Quarterly report pursuant to Section 13 or 15(d)

REVENUE

v3.10.0.1
REVENUE
6 Months Ended
Jun. 30, 2018
REVENUE  
REVENUE

NOTE 5—REVENUE

The Company provides a comprehensive range of maintenance, modification and construction support services for nuclear power plants and a wide range of utility and industrial customers in the fossil fuel, industrial gas, natural gas and petrochemical industries, as well as other industrial operations. The Company provides these services in the U.S. both on a constant presence basis and for discrete projects. The services the Company provides are designed to improve or sustain operating efficiencies and extend the useful lives of process equipment.

The Company’s contracts are awarded on a competitively bid and negotiated basis and the timing of revenue recognition is impacted by the terms of such contracts. The Company enters into a variety of contract structures, including cost plus reimbursement contracts and fixed-price contracts. The determination of contract structure is based on the scope of work, complexity and project length, and customer preference of contract terms. Cost plus contracts represent the majority of the Company’s contracts. There were no direct and incremental costs to the acquisition of a new contract that required a deferral of costs.

Performance obligations

A performance obligation is a contractual promise to transfer a distinct good or service to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. To the extent a contract is deemed to have multiple performance obligations, the Company allocates the transaction price of the contract to each performance obligation using its best estimate of the standalone selling price of each distinct good or service in the contract. In addition, certain contracts may be combined and deemed to be a single performance obligation.

The majority of the Company’s contracts are in the form of master service agreements, basic ordering agreements and other similar agreements, and related subsequent purchase orders, contract work authorizations and other similar agreements. The Company’s purchase orders, contract work authorizations and other similar agreements are generally deemed to be single performance obligations, and its contracts with multiple performance obligations were not material during the three and six months ended June 30, 2018. The Company’s performance obligations are satisfied over time because the services provided create or enhance a customer-controlled asset. Therefore, the Company recognizes revenue in the same period the services are performed. For cost-plus reimbursement contracts, revenue is recognized when services are performed and contractually billable based on an agreed-upon price for the completed services or based on the agreed-upon hours incurred and agreed-upon hourly rates. Revenue on fixed-price contracts is recognized and invoiced over time using the cost-to-cost percentage-of-completion method. The Company does not adjust the price of the contract for the effects of a significant financing component. Change orders are generally not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as a modification of the existing contract and performance obligation.

Variable consideration

The Company’s contracts may include several types of variable consideration, including unapproved change orders and claims, incentives, penalties and liquidated damages. The Company estimates the amount of revenue to be recognized on variable consideration using estimation methods that best predict the amount of consideration to which the Company expects to be entitled or expects to incur. The Company includes variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. The Company’s estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of its anticipated performance and all information (historical, current and forecasted) that is reasonably available. The Company updates its estimate of the transaction price each reporting period and the effect of variable consideration on the transaction price is recognized as an adjustment to revenue on a cumulative catch-up basis.

The Company generally provides a limited warranty for a term of two years or less following completion of services performed under its contracts. Historically, warranty claims have not resulted in material costs incurred.

Disaggregation of revenue

Disaggregated revenue by type of contract was as follows.  

 

 

 

 

 

 

 

 

(in thousands)

 

Three Months Ended June 30, 2018

 

 

Six Months Ended June 30, 2018

Cost-plus reimbursement contracts

 

$

39,332

 

 

$

73,109

Fixed-price contracts

 

 

8,643

 

 

 

17,987

Total

 

$

47,975

 

 

$

91,096

 

Contract balances

The Company enters into contracts that allow for periodic billings over the contract term that are dependent upon specific advance billing terms, as services are provided, or milestone billings based on completion of certain phases of work. Projects with performance obligations recognized over time that have costs and estimated earnings recognized to date in excess of cumulative billings are reported in the Company’s condensed consolidated balance sheet as costs and estimated earnings in excess of billings (i.e., contract assets). Projects with performance obligations recognized over time that have cumulative billings in excess of costs and estimated earnings recognized to date are reported in the Company’s condensed consolidated balance sheet as billings in excess of costs and estimated earnings (i.e., contract liabilities). At any point in time, each project in process could have either costs and estimated earnings in excess of billings or billings in excess of costs and estimated earnings.

The following table provides information about contract assets and contract liabilities from contracts with customers. The table also includes changes in the contract assets and the contract liabilities balances during the period.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2018

 

December 31, 2017 (1)

(in thousands)

 

Asset

 

Liability

 

Asset

 

Liability

Costs and estimated earnings on contracts in progress

 

$

45,735

 

$

(1,886)

 

$

22,274

 

$

(422)

Billings on contracts in progress

 

 

(31,620)

 

 

(4,220)

 

 

(10,787)

 

 

(6,627)

Contracts in progress, net

 

$

14,115

 

$

(6,106)

 

$

11,487

 

$

(7,049)

 

(1)

Prior period amounts have not been adjusted for the adoption of ASC Topic 606 under the modified retrospective method.

For the three and six months ended June 30, 2018, the Company recognized revenue of approximately $2.4 million and $6.9 million, respectively, that was included in the corresponding contracts in progress liability balance at December 31, 2017.

Transaction price allocated to the remaining performance obligations

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period.

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

2019

 

2020

 

Thereafter

Total

Fixed-price contracts

 

$

6,500

 

$

6,500

 

$

12,644

 

 

25,644