Segment and Geographic Information

6 Months Ended

Jun. 28, 2019

SEGMENT AND GEOGRAPHIC INFORMATION

The Company is organized based upon the nature of its products and services, and is composed of two operating segments each overseen by a segment manager. These segments are reflective of how the Company’s Chief Executive Officer, who is its Chief Operating Decision Maker (“CODM”), reviews operating results for the purposes of allocating resources and assessing performance. The Company has not aggregated operating segments for purposes of identifying reportable segments.

The Aerospace segment produces and markets proprietary aircraft bearings and components; super precision, miniature ball bearings for the medical, industrial and aerospace markets; complex metallic and composite aerostructures for commercial, military and general aviation fixed and rotary wing aircraft; and safe and arming solutions for missile and bomb systems for the U.S. and allied militaries. The segment also markets the design and supply of aftermarket parts to businesses performing maintenance, repair and overhaul ("MRO") in aerospace markets; performs helicopter subcontract work; restores, modifies and supports the Company's SH-2G Super Seasprite maritime helicopters; and manufactures and supports the Company's K-MAX® manned and unmanned medium-to-heavy lift helicopters.

The Distribution segment is a leading power transmission, automation and fluid power industrial distributor with operations throughout the United States. The segment provides electro-mechanical products, bearings, power transmission, motion control and electrical and fluid power components, along with engineered integrated solutions for its customers' most challenging applications serving a broad spectrum of industrial markets, including both MRO and original equipment manufacturer ("OEM") customers. In the second quarter of 2019, the Company entered into a definitive agreement to sell its Distribution segment to affiliates of Littlejohn & Co., LLC; therefore, results for the Distribution segment were included in earnings from discontinued operations.

18. SEGMENT AND GEOGRAPHIC INFORMATION (CONTINUED)

Summarized financial information by business segment is as follows:



	For the Three Months Ended						For the Six Months Ended
In thousands	June 28, 2019			June 29, 2018			June 28, 2019			June 29, 2018
Net sales:
Aerospace	$	174,712		$	178,606		$	341,146		$	358,001
Operating income:
Aerospace	$	24,598		$	22,741		$	51,210		$	45,403
Net gain on sale of assets	—			1,528			65			1,589
Corporate expense⁽¹⁾	(14,023		)	(17,043		)	(28,331		)	(31,150		)
Operating income	10,575			7,226			22,944			15,842
Interest expense, net	5,236			5,000			10,537			10,323
Non-service pension and post retirement benefit income	(100		)	(3,039		)	(199		)	(6,068		)
Other (income) expense, net	(463		)	364			(552		)	22
Earnings before income taxes	5,902			4,901			13,158			11,565
Income tax (benefit) expense	(487		)	123			947			1,817
Earnings from continuing operations	6,389			4,778			12,211			9,748
Earnings from discontinued operations, net of tax⁽²⁾	7,077			10,316			15,380			19,412
Net earnings	$	13,466		$	15,094		$	27,591		$	29,160

⁽¹⁾Certain expenses previously included in corporate expense were reclassified to earnings from discontinued operations on the Company's Condensed Consolidated Statement of Operations as a result of the Company's agreement to sell the Distribution segment.

⁽²⁾Earnings of the Distribution segment were included in earnings from discontinued operations, net of tax on the Company's Condensed Consolidated Statement of Operations. See Note 4, Discontinued Operations, for further information on the Company's agreement to sell the Distribution segment.

Disaggregation of Revenue

The following table disaggregates total revenue by major product line.



	For the Three Months Ended				For the Six Months Ended
	June 28, 2019		June 29, 2018		June 28, 2019		June 29, 2018
In thousands
Aerospace
Military and Defense, excluding fuzes	$	46,758	$	51,743	$	82,400	$	99,499
Missile and Bomb Fuzes	39,113		41,601		96,707		94,586
Commercial Aerospace and Other	88,841		85,262		162,039		163,916
Total Sales⁽¹⁾⁽²⁾	$	174,712	$	178,606	$	341,146	$	358,001

⁽¹⁾Service revenue was not material for the three-month and six-month fiscal periods ended June 28, 2019 and June 29, 2018.

⁽²⁾Sales of the Distribution segment were included in earnings from discontinued operations, net of tax on the Company's Condensed Consolidated Statement of Operations. See Note 4, Discontinued Operations, for further information on the Company's agreement to sell the Distribution segment.

18. SEGMENT AND GEOGRAPHIC INFORMATION (CONTINUED)

Disaggregation of Revenue - continued

The following table illustrates the approximate percentage of revenue recognized for performance obligations satisfied over time versus the amount of revenue recognized for performance obligations satisfied at a point in time for the Aerospace segment:



	For the Three Months Ended				For the Six Months Ended
In thousands	June 28, 2019		June 29, 2018		June 28, 2019		June 29, 2018
Revenue recognized for performance obligations satisfied:
Over time	50	%	48	%	47	%	50	%
Point-in-time	50	%	52	%	53	%	50	%
Total revenue	100	%	100	%	100	%	100	%

For contracts that recognize revenue over time, the Company performs detailed quarterly reviews of the progress and execution of its performance obligations under these contracts. As part of this process, management reviews information including, but not limited to, any outstanding key contract matters, progress towards completion and the related program schedule, identified risks and opportunities and the related changes in estimates of revenues and costs. The risks and opportunities include management's judgment about the ability and cost to achieve the schedule (e.g. the number and type of milestone events), technical requirements (e.g., a newly-developed product versus a mature product) and other contract requirements. Management must make assumptions and estimates regarding labor productivity and availability, the complexity of the work to be performed, the availability of materials, the length of time to complete the performance obligation (e.g. to estimate increases in wages and prices for materials and related support cost allocations), execution by subcontractors, the availability and timing of funding from customers and overhead cost rates, among other variables. Based upon these reviews, the Company will record the effects of adjustments in profit estimates each period. If at any time management determines that in the case of a particular contract total costs will exceed total contract revenue, a provision for the entire anticipated contract loss is recorded at that time. The amount of revenue recognized in the three-month fiscal period ended June 28, 2019 from performance obligations satisfied (or partially satisfied) in previous periods was $0.5 million. This amount was primarily related to favorable cost performance on the JPF contract with the USG, partially offset by cost growth on certain legacy fuzing contracts and the the SH-2G contract with Peru. The Company recognized a reduction in revenue of $0.3 million in the six-month fiscal period ended June 28, 2019. This amount was primarily related to cost growth on the SH-2G program with Peru, certain legacy fuzing contracts, and a certain metallics structures contract, partially offset by favorable cost performance on certain Aerospace contracts, more specifically the JPF contract with the USG and the FMU-139 fuzing contract. The amount of revenue recognized in the three-month and six-month fiscal periods ended June 29, 2018 from performance obligations satisfied (or partially satisfied) in previous periods was $1.4 million and $3.0 million, respectively. These amounts were primarily related to changes in the estimates of the stage of completion of Aerospace contracts, more specifically the JPF contract with the USG, the AH-1Z contract and the SH-2G contract with Peru.