Revenue from Contracts with Customers

9 Months Ended

Sep. 28, 2019

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue

Revenue from contracts with customers disaggregated by sales channel and by segment is as follows (in thousands):



		Three Months Ended				Nine Months Ended
	Segment	September 28, 2019		September 29, 2018		September 28, 2019		September 29, 2018
Supplies-driven channel	Office furniture	$	260,359	$	265,971	$	649,380	$	680,656
Contract channel	Office furniture	224,396		205,716		598,398		595,824
Hearth	Hearth products	140,631		139,433		383,090		383,323
Net sales		$	625,386	$	611,120	$	1,630,868	$	1,659,803

The majority of revenue presented as "Net sales" in the Condensed Consolidated Statements of Comprehensive Income is the result of contracts with customers. All other sources of revenue are not material to the Corporation's results of operations.

Sales by channel type are subject to similar economic factors and market conditions regardless of the channel under which the product is sold. See “Note 18. Reportable Segment Information” in the Notes to Condensed Consolidated Financial Statements for further information about operating segments.

Contract Assets and Contract Liabilities

In addition to trade receivables, the Corporation has contract assets consisting of funds paid to certain office furniture dealers in exchange for their multi-year commitment to market and sell the Corporation’s products. These contract assets are amortized over the term of the contracts and recognized as a reduction of revenue. The Corporation has contract liabilities consisting of customer deposits and rebate and marketing program liabilities.

Contract assets and contract liabilities were as follows (in thousands):



	September 28, 2019		December 29, 2018
Trade receivables (1)	$	275,738	$	259,075
Other contract assets (current) (2)	$	837	$	529
Other contract assets (long-term) (3)	$	2,865	$	2,188
Contract liabilities (4)	$	44,463	$	44,858

The index below indicates the line item in the Condensed Consolidated Balance Sheets where contract assets and contract liabilities are reported:

(1) "Receivables"

(2) "Prepaid expenses and other current assets"

(3) "Other Assets"

(4) "Accounts payable and accrued expenses"

Changes in other contract asset and contract liability balances during the nine months ended September 28, 2019 were as follows (in thousands):



	Contract assets increase (decrease)			Contract liabilities (increase) decrease
Contract assets recognized	$	1,313		$	—
Reclassification of contract assets to contra revenue	(328		)	—
Contract liabilities recognized and recorded to contra revenue as a result of performance obligations satisfied	—			(110,789		)
Contract liabilities paid	—			109,592
Cash received in advance and not recognized as revenue	—			(49,962		)
Reclassification of cash received in advance to revenue as a result of performance obligations satisfied	—			51,554
Net change	$	985		$	395

Contract liabilities for customer deposits paid to the Corporation prior to the satisfaction of performance obligations are recognized as revenue upon completion of the performance obligations. The amount of revenue recognized during the three and nine months ended September 28, 2019 that was included in the December 29, 2018 contract liabilities balance was $0.0 million and $8.3 million, respectively.

Performance Obligations

The Corporation recognizes revenue for sales of office furniture and hearth products at a point in time following the transfer of control of such products to the customer, which typically occurs upon shipment of the product. In certain circumstances, transfer of control to the customer does not occur until the goods are received by the customer or upon installation and/or customer acceptance, depending on the terms of the underlying contracts. Contracts typically have a duration of less than one year and normally do not include a significant financing component. Generally, payment is due within 30 days of invoicing.

The Corporation's backlog orders are typically cancelable for a period of time and almost all contracts have an original duration of one year or less. As a result, the Corporation has elected the practical expedient permitted in the revenue accounting standard not to disclose the unsatisfied performance obligation as of September 28, 2019. The backlog is typically fulfilled within a quarter.

Significant Judgments

The amount of consideration the Corporation receives and revenue recognized varies with changes in rebate and marketing program incentives, as well as early pay discounts, offered to customers. The Corporation uses significant judgment throughout the year in estimating the reduction in net sales driven by variable consideration for rebate and marketing programs. Judgments made include expected sales levels and utilization of funds. However, this judgment factor is significantly reduced at the end of each year when sales volumes and the impact to rebate and marketing programs are known and recorded as the programs typically end near the Corporation's fiscal year end.