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REVENUE (Notes)

9 Months Ended

Jul. 31, 2019

Revenue from Contract with Customer [Abstract]

Revenue from Contract with Customer [Text Block]

REVENUE

The Company recognizes revenue when it transfers control of a promised good or service to a customer in an amount that reflects the consideration it expects to receive in exchange for the good or service. The Company’s performance obligations are satisfied and control is transferred either at a point-in-time or over-time. The majority of the Company’s revenue is recognized at a point-in-time when control is transferred, which is generally evidenced by the shipment or delivery of the product to the customer, a transfer of title, a transfer of the significant risks and rewards of ownership, and customer acceptance. For certain contracts under which the Company produces products with no alternative use and for which it has an enforceable right to recover costs incurred plus a reasonable profit margin for work completed to date and for certain other contracts under which the Company creates or enhances a customer-owned asset while performing repair and overhaul services, control is transferred to the customer over-time. The Company recognizes revenue using an over-time recognition model for these types of contracts.

Details of the products and services provided by the Company can be found within Disaggregation of Revenue which follows within this Note 6.

Contracts with Customers and Performance Obligations

The Company accounts for a contract with a customer when it has approval and commitment from both parties, the rights of the parties are identified, the payment terms are identified, the contract has commercial substance, and it is probable that the Company will collect the consideration to which it is entitled to receive. Customer payment terms related to the sale of products and the rendering of services vary by Company subsidiary and product line. The time between receipt of payment and recognition of revenue for satisfaction of the related performance obligation is not significant.

A performance obligation is a promise within a contract to transfer a distinct good or service to the customer in exchange for payment and is the unit of account for recognizing revenue. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when or as the performance obligation is satisfied. The majority of the Company’s contracts have a single performance obligation to transfer goods or services. For contracts with more than one performance obligation, the Company allocates the transaction price to each performance obligation based on its estimated standalone selling price. When standalone selling prices are not available, the transaction price is allocated using an expected cost plus margin approach as pricing for such contracts is typically negotiated on the basis of cost.

The Company accounts for contract modifications prospectively when the remaining goods or services are distinct and on a cumulative catch-up basis when the remaining goods or services are not distinct.

The Company provides assurance type warranties on many of its products and services. Since customers cannot purchase such warranties independently of the products or services under contract and they are not priced separately, warranties are not separate performance obligations.

Contract Estimates

The Company utilizes the cost-to-cost method as a measure of progress for performance obligations that are satisfied over-time as it believes this input method best represents the transfer of control to the customer. Under this method, revenue for the current period is recorded at an amount equal to the ratio of costs incurred to date divided by total estimated contract costs multiplied by (i) the transaction price, less (ii) cumulative revenue recognized in prior periods. Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation.

Certain of the Company’s contracts give rise to variable consideration when they contain items such as customer rebates, credits, volume purchase discounts, penalties and other provisions that may impact the total consideration the Company will receive. The Company includes variable consideration in the transaction price generally by applying the most likely amount method of the consideration that it expects to be entitled to receive based on an assessment of all available information (i.e., historical experience, current and forecasted performance) and only to the extent it is probable that a significant reversal of revenue

recognized will not occur when the uncertainty is resolved. The Company estimates variable consideration by applying the most likely amount method when there are a limited number of outcomes related to the resolution of the variable consideration.

Changes in estimates that result in adjustments to net sales and cost of sales are recognized as necessary in the period they become known on a cumulative catch-up basis. Changes in estimates did not have a material effect on net income from consolidated operations for the nine and three months ended July 31, 2019.

Practical Expedients and Optional Exemptions

The Company has elected the following practical expedients and optional exemptions allowed under ASC 606:


•	The majority of the Company’s performance obligations related to customer contracts are satisfied within one year. As such, the Company has elected to disclose remaining performance obligations only for contracts with an original duration of greater than one year.


•	The Company has elected to record all shipping and handling activities as fulfillment activities. When revenue is recognized in advance of incurring shipping and handling costs, the costs related to the shipping and handling activities are accrued.

•

For certain contracts with similar characteristics and for which revenue is recognized using an over-time model, the Company uses a portfolio approach to estimate the amount of revenue to recognize. For each portfolio of contracts, the respective work in process and/or finished goods inventory balances are identified and the portfolio-specific margin is applied to estimate the pro rata portion of the transaction price to recognize in relation to the costs incurred. This approach is utilized only when the resulting revenue recognition is not expected to be materially different than if the accounting was applied to the individual contracts.


•	The Company does not adjust the amount of revenue to be recognized under a customer contract for the effects of the time value of money when the timing difference between receipt of payment and recognition of revenue for satisfaction of the related performance obligation is less than one year.


•	Sales commissions and any other costs of obtaining a customer contract with a duration of one year or less are expensed as incurred.

Contract Balances

Contract assets (unbilled receivables) represent revenue recognized on contracts using an over-time recognition model in excess of amounts invoiced to the customer. Contract liabilities (deferred revenue) represent customer advances and billings in excess of revenue recognized and are included within accrued expenses and other current liabilities in the Company’s Condensed Consolidated Balance Sheet.

Changes in the Company’s contract assets and liabilities for the nine months ended July 31, 2019 are as follows (in thousands):



	July 31, 2019		November 1, 2018		Change

Contract assets		$47,238		$54,272		($7,034	)
Contract liabilities	21,474		19,674		1,800
Net contract assets		$25,764		$34,598		($8,834	)

The decrease in the Company's contract assets during the first nine months of fiscal 2019 mainly occurred within the ETG and principally reflects billings on certain customer contracts made during the period in excess of the amounts recorded as additional unbilled receivables for contracts using an over-time recognition model.

The increase in the Company's contract liabilities during the first nine months of fiscal 2019 mainly occurred within the FSG and principally reflects the receipts of new customer deposits on certain customer contracts in excess of reductions to contract liabilities from customer deposits recognized as revenue.

The amount of revenue that the Company recognized during the nine and three months ended July 31, 2019 that was included in contract liabilities as of the beginning of fiscal 2019 was $14.5 million and $2.4 million, respectively.

Remaining Performance Obligations

As of July 31, 2019, the Company had $383.3 million of remaining performance obligations associated with contracts with an original duration of greater than one year pertaining to the majority of the products offered by the ETG and the FSG's aftermarket replacement parts and specialty products product line. The Company will recognize net sales as these obligations are satisfied. The Company expects to recognize $81.3 million of this amount during the remainder of fiscal 2019 and $302.0 million thereafter, of which the majority is expected to occur in fiscal 2020.

Disaggregation of Revenue

The following table summarizes the Company’s net sales by product line for each operating segment (in thousands):



	Nine months ended July 31,						Three months ended July 31,
	2019			2018			2019			2018
Flight Support Group:
Aftermarket replacement parts ⁽¹⁾		$500,714			$424,584			$173,992			$150,729
Repair and overhaul parts and services ⁽²⁾	216,887			214,933			76,270			74,853
Specialty products ⁽³⁾	197,879			168,166			69,754			59,544
Total net sales	915,480			807,683			320,016			285,126

Electronic Technologies Group:
Electronic component parts for defense, space and aerospace equipment ⁽⁴⁾	459,445			394,884			160,031			146,652
Electronic component parts for equipment in various other industries ⁽⁵⁾	155,564			115,866			56,098			39,718
Total net sales	615,009			510,750			216,129			186,370

Intersegment sales	(16,371		)	(17,596		)	(3,821		)	(5,671		)

Total consolidated net sales		$1,514,118			$1,300,837			$532,324			$465,825


⁽¹⁾	Includes various jet engine and aircraft component replacement parts.


⁽²⁾	Includes primarily the sale of parts consumed in various repair and overhaul services on selected jet engine and aircraft components, avionics, instruments, composites and flight surfaces of commercial and military aircraft.


⁽³⁾	Includes primarily the sale of specialty components such as thermal insulation blankets, renewable/reusable insulation systems, advanced niche components, complex composite assemblies, and expanded foil mesh.

⁽⁴⁾

Includes various component parts such as electro-optical infrared simulation and test equipment, electro-optical laser products, electro-optical, microwave and other power equipment, high-speed interface products, power conversion products, underwater locator beacons, emergency locator transmission beacons, traveling wave tube amplifiers, microwave power modules, three-dimensional microelectronic and stacked memory products, crashworthy and ballistically self-sealing auxiliary fuel systems, radio frequency (RF) and microwave amplifiers, transmitters and receivers, high performance communications and electronic intercept receivers and tuners and high performance active antenna systems.


⁽⁵⁾	Includes various component parts such as electromagnetic and radio interference shielding, high voltage interconnection devices, high voltage advanced power electronics, harsh environment connectivity products, custom molded cable assemblies, silicone material for a variety of demanding applications and technical surveillance countermeasures equipment.

The following table summarizes the Company’s net sales by industry for each operating segment (in thousands):



	Nine months ended July 31,						Three months ended July 31,
	2019			2018			2019			2018
Flight Support Group:
Aerospace		$742,555			$660,307			$258,157			$230,633
Defense and Space	137,272			114,103			49,769			43,009
Other ⁽¹⁾	35,653			33,273			12,090			11,484
Total net sales	915,480			807,683			320,016			285,126

Electronic Technologies Group:
Defense and Space	390,046			331,587			138,875			125,375
Other ⁽²⁾	162,063			132,559			56,525			44,849
Aerospace	62,900			46,604			20,729			16,146
Total net sales	615,009			510,750			216,129			186,370

Other, primarily corporate and intersegment	(16,371		)	(17,596		)	(3,821		)	(5,671		)

Total consolidated net sales		$1,514,118			$1,300,837			$532,324			$465,825


⁽¹⁾	Principally industrial products.

⁽²⁾

Principally other electronics and medical products.