Restatement

As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2014, we restated our consolidated financial statements for the years ended December 31, 2013 and 2012 and our unaudited quarterly financial information for the first three quarters in the year ended December 31, 2014 and for each of the quarters in the year ended December 31, 2013, to correct errors in prior periods primarily related to (i) a long-term contract (“Contract”) following the discovery of misconduct by employees in the recording of direct labor costs to the Contract from 2009 through the third quarter 2014 which resulted in the identification of a forward loss provision that should have been recorded in 2009 and the impact on subsequent periods of adjustments to the forward loss provision based on information available at the time (“Forward Loss Adjustments”); and (ii) the year end reconciliation of income taxes payable and deferred tax balances identified errors primarily in 2013, 2012, and 2011 (“Tax Adjustments”). The misconduct and its related financial impact were concealed from our senior management, internal auditors, and external auditors.

Also as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2014, the Forward Loss Adjustments were based on certain assumptions and estimates. To determine the loss on the Contract, we estimated the number of units we would have expected to ship over the life of the Contract at inception of the Contract using external market industry data for fiscal years 2009, 2010, 2011, 2012, and 2013. We used data obtained directly from the customer for 2014 and 2015. The total estimated costs at any given point in time would typically include actual historical costs up to that time plus the estimated cost to produce units to be delivered. In addition, the estimated total cost for the life of the Contract includes certain inefficiencies on labor, material, and overhead costs during the initial start-up period. However, as we progress along the learning curve, the direct labor hours and overhead rates are expected to decrease as we gain technical knowhow and efficiency in producing the product. As a result of the misconduct by the employees in the recording of direct labor hours to the Contract, the historical actual direct labor hours charged to the Contract were inaccurate. As a result, we estimated the costs to complete future units at the end of each period based on an estimate of the direct labor hours chargeable to the Contract, including consideration of anticipated learning curve efficiencies that would decrease the direct labor hours over the remaining term of the Contract. Further, we used the actual direct labor hours incurred by the employees assigned to the Contract as a basis for projecting future hours, less an estimate of the time not allocable to the Contract. Using this model, we calculated the Forward Loss Adjustments from the inception of the Contract in 2009 through the expected life of the Contract. As a result of the Forward Loss Adjustments, cost of goods sold increased (decreased) approximately $6.7 million in 2009, $1.3 million in 2010, $(0.3) million in 2011, $(2.2) million in 2012, $(0.9) million in 2013, and $(0.8) million in the nine months ended September 27, 2014.

Further, as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2014, the Tax Adjustments were necessary as a result of certain calculation errors. The Tax Adjustments resulted in a net decrease to income tax expense of approximately $0.9 million in 2013 and zero in 2012. The Tax Adjustments in 2011 resulted in a reduction to the carrying value of goodwill totaling approximately $4.0 million due to a calculation error in the original purchase price allocation and subsequent performance of step 2 of our annual goodwill impairment analysis related to deferred income taxes and thus, (i) reduced deferred income taxes by approximately $2.7 million and (ii) generated a pre-tax goodwill impairment charge of approximately $1.4 million. Further, the Tax Adjustments in 2011 reduced deferred tax assets by approximately $1.6 million that were established as a result of shared-based compensation expenses recorded previously and should have been reduced as the tax deductions were utilized. Moreover, the restated amounts include previously identified and disclosed immaterial adjustments.

In evaluating whether our previously issued consolidated financial statements were materially misstated, we evaluated the cumulative impact of these items on prior periods in accordance with the guidance in ASC 250-10, “Accounting Changes and Error Corrections,” relating to SEC Staff Accounting Bulletin No. 99, “Materiality” (“SAB 99”), and SAB No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”), and we concluded these errors were in the aggregate material to the prior reporting periods, and therefore, restatement of previously filed financial statements was necessary to our previously issued 2013, 2012, 2011, and 2010 financial statements.

This Quarterly Report on Form 10-Q for the quarter ended April 4, 2015 includes the impact of the restatement on the comparative unaudited quarterly financial information for the quarter ended March 29, 2014. In addition, our future Quarterly Reports on Form 10-Q for subsequent quarterly periods during 2015 will reflect the impact of the restatement in the 2014 comparative prior quarter and year-to-date periods. Certain reclassifications have been made to prior period amounts to conform to the current year’s presentation.

The account balances labeled “As Reported” in the following tables for the quarter ended March 29, 2014 represent the previously reported unaudited balances in our Quarterly Report on Form 10-Q for the quarter ended March 29, 2014. The effects of these prior period errors on our unaudited condensed consolidated financial statements are as follows (in thousands, except per share data):



	March 29, 2014
Unaudited Condensed Consolidated Balance Sheet:	As Reported			Adjustments			As Restated
Assets
Current Assets
Cash and cash equivalents	$	29,415		$	—		$	29,415
Accounts receivable (less allowance for doubtful accounts of $427 at March 29, 2014)	100,570			—			100,570
Inventories	148,895			—			148,895
Production cost of contracts	10,479			—			10,479
Deferred income taxes	13,836			1,504			15,340
Other current assets	21,664			998			22,662
Total Current Assets	324,859			2,502			327,361
Property and Equipment, Net	94,168			—			94,168
Goodwill	161,940			(4,371		)	157,569
Intangibles, Net	162,875			—			162,875
Other Assets	9,320			—			9,320
Total Assets	$	753,162		$	(1,869	)	$	751,293
Liabilities and Shareholders’ Equity
Current Liabilities
Current portion of long-term debt	$	25		$	—		$	25
Accounts payable	53,973			—			53,973
Accrued liabilities	39,628			3,824			43,452
Total Current Liabilities	93,626			3,824			97,450
Long-Term Debt, Less Current Portion	325,171			—			325,171
Deferred Income Taxes	70,556			(500		)	70,056
Other Long-Term Liabilities	18,922			(300		)	18,622
Total Liabilities	508,275			3,024			511,299
Commitments and Contingencies
Shareholders’ Equity
Common stock - $0.01 par value; 35,000,000 shares authorized; 10,999,632 shares issued at March 29, 2014	110			—			110
Treasury stock, at cost; 143,300 shares at March 29, 2014	(1,924		)	—			(1,924		)
Additional paid-in capital	71,037			(1,633		)	69,404
Retained earnings	179,457			(3,260		)	176,197
Accumulated other comprehensive loss	(3,793		)	—			(3,793		)
Total Shareholders’ Equity	244,887			(4,893		)	239,994
Total Liabilities and Shareholders’ Equity	$	753,162		$	(1,869	)	$	751,293



	Three Months Ended March 29, 2014
Unaudited Condensed Consolidated Statement of Income:	As Reported			Adjustments			As Restated
Net Revenues	$	179,753		$	—		$	179,753
Cost of Sales	144,683			(845		)	143,838
Gross Profit	35,070			845			35,915
Selling, General and Administrative Expenses	21,087			—			21,087
Operating Income	13,983			845			14,828
Interest Expense	(7,125		)	—			(7,125		)
Income Before Taxes	6,858			845			7,703
Income Tax Expense	2,229			315			2,544
Net Income	$	4,629		$	530		$	5,159
Earnings Per Share
Basic earnings per share	$	0.43		$	0.05		$	0.48
Diluted earnings per share	$	0.42		$	0.05		$	0.46
Weighted-Average Number of Shares Outstanding
Basic	10,844			—			10,844
Diluted	11,107			—			11,107



	Three Months Ended March 29, 2014
Unaudited Condensed Consolidated Statement of Comprehensive Income:	As Reported			Adjustments		As Restated
Net Income	$	4,629		$	530	$	5,159
Pension Adjustments
Amortization of actuarial loss included in net income, net of tax benefit of $36 for the three months ended March 29, 2014	(69		)	—		(69		)
Other Comprehensive Loss	(69		)	—		(69		)
Comprehensive Income	$	4,560		$	530	$	5,090



	Three Months Ended March 29, 2014
Unaudited Condensed Consolidated Cash Flow Statement:	As Reported			Adjustments			As Restated
Cash Flows from Operating Activities
Net Income	$	4,629		$	530		$	5,159
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and amortization	7,426			—			7,426
Stock-based compensation expense	364			—			364
Deferred income taxes	(919		)	315			(604		)
Excess tax benefits from stock-based compensation	(124		)	—			(124		)
Recovery of doubtful accounts	(62		)	—			(62		)
Other	88			(845		)	(757		)
Changes in Assets and Liabilities:
Accounts receivable	(8,599		)	—			(8,599		)
Inventories	(8,388		)	—			(8,388		)
Production cost of contracts	513			—			513
Other assets	5,440			—			5,440
Accounts payable	(4,138		)	—			(4,138		)
Accrued and other liabilities	(6,067		)	—			(6,067		)
Net Cash Used in Operating Activities	(9,837		)	—			(9,837		)
Cash Flows from Investing Activities
Purchases of property and equipment	(2,192		)	—			(2,192		)
Proceeds from sales of assets	5			—			5
Net Cash Used in Investing Activities	(2,187		)	—			(2,187		)
Cash Flows from Financing Activities
Repayment of term loan and other debt	(7,506		)	—			(7,506		)
Excess tax benefits from stock-based compensation	124			—			124
Net proceeds from issuance of common stock under stock plans	7			—			7
Net Cash Used in Financing Activities	(7,375		)	—			(7,375		)
Net Decrease in Cash and Cash Equivalents	(19,399		)	—			(19,399		)
Cash and Cash Equivalents at Beginning of Year	48,814			—			48,814
Cash and Cash Equivalents at End of Year	$	29,415		$	—		$	29,415
Supplemental Disclosures of Cash Flow Information
Interest paid	$	11,397		$	—		$	11,397
Taxes paid	$	58		$	—		$	58
Non-cash activities:
Purchases of property and equipment not paid	$	182		$	—		$	182