Note 4: revenueS

There have been no significant changes to the amount or timing of our revenue recognition as a result of our adoption of Accounting Standards Update (ASU) 2014-09, “Revenue from Contracts with Customers” (Accounting Standards Codification Topic 606). Revenues are measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Sales and other taxes we collect are excluded from revenues. Costs to obtain and fulfill construction paving contracts are also immaterial and are expensed as incurred when the expected amortization period is one year or less.

Total revenues are primarily derived from our product sales of aggregates, asphalt mix and ready-mixed concrete, and include freight & delivery costs that we pass along to our customers to deliver these products. We also generate revenues from our asphalt construction paving business (represents less than 10% of our Asphalt segment’s revenues) and services related to our aggregates business (represents less than 2% of our Aggregates segment’s revenues).

Our products typically are sold to private industry and not directly to governmental entities. Although approximately 45% to 55% of our aggregates shipments have historically been used in publicly funded construction, such as highways, airports and government buildings, relatively insignificant sales are made directly to federal, state, county or municipal governments/agencies. Therefore, although reductions in state and federal funding can curtail publicly funded construction, our business is not directly subject to renegotiation of profits or termination of contracts with state or federal governments.

Our segment total revenues by geographic market for the three and six month periods ended June 30, 2018 and 2017 are disaggregated as follows:



	Three Months Ended June 30, 2018
in thousands	Aggregates	Asphalt	Concrete	Calcium	Total
Total Revenues by Geographic Market 1
East	$ 313,245	$ 49,339	$ 69,605	$ 0	$ 432,189
Gulf Coast	493,696	38,845	18,354	2,282	553,177
West	149,324	123,644	18,764	0	291,732
Segment sales	$ 956,265	$ 211,828	$ 106,723	$ 2,282	$ 1,277,098
Intersegment sales	(76,947)	0	0	0	(76,947)
Total revenues	$ 879,318	$ 211,828	$ 106,723	$ 2,282	$ 1,200,151



	Three Months Ended June 30, 2017
in thousands	Aggregates	Asphalt	Concrete	Calcium	Total
Total Revenues by Geographic Market 1
East	$ 281,304	$ 29,775	$ 59,647	$ 0	$ 370,726
Gulf Coast	384,793	24,444	25,501	1,971	436,709
West	151,489	121,539	20,065	0	293,093
Segment sales	$ 817,586	$ 175,758	$ 105,213	$ 1,971	$ 1,100,528
Intersegment sales	(69,765)	0	0	0	(69,765)
Total revenues	$ 747,821	$ 175,758	$ 105,213	$ 1,971	$ 1,030,763



	Six Months Ended June 30, 2018
in thousands	Aggregates	Asphalt	Concrete	Calcium	Total
Total Revenues by Geographic Market 1
East	$ 496,459	$ 61,068	$ 131,175	$ 0	$ 688,702
Gulf Coast	888,271	53,488	43,554	4,224	989,537
West	271,192	201,107	32,956	0	505,255
Segment sales	$ 1,655,922	$ 315,663	$ 207,685	$ 4,224	$ 2,183,494
Intersegment sales	(128,869)	0	0	0	(128,869)
Total revenues	$ 1,527,053	$ 315,663	$ 207,685	$ 4,224	$ 2,054,625



	Six Months Ended June 30, 2017
in thousands	Aggregates	Asphalt	Concrete	Calcium	Total
Total Revenues by Geographic Market 1
East	$ 463,762	$ 39,154	$ 113,897	$ 0	$ 616,813
Gulf Coast	752,006	42,480	51,807	3,857	850,150
West	252,118	189,900	28,259	0	470,277
Segment sales	$ 1,467,886	$ 271,534	$ 193,963	$ 3,857	$ 1,937,240
Intersegment sales	(119,149)	0	0	0	(119,149)
Total revenues	$ 1,348,737	$ 271,534	$ 193,963	$ 3,857	$ 1,818,091

The geographic markets are defined by states/countries as follows:

East market — Arkansas, Delaware, Illinois, Kentucky, Maryland, North Carolina, Pennsylvania, Tennessee, Virginia, and Washington D.C.

Gulf Coast market — Alabama, Florida, Georgia, Louisiana, Mexico, Mississippi, Oklahoma, South Carolina, Texas and the Bahamas

West market — Arizona, California and New Mexico

PRODUCT AND SERVICE REVENUES

Revenue is recognized when obligations under the terms of a contract with our customer are satisfied; generally this occurs at a point in time when our aggregates, asphalt mix and ready-mixed concrete are shipped/delivered and control passes to the customer. Revenue for our products and services is recorded at the fixed invoice amount and is due by the 15th day of the following month — we do not offer discounts for early payment. Freight & delivery generally represents pass-through transportation we incur (including our administrative costs) and pay to third-party carriers to deliver our products to customers and are accounted for as a fulfillment activity. Likewise, the cost related to freight & delivery is included in cost of revenues.

CONSTRUCTION PAVING REVENUES

Revenue from our asphalt construction paving business is recognized over time using the percentage-of-completion method under the cost approach. The percentage of completion is determined by costs incurred to date as a percentage of total costs estimated for the project. Under this approach, recognized contract revenue equals the total estimated contract revenue multiplied by the percentage of completion. Our construction contracts are unit priced and an account receivable is recorded for amounts invoiced based on actual units produced. Contract assets for estimated earnings in excess of billings, contract assets related to retainage provisions and contract liabilities for billings in excess of costs are immaterial. Variable consideration in our construction paving contracts is immaterial and consists of incentives and penalties based on the quality of work performed. Our construction paving contracts may contain warranty provisions covering defects in equipment, materials, design or workmanship that generally run from nine months to one year after project completion. Due to the nature of our construction paving projects, including contract owner inspections of the work during construction and prior to acceptance, we have not experienced material warranty costs for these short-term warranties.

VOLUMETRIC PRODUCTION PAYMENT REVENUES

In 2013 and 2012, we sold a percentage interest in certain future aggregates production for net cash proceeds of $226,926,000. These transactions, structured as volumetric production payments (VPPs):

relate to eight quarries in Georgia and South Carolina

provide the purchaser solely with a nonoperating percentage interest in the subject quarries’ future aggregates production

contain no minimum annual or cumulative guarantees by us for production or sales volume, nor minimum sales price

are both volume and time limited (we expect the transactions will last approximately 25 years, limited by volume rather than time)

We are the exclusive sales agent for, and transmit quarterly to the purchaser the proceeds from the sale of, the purchaser’s share of future aggregates production. Our consolidated total revenues exclude the revenue from the sale of the purchaser’s share of aggregates.

These proceeds we received from the sale of the percentage interest were recorded as deferred revenue on the balance sheet. We recognize revenue on a unit-of-sales basis (as we sell the purchaser’s share of future production) relative to the volume limitations of the transactions. Given the nature of the risks and potential rewards assumed by the buyer, the transactions do not reflect financing activities.

Reconciliation of the deferred revenue balances (current and noncurrent) is as follows:



	Three Months Ended		Six Months Ended
	June 30		June 30
in thousands	2018	2017	2018	2017
Deferred Revenue
Balance at beginning of period	$ 198,201	$ 204,819	$ 199,556	$ 206,468
Revenue recognized from deferred revenue	(1,905)	(1,719)	(3,260)	(3,368)
Balance at end of period	$ 196,296	$ 203,100	$ 196,296	$ 203,100

Based on expected sales from the specified quarries, we expect to recognize $7,470,000 of deferred revenue as income during the 12-month period ending June 30, 2019 (reflected in other current liabilities in our June 30, 2018 Condensed Consolidated Balance Sheet).