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Shipyard Transaction and Discontinued Operations | 6 Months Ended
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Jun. 30, 2021
Discontinued Operations And Disposal Groups [Abstract] |
Shipyard Transaction and Discontinued Operations |
3. | SHIPYARD TRANSACTION AND DISCONTINUED OPERATIONS
Shipyard Transaction Transaction Summary – On April 19, 2021 (the “Closing Date”), we entered into a definitive agreement (the “Purchase Agreement”) pursuant to which we sold the operating assets and certain construction contracts of our Shipyard Division (“Shipyard Transaction”) to Bollinger Houma Shipyards, L.L.C. and Bollinger Shipyards Lockport, L.L.C. (collectively, “Bollinger”) for approximately $28.6 million (“Transaction Price”) ($26.1 million, net of transaction and other costs). We received $26.4 million of the Transaction Price on the Closing Date and the remaining $2.2 million (“Deferred Transaction Price”) will be received upon Bollinger’s collection of certain customer payments associated with the Divested Shipyard Contracts (defined below), which is anticipated to occur by the first quarter 2022. The $2.2 million receivable associated with the Deferred Transaction Price has been reflected within prepaid expenses and other assets on our Balance Sheet at June 30, 2021. We also received $8.0 million from Bollinger on the Closing Date, representing an estimate of the change in working capital for the Divested Shipyard Contracts from December 31, 2020 through the Closing Date (the “Closing Adjustment”). The Closing Adjustment was subject to a post-closing reconciliation and true-up (the “Closing Adjustment True-Up”) based on actual changes in working capital for the Divested Shipyard Contracts from December 31, 2020 through the Closing Date compared to the Closing Adjustment. Actual changes in working capital for the Divested Shipyard Contracts from December 31, 2020 through the Closing Date totaled approximately $7.8 million ($3.0 million during the three months ended March 31, 2021 and $4.8 million during the three months ended June 30, 2021 prior to the Closing Date). Accordingly, $0.2 million of the Closing Adjustment was returned to Bollinger during the three months ended June 30, 2021 in connection with the Closing Adjustment True-Up. Included in the Shipyard Transaction were the Shipyard Division’s:
| • | Shipyard Facility and inventory and equipment in Houma, Louisiana;
| • | Contracts and related obligations for our three research vessel projects and five towing, salvage and rescue ship projects (collectively, the “Divested Shipyard Contracts”);
| • | Contract retentions, contract assets, contract liabilities and certain accounts payable associated with the Divested Shipyard Contracts as of the Closing Date; and
| • | Four drydocks (three of which previously supported our Shipyard Division operations in our Lake Charles Facility and Jennings Facility).
Bollinger offered employment to most of the employees of our Shipyard Division associated with the Acquired Shipyard Contracts. Excluded from the Shipyard Transaction were the Shipyard Division’s:
| • | Accounts receivable, certain accounts payable and other accrued liabilities associated with the Divested Shipyard Contracts as of the Closing Date;
| • | Contracts and related obligations for our (i) two forty-vehicle ferry projects, (ii) seventy-vehicle ferry project and (iii) two multi-purpose support vessel (“MPSV”) projects (which are subject to dispute) (collectively, the “Retained Shipyard Contracts”), together with the associated accounts receivable, accounts payable and other accrued liabilities;
| • | Lake Charles Facility and Jennings Facility (which were closed in the fourth quarter 2020) and related lease obligations; and
| • | Remaining assets and liabilities of the Shipyard Division.
We retained those employees of our Shipyard Division associated with the Retained Shipyard Contracts. In connection with the Shipyard Transaction, we recorded a total pre-tax loss of $25.3 million during the six months ended June 30, 2021, of which $23.4 million was recorded during the three months ended March 31, 2021 related to the impairment of our Shipyard Division’s long-lived assets (discussed further below) and transaction costs, and $1.9 million was recorded during the three months ended June 30, 2021 related to transaction and other costs associated with the Shipyard Transaction. At June 30, 2021, the net liabilities on our Balance Sheet associated with the Retained Shipyard Contracts and other retained Shipyard Division operations totaled $11.9 million. The wind down of the Shipyard Division operations is anticipated to occur by mid-2022. Impairment – During the first quarter 2021, events and changes in circumstances indicated that the carrying amount of our Shipyard Division’s long-lived assets may not be recoverable. These changes in circumstances were primarily attributable to a reassessment of our asset groups within our Shipyard Division as well as revisions to our probability assessment of net future cash flows of the applicable asset group based on the likelihood, that existed as of March 31, 2021, of the Shipyard Transaction occurring. Based on these assessments, we determined that an impairment of our Shipyard Division’s property, plant and equipment had occurred during the first quarter 2021. We measured the impairment by comparing the carrying amount of the applicable asset group at March 31, 2021 to an estimate of its fair value (which represents a Level 3 fair value measurement), resulting in an impairment charge of $22.8 million during the three months ended March 31, 2021. We based our fair value estimate on the Transaction Price inclusive of the Closing Adjustment and an estimate of the Closing Adjustment True-Up, associated with the Shipyard Transaction. Discontinued Operations The Shipyard Transaction (which included, among other things, our owned Shipyard Facility, Divested Shipyard Contracts and drydocks), and the previously disclosed fourth quarter 2020 closures of our leased Lake Charles Facility and Jennings Facility, represented the disposal and closure of a substantial portion of our Shipyard Division operations and the culmination of a strategic shift that will have a major effect on our ongoing operations and financial results. Therefore, we determined the assets, liabilities and operations associated with the Shipyard Transaction, and associated with the previously closed facilities, to be discontinued operations in the second quarter 2021. Accordingly, such assets and liabilities at June 30, 2021, and operating results for the three and six months ended June 30, 2021, have been classified as discontinued operations on our Balance Sheet and Statement of Operations, respectively. Our classification of these operations as discontinued requires retrospective application to financial information for all prior periods presented. Therefore, such assets and liabilities at December 31, 2020, and operating results for the three and six months ended June 30, 2020, have been recast and classified as discontinued operations on our Balance Sheet and Statement of Operations, respectively. We are completing construction of the Retained Shipyard Contracts within our F&S Facility and are winding down our Shipyard Division operations, which is anticipated to occur by mid-2022. The assets, liabilities and operating results attributable to the Retained Shipyard Contracts and remaining assets and liabilities of our Shipyard Division operations that were excluded from the Shipyard Transaction, and are not associated with the previously closed facilities, represent our Shipyard Segment and are classified as continuing operations on our Balance Sheet and Statement of Operations. Discontinued operations are presented separately from continuing operations on our Balance Sheet and Statement of Operations; however, they are not presented separately on our Statement of Cash Flows. Statement of Operations – A summary of the operating results constituting the loss from discontinued operations for the three and six months ended June 30, 2021 and 2020, is as follows (in thousands):
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Revenue |  | $ | 6,471 |  |  | $ | 27,986 |  |  | $ | 41,637 |  |  | $ | 68,862 |
Cost of revenue |  |  | 6,406 |  |  |  | 28,961 |  |  |  | 33,912 |  |  |  | 69,623 |
Gross profit (loss) |  |  | 65 |  |  |  | (975 | ) |  |  | 7,725 |  |  |  | (761 | )
General and administrative expense |  |  | 73 |  |  |  | 352 |  |  |  | 413 |  |  |  | 785 |
Impairments and (gain) loss on assets held for sale |  |  | 1,903 |  |  |  | — |  |  |  | 25,331 |  |  |  | — |
Other (income) expense, net |  |  | (660 | ) |  |  | — |  |  |  | (647 | ) |  |  | 100 |
Operating loss |  |  | (1,251 | ) |  |  | (1,327 | ) |  |  | (17,372 | ) |  |  | (1,646 | )
Income tax (expense) benefit(1) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Loss from discontinued operations, net of taxes |  | $ | (1,251 | ) |  | $ | (1,327 | ) |  | $ | (17,372 | ) |  | $ | (1,646 | )
| (1) | Income taxes attributable to discontinued operations were not material for all periods presented.
As a result of the Shipyard Transaction and classification of certain Shipyard Division operations as discontinued operations, certain allocations that were previously reflected within our Shipyard Division have been reclassified to our Corporate Division and Fabrication & Services Division for the three and six months ended June 30, 2020. Further, legal costs associated with our MPSV dispute that were previously reflected within our Corporate Division have been reclassified to our Shipyard Division for the three and six months ended June 30, 2020. See Note 8 for a summary of the reclassifications to our previously reported segment results and Note 6 for further discussion of our MPSV dispute. Assets and Liabilities – A summary of the carrying values of the major classes of assets and liabilities of discontinued operations at June 30, 2021 and December 31, 2020, is as follows (in thousands):
|  | June 30, 2021 |  |  | December 31, 2020 |
Current assets of discontinued operations: |  |  |  |  |  |  |  |
Contract receivables and retainage, net |  | $ | 2 |  |  | $ | 1,304 |
Contract assets |  |  | — |  |  |  | 62,423 |
Prepaid expenses and other assets |  |  | — |  |  |  | 270 |
Inventory |  |  | — |  |  |  | 105 |
Assets held for sale |  |  | — |  |  |  | 2,014 |
Total current assets of discontinued operations |  | $ | 2 |  |  | $ | 66,116 |
Noncurrent assets of discontinued operations: |  |  |  |  |  |  |  |
Property, plant and equipment, net |  |  | — |  |  |  | 36,280 |
Other noncurrent assets |  |  | — |  |  |  | 2,889 |
Total noncurrent assets of discontinued operations |  | $ | — |  |  | $ | 39,169 |
|  | June 30, 2021 |  |  | December 31, 2020 |
Current liabilities of discontinued operations: |  |  |  |  |  |  |  |
Accounts payable |  | $ | 225 |  |  | $ | 57,752 |
Contract liabilities |  |  | — |  |  |  | 4,867 |
Accrued expenses and other liabilities |  |  | 546 |  |  |  | 988 |
Total current liabilities of discontinued operations |  | $ | 771 |  |  | $ | 63,607 |
Cash Flows – A summary of the cash flows of discontinued operations for the six months ended June 30, 2021 and 2020, is as follows (in thousands):
|  | Six Months Ended June 30, |
|  | 2021 |  |  | 2020 |
Operating cash flows from discontinued operations |  | $ | (8,474 | ) |  | $ | (1,603 | )
Investing cash flows from discontinued operations |  | $ | 31,424 |  |  | $ | (5,742 | )
Changes in Project Estimates – For the six months ended June 30, 2021, significant changes in estimated margins on projects positively impacted operating results of our discontinued operations by $8.4 million. The impacts occurred during the first quarter 2021 and were associated with our towing, salvage and rescue ship projects, resulting from increased contract price primarily associated with an approved change order ($9.2 million impact), offset partially by increased forecast costs primarily associated with increased craft labor costs ($0.8 million impact). There were no significant changes in estimated margins on projects for our discontinued operations during the second quarter 2021. For both the three and six months ended June 30, 2020, significant changes in estimated margins on projects negatively impacted operating results of our discontinued operations by $0.6 million. The impacts were associated with our final two harbor tug projects in our Jennings Facility, resulting from increased forecast costs primarily associated with increased craft labor and subcontracted services costs and extensions of schedule. Other – Other (income) expense, net includes a gain of $0.6 million for both the three and six months ended June 30, 2021, resulting from insurance recoveries associated with damage previously caused by Hurricane Laura to a drydock that was sold in connection with the Shipyard Transaction.

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI http://asc.fasb.org/topic&trid=2155823 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 + Details
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