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Revenue Recognition
 6 Months Ended
Jul. 02, 2023
Revenue from Contract with Customer [Abstract]  
Revenue Recognition Revenue Recognition The Company's revenue is derived from a variety of contracts. A significant portion of revenues are from contracts associated with the design, development, manufacture or modification of highly engineered, complex and severe environment products with customers who are either in or service the aerospace, defense and industrial markets. Contracts within the defense markets are primarily with U.S. military customers. These contracts typically are subject to the Federal Acquisition Regulations. The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. Contracts may be modified to account for changes in contract specifications and requirements.
For revenue that is recognized from products and services transferred to customers over time, the Company uses an input measure (e.g., costs incurred to date relative to total estimated costs at completion, known as the “cost-to-cost” method) to measure progress. The Company uses the cost-to-cost measure of progress because it best depicts the transfer of control to the customer which occurs as it incurs costs on its contracts. Under the cost-to-cost measure of progress, revenue is recognized proportionally as costs are incurred. Contract costs include labor, materials and subcontractors’ costs, other direct costs and an allocation of overhead, as appropriate.

As of July 2, 2023, the Company had $246.2 million of transaction price related to remaining performance obligations which, is invoiced and paid in accordance with terms of contractual agreements. The Company expects to recognize approximately 43% of its remaining performance obligations as revenue during the remainder of 2023, 45% in 2024, and the remaining 12% in 2025 and thereafter.

In order to determine revenue recognized during the period from contract liabilities at the beginning of the period, the Company first allocates revenue to the individual contract liabilities balance outstanding at the beginning of the period until the revenue exceeds that balance. If additional advances are received on those contracts in the subsequent periods, the Company assumes all revenue recognized in the reporting period first applies to the beginning contract liability as opposed to a portion applying to the new advances for the period. Revenue recognized during the six months ended July 2, 2023 that was included in contract liabilities at the beginning of the period amounted to $19.1 million.

Disaggregation of Revenue

The following tables present revenue disaggregated by major product line and geographical market (in thousands):
Three Months EndedSix Months Ended
July 2, 2023July 3, 2022July 2, 2023July 3, 2022
Aerospace & Defense Segment
Commercial Aerospace & Other$40,058 $28,821 $72,316 $54,034 
Defense33,470 38,450 69,763 76,607 
Total73,528 67,271 142,079 130,641 
Industrial Segment
Valves 43,071 41,435 87,029 86,911 
Pumps 92,210 82,670 182,798 159,479 
Total135,281 124,105 269,827 246,390 
Net Revenues$208,809 $191,376 $411,906 $377,031 

Three Months EndedSix Months Ended
July 2, 2023July 3, 2022July 2, 2023July 3, 2022
Aerospace & Defense Segment
EMEA$21,813 $15,801 $39,739 $30,010 
North America42,918 46,963 88,082 92,160 
Other8,797 4,507 14,258 8,471 
Total73,528 67,271 142,079 130,641 
Industrial Segment
EMEA51,462 51,216 111,103 105,858 
North America48,071 42,555 90,381 83,392 
Other35,748 30,334 68,343 57,140 
Total135,281 124,105 269,827 246,390 
Net Revenues$208,809 $191,376 $411,906 $377,031 
Contract Balances

The Company’s contract assets and contract liabilities balances as of July 2, 2023 and December 31, 2022 are as follows (in thousands):
July 2, 2023December 31, 2022Increase/(Decrease)
Contract assets:
Recorded within prepaid expenses and other current assets$95,319 $98,406 $(3,087)
Recorded within other assets6,856 7,677 (821)
$102,175 $106,083 $(3,908)
Contract liabilities:
Recorded within accrued expenses and other current liabilities$42,861 $36,871 $5,990 
Recorded within other non-current liabilities2,699 5,149 (2,450)
$45,560 $42,020 $3,540 

Contract assets decreased by $3.9 million during the six months ended July 2, 2023, primarily due to the reversal of $5.4 million of contract asset related to the Russian customer, as further discussed below. Excluding this reversal, the contract asset balance increased by $1.5 million primarily due to revenue recognized in excess of invoicing within the Defense business.

Contract liabilities increased by $3.5 million during the six months ended July 2, 2023, primarily due to customer advances received in excess of revenue recognized in the Industrial Pumps and Valves and Refinery Valves businesses, partially offset by recognition of revenue against customer advances within the Defense business.

Revenue on over time contracts is recognized as the Company, in accordance with the terms of the applicable contract, transfers control in the underlying products or services to the customer, which occurs as it incurs costs on its contracts under the cost-to-cost measure of progress. Revenue on over time contracts may be recognized before or after payments, advances or progress billings from customers are received. The recognition of revenue on over time contracts before the Company can invoice the customer may result in contract assets. Receipt of progress billings or advances from customers in advance of recognizing revenue can result in contract liabilities. The contract assets and contract liabilities amounts presented above are determined at the contract level unit of account. At the contract level, the Company determines whether the contract is in a net contract asset or net contract liability position.

Contract assets are generally classified between current (one year or less) and non-current (more than one year) based on factors such as when payments are due. Contract liabilities are generally classified as current or non-current based on factors such as the expected timing of performance obligation satisfaction.

The Company had previously recognized $5.4 million in revenue and $3.5 million in related costs of revenues cumulatively over the period of 2019 through 2022 as part of a contract with a Russian customer within its Industrial segment. During the second quarter of 2023, the U.S. government imposed additional sanctions on exports to Russia prohibiting the delivery of the equipment under this contract. As as result, during the three months ended July 2, 2023, the Company concluded that it is unable to satisfy its performance obligation under the contract, and has reversed the $5.4 million revenue and the related contract assets recognized previously.

Allowance for Credit Losses
The Company continuously monitors collections and payments from its customers and maintains a provision for estimated credit losses or doubtful accounts based upon expected losses, historical experience, expectation of changes in risk of loss and any specific customer collection issues that have been identified. During the six months ended July 2, 2023, there were no material changes in the allowance for credit losses including additional allowances, write-offs or recoveries. During the six months ended July 2, 2022, there were no material changes in the allowance for credit losses including additional allowances, write-offs or recoveries other than charges in the amount of $1.0 million for the Pipeline Engineering business as described further in Note 4, Special and Restructuring Charges (Recoveries), net.