Revenue Recognition

Disaggregation of Net Sales

The following table presents a disaggregation of our net sales by product type and revenue source. We believe these categories most appropriately depict the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with our customers.



	Three Months Ended				Nine Months Ended
	September 30, 2018		September 30, 2017(1)		September 30, 2018		September 30, 2017(1)
	(In thousands)
Fluid milk	$	1,118,474	$	1,266,951	$	3,535,696	$	3,950,295
Ice cream(2)	303,740		307,319		864,343		887,658
Fresh cream(3)	99,771		99,930		291,537		280,712
Extended shelf life and other dairy products(4)	44,379		47,410		135,804		142,126
Cultured	65,343		72,223		195,013		216,408
Other beverages(5)	71,506		73,825		208,550		220,859
Other(6)	32,577		33,621		95,675		88,640
Subtotal	1,735,790		1,901,279		5,326,618		5,786,698
Sales of excess raw materials(7)	112,446		—		387,128		—
Sales of other bulk commodities	45,830		36,341		112,057		73,330
Total net sales	$	1,894,066	$	1,937,620	$	5,825,803	$	5,860,028


(1)	Prior period amounts have not been restated as we have elected to adopt ASC 606 using the modified retrospective method. Sales of excess raw materials of $148.3 million and $456.5 million for the three and nine months ended September 30, 2017, respectively, were included as a reduction of cost of sales in our unaudited Condensed Consolidated Statements of Operations.


(2)	Includes ice cream, ice cream mix and ice cream novelties.


(3)	Includes half-and-half and whipping creams.


(4)	Includes creamers and other extended shelf life fluids.


(5)	Includes fruit juice, fruit flavored drinks, iced tea, water and flax-based milk.


(6)	Includes items for resale such as butter, cheese, eggs and milkshakes.

(7)

Historically, we presented sales of excess raw materials as a reduction of cost of sales within our Consolidated Statements of Operations; however, upon further evaluation of these sales in connection with our implementation of ASC 606, we have determined that it is appropriate to present these sales as revenue. Therefore, on a prospective basis, effective January 1, 2018, we began reporting these sales within the net sales line of our unaudited Condensed Consolidated Statements of Operations.

The following table presents a disaggregation of our net product sales between sales of Company-branded products versus sales of private label products:



	Three Months Ended				Nine Months Ended
	September 30, 2018		September 30, 2017		September 30, 2018		September 30, 2017
	(In thousands)
Branded products	$	844,356	$	909,186	$	2,607,751	$	2,816,782
Private label products	891,434		992,093		2,718,867		2,969,916
Subtotal	1,735,790		1,901,279		5,326,618		5,786,698
Sales of excess raw materials	112,446		—		387,128		—
Sales of other bulk commodities	45,830		36,341		112,057		73,330
Total net sales	$	1,894,066	$	1,937,620	$	5,825,803	$	5,860,028

Revenue Recognition and Nature of Products and Services

We manufacture, market and distribute a wide variety of branded and private label dairy and dairy case products, including fluid milk, ice cream, cultured dairy products, creamers, ice cream mix and other dairy products to retailers, distributors, foodservice outlets, educational institutions and governmental entities across the United States. Revenue is recognized upon transfer of control of promised goods or services to our customers’ facility in an amount that reflects the consideration we expect to ultimately receive in exchange for those promised goods or services. Revenue is recognized net of allowances for product returns, trade promotions and prompt pay and other discounts.

The substantial majority of our revenue is derived from the sale of fluid milk, ice cream and other dairy products, which includes sales of both Company-branded products as well as private label products. In addition, we derive revenue from the sale of excess raw materials and the sale of other bulk commodities.

Our portfolio of products includes fluid milk, ice cream, cultured dairy products, creamers, ice cream mix and other dairy and dairy case products. We sell these products under national, regional and local proprietary or licensed brands, or under private labels. Our sales of excess raw materials consist primarily of bulk cream sales. As a result of the purchase of raw milk, we obtain more butterfat than is needed in our production process. Excess butterfat is sold, primarily in the form of bulk cream, to third parties. Additionally, in certain cases we may be required to externally purchase bulk cream in order to fulfill minimum supply requirements for our customers. In these cases, we purchase bulk cream from other processors or suppliers and resell it to our customers to fulfill our contractual requirements with them.

In all cases, we recognize revenue upon delivery to our customers as we have determined that this is the point at which control is transferred, our performance obligation is complete, and we are entitled to consideration.

Contractual Arrangements with Customers

The majority of our sales are to retailers, warehouse clubs, distributors, foodservice outlets, educational institutions and governmental entities with whom we have contractual agreements. Our sales of excess raw materials and other bulk commodities are primarily to dairy cooperatives, dairy processors or other manufacturers for use as a raw ingredient in their respective manufacturing processes. Our customer contracts typically contain standard terms and conditions and a term sheet. In some cases, upon expiration, these arrangements may continue with the same terms and may not be formally renewed. Additionally, we have a number of informal sales arrangements with certain local and regional customers, which we consider to be contracts based on the criteria outlined in ASC 606. Payment terms and conditions vary by customer, but we generally provide credit terms to customers ranging up to 30 days; therefore, we have determined that our contracts do not include a significant financing component. We perform ongoing credit evaluations of our customers and maintain allowances for potential credit losses based on our historical experience.

We have determined that we satisfy our performance obligations related to our customer contracts at a point in time, as opposed to over time, and, accordingly, revenue is recognized at a point in time across all of our revenue streams. Therefore, we do not have any contract balances with our customers recorded on our unaudited Condensed Consolidated Balance Sheets.

Sales Incentives and Other Promotional Programs

We routinely offer sales incentives and discounts through various regional and national programs to our customers and consumers. These programs include scan backs, product rebates, product returns, trade promotions and co-op advertising, product discounts, product coupons and amounts paid to customers for shelf space in retail stores. The expenses associated with these programs are accounted for as reductions to the transaction price of our products and are therefore recorded as reductions to gross sales.

Some of our sales incentives are recorded by estimating incentive costs or redemption rates based on our historical experience and expected levels of performance of the trade promotion or other program. We maintain liabilities at the end of each period for the estimated incentive costs incurred but unpaid for these programs. Differences between estimated and actual incentive costs are normally not material and are recognized in earnings in the period such differences are determined.