What changed in this filing

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Item 1. Financial Statements

2020-08-07 compared with 2020-05-11 · 394 added, 220 removed, 467 unchanged (57% of the section changed)

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(in thousands, except per share data) 2020 2019 2020 2019

Net sales $ 150,420 $ 221,666 $ 350,165 $ 434,922

Cost of sales (exclusive of depreciation and amortization shown separately below) 115,389 164,099 267,630 326,286

4 unchanged sentences

Other operating (income) expense, net ( 955 ) 388 4,174 236

Loss from operations

Income (loss) from operations ( 8,206 ) 7,512 ( 253,538 ) 7,195

Interest expense 18,696 13,958 35,773 27,759

4 unchanged sentences

Share of net income (loss) from joint venture 927 ( 203 ) 656 66

Net income (loss)

Other comprehensive loss:

Net loss $ ( 21,748 ) $ ( 7,283 ) $ ( 269,939 ) $ ( 26,801 )

Other comprehensive gain (loss):

Foreign currency translation gain (loss) 994 ( 1,497 ) ( 13,348 ) ( 176 )

1 unchanged sentence

Change in fair value of interest rate swap, net of tax ( 1,255 ) ( 6,962 ) ( 12,464 ) ( 10,818 )

reclassification adjustment for (gains) losses included in net income, net of tax

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

Other comprehensive income (loss) 2,377 ( 8,459 ) $ ( 22,122 ) $ ( 10,994 )

Comprehensive income (loss)

Basic net income (loss) per common share:

Net income (loss) per common share

Comprehensive loss $ ( 19,371 ) $ ( 15,742 ) $ ( 292,061 ) $ ( 37,795 )

Basic net loss per common share:

Net loss per common share $ ( 0.59 ) $ ( 0.17 ) $ ( 6.55 ) $ ( 0.64 )

Weighted average common shares outstanding 42,197 42,028 42,154 42,000

Diluted net income (loss) per common share:

Net income (loss) per common share

Diluted net loss per common share:

Net loss per common share $ ( 0.59 ) $ ( 0.17 ) $ ( 6.55 ) $ ( 0.64 )

Weighted average common shares outstanding 42,197 42,028 42,154 42,000

See notes to condensed consolidated financial statements (unaudited).

Condensed Consolidated Balance Sheet s

(in thousands, except per share data)

March 31, 2020

December 31, 2019

Condensed Consolidated Balance Sheets

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

Current assets:

1 unchanged sentence

Accounts receivable, net 105,661 131,558

Inventories 121,031 118,722

Income tax receivable 17,458 5,973

3 unchanged sentences

Operating lease right-of-use assets 77,121 65,496

Goodwill 196,467 439,095

Intangible assets, net 306,577 329,260

1 unchanged sentence

Other non-current assets 7,350 8,885

Total assets $ 1,296,014 $ 1,541,984

Liabilities, Preferred Stock, and Stockholders’ Equity

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Commitments and contingencies (Note 12)

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

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

98,707 93,012

Stockholders' equity:

Common stock - $0.01 par value per share, 90,000 shares authorized, 42,313 and 42,757 shares issued and outstanding at December 31, 2019, and March 31, 2020, respectively

Common stock - $ 0.01 par value per share, 90,000 shares authorized, 42,313 and 42,747 shares issued and outstanding at December 31, 2019, and June 30, 2020, respectively

Additional paid-in capital 498,294 501,615

Warrants 1,076 1,076

Accumulated deficit ( 375,222 ) ( 105,283 )

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Condensed Consolidated Statements of Changes in Stockholders’ Equity

Three Months Ended March 31, 2020 and 2019

(in thousands)

Retained earnings (Accumulated

Accumulated other comprehensive income (loss)

Three Months Ended June 30, 2020 and 2019

(in thousands) Number

value Additional

capital Warrants Retained earnings (Accumulated

deficit) Accumulated other comprehensive income (loss) Total

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

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

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

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

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

— — — — — ( 1,255 ) ( 1,255 )

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

— — — — — 2,638 2,638

Foreign currency translation gain — — — — — 994 994

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

(in thousands) Number

value Additional

capital Retained earnings (Accumulated

deficit) Accumulated other comprehensive income (loss) Total

Balance, March 31, 2019 42,367 $ 424 $ 506,442 $ ( 78,060 ) $ ( 33,849 ) $ 394,957

Net loss — — — ( 7,283 ) — ( 7,283 )

Dividends declared or accrued for common stock — — ( 2,992 ) — — ( 2,992 )

Share-based compensation expense — — 1,106 — — 1,106

Change in fair value of interest rate swap, net of tax of $ 1,993

— — — — ( 6,962 ) ( 6,962 )

Foreign currency translation loss — — — — ( 1,497 ) ( 1,497 )

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

See notes to condensed consolidated financial statements (unaudited).

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Six Months Ended June 30, 2020 and 2019

(in thousands) Number

value Additional

capital Warrants Retained earnings (Accumulated

deficit) Accumulated other comprehensive income (loss) Total

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

Net loss — — — — ( 269,939 ) — ( 269,939 )

Dividends accrued for preferred stock — — ( 5,994 ) — — — ( 5,994 )

2 unchanged sentences

Change in fair value of interest rate swap, net of tax of $ 3,770

— — — — — ( 12,464 ) ( 12,464 )

Reclassification of interest rate swap settlement to income, net of tax of $ 1,116

— — — — — 3,690 3,690

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

Balance, March 31, 2020

(in thousands)

Retained earnings (Accumulated

Accumulated other comprehensive income (loss)

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

(in thousands) Number

value Additional

capital Retained earnings (Accumulated

deficit) Accumulated other comprehensive income (loss) Total

Balance, December 31, 2018 42,104 $ 421 $ 508,655 $ ( 58,491 ) $ ( 31,314 ) $ 419,271

Net loss — — — ( 26,801 ) — ( 26,801 )

Dividends declared or accrued for common stock — — ( 5,934 ) — — ( 5,934 )

2 unchanged sentences

Change in fair value of interest rate swap, net of tax of $ 3,097

Foreign currency translation gain

— — — — ( 10,818 ) ( 10,818 )

Foreign currency translation loss — — — — ( 176 ) ( 176 )

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

Balance, March 31, 2019

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

See notes to condensed consolidated financial statements (unaudited).

Condensed Consolidated Statements of Cash Flows

Three Months Ended

Six Months Ended

(in thousands) 2020 2019

Cash flows from operating activities

Net income (loss)

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

Net loss $ ( 269,939 ) $ ( 26,801 )

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

Depreciation and amortization 46,385 46,349

2 unchanged sentences

Loss on extinguishment of debt and write-off of debt issuance costs — 2,699

Share of net income/loss from joint venture, net of cash dividends received

Share of net income from joint venture, net of cash dividends received ( 656 ) ( 66 )

Compensation expense from issuance of share-based awards 2,707 1,979

Deferred income taxes ( 8,889 ) ( 8,093 )

Other ( 2,207 ) 540

Changes in operating assets and liabilities:

Accounts receivable 23,485 ( 17,723 )

Inventories ( 4,327 ) ( 4,839 )

Accounts payable ( 12,391 ) ( 1,405 )

Income taxes receivable and payable, net ( 12,897 ) 1,646

Net cash provided by (used in) operating activities

Other 11,544 7,727

Net cash provided by operating activities 15,862 4,367

Cash flows from investing activities

2 unchanged sentences

Proceeds from sale of property, plant, and equipment 3,112 1,949

Net cash provided by (used in) investing activities

Other — ( 726 )

Net cash used in investing activities ( 12,512 ) ( 19,771 )

Cash flows from financing activities

Cash paid for debt issuance or prepayment costs

Cash paid for debt issuance costs ( 286 ) ( 967 )

Dividends paid — ( 5,913 )

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Proceeds from (repayments of) short-term debt, net ( 411 ) ( 6,218 )

Net cash provided by (used in) financing activities

Other ( 1,523 ) ( 1,759 )

Net cash provided by financing activities 53,418 19,718

Effect of exchange rate changes on cash flows ( 5,776 ) ( 225 )

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Notes to Condensed Consolidated Financial Statements

March 31, 2020

June 30, 2020

Amounts in thousands, except per share data

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Securities and Exchange Commission (the “SEC”) on March 16, 2020.

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, 2020 and 2019 ;

financial position as of March 31, 2020 , and December 31, 2019 ;

and cash flows for the three months ended March 31, 2020 and 2019 , on a basis consistent with our audited consolidated financial statements other than the adoption of new accounting standards (see Accounting Standards Recently Adopted section below).

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

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

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

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These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and accompanying notes included in the 2019 Annual Report.

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

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

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

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The strategic options we are evaluating include further cost savings and cash generation initiatives, more efficient capital deployment, changes to our debt and equity structure to improve financial flexibility and liquidity, and the sale of part or all of NN, among others.

As discussed in our 2019 Annual Report, on December 11, 2019, we issued preferred stock for net proceeds of $95.7 million and used a portion of the proceeds to repay amounts due at that time on our Senior Secured Revolver.

As discussed in our 2019 Annual Report, on December 11, 2019, we issued Series B Convertible Preferred Stock (“Preferred Stock”) for net proceeds of $ 95.7 million and used a portion of the proceeds to repay amounts due at that time on our Senior Secured Revolver.

In December 2019, we amended our Credit Agreement which, in turn, extended the due date of our Senior Secured Revolver to July 20, 2022, reduced the total capacity under the Senior Secured Revolver to $ 75.0 million, and extended the due date of our Incremental Term Loan to October 19, 2022, matching the date of our longer-dated Senior Secured Term Loan.

Additionally, as part of this amendment, our debt covenants were amended to establish more restrictive leverage ratios that also become more restrictive over time.

Our Consolidated Net Leverage Ratio covenant (the “financial leverage ratio covenant”) is required to be complied with on a quarterly basis at the end of each of our quarterly reporting periods.

Our Consolidated Net Leverage Ratio (the “financial leverage ratio”) covenant is required to be complied with on a quarterly basis at the end of each of our quarterly reporting periods.

Our financial leverage ratio covenant is based upon our consolidated net indebtedness at each quarter end and our trailing twelve-month Adjusted EBITDA as defined in our Credit Agreement.

In order to maintain compliance with the financial leverage ratio covenant, our operational and financial performance must improve .

In accordance with Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), we have evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the Condensed Consolidated Financial Statements are issued.

In July 2020, we amended our Credit Agreement to waive compliance with the financial leverage ratio covenant for the second and third quarters of 2020.

During this period, we are required to maintain minimum liquidity levels, provide certain financial and other information, and take certain other action as specified in the amendment.

Failure to maintain the required minimum liquidity levels or satisfy other requirements set forth in the amendment would allow the revolving credit lenders, the Senior Secured Term loan lenders, and the Incremental Term Loan lenders to cause amounts due under our credit facility to become immediately due and payable and would have a material, adverse impact on our financial position.

aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the Condensed Consolidated Financial Statements are issued.

We rely on cash flow generated from operations and available borrowings under our Senior Secured Revolver to fund our working capital and other operating and investing needs.

Our ability to borrow under the Senior Secured Revolver is based on our continued compliance with our financial leverage ratio covenant, as defined, which becomes more restrictive in the second quarter of 2020 and the first quarter of 2021.

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

Our ability to borrow under the Senior Secured Revolver is based on our continued compliance with the minimum liquidity requirements and, for periods beginning in the fourth quarter of 2020, the financial leverage ratio covenant, as defined, which become more restrictive over time and upon the occurrence of a qualified sale transaction.

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

We have developed a plan to mitigate the impact of COVID-19, which includes the implementation of a series of specific and identified cost reductions in both our corporate and business groups, in addition to actions already taken, including further reducing our direct and indirect labor costs and benefits.

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If there are differences between these estimates and actual results, our consolidated financial statements may be materially affected.

Based on our current and projected use of the Senior Secured Revolver, as well as cash flows expected to be generated from operations and investing activities, we anticipate that we may not be able to maintain compliance with the existing financial leverage ratio covenant for the next twelve months.

If we are unable to comply with our financial ratio covenant, then the revolving credit lenders, the Senior Secured Term Loan lenders, and the Incremental Term Loan lenders could take action to cause amounts due under our credit facility to become due and payable unless we are able to amend such covenants or otherwise refinance our debt.

Based on available borrowing capacity of the Senior Secured Revolver, as well as cash flows expected to be generated from operations and investing activities, we anticipate that we may not be able to maintain compliance with the existing financial leverage ratio covenant for the next twelve months.

If we are unable to comply with our financial leverage ratio covenant, then the revolving credit lenders, the Senior Secured Term Loan lenders, and the Incremental Term Loan lenders could take action to cause amounts due under our credit facility to become due and payable unless we are able to amend such covenants or otherwise refinance our debt.

Our ability to amend our covenants or refinance our debt is dependent upon several factors, and therefore there can be no assurance that we would be successful in these efforts.

If we are unable to access future borrowings or be required to pay amounts due under our credit facilities prior to their normal maturity dates, this would have a material impact to our financial position.

We are in negotiations with our lenders to amend the financial leverage ratio covenant;

however, there can be no assurance that we will be successful in such efforts.

Accordingly, we believe there is substantial doubt about our ability to continue as a going concern for the twelve-month period following the date of this report.

Accordingly, we believe there is substantial doubt about our ability to continue as a going concern for the twelve-month period following the date of this Quarterly Report.

Accounting Standards Recently Adopted

Financial Instruments - Credit Losses .

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326):

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which modifies the measurement of expected credit losses on certain financial instruments and the timing of when such losses are recorded.

In November 2019, the

SEC issued SAB No.

119, codified in ASC Topic 326, Financial Instruments-Credit Losses, which provides guidance on

accounting of credit losses.

In November 2019, the SEC issued SAB No.

119, codified in ASC Topic 326, Financial Instruments-Credit Losses, which provides guidance on accounting of credit losses.

We adopted ASU 2016-13 on January 1, 2020, using the modified retrospective transition method which resulted in no material adjustment to our financial statements as of January 1, 2020.

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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.

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

This standard is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

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

In connection with the filing of this Quarterly Report, we have revised the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), Changes in Stockholders’ Equity, and Cash Flows for the three months ended March 31, 2019 , and the related notes to revise for those misstatements that impacted such period.

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

We will revise the remaining 2019 previously issued quarterly financial statements in connection with future 2020 filings on Form 10-Q.

The following table presents the effect of the correction of the misstatements and the resulting revision on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

Three Months Ended March 31, 2019

As Originally Reported

Three Months Ended June 30, 2019

As Originally Reported Adjustment As Revised

Cost of sales (exclusive of depreciation and amortization) $ 163,513 $ 586 $ 164,099

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Diluted net income (loss) per share $ ( 0.16 ) $ ( 0.01 ) $ ( 0.17 )

Six Months Ended June 30, 2019

As Originally Reported Adjustment As Revised

Cost of sales (exclusive of depreciation and amortization) $ 324,782 $ 1,504 $ 326,286

Income (loss) from operations 8,699 ( 1,504 ) 7,195

Loss before (provision) benefit for income taxes and share of net income from joint venture ( 22,545 ) ( 1,504 ) ( 24,049 )

Net income (loss) ( 25,297 ) ( 1,504 ) ( 26,801 )

Foreign currency translation gain (loss) ( 172 ) ( 4 ) ( 176 )

Comprehensive income (loss) ( 36,287 ) ( 1,508 ) ( 37,795 )

Basic net income (loss) per share $ ( 0.60 ) $ ( 0.04 ) $ ( 0.64 )

Diluted net income (loss) per share $ ( 0.60 ) $ ( 0.04 ) $ ( 0.64 )

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

As Originally Reported

As of and for the three months ended March 31, 2019

As Originally Reported Adjustment As Revised

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

Additional paid-in capital $ 513,380 $ ( 8,824 ) $ 504,556

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Total stockholders' equity 377,861 ( 532 ) 377,329

As of and for the six months ended June 30, 2019

Additional paid-in capital $ 513,380 $ ( 8,824 ) $ 504,556

Net income (loss) ( 25,297 ) ( 1,504 ) ( 26,801 )

Accumulated deficit ( 93,328 ) 7,985 ( 85,343 )

Foreign currency translation gain (loss) ( 172 ) ( 4 ) ( 176 )

Accumulated other comprehensive income (loss) ( 42,615 ) 307 ( 42,308 )

Total stockholders' equity 377,861 ( 532 ) 377,329

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

Three Months Ended March 31, 2019

As Originally Reported

Six Months Ended June 30, 2019

As Originally Reported Adjustment As Revised

Net income (loss) $ ( 25,297 ) $ ( 1,504 ) $ ( 26,801 )

1 unchanged sentence

Changes in operating assets and liabilities, net of acquisitions:

Inventories ( 5,826 ) 987 ( 4,839 )

Income taxes receivable and payable, net 315 1,331 1,646

Other 7,210 517 7,727

Segment Information

Management has concluded that Life Sciences, which is focused on growth in the medical end market, primarily in the orthopaedics and medical/surgical end markets;

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

Management has concluded that:

Life Sciences, which is focused on growth in the medical end market, primarily in the orthopaedics and medical/surgical end markets;

Mobile Solutions, which is focused on growth in the general industrial and

automotive end markets;

and Power Solutions, which is focused on growth in the electrical and aerospace and defense end markets, constitute our operating segments.

Life Sciences, Mobile Solutions, and Power Solutions are considered 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 (“CODM”) reviews discrete financial information for purposes of allocating resources and assessing performance.

Life Sciences, Mobile Solutions, and Power Solutions are considered 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.

The following tables present results of operations by reportable segment.

Consolidations

Three Months Ended March 31, 2020

Goodwill impairment

Sciences Mobile

Solutions Power

Solutions Corporate

Consolidations Total

Three Months Ended June 30, 2020

Net sales $ 72,399 $ 41,037 $ 37,491 $ ( 507 ) (a) $ 150,420

Income (loss) from operations 4,333 ( 4,592 ) 1,454 ( 9,401 ) $ ( 8,206 )

1 unchanged sentence

Loss before benefit for income taxes and share of net loss from joint venture $ ( 26,021 )

Three Months Ended March 31, 2019

Three Months Ended June 30, 2019

Net sales $ 91,332 $ 79,444 $ 51,393 $ ( 503 ) (a) $ 221,666

Income (loss) from operations 9,305 3,506 5,682 ( 10,981 ) $ 7,512

1 unchanged sentence

Loss before provision for income taxes and share of net income from joint venture $ ( 6,503 )

Sciences Mobile

Solutions Power

Solutions Corporate

Consolidations Total

Six Months Ended June 30, 2020

Net sales $ 156,447 $ 110,921 $ 83,892 $ ( 1,095 ) (a) $ 350,165

Goodwill impairment 146,757 — 92,942 — $ 239,699

Income (loss) from operations ( 136,646 ) ( 4,328 ) ( 88,880 ) ( 23,684 ) ( 253,538 )

Interest expense ( 35,773 )

Other ( 239 )

Loss before provision for income taxes and share of net income from joint venture $ ( 289,550 )

Six Months Ended June 30, 2019

Net sales $ 177,340 $ 157,519 $ 101,050 $ ( 987 ) (a) $ 434,922

Income (loss) from operations 13,151 6,695 9,506 ( 22,157 ) $ 7,195

Interest expense ( 27,759 )

Other ( 3,485 )

Loss before benefit for income taxes and share of net income from joint venture $ ( 24,049 )

_______________________________

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

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

March 31, 2020

December 31, 2019

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

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

June 30, 2020 December 31, 2019

Life Sciences $ 637,927 $ 811,526

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Corporate and Consolidations 100,069 46,657

Total $ 1,296,014 $ 1,541,984

Inventories are comprised of the following amounts:

March 31, 2020

December 31, 2019

June 30, 2020 December 31, 2019

Raw materials $ 37,491 $ 49,135

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

Sciences Power

Solutions Total

Balance as of December 31, 2019 $ 344,316 $ 94,779 $ 439,095

Currency impact and other ( 1,092 ) ( 1,837 ) ( 2,929 )

Balance as of March 31, 2020

As of March 31, 2020 , and December 31, 2019 , no goodwill was recorded in the Mobile Solutions reportable segment.

Impairments ( 146,757 ) ( 92,942 ) ( 239,699 )

Balance as of June 30, 2020 $ 196,467 $ — $ 196,467

As of June 30, 2020, and December 31, 2019, no goodwill was recorded in the Mobile Solutions reportable segment.

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

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Management’s judgment used in the assessment of fair value is more significant under the current market conditions and economic uncertainty created by COVID-19.

The carrying values of the Life Sciences and Power Solutions reporting units exceeded their estimated fair values as of March 31, 2020.

The carrying values of the Life Sciences and Power Solutions reporting units exceeded their estimated fair values as of the March 31, 2020, analysis.

As a result of our analysis, we recorded an impairment loss on goodwill of $ 146.8 million and $ 92.9 million for Life Sciences and Power Solutions, respectively, to the “Goodwill impairment” line on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

Life Sciences goodwill as of March 31, 2020 , was $196.3 million .

In conjunction with the goodwill impairment test performed during the first quarter of 2020, Life Sciences goodwill was impaired by $146.8 million , resulting in the carrying value of the reporting unit being equal to its fair value.

If our assessment of the relevant facts and circumstances change, or if the actual performance falls short of expected results, an additional impairment charge will be required.

Life Sciences goodwill as of June 30, 2020, was $ 196.5 million.

In conjunction with the goodwill impairment test performed during the first quarter of 2020, Life Sciences goodwill was impaired by $ 146.8 million, resulting in the carrying value of the reporting unit being equal to its fair value as of the date of the assessment.

If our assessment of the relevant facts and circumstances changes, or if the actual performance falls short of expected results, an additional impairment charge will be required.

An impairment of goodwill may also lead us to record an impairment of other intangible assets.

The carrying value of finite-lived intangible assets for the Life Sciences group as of March 31, 2020 , was $204.1 million .

The carrying value of finite-lived intangible assets for the Life Sciences group as of June 30, 2020, was $ 196.3 million.

Intangible Assets, Net

The following table shows changes in the carrying amount of intangible assets, net, by reportable segment.

Sciences Mobile

Solutions Power

Solutions Total

Balance as of December 31, 2019 $ 211,847 $ 32,416 $ 84,997 $ 329,260

Balance as of March 31, 2020

Amortization ( 15,509 ) ( 1,677 ) ( 5,497 ) ( 22,683 )

Balance as of June 30, 2020 $ 196,338 $ 30,739 $ 79,500 $ 306,577

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

As of March 31, 2020 , the goodwill impairment testing trigger caused us to test intangible assets in all of our reportable segments for impairment as well.

Based on our analysis, no impairment charge was deemed necessary in the three months ended March 31, 2020 .

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

Investment in Joint Venture

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Foreign currency translation loss ( 307 )

Balance as of March 31, 2020

Balance as of June 30, 2020 $ 22,104

During the fourth quarter of 2018, as a result of changing market conditions, the fair value of the JV was assessed, and we recorded an impairment of $ 16.6 million against our investment in the JV.

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During the first quarter of 2020, the goodwill impairment testing trigger caused us to test the JV for impairment as well.

Based on our analysis, no impairment charge was deemed necessary in the three months ended March 31, 2020 .

Based on our analysis, no impairment charge was deemed necessary.

It is reasonably possible that material deviation of future performance from the estimates used in the March 31, 2020, impairment test could result in additional impairment to our investment in the JV in subsequent periods.

We recognized sales to the JV of less than $0.1 million and less than $0.1 million during the three months ended March 31, 2020 and 2019 , respectively.

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

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

Among other provisions, the CARES Act allows for the carryback of certain tax losses and favorably impacts the deductibility of interest expense and depreciation.

The CARES Act had a material impact on our financial statements and has been accounted for in the benefit/provision for income taxes for the three months ended March 31, 2020 , which is the period of enactment.

Our effective tax rate was 5.9% for the three months ended March 31, 2020 , and (12.8)% for the three months ended March 31, 2019 .

The effective tax rate for the three months ended March 31, 2020 , differs from the U.S.

The CARES Act had a material impact on our financial statements and has been accounted for in the benefit/provision for income taxes for the six months ended June 30, 2020.

Our effective tax rate was 12.9 % and 6.6 % for the three and six months ended June 30, 2020, respectively, and ( 8.9 )% and ( 11.7 )% for the three and six months ended June 30, 2019, respectively.

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

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

The effective tax rate was also impacted by the CARES Act and the anticipated withholding taxes which would be due upon repatriation of the unremitted earnings of foreign subsidiaries.

Our effective tax rate for the three months ended March 31, 2019 , differs from the U.S.

federal statutory tax rate of 21% principally due to a discrete tax charge of $6.0 million related to final tax regulations published by the Department of the Treasury and Internal Revenue Service on February 4, 2019, as well as the minimum tax on global intangible low-tax income (“GILTI”).

The year-to-date effective tax rate was also impacted by the CARES Act and the anticipated withholding taxes which would be due upon repatriation of the unremitted earnings of foreign subsidiaries.

The effective tax rate for the three months ended June 30, 2020, was primarily impacted by the effect of the impairment of nondeductible goodwill on the estimated annual effective tax rate and the impact of the minimum tax on global intangible low-tax income (“GILTI”).

The 2019 effective tax rate differs from the U.S.

federal statutory tax rate of 21 % principally due to a discrete tax charge of $ 6.0 million related to final tax regulations published by the Department of the Treasury and Internal Revenue Service on February 4, 2019, as well as the minimum tax on GILTI.

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

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

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

a term loan with a face amount of $ 300.0 million, maturing on October 19, 2022 (the

“Incremental Term Loan”);

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

The credit facility is collateralized by all of our assets.

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

March 31, 2020

December 31, 2019

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

June 30, 2020 December 31, 2019

Senior Secured Term Loan $ 523,438 $ 526,313

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_______________________________

(1) In addition to this amount, costs of $2.7 million and $3.0 million related to the Senior Secured Revolver are recorded in other non-current assets as of March 31, 2020 , and December 31, 2019 , respectively.

We capitalized interest costs of $0.3 million and $0.6 million in the three months ended March 31, 2020 and 2019 , respectively, related to construction in progress.

(1) In addition to this amount, costs of $ 2.4 million and $ 3.0 million related to the Senior Secured Revolver are recorded in other non-current assets as of June 30, 2020, and December 31, 2019, respectively.

We capitalized interest costs of $ 0.2 million and $ 0.5 million in the three months ended June 30, 2020 and 2019, respectively, and $ 0.5 million and $ 1.1 million in the six months ended June 30, 2020 and 2019, respectively, related to construction in progress.

Senior Secured Term Loan

Outstanding borrowings under the Senior Secured Term Loan bear interest at the greater of 0.75% or one-month LIBOR plus an applicable margin of 5.75% .

At March 31, 2020 , the Senior Secured Term Loan bore interest at 6.74% .

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

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

Incremental Term Loan

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

At March 31, 2020 , the Incremental Term Loan bore interest of 6.74% .

At June 30, 2020, the Incremental Term Loan bore interest of 5.93 %.

Senior Secured Revolver

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

At March 31, 2020 , the weighted average interest rate on outstanding borrowings under the Senior Secured Revolver was 4.96% .

At June 30, 2020, the weighted average interest rate on outstanding borrowings under the Senior Secured Revolver was 4.18 %.

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

We had $60.0 million outstanding under the Senior Secured Revolver at March 31, 2020 .

Total capacity under the Senior Secured Revolver was $75.0 million as of March 31, 2020 , with $3.4 million available for future borrowings after reductions for outstanding letters of credit and outstanding borrowings as of March 31, 2020 .

Our credit facility is subject to certain financial covenants based on a consolidated net leverage ratio, becoming more restrictive over time.

If our operational or financial performance does not improve, we may be required to take actions to further reduce expenditures and decrease our net indebtedness to maintain compliance in future periods or attempt to amend our covenants or refinance our debt.

We were in compliance with all covenants under our credit facility at March 31, 2020 .

Derivative Instruments and Hedging Activities

We had $ 62.5 million outstanding under the Senior Secured Revolver at June 30, 2020.

Total capacity under the Senior Secured Revolver was $ 75.0 million as of June 30, 2020, with $ 0.7 million available for future borrowings after reductions for outstanding letters of credit and outstanding borrowings as of June 30, 2020.

In July 2020, we amended our Credit Agreement to waive compliance with the financial leverage ratio covenant for the second and third quarters of 2020.

During this period, we are required to maintain minimum liquidity levels, provide certain financial and other information, and take certain other action as specified in the amendment.

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

Interest Rate Swap

In February 2019, we entered into a $ 700.0 million amortizing notional amount fixed-rate interest rate swap agreement to manage the interest rate risk associated with our long-term variable-rate debt until 2022.

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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

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Right-of-use assets obtained in exchange for new operating lease liabilities (1) $ 15,398 $ 2,878

_______________________________

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

As disclosed in our 2019 Annual Report, we had an operating lease commitment that had not yet commenced.

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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 (income) expense, net.”

During the second quarter of 2020 and as part of our overall plan to improve liquidity during the COVID-19 pandemic, we negotiated with certain lessors to defer rent payments on leased buildings.

In total, $ 0.8 million of operating lease payments are being deferred over a period ranging from April 2020 to December 2020 and will be repaid over a period ranging from June 2020 through December 2022.

The deferral of rent payments did not result in a substantial change in total lease payments over the individual lease terms.

We have elected to apply lease accounting relief announced by the FASB in April 2020 and have treated these lease concessions as if they existed in the original contracts rather than applying lease modification accounting.

The net impact on cash flows from operating activities on the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020, was $ 0.4 million in cash savings.

Restructuring and Integration

We incurred no new restructuring and integration charges for the three months ended March 31, 2020 .

During the three months ended March 31, 2020 , we made cash payments of $0.1 million for restructuring costs.

As of March 31, 2020 , we had $0.4 million accrued for severance costs associated with restructuring and integration projects.

We incurred no new restructuring and integration charges for the six months ended June 30, 2020.

During the six months ended June 30, 2020, we made cash payments of $ 0.2 million for restructuring costs.

As of June 30, 2020, we had $ 0.3 million accrued for severance costs associated with restructuring and integration projects.

We expect to pay this balance over the next 0.9 years.

We expect to pay $0.3 million within the next twelve months.

Commitments and Contingencies

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We have filed actions in each court requesting dismissal of the matter based on the earlier court action.

Although we anticipate a favorable resolution to all matters, we can provide no assurances that we will be successful in achieving dismissal of all pending cases.

While we believe a loss is not probable, we estimate the range of possible losses related to this assessment is from $0 to $6.0 million .

No amount was accrued at March 31, 2020 , for this matter.

In May 2020, we received an unfavorable decision in one of the lawsuits, and as a result have recorded a liability to the Brazilian tax authorities and a receivable from the former shareholders of Autocam for the same amount.

Although we anticipate a favorable resolution to the remaining matters, we can provide no assurances that we will be successful in achieving dismissal of all pending cases.

dollar amount that would be owed in the event of an unfavorable decision is subject to interest, penalties, and currency impacts and therefore is dependent on the timing of the decision.

For the remaining open lawsuits, we currently believe the cumulative potential liability in the event of unfavorable decisions on all matters will be less than $ 5.0 million, inclusive of interest and penalties.

We are entitled to indemnification from the former shareholders of Autocam, subject to the limitations and procedures set forth in the agreement and plan of merger relating to the Autocam acquisition.

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 June 30, 2020.

Securities Offering Matter

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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.

Preferred Stock

Preferred Stock and Stockholders' Equity

Series B Convertible Preferred Stock

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

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If a Preferred Stock dividend is declared by the Board of Directors, then it will be paid in cash.

Additionally, holders of Preferred Stock participate in any dividends paid on shares of NN’s common stock on an as-converted basis at a fixed conversion rate.

If our common stockholders do not approve a proposal at our 2020 annual stockholder meeting to issue common stock in excess of thresholds established by certain Nasdaq stock market rules upon the exercise of Warrants or the conversion or redemption of Preferred Stock, then the annual dividend rate will immediately increase to 11.625% until such time approval is obtained.

Additionally, holders of Preferred Stock participate in any dividends paid on shares of our common stock on an as-converted basis at a fixed conversion rate.

Our common stockholders approved a proposal at our 2020 annual stockholder meeting to issue common stock in excess of thresholds established by certain Nasdaq stock market rules upon the exercise of Warrants or the conversion or redemption of Preferred Stock.

Preferred Stock is classified as mezzanine equity, between liabilities and stockholders’ equity, because certain features of the Preferred Stock could require redemption of some or all Preferred Stock upon events that are considered not solely within our control, including a leverage ratio threshold and the passage of time.

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

As of March 31, 2020 , the carrying value of the Preferred Stock shares was $95.7 million which included $3.6 million of accumulated unpaid and deemed dividends.

The following table presents the change in the Preferred Stock carrying value during the three months ended March 31, 2020 .

Three Months Ended March 31, 2020

As of June 30, 2020, the carrying value of the Preferred Stock shares was $ 98.7 million which included $ 6.0 million of accumulated unpaid and deemed dividends.

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

Six Months Ended June 30, 2020

Beginning balance $ 93,012

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Ending balance $ 98,707

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 will become exercisable if a person or group becomes the beneficial owner of 15 % or more of our outstanding common stock (including in the form of synthetic ownership through derivative positions).

In the event that the rights become exercisable due to the triggering ownership threshold being crossed, each right will entitle its holder to purchase one thousandth of a share of Series C Junior Participating Preferred Stock for $ 31.50 per share.

Rights held by the triggering person or entity will become void and will not be exercisable.

The Board of Directors may, rather than permitting the exercise of the rights, exchange each right (other than rights held by the triggering person or entity) for one share of common stock per right, subject to adjustment.

The Board of Directors will, prior to the rights becoming exercisable, in general be entitled to redeem the rights for $ 0.001 per right.

The rights expire on March 31, 2021.

Revenue from Contracts with Customers

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

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

Sciences Mobile

Solutions Power

Solutions Intersegment

Eliminations Total

United States and Puerto Rico $ 60,027 $ 20,237 $ 30,859 $ ( 507 ) $ 110,616

China 2,716 10,726 1,252 — 14,694

Brazil 7 2,132 63 — 2,202

Mexico 6 2,456 4,119 — 6,581

Germany 4,986 851 90 — 5,927

Switzerland 2,590 618 2 — 3,210

Other 2,067 4,017 1,106 — 7,190

Total net sales $ 72,399 $ 41,037 $ 37,491 $ ( 507 ) $ 150,420

Three Months Ended March 31, 2019

Three Months Ended June 30, 2019

Sciences Mobile

Solutions Power

Solutions Intersegment

Eliminations Total

United States and Puerto Rico $ 74,229 $ 44,512 $ 40,580 $ ( 503 ) $ 158,818

China 1,873 9,318 1,598 — 12,789

Brazil — 9,636 80 — 9,716

Mexico 117 5,066 4,235 — 9,418

Germany 8,447 1,316 21 — 9,784

Switzerland 3,509 1,153 25 — 4,687

Other 3,157 8,443 4,854 — 16,454

Total net sales $ 91,332 $ 79,444 $ 51,393 $ ( 503 ) $ 221,666

Six Months Ended June 30, 2020

Sciences Mobile

Solutions Power

Solutions Intersegment

Eliminations Total

United States and Puerto Rico $ 130,389 $ 57,366 $ 69,156 $ ( 1,095 ) $ 255,816

China 4,754 18,418 2,409 — 25,581

Brazil 7 10,715 193 — 10,915

Mexico 126 7,292 6,262 — 13,680

Germany 10,596 3,001 129 — 13,726

Switzerland 5,622 1,549 23 — 7,194

Other 4,953 12,580 5,720 — 23,253

Total net sales $ 156,447 $ 110,921 $ 83,892 $ ( 1,095 ) $ 350,165

Six Months Ended June 30, 2019

Sciences Mobile

Solutions Power

Solutions Intersegment

Eliminations Total

United States and Puerto Rico $ 142,572 $ 88,969 $ 81,695 $ ( 987 ) $ 312,249

China 3,565 18,471 3,436 — 25,472

Brazil — 18,018 149 — 18,167

Mexico 244 10,444 6,944 — 17,632

Germany 17,332 2,722 37 — 20,091

Switzerland 6,775 2,512 41 — 9,328

Other 6,852 16,383 8,748 — 31,983

Total net sales $ 177,340 $ 157,519 $ 101,050 $ ( 987 ) $ 434,922

Deferred Revenue

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Balance at January 1, 2020 $ 4,172

Balance at March 31, 2020

Revenue recognized during the three months ended March 31, 2020 , from amounts included in deferred revenue at the beginning of the period for performance obligations satisfied or partially satisfied during the period, was $1.0 million .

Balance at June 30, 2020 $ 3,105

Revenue recognized during the six months ended June 30, 2020, from amounts included in deferred revenue at the beginning of the period for performance obligations satisfied or partially satisfied during the period, was $ 1.6 million.

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

Transaction Price Allocated to Future Performance Obligations

We are required to disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of March 31, 2020 , unless our contracts meet one of the practical expedients.

We are required to disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of June 30, 2020, 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 $25.6 million , or 13% of consolidated net sales, during the three months ended March 31, 2020 , and $23.3 million , or 11% of consolidated net sales, during the three months ended March 31, 2019 .

We recognized sales from a single customer of $ 20.0 million, or 13 % of consolidated net sales, during the three months ended June 30, 2020, and $ 23.0 million, or 10 % of consolidated net sales, during the three months ended June 30, 2019.

We recognized sales from this customer of $ 45.5 million, or 13 % of consolidated net sales, during the six months ended June 30, 2020, and $ 45.1 million, or 10 % of consolidated net sales, during the six months ended June 30, 2019.

Revenues from this customer are in our Life Sciences and Power Solutions groups.

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Three Months Ended

June 30, Six Months Ended

2020 2019 2020 2019

Stock options $ 140 $ 169 $ 321 $ 361

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Stock Options

During the three months ended March 31, 2020 , we granted options to purchase 158,700 shares to certain key employees.

The weighted average grant date fair value of the options granted during the three months ended March 31, 2020 , was $4.76 per share.

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

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

The fair value of our options cannot be determined by market value because they are not traded in an open market.

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The following table shows the weighted average assumptions relevant to determining the fair value of stock options granted in 2020.

Expected term

Expected term 6 years

Risk free interest rate 1.42 %

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

The following table presents stock option activity for the three months ended March 31, 2020 .

The following table presents stock option activity for the six months ended June 30, 2020.

Number of Options

(in thousands)

(in thousands) Weighted-

(per share) Weighted-

Term (years) Aggregate

Outstanding at January 1, 2020 775 $ 13.24

Granted 159 9.44

Forfeited or expired ( 44 ) 14.53

Outstanding at March 31, 2020

Exercisable at March 31, 2020

Outstanding at June 30, 2020 890 $ 12.50 5.7 $ — (1)

Exercisable at June 30, 2020 600 $ 13.92 4.0 $ — (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, 2020 , was greater than the exercise price of any individual option grant.

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

Restricted Stock

During the three months ended March 31, 2020 , we granted 460,255 restricted stock awards to non-executive directors, officers and certain other key employees.

The shares of restricted stock granted during the three months ended March 31, 2020 , vest pro-rata generally over three years for officers and certain other key employees and over one year for non-executive directors and certain officers.

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

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

We determined the fair value of the shares awarded by using the closing price of our common stock as of the date of grant.

The weighted average grant date value of restricted stock granted in the three months ended March 31, 2020 , was $9.35 per share.

Total grant-date fair value of restricted stock that vested in the three months ended March 31, 2020 , was $1.0 million .

The following table presents the status of unvested restricted stock awards as of March 31, 2020 , and changes during the three months then ended.

(in thousands)

The weighted average grant date value of restricted stock granted in the six months ended June 30, 2020, was $ 9.35 per share.

Total grant-date fair value of restricted stock that vested in the six months ended June 30, 2020, was $ 1.0 million.

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

(in thousands) Weighted

Unvested at January 1, 2020 222 $ 9.33

Unvested at March 31, 2020

Granted 460 9.35

Vested ( 116 ) 8.97

Forfeited ( 19 ) 9.32

Unvested at June 30, 2020 547 $ 9.16

Performance Share Units

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Threshold Performance

(50% of Shares)

Target Performance

(100% of Shares)

Maximum Performance

(50% of Shares) Target Performance

(100% of Shares) Maximum Performance

(150% of Shares)

35th Percentile

50th Percentile

75th Percentile

2020 grants 35 th Percentile 50 th Percentile 75 th Percentile

Threshold Performance

(35% of Shares)

Target Performance

(100% of Shares)

Maximum Performance

(35% of Shares) Target Performance

(100% of Shares) Maximum Performance

(150% of Shares)

2020 grants 4.9 % 5.1 % 5.6 %

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

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

(in thousands)

Grant Date Fair

TSR Awards ROIC Awards

Award Year Shares

(in thousands) Grant Date

(per share) Shares

(in thousands) Grant Date Fair

Value (per share)

2020 139 $ 10.88 157 $ 9.44

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 March 31, 2020 , and changes during the three months then ended.

Nonvested TSR Awards

Nonvested ROIC Awards

(in thousands)

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

Nonvested TSR Awards Nonvested ROIC Awards

(in thousands) Weighted

(per share) Shares

(in thousands) Weighted

Nonvested at January 1, 2020 65 $ 13.27 79 $ 11.50

Nonvested at March 31, 2020

Granted 139 10.88 157 9.44

Forfeited ( 19 ) 11.43 ( 21 ) 12.88

Nonvested at June 30, 2020 185 $ 10.53 215 $ 11.04

Accumulated Other Comprehensive Income

The following table presents the components of accumulated other comprehensive income (“AOCI”).

Foreign Currency Translation

Interest rate swap

Income taxes (2)

Balance at December 31, 2019

The following tables present the components of accumulated other comprehensive income (“AOCI”).

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

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

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

Amounts reclassified from AOCI (1)

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

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

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

Balance at March 31, 2019 $ ( 29,993 ) $ ( 4,960 ) $ 1,104 $ ( 33,849 )

Net current-period other comprehensive income (loss) ( 1,497 ) ( 8,955 ) 1,993 ( 8,459 )

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

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

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

Other comprehensive income (loss) before reclassifications ( 13,348 ) ( 16,234 ) 3,770 ( 25,812 )

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

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

Balance at March 31, 2019

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

Balance at December 31, 2018 $ ( 31,314 ) $ — $ — $ ( 31,314 )

Net current-period other comprehensive income (loss) ( 176 ) ( 13,915 ) 3,097 ( 10,994 )

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

_______________________

(1) Amount reflects $1.1 million of settlements on the interest rate swap, net of tax, that are reclassified out of AOCI into interest expense on the Consolidated Statements of Operations and Comprehensive Income (Loss) .

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

(2) Represents settlements on the interest rate swap.

Net Income (Loss) Per Common Share

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Three Months Ended

Net income (loss)

June 30, Six Months Ended

2020 2019 2020 2019

Net loss $ ( 21,748 ) $ ( 7,283 ) $ ( 269,939 ) $ ( 26,801 )

Preferred Stock cumulative dividends and deemed dividends ( 3,043 ) — ( 5,994 ) —

Numerator for basic and diluted net income (loss) per common share (1)

Numerator for basic and diluted net loss per common share (1) $ ( 24,791 ) $ ( 7,283 ) $ ( 275,933 ) $ ( 26,801 )

Weighted average common shares outstanding, basic and diluted 42,197 42,028 42,154 42,000

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Three Months Ended

June 30, Six Months Ended

2020 2019 2020 2019

Options 890 754 890 754

Warrants 1,500 — 1,500 —

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

Given the loss from continuing operations in the three months ended March 31, 2020 and 2019 , all options and warrants are considered anti-dilutive and were excluded from the calculation of diluted net income (loss) per share.

Stock options excluded from the calculations of diluted net income (loss) per share had a per share exercise price ranging from $7.93 to $25.16 for the three months ended March 31, 2020 , and $8.90 to $25.16 for three months ended March 31, 2019 .

Warrants excluded from the calculation of diluted net income (loss) per share for the three months ended March 31, 2020 , had a per share exercise price of $12.00 .

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

27,668 754 27,668 754

Given the loss from continuing operations in the three and six months ended June 30, 2020 and 2019, all options and warrants are considered anti-dilutive and were excluded from the calculation of diluted net income (loss) per share.

Stock options excluded from the calculations of diluted net income (loss) per share had a per share exercise price ranging from $ 7.93 to $ 25.16 for the three months ended June 30, 2020, and $ 8.86 to $ 25.16 for three months ended June 30, 2019.

Stock options excluded from the calculations of diluted net income (loss) per share had a per share exercise price ranging from $ 7.93 to $ 25.16 for the six months ended June 30, 2020, and $ 8.86 to $ 25.16 for six months ended June 30, 2019.

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

Preferred Stock excluded from the calculation of diluted net income (loss) per share for the three and six months ended June 30, 2020, was calculated on an as-converted basis.

Holders of Preferred Stock will have the right to convert up to 25 % of their Preferred Stock into common shares per quarter after December 31, 2023, at a conversion price that equals a 30 -day volume weighted average price per common share.

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

The potentially dilutive Preferred Stock in the preceding table presents the more dilutive result of these conversion prices as if the Preferred Stock were converted on March 31, 2020 .

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

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

As of June 30, 2020, the carrying values of these financial instruments approximated fair value except for long-term debt as disclosed below.

Derivative Financial Instruments

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• Contingent dividends.

The feature that allows for the dividend rate to increase to 11.625% in 2020 is not considered clearly and closely related to the debt host.

The feature that allowed for the dividend rate to increase to 11.625 % in 2020 if shareholder approval was not obtained is not considered clearly and closely related to the debt host.

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

• Dividends withholding.

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

The following tables show the liabilities measured at fair value for the Preferred Stock derivative above as of March 31, 2020 , and December 31, 2019 .

Fair Value Measurements as of March 31, 2020

Quoted Prices in Active Markets for Identical Assets (Level 1)

Significant Other Observable Inputs (Level 2)

Significant Unobservable Inputs

The following tables show the liabilities measured at fair value for the Preferred Stock derivative above as of June 30, 2020, and December 31, 2019.

Fair Value Measurements as of June 30, 2020

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

Derivative liability - other current liabilities $ — $ — $ 1,794

Derivative liability - other non-current liabilities — — 649

Total $ — $ — $ 2,443

Fair Value Measurements as of December 31, 2019

Quoted Prices in Active Markets for Identical Assets (Level 1)

Significant Other Observable Inputs (Level 2)

Significant Unobservable Inputs

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 $ — $ — $ 60

Derivative liability - other non-current liabilities — — 2,235

Total $ — $ — $ 2,295

The inputs for determining fair value of the Preferred Stock derivative are classified as Level 3 inputs.

Level 3 fair value is based on unobservable inputs based on the best information available.

These inputs include probability assessments of how long the Preferred Stock will remain outstanding, whether the leverage ratio threshold will be exceeded, and whether approval is obtained from common stockholders for issuance of common stock upon exercise of the Warrants and conversion or redemption of the Preferred Stock.

These inputs include probability assessments of how long the Preferred Stock will remain outstanding, whether the leverage ratio threshold will be exceeded, and, as of December 31, 2019, whether approval would be obtained from common stockholders for issuance of common stock upon exercise of the Warrants and conversion or redemption of the Preferred Stock.

Inputs also include the percentage of Preferred Stock held by non-U.S.

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

The following table presents the change in the Preferred Stock derivative during the three months ended March 31, 2020 .

Three Months Ended March 31, 2020

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

Six Months Ended June 30, 2020

Beginning balance $ 2,295

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

All of the change in fair value relates to the derivative liability held at March 31, 2020 .

Cash Flow Hedge

All of the change in fair value relates to the derivative liability held at June 30, 2020.

Interest Rate Swap

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

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

The interest rate swap effectively mitigates our exposures to the risks and variability of changes in LIBOR.

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

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If one-month LIBOR is greater than the minimum percentage under the Senior Secured Term Loan, the changes in cash flows of the interest rate swap are expected to exactly offset changes in cash flows of the variable rate debt.

The interest rate swap is designated as a cash flow hedge.

As of March 31, 2020 , we reported a $19.6 million loss , net of tax, in accumulated other comprehensive income related to the interest rate swap.

The following tables present the liabilities measured at fair value on a recurring basis for the interest rate swap as of March 31, 2020 , and December 31, 2019 .

Fair Value Measurements as of March 31, 2020

Quoted Prices in Active Markets for Identical Assets

Significant Other Observable Inputs

Significant Unobservable Inputs

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

As of June 30, 2020, we reported a cumulative $ 18.2 million loss, net of tax, in accumulated other comprehensive income related to the interest rate swap.

The following tables present the liabilities measured at fair value on a recurring basis for the interest rate swap as of June 30, 2020, and December 31, 2019.

Fair Value Measurements as of June 30, 2020

Description Quoted Prices in Active Markets for Identical Assets

(Level 1) Significant Other Observable Inputs

(Level 2) Significant Unobservable Inputs

Derivative liability - other current liabilities $ — $ 13,633 $ —

Derivative liability - other non-current liabilities — 10,027 —

Total $ — $ 23,660 $ —

Fair Value Measurements as of December 31, 2019

Quoted Prices in Active Markets for Identical Assets (Level 1)

Significant Other Observable Inputs (Level 2)

Significant Unobservable Inputs

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 $ — $ 5,943 $ —

Derivative liability - other non-current liabilities — 6,290 —

Total $ — $ 12,233 $ —

The inputs for determining fair value of the interest rate swap are classified as Level 2 inputs.

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

Fixed Rate Debt

The fair value of floating-rate debt generally approximates the carrying amount as interest rates are based on short-term maturities.

As of March 31, 2020, the aggregate fair value of our Senior Secured Term Loan and Incremental Term Loan is approximately $557.7 million , compared to the net carrying amount of $763.9 million .

As of June 30, 2020, the aggregate fair value of our Senior Secured Term Loan and Incremental Term Loan is approximately $ 677.7 million, compared to the net carrying amount of $ 760.9 million.

The fair value of these term loans is based on recently completed market transactions and is primarily classified as Level 2 within the fair value hierarchy.

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 was $11.1 million and $9.8 million as of March 31, 2020 and December 31, 2019 , respectively.

The fair value of our outstanding fixed-rate debt included in the “International lines of credit and other loans” line item within Note 9 to these Notes to Condensed Consolidated Financial Statements was $ 14.1 million and $ 9.8 million as of June 30, 2020, and December 31, 2019, respectively.

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

The carrying value of this fixed-rate debt was $11.1 million and $9.8 million as of March 31, 2020 and December 31, 2019 , respectively.

The carrying value of this fixed-rate debt was $ 14.1 million and $ 9.8 million as of June 30, 2020 and December 31, 2019, respectively.

Subsequent Event

Preferred Share Purchase Rights

The rights will become exercisable if a person or group becomes the beneficial owner of 15% or more of our outstanding common stock (including in the form of synthetic ownership through derivative positions).

In the event that the rights become exercisable due to the triggering ownership threshold being crossed, each right will entitle its holder to purchase one one-thousandth of a share of Series C Junior Participating Preferred Stock for $31.50 .

Rights held by the triggering person or entity will become void and will not be exercisable.

The Board of Directors will, prior to the rights becoming exercisable, in general be entitled to redeem the rights for $0.001 per right.

The rights expire on March 31, 2021.

In July 2020, we amended our Credit Agreement to waive compliance with the financial leverage ratio covenant for the second and third quarters of 2020.

During this period, we are required to maintain minimum liquidity levels, provide certain financial and other information, and take certain other action as specified in the amendment.

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