Revenue and Contract Receivables, net | 9 Months Ended |
Apr. 30, 2014 |
Revenue and Contract Receivables, net [Abstract] | ' |
Revenue and Contract Receivables, net | ' |
5 | Revenue and Contract Receivables, net | | | | | | | | | | | | | | | |
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Revenue Recognition |
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Substantially all of the Company's revenue is derived from environmental consulting work. The consulting revenue is principally derived from the sale of labor hours. The consulting work is performed under a mix of fixed price, cost-type, and time and material contracts. Contracts are required from all customers. Revenue is recognized as follows: |
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Contract Type | | Work Type | | Revenue Recognition Policy | | | | | | | | | | | | |
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Time and Materials | | Consulting | | As incurred at contract rates. | | | | | | | | | | | | |
Fixed Price | | Consulting | | Percentage of completion, approximating the ratio of either total costs or Level of Effort (LOE) hours incurred to date to total estimated costs or LOE hours. | | | | | | | | | | | | |
Cost-Type | | Consulting | | Costs as incurred. Fixed fee portion is recognized using percentage of completion determined by the percentage of LOE hours incurred to total LOE hours in the respective contracts. | | | | | | | | | | | | |
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Revenues reflected in the Company's consolidated statements of operations represent services rendered for which the Company maintains a primary contractual relationship with its customers. Included in revenues are certain services outside the Company's normal operations which the Company has elected to subcontract to other contractors. |
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Substantially all of the Company's cost-type work is with federal governmental agencies and, as such, is subject to audits after contract completion. Under these cost-type contracts, provisions for adjustments to accrued revenue are recognized on a quarterly basis and based on past audit settlement history. Government audits have been completed and final rates have been negotiated through fiscal year 2005. The Company records an allowance for project disallowances in other accrued liabilities for potential disallowances resulting from government audits (refer to Note 10 of these condensed consolidated financial statements). |
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Change orders can occur when changes in scope are made after project work has begun, and can be initiated by either the Company or its clients. Claims are amounts in excess of the agreed contract price which the Company seeks to recover from a client for customer delays and /or errors or unapproved change orders that are in dispute. Costs related to change orders and claims are recognized as incurred. Revenues and profit are recognized on change orders when it is probable that the change order will be approved and the amount can be reasonably estimated. Revenues are recognized only up to the amount of costs incurred on contract claims when realization is probable, estimable and reasonable support from the customer exists. |
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All bid and proposal and other pre-contract costs are expensed as incurred. Out of pocket expenses such as travel, meals, field supplies, and other costs billed direct to contracts are included in both revenues and cost of professional services. Revenue, the cost of professional services, other direct operating expenses and subcontract costs of the Company’s South American subsidiaries exclude tax assessments by governmental authorities, which are collected by the Company from its customers and then remitted to governmental authorities. |
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Billed contract receivables represent amounts billed to clients in accordance with contracted terms, which have not been collected from clients as of the end of the reporting period. Billed contract receivables may include: (i) amounts billed for revenues from incurred costs and fees that have been earned in accordance with contractual terms; and (ii) progress billings in accordance with contractual terms that include revenue not yet earned as of the end of the reporting period. |
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Unbilled contract receivables result from: (i) revenues from incurred costs and fees which have been earned, but are not billed as of period-end; and (ii) differences between year-to-date provisional billings and year-to-date actual contract costs incurred. |
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The Company reduces contract receivables by recording an allowance for doubtful accounts to account for the estimated impact of collection issues resulting from a client’s inability or unwillingness to pay valid obligations to the Company. The resulting provision for bad debts is recorded within administrative and indirect operating expenses on the consolidated statements of operations. |
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The Company also reduces contract receivables by establishing an allowance for billed and earned contract revenues that have become unrealizable, or may become unrealizable in the future. Management reviews contract receivables and determines allowance amounts based on historical experience, geopolitical considerations, client acknowledgment of the amount owed, client ability to pay, relationship history with the client and the probability of payment. Such contract adjustments are recorded as direct adjustments to revenue in the consolidated statements of operations. |
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Contract Receivables, Net |
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Contract receivables, net are summarized in the following table. |
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| | Balance at | | | | | | | | | |
| | April 30, | | | July 31, | | | | | | | | | |
2014 | 2013 | | | | | | | | |
Contract Receivables: | | | | | | | | | | | | | | |
Billed | | $ | 27,891,151 | | | $ | 36,284,950 | | | | | | | | | |
Unbilled | | | 21,125,047 | | | | 16,441,857 | | | | | | | | | |
| | | 49,016,199 | | | | 52,726,807 | | | | | | | | | |
Allowance for doubtful accounts and contract adjustments | | | (5,340,200 | ) | | | (5,592,800 | ) | | | | | | | | |
Total contract receivables, net | | $ | 43,675,999 | | | $ | 47,134,007 | | | | | | | | | |
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Billed contract receivables did not include any contractual retainage balances at April 30, 2014 or July 31, 2013. Management anticipates that the unbilled receivables outstanding at April 30, 2014 will be substantially billed and collected within one year. |
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Contract Receivable Concentrations |
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Significant concentrations of contract receivables and the allowance for doubtful accounts and contract adjustments are summarized in the following table. |
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| | Balance at April 30, 2014 | | | Balance at July 31, 2013 | |
Region | | Contract | | | Allowance for | | | Contract | | | Allowance for | |
Receivables | Doubtful | Receivables | Doubtful |
| Accounts and | | Accounts and |
| Contract Adjustments | | Contract |
| | | Adjustments |
| | | | | | | | | | | | |
United States, Canada and South America | | $ | 41,078,347 | | | $ | 1,458,553 | | | $ | 41,302,180 | | | $ | 1,576,746 | |
Middle East and Africa | | | 7,482,184 | | | | 3,752,101 | | | | 10,876,151 | | | | 3,886,508 | |
Asia | | | 455,668 | | | | 129,546 | | | | 548,476 | | | | 129,546 | |
Totals | | $ | 49,016,199 | | | $ | 5,340,200 | | | $ | 52,726,807 | | | $ | 5,592,800 | |
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Combined contract receivables related to projects in the Middle East, Africa and Asia represented 16% and 22% of total contract receivables at April 30, 2014 and July 31, 2013, respectively, while the combined allowance for doubtful accounts and contract adjustments related to these projects represented 74% and 72%, respectively, of the total allowance for doubtful accounts and contract adjustments at those same period end dates. These allowance percentages highlight the Company’s experience of heightened operating risks (i.e., political, regulatory and cultural risks) within these foreign regions in comparison with similar risks in the United States, Canada and South America. These heightened operating risks have resulted in increased collection risks and the Company expending resources that it may not recover for several months, or at all. |
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Allowance for Doubtful Accounts and Contract Adjustments |
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Activity within the allowance for doubtful accounts and contract adjustments is summarized in the following table. |
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| | Three Months Ended | | | Nine Months Ended | |
April 30, | April 30, |
| | 2014 | | | 2013 | | | 2014 | | | 2013 | |
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Balance at beginning of period | | $ | 5,336,972 | | | $ | 10,216,404 | | | $ | 5,592,800 | | | $ | 10,238,391 | |
Net increase (decrease) due to adjustments in the allowance for: | | | | | | | | | | | | | | | | |
Contract adjustments (1) | | | 94,658 | | | | 471,830 | | | | (163,745 | ) | | | 707,897 | |
Doubtful accounts (2) | | | (78,930 | ) | | | 103 | | | | (66,355 | ) | | | (257,951 | ) |
Transfer of reserves to allowance for project disallowances (3) | | | (12,500 | ) | | | (22,500 | ) | | | (22,500 | ) | | | (22,500 | ) |
Balance at end of period | | $ | 5,340,200 | | | $ | 10,665,837 | | | $ | 5,340,200 | | | $ | 10,665,837 | |
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| -1 | Increases (decreases) to the allowance for contract adjustments on the condensed consolidated balance sheets are recorded as (decreases) increases to revenue on the condensed consolidated statements of operations. | | | | | | | | | | | | | | |
| -2 | Increases (decreases) to the allowance for doubtful accounts on the condensed consolidated balance sheets are recorded as increases (decreases) to administrative and other indirect operating expenses on the condensed consolidated statements of operations. | | | | | | | | | | | | | | |
| -3 | Refer to Note 10 of these condensed consolidated financial statements for a summary of the allowance for project disallowances. | | | | | | | | | | | | | | |
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As of April 30, 2013, the Company recorded $7.0 million of contract receivables and $2.1 million of allowance for contract adjustments related to projects in China. All contract receivables associated with these projects in China were fully reserved and written off during the quarter ended July 31, 2013. |
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As of April 30, 2013, $3.4 million of aged contract receivables related to projects in the Middle East and Africa were fully reserved. All contract receivables associated with these projects were written off during the quarter ended July 31, 2013, resulting in corresponding decreases in contract receivables and the allowance for contract adjustments during that quarter. |