What changed in this filing

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Item 1. Financial Statements

2021-08-06 compared with 2021-05-07 · 298 added, 153 removed, 596 unchanged (43% of the section changed)

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(in thousands, except per share data) 2021 2020 2021 2020

5 unchanged sentences

Other operating expense (income), net ( 324 ) ( 949 ) ( 329 ) 4,177

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

Loss from operations ( 1,588 ) ( 11,177 ) ( 610 ) ( 115,027 )

Interest expense 3,573 6,356 5,597 10,163

3 unchanged sentences

Other expense (income), net 1,680 ( 1,215 ) 1,558 329

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 before benefit (provision) for income taxes and share of net income from joint venture ( 6,841 ) ( 16,318 ) ( 13,905 ) ( 125,519 )

Benefit (provision) for income taxes 231 ( 2,175 ) 987 ( 780 )

Share of net income from joint venture 1,219 927 2,614 656

Loss from continuing operations ( 5,391 ) ( 17,566 ) ( 10,304 ) ( 125,643 )

1 unchanged sentence

Net loss $ ( 5,391 ) $ ( 21,748 ) $ ( 10,304 ) $ ( 269,939 )

Other comprehensive loss:

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

Other comprehensive income (loss):

Foreign currency translation gain (loss) $ 4,409 $ 994 $ 1,062 $ ( 13,348 )

Interest rate swap:

1 unchanged sentence

Reclassification adjustment for losses included in net loss, net of tax — 2,638 2,851 3,690

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

Other comprehensive income (loss) $ 4,409 $ 2,377 $ 3,913 $ ( 22,122 )

Comprehensive loss $ ( 982 ) $ ( 19,371 ) $ ( 6,391 ) $ ( 292,061 )

11 unchanged sentences

Condensed Consolidated Balance Sheets

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

(in thousands, except per share data) June 30, 2021 December 31, 2020

Current assets:

9 unchanged sentences

Investment in joint venture 29,897 26,983

Deferred tax assets 131 —

Other non-current assets 4,763 5,742

15 unchanged sentences

Commitments and contingencies (Note 11)

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

Series D perpetual preferred stock - $ 0.01 par value per share, 65 shares authorized, issued and outstanding at June 30, 2021

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

Stockholders' equity:

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

Common stock - $ 0.01 par value per share, 90,000 shares authorized, 42,686 and 43,034 shares issued and outstanding at December 31, 2020 and June 30, 2021, respectively

Additional paid-in capital 477,923 493,332

5 unchanged sentences

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Three Months Ended March 31, 2021 and 2020

Three Months Ended June 30, 2021 and 2020

Common Stock Accumulated deficit Accumulated other comprehensive income (loss)

(in thousands) Number

value Additional

capital Accumulated deficit Accumulated other comprehensive income (loss) Total

capital Total

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

Net loss — — — ( 5,391 ) — ( 5,391 )

Dividends accrued for preferred stock — — ( 2,211 ) — — ( 2,211 )

Shares issued for option exercises 6 — 48 — — 48

Share-based compensation expense ( 19 ) — 1,100 — — 1,100

Restricted shares forgiven for taxes ( 2 ) — ( 18 ) — — ( 18 )

Change in estimate of share-based award vesting — — ( 337 ) — — ( 337 )

Foreign currency translation gain — — — — 4,409 4,409

Balance, June 30, 2021 43,034 $ 430 $ 477,923 $ ( 216,179 ) $ ( 29,819 ) $ 232,355

Common Stock Accumulated deficit Accumulated other comprehensive income (loss)

(in thousands) Number

value Additional

capital Warrants Total

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

Net loss — — — — ( 21,748 ) — ( 21,748 )

Dividends accrued for preferred stock — — ( 3,043 ) — — — ( 3,043 )

Share-based compensation expense ( 10 ) ( 1 ) 1,412 — — — 1,411

Change in fair value of interest rate swap, net of tax of $ 380

— — — — — ( 1,255 ) ( 1,255 )

Reclassification of interest rate swap settlement to net loss, net of tax of $ 798

— — — — — 2,638 2,638

Foreign currency translation gain — — — — — 994 994

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

See notes to condensed consolidated financial statements (unaudited).

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Six Months Ended June 30, 2021 and 2020

Common Stock Accumulated deficit Accumulated other comprehensive income (loss)

(in thousands) Number

value Additional

capital Total

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

1 unchanged sentence

Dividends accrued for preferred stock — — ( 16,740 ) — — ( 16,740 )

Shares issued for option exercises 6 — 48 — — 48

Share-based compensation expense 394 4 1,982 — — 1,986

Restricted shares forgiven for taxes ( 52 ) ( 1 ) ( 362 ) — — ( 363 )

Change in estimate of share-based award vesting — — ( 337 ) — — ( 337 )

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

Foreign currency translation gain — — — — 1,062 1,062

Balance, June 30, 2021 43,034 $ 430 $ 477,923 $ ( 216,179 ) $ ( 29,819 ) $ 232,355

Common Stock Accumulated deficit Accumulated other comprehensive income (loss)

(in thousands) Number

value Additional

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

capital Warrants Total

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

8 unchanged sentences

Foreign currency translation loss — — — — — ( 13,348 ) ( 13,348 )

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

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

See notes to condensed consolidated financial statements (unaudited).

Condensed Consolidated Statements of Cash Flows

Three Months Ended

Six Months Ended

(in thousands) 2021 2020

4 unchanged sentences

Depreciation and amortization of discontinued operations — 23,701

Amortization of debt issuance costs 405 1,652

Amortization of debt issuance costs and discount 718 3,348

Goodwill impairment of continuing operations — 92,942

2 unchanged sentences

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

Share of net income from joint venture ( 2,614 ) ( 656 )

Compensation expense from issuance of share-based awards 1,649 2,707

11 unchanged sentences

Proceeds from sale of property, plant, and equipment 74 3,112

Cash paid for post-closing adjustments on sale of business ( 3,880 ) —

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

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_______________________________

(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.

(1) Cash and cash equivalents include $ 12.2 million and $ 13.8 million of cash and cash equivalents that were included in current assets of discontinued operations as of June 30, 2020, and December 31, 2019, respectively.

See notes to condensed consolidated financial statements (unaudited).

Notes to Condensed Consolidated Financial Statements

March 31, 2021

Amounts in thousands, except per share data

June 30, 2021

Interim Financial Statements

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 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.

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

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 months ended March 31, 2021 and 2020;

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).

financial position as of June 30, 2021, and December 31, 2020;

and cash flows for the six months ended June 30, 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.

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

The results for the three and six months ended June 30, 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.

dollar amounts and share counts presented in the tables in these Notes to Condensed Consolidated Financial Statements are in thousands.

Accounting Standards Recently Adopted

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

In May 2021, the FASB issued ASU 2021-04, Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options , (“ASU 2021-04”) which clarifies the accounting for modifications or exchanges of

freestanding equity-classified written call options that remain equity classified after modification or exchange.

Specifically, ASU 2021-04 requires the issuer to treat a modification of an equity-classified warrant as an exchange of the original warrant.

The difference between the fair value of the modified warrant and the fair value of the warrant immediately before modification is then recognized as an issuance cost or discount of the related transaction.

ASU 2021-04 is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted.

ASU 2021-04 should be applied prospectively to modifications or exchanges occurring after the effective date.

Either the full or modified retrospective adoption method is allowed.

We do not have any equity-classified written call options that would be subject to this guidance.

Therefore, we do not expect any impact on our consolidated financial statements and related disclosures.

Discontinued Operations

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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.

After working capital and other closing adjustments, we received cash proceeds at closing of $ 757.2 million and paid $ 3.9 million to the buyer during the six months ended June 30, 2021, for post-closing adjustments.

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.

5 unchanged sentences

Three Months Ended

March 31, 2020

June 30, 2020 Six Months Ended

June 30, 2020

Net sales $ 71,888 $ 155,420

3 unchanged sentences

Goodwill impairment — 146,757

Other operating expense, net 3

Loss from operations ( 141,223 )

Other operating income, net ( 6 ) ( 3 )

Income (loss) from operations 4,070 ( 137,153 )

Interest expense 12,340 25,610

Other income, net ( 424 )

Other expense (income), net 334 ( 90 )

Loss from discontinued operations before costs of disposal and benefit for income taxes ( 8,604 ) ( 162,673 )

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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

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

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

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Three Months Ended

March 31, 2020

June 30, 2020 Six Months Ended

June 30, 2020

Interest on debt $ 11,214 $ 23,350

Amortization of debt issuance costs 1,251 2,477

Capitalized interest and other ( 223 )

Capitalized interest ( 182 ) ( 405 )

Total interest expense of discontinued operations $ 12,340 $ 25,610

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

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

Six Months Ended

June 30, 2020

Depreciation and amortization $ 23,701

3 unchanged sentences

Right-of-use assets obtained in exchange for new finance lease liabilities 696

Right-of-use assets obtained in exchange for new operating lease liabilities (1) 6,064

_______________________________

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

Segment Information

1 unchanged sentence

• 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.

• Power Solutions, which is focused on growth in the electrical, general industrial, automotive, aerospace, 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.

1 unchanged sentence

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 results of the Life Sciences business are classified as discontinued operations for the three and six months ended June 30, 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 March 31, 2021

Three Months Ended June 30, 2021

Net sales $ 73,886 $ 49,271 $ — (a) $ 123,157

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Loss from continuing operations before income taxes and share of net income from joint venture $ ( 6,841 )

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

Net sales $ 41,037 $ 37,491 $ 4 (a) $ 78,532

Goodwill impairment — 92,942 — $ 92,942

Income (loss) from operations ( 4,592 ) 1,454 ( 8,039 ) $ ( 11,177 )

Interest expense ( 6,356 )

Loss from continuing operations before income taxes and share of net income from joint venture $ ( 16,318 )

Solutions Power

Solutions Corporate

Consolidations Total

Six Months Ended June 30, 2021

Net sales $ 151,662 $ 98,346 $ ( 47 ) (a) $ 249,961

Income (loss) from operations 8,599 5,307 ( 14,516 ) $ ( 610 )

Interest expense ( 5,597 )

Other ( 7,698 )

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

Loss from continuing operations before income taxes and share of net income from joint venture $ ( 13,905 )

Six Months Ended June 30, 2020

Net sales $ 110,921 $ 83,892 $ ( 68 ) (a) $ 194,745

Goodwill impairment — 92,942 — 92,942

Loss from operations ( 4,328 ) ( 88,880 ) ( 21,819 ) $ ( 115,027 )

Interest expense ( 10,163 )

Other ( 329 )

Loss from continuing operations before income taxes and share of net income from joint venture $ ( 125,519 )

_______________________________

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

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

As of June 30, 2021, and December 31, 2020, one customer represented 11 % 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:

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Raw materials $ 27,456 $ 22,589

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

As of June 30, 2021, and December 31, 2020, there was no remaining goodwill balance.

Intangible Assets, Net

4 unchanged sentences

Amortization ( 1,677 ) ( 5,497 ) ( 7,174 )

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

Balance as of June 30, 2021 $ 27,385 $ 68,506 $ 95,891

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

As of June 30, 2021, and December 31, 2020, there were no indicators of impairment.

Investment in Joint Venture

5 unchanged sentences

Share of earnings 2,614

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.

Foreign currency translation gain 300

Balance as of June 30, 2021 $ 29,897

Our effective tax rate for continuing operations was 3.4 % and 7.1 % for the three and six months ended June 30, 2021, respectively, and ( 13.3 )% and ( 0.6 )% for the three and six months ended June 30, 2020, respectively.

The effective tax rate for the three and six months ended June 30, 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 that a portion of the future tax benefit may not be realized.

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

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

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.

The provisions of the legislation had a significant impact on our effective tax rate and income tax receivable as of and for the six months ended June 30, 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.

The effective tax rate for the three and six months ended June 30, 2020, was also adversely impacted by the effect of the non-deductible goodwill impairment on the estimated annual effective tax rate and the impact of the minimum GILTI tax, 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”).

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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

The following table presents debt balances as of June 30, 2021, and December 31, 2020.

June 30, 2021 December 31, 2020

Term Loan Facility $ 149,625 $ —

5 unchanged sentences

Principal, net of current portion 156,988 79,977

Less-unamortized debt issuance costs (1) 6,152 952

Less-unamortized debt issuance costs and discount (1) 6,260 952

Long-term debt, net of current portion $ 150,728 $ 79,025

_______________________________

(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.

(1) In addition to this amount, costs of $ 0.8 million related to the ABL Facility were recorded in other non-current assets as of June 30, 2021, and $ 1.8 million related to the Senior Secured Revolver were recorded in other non-current assets as of December 31, 2020.

We capitalized interest costs of $ 0.1 million and less than $ 0.1 million in the three months ended June 30, 2021 and 2020, respectively, and $ 0.1 million and $ 0.1 million in the six months ended June 30, 2021 and 2020, respectively, related to construction in progress.

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 %.

At June 30, 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.

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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.

We were in compliance with all requirements under the Term Loan Facility as of June 30, 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.

We capitalized an additional $ 2.8 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.

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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.

At June 30, 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.

We had no outstanding borrowings under the ABL Facility at June 30, 2021.

Total capacity under the ABL Facility was $ 44.2 million as of June 30, 2021, of which $ 30.2 million was available for future borrowings after reductions for outstanding letters of credit as of June 30, 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 were in compliance with all requirements under the ABL Facility as of June 30, 2021.

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

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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.

We recognized a $ 2.4 million loss on extinguishment for unamortized debt issuance costs that were written off in the six months ended June 30, 2021, in connection with the termination of our previous credit facility.

Interest Rate Swap

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.

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 during the first quarter of 2021.

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

On July 22, 2021, we entered into a new interest rate swap as discussed in Note 18.

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

Three Months Ended

Six Months Ended

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

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Brazil ICMS Tax Matter

Prior to the acquisition of Autocam Corporation in 2014 (“Autocam”), Autocam’s Brazilian subsidiary (“Autocam Brazil”) received notification from the Brazilian tax authority regarding ICMS (state value added tax or “VAT”) tax credits claimed on intermediary materials (e.g., tooling and perishable items) used in the manufacturing process.

Prior to the acquisition of Autocam Corporation (“Autocam”) in 2014, Autocam’s Brazilian subsidiary (“Autocam Brazil”) received notification from the Brazilian tax authority regarding ICMS (state value added tax or “VAT”) tax credits claimed on intermediary materials (e.g., tooling and perishable items) used in the manufacturing process.

The Brazilian tax authority notification disallowed state ICMS tax credits claimed on intermediary materials based on the argument that these items are not intrinsically related to the manufacturing 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 March 31, 2021.

Securities Offering Matter

7 unchanged sentences

Other Legal Matters

On October 26, 2020, Corre Opportunities Qualified Master Fund, LP, and Corre Horizon Fund, LP, filed a complaint in the Chancery Court of the State of Delaware against the Company.

The complaint alleges that the Company’s sale of its Life Sciences business without obtaining the prior consent of the plaintiffs was a breach of the terms of the Series B Preferred Stock.

The complaint seeks unspecified monetary damages and other relief.

The Company believes the complaint and allegations to be without merit and intends to vigorously defend itself against these actions.

The Company is unable at this time to determine whether the outcome of the litigation would have a material impact on the Company’s financial position, results of operations, or cash flows.

On October 26, 2020, Corre Opportunities Qualified Master Fund, LP, and Corre Horizon Fund, LP, (collectively, “Corre Partners”) filed a complaint in the Chancery Court of the State of Delaware against the Company.

The complaint alleged 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.

On May 13, 2021, Company entered into a cooperation agreement with Corre Partners.

In connection with the cooperation agreement, on May 13, 2021, the Company also entered into a settlement agreement with Corre Partners, which resolved the complaint.

All other legal proceedings are of an ordinary and routine nature and are incidental to our operations.

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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.

The Series D Preferred Stock has an initial liquidation preference of $ 1,000 per share and is redeemable at our option in cash at a redemption price equal to the liquidation preference then in effect.

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.

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.

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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

As of June 30, 2021, the carrying value of the Series D Preferred Stock shares was $ 49.1 million which included $ 2.4 million of accumulated unpaid and deemed dividends.

The following table presents the change in the Series D Preferred Stock carrying value during the six months ended June 30, 2021.

Six Months Ended

June 30, 2021

Beginning balance $ —

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Ending balance $ 49,069

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”).

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 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

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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

The following table presents the change in the Series B Preferred Stock carrying value during the six months ended June 30, 2021.

Six Months Ended

June 30, 2021

Beginning balance $ 105,086

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Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or services.

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

Three Months Ended March 31, 2021

The following tables summarize revenue by customer geographical region.

Three Months Ended June 30, 2021

Solutions Power

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Total net sales $ 73,886 $ 49,271 $ — $ 123,157

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

Solutions Power

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Total net sales $ 41,037 $ 37,491 $ 4 $ 78,532

Three Months Ended March 31, 2021

Six Months Ended June 30, 2021

Solutions Power

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Eliminations Total

United States and Puerto Rico $ 72,722 $ 79,230 $ ( 47 ) $ 151,905

China 27,633 2,788 — 30,421

Brazil 19,653 535 — 20,188

Mexico 9,844 7,746 — 17,590

Germany 3,136 260 — 3,396

Poland 2,084 7 — 2,091

Other 16,590 7,780 — 24,370

Total net sales $ 151,662 $ 98,346 $ ( 47 ) $ 249,961

Six Months Ended June 30, 2020

Solutions Power

Solutions Intersegment

Eliminations Total

United States and Puerto Rico $ 57,366 $ 69,156 $ ( 68 ) $ 126,454

China 18,418 2,409 — 20,827

Brazil 10,715 193 — 10,908

Mexico 7,292 6,262 — 13,554

Germany 3,001 129 — 3,130

Poland 2,099 8 — 2,107

Other 12,030 5,735 — 17,765

Total net sales $ 110,921 $ 83,892 $ ( 68 ) $ 194,745

The following tables summarize revenue by customer industry.

Our products in the automotive industry include high-precision components and assemblies for fuel systems, steering systems, electric motors, transmissions, moldings, stampings, sensors, and electrical contacts.

Our products in the general industrial industry include high-precision metal and plastic components for a variety of industrial applications including heating and cooling systems, fluid power systems, power tools, and more.

While many of the industries we serve include electrical components, our products in the residential/commercial electrical industry category in the following tables include electrical contact assemblies, precision stampings, welded contact assemblies, and specification plating and surface finishing.

Three Months Ended June 30, 2021

Solutions Power

Solutions Intersegment

Eliminations Total

Automotive $ 46,247 $ 12,121 $ — $ 58,368

General Industrial 24,449 13,625 — 38,074

Electrical — 15,182 15,182

Residential/Commercial Electrical — 16,798 — 16,798

Other 3,190 6,727 — 9,917

Total net sales $ 73,886 $ 49,271 $ — $ 123,157

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

Solutions Power

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General Industrial 17,178 11,345 — 28,523

Electrical — 13,861 13,861

Residential/Commercial Electrical — 12,838 — 12,838

Other 1,348 6,491 4 7,843

Total net sales $ 41,037 $ 37,491 $ 4 $ 78,532

Six Months Ended June 30, 2021

Solutions Power

Solutions Intersegment

Eliminations Total

Automotive $ 96,391 $ 25,581 $ — $ 121,972

General Industrial 48,759 27,335 — 76,094

Residential/Commercial Electrical — 31,980 — 31,980

Other 6,512 13,450 ( 47 ) 19,915

Total net sales $ 151,662 $ 98,346 $ ( 47 ) $ 249,961

Six Months Ended June 30, 2020

Solutions Power

Solutions Intersegment

Eliminations Total

Automotive $ 71,585 $ 19,181 $ — $ 90,766

General Industrial 35,157 23,888 — 59,045

Residential/Commercial Electrical — 26,699 — 26,699

Other 4,179 14,124 ( 68 ) 18,235

Total net sales $ 110,921 $ 83,892 $ ( 68 ) $ 194,745

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 March 31, 2021, 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 June 30, 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 $ 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.

We recognized sales from a single customer of $ 13.2 million, or 11 % and $ 26.2 million, or 11 %, of consolidated net sales, during the three and six months ended June 30, 2021, respectively.

We recognized sales from this customer of $ 9.2 million, or 12 % of consolidated net sales, during the three months ended June 30, 2020.

Revenues from this customer 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, attributable to discontinued operations for the three months ended March 31, 2020.

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 $ 0.4 million, attributable to discontinued operations for the three and six months ended June 30, 2020, respectively.

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

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Stock options $ 59 $ 140 $ 148 $ 321

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Performance share units 450 335 699 558

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

( 337 ) — ( 337 ) —

Share-based compensation expense $ 763 $ 1,411 $ 1,649 $ 2,707

Stock Options

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

_______________________________

(1) Amounts reflect the decrease in share-based compensation expense based on the change in estimate of the probability of vesting of share-based awards.

S tock Options

The following table presents stock option activity for the six months ended June 30, 2021.

Number of Options

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Outstanding at January 1, 2021 871 $ 12.41

Exercised ( 6 ) 7.93

Forfeited or expired ( 71 ) 13.81

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

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

Outstanding at June 30, 2021 794 $ 12.32 3.6 years $ — (1)

Exercisable at June 30, 2021 698 $ 12.79 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 March 31, 2021, 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 June 30, 2021, was greater than the exercise price of any individual option grant.

Restricted Stock

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.

During the six months ended June 30, 2021, we granted 459 thousand shares of restricted stock to non-executive directors, officers and certain other key employees.

The shares of restricted stock granted during the six months ended June 30, 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 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.

The weighted average grant date fair value of restricted stock granted in the six months ended June 30, 2021, was $ 6.84 per share.

Total grant date fair value of restricted stock that vested in the six months ended June 30, 2021, was $ 2.8 million.

The following table presents the status of unvested restricted stock awards as of June 30, 2021, and changes during the six months then ended.

(in thousands) Weighted

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Forfeited ( 65 ) 7.20

Unvested at March 31, 2021 514 $ 7.24

Unvested at June 30, 2021 476 $ 7.28

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.

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

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.

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(per share) Shares

(in thousands) Grant Date Fair

Value (per share)

(in thousands) Grant Date

2021 142 $ 8.58 172 $ 7.20

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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 March 31, 2021, and changes during the three months then ended.

The following table presents the status of unvested PSUs as of June 30, 2021, and changes during the six months then ended.

Nonvested TSR Awards Nonvested ROIC Awards

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Granted 142 8.58 172 7.20

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

Forfeited ( 61 ) 9.61 ( 71 ) 8.17

Nonvested at June 30, 2021 219 $ 9.55 261 $ 8.12

Change in Vesting Estimates

During the six months ended June 30, 2021, we recognized a decrease in share-based compensation expense in continuing operations of $ 0.3 million in the “Selling, general, and administrative expense” line in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) to reverse cumulative expense for restricted stock and PSU awards that were forfeited upon termination of employment and were in excess of our estimated forfeiture rate.

Accumulated Other Comprehensive Income

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

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

Net other comprehensive income (loss) 4,409 — — 4,409

Balance at June 30, 2021 $ ( 29,819 ) $ — $ — $ ( 29,819 )

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

Other comprehensive income (loss) before reclassifications 994 ( 1,635 ) 380 ( 261 )

Amounts reclassified from AOCI to interest expense (2) — 3,436 ( 798 ) 2,638

Net other comprehensive income (loss) 994 1,801 ( 418 ) 2,377

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

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

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

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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 )

Net current-period other comprehensive income (loss) 1,062 3,712 ( 861 ) 3,913

Balance at June 30, 2021 $ ( 29,819 ) $ — $ — $ ( 29,819 )

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

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Amounts reclassified from AOCI to interest expense (2) — 4,806 ( 1,116 ) 3,690

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 )

Net current-period other comprehensive income (loss) ( 13,348 ) ( 11,428 ) 2,654 ( 22,122 )

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

_______________________

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Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Loss from continuing operations $ ( 5,391 ) $ ( 17,566 ) $ ( 10,304 ) $ ( 125,643 )

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Numerator for basic and diluted undistributed net loss per common share (1) $ ( 7,602 ) $ ( 24,791 ) $ ( 27,044 ) $ ( 275,933 )

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

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

Weighted average common shares outstanding 43,067 42,753 42,952 42,671

Adjustment for unvested restricted common stock ( 524 ) ( 556 ) ( 450 ) ( 517 )

Adjustment for 2021 Warrants outstanding (2) 1,897 — 1,059 —

Shares used to calculate income (loss) per share, basic and diluted 44,440 42,197 43,561 42,154

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(1) Preferred Stock does not participate in losses.

(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).

(2) Weighted average 2021 Warrants outstanding are included in shares outstanding for calculation of basic earnings per share because they are exercisable at an exercise price of $0.01 per share, subject to certain adjustments (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

June 30, Six Months Ended

2021 2020 2021 2020

Options 825 890 843 890

2019 Warrants 1,500 1,500 1,500 1,500

Preferred Stock, as-converted — 26,275

Series B Preferred Stock, as-converted — 25,278 — 25,278

2,325 27,668 2,343 27,668

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

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.

As there was no undistributed income for the three and six months ended June 30, 2021, no such allocation was necessary.

In addition, given the undistributed loss from continuing operations in the three and six months ended June 30, 2021 and 2020, options and the 2019 Warrants are considered anti-dilutive and were excluded from the calculation of diluted net 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 June 30, 2021, and $ 7.93 to $ 25.16 for three months ended June 30, 2020.

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 six months ended June 30, 2021, and $ 7.93 to $ 25.16 for six months ended June 30, 2020.

The 2019 Warrants excluded from the calculation of diluted net loss per share for the three and six months ended June 30, 2021, had a per share exercise price of $ 11.49 .

Series B Preferred Stock excluded from the calculation of diluted net loss per share for the three and six months ended June 30, 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 March 31, 2021, the carrying values of these financial instruments approximated fair value.

As of June 30, 2021, the carrying values of these financial instruments approximated fair value.

Derivative Financial Instruments

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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.

The issuance of the 2021 Warrants resulted in an adjusted exercise price of $ 11.49 per share for the 2019 Warrants 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.

3 unchanged sentences

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

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 June 30, 2021, and December 31, 2020.

Fair Value Measurements as of June 30, 2021

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

7 unchanged sentences

Total $ — $ — $ 3,117

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

Three Months Ended March 31, 2021

The following table presents the change in the above derivatives during the six months ended June 30, 2021.

Six Months Ended June 30, 2021

Beginning balance $ 3,117

6 unchanged sentences

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 probability of a change-in-control event ranged from 1 % to 10 % as of June 30, 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.

These inputs included probability assessments of how long the Series B 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.

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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.

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.

An increase in these probabilities would have resulted in an increase in the derivative liability fair value.

Given the Series B Preferred Stock value changed 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 that 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 4.2 years as of June 30, 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.

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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,

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

June 30, Six Months Ended June 30,

2021 2020 2021 2020

Interest expense $ — $ 3,436 $ — $ 4,806

11 unchanged sentences

Counterparty to this derivative contract is a highly rated financial institution which we believe carries only a minimal risk of nonperformance.

On July 22, 2021, we entered into a new interest rate swap as discussed in Note 18.

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 9 to these Notes to Condensed Consolidated Financial Statements approximated carrying value as of March 31, 2021, and December 31, 2020, 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 June 30, 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 $ 12.5 million and $ 14.4 million as of March 31, 2021 and December 31, 2020, respectively.

The carrying value of this fixed-rate debt was $ 12.2 million and $ 14.4 million as of June 30, 2021 and December 31, 2020, respectively.

Subsequent Event

Interest Rate Swap Agreement

On July 22, 2021, we entered into a new fixed-rate interest rate swap agreement to change the LIBOR-based component of the interest rate on a portion of our variable rate debt to a fixed rate of 1.291 %.

The interest rate swap has a notional amount of $ 60.0 million and a maturity date of July 31, 2024.

The objective of the interest rate swap is to eliminate the variability of cash flows in interest payments on the first $ 60.0 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.

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

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