16. CHANGES IN ACCOUNTING POLICIES

The Company adopted ASC Topic 606 on January 1, 2018 through a cumulative adjustment to equity and contract assets of $1,069,000. Under ASC Topic 606, revenue of certain tooling programs that include an enforceable right to payment are now recognized over time based on the extent of progress towards completion of its performance obligation. Prior to the adoption of ASC Topic 606, the Company recognized revenue for these contracts on a completed contract basis.

The following tables summarize the effects of adopting Topic 606 on our consolidated financial statements for the twelve months ended December 31, 2018.

Consolidated Statement of Income



	Year Ended
	December 31, 2018
	As Reported			Adjustments		Without adoption of Topic 606
Net sales:
Products	$	256,217,000		$	—	$	256,217,000
Tooling	13,268,000			3,932,000		17,200,000
Total net sales	269,485,000			3,932,000		273,417,000

Total cost of sales	242,344,000			3,031,000		245,375,000

Gross margin	27,141,000			901,000		28,042,000

Selling, general and administrative expense	27,838,000			—		27,838,000
Goodwill impairment	2,403,000			—		2,403,000
Total expenses	30,241,000			—		30,241,000

Operating Income (Loss)	(3,100,000		)	901,000		(2,199,000		)

Other income and expense
Net periodic post-retirement benefit cost	(48,000		)	—		(48,000		)
Interest expense	2,394,000			—		2,394,000
Total other income and expense	2,346,000			—		2,346,000

Income (loss) before taxes	(5,446,000		)	901,000		(4,545,000		)

Income tax expense	(664,000		)	189,000		(475,000		)

Net income (loss)	$	(4,782,000	)	$	712,000	$	(4,070,000	)

Net income (loss) per common share:
Basic	$	(0.62	)	$	0.09	$	(0.53	)
Diluted	$	(0.62	)	$	0.09	$	(0.53	)

Consolidated Balance Sheets



	December 31, 2018
	As Reported			Adjustments			Without adoption of Topic 606
Assets:
Current assets:
Cash and cash equivalents	$	1,891,000		$	—		$	1,891,000
Accounts receivable, net	45,468,000			—			45,468,000
Inventories:
Finished goods	6,453,000			—			6,453,000
Work in process	2,034,000			—			2,034,000
Raw materials and components	17,278,000			—			17,278,000
Total inventories, net	25,765,000			—			25,765,000

Contract assets	3,915,000			(356,000		)	3,559,000
Foreign sales tax receivable	1,789,000			—			1,789,000
Prepaid expenses and other current assets	1,474,000			—			1,474,000
Total current assets	80,302,000			(356,000		)	79,946,000

Property, plant and equipment, net	80,657,000			—			80,657,000

Deferred tax asset	1,153,000			—			1,153,000
Goodwill	21,476,000			—			21,476,000
Intangibles, net	15,413,000			—			15,413,000
Other non-current assets	2,197,000			—			2,197,000
Total Assets	$	201,198,000		$	(356,000	)	$	200,842,000

Liabilities and Stockholders’ Equity:
Liabilities:
Current liabilities:
Current portion of long-term debt	$	3,230,000		$	—		$	3,230,000
Accounts payable	25,450,000			—			25,450,000
Contract liabilities	1,686,000			—			1,686,000
Current portion of post retirement benefits liability	1,157,000			—			1,157,000
Accrued liabilities:
Compensation and related benefits	5,154,000			—			5,154,000
Other	3,514,000			—			3,514,000
Total current liabilities	40,191,000			—			40,191,000

Long-term debt	37,784,000			—			37,784,000
Revolving debt	17,375,000			—			17,375,000
Post retirement benefits liability	6,919,000			—			6,919,000
Total Liabilities	102,269,000			—			102,269,000
Commitments and Contingencies	—			—			—
Stockholders’ Equity:
Preferred stock — $0.01 par value, authorized shares - 10,000,000; no shares outstanding at December 31, 2018 and December 31, 2017	—			—			—
Common stock — $0.01 par value, authorized shares - 20,000,000; outstanding shares: 7,776,164 at December 31, 2018 and 7,711,277 at December 31, 2017	78,000			—			78,000
Paid-in capital	33,208,000			—			33,208,000
Accumulated other comprehensive income, net of income taxes	2,117,000			—			2,117,000
Treasury stock — at cost, 3,790,308 shares at December 31, 2018 and 3,773,128 shares at December 31, 2017	(28,403,000		)	—			(28,403,000		)
Retained earnings	91,929,000			(356,000		)	91,573,000
Total Stockholders’ Equity	98,929,000			(356,000		)	98,573,000
Total Liabilities and Stockholders’ Equity	$	201,198,000		$	(356,000	)	$	200,842,000

Consolidated Statements of Cash Flows



	Twelve Months Ended
	December 31, 2018
	As Reported			Adjustments			Without adoption of Topic 606
Cash flows from operating activities:
Net income (loss)	$	(4,782,000	)	$	712,000		$	(4,070,000	)

Adjustments to reconcile net income (loss) to net cash provided (used in) by operating activities:
Depreciation and amortization	9,384,000			—			9,384,000
Deferred income taxes	(1,739,000		)	—			(1,739,000		)
Mark-to-market of interest rate swap	159,000			—			159,000
Goodwill impairment	2,403,000			—			2,403,000
Share-based compensation	1,743,000			—			1,743,000
(Gain) loss on foreign currency translation	5,000			—			5,000
Change in operating assets and liabilities, net of effects of acquisition:
Accounts receivable	(17,945,000		)	—			(17,945,000		)
Inventories	(5,783,000		)	—			(5,783,000		)
Prepaid and other assets	(528,000		)	(712,000		)	(1,240,000		)
Accounts payable	7,822,000			—			7,822,000
Accrued and other liabilities	3,122,000			—			3,122,000
Post retirement benefits liability	(389,000		)	—			(389,000		)
Net cash used in operating activities	(6,528,000		)	—			(6,528,000		)
				—			—
Cash flows from investing activities:
Purchase of property, plant and equipment	(5,801,000		)	—			(5,801,000		)
Purchase of assets of Horizon Plastics	(63,005,000		)	—			(63,005,000		)
Net cash used in investing activities	(68,806,000		)	—			(68,806,000		)

Cash flows from financing activities:
Gross borrowings on revolving loans	133,848,000			—			133,848,000
Gross repayment on revolving loans	(116,473,000		)	—			(116,473,000		)
Proceeds from term loan	45,000,000			—			45,000,000
Payment of principal of term loan	(10,125,000		)	—			(10,125,000		)
Payment of deferred loan costs	(763,000		)	—			(763,000		)
Payments related to the purchase of treasury stock	(250,000		)	—			(250,000		)
Cash dividends paid	(792,000		)	—			(792,000		)
Net cash provided by financing activities	50,445,000			—			50,445,000

Net change in cash and cash equivalents	(24,889,000		)	—			(24,889,000		)

Cash and cash equivalents at beginning of year	26,780,000			—			26,780,000

Cash and cash equivalents at end of year	$	1,891,000		$	—		$	1,891,000

Cash paid for:
Interest (net of amounts capitalized)	$	2,261,000		$	—		$	2,261,000
Income taxes	$	1,033,000		—			1,033,000
Non Cash:
Fixed asset purchases in accounts payable	$	871,000		—			871,000