ENGLOBAL CORP | 2013 | FY | 3

NOTE 8 - CONTRACTS

Costs, estimated earnings and billings on uncompleted contracts consisted of the following at December 28, 2013 and December 29, 2012 (dollars in thousands):

   
2013
   
2012
 
Costs incurred on uncompleted contracts
 
$
43,342
   
$
51,649
 
Estimated earnings on uncompleted contracts
   
12,022
     
3,216
 
Earned revenues
   
55,364
     
54,865
 
Less: billings to date
   
61,212
     
55,855
 
Net costs in excess of billings on uncompleted contracts
 
$
(5,848
)
 
$
(990
) 
Costs and estimated earnings in excess of billings on uncompleted contracts
 
$
1,206
   
$
3,840
 
Billings in excess of costs/earnings on uncompleted contracts
   
(7,054
)
   
(4,830
)
Net costs in excess of billings on uncompleted contracts
 
$
(5,848
)
 
$
(990
) 

Revenue on fixed-price contracts is recorded primarily using the percentage-of-completion (cost-to-cost) method. Revenue and gross margin on fixed-price contracts are subject to revision throughout the lives of the contracts and any required adjustments are made in the period in which the revisions become known. To manage unknown risks, management may use contingency amounts to increase the estimated costs, therefore, lowering the earned revenues until the risks are better identified and quantified or have been mitigated. We currently have $3.6 million in contingency amounts as of December 28, 2013 compared to $4.4 million as of December 29, 2012. Losses on contracts are recorded in full as they are identified.

The Company recognizes service revenue as soon as the services are performed. For clients that we consider higher risk, due to past payment history or history of not providing written work authorizations, we have deferred revenue recognition until we receive either a written authorization or a payment. The current amount of revenue deferred for these reasons is $0.1 million as of December 28, 2013 compared to $0.4 million as of December 29, 2012.

us-gaap:LongTermContractsOrProgramsDisclosureTextBlock