Note C - Revenue Recognition

3 Months Ended

Sep. 28, 2018

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

C.

Revenue

Recognition

Revenue from contracts with customers is recognized using a

five

-step model consisting of the following: (

1

) identify the contract with a customer; (

2

) identify the performance obligations in the contract; (

3

) determine the transaction price; (

4

) allocate the transaction price to the performance obligations in the contract; and (

5

) recognize revenue when (or as) the Company satisfies a performance obligation. Performance obligations are satisfied when the Company transfers control of a good or service to a customer, which can occur over time or at a point in time. The amount of revenue recognized is based on the consideration to which the Company expects to be entitled in exchange for those goods or services, including the expected value of variable consideration. The customer’s ability and intent to pay the transaction price is assessed in determining whether a contract exists with the customer. If collectibility of substantially all of the consideration in a contract is

not

probable, consideration received is

not

recognized as revenue unless the consideration is nonrefundable and the Company

no

longer has an obligation to transfer additional goods or services to the customer or collectibility becomes probable.

The Company designs, manufactures and sells marine and heavy duty off highway power transmission equipment. Products offered include: marine transmissions, azimuth drives, surface drives, propellers and boat management systems as well as power-shift transmissions, hydraulic torque converters, power take-offs, industrial clutches and controls systems. The Company sells its products to customers primarily in the commercial, pleasure craft, and military marine markets as well as in the energy and natural resources, government and industrial markets. The Company's worldwide sales to both domestic and foreign customers are transacted through a direct sales force and a distributor network

Identify contract with customer:

The Company gathered customer contracts and representative customer purchase orders of its various locations. The Company’s customers consist of distributors and direct end-users. With regard to distributors, the Company generally has written distribution agreements which describe the terms of the distribution arrangement, such as the product range, the sales territory, product pricing, sales support, payment and returns policy, etc. Customer contracts are generally in the form of acknowledged purchase orders. Services to be rendered, as part of the delivery of those products, are also generally specified. Such services include installation reviews and technical commissioning.

Performance obligations:

The Company’s performance obligation as it relates to the delivery of goods is straightforward; the recognition of revenue is generally driven by shipment date and the terms of sale. As it relates to the Company’s service obligations, the Company determined that installation reviews, shift development and technical commissioning are separate and distinct performance obligations.

Transaction price:

The Company considers the invoice price as the transaction price.

Allocation of transaction price:

The Company determined that the most relevant allocation method for its service obligations is to apply the expected cost plus appropriate margin. This is the Company’s current practice of billing for repairs, overhaul, and other product service related time incurred by its technicians.

Recognize revenue:

Revenue is recognized upon transfer of control of the products to the customer. For installation review, shift development, and technical commissioning services, revenue is recognized upon completion of the service.

Disaggregated revenue:

The following table presents details deemed most relevant to the users of the financial statements for the quarter ended

September 28, 2018.

Net sales by product group is summarized as follows:

					Elimination of
	Manufacturing		Distribution		Intercompany Sales			Total
Industrial	$	6,481	$	1,396	$	(832	)	$	7,045
Land-based transmissions		29,432		5,611		(5,407	)		29,636
Marine and propulsion systems		32,976		14,156		(10,857	)		36,275
Other		23		1,757		(47	)		1,733
Total	$	68,912	$	22,920	$	(17,143	)	$	74,689

Contract assets

/liabiliies

:

There are

no

significant balances of contract assets or liabilities as of

September 28, 2018.