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CONTRACT ASSETS AND LIABILITIES

3 Months Ended

Mar. 30, 2024

11. 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 30, 2024			December 30, 2023			$ Change		% Change
Contract assets and unbilled receivables —current	$	5,687,165		$	3,409,809		$	2,277,356		67	%
Contract liabilities and billings in excess of revenues earned		(886,432	)		(916,826	)		30,394		(3	)%
Contract liabilities—noncurrent		(10,080	)		(23,198	)		13,118		(57	)%
Net contract assets	$	4,790,653		$	2,469,785		$	2,320,868		94	%

The $2.3 million increase in the Company’s net contract assets at March 30, 2024 as compared to December 30, 2023 was primarily due to an increase in amounts owed from production of defense products.

In the three months ended March 30, 2024, the Company recognized revenue of $0.3 million related to its contract liabilities at December 30, 2023. In the three months ended April 1, 2023, the Company recognized revenue of $0.5 million related to its contract liabilities at December 31, 2022.

The Company did not recognize impairment losses on its contract assets in the three months ended March 30, 2024 or April 1, 2023.

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 30, 2024			April 1, 2023
Point in time		26	%		26	%
Over time		74	%		74	%
Performance obligation percentage

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 30, 2024, the aggregate amount of the transaction price allocated to remaining performance obligations was $31.1 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.