Contract Assets, Contract Costs and Contract Liabilities (Notes)

12 Months Ended

Dec. 31, 2020

Contract Assets, Contract Costs and Contract Liabilities [Abstract]

Contract Assets, Contract Costs and Contract Liabilities [Text Block]

. CONTRACT ASSETS, CONTRACT COSTS AND CONTRACT LIABILITIES

Contract assets consist of unbilled amounts typically resulting from sales under long-term contracts when the cost-to-cost method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer. Contract costs consist of costs to obtain and fulfill a contract. Costs to fulfill a contract primarily consist of nonrecurring engineering costs incurred at the start of a new program for which such costs are expected to be recovered under existing and future contracts. Such costs are amortized over the estimated revenue amount of the contract. Costs to obtain a contract consist of commissions and agent fees paid in connection with the award of a contract. Contract liabilities consist of advance payments and billings in excess of costs incurred and deferred revenue.

Activity related to contract assets, contract costs and contract liabilities is as follows:

	December 31, 2020(2)		December 31, 2019		$ Change		% Change
In thousands
Contract assets(1)	$	108,645	$	121,614	$	(12,969)	(10.7)	%
Contract costs, current portion	$	3,511	$	6,052	$	(2,541)	(42.0)	%
Contract costs, noncurrent portion	$	8,311	$	6,099	$	2,212	36.3	%
Contract liabilities, current portion	$	39,073	$	42,942	$	(3,869)	(9.0)	%
Contract liabilities, noncurrent portion	$	11,019	$	37,855	$	(26,836)	(70.9)	%

(1) The Company's contract assets were net of unliquidated progress payments, primarily from the U.S. Government, of $32.4 million and $30.2 million at December 31, 2020 and December 31, 2019, respectively.

(2) Contract liabilities attributable to the Company's UK Composites business were included in liabilities held for sale, current portion as of December 31, 2020 on the Company's Balance Sheets. See Note 2, Discontinued Operations and Liabilities Held for Sale, for further information on the Company's anticipated sale of the UK Composites business.

Contract Assets

The decrease in contract assets was primarily due to amounts billed on the JPF program with the USG, the AH-1Z program and the impairment on the contract assets of the UK Composites business during the year ended December 31, 2020. These decreases were partially offset by the recognition of revenue related to the satisfaction or partial satisfaction of performance obligations, particularly on a JPF DCS contract, certain fuzing contracts and the Sikorsky Combat Rescue Helicopter contract. As discussed above, the company recorded a $36.3 million impairment loss, inclusive of $1.2 million of impaired contract assets, associated with its UK Composites business in the year ended December 31, 2020. Refer to Note 2, Discontinued Operations and Liabilities Held for Sale, for further information on the impairment. There were no significant impairment losses related to the Company's contract assets during the year ended December 31, 2019.

7. CONTRACT ASSETS, CONTRACT COSTS AND CONTRACT LIABILITIES (CONTINUED)

Contract Assets - continued

Contract assets includes amounts for matters such as contract changes, negotiated settlements and claims for unanticipated contract costs. These amounts are as follows:

	At December 31,
	2020		2019
In thousands
Contract changes, negotiated settlements and claims for unanticipated contract costs	$	3,178	$	3,745

Contract Costs

At December 31, 2020, costs to fulfill a contract and costs to obtain a contract were $9.3 million and $2.5 million, respectively. At December 31, 2019, costs to fulfill a contract and costs to obtain a contract were $6.6 million and $5.6 million, respectively. These amounts are included in contract costs, current portion and contract costs, noncurrent portion on the Company's Consolidated Balance Sheets at December 31, 2020 and December 31, 2019.

Contract costs, current portion at December 31, 2020 decreased when compared to December 31, 2019. This was primarily the result of the amortization of contract costs, partially offset by the reclassification of a portion of costs to obtain a JPF DCS contract and costs to fulfill certain structures programs from contract costs, noncurrent portion. For the years ended December 31, 2020 and December 31, 2019, amortization of contract costs was $11.5 million and $11.6 million, respectively.

The increase in contract costs, noncurrent portion was primarily attributable to the addition of costs to fulfill unmanned K-MAX® contracts and costs to obtain a JPF DCS contract, partially offset by the reclassification of a portion of costs to obtain a JPF DCS contract and costs to fulfill certain structures programs to contract costs, current portion.

Contract Liabilities

The decrease in contract liabilities, current portion was primarily due to revenue recognized on a JPF DCS contract and certain fuzing programs. These decreases were partially offset by the reclassification of a portion of the advance payments received for a JPF DCS contract from contract liabilities, noncurrent portion. For the years ended December 31, 2020 and December 31, 2019, revenue recognized related to contract liabilities, current portion was $58.1 million and $48.5 million, respectively.

The decrease in contract liabilities, noncurrent portion was due to the reclassification of advance payments received for a JPF DCS contract to contract liabilities, current portion, partially offset by advances received on the JPF DCS contract. For the years ended December 31, 2020 and December 31, 2019, the Company did not recognize revenue against contract liabilities, noncurrent portion.