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Revenue | 3 Months Ended
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Apr. 01, 2022
Revenue from Contract with Customer [Abstract] |
Revenue | REVENUE Performance Obligations A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue in ASC Topic 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. To determine the proper revenue recognition method, consideration is given as to whether a single contract should be accounted for as more than one performance obligation. For most of our contracts, the customer contracts with us to perform an integrated set of tasks and deliverables as a single service solution, whereby each service is not separately identifiable from other promises in the contract and therefore is not distinct. As a result, when this integrated set of tasks exists, the contract is accounted for as one performance obligation. The vast majority of our contracts have a single performance obligation. Unexercised contract options and indefinite delivery and indefinite quantity (IDIQ) contracts are considered to be separate performance obligations when the option or IDIQ task order is exercised or awarded. Contracts are often modified to account for changes in contract specifications and requirements. If the modification either creates new enforceable rights and obligations or changes the existing enforceable rights and obligations, the modification will be treated as a separate contract. Our contract modifications, except for those to exercise option years, have historically not been distinct from the existing contract and have been accounted for as if they were part of that existing contract. The Company's performance obligations are satisfied over time as services are provided throughout the contract term. We recognize revenue over time using the input method (e.g., costs incurred to date relative to total estimated costs at completion) to measure progress. Our over time recognition is reinforced by the fact that our customers simultaneously receive and consume the benefits of our services as they are performed. For most U.S. government contracts, this continuous transfer of control to the customer is supported by clauses in the contract that allow the customer to unilaterally terminate the contract for convenience, pay us for costs incurred plus a reasonable profit and take control of any work in process. This continuous transfer of control requires that we track progress towards completion of performance obligations in order to measure and recognize revenue. The Company's contracts are multi-year contracts and typically include an initial period of one year or less with annual one-year or less option periods. The number of option periods varies by contract, and there is no guarantee that an option period will be exercised. The right to exercise an option period is at the sole discretion of the U.S. government when we are the prime contractor or of the prime contractor when we are a subcontractor. We expect to recognize a substantial portion of our performance obligations as revenue within the next 12 months. However, the U.S. government or the prime contractor may cancel any contract at any time through a termination for convenience or for cause. Substantially all of our contracts have terms that would permit us to recover all or a portion of our incurred costs and fees for work performed in the event of a termination for convenience. Remaining performance obligations as of April 1, 2022 and December 31, 2021 are presented in the following table:
|  | April 1, |  | December 31,
(In millions) |  | 2022 |  | 2021
Performance Obligations |  | $ | 1,288 |  |  | $ | 1,398 |
We expect to recognize approximately 64% of the remaining performance obligations as of April 1, 2022 as revenue in 2022 and the remaining 36% during 2023. Contract Estimates Accounting for contracts and programs involves the use of various techniques to estimate total contract revenue and costs. For contracts, we estimate the profit on a contract as the difference between the total estimated revenue and expected costs to complete a contract and recognize that profit over the life of the contract. Contract estimates are based on various assumptions to project the outcome of future events. These assumptions include labor productivity and availability; the complexity of the services being performed; the cost and availability of materials; the performance of subcontractors; and negotiations with the customer on contract modifications. When the estimates of total costs to be incurred on a contract exceed total estimates of the transaction price, a provision for the entire loss is determined at a contract level and is recognized in the period in which the loss was determined. The impact of adjustments in contract estimates on our operating income can be reflected in either revenue or cost of revenue. Cumulative catch-up adjustments for the three months ended April 1, 2022 and April 2, 2021 increased operating income by $0.6 million and decreased operating income by $1.3 million, respectively. For the three months ended April 1, 2022 and April 2, 2021, the cumulative catch-up adjustments to operating income increased revenue by $0.6 million and decreased revenue by $1.9 million, respectively. Revenue by Category Generally, the sales price elements for our contracts are cost-plus, cost-reimbursable or firm-fixed-price. We commonly have elements of cost-plus, cost-reimbursable and firm-fixed-price contracts on a single contract. On a cost-plus type contract, we are paid our allowable incurred costs plus a profit, which can be fixed or variable depending on the contract’s fee arrangement, up to funding levels predetermined by our customers. On cost-plus type contracts, we do not bear the risks of unexpected cost overruns, provided that we do not incur costs that exceed the predetermined funded amounts. Most of our cost-plus contracts also contain a firm-fixed price element. Cost-plus type contracts with award and incentive fee provisions are our primary variable contract fee arrangement. Award fees provide for a fee based on actual performance relative to contractually specified performance criteria. Incentive fees provide for a fee based on the relationship between total allowable and target cost. On most of our contracts, a cost-reimbursable element captures consumable materials required for the contract. Typically, these costs do not bear fees. On a firm-fixed-price type contract, we agree to perform the contractual statement of work for a predetermined contract price. A firm-fixed-price type contract typically offers higher profit margin potential than a cost-plus type contract, which is commensurate with the greater levels of risk we assume on a firm-fixed-price type contract. Although a firm-fixed-price type contract generally permits us to retain profits if the total actual contract costs are less than the estimated contract costs, we bear the risk that increased or unexpected costs may reduce our profit or cause us to sustain losses on the contract. Although the overall scope of work required under the contract may not change, profit may be adjusted as experience is gained and as efficiencies are realized or costs are incurred. The following tables present our revenue disaggregated by several categories. Revenue by contract type for the three months ended April 1, 2022 and April 2, 2021 is as follows:
|  | Three Months Ended |  |
|  | April 1, |  | April 2, |  | % |  |  |  |  |  |
(In thousands) |  | 2022 |  | 2021 |  | Change |  |  |  |  |  |
Cost-plus and cost-reimbursable |  | $ | 311,094 |  |  | $ | 290,230 |  |  | 7.2 | % |  |  |  |  |  |
Firm-fixed-price |  | 128,004 |  |  | 128,757 |  |  | (0.6) | % |  |  |  |  |  |
Time and material |  | 17,373 |  |  | 15,017 |  |  | 15.7 | % |  |  |  |  |  |
Total revenue |  | $ | 456,471 |  |  | $ | 434,004 |  |  |  |  |  |  |  |  |
Revenue by geographic region in which the contract is performed for the three months ended April 1, 2022 and April 2, 2021 is as follows:
|  | Three Months Ended |  |
|  | April 1, |  | April 2, |  | % |  |  |  |  |  |
(In thousands) |  | 2022 |  | 2021 |  | Change |  |  |  |  |  |
Middle East |  | $ | 235,754 |  |  | $ | 240,013 |  |  | (1.8) | % |  |  |  |  |  |
United States |  | 167,980 |  |  | 149,811 |  |  | 12.1 | % |  |  |  |  |  |
Europe |  | 36,531 |  |  | 40,623 |  |  | (10.1) | % |  |  |  |  |  |
Asia |  | 16,206 |  |  | 3,557 |  |  | 355.6 | % |  |  |  |  |  |
Total revenue |  | $ | 456,471 |  |  | $ | 434,004 |  |  |  |  |  |  |  |  |
Revenue by contract relationship for the three months ended April 1, 2022 and April 2, 2021 is as follows:
|  | Three Months Ended |  |
|  | April 1, |  | April 2, |  | % |  |  |  |  |  |
(In thousands) |  | 2022 |  | 2021 |  | Change |  |  |  |  |  |
Prime contractor |  | $ | 427,093 |  |  | $ | 403,262 |  |  | 5.9 | % |  |  |  |  |  |
Subcontractor |  | 29,378 |  |  | 30,742 |  |  | (4.4) | % |  |  |  |  |  |
Total revenue |  | $ | 456,471 |  |  | $ | 434,004 |  |  |  |  |  |  |  |  |
Revenue by customer for the three months ended April 1, 2022 and April 2, 2021 is as follows:
|  | Three Months Ended |  |
|  | April 1, |  | April 2, |  | % |  |  |  |  |  |
(In thousands) |  | 2022 |  | 2021 |  | Change |  |  |  |  |  |
Army |  | $ | 280,113 |  |  | $ | 257,349 |  |  | 8.8 | % |  |  |  |  |  |
Air Force |  | 61,474 |  |  | 78,170 |  |  | (21.4) | % |  |  |  |  |  |
Navy |  | 75,217 |  |  | 56,427 |  |  | 33.3 | % |  |  |  |  |  |
Other |  | 39,667 |  |  | 42,058 |  |  | (5.7) | % |  |  |  |  |  |
Total revenue |  | $ | 456,471 |  |  | $ | 434,004 |  |  |  |  |  |  |  |  |
Contract Balances The timing of revenue recognition, billings, and cash collections results in billed and unbilled accounts receivable (contract assets) and customer advances and deposits (contract liabilities) on the Condensed Consolidated Balance Sheets. Amounts are billed as work progresses in accordance with agreed-upon contractual terms at periodic intervals (e.g., biweekly or monthly). Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. However, we may receive advances or deposits from our customers, before revenue is recognized, resulting in contract liabilities. These advance billings and payments are not considered significant financing components because they are frequently intended to fund current operating expenses under the contract. These assets and liabilities are reported on the Condensed Consolidated Balance Sheets on a contract-by-contract basis at the end of each reporting period. As of April 1, 2022 and December 31, 2021, we had contract assets of $235.3 million and $240.0 million, respectively. Contract assets primarily consist of unbilled receivables which represent rights to consideration for work completed but not billed as of the reporting date. The balance of unbilled receivables consists of costs and fees that are: (i) billable immediately; (ii) billable on contract completion; or (iii) billable upon other specified events, such as the resolution of a request for equitable adjustment. Refer to Note 5, "Receivables" for additional information regarding the composition of our receivable balances. As of both April 1, 2022 and December 31, 2021, our contract liabilities were insignificant.

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- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130551-203045 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 13 -Subparagraph (b)(2) -URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130556-203045 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130554-203045 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130550-203045 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (e) -URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130554-203045 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130554-203045 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (d) -URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130554-203045 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130558-203045 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (c) -URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130554-203045 + Details
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