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Description of Business, Basis of Consolidation, Basis of Presentation and Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2018
Accounting Policies [Abstract] |
Description of Business, Basis of Consolidation, Basis of Presentation and Significant Accounting Policies | Description of Business, Basis of Consolidation, Basis of Presentation and Significant Accounting Policies American Vanguard Corporation (the “Company” or “AVD”) is primarily a specialty chemical manufacturer that develops and markets safe and effective products for agricultural, commercial and consumer uses. The Company manufactures and formulates chemicals for crops, human and animal protection. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company operates within a single operating category. Based on similar economic and operational characteristics, the Company’s business is aggregated into one reportable category. Selective enterprise information is as follows:
|  | 2018 |  |  | 2017 |  |  | 2016 |
Net sales: |  |  |  |  |  |  |  |  |  |  |  |
Insecticides |  | $ | 150,595 |  |  | $ | 134,377 |  |  | $ | 119,226 |
Herbicides/soil fumigants/fungicides |  |  | 183,350 |  |  |  | 124,529 |  |  |  | 123,540 |
Other, including plant growth regulators |  |  | 58,360 |  |  |  | 42,503 |  |  |  | 29,438 |
Total crop |  |  | 392,305 |  |  |  | 301,409 |  |  |  | 272,204 |
Non-crop |  |  | 61,967 |  |  |  | 53,638 |  |  |  | 39,909 |
|  | $ | 454,272 |  |  | $ | 355,047 |  |  | $ | 312,113 |
Gross profit: |  |  |  |  |  |  |  |  |  |  |  |
Crop |  | $ | 150,986 |  |  | $ | 117,892 |  |  | $ | 107,821 |
Non-crop |  |  | 31,645 |  |  |  | 29,500 |  |  |  | 20,467 |
|  | $ | 182,631 |  |  | $ | 147,392 |  |  | $ | 128,288 |
Due to elements inherent to the Company’s business, such as differing and unpredictable weather patterns, crop growing cycles, changes in product mix of sales and ordering patterns that may vary in timing, measuring the Company’s performance on a quarterly basis (for example, gross profit margins on a quarterly basis may vary significantly) even when such comparisons are favorable, is not as good an indicator as full-year comparisons. Reclassifications—Certain prior years’ amounts have been reclassified to conform to the current year’s presentation. Cost of Sales—In addition to normal cost centers (i.e., direct labor, raw materials), the Company also includes such cost centers as Health and Safety, Environmental, Maintenance and Quality Control in cost of sales. Operating Expenses—Operating expenses include cost centers for Selling, General and Administrative, Research, Product Development, and Regulatory, and Freight, Delivery and Warehousing.
|  | 2018 |  |  | 2017 |  |  | 2016 |
Selling |  | $ | 39,585 |  |  | $ | 29,112 |  |  | $ | 27,442 |
General and administrative |  |  | 42,981 |  |  |  | 37,660 |  |  |  | 32,128 |
Research, product development and regulatory |  |  | 26,428 |  |  |  | 26,076 |  |  |  | 21,298 |
Freight, delivery and warehousing |  |  | 34,616 |  |  |  | 27,750 |  |  |  | 26,880 |
|  | $ | 143,610 |  |  | $ | 120,598 |  |  | $ | 107,748 |
Advertising Expense—The Company expenses advertising costs in the period incurred. Advertising expenses, which include promotional costs, are recognized in operating expenses (specifically in selling expenses) in the consolidated statements of operations and were $4,865, $3,020 and $2,271 in 2018, 2017 and 2016, respectively. Cash and cash equivalents—The Company’s cash equivalents consist primarily of certificates of deposit with an initial term of less than three months. For purposes of the consolidated statements of cash flows, the Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. Inventories—The Company values its inventories at lower of cost or net realizable value. Cost is determined by the first-in, first-out (“FIFO”) method, including material, labor, factory overhead and subcontracting services. The Company writes down and makes adjustments to its inventory carrying values as a result of net realizable value assessments of slow moving and obsolete inventory and other annual adjustments to ensure that our standard costs continue to closely reflect manufacturing cost. The Company recorded an inventory reserve allowance of $1,989 at December 31, 2018, as compared to $3,137 at December 31, 2017. The components of inventories, net of reserve allowance, consist of the following:
|  | 2018 |  |  | 2017 |
Finished products |  | $ | 147,297 |  |  | $ | 107,595 |
Raw materials |  |  | 12,598 |  |  |  | 15,529 |
|  | $ | 159,895 |  |  | $ | 123,124 |
Revenue Recognition—The Company recognizes revenue from the sale of its products, which include insecticides, herbicides, soil fumigants, and fungicides. The Company sells its products to customers, which include distributors and retailers. In addition, the Company recognizes royalty income from the sale of intellectual property. Based on similar economic and operational characteristics, the Company’s business is aggregated into one reportable segment. Selective enterprise information of sales disaggregated by category and geographic region is as follows:
|  | 2018 |
|  | As reported |  |  | Without adoption of ASC 606 |
Net sales: |  |  |  |  |  |  |  |
Crop: |  |  |  |  |  |  |  |
Insecticides |  | $ | 150,595 |  |  | $ | 150,638 |
Herbicides/soil fumigants/fungicides |  |  | 183,350 |  |  |  | 183,350 |
Other, including plant growth regulators and distribution |  |  | 58,360 |  |  |  | 58,360 |
|  |  | 392,305 |  |  |  | 392,348 |
Non-crop, including distribution |  |  | 61,967 |  |  |  | 60,467 |
Total net sales: |  | $ | 454,272 |  |  | $ | 452,815 |
Net sales: |  |  |  |  |  |  |  |
US |  | $ | 300,314 |  |  | $ | 298,857 |
International |  |  | 153,958 |  |  |  | 153,958 |
Total net sales: |  | $ | 454,272 |  |  | $ | 452,815 |
Timing of revenue recognition: |  |  |  |  |  |  |  |
Goods transferred at a point in time |  | $ | 453,449 |  |  | $ | 452,815 |
Goods and services transferred over time |  |  | 823 |  |  |  | — |
Total net sales: |  | $ | 454,272 |  |  | $ | 452,815 |
In May 2014, Financial Accounting Standards Board, (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Accounting Standards Codification “ASC” 606). ASU 2014-09 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. The new model requires revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. In March 2016, FASB issued an amendment to the standard, ASU 2016-08, to clarify the implementation guidance on principal versus agent considerations. Under the amendment, an entity is required to determine whether the nature of its promise is to provide the specified good or service itself (that is, the entity is a principal) or to arrange for that good or service to be provided by the other party (that is, the entity is an agent). In April 2016, FASB issued another amendment to the standard, ASU 2016-10, to clarify identifying performance obligations and the licensing implementation guidance, which retaining the related principles for those areas. The standard and the amendments are effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). These amendments are effective upon adoption of ASC 606. This standard also requires enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows. Effective January 1, 2018, the Company adopted ASC 606 using the modified retrospective method, therefore, the comparative information has not been adjusted and continues to be reported under ASC 605. The Company determined that for certain products that are deemed to have no alternative use accompanied by an enforceable right to payment for performance completed to date, recognition will change from point in time, to over time. These sales were previously recognized upon delivery, and are now recognized over time utilizing an output method. In addition, the Company earns royalties on certain licenses granted for the use of its intellectual property, which were previously recognized over time. For certain licenses that are considered functional intellectual property, revenue recognition is now at a point in time. As part of the Company's adoption of ASC 606, the Company elected to use the following practical expedients (i) not to adjust the promised amount of consideration for the effects of a significant financing component when the Company expects, at contract inception, that the period between the Company's transfer of a promised product or service to a customer and when the customer pays for that product or service will be one year or less (ii) allowing entities the option to treat shipping and handling activities that occur after control of the good transfers to the customer as fulfillment activities. For all of the Company’s sales and distribution channels, revenue is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which typically occurs at shipment for product sales, but also occurs over time for certain products that are deemed to have no alternative use accompanied by an enforceable right to payment for performance completed to date. For revenue recognized over time, the Company uses an output measure, units produced, to measure progress. From time to time, the Company may offer a program to eligible customers, in good standing, that provides extended payment terms on a portion of the sales on selected products. The Company analyzes these extended payment programs in connection with its revenue recognition policy to ensure all revenue recognition criteria are satisfied at the time of sale. Performance Obligations—A performance obligation is a promise in a contract or sales order to transfer a distinct good or service to the customer, and is the unit of account in ASC 606. A transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Certain of the Company’s sales orders have multiple performance obligations, as the promise to transfer individual goods or services is separately identifiable from other promises in the sales orders. For sales orders with multiple performance obligations, the Company allocates the sales order’s transaction price to each performance obligation based on its relative stand-alone selling price. The stand-alone selling prices are determined based on the prices at which the Company separately sells these products. The Company’s performance obligations are satisfied either at a point in time or over time as work progresses. At December 31, 2018, the Company had $23,793 of remaining performance obligations, which are comprised of deferred revenue and services not yet delivered. The Company expects to recognize approximately all of its remaining performance obligations as revenue in fiscal 2019. Contract Balances—The timing of revenue recognition, billings and cash collections may result in deferred revenue in the consolidated balance sheets. The Company sometimes receives payments from its customers in advance of goods and services being provided in return for early cash incentive programs, resulting in deferred revenues. These liabilities are reported on the consolidated balance sheet at the end of each reporting period. The contract assets in the table below are related to royalties earned on certain licenses granted for the use of the Company’s intellectual property, which are recognized at a point in time and remain outstanding as of December 31, 2018.
|  | December 31, 2018 |  |  | December 31, 2017 |
Total receivables, net |  | $ | 134,029 |  |  | $ | 109,605 |
Contract assets |  |  | 3,750 |  |  |  | — |
Deferred revenue |  |  | 20,043 |  |  |  | 14,574 |
Revenue recognized for the year ended December 31, 2018, that was included in the deferred revenue balance at the beginning of 2018 was $14,063. The following table presents the effect of the adoption of ASC 606 on our consolidated balance sheet as of December 31, 2017:
|  | As of December 31, 2017 |
|  | As previously reported |  |  | Adjustment due to adoption of ASC 606 |  |  | As adjusted |
Total assets |  | $ | 535,592 |  |  | $ | 3,000 |  |  | $ | 538,592 |
Deferred income tax liabilities, net |  |  | 16,284 |  |  |  | 786 |  |  |  | 17,070 |
Retained earnings |  |  | 238,953 |  |  |  | 2,214 |  |  |  | 241,167 |
In accordance with ASC 606, the disclosure of the impact of adoption to our consolidated statements of operations for the period ended December 31, 2018 was $43, reductions in net sales. This revenue will move from being recognized at a point in time to be recognized over time. In accordance with ASC 606, the disclosure of the impact of adoption to our consolidated balance sheets was as follows:
|  | As of December 31, 2018 |
|  | As reported |  |  | Balances without adoption of ASC 606 |  |  | Impact |
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Contract assets |  | $ | 3,750 |  |  | $ | — |  |  | $ | 3,750 |
Current liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Deferred revenue |  |  | 20,043 |  |  |  | 20,000 |  |  |  | 43 |
Income taxes payable |  |  | 1,168 |  |  |  | — |  |  |  | 1,168 |
Stockholders' equity: |  |  |  |  |  |  |  |  |  |  |  |
Retained earnings |  |  | 262,840 |  |  |  | 259,551 |  |  |  | 3,289 |
Revenue Recognition for 2017 and 2016 under ASC 605—Revenues from sales are recognized at the time title and the risks of ownership pass. This is when the customer has made the fixed commitment to purchase the goods, the products are shipped per the customer’s instructions, the sales price is fixed and determinable, and collection is reasonably assured. The Company has in place procedures to ensure that revenues are recognized when earned. The procedures are subject to management’s review and from time to time certain revenues are excluded until it is clear that the title has passed and there is no further recourse to the Company. From time to time, the Company may offer a program to eligible customers, in good standing, that provides extended payment terms on a portion of the sales on selected products. The Company analyzes these extended payment programs in connection with its revenue recognition policy to ensure all revenue recognition criteria are satisfied at the time of sale. Allowance for Doubtful Accounts—Allowance for doubtful accounts is established based on estimates of losses related to customer receivable balances. Estimates are developed using either standard quantitative measures based on historical losses, adjusted for current economic conditions, or by evaluating specific customer accounts for risk of loss. Accrued Program Costs— The Company offers various discounts to customers based on the volume purchased within a defined time period, other pricing adjustments, some grower volume incentives or other key performance indicator driven payments made to distributors, retailers or growers, at the end of a growing season. The Company describes these payments as “Programs.” Programs are a critical part of doing business in both the US crop and non-crop chemicals market places. These discount Programs represent variable consideration. In accordance with ASC 606, revenues from sales are recorded at the net sales price, which is the transaction price net of the impact of Programs, and includes estimates of variable consideration. Variable consideration includes amounts expected to be paid to its customers estimated using the expected value method. Each quarter management compares individual sale transactions with Programs to determine what, if any, estimated program liabilities have been incurred. Once this initial calculation is made for the specific quarter, sales and marketing management, along with executive and financial management, review the accumulated Program balance and, for volume driven payments, make assessments of whether or not customers are tracking in a manner that indicates that they will meet the requirements set out in agreed upon terms and conditions attached to each Program. Following this assessment, management will make adjustments to the accumulated accrual to properly reflect the Company’s best estimate of the liability at the balance sheet date. The majority of adjustments are made at, or close to, the end of the crop season, at which time customer performance can be more fully assessed. Programs are paid out predominantly on an annual basis, usually in the final quarter of the financial year or the first quarter of the following year. The Company recorded accrued program costs of $37,349 at December 31, 2018, as compared to $39,054 at December 31, 2017. Long-lived Assets— Long-lived assets primarily consist of the costs of proprietary returnable packaging assets including SmartBox and Lock and Load containers. The carrying values of long-lived assets are reviewed for impairment quarterly and/or whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. The Company evaluates recoverability of an asset group by comparing the carrying value to the future undiscounted cash flows that it expects to generate from the asset group. If the comparison indicates that the carrying value of an asset group is not recoverable, measurement of the impairment loss is based on the fair value of the asset. There were no circumstances that would indicate any impairment of the carrying value of these long-lived assets and no material impairment losses were recorded in 2018 or 2017. Property, Plant and Equipment and Depreciation— Property, plant and equipment includes the cost of land, buildings, machinery and equipment, office furniture and fixtures, automobiles, construction projects and significant improvements to existing plant and equipment. Interest costs related to significant construction projects are capitalized at the Company’s current weighted average effective interest rate. Expenditures for minor repairs and maintenance are expensed as incurred. When property or equipment is sold or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts and the gain or loss realized on disposition is reflected in operations. All plant and equipment is depreciated using the straight-line method, utilizing the estimated useful property lives. See note 1 for useful lives. Foreign Currency Translation— Assets and liabilities of foreign subsidiaries, where the local currency is the functional currency, have been translated at period end exchange rates, and profit and loss accounts have been translated using weighted average yearly exchange rates. Adjustments resulting from translation have been recorded in the equity section of the balance sheet as cumulative translation adjustments in other comprehensive income (loss). The effects of foreign currency exchange gains and losses on transactions that are denominated in currencies other than the Company’s functional currency, including transactions denominated in the local currencies of the Company’s international subsidiaries where the functional currency is the U.S. dollar, are remeasured to the functional currency using the end of the period exchange rates. The effects of remeasurement related to foreign currency transactions are included in operations. Goodwill and Other Intangible Assets— The primary identifiable intangible assets of the Company relate to assets associated with its product and business acquisitions. Identifiable intangibles with finite lives are amortized and those with indefinite lives are not amortized. The estimated useful life of an identifiable intangible asset to the Company is based upon a number of factors including the effects of demand, competition, and expected changes in the marketability of the Company’s products. The Company re-evaluates whether these intangible assets are impaired on both a quarterly and an annual basis and anytime when there is a specific indicator for impairment, relying on a number of factors including operating results, business plans and future cash flows. Identifiable intangible assets that are subject to amortization are evaluated for impairment using a process similar to that used to evaluate long-lived assets. The impairment test for identifiable intangible assets not subject to amortization consists of either a qualitative assessment or a comparison of the fair value of the intangible asset with its carrying amount. An impairment loss, if any, is recognized for the amount by which the carrying value exceeds the fair value of the asset. Fair value is typically estimated using a discounted cash flow analysis. When determining future cash flow estimates, the Company considers historical results adjusted to reflect current and anticipated operating conditions. Estimating future cash flows requires significant judgment by the Company, in such areas as: future economic conditions, industry-specific conditions, product pricing and necessary capital expenditures. The use of different assumptions or estimates for future cash flows could produce different impairment amounts (or none at all) for long-lived assets, goodwill and identifiable intangible assets. The Company performed impairment reviews for the years ended December 31, 2018, 2017 and 2016 and recorded immaterial impairment losses. The Company reviews goodwill for impairment utilizing either a qualitative assessment or a two-step process. If the Company decides that it is appropriate to perform a qualitative assessment and concludes that the fair value of a reporting unit more likely than not exceeds its carrying value, no further evaluation is necessary. If the Company performs the two-step process, the first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired and the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step is performed to measure the amount of impairment by comparing the carrying amount of the goodwill to a determination of the implied value of the goodwill. If the carrying amount of goodwill is greater than the implied value, an impairment charge is recognized for the difference. The Company annually tests goodwill for impairment in beginning of the fourth quarter. The Company did not record any impairment losses in 2018 or 2017. Income Taxes—The Company utilizes the liability method of accounting for income taxes as set forth in ASC 740. Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized. In determining the need for valuation allowances, the Company considers projected future taxable income and the availability of tax planning strategies. If in the future the Company determines that it would not be able to realize its recorded deferred tax assets, an increase in the valuation allowance would be recorded, decreasing earnings in the period in which such determination is made. The Company assesses its income tax positions and records tax benefits for all years subject to examination based upon the Company’s evaluation of the facts, circumstances and information available at the reporting date. For those tax positions where there is greater than 50% likelihood that a tax benefit will be sustained, the Company has recorded the largest amount of tax benefit that may potentially be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where there is less than 50% likelihood that a tax benefit will be sustained, no tax benefit has been recognized in the consolidated financial statements. At December 31, 2018 and 2017, the Company recorded unrecognized tax benefits of $2,170 and $2,118, respectively. Per Share Information—FASB ASC 260 requires dual presentation of basic earnings per share (“EPS”) and diluted EPS on the face of all consolidated statements of operations. Basic EPS is computed as net income divided by the weighted average number of shares of common stock outstanding during the period. Diluted EPS reflects potential dilution to EPS that could occur if securities or other contracts, which, for the Company, consists of restricted stock grants and options to purchase shares of the Company’s common stock, are exercised as calculated using the treasury stock method. The components of basic and diluted earnings per share were as follows:
|  | 2018 |  |  | 2017 |  |  | 2016 |
Numerator: |  |  |  |  |  |  |  |  |  |  |  |
Net income attributable to American Vanguard |  | $ | 24,195 |  |  | $ | 20,274 |  |  | $ | 12,788 |
Denominator: |  |  |  |  |  |  |  |  |  |  |  |
Weighted average shares outstanding—basic |  |  | 29,326 |  |  |  | 29,100 |  |  |  | 28,859 |
Dilutive effect of stock options and grants |  |  | 722 |  |  |  | 603 |  |  |  | 535 |
|  |  | 30,048 |  |  |  | 29,703 |  |  |  | 29,394 |
For the years ended December 31, 2018, 2017, and 2016 no options or grants were excluded from the computation. Accounting Estimates—The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities (including those related to litigation), and revenues, at the date that the consolidated financial statements are prepared. Significant estimates relate to the allowance for doubtful accounts, inventory reserves, impairment of long-lived assets, accrued program costs, and stock based compensation. Actual results could materially differ from those estimates. Total comprehensive income—In addition to net income, total comprehensive income includes changes in equity that are excluded from the consolidated statements of operations and are recorded directly into a separate section of stockholders’ equity on the consolidated balance sheets. For the years ended December 31, 2018, 2017, and 2016 total comprehensive income consisted of net income attributable to AVD and foreign currency translation adjustments. Stock-Based Compensation—The Company accounts for stock-based awards to employees and directors pursuant to ASC 718. When applying the provisions of ASC 718, the Company also applies the provisions of Staff Accounting Bulletin (“SAB”) No. 107 and SAB No. 110. ASC 718 requires companies to estimate the fair value of share-based payment awards on the date of grant. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Company’s Consolidated Statements of Operations. Stock-based compensation expense recognized during the period is based on the fair value of the portion of share-based payment awards that is ultimately expected to vest during the period. Stock-based compensation expense recognized is reduced for estimated forfeitures pursuant to ASC 718. Estimated forfeitures recognized in the Company’s Consolidated Statements of Operations reduced compensation expense by $358, $177, and $118 for the years ended December 31, 2018, 2017, and 2016, respectively. The Company estimates that 16.2% of all restricted stock grants, 16.1% of the performance based restricted shares and 8.0% of all stock option grants that are currently subject to vesting will be forfeited. These estimates are reviewed quarterly and revised as necessary. The below tables illustrate the Company’s stock based compensation, unamortized stock-based compensation, and remaining weighted average period for the years ended December 31, 2018, 2017 and 2016. This projected expense will change if any stock options and restricted stock are granted or cancelled prior to the respective reporting periods, or if there are any changes required to be made for estimated forfeitures.
|  | Stock-Based Compensation |  |  | Unamortized Stock-Based Compensation |  |  | Remaining Weighted Average Period (years) |
December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |
Restricted Stock |  | $ | 3,657 |  |  | $ | 5,166 |  |  |  | 1.3 |
Performance Based Restricted Stock |  |  | 2,148 |  |  |  | 2,565 |  |  |  | 1.9 |
Total |  | $ | 5,805 |  |  | $ | 7,731 |  |  |  |  |
December 31, 2017 |  |  |  |  |  |  |  |  |  |  |  |
Incentive Stock Options |  | $ | 345 |  |  | $ | — |  |  |  | — |
Performance Based Options |  |  | 416 |  |  |  | — |  |  |  | — |
Restricted Stock |  |  | 2,705 |  |  |  | 3,788 |  |  |  | 1.0 |
Performance Based Restricted Stock |  |  | 1,248 |  |  |  | 1,642 |  |  |  | 1.8 |
Total |  | $ | 4,714 |  |  | $ | 5,430 |  |  |  |  |
December 31, 2016 |  |  |  |  |  |  |  |  |  |  |  |
Incentive Stock Options |  | $ | 354 |  |  | $ | 397 |  |  |  | 1.0 |
Performance Based Options |  |  | 188 |  |  |  | 178 |  |  |  | 1.0 |
Restricted Stock |  |  | 1,630 |  |  |  | 2,153 |  |  |  | 1.6 |
Performance Based Restricted Stock |  |  | 995 |  |  |  | 796 |  |  |  | 1.7 |
Total |  | $ | 3,167 |  |  | $ | 3,524 |  |  |  |  |
The Company uses the Black-Scholes option-pricing model (“Black-Scholes model”) to value option grants using the following weighted average assumptions (i.e. risk free interest rate, dividend yield, volatility and average lives). There were no stock options granted during 2018, 2017 or 2016. The expected volatility and expected life assumptions are complex and use subjective variables. The variables take into consideration, among other things, actual and projected employee stock option exercise behavior. The Company estimates the expected term or vesting period using the “safe harbor” provisions of SAB 107 and SAB 110. The Company used historical volatility as a proxy for estimating expected volatility. The Company values restricted stock grants using the Company’s traded stock price on the date of grant. The weighted average grant-date fair values of restricted stock grants during 2018, 2017, and 2016 were $20.21, $16.24, and $15.22, respectively. Recently Issued Accounting Guidance— In February 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-02, Income Statement-Reporting Comprehensive Income (ASC 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income: The standard permits a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. ASU 2018-02 is effective for the Company’s annual and interim reporting periods beginning December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact of ASU 2018-02; however, at the current time the Company does not expect the adoption of this ASU will have a material impact on its consolidated financial statements. In January 2018, the FASB released guidance on the accounting for tax on the global intangible low-taxed income (“GILTI”) provisions of the Tax Cuts and Jobs Act (the “Act”). The GILTI provisions imposed a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The Company has considered options regarding the accounting treatment for any potential GILTI inclusions and has elected to treat such inclusions as period costs. In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (ASC 350). The FASB eliminated Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Under this update, an entity should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount the carrying amount exceeds the reporting unit’s fair value. This update is effective for fiscal years beginning after December 15, 2019 with early adoption permitted after January 1, 2017. The impact of the new standard will be dependent on the facts and circumstances of future individual impairments, if any. In January 2017, the FASB issued ASU 2017-01, Business Combinations (ASC 805) that provided guidance on narrowing the definition of a business. The new guidance requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities is not a business. The guidance also requires a business to include at least one substantive process and narrows the definition of outputs. The Company adopted this new accounting standard on January 1, 2018. Based on the updated definition of a business, the Company concluded that three acquisitions completed in 2018 did not meet the criteria of a business and were therefore accounted for as asset acquisitions rather than business combinations. These three acquisitions would have previously been accounted for as business combinations (see Note 8). In October 2016, FASB issued ASU 2016-16, Income Taxes (ASC 740). At the time the ASU was issued, US GAAP prohibited the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. Under the new standard, an entity is to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The new standard does not include new disclosure requirements; however, existing disclosure requirements might be applicable when accounting for the current and deferred income taxes for an intra-entity transfer of an asset other than inventory. The new standard is effective for annual periods beginning after December 15, 2017, including interim reporting periods within those annual periods. The Company adopted ASU 2016-16 as of January 1, 2018 and recorded a reduction of $180 to retained earnings. In August 2016, FASB issued ASU 2016-15, Statement of Cash Flows (ASC 230). The new standard addresses eight specific classification issues within the current practice regarding the manner in which certain cash receipts and cash payments are presented. The new standard is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. The Company adopted the standard for the year beginning January 1, 2018. There was no material impact on the Company’s consolidated statements of cash flows for the year ended December 31, 2018 and the Company does not expect any material impact going forward. In February 2016, the FASB established Topic 842, Leases, by issuing Accounting Standards Update (ASU) No. 2016-02, which requires lessees to recognize leases with terms longer than 12 months on the balance sheet and disclose key information about leasing arrangements. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The classification criteria for distinguishing between operating and finance (previously capital) leases are substantially similar to the previous lease guidance, but with no explicit bright lines. The Company adopted the standard as of January 1, 2019, electing the transition method that allows us to apply the standard as of the adoption date and record a cumulative adjustment in retained earnings, if applicable. We elected to apply all relevant practical expedients permitted under the transition guidance within the new lease standard with the exception of the practical expedient allowing the use of hindsight in determining the lease term and in assessing impairment. The new standard also provides practical expedients for an entity’s ongoing accounting. We have elected an accounting policy election to keep leases with an initial term of 12 months or less off the balance sheet and recognize those lease payments in the consolidated statements of income on a straight-line basis over the lease term. We have also elected the practical expedient to not separate lease and non-lease components for all of our leases as the non-lease components are not significant to the overall lease costs. The Company has nearly completed evaluating the impact that the adoption of this standard will have on its consolidated financial statements and anticipates that the adoption of this standard will result in the recognition of net lease assets and lease liabilities of approximately 2.5 % of its total assets on the consolidated balance sheets as of January 1, 2019. The Company does not expect that the adoption of this standard will have a material impact on the consolidated statement of operations and comprehensive income and loss or in the statement of cash flows. In January 2016, the FASB issued ASU 2016-01, "Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities." The amendment requires (i) equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, (ii) public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes and (iii) separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables). This amendment eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. The Company adopted the provisions of ASU 2016-01 on January 1, 2018 and has elected to measure its cost method investment without a readily determinable fair value at its cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. There were no observable price changes during the year ended December 31, 2018. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

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- Definition The entire disclosure for the organization, consolidation and basis of presentation of financial statements disclosure, and significant accounting policies of the reporting entity. May be provided in more than one note to the financial statements, as long as users are provided with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. Describes procedure if disclosures are provided in more than one note to the financial statements. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -URI http://asc.fasb.org/topic&trid=2122149 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -URI http://asc.fasb.org/topic&trid=2197479 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -URI http://asc.fasb.org/topic&trid=2134479 + Details
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