The Company derives revenues primarily from the assembly of products under supply agreements with its customers and the fabrication of customized optics and glass. The Company recognizes revenue relating to contracts with customers that depicts the transfer of promised goods or services to customers in an amount reflecting the consideration to which the Company expects to be entitled in exchange for such goods or services. In order to meet this requirement, the Company applies the following five steps: (1) identify the contract with a customer, (2) identify the performance obligations under the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations under the contract, and (5) recognize revenue when a performance obligation is satisfied. Revenue is recognized net of any taxes collected from customers, which is subsequently remitted to governmental authorities.

A performance obligation is a contractual promise to transfer a distinct good or service to the customer. In contracts with multiple performance obligations, the Company identifies each performance obligation and evaluates whether the performance obligation is distinct within the context of the contract at contract inception. The majority of the Company’s contracts have a single performance obligation, as the promise to transfer the individual goods or services is not separately identifiable from other promises under the contracts and, therefore, is not distinct.

The Company manufactures products that are customized to customers’ specifications. However, control of the products is typically transferred to the customer at the point in time the product is either shipped or delivered, depending on the terms of the arrangement, as the criteria for recognizing revenue over time are not met. Based on a review of its contracts, the Company determined that it does not have contractual rights to bill profit for work in progress in the event of a contract termination, an event which is expected to be infrequent. Further, in limited circumstances, substantive acceptance by the customer will result in the deferral of revenue until acceptance is formally received from the customer. Judgment may be required in determining if the acceptance clause provides for substantive acceptance.

Certain customers may request the Company to store finished products purchased by them at the Company’s warehouse. In these instances, the Company receives a written request from the customer asking the Company to hold the inventory at the Company’s warehouse, and the ordered goods cannot be used to fulfill other customer orders. In these situations, revenue is only recognized when the goods are completed and ready for shipment and transferred to the Company’s warehouse.

Our customers generally are obligated to purchase finished goods that we have manufactured according to their demand requirements. Materials that are not consumed by our customers within a specified period of time, or that are no longer required due to a product’s cancellation or

end-of-life,

are typically designated as excess or obsolete inventory under our contracts. After materials are designated as either excess or obsolete inventory, our customers are typically required to purchase such inventory from us even if they have chosen to cancel production of the related products. The excess or obsolete inventory is shipped to the customer and revenue is recognized upon shipment.

A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled. The Company generally does not grant return privileges other than for defective products during the warranty period. The Company generally provides a warranty of between one to five years on the product.

The Company has applied the practical expedient to not adjust the amount of revenue to be recognized due to the effects of a significant financing component when the Company expects, at contract inception, that the period between the transfer of goods and/or services and the payment for those goods and/or services will be less than one year.

Warranty provision

Provisions for estimated expenses relating to pr

duct warranties are made at the time the products are sold using historical experience. Generally, this warranty is limited to workmanship, and the Company’s liability is capped at the price of the product. The provisions will be adjusted when experience indicates an expected settlement will differ from initial estimates.

Contract assets and liabilities

A contract asset is recognized when the Company has recognized revenues prior to generating an invoice for payment. Contract assets are classified separately within the unaudited condensed consolidated balance sheets and transferred to accounts receivable when rights to payment become unconditional. During the nine months ended March 27, 2020, the Company had no impairment for contract assets recognized.

A contract liability is recognized when the Company has advance payment arrangements with customers. The contract liabilities balance is normally recognized as revenue within six months.

The following tables summarize the activity in the Company’s contract assets and contract liabilities during the nine months ended March 27, 2020:


(amount in thousands)	Contract Assets
Beginning balance, June 28, 2019	$	12,447
Revenue recognized		58,037
Amounts collected or invoiced		(54,071	)

Ending balance, March 27, 2020	$	16,413


(amount in thousands)	Contract Liabilities
Beginning balance, June 28, 2019	$	2,239
Advance payment received during the period		6,857
Revenue recognized		(7,155	)

Ending balance, March 27, 2020	$	1,941

Contract costs

The incremental costs of obtaining a contract with a customer are recognized as an asset (not expensed as incurred) if such costs are expected to be recovered. Incremental costs of obtaining a contract are costs that the Company would not have incurred if the contract had not been obtained (e.g., sales commissions or similar incentive payments linked directly to new or modified customer contracts). Costs that would have been incurred regardless of whether a customer contract was obtained (e.g., costs of pursuing the contact, legal advice, etc.) are expensed as incurred, unless such costs are explicitly chargeable to the customer. During the nine months ended

March 27, 2020, the Company did not have any incremental costs of obtaining a contract.

Shipping and handling

Shipping costs billed to customers are recorded as revenue. Shipping and handling expense related to costs incurred to deliver product are recognized within cost of goods sold. The Company accounts for shipping and handling activities that occur after control has transferred as a fulfillment cost as opposed to a separate performance obligation, and the costs of shipping and handling are recognized concurrently with the related revenue.

Revenue by geographic area

Total revenues are attributed to a particular geographic area based on the

bill-to-location

of the Company’s customers. The Company operates in three geographic regions: North America, Asia-Pacific and Europe.

The following tables present total revenues by geographic region


(amount in thousands, except percentages)	Three Months Ended March 27, 2020		As a % of Total Revenues			Nine Months Ended March 27, 2020		As a % of Total Revenues

North America	$	206,751		50.3	%	$	631,096		51.0	%
Asia-Pacific		141,639		34.4			401,209		32.5
Europe		62,820		15.3			204,418		16.5

Total	$	411,210		100.0	%	$	1,236,723		100.0	%


(amount in thousands, except percentages)	Three Months Ended March 29, 2019		As a % of Total Revenues			Nine Months Ended March 29, 2019		As a % of Total Revenues

North America	$	195,504		49.0	%	$	558,028		47.3	%
Asia-Pacific		151,263		37.9			469,921		39.9
Europe		52,184		13.1			151,259		12.8

Total	$	398,951		100.0	%	$	1,179,208		100.0	%

The following tables set forth our revenues by end market:


(amount in thousands, except percentages)	Three Months Ended March 2 7 , 20 20		As a % of Total Revenues			Nine Months Ended March 2 7 , 20 20		As a % of Total Revenues

Optical communications	$	308,566		75.0	%	$	933,013		75.4	%
Lasers, sensors and other		102,644		25.0			303,710		24.6

Total	$	411,210		100.0	%	$	1,236,723		100.0	%


(amount in thousands, except percentages)	Three Months Ended March 29, 2019		As a % of Total Revenues			Nine Months Ended March 29, 2019		As a % of Total Revenues

Optical communications	$	298,139		74.7	%	$	884,454		75.0	%
Lasers, sensors and other		100,812		25.3			294,754		25.0

Total	$	398,951		100.0	%	$	1,179,208		100.0	%