

2.	REVENUE FROM CONTRACTS WITH CUSTOMERS

Performance Obligations Satisfied Over Time—Revenue for the heavy civil construction segment contracts that satisfy the criteria for over time recognition is recognized as the work progresses. The majority of the revenue is derived from long-term, heavy civil construction contracts and projects that typically span between 12 to 36 months. Revenue from products and services transferred to customers over time accounted for 81% and 84% of revenue for the three months ended March 31, 2019 and 2018, respectively.

Performance Obligations Satisfied at a Point in Time—Revenue for the residential construction segment contracts that do not satisfy the criteria for over time recognition is recognized at a point in time and utilizes an output measure for performance based on the completion of a unit of work (e.g., residential foundation). The typical time frame for completion of a residential foundation is less than one month. Revenue from products and services transferred to customers at a point in time accounted for 19% and 16% of revenue for the three months ended March 31, 2019 and 2018, respectively.

Backlog—On March 31, 2019, the Company had approximately $808,700 of remaining performance obligations in its heavy civil construction segment, which is also referred to as backlog. The Company expects to recognize approximately 78% of its backlog as revenue during the next twelve months, and the balance thereafter.

Contract Estimates—Contract estimates are based on various assumptions to project the outcome of future events that often span several years. These assumptions include labor productivity and availability, the complexity of the work to be performed, the cost and availability of materials and the performance of subcontractors. Changes in job performance, job conditions and estimated profitability, including those changes arising from contract penalty provisions and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions are determined. Changes in estimated revenues and gross margin resulted in a net decrease of approximately $200 and a net increase of approximately $1,300 for the three months ended March 31, 2019 and 2018, respectively, included in “Operating income” on the Condensed Consolidated Statements of Operations. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined.

Variable Consideration—The transaction price for contracts may include variable consideration, which includes increases to transaction price for approved and unapproved change orders, claims and incentives, and reductions to transaction price for liquidated damages. Based upon the Company’s review of the provisions of its contracts, specific costs incurred, and other related evidence supporting the unapproved change orders and claims, the Company concluded that it was appropriate to include in project price amounts of approximately $9,300 at both March 31, 2019 and December 31, 2018, in “Costs and estimated earnings in excess of billings on uncompleted contracts” on its Condensed Consolidated Balance Sheets, primarily relating to extended delays on a bridge project in Texas. However, unapproved change order and claim amounts are subject to negotiations which may cause actual results to differ materially from estimated and recorded amounts.

Revenue by Heavy Civil Construction Category—The Company’s heavy civil construction segment’s portfolio of products and services consists of approximately 150 active contracts. The following series of tables presents the Company’s heavy civil construction revenue disaggregated by several categories:



Revenue by major end market	Three Months Ended March 31,
	2019		2018
Heavy Highway	$	93,610	$	107,408
Commercial	30,850		28,519
Aviation	29,937		23,252
Water Containment and Treatment	15,234		14,995
Other	11,553		13,067
Total Heavy Civil Construction Revenue	$	181,184	$	187,241



Revenue by contract type	Three Months Ended March 31,
	2019		2018
Fixed Unit Price	$	141,219	$	160,236
Lump Sum and Other	39,965		27,005
Total Heavy Civil Construction Revenue	$	181,184	$	187,241

Each of these contract types presents advantages and disadvantages. Typically, the Company assumes more risk with lump-sum contracts. However, these types of contracts offer additional profits when the work is completed for less than originally estimated. Under fixed-unit price contracts, the Company’s profit may vary if actual labor-hour costs vary significantly from the negotiated rates. Also, because some contracts can provide little or no fee for managing material costs, the components of contract cost can impact profitability.

Contract Balances—The timing of revenue recognition, billings and cash collections results in billed accounts receivable and costs and estimated earnings in excess of billings on uncompleted contracts (contract assets) on the Condensed Consolidated Balance Sheet. In the Company’s heavy civil construction segment, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., biweekly or monthly) or upon achievement of contractual milestones. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. However, the Company occasionally receives advances or deposits from its customers, before revenue is recognized, resulting in billings in excess of costs and estimated earnings on uncompleted contracts (contract liabilities). These assets and liabilities are reported on the Condensed Consolidated Balance Sheet on a contract-by-contract basis at the end of each reporting period. Changes in the contract asset and liability balances during the three month period ended March 31, 2019, were not materially impacted by any other factors.

The table below reconciles the net excess billings to the amounts included in the Condensed Consolidated Balance Sheets at those dates:



	March 31, 2019			December 31, 2018
Costs and estimated earnings in excess of billings on uncompleted contracts	$	44,133		$	41,542
Billings in excess of costs and estimated earnings on uncompleted contracts	(55,598		)	(62,407		)
Net amount of billings in excess of costs and estimated earnings on uncompleted contracts	$	(11,465	)	$	(20,865	)

Revenues recognized and billings on uncompleted contracts include cumulative amounts recognized as revenues and billings in prior periods. This revenue primarily represents progress on the Company’s construction jobs.