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Note 3 - Revenue
 9 Months Ended
Sep. 30, 2020
Notes to Financial Statements  
Revenue from Contract with Customer [Text Block]

NOTE 3 – REVENUE

 

Disaggregation of Revenue

 

The following tables disaggregate total net sales by major product category and geographic location:

 

  

Product Category

 
  

Three Months Ended
September 30,

  

Nine Months Ended
September 30,

 
  

2020

  

2019

  

2020

  

2019

 

Pumps and pump systems

 $77,035  $86,114  $230,581  $260,913 

Repair parts for pumps and pump systems and other

  11,947   13,184   35,886   43,574 

Total net sales

 $88,982  $99,298  $266,467  $304,487 

 

  

Geographic Location

 
  

Three Months Ended
September 30,

  

Nine Months Ended
September 30,

 
  

2020

  

2019

  

2020

  

2019

 

United States

 $63,292  $69,491  $188,312  $211,976 

Foreign countries

  25,690   29,807   78,155   92,511 

Total net sales

 $88,982  $99,298  $266,467  $304,487 

 

International sales represented approximately 29% of total net sales for the third quarter of 2020 and approximately 30% of total net sales for the third quarter in 2019, and were made to customers in many different countries around the world.

 

Performance Obligations

 

A performance obligation is a promise in a contract to transfer a distinct good or service to a customer, and is the unit of account in ASC Topic 606. The transaction price for a customer contract is allocated to each distinct performance obligation and recognized as revenue when, or as, the Company’s performance obligation is satisfied. For product sales, other than long-term construction-type contracts, the Company recognizes revenue once control has passed at a point in time, which is generally when products are shipped. Payments received for product sales typically occur following delivery and the satisfaction of the performance obligation based upon the terms outlined in the contracts. Substantially all of our customer contracts are fixed-price contracts and the majority of our customer contracts have a single performance obligation, as the promise to transfer the individual products or services is not separately identifiable from other promises in the contract. For customer contracts with multiple performance obligations, the Company allocates revenue to each performance obligation based on its relative standalone selling price, which is generally determined based on standalone selling prices charged to customers or using expected cost plus margin.

 

All of the Company's performance obligations, and associated revenue, are generally transferred to customers at a point in time, with the exception of certain highly customized pump products, which are transferred to the customer over time. The Company’s method for recognizing revenue over time is the percentage of completion method, whereby progress towards completion is measured by applying an input measure based on costs incurred to date relative to total estimated costs at completion.

 

The Company offers standard warranties for its products to ensure that its products comply with agreed-upon specifications in its contracts. For standard warranties, these do not give rise to performance obligations and represent assurance-type warranties.

 

Shipping and handling activities related to products sold to customers, whether performed before or after the customer obtains control of the products, are generally accounted for as activities to fulfill the promise to transfer the products and not as a separate performance obligation.

 

On September 30, 2020, the Company had $102.0 million of remaining performance obligations, also referred to as backlog. The Company expects to recognize as revenue substantially all of the remaining performance obligations within one year.

 

Contract Estimates

 

Accounting for long-term contracts involves the use of various techniques to estimate total contract revenue and costs. For long-term contracts, the Company estimates the profit on a contract as the difference between the total estimated revenue and expected costs to complete a contract and recognizes that profit as performance obligations are satisfied. Contract estimates are based on various assumptions to project the outcome of future events that could span longer than one year. These assumptions include labor productivity and availability, the complexity of the work to be performed, the cost and availability of materials, and the performance of subcontractors as applicable.

 

As a significant change in one or more of these estimates could affect the profitability of our contracts, the Company reviews and updates its contract-related estimates regularly. Adjustments in estimated profit on contracts are accounted for under the cumulative catch-up method. Under this method, the impact of the adjustment on profit recorded to date on a contract is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance are recognized using the adjusted estimate.

 

Contract Balances

 

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) in the Consolidated Balance Sheets. For certain highly customized pump products, revenue is recognized over time before the customer is invoiced, resulting in contract assets. Sometimes the Company receives advances or deposits from its customers before revenue is recognized, resulting in contract liabilities. These contract assets and liabilities are reported in the Consolidated Balance Sheets as a component of Other assets and Deferred revenue and customer deposits, respectively, on a contract-by-contract basis at the end of each reporting period.

 

The Company’s contract assets and liabilities as of September 30, 2020 and December 31, 2019 were as follows:

 

  

September 30, 2020

  

December 31, 2019

 

Contract assets

 $-  $393 

Contract liabilities

 $4,087  $4,911 

 

Revenue recognized for the nine months ended September 30, 2020 and 2019 that was included in the contract liabilities balance at the beginning of the period was $4.4 million for both periods.