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REVENUE (Notes) | 3 Months Ended
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Jul. 28, 2018
Revenue [Abstract] |
Revenue from Contract with Customer [Text Block] | 3. REVENUE The Company is a global manufacturer of component and subsystem devices whose components are found in the primary end-markets of the aerospace, appliance, automotive, construction, consumer and industrial equipment, communications (including information processing and storage, networking equipment and wireless and terrestrial voice/data systems), medical, rail and other transportation industries. On April 29, 2018, we adopted ASC 606 along with the related amendments using a modified retrospective approach to all contracts open as of that date. Upon adoption, we recognized a $0.1 million increase to opening retained earnings. This adjustment was a result of modifying our revenue recognition pattern for highly customized goods with no alternative use to over time recognition instead of point in time and for deferring revenue related to material rights that we provide to our customers. The overall impact to our financial statements was immaterial. We have modified our controls to address the risks present under ASC 606. As we have adopted ASC 606 using the modified retrospective approach, our prior periods have not been restated, and as such they are presented under ASC 605. The impact of the changes in accounting policy on our first quarter of fiscal 2019 is provided below.
|  | Impact of Changes in Accounting Policies
(Dollars in Millions) |  | As Reported |  | Adjustments |  | Balance Under ASC 605
Net Sales |  | $ | 223.4 |  |  | $ | (7.1 | ) |  | $ | 230.5 |
Cost of Products Sold |  | $ | 163.3 |  |  | $ | (7.2 | ) |  | $ | 170.5 |
Total Inventories |  | $ | 88.5 |  |  | $ | (0.7 | ) |  | $ | 89.2 |
Contract Assets |  | $ | 1.0 |  |  | $ | 1.0 |  |  | $ | — |
Contract Liabilities |  | $ | 0.2 |  |  | $ | 0.2 |  |  | $ | — |
Retained Earnings |  | $ | 490.0 |  |  | $ | 0.1 |  |  | $ | 489.9 |
Revenue Accounting Policy: In May 2014, the FASB issued ASC 606, which supersedes the revenue recognition requirements in ASC 605, and requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The Company adopted ASC 606 as of April 29, 2018 using the modified retrospective transition method. The cumulative effect of initially applying the new standard was recorded as an adjustment to the opening balance of retained earnings within our condensed consolidated balance sheets. In accordance with the modified retrospective transition method, the historical information within the financial statements has not been restated and continues to be reported under the accounting standard in effect for those periods. As a result, the Company has disclosed the accounting policies in effect prior to April 29, 2018, as well as the policies it has applied starting April 29, 2018. Periods prior to April 29, 2018 Revenue is recognized in accordance with ASC 605. Revenue is recognized upon either shipment or delivery (depending on shipping terms) of product to customers and is recorded net of returns, allowances, customer discounts, and incentives. Sales taxes collected from customers and remitted to governmental authorities are accounted for on a net (excluded from revenues) basis. Periods commencing April 29, 2018 The majority of our revenue is recognized at a point in time. The Company has determined that the most definitive demonstration that control has transferred to a customer is physical shipment or delivery, depending on the contractual shipping terms, with the exception of consignment transactions. Consignment transactions are arrangements where the Company transfers product to a customer location but retains ownership and control of such product until it is used by the customer. Revenue for consignment arrangements is recognized upon the customer’s usage. Revenues associated with products which we believe have no alternative use, and where the Company has an enforceable right to payment, are recognized on an over time basis. In transition to ASC 606, the Company noted some customers ordered highly customized parts, in which the Company was entitled to payment throughout the manufacturing process. In accordance with ASC 606, the Company has begun recognizing revenue over time for these customers as the performance obligation is satisfied. The Company believes the most faithful depiction of the transfer of goods to the customer is based on progress to date, which is typically smooth throughout the production process. As such, the company recognizes revenue evenly over the production process through transfer of control to the customer. In addition, customers typically negotiate annual price downs. Management has evaluated these price downs and determined that in some instances, these price downs give rise to a material right. In instances that a material right exists, a portion of the transaction price is allocated to the material right and recognized over the life of the contract. Our warranties are standard, assurance-type warranties only. We do not offer any additional service or extended term warranties to our customers. As such, we continue to recognize warranty as an expense with accounting outside of the scope of ASC 606. The Company has elected to treat shipping and handling costs as an activity necessary to fulfill the performance obligation to transfer product to the customer and not as a separate performance obligation. Shipping and handling costs are estimated at quarter end in proportion to revenue recognized for transactions where actual costs are not yet known. Across all products, the amount of revenue recognized corresponds to the related purchase order. Revenue is adjusted for variable consideration (such as discounts) as described further below. Sales and other taxes collected concurrent with revenue-producing activities are excluded from revenue. The Company’s performance obligations are typically short-term in nature. As a result, the Company has elected the practical expedient that provides an exemption of the disclosure requirements regarding information about remaining performance obligations on contracts that have original expected durations of one year or less. Costs to Fulfill/Obtain a Contract: We incur pre-production tooling costs related to products produced for our customers under long-term supply agreements. We had $23.4 million and $20.5 million as of July 28, 2018 and April 28, 2018, respectively, of pre-production tooling costs related to customer-owned tools for which reimbursement is contractually guaranteed by the customer or for which the customer has provided a non-cancelable right to use the tooling. These costs are capitalized and recognized into income upon acceptance. The Company concluded that pre-production tooling and engineering costs do not represent a promised good or service under ASC 606, and as such, reimbursements received are accounted for as a reimbursement of the expense, not revenue. This change resulted in tooling reimbursements of $7.3 million being recorded into cost of products sold during the three months ended July 28, 2018. The Company has not historically incurred material costs to obtain a contract. In the instances that costs to obtain contracts are incurred, the Company will capitalize and amortize those over the life of the contract. Contract Estimates: Due to the nature of the work performed in completing certain performance obligations, the estimation of both total revenue and cost at completion includes a number of variables and requires significant judgment. Estimating total contract revenue may require judgment as certain contracts contain pricing discount structures, early payment discounts or other provisions that can impact the transaction price. The Company generally estimates variable consideration utilizing the most likely amount to which we expect to be entitled. When the contract provides the customer with the right to return eligible products, the Company reduces revenue at the point of sale using current facts and historical experience by using an estimate for expected product returns. The Company adjusts these estimates at the earlier of when the most likely amount of consideration that is expected to be received changes or when the consideration becomes fixed. Accordingly, an increase or decrease to revenue is recognized at that time. The Company has elected the practical expedient for significant financing components, allowing the Company to not adjust the promised amount of consideration for the effects of a financing component when payment terms are within one year from the time a performance obligation is satisfied. Our customers' payment terms are typically 30-45 days from the time control transfers. Certain of the Company's contracts contain annual contractually-guaranteed price reductions that grant the customer the right to purchase products at decreased prices throughout the life of the contract. Most of these contractual price reductions are merely the result of efficiencies in the production process being passed down to our customers. For certain of these price reductions, however, the amount of the reduction cannot be attributed entirely to production efficiencies gained. In these cases, the annual price-downs are considered to be material rights as the customer, as part of their current contract, is purchasing an option that they would not have received without the contract to purchase future product. When a contract contains a material right, a portion of the transaction price is allocated to the material right for which revenue recognition is deferred until the customer exercises its option. The standalone selling price for a material right used to allocate the transaction price is determined at contract inception by calculating the portion of the option purchased relative to the estimated total amount of incremental value the customer will likely earn, based on historical data, customer forecast communications, current economic information and industry trends. The standalone selling price of a material right is not adjusted prior to customer exercise or option expiration. Estimating the total expected costs related to contracts also requires significant judgment. In cases where the Company is recognizing revenue over time, it is required to record a proportionate amount of the costs of production as well. As part of this process, management considers the progress towards completion of the performance obligation, the length of time necessary to complete the performance obligation and the historical costs incurred in the manufacture of similar products, among other variables. The Company has elected the portfolio approach practical expedient to estimate the amount of revenue to recognize for certain contracts which require over time revenue recognition. Such contracts are grouped together either by revenue stream, customer or product. Each portfolio of contracts is grouped together based on having similar characteristics. The portfolio approach is utilized only when the result of the accounting is not expected to be materially different than if applied to individual contracts. For each portfolio of contracts, the respective work in process and/or finished goods inventory balances are identified and the portfolio-specific margin is applied to estimate the pro-rata portion of revenue earned in relation to the costs incurred. Adjustments due to any of the factors above to net sales, cost of sales and the related impact to operating income are recognized as necessary in the period they become known. The resultant impacts from these changes in estimates are recognized on a cumulative catch-up basis, which recognizes in the current period the cumulative effect of the changes on both current and prior periods. Contract Balances: The Company receives payment from customers based on the contractual billing schedule and specific performance requirements established in the contract. Billings are recorded as accounts receivable when an unconditional right to the contractual consideration exists. A contract asset is an entity’s right to consideration in exchange for goods or services that the entity has transferred to a customer. A contract liability exists when the Company has received consideration or the amount is due from the customer in advance of revenue recognition. Contract assets and contract liabilities are recognized in other current assets and other liabilities, respectively, in the Company's condensed consolidated balance sheets. Unbilled Receivables (Contract Assets) - Pursuant to the over time revenue recognition model, revenue may be recognized prior to the customer being invoiced. An unbilled receivable is recorded to reflect revenue that is recognized over time. The Company has determined that unbilled receivables were $0.8 million and $1.0 million as of April 29, 2018 and July 28, 2018, respectively. During the three months ended July 28, 2018, $0.8 million of previously unbilled receivables were recorded into accounts receivable. There were no impairments of contract assets as of July 28, 2018. Deferred Revenue (Contract Liabilities) - For certain of the price reductions offered by the Company, the amount of the reduction cannot be attributed entirely to production efficiencies gained. In these cases, the annual price-downs are considered to be material rights as the customer, as part of their current contract, are purchasing an option that they would not have received without the contract to purchase future product. When a contract contains a material right, a portion of the transaction price is allocated to the material right for which revenue recognition is deferred until the customer exercises its option. Deferred revenue was $0.2 million at both April 29, 2018 and July 28, 2018. No previously deferred revenue was recorded into revenue during the period. Disaggregated Revenue Information: The Company views the following disaggregated disclosures as useful to understanding the composition of revenue recognized during the respective reporting periods. Geographic net sales are determined based on our sales from our various operational locations. Though revenue recognition patterns and contracts are generally consistent, the amount, timing and uncertainty of revenue and cash flows may vary in each reportable segment due to geographic and economic factors.
|  | Three Months Ended July 28, 2018
|  | Auto |  | Interface |  | Power |  | Other |  | Total
Geographic Net Sales: |  |  |  |  |  |  |  |  |  |
U.S. |  | $ | 77.3 |  |  | $ | 19.4 |  |  | $ | 7.7 |  |  | $ | 0.3 |  |  | $ | 104.7 |
Malta |  | 30.5 |  |  | 6.1 |  |  | 2.3 |  |  | — |  |  | 38.9 |
China |  | 20.0 |  |  | 0.1 |  |  | 8.8 |  |  | — |  |  | 28.9 |
Canada |  | 20.8 |  |  | — |  |  | — |  |  | — |  |  | 20.8 |
Egypt |  | 12.7 |  |  | — |  |  | — |  |  | — |  |  | 12.7 |
Belgium |  | 8.3 |  |  | — |  |  | — |  |  | — |  |  | 8.3 |
Other |  | 5.7 |  |  | 3.4 |  |  | — |  |  | — |  |  | 9.1 |
Total Net Sales |  | $ | 175.3 |  |  | $ | 29.0 |  |  | $ | 18.8 |  |  | $ | 0.3 |  |  | $ | 223.4 |
Timing of Revenue Recognition: |  |  |  |  |  |  |  |  |  |
Goods Transferred at a Point in Time |  | $ | 165.5 |  |  | $ | 29.0 |  |  | $ | 18.8 |  |  | $ | 0.3 |  |  | $ | 213.6 |
Goods Transferred Over Time |  | 9.8 |  |  | — |  |  | — |  |  | — |  |  | 9.8 |
Total Net Sales |  | $ | 175.3 |  |  | $ | 29.0 |  |  | $ | 18.8 |  |  | $ | 0.3 |  |  | $ | 223.4 |

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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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 + Details
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