Adoption of Accounting Standards Codification 606

We adopted ASC 606 with an initial application as of January 1, 2018. We utilized the modified retrospective method, under which the cumulative effect of initially applying the new guidance is recognized as an adjustment to certain captions on the condensed consolidated balance sheet, including the opening balance of retained earnings in the six months ended June 30, 2018.

The net impact to the various captions on our January 1, 2018 opening unaudited condensed consolidated balance sheets was as follows:



	(In thousands)
	December 31, 2017					January 1, 2018
Unaudited Condensed Consolidated Balance Sheets	Balances Without Adoption of ASC 606		Effect of Adoption			Balances With Adoption of ASC 606
Assets
Contract assets	$	—	$	68,739		$	68,739
Inventories	$	122,161	$	(39,002	)	$	83,159
Non-current deferred income taxes	$	261	$	(95	)	$	166
Liabilities
Contract liabilities	$	—	$	24,460		$	24,460
Accrued liabilities	$	28,329	$	(6,091	)	$	22,238
Non-current deferred income taxes	$	15,981	$	2,608		$	18,589
Shareholders’ Equity
Retained earnings	$	161,364	$	8,665		$	170,029

Under ASC 606, we no longer net progress payments from customers related to inventory purchases against inventories but instead, they are included in contract liabilities on the condensed consolidated balance sheets. See Note 6.

The net impact to retained earnings as a result of adopting ASC 606 on the January 1, 2018 opening balance sheet was shown as a change in “other” on the condensed consolidated statements of cash flows.

The following tables summarize the impact of adopting ASC 606 on our unaudited condensed consolidated financial statements for the three and six months ended June 30, 2018 (in thousands, except per share data):



	June 30, 2018
Unaudited Condensed Consolidated Balance Sheets	As Reported			Effect of Adoption			Balances Without Adoption of ASC 606
Assets
Current Assets
Cash and cash equivalents	$	3,532		$	—		$	3,532
Accounts receivable, net of allowance for doubtful accounts of $838 and $868 at March 31, 2018 and December 31, 2017, respectively	64,439			—			64,439
Contract assets	81,663			(81,663		)	—
Inventories	95,244			53,730			148,974
Production cost of contracts	10,719			—			10,719
Other current assets	12,638			(1,109		)	11,529
Total Current Assets	268,235			(29,042		)	239,193
Property and equipment, net of accumulated depreciation of $155,069 and $143,216 at June 30, 2018 and December 31, 2017, respectively	106,636			—			106,636
Goodwill	136,051			—			136,051
Intangibles, net	117,485			—			117,485
Non-current deferred income taxes	130			131			261
Other assets	3,356			—			3,356
Total Assets	$	631,893		$	(28,911	)	$	602,982
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	71,660		$	—		$	71,660
Contract liabilities	15,164			(15,164		)	—
Accrued liabilities	25,813			2,673			28,486
Total Current Liabilities	112,637			(12,491		)	100,146
Long-term debt	231,159			—			231,159
Non-current deferred income taxes	19,947			(3,606		)	16,341
Other long-term liabilities	18,149			—			18,149
Total Liabilities	381,892			(16,097		)	365,795
Commitments and contingencies (Notes 11, 13)
Shareholders’ Equity
Common stock - $0.01 par value; 35,000,000 shares authorized; 11,401,525 and 11,332,841 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively	114			—			114
Additional paid-in capital	81,331			—			81,331
Retained earnings	175,243			(12,814		)	162,429
Accumulated other comprehensive loss	(6,687		)	—			(6,687		)
Total Shareholders’ Equity	250,001			(12,814		)	237,187
Total Liabilities and Shareholders’ Equity	$	631,893		$	(28,911	)	$	602,982



	Three Months Ended June 30, 2018									Six Months Ended June 30, 2018
Unaudited Condensed Consolidated Statements of Operations	As Reported			Effect of Adoption			Balances Without Adoption of ASC 606			As Reported			Effect of Adoption			Balances Without Adoption of ASC 606
Net Revenues	$	154,827		$	45		$	154,872		$	305,282		$	(11,952	)	$	293,330
Cost of Sales	122,799			2,597			125,396			246,499			(7,606		)	238,893
Gross Profit	32,028			(2,552		)	29,476			58,783			(4,346		)	54,437
Selling, General and Administrative Expenses	21,194			—			21,194			40,521			—			40,521
Restructuring Charges	5,238			—			5,238			7,411			—			7,411
Operating Income	5,596			(2,552		)	3,044			10,851			(4,346		)	6,505
Interest Expense	(3,763		)	—			(3,763		)	(6,661		)	—			(6,661		)
Income (Loss) Before Taxes	1,833			(2,552		)	(719		)	4,190			(4,346		)	(156		)
Income Tax Expense (Benefit)	242			(11		)	231			(1		)	(87		)	(88		)
Net Income (Loss)	$	1,591		$	(2,541	)	$	(950	)	$	4,191		$	(4,259	)	$	(68	)
Earnings (Loss) Per Share
Basic earnings (loss) per share	$	0.14					$	(0.08	)	$	0.37					$	(0.01	)
Diluted earnings (loss) per share	$	0.14					$	(0.08	)	$	0.36					$	(0.01	)
Weighted-Average Number of Common Shares Outstanding
Basic	11,394						11,394			11,370						11,370
Diluted	11,624						11,394			11,609						11,370



	Three Months Ended June 30, 2018								Six Months Ended June 30, 2018
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)	As Reported		Effect of Adoption			Balances Without Adoption of ASC 606			As Reported		Effect of Adoption			Balances Without Adoption of ASC 606
Net Income (Loss)	$	1,591	$	(2,541	)	$	(950	)	$	4,191	$	(4,259	)	$	(68	)
Other Comprehensive Income (Loss), Net of Tax:
Amortization of actuarial losses and prior service costs, net of tax benefit of $44 and $89 for the three and six months ended June 30, 2018, respectively	142		—			142			283		—			283
Change in unrealized gains and losses on cash flow hedges, net of tax of $28 and $89 for the three and six months ended June 30, 2018, respectively	87		—			87			281		—			281
Other Comprehensive Income (Loss), Net of Tax	229		—			229			564		—			564
Comprehensive Income (Loss)	$	1,820	$	(2,541	)	$	(721	)	$	4,755	$	(4,259	)	$	496



	Six Months Ended June 30, 2018
Unaudited Condensed Consolidated Statements of Cash Flows	As Reported			Effect of Adoption			Balances Without Adoption of ASC 606
Cash Flows from Operating Activities
Net Income (Loss)	$	4,191		$	(4,259	)	$	(68	)
Adjustments to Reconcile Net Income (Loss) to
Net Cash Provided by Operating Activities:
Depreciation and amortization	12,315			—			12,315
Property and equipment impairment due to restructuring	4,375			—			4,375
Stock-based compensation expense	2,115			—			2,115
Deferred income taxes	3,966			(3,606		)	360
Recovery of doubtful accounts	(30		)	—			(30		)
Other	9,050			(7,661		)	1,389
Changes in Assets and Liabilities:
Accounts receivable	11,172			—			11,172
Contract assets	(81,663		)	81,663			—
Inventories	29,417			(53,730		)	(24,313		)
Production cost of contracts	160			—			160
Other assets	1,475			(1,494		)	(19		)
Accounts payable	20,117			—			20,117
Contract liabilities	15,164			(15,164		)	—
Accrued and other liabilities	(5,597		)	4,251			(1,346		)
Net Cash Provided by Operating Activities	26,227			—			26,227
Cash Flows from Investing Activities
Purchases of property and equipment	(7,513		)	—			(7,513		)
Proceeds from sale of assets	67			—			67
Payments for purchase of Certified Thermoplastics Co., LLC, net of cash acquired	(30,993		)	—			(30,993		)
Net Cash Used in Investing Activities	(38,439		)	—			(38,439		)
Cash Flows from Financing Activities
Borrowings from senior secured revolving credit facility	189,600			—			189,600
Repayments of senior secured revolving credit facility	(175,000		)	—			(175,000		)
Net cash paid upon issuance of common stock under stock plans	(1,006		)	—			(1,006		)
Net Cash Provided by Financing Activities	13,594			—			13,594
Net Increase in Cash and Cash Equivalents	1,382			—			1,382
Cash and Cash Equivalents at Beginning of Period	2,150			—			2,150
Cash and Cash Equivalents at End of Period	$	3,532		$	—		$	3,532