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Revenue Recognition
9 Months Ended
Mar. 31, 2020
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 and nine months ended March 31, 2020 and 2019 (in thousands):

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

March 31, 2020

 

 

March 31, 2020

 

 

 

Domestic

 

 

International

 

 

Total

 

 

Domestic

 

 

International

 

 

Total

 

Cost-plus-fee

 

$

852,700

 

 

$

 

 

$

852,700

 

 

$

2,418,891

 

 

$

 

 

$

2,418,891

 

Firm fixed-price

 

 

376,314

 

 

 

29,422

 

 

 

405,736

 

 

 

1,128,866

 

 

 

83,713

 

 

 

1,212,579

 

Time and materials

 

 

190,344

 

 

 

16,820

 

 

 

207,164

 

 

 

550,167

 

 

 

42,824

 

 

 

592,991

 

Total

 

$

1,419,358

 

 

$

46,242

 

 

$

1,465,600

 

 

$

4,097,924

 

 

$

126,537

 

 

$

4,224,461

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

March 31, 2019

 

 

March 31, 2019

 

 

 

Domestic

 

 

International

 

 

Total

 

 

Domestic

 

 

International

 

 

Total

 

Cost-plus-fee

 

$

704,627

 

 

$

 

 

$

704,627

 

 

$

2,003,204

 

 

$

 

 

$

2,003,204

 

Firm fixed-price

 

 

348,143

 

 

 

25,863

 

 

 

374,006

 

 

 

982,232

 

 

 

73,152

 

 

 

1,055,384

 

Time and materials

 

 

172,761

 

 

 

13,564

 

 

 

186,325

 

 

 

509,170

 

 

 

44,705

 

 

 

553,875

 

Total

 

$

1,225,531

 

 

$

39,427

 

 

$

1,264,958

 

 

$

3,494,606

 

 

$

117,857

 

 

$

3,612,463

 

 


Customer Information

The Company generated revenue from our primary customer groups as follows during the three and nine months ended March 31, 2020 and 2019 (in thousands):

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

March 31, 2020

 

 

March 31, 2020

 

 

 

Domestic

 

 

International

 

 

Total

 

 

Domestic

 

 

International

 

 

Total

 

Department of Defense

 

$

1,037,242

 

 

$

 

 

$

1,037,242

 

 

$

2,965,263

 

 

$

 

 

$

2,965,263

 

Federal civilian agencies

 

 

361,320

 

 

 

 

 

 

361,320

 

 

 

1,067,342

 

 

 

 

 

 

1,067,342

 

Commercial and other

 

 

20,796

 

 

 

46,242

 

 

 

67,038

 

 

 

65,319

 

 

 

126,537

 

 

 

191,856

 

Total

 

$

1,419,358

 

 

$

46,242

 

 

$

1,465,600

 

 

$

4,097,924

 

 

$

126,537

 

 

$

4,224,461

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

March 31, 2019

 

 

March 31, 2019

 

 

 

Domestic

 

 

International

 

 

Total

 

 

Domestic

 

 

International

 

 

Total

 

Department of Defense

 

$

887,030

 

 

$

 

 

$

887,030

 

 

$

2,540,093

 

 

$

 

 

$

2,540,093

 

Federal civilian agencies

 

 

318,374

 

 

 

 

 

 

318,374

 

 

 

898,491

 

 

 

 

 

 

898,491

 

Commercial and other

 

 

20,127

 

 

 

39,427

 

 

 

59,554

 

 

 

56,022

 

 

 

117,857

 

 

 

173,879

 

Total

 

$

1,225,531

 

 

$

39,427

 

 

$

1,264,958

 

 

$

3,494,606

 

 

$

117,857

 

 

$

3,612,463

 

Prime or Subcontractor

The Company generated revenue as either the prime or subcontractor as follows during the three and nine months ended March 31, 2020 and 2019 (in thousands):

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

March 31, 2020

 

 

March 31, 2020

 

 

 

Domestic

 

 

International

 

 

Total

 

 

Domestic

 

 

International

 

 

Total

 

Prime contractor

 

$

1,298,073

 

 

$

46,242

 

 

$

1,344,315

 

 

$

3,723,024

 

 

$

126,537

 

 

$

3,849,561

 

Subcontractor

 

 

121,285

 

 

 

 

 

 

121,285

 

 

 

374,900

 

 

 

 

 

 

374,900

 

Total

 

$

1,419,358

 

 

$

46,242

 

 

$

1,465,600

 

 

$

4,097,924

 

 

$

126,537

 

 

$

4,224,461

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

March 31, 2019

 

 

March 31, 2019

 

 

 

Domestic

 

 

International

 

 

Total

 

 

Domestic

 

 

International

 

 

Total

 

Prime contractor

 

$

1,114,172

 

 

$

39,427

 

 

$

1,153,599

 

 

$

3,217,570

 

 

$

117,857

 

 

$

3,335,427

 

Subcontractor

 

 

111,359

 

 

 

 

 

 

111,359

 

 

 

277,036

 

 

 

 

 

 

277,036

 

Total

 

$

1,225,531

 

 

$

39,427

 

 

$

1,264,958

 

 

$

3,494,606

 

 

$

117,857

 

 

$

3,612,463

 


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.  For the three and nine months ended March 31, 2020, we recognized an increase to income before income taxes of $8.3 million ($0.24 per diluted share) and $32.1 million ($0.93 per diluted share), respectively, compared with $6.3 million ($0.18 per diluted share) and $16.9 million ($0.49 per diluted share) for the three and nine months ended March 31, 2019, respectively, from EAC adjustments.  The Company used its statutory tax rate when calculating the impact to diluted earnings per share.

Revenue recognized from previously satisfied performance obligations was $(0.3) million and $9.9 million for the three and nine months ended March 31, 2020, respectively, compared with $0.8 million and $1.1 million for the three and nine months ended March 31, 2019.  The change in revenue generally relates to final true-up adjustments to our estimated award or incentive fees in the period in which we receive the customer’s final performance score or when we can determine that more objective, contractually-defined criteria have been fully satisfied.  During the nine months ended March 31, 2020, the Company received notification that certain contract close out risks had been mitigated on previously satisfied performance obligations and therefore recorded a reduction to its established reserve amount.

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 March 31, 2020 was $6.3 billion.

The Company expects to recognize approximately 88 percent of our remaining performance obligations balance as revenue over the next twelve months and the remaining 12 percent thereafter.