Revenue from Lessor Arrangements and Contracts with Customers

6 Months Ended

Jun. 30, 2020

Revenue from Lessor Arrangements and Contracts with Customers

The majority of the Company’s revenue is generated from short-term arrangements associated with the production and sale of concrete admixtures and cement additives within its SCC operating segment, as well as sheet and liquid membrane systems and other specialty products designed to protect the building envelope within its SBM operating segment. For such arrangements, the transfer of control takes place at a point in time when products are shipped to the customer.

Short-term arrangements within its SCC operating segment involve selling concrete admixtures and providing dispensers to customers. Such arrangements contain a lease element due to the customer's right to control the use of dispensers over a period of time in exchange for consideration. Dispenser leases have a non-cancelable lease term of thirty days or less. The Company classifies leases as operating and recognizes revenue on a straight line basis over the lease term. Revenue for concrete admixtures is recognized at the point of time when control is transferred to the customer.

The Company generates revenue from long-term arrangements within its SCC operating segment, which generally consist of VERIFI^® and Ductilcrete sales arrangements.

VERIFI^® sales arrangements involve installing equipment on the customers’ trucks and at their plants, as well as performing slump management and truck location tracking services. The installed equipment represents a lease since the customer has the right to control its use over a period of time in exchange for consideration. Slump management and truck location tracking services represent a separate performance obligation for which revenue is recognized over the performance period. The Company classifies leases as operating and recognizes revenue on a straight line basis over the lease term. The transaction price in VERIFI^® sales arrangements consists of fixed installation fees and other fixed payments included in the contract consideration, as well as slump management fees which are dependent on the quantity of material poured and represent variable consideration. The Company allocates the contract consideration and the variable consideration between the lease element and the services based on their relative stand-alone selling prices. Revenue related to variable consideration is recorded at the time the services are performed and constrained by the amount for which a significant revenue reversal is not probable to occur. Revenue generated from VERIFI^® sales arrangements represented less than 10% of the Company's consolidated revenue during the three and six months ended June 30, 2020 and 2019.

The following table summarizes the revenue recognized for these sales arrangements for the three and six months ended June 30, 2020 and 2019 and distinguishes between the lease and the service revenue:


	Three Months Ended June 30,						Six Months Ended June 30,
(In millions)	2020		2019		2020		2019






Lease revenue^(1):
Lease payments revenue	$	6.6	$	6.8	$	13.4	$	13.2
Variable lease revenue	2.5		1.9		4.5		3.4
Total lease revenue	$	9.1	$	8.7	$	17.9	$	16.6

Service revenue^(2):
Fixed fee revenue	$	0.1	$	—	$	0.2	$	—
Variable fee revenue	1.5		1.2		2.8		2.2
Total service revenue	$	1.6	$	1.2	$	3.0	$	2.2
Total revenue	$	10.7	$	9.9	$	20.9	$	18.8

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⁽¹⁾Lease revenue consists of dispenser lease revenue, as well as an allocated portion of VERIFI^®fixed fees and variable slump management fees. Lease revenue is included within "Net Sales" in the accompanying unaudited Consolidated Statements of Operations.

⁽²⁾Service revenue consists of an allocated portion of VERIFI^®fixed fees and variable slump management fees. Service revenue is included within "Net Sales" in the accompanying unaudited Consolidated Statements of Operations.

As of June 30, 2020 and December 31, 2019, the Company’s total trade accounts receivable balance was $148.9 million and $183.7 million, respectively, of which $5.8 million and $5.6 million, respectively, was related to trade accounts receivable associated with lease revenue generated from certain SCC contracts. The future minimum lease payments receivable under the operating leases were not material as of June 30, 2020.

Revenue generated from Ductilcrete sales arrangements represented less than 10% of the Company's consolidated revenue during the three and six months ended June 30, 2020 and 2019.

The Company’s revenue is principally recognized as goods and services are delivered and performance obligations are satisfied upon delivery. The Company has certain long-term arrangements resulting in remaining obligations for which the work has not been performed or has been partially performed. As of June 30, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations was $8.6 million, including the estimated transaction price to be earned as revenue over the remaining term of these contracts, which is generally one to five years. The Company’s contract assets and liabilities resulting from its contracts in the SCC or SBM operating segments were not material as of June 30, 2020 and December 31, 2019. Additionally, the amounts recorded in the accompanying unaudited Consolidated Statements of Operations during the three and six months ended June 30, 2020 and 2019 related to changes in the contract assets and liabilities were not material.

For further information on revenue recognition related to product sale arrangements, please refer to Note 2, "Revenue from Lessor Arrangements and Contracts with Customers", to the Company’s Consolidated Financial Statements included in the 2019 Annual Report on Form 10-K.