Changes in Accounting Policies (Notes)

6 Months Ended

Jun. 30, 2018

Accounting Changes and Error Corrections [Abstract]

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. ASC Topic 606 is based on the principle that revenue is recognized to depict the transfer of 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. ASC Topic 606 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The effective date for ASC Topic 606, as updated by ASU No. 2015-14, is the first quarter of fiscal year 2018. ASU 2014-09 affects the timing of certain revenue-related transactions primarily resulting from the earlier recognition of the Company's tooling sales and costs. The Company adopted this update as required through a cumulative adjustment to equity and contract assets of $1,069,000 on January 1, 2018. The transitional practical expedient related to contract modifications has been applied and the Company has not retrospectively restated contracts that were modified prior to January 1, 2018. Therefore, the comparative information has not been adjusted and continues to be reported under Topic 605. See Note 2, Critical Accounting Policies and Estimates, for the Company's policy on Revenue Recognition and Note 16, Changes in Accounting Policies, for further discussion on the effect of the adoption of ASC Topic 606 on the Company's Consolidated Financial Statements.

In March 2017, FASB issued ASU No. 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost ("ASU 2017-07"). The amendments in this update require that an employer disaggregate the service cost component from the other components of net periodic cost (benefit) and report that component in the same line item as other compensation costs arising from services rendered by employees during the period. The other components of net periodic cost (benefit) are required to be presented in the statement of operations separately from the service cost component and outside of operating earnings. The amendment also allows for the service cost component of net periodic cost (benefit) to be eligible for capitalization when applicable. The guidance was effective for the Company on January 1, 2018 and interim periods within that reporting period. The income statement presentation of the components of net periodic cost (benefit) was applied retrospectively, while limiting the capitalization of net periodic cost (benefit) in assets to the service cost component was applied prospectively. The Company adopted this standard update as required on January 1, 2018 and the impact of adoption resulted in a reclassification of all components of net periodic benefit from operating earnings to other income in the amount of $12,000 for the three months ended June 30, 2018 and 2017, respectively, and $24,000 for the six months ended June 30, 2018 and 2017, respectively.

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 unaudited consolidated financial statements for the three and six months ended June 30, 2018.

Consolidated Statements of Income (Unaudited)



	Three Months Ended
	June 30, 2018
	As Reported			Adjustments		Without adoption of Topic 606
Net sales:
Products	$	65,225,000		$	—	$	65,225,000
Tooling	3,376,000			3,020,000		6,396,000
Total net sales	68,601,000			3,020,000		71,621,000

Total cost of sales	60,704,000			2,472,000		63,176,000

Gross margin	7,897,000			548,000		8,445,000

Total selling, general and administrative expense	6,479,000			—		6,479,000

Operating Income	1,418,000			548,000		1,966,000

Other income and expense
Interest expense	624,000			—		624,000
Net periodic post-retirement benefit cost	(12,000		)	—		(12,000		)
Total other income and expense	612,000			—		612,000

Income before taxes	806,000			548,000		1,354,000

Income tax expense	361,000			115,000		476,000

Net income	$	445,000		$	433,000	$	878,000

Net income per common share:
Basic	$	0.06		$	—	$	0.11
Diluted	$	0.06		$	—	$	0.11

Consolidated Statements of Income (Unaudited)



	Six Months Ended
	June 30, 2018
	As Reported			Adjustments		Without adoption of Topic 606
Net sales:
Products	$	124,937,000		$	—	$	124,937,000
Tooling	6,710,000			2,362,000		9,072,000
Total net sales	131,647,000			2,362,000		134,009,000

Total cost of sales	115,864,000			1,760,000		117,624,000

Gross margin	15,783,000			602,000		16,385,000

Total selling, general and administrative expense	13,239,000			—		13,239,000

Operating Income	2,544,000			602,000		3,146,000

Other income and expense
Interest expense	1,073,000			—		1,073,000
Net periodic post-retirement benefit cost	(24,000		)	—		(24,000		)
Total other income and expense	1,049,000			—		1,049,000

Income before taxes	1,495,000			602,000		2,097,000

Income tax expense	532,000			126,000		658,000

Net income	$	963,000		$	476,000	$	1,439,000

Net income per common share:
Basic	$	0.12		$	—	$	0.19
Diluted	$	0.12		$	—	$	0.18

Consolidated Balance Sheets (Unaudited)



	June 30, 2018
	As Reported			Adjustments			Without adoption of Topic 606
Assets:
Current assets:
Cash and cash equivalents	$	—		$	—		$	—
Accounts receivable, net	38,601,000			—			38,601,000
Inventory, net	19,683,000			—			19,683,000
Prepaid expenses and other current assets	8,382,000			(593,000		)	7,789,000
Total current assets	66,666,000			(593,000		)	66,073,000

Property, plant and equipment, net	81,609,000			—			81,609,000
Goodwill	22,957,000			—			22,957,000
Intangibles, net	17,148,000			—			17,148,000
Other non-current assets	2,125,000			—			2,125,000
Total Assets	$	190,505,000		$	(593,000	)	$	189,912,000

Liabilities and Stockholders’ Equity:
Current liabilities:
Revolving line of credit	$	784,000		$	—		$	784,000
Current portion of long-term debt	3,230,000			—			3,230,000
Accounts payable	24,883,000			—			24,883,000
Compensation and related benefits	5,075,000			—			5,075,000
Accrued other liabilities	5,210,000			—			5,210,000
Total current liabilities	39,182,000			—			39,182,000

Long-term debt	39,401,000			—			39,401,000
Deferred tax liability	395,000			—			395,000
Post retirement benefits liability	7,912,000			—			7,912,000
Total Liabilities	$	86,890,000		$	—		$	86,890,000
Commitments and Contingencies	—						—
Stockholders’ Equity:
Preferred stock — $0.01 par value, authorized shares — 10,000,000; no shares outstanding at June 30, 2018 and December 31, 2017	—			—			—
Common stock — $0.01 par value, authorized shares – 20,000,000; outstanding shares: 7,771,415 at June 30, 2018 and 7,711,277 December 31, 2017	78,000			—			78,000
Paid-in capital	32,434,000			—			32,434,000
Accumulated other comprehensive income, net of income taxes	1,832,000			—			1,832,000
Treasury stock - at cost, 3,790,308 at June 30, 2018 and 3,773,128 at December 31, 2017	(28,403,000		)	—			(28,403,000		)
Retained earnings	97,674,000			(593,000		)	97,081,000
Total Stockholders’ Equity	103,615,000			(593,000		)	103,022,000
Total Liabilities and Stockholders’ Equity	$	190,505,000		$	(593,000	)	$	189,912,000

Consolidated Statements of Cash Flows (Unaudited)



	Six Months Ended
	June 30, 2018
	As Reported			Adjustments			Without adoption of Topic 606
Cash flows from operating activities:
Net income	$	963,000		$	476,000		$	1,439,000

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	4,701,000			—			4,701,000
Share-based compensation	969,000			—			969,000
Loss on foreign currency translation	(5,000		)	—			(5,000		)
Change in operating assets and liabilities:
Accounts receivable	(12,463,000		)	—			(12,463,000		)
Inventories	700,000			—			700,000
Prepaid and other assets	(1,644,000		)	(476,000		)	(2,120,000		)
Accounts payable	8,878,000			—			8,878,000
Accrued and other liabilities	1,664,000			—			1,664,000
Post retirement benefits liability	(205,000		)	—			(205,000		)
Net cash used in operating activities	3,558,000			—			3,558,000

Cash flows from investing activities:
Purchase of property, plant and equipment	(3,428,000		)	—			(3,428,000		)
Purchase of assets of Horizon Plastics	(62,457,000		)	—			(62,457,000		)
Net cash used in investing activities	(65,885,000		)	—			(65,885,000		)

Cash flows from financing activities:
Gross repayments on revolving line of credit	(46,514,000		)	—			(46,514,000		)
Gross borrowings on revolving line of credit	47,298,000			—			47,298,000
Proceeds from Horizon Plastics term loan	45,000,000			—			45,000,000
Payment of principal on term loans	(8,438,000		)	—			(8,438,000		)
Payment of deferred loan costs	(757,000		)	—			(757,000		)
Cash dividends paid	(792,000		)	—			(792,000		)
Payments related to the purchase of treasury stock	(250,000		)	—			(250,000		)
Net cash provided by financing activities	35,547,000			—			35,547,000

Net change in cash and cash equivalents	(26,780,000		)	—			(26,780,000		)

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

Cash and cash equivalents at end of period	$	—		$	—		$	—

Cash paid for:
Interest (net of amounts capitalized)	$	1,022,000		$	—		$	1,022,000
Income taxes	$	520,000		$	—		$	520,000
Non Cash:
Fixed asset purchases in accounts payable	$	574,000		$	—		$	574,000