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REVENUE RECOGNITION AND CONTRACTS WITH CUSTOMERS

9 Months Ended

Sep. 29, 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 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	ASC 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 three and nine months ended September 29, 2018 is as follows:

Three Months Ended September 29, 2018

Nine Months Ended September 29, 2018

Contract liabilities with customers beginning of period

$ 6,674

$ 6,950

Revenue recognized

(7,090)

(16,807)

Revenue deferred

6,347

15,788

Contract liabilities with customers at September 29, 2018

$ 5,931

$ 5,931

During the three and nine months ended September 29, 2018, the Company deferred $6.4 million and $15.8 million of revenue, respectively, offset by the recognition of $7.1 million and $16.8 million, respectively, of revenue previously deferred as the performance obligations relating to the shipment of free products were satisfied. This resulted in a net increase in firearms sales for the three and nine months ended September 29, 2018 of $0.7 million and $1.0 million, respectively, and a deferred contract revenue liability at September 29, 2018 of $5.9 million. The Company estimates that revenue from this deferred contract liability will be recognized in the fourth quarter of 2018. As a result of the adoption of ASC 606, for the three months ended September 29, 2018, the gross margin percentage was reduced by 3% and earnings per share increased by approximately 1¢ over the comparable prior year period. As a result of the adoption of ASC 606, for the nine months ended September 25, 2018, the gross margin percentage was reduced by 2% and earnings per share increased by approximately 2¢ over the comparable prior year period.

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 that are recognized upon shipment of the goods.