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Revenue Recognition
6 Months Ended
Dec. 31, 2019
Revenue From Contract With Customer [Abstract]  
Revenue Recognition

7.

Revenue Recognition

We disaggregate our revenue arrangements by contract type, customer, and whether the Company performs on the contract as the prime or subcontractor.  We believe that these categories allow for a better understanding of the nature, amount, timing, and uncertainty of revenue and cash flows arising from our contracts.

Revenue by Contract Type

The Company generated revenue on our cost-plus-fee, firm fixed-price, and time-and-materials contracts as follows during the three and six months ended December 31, 2019 and 2018 (in thousands):

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

December 31, 2019

 

 

December 31, 2019

 

 

 

Domestic

 

 

International

 

 

Total

 

 

Domestic

 

 

International

 

 

Total

 

Cost-plus-fee

 

$

818,477

 

 

$

 

 

$

818,477

 

 

$

1,566,191

 

 

$

 

 

$

1,566,191

 

Firm fixed-price

 

 

361,016

 

 

 

27,851

 

 

 

388,867

 

 

 

752,552

 

 

 

54,291

 

 

 

806,843

 

Time and materials

 

 

174,300

 

 

 

13,825

 

 

 

188,125

 

 

 

359,823

 

 

 

26,004

 

 

 

385,827

 

Total

 

$

1,353,793

 

 

$

41,676

 

 

$

1,395,469

 

 

$

2,678,566

 

 

$

80,295

 

 

$

2,758,861

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

December 31, 2018

 

 

December 31, 2018

 

 

 

Domestic

 

 

International

 

 

Total

 

 

Domestic

 

 

International

 

 

Total

 

Cost-plus-fee

 

$

657,050

 

 

$

 

 

$

657,050

 

 

$

1,298,577

 

 

$

 

 

$

1,298,577

 

Firm fixed-price

 

 

313,018

 

 

 

24,356

 

 

 

337,374

 

 

 

634,089

 

 

 

47,289

 

 

 

681,378

 

Time and materials

 

 

172,484

 

 

 

14,733

 

 

 

187,217

 

 

 

336,409

 

 

 

31,141

 

 

 

367,550

 

Total

 

$

1,142,552

 

 

$

39,089

 

 

$

1,181,641

 

 

$

2,269,075

 

 

$

78,430

 

 

$

2,347,505

 

Customer Information

The Company generated revenue from our primary customer groups as follows during the three and six months ended December 31, 2019 and 2018 (in thousands):

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

December 31, 2019

 

 

December 31, 2019

 

 

 

Domestic

 

 

International

 

 

Total

 

 

Domestic

 

 

International

 

 

Total

 

Department of Defense

 

$

990,381

 

 

$

 

 

$

990,381

 

 

$

1,928,021

 

 

$

 

 

$

1,928,021

 

Federal civilian agencies

 

 

342,029

 

 

 

 

 

 

342,029

 

 

 

706,022

 

 

 

 

 

 

706,022

 

Commercial and other

 

 

21,383

 

 

 

41,676

 

 

 

63,059

 

 

 

44,523

 

 

 

80,295

 

 

 

124,818

 

Total

 

$

1,353,793

 

 

$

41,676

 

 

$

1,395,469

 

 

$

2,678,566

 

 

$

80,295

 

 

$

2,758,861

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

December 31, 2018

 

 

December 31, 2018

 

 

 

Domestic

 

 

International

 

 

Total

 

 

Domestic

 

 

International

 

 

Total

 

Department of Defense

 

$

834,797

 

 

$

 

 

$

834,797

 

 

$

1,653,063

 

 

$

 

 

$

1,653,063

 

Federal civilian agencies

 

 

287,915

 

 

 

 

 

 

287,915

 

 

 

580,117

 

 

 

 

 

 

580,117

 

Commercial and other

 

 

19,840

 

 

 

39,089

 

 

 

58,929

 

 

 

35,895

 

 

 

78,430

 

 

 

114,325

 

Total

 

$

1,142,552

 

 

$

39,089

 

 

$

1,181,641

 

 

$

2,269,075

 

 

$

78,430

 

 

$

2,347,505

 

Prime or Subcontractor

The Company generated revenue as either the prime or subcontractor as follows during the three and six months ended December 31, 2019 and 2018 (in thousands):

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

December 31, 2019

 

 

December 31, 2019

 

 

 

Domestic

 

 

International

 

 

Total

 

 

Domestic

 

 

International

 

 

Total

 

Prime contractor

 

$

1,227,317

 

 

$

41,676

 

 

$

1,268,993

 

 

$

2,424,951

 

 

$

80,295

 

 

$

2,505,246

 

Subcontractor

 

 

126,476

 

 

 

 

 

 

126,476

 

 

 

253,615

 

 

 

 

 

 

253,615

 

Total

 

$

1,353,793

 

 

$

41,676

 

 

$

1,395,469

 

 

$

2,678,566

 

 

$

80,295

 

 

$

2,758,861

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

December 31, 2018

 

 

December 31, 2018

 

 

 

Domestic

 

 

International

 

 

Total

 

 

Domestic

 

 

International

 

 

Total

 

Prime contractor

 

$

1,052,867

 

 

$

39,089

 

 

$

1,091,956

 

 

$

2,103,398

 

 

$

78,430

 

 

$

2,181,828

 

Subcontractor

 

 

89,685

 

 

 

 

 

 

89,685

 

 

 

165,677

 

 

 

 

 

 

165,677

 

Total

 

$

1,142,552

 

 

$

39,089

 

 

$

1,181,641

 

 

$

2,269,075

 

 

$

78,430

 

 

$

2,347,505

 


Significant Estimates

For many of our fixed price revenue arrangements and for revenue arrangements that have award or incentive fees, the Company uses an estimate at completion (EAC) to measure progress towards the complete satisfaction of its performance obligations.  For these revenue arrangements, revenue is recognized over time primarily using a cost-to-cost input method based on the ratio of costs incurred to date to total estimated costs at completion. The EAC process requires the Company to use professional judgment when assessing risks, estimating contract revenue and costs, estimating variable consideration, and making assumptions for schedule and technical issues.  The Company periodically reassesses its EAC assumptions and updates its estimates as needed.  When estimates of total costs to be incurred on a contract exceed total revenue, a provision for the entire loss on the contract is recorded in the period in which the loss is determined.

Based on changes in a contract’s EAC, a cumulative adjustment to revenue will be recorded.  For the three and six months ended December 31, 2019, we recognized an increase to income before income taxes of $17.2 million ($0.50 per diluted share) and $23.8 million ($0.69 per diluted share), respectively, compared with $4.2 million ($0.12 per diluted share) and $10.6 million ($0.31 per diluted share) for the three and six months ended December 31, 2018, respectively, from EAC adjustments.  The Company used its statutory tax rate when calculating the impact to diluted earnings per share.

Revenue recognized from previously satisfied performance obligations was $9.8 million and $10.2 million for the three and six months ended December 31, 2019, respectively, compared with an immaterial amount for the three and six months ended December 31, 2018.  The change in revenue generally relates to final true-up adjustments to our estimated award or incentive fees in the period in which we receive the customer’s final performance score or when we can determine that more objective, contractually-defined criteria have been fully satisfied.  During the three months ended December 31, 2019, the Company received notification that certain contract close out risks had been mitigated on previously satisfied performance obligations and therefore recorded a reduction to its established reserve amount.

Remaining Performance Obligations

The Company’s remaining performance obligations balance as of period end represents the expected revenue to be recognized for the satisfaction of remaining performance obligations on our existing contracts.  This balance excludes unexercised contract option years and task orders that may be issued underneath an Indefinite Delivery/Indefinite Quantity (IDIQ) vehicle until such task orders are awarded.  The remaining performance obligations balance generally increases with the execution of new contracts and converts into revenue as our contractual performance obligations are satisfied.  

The Company continues to monitor this balance as it is subject to change from execution of new contracts, contract modifications or extensions, government deobligations, or early terminations.  Based on this analysis, an adjustment to the period end balance may be required.  Our remaining performance obligations balance as of December 31, 2019 was $6.4 billion.

The Company expects to recognize approximately 84 percent of our remaining performance obligations balance as revenue over the next twelve months and the remaining 16 percent thereafter.