We adopted the new revenue standard on September 30, 2018 for our fiscal year 2019 under the modified retrospective transition method. We applied the new revenue standard to all contracts which were not completed as of the effective date and elected not to apply contract modification guidance retrospectively. As a result of adoption, we recorded a cumulative-effect reduction to the opening balance of our fiscal year 2019 retained earnings of $6,227, net of tax, for the net deferral of previously recognized revenue and related cost of sales, partially offset by the capitalization and deferral of pre-contract costs.

The timing of revenue recognition for the majority of our products and contracts remains substantially unchanged under the new revenue standard, with the exception of certain contracts in our Test & Simulation segment (Test & Simulation). Dependent on contract-specific terms that evidence customer control of the work in process or an enforceable right to payment with no alternative use, certain contracts have a delay in revenue recognition until the customer takes control of the product, while certain contracts accelerate the recognition of revenue over the life of the contract. Under the new revenue standard, certain costs to obtain contracts (i.e., pre-contract costs) are capitalized at contract inception and recognized as revenue is earned. While we do not expect the adoption of the new revenue standard to have a significant impact on annual revenue recognized, our financial condition or results of operations, we do expect that it will have an impact on the timing of revenue recognition in interim periods.



Consolidated Statements of Income	Three Months Ended June 29, 2019
	As Reported			Balances without Adoption of ASC 606			Effect of Change
Revenue	$	232,209		$	213,443		$	18,766
Cost of sales	147,106			136,563			10,543
Gross profit	85,103			76,880			8,223
Selling and marketing	33,321			33,075			246
Income tax provision (benefit)	2,605			1,326			1,279
Net income	13,585			6,887			6,698

	Nine Months Ended June 29, 2019
	As Reported			Balances without Adoption of ASC 606			Effect of Change
Revenue	$	668,436		$	636,546		$	31,890
Cost of sales	417,678			397,295			20,383
Gross profit	250,758			239,251			11,507
Selling and marketing	98,805			98,566			239
Income tax provision (benefit)	6,217			4,363			1,854
Net income	38,246			28,832			9,414

Consolidated Balance Sheets	June 29, 2019
	As Reported			Balances without Adoption of ASC 606			Effect of Change
Assets
Accounts receivable, net	$	131,365		$	133,548		$	(2,183	)
Unbilled accounts receivable, net	68,804			59,784			9,020
Inventories, net	164,853			156,108			8,745
Prepaid expenses and other current assets	27,118			24,003			3,115
Other long-term assets	3,986			2,880			1,106
Deferred income taxes	3,818			3,167			651
Liabilities and Shareholders' Equity
Advance payments from customers	87,935			84,970			2,965
Accrued income taxes	3,736			3,345			391
Other accrued liabilities	35,367			20,566			14,801
Deferred income taxes	50,315			51,540			(1,225		)
Other long-term liabilities	15,305			15,021			284
Accumulated other comprehensive income (loss)	(5,409		)	(5,460		)	51
Retained earnings	316,249			313,062			3,187



Consolidated Balance Sheets
	Balance at September 29, 2018		Adjustments due to ASC 606 Adoption			Balance at September 30, 2018
Assets
Accounts receivable, net	$	122,243	$	(4,481	)	$	117,762
Unbilled accounts receivable, net	70,474		(8,002		)	62,472
Inventories, net	139,109		16,727			155,836
Prepaid expenses and other current assets	24,572		4,651			29,223
Other long-term assets	2,263		1,060			3,323
Deferred income taxes	3,249		643			3,892
Liabilities and Shareholders' Equity
Advance payments from customers	80,131		13,568			93,699
Other accrued liabilities	19,146		(2,504		)	16,642
Deferred income taxes	46,482		(1,228		)	45,254
Other long-term liabilities	4,894		6,989			11,883
Retained earnings	300,585		(6,227		)	294,358

Revenue is recognized when control of the promised goods or services is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for transferring those goods or providing those services. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are known, the contract has commercial substance and collectability of consideration is probable.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account under the new revenue standard. A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Many of our contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct. In situations when our contract includes distinct goods or services that are substantially the same and have the same pattern of transfer to the customer over time, they are recognized as a series of distinct goods or services. For contracts with multiple performance obligations, we allocate the contract's transaction price to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract.

Revenue is recorded net of taxes collected from customers, and taxes collected are recorded as current liabilities until remitted to the relevant government authority. Shipping and handling costs associated with outbound freight after control of a product has transferred are accounted for as a fulfillment cost and are included in cost of sales in the Consolidated Statements of Income.

Test & Simulation manufactures and sells equipment and related software and services which are used by customers to characterize a product's mechanical properties or performance. Our solutions simulate forces and motions that customers expect their products to encounter in use or are necessary to properly characterize the product's performance. Primary Test & Simulation markets include transportation, infrastructure, energy, aerospace, materials science, medical, flight training and amusement parks. A typical system is a comprehensive solution which includes a reaction frame to hold the prototype specimen; a hydraulic or electro-mechanical power source; actuators to create the force or motion; and a computer controller with specialized software to coordinate the actuator movement and to measure, record and manipulate results. Our portfolio of Test & Simulation solutions includes standard, configurable testing products; engineered products which combine standard product configurations with a moderate degree of customization per customer specifications; and highly customized, highly

engineered testing solutions built to address the customer's unique business need, which can include development of first-of-a-kind technology. To complement our Test & Simulation products, we provide our customers with a spectrum of services to maximize product performance including installation, product life cycle management, professional training, calibration and metrology, technical consulting and onsite and factory repair and maintenance. In addition, we sell a variety of accessories and spare parts. The manufacturing cycle for a typical system ranges from weeks to 12 months, depending on the complexity of the system and the availability of components, and can be up to three years for larger, more complex systems. For certain contracts, the order to revenue cycle may extend beyond the manufacturing cycle, such as when the manufacturing start date is driven by the customer's project timeline or when the contract terms require equipment installation and commissioning and customer acceptance prior to point-in-time revenue recognition.

Test & Simulation contracts often have multiple performance obligations, most commonly due to the contract covering multiple phases of the product life cycle (i.e., equipment design and production, installation and commissioning, extended warranty and software maintenance). The primary method used to estimate standalone selling price is the expected cost plus a margin approach under which we forecast our expected costs of satisfying a performance obligation and then add an appropriate margin for that distinct good or service.

Test & Simulation revenue is recognized either over time as work progresses or point-in-time, depending on contract-specific terms and the pattern of transfer of control of the product or service to the customer. Revenue from services is recognized in the period the service is performed or ratably over the period of the related service contract. Equipment revenue is recognized over time when: (i) control is transferred to the customer over time as work progresses; or (ii) contract terms evidence customer control of the work in process or an enforceable right to payment with no alternative use. Equipment revenue is recognized over time using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying the performance obligation. Incurred cost represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Equipment contract costs include materials, component parts, labor and overhead costs.

Equipment revenue is recognized point-in-time when either: (i) control is transferred to the customer at a point-in-time when obligations under the terms of the contract are satisfied; or (ii) contract terms do not evidence customer control of the work in process or an enforceable right to payment with no alternative use, and consequently revenue is deferred as work progresses. Satisfaction of performance obligations under the terms of the contract occurs either upon product shipment (as evidenced by delivery or shipment terms), completion of equipment installation and commissioning, or customer acceptance.

Our Sensors segment (Sensors) manufactures and sells high-performance sensors which provide measurements of vibration, pressure, position, force and sound in a variety of applications. Our Sensors products are used to enable automation, enhance precision and safety, and lower our customers' production costs by improving performance and reducing downtime. Primary Sensors markets include automotive, aerospace and defense, industrial, and research and development. Our Sensors products are sold as configurable, standard units; utilize piezoelectric or magnetostriction technology; and are ideal for use in harsh operating environments to provide accurate and reliable sensor information. To complement our Sensors products, we also provide spare parts and services. The cycle from contract inception to shipment of equipment is typically one to three months, with the exception of certain high-volume contracts which are fulfilled in a series of shipments over an extended period.

Our Sensors contracts generally have a single performance obligation which is satisfied at a point in time. The performance obligation is a stand-alone sensor product, accessory, service or software license. Sensors contracts are generally fixed-price purchase order fulfillment contracts, and the transaction price is equal to the observable consideration in the contract. Revenue is recognized when obligations under the terms of the contract with our customer are satisfied; generally this occurs with the transfer of control upon product shipment (as evidenced by shipment or delivery terms) or with the performance of the service. Certain contracts are measured using the as invoiced practical expedient as we have a right to consideration from a customer in an amount that corresponds directly with the value to the customer of our performance completed to date.

We disaggregate our revenue by reportable segment, sales type (product or service), the timing of recognition of revenue for transfer of goods or services to customers (point-in-time or over time), and geographic market based on the billing location of the customer. See Note 15 for further information on our reportable segments and intersegment revenue.



	Three Months Ended June 29, 2019
	Test & Simulation		Sensors		Intersegment			Total
Sales type
Product	$	123,573	$	82,305	$	(350	)	$	205,528
Service	24,755		1,926		—			26,681
Total revenue	$	148,328	$	84,231	$	(350	)	$	232,209

Timing of recognition
Point-in-time	$	95,247	$	77,978	$	(350	)	$	172,875
Over time	53,081		6,253		—			59,334
Total revenue	$	148,328	$	84,231	$	(350	)	$	232,209

Geographic market
Americas	$	47,892	$	42,365	$	(350	)	$	89,907
Europe	34,137		26,994		—			61,131
Asia	66,299		14,872		—			81,171
Total revenue	$	148,328	$	84,231	$	(350	)	$	232,209

	Nine Months Ended June 29, 2019
	Test & Simulation		Sensors		Intersegment			Total
Sales type
Product	$	348,992	$	239,345	$	(1,040	)	$	587,297
Service	75,928		5,211		—			81,139
Total revenue	$	424,920	$	244,556	$	(1,040	)	$	668,436

Timing of recognition
Point-in-time	$	273,226	$	231,507	$	(1,040	)	$	503,693
Over time	151,694		13,049		—			164,743
Total revenue	$	424,920	$	244,556	$	(1,040	)	$	668,436

Geographic market
Americas	$	138,780	$	119,069	$	(1,040	)	$	256,809
Europe	92,300		79,995		—			172,295
Asia	193,840		45,492		—			239,332
Total revenue	$	424,920	$	244,556	$	(1,040	)	$	668,436

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled accounts receivable (contract assets) and advance payments from customers (contract liabilities). Contract balances are classified as assets or liabilities on a contract-by-contract basis at the end of each reporting period. Contract liabilities represent payments received from customers at contract inception and at milestones per contract provisions. These payments are recorded in advance payments from customers and other long-term liabilities in our Consolidated Balance Sheets (current and non-current portions, respectively) and are liquidated as revenue is recognized. Conversely, when billing occurs subsequent to revenue recognition for contracts recognized over time, balances are recorded in unbilled accounts receivable, net in our Consolidated Balance Sheets. As customers are billed, unbilled accounts receivable balances are transferred to accounts receivable, net in the Consolidated Balance Sheets.



	Contract Assets
Balance, September 29, 2018	$	70,474
Cumulative transition adjustment upon adoption	(8,002		)
Changes in estimated stage of completion	92,958
Transfers to accounts receivable, net	(88,506		)
Acquisitions¹	1,518
Other	362
Balance, June 29, 2019	$	68,804

	Contract Liabilities
Balance, September 29, 2018	$	80,131
Cumulative transition adjustment upon adoption	20,557
Revenue recognized included in balance at beginning of period	(70,294		)
Increases due to payments received, excluding amounts recognized as revenue during period	64,248
Acquisitions¹	4,853
Other	(820		)
Balance, June 29, 2019	$	98,675

As of June 29, 2019, we had approximately $227,000 of remaining performance obligations on contracts with an original expected duration of one year or more which are primarily related to Test & Simulation. As of June 29, 2019, we expect to recognize approximately 77% of these remaining performance obligations as revenue within one year, an additional 19% within two years and the balance thereafter. We do not disclose the value of remaining performance obligations for contracts with an original expected duration of one year or less.

For contracts recognized over time, we estimate the profit on a contract as the difference between the total estimated revenue and expected costs to complete a contract and recognize that profit over the life of the contract. Contract estimates are based on various assumptions to project the outcome of future events that may span several years. These assumptions include labor productivity and availability, the complexity of the work to be performed, the cost and availability of materials, and internal and subcontractor performance.

Pricing is established at or prior to the time of sale with our customers, and we record sales at the agreed-upon selling price. The terms of a contract or the historical business practice can give rise to variable consideration due to but not limited to volume discounts, penalties and early payment discounts. We estimate variable consideration at the most likely amount we will receive from customers. We include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized for such transaction will not occur, or when the uncertainty associated with the variable consideration is resolved. In general, variable consideration in our contracts relates to the entire contract. As a result, the variable consideration is allocated proportionately to all performance obligations. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to us at contract

As a significant change in one or more of these estimates could affect the profitability of our contracts, we review and update our contract-related estimates regularly. We recognize adjustments in estimated profit on contracts under the cumulative catch-up method. Under this method, the impact of the adjustment on profit recorded to date is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance is recognized using the adjusted estimate. If at any time the estimate of contract profitability indicates an anticipated loss on the contract, we recognize the total loss in the period it is identified. Our review of contract-related estimates has not resulted in adjustments that are significant to our results of operations.

When contracts are modified to account for changes in contract specifications and requirements, we consider whether the modification either creates new, or changes existing, enforceable rights and obligations. Contract modifications that are for goods or services that are not distinct from the existing contract, due to the significant integration with the original product or service provided, are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price, and our measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis. When the modifications include additional performance obligations that are distinct and at a relative stand-alone selling price, they are accounted for as a new contract and performance obligation and recognized prospectively.

For both Test & Simulation and Sensors, we provide a manufacturer's warranty on our products and systems which is included in customer contracts. At the time a sale is recognized, we record estimated future warranty costs. See Note 5 for further discussion of our product warranty liabilities. We also offer separately-priced extended warranties or service-type contracts on certain products for which revenue is recognized over the contractual period or as services are rendered.

We recognize an asset for the incremental costs of obtaining a contract with a customer (i.e., pre-contract costs) when costs are considered recoverable. Capitalized pre-contract costs, consisting primarily of Test & Simulation sales commissions, are amortized as the related revenue is recognized. We recognized total capitalized pre-contract costs of $5,694 in prepaid expenses and other current assets and other long-term assets in the Consolidated Balance Sheets as of June 29, 2019 and related expense of $1,747 and $5,616 in the Consolidated Statements of Income during the three and nine months ended June 29, 2019, respectively.