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 update affects all companies and other organizations that lease assets such as real estate, airplanes, and manufacturing equipment. The amendments 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 amendments 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 update 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 amendments 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 update with a cumulative-effect adjustment to the opening balance of retained earnings at the date of adoption. The adoption of this update will not have a material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15 Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40) to align the requirements for capitalizing implementation costs incurred in cloud computing arrangements that are service contracts with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The update will be effective for financial statements issued for annual periods, and interim periods within these annual periods, beginning after December 15, 2019, with early adoption permitted. The Company plans to apply the amendments in the update prospectively to all implementation costs incurred after the date of the adoption. The adoption of this update will not have a material impact on the Company’s consolidated financial statements and related disclosures.

In August 2018, the SEC issued a final rule to amend certain redundant or outdated disclosure requirements to simplify compliance with financial reporting. In an effort to reduce such duplicative disclosures, many requirements of the SEC were either eliminated or reduced where GAAP had identical or similar disclosure provisions for the notes to financial statements. In other instances, disclosure requirements were enhanced to improve transparency. The amendments will be effective for financial statements issued after November 5, 2018 and the adoption will not have a material impact on the Company’s consolidated financial statements and related disclosures.

Recently Adopted Standards

In May 2014, the FASB issued ASU 2014-09, Revenue—Revenue from Contracts with Customers. The Company has adopted the update 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 update as an adjustment to the opening balance of retained earnings. The Company applied the amendments 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 update 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 nine months ended September 30, 2018 and the consolidated balance sheet as of September 30, 2018 was as follows:

	Three Months Ended September 30, 2018
	As Reported		Balances Without Adoption of ASU 2014-09		Effect of Adoption Increase/(Decrease)
Statement of Income
Revenues
Net Sales	$	195,690	$	193,828	$	1,862
Costs and Expenses
Costs of Operations		174,214		172,724		1,490
Income Tax Provision		2,748		2,600		148
Net Income		8,677		8,453		224

	Nine Months Ended September 30, 2018
	As Reported		Balances Without Adoption of ASU 2014-09		Effect of Adoption Increase/(Decrease)
Statement of Income
Revenues
Net Sales	$	531,738	$	530,718	$	1,020
Costs and Expenses
Costs of Operations		470,556		469,740		816
Income Tax Provision		8,301		8,188		113
Net Income		22,947		22,856		91

	September 30, 2018
	As Reported		Balances Without Adoption of ASU 2014-09		Effect of Adoption Increase/(Decrease)
Balance Sheet
Assets
Accounts Receivable, net	$	155,693	$	154,673	$	1,020
Inventories, net		84,104		84,920		(816	)
Liabilities and Shareholders’ Equity
Accrued Liabilities		26,295		26,182		113
Accumulated Surplus		72,606		72,515		91

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 update 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 update 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.