Revenue Recognition (Notes)

9 Months Ended

Sep. 30, 2019

Revenue Recognition, Sales of Goods [Policy Text Block]

Note 2. Revenue Recognition

The following tables disaggregate the Company’s revenue by major product type and geography (in thousands):



	Three months ended September 30, 2019
	ORV / Snowmobiles		Motorcycles		Global Adj. Markets		Aftermarket		Boats		Consolidated
Revenue by product type
Wholegoods	$	950,024	$	127,419	$	92,268	—		$	119,078	$	1,288,789
PG&A	202,381		22,481		21,735		$	236,261	—		482,858
Total revenue	$	1,152,405	$	149,900	$	114,003	$	236,261	$	119,078	$	1,771,647

Revenue by geography
United States	$	964,052	$	105,566	$	60,900	$	224,090	$	117,239	$	1,471,847
Canada	91,078		7,865		380		12,171		1,839		113,333
EMEA	63,436		21,668		52,294		—		—		137,398
APLA	33,839		14,801		429		—		—		49,069
Total revenue	$	1,152,405	$	149,900	$	114,003	$	236,261	$	119,078	$	1,771,647

	Three months ended September 30, 2018
	ORV / Snowmobiles		Motorcycles		Global Adj. Markets		Aftermarket		Boats		Consolidated
Revenue by product type
Wholegoods	$	851,733	$	134,410	$	78,312	—		$	134,321	$	1,198,776
PG&A	183,821		20,906		17,939		$	229,973	—		452,639
Total revenue	$	1,035,554	$	155,316	$	96,251	$	229,973	$	134,321	$	1,651,415

Revenue by geography
United States	$	866,289	$	116,072	$	51,363	$	217,816	$	132,139	$	1,383,679
Canada	70,765		9,712		837		12,157		2,182		95,653
EMEA	64,218		15,706		42,893		—		—		122,817
APLA	34,282		13,826		1,158		—		—		49,266
Total revenue	$	1,035,554	$	155,316	$	96,251	$	229,973	$	134,321	$	1,651,415



	Nine months ended September 30, 2019
	ORV / Snowmobiles		Motorcycles		Global Adj. Markets		Aftermarket		Boats		Consolidated
Revenue by product type
Wholegoods	$	2,515,147	$	399,189	$	275,589	—		$	486,313	$	3,676,238
PG&A	554,026		65,426		65,294		$	685,668	—		1,370,414
Total revenue	$	3,069,173	$	464,615	$	340,883	$	685,668	$	486,313	$	5,046,652

Revenue by geography
United States	$	2,544,776	$	293,646	$	170,729	$	654,880	$	475,302	$	4,139,333
Canada	216,932		24,300		3,583		30,788		11,011		286,614
EMEA	207,919		101,091		164,564		—		—		473,574
APLA	99,546		45,578		2,007		—		—		147,131
Total revenue	$	3,069,173	$	464,615	$	340,883	$	685,668	$	486,313	$	5,046,652

	Nine months ended September 30, 2018
	ORV / Snowmobiles		Motorcycles		Global Adj. Markets		Aftermarket		Boats		Consolidated
Revenue by product type
Wholegoods	$	2,356,086	$	395,189	$	263,874	—		$	134,321	$	3,149,470
PG&A	502,873		63,096		59,122		$	676,859	—		1,301,950
Total revenue	$	2,858,959	$	458,285	$	322,996	$	676,859	$	134,321	$	4,451,420

Revenue by geography
United States	$	2,347,202	$	313,530	$	151,157	$	644,382	$	132,139	$	3,588,410
Canada	197,096		27,421		16,422		32,477		2,182		275,598
EMEA	207,779		74,044		151,982		—		—		433,805
APLA	106,882		43,290		3,435		—		—		153,607
Total revenue	$	2,858,959	$	458,285	$	322,996	$	676,859	$	134,321	$	4,451,420

With respect to wholegood vehicles, boats, parts, garments and accessories, revenue is recognized when the Company transfers control of the product to the customer. With respect to services provided by the Company, revenue is recognized upon completion of the service or over the term of the service agreement in proportion to the costs expected to be incurred in satisfying the obligations over the term of the service period. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. Sales, value add, and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense. The expected costs associated with the Company’s limited warranties and field service bulletin actions are recognized as expense when the products are sold. The Company recognizes revenue for vehicle service contracts that extend mechanical and maintenance beyond the Company’s limited warranties over the life of the contract. Revenue from goods and services transferred to customers at a point-in-time accounts for the majority of the Company’s revenue. Revenue from products or services transferred over time is discussed in the deferred revenue section.

ORV/Snowmobiles, Motorcycles and Global Adjacent Markets segments

Wholegood vehicles and parts, garments and accessories. For the majority of wholegood vehicles, parts, garments and accessories (PG&A), the Company transfers control and recognizes a sale when it ships the product from its manufacturing facility, distribution center, or vehicle holding center to its customer (primarily dealers and distributors). The amount of consideration the Company receives and revenue it recognizes varies with changes in marketing incentives and rebates it offers to its dealers and their customers. Sales returns are not material. The Company adjusts its estimate of revenue at the earlier of when the most likely amount of consideration it expects to receive changes or when the consideration becomes fixed.

Depending on the terms of the arrangement, the Company may also defer the recognition of a portion of the consideration received because it has to satisfy a future obligation (e.g., free extended service contracts). The Company uses an observable price to determine the stand-alone selling price for separate performance obligations. The Company has elected to recognize

the cost for freight and shipping when control over vehicles, parts, garments or accessories has transferred to the customer as an expense in cost of sales.

Extended Service Contracts. The Company sells separately-priced service contracts that extend mechanical and maintenance coverages beyond its base limited warranty agreements to vehicle owners. The separately priced service contracts range from 12 months to 84 months. The Company primarily receives payment at the inception of the contract and recognizes revenue over the term of the agreement in proportion to the costs expected to be incurred in satisfying the obligations under the contract. Extended service contract revenue is recorded within PG&A.

Aftermarket segment

The Company’s Aftermarket products are sold through dealer, distributor, retail, and e-commerce channels. The Company transfers control and recognizes a sale when products are shipped or delivered to its customer. The amount of consideration the Company receives and revenue it recognizes varies with changes in marketing incentives and rebates it offers to its customers and their customers. When the Company gives its customers the right to return eligible parts and accessories, it estimates the expected returns based on an analysis of historical experience. The Company adjusts its estimate of revenue at the earlier of when the most likely amount of consideration it expects to receive changes or when the consideration becomes fixed.

Service revenue. The Company offers installation services for parts that it sells. Service revenues are recognized upon completion of the service.

Depending on the terms of the arrangement, the Company may also defer the recognition of a portion of the consideration received because it has to satisfy a future obligation (e.g., extended service contracts). The Company uses an observable price to determine the stand-alone selling price for separate performance obligations. The Company has elected to recognize the cost for freight and shipping when control over parts, garments or accessories has transferred to the customer as an expense in cost of sales.

Boats segment

Boats. The Company transfers control and recognizes a sale when it ships the product from its manufacturing facility or distribution center to its customer (primarily dealers). The amount of consideration the Company receives and revenue it recognizes varies with changes in marketing incentives and rebates it offers to its dealers and their customers. Sales returns are not material. The Company adjusts its estimate of revenue at the earlier of when the most likely amount of consideration it expects to receive changes or when the consideration becomes fixed. The Company has elected to recognize the cost for freight and shipping when control over boats has transferred to the customer as an expense in cost of sales.

Deferred revenue

The Company finances its self-insured risks related to extended service contracts (“ESCs”). The premiums for ESCs are primarily recognized in income in proportion to the costs expected to be incurred over the contract period. Warranty costs are recognized as incurred.

The Company expects to recognize approximately $30,703,000 of the unearned amount over the next 12 months and $41,688,000 thereafter. The activity in the deferred revenue reserve during the periods presented was as follows (in thousands):



	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
Balance at beginning of period	$	67,681		$	52,620		$	59,915		$	45,760
New contracts sold	11,119			8,054			32,504			25,226
Less: reductions for revenue recognized	(6,409		)	(5,088		)	(20,028		)	(15,400		)
Balance at end of period ⁽¹⁾	$	72,391		$	55,586		$	72,391		$	55,586

(1) The unamortized ESC premiums (deferred revenue) recorded in other current liabilities totaled $30,703,000 and $23,893,000 at September 30, 2019 and 2018, respectively, while the amount recorded in other long-term liabilities totaled $41,688,000 and $31,693,000 at September 30, 2019 and 2018, respectively.