2.	Revenue Recognition

Total revenues include sales of products and services to customers, net of any discounts or allowances, and freight revenues. Product revenues are recognized when control of the promised good is transferred to the customer, typically when finished products are shipped. Intersegment and interproduct revenues are eliminated in consolidation. Service revenues are derived from the paving business and recognized using the percentage-of-completion method under the revenue-cost approach. Under the revenue-cost approach, recognized contract revenue is determined by multiplying the total estimated contract revenue by the estimated percentage of completion. Contract costs are recognized as incurred. The percentage of completion is determined on a contract-by-contract basis using project costs incurred to date as a percentage of total estimated project costs. The Company believes the revenue-cost approach is appropriate as the use of asphalt in a paving contract is relatively consistent with the performance of the paving service. Paving contracts, notably with governmental entities, may contain performance bonuses based on quality specifications. Given the uncertainty of meeting the criteria until the performance obligation is completed, performance bonuses are recognized as revenues when and if determined to be achieved. Performance bonuses are not material to the Company’s consolidated results of operations for the three-months ended March 31, 2018 and 2017. Freight revenues reflect delivery arranged by the Company using a third party on behalf of the customer and are recognized consistent with the timing of the product revenues.

Performance Obligations. Performance obligations are contractual promises to transfer or provide a distinct good or service for a stated price. The Company’s product sales agreements are single-performance obligations that are satisfied at a point in time. Performance obligations within paving service agreements are satisfied over time, primarily ranging from one day to 20 months. For product revenues and freight revenues, customer payment terms are generally 30 days from invoice date. Customer payments for the paving operations are based on a contractual billing schedule and are due 30 days from invoice date.

2.Revenue Recognition (continued)

Future revenues from unsatisfied performance obligations at March 31, 2018 and 2017 were $88,054,000 and $145,921,000, respectively, where the remaining periods to complete these obligations ranged from one day to 20 months and one day to 11 months, respectively.

Sales Taxes. The Company is deemed to be an agent when collecting sales taxes from customers. Sales taxes collected are initially recorded as liabilities until remitted to taxing authorities and are not reflected in the consolidated statements of earnings as revenues and expenses.

Revenue by Category. The following table presents the Company’s total revenues by category for each reportable segment:

	Three-Months Ended
	March 31, 2018
(Dollars in Thousands)	Products and Services		Freight		Total
Mid-America Group	$	167,890	$	10,891	$	178,781
Southeast Group		77,563		2,676		80,239
West Group		442,983		30,739		473,722
Total Building Materials Business		688,436		44,306		732,742
Magnesia Specialties		64,869		4,393		69,262
Total	$	753,305	$	48,699	$	802,004

	Three-Months Ended
	March 31, 2017
(Dollars in Thousands)	Products and Services		Freight		Total
Mid-America Group	$	177,407	$	11,612	$	189,019
Southeast Group		86,726		3,556		90,282
West Group		463,881		32,100		495,981
Total Building Materials Business		728,014		47,268		775,282
Magnesia Specialties		64,302		4,275		68,577
Total	$	792,316	$	51,543	$	843,859

Service revenues, which includes paving operations located in Colorado, were $11,143,000 and $16,000,000 for the three-months ended March 31, 2018 and 2017, respectively.

2.Revenue Recognition (continued)

Contract Balances. Costs in excess of billings relate to the conditional right to consideration for completed contractual performance and are contract assets on the consolidated balance sheets. Costs in excess of billings are reclassified to accounts receivable when the right to consideration becomes unconditional. Billings in excess of costs relate to customers invoiced in advance of contractual performance and are contract liabilities on the consolidated balance sheets. The following table presents information about the Company’s contract balances:

(Dollars in Thousands)

March 31,

2018

December 31, 2017

March 31,

2017

Costs in excess of billings

2,827

1,310

1,815

Billings in excess of costs

6,136

7,204

5,953

Revenue recognized from beginning balance of contract liabilities for the three-months ended March 31, 2018 and 2017 were $4,199,000 and $3,835,000, respectively.

Retainage represents amounts that have been billed to customers but payment withheld until final acceptance of the performance obligation by the customer. Included on the Company’s consolidated balance sheets, retainage was $4,824,000, $9,029,000 and $5,759,000 at March 31, 2018, December 31, 2017 and March 31, 2017, respectively.

Warranties. The Company’s construction contracts contain warranty provisions generally for a period of nine months to one year after project completion and cover materials, design or workmanship defects. Historically, the Company has not experienced material costs for warranties. The ready mixed concrete product line carries longer warranty periods, for which the Company has accrued an estimate of warranty cost based on experience with the type of work and any known risks relative to the project. In total, warranty costs were not material to the Company’s consolidated results of operations for the three-months ended March 31, 2018 and 2017.

Policy Elections. When the Company arranges third party freight to deliver products to customers, the Company has elected the delivery to be a fulfillment activity rather than a separate performance obligation. Further, the Company acts as a principal in the delivery arrangements and the related revenues and costs are included in the consolidated statements of earnings.