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Note 3 - Revenue
6 Months Ended
Jun. 30, 2019
Notes to Financial Statements  
Revenue from Contract with Customer [Text Block]
NOTE
3.
REVENUE
 
Revenue recognition
Our revenue is comprised of product, engineering services and repair services. All revenue is recognized when the Company satisfies its performance obligation(s) under the contract by transferring the promised product or service to our customer either when (or as) our customer obtains control of the product or service, with the majority of our revenue being recognized over time including goods produced under contract manufacturing agreements and services revenue. A performance obligation is a promise in a contract to transfer a distinct product or service to a customer. A contract’s transaction price is allocated to each distinct performance obligation. The majority of our contracts have a single performance obligation, as the promise to transfer products or services is
not
separately identifiable from other promises in the contract and, therefore,
not
distinct.
 
Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products or providing services. As such, revenue is recorded net of returns, allowances and customer discounts. Sales, value add, and other taxes collected from customers and remitted to governmental authorities are accounted for on a net (excluded from revenues) basis. Shipping and handling costs are included in cost of goods sold.
 
The majority of our revenue is derived from the transfer of goods produced under contract manufacturing agreements which have
no
alternative use and we have an enforceable right to payment for our performance completed to date. Our performance obligations within our contract manufacturing agreements are generally satisfied over time as the goods are produced based on customer specifications and we have an enforceable right to payment for the goods produced. If these requirements are
not
met, the revenue is recognized at a point in time, generally upon shipment. Revenue under contract manufacturing agreements that was recognized over time accounted for approximately
91%
of our revenue for both the
three
and
six
months ended
June 30, 2019.
Revenues under these agreements are generally recognized over time using an input measure based upon the proportion of actual costs incurred.
 
Accounting for contract manufacturing agreements involves the use of various techniques to estimate total revenue and costs. We estimate profit on these agreements as the difference between total estimated revenue and expected costs to complete the performance obligation within the terms of the agreement and recognize the respective profit as the goods are produced. The estimates to determine the profit earned on the performance obligation are based on anticipated selling prices and historical cost of goods sold and represent our best judgement at the time. Changes in judgements on these above estimates could impact the timing and amount of revenue recognized with a resulting impact on the timing and amount of associated profit.
 
On occasion our customers provide materials to be used in the manufacturing process and the fair value of the materials is included in revenue as noncash consideration at the point in time when the manufacturing process commences along with the same corresponding amount recorded as cost of goods sold. The inclusion of noncash consideration has
no
impact on overall profitability.
 
Contract Assets
Contract assets, recorded as such in the Condensed Consolidated Balance Sheet, consist of unbilled amounts related to revenue recognized over time. Significant changes in the contract assets balance during the
three
and
six
months ended
June 30, 2019
was as follows (in thousands):
 
Six Months Ended June 30, 2019
       
Outstanding at January 1, 2019
  $
6,431
 
Increase (decrease) attributed to:
       
Transferred to receivables from contract assets recognized
   
(4,985
)
Product transferred over time
   
5,782
 
Outstanding at June 30, 2019
  $
7,228
 
 
 
We expect substantially all the remaining performance obligations for the contract assets recorded as of
June 30, 2019,
to be transferred to receivables within
90
days, with any remaining amounts to be transferred within
180
days. We bill our customers upon shipment with payment terms of up to
120
days.
 
The following tables summarize our net sales by market for the
three
and
six
months ended
June 30, 2019 (
in thousands):
 
   
Three Months Ended June 30, 2019
 
   
Product/ Service
Transferred
Over Time
   
Product
Transferred at
Point in Time
   
Noncash
Consideration
   
Total Net Sales
by Market
 
Aerospace and Defense
  $
4,155
    $
222
    $
205
    $
4,582
 
Medical
   
13,145
     
218
     
661
     
14,024
 
Industrial
   
7,428
     
878
     
380
     
8,686
 
Total net sales
  $
24,728
    $
1,318
    $
1,246
    $
27,292
 
 
 
   
Six Months Ended June 30, 2019
 
   
Product/ Service
Transferred
Over Time
   
Product
Transferred at
Point in Time
   
Noncash
Consideration
   
Total Net Sales
by Market
 
Aerospace and Defense
  $
8,258
    $
242
    $
327
    $
8,827
 
Medical
   
27,640
     
253
     
1,070
     
28,963
 
Industrial
   
15,568
     
1,475
     
624
     
17,667
 
Total net sales
  $
51,466
    $
1,970
    $
2,021
    $
55,457