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Revenue (Notes) | 3 Months Ended
--- | ---
Mar. 31, 2018
Revenue from Contract with Customer [Abstract] |
Revenue | REVENUE Revenue is recognized when the Company satisfies the performance obligation by transferring control over goods or services to a dealer, distributor or other customer. The amount of revenue recognized is measured as the consideration the Company expects to receive in exchange for those goods or services pursuant to a contract with the customer. A contract exists once the Company receives and accepts a purchase order under a dealer sales agreement, or once the Company enters into a contract with an end user. The Company does not recognize revenue in cases where collectability is not probable, and defers the recognition until collection is probable or payment is received. The Company generates revenue from the manufacture and distribution of agricultural equipment and replacement parts. Sales of equipment and replacement parts, which represents a majority of the Company’s net sales, are recorded by the Company at the point in time when title and control have been transferred to an independent dealer, distributor or other customer. Title generally passes to the dealer or distributor upon shipment or specified delivery, and the risk of loss upon damage, theft or destruction of the equipment is the responsibility of the dealer, distributor or designated third-party carrier. The Company believes control passes and the performance obligation is satisfied at the point of the stated shipping or delivery term with respect to such sales. The amount of consideration the Company receives and the revenue recognized varies with certain sales incentives the Company offers to dealers and distributors. Estimates for sales incentives are made at the time of sale for existing incentive programs using the expected value method. These estimates are revised in the event of subsequent modification to the incentive program. Dealers or distributors may not return equipment or replacement parts while its contract with the Company is in force, except for under established promotional and annual replacement parts return programs. At the time of sale, the Company estimates the amount of returns based on the terms of promotional and annual return programs and anticipated returns in the future. Sales and other related taxes are excluded from the transaction price. Shipping and handling costs associated with freight are accounted for as fulfillment costs and are expensed at the time revenue is recognized in “Cost of goods sold” and “Selling, general and administrative expenses” in the Company’s Condensed Consolidated Statements of Operations. The Company applied the practical expedient in ASU 2014-09 to not adjust the amount of revenue to be recognized under a contract with a dealer, distributor or other customer for the time value of money when the difference between the receipt of payment and the recognition of revenue is less than one year. Although, substantially all revenue is recognized at a point in time, a relatively insignificant amount of installation revenue associated with the sale of grain storage and protein production systems is recognized on an “over time” basis as discussed below. The Company also recognizes revenue “over time” with respect to extended warranty or maintenance contracts and certain technology services. Largely, all of the contracts with customers that relate to “over time” revenue recognition have contract durations of less than 12 months. Grain Storage and Protein Production Systems Installation Revenue. In certain countries, the Company sells grain storage and protein production systems where the Company is responsible for construction and installation, and the sale is contingent upon customer acceptance. Under these conditions, the revenues are recognized over the term of the contract. For these contracts, the Company may be entitled to receive an advance payment, which is recognized as a contract liability for the amount in excess of the revenue recognized. The Company uses the input method using costs incurred to date relative to total estimated costs at completion to measure the progress toward satisfaction of the performance obligation. Revenues are recorded proportionally as costs are incurred. Costs include labor, material and overhead. The estimation of the progress toward completion is subject to various assumptions. As part of the estimation process, the Company reviews the length of time to complete the performance obligation, the cost of materials and labor productivity. If a significant change in one of the assumptions occurs, then the Company will recognize an adjustment under the cumulative catch-up method and the impact of the adjustment on the revenue recorded to date is recognized in the period the adjustment is identified. Extended Warranty Contracts. The Company sells separately priced extended warranty contracts, which extends coverage beyond the base warranty period. Revenue is recognized for the extended warranty contract on a straight-line basis, which the Company believes approximates the costs expected to be incurred in satisfying the obligations, over the extended warranty period. The extended warranty period ranges from one to five years. Payment is received at the inception of the extended warranty contract, which is recognized as a contract liability for the amount in excess of the revenue recognized. The revenue associated with the sale of extended warranty contracts is insignificant. Technology Services Revenue. The Company sells a combination of technology products and services. When the bundled package of technology products and services is sold, the portion of the consideration received related to the services component is recognized over time as the Company satisfies the future performance obligation. Revenue is recognized for the hardware component when control is transferred to the dealer or distributor. The revenue associated with the sale of technology services is insignificant. Contract Assets and Liabilities Contract assets relate to the Company’s right to recover returned replacement parts. When the refund for the returned replacement part is settled with the dealer or distributor, the contract asset is then transferred to inventory. Contract liabilities relate to the following: (1) the obligation to refund dealers or distributors for the expected return of replacement parts, (2) unrecognized revenues where advance payment of consideration precedes the Company’s performance with respect to extended warranty contracts and where the performance obligation is satisfied over time, (3) unrecognized revenues where advance payment of consideration precedes the Company’s performance with respect to certain grain storage and protein production systems and where the performance obligation is satisfied over time and (4) unrecognized revenues where advance payment consideration precedes the Company’s performance with respect to technology services and where the performance obligation is satisfied over time. Significant changes in the balance of contract assets and liabilities during the period from adoption of ASU 2014-09 as of January 1, 2018 to March 31, 2018 were as follows (in millions):
| Contract Assets
Balance as of January 1, 2018 | $ | 10.1 |
Additions for expected returns of replacement parts sold during the period | 4.9 |
Transfer of returned replacement parts to inventory | (4.6 | )
Balance as of March 31, 2018 | $ | 10.4 |
| Contract Liabilities
Balance as of January 1, 2018 | $ | 104.4 |
Advance consideration received | 34.5 |
Accrual for expected reimbursement of replacement parts sold during the period | 11.6 |
Revenue recognized during the period for extended warranty contracts | (6.4 | )
Revenue recognized during the period related to installation of grain storage and protein production systems | (15.5 | )
Replacement part settlements made during the period | (11.3 | )
Foreign currency translation | 1.8 |
Balance as of March 31, 2018 | $ | 119.1 |
The contract assets are classified as “Other current assets” and the contract liabilities are classified as either “Other current and noncurrent liabilities” or “Accrued expenses” in the Company’s Condensed Consolidated Balance Sheets. Remaining Performance Obligations The estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of March 31, 2018 are $23.9 million in 2018, $16.7 million in 2019, $9.9 million in 2020, $5.0 million in 2021 and $1.8 million thereafter, and relate primarily to extended warranty contracts. The Company applied the practical expedient in ASU 2014-09 and has not disclosed information about remaining performance obligations that have original expected durations of 12 months or less. Disaggregated Revenue Net sales for the three months ended March 31, 2018 disaggregated by primary geographical markets and major products consisted of the following (in millions):
|  | North America |  | South America |  | Europe/Middle East |  | Asia/Pacific/Africa |  | Consolidated
Primary geographical markets: |  |  |  |  |  |  |  |  |  |  |  |  |
United States |  | $ | 399.1 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 399.1 |
Canada |  | 73.6 |  |  | — |  |  | — |  |  | — |  |  | 73.6 |
Germany |  | — |  |  | — |  |  | 287.9 |  |  | — |  |  | 287.9 |
France |  | — |  |  | — |  |  | 196.6 |  |  | — |  |  | 196.6 |
United Kingdom and Ireland |  | — |  |  | — |  |  | 140.3 |  |  | — |  |  | 140.3 |
Finland and Scandinavia |  | — |  |  | — |  |  | 177.1 |  |  | — |  |  | 177.1 |
Other Europe |  | — |  |  | — |  |  | 358.1 |  |  | — |  |  | 358.1 |
South America |  | — |  |  | 180.5 |  |  | — |  |  | — |  |  | 180.5 |
Middle East and Algeria |  | — |  |  | — |  |  | 3.7 |  |  | — |  |  | 3.7 |
Africa |  | — |  |  | — |  |  | — |  |  | 22.2 |  |  | 22.2 |
Asia |  | — |  |  | — |  |  | — |  |  | 74.6 |  |  | 74.6 |
Australia and New Zealand |  | — |  |  | — |  |  | — |  |  | 62.0 |  |  | 62.0 |
Mexico, Central America and Caribbean |  | 30.2 |  |  | 1.6 |  |  | — |  |  | — |  |  | 31.8 |
|  | $ | 502.9 |  |  | $ | 182.1 |  |  | $ | 1,163.7 |  |  | $ | 158.8 |  |  | $ | 2,007.5 |
Major products: |  |  |  |  |  |  |  |  |  |
Tractors |  | $ | 154.6 |  |  | $ | 106.8 |  |  | $ | 778.4 |  |  | $ | 73.5 |  |  | $ | 1,113.3 |
Replacement parts |  | 60.8 |  |  | 21.7 |  |  | 210.5 |  |  | 19.7 |  |  | 312.7 |
Other machinery |  | 119.4 |  |  | 7.0 |  |  | 104.5 |  |  | 12.0 |  |  | 242.9 |
Grain storage and protein production systems |  | 110.4 |  |  | 17.2 |  |  | 34.4 |  |  | 44.2 |  |  | 206.2 |
Combines |  | 3.1 |  |  | 25.7 |  |  | 33.5 |  |  | 0.4 |  |  | 62.7 |
Application equipment |  | 54.6 |  |  | 3.7 |  |  | 2.4 |  |  | 9.0 |  |  | 69.7 |
|  | $ | 502.9 |  |  | $ | 182.1 |  |  | $ | 1,163.7 |  |  | $ | 158.8 |  |  | $ | 2,007.5 |

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- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 + Details
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