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 nine months ended September 29, 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 nine months ended September 29, 2018 (in thousands, except per share data):



	September 29, 2018
Unaudited Condensed Consolidated Balance Sheets	As Reported			Effect of Adoption			Balances Without Adoption of ASC 606
Assets
Current Assets
Cash and cash equivalents	$	3,573		$	—		$	3,573
Accounts receivable, net of allowance for doubtful accounts of $1,212 at September 29, 2018	64,466			—			64,466
Contract assets	88,066			(88,066		)	—
Inventories	101,752			59,679			161,431
Production cost of contracts	12,021			—			12,021
Other current assets	12,124			(524		)	11,600
Total Current Assets	282,002			(28,911		)	253,091
Property and equipment, net of accumulated depreciation of $159,010 at September 29, 2018	106,583			—			106,583
Goodwill	135,769			—			135,769
Intangibles, net	114,746			—			114,746
Non-current deferred income taxes	131			130			261
Other assets	3,334			—			3,334
Total Assets	$	642,565		$	(28,781	)	$	613,784
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	73,534		$	—		$	73,534
Contract liabilities	15,108			(15,108		)	—
Accrued liabilities	31,929			4,105			36,034
Total Current Liabilities	120,571			(11,003		)	109,568
Long-term debt	229,402			—			229,402
Non-current deferred income taxes	19,427			(3,751		)	15,676
Other long-term liabilities	17,608			—			17,608
Total Liabilities	387,008			(14,754		)	372,254
Commitments and contingencies (Notes 11, 13)
Shareholders’ Equity
Common stock - $0.01 par value; 35,000,000 shares authorized; 11,409,623 shares issued and outstanding at September 29, 2018	114			—			114
Additional paid-in capital	82,447			—			82,447
Retained earnings	179,412			(14,027		)	165,385
Accumulated other comprehensive loss	(6,416		)	—			(6,416		)
Total Shareholders’ Equity	255,557			(14,027		)	241,530
Total Liabilities and Shareholders’ Equity	$	642,565		$	(28,781	)	$	613,784



	Three Months Ended September 29, 2018									Nine Months Ended September 29, 2018
Unaudited Condensed Consolidated Statements of Income	As Reported			Effect of Adoption			Balances Without Adoption of ASC 606			As Reported			Effect of Adoption			Balances Without Adoption of ASC 606
Net Revenues	$	159,842		$	(5,344	)	$	154,498		$	465,124		$	(17,296	)	$	447,828
Cost of Sales	128,726			(4,461		)	124,265			375,225			(12,067		)	363,158
Gross Profit	31,116			(883		)	30,233			89,899			(5,229		)	84,670
Selling, General and Administrative Expenses	20,956			—			20,956			61,476			—			61,476
Restructuring Charges	3,373			—			3,373			10,784			—			10,784
Operating Income	6,787			(883		)	5,904			17,639			(5,229		)	12,410
Interest Expense	(2,524		)	(1,059		)	(3,583		)	(9,186		)	(1,059		)	(10,245		)
Other Income	27			—			27			27			—			27
Income Before Taxes	4,290			(1,942		)	2,348			8,480			(6,288		)	2,192
Income Tax Expense (Benefit)	119			(726		)	(607		)	118			(813		)	(695		)
Net Income	$	4,171		$	(1,216	)	$	2,955		$	8,362		$	(5,475	)	$	2,887
Earnings Per Share
Basic earnings per share	$	0.37					$	0.26		$	0.73					$	0.25
Diluted earnings per share	$	0.36					$	0.25		$	0.72					$	0.25
Weighted-Average Number of Common Shares Outstanding
Basic	11,404						11,404			11,382						11,382
Diluted	11,683						11,683			11,639						11,639



	Three Months Ended September 29, 2018							Nine Months Ended September 29, 2018
Unaudited Condensed Consolidated Statements of Comprehensive Income	As Reported		Effect of Adoption			Balances Without Adoption of ASC 606		As Reported		Effect of Adoption			Balances Without Adoption of ASC 606
Net Income	$	4,171	$	(1,216	)	$	2,955	$	8,362	$	(5,475	)	$	2,887
Other Comprehensive Income (Loss), Net of Tax:
Amortization of actuarial losses and prior service costs, net of tax benefit of $45 and $134 for the three and nine months ended September 29, 2018, respectively	140		—			140		423		—			423
Change in unrealized gains and losses on cash flow hedges, net of tax of $16 and $104 for the three and nine months ended September 29, 2018, respectively	49		—			49		330		—			330
Other Comprehensive Income (Loss), Net of Tax	189		—			189		753		—			753
Comprehensive Income	$	4,360	$	(1,216	)	$	3,144	$	9,115	$	(5,475	)	$	3,640



	Nine Months Ended September 29, 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	$	8,362		$	(5,475	)	$	2,887
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and amortization	18,635			—			18,635
Property and equipment impairment due to restructuring	5,784			—			5,784
Stock-based compensation expense	3,414			—			3,414
Deferred income taxes	3,446			(3,751		)	(305		)
Provision for doubtful accounts	344			—			344
Other	9,275			(6,463		)	2,812
Changes in Assets and Liabilities:
Accounts receivable	10,771			—			10,771
Contract assets	(88,066		)	88,066			—
Inventories	22,909			(59,679		)	(36,770		)
Production cost of contracts	(1,447		)	—			(1,447		)
Other assets	3,709			(3,644		)	65
Accounts payable	22,610			—			22,610
Contract liabilities	15,108			(15,108		)	—
Accrued and other liabilities	(1,452		)	6,054			4,602
Net Cash Provided by Operating Activities	33,402			—			33,402
Cash Flows from Investing Activities
Purchases of property and equipment	(12,796		)	—			(12,796		)
Proceeds from sale of assets	117			—			117
Payments for purchase of Certified Thermoplastics Co., LLC, net of cash acquired	(30,711		)	—			(30,711		)
Net Cash Used in Investing Activities	(43,390		)	—			(43,390		)
Cash Flows from Financing Activities
Borrowings from senior secured revolving credit facility	239,700			—			239,700
Repayments of senior secured revolving credit facility	(227,100		)	—			(227,100		)
Net cash paid upon issuance of common stock under stock plans	(1,189		)	—			(1,189		)
Net Cash Provided by Financing Activities	11,411			—			11,411
Net Increase in Cash and Cash Equivalents	1,423			—			1,423
Cash and Cash Equivalents at Beginning of Period	2,150			—			2,150
Cash and Cash Equivalents at End of Period	$	3,573		$	—		$	3,573