Note 9 - Product Warranty Obligations

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Product Warranty Disclosure [Text Block]

9. Product Warranty Obligations

The Company records a liability for standard product warranty obligations accounted for as assurance warranties at the time of sale to a customer based upon historical warranty experience. The Company also records a liability for specific warranty matters when they become known and are reasonably estimable. The following is a tabular reconciliation of the Company’s standard product warranty liability accounted for as an assurance warranty:

	Year Ended December 31,
	2018			2017			2016
Balance at beginning of period	$	35,422		$	31,695		$	30,197
Product warranty reserve assumed in acquisition		-			43			840
Payments		(20,029	)		(18,861	)		(18,691	)
Provision for warranty issued		26,910			21,347			19,148
Changes in estimates for pre-existing warranties		(518	)		1,198			201
Balance at end of period	$	41,785		$	35,422		$	31,695

Additionally, the Company sells extended warranty coverage for certain products, which it accounts for as a service warranty. The sales of extended warranties are recorded as deferred revenue, and typically have a duration of

five

to

ten

years. The deferred revenue related to extended warranty coverage is amortized over the duration of the extended warranty contract period, following the standard warranty period, using the straight-line method. The Company believes the straight-line method is appropriate because the performance obligation is satisfied based on the passage of time. The amortization of deferred revenue is recorded to net sales in the consolidated statements of comprehensive income. The following is a tabular reconciliation of the deferred revenue related to extended warranty coverage:

	Year Ended December 31,
	2018			2017			2016
Balance at beginning of period	$	57,854		$	36,139		$	31,956
Deferred revenue contracts issued		21,440			29,262	(1)		9,797
Amortization of deferred revenue contracts		(10,954	)		(7,547	)		(5,614	)
Balance at end of period	$	68,340		$	57,854		$	36,139

( 1 ) The increase in deferred revenue contracts issued during 2017 was largely due to the launch of a post-sale extended warranty marketing program.

The timing of recognition of the Company’s deferred revenue balance related to extended warranties at

December 31, 2018

is as follows:

2019	$	13,438
2020		13,547
2021		12,178
2022		9,756
After 2022		19,421
Total	$	68,340

In

2017,

the Company launched a post-sale extended warranty marketing program with a

third

party. In the program’s agreement, the Company is required to pay fees to the 

third

-party service provider based on the number of extended warranty contracts that they sell, which it classifies as costs to obtain a contract. The contract costs are deferred and recorded as other assets in the consolidated balance sheets. The deferred contract costs are amortized to net sales in the consolidated statements of comprehensive income over the same period that the underlying deferred revenue is recognized. The balance of deferred contract costs as of

December 31, 2018

and

2017

was

$4,782

and

$3,346,

respectively. Amortization of deferred contract costs recorded during the years ended

December 31, 2018

and

2017

was

$615

and

$193,

respectively.

Standard product warranty obligations and extended warranty related deferred revenues are included in the consolidated balance sheets as follows:

	December 31,
	2018		2017
Product warranty liability
Current portion - other accrued liabilities	$	25,396	$	20,576
Long-term portion - other long-term liabilities		16,389		14,846
Total	$	41,785	$	35,422
Deferred revenue related to extended warranties
Current portion - other accrued liabilities	$	13,646	$	11,017
Long-term portion - other long-term liabilities		54,694		46,837
Total	$	68,340	$	57,854