| Revenue and Contract Balances | Revenue and Contract Balances 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 present revenue disaggregated by client sector and contract type: Three Months Ended December 27, December 29, (in thousands) Client Sector: U.S. state and local government $ 124,966 $ 123,836 U.S. federal government (1) 265,864 245,303 U.S. commercial 157,806 181,491 International (2) 216,468 246,993 Total $ 765,104 $ 797,623 Contract Type: Fixed-price $ 274,432 $ 271,055 Time-and-materials 355,241 388,158 Cost-plus 135,431 138,410 Total $ 765,104 $ 797,623 (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, 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 months ended December 27, 2020 and December 29, 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 retentions, included in contract assets, represent amounts withheld by clients until certain conditions are met or the project is completed, which may extend beyond one year. 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 December 27, September 27, 2020 (in thousands) Contract assets (1) $ 91,598 $ 92,632 Contract liabilities (199,297) (171,905) Net contract liabilities $ (107,699) $ (79,273) (1) Includes $8.5 million and $12.3 million of contract retentions as of December 27, 2020 and September 27, 2020, respectively. In the first quarter of fiscal 2021, we recognized revenue of approximate ly $60 million from amounts included in the contract liability balance at the end of fiscal 2020, compared to approximately $64 million for the same period last year. 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. For the first quarters of fiscal 2021 and 2020, these net adjustments to our operating income 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 December 27, 2020 and September 27, 2020, our consolidated balance sheets included liabilities for anticipated losses of $11.4 million and $13.2 million, respectively. The estimated cost to complete the related contracts as of December 27, 2020 was approxima tely $135 million . Accounts Receivable, Net Net accounts receivable consisted of the following: Balance at December 27, September 27, (in thousands) Billed $ 438,458 $ 402,818 Unbilled 242,890 253,364 Total accounts receivable 681,348 656,182 Allowance for doubtful accounts (7,585) (7,147) Total accounts receivable, net $ 673,763 $ 649,035 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 December 27, 2020 are expected to be billed and collecte d 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 December 27, 2020 and September 27, 2020 included approximate ly $14 million for each period (all in our Remediation Construction Management ("RCM") segment) , r elated to claims, including requests for equitable adjustment, on contracts that provide for price redeterminat ion . Claims are amounts in excess of agreed contract prices that we seek to collect from our clients or other third parties for delays, errors in specifications and designs, contract terminations, change orders in dispute or unapproved as to both scope and price, or other causes of unanticipated additional costs. Factors considered in determining whether revenue associated with claims (including change orders in dispute and unapproved change orders in regards to both scope and price) should be recognized include the following: (a) the contract or other evidence provides a legal basis for the claim, (b) additional costs were caused by circumstances that were unforeseen at the contract date and not the result of deficiencies in our performance, (c) claim-related costs are identifiable and considered reasonable in view of the work performed, and (d) evidence supporting the claim is objective and verifiable. This can lead to a situation in which costs are recognized in one period and revenue is recognized in a subsequent period when a client agreement is obtained, or a claims resolution occurs. We regularly evaluate all unsettled claim amounts and record appropriate adjustme nts to operating earnings when it is probable that the claim will result in a different contract value than the amount previously estimated. In the first quarters of fiscal 2021 and 2020, we recorded no material gains or losses related to claims. No single client accounted for more than 10% of our accounts receivable at December 27, 2020 and September 27, 2020. 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 $3.2 billion of RUPOs as of December 27, 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 December 27, 2020 over the following periods: Amount (in thousands) Within 12 months $ 1,823,137 Beyond 1,341,016 Total $ 3,164,153 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). |
