What changed in this filing

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Item 1. Financial Statements

2022-05-06 compared with 2021-11-05 · 167 added, 484 removed, 434 unchanged (60% of the section changed)

2 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands, except per share data) 2022 2021

3 unchanged sentences

Depreciation and amortization 11,429 11,568

Goodwill impairment — — — 92,942

Other operating expense (income), net 2,026 ( 5 )

Loss from operations ( 4,612 ) ( 1,456 ) ( 5,222 ) ( 116,483 )

Income (loss) from operations ( 3,420 ) 978

Interest expense 3,439 2,024

2 unchanged sentences

Loss on interest rate swap — 2,033

Other expense (income), net ( 4,346 ) ( 262 ) ( 2,788 ) 67

Loss from continuing operations before benefit (provision) for income taxes and share of net income from joint venture ( 3,844 ) ( 8,211 ) ( 17,749 ) ( 133,730 )

Other income, net ( 2,996 ) ( 122 )

Loss before benefit (provision) for income taxes and share of net income from joint venture ( 3,863 ) ( 7,064 )

Benefit (provision) for income taxes ( 1,531 ) 756

Share of net income from joint venture 2,092 1,395

Income (loss) from continuing operations ( 3,377 ) 1,640 ( 13,681 ) ( 124,003 )

Income (loss) from discontinued operations, net of tax (Note 2) — 20,330 — ( 123,966 )

Net income (loss) $ ( 3,377 ) $ 21,970 $ ( 13,681 ) $ ( 247,969 )

Net loss $ ( 3,302 ) $ ( 4,913 )

Other comprehensive income (loss):

2 unchanged sentences

Change in fair value, net of tax 1,187 —

Reclassification adjustment for losses included in net income (loss), net of tax 22 3,148 2,873 6,838

Reclassification adjustment for losses included in net loss, net of tax 34 2,851

Other comprehensive income (loss) $ 3,821 $ ( 496 )

Comprehensive income (loss) $ 519 $ ( 5,409 )

Basic net income (loss) per common share:

Income (loss) from continuing operations per common share $ ( 0.13 ) $ ( 0.04 ) $ ( 0.75 ) $ ( 3.16 )

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

Net income (loss) per common share $ ( 0.13 ) $ 0.45 $ ( 0.75 ) $ ( 6.10 )

Basic net loss per common share:

Net loss per common share $ ( 0.13 ) $ ( 0.46 )

Weighted average common shares outstanding 44,594 42,672

Diluted net income (loss) per common share:

Income (loss) from continuing operations per common share $ ( 0.13 ) $ ( 0.04 ) $ ( 0.75 ) $ ( 3.16 )

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

Net income (loss) per common share $ ( 0.13 ) $ 0.45 $ ( 0.75 ) $ ( 6.10 )

Diluted net loss per common share:

Net loss per common share $ ( 0.13 ) $ ( 0.46 )

Weighted average common shares outstanding 44,594 42,672

See notes to condensed consolidated financial statements (unaudited).

Table of Conte nts

Condensed Consolidated Balance Sheets

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

(in thousands, except per share data) March 31, 2022 December 31, 2021

Current assets:

Cash and cash equivalents $ 20,627 $ 28,656

Accounts receivable, net 83,990 84,615

Accounts receivable, net of allowances of $ 1,684 and $ 1,352 at March 31, 2022 and December 31, 2021, respectively

89,397 71,419

Inventories 81,239 75,027

2 unchanged sentences

Total current assets 217,307 196,282

Property, plant and equipment, net 212,468 223,690

Property, plant and equipment, net of accumulated depreciation of $ 207,636 and $ 197,936 at March 31, 2022 and December 31, 2021, respectively

208,286 209,105

Operating lease right-of-use assets 46,771 46,443

19 unchanged sentences

Commitments and contingencies (Note 9)

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

Series B convertible preferred stock - $ 0.01 par value per share, 100 shares authorized, 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 March 31, 2022 and December 31, 2021, respectively

56,345 53,807

Stockholders' equity:

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 September 30, 2021, respectively

Common stock - $ 0.01 par value per share, 90,000 shares authorized, 43,890 and 43,027 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

Additional paid-in capital 473,072 474,757

4 unchanged sentences

See notes to condensed consolidated financial statements (unaudited).

Table of Conte nts

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Three Months Ended September 30, 2021 and 2020

Three Months Ended March 31, 2022 and 2021

Common Stock Accumulated deficit Accumulated other comprehensive income (loss)

2 unchanged sentences

capital Total

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

Balance at December 31, 2021 43,027 $ 430 $ 474,757 $ ( 219,100 ) $ ( 31,902 ) $ 224,185

Net loss — — — ( 3,302 ) — ( 3,302 )

1 unchanged sentence

Share-based compensation expense 893 9 940 — — 949

Change in fair value of interest rate swap, net of tax of $ 53

— — — — ( 176 ) ( 176 )

Reclassification of interest rate swap to net loss, net of tax of $ 7

— — — — 22 22

Foreign currency translation loss — — — — ( 2,612 ) ( 2,612 )

Balance, September 30, 2021 43,034 $ 430 $ 476,540 $ ( 219,556 ) $ ( 32,585 ) $ 224,829

Common Stock Accumulated deficit Accumulated other comprehensive income (loss)

(in thousands) Number

value Additional

capital Warrants Total

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

Net income — — — — 21,970 — 21,970

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

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

Restricted shares forgiven for taxes ( 30 ) — ( 87 ) — — ( 87 )

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

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

Change in fair value of interest rate swap, net of tax of $ 316

— — — — 1,187 1,187

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

Reclassification of interest rate swap settlement to net loss, net of tax of $ 9

— — — — 34 34

Foreign currency translation gain — — — — 2,600 2,600

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

See notes to condensed consolidated financial statements (unaudited).

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Nine Months Ended September 30, 2021 and 2020

Balance at March 31, 2022 43,890 $ 439 $ 473,072 $ ( 222,402 ) $ ( 28,081 ) $ 223,028

Common Stock Accumulated deficit Accumulated other comprehensive income (loss)

2 unchanged sentences

capital Total

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

Net loss — — — ( 13,681 ) — ( 13,681 )

Dividends accrued for preferred stock — — ( 19,054 ) — — ( 19,054 )

Shares issued for option exercises 6 — 48 — — 48

Share-based compensation expense 394 4 2,913 — — 2,917

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

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

Change in fair value of interest rate swap, net of tax of $ 53

— — — — ( 176 ) ( 176 )

Reclassification of interest rate swap to net loss, net of tax of $ 868

— — — — 2,873 2,873

Foreign currency translation loss — — — — ( 1,550 ) ( 1,550 )

Balance, September 30, 2021 43,034 $ 430 $ 476,540 $ ( 219,556 ) $ ( 32,585 ) $ 224,829

Common Stock Accumulated deficit Accumulated other comprehensive income (loss)

(in thousands) Number

value Additional

capital Warrants Total

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

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

Net loss — — — ( 4,913 ) — ( 4,913 )

2 unchanged sentences

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

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

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

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

— — — — — ( 12,443 ) ( 12,443 )

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

1 unchanged sentence

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

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

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

See notes to condensed consolidated financial statements (unaudited).

Table of Conte nts

Condensed Consolidated Statements of Cash Flows

Nine Months Ended

September 30,

Three Months Ended

(in thousands) 2022 2021

1 unchanged sentence

Net loss $ ( 3,302 ) $ ( 4,913 )

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

Depreciation and amortization of continuing operations 34,860 34,119

Depreciation and amortization of discontinued operations — 35,731

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

Depreciation and amortization 11,429 11,568

Amortization of debt issuance costs and discount 332 405

Goodwill impairment of continuing operations — 92,942

Goodwill impairment of discontinued operations — 146,757

Impairments of property, plant and equipment 233 —

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

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

Share of net income from joint venture ( 3,456 ) ( 1,792 )

Total derivative loss (gain), net of cash settlements ( 2,543 ) 3,301

Share of net income from joint venture, net of cash dividends received 1,934 ( 1,395 )

Compensation expense from issuance of share-based awards 949 886

7 unchanged sentences

Other ( 1,003 ) 3,851

Net cash provided by operating activities 5,691 19,344

Net cash provided by (used in) operating activities ( 5,223 ) 7,884

Cash flows from investing activities

1 unchanged sentence

Proceeds from sale of property, plant, and equipment 36 11

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

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

8 unchanged sentences

Other ( 787 ) ( 1,189 )

Net cash provided by financing activities 4,519 43,941

Net cash provided by (used in) financing activities ( 1,516 ) 9,628

Effect of exchange rate changes on cash flows 2,936 ( 1,740 )

2 unchanged sentences

Cash and cash equivalents at end of period $ 20,627 $ 43,033

_______________________________

(1) Cash and cash equivalents include $ 16.0 million and $ 13.8 million of cash and cash equivalents that were included in current assets of discontinued operations as of September 30, 2020, and December 31, 2019, respectively.

See notes to condensed consolidated financial statements (unaudited).

Table of Conte nts

Notes to Condensed Consolidated Financial Statements

September 30, 2021

March 31, 2022

Interim Financial Statements

6 unchanged sentences

Securities and Exchange Commission (the “SEC”) on March 11, 2022.

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 and nine months ended September 30, 2021 and 2020;

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

and cash flows for the nine months ended September 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).

financial position as of March 31, 2022 and December 31, 2021;

and cash flows for the three months ended March 31, 2022 and 2021, on a basis consistent with our audited consolidated financial statements.

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.

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

Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S.

GAAP”) have been condensed or omitted from the interim financial statements presented in this Quarterly Report.

GAAP”) have been condensed or omitted from the unaudited condensed consolidated financial statements presented in this Quarterly Report.

These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and accompanying notes included in the 2021 Annual Report.

The results for the three and nine months ended September 30, 2021, are not necessarily indicative of results for the year ending December 31, 2021, or any other future periods.

The results for the three months ended March 31, 2022, are not necessarily indicative of results for the year ending December 31, 2022, or any other future periods.

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

1 unchanged sentence

Accounting Standards Recently Adopted

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

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

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

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

Accounting Standards Not Yet Adopted

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

2 unchanged sentences

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

We plan to adopt ASU 2020-06 effective January 1, 2022 using the modified retrospective adoption method.

We do not anticipate that the adoption will have a material impact on our consolidated financial statements and related disclosures.

The adoption of ASU 2020-06 effective January 1, 2022 did not have a material 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.

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

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

The SPA includes a potential earnout payment of up to $ 70.0 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 in 2020 and paid $ 3.9 million to the buyer during the nine months ended September 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 September 30, 2021, and December 31, 2020.

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

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

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

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

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

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

Three Months Ended

September 30, 2020 Nine Months Ended

September 30, 2020

Net sales $ 68,525 $ 223,944

Cost of sales (exclusive of depreciation and amortization shown separately below) 50,444 158,538

Selling, general, and administrative expense 6,164 20,189

Depreciation and amortization 12,030 35,731

Goodwill impairment — 146,757

Other operating expense, net 24 20

Loss from operations ( 137 ) ( 137,291 )

Interest expense 12,248 37,857

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

Other income, net ( 234 ) ( 325 )

Loss from discontinued operations before costs of disposal and benefit for income taxes ( 13,539 ) ( 176,211 )

Benefit for income taxes 39,954 59,598

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

Costs of disposal of discontinued operations (1) ( 6,598 ) ( 7,956 )

Benefit for income taxes on costs of disposal 513 603

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

_______________________________

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

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

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

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

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

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

We paid $ 700.0 million in the aggregate on our term loans immediately after the transaction closed on October 6, 2020.

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

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

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

Three Months Ended

September 30, 2020 Nine Months Ended

September 30, 2020

Interest on debt $ 11,060 $ 34,410

Amortization of debt issuance costs 1,215 3,692

Capitalized interest ( 114 ) ( 519 )

Total interest expense of discontinued operations $ 12,248 $ 37,857

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

Nine Months Ended

September 30, 2020

Depreciation and amortization $ 35,731

Goodwill impairment 146,757

Amortization of debt issuance costs 3,692

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

Acquisition of property, plant and equipment 7,626

Right-of-use assets obtained in exchange for new finance lease liabilities 695

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

_______________________________

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

Since we do not have any equity-classified written call options that would be subject to this guidance, the adoption of ASU 2021-04 did not have any impact on our consolidated financial statements and related disclosures during the three months ended March 31, 2022.

Table of Conte nts

Accounting Standards Not Yet Adopted

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance (“ASU 2021-10”), which requires business entities to provide certain annual disclosures when they have received government assistance and use a grant or contribution accounting model by analogy to other accounting guidance.

Such disclosures include the nature of the transactions, significant terms and conditions, accounting policies, and affected financial statement line items.

ASU 2021-10 may be applied either prospectively or retrospectively.

We are in the process of assessing the impact ASU 2021-10 may have on our annual disclosures for the year ending December 31, 2022.

Segment Information

3 unchanged sentences

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

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

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

The results of the Life Sciences business are classified as discontinued operations for the three and nine months ended September 30, 2020, and therefore are not included in the tabular presentation below.

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

Solutions Power

Solutions Corporate

Consolidations Total

Three Months Ended September 30, 2021

Net sales $ 68,586 $ 48,680 $ ( 22 ) (a) $ 117,244

Income (loss) from operations ( 257 ) 1,252 ( 5,607 ) $ ( 4,612 )

Interest expense ( 3,578 )

Loss from continuing operations before income taxes and share of net income from joint venture $ ( 3,844 )

Three Months Ended September 30, 2020

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

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

Interest expense ( 6,873 )

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

The following tables present results of operations by reportable segment.

Solutions Power

1 unchanged sentence

Consolidations Total

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Net sales $ 76,070 $ 52,011 $ ( 14 ) (a) $ 128,067

1 unchanged sentence

Interest expense ( 3,439 )

Other ( 3,352 )

Loss from continuing operations before income taxes and share of net income from joint venture $ ( 17,749 )

Nine Months Ended September 30, 2020

Loss from operations before income taxes and share of net income from joint venture $ ( 3,863 )

Three Months Ended March 31, 2021

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

Goodwill impairment — 92,942 — 92,942

Income (loss) from operations 6,090 2,432 ( 7,544 ) 978

1 unchanged sentence

Other ( 6,018 )

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

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

_______________________________

1 unchanged sentence

Inventories are comprised of the following amounts:

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Raw materials $ 31,108 $ 27,221

2 unchanged sentences

Total inventories $ 81,239 $ 75,027

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 the operating segment, and determination of weighted average cost of capital.

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

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).

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

Table of Conte nts

Intangible Assets, Net

4 unchanged sentences

Amortization ( 838 ) ( 2,749 ) ( 3,587 )

Balance as of September 30, 2021 $ 26,547 $ 65,758 $ 92,305

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

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

Balance as of March 31, 2022 $ 24,871 $ 60,260 $ 85,131

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

At March 31, 2022, 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 an impairment analysis on our long-lived assets as of March 31, 2022.

Based on our analysis, the carrying values of the long-lived assets were recoverable and no impairment charge was recorded during the three months ended March 31, 2022.

Investment in Joint Venture

5 unchanged sentences

Share of earnings 2,092

Dividends paid by joint venture ( 4,026 )

Foreign currency translation gain 66

Balance as of September 30, 2021 $ 30,799

Our effective tax rate for continuing operations was ( 9.8 )% and 3.5 % for the three and nine months ended September 30, 2021, respectively, and 106.1 % and 5.9 % for the three and nine months ended September 30, 2020, respectively.

The effective tax rate for the three and nine months ended September 30, 2021, differs from the U.S.

Balance as of March 31, 2022 $ 32,177

Our effective tax rate was ( 39.6 )% and 10.7 % for the three months ended March 31, 2022 and 2021, respectively.

The effective tax rate for the three months ended March 31, 2022, 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.

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

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

The provisions of the legislation had a significant impact on our effective tax rate and income tax receivable as of and for the nine months ended September 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 and nine months ended September 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.

tax on the earnings of foreign subsidiaries under the global intangible low-taxed income regime.

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

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

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

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

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

September 30, 2021 December 31, 2020

The following table presents debt balances as of March 31, 2022 and December 31, 2021.

March 31, 2022 December 31, 2021

Term Loan Facility $ 148,500 $ 148,875

Senior Secured Term Loan — 47,728

Incremental Term Loan — 22,716

International lines of credit and other loans 10,302 10,930

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_______________________________

(1) In addition to this amount, costs of $ 0.7 million related to the ABL Facility were recorded in other non-current assets as of September 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 $ 0.2 million and $ 0.2 million in the nine months ended September 30, 2021 and 2020, respectively, related to construction in progress.

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(1) In addition to this amount, costs of $ 0.7 million and $ 0.7 million related to the ABL Facility were recorded in other non-current assets as of March 31, 2022 and December 31, 2021, respectively.

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 September 30, 2021, the Term Loan Facility bore interest, based on one-month LIBOR, at 7.875 %.

At March 31, 2022, the Term Loan Facility bore interest, based on one-month LIBOR, at 7.875 %.

We have an interest rate swap that changes the one-month LIBOR to a fixed rate of 1.291 % on $ 60.0 million of the outstanding balance of the Term Loan 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.

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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 September 30, 2021.

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

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.

On March 3, 2022, we amended our Term Loan Facility, which increases the quarterly maximum consolidated net leverage ratio.

We were in compliance with all requirements under the Term Loan Facility as of March 31, 2022.

The Term Loan Facility was issued at a $ 3.8 million discount and we capitalized an additional $ 2.8 million in new debt issuance costs.

These costs are recorded as a direct reduction to the carrying amount of the associated long-term debt and amortized over the term of the debt.

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

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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 September 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.

At March 31, 2022, 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 1.875 % 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 September 30, 2021.

Total capacity under the ABL Facility was $ 47.7 million as of September 30, 2021, of which $ 36.5 million was available for future borrowings after reductions for outstanding letters of credit as of September 30, 2021.

As of March 31, 2022, we had no outstanding borrowings under the ABL Facility, $ 11.1 million of outstanding letters of credit, and $ 37.8 million available for future borrowings under the ABL Facility.

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 September 30, 2021.

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

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

Senior Secured Term Loan

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

During 2021 until termination, the Senior Secured Term Loan bore interest at 6.50 %.

Incremental Term Loan

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

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

Senior Secured Revolver

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

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

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

Debt Issuance Costs

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

Interest Rate Swaps

On July 22, 2021, we entered into a fixed-rate interest rate swap agreement to change the LIBOR-based component of the interest rate on a portion of the Term Loan Facility 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.

A portion of the proceeds from the Term Loan Facility was used to settle and terminate our previous 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 agreements.

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

Nine Months Ended

September 30,

We were in compliance with all requirements under the ABL Facility as of March 31, 2022.

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

Three Months Ended

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

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

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

The amendment was accounted for as a lease modification, and the remeasurement of the lease resulted in an $ 8.1 million decrease in the operating lease right-of-use (“ROU”) asset, a $ 10.5 million decrease in the noncurrent portion of the operating lease liability, and a $ 0.6 million decrease in the current portion of the operating lease liability.

The $ 3.0 million difference between the change in the operating lease ROU asset and the operating lease liabilities was recognized in “Other operating expense (income), net,” on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

In connection with the discontinued use of the previously leased space, we also recognized a $ 4.4 million termination charge and a $ 2.9 million impairment charge on the associated leasehold improvements, all of which were also recognized in “Other operating expense (income), net.”

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Commitments and Contingencies

Brazil ICMS Tax Matter

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.

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) 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.

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Management believes the indemnification would include amounts owed for the tax, interest, and penalties related to this matter.

Accordingly, we don’t expect to incur a loss related to this matter even in the event of an unfavorable decision and, therefore, have not accrued an amount for the remaining matters as of September 30, 2021.

Accordingly, we do not 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, 2022.

Securities Offering Matter

On November 1, 2019, Erie County Employees’ Retirement System, on behalf of a purported class of plaintiffs, filed a complaint in the Supreme Court of the State of New York, County of New York, against the Company, certain of the Company’s current and former officers and directors, and each of the underwriters involved in the Company’s public offering and sale of 14.4 million shares of its common stock pursuant to a preliminary prospectus supplement, dated September 10, 2018, a final prospectus supplement, dated September 13, 2018, and a base prospectus, dated April 19, 2017, relating to the Company’s effective shelf registration statement on Form S-3 (File No.

On November 1, 2019, Erie County Employees’ Retirement System, on behalf of a purported class of plaintiffs, filed a complaint in the Supreme Court of the State of New York, County of New York, against us, certain of our current and former officers and directors, and each of the underwriters involved in our public offering and sale of 14.4 million shares of our common stock pursuant to a preliminary prospectus supplement, dated September 10, 2018, a final prospectus supplement, dated September 13, 2018, and a base prospectus, dated April 19, 2017, relating to our effective shelf registration statement on Form S-3 (File No.

333-216737) (the “Offering”), which complaint was amended on January 24, 2020.

The complaint alleges violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 in connection with the Offering.

The plaintiffs seek to represent a class of stockholders who purchased shares of the Company’s common stock in the Offering.

The plaintiffs seek to represent a class of stockholders who purchased shares of our common stock in the Offering.

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.

We believe the complaint and allegations to be without merit and intend to vigorously defend ourself against these actions.

We are unable at this time to determine whether the outcome of the litigation would have a material impact on our financial position, results of operations, or cash flows.

Other Legal Matters

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, the 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.

On April 25, 2022, we reached an agreement to settle breach of contract claims brought by a former customer regarding the sale of products by us in 2016.

Under the agreement, we will pay $ 1.8 million to the customer in specified installments through July 2023.

Since the $ 1.8 million settlement was related to claims made against us prior to March 31, 2022, it was recognized during the three months ended March 31, 2022 and is included in the Other operating expense (income), net line in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

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

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In making that determination, we analyze the facts and circumstances of each case at least quarterly in consultation with our attorneys and determine a range of reasonably possible outcomes.

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Preferred Stock and Stockholders' Equity

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Note 15 discusses the accounting for these features.

As of September 30, 2021, the carrying value of the Series D Preferred Stock shares was $ 51.4 million, which included $ 4.7 million of accumulated unpaid and deemed dividends.

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

Nine Months Ended

September 30, 2021

Beginning balance $ —

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

Fair value of 2021 Warrants issued ( 14,839 )

Recognition of bifurcated embedded derivative ( 282 )

Accrual of in-kind dividends 4,142

Amortization 569

Ending balance $ 51,383

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

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

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

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

The aggregate discount was amortized as a deemed dividend through December 31, 2023, which is the date the holders had a non-contingent conversion option into a variable number of common shares equal to the liquidation preference plus accrued and unpaid dividends.

Deemed dividends adjust retained earnings (or in the absence of retained earnings, additional paid-in capital).

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 nine months ended September 30, 2021.

Nine Months Ended

September 30, 2021

As of March 31, 2022, the carrying value of the Series D Preferred Stock shares was $ 56.3 million, which included $ 9.7 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, 2022.

Three Months Ended

March 31, 2022

Beginning balance $ 53,807

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Amortization 396

Redemption ( 119,429 )

Ending balance $ 56,345

Preferred Share Purchase Rights

On April 15, 2020, our Board of Directors authorized and declared a dividend of one preferred share purchase right for each outstanding share of common stock to shareholders of record on April 27, 2020.

The rights expired on March 31, 2021.

Revenue from Contracts with Customers

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The following tables summarize revenue by customer geographical region.

Three Months Ended September 30, 2021

Solutions Power

Solutions Intersegment

Eliminations Total

United States and Puerto Rico $ 35,812 $ 38,313 $ ( 22 ) $ 74,103

China 10,849 749 — 11,598

Brazil 8,951 192 — 9,143

Mexico 4,981 4,627 — 9,608

Germany 1,080 159 — 1,239

Poland 698 3 — 701

Other 6,215 4,637 — 10,852

Total net sales $ 68,586 $ 48,680 $ ( 22 ) $ 117,244

Three Months Ended September 30, 2020

Solutions Power

Solutions Intersegment

Eliminations Total

United States and Puerto Rico $ 37,116 $ 35,299 $ ( 25 ) $ 72,390

China 12,785 1,580 — 14,365

Brazil 7,100 253 — 7,353

Mexico 4,454 3,239 — 7,693

Germany 1,400 132 — 1,532

Poland 1,342 4 — 1,346

Other 6,174 2,908 — 9,082

Total net sales $ 70,371 $ 43,415 $ ( 25 ) $ 113,761

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Solutions Power

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Total net sales $ 76,070 $ 52,011 $ ( 14 ) $ 128,067

Nine Months Ended September 30, 2020

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Three Months Ended March 31, 2021

Solutions Power

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

Three Months Ended September 30, 2021

Solutions Power

Solutions Intersegment

Eliminations Total

Automotive $ 43,486 $ 12,455 $ — $ 55,941

General Industrial 21,396 12,273 — 33,669

Residential/Commercial Electrical — 16,257 — 16,257

Other 3,704 7,695 ( 22 ) 11,377

Total net sales $ 68,586 $ 48,680 $ ( 22 ) $ 117,244

Three Months Ended September 30, 2020

Solutions Power

Solutions Intersegment

Eliminations Total

Automotive $ 47,484 $ 10,629 $ — $ 58,113

General Industrial 19,912 13,142 — 33,054

Residential/Commercial Electrical — 12,996 — 12,996

Other 2,975 6,648 ( 25 ) 9,598

Total net sales $ 70,371 $ 43,415 $ ( 25 ) $ 113,761

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Solutions Power

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Total net sales $ 76,070 $ 52,011 $ ( 14 ) $ 128,067

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

Solutions Power

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

Deferred Revenue

Deferred revenue relates to payments received in advance of performance under the contract and recognized as revenue as (or when) we perform under the contract.

The balance of deferred revenue was $ 0.4 million and $ 0.5 million as of March 31, 2022 and December 31, 2021, respectively.

Revenue recognized for performance obligations satisfied or partially satisfied during the three months ended March 31, 2022 included $ 0.3 million that was included in deferred revenue as of December 31, 2021.

Transaction Price Allocated to Future Performance Obligations

We are required to disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of September 30, 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 March 31, 2022, 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 $ 11.1 million, or 10 %, and $ 37.3 million, or 10 %, of consolidated net sales, during the three and nine months ended September 30, 2021, respectively.

Revenues from this customer are primarily in our Mobile Solutions segment.

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Share-Based Compensation

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

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

The following table lists the components of share-based compensation expense by type of award, which is recognized in the “Selling, general, and administrative expense” line in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Stock options $ 56 $ 89

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Performance share units 289 249

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

— ( 577 ) ( 337 ) ( 577 )

Share-based compensation expense $ 949 $ 886

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

S tock Options

The following table presents stock option activity for the nine months ended September 30, 2021.

The following table presents stock option activity for the three months ended March 31, 2022.

Number of Options

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Outstanding at January 1, 2022 621 $ 12.24

Exercised ( 6 ) 7.93

Forfeited or expired ( 118 ) 15.25

Outstanding at September 30, 2021 747 $ 11.99 3.6 years $ — (1)

Exercisable at September 30, 2021 651 $ 12.45 3.0 years $ — (1)

Expired ( 71 ) 9.83

Outstanding at March 31, 2022 550 $ 12.55 4.0 years $ — (1)

Exercisable at March 31, 2022 523 $ 12.71 3.8 years $ — (1)

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

The intrinsic value is the amount by which the closing market price of our stock at September 30, 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 March 31, 2022, was greater than the exercise price of any individual option grant.

Restricted Stock

During the nine months ended September 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 nine months ended September 30, 2021, vest pro-rata generally over three years for employees and over one year for non-executive directors.

During the three months ended March 31, 2022, we granted 897,000 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, 2022, 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 nine months ended September 30, 2021, was $ 6.84 per share.

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

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

The weighted average grant date fair value of restricted stock granted in the three months ended March 31, 2022, was $ 3.31 per share.

Total grant date fair value of restricted stock that vested in the three months ended March 31, 2022, was $ 1.8 million.

The following table presents the status of unvested restricted stock awards as of March 31, 2022 and changes during the three months then ended.

(in thousands) Weighted

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Forfeited ( 4 ) 7.49

Unvested at September 30, 2021 476 $ 7.28

Unvested at March 31, 2022 1,101 $ 4.11

Performance Share Units

Performance Share Units (“PSUs”) are a form of long-term incentive compensation awarded to executive officers and certain other key employees designed to directly align the interests of employees to the interests of our stockholders, and to create long-term stockholder value.

PSUs granted in 2021 were made pursuant to the NN, Inc.

Some PSUs are based on total shareholder return (“TSR Awards”), and other PSUs are based on

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return on invested capital (“ROIC Awards”).

TSR Awards granted in 2022 were made pursuant to the NN, Inc.

2019 Omnibus Incentive Plan and a Performance Share Unit Agreement (the “2019 Omnibus Agreement”).

Some PSUs are based on total shareholder return (“TSR Awards”), and other PSUs are based on return on invested capital (“ROIC Awards”).

The TSR Awards vest, if at all, upon our achieving a specified relative total shareholder return, which will be measured against the total shareholder return of the S&P SmallCap 600 Index during specified performance periods as defined in the 2019 Omnibus Agreement.

No ROIC Awards were granted during the three months ended March 31, 2022.

The TSR Awards vest, if at all, upon our achieving a specified relative total shareholder return, which will be measured against the total shareholder return of a specified index during specified performance periods as defined in the 2019 Omnibus Agreement.

The ROIC Awards vest, if at all, upon our achieving a specified average return on invested capital during the performance periods.

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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.

The following table presents the goals with respect to TSR Awards and ROIC Awards granted or modified in 2021.

Threshold Performance

The following table presents the goals with respect to TSR Awards granted in 2022.

(25% of Shares) Target Performance

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2022 grants 25 th Percentile 55 th Percentile 75 th Percentile

Threshold Performance

(50% of Shares) Target Performance

(100% of Shares) Maximum Performance

(150% of Shares)

2021 grants 6.3 % 7.0 % 8.6 %

2020 grants (1) 6.7 % 7.9 % 8.7 %

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(1) The performance levels for 2020 grants were modified by the compensation committee of the board of directors in the first quarter of 2021 to adjust for the sale of the Life Sciences business and the ongoing effects of the COVID-19 pandemic.

We estimate the grant date fair value of TSR Awards using the Monte Carlo simulation model, as the total shareholder return metric is considered a market condition under ASC Topic 718, Compensation – stock compensation .

The grant date fair value of ROIC Awards is based on the closing price of a share of our common stock on the date of grant.

The following table presents the number of PSUs granted and the grant date fair value in the period presented.

TSR Awards ROIC Awards

Award Year Shares

(in thousands) Grant Date

(per share) Shares

(in thousands) Grant Date

2021 142 $ 8.58 172 $ 7.20

We recognize expense for ROIC Awards based on the probable outcome of the associated performance condition.

We generally recognize an expense for ROIC Awards based on the Target Performance threshold of 100 % because, at the date of grant, the Target Performance is the probable level of performance achievement.

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

The following table presents the status of unvested PSUs as of March 31, 2022 and changes during the three months then ended.

Nonvested TSR Awards Nonvested ROIC Awards

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Granted 382 2.53 — —

Forfeited ( 61 ) 9.61 ( 71 ) 8.17

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

Change in Vesting Estimates

During the nine months ended September 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.

Nonvested at March 31, 2022 576 $ 4.90 228 $ 8.14

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Accumulated Other Comprehensive Income

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

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

Other comprehensive income (loss) before reclassifications ( 2,612 ) ( 229 ) 53 ( 2,788 )

Amounts reclassified from AOCI to interest expense (2) — 29 ( 7 ) 22

Net other comprehensive income (loss) ( 2,612 ) ( 200 ) 46 ( 2,766 )

Balance at September 30, 2021 $ ( 32,431 ) $ ( 200 ) $ 46 $ ( 32,585 )

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

Balance at December 31, 2021 $ ( 32,016 ) $ 151 $ ( 37 ) $ ( 31,902 )

Other comprehensive income (loss) before reclassifications 2,600 1,503 ( 316 ) 3,787

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Net other comprehensive income (loss) 2,600 1,547 ( 326 ) 3,821

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

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

Balance at March 31, 2022 $ ( 29,416 ) $ 1,698 $ ( 363 ) $ ( 28,081 )

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

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

Amounts reclassified from AOCI to interest expense (2) — 29 ( 7 ) 22

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

Net current-period other comprehensive income (loss) ( 1,550 ) 3,512 ( 815 ) 1,147

Balance at September 30, 2021 $ ( 32,431 ) $ ( 200 ) $ 46 $ ( 32,585 )

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

Other comprehensive income (loss) before reclassifications ( 6,636 ) ( 16,207 ) 3,764 ( 19,079 )

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

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

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

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

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

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(2) Represents interest rate swap settlements of effective hedge.

(3) Represents reclassification of derivative loss and settlements after discontinuation of hedge accounting.

Net Income (Loss) Per Common Share

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Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Income (loss) from continuing operations $ ( 3,377 ) $ 1,640 $ ( 13,681 ) $ ( 124,003 )

Net loss $ ( 3,302 ) $ ( 4,913 )

Preferred stock cumulative dividends and deemed dividends ( 2,538 ) ( 14,529 )

Numerator for basic and diluted income (loss) from continuing operations per common share (1) ( 5,691 ) ( 1,499 ) ( 32,735 ) ( 133,136 )

Income (loss) from discontinued operations, net of tax (Note 2) — 20,330 — ( 123,966 )

Numerator for basic and diluted undistributed net loss per common share (1) $ ( 5,840 ) $ ( 19,442 )

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Adjustment for 2021 Warrants outstanding (2) 1,894 211

Shares used to calculate income (loss) per share, basic and diluted 44,455 42,202 43,862 42,170

Per common share net income (loss):

Basic loss from continuing operations per common share $ ( 0.13 ) $ ( 0.04 ) $ ( 0.75 ) $ ( 3.16 )

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

Basic income (loss) per common share $ ( 0.13 ) $ 0.45 $ ( 0.75 ) $ ( 6.10 )

Diluted loss from continuing operations per common share $ ( 0.13 ) $ ( 0.04 ) $ ( 0.75 ) $ ( 3.16 )

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

Diluted income (loss) per common share $ ( 0.13 ) $ 0.45 $ ( 0.75 ) $ ( 6.10 )

Shares used to calculate loss per share, basic and diluted 44,594 42,672

Basic and diluted loss per common share $ ( 0.13 ) $ ( 0.46 )

Cash dividends declared per common share $ — $ —

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(1) Preferred Stock does not participate in losses.

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(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 15).

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Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Options 600 847

2019 Warrants 1,500 1,500

Series B Preferred Stock, as-converted — 23,573 — 23,573

2,252 25,948 2,312 25,948

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 and nine months ended September 30, 2021, no such allocation was necessary.

In addition, given the undistributed loss from continuing operations in the three and nine months ended September 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 September 30, 2021, and $ 7.93 to $ 25.16 for three months ended September 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 nine months ended September 30, 2021, and $ 7.93 to $ 25.16 for nine months ended September 30, 2020.

The 2019 Warrants excluded from the calculation of diluted net loss per share for the three and nine months ended September 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 nine months ended September 30, 2020, was calculated on an as-converted basis.

As there was no undistributed income for the three months ended March 31, 2022, no such allocation was necessary.

In addition, given the undistributed loss in the three months ended March 31, 2022 and 2021, 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 March 31, 2022, and $ 7.93 to $ 25.16 for three months ended March 31, 2021.

The 2019 Warrants excluded from the calculation of diluted net loss per share for the three months ended March 31, 2022 and 2021, had a per share exercise price of $ 11.49 .

Fair Value Measurements

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

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

As of March 31, 2022, the carrying values of these financial instruments approximated fair value.

Derivative Financial Instruments

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

The following features were recorded as derivatives.

• Leverage ratio put feature.

The Series B Preferred Stock included a redemption option based on a leverage ratio threshold that provided the preferred holder the option to convert the Series B Preferred Stock to a variable number of shares of common stock at a discount to the then fair value of our common stock.

The conversion feature was considered a redemption right at a premium which was not clearly and closely related to the debt host.

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

• Dividends withholding.

The Series B Preferred Stock bore a feature that could require us to make an effective distribution to purchasers which is indexed to the tax rate of the purchasers.

This distribution would be partially offset by an adjustment to the redemption price and/or conversion rate.

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

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

In conjunction with our placement of the Series B Preferred Stock, we issued detachable warrants to purchase up to 1.5 million shares of our common stock (the “2019 Warrants”), which are exercisable, in full or in part, at any time prior to December 11, 2026.

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

The issuance of 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 B Preferred Stock, which was redeemed in March 2021.

The following feature was recorded as a derivative.

In conjunction with our placement of the Series B Preferred Stock in December 2019, we issued detachable warrants to purchase up to 1.5 million shares of our common stock (the “2019 Warrants”), which are exercisable, in full or in part, at any time prior to December 11, 2026, at an exercise price of $ 11.49 per share.

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

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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 September 30, 2021, and December 31, 2020.

Fair Value Measurements as of September 30, 2021

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The following tables show the liabilities measured at fair value for the Preferred Stock derivatives as of March 31, 2022 and December 31, 2021.

Fair Value Measurements as of March 31, 2022

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

Derivative liability - other current liabilities $ — $ — $ —

Derivative liability - other non-current liabilities 5,453 — 228

Total $ 9,956 $ — $ 671

Fair Value Measurements as of December 31, 2021

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

Derivative liability - other current liabilities $ — $ — $ 2,453

Derivative liability - other non-current liabilities 7,771 — 453

Total $ — $ — $ 3,117

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

Nine Months Ended September 30, 2021

The following table presents the change in the Preferred Stock derivatives during the three months ended March 31, 2022.

Three Months Ended March 31, 2022

Beginning balance $ 8,224

Issuances 15,121

Change in fair value (1) ( 2,543 )

Settlements ( 3,005 )

Ending balance $ 5,681

_______________________________

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

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

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 September 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 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.

resident holders and the applicable tax withholding rates for those holders.

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

The leverage ratio put feature also utilized unobservable inputs to determine the probability of the leverage ratio put being exercisable as of March 31, 2023, which ranged from 10 % to 1 % as of December 31, 2020.

These probabilities were determined based on management’s assessment of facts and circumstances at each reporting date.

An increase in these probabilities would 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 probability of a change-in-control event ranged from 3 % to 10 % as of March 31, 2022.

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 3.6 years as of September 30, 2021, and 2.4 years as of December 31, 2020.

The probabilities resulted in a weighted average term of 3.1 years as of March 31, 2022, and 3.6 years as of December 31, 2021.

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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However, in the fourth quarter of 2020, the 2019 Swap no longer qualified as an effective hedge, and subsequent changes in fair value of the 2019 Swap were recognized in earnings.

Amounts recognized in earnings related to the 2019 Swap are recorded in the “Loss on interest rate swap (2)” 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.

Amounts recognized in earnings related to the 2019 Swap are recorded in the “Loss on interest rate swap” line on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) except

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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 swaps on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Interest expense (1) $ 44 $ —

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(2) Represents settlements and changes in fair value on the 2019 Swap.

The following tables present the liabilities measured at fair value on a recurring basis for the interest rate swaps as of September 30, 2021, and December 31, 2020.

Fair Value Measurements as of September 30, 2021

The following tables present the assets and liabilities measured at fair value on a recurring basis for the interest rate swaps as of March 31, 2022 and December 31, 2021.

Fair Value Measurements as of March 31, 2022

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

Derivative liability - other current liabilities $ — $ 174 $ —

Derivative liability - other non-current liabilities — 23 —

Derivative asset - other current assets $ — $ 364 $ —

Derivative asset - other non-current assets — 1,337 —

Total $ — $ 1,701 $ —

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

Derivative asset - other non-current assets $ — $ 284 $ —

Derivative liability - other current liabilities — ( 129 ) —

Derivative liability - other non-current liabilities — 4,357 —

Total $ — $ 155 $ —

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Fixed Rate Debt

The fair value of our outstanding fixed-rate debt included in the “International lines of credit and other loans” line item within Note 9 to these Notes to Condensed Consolidated Financial Statements approximated carrying value as of September 30, 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 7 to these Notes to Condensed Consolidated Financial Statements approximated carrying value as of March 31, 2022 and December 31, 2021, respectively.

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

The carrying value of this fixed-rate debt was $ 11.4 million and $ 14.4 million as of September 30, 2021 and December 31, 2020, respectively.

The carrying value of this fixed-rate debt was $ 10.3 million and $ 10.9 million as of March 31, 2022 and December 31, 2021, respectively.

Table of Conte nts

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