CONTRACT ASSETS, CONTRACT COSTS AND CONTRACT LIABILITIES

Contract assets consist of unbilled amounts typically resulting from sales under long-term contracts when the cost-to-cost method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer. Contract costs consist of costs to obtain and fulfill a contract. Costs to fulfill a contract primarily consist of nonrecurring engineering costs incurred at the start of a new program for which such costs are expected to be recovered under existing and future contracts. Such costs are amortized over the estimated revenue amount of the contract. Costs to obtain a contract consist of commissions and agent fees paid in connection with the award of a contract. Contract liabilities consist of advance payments and billings in excess of costs incurred and deferred revenue.

Reconciliation of Contract Balances

Activity related to contract assets, contract costs and contract liabilities is as follows:



	March 30, 2018		January 1, 2018⁽¹⁾		$ Change			% Change
In thousands
Contract assets	$	108,114	$	82,699	$	25,415		30.7	%

Contract costs, current portion	$	3,271	$	3,022	$	249		8.2	%
Contract costs, noncurrent portion	$	12,630	$	7,852	$	4,778		60.9	%

Contract liabilities, current portion	$	5,670	$	10,705	$	(5,035	)	(47.0	)%
Contract liabilities, noncurrent portion	$	81,708	$	689	$	81,019		11,758.9	%

⁽¹⁾ These amounts include the impact of the cumulative effect adjustment resulting from the adoption of ASC 606.

Contract Assets

The increase in contract assets was primarily due to the recognition of revenue related to the satisfaction or partial satisfaction of performance obligations during the three-month fiscal period ended March 30, 2018. This increase is primarily related to work performed and not yet billed on the JPF program with the USG, legacy fuze programs and the SH-2G program with Peru. There were no significant impairment losses related to our contract assets during the three-month fiscal period ended March 30, 2018.

Contract assets includes amounts for matters such as contract changes, negotiated settlements and claims for unanticipated contract costs. These amounts are as follows:



	March 30, 2018		December 31, 2017
In thousands
Contract changes, negotiated settlements and claims for unanticipated contract costs	$	4,949	$	—

Claims previously included in inventory were reclassed to contract assets as part of the cumulative effect adjustment on January 1, 2018 resulting from the adoption of ASC 606.

6. CONTRACT ASSETS, CONTRACT COSTS AND CONTRACT LIABILITIES (CONTINUED)

Contract Costs

The increase in contract costs, current portion was primarily related to costs to fulfill certain metallic structures programs, partially offset by amortization of contract costs for the three-month fiscal period ended March 30, 2018 of $0.7 million.

The increase in contract costs, noncurrent portion was primarily related to costs to obtain a JPF DCS contract.

Contract Liabilities

The decrease in contract liabilities, current portion was primarily due to revenue recognized in excess of payments received on these performance obligations, primarily associated with deliveries under a JPF DCS contract. For the three-month fiscal period ended March 30, 2018, revenue recognized related to contract liabilities, current portion at January 1, 2018 was $5.0 million.

The increase in contract liabilities, noncurrent portion was due to an advance payment received for a JPF DCS contract. For the three-month fiscal period ended March 30, 2018, the Company did not recognize revenue against contract liabilities, noncurrent portion.