The Company designs, manufactures and sells marine and heavy duty off highway power transmission equipment. Products offered include: marine transmissions, azimuth drives, surface drives, propellers and boat management systems as well as power-shift transmissions, hydraulic torque converters, power take-offs, industrial clutches and controls systems. The Company sells its products to customers primarily in the commercial, pleasure craft, and military marine markets as well as in the energy and natural resources, government and industrial markets. The Company's worldwide sales to both domestic and foreign customers are transacted through a direct sales force and a distributor network.
Identify contract with customer:
The Company’s customers consist of distributors and direct end-users. With regard to distributors, the Company generally has written distribution agreements which describe the terms of the distribution arrangement, such as the product range, the sales territory, product pricing, sales support, payment and returns policy, etc. Customer contracts are generally in the form of acknowledged purchase orders. Services to be rendered, as part of the delivery of those products, are also generally specified. Such services include installation reviews and technical commissioning.
The Company’s performance obligations primarily consist of product delivery and certain service obligations such as technical commissioning, repair services, installation reviews, and shift development.
The Company considers the invoice price as the transaction price.
Allocation of transaction price:
The Company determined that the most relevant allocation method for its service obligations is to apply the expected cost plus appropriate margin. This is the Company’s practice of billing for repairs, overhaul, and other product service related time incurred by its technicians.
Revenue is recognized as each performance obligation is satisfied which is typically at a point in time. For technical commissioning, repairs, installation review, and shift development services, revenue is recognized upon completion of the service.
The following table presents details deemed most relevant to the users of the financial statements for the year ended
June 30, 2019.
Net sales by product group for year ended
June 30, 2019
is summarized as follows:
| | | | | | | | | | | Elimination of | | | | | |
| | | Manufacturing | | | Distribution | | | Intercompany Sales | | | Total | |
| Industrial | | $ | 30,393 | | | $ | 8,079 | | | $ | (4,430 | ) | | $ | 34,042 | |
| Land-based transmissions | | | 111,260 | | | | 30,483 | | | | (28,950 | ) | | | 112,793 | |
| Marine and propulsion systems | | | 138,704 | | | | 62,329 | | | | (50,796 | ) | | | 150,237 | |
| Other | | | 71 | | | | 5,590 | | | | (70 | ) | | | 5,591 | |
| Total | | $ | 280,428 | | | $ | 106,481 | | | $ | (84,246 | ) | | $ | 302,663 | |
Contract assets/liabilities:
There are
significant balances of contract assets or liabilities as of
June 30, 2019.
About Revenue Disclosures
Revenue disclosures under ASC 606 explain how a company identifies performance obligations, allocates transaction prices, and determines when revenue is recognized. This section is essential for understanding whether reported revenue reflects genuine economic activity or aggressive accounting choices. Analysts examine the mix of point-in-time versus over-time recognition, which directly affects revenue timing and comparability.
Key signals: rising contract liabilities (deferred revenue) suggest strong future revenue visibility, while declining contract assets may indicate slowing project milestones. Watch for variable consideration estimates — rebates, returns, and performance bonuses that require management judgment. Significant changes in disaggregated revenue by geography or product line can reveal shifting business mix before it appears in headline numbers. Compare revenue growth against contract liability growth to assess sustainability, and scrutinize any changes in the timing of recognition that coincide with earnings pressure.