Revenue

On December 31, 2017, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), using the modified retrospective basis. Results for reporting periods beginning December 31, 2017 are presented under Topic 606, while prior periods are not adjusted and continue to be reported in accordance with the Company's historic accounting under Topic 605. The adoption did not change the timing of revenue recognition as the Company's revenues have been determined to be recognized at a point in time and not over time. The Company elected not to capitalize contract fulfillment costs as the recovery of such costs are for a period of less than one year's time and are not material to the Company. At June 30, 2018, there were no contract assets recorded on the Consolidated Balance sheets. Also, the Company elected to treat shipping and handling as fulfillment costs under Topic 606, which will result in billed freight recorded in cost of sales and netted against freight costs. Sales, value-add, and other taxes collected concurrently with revenue-producing activities are excluded from revenue and booked on a net basis.

The Company extends payment terms to its customers based on commercially acceptable practices. The term between invoicing and payment due date is not significant. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring finished products or performing services, which is generally based on executed agreement or purchase order.

Most of the Company's products are shipped based on the customer specifications. Customer returns are infrequent and not material to the Company. Adjustments to net sales for sales deductions are generally recognized in the same period as the sale or when known. Customers in certain industries or countries may be required to prepay prior to shipment in order to maintain payment protection. These represent short-term prepayment from customers and are not material to the Company.

The following table summarizes the impact of adopting Topic 606 on the Company's consolidated financial statements for the three and six months ended June 30, 2018 (in thousands):



	Impact of changes in accounting policies
	As reported		Adjustments	Balances without adoption of Topic 606
Three Months Ended June 30, 2018

Net sales	$	846,646	45,449	$	892,095
Cost of sales and operating expenses	$	653,001	45,449	$	698,450

Six Months Ended June 30, 2018

Net sales	$	1,722,020	91,636	$	1,813,656
Cost of sales and operating expenses	$	1,331,100	91,636	$	1,422,736

The following tables presents the Company revenues disaggregated by geographic area and major product types by reportable segment for the three and six months ended June 30, 2018 and July 1, 2017 (in thousands):



	Three Months Ended June 30, 2018
	Feed Ingredients		Food Ingredients		Fuel Ingredients		Total
Geographic Area
North America	$	408,402	$	45,988	$	10,512	$	464,902
Europe	82,324		159,622		60,582		302,528
China	6,402		45,481		—		51,883
South America	—		9,916		—		9,916
Other	1,695		15,722		—		17,417
Net sales	$	498,823	$	276,729	$	71,094	$	846,646

Major product types
Fats	$	137,143	$	38,815	$	—	$	175,958
Used cooking oil	48,084		—		—		48,084
Proteins	221,467		—		—		221,467
Bakery	44,482		—		—		44,482
Other rendering	28,979		—		—		28,979
Food ingredients	—		217,366		—		217,366
Bioenergy	—		—		60,582		60,582
Biofuels	—		—		10,512		10,512
Other	18,668		20,548		—		39,216
Net sales	$	498,823	$	276,729	$	71,094	$	846,646



	Six Months Ended June 30, 2018
	Feed Ingredients		Food Ingredients		Fuel Ingredients		Total
Geographic Area
North America	$	798,778	$	90,265	$	32,052	$	921,095
Europe	170,114		343,261		123,098		636,473
China	12,080		89,393		—		101,473
South America	—		24,260		—		24,260
Other	3,649		35,070		—		38,719
Net sales	$	984,621	$	582,249	$	155,150	$	1,722,020

Major product types
Fats	$	280,695	$	83,634	$	—	$	364,329
Used cooking oil	84,692		—		—		84,692
Proteins	424,862		—		—		424,862
Bakery	91,233		—		—		91,233
Other rendering	60,341		—		—		60,341
Food ingredients	—		451,289		—		451,289
Bioenergy	—		—		123,098		123,098
Biofuels	—		—		32,052		32,052
Other	42,798		47,326		—		90,124
Net sales	$	984,621	$	582,249	$	155,150	$	1,722,020



	Three Months Ended July 1, 2017 (a)
	Feed Ingredients		Food Ingredients		Fuel Ingredients		Total
Geographic Area Revenues
North America	$	415,465	$	48,838	$	10,866	$	475,169
Europe	124,925		157,209		56,536		338,670
China	7,210		41,223		—		48,433
South America	—		12,107		—		12,107
Other	1,519		19,032		—		20,551
Net sales	$	549,119	$	278,409	$	67,402	$	894,930

Major product types
Fats	$	160,235	$	43,567	$	—	$	203,802
Used cooking oil	45,457		—		—		45,457
Proteins	195,750		—		—		195,750
Bakery	51,591		—		—		51,591
Other rendering	73,555		—		—		73,555
Food ingredients	—		212,128		—		212,128
Bioenergy	—		—		56,536		56,536
Biofuels	—		—		10,866		10,866
Other	22,531		22,714		—		45,245
Net sales	$	549,119	$	278,409	$	67,402	$	894,930



	Six Months Ended July 1, 2017 (b)
	Feed Ingredients		Food Ingredients		Fuel Ingredients		Total
Geographic Area Revenues
North America	$	838,400	$	94,563	$	18,949	$	951,912
Europe	247,852		306,910		108,113		662,875
China	11,944		82,883		—		94,827
South America	—		25,081		—		25,081
Other	3,547		35,198		—		38,745
Net sales	$	1,101,743	$	544,635	$	127,062	$	1,773,440

Major product types
Fats	$	318,240	$	84,460	$	—	$	402,700
Used cooking oil	89,503		—		—		89,503
Proteins	393,901		—		—		393,901
Bakery	107,688		—		—		107,688
Other rendering	147,155		—		—		147,155
Food ingredients	—		418,407		—		418,407
Bioenergy	—		—		108,113		108,113
Biofuels	—		—		18,949		18,949
Other	45,256		41,768		—		87,024
Net sales	$	1,101,743	$	544,635	$	127,062	$	1,773,440

(a) As noted above prior year amounts have not been adjusted under the modified retrospective method for billed freight of approximately $37.9 million that is included in net sales in the three months ended July 1, 2017.

(b) As noted above prior year amounts have not been adjusted under the modified retrospective method for billed freight of approximately $76.1 million that is included in net sales in the six months ended July 1, 2017.

Revenue from Contracts with Customers

The Company has two primary revenue streams. Finished product revenues are recognized when control of the promised finished product is transferred to the Company's customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for the finished product. Service revenues are recognized when the service occurs.

Fats and Proteins. Fats and Proteins include the Company's global activities related to the collection and processing of beef, poultry and pork animal by-products into finished products of non-food grade oils, food grade fats and protein meal. Fats and proteins net sales are recognized when the Company ships the finished product to the customer and control has been transferred.

Used Cooking Oil. Used cooking oil includes collection and processing of used cooking oil into finished products of non-food grade fats. Used cooking oil net sales are recognized when the Company ships the finished product to the customer and control has been transferred.

Bakery. Bakery includes collection and processing of bakery residuals into finished product including Cookie Meal®, an animal feed ingredient primarily used in poultry and swine rations. Bakery net sales are recognized when the Company ships the finished product to the customer and control has been transferred.

Other Rendering. Other rendering include hides, pet food products, and service charges. Hides and pet food net sales are recognized when the Company ships the finished product to the customer and control has been transferred. Service revenues are recognized when the service has occurred.

Food Ingredients. Food ingredients includes collection and processing of pigskin, hide, bone and fish into finished product. Also includes harvesting, sorting and selling of hog and sheep casings as well as harvesting, purchasing and processing of hog, sheep and beef meat for pet food industry. Gelatin and CTH meat and casings net sales are recognized when the Company ships the finished product to the customer and control has been transferred.

Bioenergy. Bioenergy includes Ecoson, which converts organic sludge and food waste into biogas and Rendac, which collects fallen stock and animal waste for a fee and processes these materials into fats and meals that can only be used as low grade energy or fuel for boilers and cement kilns. Net sales are recognized when the finished product is shipped to the customer and control has been transferred. Service revenues are recognized in net sales when the service has occurred.

Biofuels. Biofuels includes the North American processing of rendered animal fats, recycled cooking oils and third party additives to produce diesel fuel. Biofuel net sales are recognized when the finished product is shipped to the customer and control has been transferred.

Other. Other includes grease trap collection and environmental services to food processors in the Feed Ingredients segment and Sonac Bone and Sonac Heparin in the Food Ingredients segment. Net sales are recognized when the Company ships the finished product to the customer. Service revenues are recognized when the service has occurred.