NOTE 7 – REVENUE RECOGNITION

Disaggregation of Revenue

The Company disaggregates revenue from clients, most of which is earned over time, into categories that depict how the nature, amount and uncertainty of revenue and cash flows are affected by economic factors. Those categories are: client market, client type and contract mix. Client market provides insight into the breadth of the Company’s expertise. In classifying revenue by client market, the Company attributes revenue from a client to the market that the Company believes is the client’s primary market. The Company also classifies revenue by the type of entity for which it does business which is an indicator of the diversity of its client base. The Company attributes revenue generated as a subcontractor to a commercial company as government revenue when the ultimate client is a government agency or department. Finally, disaggregation by contract mix provides insight in terms of the performance risk that the Company has assumed. Fixed-price contracts are considered to provide the highest amount of performance risk as the Company is required to deliver a scope of work or level of effort for a negotiated fixed price. Time-and-materials contracts require the Company to provide skilled employees on contract for negotiated fixed hourly rates. Since the Company is not required to deliver a scope of work, but merely skilled employees, it considers these contracts to be less risky than a fixed-price agreement. Cost-based contracts are considered to provide the lowest amount of performance risk since the Company is generally reimbursed for all contract costs incurred in performance of contract deliverables with only the amount of incentive or award fees (if applicable) dependent on the achievement of negotiated performance requirements.

	Three Months Ended
	March 31, 2018
Client Markets:
Energy, environment, and infrastructure	$	124,352
Health, education, and social programs		123,204
Safety and security		25,322
Consumer and financial		29,902
Total	$	302,780

	Three Months Ended
	March 31, 2018
Client Type:
U.S. federal government	$	133,544
U.S. state and local government		31,986
International government		28,804
Total Government		194,334
Commercial		108,446
Total	$	302,780

	Three Months Ended
	March 31, 2018
Contract Mix:
Fixed-price	$	121,042
Time-and-materials		125,630
Cost-based		56,108
Total	$	302,780

Contract Balances:

Contract assets consist primarily of unbilled amounts resulting from long-term contracts when revenue recognized exceeds the amount billed due to billing schedule timing. Contract liabilities result from advance payments received on a contract or from billings in excess of revenue recognized on long-term contracts due to billing schedule timing. The $11.6 million increase in our net contract assets (liabilities) is due to the timing of worked performed versus the milestone billing schedule on fixed price programs, particularly in our international operations, as well as revenue recognized in the three months ended March 31, 2018 on significant fourth quarter pre-billings for key marketing campaigns. There were no changes to contract balances due to impairments or business combinations during the period.

	March 31, 2018			At date of adoption			Change
Contract asset	$	128,522		$	123,197		$	5,325
Contract liabilities		(32,281	)		(38,571	)		6,290
Net contract assets (liabilities)	$	96,241		$	84,626		$	11,615

Performance Obligations:

The Company had $1.1 billion in unfulfilled performance obligations as of March 31, 2018 which primarily entail the future delivery of services for which revenue will be recognized over time. The obligations relate to continued or additional services required on contracts and were valued using an estimated cost plus margin approach with variable consideration being estimated at the most likely amount. The Company expects to satisfy these performance obligations, on average, in one year.