What changed in this filing

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Item 1. Financial Statements

2022-08-05 compared with 2022-05-06 · 230 added, 121 removed, 480 unchanged (42% of the section changed)

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(in thousands, except per share data) 2022 2021 2022 2021

4 unchanged sentences

Other operating expense (income), net ( 147 ) ( 324 ) 1,879 ( 329 )

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

Loss from operations ( 4,514 ) ( 1,588 ) ( 7,934 ) ( 610 )

Interest expense 3,488 3,573 6,927 5,597

2 unchanged sentences

Loss on interest rate swap — — — 2,033

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

Other expense (income), net ( 67 ) 1,680 ( 3,063 ) 1,558

Loss before benefit (provision) for income taxes and share of net income from joint venture ( 7,935 ) ( 6,841 ) ( 11,798 ) ( 13,905 )

8 unchanged sentences

Other comprehensive income (loss) $ ( 8,086 ) $ 4,409 $ ( 4,265 ) $ 3,913

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

Comprehensive loss $ ( 16,653 ) $ ( 982 ) $ ( 16,134 ) $ ( 6,391 )

Basic net loss per common share:

5 unchanged sentences

See notes to condensed consolidated financial statements (unaudited).

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Condensed Consolidated Balance Sheets

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

(in thousands, except per share data) June 30,

2022 December 31, 2021

Current assets:

Cash and cash equivalents $ 15,186 $ 28,656

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

Accounts receivable, net of allowances of $ 1,762 and $ 1,352 at June 30, 2022 and December 31, 2021, respectively

82,621 71,419

3 unchanged sentences

Total current assets 206,731 196,282

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

Property, plant and equipment, net of accumulated depreciation of $ 210,618 and $ 197,936 at June 30, 2022 and December 31, 2021, respectively

202,239 209,105

20 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 March 31, 2022 and December 31, 2021, respectively

Series D perpetual preferred stock - $ 0.01 par value per share, 65 shares authorized, issued and outstanding at June 30, 2022 and December 31, 2021, respectively

59,003 53,807

Stockholders' equity:

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

Common stock - $ 0.01 par value per share, 90,000 shares authorized, 43,884 and 43,027 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

Additional paid-in capital 473,019 474,757

4 unchanged sentences

See notes to condensed consolidated financial statements (unaudited).

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Condensed Consolidated Statements of Changes in Stockholders’ Equity

Three Months Ended March 31, 2022 and 2021

Three Months Ended June 30, 2022 and 2021

Common Stock Accumulated deficit Accumulated other comprehensive income (loss)

2 unchanged sentences

capital Total

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

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

Net loss — — — ( 8,567 ) — ( 8,567 )

6 unchanged sentences

— — — — 31 31

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

Foreign currency translation loss — — — — ( 8,490 ) ( 8,490 )

Balance at June 30, 2022 43,884 $ 439 $ 473,019 $ ( 230,969 ) $ ( 36,167 ) $ 206,322

Common Stock Accumulated deficit Accumulated other comprehensive income (loss)

(in thousands) Number

value Additional

capital Total

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

See notes to condensed consolidated financial statements (unaudited).

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Six Months Ended June 30, 2022 and 2021

Common Stock Accumulated deficit Accumulated other comprehensive income (loss)

7 unchanged sentences

Restricted shares forgiven for taxes ( 31 ) — ( 88 ) — — ( 88 )

Change in fair value of interest rate swap, net of tax of $ 414

— — — — 1,560 1,560

Reclassification of interest rate swap settlement to net loss, net of tax of $ 17

1 unchanged sentence

Foreign currency translation loss — — — — ( 5,890 ) ( 5,890 )

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

Balance at June 30, 2022 43,884 $ 439 $ 473,019 $ ( 230,969 ) $ ( 36,167 ) $ 206,322

Common Stock Accumulated deficit Accumulated other comprehensive income (loss)

(in thousands) Number

value Additional

capital Total

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

Net loss — — — ( 10,304 ) — ( 10,304 )

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 settlement to net loss, net of tax of $ 861

— — — — 2,851 2,851

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

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

See notes to condensed consolidated financial statements (unaudited).

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Condensed Consolidated Statements of Cash Flows

Three Months Ended

Six Months Ended

(in thousands) 2022 2021

4 unchanged sentences

Amortization of debt issuance costs and discount 662 718

Impairments of property, plant and equipment 233 —

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

14 unchanged sentences

Proceeds from sale of property, plant, and equipment 422 74

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

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

2 unchanged sentences

Cash paid for debt issuance costs — ( 6,981 )

Dividends paid — —

Proceeds from issuance of preferred stock — 61,793

10 unchanged sentences

See notes to condensed consolidated financial statements (unaudited).

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Notes to Condensed Consolidated Financial Statements

March 31, 2022

June 30, 2022

Interim Financial Statements

6 unchanged sentences

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

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, 2022 and 2021;

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.

financial position as of June 30, 2022 and December 31, 2021;

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

3 unchanged sentences

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

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.

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

9 unchanged sentences

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.

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.

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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.

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.

10 unchanged sentences

Consolidations Total

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

Net sales $ 73,350 $ 52,049 $ ( 37 ) (a) $ 125,362

2 unchanged sentences

Loss from operations before income taxes and share of net income from joint venture $ ( 7,935 )

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Net sales $ 73,886 $ 49,271 $ — $ 123,157

Income (loss) from operations 2,509 2,875 ( 6,972 ) ( 1,588 )

Interest expense ( 3,573 )

Other ( 1,680 )

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

Solutions Power

Solutions Corporate

Consolidations Total

Six Months Ended June 30, 2022

Net sales $ 149,420 $ 104,060 $ ( 51 ) (a) $ 253,429

1 unchanged sentence

Interest expense ( 6,927 )

Loss from operations before income taxes and share of net income from joint venture $ ( 11,798 )

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 )

3 unchanged sentences

Inventories are comprised of the following amounts:

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Raw materials $ 32,305 $ 27,221

2 unchanged sentences

Total inventories $ 84,726 $ 75,027

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Intangible Assets, Net

4 unchanged sentences

Amortization ( 1,677 ) ( 5,496 ) ( 7,173 )

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

Balance as of June 30, 2022 $ 24,032 $ 57,513 $ 81,545

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.

At June 30, 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 June 30, 2022.

Based on our analysis, the carrying values of the long-lived assets were recoverable and no impairment charge was recorded during the six months ended June 30, 2022.

Investment in Joint Venture

6 unchanged sentences

Dividends paid by joint venture ( 4,026 )

Foreign currency translation gain 66

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.

Foreign currency translation loss ( 1,655 )

Balance as of June 30, 2022 $ 30,875

Our effective tax rate was ( 13.2 )% and ( 21.9 )% for the three and six months ended June 30, 2022, respectively, and 3.4 % and 7.1 % for the three and six months ended June 30, 2021, respectively.

The effective tax rate for the three and six months ended June 30, 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.

2 unchanged sentences

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

March 31, 2022 December 31, 2021

The following table presents debt balances as of June 30, 2022 and December 31, 2021.

June 30, 2022 December 31, 2021

Term Loan Facility $ 148,125 $ 148,875

ABL Facility 2,000 —

International lines of credit and other loans 9,306 10,930

5 unchanged sentences

_______________________________

Table of Conte nts

(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.

(1) In addition to this amount, costs of $ 0.6 million and $ 0.7 million related to the ABL Facility were recorded in other non-current assets as of June 30, 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 March 31, 2022, the Term Loan Facility bore interest, based on one-month LIBOR, at 7.875 %.

At June 30, 2022, the Term Loan Facility bore interest, based on one-month LIBOR, at 8.541 %.

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.

3 unchanged sentences

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.

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

6 unchanged sentences

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, 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.

At June 30, 2022, using one-month LIBOR plus a 1.75 % spread, the weighted average interest rate on outstanding borrowings under the ABL Facility was 3.00 %.

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.

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.

As of June 30, 2022, we had $ 2.0 million of outstanding borrowings under the ABL Facility, $ 11.1 million of outstanding letters of credit, and $ 36.9 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 March 31, 2022.

We were in compliance with all requirements under the ABL Facility as of June 30, 2022.

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

Three Months Ended

Six Months Ended

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

6 unchanged sentences

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

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Commitments and Contingencies

13 unchanged sentences

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

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 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 our common stock in the Offering.

The complaint seeks unspecified monetary damages and other relief.

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.

As previously disclosed, 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”).

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

On July 25, 2022, the parties filed a Stipulation of Settlement, which is subject to court approval, to settle the securities offering action.

Under the terms of the Stipulation of Settlement, the Company and/or its insurance carrier will make a cash payment to the plaintiff in the amount $ 9.5 million (the “Settlement Amount”), in exchange for which the Company and the other named defendants will be released from all claims related to the securities offering action.

As of June 30, 2022, we have previously

paid covered expenses totaling $ 1.0 million meeting our directors' and officers' retention requirement and therefore the Settlement Amount will be covered and paid by our directors' and officers' insurance carrier.

Other Legal Matters

1 unchanged sentence

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).

The $ 1.8 million settlement 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.

1 unchanged sentence

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

12 unchanged sentences

Note 15 discusses the accounting for these features.

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

As of June 30, 2022, the carrying value of the Series D Preferred Stock shares was $ 59.0 million, which included $ 12.3 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, 2022.

Six Months Ended

June 30, 2022

Beginning balance $ 53,807

5 unchanged sentences

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

During the six months ended June 30, 2022, we received equipment from a customer as part of the selling price of goods transferred.

This noncash consideration was recognized as revenue equal to the fair value of the equipment received.

The following tables summarize revenue by customer geographical region.

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

Solutions Power

9 unchanged sentences

Total net sales $ 73,350 $ 52,049 $ ( 37 ) $ 125,362

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Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Solutions Power

9 unchanged sentences

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

Six Months Ended June 30, 2022

Solutions Power

Solutions Intersegment

Eliminations Total

United States and Puerto Rico $ 73,764 $ 80,863 $ ( 51 ) $ 154,576

China 21,316 2,477 — 23,793

Brazil 22,013 657 — 22,670

Mexico 13,151 9,099 — 22,250

Germany 2,404 135 — 2,539

Poland 2,498 5 — 2,503

Other 14,274 10,824 — 25,098

Total net sales $ 149,420 $ 104,060 $ ( 51 ) $ 253,429

Six Months Ended June 30, 2021

Solutions Power

Solutions Intersegment

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

The following tables summarize revenue by customer industry.

2 unchanged sentences

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 March 31, 2022

Three Months Ended June 30, 2022

Solutions Power

6 unchanged sentences

Total net sales $ 73,350 $ 52,049 $ ( 37 ) $ 125,362

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Solutions Power

6 unchanged sentences

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

Six Months Ended June 30, 2022

Solutions Power

Solutions Intersegment

Eliminations Total

Automotive $ 99,446 $ 19,806 $ — $ 119,252

General Industrial 42,337 32,975 — 75,312

Residential/Commercial Electrical — 35,956 — 35,956

Other 7,637 15,323 ( 51 ) 22,909

Total net sales $ 149,420 $ 104,060 $ ( 51 ) $ 253,429

Six Months Ended June 30, 2021

Solutions Power

Solutions Intersegment

Eliminations Total

Automotive $ 96,391 $ 20,082 $ — $ 116,473

General Industrial 48,759 30,431 — 79,190

Residential/Commercial Electrical — 31,573 — 31,573

Other 6,512 16,260 ( 47 ) 22,725

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

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.

The balance of deferred revenue was $ 0.6 million and $ 0.5 million as of June 30, 2022 and December 31, 2021, respectively.

Revenue recognized for performance obligations satisfied or partially satisfied during the six months ended June 30, 2022 included $ 0.5 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 March 31, 2022, 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, 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.

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Share-Based Compensation

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Stock options $ 31 $ 59 $ 87 $ 148

1 unchanged sentence

Performance share units 417 450 706 699

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

— ( 337 ) — ( 337 )

Share-based compensation expense $ 2,606 $ 763 $ 3,555 $ 1,649

_______________________________

(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 three months ended March 31, 2022.

The following table presents stock option activity for the six months ended June 30, 2022.

Number of Options

4 unchanged sentences

Expired ( 79 ) 9.71

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

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

Outstanding at June 30, 2022 542 $ 12.61 4.1 years $ — (1)

Exercisable at June 30, 2022 515 $ 12.77 3.9 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, 2022, 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, 2022, was greater than the exercise price of any individual option grant.

Restricted Stock

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.

During the six months ended June 30, 2022, we granted 897,000 shares of restricted stock to non-executive directors, officers and certain other key employees under the NN, Inc.

2019 Omnibus Incentive Plan (“2019 Omnibus Plan”).

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

The weighted average grant date fair value of restricted stock granted in the six months ended June 30, 2022, was $ 3.31 per share.

Total grant date fair value of restricted stock that vested in the six months ended June 30, 2022, was $ 2.1 million.

The following table presents the status of unvested restricted stock awards as of June 30, 2022 and changes during the six months then ended.

(in thousands) Weighted

3 unchanged sentences

Forfeited ( 9 ) 4.73

Unvested at March 31, 2022 1,101 $ 4.11

Unvested at June 30, 2022 1,066 $ 4.02

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.

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

Table of Conte nts

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”).

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

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

TSR Awards granted in 2022 were made pursuant to the 2019 Omnibus Plan and a Performance Share Unit Agreement (the “2019 Omnibus Agreement”).

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

2022 Omnibus Incentive Plan and a Performance Share Unit Agreement.

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.

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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.

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

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

(25% of Shares) Target Performance

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(150% of Shares)

2022 grants 25 th Percentile 55 th Percentile 75 th Percentile

TSR Awards 25 th Percentile 55 th Percentile 75 th Percentile

(50% of Shares) Target Performance

(100% of Shares) Maximum Performance

(150% of Shares)

ROIC Awards 6.4 % 8.6 % 10.0 %

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

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 status of unvested PSUs as of June 30, 2022 and changes during the six months then ended.

Nonvested TSR Awards Nonvested ROIC Awards

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Granted 382 2.53 408 2.62

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

Table of Conte nts

Nonvested at June 30, 2022 576 $ 4.90 636 $ 4.60

Accumulated Other Comprehensive Income

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

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

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

Other comprehensive income (loss) before reclassifications ( 8,490 ) 471 ( 98 ) ( 8,117 )

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Net other comprehensive income (loss) ( 8,490 ) 509 ( 105 ) ( 8,086 )

Balance at June 30, 2022 $ ( 37,906 ) $ 2,207 $ ( 468 ) $ ( 36,167 )

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 )

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

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

Other comprehensive income (loss) before reclassifications ( 5,890 ) 1,974 ( 414 ) ( 4,330 )

Amounts reclassified from AOCI to interest expense (2) — 82 ( 17 ) 65

Net other comprehensive income (loss) ( 5,890 ) 2,056 ( 431 ) ( 4,265 )

Balance at June 30, 2022 $ ( 37,906 ) $ 2,207 $ ( 468 ) $ ( 36,167 )

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

Other comprehensive income (loss) before reclassifications 1,062 — — 1,062

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

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

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

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

______________________

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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

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

In accordance with ASC 260, Earnings Per Share, a company that has participating securities is required to utilize the two-class

method for calculating earnings per share (“EPS”) unless the treasury stock method results in lower EPS.

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

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

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

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

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Net loss $ ( 8,567 ) $ ( 5,391 ) $ ( 11,869 ) $ ( 10,304 )

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Adjustment for 2021 Warrants outstanding (2) 1,893 1,897 1,894 1,059

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 )

Shares used to calculate net loss per share, basic and diluted 44,708 44,440 44,649 43,561

Per common share net loss:

Basic and diluted net loss per common share $ ( 0.25 ) $ ( 0.17 ) $ ( 0.38 ) $ ( 0.62 )

Cash dividends declared per common share $ — $ — $ — $ —

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(1) Preferred Stock does not participate in losses.

Table of Conte nts

(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

June 30, Six Months Ended

2022 2021 2022 2021

Options 546 825 573 843

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

2,046 2,325 2,073 2,343

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, 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 .

As there was no undistributed income for the six months ended June 30, 2022, no such allocation was necessary.

In addition, given the undistributed loss in the three and six months ended June 30, 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 June 30, 2022, and $ 7.93 to $ 25.16 for three months ended June 30, 2021.

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 six months ended June 30, 2022, and $ 7.93 to $ 25.16 for six months ended June 30, 2021.

The 2019 Warrants excluded from the calculation of diluted net loss per share for the three and six months ended June 30, 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 March 31, 2022, the carrying values of these financial instruments approximated fair value.

As of June 30, 2022, the carrying values of these financial instruments approximated fair value.

Derivative Financial Instruments

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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.

Table of Conte nts

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

The following tables show the liabilities measured at fair value for the Preferred Stock derivatives as of June 30, 2022 and December 31, 2021.

Fair Value Measurements as of June 30, 2022

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

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

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

The following table presents the change in the Preferred Stock derivatives during the six months ended June 30, 2022.

Six Months Ended June 30, 2022

Beginning balance $ 8,224

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_______________________________

(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).

(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).

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 3 % to 10 % as of March 31, 2022.

The probability of a change-in-control event ranged from 3 % to 10 % as of June 30, 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 3.1 years as of March 31, 2022, and 3.6 years as of December 31, 2021.

The probabilities resulted in a weighted average term of 2.9 years as of June 30, 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.

Table of Conte nts

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 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

June 30, Six Months Ended

2022 2021 2022 2021

Interest expense (1) $ 38 $ — $ 82 $ —

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

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

The following tables present the assets and liabilities measured at fair value on a recurring basis for the interest rate swaps as of June 30, 2022 and December 31, 2021.

Fair Value Measurements as of June 30, 2022

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

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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 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 $ 10.3 million and $ 10.9 million as of March 31, 2022 and December 31, 2021, respectively.

Table of Conte nts

The carrying value of this fixed-rate debt was $ 9.3 million and $ 10.9 million as of June 30, 2022 and December 31, 2021, respectively.

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

What changed 10-Q

Item 1. Financial Statements