capacity from $ 75.0 million to $ 60.0 million immediately after the sale of the Life Sciences business.

The capacity will decrease to $ 50.0 million on June 30, 2021.

The amendment requires cash in excess of $ 35.0 million on the last day of each month to be used to pay down the Senior Secured Revolver.

Liquidity thresholds were amended so that the threshold decreases commensurate with any principal payment on the Senior Secured Revolver.

We were in compliance with all covenants under our credit facility at December 31, 2020.

We capitalized a total of $ 0.4 million in new debt issuance costs related to the July 2020 and August 2020 amendments.

Costs related to the Senior Secured Term Loan and the Incremental Term Loan are recorded as a direct reduction to the carrying amount of the associated long-term debt.

Costs related to the Senior Secured Revolver are recorded in other non-current assets as of December 31, 2019 , as no borrowings were outstanding.

Additionally, $3.3 million of unamortized debt issuance costs associated with the March 2019 amendment and the December 2019 amendment were written off in 2019.

Costs related to the Senior Secured Revolver are recorded in other non-current assets.

Additionally, $ 1.5 million of unamortized debt issuance costs were written off in the twelve months ended December 31, 2020, in connection with the July 2020 and August 2020 amendments.

See Note 2 for a description of the methodology for allocating amortization and write-offs of debt issuance costs in historical periods to discontinued operations.

International Lines of Credit and Other Loans

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As of December 31, 2020, the international lines of credit and other loans had $ 14.4 million outstanding of which $ 4.5 million is classified as “Current maturities of long-term debt” on the Consolidated Balance Sheets.

Derivative Instruments and Hedging Activities

Interest Rate Swap

In February 2019, we entered into a $ 700.0 million amortizing notional amount fixed-rate interest rate swap agreement to manage the interest rate risk associated with our long-term variable-rate debt until 2022.

The fixed-rate interest rate swap agreement calls for us to receive interest monthly at a variable rate equal to one-month LIBOR and to pay interest monthly at a fixed rate of 2.4575 %.

In connection with the prepayment of debt on October 6, 2020, with proceeds from the sale of our Life Sciences business, the outstanding balance of our variable rate debt fell below the $ 700.0 million notional amount of the interest rate swap contract.

Refer to Note 21 for further discussion of the interest rate swap agreement.

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The following table lists aggregate maturities of long-term debt for the next five years and thereafter.

Year Ending December 31,

Year Ending December 31, Aggregate

Thereafter 3,654

Total outstanding principal $ 84,862

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Right-of-use (“ROU”) lease assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease.

ROU lease assets and liabilities are recognized at the lease commencement date based on the present value of lease payments

over the lease term.

ROU lease assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

When the implicit rate is not readily determinable, we use the estimated incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments.

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We recognize short-term leases on a straight-line basis and do not record a related lease asset or liability for such leases.

Finance lease ROU assets consist primarily of equipment used in the manufacturing process with terms greater than twelve months to seven years .

Finance lease ROU assets consist primarily of equipment used in the manufacturing process with terms greater than two years to seven years .

Operating lease ROU assets consist of the following:

Equipment used in the manufacturing process as well as office equipment with terms three years to seven years ;

Manufacturing plants and office facilities with terms two years to 20 years .

The following table presents components of lease expense for the year ended December 31, 2019 :

• Equipment used in the manufacturing process as well as office equipment with terms two years to five years ;

• Manufacturing plants and office facilities with terms two years to twenty years .

The following table presents components of lease expense:

Years Ended December 31,

Financial Statement Line Item 2020 2019

Year Ended December 31, 2019

Finance lease cost:

Amortization of right-of-use assets

Depreciation and amortization

Interest expense

Operating lease cost

Cost of sales and selling, general and administrative expense

Short-term lease cost (1)

Cost of sales and selling, general and administrative expense

Variable lease cost (2)

Cost of sales and selling, general and administrative expense

Amortization of right-of-use assets Depreciation and amortization $ 1,272 $ 1,229

Interest expense Interest expense 192 226

Operating lease cost Cost of sales and selling, general, and administrative expense 8,396 9,108

Short-term lease cost (1) Cost of sales and selling, general, and administrative expense 591 479

Variable lease cost (2) Cost of sales and selling, general, and administrative expense 1 1

Total lease cost $ 10,452 $ 11,043

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(2) Represents changes to index-based lease payments.

The following table presents the lease-related assets and liabilities recorded on the balance sheet as of December 31, 2019 :

The following table presents lease-related assets and liabilities recorded on the balance sheet.

As of December 31,

Financial Statement Line Item 2020 2019

December 31, 2019

Operating lease assets

Operating lease right-of-use assets

Finance lease assets

Property, plant and equipment, net

Operating lease assets Operating lease right-of-use assets $ 50,264 $ 45,452

Finance lease assets Property, plant and equipment, net 14,644 13,267

Total lease assets $ 64,908 $ 58,719

Current liabilities:

Operating lease liabilities

Current portion of operating lease liabilities

Finance lease liabilities

Other current liabilities

Operating lease liabilities Current portion of operating lease liabilities $ 4,797 $ 4,288

Finance lease liabilities Other current liabilities 4,252 2,701

Non-current liabilities:

Operating lease liabilities

Operating lease liabilities, net of current portion

Finance lease liabilities

Other non-current liabilities

Operating lease liabilities Operating lease liabilities, net of current portion 55,053 48,575

Finance lease liabilities Other non-current liabilities 6,858 7,911

Total lease liabilities $ 70,960 $ 63,475

The following table contains supplemental information related to leases for the year ended December 31, 2019 :

Supplemental Cash Flows Information

Year Ended December 31, 2019

The following table contains supplemental cash flow information related to leases of continuing operations.

Years Ended December 31,

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from finance leases

Operating cash flows from operating leases

Financing cash flows from finance leases

Operating cash flows used in finance leases $ 192 $ 226

Operating cash flows used in operating leases 13,498 14,090

Financing cash flows used in finance leases 2,018 3,156

Right-of-use assets obtained in exchange for new finance lease liabilities $ 728 $ 5,250

Right-of-use assets obtained in exchange for new operating lease liabilities (1) $ 8,682 $ 8,457

As of December 31, 2019 , the weighted average remaining lease term and weighted-average discount rate for finance and operating leases was as follows:

Operating Leases

Finance Leases

Weighted-average remaining lease term (years)

Weighted-average discount rate

_______________________________

(1) Includes new leases, renewals, and modifications.

As of December 31, 2020, the weighted average remaining lease term and weighted-average discount rate for finance and operating leases of continuing operations were as follows:

Years Ended December 31,

Weighted-average remaining lease term - finance leases 3.2 years 4.0 years

Weighted-average remaining lease term - operating leases 11.7 years 11.0 years

Weighted-average discount rate - finance leases 2.2 % 2.2 %

Weighted-average discount rate - operating leases 7.0 % 5.7 %

The maturities of lease liabilities greater than twelve months as of December 31, 2020, is as follows:

Operating Leases

Finance Leases

Operating Leases Finance Leases

2021 $ 9,348 $ 4,442

2022 8,485 3,107

2023 7,370 2,365

2024 7,276 1,122

2025 7,194 223

Thereafter 48,523 210

Total future minimum lease payments 88,196 11,469

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Total lease liabilities $ 59,850 $ 11,110

As of December 31, 2019 , we have an additional operating lease commitment that would require us to pay a total of approximately $27.5 million base rent payments over the lease term of 15 years .

We are expected to commence base rent payments during the third quarter of 2020 .

The following table presents the future minimum lease payments under operating leases with initial or non-cancelable lease terms in excess of one year prior to adoption of ASC 842 as reported in the 2018 Annual Report.

Year Ending December 31,

Total minimum payments

During the years ended December 31, 2018 and 2017 , we recognized rent expense of $12.4 million and $7.6 million , respectively.

As of December 31, 2019, we had an operating lease commitment that had not yet commenced.

In March 2020, the operating lease for the manufacturing facility commenced and requires us to pay a total of approximately $ 27.5 million base rent payments over the lease term of 15 years.

We began making rent payments in the third quarter of 2020.

In March 2020, we amended the lease of our corporate headquarters building to exit over half of the previously leased space and reduce annual base rent payments by approximately $ 1.3 million over the remaining lease term which ends in 2030.

The amendment was accounted for as a lease modification, and the remeasurement of the lease resulted in an $ 8.1 million decrease in the operating lease right-of-use (“ROU”) asset, a $ 10.5 million decrease in the noncurrent portion of the operating lease liability, and a $ 0.6 million decrease in the current portion of the operating lease liability.

The $ 3.0 million difference between the change in the operating lease ROU asset and the operating lease liabilities was recognized in “Other operating expense, net,” on the Consolidated Statements of Operations and Comprehensive Income (Loss).

In connection with the discontinued use of the previously leased space, we also recognized a $ 4.4 million termination charge and a $ 2.9 million impairment charge on the associated leasehold improvements, all of which were also recognized in “Other operating expense, net.”

During the second quarter of 2020 and as part of our overall plan to improve liquidity during the COVID-19 pandemic, we negotiated with certain lessors to defer rent payments on leased buildings.

In total, $ 0.5 million of operating lease payments for continuing operations were deferred over a period ranging from April 2020 to December 2020 and are being repaid over a period ranging from June 2020 through December 2022.

The deferral of rent payments did not result in a substantial change in total lease payments over the individual lease terms.

We have elected to apply lease accounting relief announced by the FASB in April 2020 and have treated these lease concessions as if they existed in the original contracts rather than applying lease modification accounting.

The net impact on cash flows from operating activities on the Consolidated Statements of Cash Flows for the twelve months ended December 31, 2020, was $ 0.7 million in cash savings which includes $ 0.4 million related to continuing operations.

During the year ended December 31, 2018, we recognized rent expense of $ 8.7 million in continuing operations.

Restructuring and Integration

The following table presents restructuring and integration charges for the years ended December 31, 2019 and 2018.

Corporate and

Consolidations

Year Ended December 31, 2019

Severance and other employee costs

Site closure and other associated costs

There were no restructuring and integration charges for the year ended December 31, 2020.

Solutions Corporate and

Consolidations Total

Year Ended December 31, 2019

Severance and other employee costs

Site closure and other associated costs $ ( 12 ) $ — $ ( 12 )

Total $ ( 12 ) $ — $ ( 12 )

Year Ended December 31, 2018

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Site closure and other associated costs 63 — 63

The following tables presents restructuring and integration reserve activity for the years ended December 31, 2019 , 2018 , and 2017 .

Balance as of

December 31, 2018

Balance as of

December 31, 2019

Severance and other employee costs

Site closure and other associated costs

Balance as of

December 31, 2017

Balance as of

Total $ 63 $ 626 $ 689

The following tables present restructuring and integration reserve activity for the years ended December 31, 2019 and 2018.

There was no restructuring and integration reserve activity for the year ended December 31, 2020.

Reserve Balance

December 31, 2018 Charges Non-cash

Adjustments Cash

Reductions Reserve Balance

December 31, 2019

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Site closure and other associated costs 24 ( 12 ) — ( 12 ) —

Balance as of

December 31, 2016

Balance as of

Total $ 153 $ ( 12 ) $ — $ ( 141 ) $ —

Reserve Balance

December 31, 2017 Charges Non-cash

Adjustments Cash

Reductions Reserve Balance

December 31, 2018

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Site closure and other associated costs 1,099 63 ( 56 ) ( 1,082 ) 24

In 2018 , we recognized severance and other employee costs of $0.7 million at corporate headquarters related to the restructuring of our former Precision Engineered Products Group to form the Life Sciences and Power Solutions groups, effective January 2, 2018 .

We also recognized severance and other employee costs of $1.3 million in our Life Sciences group related to the post-acquisition integration of Paragon Medical into our existing business.

In 2017 , we recognized restructuring and integration expense of $0.4 million in our Mobile Solutions group due primarily to the closure of a plant in Wheeling, Illinois, which was a part of our integration plan after the acquisition of Autocam Corporation (“Autocam”) in 2014.

The amount accrued as of December 31, 2019 , for restructuring and integration costs represents our expected obligation over the next 1.4 years primarily related to severance and other employee costs.

We expect to pay $0.3 million within the next twelve months.

Total $ 1,099 $ 689 $ ( 56 ) $ ( 1,579 ) $ 153

In 2018, we recognized severance and other employee costs of $ 0.6 million at corporate headquarters related to the restructuring of our former Precision Engineered Products Group, effective January 2, 2018.

Commitments and Contingencies

Brazil ICMS Tax Matter

Prior to the acquisition of Autocam in 2014, Autocam’s Brazilian subsidiary (“Autocam Brazil”) received notification from the Brazilian tax authority regarding ICMS (state value added tax or “VAT”) tax credits claimed on intermediary materials (e.g., tooling and perishable items) used in the manufacturing process.

The Brazilian tax authority notification disallowed state ICMS tax credits claimed on intermediary materials based on the argument that these items are not intrinsically related to the manufacturing process.

Prior to the acquisition of Autocam Corporation in 2014 (“Autocam”), Autocam’s Brazilian subsidiary (“Autocam Brazil”) received notification from the Brazilian tax authority regarding ICMS (state value added tax or “VAT”) tax credits claimed on intermediary materials (e.g., tooling and perishable items) used in the manufacturing process.

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.

The matter encompasses several lawsuits filed with Brazilian courts requesting declaratory actions that no tax is due or seeking a stay of execution on the collection of the tax.

The matter encompasses several lawsuits filed with the Brazilian courts requesting declaratory actions that no tax is due or seeking a stay of execution on the collection of the tax.

In 2018, we obtained a favorable decision in one of the declaratory actions for which the period for appeal has expired.

We have filed actions in each court requesting dismissal of the matter based on the earlier court action.

Although we anticipate a favorable resolution to all matters, we can provide no assurances that we will be successful in achieving dismissal of all pending cases.

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 December 31, 2019 , for this matter.

In May 2020, we received an unfavorable decision in one of the lawsuits, and as a result have recorded a liability to the Brazilian tax authorities and a receivable from the former shareholders of Autocam for the same amount.

Although we anticipate a favorable resolution to the remaining matters, we can provide no assurances that we will be successful in achieving dismissal of all pending cases.

dollar amount that would be owed in the event of an unfavorable decision is subject to interest, penalties, and currency impacts and therefore is dependent on the timing of the decision.

For the remaining open lawsuits, we currently believe the cumulative potential liability in the event of unfavorable decisions on all matters will be less than $ 5.0 million, inclusive of interest and penalties.

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.

Accordingly, we don’t expect to incur a loss related to this matter even in the event of an unfavorable decision and, therefore, have not accrued an amount for the remaining matters as of December 31, 2020.

Securities Offering Matter

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The complaint alleges violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 in connection with the Offering.

The plaintiffs seek to represent a class of stockholders who purchased shares of the Company’s common stock in the Offering.

The plaintiffs seek to represent a class of stockholders who purchased shares of the

Company’s common stock in the Offering.

The complaint seeks unspecified monetary damages and other relief.

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All Other Legal Matters

On October 26, 2020, Corre Opportunities Qualified Master Fund, LP, and Corre Horizon Fund, LP, filed a complaint in the Chancery Court of the State of Delaware against the Company.

The complaint alleges that the Company’s sale of its Life Sciences business without obtaining the prior consent of the plaintiffs was a breach of the terms of the Series B Preferred Stock.

The complaint seeks unspecified monetary damages and other relief.

The Company believes the complaint and allegations to be without merit and intends to vigorously defend itself against these actions.

The Company is unable at this time to determine whether the outcome of the litigation would have a material impact on the Company’s financial position, results of operations, or cash flows.

All other legal proceedings are of an ordinary and routine nature and are incidental to our operations.

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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.

Series B Convertible Preferred Stock and Stockholders' Equity

Preferred Stock and Stockholders' Equity

Series B Convertible Preferred Stock

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Net cash proceeds of $ 95.7 million from the issuance of the Preferred Stock were used for debt repayment, fees associated with the amendment and extension of our credit facility, and for general corporate purposes.

Preferred Stock shares have limited

voting rights and earn cumulative dividends at a rate of 10.625% per year, payable quarterly in arrears if declared, and accrue whether or not earned or declared.

Preferred Stock shares earn cumulative dividends at a rate of 10.625 % per year, payable quarterly in arrears if declared, and accrue whether or not earned or declared.

If a Preferred Stock dividend is declared by the Board of Directors, then it will be paid in cash.

Additionally, holders of Preferred Stock participate in any dividends paid on shares of NN’s common stock on an as-converted basis at a fixed conversion rate.

If our common stockholders do not approve a proposal at our 2020 annual stockholder meeting to issue common stock in excess of thresholds established by certain Nasdaq stock market rules upon the exercise of Warrants or the conversion or redemption of Preferred Stock, then the annual dividend rate will immediately increase to 11.625% until such time approval is obtained.

Additionally, holders of Preferred Stock participate in any dividends paid on shares of our common stock on an as-converted basis at a fixed conversion rate.

Our common stockholders approved a proposal at our 2020 annual stockholder meeting to issue common stock in excess of thresholds established by certain Nasdaq stock market rules upon the exercise of Warrants or the conversion or redemption of Preferred Stock.

Preferred Stock is classified as mezzanine equity, between liabilities and stockholders’ equity, because certain features of the Preferred Stock could require redemption of some or all Preferred Stock upon events that are considered not solely within our control, including a leverage ratio threshold and the passage of time.

For initial recognition, the Preferred Stock is recognized at a discounted value, net of issuance costs, reflecting allocation to the Warrants on a relative fair value basis and allocation to bifurcated embedded derivatives on a fair value basis.

For initial recognition in 2019, the Preferred Stock was recognized at a discounted value, net of issuance costs and allocation to warrants and bifurcated embedded derivatives.

The aggregate discount is amortized as a deemed dividend through December 31, 2023, which is the date the holders have a non-contingent conversion option into a variable number of common shares equal to the liquidation preference plus accrued and unpaid dividends.

Deemed dividends adjust retained earnings (or in the absence of retained earnings, additional paid-in capital).

In accordance with ASC 815-15, Derivatives and Hedging - Embedded Derivatives, (“ASC 815-15”) certain features of the Preferred Stock were bifurcated and accounted for separate from the Preferred Stock.

The following features are recorded on a combined basis as a single derivative.

Leverage ratio put feature.

The Preferred Stock includes a redemption option based on a leverage ratio threshold that provides the preferred holder the option to convert the Preferred Stock to a variable number of shares of common stock at a discount to the then fair value of our common stock.

The conversion feature is considered a redemption right at a premium which is not clearly and closely related to the debt host.

Contingent dividends.

The feature that allows for the dividend rate to increase to 11.625% in 2020 is not considered clearly and closely related to the debt host.

Dividends withholding.

The Preferred Stock bears a feature that could require us to make an effective distribution to purchasers which is indexed to the tax rate of the purchasers.

This distribution would be partially offset by an adjustment to the redemption price and/or conversion rate.

The dividends withholding feature is not clearly and closely related to the debt host.

As of December 31, 2019 , the carrying value of the Preferred Series B shares was $93.0 million which included $0.6 million of accumulated unpaid and deemed dividends.

The following table presents the change in the Series B Preferred carrying value during the year ended December 31, 2019 .

Year Ended December 31, 2019

In accordance with ASC 815-15, Derivatives and Hedging - Embedded Derivatives, (“ASC 815-15”) certain features of the Preferred Stock were bifurcated and accounted for as derivatives separate from the Preferred Stock.

Note 21 discusses the accounting for these features.

As of December 31, 2020, the carrying value of the Preferred Stock shares was $ 105.1 million which included $ 13.0 million of accumulated unpaid and deemed dividends.

The following table presents the change in the Preferred Stock carrying value during the year ended December 31, 2020.

Years Ended December 31,

Beginning balance $ 93,012 $ —

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Accrual of in-kind dividends 11,121 590

Amortization of discount (deemed dividends)

Amortization and other 953 52

Ending balance $ 105,086 $ 93,012

In September 2018, we issued 14.4 million shares of our common stock in a public offering under our shelf registration statement at a price of $ 16.00 per share.

Net proceeds of $217.3 million were used to repay the Second Lien Facility and a portion of the Senior Secured Revolver.

The Warrants are exercisable, in full or in part, at any time prior to December 11, 2026, at an exercise price of $12.00 per share, subject to customary anti-dilution adjustments in the event of future below market issuances, stock splits, stock dividends, combinations or similar events.

Unless and until common stockholders approve the issuance of additional common shares upon exercise of the Warrants, the Warrants may not be exercisable.

In addition, certain other ownership limitations apply to any holder of a Warrant.

The Warrant may be exercised for cash or on a cashless basis, based on an exercise price equal to the

closing sale price on the immediately preceding trading day.

Warrant holders are entitled to participate in any dividend or other distribution by the Company to holders of shares of its Common Stock, on an as-exercised basis if the Warrant is exercised.

The Warrants are classified as equity and recognized in additional paid-in capital based on relative fair value allocation.

The Warrants were valued at issuance using the Black-Scholes method.

The valuation at issuance was agreed to by the Preferred Stock holders and the Company, and is specified in the Preferred Stock agreement.

Key assumptions relevant to determining the fair value of the Warrants included an expected term of 1.25 years , a risk free interest rate of 1.62% , and expected volatility of 50% .

Net proceeds of $ 217.3 million were used to repay debt.

Preferred Share Purchase Rights

On April 15, 2020, our Board of Directors authorized and declared a dividend of one preferred share purchase right for each outstanding share of common stock to shareholders of record on April 27, 2020.

The rights will become exercisable if a person or group becomes the beneficial owner of 15 % or more of our outstanding common stock (including in the form of synthetic ownership through derivative positions).

In the event that the rights become exercisable due to the triggering ownership threshold being crossed, each right will entitle its holder to purchase one thousandth of a share of Series C Junior Participating Preferred Stock for $ 31.50 per share.

Rights held by the triggering person or entity will become void and will not be exercisable.

The Board of Directors may, rather than permitting the exercise of the rights, exchange each right (other than rights held by the triggering person or entity) for one share of common stock per right, subject to adjustment.

The Board of Directors will, prior to the rights becoming exercisable, in general be entitled to redeem the rights for $ 0.001 per right.

The rights expire on March 31, 2021.

Revenue from Contracts with Customers

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Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or services.

The following tables present net sales to external customers by reportable segment.

Year Ended December 31, 2020

Intersegment Sales Eliminations

United States

Solutions Power

Solutions Intersegment

Eliminations Total

United States and Puerto Rico $ 129,147 $ 139,499 $ ( 95 ) $ 268,551

China 46,442 5,563 — 52,005

Brazil 27,055 689 — 27,744

Mexico 16,465 13,400 — 29,865

Germany 5,846 378 — 6,224

Poland 4,913 14 — 4,927

Other 26,492 11,726 — 38,218

Total net sales $ 256,360 $ 171,269 $ ( 95 ) $ 427,534

Year Ended December 31, 2019

Intersegment Sales Eliminations

United States

Solutions Power

Solutions Intersegment

Eliminations Total

United States and Puerto Rico $ 162,445 $ 156,945 $ ( 335 ) $ 319,055

China 38,793 6,722 — 45,515

Brazil 36,058 300 — 36,358

Mexico 18,815 13,489 — 32,304

Germany 6,372 65 — 6,437

Poland 6,363 15 — 6,378

Other 28,903 14,564 — 43,467

Total net sales $ 297,749 $ 192,100 $ ( 335 ) $ 489,514

Year Ended December 31, 2018

Intersegment Sales Eliminations

United States

Solutions Power

Solutions Intersegment

Eliminations Total

United States and Puerto Rico $ 187,178 $ 157,357 $ ( 621 ) $ 343,914

China 43,610 5,537 — 49,147

Brazil 35,314 215 — 35,529

Mexico 27,053 12,254 — 39,307

Germany 5,652 26 — 5,678

Poland 7,010 13 — 7,023

Other 29,220 14,376 — 43,596

Total net sales $ 335,037 $ 189,778 $ ( 621 ) $ 524,194

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We utilize the portfolio approach practical expedient to evaluate sales-related discounts on a portfolio basis to contracts with similar characteristics.

The effect on our financial statements of applying the portfolio approach would not differ materially from applying the new standard to individual contracts.

The effect on our consolidated financial statements of applying the portfolio approach would not differ materially from evaluation of individual contracts.

We give our customers the right to return only defective products in exchange for functioning products or rework of the product.

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These contracts generally have an original expected duration of less than one year.

The following table provides information about contract liabilities from contracts with customers.

Balance at January 1, 2019

Balance at December 31, 2019

The timing of revenue recognition, billings, and cash collections results in billed accounts receivable and customer advances and deposits (e.g.

contract liability) on the Consolidated Balance Sheets.

These contract liabilities are reported on the Consolidated Balance Sheets on a contract-by-contract basis at the end of each reporting period as deferred revenue.

Deferred revenue relates to payments received in advance of performance under the contract and recognized as revenue as (or when) we perform under the contract.

Changes in the contract liability balances during the year ended December 31, 2019 , were not materially impacted by any other factors.

Revenue recognized for the year ended December 31, 2019 , from amounts included in deferred revenue at the beginning of the period for performance obligations satisfied or partially satisfied during the period was $3.0 million .

Transaction Price Allocated to Future Performance Obligations

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We recognize commissions paid to internal sales personnel that are incremental to obtaining customer contracts as an expense when incurred since the amortization period is less than one year.

The judgments made in determining the amount of costs incurred included whether the commissions are in fact incremental and would not have occurred absent the customer contract.

Costs to obtain a contract are expensed as selling, general and administrative expense.

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Sales Concentration

For the year ended December 31, 2019 , we recognized sales from a single customer of $93.1 million , or 11.0% of consolidated net sales.

Revenues from this customer are in our Life Sciences and Power Solutions groups.

No customers represented more than 10% of our net sales for the years ended December 31, 2018 and 2017 .

No customers represented more than 10% of accounts receivable as of December 31, 2019 or 2018 .

We recognized sales from a single customer of $ 49.7 million, or 10 % of consolidated net sales, during the year ended December 31, 2019, and $ 65.3 million, or 12 % of consolidated net sales, during the year ended December 31, 2018.

Revenues from this customer are in our Mobile Solutions segment and were less than 10 % of consolidated net sales during the year ended December 31, 2020.

Share-Based Compensation

We recognize compensation expense of all employee and non-employee director share-based compensation awards in the financial statements based upon the grant date fair value of the awards over the requisite service or vesting period, less any expense incurred for estimated forfeitures.

As of December 31, 2019 , we have 3.6 million maximum shares that can be issued as options, stock appreciation rights, and other share-based awards.

We recognize compensation expense of all employee and non-employee director share-based compensation awards in the consolidated financial statements based upon the grant-date fair value of the awards over the requisite service or vesting period, less any expense incurred for estimated forfeitures.

As of December 31, 2020, we have 2.7 million maximum shares available that can be issued as options, stock appreciation rights, and other share-based awards.

Shares of our common stock delivered upon exercise or vesting may consist of newly issued shares of our common stock or shares acquired in the open market.

Share-based compensation expense is recognized in the “ Selling, general and administrative expense ” line in the Consolidated Statements of Operations and Comprehensive Income (Loss) except for $1.0 million attributable to discontinued operations for the year ended December 31, 2017 .

Share-based compensation expense is recognized in the “Selling, general, and administrative expense” line in the Consolidated Statements of Operations and Comprehensive Income (Loss) except for $ 0.8 million, $ 0.4 million, and $ 0.2 million attributable to discontinued operations for the twelve months ended December 31, 2020, 2019, and 2018, respectively.

The following table lists the components of share-based compensation expense by type of award.

Year Ended December 31,

2020 2019 2018

Stock options $ 741 $ 881 $ 678

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Change in estimate of share-based award vesting (1)

( 743 ) ( 1,111 ) ( 1,968 )

Share-based compensation expense $ 4,226 $ 2,822 $ 2,416

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(1) Amounts reflect the decrease in share-based compensation expense based on the change in estimate of the probability of vesting of share-based awards.

The total tax benefit for share-based compensation cost was $0.1 million , $0.7 million , and $1.6 million for the years ended December 31, 2019 , 2018 , and 2017 , respectively.

Unrecognized compensation cost related to unvested awards was $ 3.6 million as of December 31, 2020.

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The weighted average grant-date fair value of the options granted during 2020, 2019, and 2018 was $ 4.76 , $ 2.77 , and $ 10.60 per share, respectively.

The fair value of our options cannot be determined by market value because they are not traded in an open market.

The fair value of our options cannot be determined by market

value because they 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 stock options granted in each year.

Expected term

2020 2019 2018

Expected term 6 years 6 years 6 years

Average risk-free interest rate 1.42 % 2.47 % 2.66 %

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The expected dividend yield is derived by a mathematical formula which uses the expected annual dividends over the expected term divided by the fair market value of our common stock at the grant date.

The expected volatility is derived from our actual common stock historical volatility over the same time period as the expected term.

The expected volatility rate is derived by mathematical formula utilizing daily closing price data.

The expected dividend yield for 2020 grants reflects no expected annual dividends over the expected term because we discontinued dividends in 2019.

The expected volatility rate is derived from our actual common stock historical volatility over the same time period as the expected term.

The expected volatility rate is derived by a mathematical formula utilizing daily closing price data.

The expected forfeiture rate is determined from examining the historical pre-vesting forfeiture patterns of past option issuances to key employees.

While the expected forfeiture rate is not an input of the Black Scholes financial pricing model for determining the fair value of the options, it is an important determinant of stock option compensation expense to be recorded.

The following table summarizes stock option activity for the year ended December 31, 2019 .

The following table presents stock option activity for the year ended December 31, 2020.

Number of Options

(in thousands)

(in thousands) Weighted-

(per share) Weighted-

Term (years) Aggregate

Outstanding at January 1, 2020 775 $ 13.24

Granted 159 9.44

Forfeited or expired ( 63 ) 15.09

Outstanding at December 31, 2019

Exercisable at December 31, 2019

Outstanding at December 31, 2020 871 $ 12.41 4.0 years $ — (1)

Exercisable at December 31, 2020 682 $ 13.17 2.7 years $ — (1)

_______________________________

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The intrinsic value is the amount by which the closing market price of our stock at December 31, 2020, was greater than the exercise price of any individual option grant.

Cash proceeds from the exercise of options in the years ended December 31, 2019 , 2018 , and 2017 totaled less than $0.1 million , $0.3 million , and $3.1 million , respectively.

The tax benefit recognized from stock option exercises was less than $0.1 million , $0.1 million , and $0.2 million in the years ended December 31, 2019 , 2018 , and 2017 , respectively.

No options were exercised during the year ended December 31, 2020.

Cash proceeds from the exercise of options in the years ended December 31, 2019 and 2018, totaled less than $ 0.1 million and $ 0.3 million, respectively.

The tax benefit recognized from stock option exercises was less than $ 0.1 million and $ 0.1 million in the years ended December 31, 2019 and 2018, respectively.

For the years ended December 31, 2019 and 2018, proceeds from stock options are presented exclusive of tax benefits in cash flows from financing activities in the Consolidated Statements of Cash Flows.

The total intrinsic value of options exercised during the years ended December 31, 2019 , 2018 , and 2017 was $7 thousand , $0.5 million , and $3.8 million , respectively.

The total intrinsic value of options exercised during the years ended December 31, 2019 and 2018, was $ 7.0 thousand and $ 0.5 million, respectively.

Restricted Stock

During the years ended December 31, 2019 , 2018 , and 2017 , we granted 339,498 , 86,516 , and 85,393 restricted stock awards to non-executive directors, officers, and certain other key employees.

The shares of restricted stock granted during the years ended December 31, 2019 , 2018 , and 2017 , vest pro-rata generally over three years for officers and certain other key employees and over one year for non-executive directors.

During the years ended December 31, 2020, 2019, and 2018, we granted 460,255 , 339,498 , and 86,516 shares of restricted stock to non-executive directors, officers, and certain other key employees.

The shares of restricted stock granted during the years ended December 31, 2020, 2019, and 2018, vest pro-rata generally over three years for officers and certain other key employees and over one year for non-executive directors and certain key employees.

We determined the fair value of the shares awarded by using the closing price of our common stock as of the date of grant.

The weighted average grant date fair value of restricted stock granted in the years ended December 31, 2019 , 2018 , and 2017 , was $7.74 , $24.55 , and $24.29 per share, respectively.

The weighted average grant-date fair value of

restricted stock granted in the years ended December 31, 2020, 2019, and 2018, was $ 9.35 , $ 7.74 , and $ 24.55 per share, respectively.

The total grant-date fair value of restricted stock that vested in the years ended December 31, 2020, 2019, and 2018, was $ 1.9 million, $ 2.9 million, and $ 1.8 million, respectively.

The following table summarizes unvested restricted stock award activity for the year ended December 31, 2019 .

Number of Unvested

(in thousands)

Average Grant

The following table presents the status of unvested restricted stock awards as of December 31, 2020, and changes during the year then ended.

(in thousands) Weighted

Unvested at January 1, 2020 222 $ 9.33

Granted 460 9.35

Vested ( 254 ) 7.31

Forfeited ( 43 ) 9.17

Unvested at December 31, 2020 385 $ 9.42

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Performance Share Units (“PSUs”) are a form of long-term incentive compensation awarded to executive officers and certain other key employees designed to directly align the interests of employees to the interests of our stockholders, and to create long-term stockholder value.

PSUs granted in 2020 were made pursuant to the NN, Inc.

2019 Omnibus Incentive Plan and a Performance Share Unit Agreement (the “2019 Omnibus Agreement”).

PSUs granted in 2019 and 2018 were made pursuant to the NN, Inc.

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Some PSUs are based on total shareholder return (“TSR Awards”), and other PSUs are based on return on invested capital (“ROIC Awards”).

The TSR Awards vest, if at all, upon our achieving a specified relative total shareholder return, which will be measured against the total shareholder return of the S&P SmallCap 600 Index during specified performance periods as defined in the 2016 Omnibus Agreement.

The ROIC Awards will vest, if at all, upon our achieving a specified average return on invested capital during the performance periods.

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If the PSUs do not vest at the end of the performance periods, then the PSUs will expire automatically.

Upon vesting, the PSUs will be settled by the issuance of shares of our common stock, subject to the executive officer’s continued employment.

Upon vesting, the PSUs will be settled by the issuance of shares of our common stock, subject to the award recipient’s continued employment.

The actual number of shares of common stock to be issued to each award recipient at the end of the performance periods will be interpolated between a threshold and maximum payout amount based on actual performance results.

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With respect to the TSR Awards, a participant will earn 50 % of the target number of PSUs for “Threshold Performance,” 100 % of the target number of PSUs for “Target Performance,” and 150 % of the target number of PSUs for “Maximum Performance.” With respect to the ROIC Awards, a participant will earn 35 % of the target number of PSUs for “Threshold Performance,” 100 % of the target number of PSUs for “Target Performance,” and 150 % of the target number of PSUs for “Maximum Performance.” For performance levels falling between the values shown below, the percentages will be determined by interpolation.

The following table presents the goals with respect to TSR Awards and ROIC Awards granted in 2019 , 2018 , and 2017 .

The following tables present the goals with respect to TSR Awards and ROIC Awards granted in 2020, 2019, and 2018.

Threshold Performance

(50% of Shares)

Target Performance

(100% of Shares)

Maximum Performance

(50% of Shares) Target Performance

(100% of Shares) Maximum Performance

(150% of Shares)

2020 grants 35 th Percentile 50 th Percentile 75 th Percentile

2019 grants 35 th Percentile 50 th Percentile 75 th Percentile

2018 grants 35 th Percentile 50 th Percentile 75 th Percentile

Threshold Performance

(35% of Shares)

Target Performance

(100% of Shares)

Maximum Performance

(35% of Shares) Target Performance

(100% of Shares) Maximum Performance

(150% of Shares)

2020 grants (1) 4.9 % 5.1 % 5.6 %

2019 grants 4.7 % 5.8 % 7.0 %

2018 grants 15.5 % 18.0 % 19.5 %

_______________________________

(1) The performance levels for 2020 grants were modified by the compensation committee of the board of directors in the first quarter of 2021 to adjust for the sale of the Life Sciences business and the ongoing effects of the COVID-19 pandemic.

Threshold Performance was changed to 6.7 % to earn 50 % of Shares, Target Performance was changed to 7.9 % to earn 100 % of Shares, and Maximum Performance was changed to 8.7 % to earn 150 % of Shares.

We estimate the grant-date fair value of TSR Awards using the Monte Carlo simulation model, as the total shareholder return metric is considered a market condition under ASC Topic 718, Compensation – stock compensation .

The grant-date fair value of ROIC Awards is based on the closing price of a share of our common stock on the date of grant.

The following table presents the number of awards granted and the grant date fair value of each award in the periods presented.

(in thousands)

The following table presents the number of PSUs granted and the grant-date fair value of each award in the periods presented.

TSR Awards ROIC Awards

Award Year Shares

(in thousands) Grant-Date

(per share) Shares

(in thousands) Grant-Date

2020 139 $ 10.88 157 $ 9.44

2019 136 $ 9.28 174 $ 7.93

2018 55 $ 24.65 55 $ 24.55

We recognize expense for ROIC Awards based on the probable outcome of the associated performance condition.

We generally recognize an expense for ROIC Awards based on the Target Performance threshold of 100 % because, at the date of grant, the Target Performance is the probable level of performance achievement.

During 2019 , none of the ROIC Awards that were granted in 2017 vested because the actual performance achieved was below the “Threshold Performance” level of 15.0% , as defined by the grant agreement.

All of the expense related to the 2017 ROIC Awards was reversed during the year ended December 31, 2018 , when we recognized a decrease in share-based compensation expense of $0.8 million in the “ Selling, general and administrative expense ” line in the Consolidated Statements of Operations and Comprehensive Income (Loss) .

Also during the year ended December 31, 2018 , we determined that the probability of performance achievement for ROIC Awards that were granted in 2018 and 2016 diminished to below the “Threshold Performance” level of 15.5% , as defined by the grant agreement, and recognized a decrease in share-based compensation expense of $1.2 million to reflect the change in estimate of the probability of vesting for the 2018 and 2016 ROIC Awards in the “ Selling, general and administrative expense ” line in the Consolidated Statements of Operations and Comprehensive Income (Loss) .

In 2019 , we recognized a decrease in share-based compensation expense of $1.1 million in the Selling, general and administrative expense line in the Consolidated Statements of Operations and Comprehensive Income (Loss) to reverse cumulative expense for awards to executives that were forfeited upon termination of employment.

Related accrued dividend equivalents of $0.1 million were also reversed in 2019 for awards that are not expected to vest.

The following table summarizes changes in unvested PSUs during the year ended December 31, 2019 , and changes during the year then ended.

Nonvested TSR Awards

Nonvested ROIC Awards

(in thousands)

The following table presents the status of unvested PSUs as of December 31, 2020, and changes during the year then ended.

Nonvested TSR Awards Nonvested ROIC Awards

(in thousands) Weighted

Fair Value Number of

(in thousands) Weighted

Nonvested at January 1, 2020 65 $ 13.27 79 $ 11.50

Granted 139 10.88 157 9.44

Forfeited ( 56 ) 11.89 ( 66 ) 10.32

Expired ( 10 ) 24.65 ( 10 ) 24.55

Nonvested at December 31, 2020 138 $ 10.58 160 $ 9.13

No TSR Awards or ROIC Awards vested in 2019 or 2018 .

None of the PSUs that were granted in 2016, 2017, and 2018 vested in 2018, 2019, and 2020, respectively, because the actual performance achieved was below the “Threshold Performance” level as defined by the grant agreements.

Change in Vesting Estimates

During the year ended December 31, 2020, we recognized a decrease in share-based compensation expense in continuing operations of $ 0.3 million in the “Selling, general, and administrative expense” line of the Consolidated Statements of Operations and Comprehensive Income (Loss) to reverse cumulative expense for option, restricted stock, and PSU awards that

were forfeited upon termination of employment and for ROIC Awards that were granted in 2019 and are not expected to achieve Threshold Performance.

In 2020 we also recognized a decrease in share-based compensation expense of $ 0.5 million in the “Income (loss) from discontinued operations, net of tax” line in the Consolidated Statements of Operations and Comprehensive Income (Loss) to reverse cumulative expense for option, restricted stock, and PSU awards that were forfeited upon termination of employees related to the Life Sciences business.

During the year ended December 31, 2019, we recognized a decrease in share-based compensation expense in continuing operations of $ 1.1 million in the “Selling, general, and administrative expense” line in the Consolidated Statements of Operations and Comprehensive Income (Loss) to reverse cumulative expense for option, restricted stock, and PSU awards that were forfeited upon termination of employment.

During the year ended December 31, 2018, we determined that the probability of performance achievement for ROIC Awards that were granted in 2016, 2017, and 2018 diminished to below the “Threshold Performance” level as defined by the grant agreements, and we recognized a decrease in share-based compensation expense in continuing operations of $ 1.8 million in “Selling, general, and administrative expense” and $ 0.2 million in “Income (loss) from discontinued operations, net of tax” on the Consolidated Statements of Operations and Comprehensive Income (Loss).

Related accrued dividend equivalents of less than $ 0.1 million, $ 0.1 million, and $ 0.1 million were also reversed in 2020, 2019, and 2018, respectively, for awards that are not expected to vest.

Accumulated Other Comprehensive Income

The components of AOCI are as follows:

Foreign Currency Translation

Interest Rate Swap

Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive income (“AOCI”) are as follows:

Foreign Currency Translation Interest rate swap Income taxes (1) Total

Balance at December 31, 2017 $ ( 17,705 ) $ — $ — $ ( 17,705 )

Amounts reclassified from AOCI (1)

Current-period other comprehensive income (loss) activity ( 13,609 ) — — ( 13,609 )

Balance at December 31, 2018 $ ( 31,314 ) $ — $ — $ ( 31,314 )

Current-period other comprehensive income (loss) activity

Other comprehensive income (loss) before reclassifications ( 3,845 ) ( 13,645 ) 3,166 ( 14,324 )

Amounts reclassified from AOCI to interest expense (2) — 1,411 ( 327 ) 1,084

Net current-period other comprehensive income (loss) ( 3,845 ) ( 12,234 ) 2,839 ( 13,240 )

Balance at December 31, 2019 $ ( 35,159 ) $ ( 12,234 ) $ 2,839 $ ( 44,554 )

Amounts reclassified from AOCI (2)

Current-period other comprehensive income (loss) activity

Other comprehensive income (loss) before reclassifications ( 1,683 ) ( 16,207 ) 3,764 ( 14,126 )

Amounts reclassified from AOCI to interest expense (2) — 8,906 ( 2,068 ) 6,838

Amounts reclassified from AOCI to loss on interest rate swap (3) — 15,823 ( 3,674 ) 12,149

Sale of discontinued operations 5,961 — — 5,961

Net current-period other comprehensive income (loss) 4,278 8,522 ( 1,978 ) 10,822

Balance at December 31, 2020 $ ( 30,881 ) $ ( 3,712 ) $ 861 $ ( 33,732 )

_______________________________

(1) Amount reflects $9.2 million of foreign currency translation that was reclassified out of AOCI to discontinued operations on the Consolidated Statements of Operations and Comprehensive Income (Loss) in connection with the sale of the PBC Business as discussed in Note 3 .

(2) Amount reflects $1.1 million of settlements on the interest rate swap, net of tax, that are reclassified out of AOCI into net income on the Consolidated Statements of Operations and Comprehensive Income (Loss) .

(1) Income tax effect of changes in interest rate swap.

(2) Represents settlements on the interest rate swap while the hedge was effective.

(3) Represents reclassification of derivative loss and settlements after discontinuation of hedge accounting.

See Note 21 for further discussion of the interest rate swap.

Net Income (Loss) Per Common Share

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The following table summarizes the computation of basic and diluted net income (loss) per common share.

Year Ended December 31,

Income (loss) from continuing operations

Income from discontinued operations, net of tax

Net income (loss)

Years Ended December 31,

2020 2019 2018

Loss from continuing operations $ ( 139,490 ) $ ( 30,749 ) $ ( 221,220 )

Preferred Stock cumulative dividends and deemed dividends ( 12,373 ) ( 642 ) —

Numerator for basic and diluted net income (loss) per common share (1)

Weighted average common shares outstanding

Effect of dilutive stock options

Diluted shares outstanding

Basic income (loss) from continuing operations per common share

Basic income from discontinued operations per common share

Basic net income (loss) per common share

Diluted income (loss) from continuing operations per common share

Diluted income from discontinued operations per common share

Diluted net income (loss) per common share

Numerator for basic and diluted loss from continuing operations per common share (1) ( 151,863 ) ( 31,391 ) ( 221,220 )

Income (loss) from discontinued operations, net of tax (Note 2) 38,898 ( 15,992 ) ( 41,767 )

Numerator for basic and diluted undistributed net loss per common share (1) $ ( 112,965 ) $ ( 47,383 ) $ ( 262,987 )

Weighted average common shares outstanding, basic and diluted 42,199 42,030 31,678

Per common share net loss:

Basic loss from continuing operations per common share $ ( 3.60 ) $ ( 0.75 ) $ ( 6.98 )

Basic income (loss) from discontinued operations per common share 0.92 ( 0.38 ) ( 1.32 )

Basic net loss per common share $ ( 2.68 ) $ ( 1.13 ) $ ( 8.30 )

Diluted loss from continuing operations per common share $ ( 3.60 ) $ ( 0.75 ) $ ( 6.98 )

Diluted income (loss) from discontinued operations per common share 0.92 ( 0.38 ) ( 1.32 )

Diluted net loss per common share $ ( 2.68 ) $ ( 1.13 ) $ ( 8.30 )

Cash dividends declared per common share $ — $ 0.21 $ 0.28

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(1) Preferred Stock does not participate in losses.

The following table presents the number of potentially dilutive securities that were excluded from the calculation of diluted income (loss) from continuing operations per common share and diluted net income (loss) per common share because they had an anti-dilutive effect.

The following table presents potentially dilutive securities that were excluded from the calculation of diluted net income (loss) per common share because they had an anti-dilutive effect.

Year Ended December 31,

2020 2019 2018

Options 871 577 428

Warrants 1,500 1,500 —

Preferred Stock, as-converted 19,021 12,976 —

Given the loss from continuing operations in 2019 and 2018 , all options and warrants are considered anti-dilutive and were excluded from the calculation of diluted loss from continuing operations per share and diluted net income (loss) per share.

Stock options excluded from the calculations of diluted income (loss) from continuing operations per share had a per share exercise price ranging from $8.54 to $25.16 for the year ended December 31, 2019 , and $4.42 to $25.16 for each of the years ended December 31, 2018 , and 2017 .

Warrants excluded from the calculation of diluted income (loss) from continuing operations per share for the year ended December 31, 2019 , had a per share exercise price of $12.00 .

Preferred Stock excluded from the calculation of diluted income (loss) from continuing operations per share for the year ended December 31, 2019 , was calculated on an as-converted basis.

21,392 15,053 428

We have elected to allocate undistributed income to participating securities based on year-to-date results.

As there was no undistributed income for the years ended December 31, 2020, and 2019, no such allocation was necessary.

In addition, given the undistributed loss from continuing operations in the years ended December 31, 2020, 2019, and 2018, all options and warrants are considered anti-dilutive and were excluded from the calculation of diluted net income (loss) per share.

Stock options excluded from the calculations of diluted net income (loss) per share had a per share exercise price ranging from $ 7.93 to $ 25.16 for the year ended December 31, 2020, $ 8.54 to $ 25.16 for year ended December 31, 2019, and $ 4.42 to $ 25.16 for the year ended December 31, 2018.

Warrants excluded from the calculation of diluted net income (loss) per share for the years ended December 31, 2020 and 2019, had a per share exercise price of $ 12.00 .

Preferred Stock excluded from the calculation of diluted net income (loss) per share for the years ended December 31, 2020 and 2019, was calculated on an as-converted basis.

Holders of Preferred Stock will have the right to convert up to 25 % of their Preferred Stock into common shares per quarter after December 31, 2023, at a conversion price that equals a 30-day volume weighted average price per common share.

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As described in Note 16, in connection with the issuance of Preferred Stock in December 2019 and in accordance with ASC 815-15, certain features of the Preferred Stock were bifurcated and accounted for separate from the Preferred Stock.

The following features are recorded on a combined basis as a single derivative.

The following features are recorded as derivatives.

• Leverage ratio put feature.

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• Contingent dividends.

The feature that allows for the dividend rate to increase to 11.625% in 2020 is not considered clearly and closely related to the debt host.

The feature that allowed for the dividend rate to increase to 11.625 % in 2020 if shareholder approval was not obtained is not considered clearly and closely related to the debt host.

Because shareholder approval was obtained during 2020, the contingent dividends feature no longer exists as of December 31, 2020.

• Dividends withholding.

2 unchanged sentences

The dividends withholding feature is not clearly and closely related to the debt host.

The following table shows the liabilities measured at fair value for the Preferred Stock derivative above as of December 31, 2019 .

The Warrants issued with the Preferred Stock are exercisable, in full or in part, at any time prior to the seventh anniversary of their issuance at an exercise price of $ 12.00 per share, subject to customary anti-dilution adjustments in the event of future below market issuances, stock splits, stock dividends, combinations or similar events.

The following tables show the liabilities measured at fair value for the Preferred Stock derivatives above as of December 31, 2020, and December 31, 2019.

Fair Value Measurements as of December 31, 2020

Quoted Prices in Active Markets for Identical Assets (Level 1)

Significant Other Observable Inputs (Level 2)

Significant Unobservable Inputs

Description Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs

Derivative liability - other current liabilities $ — $ — $ 2,453

Derivative liability - other non-current liabilities — — 664

The inputs for determining fair value of the Preferred Stock derivative are classified as Level 3 inputs.

Level 3 fair value is based on unobservable inputs based on the best information available.

These inputs include probability assessments of how long the Preferred Stock will remain outstanding, whether the leverage ratio threshold will be exceeded, and whether approval is obtained from common stockholders for issuance of common stock upon exercise of the Warrants and conversion or redemption of the Preferred Stock.

Inputs also include the percentage of Preferred Stock held by non-U.S.

resident holders and the applicable tax withholding rates for those holders.

The following table presents the change in the Preferred Stock derivative during the year ended December 31, 2019.

Year Ended December 31, 2019

Description $ — $ — $ 3,117

Fair Value Measurements as of December 31, 2019

Description Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs

Derivative liability - other current liabilities $ — $ — $ 60

Derivative liability - other non-current liabilities — — 2,235

Total $ — $ — $ 2,295

The following table presents the change in the Preferred Stock derivatives during the twelve months ended December 31, 2020 and 2019.

Years Ended December 31,

Beginning balance $ 2,295 $ —

Issuances — 2,295

Change in fair value (1) ( 493 ) —

Other (2) 1,315 —

Ending balance $ 3,117 $ 2,295

Changes in the fair value of the Preferred Stock derivative will be recognized in earnings.

There was no change in the fair value from the date of issuance through December 31, 2019.

Cash Flow Hedge

_______________________________

(1) Changes in the fair value are recognized in the “Other expense (income), net” line in the Consolidated Statements of Operations and Comprehensive Income (Loss).

All of the change in fair value relates to the derivative liability held at December 31, 2020.

(2) In 2020, we determined that certain anti-dilution provisions of the Warrants require liability accounting;

therefore, we reclassified the $ 1.1 million value of the Warrants recorded in Stockholders’ Equity as of December 31, 2019, to a liability during the twelve months ended December 31, 2020.

The fair value of the leverage ratio put feature, the dividends withholding feature, and the contingent dividends feature utilizes unobservable inputs based on the best information available to determine the probability of the preferred stock remaining outstanding for future periods.

These inputs include probability assessments of how long the Preferred Stock will remain outstanding, whether the leverage ratio threshold will be exceeded, and, as of December 31, 2019, whether approval would be obtained from common stockholders for issuance of common stock upon exercise of the Warrants and conversion or redemption of the Preferred Stock.

Inputs also include the percentage of Preferred Stock held by non-U.S.

resident holders and the applicable tax withholding rates for those holders.

The probability of the Preferred Stock remaining in future periods ranged from 3 % to 2 % as of December 31, 2020, and from 97 % to 2 % as of December 31, 2019.

The leverage ratio put feature also utilizes unobservable inputs to determine the probability of the leverage ratio put being exercisable as of March 31, 2023, which ranged from 10 % to 1 % as of December 31, 2020, and from 20 % to 1 % at December 31, 2019.

These probabilities are determined based on management’s assessment of facts and circumstances at each reporting date.

An increase in these probabilities would result in an increase in the derivative liability fair value.

Given the Preferred Stock value changes by period as a result of dividends and redemption premiums, weighted average values for these assumptions are not meaningful.

The fair value of the Warrants feature is determined using a valuation model, which utilizes unobservable inputs to determine the probability that the Warrants will remain outstanding for future periods.

The probabilities ranged from 80 % to 5 % and resulted in a weighted average term of 2.4 years as of December 31, 2020.

An increase in these probabilities would result in an increase in the derivative liability fair value.

As of December 31, 2019, the Warrants were classified in equity and valued using a term of 1.3 years.

Interest Rate Swap

We manage our exposure to fluctuations in interest rates using a mix of fixed and variable rate debt.

1 unchanged sentence

The term of the interest rate swap is from the effective date of February 12, 2019, through the termination date of October 19, 2022 (the “interest rate swap term”).

The interest rate swap effectively mitigates our exposures to the risks and variability of changes in LIBOR.

The notional amount of the interest rate swap will decrease over the interest rate swap term as follows:

The interest rate swap effectively mitigated our exposures to the risks and variability of changes in LIBOR.

The notional amount of the interest rate swap decreases over time as presented in the following table:

Notional Amount

2 unchanged sentences

December 31, 2021 - October 19, 2022 233,333,000

The objective of the interest rate swap is to eliminate the variability of cash flows in interest payments on the first $700.0 million of variable rate debt attributable to changes in benchmark one-month LIBOR interest rates.

The hedged risk is the interest rate risk exposure to changes in interest payments, attributable to changes in benchmark one-month LIBOR interest rates over the interest rate swap term.

If one-month LIBOR is greater than the minimum percentage under the Senior Secured Term Loan, the changes in cash flows of the interest rate swap are expected to exactly offset changes in cash flows of the variable rate debt.

The interest rate swap is designated as a cash flow hedge.

As of December 31, 2019 , we reported a $9.4 million loss , net of tax, in accumulated other comprehensive income related to the interest rate swap.

The following table shows the liabilities measured at fair value on a recurring basis for the interest rate swap as of December 31, 2019 .

The objective of the interest rate swap was to eliminate the variability of cash flows in interest payments on the first $ 700.0 million of variable rate debt attributable to changes in benchmark one-month LIBOR interest rates.

The hedged risk was the interest rate risk exposure to changes in interest payments, attributable to changes in benchmark one-month LIBOR interest rates over the interest rate swap term.

If one-month LIBOR were greater than the minimum percentage under the Senior Secured Term Loan, then the changes in cash flows of the interest rate swap were expected to exactly offset changes in cash flows of the variable rate debt.

The interest rate swap was designated as a cash flow hedge at inception.

After the prepayment, a majority of the hedged forecasted transactions (i.e.

interest payments) were probable of not occurring, resulting in the recognition in earnings of $ 14.8 million of the hedging loss in accumulated other comprehensive income in the fourth quarter of 2020.

The remaining $ 2.9 million of the hedging loss in accumulated other comprehensive income will be amortized into earnings as settlements occur.

Finally, as the interest rate swap no longer qualifies as an effective hedge subsequent to October 6, 2020, changes in fair value of the interest rate swap are recognized in earnings each period.

All amounts recognized in earnings related to the interest rate swap are recorded in the “ Loss on interest rate swap” line on the Consolidated Statements of Operations and Comprehensive Income (Loss) except that cash settlements were recognized in “Interest expense” prior to October 6, 2020, and in “Derivative payments on interest rate swap” after October 6, 2020.

Cash settlements are presented in operating activities on the Consolidated Statements of Cash Flows prior to October 6, 2020, and in investing activities after October 6, 2020.

The following table presents the effect of the interest rate swap on the Consolidated Statements of Operations and Comprehensive Income (Loss).

Years Ended December 31,

Interest expense $ 8,906 $ 1,411

Derivative payments on interest rate swap 4,133 —

Loss on interest rate swap 11,669 —

As of December 31, 2020 and 2019, we reported a $ 2.9 million loss and a $ 9.4 million loss, respectively, net of tax, in accumulated other comprehensive income related to the interest rate swap.

The following tables present the liabilities measured at fair value on a recurring basis for the interest rate swap as of December 31, 2020, and December 31, 2019.

Fair Value Measurements as of December 31, 2020

Quoted Prices in Active Markets for Identical Assets

Significant Other Observable Inputs

Significant Unobservable Inputs

Description Quoted Prices in Active Markets for Identical Assets

(Level 1) Significant Other Observable Inputs

(Level 2) Significant Unobservable Inputs

Derivative liability - other current liabilities $ — $ 11,022 $ —

Derivative liability - other non-current liabilities — 4,357 —

Total $ — $ 15,379 $ —

Fair Value Measurements as of December 31, 2019

Description Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs

Derivative liability - other current liabilities $ — $ 5,943 $ —

Derivative liability - other non-current liabilities — 6,290 —

Total $ — $ 12,233 $ —

The inputs for determining fair value of the interest rate swap are classified as Level 2 inputs.

2 unchanged sentences

Counterparty to this derivative contract is a highly rated financial institution which we believe carries only a minimal risk of nonperformance.

As of December 31, 2018 , we had no interest rate swap agreements or other derivative financial instruments outstanding.

Fixed Rate Debt

The fair value of our outstanding fixed-rate debt included in the “International lines of credit and other loans” line item within Note 13 to these Notes to Consolidated Financial Statements was $9.8 million as of December 31, 2019 .

This fair value represents Level 2 under the three-tier hierarchy described above.

The carrying value of this fixed-rate debt was $9.8 million as of December 31, 2019 .

We had no significant fixed-rate debt outstanding as of December 31, 2018 .

The fair value of our outstanding fixed-rate debt included in the “International lines of credit and other loans” line item within Note 12 to these Notes to Consolidated Financial Statements was $ 14.4 million and $ 9.6 million as of December 31, 2020 and 2019, respectively.

These fair values represent Level 2 under the three-tier hierarchy described above.

The carrying value of this fixed-rate debt was $ 14.4 million and $ 9.6 million as of December 31, 2020 and 2019, respectively.

Quarterly Results of Operations (Unaudited)

The following tables present the quarterly results of operations for the years ended December 31, 2020 and 2019.

Cost of sales (exclusive of depreciation and amortization)

Net income (loss)

Comprehensive income (loss)

Basic net income (loss) per common share

Diluted net income (loss) per common share

Cost of sales (exclusive of depreciation and amortization)

Net income (loss)

Comprehensive income (loss)

Basic net income (loss) per common share

Diluted net income (loss) per common share

As further described in Note 2 , during 2019 we identified misstatements in our previously issued financial statements which we are correcting through the revision of our previously issued financial statements.

The effect of the revision on the 2019 and 2018 previously issued unaudited quarterly financial results is presented in the tables below.

The revision of our 2019 quarterly financial statements will be effected in connection with the prospective issuance of 2020 quarterly filings on Form 10-Q.

As Originally Reported

Third Quarter 2019

Cost of sales (exclusive of depreciation and amortization)

Net income (loss)

Comprehensive income (loss)

Basic net income (loss) per common share

Diluted net income (loss) per common share

Second Quarter 2019

Cost of sales (exclusive of depreciation and amortization)

Net income (loss)

Comprehensive income (loss)

Basic net income (loss) per common share

Diluted net income (loss) per common share

First Quarter 2019

Cost of sales (exclusive of depreciation and amortization)

Net income (loss)

Comprehensive income (loss)

Basic net income (loss) per common share

Diluted net income (loss) per common share

As Originally Reported

Fourth Quarter 2018

Cost of sales (exclusive of depreciation and amortization)

Net income (loss)

Comprehensive income (loss)

Basic net income (loss) per common share

Diluted net income (loss) per common share

Third Quarter 2018

Cost of sales (exclusive of depreciation and amortization)

Net income (loss)

Comprehensive income (loss)

Basic net income (loss) per common share

Diluted net income (loss) per common share

Second Quarter 2018

Quarter Second

Quarter Third

Quarter Fourth

Net sales $ 116,213 $ 78,532 $ 113,761 $ 119,028

Cost of sales (exclusive of depreciation and amortization) 94,478 65,058 90,076 93,982

Income (loss) from continuing operations ( 108,077 ) ( 17,566 ) 1,640 ( 15,487 )

Income (loss) from discontinued operations, net of tax ( 140,114 ) ( 4,182 ) 20,330 162,864

Net income (loss) ( 248,191 ) ( 21,748 ) 21,970 147,377

Comprehensive income (loss) ( 272,690 ) ( 19,371 ) 31,851 170,440

Basic loss from continuing operations per common share $ ( 2.64 ) $ ( 0.49 ) $ ( 0.04 ) $ ( 0.44 )

Basic net income (loss) per common share $ ( 5.96 ) $ ( 0.59 ) $ 0.45 $ 3.41

Diluted loss from continuing operations per common share $ ( 2.64 ) $ ( 0.49 ) $ ( 0.04 ) $ ( 0.44 )

Diluted net income (loss) per common share $ ( 5.96 ) $ ( 0.59 ) $ 0.45 $ 3.41

First Quarter 2018

Quarter Second

Quarter Third

Quarter Fourth

Net sales $ 127,528 $ 130,851 $ 120,459 $ 110,676

Cost of sales (exclusive of depreciation and amortization) 101,369 102,643 96,654 91,816

Net income (loss)

Comprehensive income (loss)

Basic net income (loss) per common share

Diluted net income (loss) per common share

Loss from continuing operations ( 11,517 ) ( 4,453 ) ( 4,836 ) ( 9,943 )

Loss from discontinued operations, net of tax ( 8,001 ) ( 2,830 ) ( 1,019 ) ( 4,142 )

Net loss ( 19,518 ) ( 7,283 ) ( 5,855 ) ( 14,085 )

Comprehensive loss ( 22,053 ) ( 15,742 ) ( 17,976 ) ( 4,210 )

Basic loss from continuing operations per common share $ ( 0.27 ) $ ( 0.11 ) $ ( 0.12 ) $ ( 0.25 )

Basic net loss per common share $ ( 0.47 ) $ ( 0.17 ) $ ( 0.14 ) $ ( 0.35 )

Diluted loss from continuing operations per common share $ ( 0.27 ) $ ( 0.11 ) $ ( 0.12 ) $ ( 0.25 )

Diluted net loss per common share $ ( 0.47 ) $ ( 0.17 ) $ ( 0.14 ) $ ( 0.35 )

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Dismissal of Previous Independent Registered Public Accounting Firm

On May 29, 2020, the Audit Committee of our Board of Directors dismissed PricewaterhouseCoopers LLP (“PwC”) as our independent registered public accounting firm.

The reports of PwC on our consolidated financial statements as of and for the years ended December 31, 2019 and 2018, did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles.

During the years ended December 31, 2019 and 2018, and during the interim period through May 29, 2020, there were (i) no disagreements within the meaning of Item 304(a)(1)(iv) of Regulation S-K between the Company and PwC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, any of which, if not resolved to PwC’s satisfaction, would have caused PwC to make reference thereto in their reports, and (ii) no “reportable events” within the meaning of Item 304(a)(1)(v) of Regulation S-K, except as noted below.

For the year ended December 31, 2019, the material weaknesses in the Company’s internal control over financial reporting previously reported in Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2019, filed on March 16, 2020, related to (a) an ineffective control environment due to a lack of a sufficient complement of personnel with an appropriate level of knowledge, experience and training commensurate with our financial reporting requirements and (b) ineffective design and maintenance of monitoring controls over our Paragon Medical business.

These material weaknesses contributed to additional material weakness in that we (1) did not design and maintain effective internal controls over the accounting for transactions in the revenue and receivables business process within our Paragon Medical business to determine whether the transactions occurred and were complete and accurate, and (2) did not design and maintain effective controls over certain information technology general controls within our Paragon Medical business for information systems that are relevant to the preparation of our financial statements.

Additionally, for the fiscal year ended December 31, 2019, we did not maintain effective control activities at one of our smaller foreign subsidiaries in which certain employees intentionally did not operate the controls related to inventory quantities as designed that resulted in the creation of unsupported physical inventory counts and inventory quantity adjustments.

For the year ended December 31, 2018, the material weakness in the Company’s internal control over financial reporting previously reported in Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2018, filed on March 18, 2019, related to an ineffective control environment due to a lack of a sufficient complement of personnel with an appropriate level of knowledge, experience and training commensurate with our financial reporting requirements.

Appointment of New Independent Registered Public Accounting Firm

On May 29, 2020, the Audit Committee approved the engagement of Grant Thornton LLP (“Grant Thornton”) as our independent registered public accounting firm for the year ending December 31, 2020, effective immediately.

During the Company’s two most recent years ended December 31, 2019 and 2018, and during the interim period through May 29, 2020, neither the Company nor anyone acting on its behalf consulted with Grant Thornton regarding any of the matters described in Items 304(a)(2)(i) and (ii) of Regulation S-K.

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-K

Item 8. Financial Statements and Supplementary Data