Revenue (Notes)

9 Months Ended

Oct. 02, 2020

Revenue from Contract with Customer [Text Block]

5. REVENUE

Disaggregation of Revenue

The following table disaggregates total revenue by major product sales by end market.


	For the Three Months Ended				For the Nine Months Ended
	October 2, 2020		September 27, 2019		October 2, 2020		September 27, 2019
In thousands
Defense	$	46,324	$	45,124	$	137,281	$	128,445
Safe and Arm Devices	81,252		56,167		196,238		152,874
Commercial, Business, & General Aviation	52,894		63,754		164,006		187,191
Medical	17,506		6,581		53,245		21,807
Industrial & Other	15,983		11,044		48,401		33,499
Total revenue(1)	$	213,959	$	182,670	$	599,171	$	523,816

(1) Sales of the Company's formerly owned Distribution business were included in earnings from discontinued operations, net of tax, on the Company's Condensed Consolidated Statements of Operations. See Note 3, Discontinued Operations, for further information on the Company's sale of the Distribution business.

COVID-19

The impact of the novel coronavirus (“COVID-19”) and the precautionary measures instituted by governments and businesses to mitigate the spread, including limiting non-essential gatherings of people, ceasing all non-essential travel, ordering certain businesses and government agencies to cease non-essential operations at physical locations and issuing “shelter-in-place” orders, have contributed to a general slowdown in the global economy and significant volatility in financial markets. The Company has implemented strategies to limit the risk to its operations with a continued focus on the health of its employees and the satisfaction of its customers’ requirements. Despite all of these efforts to mitigate the risks associated with COVID-19, the effects of the pandemic have adversely impacted our commercial end markets, more specifically Commercial, Business, and General Aviation customers, and Medical. Additionally, the Company has experienced modest declines in its other product lines driven by lower demand in the industrial end market. As of the date of this filing, the Company's defense and safe and arm device end markets have not been impacted by COVID-19. The extent and duration of time to which COVID-19 may adversely impact the Company depends on future developments, which are highly uncertain and unpredictable at this time.

The following table disaggregates total revenue by product types.


	For the Three Months Ended				For the Nine Months Ended
	October 2, 2020		September 27, 2019		October 2, 2020		September 27, 2019

Original Equipment Manufacturer	49	%	54	%	55	%	55	%
Aftermarket	13	%	15	%	12	%	16	%
Safe and Arm Devices	38	%	31	%	33	%	29	%
Total revenue	100	%	100	%	100	%	100	%

5. REVENUE (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 Three Months Ended				For the Nine Months Ended
	October 2, 2020		September 27, 2019		October 2, 2020		September 27, 2019

Over time	25	%	32	%	31	%	41	%
Point-in-time	75	%	68	%	69	%	59	%
Total revenue	100	%	100	%	100	%	100	%

For contracts in which revenue is recognized 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. Net changes in revenue associated with cost growth on the Company's over time contracts were as follows:


	For the Three Months Ended				For the Nine Months Ended
	October 2, 2020		September 27, 2019		October 2, 2020		September 27, 2019
In thousands
Net change in revenue due to change in profit estimates	$	(2,798)	$	(1,243)	$	(5,338)	$	(1,557)

The net reductions in revenue in the three-month and nine-month fiscal periods ended October 2, 2020 were primarily related to cost growth on certain structures programs and legacy fuzing contracts, partially offset by favorable cost performance on the joint programmable fuze ("JPF") contract with the U.S. Government ("USG"). The company recognized reductions in revenue in the three-month and nine-month fiscal periods ended September 27, 2019. These amounts were primarily related to cost growth on the SH-2G program for Peru, certain legacy fuzing contracts, and certain structures contracts. For the nine-month fiscal period ended September 27, 2019, the cost growth was partially offset by favorable cost performance on certain contracts, more specifically the JPF contract with the USG and the FMU-139 fuzing contract.

5. REVENUE (CONTINUED)

Unfulfilled Performance Obligations

Unfulfilled performance obligations ("backlog") represents the transaction price of firm orders for which work has not been performed and excludes unexercised contract options and potential orders under ordering-type contracts. Backlog at October 2, 2020 and December 31, 2019, and the portion of backlog we expect to recognize revenue on over the next twelve months is as follows:


	October 2, 2020(1)		December 31, 2019
In thousands
Backlog	$	712,133	$	806,870

(1) The Company expects to recognize revenue on approximately 72% of backlog as of October 2, 2020 over the next twelve months.