Revenues from Contracts with Customers

12 Months Ended

Sep. 30, 2022

Revenues from Contracts with Customers

Revenues from Contracts with Customers

Note 3.  Revenues from Contracts with Customers

The Company applies a five-step analysis to: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when, or as, the Company satisfies a performance obligation.  The Company’s revenue from contracts with customers is generated primarily from providing high-performance alloys, manufactured to the specifications of its customers, along with conversion services to certain customers.  

Performance Obligations

Revenue is recognized when performance obligations under the terms of contracts with the customer are satisfied, which occurs when control of the goods and services has been transferred to the customer.  This predominately occurs upon shipment or delivery of the product or when the service is performed. 

The Company may occasionally have customer agreements involving production and shipment of goods that would require revenue to be recognized over time due to there being no alternative use for the product without significant economic loss and an enforceable right to payment including a normal profit margin from the customer in the event of contract termination.  As of September 30, 2021 and September 30, 2022, the Company did not have any customer agreements that would require revenue to be recorded over time. 

Each customer purchase order or contract for goods transferred represents a single performance obligation for which revenue is recognized at either a point in time or over-time as described in the preceding paragraph. The standard terms and conditions of a customer purchase order include limited warranties and the right of customers to have products that do not meet specifications repaired or replaced, at the Company’s option.  Such warranties do not represent a separate performance obligation.

The customer agreement with Titanium Metals Corporation (“TIMET”) (See Note 15) includes the performance obligation to provide conversion services for up to ten million pounds of titanium metal annually over a twenty-year period which ends in fiscal 2027.  The transaction price under this contract included a $50,000 up-front fee as well as conversion service fees based upon the fulfillment of conversion services requested at the option of TIMET.  The $50,000 fee is allocated to the obligation to provide manufacturing capacity over time and, therefore, is recognized in income on a straight-line basis over the 20-year term of that agreement.  The fees for conversion services are based on quantity of service and are recognized as revenue at the time the service is performed. 

Transaction Price

Each customer purchase order or contract sets forth the transaction price for the products and services purchased under that arrangement.  Some customer arrangements may include variable consideration, such as volume rebates, which generally depend upon the Company’s customers meeting specified performance criteria, such as a purchasing level over a period of time.  The Company exercises judgment to estimate the most likely amount of variable consideration at each reporting date.

Revenue is measured as the amount of consideration expected to be received in exchange for the transfer of goods or services to customers. Revenue is derived from product sales or conversion services, and is reported net of sales discounts, rebates, incentives, returns and other allowances offered to customers, if applicable.   Payment terms vary from customer to customer depending upon credit worthiness, prior payment history and other credit considerations.  

Amounts billed to customers for shipping and handling activities to fulfill the Company’s promise to transfer of the goods are included in revenues and costs incurred by the Company for the delivery of goods and are classified as cost of sales in the consolidated statements of operations. Shipping terms may vary for products shipped outside the United States depending on the mode of transportation, the country where the material is shipped and any agreements made with the customers.

Contract Balances

As of September 30, 2021 and September 30, 2022, accounts receivable with customers were $58,517 and $95,340, respectively.  Allowance for credit losses as of September 30, 2021 and September 30, 2022 were $553 and $428, respectively, and are presented within accounts receivable, less allowance for credit losses on the consolidated balance sheet.    

Contract liabilities are recognized when the Company has received consideration from a customer to transfer goods or services at a future point in time when the Company performs under the purchase order or contract.  As of September 30, 2021 and September 30, 2022, no contract liabilities have been recorded except for $12,829 and $10,329, respectively, for the TIMET agreement and $1,060 and $700 for accrued product returns, respectively. 

Practical Expedients

The Company has elected to use the practical expedient that permits the omission of disclosure for remaining performance obligations which are expected to be satisfied within one year or less.  Aside from the TIMET agreement, the Company does not have any remaining performance obligations in excess of one year or contracts that it does not have the right to invoice as of September 30, 2022.  The Company does not adjust for the time value of money as the majority of its contracts have an original expected duration of one year or less; contracts that are greater than one year are related to net revenues that are constrained until the subsequent sales occur.  

Disaggregation of Revenue

Revenue is disaggregated by end-use markets.  The following table includes a breakdown of net revenues to the markets served by the Company for the fiscal years ended September 30, 2020, 2021 and 2022.

	Year Ended
	September 30,
	2020		2021		2022
Net revenues (dollars in thousands)
Aerospace	$	191,980	$	128,072	$	230,001
Chemical processing		63,170		63,147		91,665
Industrial gas turbine		56,576		66,772		91,878
Other markets		45,099		58,090		53,706
Total product revenue		356,825		316,081		467,250
Other revenue		23,705		21,580		23,211
Net revenues	$	380,530	$	337,661	$	490,461

See Note 13 for revenue disaggregated by geography and product group.