Revisions in Estimates

Our profit recognition related to construction contracts is based on estimates of costs to complete each project. These estimates can vary significantly in the normal course of business as projects progress, circumstances develop and evolve, and uncertainties are resolved. We recognize revenue on affirmative claims when we have a signed agreement and recognize revenue associated with unapproved change orders to the extent the related costs have been incurred, the amount can be reliably estimated and recovery is probable. We recognize costs associated with affirmative claims and unapproved change orders as incurred and revisions to estimated total costs as soon as the obligation to perform is determined. Approved change orders and affirmative claims, as well as changes in related estimates of costs to complete, are considered revisions in estimates. We use the cumulative catch-up method applicable to construction contract accounting to account for revisions in estimates. Under this method, revisions in estimates are accounted for in their entirety in the period of change. There can be no assurance that we will not experience further changes in circumstances or otherwise be required to further revise our profitability estimates.

For the majority of our contracts, revenue in an amount equal to cost incurred is recognized until there is sufficient information to determine the estimated profit on the project with a reasonable level of certainty. The gross profit impact from projects that reached initial profit recognition is not included in the tables below. During the three and nine months ended September 30, 2014, the gross profit impact from projects that reached initial profit recognition was $21.4 million and $50.0 million, respectively. During the three and nine months ended September 30, 2013, the gross profit impact from projects that reached initial profit recognition was $13.5 million and $28.8 million, respectively.

Construction

The net changes in project profitability from revisions in estimates, both increases and decreases, that individually had an impact of $1.0 million or more on gross profit were net decreases of $1.0 million and $9.4 million for the three and nine months ended September 30, 2014, respectively. The net changes for the three and nine months ended September 30, 2013 were net increases of $1.5 million and $0.6 million, respectively. The projects are summarized as follows:

Increases



	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in millions)			2014		2013		2014		2013
Number of projects with upward estimate changes			—		4		2		5
Range of increase in gross profit from each project, net		$	—	$	1.3 - 2.7	$	1.1 - 1.2	$	1.1 - 3.0
Increase on project profitability		$	—	$	7.4	$	2.2	$	11.8

The increases during the three months ended September 30, 2013 and during the nine months ended September 30, 2014 and 2013 were due to owner-directed scope changes and lower costs than originally anticipated.

Decreases



	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in millions)			2014		2013		2014		2013
Number of projects with downward estimate changes			1		3		5		4
Reduction in gross profit from each project, net		$	1.0	$	1.5 - 2.5	$	1.7 - 2.9	$	1.1 - 4.3
Decrease on project profitability		$	1.0	$	5.9	$	11.6	$	11.2

The decreases during the three and nine months ended September 30, 2014 and 2013 were due to higher costs than originally anticipated and outstanding claims and change orders.

Large Project Construction

The net changes in project profitability from revisions in estimates, both increases and decreases, that individually had an impact of $1.0 million or more on gross profit were a net decrease of $8.5 million and a net increase of $25.9 million for the three and nine months ended September 30, 2014, respectively. The net changes for the three and nine months ended September 30, 2013 were a net decrease of $6.8 million and a net increase of $13.6 million, respectively. Amounts attributable to non-controlling interests were $1.8 million of the net decrease and $5.8 million of the net increase for the three and nine months ended September 30, 2014, respectively. Amounts attributable to non-controlling interests were $5.9 million of the net decrease for the three months ended September 30, 2013 and $4.3 million of the net increase for the nine months ended September 30, 2013. The projects are summarized as follows:

Increases



	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in millions)			2014		2013		2014		2013
Number of projects with upward estimate changes			2		3		9		6
Range of increase in gross profit from each project, net		$	1.3 - 3.8	$	1.0 - 10.5	$	1.1 - 11.8	$	2.1 - 26.6
Increase on project profitability		$	5.1	$	12.9	$	43.0	$	47.5

The increases during the three and nine months ended September 30, 2014 were due to higher productivity than originally anticipated, owner-directed scope changes and settlement of outstanding claims with contract owners. The increases during the three and nine months ended September 30, 2013 were due to production at a higher rate than anticipated and owner-directed scope changes.

Decreases



	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in millions)			2014		2013		2014		2013
Number of projects with downward estimate changes			3		4		3		4
Range of reduction in gross profit from each project, net		$	2.0 - 7.0	$	1.4 - 14.7	$	1.3 - 13.9	$	1.6 - 23.5
Decrease on project profitability		$	13.6	$	19.7	$	17.1	$	33.9

The decreases during the three and nine months ended September 30, 2014 and 2013 were due to additional costs, lower productivity than originally anticipated and outstanding claims and change orders.