Annual report pursuant to Section 13 and 15(d)

Transportation and Distribution Revenue

v3.10.0.1
Transportation and Distribution Revenue
 12 Months Ended
Dec. 31, 2018
Revenue from Contract with Customer [Abstract]  
Transportation and Distribution Revenue
TRANSPORTATION AND DISTRIBUTION REVENUE
The Company's contracts related to transportation and distribution revenue are primarily comprised of a mix of natural gas supply, transportation and distribution performance obligations, as well as limited performance obligations related to system maintenance and expansion. Refer to Note 2 ("Significant Accounting Policies") for additional details on the Company's revenue recognition guidance under ASC 606.
The table below summarizes the Company's contract asset and contract liability balances related to its transportation and distribution revenue contracts as of December 31, 2018:
 
Contract Asset(1)
 
Contract Liability(2)
Beginning Balance January 1, 2018
$
328,033

 
$
—

Cumulative Transition Adjustment Upon Adoption of ASC 606
—

 
3,307,109

Unrecognized Performance Obligations
(836,628
)
 
3,307,109

Recognized Performance Obligations
689,174

 
(91,864
)
Ending Balance December 31, 2018
$
180,579

 
$
6,522,354

(1) The contract asset balance is included in prepaid expenses and other assets in the Consolidated Balance Sheets.
(2) The contract liability balance is included in unearned revenue in the Consolidated Balance Sheets.
Based on a downward revision of the rate during the Company's long-term natural gas transportation contract with Spire, ASC 606 requires the Company to record the contractual transaction price, and therefore aggregate revenue, from the contract ratably over the term of the contract. Accordingly, on January 1, 2018, the Company recorded a cumulative adjustment to recognize a contract liability of approximately $3.3 million, and a corresponding reduction to beginning equity (net of deferred tax impact). The adjustment reflects the difference in amounts previously recognized as invoiced, versus cumulative revenues earned under the contract on a straight-line basis in accordance with ASC 606, as of the date of adoption. The contract liability continued to accumulate additional unrecognized performance obligations at a rate of approximately $992 thousand per quarter until the contractual rate decrease took effect in November 2018. Following the rate decline, recognized performance obligations exceeded amounts invoiced and the contract liability will decline at a rate of approximately $138 thousand per quarter through the end of the contract in October 2030. As of December 31, 2018, the revenue allocated to the remaining performance obligation under this contract is approximately $63.5 million.
The following is a breakout of the Company's transportation and distribution revenue for the years ended December 31, 2018, 2017 and 2016:
 
For the Years Ended December 31,
 
2018
 
2017
 
2016
Natural gas transportation contracts
64.3
%
 
71.5
%
 
67.6
%
Natural gas distribution contracts
26.8
%
 
20.4
%
 
19.0
%

In accordance with ASC 606 transition disclosure requirements, the cumulative effect of changes made to the Consolidated Balance Sheet as of January 1, 2018 for the adoption of ASC 606 were as follows:
Balance Sheet
 
Balance at December 31, 2017
 
Adjustments Due to ASC 606
 
Balance at
January 1, 2018
Assets
 
 
 
 
 
 
Deferred Tax Asset
 
$
2,244,629

 
$
857,864

 
$
3,102,493

Liabilities
 
 
 
 
 
 
Unearned revenue
 
3,397,717

 
3,307,109

 
6,704,826

Equity
 
 
 
 
 
 
Additional paid in capital
 
331,773,716

 
(2,449,245
)
 
329,324,471

The tables below disclose the impact of adoption on the Consolidated Balance Sheet and Consolidated Statement of Income as of and for the year ended December 31, 2018:
 
 
As of December 31, 2018
Balance Sheet
 
As Reported
 
Balances Without Adoption of ASC 606
 
Effect of Change Higher/(Lower)
Assets
 
 
 
 
 
 
Deferred Tax Asset
 
$
4,948,203

 
$
3,256,304

 
$
1,691,899

Liabilities
 
 
 
 
 
 
Unearned revenue
 
6,552,049

 
29,695

 
6,522,354

Equity
 
 
 
 
 
 
Additional paid in capital
 
320,295,969

 
325,126,424

 
(4,830,455
)
 
 
For the Year Ended December 31, 2018
Statement of Income
 
As Reported
 
Balances Without Adoption of ASC 606
 
Effect of Change Higher/(Lower)
Revenues
 
 
 
 
 
 
Transportation and distribution revenue
 
$
16,484,236

 
$
19,699,481

 
$
(3,215,245
)
Taxes
 
 
 
 
 
 
Deferred tax benefit
 
(1,833,340
)
 
(999,305
)
 
(834,035
)