RECENT ACCOUNTING PRONOUNCEMENTS

6 Months Ended

Jun. 30, 2018

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

RECENT ACCOUNTING PRONOUNCEMENTS

2. RECENT ACCOUNTING PRONOUNCEMENTS

Recently Issued Standards

The Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-02 Leases (Topic 842) on February 25, 2016 and is intended to improve financial reporting on leasing transactions. The standard affects all companies and other organizations that lease assets such as real estate, airplanes, and manufacturing equipment. The standard will require lessees to recognize on the balance sheet the assets and liabilities for the rights and obligations created by their lease agreements. An organization is to provide disclosures designed to enable users of financial statements to understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements concerning additional information about the amounts recorded in the financial statements. Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee will depend primarily on its classification as a finance or operating lease. However, unlike current GAAP, which requires only capital leases to be recognized on the balance sheet, the new standard will require both types of leases (i.e. operating and finance) to be recognized on the balance sheet. The lessee accounting model prescribed by the new standard will require a finance lease to be accounted for in substantially the same manner as capital leases under existing GAAP. An operating lease will be accounted for in a manner similar to operating leases under existing GAAP, except that lessees will recognize a lease liability and a right-of-use asset on the balance sheet during the lease term.

The standard will be effective for financial statements issued for annual periods, and interim periods within these annual periods, beginning after December 15, 2018, with early adoption permitted. See “Credit Facilities and Other Obligations” within Item 2 for the Company’s current lease commitments. The Company plans to use the modified retrospective approach and will elect to initially apply the standard with a cumulative-effect adjustment to the opening balance of retained earnings at the date of adoption. The Company is currently evaluating the effect that implementation will have on its consolidated financial position, results of operations and cash flows.

Recently Adopted Standards

In May 2014, the FASB issued ASU 2014-09, Revenue—Revenue from Contracts with Customers. The Company has adopted the standard and all related amendments with an effective date of January 1, 2018 using the modified retrospective method, thus recognizing the cumulative effect of adopting the standard as an adjustment to the opening balance of retained earnings. The Company applied the standard to contracts that were not completed as of the adoption date. Comparative information has not been restated and continues to be reported under the accounting standards in effect for the periods prior to the effective date.

As a result of the adoption, effective January 1, 2018, the Company began including the costs of painting activities as performance obligations within each contract, which results in a delay in recognition of revenue until such activities are complete and the product is shipped. With the exception of certain extended service contracts on a small percentage of units sold, the Company’s performance obligations are complete and sales revenue is recognized when products are shipped from the Company’s facilities.

We do not anticipate the adoption of the standard to have a material impact on an ongoing basis to the Company’s consolidated financial statements and related disclosures. The cumulative effect adjustment to the consolidated balance sheets as of January 1, 2018 was as follows:

	Balance at  December 31, 2017		Cumulative Effect  Adjustment			Balance at  January 1, 2018
Assets
Accounts Receivable, net	$	132,699	$	(2,496	)	$	130,203
Inventories, net		68,567		1,996			70,563
Liabilities and Shareholders' Equity
Accrued Liabilities		22,001		(176	)		21,825
Accumulated Surplus		55,580		(324	)		55,256

In accordance with the new revenue standard requirements, the impact of the adoption to the consolidated statement of income during the three and six months ended June 30, 2018 and the consolidated balance sheets as of June 30, 2018 was as follows:

	Three Months Ended June 30, 2018
	As Reported		Balances Without  Adoption of ASU 2014-09		Effect of Adoption Increase/(Decrease)
Statement of Income
Revenues
Net Sales	$	176,888	$	176,855	$	33
Costs and Expenses
Costs of Operations		155,609		155,583		26
Income Tax Provision		2,890		2,864		26
Net Income		7,600		7,619		(19	)

	Six Months Ended June 30, 2018
	As Reported		Balances Without  Adoption of ASU 2014-09		Effect of Adoption Increase/(Decrease)
Statement of Income
Revenues
Net Sales	$	336,048	$	336,890	$	(842	)
Costs and Expenses
Costs of Operations		296,342		297,016		(674	)
Income Tax Provision		5,553		5,588		(35	)
Net Income		14,270		14,403		(133	)

	June 30, 2018
	As Reported		Balances Without  Adoption of ASU 2014-09		Effect of Adoption Increase/(Decrease)
Balance Sheet
Assets
Accounts Receivable, net	$	148,023	$	148,865	$	(842	)
Inventories, net		81,219		80,545		674
Liabilities and Shareholders’ Equity
Accrued Liabilities		26,729		26,764		(35	)
Accumulated Surplus		65,752		65,885		(133	)

As a result of the adoption, we changed our accounting policy. See Note 4 for further information. 

In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The standard eliminates the second step in the goodwill impairment test which required an entity to determine the implied fair value of the reporting unit’s goodwill. Instead, an entity will now recognize an impairment loss if the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, with the impairment loss not to exceed the amount of goodwill allocated to the reporting unit. The Company elected to adopt the standard in the first quarter of 2018, with an effective date of January 1, 2018. The adoption of this guidance did not have a material impact on its consolidated financial statements and related disclosures.

In May 2017, the FASB amended the requirements in the Compensation—Stock Compensation Topic of the ASC related to changes to the terms or conditions of a share-based payment award. The amendments provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The Company adopted the amendments in the first quarter of 2018, with an effective date of January 1, 2018. The adoption of this guidance did not have a material impact on the Company’s financial statements and related disclosures.