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COSTS AND ESTIMATED PROFITS ON UNCOMPLETED CONTRACTS | 12 Months Ended
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Dec. 31, 2018
Contractors [Abstract] |
COSTS AND ESTIMATED PROFITS ON UNCOMPLETED CONTRACTS | REVENUE RECOGNTION In May 2014, the FASB issued ASU 2014-9, Revenue from Contracts with Customers, and issued subsequent amendments to the initial guidance in August 2015, March 2016, April 2016, May 2016, and December 2016 within ASU 2015-14, ASU 2016-8, ASU 2016-10, ASU 2016-12 and ASU 2016-20, respectively. The core principle of this new revenue recognition guidance is that a company will recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The new guidance defines a five-step process to achieve this core principle. The new guidance also requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance provided for two transition methods, a full retrospective approach and a modified retrospective approach. On January 1, 2018, the Company adopted ASC Topic 606 using the modified retrospective method with no impact to opening retained earnings and determined there were no changes required to its reported revenue amounts for prior periods as a result of the adoption. Results for reporting periods beginning after January 1, 2018 are presented under ASC Topic 606, while comparative prior period amounts were not adjusted and continue to be reported under the accounting standards in effect for those periods. The Company has enhanced its disclosures of revenue to comply with the new guidance. Overview The Company's primary source of revenue is the sale of products, and service to energy and industrial customers. The Company is organized into three business segments: Service Centers, Supply Chain Services and Innovative Pumping Solutions. Revenues are recognized when a contract is in place, the performance obligations under the contract have been identified, and the price or consideration to be received is fixed and allocated to the performance obligation(s) in the contract. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in ASC 606. The Company recognizes revenue upon the satisfaction of our performance obligation(s) under its contracts. The timing of revenue recognition varies for the revenue streams described in more detail below. In general, the timing of revenue recognition includes recognition of revenue over time as services are being performed as well as recognition of revenue at a point in time, for delivery of products. Revenues are recorded net of sales taxes. The revenue streams described below cross reporting segments in some instances, but the categories presented have similar products, customer class and timing of cash flows and revenue recognition. Inventory management services The Supply Chain Services segment is engaged in providing a wide variety of inventory management services including Service Teams, Sales Engineers, Customer Service Support, Service Center Support and performance Reporting and Communication. These services represent a series of distinct services that are substantially the same and that have the same pattern of transfer to the customer over the contract period, and therefore qualify as a single (combined) performance obligation that is satisfied over time. The customer simultaneously receives and consumes the benefits of our services as they are provided by us. Revenue associated with Inventory Management Services is recognized over the service period. The transaction price for the inventory management services do not include any consideration that is variable in nature. Accordingly, the transaction price is based on the amount the Company has a right to invoice the customer under the terms of the contract and on the company’s estimate of the standalone sales price for these services at the initiation of the contract. The standalone sales price is established based on the anticipated cost of performing these services, plus the Company’s anticipated profit margin for inventory management services. Product Sales The majority of the Service Centers segment and the Supply Chain Services segment revenue originates from the satisfaction of a single performance obligation, the delivery of products. The IPS segment also sells its customers certain products and supplies, however, most of its revenue is generated through pump manufacturing and fabrication described below. We often establish product and service agreements with clients. However, these product and service agreements do not specify the individual goods or services that will ultimately be purchased by the customer. Rather, the product and service agreement establishes an agreement to stand-ready to provide future products and services when they are ordered and therefore is not a contract for revenue recognition purposes under ASC 606. The memorandum of understanding, purchase order or invoice, which lists the goods or services to be provided and the corresponding payment amounts, is the contract under which revenue is recognized. The Company accounts for all shipping and handling services as fulfillment services in accordance with ASC 606; accordingly, shipping and handling activities is combined with the product deliverable rather than being accounted for as a distinct performance obligation within the terms of the agreement. The product sales are generally offered to our customers on a cost plus a fixed mark-up percentage basis which varies based on the category of the item being sold. The transaction price for product sales does not include any consideration that is variable in nature. Accordingly, the transaction price is based on the amount the Company has a right to invoice the customer under the terms of the contract. The Company recognizes revenues associated with product sales upon satisfaction of a single performance obligation, delivery, in accordance with the shipping terms, at the contract price, net of sales taxes. Customized pump production The Company fabricates and assembles custom-made pump packages, remanufactures pumps and manufactures branded private label pumps within our Innovative Pumping Solutions (IPS) segment. For binding agreements to fabricate tangible assets to customer specifications, the Company recognizes revenues over time when the customer is able to direct the use of and obtain substantially all of the benefits of the work performed. This typically occurs when the products have no alternative use for us and we have an enforceable right to payment for the work completed to date plus a reasonable profit margin. Contracts generally include cancellation provisions that require the customer to reimburse us for costs incurred through the date of cancellation. We recognize revenue over time for these contracts using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying our performance obligations, an "input method" as defined by the new standard. Under this method, revenues are recognized as costs are incurred and include estimated profits calculated on the basis of the relationship between costs incurred and total estimated costs at completion. Incurred cost represents work performed, which corresponds with, and thereby best depicts, the transfer of control of goods and services to customers. If at any time expected costs exceed the value of the contract, the loss is recognized immediately in the period it is identified. The typical time span of these contracts is approximately three to eighteen months. Staffing services Within the Service Centers segment, the Company also provides certain customers with safety personnel who are deployed to customer locations to provide emergency response services. The staffing services is a single performance obligation from which clients are able to benefit independently and is billed to the client on a day-rate basis. As our customer simultaneously receives and consumes the benefit as the service is provided, revenue from staffing services is recognized over time as the service is performed based on the day-rate specified in the contract. The transaction price for staffing does not include any variable consideration. The following table presents our revenue disaggregated by major category and segment for the years ended December 31, 2018, 2017 and 2016, respectively:
Years Ended December 31, | Service Centers |  | Innovative Pumping Solutions |  | Supply Chain Services |  | Total
2018 |  |  |  |  |  |  |
Product sales (recognized at a point in time) | 685,309 |  |  | — |  |  | 160,770 |  |  | $ | 846,079 |
Inventory management services (recognized over contract life) | — |  |  | — |  |  | 13,686 |  |  | 13,686 |
Staffing services (day-rate basis) | 64,735 |  |  | — |  |  | — |  |  | 64,735 |
Customized pump production (recognized over time) | — |  |  | 291,697 |  |  | — |  |  | 291,697 |
Total revenue | $ | 750,044 |  |  | $ | 291,697 |  |  | $ | 174,456 |  |  | $ | 1,216,197 |
2017 |  |  |  |  |  |  |  |  |  |  |
Product sales (recognized at a point in time) | 575,328 |  |  | — |  |  | 147,927 |  |  | $ | 723,255 |
Inventory management services (recognized over contract life) | 0 |  | — |  |  | 13,550 |  |  | 13,550 |
Staffing services (day-rate basis) | 65,947 |  |  | — |  |  | — |  |  | 65,947 |
Customized pump production (recognized over time) | — |  |  | 204,030 |  |  | — |  |  | 204,030 |
Total revenue | $ | 641,275 |  |  | $ | 204,030 |  |  | $ | 161,477 |  |  | $ | 1,006,782 |
2016 |  |  |  |  |  |  |  |  |  |  |
Product sales (recognized at a point in time) | 565,157 |  |  | — |  |  | 140,019 |  |  | $ | 705,176 |
Inventory management services (recognized over contract life) | — |  |  | — |  |  | 13,942 |  |  | 13,942 |
Staffing services (day-rate basis) | 55,850 |  |  | — |  |  | — |  |  | 55,850 |
Customized pump production (recognized over time) | — |  |  | 187,124 |  |  | — |  |  | 187,124 |
Total revenue | $ | 621,007 |  |  | $ | 187,124 |  |  | $ | 153,961 |  |  | $ | 962,092 |
Contract Assets and Liabilities Under our customized pump production contracts in our IPS segment, amounts are billed as work progresses in accordance with agreed-upon contractual terms, upon various measures of performance, including achievement of certain milestones, completion of specified units, or completion of a contract. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. Our contract assets are presented as “cost and estimated profits in excess of billings” on our Condsolidated Balance Sheets. However, we sometimes receive advances or deposits from our customers before revenue is recognized, resulting in contract liabilities that are presented as “Billings in excess of costs and estimated profits” on our Consolidated Balance Sheets. See Note 7 - Costs and Estimated Profits on Uncompleted Contracts. During the twelve months ended December 31, 2018, $21.3 million of the balances that were previously classified as contract liabilities at the beginning of the period shipped. Contract assets and liability changes were primarily due to normal activity and timing differences between our performance and customer payments. Practical expedients and elections We generally expense sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within selling, general and administrative expense. We do not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less and contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed. We do not assess whether a contract has a significant financing component if at contract inception, the period between when we transfer a promised good to a customer and when the customer pays is expected to be one year or less. See Note 19 - Segment and Geographical Reporting for disaggregation of revenue by reporting segments. The Company believes this disaggregation best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. COSTS AND ESTIMATED PROFITS ON UNCOMPLETED CONTRACTS Costs and estimated profits in excess of billings arise in the consolidated balance sheets when revenues have been recognized but the amounts cannot be billed under the terms of the contracts. Such amounts are recoverable from customers upon various measures of performance, including achievement of certain milestones, completion of specified units, or completion of a contract. Costs and estimated profits on uncompleted contracts and related amounts billed for 2018 and 2017 were as follows (in thousands):
| December 31,
| 2018 |  | 2017
Costs incurred on uncompleted contracts | $ | 53,595 |  |  | $ | 37,899 |
Estimated earnings, thereon | 6,847 |  |  | 2,665 |
Total | $ | 60,442 |  |  | $ | 40,564 |
Less: billings to date | 38,662 |  |  | 17,881 |
Net | $ | 21,780 |  |  | $ | 22,683 |
Such amounts were included in the accompanying consolidated balance sheets for 2018 and 2017 under the following captions (in thousands):
| December 31,
| 2018 |  | 2017
Costs and estimated profits in excess of billings | $ | 32,514 |  |  | $ | 26,915 |
Billings in excess of costs and estimated profits | (10,696 | ) |  | (4,249 | )
Translation Adjustment | (38 | ) |  | 17 |
Net | $ | 21,780 |  |  | $ | 22,683 |

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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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