Quarterly report pursuant to Section 13 or 15(d)

Accrued Warranty Reserve

v3.6.0.2
Accrued Warranty Reserve
9 Months Ended
Dec. 31, 2016
Accrued Warranty Reserve  
Accrued Warranty Reserve

12.  Accrued Warranty Reserve

 

The Company provides for the estimated costs of warranties at the time revenue is recognized. The specific terms and conditions of those warranties vary depending upon the microturbine product sold and geography of sale.  The Company’s product warranties generally start from the delivery date and continue for up to eighteen months. Factors that affect the Company’s warranty obligation include product failure rates, anticipated hours of product operations and costs of repair or replacement in correcting product failures. These factors are estimates that may change based on new information that becomes available each period. Similarly, the Company also accrues the estimated costs to address reliability repairs on products no longer in warranty when, in the Company’s judgment, and in accordance with a specific plan developed by the Company, it is prudent to provide such repairs. The Company assesses the adequacy of recorded warranty liabilities quarterly and makes adjustments to the liability as necessary. When the Company has sufficient evidence that product changes are altering the historical failure occurrence rates, the impact of such changes is then taken into account in estimating future warranty liabilities. During the three months ended December 31, 2016, the Company recorded a one-time non-cash warranty provision of approximately $5.2 million to retrofit proactively select non-Signature Series C200 microturbines with the more robust new Signature Series generator components to improve product performance and reliability. The balance of this reliability repair program as of December 31, 2016 was $3.0 million. Changes in accrued warranty reserve during the nine months ended December 31, 2016 are as follows (in thousands):

 

 

 

 

 

 

Balance, beginning of the period

 

$

1,639

 

Standard warranty provision

 

 

1,274

 

Accrual related to reliability repair programs

 

 

5,188

 

Deductions for warranty claims

 

 

(3,790)

 

Balance, end of the period

 

$

4,311