XML 22 R9.htm IDEA: XBRL DOCUMENT

Revenue Recognition and Contracts with Customers

12 Months Ended

Dec. 31, 2018

Revenue from Contract with Customer [Abstract]

Revenue Recognition and Contracts with Customers

2.	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 $6.9 million to increase the deferred contract liability, a decrease to accounts payable and accrued expenses by $4.0 million, an increase to deferred tax assets by $0.7 million, and a reduction to 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 year ended December 31, 2018 is as follows:

Contract liabilities with customers at January 1, 2018	$	6,950
Revenue recognized		(20,653	)
Revenue deferred		21,180
Contract liabilities with customers at December 31, 2018	$	7,477

During the year ended December 31, 2018, the Company deferred $21.2 million of revenue, offset by the recognition of $20.7 million of revenue previously deferred as the performance obligations relating to the shipment of free products were satisfied. This resulted in a net decrease in firearms sales for the year ended December 31, 2018 of $0.5 million and a deferred contract revenue liability at December 31, 2018 of $7.4 million. The Company estimates that revenue from this deferred contract liability will be recognized in the first two quarters of 2019. As a result, approximately $12.1 million of promotional expenses that had been classified as selling expenses in prior years were recorded as cost of products sold in 2018. As a result of the adoption of ASC 606, for the year ended December 31, 2018, the gross margin percentage was reduced by 3% and earnings per share decreased by approximately 1¢ from 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.