Note 2 - Revenue Recognition

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

NOTE 2 – REVENUE RECOGNITION

We recognize revenue when we transfer control of promised goods or services to our customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. We recognize substantially all of our revenue when products are shipped or delivered to our customers, and payment is due from our customers at the time of billing with a majority of our customers having 30-day terms. We estimate and record returns as a reduction of revenue. Amounts received in advance of shipment are deferred and recognized when the performance obligations are satisfied. Sales taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and, therefore, we exclude these taxes from sales in the accompanying consolidated statements of operations. Cost of sales includes the cost of inventory sold and related items, such as vendor rebates, inventory allowances and reserves and shipping and handling costs associated with inbound and outbound freight, as well as depreciation and amortization of intangible assets. In some cases, particularly with third-party pipe shipments, we consider shipping and handling costs to be separate performance obligations, and as such, we record the revenue and cost of sales when the performance obligation is fulfilled.

Our contracts with customers ordinarily involve performance obligations that are one year or less. Therefore, we have applied the optional exemption that permits the omission of information about our unfulfilled performance obligations as of the balance sheet dates.

Contract Balances: Variations in the timing of revenue recognition, invoicing and receipt of payment result in categories of assets and liabilities that include invoiced accounts receivable, uninvoiced accounts receivable, contract assets and deferred revenue (contract liabilities) on the consolidated balance sheets.

Generally, revenue recognition and invoicing occur simultaneously as we transfer control of promised goods or services to our customers. We consider contract assets to be accounts receivable when we have an unconditional right to consideration and only the passage of time is required before payment is due. In certain cases, particularly those involving customer-specific documentation requirements, we delay invoicing until we are able to meet the documentation requirements. In these cases, we recognize a contract asset separate from accounts receivable until those requirements are met, and we are able to invoice the customer. Our contract asset balance associated with these requirements as of September 30, 2022, and December 31, 2021, was $17 million and $12 million, respectively. These contract asset balances are included within accounts receivable in the accompanying consolidated balance sheets.

We record contract liabilities, or deferred revenue, when we receive cash payments from customers in advance of our performance, including amounts that are refundable. The deferred revenue balance at September 30, 2022 and December 31, 2021 was $5 million and $4 million, respectively. During the three and nine months ended September 30, 2022, we recognized $0 million and $3 million of revenue that was deferred as of December 31, 2021. During the three and nine months ended September 30, 2021, we recognized $1 million and $6 million of revenue that was deferred as of December 31, 2020. Deferred revenue balances are included within accrued expenses and other current liabilities in the accompanying consolidated balance sheets.

Disaggregated Revenue:

Our disaggregated revenue represents our business of selling PVF to the energy and industrial sectors across each of the gas utilities (storage and distribution of natural gas), downstream, industrial and energy transition (crude oil refining, petrochemical and chemical processing, general industrials and energy transition projects), upstream production (exploration, production and extraction of underground oil and gas) and midstream pipeline (gathering, processing and transmission of oil and gas) sectors, in each of our reportable segments. Varying factors, including macroeconomic environment, commodity prices, maintenance and capital spending and exploration and production activity influence each of our end market sectors and geographical reportable segments. As such, we believe that this information is important in depicting the nature, amount, timing and uncertainty of our contracts with customers.

The following table presents our revenue disaggregated by revenue source (in millions):

Three Months Ended
September 30,
	U.S.		Canada		International		Total
2022:
Gas utilities	$	355	$	3	$	1	$	359
Downstream, industrial & energy transition		209		6		61		276
Upstream production		118		25		33		176
Midstream pipeline		86		3		4		93
	$	768	$	37	$	99	$	904
2021:
Gas utilities	$	269	$	2	$	—	$	271
Downstream, industrial & energy transition		143		6		48		197
Upstream production		82		18		32		132
Midstream pipeline		76		4		5		85
	$	570	$	30	$	85	$	685

Nine Months Ended
September 30,
	U.S.		Canada		International		Total
2022:
Gas utilities	$	934	$	9	$	1	$	944
Downstream, industrial & energy transition		576		20		165		761
Upstream production		336		83		93		512
Midstream pipeline		257		8		12		277
	$	2,103	$	120	$	271	$	2,494
2021:
Gas utilities	$	745	$	5	$	—	$	750
Downstream, industrial & energy transition		417		15		150		582
Upstream production		231		62		109		402
Midstream pipeline		219		10		17		246
	$	1,612	$	92	$	276	$	1,980