| Revenue | 3.
Revenue The following tables represent a disaggregation of
revenue from contracts with customers for the three and six months
ended June 30, 2018 and July 1, 2017 along with
the reportable segment for each category. As noted above, the prior
period amounts have not been adjusted under the modified
retrospective method.
Major Products and Service Lines
TFE Three Months Ended Three Months Ended
(In
thousands)
HDD DCP PV Total HDD DCP PV Total
Systems, upgrades and spare parts $ 19,221 $
— $ 1 $ 19,222 $ 11,975 $ 351 $ 8,996 $ 21,322
Field service 1,625
— 1 1,626 1,104
—
— 1,104
Total TFE net revenues $ 20,846 $
— $ 2 $ 20,848 $ 13,079 $ 351 $ 8,996 $ 22,426
Six Months Ended Six Months Ended July 1, 2017
(In
thousands)
HDD DCP PV Total HDD DCP PV Total
Systems, upgrades and spare parts $ 29,614 $ 1 $ 3 $ 29,618 $ 19,256 $ 13,138 $ 8,996 $ 41,390
Field service 3,980
— 39 4,019 2,520
—
— 2,520
Total TFE net revenues $ 33,594 $ 1 $ 42 $ 33,637 $ 21,776 $ 13,138 $ 8,996 $ 43,910
Three Months Ended Six Months Ended
Photonics June 30, 2018 July 1, 2017 June 30, 2018 July 1, 2017
(In
thousands)
Products:
Military products $ 2,145 $ 7,213 $ 4,399 $ 13,920
Commercial products 54 16 54 62
Repair and other services 288 208 717 394
Total Photonics product net revenues 2,487 7,437 5,170 14,376
Technology development:
CPFF 2,220 187 4,010 1,068
FFP 540 913 1,232 1,997
Time and materials 3
— 23
—
Total technology development net revenues 2,763 1,100 5,265 3,065
Total Photonics net revenues $ 5,250 $ 8,537 $ 10,435 $ 17,441
Primary Geographical Markets
Three Months Ended Three Months Ended
June 30, 2018 July 1, 2017
(In
thousands)
TFE Photonics Total TFE Photonics Total
United States $ 1,351 $ 4,998 $ 6,349 $ 2,050 $ 8,333 $ 10,383
Asia 19,497 31 19,528 20,376 8 20,384
Europe
— 187 187
— 196 196
Rest of World
— 34 34
—
—
—
Total net revenues $ 20,848 $ 5,250 $ 26,098 $ 22,426 $ 8,537 $ 30,963
Six Months Ended Six Months Ended
June 30, 2018 July 1, 2017
(In
thousands)
TFE Photonics Total TFE Photonics Total
United States $ 3,262 $ 9,760 $ 13,022 $ 2,663 $ 16,922 $ 19,585
Asia 30,375 31 30,406 41,247 8 41,255
Europe
— 480 480
— 511 511
Rest of World
— 164 164
—
—
—
Total net revenues $ 33,637 $ 10,435 $ 44,072 $ 43,910 $ 17,441 $ 61,351
Timing of Revenue Recognition
Three Months Ended Six Months Ended
June 30, 2018 June 30, 2018
(In
thousands)
TFE Photonics Total TFE Photonics Total
Products transferred at a point in time $ 20,848 $ 288 $ 21,136 $ 33,637 $ 717 $ 34,354
Products and services transferred over time
— 4,962 4,962
— 9,718 9,718
$ 20,848 $ 5,250 $ 26,098 $ 33,637 $ 10,435 $ 44,072
The following table reflects the changes in our
contract assets, which we classify as accounts receivable, unbilled
or retainage, and our contract liabilities, which we classify as
deferred revenue and customer advances, for the six months ended
June 30, 2018:
June 30, 2018 December 30, 2017 Six Months Change
(In
thousands)
TFE:
Contract assets:
Accounts receivable, unbilled $ 529 $ 1,368 $ (839 )
Contract liabilities:
Deferred revenue $ 5,246 $ 5,190 $ 56
Customer advances 9,672 10,204 (532 )
$ 14,918 $ 15,394 $ (476 )
Photonics:
Contract assets:
Accounts receivable, unbilled $ 1,523 $ 1,346 $ 177
Retainage 294 281 13
$ 1,817 $ 1,627 $ 190
Contract liabilities:
Deferred revenue $ 1,443 $ 97 $ 1,346
Customer advances 880 822 58
$ 2,323 $ 919 $ 1,404
Accounts receivable, unbilled in our TFE segment
represents a contract asset for revenue that has been recognized in
advance of billing the customer. For our system and certain upgrade
sales, our TFE customers generally pay in three installments, with
a portion of the system price billed upon receipt of an order, a
portion of the price billed upon shipment, and the balance of the
price due upon completion of installation and acceptance of the
system at the customer’s factory. Accounts receivable,
unbilled in our TFE segment generally represents the balance of the
system price that is due upon completion of installation and
acceptance less the amount that has been deferred as revenue for
the performance of the installation tasks. During the six months
ended June 30, 2018, contract assets in our TFE segment
decreased by $839,000 primarily due to the final billing on four
systems that were pending acceptance as of
December 30, 2017 that completed installation and were
accepted by the customer, offset by the accrual of revenue for an
additional two systems delivered during the first half of fiscal
2018 that were pending acceptance as of
June 30, 2018. Customer advances in our TFE segment generally
represent amounts billed to the customer prior to transferring
goods which represents a contract liability. We have elected to use
the practical expedient to disregard the effect of the time value
of money in a significant financing component when its payment
terms are less than one year. These contract advances are
liquidated when revenue is recognized. Deferred revenue in our TFE
segment generally represents amounts billed to a customer for
completed systems at the customer site that are undergoing
installation and acceptance testing where transfer of control has
not yet occurred as we do not yet have a demonstrated history of
meeting the acceptance criteria upon the customer’s receipt
of product and represents a contract liability. During the six
months ended June 30, 2018, we recognized revenue in our TFE
segment of $6.6 million and $69,000 that was included in
customer advances and deferred revenue, respectively, at the
beginning of the period. Accounts receivable, unbilled in our Photonics
segment represents a contract asset for revenue that has been
recognized in advance of billing the customer, which is common for
contracts in the defense industry. In our Photonics segment,
amounts are billed as work progresses in accordance with
agreed-upon contractual terms, either at periodic intervals (e.g.,
monthly) or upon achievement of contractual milestones. Generally,
billing occurs subsequent to revenue recognition, resulting in
contract assets. Our contracts with the U.S. government may also
contain retainage provisions. Retainage represents a contract asset
for the portion of the contract price earned by us for work
performed, but held for payment by the U.S. government as a form of
security until satisfactory completion of the contract. The
retainage is billable upon completion of the contract performance
and approval of final indirect expense rates by the government.
During the six months ended June 30, 2018, contract
assets in our Photonics segment increased by $190,000 primarily due
to the accrual of revenue for incurred costs under CPFF
contracts. Customer advances in our Photonics segment
generally represent deposits from customers upon contract execution
and upon achievement of contractual milestones which represents a
contract liability. These deposits are liquidated when revenue is
recognized. Deferred revenue in our Photonics segment includes
$1.4 million deferred for the impact of the allocation and the
timing of the recognition of revenues for a military product
agreement with a tiered pricing structure. Deferred revenue in our
Photonics segment also includes incurred costs under CPFF contracts
pending approval of final indirect expense rates by the government
and represents a contract liability. During the six months ended
June 30, 2018, we recognized revenue in our Photonics
segment of $206,000 and $229,000 that was included in customer
advances and deferred revenue, respectively, at the beginning of
the period. On June 30, 2018 we had
$64.6 million of remaining performance obligations, which we
also refer to as total backlog. Backlog at June 30, 2018
consisted of $54.2 million of TFE backlog and
$10.3 million of Photonics backlog. We expect to recognize
approximately 72.8% of our remaining performance obligations as
revenue in 2018, and the balance in 2019. |
