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 July 4, 2015 includes the impact of the restatement on the comparative unaudited quarterly financial information for the quarter ended June 28, 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 June 28, 2014 represent the previously reported unaudited balances in our Quarterly Report on Form 10-Q for the quarter ended June 28, 2014. The effects of these prior period errors on our unaudited condensed consolidated financial statements are as follows (in thousands, except per share data):



	June 28, 2014
Unaudited Condensed Consolidated Balance Sheet:	As Reported			Adjustments			As Restated
Assets
Current Assets
Cash and cash equivalents	$	43,751		$	—		$	43,751
Accounts receivable (less allowance for doubtful accounts of $254 at June 28, 2014)	105,209			—			105,209
Inventories	142,201			—			142,201
Production cost of contracts	11,023			—			11,023
Deferred income taxes	11,513			1,416			12,929
Other current assets	20,602			998			21,600
Total Current Assets	334,299			2,414			336,713
Property and Equipment, Net	94,070			—			94,070
Goodwill	161,940			(4,371		)	157,569
Intangibles, Net	160,285			—			160,285
Other Assets	8,660			—			8,660
Total Assets	$	759,254		$	(1,957	)	$	757,297
Liabilities and Shareholders’ Equity
Current Liabilities
Current portion of long-term debt	$	26		$	—		$	26
Accounts payable	53,749			—			53,749
Accrued liabilities	47,973			3,589			51,562
Total Current Liabilities	101,748			3,589			105,337
Long-Term Debt, Less Current Portion	317,664			—			317,664
Deferred Income Taxes	69,747			(500		)	69,247
Other Long-Term Liabilities	17,456			(300		)	17,156
Total Liabilities	506,615			2,789			509,404
Commitments and Contingencies
Shareholders’ Equity
Common stock - $0.01 par value; 35,000,000 shares authorized; 10,892,133 shares issued at June 28, 2014	109			—			109
Additional paid-in capital	70,337			(1,633		)	68,704
Retained earnings	185,929			(3,113		)	182,816
Accumulated other comprehensive loss	(3,736		)	—			(3,736		)
Total Shareholders’ Equity	252,639			(4,746		)	247,893
Total Liabilities and Shareholders’ Equity	$	759,254		$	(1,957	)	$	757,297



	Three Months Ended June 28, 2014									Six Months Ended June 28, 2014
Unaudited Condensed Consolidated Statement of Income:	As Reported			Adjustments			As Restated			As Reported			Adjustments			As Restated
Net Revenues	$	186,516		$	—		$	186,516		$	366,269		$	—		$	366,269
Cost of Sales	149,073			(235		)	148,838			293,756			(1,080		)	292,676
Gross Profit	37,443			235			37,678			72,513			1,080			73,593
Selling, General and Administrative Expenses	20,868			—			20,868			41,955			—			41,955
Operating Income	16,575			235			16,810			30,558			1,080			31,638
Interest Expense	(6,994		)	—			(6,994		)	(14,119		)	—			(14,119		)
Income Before Taxes	9,581			235			9,816			16,439			1,080			17,519
Income Tax Expense	3,109			88			3,197			5,338			403			5,741
Net Income	$	6,472		$	147		$	6,619		$	11,101		$	677		$	11,778
Earnings Per Share
Basic earnings per share	$	0.60		$	0.01		$	0.61		$	1.02		$	0.06		$	1.08
Diluted earnings per share	$	0.59		$	0.01		$	0.60		$	1.00		$	0.06		$	1.06
Weighted-Average Number of Shares Outstanding
Basic	10,871			—			10,871			10,864			—			10,864
Diluted	11,045			—			11,045			11,122			—			11,122



	Three Months Ended June 28, 2014								Six Months Ended June 28, 2014
Unaudited Condensed Consolidated Statement of Comprehensive Income:	As Reported			Adjustments		As Restated			As Reported			Adjustments		As Restated
Net Income	$	6,472		$	147	$	6,619		$	11,101		$	677	$	11,778
Pension Adjustments
Amortization of actuarial loss and prior service costs, net of tax benefit of approximately $48 and $84 for the three months and six months ended June 28, 2014	(57		)	—		(57		)	(126		)	—		(126		)
Other Comprehensive Loss	(57		)	—		(57		)	(126		)	—		(126		)
Comprehensive Income	$	6,529		$	147	$	6,676		$	11,227		$	677	$	11,904



	Six Months Ended June 28, 2014
Unaudited Condensed Consolidated Cash Flow Statement:	As Reported			Adjustments			As Restated
Cash Flows from Operating Activities
Net Income	$	11,101		$	677		$	11,778
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and amortization	15,125			—			15,125
Stock-based compensation expense	1,288			—			1,288
Deferred income taxes	595			403			998
Excess tax benefits from stock-based compensation	(61		)	—			(61		)
Recovery of doubtful accounts	(235		)	—			(235		)
Other	1,111			(1,080		)	31
Changes in Assets and Liabilities:
Accounts receivable	(13,066		)	—			(13,066		)
Inventories	(1,694		)	—			(1,694		)
Production cost of contracts	(1,734		)	—			(1,734		)
Other assets	6,563			—			6,563
Accounts payable	(4,363		)	—			(4,363		)
Accrued and other liabilities	835			—			835
Net Cash Provided by Operating Activities	15,465			—			15,465
Cash Flows from Investing Activities
Purchases of property and equipment	(5,997		)	—			(5,997		)
Proceeds from sales of assets	51			—			51
Net Cash Used in Investing Activities	(5,946		)	—			(5,946		)
Cash Flows from Financing Activities
Repayment of term loan and other debt	(15,012		)	—			(15,012		)
Excess tax benefits from stock-based compensation	61			—			61
Net proceeds from issuance of common stock under stock plans	369			—			369
Net Cash Used in Financing Activities	(14,582		)	—			(14,582		)
Net Decrease in Cash and Cash Equivalents	(5,063		)	—			(5,063		)
Cash and Cash Equivalents at Beginning of Year	48,814			—			48,814
Cash and Cash Equivalents at End of Year	$	43,751		$	—		$	43,751