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Revenue Recognition
3 Months Ended
Sep. 30, 2019
Revenue From Contract With Customer [Abstract]  
Revenue Recognition

7.

Revenue Recognition

We disaggregate our revenue arrangements by contract type, customer, and whether the Company performs on the contract as the prime or subcontractor.  We believe that these categories allow for a better understanding of the nature, amount, timing, and uncertainty of revenue and cash flows arising from our contracts.

Revenue by Contract Type

The Company generated revenue on our cost-plus-fee, firm fixed-price, and time-and-materials contracts as follows during the three months ended September 30, 2019 and 2018 (in thousands):

 

 

 

Three Months Ended

 

 

Three Months Ended

 

 

 

September 30, 2019

 

 

September 30, 2018

 

 

 

Domestic

 

 

International

 

 

Total

 

 

Domestic

 

 

International

 

 

Total

 

Cost-plus-fee

 

$

747,714

 

 

$

 

 

$

747,714

 

 

$

641,527

 

 

$

 

 

$

641,527

 

Firm fixed-price

 

 

391,536

 

 

 

26,440

 

 

 

417,976

 

 

 

321,071

 

 

 

22,933

 

 

 

344,004

 

Time and materials

 

 

185,523

 

 

 

12,179

 

 

 

197,702

 

 

 

163,925

 

 

 

16,408

 

 

 

180,333

 

Total

 

$

1,324,773

 

 

$

38,619

 

 

$

1,363,392

 

 

$

1,126,523

 

 

$

39,341

 

 

$

1,165,864

 

Customer Information

The Company generated revenue from our primary customer groups as follows during the three months ended September 30, 2019 and 2018 (in thousands):

 

 

 

Three Months Ended

 

 

Three Months Ended

 

 

 

September 30, 2019

 

 

September 30, 2018

 

 

 

Domestic

 

 

International

 

 

Total

 

 

Domestic

 

 

International

 

 

Total

 

Department of Defense

 

$

937,640

 

 

$

 

 

$

937,640

 

 

$

818,266

 

 

$

 

 

$

818,266

 

Federal civilian agencies

 

 

363,993

 

 

 

 

 

 

363,993

 

 

 

292,202

 

 

 

 

 

 

292,202

 

Commercial and other

 

 

23,140

 

 

 

38,619

 

 

 

61,759

 

 

 

16,055

 

 

 

39,341

 

 

 

55,396

 

Total

 

$

1,324,773

 

 

$

38,619

 

 

$

1,363,392

 

 

$

1,126,523

 

 

$

39,341

 

 

$

1,165,864

 


Prime or Subcontractor

The Company generated revenue as either the prime or subcontractor as follows during the three months ended September 30, 2019 and 2018 (in thousands):

 

 

 

Three Months Ended

 

 

Three Months Ended

 

 

 

September 30, 2019

 

 

September 30, 2018

 

 

 

Domestic

 

 

International

 

 

Total

 

 

Domestic

 

 

International

 

 

Total

 

Prime contractor

 

$

1,197,634

 

 

$

38,619

 

 

$

1,236,253

 

 

$

1,050,531

 

 

$

39,341

 

 

$

1,089,872

 

Subcontractor

 

 

127,139

 

 

 

 

 

 

127,139

 

 

 

75,992

 

 

 

 

 

 

75,992

 

Total

 

$

1,324,773

 

 

$

38,619

 

 

$

1,363,392

 

 

$

1,126,523

 

 

$

39,341

 

 

$

1,165,864

 

 

Significant Estimates

For many of our fixed price revenue arrangements and for revenue arrangements that have award or incentive fees, the Company uses an estimate at completion (EAC) to measure progress towards the complete satisfaction of its performance obligations.  For these revenue arrangements, revenue is recognized over time primarily using a cost-to-cost input method based on the ratio of costs incurred to date to total estimated costs at completion. The EAC process requires the Company to use professional judgment when assessing risks, estimating contract revenue and costs, estimating variable consideration, and making assumptions for schedule and technical issues.  The Company periodically reassesses its EAC assumptions and updates its estimates as needed.  When estimates of total costs to be incurred on a contract exceed total revenue, a provision for the entire loss on the contract is recorded in the period in which the loss is determined.

Based on changes in a contract’s EAC, a cumulative adjustment to revenue will be recorded.  During the three months ended September 30, 2019 and 2018, we recognized an increase to income before income taxes of $6.5 million ($0.19 per diluted share) and $6.4 million ($0.19 per diluted share), respectively, from EAC adjustments.  The Company used its statutory tax rate when calculating the impact to diluted earnings per share.

Remaining Performance Obligations

The Company’s remaining performance obligations balance as of period end represents the expected revenue to be recognized for the satisfaction of remaining performance obligations on our existing contracts.  This balance excludes unexercised contract option years and task orders that may be issued underneath an Indefinite Delivery/Indefinite Quantity (IDIQ) vehicle until such task orders are awarded.  The remaining performance obligations balance generally increases with the execution of new contracts and converts into revenue as our contractual performance obligations are satisfied.  

The Company continues to monitor this balance as it is subject to change from execution of new contracts, contract modifications or extensions, government deobligations, or early terminations.  Based on this analysis, an adjustment to the period end balance may be required.  Our remaining performance obligations balance as of September 30, 2019 was $7.1 billion.

The Company expects to recognize approximately 73 percent of our remaining performance obligations balance as revenue over the next year and the remaining 27 percent thereafter.