XML 21 R9.htm IDEA: XBRL DOCUMENT
v3.10.0.1

REVENUE RECOGNITION | 6 Months Ended
--- | ---
Jul. 31, 2018
REVENUE RECOGNITION |
REVENUE RECOGNITION | NOTE 4 — REVENUE RECOGNITION Impact of the Adoption of the New Accounting Standard ASC Topic 606 outlines a single comprehensive model for entities to use in accounting for revenues arising from contracts with customers. The new standard supersedes most previous revenue recognition guidance, including industry-specific guidance. Central to the new framework is a five-step revenue recognition model that requires reporting entities to:
| 1. |  | Identify the contract,
| 2. |  | Identify the performance obligations of the contract,
| 3. |  | Determine the transaction price of the contract,
| 4. |  | Allocate the transaction price to the performance obligations, and
| 5. |  | Recognize revenue.
The new guidance focuses on the transfer of the contractor’s control of the goods and/or services to the customer, as opposed to the transfer of risk and rewards, and it also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. Major provisions cover the determination of which goods and services are distinct and represent separate performance obligations, the appropriate treatments for variable consideration (which may relate to change requests, claims, performance incentives and liquidated damages), and the evaluation of whether revenues should be recognized at a point in time or over time. Where a performance obligation is satisfied over time, the related revenues are also recognized over time. The effect of the adoption of ASC Topic 606 on retained earnings as of February 1, 2018 was a net tax-effected increase of less than $0.1 million. The differences between the Company’s reported operating results for the three and six months ended July 31, 2018, which reflect the application of the new standard on the Company’s contracts, and the results that would have been reported if the accounting was performed pursuant to the accounting standards previously in effect, were not material. In accordance with ASC Topic 606, the Company has reported balances for contract assets and contract liabilities in its condensed consolidated balance sheets as of July 31 and January 31, 2018. Contract assets are defined in the new standard to include amounts that represent the rights to receive payment for goods or services that have been transferred to the project owner, with the rights conditional upon something other than the passage of time. Contract liabilities are defined in the new standard to include the amounts that reflect obligations to provide goods or services for which payment has been received. Contract assets and liabilities related to rights and obligations in a contract are interdependent and are recorded net on a contract by contract basis. Accordingly, the amounts presented in prior condensed consolidated balance sheets that were identified as “costs and estimated earnings in excess of billings” and “billings in excess of costs and estimated earnings” are now reflected in the line items entitled “contract assets” and “contract liabilities”. In addition, accounts receivable have been redefined to represent unconditional rights to receive payments which only require the passage of time. Accordingly, amounts retained by project owners that have been historically included in accounts receivable are now reflected in contract assets or contract liabilities depending on the net contract position of the particular contract. Amounts retained by project owners under construction contracts at July 31 and January 31, 2018 were $23.4 million and $69.7 million, respectively. Further, the proper accounting for certain costs that may be incurred to obtain contracts or that may be incurred on contracts but not representing actual progress, has been altered. For example, significant costs that are typically incurred during the initial phases of a contract may no longer be charged to contract costs when incurred. Such costs, identified as contract fulfillment costs, should be capitalized and amortized to contract costs over the contract performance period. The net balances for capitalized contract fulfillment costs as of July 31 and January 31, 2018 that are being charged to active contracts on an amortization basis were $0.6 million and $1.7 million, respectively. Costs incurred by the Company to obtain contracts have not been material historically. Balances as of January 31, 2018 for the accounts identified below were recast in order to conform to the presentation as of July 31, 2018:
|  | Balances |  | Impact of the |  | Classification |
|  | Reported Previously |  | Adoption of ASC Topic 606 |  | Under ASC Topic 606 |
Accounts receivable, net |  | $ | 94,440 |  | $ | (69,684 | ) | $ | 24,756 |
Costs and estimated earnings in excess of billings |  | 4,887 |  | (4,887 | ) | — |
Contract assets |  | — |  | 13,847 |  | 13,847 |
Billings in excess of costs and estimated earnings |  | 108,388 |  | (108,388 | ) | — |
Contract liabilities |  | — |  | 47,613 |  | 47,613 |
Deferred taxes |  | 1,279 |  | 13 |  | 1,293 |
Retained earnings |  | 211,112 |  | 38 |  | 211,150 |
The increase in contracts-in-progress, net, for the six months ended July 31, 2018 in the amount of $44.2 million was caused primarily by a decline of $62.8 million in billings in excess of costs and estimated earnings and an increase in costs and estimated earnings in excess of billings in the amount of $24.5 million, offset partially by a decrease in customer retainages in the amount of $46.3 million. Regarding the presentation of net cash provided by operating activities for the six months ended July 31, 2017, the increase of $44.4 million in contracts-in-progress represented the decrease of $23.7 million in the amounts of billings in excess of costs and estimated earnings and an increase in customer retainages in the amount of $20.7 million. The changes in contract fulfillment costs during the periods were not material. Update to Significant Accounting Policies Upon adoption of ASC Topic 606, the Company revised its accounting policy on revenue recognition from the policy provided in the Notes to Consolidated Financial Statements included in the Company’s Form 10-K for the year ended January 31, 2018. The revised accounting policy for revenue recognition is provided below. Revenues are recognized primarily under various types of long-term construction contracts, including those for which revenues are based on either a fixed price, time and materials or cost-plus-fee basis, and primarily over time as performance obligations are satisfied due to the continuous transfer of control to the project owner or other customer. Contracts typically have durations of three months to three years. Revenues from fixed price contracts, including a portion of estimated profit, are recognized as services are provided, based on costs incurred and estimated total contract costs using the percentage-of-completion method. However, costs incurred on a particular contract that are related to materials or equipment items over which the corresponding project owner has yet to obtain control shall be excluded from the measurement of progress toward the satisfaction of the corresponding performance obligation determined as of the report date. Revenues from time and materials contracts are recognized when the related services are provided to the customer. Revenues from cost-plus-fee construction contracts are recognized on the basis of costs incurred during the period plus the fee earned, measured using the cost-to-cost method. Most of the Company’s long-term contracts have a single performance obligation as the promises to transfer the individual goods or services are not separately identifiable from other promises in the contracts and, therefore, are not distinct. Under previous revenue recognition guidance, the Company also generally accounted for its long-term contracts as single units of account (i.e., a single performance obligation). Historically, the Company has recognized adjustments in revenues and profits on contracts, including those associated with contract modifications and estimated cost changes, using a cumulative catch-up method as now required by the new standard. Under this method, the impact of the adjustment on revenues recorded to date is recognized in the period the adjustment is identified. Revenues and profits in future periods of contract performance are recognized using the adjusted estimate. As required by both prior and new guidance, if at any time the estimate of contract profitability indicates an anticipated loss on a contract, the Company will recognize the total loss in the quarter it is identified. The net impacts on revenues of changes that the Company made to transaction prices and to its estimates of the costs-to-complete active contracts were increases of approximately $15.4 million and $10.8 million for the three and six months ended July 31, 2018, respectively. The timing of when the Company bills its customers is generally dependent upon negotiated billing terms, the achievement of certain contract milestones, the completion of certain other phases of the work, or when services are provided or products are shipped. Projects with performance obligations satisfied over time will typically have revenues recognized to date in amounts different from the amounts of cumulative billings. As the rights and obligations in a contract are interdependent, the differences for each contract are combined with certain other asset and liability amounts related to the corresponding contracts in order to determine the net contract asset or net contract liability amounts, on a contract-by-contract basis. These amounts are totaled at the report date and presented in the corresponding consolidated balance sheet as contract assets and contract liabilities. Customer retainage amounts represent funds withheld by project owners until a defined phase of a contract or project has been completed and accepted by the project owner. Retention amounts and the length of retention periods may vary. Most of the amount outstanding as of July 31, 2018, related to active projects that will be collected during the fiscal year ending January 31, 2019. Retainage amounts related to active contracts are considered current assets regardless of the term of the applicable contract; such amounts are generally collected by the completion of the applicable contract. Costs charged to contracts include amounts billed to the Company for delivered goods and services where payments have been retained from subcontractors and suppliers. Retained amounts as of July 31 and January 31, 2018, which were included in the Company’s balance of accounts payable as of those dates, totaled $35.1 million and $38.7 million, respectively. Generally, such amounts are expected to be paid prior to or upon the completion of the applicable project. The transaction price for a contract represents the value of the corresponding contract used to determine the amount of revenues recognized as of the balance sheet date. It may reflect amounts of variable consideration, which could include increases or decreases to the transaction price made from time-to-time during the period of contract performance as circumstances evolve related to such items as approved and unapproved change requests, incentives, and liquidated damages. The Company includes the estimated amount of variable consideration in the transaction price to the extent it is probable that a significant reversal of cumulative revenues recognized on the particular contract will not occur when the uncertainty associated with the variable consideration is resolved. The Company’s determination of the amount of variable consideration to be included in the transaction price of a particular contract is based largely on an assessment of the Company’s anticipated performance and all information (historical, current and forecasted) that is reasonably available. The effect of any revisions to the transaction price on the amount of previously recognized revenues that is due to the addition or reduction of variable consideration is recorded currently as an adjustment to revenues on a cumulative catch-up basis. In the event that any amounts of variable consideration that are reflected in the transaction price of a contract are not resolved in the Company’s favor, there could be reductions in, or reversals of, previously recognized revenues. Contract variations for which the Company has project-owner directive for additional work or other scope change, but not for the price associated with the corresponding additional effort, are included in the transaction price and are reflected in revenues when it is considered probable that the applicable costs will be recovered through an adjustment to the contract price. The aggregate amounts of contract variations, including change request, included in the transaction prices that were used to determine project-to-date revenues at July 31 and January 31, 2018, were $4.1 million and $9.3 million, respectively. The effects of any revision to a transaction price can be determined at any time and they could be material. Actual costs related to any changes in the scope of the corresponding contract are expensed as they are incurred. Changes to total estimated contract costs and losses, if any, are reflected in operating results for the period in which they are determined. In general, any contract claim would be included in the corresponding transaction price only when an agreement on the amount has been reached with the project owner. Variations related to the Company’s contracts typically are accounted for as modifications to the existing contracts and performance obligations. The Company’s long-term contracts typically have schedule dates and other performance obligations that if not achieved could subject the Company to liquidated damages. These contract requirements generally relate to specified activities that must be completed by an established date or by the achievement of a specified level of output or efficiency. Each applicable contract defines the conditions under which a project owner may be entitled to liquidated damages. At the outset of each of the Company’s contracts, the potential amounts of liquidated damages typically are not constrained, or subtracted, from the transaction price as the Company believes that it has included activities in its contract plan, and the associated costs, that will be effective in preventing such damages. Of course, circumstances may change as the Company executes the corresponding contract. The transaction price is reduced by an applicable amount when the Company no longer considers it probable that a future reversal of revenues will not occur when the matter is resolved. In general, the Company considers potential liquidated damages, the costs of other related items and potential mitigating factors in determining the adequacy of its regularly updated estimates of costs expected to be incurred to complete active projects. In other cases, the Company may have the grounds to assert liquidated damages against subcontractors, suppliers, project owners or other parties related to a project. Such circumstances may arise when the Company’s activities and progress are adversely affected by delayed or damaged materials, challenges with equipment performance or other events out of the Company’s control where the Company has rights to recourse, typically in the form of liquidated damages. In general, the Company does not adjust the corresponding contract accounting until it is probable that the benefit will be realized. Such adjustments could be material. Remaining Unsatisfied Performance Obligations The amount of the Company’s remaining unsatisfied performance obligations (“RUPO”) represents the unrecognized revenue value of contracts with customers as determined under ASC Topic 606. Additions made to RUPO during a reporting period represent the total expected revenue value of new performance obligations, as well as the growth in value on existing contracts. The amounts of additions may vary significantly each reporting period based on the timing of major new contract commitments and the Company’s RUPO may fluctuate with currency movements. At July 31, 2018, the Company had RUPO of $193.6 million. Approximately 80% of the Company’s RUPO as of July 31, 2018 is anticipated to be recognized as revenues during the six months ending January 31, 2019, with the remainder recognized as revenues during the year ending January 31, 2020. Although the amount of reported RUPO includes business that is considered to be firm, it is important to note that cancellations, deferrals or scope adjustments may occur. RUPO may be adjusted to reflect any known project cancellations, revisions to project scope and cost, foreign currency exchange fluctuations and project deferrals, as appropriate. The amount of revenues recognized during the six months ended July 31, 2018 related to performance obligations that were partially satisfied as of January 31, 2018 was $236.8 million. The amount of revenues recognized in the six months ended July 31, 2018 that was included in contract liabilities as of January 31, 2018 was $38.9 million. Disaggregation of Revenues The following table presents consolidated revenues for the three and six months ended July 31, 2018 and 2017 disaggregated by the geographic area where the work was performed:
|  | Three Months Ended July 31, |  | Six Months Ended July 31, |
|  | 2018 |  | 2017 |  | 2018 |  | 2017 |
United States |  | $ | 108,939 |  | $ | 254,259 |  | $ | 233,093 |  | $ | 482,039 |
United Kingdom |  | 19,690 |  | 2,170 |  | 34,158 |  | 2,669 |
Republic of Ireland |  | 7,415 |  | 3,374 |  | 10,159 |  | 5,584 |
Other |  | 626 |  | — |  | 626 |  | — |
Consolidated Revenues |  | $ | 136,670 |  | $ | 259,803 |  | $ | 278,036 |  | $ | 490,292 |
The consolidated revenues are disaggregated by reportable segment in Note 15 to the condensed consolidated financial statements. Prior period financial operating results have not been adjusted for the adoption of ASC Topic 606 under the Company’s application of the modified retrospective method.

X
- References No definition available. + Details
Name: | us-gaap_RevenueFromContractWithCustomerAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 + Details
Name: | us-gaap_RevenueFromContractWithCustomerTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration