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Revenue Recognition | 9 Months Ended
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Sep. 30, 2018
Revenue from Contract with Customer [Abstract] |
Revenue from Contract with Customer [Text Block] | 3. Revenue Recognition Adoption and Accounting Policy On January 1, 2018, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) using the modified retrospective method for contracts that were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under this new pronouncement, while prior period amounts are not adjusted and continue to be reported under the accounting standard Revenue Recognition Topic 605, which was in effect for prior periods. The Company recorded an increase to opening retained earnings of $0.7 million, net of tax, as of January 1, 2018 due to the cumulative impact of adopting Topic 606, representing revenues which would have been recognized in prior periods under Topic 606. The impact of adopting Topic 606 to revenue for the three months ended September 30, 2018 was not significant. The impact of adopting Topic 606 for the nine months ended September 30, 2018 was an increase of $0.3 million to revenue. The cumulative adjustment and the impact experienced during the nine months ended September 30, 2018 were due to accelerated recognition of contract provisions related to variable consideration previously not permitted to be recognized under Topic 605 until no remaining contingency existed related to this consideration. Under Topic 606, the Company recognizes revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for goods or services provided. Revenue associated with contracts with customers is recognized over time as the Company’s performance creates or enhances customer controlled assets or creates or enhances an asset with no alternative use, for which the Company has an enforceable right to receive compensation as defined under the contract. To determine the amount of revenue to recognize over time, the Company estimates profit by determining the difference between total estimated revenue and total estimated cost of a contract. In addition, the Company estimates a cost accrual every quarter that represents unbilled invoicing activity for services performed by subcontractors and suppliers during the quarter, and estimates revenue from the contract cost portion of this accrual based on current gross margin rates to be consistent with its cost method of revenue recognition. The estimated value of unbilled amounts are determined using a regression analysis that estimates value based on our historical experience, and is adjusted for large individual projects. The profit and corresponding revenue is recognized over the contract term based on costs incurred under the cost-to-cost method. The Company utilized the cost-to-cost method as we believe cost incurred best represent the amount of work completed and remaining on our projects, and is the most common basis for computing percentage of completion in our industry. For purposes of recognizing revenue, the Company follows the five-step approach outlined in ASC 606-10-25. As the cost-to-cost method is driven by incurred cost, the Company calculates the percentage of completion by dividing costs incurred to date by the total estimated cost. The percentage of completion is then multiplied by estimated revenues to determine inception-to-date revenue. Revenue recognized for the period is the current inception-to-date recognized revenue less the prior period inception-to-date recognized revenue. If a contract is projected to result in a loss, the entire contract loss is recognized in the period when the loss was first determined and the amount of the loss is updated in subsequent reporting periods. Revenue recognition also includes an amount related to a contract asset or contract liability. If the recognized revenue is greater than the amount billed to the customer, a contract asset is recorded in costs and estimated earnings in excess of billings on uncompleted contracts. Conversely, if the amount billed to the customer is greater than the recognized revenue, a contract liability is recorded in billings in excess of costs and estimated earnings on uncompleted contracts. Contract costs incurred to date and expected total contract costs are continuously monitored during the term of the contract. Changes in the job performance, job conditions and final contract settlements are factors that influence management’s assessment of total contract value and the total estimated costs to complete those contracts, and therefore, profit and revenue recognition. Additionally, the Company estimates costs to complete on fixed price contracts which are determined on an individual contract basis by evaluating each project’s status as of the balance sheet date, and using our historical experience with the level of effort required to complete the underlying project. Claims and change orders are also measured based on our historical experience with individual customers and similar contracts, and are evaluated by management individually. The Company includes these estimated amounts of variable consideration to the extent that it is probable there will not be a significant reversal of revenue. Some of the Company’s contracts may have contract terms that include variable consideration such as safety or performance bonuses or liquidated damages. In accordance with ASC 606-10-32, the Company estimates the variable consideration using one of two methods. In contracts in which there is a binary outcome, the most likely amount method is used. In instances in which there is a range of possible outcomes, the expected value method is used. In accordance with ASC 606-10-32-11, the Company includes the estimated amount of variable consideration in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative recognized revenue will not result when the final outcome of the variable consideration is determined. In contracts in which a significant reversal may occur, the Company uses constraint in recognizing revenue on variable consideration. Although the Company often enters into contracts that contain liquidated damage clauses, the Company rarely incurs them, and as such, the Company does not include amounts associated with liquidated damage clauses until it is probable that liquidated damages will occur. These items are continually monitored by multiple levels of management throughout the reporting period. A portion of the work the Company performs requires financial assurances in the form of performance and payment bonds or letters of credit at the time of execution of the contract. Most contracts include retention provisions of up to 10%, which are generally withheld from each progress payment as retainage until the contract work has been completed and approved. Disaggregation of Revenue A majority of the Company’s revenues are earned through contracts with customers that normally provide for payment upon completion of specified work or units of work as identified in the contract. Although there is considerable variation in the terms of these contracts they are primarily structured as fixed-price contracts, under which the Company agrees to do the entire project for a fixed amount, or unit-price contracts, under which the Company agrees to do the work at a fixed price per unit of work as specified in the contract. The Company also enters into time-and-equipment and time-and-materials contracts under which the Company is paid for labor and equipment at negotiated hourly billing rates and for other expenses, including materials, as incurred. Finally, the Company sometimes enters into cost-plus contracts, where the Company is paid for costs plus a negotiated margin. On occasion, time-and-equipment, time-and-materials and cost-plus contracts require the Company to include a guaranteed not-to-exceed maximum price. Historically, fixed-price and unit-price contracts have had the highest potential margins; however, they have had a greater risk in terms of profitability because cost overruns may not be recoverable. Time-and-equipment, time-and-materials and cost-plus contracts have historically had less margin upside, but generally have had a lower risk of cost overruns. The Company also provides services under master service agreements (“MSAs”) and other variable-term service agreements. MSAs normally cover maintenance, upgrade and extension services, as well as new construction. Work performed under MSAs is typically billed on a unit-price, time-and-materials or time-and-equipment basis. MSAs are typically one to three years in duration; however, most of the Company’s contracts, including MSAs, may be terminated by the customer on short notice, typically 30 to 90 days, even if the Company is not in default under the contract. Under MSAs, customers generally agree to use the Company for certain services in a specified geographic region. Most MSAs include no obligation for the contract counterparty to assign specific volumes of work to the Company and do not require the counterparty to use the Company exclusively, although in some cases the MSA contract gives the Company a right of first refusal for certain work. Additional information related to the Company’s market types is provided in Note 11–Segment Information to the Financial Statements. The components of the Company’s revenue by contract type for the three and nine months ended September 30, 2018 were as follows:
|  | Three months ended September 30, 2018 |
|  | T&D |  |  | C&I |  |  | Total |
(in thousands) |  | Amount |  |  | Percent |  |  | Amount |  |  | Percent |  |  | Amount |  |  | Percent |
Fixed price |  | $ | 82,058 |  |  |  | 36.9 | % |  | $ | 132,439 |  |  |  | 74.8 | % |  | $ | 214,497 |  |  |  | 53.7 | %
Unit Price |  |  | 42,751 |  |  |  | 19.2 |  |  |  | 14,256 |  |  |  | 8.1 |  |  |  | 57,007 |  |  |  | 14.3 |
T&E |  |  | 76,520 |  |  |  | 34.4 |  |  |  | 9,431 |  |  |  | 5.3 |  |  |  | 85,951 |  |  |  | 21.5 |
Other |  |  | 21,202 |  |  |  | 9.5 |  |  |  | 20,880 |  |  |  | 11.8 |  |  |  | 42,082 |  |  |  | 10.5 |
|  | $ | 222,531 |  |  |  | 100.0 | % |  | $ | 177,006 |  |  |  | 100.0 | % |  | $ | 399,537 |  |  |  | 100.0 | %
|  | Nine months ended September 30, 2018 |
|  | T&D |  |  | C&I |  |  | Total |
(in thousands) |  | Amount |  |  | Percent |  |  | Amount |  |  | Percent |  |  | Amount |  |  | Percent |
Fixed price |  | $ | 238,723 |  |  |  | 37.5 | % |  | $ | 312,033 |  |  |  | 69.5 | % |  | $ | 550,756 |  |  |  | 50.8 | %
Unit Price |  |  | 130,058 |  |  |  | 20.5 |  |  |  | 39,314 |  |  |  | 8.8 |  |  |  | 169,372 |  |  |  | 15.6 |
T&E |  |  | 224,938 |  |  |  | 35.4 |  |  |  | 27,830 |  |  |  | 6.2 |  |  |  | 252,768 |  |  |  | 23.3 |
Other |  |  | 42,123 |  |  |  | 6.6 |  |  |  | 69,805 |  |  |  | 15.5 |  |  |  | 111,928 |  |  |  | 10.3 |
|  | $ | 635,842 |  |  |  | 100.0 | % |  | $ | 448,982 |  |  |  | 100.0 | % |  | $ | 1,084,824 |  |  |  | 100.0 | %
The components of the Company’s revenue by market type for the three and nine months ended September 30, 2018 were as follows:
|  | Three months ended September 30, 2018 |  |  | Nine months ended September 30, 2018 |
(in thousands) |  | Amount |  |  | Percent |  |  | Segment |  |  | Amount |  |  | Percent |  |  | Segment |
Transmission |  | $ | 121,619 |  |  |  | 30.4 | % |  |  | T&D |  |  | $ | 377,780 |  |  |  | 34.8 | % |  |  | T&D |
Distribution |  |  | 100,912 |  |  |  | 25.3 |  |  |  | T&D |  |  |  | 258,062 |  |  |  | 23.8 |  |  |  | T&D |
Electrical Construction |  |  | 177,006 |  |  |  | 44.3 |  |  |  | C&I |  |  |  | 448,982 |  |  |  | 41.4 |  |  |  | C&I |
Total Revenue |  | $ | 399,537 |  |  |  | 100.0 | % |  |  |  |  |  | $ | 1,084,824 |  |  |  | 100.0 | % |  |  |  |
Contract Assets and Liabilities Contracts with customers usually stipulate the timing of payment, which is defined by the terms found within the various contracts under which work was performed during the period. Therefore, contract assets and liabilities are created when the timing of costs incurred on work performed does not coincide with the billing terms, which frequently include retention provisions contained in each contract. The following table provides information about receivables, contract assets and contract liabilities from contracts with customers:
|  | September 30, |  |  | December 31, |  |  |  |
(in thousands) |  | 2018 |  |  | 2017 |  |  | Change |
Contract assets |  | $ | 124,057 |  |  | $ | 78,260 |  |  | $ | 45,797 |
Contract liabilities |  |  | (46,186 | ) |  |  | (28,919 | ) |  |  | (17,267 | )
Net contract assets (liabilities) |  | $ | 77,871 |  |  | $ | 49,341 |  |  | $ | 28,530 |
The difference between the opening and closing balances of the Company’s contract assets and contract liabilities primarily results from the timing of the Company’s performance and customer payment. The amounts of revenue recognized in the period that was included in the opening contract liability balances was $35.3 million and $37.3 million for the three and nine months ended September 30, 2018, respectively. This revenue consists primarily of work performed on previous billings to customers. Remaining Performance Obligations On September 30, 2018, the Company had $1.02 billion of remaining performance obligations. The Company’s remaining performance obligations includes projects that have a written award, a letter of intent, a notice to proceed or an agreed upon work order to perform work on mutually accepted terms and conditions. The following table summarizes that amount of remaining performance obligations that the Company expects to be realized as of September 30, 2018 and the amount of the remaining performance obligations that the Company reasonably estimates will not be recognized within the next twelve months. The Company expects a vast majority of the remaining performance obligations to be recognized within twenty-four months, although the timing of the Company’s performance is not always under its control. Additionally, the difference between the remaining performance obligations and backlog is due to the exclusion of a portion of the Company’s MSAs under certain contract types from the Company’s remaining performance obligations as these contracts can be canceled for convenience at any time by the Company or the customer without considerable cost incurred by the customer. Additional information related to backlog is provided in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations”.
|  | Remaining Performance Obligations as of September 30, 2018 |
(In thousands) |  | Total |  |  | Amount estimated to not be recognized within 12 months |
T&D |  | $ | 403,046 |  |  | $ | 63,683 |
C&I |  |  | 615,575 |  |  |  | 132,551 |
Total |  | $ | 1,018,621 |  |  | $ | 196,234 |

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- 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
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