Revenue Recognition

12 Months Ended

Dec. 31, 2018

Revenue from Contract with Customer [Abstract]

3. Revenue Recognition

Change in Accounting Policy

On January 1, 2018, the Company adopted ASU No. 2014-09,

Revenue from Contracts with Customers (Topic 606)

using the modified retrospective method for contracts that were not completed as of January 1, 2018. Results on the Company’s consolidated statement of operations for reporting periods beginning after December 31, 2017 are presented under this new pronouncement, while prior period amounts reported on the Company’s consolidated statement of operations are not adjusted and continue to be reported under the accounting standard Revenue Recognition Topic 605, which was in effect for prior periods. In connection with the adoption of this ASU, certain changes have been made to the Company’s consolidated balance sheet. The accounts previously named “Costs and estimated earnings in excess of billings on uncompleted contracts” and “Billings in excess of costs and estimated earnings on uncompleted contracts” have been renamed “Contract assets” and “Contract liabilities”, respectively. In addition, contract retainages previously classified in accounts receivable, net of allowances were reclassified into contract assets and accruals for contracts in a loss position previously classified in other current liabilities were reclassified into contract liabilities.

The Company

recorded an increase to opening retained earnings of $0.7 million, net of tax, as of January 1, 2018 due to the cumulative impact of adopting Topic 606, representing revenues which would have been recognized in prior periods under Topic

606

. The impact of adopting Topic

606

for

2018

was an increase of $

0.2

million to revenue. The cumulative adjustment and the impact experienced during

2018

were due to accelerated recognition of contract provisions related to variable consideration previously not permitted to be recognized under Topic

605

until no remaining contingency existed related to this consideration. For additional information related to impact of this

pronouncement, see Note 1 — Organization, Business and Summary of Significant Accounting Policies to our Financial Statements.

Disaggregation of Revenue

A majority of the Company’s revenues are earned through contracts with customers that normally provide for payment upon completion of specified work or units of work as identified in the contract. Although there is considerable variation in the terms of these contracts, they are primarily structured as fixed-price contracts, under which the Company agrees to do the entire project for a fixed amount, or unit-price contracts, under which the Company agrees to do the work at a fixed price per unit of work as specified in the contract. The Company also enters into time-and-equipment and time-and-materials contracts under which the Company is paid for labor and equipment at negotiated hourly billing rates and for other expenses, including materials, as

incurred

at rates agreed to in the contract

. Finally, the Company sometimes enters into cost-plus contracts, where the Company is paid for costs plus a negotiated margin. On occasion, time-and-equipment, time-and-materials and cost-plus contracts require the Company to include a guaranteed not-to-exceed maximum price.

Historically, fixed-price and unit-price contracts have had the highest potential margins; however, they have had a greater risk in terms of profitability because cost overruns may not be recoverable. Time-and-equipment, time-and-materials and cost-plus contracts have historically had less margin upside, but generally have had a lower risk of cost overruns. The Company also provides services under master service agreements (“MSAs”) and other variable-term service agreements. MSAs normally cover maintenance, upgrade and extension services, as well as new construction. Work performed under MSAs is typically billed on a unit-price, time-and-materials or time-and-equipment basis. MSAs are typically one to three years in duration; however, most of the Compa

ny’s contracts, includin

g MSAs, may be terminated by the customer on short notice, typically 30 to 90 days, even if the Company is not in default under the contract. Under MSAs, customers generally agree to use the Company for certain services in a specified geographic region. Most MSAs include no obligation for the contract counterparty to assign specific volumes of

work to the Company and do not require the counterparty to use the Company exclusively, although in some cases the MSA contract gives the Comp

any a right of first refusal for certain work. Additional information related to the Company’s market types is provided in Note 16

—

Segment Information to the Financial Statements.

The components of the Company’s revenue by contract type

for

the year ended December 31,

2018

were as follows:

	2018
	T&D					C&I					Total
(dollars in thousands)	Amount		Percent			Amount		Percent			Amount		Percent
Fixed price	$	361,699		40.5	%	$	452,732		71.0	%	$	814,431		53.2	%
Unit price		181,179		20.3			51,590		8.1			232,769		15.2
T&E		305,581		34.2			34,938		5.4			340,519		22.2
Other		44,649		5.0			98,801		15.5			143,450		9.4
	$	893,108		100.0	%	$	638,061		100.0	%	$	1,531,169		100.0	%

The components of the Company’s revenue by market type for

the

year ended December 31,

2018 were as follows:

	2018
(dollars in thousands)	Amount		Percent			Segment
Transmission	$	559,467		36.5	%		T&D
Distribution		333,641		21.8			T&D
Electrical construction		638,061		41.7			C&I
Total Revenue	$	1,531,169		100.0	%

Contract Assets and Liabilities

Contracts with customers usually stipulate the timing of payment, which is defined by the terms found within the various contracts under which work was performed during the period. Therefore, contract assets and liabilities are created when the timing of costs incurred on work performed does not coincide with the billing terms, which frequently include retention provisions contained in each contract.

The Company’s consolidated balance sheets present contract assets which contains unbilled revenue (previously identified as costs and estimated earnings in excess of billings) and contract retainages associated with contract work that has been completed and billed but not paid by customers, pursuant to retainage provisions, which are generally due once the job is completed and approved. The allowance for collection of contract retainage was not significant as of December 31, 2018 and 2017.

Contract assets consisted of the following at December 31:

(in thousands)	2018		2017		Change
Unbilled revenue	$	111,153	$	78,260	$	32,893
Contract retainages, net		49,128		42,732		6,396
Contract assets	$	160,281	$	120,992	$	39,289

The Company’s consolidated balance sheets present contract liabilities which contains deferred revenue (previously identified as billings in excess of costs and estimated earnings on uncompleted contracts) and an accrual for contracts in a loss provision.

Contract liabilities consisted of the following at December 31:

(in thousands)	2018		2017		Change
Deferred revenue	$	57,051	$	28,919	$	28,132
Accrued loss provision		1,483		1,305		178
Contract liabilities	$	58,534	$	30,224	$	28,310

The following table provides information about contract assets and contract liabilities from contracts with customers:

(in thousands)	2018			2017			Change
Contract assets	$	160,281		$	120,992		$	39,289
Contract liabilities		(58,534	)		(30,224	)		(28,310	)
Net contract assets (liabilities)	$	101,747		$	90,768		$	10,979

The difference between the opening and closing balances of the Company’s contract assets and contract liabilities primarily results from the timing of the Company’s performance and customer payment. The amount of revenue recognized in the period that was included in the opening contract liability balances was $

22.1 million for

2018

. This revenue consists primarily of work performed on previous billings to customers.

The net asset position for contracts in process consisted of the following at December 31:


(in thousands)	2018		2017
Costs and estimated earnings on uncompleted contracts	$	2,718,713	$	1,978,981
Less: Billings to date		2,664,611		1,929,640
	$	54,102	$	49,341

The net asset position for contracts in process is included within the contract asset and contract liability in the accompanying consolidated balance sheets as follows at December 31:


(in thousands)	2018			2017
Unbilled revenue	$	111,153		$	78,260
Deferred revenue		(57,051	)		(28,919	)
	$	54,102		$	49,341

Remaining Performance Obligations

December 31, 2018

, the Company had $1.06 billion of remaining performance obligations. The Company’s remaining performance obligations includes projects that have a written award, a letter of intent, a notice to proceed or an agreed upon work order to perform work on mutually accepted terms and conditions. The following table summarizes that amount of remaining performance obligations that the Company expects to be realized as of

December 31, 2018

and the amount of the remaining performance obligations that the Company reasonably estimates will not be recognized within the next twelve months.

	Remaining Performance Obligations as of December 31, 2018
(In thousands)	Total		Amount estimated to not be recognized within 12 months
T&D	$	418,178	$	19,698
C&I		644,547		167,652
Total	$	1,062,725	$	187,350

The Company expects a vast majority of the remaining performance obligations to be recognized within twenty-four months, although the timing of the Company’s performance is not always under its control. Additionally, the difference between the remaining performance obligations and backlog is due to the exclusion of a portion of the Company’s MSAs under certain contract types from the Company’s remaining performance obligations as these contracts can be canceled for convenience at any time by the Company or the customer without considerable cost incurred by the customer. Additional information related to backlog is provided in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.