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Note 7 - Revenue
 3 Months Ended
Mar. 31, 2025
Notes to Financial Statements  
Revenue from Contract with Customer [Text Block]

7.

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, as well as precast and reinforced concrete products. 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. The Company generally 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.

 

SPP revenue for water infrastructure steel pipe products 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 no 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. 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.

 

Net revisions in contract estimates resulted in an increase in SPP net sales of $3.6 million and $1.9 million for the three months ended March 31, 2025 and 2024, respectively.

 

Precast revenue for water infrastructure concrete pipe and precast concrete products is recognized at the time control is transferred to customers which is generally at the time of shipment, in an amount that reflects the consideration the Company expects to be entitled to in exchange for the products. All variable considerations that may affect the total transaction price, including contractual discounts, returns, and credits, are included in net sales. Estimates for variable consideration are based on historical experience, anticipated performance, and management’s judgment. The Company’s contracts do not contain significant financing.

 

Disaggregation of Revenue

 

The following table disaggregates revenue by recognition over time or at a point in time, as the Company believes it best depicts how the nature, amount, timing, and uncertainty of its revenue and cash flows are affected by economic factors (in thousands):

 

   

Three Months Ended March 31,

  
   

2025

    

2024

  
                 

Over time

   $ 78,446     $ 80,007  

Point in time

     37,669       33,208  

Net sales

   $ 116,115     $ 113,215  

 

Contract Assets and Contract 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 can include certain milestones, partial shipments, or completion of the contracts. Payment terms of amounts billed vary based on the customer, but are typically due within 30 days of invoicing. Contract liabilities represent advance billings on contracts, typically for purchased steel.

 

The difference between the opening and closing balances of the Company’s contract assets and contract liabilities primarily results from the timing difference between the Company’s performance and billings.

 

The following is a summary of the changes in contract assets and contract liabilities (in thousands):

 

   

Contract Assets

    

Contract Liabilities

    

Net Contract Assets

  

Three Months Ended March 31, 2025

                        

Balance, beginning of period

   $ 103,422     $ (11,197 )   $ 92,225  

Revenue recognized

     65,788       12,658       78,446  

Billings

     (64,127 )     (10,888 )     (75,015 )

Other

     (118 )     123       5  

Balance, end of period

   $ 104,965     $ (9,304 )   $ 95,661  
                         

Three Months Ended March 31, 2024

                        

Balance, beginning of period

   $ 120,516     $ (21,450 )   $ 99,066  

Revenue recognized

     70,640       9,367       80,007  

Billings

     (54,772 )     (6,512 )     (61,284 )

Other

     (669 )     (1 )     (670 )

Balance, end of period

   $ 135,715     $ (18,596 )   $ 117,119  

 

The Company recognized revenue that was included in the contract liabilities balance at the beginning of each period of $8.8 million and $9.4 million during the three months ended March 31, 2025 and 2024, respectively.

 

Backlog

 

Backlog represents the balance of remaining performance obligations under signed contracts for SPP water infrastructure steel pipe products for which revenue is recognized over time. As of March 31, 2025, backlog was $203 million. The Company expects to recognize approximately 75% of the remaining performance obligations in 2025, 22% in 2026, and the balance thereafter.