What changed in this filing

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Item 1. Financial Statements

2021-05-07 compared with 2020-11-06 · 317 added, 615 removed, 432 unchanged (68% of the section changed)

2 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands, except per share data) 2021 2020

3 unchanged sentences

Depreciation and amortization 11,568 11,357

Restructuring and integration expense, net — — — ( 12 )

Goodwill impairment — 92,942

Other operating expense (income), net ( 5 ) 5,126

Loss from operations ( 1,456 ) ( 1,811 ) ( 116,483 ) ( 7,457 )

Income (loss) from operations 978 ( 103,850 )

Interest expense 2,024 3,807

Loss on extinguishment of debt and write-off of debt issuance costs 2,390 —

Derivative payments on interest rate swap 1,717 —

Loss on interest rate swap 2,033 —

Other expense (income), net ( 122 ) 1,544

Loss from continuing operations before benefit (provision) for income taxes and share of net income from joint venture ( 8,211 ) ( 6,249 ) ( 133,730 ) ( 17,457 )

Benefit (provision) for income taxes 8,715 1,134 7,935 ( 3,694 )

Share of net income from joint venture 1,136 279 1,792 345

Income (loss) from continuing operations 1,640 ( 4,836 ) ( 124,003 ) ( 20,806 )

Income (loss) from discontinued operations, net of tax (Note 2) 20,330 ( 1,019 ) ( 123,966 ) ( 11,850 )

Net income (loss) $ 21,970 $ ( 5,855 ) $ ( 247,969 ) $ ( 32,656 )

Other comprehensive income (loss):

Foreign currency translation gain (loss) $ 6,712 $ ( 11,178 ) $ ( 6,636 ) $ ( 11,354 )

Loss from continuing operations before benefit for income taxes and share of net income (loss) from joint venture ( 7,064 ) ( 109,201 )

Benefit for income taxes 756 1,395

Share of net income (loss) from joint venture 1,395 ( 271 )

Loss from continuing operations ( 4,913 ) ( 108,077 )

Loss from discontinued operations, net of tax (Note 2) — ( 140,114 )

Net loss $ ( 4,913 ) $ ( 248,191 )

Other comprehensive loss:

Foreign currency translation loss ( 3,347 ) ( 14,342 )

Interest rate swap:

Change in fair value, net of tax — ( 11,209 )

Reclassification adjustment for losses included in net income (loss), net of tax 3,148 238 6,838 238

Other comprehensive income (loss) $ 9,881 $ ( 12,121 ) $ ( 12,241 ) $ ( 23,115 )

Comprehensive income (loss) $ 31,851 $ ( 17,976 ) $ ( 260,210 ) $ ( 55,771 )

Basic net income (loss) per common share:

Income (loss) from continuing operations per common share $ ( 0.04 ) $ ( 0.12 ) $ ( 3.16 ) $ ( 0.50 )

Income (loss) from discontinued operations per common share 0.49 ( 0.02 ) ( 2.94 ) ( 0.28 )

Net income (loss) per common share $ 0.45 $ ( 0.14 ) $ ( 6.10 ) $ ( 0.78 )

Reclassification adjustment for losses included in net loss, net of tax 2,851 1,052

Other comprehensive loss $ ( 496 ) $ ( 24,499 )

Comprehensive loss $ ( 5,409 ) $ ( 272,690 )

Basic net loss per common share:

Loss from continuing operations per common share $ ( 0.46 ) $ ( 2.64 )

Loss from discontinued operations per common share — ( 3.32 )

Net loss per common share $ ( 0.46 ) $ ( 5.96 )

Weighted average common shares outstanding 42,672 42,111

Diluted net income (loss) per common share:

Income (loss) from continuing operations per common share $ ( 0.04 ) $ ( 0.12 ) $ ( 3.16 ) $ ( 0.50 )

Income (loss) from discontinued operations per common share 0.49 ( 0.02 ) ( 2.94 ) ( 0.28 )

Net income (loss) per common share $ 0.45 $ ( 0.14 ) $ ( 6.10 ) $ ( 0.78 )

Diluted net loss per common share:

Loss from continuing operations per common share $ ( 0.46 ) $ ( 2.64 )

Loss from discontinued operations per common share — ( 3.32 )

Net loss per common share $ ( 0.46 ) $ ( 5.96 )

Weighted average common shares outstanding 42,672 42,111

1 unchanged sentence

Condensed Consolidated Balance Sheets

(in thousands, except per share data) September 30, 2020 December 31, 2019

(in thousands, except per share data) March 31, 2021 December 31, 2020

Current assets:

3 unchanged sentences

Income tax receivable 8,956 8,800

Current assets held for sale 630,900 117,000

Other current assets 12,431 11,148

2 unchanged sentences

Operating lease right-of-use assets 49,545 50,264

Goodwill — 94,779

Intangible assets, net 99,479 103,065

Investment in joint venture 28,207 26,983

Deferred tax assets 38,026 —

Non-current assets held for sale — 695,054

Other non-current assets 4,532 5,742

7 unchanged sentences

Current portion of operating lease liabilities 4,963 4,797

Current liabilities held for sale 120,832 41,546

Other current liabilities 17,042 31,261

1 unchanged sentence

Deferred tax liabilities 10,326 11,178

Non-current income tax payable — 1,272

Long-term debt, net of current portion 151,551 79,025

Operating lease liabilities, net of current portion 54,780 55,053

Non-current liabilities held for sale — 84,199

Other non-current liabilities 25,976 17,237

1 unchanged sentence

Commitments and contingencies (Note 11)

Series B convertible preferred stock - $ 0.01 par value per share, 100 shares authorized, 100 shares issued and outstanding at December 31, 2019, and September 30, 2020

101,846 93,012

Series D perpetual preferred stock - $ 0.01 par value per share, 5,000 shares authorized, 65 shares issued and outstanding at March 31, 2021

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

Stockholders' equity:

Common stock - $ 0.01 par value per share, 90,000 shares authorized, 42,313 and 42,739 shares issued and outstanding at December 31, 2019, and September 30, 2020, respectively

Common stock - $ 0.01 par value per share, 90,000 shares authorized, 42,686 and 43,049 shares issued and outstanding at December 31, 2020 and March 31, 2021, respectively

Additional paid-in capital 479,341 493,332

Warrants — 1,076

Accumulated deficit ( 210,788 ) ( 205,875 )

4 unchanged sentences

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Three Months Ended September 30, 2020 and 2019

(in thousands) Number

value Additional

capital Warrants Retained earnings (Accumulated

deficit) Accumulated other comprehensive income (loss) Total

Balance, June 30, 2020 42,747 $ 427 $ 498,294 $ 1,076 $ ( 375,222 ) $ ( 66,676 ) $ 57,899

Net income — — — — 21,970 — 21,970

Dividends accrued for preferred stock — — ( 3,139 ) — — — ( 3,139 )

Share-based compensation expense — — 1,435 — — — 1,435

Restricted shares forgiven for taxes ( 8 ) — ( 46 ) — — — ( 46 )

Change in estimate of share-based award vesting — — ( 577 ) — — — ( 577 )

Reclassification of warrants to liabilities (Note 18) — — — ( 1,076 ) — — ( 1,076 )

Change in fair value of interest rate swap, net of tax of $ 6

— — — — — 21 21

Reclassification of interest rate swap settlement to net income, net of tax of $ 952

— — — — — 3,148 3,148

Foreign currency translation gain — — — — — 6,712 6,712

Balance, September 30, 2020 42,739 $ 427 $ 495,967 $ — $ ( 353,252 ) $ ( 56,795 ) $ 86,347

(in thousands) Number

value Additional

capital Retained earnings (Accumulated

deficit) Accumulated other comprehensive income (loss) Total

Balance, June 30, 2019 42,367 $ 424 $ 504,556 $ ( 85,343 ) $ ( 42,308 ) $ 377,329

Net loss — — — ( 5,855 ) — ( 5,855 )

Dividends declared or accrued for common stock — — ( 2,973 ) — — ( 2,973 )

Shares issued for options exercised 5 — 21 — — 21

Share-based compensation expense ( 50 ) ( 1 ) 1,152 — — 1,151

Restricted shares forgiven for taxes ( 25 ) — ( 10 ) — — ( 10 )

Change in estimate of share-based award vesting — — ( 1,240 ) — — ( 1,240 )

Change in fair value of interest rate swap, net of tax of $ 375

— — — — ( 1,181 ) ( 1,181 )

Reclassification of interest rate swap settlement to net loss, net of tax of $ 68

— — — — 238 238

Foreign currency translation loss — — — — ( 11,178 ) ( 11,178 )

Balance, September 30, 2019 42,297 $ 423 $ 501,506 $ ( 91,198 ) $ ( 54,429 ) $ 356,302

See notes to condensed consolidated financial statements (unaudited).

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Nine Months Ended September 30, 2020 and 2019

Three Months Ended March 31, 2021 and 2020

(in thousands) Number

value Additional

capital Warrants Retained earnings (Accumulated

deficit) Accumulated other comprehensive income (loss) Total

capital Accumulated deficit Accumulated other comprehensive income (loss) Total

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

3 unchanged sentences

Restricted shares forgiven for taxes ( 50 ) ( 1 ) ( 344 ) — — ( 345 )

Change in estimate of share-based award vesting — — ( 577 ) — — — ( 577 )

Reclassification of warrants to liabilities (Note 18) — — — ( 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 settlement to net loss, net of tax of $ 2,068

Reclassification of interest rate swap to net loss, net of tax of $ 861

— — — — 2,851 2,851

Foreign currency translation loss — — — — ( 3,347 ) ( 3,347 )

Balance, September 30, 2020 42,739 $ 427 $ 495,967 $ — $ ( 353,252 ) $ ( 56,795 ) $ 86,347

Balance, March 31, 2021 43,049 $ 430 $ 479,341 $ ( 210,788 ) $ ( 34,228 ) $ 234,755

(in thousands) Number

value Additional

capital Retained earnings (Accumulated

deficit) Accumulated other comprehensive income (loss) Total

capital Warrants Accumulated deficit Accumulated other comprehensive income (loss) Total

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

Net loss — — — — ( 248,191 ) — ( 248,191 )

Dividends declared or accrued for common stock — — ( 8,907 ) — — ( 8,907 )

Shares issued for option exercises 5 — 21 — — 21

Dividends accrued for preferred stock — — ( 2,951 ) — — — ( 2,951 )

Share-based compensation expense 452 5 1,291 — — — 1,296

Restricted shares forgiven for taxes ( 8 ) — ( 30 ) — — — ( 30 )

Change in estimate of share-based award vesting — — ( 1,240 ) — — ( 1,240 )

Change in fair value of interest rate swap, net of tax of $ 3,390

3 unchanged sentences

Foreign currency translation loss — — — — — ( 14,342 ) ( 14,342 )

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

Balance, September 30, 2019 42,297 423 501,506 ( 91,198 ) ( 54,429 ) 356,302

Balance, March 31, 2020 42,757 $ 428 $ 499,925 $ 1,076 $ ( 353,474 ) $ ( 69,053 ) $ 78,902

See notes to condensed consolidated financial statements (unaudited).

Condensed Consolidated Statements of Cash Flows

Nine Months Ended

September 30,

Three Months Ended

(in thousands) 2021 2020

8 unchanged sentences

Loss on extinguishment of debt and write-off of debt issuance costs 2,390 —

Share of net income from joint venture, net of cash dividends received ( 1,792 ) ( 345 )

Total derivative loss, net of cash settlements 3,750 —

Share of net income (loss) from joint venture, net of cash dividends received ( 1,395 ) 271

Compensation expense from issuance of share-based awards 886 1,296

10 unchanged sentences

Acquisition of property, plant and equipment ( 5,468 ) ( 11,260 )

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

Proceeds from sale of property, plant, and equipment 11 82

Other — ( 712 )

Cash settlements of interest rate swap ( 15,420 ) —

Net cash used in investing activities ( 20,877 ) ( 11,178 )

1 unchanged sentence

Cash paid for debt issuance costs ( 6,856 ) ( 286 )

Dividends paid — ( 8,879 )

Proceeds from issuance of preferred stock 61,918 —

Redemption of preferred stock ( 122,434 ) —

Proceeds from long-term debt 150,000 60,012

Repayments of long-term debt ( 70,721 ) ( 4,527 )

Proceeds from (repayments of) short-term debt, net ( 849 ) ( 6,086 )

Repayments of short-term debt, net ( 1,090 ) ( 411 )

Other ( 1,189 ) ( 888 )

5 unchanged sentences

_______________________________

(1) Cash and cash equivalents include $ 16.0 million, $ 13.8 million, $ 13.2 million, and $ 10.2 million of cash and cash equivalents that were included in current assets held for sale as of September 30, 2020, December 31, 2019, September 30, 2019, and December 31, 2018, respectively.

(1) Cash and cash equivalents include $ 11.7 million and $ 13.8 million of cash and cash equivalents that were included in current assets of discontinued operations as of March 31, 2020, and December 31, 2019, respectively.

See notes to condensed consolidated financial statements (unaudited).

Notes to Condensed Consolidated Financial Statements

September 30, 2020

March 31, 2021

Amounts in thousands, except per share data

1 unchanged sentence

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 primarily for the aerospace and defense, electrical, automotive, medical, and general industrial markets.

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 automotive, general industrial, electrical, aerospace and defense, and medical markets.

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

Basis of Presentation and Going Concern

The accompanying condensed consolidated financial statements have not been audited, except that the Condensed Consolidated Balance Sheet as of December 31, 2019, was derived from the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Annual Report”), which we filed with the U.S.

Basis of Presentation

The accompanying condensed consolidated financial statements have not been audited.

The Condensed Consolidated Balance Sheet as of December 31, 2020, was derived from the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Annual Report”), which we filed with the U.S.

Securities and Exchange Commission (the “SEC”) on March 15, 2021.

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

Historical periods also reflect revisions that we disclosed in our 2019 Annual Report (see Note 3).

In management’s opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments necessary to fairly state our results of operations for the three and nine months ended September 30, 2020 and 2019;

financial position as of September 30, 2020, and December 31, 2019;

and cash flows for the nine months ended September 30, 2020 and 2019, on a basis consistent with our audited consolidated financial statements other than the adoption of new accounting standards (see Accounting Standards Recently Adopted section below).

financial position as of March 31, 2021, and December 31, 2020;

and cash flows for the three months ended March 31, 2021 and 2020, on a basis consistent with our audited consolidated financial statements other than the adoption of new accounting standards (see Accounting Standards Recently Adopted section below).

These adjustments are of a normal recurring nature and are, in the opinion of management, necessary to state fairly the Company’s financial position and operating results for the interim periods.

2 unchanged sentences

These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and accompanying notes included in the 2020 Annual Report.

The results for the three and nine months ended September 30, 2020, are not necessarily indicative of results for the year ending December 31, 2020, or any other future periods.

The results for the three months ended March 31, 2021, are not necessarily indicative of results for the year ending December 31, 2021, or any other future periods.

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

dollar amounts presented in the tables in these Notes to Condensed 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 have evaluated included 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 our 2019 Annual Report, on December 11, 2019, we issued Series B Convertible Preferred Stock (“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, reduced the total capacity under the Senior Secured Revolver to $ 75.0 million, and extended the due date of 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 (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 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 are 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.

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.

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 Condensed 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 the 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 occurred on October 6, 2020.

The full extent of the effect of the coronavirus (“COVID-19”) pandemic on our customers, our supply chain and our business cannot be reasonably assessed at this time although we expect our full year 2020 results of operations to be adversely affected.

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.

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 financial statements.

Accordingly, we believe that the conditions that raised substantial doubt about our ability to continue as a going concern as disclosed in our Quarterly Report for the period ended June 30, 2020, have been resolved.

Accounting Standards Recently 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 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 adjustment to our financial statements as of January 1, 2020.

Fair Value Disclosures.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

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

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 financial condition, results of operations, or cash flows.

Internal-Use Software.

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software:

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 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 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

Income Taxes.

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.

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.

Adoption methods vary based on the specific items impacted.

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

This standard was effective for us beginning January 1, 2021.

The adoption of ASU 2019-12 did not have a material impact on our consolidated financial statements and related disclosures.

Accounting Standards Not Yet Adopted

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.

2 unchanged sentences

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.

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

Either the full or modified retrospective adoption method is allowed.

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.

Discontinued Operations

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.

See Note 19 for more information about the closing of the transaction.

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.

In October 2020, we closed on the sale of our Life Sciences business under the terms of a Stock Purchase Agreement (the “SPA”) with affiliates of American Securities LLC for $ 753.3 million cash.

The SPA includes a potential earnout payment of up to $ 70 million based on the performance of the Life Sciences business during the year ending December 31, 2022, measured by Adjusted EBITDA targets, as defined by the SPA.

After working capital and other closing adjustments, we received cash proceeds at closing of $ 757.2 million and have recorded a $ 3.9 million payable as of March 31, 2021, and December 31, 2020, for the balance.

Under the terms of a transition services agreement, we provided certain support services after 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 Condensed Consolidated Balance Sheets as of March 31, 2021, and 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 Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

The Condensed 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 condensed consolidated financial statements and the accompanying notes unless otherwise stated.

The Condensed 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.

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

2020 2019 2020 2019

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

The Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for all historical 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 historical periods presented in the condensed consolidated financial statements and the accompanying notes unless otherwise stated.

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

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

Three Months Ended

March 31, 2020

Net sales $ 83,532

3 unchanged sentences

Goodwill impairment 146,757

Other operating expense (income), net 24 ( 94 ) 20 ( 114 )

Income (loss) from operations ( 137 ) 9,225 ( 137,291 ) 22,066

Other operating expense, net 3

Loss from operations ( 141,223 )

Interest expense 13,270

Loss on extinguishment of debt and write-off of debt issuance costs 1,388 — 1,388 2,391

Other expense (income), net ( 234 ) ( 535 ) ( 325 ) 21

Other income, net ( 424 )

Loss from discontinued operations before costs of disposal and benefit for income taxes ( 154,069 )

Benefit for income taxes 14,187

Income (loss) from discontinued operations before costs of disposal 26,415 ( 1,019 ) ( 116,613 ) ( 11,850 )

Loss from discontinued operations before costs of disposal ( 139,882 )

Costs of disposal of discontinued operations (1) ( 259 )

Benefit for income taxes on disposal costs 513 — 603 —

Income (loss) from discontinued operations, net of tax $ 20,330 $ ( 1,019 ) $ ( 123,966 ) $ ( 11,850 )

_______________________________

(1) Represents legal, accounting, and other incremental direct costs related to the sale of the Life Sciences business that were incurred prior to the closing of the sale.

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 10.

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.

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

Benefit for income taxes on costs of disposal 27

Loss from discontinued operations, net of tax $ ( 140,114 )

_______________________________

(1) Represents incremental direct costs related to the sale of the Life Sciences business that were incurred prior to the closing of the sale.

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

The judgments, assumptions, and estimates involved in the goodwill impairment analysis for the Life Sciences reporting unit are consistent with those discussed in Note 5.

Our previous credit facility, which was in place at the time, required us to use proceeds from the sale of the Life Sciences business to prepay a portion of our previous debt.

We paid $ 700 million in the aggregate on our term loans immediately after the transaction closed on October 6, 2020.

The prepayment was applied to debt in accordance with the prepayment provisions of the previous credit agreement which was in place at the time.

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

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

Three Months Ended

March 31, 2020

Interest on debt $ 12,136

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Total interest expense of discontinued operations $ 13,270

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

September 30, 2020 December 31, 2019

Cash and cash equivalents $ 15,986 $ 13,792

Accounts receivable, net 37,465 48,318

Inventories 49,646 51,644

Other current assets 3,042 3,246

Total current assets 106,139 117,000

Property, plant and equipment, net 114,364 118,536

Operating lease right-of-use assets 24,199 20,044

Goodwill 197,353 344,316

Intangible assets, net 188,584 211,847

Other non-current assets 261 311

Total non-current assets 524,761 695,054

Total assets held for sale (1) $ 630,900 $ 812,054

Accounts payable $ 11,362 $ 16,367

Accrued salaries, wages and benefits 15,709 14,844

Income tax payable 218 344

Current portion of operating lease liabilities 2,768 2,364

Other current liabilities 5,962 7,627

Total current liabilities 36,019 41,546

Deferred tax liabilities 55,728 61,338

Operating lease liabilities, net of current portion 22,333 18,405

Other non-current liabilities 6,752 4,456

Total non-current liabilities 84,813 84,199

Total liabilities held for sale (1) $ 120,832 $ 125,745

_______________________________

(1) As of September 30, 2020, all assets and liabilities held for sale are classified as current on the Condensed Consolidated Balance Sheet because they were expected to be sold within twelve months.

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

Nine Months Ended September 30,

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

Three Months Ended

March 31, 2020

Depreciation and amortization $ 11,827

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Amortization of debt issuance costs 1,226

Loss on extinguishment of debt and write-off of debt issuance costs 1,388 2,391

Acquisition of property, plant and equipment 4,084

Right-of-use assets obtained in exchange for new finance lease liabilities 694

Right-of-use assets obtained in exchange for new operating lease liabilities (1) 6,174 115

_______________________________

(1) Includes new leases, renewals, and modifications.

Prior Periods' Financial Statement Revisions

As disclosed in our 2019 Annual Report, we identified various misstatements in 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

These misstatements primarily related to (i) intentional misstatements in the accounting for inventory at one of our smaller foreign subsidiaries and (ii) the tax accounting associated with the 2018 impairment of our joint venture.

We assessed the materiality of the misstatements on prior periods’ financial statements in accordance with SEC Staff Accounting Bulletin (“SAB”) Topic 1.M, Materiality , codified in 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, we revised our previously issued 2018 and 2017 annual consolidated financial statements to correct for these misstatements.

In connection with such revision, we also corrected for other immaterial misstatements.

In connection with the filing of this Quarterly Report, we have revised the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), Changes in Stockholders’ Equity, and Cash Flows for the three and nine months ended September 30, 2019, and the related notes to revise for those misstatements that impacted such period.

The following tables present the effect of the correction of the misstatements and the resulting revision on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) as well as the effect of recasting the prior periods for the Life Sciences discontinued operations (see Note 2).

Three Months Ended September 30, 2019

As Originally Reported Adjustment Discontinued Operations Adjustment As Revised

Cost of sales (exclusive of depreciation and amortization) $ 160,816 $ 258 $ ( 64,420 ) $ 96,654

Income (loss) from operations 7,672 ( 258 ) ( 9,225 ) ( 1,811 )

Loss before (provision) benefit for income taxes and share of net income from joint venture ( 7,159 ) ( 258 ) 1,168 ( 6,249 )

Loss from continuing operations ( 5,597 ) ( 258 ) 1,019 ( 4,836 )

Net loss ( 5,597 ) ( 258 ) — ( 5,855 )

Foreign currency translation loss ( 11,448 ) 270 — ( 11,178 )

Comprehensive loss ( 17,988 ) 12 — ( 17,976 )

Basic loss from continuing operations per common share $ ( 0.13 ) $ ( 0.01 ) $ 0.02 $ ( 0.12 )

Basic net loss per common share $ ( 0.13 ) $ ( 0.01 ) $ — $ ( 0.14 )

Diluted loss from continuing operations per common share $ ( 0.13 ) $ ( 0.01 ) $ 0.02 $ ( 0.12 )

Diluted net loss per common share $ ( 0.13 ) $ ( 0.01 ) $ — $ ( 0.14 )

Nine Months Ended September 30, 2019

As Originally Reported Adjustment Discontinued Operations Adjustment As Revised

Cost of sales (exclusive of depreciation and amortization) $ 485,598 $ 1,762 $ ( 186,694 ) $ 300,666

Income (loss) from operations 16,371 ( 1,762 ) ( 22,066 ) ( 7,457 )

Loss before provision for income taxes and share of net income from joint venture ( 29,704 ) ( 1,762 ) 14,009 ( 17,457 )

Loss from continuing operations ( 30,894 ) ( 1,762 ) 11,850 ( 20,806 )

Net loss ( 30,894 ) ( 1,762 ) — ( 32,656 )

Foreign currency translation loss ( 11,620 ) 266 — ( 11,354 )

Comprehensive loss ( 54,275 ) ( 1,496 ) — ( 55,771 )

Basic loss from continuing operations per common share $ ( 0.74 ) $ ( 0.04 ) $ 0.28 $ ( 0.50 )

Basic net loss per common share $ ( 0.74 ) $ ( 0.04 ) $ — $ ( 0.78 )

Diluted loss from continuing operations per common share $ ( 0.74 ) $ ( 0.04 ) $ 0.28 $ ( 0.50 )

Diluted net loss per common share $ ( 0.74 ) $ ( 0.04 ) $ — $ ( 0.78 )

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

As Originally Reported Adjustment As Revised

As of and for the three months ended September 30, 2019

Additional paid-in capital $ 513,268 $ ( 11,762 ) $ 501,506

Net loss ( 5,597 ) ( 258 ) ( 5,855 )

Accumulated deficit ( 98,888 ) 7,690 ( 91,198 )

Foreign currency translation loss ( 11,448 ) 270 ( 11,178 )

Accumulated other comprehensive loss ( 55,006 ) 577 ( 54,429 )

Total stockholders' equity 359,797 ( 3,495 ) 356,302

As of and for the nine months ended September 30, 2019

Additional paid-in capital $ 513,268 $ ( 11,762 ) $ 501,506

Net loss ( 30,894 ) ( 1,762 ) ( 32,656 )

Accumulated deficit ( 98,888 ) 7,690 ( 91,198 )

Foreign currency translation loss ( 11,620 ) 266 ( 11,354 )

Accumulated other comprehensive loss ( 55,006 ) 577 ( 54,429 )

Total stockholders' equity 359,797 ( 3,495 ) 356,302

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

Nine Months Ended September 30, 2019

As Originally Reported Adjustment As Revised

Net loss $ ( 30,894 ) $ ( 1,762 ) $ ( 32,656 )

Changes in operating assets and liabilities, net of acquisitions:

Inventories ( 5,794 ) 969 ( 4,825 )

Other 11,078 793 11,871

Segment Information

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

• Mobile Solutions, which is focused on growth in the general industrial and automotive end markets;

• Power Solutions, which is focused on growth in the electrical and aerospace and defense end markets;

• Life Sciences, which is focused on growth in the medical end market, primarily in the orthopaedics and medical/surgical end markets and was sold on October 6, 2020.

These divisions have historically been considered our three 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 reviews discrete financial information for purposes of allocating resources and assessing performance.

See Note 2 and Note 19 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 condensed consolidated financial statements and accompanying notes unless otherwise stated.

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

Our business is aggregated into the following two reportable segments:

• Mobile Solutions, which is focused on growth in the automotive and general industrial end markets;

• Power Solutions, which is focused on growth in the electrical, general industrial, automotive, and aerospace and defense, and medical end markets.

These divisions are considered our two 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 reviews discrete financial information for purposes of allocating resources and assessing performance.

Historically, we had a third operating segment, Life Sciences, that was focused on growth in the medical end market.

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 the three months ended March 31, 2020, and therefore are not included in the tabular presentation below.

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

2 unchanged sentences

Consolidations Total

Three Months Ended September 30, 2020

Net sales $ 70,371 $ 43,415 $ ( 25 ) (a) $ 113,761

Income (loss) from operations 4,953 1,143 ( 7,552 ) $ ( 1,456 )

Interest expense ( 6,873 )

Loss from continuing operations before income taxes and share of net income from joint venture $ ( 8,211 )

Three Months Ended September 30, 2019

Three Months Ended March 31, 2021

Net sales $ 77,776 $ 49,075 $ ( 47 ) (a) $ 126,804

3 unchanged sentences

Loss from continuing operations before income taxes and share of net income from joint venture $ ( 7,064 )

Solutions Power

Solutions Corporate

Consolidations Total

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2020

Net sales $ 69,884 $ 46,401 $ ( 72 ) (a) $ 116,213

3 unchanged sentences

Other ( 1,544 )

Loss from continuing operations before income taxes and share of net income from joint venture $ ( 133,730 )

Nine Months Ended September 30, 2019

Net sales $ 230,590 $ 148,480 $ ( 232 ) (a) $ 378,838

Income (loss) from operations 10,118 12,857 ( 30,432 ) $ ( 7,457 )

Interest expense ( 8,829 )

Other ( 1,171 )

Loss from continuing operations before income taxes and share of net income from joint venture $ ( 17,457 )

Loss from continuing operations before income taxes and share of net loss from joint venture $ ( 109,201 )

_______________________________

(a) Includes elimination of intersegment transactions occurring during the ordinary course of business.

The following table presents total assets by reportable segment as of September 30, 2020, and December 31, 2019.

September 30, 2020 December 31, 2019

Mobile Solutions $ 369,939 $ 373,256

Power Solutions 199,906 310,545

Corporate and Consolidations 746,364 858,183

Total $ 1,316,209 $ 1,541,984

As of September 30, 2020, and December 31, 2019, one customer represented 12 % and 10 %, respectively, of consolidated accounts receivable from continuing operations.

As of March 31, 2021, and December 31, 2020, one customer represented 10 % and 11 %, respectively, of consolidated accounts receivable.

Amounts due from this customer are primarily related to Mobile Solutions.

Inventories are comprised of the following amounts:

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Raw materials $ 23,605 $ 22,589

2 unchanged sentences

Total inventories $ 67,531 $ 62,517

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

Balance as of December 31, 2019 $ 94,779

Currency impact and other ( 1,837 )

Impairments ( 92,942 )

Balance as of September 30, 2020 $ —

As of December 31, 2019, all goodwill related to the Power Solutions reportable segment, and no goodwill was recorded in the Mobile Solutions reportable segment.

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.

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 the 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.

4 unchanged sentences

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

As of September 30, 2020, there is no remaining goodwill balance.

As of March 31, 2021, and December 31, 2020, there was no remaining goodwill balance.

Intangible Assets, Net

4 unchanged sentences

Amortization ( 838 ) ( 2,748 ) ( 3,586 )

Balance as of September 30, 2020 $ 29,900 $ 76,752 $ 106,652

Balance as of March 31, 2021 $ 28,224 $ 71,255 $ 99,479

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

As of March 31, 2020, the goodwill impairment testing trigger caused us to test intangible assets in all of our reportable segments for impairment as well, and based on our analysis no impairment charge was deemed necessary.

As of March 31, 2021, and December 31, 2020, there were no indicators of impairment.

Investment in Joint Venture

5 unchanged sentences

Share of earnings 1,395

Foreign currency translation gain 600

Balance as of September 30, 2020 $ 24,147

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.

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.

We recognized sales to the JV of less than $ 0.1 million and $ 0.1 million during the three and nine months ended September 30, 2020, respectively, and less than $ 0.1 million and $ 0.1 million during the three and nine months ended September 30, 2019, respectively.

Foreign currency translation loss ( 171 )

Balance as of March 31, 2021 $ 28,207

Our effective tax rate for continuing operations was 10.7 % and 1.3 % for the three months ended March 31, 2021 and 2020, respectively.

The effective tax rate for the three months ended March 31, 2021, differs from the U.S.

federal statutory tax rate of 21 % primarily due to the accrual of tax on non-permanently reinvested unremitted earnings of foreign subsidiaries and by limitation on the amount of tax benefit recorded for loss carryforwards in certain jurisdictions where we believe it is more likely than not a portion of the future tax benefit may not be realized.

In addition, the effective tax rate was unfavorably impacted by U.S.

tax on the earnings of foreign subsidiaries under the global intangible low-taxed income (“GILTI”) regime.

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 financial statements and has been accounted for in the benefit/provision for income taxes for the nine months ended September 30, 2020.

Our effective tax rate for continuing operations was 106.1 % and 5.9 % for the three and nine months ended September 30, 2020, respectively, and 18.2 % and ( 21.2 )% for the three and nine months ended September 30, 2019, respectively.

The 2020 year-to-date effective tax rate for continuing operations differs from the U.S.

federal statutory tax rate of 21 % primarily due to the impact of the impairment of nondeductible goodwill which is treated as a permanent difference.

The year-to-date effective tax rate was also impacted by the CARES Act, the anticipated withholding taxes which would be due upon repatriation of the unremitted earnings of foreign subsidiaries, and the impact of losses in jurisdictions where it is more likely than not that a tax benefit will not be realized.

The effective tax rate for the three months ended September 30, 2020, was primarily impacted by the effect of the impairment of nondeductible goodwill on the estimated annual effective tax rate and a change in the estimated impact of the CARES Act.

The 2019 effective tax rate 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 effective tax rate for the three months ended September 30, 2019, was primarily impacted by changes in the full year forecast book income (loss) within each jurisdiction in which we operate.

During the three months ended September 30, 2020, we realized a tax benefit in discontinued operations related to estimated tax in excess of book outside basis in a subsidiary held for sale.

The related deferred tax asset is not included in current assets held for sale given it will be retained and settled by NN, Inc.

Collectively, our credit facility is comprised of a term loan with a face amount of $ 545.0 million, maturing on October 19, 2022 (the “Senior Secured Term Loan”);

a term loan with a face amount of $ 300.0 million, maturing on October 19, 2022 (the “Incremental Term Loan”);

and a revolving line of credit with a face amount of $ 75.0 million, maturing on July 20, 2022 (the “Senior Secured Revolver”).

The credit facility is collateralized by all of our assets.

The following table presents debt balances as of September 30, 2020, and December 31, 2019.

September 30, 2020 December 31, 2019

The provisions of the legislation had a significant impact on the effective tax rate and income tax receivable of the Company for the three months ended March 31, 2020.

Under the CARES Act, NOLs arising in tax years beginning after December 31, 2017, were carried back to preceding tax years when the federal tax rate was 35% rather than the currently enacted 21%.

The effective tax rate for the three months ended March 31, 2020, was also adversely impacted by the non-deductible goodwill impairment recorded in that period, partially offset by impacts from the CARES Act.

On March 22, 2021, we entered into a new $ 150.0 million term loan facility (the “Term Loan Facility”) and a new $ 50.0 million asset backed credit facility (the “ABL Facility”).

The proceeds from the Term Loan Facility were used to prepay the amounts outstanding on our previous term loans.

The previous credit facility was terminated and consisted of a Senior Secured Term Loan, Incremental Term Loan, and Senior Secured Revolver.

No amounts were outstanding on the Senior Secured Revolver at the time of termination.

The following table presents debt balances as of March 31, 2021, and December 31, 2020.

March 31, 2021 December 31, 2020

Term Loan Facility $ 150,000 $ —

Senior Secured Term Loan — 47,728

Incremental Term Loan — 22,716

Senior Secured Revolver 59,000 —

International lines of credit and other loans 12,547 14,418

5 unchanged sentences

_______________________________

(1) Excludes $ 1.0 million and $ 0.2 million of equipment loans directly attributable to the Life Sciences business which have been reclassified to liabilities held for sale as of September 30, 2020, and December 31, 2019, respectively.

(2) As of September 30, 2020, includes $ 474.3 million of Senior Secured Term Loan principal and $ 225.7 million of Incremental Term Loan principal that is classified as current because of management’s expectation that proceeds from the liquidation of assets held for sale will be required to retire the obligation within twelve months as required by the credit agreement (see Note 2).

Also includes $ 9.0 million of outstanding borrowings on the Senior Secured Revolver as of September 30, 2020, which represents the excess over the $ 50.0 million available capacity that will be in effect twelve months after the balance sheet date.

(3) In addition to this amount, costs of $ 2.1 million and $ 3.0 million related to the Senior Secured Revolver are recorded in other non-current assets as of September 30, 2020, and December 31, 2019, respectively.

We capitalized interest costs of less than $ 0.1 million and $ 0.3 million in the three months ended September 30, 2020 and 2019, respectively, and $ 0.2 million and $ 1.2 million in the nine months ended September 30, 2020 and 2019, 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.

(1) In addition to this amount, costs of $ 0.8 million related to the ABL Facility are recorded in other non-current assets as of March 31, 2021, and $ 1.8 million related to the Senior Secured Revolver are recorded in other non-current assets as of December 31, 2020.

Term Loan Facility

Outstanding borrowings under the Term Loan Facility bear interest at either 1) one-month LIBOR (subject to a 1.000 % floor) plus an applicable margin of 6.875 % or 2) the greater of various benchmark rates plus an applicable margin of 5.875 %.

At March 31, 2021, the Term Loan Facility bore interest based on one-month LIBOR at 7.875 %.

The Term Loan Facility requires quarterly principal payments of $ 0.4 million with the remaining unpaid principal amount due on the final maturity date of September 22, 2026.

The Term Loan Facility is collateralized by all of our assets.

The Term Loan Facility has a first lien on all assets other than accounts receivable and inventory and has a second lien on accounts receivable and inventory.

We were in compliance with all requirements under the Term Loan Facility as of March 31, 2021.

The Term Loan Facility was issued at a $ 3.8 million discount.

We capitalized a total of $ 2.4 million in new debt issuance costs related to the Term Loan Facility.

Debt issuance costs and original issue discount related to the Term Loan Facility are recorded as a direct reduction to the carrying amount of the associated long-term debt and amortized over the term of the debt.

The ABL Facility provides for a senior secured revolving credit facility in the amount of $ 50.0 million, of which $ 30.0 million is available in the form of letters of credit and $ 5.0 million is available for the issuance of short-term swingline loans.

The availability of credit under the ABL Facility is limited by a borrowing base calculation derived from accounts receivable and inventory held in the United States.

Outstanding borrowings under the ABL Facility bear interest on a variable rate structure plus an interest rate spread that is based on the average amount of aggregate revolving commitment available.

The variable borrowing rate is either 1) LIBOR plus an applicable margin of 1.75 % or 2.00 %, depending on availability, or 2) the greater of the federal funds rate or prime, plus an applicable margin of 0.75 % or 1.00 %, depending on availability.

We may elect whether to use one-month, three-month, or six-month LIBOR, subject to a 0.50 % floor.

Interest payments are due monthly on borrowings that utilize one-month LIBOR and quarterly on borrowings that utilize three-month or six-month LIBOR.

At March 31, 2021, using one-month LIBOR plus a 1.75 % spread, the weighted average interest rate on outstanding borrowings under the ABL Facility would have been 2.25 % if there had been any balance outstanding.

We pay a commitment fee of 0.375 % for unused capacity under the ABL Facility and a 0.125 % fee on the amount of letters of credit outstanding.

The final maturity date of the ABL Facility is March 22, 2026.

We had no outstanding borrowings under the ABL Facility at March 31, 2021.

Total capacity under the ABL Facility was $ 47.3 million as of March 31, 2021, with $ 32.9 million available for future borrowings after reductions for outstanding letters of credit as of March 31, 2021.

The ABL Facility has a first lien on accounts receivable and inventory.

We were in compliance with all requirements under the ABL Facility as of March 31, 2021.

We capitalized a total of $ 0.8 million in new debt issuance costs related to the ABL Facility.

Costs related to the ABL Facility are recorded in other non-current assets and amortized over the term of the agreement.

Senior Secured Term Loan

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 September 30, 2020, the Senior Secured Term Loan bore interest at 6.50 %.

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

During 2021 until termination, 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 of 5.75 %.

At September 30, 2020, the Incremental Term Loan bore interest of 5.90 %.

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

During 2021 until termination, the Incremental Term Loan bore interest at 5.90 %.

Senior Secured Revolver

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 %.

At September 30, 2020, the weighted average interest rate on outstanding borrowings under the Senior Secured Revolver was 4.11 %.

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

We had $ 59.0 million outstanding under the Senior Secured Revolver at September 30, 2020.

Total capacity under the Senior Secured Revolver was $ 75.0 million as of September 30, 2020, with $ 1.4 million available for future borrowings after reductions for outstanding letters of credit and outstanding borrowings as of September 30, 2020.

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 are required to maintain minimum liquidity levels, provide certain financial

and other information, and take certain other action as specified in the amendment.

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 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 requirements under our credit facility as of September 30, 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.

Additionally, $ 1.5 million of unamortized debt issuance costs were written off in the nine months ended September 30, 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.

Outstanding borrowings under the Senior Secured Revolver bore 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 had no outstanding borrowings under the Senior Secured Revolver during 2021.

We incurred a commitment fee of 0.50 % for unused capacity under the Senior Secured Revolver until it was terminated.

Debt Issuance Costs

We recognized a $ 2.4 million loss on extinguishment for unamortized debt issuance costs that were written off in the three months ended March 31, 2021, in connection with the termination of our previous credit facility.

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 %.

A portion of the proceeds from the Term Loan Facility was used to settle and terminate our fixed-rate interest rate swap agreement with a cash payment of $ 13.7 million.

Refer to Note 17 for further discussion of the interest rate swap agreement.

The following table contains supplemental cash flow information related to leases of continuing operations.

Nine Months Ended

September 30,

Three Months Ended

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from finance leases $ 127 $ 164

Operating cash flows from operating leases 10,739 10,553

Financing cash flows from finance leases 1,203 2,435

Operating cash flows used in finance leases $ 57 $ 61

Operating cash flows used in operating leases 4,103 3,348

Financing cash flows used in finance leases 846 580

Right-of-use assets obtained in exchange for new finance lease liabilities 60 710

2 unchanged sentences

(1) Includes new leases, renewals, and modifications.

As disclosed in our 2019 Annual Report, 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.

As disclosed in our 2020 Annual Report, we amended the lease of our corporate headquarters building in March 2020 to exit over half of the previously leased space and reduce annual base rent payments.

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 (income), net,” on the Condensed 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 (income), 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 are being deferred over a period ranging from April 2020 to December 2020 and will be 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 Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020, was $ 0.6 million in cash savings which includes $ 0.4 million related to continuing operations.

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 (income), net.”

Commitments and Contingencies

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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 processes.

Autocam Brazil filed an administrative defense with the Brazilian tax authority arguing, among other matters, that it should qualify for an ICMS tax credit, contending that the intermediary materials are directly related to the manufacturing process.

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.

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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 September 30, 2020.

Securities Offering Matter

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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 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.

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Preferred Stock and Stockholders' Equity

Series D Perpetual Preferred Stock

On March 22, 2021, we completed a private placement of 65 thousand shares of newly designated Series D Perpetual Preferred Stock, with a par value of $ 0.01 per share (the “Series D Preferred Stock”) at a price of $ 1,000 per share, together with detachable warrants (the “2021 Warrants”) to purchase up to 1.9 million shares of our common stock at an exercise price of $ 0.01 per share.

The Series D Preferred Stock has a liquidation preference of $ 1,000 per share and is redeemable at our option in cash, subject to the applicable redemption premium.

Series D Preferred Stock shares earn cash dividends at a rate of 10.0 % per year, payable quarterly in arrears, accruing whether or not earned or declared.

If no cash dividend is paid, then the

liquidation preference per share effective on the dividend date increases by 12.0 % per year.

On March 22, 2026, the cash dividend rate and in-kind dividend rate increase by 2.5 % per year.

Cash dividends are required beginning on September 30, 2027.

The Series D Preferred Stock is classified as mezzanine equity, between liabilities and stockholders’ equity, because certain features of the Series D Preferred Stock could require redemption of the Series D Preferred Stock upon a change of control event that is considered not solely within our control.

For initial recognition, the Series D Preferred Stock was recognized at a discounted value, net of issuance costs and allocation to warrants and a bifurcated embedded derivative.

The aggregate discount is amortized as a deemed dividend through March 22, 2026, which is the date the dividend rate begins to increase by 2.5 % per year.

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, certain features of the Series D Preferred Stock were bifurcated and accounted for as derivatives separately.

Note 17 discusses the accounting for these features.

As of March 31, 2021, the carrying value of the Series D Preferred Stock shares was $ 46.9 million which included $ 0.2 million of accumulated unpaid and deemed dividends.

The following table presents the change in the Series D Preferred Stock carrying value during the three months ended March 31, 2021.

Three Months Ended March 31, 2021

Beginning balance $ —

Proceeds from issuance of shares, net of issuance costs 61,793

Fair value of 2021 Warrants issued ( 14,839 )

Recognition of bifurcated embedded derivative ( 282 )

Accrual of in-kind dividends 168

Amortization 18

Ending balance $ 46,858

Net cash proceeds of $ 61.8 million from the issuance of the Series D Preferred Stock, along with part of the proceeds from the Term Loan Credit Facility, were used to redeem all of the outstanding shares of the Company’s Series B Convertible Preferred Stock (the “Series B Preferred Stock”).

Series B Convertible Preferred Stock

Preferred Stock has a liquidation preference of $ 1,000 per share;

is redeemable at our option in cash (or, under certain circumstances, in stock), subject to the applicable redemption premium;

is convertible into a variable number of common shares on certain terms and conditions on or after March 31, 2023;

and is subject to certain other rights and obligations.

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 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 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.

The Series B Preferred Stock had a liquidation preference of $ 1,000 per share and was redeemable in cash at our option, subject to the applicable redemption premium.

Series B Preferred Stock shares earned cumulative dividends at a rate of 10.625 % per year, and accrued whether or not earned or declared.

The Series B Preferred Stock was recognized at a discounted value, net of issuance costs and allocation to warrants and bifurcated embedded derivatives.

The aggregate discount was amortized as a deemed dividend through December 31, 2023, which is the date the holders had 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).

As of September 30, 2020, the carrying value of the Preferred Stock shares was $ 101.8 million which included $ 9.1 million of accumulated unpaid and deemed dividends.

The following table presents the change in the Preferred Stock carrying value during the nine months ended September 30, 2020.

Nine Months Ended September 30, 2020

At redemption on March 22, 2021, the carrying value of the Series B Preferred Stock shares included $ 14.3 million of accumulated unpaid and deemed dividends.

The following table presents the change in the Series B Preferred Stock carrying value during the three months ended March 31, 2021.

Three Months Ended

March 31, 2021

Beginning balance $ 105,086

Accrual of in-kind dividends 14,008

Amortization and other 604

Amortization 335

Redemption ( 119,429 )

Ending balance $ —

1 unchanged sentence

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.

The rights expired 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.

Three Months Ended September 30, 2020

The company provides disaggregated revenue by geographical region and customer industry.

Three Months Ended March 31, 2021

Solutions Power

9 unchanged sentences

Total net sales $ 77,776 $ 49,075 $ ( 47 ) $ 126,804

Three Months Ended September 30, 2019

Three Months Ended March 31, 2020

Solutions Power

9 unchanged sentences

Total net sales $ 69,884 $ 46,401 $ ( 72 ) $ 116,213

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

Solutions Power

1 unchanged sentence

Eliminations Total

United States and Puerto Rico $ 94,482 $ 104,455 $ ( 93 ) $ 198,844

China 31,203 3,989 — 35,192

Brazil 17,815 446 — 18,261

Mexico 11,746 9,501 — 21,247

Germany 4,401 261 — 4,662

Poland 3,441 11 — 3,452

Automotive $ 50,144 $ 13,460 $ 63,604

General Industrial 24,310 13,710 38,020

Electrical — 15,182 15,182

Other 3,322 6,723 ( 47 ) 9,998

Total net sales $ 77,776 $ 49,075 $ ( 47 ) $ 126,804

Nine Months Ended September 30, 2019

Three Months Ended March 31, 2020

Solutions Power

1 unchanged sentence

Eliminations Total

United States and Puerto Rico $ 129,116 $ 120,445 $ ( 232 ) $ 249,329

China 27,580 5,306 — 32,886

Brazil 27,432 221 — 27,653

Mexico 15,144 10,776 — 25,920

Germany 4,490 54 — 4,544

Poland 4,868 14 — 4,882

Automotive $ 49,074 $ 12,364 $ 61,438

General Industrial 17,979 12,543 30,522

Electrical — 13,861 13,861

Other 2,831 7,633 ( 72 ) 10,392

Total net sales $ 69,884 $ 46,401 $ ( 72 ) $ 116,213

Deferred Revenue

The following table provides information about contract liabilities from contracts with customers.

Balance at January 1, 2020 $ 797

Balance at September 30, 2020 933

Revenue recognized during the nine months ended September 30, 2020, from amounts included in deferred revenue at the beginning of the period for performance obligations satisfied or partially satisfied during the period, was $ 0.3 million.

Deferred revenue is reported in the “Other current liabilities” line on the Condensed Consolidated Balance Sheets.

Transaction Price Allocated to Future Performance Obligations

We are required to disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of September 30, 2020, unless our contracts meet one of the practical expedients.

We are required to disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of March 31, 2021, unless our contracts meet one of the practical expedients.

Our contracts met the practical expedient for a performance obligation that is part of a contract that has an original expected duration of one year or less.

Sales Concentration

We recognized sales from a single customer of $ 12.2 million, or 10 % of consolidated net sales, during the three months ended September 30, 2019.

We recognized sales from this customer of $ 39.0 million, or 10 % of consolidated net sales, during the nine months ended September 30, 2019.

Revenues from this customer are in our Mobile Solutions segment and were less than 10 % of consolidated net sales, during the nine months ended September 30, 2020.

We recognized sales from a single customer of $ 13.1 million, or 10 % of consolidated net sales, during the three months ended March 31, 2021.

We recognized sales from another customer of $ 11.1 million, or 10 % of consolidated net sales, during the three months ended March 31, 2020.

Revenues from these customers are primarily in our Mobile Solutions segment.

Share-Based Compensation

Share-based compensation cost is recognized in the “Selling, general and administrative expense” line in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) except for $( 0.2 ) million and $ 0.1 million, attributable to discontinued operations for the three months ended September 30, 2020 and 2019, respectively, and $ 0.2 million and $ 0.3 million attributable to discontinued operations for the nine months ended September 30, 2020 and 2019, respectively.

Share-based compensation cost is recognized in the “Selling, general, and administrative expense” line in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) except for $ 0.2 million, attributable to discontinued operations for the three months ended March 31, 2020.

The following table lists the components of share-based compensation expense by type of award.

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Stock options $ 89 $ 181

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Performance share units 249 223

Change in estimate of share-based award vesting ( 577 ) ( 1,275 ) ( 577 ) ( 1,275 )

Share-based compensation expense $ 886 $ 1,296

Stock Options

During the nine months ended September 30, 2020, we granted options to purchase 158,700 shares to certain key employees.

The weighted average grant date fair value of the options granted during the nine months ended September 30, 2020, was $ 4.76 per share.

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 2020.

Expected term 6 years

Risk free interest rate 1.42 %

Dividend yield — %

Expected volatility 52.80 %

The expected term is derived from using the simplified method of determining stock option terms as described under SAB Topic 14, Share-based payment .

The simplified method was used because sufficient historical stock option exercise experience was not available, primarily due to the transformation of the management structure over the past several years.

The average risk-free interest rate is derived from the United States Department of Treasury published interest rates of daily yield curves for the same time period as the expected term.

The expected dividend yield 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 volatility rate is derived by a mathematical formula utilizing daily closing price data.

The following table presents stock option activity for the nine months ended September 30, 2020.

The following table presents stock option activity for the three months ended March 31, 2021.

Number of Options

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Outstanding at January 1, 2021 871 $ 12.41

Granted 159 9.44

Forfeited or expired ( 24 ) 13.41

Outstanding at September 30, 2020 874 $ 12.43 5.5 years $ — (1)

Exercisable at September 30, 2020 589 $ 13.85 3.8 years $ — (1)

Outstanding at March 31, 2021 847 $ 12.38 3.7 years $ — (1)

Exercisable at March 31, 2021 751 $ 12.83 3.0 years $ — (1)

_______________________________

(1) The aggregate intrinsic value is the sum of intrinsic values for each exercisable individual option grant.

The intrinsic value is the amount by which the closing market price of our stock at September 30, 2020, was greater than the exercise price of any individual option grant.

The intrinsic value is the amount by which the closing market price of our stock at March 31, 2021, was greater than the exercise price of any individual option grant.

Restricted Stock

During the nine months ended September 30, 2020, we granted 460,255 shares of restricted stock to non-executive directors, officers and certain other key employees.

The shares of restricted stock granted during the nine months ended September 30, 2020, vest pro-rata generally over three years for employees and over one year for non-executive directors and certain key employees.

During the three months ended March 31, 2021, we granted 425 thousand shares of restricted stock to non-executive directors, officers and certain other key employees.

The shares of restricted stock granted during the three months ended March 31, 2021, vest pro-rata generally over three years for employees and over one year for non-executive directors.

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 value of restricted stock granted in the nine months ended September 30, 2020, was $ 9.35 per share.

Total grant-date fair value of restricted stock that vested in the nine months ended September 30, 2020, was $ 1.2 million.

The following table presents the status of unvested restricted stock awards as of September 30, 2020, and changes during the nine months then ended.

The weighted average grant date fair value of restricted stock granted in the three months ended March 31, 2021, was $ 6.79 per share.

Total grant date fair value of restricted stock that vested in the three months ended March 31, 2021, was $ 2.7 million.

The following table presents the status of unvested restricted stock awards as of March 31, 2021, and changes during the three months then ended.

(in thousands) Weighted

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Forfeited ( 12 ) 7.76

Unvested at September 30, 2020 519 $ 9.28

Unvested at March 31, 2021 514 $ 7.24

Performance Share Units

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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.

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.

No dividends will be paid on outstanding PSUs during the performance period;

however, dividend equivalents will be paid based on the number of shares of common stock that are ultimately earned at the end of the performance periods.

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 2020.

With respect to the TSR and ROIC 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.” 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 or modified in 2021.

Threshold Performance

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2021 grants 6.3 % 7.0 % 8.6 %

2020 grants (1) 6.7 % 7.9 % 8.7 %

_______________________________

(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.

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 .

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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.

The following table presents the status of unvested PSUs as of September 30, 2020, and changes during the nine months then ended.

The following table presents the status of unvested PSUs as of March 31, 2021, and changes during the three months then ended.

Nonvested TSR Awards Nonvested ROIC Awards

4 unchanged sentences

Granted 142 8.58 172 7.20

Forfeited ( 19 ) 11.43 ( 21 ) 12.88

Nonvested at September 30, 2020 185 $ 11.55 215 $ 10.04

Nonvested at March 31, 2021 280 $ 9.56 332 $ 8.13

Accumulated Other Comprehensive Income

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Foreign Currency Translation Interest rate swap Income taxes (1) Total

Balance at June 30, 2020 $ ( 48,507 ) $ ( 23,662 ) $ 5,493 $ ( 66,676 )

Other comprehensive income (loss) before reclassifications 6,712 27 ( 6 ) 6,733

Amounts reclassified from AOCI to interest expense (2) — 4,100 ( 952 ) 3,148

Net current-period other comprehensive income (loss) 6,712 4,127 ( 958 ) 9,881

Balance at September 30, 2020 $ ( 41,795 ) $ ( 19,535 ) $ 4,535 $ ( 56,795 )

Balance at June 30, 2019 $ ( 31,490 ) $ ( 13,915 ) $ 3,097 $ ( 42,308 )

Other comprehensive income (loss) before reclassifications ( 11,178 ) ( 1,556 ) 375 ( 12,359 )

Amounts reclassified from AOCI to interest expense (2) — 306 ( 68 ) 238

Net current-period other comprehensive income (loss) ( 11,178 ) ( 1,250 ) 307 ( 12,121 )

Balance at September 30, 2019 $ ( 42,668 ) $ ( 15,165 ) $ 3,404 $ ( 54,429 )

Foreign Currency Translation Interest rate swap Income taxes (1) Total

Balance at December 31, 2020 $ ( 30,881 ) $ ( 3,712 ) $ 861 $ ( 33,732 )

Other comprehensive income (loss) before reclassifications ( 3,347 ) — — ( 3,347 )

Amounts reclassified from AOCI to interest expense (2) — 8,906 ( 2,068 ) 6,838

Net current-period other comprehensive income (loss) ( 6,636 ) ( 7,301 ) 1,696 ( 12,241 )

Balance at September 30, 2020 $ ( 41,795 ) $ ( 19,535 ) $ 4,535 $ ( 56,795 )

Amounts reclassified from AOCI to loss on interest rate swap (3) — 3,712 ( 861 ) 2,851

Net other comprehensive income (loss) ( 3,347 ) 3,712 ( 861 ) ( 496 )

Balance at March 31, 2021 $ ( 34,228 ) $ — $ — $ ( 34,228 )

Balance at December 31, 2019 $ ( 35,159 ) $ ( 12,234 ) $ 2,839 $ ( 44,554 )

1 unchanged sentence

Amounts reclassified from AOCI to interest expense (2) — 1,370 ( 318 ) 1,052

Net current-period other comprehensive income (loss) ( 11,354 ) ( 15,165 ) 3,404 ( 23,115 )

Balance at September 30, 2019 $ ( 42,668 ) $ ( 15,165 ) $ 3,404 $ ( 54,429 )

Net other comprehensive income (loss) ( 14,342 ) ( 13,229 ) 3,072 ( 24,499 )

Balance at March 31, 2020 $ ( 49,501 ) $ ( 25,463 ) $ 5,911 $ ( 69,053 )

_______________________

(1) Income tax effect of changes in interest rate swap.

(2) Represents settlements on the 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.

Net Income (Loss) Per Common Share

In accordance with ASC 260, Earnings Per Share, a company that has participating securities (for example, our Preferred Stock) is required to utilize the two-class method for calculating earnings per share (“EPS”) unless the treasury stock method results in lower EPS.

In accordance with ASC 260, Earnings Per Share, a company that has participating securities is required to utilize the two-class method for calculating earnings per share (“EPS”) unless the treasury stock method results in lower EPS.

The two-class method is an allocation of earnings between the holders of common stock and a company’s participating securities.

Basic EPS is calculated by dividing income or loss attributable to common stockholders by the weighted average number of shares of common stock outstanding.

To calculate diluted EPS, basic EPS is further adjusted to include the effect of potentially dilutive stock options, warrants, and Preferred Stock.

The following table summarizes the computation of basic and diluted net income (loss) per common share.

To calculate diluted EPS, basic EPS is further adjusted to include the effect of potentially dilutive stock options, warrants, and convertible preferred stock.

The following table summarizes the computation of basic and diluted net loss per common share.

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Income (loss) from continuing operations $ 1,640 $ ( 4,836 ) $ ( 124,003 ) $ ( 20,806 )

Loss from continuing operations $ ( 4,913 ) $ ( 108,077 )

Preferred stock cumulative dividends and deemed dividends ( 14,529 ) ( 2,951 )

Numerator for basic and diluted income (loss) from continuing operations per common share (1) ( 1,499 ) ( 4,836 ) ( 133,136 ) ( 20,806 )

Income (loss) from discontinued operations, net of tax (Note 2) 20,330 ( 1,019 ) ( 123,966 ) ( 11,850 )

Numerator for basic and diluted loss from continuing operations per common share (1) ( 19,442 ) ( 111,028 )

Loss from discontinued operations, net of tax (Note 2) — ( 140,114 )

Numerator for basic and diluted undistributed net loss per common share (1) $ ( 19,442 ) $ ( 251,142 )

Weighted average common shares outstanding, basic and diluted 42,461 42,111

Weighted average warrants outstanding, basic and diluted (2) 211 —

Shares used to calculate income (loss) per share, basic and diluted 42,672 42,111

Per common share net loss:

Basic income (loss) from continuing operations per common share $ ( 0.04 ) $ ( 0.12 ) $ ( 3.16 ) $ ( 0.50 )

Basic income (loss) from discontinued operations per common share 0.49 ( 0.02 ) ( 2.94 ) ( 0.28 )

Basic net income (loss) per common share $ 0.45 $ ( 0.14 ) $ ( 6.10 ) $ ( 0.78 )

Diluted income (loss) from continuing operations per common share $ ( 0.04 ) $ ( 0.12 ) $ ( 3.16 ) $ ( 0.50 )

Diluted income (loss) from discontinued operations per common share 0.49 ( 0.02 ) ( 2.94 ) ( 0.28 )

Diluted net income (loss) per common share $ 0.45 $ ( 0.14 ) $ ( 6.10 ) $ ( 0.78 )

Basic loss from continuing operations per common share $ ( 0.46 ) $ ( 2.64 )

Basic loss from discontinued operations per common share — ( 3.32 )

Basic net loss per common share $ ( 0.46 ) $ ( 5.96 )

Diluted loss from continuing operations per common share $ ( 0.46 ) $ ( 2.64 )

Diluted loss from discontinued operations per common share — ( 3.32 )

Diluted net loss per common share $ ( 0.46 ) $ ( 5.96 )

Cash dividends declared per common share $ — $ —

1 unchanged sentence

(1) Preferred Stock does not participate in losses.

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.

(2) The 2021 Warrants are included in shares outstanding for calculation of basic earnings per share because they are exercisable with little to no consideration (see Note 17).

The following table presents securities that could be potentially dilutive in the future that were excluded from the calculation of diluted net loss per common share because they had an anti-dilutive effect.

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Options 847 897

1 unchanged sentence

Preferred Stock, as-converted — 26,275

25,948 837 25,948 627

We have elected to allocate undistributed income to participating securities based on year-to-date results.

As there was no undistributed income for the nine months ended September 30, 2020, no such allocation was necessary.

In addition, given the undistributed loss from continuing operations in the three and nine months ended September 30, 2020 and 2019, 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 three months ended September 30, 2020, and $ 7.93 to $ 25.16 for three months ended September 30, 2019.

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 nine months ended September 30, 2020, and $ 8.54 to $ 25.16 for nine months ended September 30, 2019.

Warrants excluded from the calculation of diluted net income (loss) per share for the three and nine months ended September 30, 2020, had a per share exercise price of $ 12.00 .

Preferred Stock excluded from the calculation of diluted net income (loss) per share for the three and nine months ended September 30, 2020, 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.

certain conditions, holders of Preferred Stock may elect to convert their Preferred Stock into common shares at an earlier date after March 31, 2023, at a conversion price that equals 90 % of the volume weighted average market price per common share.

The potentially dilutive Preferred Stock in the preceding table presents the more dilutive result of these conversion prices as if the Preferred Stock were converted on September 30, 2020.

As there was no undistributed income for the three months ended March 31, 2021, no such allocation was necessary.

In addition, given the undistributed loss from continuing operations in the three months ended March 31, 2021 and 2020, options and the 2019 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 loss per share had a per share exercise price ranging from $ 7.93 to $ 25.16 for the three months ended March 31, 2021, and $ 7.93 to $ 25.16 for three months ended March 31, 2020.

Warrants excluded from the calculation of diluted net loss per share for the three months ended March 31, 2021, had a per share exercise price of $ 11.49 .

Preferred Stock excluded from the calculation of diluted net loss per share for the three months ended March 31, 2020, was calculated on an as-converted basis.

Fair Value Measurements

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Our financial instruments that are subject to fair value disclosure consist of cash and cash equivalents, accounts receivable, accounts payable, derivatives, and long-term debt.

As of September 30, 2020, the carrying values of these financial instruments approximated fair value.

As of March 31, 2021, the carrying values of these financial instruments approximated fair value.

Derivative Financial Instruments

Certain features were bifurcated and accounted for separately from the Preferred Stock.

The following features are recorded as derivatives.

Certain features were bifurcated and accounted for separately from the Series B Preferred Stock.

The following features were recorded as derivatives.

• 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 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 the annual stockholder meeting has already occurred, the contingent dividends feature no longer exists as of September 30, 2020.

The Series B Preferred Stock included a redemption option based on a leverage ratio threshold that provided the preferred holder the option to convert the Series B 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 was considered a redemption right at a premium which was not clearly and closely related to the debt host.

The conversion feature was terminated upon redemption of the Series B Preferred Stock in March 2021.

• 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.

The Series B Preferred Stock bore 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.

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 derivative above as of September 30, 2020, and December 31, 2019.

Fair Value Measurements as of September 30, 2020

The dividends withholding feature was not clearly and closely related to the debt host.

Upon redemption of the Series B Preferred Stock in March 2021, we made a net cash distribution of $ 3.0 million to settle this withholding feature after effectively receiving a $ 1.0 million offset from the purchasers upon redemption of the Series B Preferred Stock.

The warrants issued with the Series B Preferred Stock (the “2019 Warrants”) are exercisable, in full or in part, at any time prior to December 11, 2026.

The original exercise price was $ 12.00 per share, subject to anti-dilution adjustments in the event of future below market issuances, stock splits, stock dividends, combinations or similar events.

The issuance of additional warrants with the Series D Preferred Stock in March 2021 resulted in an adjusted exercise price of $ 11.49 per share because the new warrants have an exercise price below market value.

Certain features were bifurcated and accounted for separately from the Series D Preferred Stock that was issued on March 22, 2021.

The following features were recorded as derivatives.

• Change-in-control put feature.

The Series D Preferred Stock includes a put feature that allows the holder to redeem the Series D Preferred Stock upon a change in control at the greater of 1) the liquidation preference plus accrued dividends or 2) 140 % of the liquidation preference.

The put feature is considered a redemption right at a premium and is not clearly and closely related to the debt host.

The warrants issued with the Series D Preferred Stock (the “2021 Warrants”) are exercisable, in full or in part, at any time prior to March 22, 2027, at an exercise price of $ 0.01 per share, subject to anti-dilution adjustments in the event of certain future equity issuances, stock splits, stock dividends, combinations or similar events.

The following tables show the liabilities measured at fair value for the above derivatives as of March 31, 2021, and December 31, 2020.

Fair Value Measurements as of March 31, 2021

Description Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs

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Total $ — $ — $ 3,117

The following table presents the change in the Preferred Stock derivative during the nine months ended September 30, 2020.

Nine Months Ended September 30, 2020

The following table presents the change in the above derivatives during the three months ended March 31, 2021.

Three Months Ended March 31, 2021

Beginning balance $ 3,117

Issuances 15,121

Change in fair value (1) ( 449 )

Other (2) 1,315

Settlements ( 3,005 )

Ending balance $ 14,784

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(1) Changes in the fair value are recognized in the “Other expense (income), net” line in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

All of the change in fair value relates to the derivative liability held at September 30, 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 nine months ended September 30, 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.

The fair value of the change-in-control put feature utilizes unobservable inputs based on the Company’s assessment of the probability of a change-in-control event occurring in a future period.

The probability of a change-in-control event ranged from 1 % to 10 % as of March 31, 2021.

The leverage ratio put feature, the dividends withholding feature, and the contingent dividends feature utilized unobservable inputs based on the best information available to determine the probability of the Series B Preferred Stock remaining outstanding for future periods.

These inputs included probability assessments of how long the preferred stock would remain outstanding and whether the leverage ratio threshold would be exceeded.

Inputs also included the percentage of Series B 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 50 % to 2 % as of September 30, 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 20 % to 1 % as of September 30, 2020, and 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 2.35 years as of September 30, 2020.

The probability of the Series B Preferred Stock remaining in future periods ranged from 3 % to 2 % as of December 31, 2020.

The leverage ratio put feature also utilized 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.

These probabilities were 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.

As of December 31, 2019, the warrants were classified in equity and valued using a term of 1.25 years.

Given the Series B 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 2019 Warrants is determined using a valuation model, which utilizes unobservable inputs to determine the probability that the 2019 Warrants will remain outstanding for future periods.

The probabilities resulted in a weighted average term of 4.3 years as of March 31, 2021, and 2.4 years as of December 31, 2020.

The fair value of the 2021 Warrants is determined using the observable market price of a share of our common stock, less the $ 0.01 per share exercise price.

Interest Rate Swap

We manage our exposure to fluctuations in interest rates using a mix of fixed and variable rate debt.

We have a $ 700.0 million fixed-rate interest rate swap agreement that changes the LIBOR-based portion of the interest rate on a portion of our variable rate debt to a fixed rate of 2.4575 % (the “interest rate swap”) through October 19, 2022.

The notional amount of the interest rate swap will decrease over time as presented in the following table.

Notional Amount

February 12, 2019 - December 30, 2020 $ 700,000

December 31, 2020 - December 30, 2021 466,667

December 31, 2021 - October 19, 2022 233,333

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.

We had a fixed-rate interest rate swap agreement that changed the LIBOR-based portion of the interest rate on a portion of our variable rate debt to a fixed rate of 2.4575 % (the “interest rate swap”).

On March 22, 2021, we terminated the interest rate swap agreement with a $ 13.7 million cash payment in connection with the extinguishment of our previously outstanding long-term variable-rate debt.

The interest rate swap was designated as a cash flow hedge at inception.

As of September 30, 2020, we reported a cumulative $ 15.0 million loss, 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 September 30, 2020, and December 31, 2019.

Fair Value Measurements as of September 30, 2020

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 $ — $ 12,331 $ —

Derivative liability - other non-current liabilities — 7,202 —

Total $ — $ 19,533 $ —

However, in the fourth quarter of 2020, the interest rate swap no longer qualified as an effective hedge, and subsequent changes in fair value of the interest rate swap were recognized in earnings.

Amounts recognized in earnings related to the interest rate swap are recorded in the “Loss on interest rate swap” line on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) except that cash settlements prior to termination are recognized in “Derivative payments on interest rate swap.” Cash settlements during 2021 are presented in investing activities on the Condensed Consolidated Statements of Cash Flows.

The following table presents

the effect of the interest rate swap on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

Three Months Ended March 31,

Interest expense $ — $ 1,370

Derivative payments on interest rate swap 1,717 —

Loss on interest rate swap 2,033 —

The following table presents the liabilities measured at fair value on a recurring basis for the interest rate swap as of December 31, 2020.

Fair Value Measurements as of December 31, 2020

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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 10 to these Notes to Condensed Consolidated Financial Statements was $ 12.8 million and $ 9.6 million as of September 30, 2020, and December 31, 2019, respectively.

The fair value of our outstanding fixed-rate debt included in the “International lines of credit and other loans” line item within Note 9 to these Notes to Condensed Consolidated Financial Statements approximated carrying value as of March 31, 2021, and December 31, 2020, respectively.

These fair values represent Level 2 under the three-tier hierarchy described above.

The carrying value of this fixed-rate debt was $ 12.8 million and $ 9.6 million as of September 30, 2020 and December 31, 2019, respectively.

Subsequent Events

Divestiture of Life Sciences Business

The sale of our Life Sciences business closed on October 6, 2020.

We received cash proceeds at closing of $ 757.2 million.

The purchase price is subject to customary post-closing adjustments and is expected to be finalized in the first quarter of 2021.

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 expect to recognize a gain on sale of greater than $ 100 million, net of income taxes, in the fourth quarter of 2020.

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.

Senior Secured Revolver

On October 6, 2020, the total borrowing capacity of the Senior Secured Revolver was reduced to $ 60.0 million from $ 75.0 million, and we repaid the entire principal balance outstanding.

Discontinuation of Hedge Accounting

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.

After the prepayment, a portion of the hedged interest payments were no longer probable of occurring, and the hedging relationship on this portion was no longer highly effective.

Therefore, part of the interest rate swap no longer qualified for hedge accounting after the debt prepayment.

After the discontinuation of hedge accounting, changes in the fair value of this portion of the swap will be recognized in earnings rather than in accumulated other comprehensive income.

During the fourth quarter of 2020, the accumulated loss in accumulated other comprehensive income related to the hedged interest payments that are no longer probable of occurring will be reclassified to earnings.

The carrying value of this fixed-rate debt was $ 12.5 million and $ 14.4 million as of March 31, 2021 and December 31, 2020, respectively.

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

What changed 10-Q

Item 1. Financial Statements