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CONTRACT ASSETS AND LIABILITIES

3 Months Ended

Mar. 27, 2021

10. CONTRACT ASSETS AND LIABILITIES

Contract assets include unbilled amounts typically resulting from sales under contracts when the cost-to-cost method of revenue recognition is utilized and revenue recognized from customer arrangements, including licensing, exceeds the amount billed to the customer, and right to payment is not just subject to the passage of time. Amounts may not exceed their net realizable value. Contract assets are generally classified as current. The Company classifies the noncurrent portion of contract assets under other assets in its condensed consolidated balance sheets.

Contract liabilities consist of advance payments and billings in excess of cost incurred and deferred revenue.

Net contract assets (liabilities) consisted of the following:

	March 27, 2021			December 26, 2020			$ Change			% Change
Contract assets—current	$	1,115,419		$	3,521,753		$	(2,406,334	)		(68	)%
Contract liabilities and billings in excess of revenues earned		(1,176,872	)		(1,493,847	)		316,975			(21	)%
Contract liabilities—noncurrent		(37,529	)		(5,069	)		(32,460	)		640	%
Net contract (liabilities) assets	$	(98,982	)	$	2,022,837		$	(2,121,819	)		(105	)%

The $2.1 million decrease in the Company’s net contract (liabilities) assets at March 27, 2021 as compared to December 26, 2020 was primarily due to the shipment of inventory which was in process at December 26, 2020 and recording of revenues earned against advanced payments.

In the three months ended March 27, 2021, the Company recognized revenue of $1.2 million related to our contract liabilities at December 26, 2020. In the three months ended March 28, 2020, the Company recognized revenue of $0.6 million related to our contract liabilities at December 28, 2019.

The Company did not recognize impairment losses on our contract assets in the three months ended March 27, 2021 or March 28, 2020.

Performance Obligations

The Company’s revenue recognition related to performance obligations that were satisfied at a point in time and over time were as follows:

	Three months ended			Three months ended
	March 27, 2021			March 28, 2020
Point in time		32	%		36	%
Over time		68	%		64	%

Remaining performance obligations represent the transaction price of orders for which work has not been performed and excludes unexercised contract options and potential orders under ordering-type contracts (e.g., indefinite-delivery, indefinite-quantity (“IDIQ”)). As of March 27, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations was $21.0 million which the Company expects to recognize over the next 12 months. The remaining performance obligations represent amounts to be earned under government contracts, which are subject to cancellation.