Contract terms of the Company’s construction contracts generally provide for progress billings based on project milestones. The excess of costs incurred and estimated earnings over amounts billed on uncompleted contracts is reported as a current asset. The excess of amounts billed over costs incurred and estimated earnings on uncompleted contracts is reported as a current liability. Gross and net amounts on uncompleted contracts are as follows:
Costs and estimated earnings recognized on uncompleted contracts
Billings on uncompleted contracts
Shown on balance sheet as:
Costs and estimated earnings in excess of billings on uncompleted contracts
Billings on uncompleted contracts in excess of costs and estimated earnings
The Company continues to pursue collection of a receivable acquired in connection with the purchase of S.M. Electric Company, Inc. in February 2009. The recorded values at June 30, 2013 and June 30, 2012 include $0.7 million in claim receivables, which represents the Company's best estimate of the amount to be collected under the claim, and an additional $2.9 million for amounts due under the related contract. Recovering the remaining receivables will require mediation or litigation and the ultimate amount realized may be significantly different than the recorded amounts, which could result in a material adjustment to future earnings.
Western Canada Aboveground Storage Tank Project
During the twelve months ended June 30, 2013, our gross profit was materially impacted by a $3.7 million charge resulting from a change in estimate for a project to construct aboveground storage tanks in western Canada. The charge was primarily driven by changes in facts and circumstances that caused labor productivity to be lower than expected and direct employee costs to be higher than expected. The change in estimate resulted in a $2.4 million decrease in our net income and a $0.10 decrease in our diluted earnings per common share during the twelve months ended June 30, 2013.
This project was completed in the fourth quarter of fiscal 2013.
On May 3, 2013, the Company settled a customer dispute related to work performed in 2002 and 2003. The settlement amount of $1.5 million, which was paid in the fourth quarter of fiscal 2013, exceeded the amount previously accrued, resulting in a charge of $1.0 million.
The western Canada aboveground storage tank project and legal settlement discussed above are the only changes in estimates considered material to our results of operations during the periods presented herein.