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 degree of 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 contracts 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.

	June 30, 2018
	Three Months Ended		Six Months Ended
Client Markets:
Energy, environment, and infrastructure	$	132,563	$	256,318
Health, education, and social programs		131,624		255,189
Safety and security		27,491		52,927
Consumer and financial		32,637		62,661
Total	$	324,315	$	627,095

	June 30, 2018
	Three Months Ended		Six Months Ended
Client Type:
U.S. federal government	$	138,875	$	272,597
U.S. state and local government		35,267		67,172
International government		34,508		63,245
Total Government		208,650		403,014
Commercial		115,665		224,081
Total	$	324,315	$	627,095

	June 30, 2018
	Three Months Ended		Six Months Ended
Contract Mix:
Fixed-price	$	136,178	$	258,825
Time-and-materials		128,243		252,268
Cost-based		59,894		116,002
Total	$	324,315	$	627,095

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 $19.7 million increase in the Company’s net contract assets (liabilities) is due to the timing of work performed in relation to billing schedule timing for fixed price programs, particularly in our international operations. There were no material changes to contract balances due to impairments or business combinations during the period.

	June 30, 2018			At date of adoption			Change
Contract asset	$	130,241		$	123,197		$	7,044
Contract liabilities		(25,886	)		(38,571	)		12,685
Net contract assets (liabilities)	$	104,355		$	84,626		$	19,729

Performance Obligations:

The Company had $1.2 billion in unfulfilled performance obligations as of June 30, 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 generally 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.