BACKLOG

6 Months Ended

Jul. 01, 2022

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.

Contract assets and liabilities in the two quarters ended July 1, 2022 were impacted primarily by the timing of contractual billing milestones.

Contract assets and contract liabilities are summarized below:

(In millions)	July 1, 2022		December 31, 2021
Contract assets	$	3,048	$	3,021
Contract liabilities, current	(1,270)		(1,297)
Contract liabilities, non-current(1)	(122)		(107)
Net contract assets	$	1,656	$	1,617

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(1)The non-current portion of contract liabilities 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:

(In millions)	July 1, 2022		December 31, 2021
Unbilled contract receivables, gross	$	4,603	$	4,921
Unliquidated progress payments and advances	(1,555)		(1,900)
Contract assets	$	3,048	$	3,021

Contract liabilities recognized as revenue that were outstanding at the end of the prior fiscal year were $254 million and $771 million for the quarter and two quarters ended July 1, 2022, respectively, and $219 million and $727 million for the quarter and two quarters ended July 2, 2021, respectively

NOTE Q— 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 July 1, 2022, our ending backlog was $19.9 billion. We expect to recognize approximately 39% of the revenue associated with this backlog by the end of 2022 and approximately 68% by the end of 2023, with the remainder to be recognized thereafter. At December 31, 2021, our ending backlog was $21.1 billion