) Revenue From Contracts With Customers

Effective

July 1, 2018,

the Company adopted the new accounting standard ASU

No.

2014

09,

“Revenue from Contracts with Customers" (ASC

606

) using the modified retrospective method to contracts that were

not

completed as of

June 30, 2018.

We recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings, whereby the cumulative impact of all prior periods is recorded in retained earnings or other impacted balance sheet line items upon adoption. The comparative information has

not

been adjusted and continues to be reported under ASC

605.

The impact on the Company’s consolidated income statements, balance sheets, equity or cash flows as of the adoption date for the fiscal quarter ended

September 30, 2018

as a result of applying ASC

606

have been reflected within those respective financial statements. The Company’s accounting policy has been updated to align with ASC

606.

Under the Company’s historical accounting policies, non-developmental long-term contracts were recognized when the goods were transferred to the customer. Upon adoption, contracts for highly customized customer products that have

alternative use and in which the contract specifies the Company has a right to payment for its costs, plus a reasonable margin met the requirements for recognition over time under ASC

606.

Additionally, under the Company’s historical accounting policies, the Food Service Equipment segment estimated the rebate accrual based on a volume-related method for rebates. Under ASC

606,

the Company will calculate the rebate accrual on anticipated sales for the rebate period, rather than measurement of actual achievement of specific tiers.

Upon adoption, we recognized a reduction to retained earnings of

$1.0

million. The net change for Engineering Technologies will be approximately

$0.1

million increase in operating income after

$0.7

million in revenues and cost of sales of

$0.6

million and the Food Service Equipment group recorded a

$1.5

million adjustment for accrued rebates. The details of the adjustments to retained earnings upon adoption on

June 30, 2018

as well as the effects on the consolidated balance sheet as of

June 30, 2018,

as if ASC

606

had been adopted in our

2018

fiscal year are as follows:

	Cumulative
(in thousands)	Effect
Net sales	$	(799	)
Cost of Sales		(574	)
Income tax expense		340
Net Loss	$	(1,033	)

Effective Date	Reported June 30, 2018		ASC 606 Adjustments			As Adjusted July 1, 2018
Inventories	$	127,223	$	(574	)	$	126,649
Accounts receivable		134,228		703			134,931
Accrued liabilities		65,575		1,502			67,077
Deferred income taxes		26,816		(340	)		26,476
Retained earnings		761,430		(1,033	)		760,397

Note that above amounts as of

June 30

are before any restatement of balances to discontinued operations.

The following tables reconcile the balances as presented as of and for the

three

months ended

September 30, 2018

exclusive of the cumulative effect adjustment presented above to the balances prior to the adjustments made to implement the new revenue recognition standard for the same period (in thousands):

	Three Months Ended September 30, 2018
	As Presented			Impact of ASC 606			Balances Without adoption of ASC 606
Net sales	$	193,080		$	(3,043	)	$	190,037
Cost of sales		123,828			(2,496	)		121,332
Gross profit		69,252			(547	)		68,705
Selling, general, and administrative expenses		45,472						45,472
Restructuring costs		447						447
Acquisition related expenses		688						688
Total operating expenses		46,607						46,607
Income from operations		22,645			(547	)		22,098
Interest expense		(2,244	)					(2,244	)
Other non-operating income (expense)		(201	)					(201	)
Income from continuing operations before income taxes		20,200			(547	)		19,653
Provision for income taxes		5,842			(158	)		5,684
Income from continuing operations		14,358			(389	)		13,969
Income (loss) from discontinued operations, net of income taxes		1,499			24			1,523
Net income (loss)	$	15,857		$	(365	)	$	15,492

Basic earnings (loss) per share:
Continuing operations	$	1.13		$	(.03	)	$	1.10
Discontinued operations		0.12			0.0			0.12
Total	$	1.25		$	(0.3	)	$	1.22
Diluted earnings (loss) per share:
Continuing operations	$	1.12		$	(0.3	)	$	1.09
Discontinued operations		0.12			0.0			0.12
Total	$	1.24		$	(0.3	)	$	1.21

	Three Months Ended September 30, 2018
	As Presented			Impact of ASC 606			Balances Without adoption of ASC 606
Cash and cash equivalents	$	109,270		$			$	109,270
Accounts receivable, net		123,804			(3,263	)		120,541
Inventories		111,687			2,496			114,183
Prepaid expenses and other current assets		15,135						15,135
Income taxes receivable		615						615
Current assets- Discontinued Operations		36,315						36,315
Total current assets		396,826			(767	)		396,059

Property, plant and equipment, net		139,707						139,707
Intangible assets, net		110,416						110,416
Goodwill		263,021						263,021
Deferred tax asset		6,816						6,816
Other non-current assets		31,088						31,088
Long-term assets- Discontinued Operations		61,733						61,733
Total non-current assets		612,781						612,781
Total Assets	$	1,009,607		$	(767	)	$	1,008,840

Accounts Payable	$	63,161		$			$	63,161
Accrued liabilities		57,868			(220	)		57,648
Income taxes payable		5,790			(158	)		5,632
Current liabilities- Discontinued Operations		17,950			(24	)		17,926
Total current liabilities		144,769			(402	)		144,367

Long-term debt		299,438						299,438
Accrued pension and other non-current liabilities		105,320						105,320
Non-current liabilities- Discontinued Operations		50						50
Total non-current liabilities		404,808						404,808

Stockholders’ equity:
Common stock		41,976						41,976
Additional paid-in capital		63,280						63,280
Retained earnings		773,938			(365	)		773,573
Accumulated other comprehensive loss		(127,105	)					(127,105	)
Treasury shares		(292,059	)					(292,059	)
Total stockholders’ equity		460,030			(365	)		459,665
Total liabilities and stockholders’ equity	$	1,009,607		$	(767	)	$	1,008,840

Revenue Recognition Accounting Policy

The adoption of ASC

606

represents a change in accounting principle that provides enhanced revenue recognition disclosures. Revenue is recognized when the control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. The Company recognizes all revenues on a gross basis based on consideration of the criteria set forth in ASC Topic

606

55,

Principal versus Agent Considerations

. To achieve this core principle, the Company applies the following

five

steps:

Identify the contract with a customer

Identify the performance obligations in the contract

Determine the transaction price

Allocate the transaction price to performance obligations in the contract

Recognize revenue when or as the Company satisfies a performance obligation

Most of the Company’s contracts have a single performance obligation which represents, the product or service being sold to the customer. Some contracts include multiple performance obligations such as a product and the related installation and/or extended warranty. Additionally, most of the Company’s contracts offer assurance type warranties in connection with the sale of a product to customers. Assurance type warranties provide a customer with assurance that the product complies with agreed-upon specifications. Assurance type warranties do

not

represent a separate performance obligation.

In general, the Company recognizes revenue at the point in time control transfers to their customer based on predetermined shipping terms. Revenue recognized under long-term contracts within the Engineering Technologies group for highly customized customer products that have

alternative use and in which the contract specifies the Company has a right to payment for its costs, plus a reasonable margin are recognized over time. For products manufactured over time, the transfer of control is measured pro rata, based upon current estimates of costs to complete such contracts. Losses on contracts are fully recognized in the period in which the losses become determinable. Revisions in profit estimates are reflected on a cumulative basis in the period in which the basis for such revision becomes known.

The Company has elected to use the following practical expedients:

●

The Company will use the portfolio approach for contracts with similar characteristics provided the accounting result will

not

be materially different from the result of applying the guidance at the individual contract level. The Company will use its judgment in the application of this approach to contracts and groups of similar contracts.

●

The Company will expense all relevant incremental costs, such as selling and marketing costs, bid and proposal costs, sales commissions and legal fees to obtain a contract that has a duration of

one

year or less.

●

The Company’s standard payment terms are less than

one

year. As such,

significant financing component exists within our contracts with our customers.

The Company has made the following accounting policy elections under ASC

606:

●

The Company accounts for shipping and handling activities performed after a customer has obtained control as a fulfillment activity rather than as a promise/performance obligation.

●

Sales, use and value added taxes assessed by governmental authorities are excluded from the measurement of the transaction price within the company’s contracts with its customers

Disaggregation of Revenue from Contracts with Customers

The following table presents revenue disaggregated by product line and segment (in thousands):

	Three Months Ended
Revenue by Product Line	September 30, 2018		September 30, 2017
Refrigeration	$	54,545	$	59,742
Merchandising & Display		9,058		8,747
Pumps		8,728		9,338
Total Food Service Equipment		72,331		77,827

Engraving Services		33,855		29,993
Engraving Products		2,124		2,836
Total Engraving		35,979		32,829

Engineering Technologies Components		20,784		20,267
Total Engineering Technologies		20,784		20,267

Electronics		51,450		46,816

Hydraulics Cylinders and System		12,536		11,403
Total Hydraulics		12,536		11,403

Total Revenue by Product Line	$	193,080	$	189,142

The following table presents revenue disaggregated by revenue types (in thousands):

	Three Months Ended
Revenues by Type	September 30, 2018		September 30, 2017
Parts, Components and Finished Goods	$	159,225	$	159,149
Services		33,855		29,993
Total Revenue	$	193,080	$	189,142

The following table presents revenue from continuing operations disaggregated by geography based on company’s locations (in thousands):

	Three Months Ended
Net sales	September 30, 2018
United States	$	124,729
Asia Pacific		27,878
EMEA (1)		35,526
Other Americas		4,947
Total	$	193,080

(

)

EMEA consists primarily of Europe, Middle East and S. Africa.

The following table presents revenue from continuing operations disaggregated by timing of recognition (in thousands):

	Three Months Ended
Timing of Revenue Recognition	September 30, 2018		September 30, 2017
Products and services transferred at a point in time	$	187,898	$	185,513
Products transferred over time		5,182		3,629
Net Sales	$	193,080	$	189,142

Contract Balances

Contract assets represent sales recognized in excess of billings related to work completed but

not

yet shipped for which revenue is recognized over time. Contract assets are recorded as accounts receivable.

Contract liabilities are customer deposits for which revenue has

not

been recognized. Current contract liabilities are recorded as accrued expenses.

The following table provides information about contract assets and liability balances as of

September 30, 2018 (

in thousands):

	Balance at Beginning of Period		Additions		Deductions		Balance at End of Period
Fiscal quarter ended September 30, 2018
Contract assets:
Accounts receivable	$	5,655	$	5,422	$	9,525	$	1,552
Unbilled services		5,904		2,960		1,681		7,183
Contract liabilities:
Customer deposits		2,552		-		503		2,049

During the quarter ended

September 30, 2018,

we recognized the following revenue as a result of changes in the contract liability balances (in thousands):

Revenue recognized in the period from:		September 30, 2018
Amounts included in the contract liability balance at the beginning of the period		$	503

The timing of revenue recognition, invoicing and cash collections results in billed receivables, contract assets and contract liabilities on the consolidated balance sheets.

When consideration is received from a customer prior to transferring goods or services to the customer under the terms of a contract, a contract liability is recorded. Contract liabilities are recognized as revenue after control of the goods and services are transferred to the customer and all revenue recognition criteria have been met.