(

)

Impact of Recently Issued Accounting Pronouncements

The following accounting pronouncements became effective for the Company in the

first

nine

months of

2017:

Simplification of Employee Share-Based Payment Accounting

March 2016,

the FASB issued ASU

2016

which simplifies several aspects of the accounting for

employee share-based payment transactions, including the accounting for income taxes, forfeitures and

classification in the statement of cash flows. This standard became effective for the Company on

January 1,

2017.

The new standard requires recognition of excess tax benefits that had

not

previously been recognized.

The Company had

remaining unrecognized excess tax benefits as of

December 31, 2016.

All excess tax

benefits and deficiencies in future periods will be recorded as part of the current period tax provision within the

Income Statement. This will result in increased volatility in the Company’s effective tax rate. During the

first

nine

months of

2017,

the Company recognized a tax benefit of

$5,114

which lowered the effective tax rate by

6.0%.

other provisions in this new standard had a significant impact on the consolidated financial

statements including the Company’s accounting policy election to account for forfeitures when they occur.

To conform to the current year presentation, the Company reclassified

$2,958

of excess tax benefits

under financing activities to operating activities for the

nine

months ended

September 30, 2016

on the

consolidated statement of cash flows.

Simplifying the Measurement of Inventory

July 2015,

the FASB issued ASU

2015

which requires that inventory be measured at the lower of

cost and net realizable value, and eliminates the other

two

options that currently exist for market, replacement

cost and net realizable value less an approximately normal profit margin. This update became effective on

January 1, 2017

and did

not

have a material impact on the Company’s consolidated financial statements.

The following recently issued accounting pronouncements will become effective for the Company in the future:

Business Combinations – Clarifying the Definition of a Business

January 2017,

the FASB issued ASU

2017

which clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The standard introduces a screen for determining when assets acquired are

not

a business and clarifies that a business must include, at a minimum, an input and a substantive process that contribute to an output to be considered a business. This standard is effective for fiscal years beginning after

December 15, 2017,

including interim periods within that reporting period. The Company does

not

expect this new guidance to have a material impact on its consolidated financial statements.

Statement of Cash Flows – Restricted Cash

November 2016,

the FASB issued ASU

2016

which clarifies the presentation requirements of restricted cash within the statement of cash flows. The changes in restricted cash and restricted cash equivalents during the period should be included in the beginning and ending cash and cash equivalents balance reconciliation on the statement of cash flows. When cash, cash equivalents, restricted cash or restricted cash equivalents are presented in more than

one

line item within the statement of financial position, an entity shall calculate a total cash amount in a narrative or tabular format that agrees to the amount shown on the statement of cash flows. Details on the nature and amounts of restricted cash should also be disclosed. This standard is effective for fiscal years beginning after

December 15, 2017,

including interim periods within that reporting period. The Company does

not

expect this new guidance to have a material impact on its consolidated financial statements.

Statement of Cash Flows

- Classification of Certain Cash Receipts and Cash Payments

August 2016,

the FASB issued ASU

2016

which provides guidance on the presentation and classification in the statement of cash flows for specific cash receipt and payment transactions, including debt prepayment or extinguishment costs, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims and corporate-owned life insurance policies, and distributions received from equity method investees. This standard is effective for fiscal years beginning after

December 15, 2017,

including interim periods within that reporting period. The Company does

not

expect this new guidance to have a material impact on its consolidated financial statements.

Leases

February 2016,

the FASB issued ASU

2016

which requires lessees to recognize right of use assets and lease liabilities on the balance sheet for all leases except short-term leases. On the income statement, leases will be classified as operating or finance leases. This standard is effective for fiscal years beginning after

December 15, 2018,

including interim periods within that reporting period. At this time, the Company has

financing leases and only a limited number of operating leases. The result of adoption will be an increase to assets and liabilities by the same amount for the identified operating leases. This adjustment will

not

be material to the Company, assuming there is

not

an increase in lease activity.

Revenue from Contracts with Customers

May 2014,

the FASB issued ASU

2014

that introduces a new

five

-step revenue recognition model in which an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires disclosures sufficient to enable users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. Numerous updates were issued in

2016

that provide clarification on a number of specific issues as well as requiring additional disclosures. The new standard is effective for fiscal years beginning after

December 15, 2017,

including interim periods within that reporting period. On

January 1, 2018,

the Company will adopt the new accounting standard for all contracts

not

completed as of the adoption date using the modified retrospective method. Certain sales that would have otherwise been reflected in the income statement in

2018

will now be recorded in equity as part of a cumulative effect adjustment. Additionally, a portion of certain products that will be in process at

December 31, 2018

will be eligible for revenue recognition in

2018

as opposed to when they would ship in

2019

under previous guidance.

The Company continues to evaluate the impact of adoption of the new standard on revenue recognition policies, internal controls, reporting and disclosures. As part of this evaluation, the Company has identified the revenue streams and reviewed the related critical customer contract terms and provisions. The Company has concluded that the timing of the recognition of revenue for products to specific customers with

alternative use, that were previously recognized upon delivery, will be recognized over time utilizing a measure of progress toward satisfaction of the performance obligations. Generally, under these customer agreements, the Company is entitled to compensation for progress to date that includes an element of profit margin. Depending on the amount of these projects in process at the end of

2017,

the cumulative adjustment could be significant, but at this time cannot be reasonably estimated. These products represented nearly half of

2016

net revenue. The Company will also record contract balances on the balance sheet and present all related disclosures in the notes to financial statements. The Company continues to assess the impact of the related disclosures as well as finalizing a methodology and process for recognizing product revenue over time.

Presentation of Net Periodic Benefit Cost Related to Defined Benefit Plans

March 2017,

the FASB issued ASU

2017

which amends the requirements in ASC

715

related to the income statement presentation of the components of net periodic benefit cost for an entity’s sponsored defined pension and other postretirement plans. The ASU requires entities to (

) disaggregate the current-service-cost component from the other components of net benefit cost and present it with other current compensation costs for related employees in the income statement and (

) present the other components elsewhere in the income statement and outside of income from operations if such subtotal is presented. The ASU also requires entities to disclose the income statement lines that contain the other components if they are

not

presented separately. The ASU’s amendment is effective for fiscal years beginning after

December 15, 2017,

including interim periods within that reporting period. The Company does

not

expect this new guidance to have an impact on its consolidated financial statements.

Simplifying the Test for Goodwill Impairment

January 2017,

the FASB issued ASU

2017

which simplifies the goodwill impairment test by eliminating Step

in the determination on whether goodwill should be considered impaired. Instead, an impairment charge should equal the amount by which a reporting unit’s carrying amount exceeds its fair value,

not

to exceed the amount of goodwill allocated to the reporting unit. The new standard is effective for fiscal years beginning after

December 15, 2019,

including interim periods within that reporting period. The Company is currently evaluating the new guidance and does

not

expect it to have an impact on its consolidated financial statements.

Scope of Modification Accounting

, Stock Based Compensation

May 2017,

the FASB issued ASU

2017

which provides clarification on when modification accounting should be used for changes to the terms or conditions of a share-based payment award. This ASU does

not

change the accounting for modifications but clarifies that modification accounting guidance should only be applied if there is a change to the value, vesting conditions, or award classification and would

not

be required if the changes are considered non-substantive.

The amendment is effective for fiscal years beginning after

December 15, 2017,

including interim periods within that reporting period.

The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements.

Targeted Improvements to Accounting for Hedging Activities

August

2017,

the FASB issued ASU

2017

which improves the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. The standard also makes certain targeted improvements to simplify the application of the hedge accounting guidance.

The amendment is effective for fiscal years beginning after

December 15, 2018,

including interim periods within that reporting period.

The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements.