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Revenue |
10. REVENUE
The Company’s revenue is derived from contracts for services with federal, state, local and foreign governmental entities and private customers. Revenues are generally derived from the enhancement or preservation of navigability of waterways or the protection of shorelines through the removal or replenishment of soil, sand or rock.
Performance obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account upon which the Company’s revenue is calculated. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue as the performance obligation is satisfied. Fixed-price contracts, which comprise substantially all of the Company’s revenue, will most often represent a single performance obligation as the promise to transfer the individual services is not separately identifiable from other promises in the contracts and, therefore, not distinct.
The Company’s performance obligations are satisfied over time and revenue is recognized using contract fulfillment costs incurred to date compared to total estimated costs at completion, also known as cost-to-cost, to measure progress towards completion. As the Company’s performance creates an asset that the customer controls, this method provides a faithful depiction of the transfer of an asset to the customer. Generally, the Company has an enforceable right to payment for performance completed to date.
The majority of the Company’s contracts are completed in a year or less. At December 31, 2020, the Company had $559,376 of remaining performance obligations, which the Company refers to as total backlog. Approximately 90% of the Company’s backlog will be completed in 2021 with the remaining balance expected to be completed by 2022.
Transaction price
The transaction price is calculated using the Company’s estimated costs to complete a project. These costs are based on the types of equipment required to perform the specified service, project site conditions, the estimated project duration, seasonality, location and complexity of a project.
The nature of the Company’s contracts gives rise to several types of variable consideration, including pay on quantity dredged for dredging projects and dredging project contract modifications. Estimated pay quantity is the amount of material the Company expects to dredge for which it will receive payment. Estimated quantity to be dredged is calculated using engineering estimates based on current survey data and the Company’s knowledge based on historical project experience.
Revenue by category
Domestically, the Company’s work generally is performed in coastal waterways and deep water ports. The U.S. dredging market consists of four primary types of work: capital, coastal protection, maintenance and rivers & lakes. Foreign projects typically involve capital work. The following table sets forth, by type of work, the Company’s contract revenues for the years ended December 31, 2020, 2019 and 2018:
The following table sets forth, by type of customer, the Company’s contract revenues for the years ended December 31, 2020, 2019 and 2018:
Contract balances
Billings on contracts are generally submitted after verification with the customers of physical progress and are recognized as accounts receivable in the balance sheet. For billings that do not match the timing of revenue recognition, the difference between amounts billed and recognized as revenue is reflected in the balance sheet as either contract revenues in excess of billings or billings in excess of contract revenues. Certain pre-contract and pre-construction costs are capitalized and reflected as contract assets in the balance sheet. Customer advances, deposits and commissions are reflected in the balance sheet as contract liabilities.
Accounts receivable at December 31, 2020 and December 31, 2019 are as follows:
The components of contracts in progress at December 31, 2020 and December 31, 2019 are as follows:
At December 31, 2020 and 2019, costs to fulfill contracts with customers recognized as an asset were $10,501 and $10,300, respectively, and are recorded in other current assets and other noncurrent assets. These costs relate to pre-contract and pre-construction activities. During the years ended December 31, 2020 and 2019 the company amortized pre-contract and pre-construction costs of $15,541 and $11,468, respectively. The Company’s largest domestic customer is the U.S. Army Corps of Engineers (the “Corps”), which has responsibility for federally funded projects related to navigation and flood control of U.S. waterways. In 2020, 2019 and 2018, 79.5%, 81.7% and 75.5%, respectively, of contract revenues were earned from contracts with federal government agencies, including the Corps, as well as other federal entities such as the U.S. Coast Guard and U.S. Navy. During the year ended December 31, 2020 and 2019, respectively, the Company recognized $616 and $2,103 of revenue related to the use of equipment by a customer working on a federal government contract. At December 31, 2020 and 2019, approximately 42.6% and 54.6% respectively, of accounts receivable, including contract revenues in excess of billings and retainage, were due on contracts with federal government agencies. The Company depends on its ability to continue to obtain federal government contracts, and indirectly, on the amount of federal funding for new and current government dredging projects. Therefore, the Company’s operations can be influenced by the level and timing of federal funding.
The Company derived revenues and gross profit from foreign project operations for the years ended December 31, 2020, 2019, and 2018, as follows:
In 2020, 2019 and 2018, foreign revenues were primarily from work done in the Middle East. The majority of the Company’s long-lived assets are marine vessels and related equipment. At any point in time, the Company may employ certain assets outside of the U.S., as needed, to perform work on the Company’s foreign projects. As of December 31, 2020 and 2019, long-lived assets with a net book value of $5,255 and $31,872, respectively, were located outside of the U.S., currently our assets outside of the U.S. do not include dredges. Revenue from foreign projects has been concentrated in the Middle East which comprised less than 10% in 2020, 2019 and 2018. At December 31, 2020 and 2019, approximately 12% and 29%, respectively, of total accounts receivable, including retainage and contract revenues in excess of billings, were due on contracts in the Middle East.
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