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SEC Filings

10-Q
NN INC filed this Form 10-Q on 08/14/2017
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The standard will be effective for us beginning January 1, 2018, with early adoption permitted. We believe the most appropriate approach for us to adopt the standard effective January 1, 2018, would be to utilize the full retrospective transition method to restate each prior reporting period presented. We continue to evaluate the adoption method as we progress through each phase of implementation.

While our ability to adopt the standard using the full retrospective method depends on system readiness and completing our analysis of information necessary to restate prior period consolidated financial statements, we remain on schedule. We have completed a diagnostic accounting assessment, including an analysis of a representative sample of contracts, to identify areas that will be most significantly impacted by implementation of the new standard. We have also completed an initial training phase to educate contract managers of the technical aspects of the new standard. We are in the process of concluding on and documenting our assessments related to the standard as well as potential system and procedural changes. We are evaluating the impact the new standard will have on our financial condition, results of operations and cash flows. Our final evaluation of the impact of adopting the new standard is expected to be completed during 2017.

Leases. In February 2016, the FASB issued ASU 2016-02, Leases. ASU 2016-02 creates Topic 842, Leases, in the ASC and supersedes ASC 840, Leases. Entities that hold numerous equipment and real estate leases, in particular those with numerous operating leases, will be most affected by the new guidance. The lease accounting standard is effective for public companies beginning January 1, 2019, with modified retrospective adoption required and early adoption permitted. The amendments in ASU 2016-02 are expected to impact balance sheets at many companies by adding lease-related assets and liabilities. This may affect compliance with contractual agreements and loan covenants. We have performed inquiries within segment locations and compiled information on operating and capital leases. We are currently evaluating the impacts of the lease accounting standard on our financial position, results of operations, and related disclosures.

Statement of Cash Flows. In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments. This standard provides clarification on how certain cash receipts and cash payments are presented and classified on the statement of cash flows. The standard is effective for us beginning January 1, 2018, and is required to be adopted using a retrospective approach if practicable, with early adoption permitted. We are in the process of assessing the effects of the standard on prior periods.

Goodwill. In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, that eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of the current goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on the current Step 1 test). The standard is effective for us beginning with impairment tests performed on or after January 1, 2020, with early adoption permitted. We are currently evaluating the impact this new guidance is expected to have on our financial position or results of operations and related disclosures.

Note 2. Inventories

Inventories are comprised of the following amounts:

 

     June 30,
2017
     December 31,
2016
 

Raw materials

   $ 52,916      $ 49,205  

Work in process

     34,786        31,348  

Finished goods

     36,000        34,298  
  

 

 

    

 

 

 

Inventories

   $ 123,702      $ 114,851  
  

 

 

    

 

 

 

Inventories on consignment at customer locations as of June 30, 2017, and December 31, 2016 totaled $6.2 million and $5.0 million, respectively.

Inventories are stated at the lower of cost or net realizable value. Cost is determined using the average cost method. The inventory valuations above were developed using normalized production capacities for each of our manufacturing locations. Any costs from abnormal excess capacity or underutilization of fixed production overheads are expensed in the period incurred and are not included as a component of inventory valuation.

 

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