Contract Assets, Contract Costs and Contract Liabilities (Notes)

12 Months Ended

Dec. 31, 2019

Contract Assets, Contract Costs and Contract Liabilities [Abstract]

Contract Assets, Contract Costs and Contract Liabilities [Text Block]

7. 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.

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

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



	December 31, 2019		December 31, 2018		$ Change			% Change
In thousands
Contract assets⁽¹⁾⁽²⁾	$	121,614	$	99,261	$	22,353		22.5	%

Contract costs, current portion	$	6,052	$	5,993	$	59		1.0	%
Contract costs, noncurrent portion	$	6,099	$	10,666	$	(4,567	)	(42.8	)%

Contract liabilities, current portion⁽²⁾	$	42,942	$	28,865	$	14,077		48.8	%
Contract liabilities, noncurrent portion⁽²⁾	$	37,855	$	78,562	$	(40,707	)	(51.8	)%

⁽¹⁾ The Company's contract assets were net of unliquidated progress payments, primarily from the U.S. Government, of $30.2 million and $30.3 million at December 31, 2019 and December 31, 2018, respectively.

⁽²⁾Contract assets and contract liabilities of the Company's formerly owned Distribution business were included in assets held for sale and liabilities held for sale, respectively, as of December 31, 2018 on the Company's Consolidated Balance Sheets. See Note 3, Discontinued Operations, for further information on the Company's sale of the Distribution business.

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 year ended December 31, 2019. This increase is primarily attributable to work performed and not yet billed on the JPF program with the USG and certain structures programs. These increases were partially offset by amounts billed on the SH-2G program for Peru. There were no significant impairment losses related to the Company's contract assets during the year ended December 31, 2019 and December 31, 2018.

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



	December 31, 2019		December 31, 2018
In thousands
Contract changes, negotiated settlements and claims for unanticipated contract costs	$	3,745	$	2,909

Contract Costs

At December 31, 2019, costs to fulfill a contract and costs to obtain a contract were $6.6 million and $5.6 million, respectively. At December 31, 2018, costs to fulfill a contract and costs to obtain a contract were $8.9 million and $7.8 million, respectively. These amounts are included in contract costs, current portion and contract costs, noncurrent portion on the Company's Consolidated Balance Sheets at December 31, 2019 and December 31, 2018.

Contract costs, current portion at December 31, 2019 remained relatively flat when compared to December 31, 2018. This was the result of the reclassification of a portion of costs to obtain a JPF DCS contract and costs to fulfill certain structures programs from contract costs, noncurrent portion, partially offset by amortization of contract costs. For the years ended December 31, 2019 and December 31, 2018, amortization of contract costs was $11.6 million and $3.7 million, respectively.

The decrease in contract costs, noncurrent portion was primarily related to the reclassification of a portion of costs to obtain a JPF DCS contract and costs to fulfill certain structures programs to contract costs, current portion.

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

Contract Liabilities

The increase in contract liabilities, current portion was primarily due to the reclassification of advance payments received for a JPF DCS contract from contract liabilities, noncurrent portion, partially offset by revenue recognized on a JPF DCS contract and the K-MAX® program. For the years ended December 31, 2019 and December 31, 2018, revenue recognized related to contract liabilities, current portion was $48.5 million and $12.1 million, respectively.

The decrease in contract liabilities, noncurrent portion was due to the reclassification of advance payments received for a JPF DCS contract to contract liabilities, current portion. For the years ended December 31, 2019 and December 31, 2018, the Company did not recognize revenue against contract liabilities, noncurrent portion.