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 Revenue Recognition (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 September 29, 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 nine months ended September 29, 2018 (in thousands):



	Impact of changes in accounting policies
	As reported		Adjustments	Balances without adoption of Topic 606
Three Months Ended September 29, 2018

Net sales	$	812,576	39,763	$	852,339
Cost of sales and operating expenses	$	648,101	39,763	$	687,864

Nine Months Ended September 29, 2018

Net sales	$	2,534,596	131,399	$	2,665,995
Cost of sales and operating expenses	$	1,979,201	131,399	$	2,110,600

The following tables presents the Company revenues disaggregated by geographic area and major product types by reportable segment for the three and nine months ended September 29, 2018 and September 30, 2017 (in thousands):



	Three Months Ended September 29, 2018
	Feed Ingredients		Food Ingredients		Fuel Ingredients		Total
Geographic Area
North America	$	388,088	$	45,538	$	8,616	$	442,242
Europe	81,381		146,872		56,008		284,261
China	11,199		43,185		—		54,384
South America	—		11,579		—		11,579
Other	2,076		18,034		—		20,110
Net sales	$	482,744	$	265,208	$	64,624	$	812,576

Major product types
Fats	$	142,453	$	39,172	$	—	$	181,625
Used cooking oil	38,863		—		—		38,863
Proteins	216,316		—		—		216,316
Bakery	44,638		—		—		44,638
Other rendering	27,519		—		—		27,519
Food ingredients	—		206,504		—		206,504
Bioenergy	—		—		56,008		56,008
Biofuels	—		—		8,616		8,616
Other	12,955		19,532		—		32,487
Net sales	$	482,744	$	265,208	$	64,624	$	812,576



	Nine Months Ended September 29, 2018
	Feed Ingredients		Food Ingredients		Fuel Ingredients		Total
Geographic Area
North America	$	1,186,866	$	135,803	$	40,668	$	1,363,337
Europe	251,495		490,133		179,106		920,734
China	23,279		132,578		—		155,857
South America	—		35,839		—		35,839
Other	5,725		53,104		—		58,829
Net sales	$	1,467,365	$	847,457	$	219,774	$	2,534,596

Major product types
Fats	$	423,148	$	122,806	$	—	$	545,954
Used cooking oil	123,555		—		—		123,555
Proteins	641,178		—		—		641,178
Bakery	135,871		—		—		135,871
Other rendering	87,860		—		—		87,860
Food ingredients	—		657,793		—		657,793
Bioenergy	—		—		179,106		179,106
Biofuels	—		—		40,668		40,668
Other	55,753		66,858		—		122,611
Net sales	$	1,467,365	$	847,457	$	219,774	$	2,534,596



	Three Months Ended September 30, 2017 (a)
	Feed Ingredients		Food Ingredients		Fuel Ingredients		Total
Geographic Area Revenues
North America	$	431,844	$	50,446	$	13,621	$	495,911
Europe	129,737		172,160		48,235		350,132
China	11,552		41,967		—		53,519
South America	—		14,072		—		14,072
Other	2,410		20,218		—		22,628
Net sales	$	575,543	$	298,863	$	61,856	$	936,262

Major product types
Fats	$	166,197	$	47,889	$	—	$	214,086
Used cooking oil	46,578		—		—		46,578
Proteins	219,091		—		—		219,091
Bakery	51,840		—		—		51,840
Other rendering	68,243		—		—		68,243
Food ingredients	—		223,717		—		223,717
Bioenergy	—		—		48,235		48,235
Biofuels	—		—		13,621		13,621
Other	23,594		27,257		—		50,851
Net sales	$	575,543	$	298,863	$	61,856	$	936,262



	Nine Months Ended September 30, 2017 (b)
	Feed Ingredients		Food Ingredients		Fuel Ingredients		Total
Geographic Area Revenues
North America	$	1,270,244	$	145,009	$	32,570	$	1,447,823
Europe	377,589		479,070		156,348		1,013,007
China	23,496		124,850		—		148,346
South America	—		39,153		—		39,153
Other	5,957		55,416		—		61,373
Net sales	$	1,677,286	$	843,498	$	188,918	$	2,709,702

Major product types
Fats	$	484,437	$	132,349	$	—	$	616,786
Used cooking oil	136,081		—		—		136,081
Proteins	612,992		—		—		612,992
Bakery	159,528		—		—		159,528
Other rendering	215,398		—		—		215,398
Food ingredients	—		642,124		—		642,124
Bioenergy	—		—		156,348		156,348
Biofuels	—		—		32,570		32,570
Other	68,850		69,025		—		137,875
Net sales	$	1,677,286	$	843,498	$	188,918	$	2,709,702

(a) As noted above prior year amounts have not been adjusted under the modified retrospective method for billed freight of approximately $40.9 million that is included in net sales in the three months ended September 30, 2017.

(b) As noted above prior year amounts have not been adjusted under the modified retrospective method for billed freight of approximately $117.0 million that is included in net sales in the nine months ended September 30, 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.