Note 3 - Revenues

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

3.    REVENUES

On January 1, 2018, the Company adopted FASB ASC 606, Revenue from Contracts with Customers (“FASB ASC 606”) for all contracts that were not completed using the modified retrospective transition method. The Company recognized the cumulative effect of initially applying FASB ASC 606 as an adjustment to the opening balance of retained earnings. Prior period information has not been restated and continues to be reported under the accounting standards in effect for those periods.

The Company recorded a net reduction to opening retained earnings of $0.3 million as of January 1, 2018 due to the cumulative impact of adopting FASB ASC 606, with the impact primarily related to royalty license fee revenues. The impact to revenues for the years ended December 31, 2019 and 2018 was a decrease of $0.4 million and an increase of $1.8 million, respectively, as a result of applying FASB ASC 606.

Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in FASB ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. For contracts in which construction, engineering and installation services are provided, there is generally a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct. The bundle of goods and services represents the combined output for which the customer has contracted. For product sales contracts with multiple performance obligations where each product is distinct, the Company allocates the contract’s transaction price to each performance obligation using its best estimate of the standalone selling price of each distinct good in the contract. For royalty license agreements whereby intellectual property is transferred to the customer, there is a single performance obligation as the license is not separately identifiable from the other goods and services in the contract.

The Company’s performance obligations are satisfied over time as work progresses or at a point in time. Revenues from products and services transferred to customers over time accounted for 92.3%, 93.5% and 93.5% of revenues for the years ended December 31, 2019, 2018 and 2017, respectively. Revenues from construction, engineering and installation services are recognized over time using an input measure (e.g., costs incurred to date relative to total estimated costs at completion) to measure progress toward satisfying performance obligations. Incurred cost represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contract costs include labor, material, overhead and, when appropriate, general and administrative expenses. Revenues from maintenance contracts are structured such that the Company has the right to consideration from a customer in an amount that corresponds directly with the performance completed to date. Therefore, the Company utilizes the practical expedient in FASB ASC 606-55-255, which allows the Company to recognize revenue in the amount to which it has the right to invoice. Applying this practical expedient, the Company is not required to disclose the transaction price allocated to remaining performance obligations under these agreements. Revenues from royalty license arrangements are recognized either at contract inception when the license is transferred or when the royalty has been earned, depending on whether the contract contains fixed consideration. Revenues from stand-alone product sales are recognized at a point in time, when control of the product is transferred to the customer. Revenues from these types of contracts accounted for 7.7%, 6.5% and 6.5% of revenues for the years ended December 31, 2019, 2018 and 2017, respectively.

On December 31, 2019, the Company had $464.6 million of remaining performance obligations from construction, engineering and installation services. The Company estimates that approximately $452.8 million, or 97.5%, of the remaining performance obligations at December 31, 2019 will be realized as revenues in the next 12 months.

Contract Estimates

Accounting for long-term contracts involves the use of various techniques to estimate total contract revenue and costs. For long-term contracts, the Company estimates the profit on a contract as the difference between the total estimated revenue and expected costs to complete a contract, and recognizes that profit over the life of the contract. Contract estimates are based on various assumptions to project the outcome of future events that sometimes span multiple years. These assumptions include labor productivity and availability; the complexity of the work to be performed; the cost and availability of materials; the performance of subcontractors; and the availability and timing of funding from the customer.

The Company’s contracts do not typically contain variable consideration or other provisions that increase or decrease the transaction price. In rare situations where the transaction price is not fixed, the Company estimates variable consideration at the most likely amount to which it expects to be entitled. The Company includes estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. For royalty license agreements, the Company applies the sales-based and usage-based royalty exception and recognizes royalties at the later of: (i) when the subsequent sale or usage occurs; or (ii) the satisfaction or partial satisfaction of the performance obligation to which some or all of the sales-or usage-based royalty has been allocated. For contracts in which a portion of the transaction price is retained and paid after the good or service has been transferred to the customer, the Company does not recognize a significant financing component. The primary purpose of the retainage payment is often to provide the customer with assurance that the Company will perform its obligations under the contract, rather than to provide financing to the customer.

The Company’s estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of anticipated performance and all information (historical, current and forecasted) that is reasonably available.

Revenue by Category

The following tables summarize revenues by segment and geography (in thousands):

	Year Ended December 31, 2019
	Infrastructure Solutions		Corrosion Protection		Energy Services		Total
Geographic region:
United States	$	427,220	$	159,408	$	328,048	$	914,676
Canada		65,370		57,663		—		123,033
Europe		49,157		15,121		—		64,278
Other foreign		49,050		62,898		—		111,948
Total revenues	$	590,797	$	295,090	$	328,048	$	1,213,935

	Year Ended December 31, 2018
	Infrastructure Solutions		Corrosion Protection		Energy Services		Total
Geographic region:
United States	$	430,187	$	200,397	$	335,707	$	966,291
Canada		62,292		71,320		—		133,612
Europe		54,567		12,227		—		66,794
Other foreign		57,075		109,796		—		166,871
Total revenues	$	604,121	$	393,740	$	335,707	$	1,333,568

	Year Ended December 31, 2017
	Infrastructure Solutions		Corrosion Protection		Energy Services		Total
Geographic region:
United States	$	437,944	$	299,643	$	290,726		$ 1,028,313
Canada		60,675		79,059		—		139,734
Europe		58,520		13,319		—		71,839
Other foreign		55,015		64,118		—		119,133
Total revenues	$	612,154	$	456,139	$	290,726	$	1,359,019

The following tables summarize revenues by segment and contract type (in thousands):

	Year Ended December 31, 2019
	Infrastructure Solutions		Corrosion Protection		Energy Services		Total
Contract type:
Fixed fee	$	523,042	$	203,887	$	704	$	727,633
Time and materials		—		65,084		327,344		392,428
Product sales		67,512		26,119		—		93,631
License fees		243		—		—		243
Total revenues	$	590,797	$	295,090	$	328,048	$	1,213,935

	Year Ended December 31, 2018
	Infrastructure Solutions		Corrosion Protection		Energy Services		Total
Contract type:
Fixed fee	$	556,642	$	296,217	$	16,134	$	868,993
Time and materials		—		58,372		319,573		377,945
Product sales		45,030		39,151		—		84,181
License fees		2,449		—		—		2,449
Total revenues	$	604,121	$	393,740	$	335,707	$	1,333,568

	Year Ended December 31, 2017
	Infrastructure Solutions		Corrosion Protection		Energy Services		Total
Contract type:
Fixed fee	$	569,701	$	353,480	$	9,225	$	932,406
Time and materials		—		56,288		281,501		337,789
Product sales		41,878		46,371		—		88,249
License fees		575		—		—		575
Total revenues	$	612,154	$	456,139	$	290,726	$	1,359,019

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, contract assets and contract liabilities on the Consolidated Balance Sheets. Contract assets represent work performed that could not be billed either due to contract stipulations or the required contractual documentation has not been finalized. Substantially all unbilled amounts are expected to be billed and collected within one year.

For fixed fee and time-and-materials based contracts, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or upon achievement of contractual milestones. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. For some royalty license arrangements, minimum amounts are billed over the license term as quarterly royalty amounts are determined. This results in contract assets as the Company recognizes revenue for the license when the license is transferred to the customer at contract inception. The Company’s contract liabilities consist of advance payments, billings in excess of revenue recognized and deferred revenue.

The Company’s contract assets and contract liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period. Advance payments, billings in excess of revenue recognized and deferred revenue are each classified as current.

Net contract assets (liabilities) consisted of the following (in thousands):

	December 31,
	2019 (1)			2018 (2)
Contract assets – current	$	51,092		$	62,467
Contract liabilities – current		(37,562	)		(32,339	)
Net contract assets	$	13,530		$	30,128

(1)	Amounts exclude contract assets of $5.4 million and contract liabilities of $0.1 million that were classified as held for sale at December 31, 2019 (see Note 6).
(2)	Amounts exclude contract assets of $1.8 million and contract liabilities of less than $0.1 million that were classified as held for sale at December 31, 2018 (see Note 6).

Included in the change of total net contract assets was a $11.4 million decrease in contract assets, primarily related to the timing between work performed on open contracts and contractual billing terms, and a $5.2 million increase in contract liabilities, primarily related to the timing of customer advances on certain contracts.

Substantially all of the $32.3 million and $51.6 million contract liabilities balances at December 31, 2018 and December 31, 2017, respectively, were recognized in revenues during 2019 and 2018, respectively.

Impairment losses recognized on receivables and contract assets were not material during 2019, 2018 and 2017.