CONTRACT ASSETS AND CONTRACT LIABILITIES

9 Months Ended

Sep. 30, 2018

Contract Assets And Contract Liabilities

CONTRACT ASSETS AND CONTRACT LIABILITIES

6.        Contract assets and contract liabilities

Net Contract assets (liabilities) consist of the following:

	September 30, 2018 - Restated
	U.S.
	Government			Commercial			Total
Contract assets	$	48,174,779		$	64,992,926		$	113,167,705
Contract liabilities		(422,666	)		(42,157	)		(464,823	)
Net contract assets (liabilities)	$	47,752,113		$	64,950,769		$	112,702,882

	December 31, 2017 (1)
	U.S.
	Government			Commercial			Total
Contract assets	$	54,591,601		$	56,566,950		$	111,158,551
Contract liabilities		(224,339	)		(21,991	)		(246,330	)
Net contract assets (liabilities)	$	54,367,262		$	56,544,959		$	110,912,221

(1) On January 1, 2018, as a result of the adoption of ASC 606, the Company reclassified costs and estimated earnings in excess of billings on uncompleted contracts to contract assets and billings in excess of costs and estimated earnings on uncompleted contracts to contract liabilities.

The increase or decrease in the Company’s net contract assets (liabilities) from January 1, 2018 to September 30, 2018 was primarily due to costs incurred on newer programs, like the new design of the HondaJet engine inlet ($2.4 million increase), for which the Company has not begun billing on a steady rate. Additionally, we experienced some delays in shipping on the G650 program which increased contract assets by $5.8 million. This has been offset by a decrease in contract assets on our E-2D program ($4.2 million decrease) which is shipping on a regular schedule.

U.S. government contracts includes contracts directly with the U.S. government and government subcontractors.

Revisions in the estimated gross profits on contracts and contract amounts are made in the period in which the circumstances requiring the revisions occur. During the nine months ended September 30, 2018, the effect of such revisions in total estimated contract profits resulted in a decrease to the total gross profit to be earned on the contracts of approximately $683,000 from that which would have been reported had the revised estimates been used as the basis of recognition of contract profits in prior years. During the nine months ended September 30, 2017, the effect of such revisions was a decrease to total gross profit of approximately $1.7 million.

Although management believes it has established adequate procedures for estimating costs to uncompleted open contracts, it is possible that additional significant costs could occur on contracts prior to completion.