Impact Of Recently Enacted Accounting Standards

6 Months Ended

Jun. 30, 2018

New Accounting Pronouncements And Changes In Accounting Principles [Abstract]

Impact of Recently Enacted Accounting Standards

Note 2 – New Accounting Pronouncements

Adopted in 2018

In May 2017, the Financial Accounting Standards Board (FASB) issued a new accounting standards update that provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The Company adopted the new guidance effective January 1, 2018.The impact of adoption on the Company's consolidated financial statements is dependent on future changes to stock-based compensation awards.

In August 2016, the FASB issued a new accounting standards update, which seeks to reduce the existing diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The Company adopted this new update effective January 1, 2018.The adoption of this guidance had no impact on the consolidated financial statements of the Company.

In May 2014, the FASB issued a new standard (commonly referred to as ASC 606), which changed the way the Company recognizes revenue and significantly expanded the disclosure requirements for revenue arrangements. The Company adopted ASC 606 with a date of the initial application of January 1, 2018. As a result, the Company has changed its accounting policy for revenue recognition as detailed below.

The Company applied ASC 606 using the full retrospective transition method. The Company elected the ASC 606 practical expedient and does not disclose the information about remaining performance obligations that have original expected durations of one year or less. Amounts prior to January 1, 2018 that have been adjusted in accordance with ASC 606 as described herein are noted “as adjusted”.

Previously, the Company recognized revenue from the sale of manufactured products built to customer specifications and excess inventory when title and risk of ownership passed, the price to the buyer was fixed or determinable and recoverability was reasonably assured, which was generally when the goods were shipped. Under ASC 606, the Company recognizes revenue as the customer takes control of the products. Under the majority of the Company’s manufacturing contracts with customers, the customer controls all of the work-in-progress as products are being built. Revenues under these contracts are recognized progressively based on the cost-to-cost method. Accordingly, the Company will recognize revenue under these contracts earlier than under the previous accounting rules. Under other manufacturing contracts, the customer does not take control of the product until it is completed. Under these contracts, the Company continues to recognize revenue upon transfer of control of product to the customer. Revenue from design, development and engineering services also continues to be recognized over time as the services are performed.

The Company’s performance obligations generally have an expected duration of one year or less. The Company applies the practical expedients and does not disclose information about remaining performance obligations that have original expected durations of one year or less or any significant financing components in the contracts.

The Company recognizes the incremental costs, if any, of obtaining contracts as an expense when incurred since the amortization period of the assets that the Company otherwise would have recognized is one year less.

The following tables summarize the impacts of ASC 606 adoption on the Company’s 2017consolidated financial statements.

Condensed Consolidated Balance Sheet
December 31, 2017
		Impact of changes in accounting policies
		As previously
(in thousands)			reported	Adjustments			As adjusted
	Contract assets	$	—	$	146,496	$	146,496
	Inventories		397,181		(128,264)		268,917
	Prepaid expenses and other assets		42,263		(6,245)		36,018
	Total assets	$	2,097,317	$	11,987	$	2,109,304
	Income taxes payable	$	11,662	$	1	$	11,663
	Deferred income taxes		7,027		1,667		8,694
	Total liabilities		768,498		1,668		770,166
	Retained earnings		697,862		10,319		708,181
	Total shareholders’ equity		1,328,819		10,319		1,339,138
	Total liabilities and shareholders’ equity	$	2,097,317	$	11,987	$	2,109,304

Condensed Consolidated Statement of Income
Three Months Ended June 30, 2017
		Impact of changes in accounting policies
		As previously
(in thousands, except per share data)			reported	Adjustments			As adjusted
Sales		$	616,904	$	2,707	$	619,611
Cost of sales		$	558,317	$	1,810	$	560,127
Income tax expense		$	3,122	$	(1)	$	3,121
Net income		$	17,176	$	898	$	18,074
Earnings per share:
	Basic	$	0.35	$	0.01	$	0.36
	Diluted	$	0.34	$	0.02	$	0.36
Weighted-average number of shares outstanding:
	Basic		49,766		49,766		49,766
	Diluted		50,239		50,239		50,239
Condensed Consolidated Statement of Income
Six Months Ended June 30, 2017
		Impact of changes in accounting policies
		As previously
(in thousands, except per share data)			reported	Adjustments			As adjusted
Sales		$	1,183,405	$	(5,891)	$	1,177,514
Cost of sales		$	1,075,758	$	(5,260)	$	1,070,498
Income tax expense		$	4,620	$	(397)	$	4,223
Net income		$	26,863	$	(234)	$	26,629
Earnings per share:
	Basic	$	0.54	$	—	$	0.54
	Diluted	$	0.54	$	(0.01)	$	0.53
Weighted-average number of shares outstanding:
	Basic		49,640		49,640		49,640
	Diluted		50,209		50,209		50,209

Condensed Consolidated Statement of Cashflows
Six Months Ended June 30, 2017
					Impact of changes in accounting policies
					As previously
(in thousands)						reported	Adjustments			As adjusted
	Net income				$	26,863	$	(234)	$	26,629
	Adjustments to reconcile net income to net cash provided
		by operating activities:
			Depreciation			18,414		—		18,414
			Amortization			5,903		—		5,903
			Deferred income taxes			2,103		(743)		1,360
			Gain on the sale of property, plant and equipment			(167)		—		(167)
			Stock-based compensation expense			4,505		—		4,505
	Changes in operating assets and liabilities:
			Accounts receivable			49,394		—		49,394
			Contract assets			—		3,466		3,466
			Inventories			(34,218)		(5,260)		(39,478)
			Prepaid expenses and other assets			(9,658)		2,425		(7,233)
			Accounts payable			16,675		—		16,675
			Accrued liabilities			13,388		—		13,388
			Income taxes			(673)		346		(327)
				Net cash provided by operations		92,529		—		92,529
				Net cash used in investing activities		(25,999)		—		(25,999)
				Net cash used in financing activities		(903)		—		(903)
	Effect of exchange rate changes					2,251		—		2,251
	Net increase in cash and cash equivalents					67,878		—		67,878
	Cash and cash equivalents at beginning of year					681,433		—		681,433
	Cash and cash equivalents at end of period				$	749,311	$	—	$	749,311

Not Yet Adopted

In February 2018, the FASB issued new accounting guidance that allows the reclassification of certain tax effects from accumulated other comprehensive income to retained earnings. This guidance is effective January 1, 2019, with early adoption permitted. The Company is evaluating whether it will adopt this new guidance along with any impacts on the Company’s financial position, results of operations and cash flows, none of which are expected to be material.

In June 2016, the FASB issued a new accounting standards update, which replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This update is effective for annual reporting periods beginning after December 15, 2019. The Company does not expect the implementation of this update to have a material impact on its consolidated financial position, results of operations or cash flows and will adopt this update effective January 1, 2020.

In February 2016, the FASB issued a new accounting standards update changing the accounting for leases, including a requirement to record all leases on the consolidated balance sheets as assets (right-of-use) and liabilities (for reasonably certain lease payments). This update is effective for fiscal years beginning after December 15, 2018. The Company will adopt this update effective January 1, 2019, which will impact its consolidated balance sheet. Originally, entities were required to adopt this update using a modified retrospective approach, which required prior periods to be presented under this new standard with various practical expedients allowed. However, in July 2018, the FASB issued additional guidance which allows entities the option of recognizing the cumulative effect of applying the new standard as an adjustment to the opening balance of retained earnings in the year of adoption (January 1, 2019). The Company is currently evaluating the impact this standard will have on its consolidated financial statements and which transition approach will be used upon adoption.

The Company has determined that other recently issued accounting standards will either have no material impact on its consolidated financial position, results of operations or cash flows, or will not apply to its operations.