

3.	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 months to 36 months. Revenue from products and services transferred to customers over time accounted for 86% and 84% of revenue for the three and six months ended June 30, 2019, respectively. Revenue from products and services transferred to customers over time accounted for 83% and 84% of revenue for the three and six months ended June 30, 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 14% and 16% of revenue for the three and six months ended June 30, 2019, respectively. Revenue from products and services transferred to customers at a point in time accounted for 17% and 16% of revenue for the three and six months ended June 30, 2018, respectively.

Backlog—On June 30, 2019, the Company had approximately $909,000 of remaining performance obligations (which is also referred to as “backlog”) in its heavy civil construction segment. The Company expects to recognize approximately 70% 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 increase of approximately $3,500 and $3,300 for the three and six months ended June 30, 2019, respectively, and a net increase of approximately $300 and $1,700 for the three and six months ended June 30, 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 amounts of approximately $15,700 and $9,300 at June 30, 2019 and December 31, 2018, respectively, in project price. These amounts, reflected in “Costs and estimated earnings in excess of billings on uncompleted contracts” on the Condensed Consolidated Balance Sheets, primarily relate to extended delays on a bridge project in Texas due to design errors in the original owner provided project plan. 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 June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Heavy Highway	$	129,964	$	126,554	$	223,574	$	233,962
Commercial	28,575		29,109		59,425		57,628
Aviation	37,061		27,832		66,998		51,084
Water Containment and Treatment	15,515		15,521		30,749		30,516
Other	17,015		24,267		28,568		37,334
Total Heavy Civil Construction Revenue	$	228,130	$	223,283	$	409,314	$	410,524



Revenue by contract type	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Fixed Unit Price	$	185,297	$	194,485	$	326,516	$	354,721
Lump Sum and Other	42,833		28,798		82,798		55,803
Total Heavy Civil Construction Revenue	$	228,130	$	223,283	$	409,314	$	410,524

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 six month period ended June 30, 2019, were not materially impacted by any other factors.