NOTE 3 - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
The asset, “Costs and estimated earnings in excess of billings on uncompleted contracts”, represents revenue recognized in excess of amounts billed. The liability, “Billings in excess of costs and estimated earnings on uncompleted contracts”, represents billings in excess of revenue recognized. Costs and estimated earnings on uncompleted contracts consist of the following at April 30:
| | | April 30, 2013 | | April 30, 2012 | |
| Costs incurred on uncompleted contracts | | $ | 74,554,932 | | $ | 76,682,610 | |
| Provision for loss on uncompleted contracts | | | (23,376) | | | (1,886,896) | |
| Estimated contract profit | | | 2,730,745 | | | 2,242,232 | |
| | | | 77,262,301 | | | 77,037,946 | |
| Less: billings to date | | | 77,755,947 | | | 79,291,760 | |
| Total | | $ | (493,646) | | $ | (2,253,814) | |
| | | | | | | | |
| Costs and estimated earnings in excess of billings on uncompleted
contracts | | $ | 1,148,855 | | $ | 1,340,379 | |
| Billings in excess of costs and estimated earnings on uncompleted
contracts | | | (1,642,501) | | | (3,594,193) | |
| Total | | $ | (493,646) | | $ | (2,253,814) | |
Revisions in the estimated gross profits on contracts and contract amounts are made in the period in which circumstances requiring the revisions become known. During the fiscal year ended April 30, 2013, the effect of such revisions in estimated contract profits resulted in an increase to gross profit of approximately $2,054,000 (or approximately $2.07 per common share), from that which would have been reported had the revised estimates been used as the basis of recognition for contract profits in the prior year. This increase in gross profit is primarily the result of change orders received of approximately $1,641,000 from the Cooper Project, for costs that were incurred in the prior fiscal year.
During the fiscal year ended April 30, 2012, the effect of such revisions in estimated contract profits resulted in a decrease to gross profit of approximately $9,829,000 (or approximately $9.87 per common share), from that which would have been reported had the revised estimates been used as the basis of recognition for contract profits in the prior year. This decrease in gross profit includes a provision of $1,887,000 for the total loss anticipated on certain long-term contracts as the revisions to such estimates indicated a loss. The primary reason for the decrease in the gross profit is due to significant adjustments to expected profits on four projects in the Trenton Operations during the year ended April 30, 2012. The estimates and related costs incurred for these four projects increased significantly over the course of fiscal year 2012 while the Company continues to complete these projects. The cumulative reduction in the expected gross profit on these four projects was approximately $9.2 million for the year ended April 30, 2012.
Although management believes it has established adequate procedures for estimating costs to complete on open contracts, it is at least reasonably possible that additional significant costs could occur on contracts prior to completion.
