Note 2 - Revenue Recognition

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

( 2 ) Revenue Recognition

On

January 1, 2018,

the Company adopted ASC

606,

Revenue from Contracts with Customers

, using the modified retrospective transition method. Under this method, the Company applied ASC

606

to contracts under which all performance obligations were

not

complete as of

January 1, 2018

and recognized the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings. Results for reporting periods beginning after

January 1, 2018

are presented in accordance with ASC

606.

Prior period amounts are

not

adjusted and are reported in accordance with requirements in ASC

605,

Revenue Recognition

,

which is also referred to herein as “legacy GAAP”.

The cumulative effect of the adoption on our condensed consolidated balance sheet, by applying the modified retrospective method as of

January 

1,

2018,

is as follows (in thousands):

	As Reported						As Adjusted
	December 31, 2017			Cumulative Adjustments			January 1, 2018
Assets:
Property, plant and equipment	$	106,716		$	1,027		$	107,743
Accumulated depreciation and amortization		(53,064	)		(548	)		(53,612	)
Net property, plant and equipment		53,652			479			54,131
Liabilities:
Deferred revenue		297			574			871
Stockholders' equity:
Retained earnings		97,562			(95	)		97,467

The following reflects the Company’s condensed consolidated balance sheet and condensed consolidated statement of income on an as reported basis and as if we had continued to recognize revenue under legacy GAAP (in thousands):

	March 31, 2018
	As Reported			Balances without adoption of ASC 606			Difference
Assets:
Property, plant and equipment	$	113,935		$	112,831		$	1,104
Accumulated depreciation and amortization		(55,148	)		(54,474	)		(674	)
Net property, plant and equipment		58,787			58,357			430
Liabilities:
Deferred revenue		3,130			2,613			517
Stockholders' equity:
Retained earnings		99,244			99,331			(87	)

	For the three months ended March 31, 2018
	As Reported		Balances without adoption of ASC 606		Difference
Net sales	$	42,931	$	42,874	$	57
Cost of sales		32,746		32,697		49
Gross profit		10,185		10,177		8

The following summarizes the significant changes under ASC

606

as compared to legacy GAAP:

· Under legacy GAAP, the Company recognized revenue for certain customer tooling at the time the tooling was complete and accepted by the customer. Under ASC 606, as “control” of this tooling does not transfer to the customer, the related purchase orders do not qualify as an “accounting contract” and as a result the consideration received is recorded as deferred revenue and recognized over the estimated time for which parts are produced on each respective tool (approximately two years). The related costs to produce the tooling are capitalized and depreciated over the estimated useful life of the tool (approximately two years).

· Under legacy GAAP, the Company recognized revenue on long-term agreements with variable pricing at the selling price that was in effect for the current period at the time of shipment. Under ASC 606, the Company will recognize revenue at the weighted average selling price for each part over the term of the agreement for any agreements where the Company estimates that we will not be able to achieve the cost reductions necessary to maintain a consistent margin over the term of the agreement. The Company has a limited number of long-term agreements with variable pricing.

The Company recognizes revenue when a customer obtains control of a promised good or service. The amount of revenue recognized reflects the consideration that the Company expects to be entitled to in exchange for promised goods or services. The Company recognizes revenue in accordance with the core principles of ASC

606

which include (

1

) identifying the contract with a customer, (

2

) identifying separate performance obligations within the contract, (

3

) determining the transaction price, (

4

) allocating the transaction price to the performance obligations, and (

5

) recognizing revenue. The Company recognizes all but an immaterial portion of its product sales upon shipment. The Company recognizes revenue from the sale of tooling primarily upon customer acceptance, with the exception of certain tooling where control does

not

transfer to the customer, which results in revenue being recognized

over the estimated time for which parts are produced on each respective tool. Although only applicable to an insignificant number of transactions,

the Company has elected to exclude sales taxes from the transaction price. The Company has elected to account for shipping and handling activities for which the Company is responsible under the terms and conditions of the sale

not

as performance obligations but rather as fulfillment costs. These activities are required to fulfill the Company’s promise to transfer the good and are expensed when revenue is recognized.

Disaggregated Revenue

The following table presents the Company’s revenue disaggregated by the major types of goods and services sold to our customers (See Note

9

for further information regarding net sales by market):

	Three Months Ended March 31,
	2018		2017
	(in thousands)
Net sales of products	$	42,440	$	36,657
Net sales of tooling		491		396
Total net sales	$	42,931	$	37,053

Contract balances

Timing of revenue recognition

may

differ from the timing of invoicing to customers. When invoicing occurs prior to revenue recognition, we have deferred revenue, or contract liabilities, included within “deferred revenue” on our condensed consolidated balance sheet.

Revenue recognized during the

three

months ended

March 31, 2018

from amounts included in deferred revenue at the beginning of the period was approximately

$314,000.

The following table presents opening and closing balances of contract liabilities for the

three

months ended

March 31, 2018 (

in thousands):

	Contract Liabilities
Deferred revenue - January 1, 2018	$	871
Acquired in Dielectrics business combination		2,175
Increases due to consideration received from customers		685
Revenue recognized  - Q1 2018		(601	)
Deferred revenue - March 31, 2018	$	3,130