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Revenue
 6 Months Ended
Mar. 28, 2020
Revenue from Contract with Customer [Abstract]  
Revenue  REVENUE 
Revenue Recognition
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 revenue recognition 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.
We do not adjust the promised amount of consideration for the effects of a significant financing component if we expect, at contract inception, that the period between when we transfer a promised good or service to a customer and when the customer pays for that good or service will be one year or less.
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.
The following is a description of the product offerings, end markets, typical revenue transactions and payment terms for each of our two reportable segments. See Note 14 for further information on reportable segments.
Test & Simulation
Our Test & Simulation segment (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 or to create a desired human experience. 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 platform on which a human or prototype specimen resides or 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, analyze and manipulate results. Our portfolio of Test & Simulation solutions includes standard, configurable products; engineered products which combine standard product configurations with a moderate degree of customization per customer specifications; and highly customized, highly engineered 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 several 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.
For our Test & Simulation contracts with customers, payment terms vary and are subject to negotiation. Typical payment terms include progress payments based on specified events or milestones. For some contracts, we are entitled to receive an advance payment.
Sensors
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 transportation, 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.
For our Sensors contracts with customers, payment terms are generally within 90 days. The timing of satisfying our Sensors performance obligations does not vary significantly from the typical timing of payment. For certain high-volume contracts, we are entitled to receive an advance payment.
Disaggregation of Revenue
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 14 for further information on our reportable segments and intersegment revenue.
 
 
Three Months Ended
 
 
March 28, 2020
 
March 30, 2019
 
 
Test & Simulation
 
Sensors
 
Intersegment
 
Total
 
Test & Simulation
 
Sensors
 
Intersegment
 
Total
Sales type
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Product
 
$
102,288

 
$
81,161

 
$
(226
)
 
$
183,223

 
$
126,511

 
$
80,540

 
$
(361
)
 
$
206,690

Service
 
23,209

 
5,037

 
(6
)
 
28,240

 
24,521

 
1,835

 
—

 
26,356

Total revenue
 
$
125,497

 
$
86,198

 
$
(232
)
 
$
211,463

 
$
151,032

 
$
82,375

 
$
(361
)
 
$
233,046

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Timing of recognition
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Point-in-time
 
$
57,616

 
$
77,536

 
$
(232
)
 
$
134,920

 
$
98,360

 
$
82,375

 
$
(361
)
 
$
180,374

Over time
 
67,881

 
8,662

 
—

 
76,543

 
52,672

 
—

 
—

 
52,672

Total revenue
 
$
125,497

 
$
86,198

 
$
(232
)
 
$
211,463

 
$
151,032

 
$
82,375

 
$
(361
)
 
$
233,046

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Geographic market
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Americas
 
$
39,375

 
$
44,848

 
$
(232
)
 
$
83,991

 
$
51,399

 
$
38,975

 
$
(361
)
 
$
90,013

Europe
 
41,135

 
26,167

 
—

 
67,302

 
29,536

 
27,653

 
—

 
57,189

Asia
 
44,987

 
15,183

 
—

 
60,170

 
70,097

 
15,747

 
—

 
85,844

Total revenue
 
$
125,497

 
$
86,198

 
$
(232
)
 
$
211,463

 
$
151,032

 
$
82,375

 
$
(361
)
 
$
233,046

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended
 
 
March 28, 2020
 
March 30, 2019
 
 
Test & Simulation
 
Sensors
 
Intersegment
 
Total
 
Test & Simulation
 
Sensors
 
Intersegment
 
Total
Sales type
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Product
 
$
197,784

 
$
164,935

 
$
(638
)
 
$
362,081

 
$
225,419

 
$
157,040

 
$
(690
)
 
$
381,769

Service
 
48,443

 
6,798

 
(16
)
 
55,225

 
51,173

 
3,285

 
—

 
54,458

Total revenue
 
$
246,227

 
$
171,733

 
$
(654
)
 
$
417,306

 
$
276,592

 
$
160,325

 
$
(690
)
 
$
436,227

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Timing of recognition
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Point-in-time
 
$
117,720

 
$
154,699

 
$
(654
)
 
$
271,765

 
$
177,979

 
$
160,325

 
$
(690
)
 
$
337,614

Over time
 
128,507

 
17,034

 
—

 
145,541

 
98,613

 
—

 
—

 
98,613

Total revenue
 
$
246,227

 
$
171,733

 
$
(654
)
 
$
417,306

 
$
276,592

 
$
160,325

 
$
(690
)
 
$
436,227

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Geographic market
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Americas
 
$
77,223

 
$
91,393

 
$
(654
)
 
$
167,962

 
$
90,888

 
$
76,704

 
$
(690
)
 
$
166,902

Europe
 
67,650

 
48,709

 
—

 
116,359

 
58,163

 
53,001

 
—

 
111,164

Asia
 
101,354

 
31,631

 
—

 
132,985

 
127,541

 
30,620

 
—

 
158,161

Total revenue
 
$
246,227

 
$
171,733

 
$
(654
)
 
$
417,306

 
$
276,592

 
$
160,325

 
$
(690
)
 
$
436,227


Contract Assets and Liabilities
Contract assets and contract liabilities are as follows:
 
 
March 28,
2020
 
September 28,
2019
Contract assets
 
$
82,274

 
$
80,331

Contract liabilities
 
71,681

 
81,045


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.
Significant changes in contract assets and contract liabilities are as follows:
 
 
Contract Assets
Balance, September 28, 2019
 
$
80,331

Changes in estimated stage of completion
 
60,450

Transfers to accounts receivable, net
 
(63,019
)
Acquisitions1
 
6,107

Other
 
(1,595
)
Balance, March 28, 2020
 
$
82,274

 
 
 
 
 
Contract Liabilities
Balance, September 28, 2019
 
$
81,045

Revenue recognized included in balance at beginning of period
 
(46,899
)
Increases due to payments received, excluding amounts recognized as revenue during period
 
36,061

Acquisitions1
 
3,182

Other
 
(1,708
)
Balance, March 28, 2020
 
$
71,681


1    See Note 16 for additional information regarding acquisitions.
Remaining Performance Obligations
As of March 28, 2020, we had approximately $228,500 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 March 28, 2020, we expect to recognize approximately 57% of these remaining performance obligations as revenue within one year, an additional 23% 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.
Contract Estimates
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 inception. There are no significant instances where variable consideration is constrained and not recorded at the initial time of sale.
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.
Contract Modifications
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) under the cumulative catch-up method. 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.
Warranties and Returns
For both Test & Simulation and Sensors, we provide a manufacturer's warranty on our products and systems which is included in customer contracts. For sales that include installation services, warranty obligations generally extend for a period of 12 to 24 months from the date of either shipment or acceptance based on contract terms. Product obligations generally extend 12 to 24 months from the date of purchase. Certain products offered in our Sensors segment include a lifetime warranty.
Under the terms of these warranties, we are obligated to repair or replace any components or assemblies deemed defective due to workmanship or materials. We reserve the right to reject warranty claims where it is determined that failure is due to normal wear, customer modifications, improper maintenance or misuse. At the time a sale is recognized, we record estimated future warranty costs. The percentage applied reflects our historical warranty claims experience over the preceding 12-month period. Both the experience percentage and the warranty liability are evaluated on an ongoing basis for adequacy. Warranty provisions are also recognized for certain unanticipated product claims that are individually significant. 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.

Our sales terms generally do not allow for a right of return except for situations where the product fails. When the right of return exists, we recognize revenue for the transferred products at the expected amount of consideration for which we will be entitled.
Shipping and Handling
Freight revenue billed to customers is reported within revenue in the Consolidated Statements of Income. Expenses incurred for shipping products to customers are reported within cost of sales in the Consolidated Statements of Income.
Pre-contract Costs
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 $4,291 and $4,297 in prepaid expenses and other current assets and other long-term assets in the Consolidated Balance Sheets as of March 28, 2020 and September 28, 2019, respectively. We incurred the related pre-contract expense of $1,377 and $1,249 in the Consolidated Statements of Income during the three months ended March 28, 2020 and March 30, 2019, respectively, and $2,840 and $3,869 in the Consolidated Statements of Income during the six months ended March 28, 2020 and March 30, 2019, respectively.