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REVENUE, CONTRACT ASSETS AND LIABILITIES AND OTHER CONTRACT MATTERS | 3 Months Ended
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Mar. 31, 2022
Revenue From Contract With Customer [Abstract] |
REVENUE, CONTRACT ASSETS AND LIABILITIES AND OTHER CONTRACT MATTERS | 2. REVENUE, CONTRACT ASSETS AND LIABILITIES AND OTHER CONTRACT MATTERS As discussed in Note 1, we recognize revenue from our contracts in accordance with Topic 606. Summarized below are required disclosures under Topic 606 and other relevant guidance. Disaggregation of Revenue The following tables summarize revenue for each of our operating segments, disaggregated by contract type, for the three months ended March 31, 2022 and 2021 (in thousands):
|  | Three Months Ended March 31, 2022 |
|  | Services |  |  | Fabrication |  |  | Shipyard |  |  | Eliminations |  |  | Total |
Fixed-price and unit-rate(1) |  | $ | 1,609 |  |  | $ | 5,044 |  |  | $ | 2,497 |  |  | $ | (1 | ) |  | $ | 9,149 |
T&M(2) |  |  | 18,463 |  |  |  | 573 |  |  |  | — |  |  |  | — |  |  |  | 19,036 |
Other |  |  | 592 |  |  |  | — |  |  |  | — |  |  |  | (91 | ) |  |  | 501 |
Total |  | $ | 20,664 |  |  | $ | 5,617 |  |  | $ | 2,497 |  |  | $ | (92 | ) |  | $ | 28,686 |
|  | Three Months Ended March 31, 2021 |
|  | Services |  |  | Fabrication |  |  | Shipyard |  |  | Eliminations |  |  | Total |
Fixed-price and unit-rate(1) |  | $ | 321 |  |  | $ | 11,018 |  |  | $ | 5,130 |  |  | $ | (190 | ) |  | $ | 16,279 |
T&M(2) |  |  | 5,551 |  |  |  | 718 |  |  |  | — |  |  |  | — |  |  |  | 6,269 |
Other |  |  | 1,634 |  |  |  | — |  |  |  | — |  |  |  | (397 | ) |  |  | 1,237 |
Total |  | $ | 7,506 |  |  | $ | 11,736 |  |  | $ | 5,130 |  |  | $ | (587 | ) |  | $ | 23,785 |
| (1) | Revenue is recognized as the contract is progressed over time.
| (2) | Revenue is recognized at contracted rates when the work is performed and costs are incurred.
Future Performance Obligations The following table summarizes our remaining performance obligations by operating segment at March 31, 2022 (in thousands):
|  | Performance Obligations |
Services |  | $ | 1,237 |
Fabrication |  |  | 7,027 |
Shipyard |  |  | 7,611 |
Total |  | $ | 15,875 |
Contracts Assets and Liabilities Revenue recognition and customer invoicing for our fixed-price and unit-rate contracts may occur at different times. Revenue recognition is based upon our estimated percentage-of-completion as discussed in Note 1; however, customer invoicing is generally dependent upon contractual billing terms, which could provide for customer payments in advance of performing the work, milestone billings based on the completion of certain phases of the work, or billings when services are provided. Revenue recognized in excess of amounts billed is reflected as contract assets on our Balance Sheet, or to the extent we have an unconditional right to the consideration, is reflected as contract receivables on our Balance Sheet. Amounts billed in excess of revenue recognized, and accrued contract losses, are reflected as contract liabilities on our Balance Sheet. Information with respect to contracts that were incomplete at March 31, 2022 and December 31, 2021, is as follows (in thousands):
|  | March 31, |  |  | December 31, |
|  | 2022 |  |  | 2021 |
Contract assets(1), (2) |  | $ | 2,694 |  |  | $ | 4,759 |
Contract liabilities(3), (4), (5) |  |  | (4,198 | ) |  |  | (6,648 | )
Contracts in progress, net |  | $ | (1,504 | ) |  | $ | (1,889 | )
| (1) | The decrease in contract assets compared to December 31, 2021, was primarily due to decreased unbilled positions on various projects within our Fabrication Division.
| (2) | Contract assets at March 31, 2022 and December 31, 2021, excludes $4.3 million and $2.3 million, respectively, associated with revenue recognized in excess of amounts billed for which we have an unconditional right to the consideration. Such amounts are reflected within contract receivables.
| (3) | The decrease in contract liabilities compared to December 31, 2021, was primarily due to a decrease in accrued contract losses and the unwind of advance payments on our forty-vehicle ferry projects within our Shipyard Division.
| (4) | Revenue recognized during the three months ended March 31, 2022 and 2021, related to amounts included in our contract liabilities balance at December 31, 2021 and 2020, was $2.1 million and $1.8 million, respectively.
| (5) | Contract liabilities at March 31, 2022 and December 31, 2021, includes accrued contract losses of $2.9 million and $3.9 million, respectively. See “Changes in Project Estimates” below for further discussion of our accrued contract losses.
Allowance for Doubtful Accounts Our provision for bad debts is included in other (income) expense, net on our Statement of Operations. Our provision for bad debts for the three months ended March 31, 2022 and 2021, and our allowance for doubtful accounts at March 31, 2022 and December 31, 2021, were not significant. Variable Consideration For the three months ended March 31, 2022 and 2021, we had no material amounts in revenue related to unapproved change orders, claims or incentives. However, at March 31, 2022 and December 31, 2021, certain projects reflected a reduction to our estimated contract price for liquidated damages of $1.3 million and $1.2 million, respectively. Changes in Project Estimates We determine the impact of changes in estimated margins on projects for a given period by calculating the amount of revenue recognized in the period that would have been recognized in a prior period had such estimated margins been forecasted in the prior period. The total impact of changes in estimated margins for a project as disclosed on a quarterly basis may be different from the applicable year-to-date impact due to the application of the percentage-of-completion method and the changing progress of the project at each period end. Such impacts may also be different when a project is commenced and completed within the applicable year-to-date period but spans multiple quarters. Changes in Estimates for 2022 – For the three months ended March 31, 2022, individual projects with significant changes in estimated margins did not have a material net impact on our operating results. Shipyard Division
| • | Forty-Vehicle Ferry Projects – During sea trials in January 2022 for our second forty-vehicle ferry project, one of the propulsion systems unexpectedly shutdown, causing the vessel to veer off course and run aground, resulting in damage to the hull. During the three months ended March 31, 2022, we recorded a charge of $0.1 million associated with our deductible for our insurance coverage for such an incident. Our current estimate of the cost to repair the damage is $0.4 million; however, we believe any amounts incurred in excess of our deductible are covered by our insurance coverage. Further, we are working with the customer to determine the corrective actions required associated with the propulsion system. While such actions and associated costs are currently unknown, we believe the propulsion system shutdown was due to design deficiencies and are the responsibility of the customer as discussed further below.
As discussed in our 2021 Annual Report, during 2020 we experienced rework and construction challenges on our two forty-vehicle ferry projects, resulting in increases in forecast costs and liquidated damages and the need to fabricate a new hull for the first vessel. We believe these impacts are the result of deficiencies in design of the vessels. Further, we believe the impacts of the design deficiencies are the responsibility of the customer, and accordingly, during 2021 we submitted claims to our customer, and subsequently filed a lawsuit, to extend our project schedules and recover the previous forecast cost increases associated with the impacts of the design deficiencies. However, we can provide no assurance that we will be successful recovering these costs. Our forecasts at March 31, 2022 do not reflect potential future benefits, if any, from the favorable resolution of the lawsuit. At March 31, 2022, the second vessel was approximately 96% complete and is forecast to be completed in the second quarter 2022 and the first vessel was approximately 77% complete and is forecast to be completed in the third quarter 2022. The projects were in a loss position at March 31, 2022 and our reserve for estimated losses was $2.2 million. Our forecast costs and schedule completion dates for the vessels are based on the current vessel design and reflect our best estimates; however, such estimates may be impacted by future challenges with, and resolution of, the vessel design deficiencies. While we continue to believe such impacts are the responsibility of the customer, we can provide no assurances that we will be successful recovering any future costs incurred associated with the design deficiencies. If future craft labor productivity and subcontractor costs differ from our current estimates, we are unable to achieve our progress estimates, our schedules are further extended or we incur additional schedule liquidated damages, we incur additional costs on the second vessel related to the damage caused during sea trials, we experience further challenges during sea trials or commissioning of either vessel or other challenges associated with the design deficiencies and are unable to recover associated costs from our customer, the projects would experience further losses. Changes in Estimates for 2021 – For the three months ended March 31, 2021, significant changes in estimated margins on projects positively impacted operating results for our Fabrication Division by $0.6 million and negatively impacted operating results for our Shipyard Division by $0.7 million. The changes in estimates were associated with the following: Fabrication Division
| • | Offshore Facility Modules Project – Positive impact for the three months ended March 31, 2021 of $0.6 million for our offshore modules project, resulting from reduced forecast costs, primarily associated with reduced craft labor and subcontracted services costs and contingency associated with schedule related liquidated damages. The impacts were primarily due to better than anticipated labor productivity and favorable resolution of change orders with the customer associated with schedule related liquidated damages. The project was complete at March 31, 2022.
Shipyard Division
| • | Seventy-Vehicle Ferry Project – Negative impact for the three months ended March 31, 2021 of $0.7 million for our seventy-vehicle ferry project, resulting from increased forecast costs and forecast liquidated damages, primarily associated with extensions of schedule and associated duration related costs, including supervision and subcontracted services costs. The impacts were primarily due to engineering delays and lower than anticipated progress on the project. At March 31, 2021, the vessel was approximately 65% complete. The project was in a loss position at March 31, 2021 and our reserve for estimated losses was $0.6 million. If future craft labor productivity and subcontractor costs differ from our current estimates, construction activities are determined to be more complex than anticipated upon finalization of production engineering, we are unable to achieve our progress estimates, our schedule is further extended or we incur additional schedule liquidated damages, the project would experience further losses.
Other Operating and Project Matters Hurricane Ida – On August 29, 2021, Hurricane Ida made landfall near Houma, Louisiana as a high-end Category 4 hurricane, with high winds, heavy rains and storm surge causing significant damage and power outages throughout the region. Our Houma Facilities did not experience significant flood damage; however, the high winds and heavy rain damaged multiple buildings and equipment and resulted in significant debris throughout the facility. As a result of the storm, certain buildings and equipment were damaged and were determined to be complete losses. Accordingly, during 2021, we recorded impairments of $0.5 million associated with the damaged assets. The impairments were offset by corresponding insurance recoveries, as we have determined it is probable that we will receive insurance proceeds to replace the damaged assets up to the amount of impairments recognized. In addition, multiple other buildings and equipment were partially damaged by the storm. We expect to incur future repair costs in excess of our deductibles for such assets; however, we believe that recovery of insurance proceeds for such costs is probable, and accordingly, we have not accrued for any future repair costs related to the partially damaged assets at March 31, 2022. We continue to work with our insurance providers and advisors to assess the full extent of damage to buildings and equipment, and applicable insurance coverage amounts, and restoration efforts are ongoing. During the three months ended March 31, 2022, we incurred actual costs of $1.9 million associated with ongoing clean-up and restoration efforts. We recorded charges of $0.3 million associated with such amounts attributable to deductibles and estimated unrecoverable amounts, and we recorded insurance recoveries of $1.6 million for the remaining amounts as we believe such costs are probable of recovery under our insurance policies. At March 31, 2022, we had total insurance receivables on our Balance Sheet of $2.7 million, net of a $1.0 million advance payment from our insurance carriers. The charges are included in other (income) expense, net on our Statement of Operations. The insurance receivable amounts, net of the advance payment, are included in prepaid expenses and other assets on our Balance Sheet. In addition to damage to our Houma Facilities, the storm resulted in damage to our second forty-vehicle ferry project, the MPSVs (and associated equipment) that are in our possession and subject to dispute, and certain bulkheads where the vessels were moored. We have retained advisors to evaluate the extent to which any damage was the result of third-party vessels that broke free from their mooring during the storm and struck the ferry, MPSVs and bulkheads. During the three months ended March 31, 2022, we recorded charges of less than $0.1 million related to actual costs incurred associated with our insurance coverages, without giving consideration to potential recoveries from the third-parties associated with damage caused by their vessels, as we expect these deductibles to be met absent such recoveries. The charges are included in other (income) expense, net on our Statement of Operations. We are working with our insurance providers and advisors to assess the full extent of damage to the MPSVs and bulkheads and applicable insurance coverage amounts, which may be subject to further deductibles associated with our insurance coverages that range from $0.5 million to $1.0 million. See Note 7 for further discussion of our MPSV dispute.

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- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130551-203045 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 13 -Subparagraph (b)(2) -URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130556-203045 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130554-203045 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130550-203045 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (e) -URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130554-203045 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130554-203045 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (d) -URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130554-203045 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130558-203045 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (c) -URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130554-203045 + Details
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