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Revenue Recognition | 9 Months Ended
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Sep. 30, 2018
Revenue Recognition [Abstract] |
Revenue Disclosure | Revenue Recognition Prior to the Adoption of ASC 606. Prior to our adoption of ASC 606 on January 1, 2018, we recognized revenue on a gross basis when all of the following criteria were met: (i) persuasive evidence of an arrangement existed; (ii) title, ownership and risk of loss had passed to the customer; (iii) the price to the customer was fixed or determinable; and (iv) collection of the resulting receivable was reasonably assured. Provisions for estimated sales returns from and allowances to customers were made in the same period as the related revenues were recognized, based on historical experience or the specific identification of an event necessitating a reserve. Subsequent to the Adoption of ASC 606. Subsequent to our adoption of ASC 606 on January 1, 2018 (see "New Accounting Pronouncements" in Note 1), we recognize revenue as we fulfill our performance obligations and transfer control of products to our customers. For products that have an alternative use and/or for which we do not have an enforceable right to payment (including a reasonable profit) during the production process, we recognize revenue at a point in time. For products that have no alternative use and for which we have an enforceable right to payment (including a reasonable profit) throughout the production process, we recognize revenue over time. In general, a majority of our Aero/HS products and our Automotive Extrusions are recognized over time, with the remainder of our products recognized at a point in time. For the majority of our business, contracts with customers begin when we acknowledge a purchase order for a specific customer order of product to be delivered in the near term. These purchase orders are short term in nature, although they may reference a longer term "blanket purchase order" or a "terms and conditions" agreement, both of which may span multiple years. For revenue recognized at a point in time, transfer of control usually occurs upon shipment or upon customer receipt of the product, depending on shipping terms. For contracts recognized over time, control transfer occurs incrementally during our production process as progress is made on fulfilling the performance obligation. We use the input method of determining our progress, capturing direct costs beginning at the point that billet or cast ingot is introduced into production at either the extrusion phase or the rolling phase, respectively. We believe the input method more accurately reflects the transfer of control as it represents the best information available of work completed to date for which we have an enforceable right to payment. For products in production, we recognize revenue using estimates of the cost incurred to date plus a reasonable margin. As the duration of our contracts for accounting purposes is typically less than one year, we do not present quantitative information about the aggregate transaction price allocated to unsatisfied performance obligations at the end of the reporting period. We adjust the amount of revenue recognized on all products, regardless of timing of revenue recognition, for variable price consideration, which could include metal market price adjustments, volume rebates and sales discounts. We estimate rebate and discount values based on forecasted order data and historical payment trends for specific customers, adjusted as necessary at each reporting period. Accounts receivable is recorded when our right to consideration becomes unconditional. Payment terms for a majority of our domestic customers are 30 days after invoice date. To accommodate shipping time to overseas locations, payment terms for foreign customers are typically several weeks longer than domestic terms. As such, we do not adjust the promised amount of consideration for the effects of a significant financing component as we do not expect the period between the transfer of control of products to our customers and receipt of payment will be greater than one year. Contract assets primarily relate to our enforceable right to consideration for work completed but not billed at the reporting date on contracts for products recognized over time. Contract assets also include amounts related to our contractual right to consideration for finished goods recognized over time that were in transit as of period end. Incremental Costs of Obtaining a Contract. We expense the costs of obtaining a contract as incurred as the amortization period of the asset that we otherwise would have recognized is one year or less. Shipping and Handling Activities. We account for shipping and handling activities that occur after the customer has obtained control of a product as fulfillment activities (i.e., an expense) rather than as a promised service (i.e., a revenue element). The following table presents the impact on our opening Consolidated Balance Sheet as of January 1, 2018 of adopting ASC 606 (in millions of dollars):
| December 31, 2017 As Reported |  | Cumulative-effect Adjustments 1 |  | January 1, 2018 As Adjusted
Contract assets | $ | — |  |  | $ | 55.6 |  |  | $ | 55.6 |
Inventories | 207.9 |  |  | (40.7 | ) |  | 167.2 |
Total current assets | 656.6 |  |  | 14.9 |  |  | 671.5 |
Deferred tax assets, net | 72.0 |  |  | (3.3 | ) |  | 68.7 |
Total assets | $ | 1,385.2 |  |  | $ | 11.6 |  |  | $ | 1,396.8 |
Other accrued liabilities | 40.5 |  |  | 1.5 |  |  | 42.0 |
Total current liabilities | 173.1 |  |  | 1.5 |  |  | 174.6 |
Total liabilities | $ | 638.9 |  |  | $ | 1.5 |  |  | $ | 640.4 |
Retained earnings | 85.5 |  |  | 10.1 |  |  | 95.6 |
Total stockholders’ equity | 746.3 |  |  | 10.1 |  |  | 756.4 |
Total liabilities and stockholders’ equity | $ | 1,385.2 |  |  | $ | 11.6 |  |  | $ | 1,396.8 |
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1 | Included in the cumulative-effect adjustment was a charge of $5.0 million as a result of decrementing higher cost prior LIFO layers.
The following table presents the impact of adopting ASC 606 on our Consolidated Balance Sheet as of the period presented (in millions of dollars):
| September 30, 2018 As Reported |  | Adjustments |  | September 30, 2018 without Adoption of ASC 606
Contract assets | $ | 51.0 |  |  | $ | (51.0 | ) |  | $ | — |
Inventories | 196.2 |  |  | 31.3 |  |  | 227.5 |
Total current assets | 673.0 |  |  | (19.7 | ) |  | 653.3 |
Deferred tax assets, net | 42.2 |  |  | 3.3 |  |  | 45.5 |
Total assets | $ | 1,426.0 |  |  | $ | (16.4 | ) |  | $ | 1,409.6 |
Other accrued liabilities | 37.0 |  |  | (2.7 | ) |  | 34.3 |
Total current liabilities | 192.5 |  |  | (2.7 | ) |  | 189.8 |
Total liabilities | $ | 663.5 |  |  | $ | (2.7 | ) |  | $ | 660.8 |
Retained earnings | 135.6 |  |  | (13.7 | ) |  | 121.9 |
Total stockholders’ equity | 762.5 |  |  | (13.7 | ) |  | 748.8 |
Total liabilities and stockholders’ equity | $ | 1,426.0 |  |  | $ | (16.4 | ) |  | $ | 1,409.6 |
The following table presents the impact of adopting ASC 606 on our Statements of Consolidated Income for each period presented (in millions of dollars, except per share amounts):
| Quarter Ended September 30, 2018 |  | Nine Months Ended September 30, 2018
| As Reported |  | Adjustments |  | Without Adoption of ASC 606 |  | As Reported |  | Adjustments |  | Without Adoption of ASC 606
Net sales | $ | 393.1 |  |  | $ | 1.6 |  |  | $ | 394.7 |  |  | $ | 1,196.5 |  |  | $ | 4.8 |  |  | $ | 1,201.3 |
Cost of products sold, excluding depreciation and amortization and other items 1 | 323.3 |  |  | 1.9 |  |  | 325.2 |  |  | 983.4 |  |  | 9.5 |  |  | 992.9 |
Operating income | 34.9 |  |  | (0.3 | ) |  | 34.6 |  |  | 106.7 |  |  | (4.7 | ) |  | 102.0 |
Income before income taxes | 29.9 |  |  | (0.3 | ) |  | 29.6 |  |  | 90.0 |  |  | (4.7 | ) |  | 85.3 |
Income tax provision | (8.2 | ) |  | 0.1 |  |  | (8.1 | ) |  | (21.9 | ) |  | 1.1 |  |  | (20.8 | )
Net income | $ | 21.7 |  |  | $ | (0.2 | ) |  | $ | 21.5 |  |  | $ | 68.1 |  |  | $ | (3.6 | ) |  | $ | 64.5 |
Net income per common share: |  |  |  |  |  |  |  |  |  |  |
Basic | $ | 1.31 |  |  | $ | (0.01 | ) |  | $ | 1.30 |  |  | $ | 4.09 |  |  | $ | (0.21 | ) |  | $ | 3.88 |
Diluted | $ | 1.29 |  |  | $ | (0.01 | ) |  | $ | 1.28 |  |  | $ | 4.03 |  |  | $ | (0.21 | ) |  | $ | 3.82 |
____________________
1 | Included in the "as reported" amounts was the benefit of having decremented higher cost prior LIFO layers as part of the cumulative-effect adjustment of adopting ASC 606, as discussed in the opening balance sheet table above.
The following table presents the impact of adopting ASC 606 on our Statements of Consolidated Comprehensive Income for each period presented (in millions of dollars):
| Quarter Ended September 30, 2018 |  | Nine Months Ended September 30, 2018
| As Reported |  | Adjustments |  | Without Adoption of ASC 606 |  | As Reported |  | Adjustments |  | Without Adoption of ASC 606
Net income | $ | 21.7 |  |  | $ | (0.2 | ) |  | $ | 21.5 |  |  | $ | 68.1 |  |  | $ | (3.6 | ) |  | $ | 64.5 |
Comprehensive income | $ | 20.9 |  |  | $ | (0.2 | ) |  | $ | 20.7 |  |  | $ | 65.4 |  |  | $ | (3.6 | ) |  | $ | 61.8 |
The following table presents the impact of adopting ASC 606 on our Statements of Consolidated Cash Flows for the period presented (in millions of dollars):
| Nine Months Ended September 30, 2018 As Reported |  | Adjustments |  | Nine Months Ended September 30, 2018 without Adoption of ASC 606
Net income | $ | 68.1 |  |  | $ | (3.6 | ) |  | $ | 64.5 |
Changes in operating assets and liabilities: |  |  |  |  |
Contract assets | 4.6 |  |  | (4.6 | ) |  | — |
Inventories | (25.6 | ) |  | 9.4 |  |  | (16.2 | )
Accrued liabilities | (1.0 | ) |  | (1.2 | ) |  | (2.2 | )
Net cash provided by operating activities | $ | 112.5 |  |  | $ | — |  |  | $ | 112.5 |

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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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