CONTRACT COSTS |
6 Months Ended |
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Jun. 30, 2015 | |
| Contractors [Abstract] | |
| CONTRACT COSTS |
CONTRACT COSTS
The Company uses the percentage-of-completion accounting method for fabrication contracts. Revenue from fixed-price or unit rate contracts is recognized on the percentage-of-completion method, computed by the efforts-expended method which measures the percentage of labor hours incurred to date as compared to estimated total labor hours to complete each contract. This progress percentage is applied to our estimate of total anticipated gross profit for each contract to determine gross profit earned to date. Revenue recognized in a period for a contract is the amount of gross profit recognized for that period plus labor costs and pass-through costs incurred on the contract during the period. We define pass-through costs as material, freight, equipment rental, and sub-contractor services included in the direct costs of revenue associated with projects. Consequently, pass-through costs are included in revenue but have no impact on the gross profit realized for that particular period.
Pass-through costs as a percentage of revenue were 39.5% and 50.9% for the three-month periods ended June 30, 2015 and 2014, respectively. Pass-through costs as a percentage of revenue were 39.5% and 50.1% for the six-month periods ended June 30, 2015 and 2014, respectively.
Costs and estimated earnings in excess of billings on uncompleted contracts at June 30, 2015 include unbilled costs of $17.1 million relating to two major customers. Billings in excess of costs and estimated earnings at June 30, 2015 include advances of $5.5 million from two major customers.
At June 30, 2015, we included in our estimates to complete, $22.3 million for change orders on three projects which have been approved as to scope but not price. These projects were 86%, 96% and 69% complete, respectively, at June 30, 2015. We expect to resolve these change orders before the end of the third quarter of 2015. At June 30, 2014, we included in our estimates to complete $5.2 million for change orders on three projects which were approved as to scope but not price. All unapproved change orders as of June 30, 2014 were subsequently approved in the normal course of business.
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