What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-07 compared with 2020-11-06 · 138 added, 293 removed, 80 unchanged (84% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

As used in this Quarterly Report, the terms “NN,” the “Company,” “we,” “our,” or “us” refer to NN, Inc.

26 unchanged sentences

Factors That May Influence Results of Operations

The following paragraphs describe factors that have influenced results of operations for the nine months ended September 30, 2020, that management believes are important to provide an understanding of the business and results of operations, or that may influence operations in the future.

The following paragraphs describe factors that have influenced results of operations for the three months ended March 31, 2021, that management believes are important to provide an understanding of the business and results of operations or that may influence operations in the future.

Global COVID-19 Pandemic

In December 2019, a novel strain of coronavirus (“COVID-19”) began to impact the population of China, where several of our manufacturing facilities are located.

In late January and early February 2020, in an effort to contain the spread of the virus and maintain the well-being of our employees and in accordance with governmental requirements, we temporarily closed our production facilities in China.

On March 11, 2020, the World Health Organization characterized the outbreak of COVID-19 as a global pandemic and recommended containment and mitigation measures.

Consistent with actions taken by governmental

authorities and in response to reduced customer demand, in late March 2020, we idled manufacturing operations in certain regions around the world, other than China, where manufacturing operations began to resume in March.

We have experienced supplier and customer disruption, which has affected our results of operations and cash flows this year.

In Europe and North America, sales began declining in the second half of March as the pandemic led to customer plant closures.

In June 2020, the National Bureau of Economic Research officially declared that the United States economy has fallen into a recession.

The situation grew more challenging in the second and third quarters, as customer closures have affected much of our operations and may continue for an unknown period of time.

Although much of the United States and the global economies have reopened, the COVID-19 pandemic is intensifying in many parts of the United States and the world, and many public health experts anticipate a COVID-19 surge in the coming weeks and months of fall and winter.

Reinstatement of directives and mandates requiring businesses to again curtail or cease normal operations remains a possibility, just as some jurisdictions rolled back reopening plans in the summer of 2020.

Further, the continuing uncertainty as to whether the federal government will address the resulting fiscal condition in both the near and long-term with measures such as additional fiscal stimulus, as well as other geopolitical issues relating to the global economic slowdown, has increased domestic and global instability.

Thus, the spread of COVID-19 and the responses thereto have created a disruption in the manufacturing, delivery and overall supply chain of automobile manufacturers and suppliers.

Global vehicle production has decreased significantly, and some vehicle manufacturers have completely shut down manufacturing operations in some countries and regions, including the United States and Europe.

The rapid development and fluidity of the situation precludes any prediction as to the ultimate impact COVID-19 will have on our business, financial condition, results of operation and cash flows, which will depend largely on future developments directly or indirectly relating to the duration and scope of the COVID-19 outbreak.

We have undertaken a number of permanent and temporary actions to manage the evolving situation, including the continuation of previously announced cost savings initiatives.

Initiatives announced in 2019:

• Streamlining facilities and reducing overall selling, general and administrative costs;

• Eliminated the quarterly dividend;

• Reduced capital expenditures;

• Issued $100 million of Preferred Stock and used net proceeds for debt repayment;

• Refinanced senior credit facilities to extend maturities and provide additional liquidity.

Additional actions taken in 2020 in response to the economic effects of the pandemic:

• In March 2020, we drew down $60 million in cash under our Senior Secured Revolver to strengthen our near-term cash position.

This debt was repaid immediately following the sale of the Life Sciences business in October 2020.

• Beginning in April 2020, executives reduced their base salaries by 20% to 25%, non-executive employee salaries were reduced by 5% to 15%.

These salary reductions were repaid in October 2020, and salaries were reinstated to their original levels.

• The 401(k) employer match was suspended.

• Non-employee board members suspended their cash compensation.

• Employee merit increases and bonus payouts were deferred, and the gainsharing plan for 2020 has been suspended.

• Travel was significantly reduced beginning in the first quarter.

• In response to government orders and reduced demand, we adjusted production and work week hours, reduced or suspended non-critical discretionary spending, and furloughed personnel, many of whom are eligible to participate in government supported programs.

• Inventory levels and collection of receivables are being closely monitored.

• We entered into rent deferral arrangements with landlords of several of our leased facilities.

• As allowed by the CARES Act, we deferred payments of the employer share of U.

payroll taxes and intend to defer the payment of remaining obligations through the end of 2020 and will begin making payments in 2021 through 2022.

• 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.

• We are taking advantage of other provisions of the CARES Act that could result in reduced income tax obligation and a positive impact on cash.

• We are pursuing other opportunities to delay payment of fixed costs.

• We continue to focus on further general cost reduction actions.

While managing decreased demand in many regions across the globe, we have begun to restart and ramp up our businesses.

We are coordinating with our customers and suppliers to make the necessary preparations.

We are focused on the safety of our employees, customers and suppliers when re-starting.

We have developed and implemented processes to ensure a safe environment for our employees and any visitors to our facilities, including providing personal protective equipment to our

employees, establishing social distancing protocols and temperature checks.

These processes include recommendations based on guidelines from the Centers for Disease Control and Prevention and the World Health Organization as well as from our recent ramp-up in China.

The COVID-19 pandemic continues to disrupt the United States and global economy, and we cannot predict when a full economic recovery will occur, but product volumes are beginning to return to more normalized levels.

Our operating results in the first quarter reflect momentum in the recovery of our business from the effects of COVID-19.

Although vaccinations are in process and economies across the globe have reopened, many public health experts warn there may be additional COVID-19 surges in 2021.

Further surges in the COVID-19 infection rates could result in the reinstatement of directives and mandates requiring businesses to again curtail or cease normal operations.

Thus, the spread of COVID-19 and the responses thereto have created a disruption in the manufacturing, delivery, and overall supply chain of automobile manufacturers and suppliers, as well as disruption within the power industry.

Global vehicle production decreased significantly in 2020, but production has since been ramping back up.

Disruptions of normal supply chains have caused challenges in obtaining raw materials we use in the manufacture of some of our products.

We have been increasing our inventories in the first quarter to mitigate the risk of supply chain disruption for our customers.

A worldwide semiconductor chip shortage is beginning to affect original equipment manufacturers, causing unpredictable volumes.

The rapid development and fluidity of the situation precludes any prediction as to the ultimate impact COVID-19 will have on our business, financial condition, results of operations, and cash flows, which will depend largely on future developments directly or indirectly relating to the duration and scope of the COVID-19 pandemic.

While managing decreased demand in many regions across the globe, we are now operating at all of our business locations.

We have implemented training and recruiting programs to address labor shortages.

We are focused on the safety of our employees, customers and suppliers.

We have developed and implemented processes to ensure a safe environment for our employees and

any visitors to our facilities, including providing personal protective equipment to our employees and establishing social distancing protocols and temperature checks.

We are actively promoting vaccination among our employees.

These processes include recommendations based on guidelines from the Centers for Disease Control and Prevention and the World Health Organization.

The health and safety of our employees remains our top priority.

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.

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.

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 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.

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 immediately following the sale.

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.

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

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.

Goodwill Impairment

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

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

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

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

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

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

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

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

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

Prior Periods’ Financial Statement Revision

Certain prior period amounts have been revised to reflect the impact of corrections of misstatements and to correct the timing of previously recorded out-of-period adjustments.

Refer to Note 3 in the Notes to Condensed Consolidated Financial Statements for more information.

We have undertaken a number of permanent and temporary actions to manage the evolving situation, as described in our 2020 Annual Report..

We continue to streamline facilities and implement cost savings initiatives.

Capital expenditures and travel costs remain at relatively low levels.

We refinanced our credit facility and preferred stock in the first quarter as discussed above.

Credit Facilities

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.

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 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.

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.

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”).

The total redemption cash payment was $118.4 million.

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.

Three Months Ended September 30, 2020, compared to the Three Months Ended September 30, 2019

Three Months Ended September 30,

2020 2019 $ Change

Net sales $ 113,761 $ 120,459 $ (6,698)

Organic decline $ (4,308)

Foreign exchange effects (2,390)

Cost of sales (exclusive of depreciation and amortization shown separately below) 90,076 96,654 (6,578)

Selling, general and administrative expense 13,745 15,493 (1,748)

Depreciation and amortization 11,435 11,284 151

Other operating income, net (39) (1,161) 1,122

Loss from operations (1,456) (1,811) 355

Interest expense 6,873 3,805 3,068

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

Other expense (income), net (262) 633 (895)

Loss from continuing operations before benefit for income taxes and share of net income from joint venture (8,211) (6,249) (1,962)

Benefit for income taxes 8,715 1,134 7,581

Share of net income from joint venture 1,136 279 857

Income (loss) from continuing operations 1,640 (4,836) 6,476

Income (loss) from discontinued operations, net of tax 20,330 (1,019) 21,349

Net income (loss) $ 21,970 $ (5,855) $ 27,825

Net sales decreased by $6.7 million, or 6%, during the three months ended September 30, 2020, compared to the three months ended September 30, 2019, primarily due to a decrease in organic volume of $4.3 million, as a result of decreased demand due to the COVID-19 pandemic and unfavorable foreign exchange effects of $2.4 million.

Cost of Sales.

Cost of sales decreased by $6.6 million, or 7%, during the three months ended September 30, 2020, compared to the three months ended September 30, 2019, primarily due to variable costs associated with the above-referenced sales volume decline and variable and fixed cost reduction initiatives that were implemented.

Selling, General and Administrative Expense.

Selling, general and administrative expense decreased by $1.7 million during the three months ended September 30, 2020, compared to the three months ended September 30, 2019, primarily due to cost reduction initiatives that drove decreases in personnel costs and travel costs.

Other Operating Income, Net.

Other operating income, net, changed unfavorably by $1.1 million primarily due to a one-time $1.4 million litigation settlement received during the three months ended September 30, 2019.

Interest Expense.

Interest expense increased by $3.1 million during the three months ended September 30, 2020, compared to the three months ended September 30, 2019, primarily due to an increase in settlements on the interest rate swap and an increase in the interest rate margin over one-month LIBOR on the Senior Secured Term Loan and the Incremental Term Loan as a result of amendments executed in 2019.

These increases were partially offset by a reduction in one-month LIBOR.

Interest on our Senior Secured Revolver decreased due to lower one-month LIBOR in 2020 and due to a lower available capacity after the December 2019 amendment to the credit agreement.

Three Months Ended September 30,

Interest on debt $ 2,198 $ 3,135

Interest rate swap settlements 4,100 306

Amortization of debt issuance costs 419 372

Capitalized interest (35) (281)

Other 191 273

Total interest expense $ 6,873 $ 3,805

Other Expense (Income), Net.

Other expense (income), net, changed favorably by $0.9 million during the three months ended September 30, 2020, compared to the three months ended September 30, 2019, primarily due to more favorable foreign exchange effects associated with intercompany borrowings compared to the prior year.

Benefit For Income Taxes.

Our effective tax rate was 106.1% for the three months ended September 30, 2020, compared to 18.2% for the three months ended September 30, 2019.

The difference in rates is primarily due to the impact of the impairment of nondeductible goodwill in 2020 and and a change in the estimated impact of the CARES Act.

Note 9 in the Notes to Condensed Consolidated Financial Statements describes the components of income taxes for each period presented.

Share of Net Income from Joint Venture.

Our share of net income from the joint venture increased during the three months ended September 30, 2020, compared to the three months ended September 30, 2019, primarily due to improved profits resulting from higher sales volumes, expanding variable margins as a result of successful process improvement initiatives and improved product mix, and fixed cost reduction actions.

Results by Segment

MOBILE SOLUTIONS

Three Months Ended September 30,

2020 2019 $ Change

Net sales $ 70,371 $ 73,071 $ (2,700)

Organic decline $ (602)

Foreign exchange effects (2,098)

Income from operations $ 4,953 $ 3,423 $ 1,530

Net sales decreased by $2.7 million during the three months ended September 30, 2020, compared to the three months ended September 30, 2019, primarily due to unfavorable foreign exchange effects and lower demand within global automotive markets resulting from the COVID-19 pandemic.

Income from operations increased by $1.5 million compared to the same period in the prior year as new product launches that began in the prior year begin to mature and become more profitable.

Additionally, certain of the fixed cost reduction actions initiated in the first half of 2020 in response to the decline in sales volume caused by the COVID-19 pandemic remained in place during the three months ended September 30, 2020.

These favorable impacts were partially offset by the prior year impact of a one-time $1.4 million favorable litigation settlement.

POWER SOLUTIONS

Three Months Ended September 30,

2020 2019 $ Change

Net sales $ 43,415 $ 47,430 $ (4,015)

Organic decline $ (3,723)

Foreign exchange effects (292)

Income from operations $ 1,143 $ 3,351 $ (2,208)

Net sales decreased by $4.0 million during the three months ended September 30, 2020, compared to the three months ended September 30, 2019, primarily due to lower demand in the electrical products, automotive, and oil and gas end markets resulting from the COVID-19 pandemic.

Income from operations decreased by $2.2 million compared to the same period in the prior year primarily due to lost variable margin on the above-referenced sales volume decline.

Commodity prices on precious metals, particularly gold and silver,

dramatically increased during the current period, driving up materials costs and decreasing profitability of certain products.

These unfavorable impacts were partially offset by fixed cost reduction actions taken in response to the decline in sales volume.

Nine Months Ended September 30, 2020, compared to the Nine Months Ended September 30, 2019

Nine Months Ended September 30,

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.

Three Months Ended March 31, 2021, compared to the Three Months Ended March 31, 2020

Three Months Ended March 31,

2021 2020 $ Change

Net sales $ 126,804 $ 116,213 $ 10,591

Organic decline $ (65,466)

Organic growth $ 11,248

Foreign exchange effects (657)

2 unchanged sentences

Depreciation and amortization 11,568 11,357 211

Restructuring and integration expense, net — (12) 12

Goodwill impairment — 92,942 (92,942)

Other operating expense (income), net (5) 5,126 (5,131)

Loss from operations (116,483) (7,457) (109,026)

Income (loss) from operations 978 (103,850) 104,828

Interest expense 2,024 3,807 (1,783)

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

Other expense, net 67 863 (796)

Loss from continuing operations before benefit (provision) for income taxes and share of net income from joint venture (133,730) (17,457) (116,273)

Benefit (provision) for income taxes 7,935 (3,694) 11,629

Share of net income from joint venture 1,792 345 1,447

Derivative payments on interest rate swap 1,717 — 1,717

Loss on interest rate swap 2,033 — 2,033

Other expense (income), net (122) 1,544 (1,666)

Loss from continuing operations before benefit for income taxes and share of net income (loss) from joint venture (7,064) (109,201) 102,137

Benefit for income taxes 756 1,395 (639)

Share of net income (loss) from joint venture 1,395 (271) 1,666

Loss from continuing operations (4,913) (108,077) 103,164

Loss from discontinued operations, net of tax (123,966) (11,850) (112,116)

Income (loss) from discontinued operations, net of tax — (140,114) 140,114

Net loss $ (4,913) $ (248,191) $ 243,278

Net sales decreased by $70.3 million, or 19%, during the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019, primarily due to a decrease in organic volume of $65.5 million, as a result of decreased demand due to the COVID-19 pandemic and unfavorable foreign exchange effects of $4.9 million.

Net sales increased by $10.6 million, or 9%, during the three months ended March 31, 2021, compared to the three months ended March 31, 2020, primarily due to an increase in organic volume of $11.2 million, as a result of increased demand in the automotive industry as the economy begins to recover from the impact of the COVID-19 pandemic.

Sales were positively impacted by increased selling prices for precious metals allowed under customer contracts due to the sharp rise in underlying commodities costs since the second half of 2020.

These increases were partially offset by decreased demand for smart meter components due to inventory adjustments at a key customer.

Sales of components to the medical industry were also negatively impacted by delays in elective surgeries caused by the COVID-19 pandemic.

We also realized unfavorable foreign exchange effects of $0.7 million.

Cost of Sales.

Cost of sales decreased by $51.1 million, or 17%, during the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019, primarily due to variable costs associated with the above-referenced sales volume decline and variable and fixed cost reduction initiatives that were implemented.

Cost of sales increased by $5.2 million, or 6%, during the three months ended March 31, 2021, compared to the three months ended March 31, 2020, primarily due to variable costs associated with the above-referenced sales volume increase, partially offset by variable and fixed cost reduction initiatives.

Selling, General and Administrative Expense.

Selling, general and administrative expense decreased by $8.8 million during the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019, primarily due to cost reduction initiatives that drove decreases in personnel costs and travel costs.

Selling, general and administrative expense decreased by $1.6 million during the three months ended March 31, 2021, compared to the three months ended March 31, 2020, primarily due to cost reduction initiatives that drove decreases in personnel and travel costs.

Goodwill Impairment.

The increase in goodwill impairment in the nine months ended September 30, 2020, was the result of a goodwill impairment charge at Power Solutions.

See Note 6 in the Notes to Condensed Consolidated Financial Statements for more information on the impairment charge.

We recognized goodwill impairment of $92.9 million at Power Solutions during the three months ended March 31, 2020, which resulted in no remaining goodwill balance.

Other Operating Expense (Income), Net.

Other operating expense (income), net, changed unfavorably by $5.0 million primarily due to charges and costs associated with asset disposals and elimination of a portion of our lease obligation as a result of our decision to vacate a portion of our corporate headquarters building.

These charges were partially offset by a $0.8 million gain on the sale of a building in Fairfield, Ohio, in the nine months ended September 30, 2020.

Other operating expense (income), net, changed favorably by $5.1 million primarily due to charges and costs associated with asset disposals and elimination of a portion of lease obligations as a result of vacating a portion of our corporate headquarters building during the three months ended March 31, 2020.

Interest Expense.

Interest expense increased by $8.2 million during the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019, primarily due to an increase in settlements on the interest rate swap and an increase in the interest rate margin over one-month LIBOR on the Senior Secured Term Loan and the Incremental Term Loan as a result of amendments executed in 2019.

These increases were partially offset by a reduction in one-month LIBOR.

Interest on our Senior Secured Revolver decreased due to a low outstanding principal balance throughout most of the first quarter of 2020 after using proceeds from the Preferred Stock offering to repay the balance in December 2019.

Nine Months Ended September 30,

Interest expense decreased by $1.8 million during the three months ended March 31, 2021, compared to the three months ended March 31, 2020, primarily due to settlements on the interest rate swap in the prior year that were recognized in interest expense while the hedge was effective.

Commitment fees on our Senior Secured Revolver decreased due to a lower available capacity after the sale of our Life Sciences business in October 2020.

Three Months Ended March 31,

Interest on debt $ 1,439 $ 1,851

4 unchanged sentences

Total interest expense $ 2,024 $ 3,807

Other Expense, Net.

Other expense, net, changed favorably by $0.8 million during the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019, primarily due to more favorable foreign exchange effects associated with intercompany borrowings compared to the prior year.

Benefit (Provision) For Income Taxes.

Our effective tax rate was 5.9% for the nine months ended September 30, 2020, compared to (21.2)% for the nine months ended September 30, 2019.

The difference in rates is primarily due to the impact of the impairment of nondeductible goodwill in 2020, the CARES Act, 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.

Note 9 in the Notes to Condensed Consolidated Financial Statements describes the components of income taxes for each period presented.

Loss on Extinguishment of Debt and Write-off of Debt Issuance Costs.

Loss on extinguishment of debt and write-off of debt issuance costs represents unamortized debt issuance costs that were associated with the credit facility that was terminated in March 2021.

Derivative Payments on Interest Rate Swap.

Derivative payments on interest rate swap represent cash settlements of the interest rate swap after hedge accounting was discontinued in October 2020.

Prior to October 2020, interest rate swap settlements were recognized in interest expense.

Loss on Interest Rate Swap .

Loss on interest rate swap represents mark-to-market adjustments on the interest rate swap after hedge accounting was discontinued in October 2020 as well as amortization of the residual loss in accumulated other comprehensive income as monthly settlements occur.

Prior to October 2020, mark-to-market adjustments on the interest rate swap were recognized in accumulated other comprehensive income.

Upon termination of the interest rate swap in March 2021, we recognized in earnings the remaining $3.3 million loss that had been deferred in accumulated other comprehensive income.

Benefit For Income Taxes.

Our effective tax rate was 10.7% for the three months ended March 31, 2021, compared to 1.3% for the three months ended March 31, 2020.

The difference in rates is primarily due to the impact of the impairment of nondeductible goodwill in 2020, and the estimated impacts of GILTI and the CARES Act.

Note 8 in the Notes to Condensed Consolidated Financial Statements describes the effective income tax rate for each period presented.

Share of Net Income from Joint Venture.

Share of net income from the JV increased during the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019, primarily due to improved profits from expanding variable margins as a result of successful process improvement initiatives and improved product mix, and fixed cost reduction actions.

These favorable impacts were partially offset by the shutdown of manufacturing operations in China during the first quarter of 2020 due to the COVID-19 pandemic.

Our share of net income from the joint venture increased during the three months ended March 31, 2021, compared to the three months ended March 31, 2020, primarily due to improved profits resulting from higher sales volumes, expanding variable margins as a result of successful process improvement initiatives and improved product mix, and fixed cost reduction actions.

Results by Segment

MOBILE SOLUTIONS

Nine Months Ended September 30,

Three Months Ended March 31,

2021 2020 $ Change

Net sales $ 77,776 $ 69,884 $ 7,892

Organic decline $ (44,027)

Organic growth $ 8,576

Foreign exchange effects (684)

Income from operations $ 6,090 $ 264 $ 5,826

Net sales decreased by $49.3 million during the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019, primarily due to lower demand within global automotive markets resulting from the COVID-19 pandemic, price reductions, the impact of reduced demand for components associated with programs nearing the end of life, and unfavorable foreign exchange effects.

Income from operations decreased by $9.5 million compared to the same period in the prior year due to lost variable margin on the above-referenced sales volume decline, partially offset by fixed cost reduction actions taken in response to the decline in sales volume.

Additionally, the nine months ended September 30, 2019, were impacted by a $1.4 million one-time favorable litigation settlement.

Net sales increased by $7.9 million during the three months ended March 31, 2021, compared to the three months ended March 31, 2020, primarily due to higher demand within all markets which were negatively impacted by the COVID-19 pandemic in the prior year and new business in the general industrial market.

The increase in volume was partially offset by unfavorable foreign exchange effects of $0.7 million.

Income from operations increased by $5.8 million during the three months ended March 31, 2021, compared to the same period in the prior year primarily due to the above-noted increase in revenue and variable and fixed cost reduction initiatives.

Moreover, we built inventory in the three months ended March 31, 2021, which resulted in favorable overhead absorption during the quarter.

POWER SOLUTIONS

Nine Months Ended September 30,

Three Months Ended March 31,

2021 2020 $ Change

Net sales $ 49,075 $ 46,401 $ 2,674

Organic decline $ (21,578)

Organic growth $ 2,647

Foreign exchange effects 27

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Income (loss) from operations $ 2,432 $ (90,334) $ 92,766

Net sales decreased by $21.2 million during the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019, primarily due to lower demand in the electrical products, automotive, and oil and gas end markets resulting from the COVID-19 pandemic.

Income from operations decreased by $100.6 million compared to the same period in the prior year primarily due to a goodwill impairment loss of $92.9 million recognized in the first quarter of 2020, lost variable margin on the above-referenced sales volume decline, and increased precious metals commodity prices.

These unfavorable impacts were partially offset by fixed cost reduction actions taken in response to the decline in sales volume.

Changes in Financial Condition from December 31, 2019, to September 30, 2020

From December 31, 2019, to September 30, 2020, total assets decreased by $225.8 million primarily due to the $92.9 million impairment of Power Solutions goodwill in the first quarter of 2020 and an additional $146.8 million impairment of Life Sciences goodwill in the first quarter of 2020, which is included in discontinued operations.

Normal depreciation and amortization of fixed assets and intangible assets also contributed to the decrease.

These decreases were partially offset by cash reserves from the drawdown of $59.0 million on our Senior Secured Revolver during the nine months ended September 30, 2020.

From December 31, 2019, to September 30, 2020, total liabilities increased by $32.3 million, primarily due to the drawdown on our Senior Secured Revolver.

Working capital of continuing operations, which consists of cash, accounts receivable, inventories, income taxes receivable, and other current assets offset by accounts payable, accrued personnel costs, income taxes payable, current maturities of long-term debt, current portion of lease liabilities, and other current liabilities, was $(573.7) million as of September 30, 2020, compared to $88.0 million as of December 31, 2019.

The decrease in working capital was primarily due to an increase in the current portion of long-term debt that was reasonably expected to be paid with proceeds from the sale of the Life Sciences business as required by the credit agreement.

This decrease was partially offset by the increase in cash resulting from the drawdown on our Senior Secured Revolver.

Cash provided by operations was $19.3 million for the nine months ended September 30, 2020, compared with cash provided by operations of $33.6 million for the nine months ended September 30, 2019.

The difference was primarily due to a decrease in sales volumes and higher interest expense.

Cash used in investing activities was $17.4 million for the nine months ended September 30, 2020, compared with cash used in investing activities of $31.0 million for the nine months ended September 30, 2019.

The decrease was primarily due to lower capital expenditures in 2020 as part of our cash savings initiatives.

Cash received from the liquidation of the short-term investment during 2019 partially offset the decrease in capital expenditures year over year.

Cash provided by financing activities was $43.9 million for the nine months ended September 30, 2020, compared with cash provided by financing activities of $6.9 million for the nine months ended September 30, 2019.

The difference was primarily due to higher net borrowings under our credit facility during the nine months ended September 30, 2020.

Impairment Analysis

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.

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

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

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

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

Net sales increased by $2.7 million during the three months ended March 31, 2021, compared to the three months ended March 31, 2020.

Sales were positively impacted by increased selling prices for precious metals allowed under customer contracts due to the sharp rise in underlying commodities costs since the second half of 2020.

Furthermore, demand in the automotive market rebounded to more normalized levels after COVID-19.

These increases were partially offset by decreased demand for smart meter components due to inventory adjustments at a key customer.

Sales of components to the medical industry were also negatively impacted by delays in elective surgeries caused by the COVID-19 pandemic.

The Power Solutions group generally began experiencing the impact of the COVID-19 pandemic on its operating results during the second quarter of 2020.

Income from operations increased by $92.8 million compared to the same period in the prior year primarily due to the $92.9 million goodwill impairment lost recognized in the first quarter of 2020.

Because increased pricing for precious metals was offset by equivalent increased raw materials cost based on commodity pricing, the increase in sales did not have a proportionate effect on income from operations.

Changes in Financial Condition from December 31, 2020, to March 31, 2021

From December 31, 2020, to March 31, 2021, total assets decreased by $2.6 million primarily due to normal depreciation and amortization of fixed assets, lease right-of-use assets, and intangible assets.

These decreases were offset by increases in accounts receivable and inventories during the three months ended March 31, 2021.

Accounts receivable increased as a result of increasing sales, and inventories increased as a result of a strategic decision to mitigate potential supply chain issues for our customers.

From December 31, 2020, to March 31, 2021, total liabilities increased by $75.0 million, primarily due to the refinancing of our credit facilities and Series B Preferred Stock.

Working capital, which consists of current assets less current liabilities, was $124.4 million as of March 31, 2021, compared to $112.0 million as of December 31, 2020.

The increase in working capital was primarily due to the increases in accounts receivable and inventories discussed above.

Cash provided by operations was $7.9 million for the three months ended March 31, 2021, compared with cash provided by operations of $10.2 million for the three months ended March 31, 2020.

The difference was primarily due to building inventory levels during the three months ended March 31, 2021, to mitigate potential supply chain issues for our customers.

Cash used in investing activities was $20.9 million for the three months ended March 31, 2021, compared with cash used in investing activities of $11.2 million for the three months ended March 31, 2020.

The decrease was primarily due to cash settlement of the interest rate swap, partially offset by lower capital expenditures in the current year.

Cash provided by financing activities was $9.6 million for the three months ended March 31, 2021, compared with cash provided by financing activities of $53.9 million for the three months ended March 31, 2020.

The difference was primarily due to $11.9 million net inflow from the debt and preferred stock refinancing in the current year compared to the $60.0 million draw on the Senior Secured Revolver in the prior year.

Liquidity and Capital Resources

On October 21, 2019, we announced expense reduction and cash savings initiatives to help the Company continue to pay down its debt and support greater growth by reinvesting in its businesses.

The expense reduction and cash saving initiatives include streamlining facilities and reducing overall selling, general and administrative costs;

elimination of quarterly dividend payments;

and a reduction in capital expenditures from 2019 spending levels as the Company returns to a more normalized level of capital spending after several years of higher investment.

As described in the “Results of Operations, Factors That May Influence Results of Operations ” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations, we have taken additional actions in response to the economic effects of the global pandemic and in order to enhance our liquidity position during this difficult period.

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.

On December 11, 2019, we issued Preferred Stock for net proceeds of $95.7 million and used a portion of the proceeds to repay amounts due at that time on our Senior Secured Revolver.

In December 2019, we amended our Credit Agreement which, in turn, extended the due date of our Senior Secured Revolver to July 20, 2022, 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 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.

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.

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.

On February 8, 2019, we entered into a $700.0 million 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 term of the interest rate swap is from the effective date of February 12, 2019, through the termination date of October 19, 2022, with a declining notional amount over the term of the interest rate swap.

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.

Refer to Note 18 in the Notes to Condensed Consolidated Financial Statements for further discussion about the interest rate swap.

Our arrangements with customers typically provide that payments are due within 30 to 60 days following the date of shipment.

We invoice and receive payment from many of our customers in various other currencies.

Additionally, we are party to various third party and intercompany loans, payables, and receivables denominated in currencies other than the U.S.

As a result of these sales, loans, payables, and receivables, we are exposed to foreign exchange transaction and translation risk.

Various strategies to manage this risk are available to management, including producing and selling in local currencies and hedging programs.

As of September 30, 2020, no currency derivatives were in place.

In addition, a strengthening of the U.S.

dollar against foreign currencies could impair our ability to compete with international competitors for foreign as well as domestic sales.

Credit Facility

Aggregate principal amounts outstanding under our Senior Secured Term Loan, Incremental Term Loan, and Senior Secured Revolver as of September 30, 2020, were $829.4 million, without regard to unamortized debt issuance costs.

Of this amount, $700.0 million was hedged with the interest rate swap.

As of September 30, 2020, we had unused borrowing capacity of $1.4 million under the Senior Secured Revolver, subject to certain limitations.

This amount of borrowing capacity is net of $14.6 million of outstanding letters of credit at September 30, 2020, which are considered as usage of the Senior Secured Revolver.

On October 6, 2020, we used proceeds from the sale of the Life Sciences business to prepay $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.

Collectively, our Senior Secured Term Loan, Incremental Term Loan, and Senior Secured Revolver comprise our credit facility.

Total capacity under the Senior Secured Revolver was $75.0 million as of September 30, 2020.

The Senior Secured Revolver matures on July 20, 2022.

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.

Among other things, the amendment reduced total capacity of the Senior Secured Revolver 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.

On October 7, 2020, immediately after paying the entire outstanding balance of the Senior Secured Revolver, we had unused borrowing capacity of $45.4 million.

The Senior Secured Term Loan requires quarterly principal payments through October 19, 2022, with the remaining principal amount due on the maturity date.

After the sale of the Life Sciences, quarterly principal payments are $0.1 million.

If one-month LIBOR is less than 0.75%, then we pay 6.50% per annum in interest on the unhedged balance.

Credit Facilities

The principal amount outstanding under our Term Loan Facility as of March 31, 2021, was $150.0 million, without regard to unamortized debt issuance costs.

As of March 31, 2021, we had unused borrowing capacity of $32.9 million under the ABL Facility, subject to certain limitations.

This amount of borrowing capacity is net of $14.5 million of outstanding letters of credit at March 31, 2021, which are considered as usage of the ABL Facility.

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.

If one-month LIBOR is less than 1.00%, then we pay 7.875% per annum in interest.

If one-month LIBOR exceeds 1.000%, then we pay the variable one-month LIBOR plus an applicable margin of 6.875%.

Based on the interest rate in effect at September 30, 2020, after the $474.3 million principal payment on October 6, 2020, annual interest payments on the remaining balance would be approximately $3.1 million.

The Incremental Term Loan requires quarterly principal payments through October 19, 2022, with the remaining principal amount due on the maturity date.

After the sale of the Life Sciences, quarterly principal payments are $0.3 million.

The Incremental Term Loan bears interest at the variable one-month LIBOR plus an applicable margin of 5.75%.

Based on the interest rate in effect at September 30, 2020, after the $225.7 million principal payment on October 6, 2020, annual interest payments on the remaining balance would be approximately $1.3 million.

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

Based on the interest rate in effect at September 30, 2020, annual interest payments would be approximately $2.4 million.

We paid in full the outstanding Senior Secured Revolver balance on October 7, 2020.

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.

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.

As discussed above, we amended our Credit Agreement again in August 2020 in conjunction with the planned sale of the Life Sciences business.

We were in compliance as of September 30, 2020, with all requirements under our credit facility.

Based on the interest rate in effect at March 31, 2021, annual interest payments would be approximately $11.8 million.

The ABL Facility bears interest on a variable rate structure with borrowings bearing interest at one-month LIBOR plus an applicable margin of 1.75%.

The interest rate in effect at March 31, 2021, was 2.25%.

We pay a commitment fee of 0.375% for unused capacity under the ABL Facility.

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

Both credit facilities allow for optional expansion of available borrowings, subject to certain terms and conditions.

Seasonality and Fluctuation in Quarterly Results

6 unchanged sentences

Our critical accounting policies, including the assumptions and judgments underlying them, are disclosed in the 2020 Annual Report, including those policies as discussed in Note 1 to the Notes to Consolidated Financial Statements included in the 2020 Annual Report.

There have been no changes to these policies during the nine months ended September 30, 2020, except as discussed in Note 1 to the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report.

There have been no changes to these policies during the three months ended March 31, 2021, except as discussed in Note 1 to the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report.

Recent Accounting Pronouncements

1 unchanged sentence

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 2. Management’s Discussion and Analysis