REVENUE

6 Months Ended

Jun. 30, 2020

REVENUE.

REVENUE

NOTE 2 – REVENUE

At contract inception, we assess the goods and services promised in our contracts with customers and identify a performance obligation for each promise to transfer a good or service (or bundle of goods or services) that is distinct. To identify the performance obligations, we consider all the goods or services promised in the contract, whether explicitly stated or implied based on customary business practices. For a contract that has more than one performance obligation, we allocate the total contract consideration to each distinct performance obligation on a relative standalone selling price basis. Revenue is recognized when (or as) the performance obligations are satisfied (i.e., when the customer obtains control of the good or service). The majority of our revenues are derived from product and tooling sales; however, we also receive revenues from service, license, exclusivity and royalty arrangements, which collectively are not material to the quarterly and year-to-date results. Revenue by segment and geography for the three and six months ended June 30, 2020 and 2019 is as follows:

	For the Three Months Ended June 30, 2020
					Latin
Segment	Europe		Domestic		America		Asia		Total
Beauty + Home	$	152,412	$	94,349	$	29,893	$	23,132	$	299,786
Pharma		201,813		81,098		6,987		11,361		301,259
Food + Beverage		27,841		54,478		6,489		9,452		98,260
Total	$	382,066	$	229,925	$	43,369	$	43,945	$	699,305

	For the Three Months Ended June 30, 2019
					Latin
Segment	Europe		Domestic		America		Asia		Total
Beauty + Home	$	202,541	$	73,973	$	41,449	$	24,117	$	342,080
Pharma		190,654		76,042		7,078		8,165		281,939
Food + Beverage		32,336		65,160		9,211		11,935		118,642
Total	$	425,531	$	215,175	$	57,738	$	44,217	$	742,661

	For the Six Months Ended June 30, 2020
					Latin
Segment	Europe		Domestic		America		Asia		Total
Beauty + Home	$	339,362	$	176,194	$	66,074	$	42,716	$	624,346
Pharma		391,943		172,063		13,566		20,883		598,455
Food + Beverage		56,610		112,068		14,523		14,856		198,057
Total	$	787,915	$	460,325	$	94,163	$	78,455	$	1,420,858

	For the Six Months Ended June 30, 2019
					Latin
Segment	Europe		Domestic		America		Asia		Total
Beauty + Home	$	418,774	$	160,952	$	84,091	$	45,922	$	709,739
Pharma		374,828		147,814		14,734		17,264		554,640
Food + Beverage		63,297		120,280		17,095		22,070		222,742
Total	$	856,899	$	429,046	$	115,920	$	85,256	$	1,487,121

We perform our obligations under a contract with a customer by transferring goods and/or services in exchange for consideration from the customer. The timing of performance will sometimes differ from the timing of the receipt of the associated consideration from the customer, thus resulting in the recognition of a contract asset or a contract liability. We recognize a contract asset when we transfer control of goods or services to a customer prior to invoicing for the related performance obligation. The contract asset is transferred to accounts receivable when the product is shipped and invoiced to the customer. We recognize a contract liability if the customer's payment of consideration precedes the entity's performance.

The opening and closing balances of our contract asset and contract liabilities are as follows:

	Balance as of		Balance as of		Increase/
	December 31, 2019		June 30, 2020		(Decrease)
Contract asset (current)	$	16,245	$	15,113	$	(1,132)
Contract asset (long-term)	$	—	$	—	$	—
Contract liability (current)	$	79,305	$	70,708	$	(8,597)
Contract liability (long-term)	$	9,779	$	20,662	$	10,883

The differences in the opening and closing balances of our contract asset and contract liabilities are primarily the result of timing differences between our performance and the customer’s payment. The total amount of revenue recognized during the current year against contract liabilities is $27.3 million, including $21.6 million relating to contract liabilities at the beginning of the year.

Determining the Transaction Price

In most cases, the transaction price for each performance obligation is stated in the contract. In determining the variable amounts of consideration within the transaction price (such as volume-based customer rebates), we include an estimate of the expected amount of consideration as revenue. We apply the expected value method based on all of the information (historical, current, and forecast) that is reasonably available and identify reasonable estimates based on this information. We apply the method consistently throughout the contract when estimating the effect of an uncertainty on the amount of variable consideration to which we will be entitled.

Product Sales

We primarily manufacture and sell dispensing, sealing and active packaging solutions. The amount of consideration is typically fixed for such customers. At the time of delivery, the customer is invoiced the agreed-upon price. Revenue from product sales is typically recognized upon manufacture or shipment, when control of the goods transfers to the customer.

To determine when the control transfers, we typically assess, among other things, the shipping terms of the contract, shipping being one of the indicators of transfer of control. A majority of product sales are sold free on board (“FOB”) shipping point. For FOB shipping point shipments, control of the goods transfers to the customer at the time of shipment of the goods. Therefore, our performance obligation is satisfied at the time of shipment. We have elected to account for shipping and handling costs that occur after the customer has obtained control of a good as fulfillment costs rather than as a promised service. We do not have any material significant payment terms as payment is typically received shortly after the point of sale.

There also exist instances where we manufacture highly customized products that have no alternative use to us and for which we have an enforceable right to payment for performance completed to date. For these products, we transfer control and recognize revenue over time by measuring progress towards completion using the Output Method based on the number of products produced. As we normally make our products to a customer’s order, the time between production and shipment of our products is typically within a few weeks.

As a part of our customary business practice, we offer a standard warranty that the products will materially comply with the technical specifications and will be free from material defects. Because such warranties are not sold separately, do not provide for any service beyond a guarantee of a product’s initial specifications, and are not required by law, there is no revenue deferral for these types of warranties.

Tooling Sales

We also build, or contract to build molds and other tools (collectively defined as “tooling”) necessary to produce our products. As with product sales, we recognize revenue when control of the tool transfers to the customer. If the tooling is highly customized with no alternative use to us and we have an enforceable right to payment for performance completed to date, we transfer control and recognize revenue over time by measuring progress towards completion using the Input Method based on costs incurred relative to total estimated costs to completion. Otherwise, revenue for the tooling is recognized at the point in time when the customer approves the tool. We do not have any material significant payment terms as payment is typically either received during the mold-build process or shortly after completion.

In certain instances, we offer extended warranties on tools sold to our customers above and beyond the normal standard warranties. We normally receive payment at the inception of the contract and recognize revenue over the term of the contract. At December 31, 2019, $515 thousand of unearned revenue associated with outstanding contracts was reported in Accounts Payable, Accrued and Other Liabilities. At June 30, 2020, the unearned amount was $410 thousand. We expect to recognize approximately $111 thousand of the unearned amount during the remainder of 2020, $125 thousand in 2021, and $174 thousand thereafter.

Credit Risk

We are exposed to credit losses primarily through our product sales, tooling sales and services to our customers. We assess each customer’s ability to pay for the products we sell by conducting a credit review. The credit review considers our expected billing exposure and timing for payment and the customer’s established credit rating or our assessment of the customer’s creditworthiness based on our analysis of their financial statements when a credit rating is not available. We also consider contract terms and conditions, country and political risks, and business strategy in our evaluation. A credit limit is established for each customer based on the outcome of this review.

We monitor our ongoing credit exposure through active review of customer balances against contract terms and due dates. Our activities include timely account reconciliation, dispute resolution and payment confirmation. We may employ collection agencies and legal counsel to pursue recovery of defaulted receivables.

At June 30, 2020, we reported $576 million of accounts receivable, net of CECL of $6.1 million. Changes in the allowance were not material for the six months ended June 30, 2020. Current uncertainty in credit and market conditions due to the COVID-19 pandemic may slow our collection efforts if customers experience significant difficulty accessing credit and paying their obligations, which may lead to higher than normal accounts receivable and increased CECL charges.