Revenue and Contract Balances

6 Months Ended

Mar. 29, 2020

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue

We disaggregate revenue by client sector and contract type, as we believe it best depicts how the nature, timing, and uncertainty of revenue and cash flows are affected by economic factors. The following tables provide information about disaggregated revenue:


	Three Months Ended						Six Months Ended
	March 29, 2020		March 31, 2019		March 29, 2020		March 31, 2019
	(in thousands)
Client Sector:
U.S. state and local government	$	102,260	$	129,868	$	224,616	$	253,147
U.S. federal government ⁽¹⁾	243,261		216,498		488,564		441,256
U.S. commercial	162,198		165,970		345,169		338,758
International ⁽²⁾	226,414		210,285		473,407		406,891
Total	$	734,133	$	722,621	$	1,531,756	$	1,440,052

Contract Type:
Fixed-price	$	255,613	$	247,831	$	526,668	$	488,764
Time-and-materials	350,618		345,626		738,776		682,163
Cost-plus	127,902		129,164		266,312		269,125
Total	$	734,133	$	722,621	$	1,531,756	$	1,440,052

⁽¹⁾ Includes revenue generated under U.S. federal government contracts performed outside the United States.

⁽²⁾Includes revenue generated from foreign operations, primarily in Canada, Australia and the United Kingdom, and revenue generated from non-U.S. clients.

Other than the U.S. federal government, no single client accounted for more than 10% of our revenue for the three and six months ended March 29, 2020 and March 31, 2019.

Contract Assets and Contract Liabilities

We invoice customers based on the contractual terms of each contract. However, the timing of revenue recognition may differ from the timing of invoice issuance.

Contract assets represent revenue recognized in excess of the amounts for which we have the contractual right to bill our customers. Such amounts are recoverable from customers based upon various measures of performance, including achievement of certain milestones or completion of a contract. In addition, many of our time and materials arrangements are billed in arrears pursuant to contract terms that are standard within the industry, resulting in contract assets and/or unbilled receivables being recorded, as revenue is recognized in advance of billings.

Contract liabilities consist of billings in excess of revenue recognized. Contract liabilities decrease as we recognize revenue from the satisfaction of the related performance obligation and increase as billings in advance of revenue recognition occur. Contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period. There were no substantial non-current contract assets or liabilities for the periods presented. Net contract assets/liabilities consisted of the following:


	Balance at
	March 29, 2020		September 29, 2019
	(in thousands)
Contract assets ⁽¹⁾	$	109,166	$	114,324
Contract liabilities	(189,741)		(165,611)
Net contract liabilities	$	(80,575)	$	(51,287)

⁽¹⁾ Includes $25.5 million and $26.5 million of contract retentions as of March 29, 2020 and September 29, 2019, respectively.

Revenue recognized in the first half of fiscal 2020 from amounts included in contract liabilities at the beginning of the period was approximately $105 million (approximately $74 million in the first half of fiscal 2019.)

We recognize revenue primarily using the cost-to-cost measure of progress method, which involves the estimates of progress towards completion. Changes in those estimates could result in the recognition of cumulative catch-up adjustments to the contract’s inception-to-date revenue, costs and profit in the period in which such changes are made. As a result, we recognized net unfavorable operating income adjustments of $2.8 million in the second quarter and first half of fiscal 2020. These adjustments to our operating income in the first half of fiscal 2019 were immaterial. Changes in revenue and cost estimates could also result in a projected loss, determined at the contract level, which would be recorded immediately in earnings. As of March 29, 2020 and September 29, 2019, our consolidated balance sheets included liabilities for anticipated losses of $14.6 million and $11.5 million, respectively. The estimated cost to complete the related contracts as of March 29, 2020 was approximately $57 million.

Accounts Receivable, Net

Net accounts receivable consisted of the following:


	Balance at
	March 29, 2020		September 29, 2019
	(in thousands)
Billed	$	438,029	$	522,256
Unbilled	279,440		300,035
Total accounts receivable	717,469		822,291
Allowance for doubtful accounts	(56,890)		(53,571)
Total accounts receivable, net	$	660,579	$	768,720

Billed accounts receivable represent amounts billed to clients that have not been collected. Unbilled accounts receivable, which represent an unconditional right to payment subject only to the passage of time, include unbilled amounts typically resulting from revenue recognized but not yet billed pursuant to contract terms or billed after the period end date. Most of our unbilled receivables at March 29, 2020 are expected to be billed and collected within 12 months. The allowance for doubtful accounts represents amounts that are expected to become uncollectible or unrealizable in the future. We determine an estimated allowance for uncollectible accounts based on management's consideration of trends in the actual and forecasted credit quality of our clients, including delinquency and payment history; type of client, such as a government agency or a commercial sector client; and general economic and industry conditions, including the potential impacts of the coronavirus disease 2019 ("COVID-19") pandemic, that may affect our clients' ability to pay.

Total accounts receivable at March 29, 2020 and September 29, 2019 included approximately $14 million and $15 million, respectively, related to claims, including requests for equitable adjustment, on contracts that provide for price redetermination. We regularly evaluate all unsettled claim amounts and record appropriate adjustments to operating earnings when it is probable that the claim will result in a different contract value than the amount previously estimated. We recorded no material gains or losses related to claims in the first half of fiscal 2020. In the first half of fiscal 2019 (all in the second quarter), we recognized reductions of revenue of $4.8 million and $3.6 million and related losses in operating income of $5.9 million and

$3.6 million in our Remediation and Construction Management ("RCM") and Commercial/International Services Group ("CIG") segments, respectively.

No single client accounted for more than 10% of our accounts receivable at March 29, 2020 and September 29, 2019.

Remaining Unsatisfied Performance Obligations (“RUPOs”)

Our RUPOs represent a measure of the total dollar value of work to be performed on contracts awarded and in progress. We had $3.0 billion of RUPOs as of March 29, 2020. RUPOs increase with awards from new contracts or additions on existing contracts and decrease as work is performed and revenue is recognized on existing contracts. RUPOs may also decrease when projects are canceled or modified in scope. We include a contract within our RUPOs when the contract is awarded and an agreement on contract terms has been reached.

We expect to satisfy our RUPOs as of March 29, 2020 over the following periods:


	Amount
	(in thousands)
Within 12 months	$	1,716,973
Beyond	1,255,124
Total	$	2,972,097

Although RUPOs reflect business that is considered to be firm, cancellations, deferrals or scope adjustments may occur. RUPOs are adjusted to reflect any known project cancellations, revisions to project scope and cost, foreign currency exchange fluctuations and project deferrals, as appropriate. Our operations and maintenance contracts can generally be terminated by the clients without a substantive financial penalty. Therefore, the remaining performance obligations on such contracts are limited to the notice period required for the termination (usually 30, 60, or 90 days).