Revenue

The Company manufactures water infrastructure steel pipe products, which are generally made to custom specifications for installation contractors serving projects funded by public water agencies. Generally, each of the Company’s contracts with its customers contains a single performance obligation, as the promise to transfer products is

not

separately identifiable from other promises in the contract and, therefore, is

not

distinct.

For a majority of contracts, revenue is recognized over time as the manufacturing process progresses because of the Company’s right to payment for work performed to date plus a reasonable profit on cancellations for unique products that have

alternative use to the Company. Revenue is measured by the costs incurred to date relative to the estimated total direct costs to fulfill each contract (cost-to-cost method). For a small number of contracts, revenue is recognized when all

four

of the following criteria have been satisfied: persuasive evidence of an arrangement exists, the price is fixed or determinable, delivery has occurred, and collectability is reasonably assured. Contract costs include all material, labor, and other direct costs incurred in satisfying the performance obligations. The cost of steel material is recognized as a contract cost when the steel is introduced into the manufacturing process. Changes in job performance, job conditions, and estimated profitability, including those arising from contract change orders, contract penalty provisions, foreign currency exchange rate movements, changes in raw materials costs, and final contract settlements

may

result in revisions to estimates of revenue, costs, and income, and are recognized in the period in which the revisions are determined.

Provisions for losses on uncompleted contracts, included in Accrued liabilities, are estimated by comparing total estimated contract revenue to the total estimated contract costs and a loss is recognized during the period in which it becomes probable and can be reasonably estimated.

The Company does

not

recognize revenue on a contract until the contract has approval and commitment from both parties, the contract rights and payment terms can be identified, the contract has commercial substance, and its collectability is probable.

Revisions in contract estimates resulted in an increase (decrease) in revenue of $(

1.5

) million and

$0.8

million for the

three

months ended

March

31,

2019

and

2018,

respectively.

Contract

Assets and Liabilities

Contract assets primarily represent revenue earned over time but

not

yet billable based on the terms of the contracts. These amounts will be billed based on the terms of the contracts, which include achievement of milestones, partial shipments, or completion of the contracts. Payment terms of amounts billed vary based on the customer, but are typically due within

days of invoicing. Contract liabilities represent amounts billed based on the terms of the contracts in advance of costs incurred and revenue earned.

Revenue recognized that was included in the Contract liabilities balance at the beginning of each period was

$3.3

million and

$1.7

million during the

three

months ended

March

31,

2019

and

2018,

respectively.

Backlog

Backlog represents the balance of remaining performance obligations under signed contracts. As of

March

31,

2019,

backlog was approximately

$167.3

million. The Company expects to recognize approximately

71%

of the remaining performance obligations in

2019,

25%

2020,

and the balance thereafter.