Backlog

6 Months Ended

Dec. 28, 2018

Revenue from Contract with Customer [Abstract]

Backlog

Note F — Contract Assets and Contract Liabilities

Contract assets include unbilled amounts typically resulting from revenue recognized exceeding amounts billed to customers for contracts utilizing the percentage of completion (“POC”) cost-to-cost revenue recognition method. We bill customers as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals, upon achievement of contractual milestones or upon deliveries and, in certain arrangements, the customer may withhold payment of a small portion of the contract price until contract completion. Contract liabilities include advance payments and billings in excess of revenue recognized, including deferred revenue associated with extended product warranties. Contract assets and liabilities are reported on a contract-by-contract basis at the end of each reporting period. The increase in contract liabilities in the two quarters ended December 28, 2018 was primarily due to an increase in the receipt of advance payments and the timing of contractual billing milestones. Changes in contract assets and contract liabilities balances during the quarter and two quarters ended December 28, 2018 were not materially impacted by any factors other than those described above.

Contract assets and contract liabilities are summarized below:

	December 28, 2018			June 29, 2018
	(In millions)
Contract assets	$	829		$	782
Contract liabilities, current	(479		)	(372		)
Contract liabilities, non-current(1)	(7		)	(7		)
Net contract assets	$	343		$	403

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(1) Represents the non-current portion of deferred revenue associated with extended product warranties, which is included as a component of the “Other long-term liabilities” line item in our Condensed Consolidated Balance Sheet (Unaudited).

The components of contract assets are summarized below:

	December 28, 2018			June 29, 2018
	(In millions)
Unbilled contract receivables, gross	$	946		$	881
Progress payments	(117		)	(99		)
	$	829		$	782

Impairment losses related to our contract assets were not material during the two quarters ended December 28, 2018 and December 29, 2017. For the quarter and two quarters ended December 28, 2018, we recognized revenue of $49 million and $207 million, respectively, related to contract liabilities that were outstanding at June 29, 2018. For the quarter and two quarters ended December 29, 2017, we recognized revenue of $53 million and $163 million, respectively, related to contract liabilities that were outstanding at June 30, 2017.

Note P — Backlog

Backlog, which is the equivalent of our remaining performance obligations, represents the future revenue we expect to recognize as we perform on our current contracts. Backlog comprises both funded backlog (i.e., firm orders for which funding is authorized and appropriated) and unfunded backlog. Backlog excludes unexercised contract options and potential orders under ordering-type contracts, such as indefinite delivery, indefinite quantity contracts.

At December 28, 2018, our ending backlog was $8.0 billion. We expect to recognize approximately half of the revenue associated with this backlog within the next twelve months and the substantial majority of the revenue associated with this backlog within the next 3 years.