Military Privatization

12 Months Ended

Dec. 31, 2015

Each of the Military Utility Privatization Subsidiaries have entered into a service contract with the U.S. government to operate and maintain, as well as perform construction activities to renew and replace, the water and/or wastewater systems at a military base or bases. The amounts charged for these services are based upon the terms of the 50-year contract between the Military Utility Privatization Subsidiaries and the U.S. government. Under the terms of each of these agreements, the Military Utility Privatization Subsidiaries agree to operate and maintain the water and/or wastewater systems for: (i) a monthly net fixed-price for operation and maintenance, and (ii) an amount to cover renewals and replacement capital work. In addition, these contracts may also include firm, fixed-priced initial capital upgrade projects to upgrade the existing infrastructure. Contract modifications are also issued for other necessary capital upgrades to the existing infrastructure approved by the U.S. government.

Under the terms of each of these contracts, prices are to be redetermined every three years, following the first two years of the contract, or upon conversion to an Economic Price Adjustment contract, on an annual basis. Prices may also be equitably adjusted for changes in law and other circumstances. Each of the contracts may be subject to termination, in whole or in part, prior to the end of the 50-year term for convenience of the U.S. government or as a result of default or nonperformance by the Military Utility Privatization Subsidiaries.

ASUS has experienced delays in redetermining prices as required by the terms of these 50-year contracts. Interim rate increases have, at times, been implemented pending the outcome of these price redeterminations. Because of the delays, price redeterminations, when finally approved, can be retrospective and prospective. During the third quarter of 2015, the U.S. government approved various price redeterminations, as well as an asset transfer at two of the bases served. ASUS received contract modifications from the U.S. government for these price redeterminations and asset transfers, which included retroactive operation and maintenance management fees for prior periods. As such, ASUS recorded approximately $3.0 million of retroactive revenues and pretax operating income during 2015 in connection with these contract modifications related to periods prior to 2015. Similarly, in September 2014, the U.S. government approved various price redeterminations, which also included retroactive operation and maintenance management fees for prior periods. ASUS recorded approximately $1.7 million of retroactive revenues and pretax operating income during 2014 related to periods prior to 2014.

Costs and estimated earnings contracts and amounts due from the U.S. government as of December 31, 2015 and 2014 are as follows:



(dollars in thousands)	2015			2014
Revenues (costs and estimated earnings) recognized on contracts	$	111,397		$	94,654
Less: Billings to date on contracts	(61,662		)	(56,114		)
	$	49,735		$	38,540

Included in the accompanying balance sheets under the following captions:
Costs and estimated earnings in excess of billings on contracts	$	53,499		$	50,276
Billings in excess of costs and estimated earnings on contracts	(3,764		)	(11,736		)
	$	49,735		$	38,540

Receivables from the U.S. government:
Billed receivables from the U.S. government	$	5,861		$	6,709
Unbilled receivables from the U.S. government (current)	1,309			3,689
Less: allowance for doubtful accounts	—			—
Total	$	7,170		$	10,398