Sales

3 Months Ended

Mar. 29, 2019

Revenue from Contract with Customer [Abstract]

NOTE 8. SALES

We derive revenues primarily from the sale of Professional Instrumentation and Industrial Technologies products and services. Revenue is recognized when control of promised products or services is transferred to customers in an amount that reflects the consideration we expect to be entitled to in exchange for those products or services.

Product Sales include revenues from the sale of products and equipment, which includes our software as a service product offerings and equipment rentals.

Service Sales includes revenues from extended warranties, post-contract customer support (“PCS”), maintenance contracts or services, contract labor to perform ongoing service at a customer location, and services related to previously sold products.

Contract Assets — In certain circumstances, we record contract assets which include unbilled amounts typically resulting from sales under contracts when revenue recognized exceeds the amount billed to the customer, and right to payment is not only subject to the passage of time. Contract assets were immaterial as of March 29, 2019 and December 31, 2018.

Contract Costs — We incur direct incremental costs to obtain certain contracts, typically sales-related commissions and costs associated with assets used by our customers in certain service arrangements. Deferred sales-related commissions are generally not capitalized as the amortization period is 1 year or less, and we elected to use the practical expedient to expense these sales commissions as incurred. As of March 29, 2019, we had $139.2 million in net revenue-related contract assets related to certain service arrangements. Our revenue-related contract assets at December 31, 2018 were $144.4 million, the majority of which were recorded in property, plant and equipment on the Consolidated Condensed Balance Sheet. These assets have estimated useful lives between 3 and 5 years.

Impairment losses recognized on our revenue-related contract assets were immaterial in the three months ended March 29, 2019.

Contract Liabilities — Our contract liabilities consist of deferred revenue generally related to PCS and extended warranty sales, where in most cases we receive up-front payment and recognize revenue over the support term. We classify deferred revenue as current or noncurrent based on the timing of when we expect to recognize revenue. The noncurrent portion of deferred revenue is included in other long-term liabilities in the accompanying Consolidated Condensed Balance Sheets.

Our contract liabilities consisted of the following ($ in millions):



	March 29, 2019		December 31, 2018
Deferred revenue - current	$	306.2	$	288.1
Deferred revenue - noncurrent	97.3		92.6
Total contract liabilities	$	403.5	$	380.7

In the three months ended March 29, 2019, we recognized $114.3 million of revenue related to our contract liabilities at December 31, 2018. The change in our contract liabilities from December 31, 2018 to March 29, 2019 was primarily due to the timing of cash receipts and sales of post-contract support and extended warranty services.

Remaining Performance Obligations — Our remaining performance obligations represent the transaction price of firm, noncancelable orders, with expected delivery dates to customers greater than one year from March 29, 2019, for which work has not been performed. We have excluded performance obligations with an original expected duration of one year or less from the amounts below.

The aggregate performance obligations attributable to each of our segments is as follows ($ in millions):



	March 29, 2019
Professional Instrumentation	$	147.2
Industrial Technologies	408.9
Total remaining performance obligations	$	556.1

The majority of remaining performance obligations are related to service and support contracts, which we expect to fulfill approximately 40 percent within the next two years, approximately 75 percent within the next three years and substantially all within four years.

Disaggregation of Revenue

We disaggregate revenue from contracts with customers by sales of products and services, geographic location, major product group and end market for each of our segments, as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Disaggregation of revenue for the three months ended March 29, 2019 is presented as follows ($ in millions):



	Total		Professional Instrumentation		Industrial Technologies
Sales:
Sales of products	$	1,405.1	$	825.8	$	579.3
Sales of services	187.8		121.5		66.3
Total	$	1,592.9	$	947.3	$	645.6

Geographic:
United States	$	887.6	$	486.0	$	401.6
China	150.0		128.4		21.6
Germany	57.6		32.4		25.2
All other (each country individually less than 5% of total sales)	497.7		300.5		197.2
Total	$	1,592.9	$	947.3	$	645.6

Major Products Group:
Professional tools and equipment	$	1,226.9	$	780.3	$	446.6
Industrial automation, controls and sensors	130.0		100.0		30.0
Franchise distribution	169.0		—		169.0
All other	67.0		67.0		—
Total	$	1,592.9	$	947.3	$	645.6

End markets:
Direct sales:
Retail fueling^(a)	$	388.2	$	—	$	388.2
Industrial & Manufacturing	109.6		96.8		12.8
Vehicle repair^(a)	153.8		—		153.8
Utilities & Power	49.6		49.6		—
Other	463.0		391.1		71.9
Total direct sales	1,164.2		537.5		626.7
Distributors^(a)	428.7		409.8		18.9
Total	$	1,592.9	$	947.3	$	645.6

(a) Retail fueling and vehicle repair include sales to these end markets made through third-party distributors. Total distributor sales for the three months ended March 29, 2019 was $745.2 million.

Disaggregation of revenue for the three months ended March 30, 2018 is presented as follows ($ in millions):



	Total		Professional Instrumentation		Industrial Technologies
Sales:
Sales of products	$	1,332.4	$	776.6	$	555.8
Sales of services	159.8		95.1		64.7
Total	$	1,492.2	$	871.7	$	620.5

Geographic:
United States	$	788.7	$	406.4	$	382.3
China	143.6		125.1		18.5
Germany	58.3		35.9		22.4
All other (each country individually less than 5% of total sales)	501.6		304.3		197.3
Total	$	1,492.2	$	871.7	$	620.5

Major Products Group:
Professional tools and equipment	$	1,119.2	$	704.7	$	414.5
Industrial automation, controls and sensors	138.0		105.0		33.0
Franchise distribution	173.0		—		173.0
All other	62.0		62.0		—
Total	$	1,492.2	$	871.7	$	620.5

End markets:
Direct sales:
Retail fueling^(a)	$	348.3	$	—	$	348.3
Industrial & Manufacturing	105.5		90.4		15.1
Vehicle repair^(a)	158.8		—		158.8
Utilities & Power	55.4		55.4		—
Other	381.9		301.2		80.7
Total direct sales	1,049.9		447.0		602.9
Distributors^(a)	442.3		424.7		17.6
Total	$	1,492.2	$	871.7	$	620.5

(a) Retail fueling and vehicle repair include sales to these end markets made through third-party distributors. Total distributor sales for the three months ended March 30, 2018 was $728.1 million.