Revenue from Contracts with Customers

9 Months Ended

Sep. 26, 2020

Revenue from Contract with Customer [Abstract]

Revenue from Contracts with Customers

Revenue from Contracts with Customers

Disaggregation of Revenue

Revenue from contracts with customers disaggregated by product category is as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 26, 2020		September 28, 2019		September 26, 2020		September 28, 2019
Systems and storage	$	207,549	$	297,934	$	578,601	$	737,984
Seating	127,294		163,353		358,005		411,142
Other	18,518		23,468		63,221		98,652
Total workplace furnishings	353,361		484,755		999,827		1,247,778
Residential building products	153,702		140,631		393,397		383,090
Net sales	$	507,063	$	625,386	$	1,393,224	$	1,630,868

Sales by product category are subject to similar economic factors and market conditions. See “Note 16. 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 workplace furnishings 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. For contracts less than one year, the Corporation has elected the practical expedient to recognize incremental costs to obtain a contract as an expense when incurred. 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 26, 2020		December 28, 2019
Trade receivables (1)	$	209,921	$	278,124
Contract assets (current) (2)	$	747	$	857
Contract assets (long-term) (3)	$	2,676	$	2,700
Contract liabilities (4)	$	51,492	$	54,972

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 contract asset and contract liability balances during the nine months ended September 26, 2020 were as follows (in thousands):

	Contract assets increase (decrease)		Contract liabilities (increase) decrease
Contract assets recognized	$	358	$	—
Reclassification of contract assets to contra-revenue	(492)		—
Contract liabilities recognized and recorded to contra-revenue as a result of performance obligations satisfied	—		(88,981)
Contract liabilities paid	—		102,985
Cash received in advance and not recognized as revenue	—		(68,840)
Reclassification of cash received in advance to revenue as a result of performance obligations satisfied	—		58,316
Net change	$	(134)	$	3,480

Changes in 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 26, 2020 that was included in the December 28, 2019 contract liabilities balance was $0.0 million and $8.6 million, respectively.

Performance Obligations

The Corporation recognizes revenue for sales of workplace furnishings and residential building 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 cancellable 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 period end. The backlog is typically fulfilled within a few months.

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.