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REVENUE RECOGNITION AND CONTRACTS WITH CUSTOMERS

3 Months Ended

Mar. 31, 2018

Revenue from Contract with Customer [Abstract]

REVENUE RECOGNITION AND CONTRACTS WITH CUSTOMERS

NOTE 3 – REVENUE RECOGNITION AND CONTRACTS WITH CUSTOMERS

On January 1, 2018, the Company adopted ASC 606, Revenue from Contracts with Customers, using the modified retrospective method, applied to those contracts for which all performance obligations were not completed as of that date. Under the modified retrospective method results for reporting periods beginning after January 1, 2018 will be presented using the guidance of ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with the previous guidance provided in ASC Topic 605, Revenue Recognition.

The effects of adjustments to the December 31, 2017 consolidated balance sheet for the adoption of ASC 606 were as follows:

		Balance at December 31,2017				Topic 606 Adjustments				Opening Balance January 1, 2018
Trade accounts payable and accrued expenses			32,422				(4,000	)			28,422
Deferred revenue from contracts with customers			—				6,950				6,950
Deferred taxes			1,402				(723	)			679
Retained earnings			321,323				(2,227	)			319,096

At December 31, 2017, the Company had accrued $4.0 million related to certain of its sales promotion activities that included the shipment of no charge firearms. Using the new accounting guidance, a deferred contract liability of $6.9 million was required at December 31, 2017 and an entry for $2.9 million to increase the deferred contract liability, increase deferred tax assets by $0.7 million, and reduce beginning retained earnings by $2.2 million was recorded on January 1, 2018 (the “transition entry”).

The impact of the adoption of ASC 606 on revenue recognized during the quarter ended March 31, 2018 is as follows:

Contract liabilities with customers at January 1, 2018		$	6,950

Revenue recognized			(4,822	)

Revenue deferred			7,180

Contract liabilities with customers at March 31, 2018		$	9,308

During the three months ended March 31, 2018, The Company deferred an additional $7.2 million of revenue, partially offset by the recognition of $4.8 million of revenue previously deferred as the performance obligation relating to the shipment of free products was satisfied. This resulted in a net reduction in firearms sales for the quarter of $2.4 million and a deferred contract revenue liability at March 31, 2018 of $9.3 million. The Company estimates that revenue from this deferred contract liability will be recognized in the second and third quarters of 2018. As a result of the adoption of ASC 606, gross margin was reduced by approximately 3% and earnings per share was reduced by approximately 4¢.

Practical Expedients and Exemptions

The Company has elected to account for shipping and handling activities that occur after control of the related product transfers to the customer as fulfillment activities and are therefore recognized upon shipment of the goods.