Note 3 - Revisions in Estimates

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Revisions in Estimates [Text Block]

3. Revisions in Estimates

Our profit recognition related to construction contracts is based on estimates of transaction price and 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. Changes in estimates of transaction price and costs to complete  may result in the reversal of previously recognized revenue if the current estimate adversely differs from the previous estimate. When we experience significant changes in our estimates, we undergo a process that includes reviewing the nature of the changes to ensure that there are no material amounts that should have been recorded in a prior period rather than as revisions in estimates for the current period. For revisions in estimates, generally we use the cumulative catch-up method for changes to the transaction price that are part of a single performance obligation. Under this method, revisions in estimates are accounted for in their entirety in the period of change. As discussed in Note 1, provisions for losses are recognized in the consolidated statements of operations for the amount of total estimated losses in the period that evidence indicates that the estimated total cost of a project exceeds its estimated total revenue.

There can be no assurance that we will not experience further changes in circumstances or otherwise be required to revise our estimates in the future. 

Other than those identified in the 2019 Annual Report on Form 10-K, we did not identify any material amounts that should have been recorded in a prior period for the years ended December 31, 2019 and 2018. In our review of these changes for the year ended  December 31, 2020, we did not identify any material amounts that should have been recorded in a prior period. 

In the normal course of business, we have revisions in estimates, including estimated costs some of which are associated with unresolved affirmative claims and back charges. The estimated or actual recovery related to these estimated costs may be recorded in future periods or may be at values below the associated cost, which can cause fluctuations in the gross profit impact from revisions in estimates.

There were no increases from revisions in estimates, which individually had an impact of $5.0 million or more on gross profit, for the periods presented.

The projects with decreases from revisions in estimates, which individually had an impact of $5.0 million or more on gross profit, are summarized as follows (dollars in millions except per share data):

Years Ended December 31,		2020		2019		2018
Number of projects with downward estimate changes		7		12		4
Range of reduction in gross profit from each project, net	$	6.7 - 49.9	$	5.5 - 52.6	$	6.4 - 49.6
Decrease to project profitability	$	143.4	$	214.1	$	104.6
Decreases to net (loss) income	$	106.5	$	158.9	$	77.7
Decreases to diluted net (loss) income per share	$	2.34	$	3.41	$	1.76

The decreases during the year ended December 31, 2020 were due to increases in design, production costs, weather-related and labor contingency costs. The decreases during the years ended December 31, 2019 and 2018 were due to increased project completion costs, schedule delays, lower productivity than originally anticipated, performance of a significant amount of unresolved disputed work, an unfavorable court ruling on a designer back charge claim and additional weather-related costs partially offset by an increase in estimated recovery from customer affirmative claims.

All decreases were in our Transportation segment except for:

• Water segment: decreases on three projects with a range of reduction on gross profit of $7.1 million to $7.9 million for a combined total decrease to project profitability of $22.5 million during the year ended December 31, 2019.

• Specialty segment: decreases to project profitability of $19.7 million and $9.0 million on one project during the years ended December 31, 2020 and 2019, respectively.

The amounts attributable to non-controlling interests were $31.9 million and $9.8 million of the net decreases for the years ended December 31, 2020 and 2019, respectively. There were no amounts attributable to non-controlling interests for the year ended  December 31, 2018.