Revenue Recognition and Related Costs

9 Months Ended

Jun. 30, 2021

Revenue from Contract with Customer [Abstract]

Revenue Recognition and Related Costs

Note 8 – Revenue Recognition and Related Costs

The Company recognizes revenue under ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The following table disaggregates the Company’s net revenue by major source for the quarters and nine months ended June 30, 2021 and 2020:

	Quarter Ended June 30,					Nine Months Ended June 30,
	2021			2020		2021			2020
Equipment sales recognized over time	$	6,507,000		$	10,350,000	$	14,509,000		$	32,269,000
Equipment sales recognized at a point in time		12,258,000			8,995,000		31,959,000			20,946,000
Parts and component sales		5,240,000			2,671,000		16,001,000			10,492,000
Freight revenue		996,000			822,000		2,888,000			2,926,000
Other		(82,000	)		102,000		(122,000	)		330,000
Net revenue	$	24,919,000		$	22,940,000	$	65,235,000		$	66,963,000

Revenues from contracts with customers for the design, manufacture and sale of custom equipment are recognized over time when the performance obligation is satisfied by transferring control of the equipment. Control of the equipment transfers over time as the equipment is unique to the specific contract and thus does not create an asset with an alternative use to the Company. Revenues and costs are recognized in proportion to actual labor costs incurred, as compared with total estimated labor costs expected to be incurred, during the entire contract. All incremental costs related to obtaining a contract are expensed as incurred as the amortization period is less than one year. Changes to total estimated contract costs or losses, if any, are recognized in the period in which they are determined.

Contract assets (excluding accounts receivable) under contracts with customers represent revenue recognized in excess of amounts billed on equipment sales recognized over time. These contract assets were zero at June 30, 2021 and $6,405,000 at September 30, 2020. Contract assets at September 30, 2020 are included in current assets as costs and estimated earnings in excess of billings on the Company’s condensed consolidated balance sheet at September 30, 2020.

Revenues from all other contracts for the design and manufacture of equipment, for service and for parts sales, net of any discounts and return allowances, are recorded at a point in time when control of the goods or services has been transferred. Control of the goods or service typically transfers at time of shipment or upon completion of the service.

Payment for equipment under contract with customers is typically due prior to shipment. Payment for services under contract with customers is due as certain milestones are completed. Accounts receivable related to contracts with customers for equipment sales was $268,000 at June 30, 2021 and $223,000 at September 30, 2020.

Product warranty costs are estimated using historical experience and known issues and are charged to production costs as revenue is recognized. Provisions for estimated returns and allowances and other adjustments are provided for in the same period the related sales are recorded. Returns and allowances, which reduce product revenue, are estimated using historical experience.

Under certain contracts with customers, recognition of a portion of the consideration received may be deferred and recorded as a contract liability if the Company has to satisfy a future obligation, such as to provide installation assistance. There were no contract liabilities other than customer deposits and billings in excess of costs and estimated earnings at June 30, 2021 and customer deposits at September 30, 2020. Customer deposits related to contracts with customers were $3,761,000 at June 30, 2021 and $3,853,000 at September 30, 2020, and are included in current liabilities on the Company’s condensed consolidated balance sheets at June 30, 2021 and September 30, 2020, respectively. Billings in excess of costs and estimated earnings were $685,000 at June 30, 2021 and zero at September 30, 2020. These contract liabilities represent billings in excess of revenue recognized on equipment sales recognized over time, and are included current liabilities on the Company’s condensed consolidated balance sheet at June 30, 2021.

The Company records revenues earned for shipping and handling as freight revenue at the time of shipment, regardless of whether or not it is identified as a separate performance obligation. The cost of shipping and handling is classified as production costs concurrently with the revenue recognition.

All product engineering and development costs, and selling, general and administrative expenses are charged to operations as incurred. Provision is made for any anticipated contract losses in the period that the loss becomes evident.

The allowance for doubtful accounts is determined by performing a specific review of all account balances greater than 90 days past due and other higher risk amounts to determine collectability, and also adjusting for any known customer payment issues with account balances in the less-than-90-day past due aging category. Account balances are charged off against the allowance for doubtful accounts when they are determined to be uncollectible. Any recoveries of account balances previously considered in the allowance for doubtful accounts reduce future additions to the allowance for doubtful accounts. The allowance for doubtful accounts also includes an estimate for returns and allowances. Provisions for estimated returns and allowances and other adjustments, are provided for in the same period the related sales are recorded. Returns and allowances, which reduce product revenue, are estimated using known issues and historical experience.