Adjustments to Previously Reported Financial Statements from the Adoption of an Accounting Pronouncement | Note 13. Adjustments to Previously Reported Financial Statements from the Adoption of an Accounting Pronouncement As discussed in Note 1, Summary of Operations and Significant Accounting Policies Topic 606 and ASU’s 2016-15 and 2016-18 were adopted by the The following tables summarize the effects of adopting Topic 606 and ASU 2016-18 had on our previously reported financial statements. Condensed Consolidated Balance Sheet (In thousands, except par value data) December 31, 2017 As Reported Adoption of Topic 606 As Adjusted (Unaudited) Assets Current assets: Cash and cash equivalents $ 148,113 $ — $ 148,113 Restricted cash 3,849 — 3,849 Accounts receivable 121,576 — 121,576 Contract assets — 105,619 105,619 Inventories 67,064 (62,952 ) 4,112 Inventories held for customer orders 64,858 (64,858 ) — Prepaid expenses and other current assets 27,507 — 27,507 Total current assets 432,967 (22,191 ) 410,776 Property, plant, and equipment, net 123,480 — 123,480 Goodwill 2,807 — 2,807 Intangible assets, net 150 958 1,108 Other noncurrent assets 14,130 4,261 18,391 Total assets $ 573,534 $ (16,972 ) $ 556,562 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable and accrued expenses $ 166,743 $ — $ 166,743 Accrued warranty 29,163 1,256 30,419 Deferred revenue 81,048 (81,048 ) — Customer deposits 10,134 (9,702 ) 432 Current maturities of long-term debt 35,506 — 35,506 Contract liabilities — 2,763 2,763 Total current liabilities 322,594 (86,731 ) 235,863 Long-term debt, net of debt issuance costs and current maturities 85,879 — 85,879 Other noncurrent liabilities 4,444 494 4,938 Total liabilities 412,917 (86,237 ) 326,680 Commitments and contingencies Stockholders’ equity: Common shares, $0.01 par value, 100,000 shares authorized and 34,049 shares issued and 34,021 shares outstanding at December 31, 2017 340 — 340 Paid-in capital 301,543 — 301,543 Accumulated other comprehensive loss (558 ) — (558 ) Accumulated deficit (140,197 ) 69,265 (70,932 ) Treasury stock, at cost, 28 shares at December 31, 2017 (511 ) — (511 ) Total stockholders’ equity 160,617 69,265 229,882 Total liabilities and stockholders’ equity $ 573,534 $ (16,972 ) $ 556,562 The primary effects of the adoption of Topic 606 on the Company’s balance sheet include 1) amounts being recognized as revenue for work performed as production takes place over time as contract assets, which differs from the prior practice of including the balances in inventory; 2) no longer reporting inventory held for customer orders or deferred revenue since revenue is now being recognized over the course of the production process, and before the product is delivered to the customer; 3) that contract liabilities are reported for amounts collected from customers in advance of the production of products, similar to our prior practice of recording customer deposits; and 4) the cumulative amount of the effect to prior periods’ net income related to the adoption of Topic 606 through December 31, 2017 is reflected in retained earnings. Condensed Consolidated Income Statement (In thousands, except per share data) Three Months Ended March 31, 2017 As Reported Adoption of Topic 606 As Adjusted (Unaudited) Net sales $ 191,602 $ 17,013 $ 208,615 Cost of sales 167,423 15,115 182,538 Startup and transition costs 6,159 — 6,159 Total cost of goods sold 173,582 15,115 188,697 Gross profit 18,020 1,898 19,918 General and administrative expenses 8,306 — 8,306 Income from operations 9,714 1,898 11,612 Other income (expense): Interest income 19 — 19 Interest expense (3,026 ) — (3,026 ) Realized loss on foreign currency remeasurement (1,381 ) — (1,381 ) Miscellaneous income 320 — 320 Total other expense (4,068 ) — (4,068 ) Income before income taxes 5,646 1,898 7,544 Income tax provision (2,101 ) (230 ) (2,331 ) Net income $ 3,545 $ 1,668 $ 5,213 Weighted-average common shares outstanding: Basic 33,737 33,737 33,737 Diluted 33,827 33,827 33,827 Net income per common share: Basic $ 0.11 $ 0.05 $ 0.15 Diluted $ 0.10 $ 0.05 $ 0.15 The primary effects of the adoption of Topic 606 on the Company’s condensed consolidated income statement relate to amounts being recognized as revenue for work performed as production takes place over time, which differs from the prior practice of recognizing revenue when the product was delivered to the customer. Condensed Consolidated Statement of Comprehensive Income (In thousands) Three Months Ended March 31, 2017 As Reported Adoption of Topic 606 As Adjusted (Unaudited) Net income $ 3,545 $ 1,668 $ 5,213 Other comprehensive income: Foreign currency translation adjustments 277 — 277 Comprehensive income $ 3,822 $ 1,668 $ 5,490 Condensed Consolidated Statements of Changes in Stockholders’ Equity (In thousands) Common Paid-in Accumulated other comprehensive Accumulated Treasury stock, Total stockholders' Shares Amount capital loss deficit at cost equity (Unaudited) Balance at December 31, 2017 - as reported 34,049 $ 340 $ 301,543 $ (558 ) $ (140,197 ) $ (511 ) $ 160,617 Cumulative effect of the adoption of Topic 606 — — — — 69,265 — 69,265 Balance at December 31, 2017 - as adjusted 34,049 $ 340 $ 301,543 $ (558 ) $ (70,932 ) $ (511 ) $ 229,882 The adoption of Topic 606 increased total stockholders’ equity in 2015 and 2016 by $61.2 million and $12.3 million, respectively and decreased total stockholders’ equity in 2017 by $4.2 million. Condensed Consolidated Statements of Cash Flows (In thousands) Three Months Ended March 31, 2017 As Reported Adoption of Topic 606 Adoption of ASU 2016-18 As Adjusted (Unaudited) Cash flows from operating activities: Net income $ 3,545 $ 1,668 $ — $ 5,213 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,829 123 — 3,952 Share-based compensation expense 1,707 — — 1,707 Amortization of debt issuance costs 143 — — 143 Changes in assets and liabilities: — — Accounts receivable (28,722 ) — — (28,722 ) Contract assets — 2,738 — 2,738 Inventories (15,220 ) 15,152 — (68 ) Prepaid expenses and other current assets 6,816 — — 6,816 Other noncurrent assets 5,871 (27 ) (6,000 ) (156 ) Accounts payable and accrued expenses 11,211 — — 11,211 Accrued warranty 1,983 97 — 2,080 Customer deposits 4,827 (4,110 ) — 717 Deferred revenue 19,751 (19,751 ) — — Contract liabilities — 4,110 — 4,110 Other noncurrent liabilities 197 — — 197 Net cash provided by (used in) operating activities 15,938 — (6,000 ) 9,938 Cash flows from investing activities: Purchase of property and equipment (16,922 ) — — (16,922 ) Net cash used in investing activities (16,922 ) — — (16,922 ) Cash flows from financing activities: Repayments of term loan (938 ) — — (938 ) Net repayments of accounts receivable financing (1,233 ) — — (1,233 ) Net proceeds from working capital loans 517 — — 517 Net repayments of other debt (1,155 ) — — (1,155 ) Restricted cash 331 — (331 ) — Net cash used in financing activities (2,478 ) — (331 ) (2,809 ) Impact of foreign exchange rates on cash and cash equivalents (63 ) — (63 ) Net change in cash and cash equivalents (3,525 ) — (6,331 ) (9,856 ) Cash, cash equivalents and restricted cash, beginning of year 119,066 10,797 129,863 Cash, cash equivalents and restricted cash, end of period $ 115,541 $ — $ 4,466 $ 120,007 The primary effects of the adoption of Topic 606 on the Company’s condensed consolidated statement of cash flows include 1) the establishment of contract assets and liabilities; 2) the reduction of inventory and elimination of inventory held for customer orders; and 3) the elimination of deferred revenue. For more details on these items, see the disclosure related to the effect of the adoption of Topic 606 on the Company’s condensed consolidated balance sheet. As part of our adoption of Topic 606, the Company has elected to use the following practical expedients: - for completed contracts that have variable consideration, the Company used the transaction price at the date on which the contract was completed, rather than estimating amounts for variable consideration in each comparative reporting period. - for modified contracts, the Company did not separately evaluate the effects of the contract modifications before the beginning of the earliest period presented. Instead, the Company reflected the aggregate effect of all of the modifications that occur before the beginning of the earliest period presented in determining the transaction price, identifying the satisfied and unsatisfied performance obligations, and allocating the transaction price to the performance obligations. - for all periods presented before the date of initial application, the Company did not disclose the amount of the transaction price allocated to remaining performance obligations, nor an explanation of when they expect to recognize that amount as revenue. The impact of applying the above practical expedients may change the period of revenue recognition but not the total amount to be recognized under the contract; therefore, the Company believes application of the practical expedients is not material to the comparability of the information presented above and the accounting and financial reporting related to the adoption of Topic 606. |