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Note 3 - Revenue From Contracts With Customers | 6 Months Ended
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Dec. 31, 2018
Notes to Financial Statements |
Revenue from Contract with Customer [Text Block] | 3 ) 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 as a result of applying ASC 606 have been reflected within those respective financial statements. 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 no 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 now calculates 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 which is comprised of (i) a net change for Engineering Technologies of $0.7 million in revenues offset by cost of sales increase of $0.6 million; and (ii) a $1.5 million adjustment for accrued rebates in the Food Service Equipment segment. 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 and six months ended December 31, 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 December 31, 2018 |
|  | As Presented |  |  | Impact of ASC 606 |  |  | Balances Without adoption of ASC 606 |
Net sales |  | $ | 195,522 |  |  | $ | (2,812 | ) |  | $ | 192,710 |
Cost of sales |  |  | 128,586 |  |  |  | (2,786 | ) |  |  | 125,800 |
Gross profit |  |  | 66,936 |  |  |  | (26 | ) |  |  | 66,910 |
Provision for income taxes |  |  | 3,860 |  |  |  | (8 | ) |  |  | 3,852 |
Income from continuing operations |  |  | 12,474 |  |  |  | (18 | ) |  |  | 12,456 |
Income (loss) from discontinued operations, net of income taxes |  |  | 924 |  |  |  | 171 |  |  |  | 1,095 |
Net income (loss) |  | $ | 13,398 |  |  | $ | 153 |  |  | $ | 13,551 |
|  | Six Months Ended December 31, 2018 |
|  | As Presented |  |  | Impact of ASC 606 |  |  | Balances Without adoption of ASC 606 |
Net sales |  | $ | 388,609 |  |  | $ | (5,855 | ) |  | $ | 382,754 |
Cost of sales |  |  | 252,421 |  |  |  | (5,282 | ) |  |  | 247,139 |
Gross profit |  |  | 136,188 |  |  |  | (573 | ) |  |  | 135,615 |
Provision for income taxes |  |  | 9,702 |  |  |  | (166 | ) |  |  | 9,536 |
Income from continuing operations |  |  | 26,767 |  |  |  | (407 | ) |  |  | 26,360 |
Income (loss) from discontinued operations, net of income taxes |  |  | 2,488 |  |  |  | 195 |  |  |  | 2,683 |
Net income (loss) |  | $ | 29,255 |  |  | $ | (212 | ) |  | $ | 29,043 |
|  | December 31, 2018 |
|  | As Presented |  |  | Impact of ASC 606 |  |  | Balances Without adoption of ASC 606 |
ASSETS |  |  |  |  |  |  |  |  |  |  |  |
Prepaid Expenses |  | $ | 21,425 |  |  | $ | (7,083 | ) |  | $ | 14,342 |
Inventories |  |  | 109,423 |  |  |  | 5,282 |  |  |  | 114,705 |
LIABILITIES |  |  |  |  |  |  |  |  |  |  |  |
Accrued liabilities |  | $ | 61,262 |  |  | $ | (1,228 | ) |  | $ | 60,034 |
Income taxes payable |  |  | 7,672 |  |  |  | (166 | ) |  |  | 7,506 |
Current liabilities- Discontinued Operations |  |  | 18,906 |  |  |  | (195 | ) |  |  | 18,711 |
Retained earnings |  |  | 784,687 |  |  |  | (212 | ) |  |  | 784,475 |
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 |  | December 31, 2018 |  |  | December 31, 2017 |
Refrigeration |  | $ | 52,217 |  |  | $ | 56,434 |
Merchandising & Display |  |  | 9,065 |  |  |  | 8,235 |
Pumps |  |  | 7,371 |  |  |  | 8,496 |
Total Food Service Equipment |  |  | 68,653 |  |  |  | 73,165 |
Engraving Services |  |  | 35,796 |  |  |  | 30,131 |
Engraving Products |  |  | 2,689 |  |  |  | 3,748 |
Total Engraving |  |  | 38,485 |  |  |  | 33,879 |
Engineering Technologies Components |  |  | 23,568 |  |  |  | 21,928 |
Electronics |  |  | 52,700 |  |  |  | 46,035 |
Hydraulics Cylinders and System |  |  | 12,116 |  |  |  | 10,687 |
Total Revenue by Product Line |  | $ | 195,522 |  |  | $ | 185,694 |
The following table presents revenue disaggregated by product line and segment (in thousands):
|  | Six Months Ended |
Revenue by Product Line |  | December 31, 2018 |  |  | December 31, 2017 |
Refrigeration |  | $ | 106,664 |  |  |  | 116,105 |
Merchandising & Display |  |  | 18,229 |  |  |  | 17,048 |
Pumps |  |  | 16,098 |  |  |  | 17,839 |
Total Food Service Equipment |  |  | 140,991 |  |  |  | 150,992 |
Engraving Services |  |  | 69,653 |  |  |  | 60,124 |
Engraving Products |  |  | 4,813 |  |  |  | 6,584 |
Total Engraving |  |  | 74,466 |  |  |  | 66,708 |
Engineering Technologies Components |  |  | 44,351 |  |  |  | 42,195 |
Electronics |  |  | 104,150 |  |  |  | 92,851 |
Hydraulics Cylinders and System |  |  | 24,651 |  |  |  | 22,090 |
Total Revenue by Product Line |  | $ | 388,609 |  |  |  | 374,836 |
The following table presents revenue from continuing operations disaggregated by geography based on company’s locations (in thousands):
Net sales |  | Three Months Ended December 31, 2018 |  |  | Six Months Ended December 31, 2018 |
United States |  | $ | 129,969 |  |  |  | 254,705 |
Asia Pacific |  |  | 28,163 |  |  |  | 56,041 |
EMEA (1) |  |  | 32,978 |  |  |  | 68,504 |
Other Americas |  |  | 4,412 |  |  |  | 9,359 |
Total |  | $ | 195,522 |  |  |  | 388,609 |
( 1 ) 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 |  | December 31, 2018 |  |  | December 31, 2017 |
Products and services transferred at a point in time |  | $ | 188,093 |  |  | $ | 182,441 |
Products transferred over time |  |  | 7,429 |  |  |  | 3,253 |
Net Sales |  | $ | 195,522 |  |  | $ | 185,694 |
|  | Six Months Ended |
Timing of Revenue Recognition |  | December 31, 2018 |  |  | December 31, 2017 |
Products and services transferred at a point in time |  | $ | 375,998 |  |  | $ | 367,954 |
Products transferred over time |  |  | 12,611 |  |  |  | 6,882 |
Net Sales |  | $ | 388,609 |  |  | $ | 374,836 |
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 December 31, 2018 and September 30, 2018 ( in thousands):
|  | Balance at Beginning of Period |  |  | Additions |  |  | Deductions |  |  | Balance at End of Period |
Fiscal quarter ended December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Contract assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts receivable |  | $ | 1,552 |  |  | $ | 10,735 |  |  | $ | 9,584 |  |  | $ | 2,703 |
Unbilled services |  |  | 7,183 |  |  |  | 2,465 |  |  |  | 1,035 |  |  |  | 8,613 |
Contract liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Customer deposits |  |  | 2,049 |  |  |  | 3,383 |  |  |  | - |  |  |  | 5,432 |
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 quarters ended December 31, 2018 and 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: |  | December 31, 2018 |  |  | 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.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
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