industry and other energy-related industries.

Our business is significantly dependent on the level of capital expenditures by (i) oil and gas ~~companies~~producers, processors and their contractors, (ii) alternative energy companies and (iii) marine companies operating in the GOM and along the Gulf ~~Coast and federal, state and local governments.~~Coast. The level of activity by these ~~parties has traditionally been~~companies can be volatile and ~~they have been~~is significantly impacted by fluctuations in oil and gas and associated commodity prices. Oil and gas prices continue to be depressed and have not increased to a level that supports a recovery in offshore exploration and production spending. In addition to the price of oil and gas, the levels of our customers’ capital expenditures are influenced by, among other things:

•

the cost of exploring for, producing and delivering oil and gas;

•

the ability of oil and gas companies to generate capital;

•

the sale and expiration dates of offshore leases in the U.S. and overseas;

•

the discovery rate, size and location of new oil and gas reserves;

•

demand for energy, including hydrocarbon production, which is affected by worldwide economic activity and population growth;

•

the ability of the Organization of the Petroleum Exporting Countries (“OPEC”) to set and maintain production levels for oil and the level of production by non-OPEC countries;

•

local, federal and international military, political and economic events and conditions, including regulatory changes under the Biden Administration, economic uncertainty, socio-political unrest, any government shutdown and instability or hostilities;

•

demand for, availability of and technological viability of, alternative sources of energy;

•

technological advances affecting energy exploration, production, transportation and consumption; and

•

uncertainty regarding the U.S. energy policy under the Biden Administration, particularly any revision, reinterpretation or creation of environmental and tax laws and regulations that would negatively impact the oil and gas industry.

~~the cost of exploring for, producing and delivering oil and gas;~~

~~the ability of oil and gas companies to generate capital;~~

~~the sale and expiration dates of offshore leases in the U.S. and overseas;~~

~~the discovery rate, size and location of new oil and gas reserves;~~

~~demand for hydrocarbon production;~~

~~the ability of the Organization of the Petroleum Exporting Countries (“OPEC”) to set and maintain production levels for oil and the level of production by non-OPEC countries;~~

~~local, federal and international political and economic conditions;~~

~~demand for, availability of and technological viability of, alternative sources of energy;~~

~~technological advances affecting energy exploration, production, transportation and consumption; and~~

uncertainty regarding the U.S. energy policy, particularly any revision, reinterpretation or creation of environmental and tax laws and regulations that would negatively impact the oil and gas industry.

The above factors have ~~not favored increased~~suppressed capital spending by offshore oil and gas companies in recent years. The oil and gas industry has also experienced increased volatility beginning in the first quarter 2020 due to certain geopolitical developments in addition to COVID-19. Further, although a reduction in gas prices has benefited capital spending for petrochemical and other facilities, the timing of, and our ability to secure, new project awards for this end market continues to be uncertain. As a result, there are fewer project awards in our traditional oil and gas markets to replace completed projects, and pricing of new contracts remains increasingly ~~competitive.This~~competitive. This creates challenges with respect to our ability to operate our fabrication facilities at desired utilization levels and may result in decreased revenue, lower margins, and losses ~~in certain periods.~~during periods of lower capital spending. Should industry conditions not improve, we may continue to suffer such decreased revenue, lower margins, and losses in future quarters. In addition, we believe that the downturn in the oil and gas industry has also adversely impacted many of our customers' businesses.

We are unable to predict future oil and gas prices or the level of oil and gas industry activity for the products and services we provide. Further, an increase in oil and gas prices may not necessarily translate into immediate or long- term increased activity, and even during periods of relatively high oil prices, our customers may cancel or curtail programs, or reduce their levels of capital expenditures for exploration and production. Advances in onshore exploration and development technologies, particularly with respect to large, onshore shale production areas, could result in our historical customers allocating a higher percentage of their capital expenditure budgets to onshore exploration and production activities and we may not be successful securing new project awards related to these onshore activities. An increase in gas prices could also negatively impact future investments in petrochemical and other facilities that benefit from lower gas prices. These factors could cause our revenue and margins to remain depressed and limit our future growth ~~prospects.~~

opportunities. See “Overview” in Item 7 for further discussion of the impacts of reductions and volatility in crude oil prices.

We operate in an industry that is highly competitive.

The onshore refining, petrochemical, LNG and industrial fabrication industries, the offshore oil and gas ~~industries~~fabrication industry and the marine fabrication ~~industries~~industry are highly competitive and influenced by events largely outside of our control. Contracts for our services are often awarded on a competitively bid basis, and our customers consider many factors when awarding a project. These factors include price, ability to meet the customer’s schedule, the availability and capacity of equipment and facilities, and the reputation, experience, and safety record of the contractor. Although we believe we have an excellent reputation for safety and quality, we can provide no assurances that we will be able to maintain our competitive position. In addition, we often compete with companies that have greater resources, which may make them more competitive for certain projects.

Competition with foreign competitors can also be challenging as such competitors often have lower operating costs and lower wage rates, and foreign governments often use subsidies and incentives to create local jobs, impose import duties and fees on products, and tax foreign operators. In addition, as a result of technological innovations, decreased transportation costs incurred by our customers when exporting structures from foreign locations to the GOM and Gulf Coast may hinder our ability to successfully bid ~~for~~ projects indestined for the GOM and Gulf Coast against foreign competitors. See ~~"Competition"~~“Competition” within Item 1 for further discussion of the competitive nature of our industry.

~~Our~~

Certain of our customers are facing significant challenges and a period of consolidation within their industry.

The oil and gas industry is facing significant challenges due to a prolonged period of depressed and volatile oil and gas prices. This has also negatively impacted the marine industry that supports offshore exploration and production. Accordingly, many companies are unable to compete and, in some cases, are unable to pay their liabilities as they become due. This has resulted in many companies within the oil and gas and marine industries seeking bankruptcy protection or pursuing consolidation through mergers with, or acquisition by, other companies. During 2020, one of our customer’s filed for and emerged from Chapter 11 bankruptcy; however, our dispute with the customer relating to the construction of two MPSVs is ongoing. See “Legal Proceedings” in Item 3 for further discussion of the status of the dispute and the impact of the customer’s bankruptcy filing. We expect these trends to continue.

The consolidation of one or more of our primary customers, the acquisition of one or more of our primary customers by a company that is not a customer, ~~and~~or a primary customer’s acquisition of another company that provides services similar to those provided by us, could result in a reduction in such customers’ capital spending and a decrease in the demand for our products and services. In addition, the liquidation of one or more of our primary customers could decrease the demand for our products and services. We can provide no assurances that we will be able to maintain our level of revenue with a customer that has consolidated or replace lost revenue. We are unable to predict what effect consolidations in the industry may have on contract pricing, capital spending by our customers, our selling strategies, our competitive position, our ability to retain customers or our ability to negotiate favorable agreements with our customers.

Financial and Operational Risks

We ~~are dependent upon~~depend on the award of new contracts and the timing of those awards.

It is difficult to predict whether or when we will be awarded a new contract due to complex bidding and selection processes, changes in existing or forecast market conditions, governmental regulations, permitting and environmental matters. Bidding activities for several new project opportunities have been delayed or suspended as a result of COVID-19 and low and volatile oil and gas prices. As these conditions continue, we may have further reduced bidding activity for new project opportunities during 2021 and beyond. In addition, political events within the U.S. have resulted, and may in the future result, in the shutdown of government services, which could impact inspections, regulatory review and certifications, grants or approvals. Because our revenue is derived from new project awards, our results of operations and cash flows can fluctuate materially from period to period as contracts are typically awarded on a project-by-project basis.

The timing of new project awards may reduce our short-term profitability as we balance our current capacity with expectations of future project awards. If an expected new project award is delayed or not received, we may incur costs to maintain an idle workforce and facilities, or alternatively, we may determine that our long-term interests are best served by reducing our workforce and incurring increased costs associated with termination benefits. In recent years we have reduced our skilled workforce in response to decreases in the utilization of our facilities. A further reduction in our workforce could also impact our results of operations if customers are hesitant to award new contracts based upon our staffing levels or if we are unable to adequately increase our labor force and staff projects that are awarded subsequent to workforce reductions.

See the risk factor below titled “We may be unable to employ a sufficient number of skilled personnel to execute our projects.”

We depend on significant customers for our revenue.

We derive a significant amount of our revenue from a small number of customers, including U.S. and, to a lesser extent, international energy producers; refining, petrochemical, LNG, industrial, power, and marine ~~operations;~~operators; EPC companies; and certain agencies of the U.S. government. Because the level of services that we may provide to any customer depends, among other things, on the amount of that customer’s capital expenditure budget and our ability to meet the customer’s delivery schedule, customers that account for a significant portion of our revenue in one year may represent an immaterial portion of revenue in subsequent years. We define significant customers as those that individually comprise 10% or more of our consolidated revenue. For 2020, 2019 and 2018, two, four and three customers accounted for 46%, 54%, and 44% ~~of our consolidated revenue. For 2017, two customers accounted for 39% of our consolidated revenue. For 2016, one customer accounted for 23%~~, respectively, of our consolidated revenue. The loss of a significant customer in any given

year for any reason, including a sustained decline in that customer’s capital expenditure budget or competitive factors, could result in a substantial loss of revenue. See ~~"Customers"~~“Customers” in Item 1 for further discussion of our customers.

We are exposed to the credit risks of our customers, including nonpayment and nonperformance by our customers.

The concentration of our customers in the oil and gas and marine industries may impact our overall exposure to credit risk as customers may be similarly affected by prolonged changes in economic and industry conditions. ~~Our business could be impacted due to nonpayment or nonperformance by our customers.~~ We believe certain of our customers finance their activities through cash flows from operations and debt or equity financing. Many of these customers are facing significant challenges ~~within~~in light of the ongoing global pandemic caused by COVID-19 and the current oil and gas ~~market. As a result, many of our customers~~market and are ~~facing~~experiencing decreased cash flows, ~~a reduction~~reductions in borrowing capacity, the inability to access capital or credit markets, and ~~a reduction~~reductions in ~~their~~ liquidity, ~~and~~which may impact their ability to pay or otherwise perform on their obligations to us. Accordingly, our operations could be impacted due to nonpayment or nonperformance by our customers. We perform ongoing credit evaluations of our customers and do not generally require collateral in support of our trade receivables. While we maintain reserves for potential credit losses, we can provide no assurances that such reserves will be sufficient to cover uncollectible receivable amounts or that our losses from such receivables will be consistent with our expectations.

Furthermore, some of our customers may be highly leveraged and subject to their own operating and regulatory risks, which increases the risk that they may default on their obligations to us. To the extent one or more of our key customers is in financial distress or commences bankruptcy proceedings, contracts with, or obligations from, these customers may be subject to renegotiation or rejection under applicable provisions of the U.S. Bankruptcy Code and similar ~~International~~international laws.

During 2020, one of our customer’s filed for and emerged from Chapter 11 bankruptcy; however, our dispute with the customer relating to the construction of two MPSVs is ongoing. See “Legal Proceedings” in Item 3 for further discussion of the status of the dispute and the impact of the customer’s bankruptcy filing.

The nature of our contracting terms for our contracts could adversely affect our operating results.

As is common in the fabrication and marine construction industries, a substantial number of our projects are performed on a fixed-price or unit-rate basis. Under fixed-price contracts, our contract price is fixed, and is generally only subject to adjustment ~~only~~ for changes in scope by the customer. Accordingly, we retain cost savings realized on a project but are also responsible for cost overruns. Under unit rate contracts, material items or labor tasks are assigned unit rates of measure. The unit rates of measure will generally be ~~an amount of dollars~~a reimbursable value per ton, per foot ~~per~~or square foot or per item installed. A typical unit rate contract can contain hundreds to thousands of unit rates of measure. Profit margins are ~~built~~incorporated into the unit rates and, similar to a ~~fixed price~~fixed-price contract, we retain cost savings realized on a project but are also responsible for cost overruns. In many cases, our fixed-price and unit rate contracts involve complex

design and engineering, significant procurement of materials and equipment, ~~supplies~~ and extensive ~~construction~~project management. In addition, as projects increase or decrease in scope, the resulting changes in contract price or unit rates could be less than the actual costs incurred associated with such changes in scope. We employ our best efforts to properly estimate the costs to complete our projects; however, our actual costs incurred to complete our projects could materially exceed our estimates. The revenue, costs and profit realized on a contract will often vary from the estimated amounts on which such contract was originally estimated due to the following:

•

failure to properly estimate costs of engineering, materials, components, equipment, labor or subcontractors;

•

unanticipated changes in the costs of engineering, materials, components, equipment, labor or subcontractors;

~~Failure to properly estimate costs of engineering, materials, components, equipment, labor or subcontractors;~~

•

failure to properly estimate the impact of engineering delays or errors on the construction of a project, including productivity, schedule and rework;

~~Changes in the costs of engineering, materials, components, equipment, labor or subcontractors;~~

•

difficulties in engaging third-party subcontractors, equipment manufacturers or materials suppliers, or failures by third-party subcontractors, equipment manufacturers or materials suppliers to perform, resulting in project delays and additional costs;

Difficulties in engaging third-party subcontractors, equipment manufacturers or materials suppliers, or failures by third-party subcontractors, equipment manufacturers or materials suppliers to perform, resulting in project delays and additional costs;

•

late delivery of materials by our vendors or the inability of subcontractors to deliver contracted services on schedule or at the agreed upon price;

~~Late delivery of materials by our vendors or the inability of subcontractors to deliver contracted services on schedule or at the agreed upon price;~~

•

increased costs due to poor project execution or productivity and/or weather conditions;

~~Increased costs due to poor execution or productivity and/or weather conditions;~~

•

unanticipated costs or claims, including costs for project modifications, delays, errors or changes in specifications or designs, regulatory changes or contract termination;

~~Unanticipated costs or claims, including costs for project modifications, delays, errors or changes in specifications or designs, regulatory changes or contract termination;~~

•

unrecoverable costs associated with customer changes in scope and schedule;

~~Unrecoverable costs associated with customer changes in scope and schedule;~~

•

payment of liquidated damages due to a failure to meet contracted delivery dates;

~~Payment of liquidated damages due to a failure to meet contracted delivery dates;~~

•

changes in labor conditions, including the availability, wage and productivity of labor;

~~Changes in labor conditions, including the availability, wage and productivity of labor;~~

•

termination, temporary suspension or significant reduction in scope of our projects by our customers;

~~Termination, temporary suspension or significant reduction in scope of our projects by our customers;~~

•

unanticipated technical problems with the structures, equipment or systems we supply;

~~Unanticipated technical problems with the structures, equipment or systems we supply;~~

•

under-utilization of our facilities and an idle labor force; and

~~Under-utilization of our facilities and an idle labor force; and~~

•

changes in general economic conditions.

~~Changes in general economic conditions.~~

These variations and risks are inherent within our industry and may result in revenue and profit that differ from ~~those~~amounts originally estimated ~~and alter profitability~~ or result in losses on projects. Depending on the size of a project, variations from estimated contract performance can have a significant impact on our operating ~~results for any quarter or year.~~results. In addition, substantially all of our contracts require us to continue work in accordance with the contractually agreed schedule, ~~(and~~and thus,

continue to incur expenses for labor and ~~materials)~~materials, notwithstanding the occurrence of a disagreement with ~~customers~~a customer over changes in scope, increased pricing and/or unresolved change orders or ~~claim.~~

claims.

Competitive pricing common in the fabrication and marine construction industry ~~may not provide sufficient protection from cost overruns.~~

~~The prices we charge for~~could negatively impact our ~~services and the demand for such services are currently severely depressed.~~ operating results.

Even when industry conditions are favorable, we operate in a very competitive industry, and as a result, we are not always successful in fully recovering our ~~cost structure~~project costs or realizing a profit. Additionally, during periods of increased market demand, a significant amount of new service capacity may enter the market, which also places pressure on the pricing of our services. Furthermore, during periods of declining pricing for our services, we may not be able to reduce our costs accordingly, which could further affect our profitability.

Our method of accounting for revenue using the percentage-of-completion method could have a negative impact on our results of operations.

Revenue for our fixed-price and unit-rate contracts is recognized using the percentage-of-completion method, based on contract costs incurred to date compared to total estimated contract costs. Contract costs include direct costs, such as materials and labor, and indirect costs ~~that are~~ attributable to contract activity. Material costs that are significant to a contract and do not reflect an accurate measure of project completion are excluded from the determination of our contract progress. Revenue for such materials is only recognized to the extent of costs incurred. Revenue and gross profit for contracts accounted for using the percentage-of-completion method can be significantly affected by changes in estimated cost to complete such contracts. Significant estimates impacting the cost to complete a contract include: forecast costs of engineering, materials, ~~components,~~ equipment and subcontracts; forecast costs of labor and ~~subcontracts;~~ labor productivity; schedule durations, including subcontractor and supplier progress; contract disputes, including claims; achievement of contractual performance requirements; and contingency, among others. The cumulative impact of revisions in total cost estimates during the progress of work is reflected in the period in which these changes become known, including, to the extent required, the reversal of profit recognized in prior periods and the recognition of losses expected to be incurred on contracts. Due to the various estimates inherent in our contract accounting, actual results could differ from those estimates, which could result in material changes to our Financial Statements and related disclosures.

We are susceptible to adverse weather conditions in our market areas.

Our operations ~~have historically been~~may be subject to seasonal variations due to weather conditions and daylight hours. ~~We attempt to mitigate the impact on productivity from weather conditions through the use of our~~Although we have large covered fabrication ~~facilities. However,~~facilities, a significant amount of our construction activities continues to take place ~~outdoors. Accordingly,~~outdoors, and accordingly, the number of ~~direct~~ labor hours worked ~~generally declines in~~may decline during the winter months due to ~~an increase in rain, colder temperatures~~unfavorable weather conditions and a decrease in daylight hours. ~~The~~In addition, the seasonality of oil and gas industry activity in the Gulf Coast region also affects our operations. Our offshore oil and gas customers often schedule the completion of their projects during the summer months in order to take advantage of more favorable weather during such months. Further, ~~the~~ rainy weather, tropical storms, hurricanes and other storms prevalent in the GOM and along the Gulf Coast ~~throughout the year~~ may also affect our operations. ~~Repercussions~~For example, in the third quarter 2020 we experienced damage to our facilities in Lake Charles, Louisiana due to Hurricane Laura, which made landfall as a high-end Category 4 hurricane. The impact of severe weather conditions or natural disasters may include disruption of our workforce, curtailment of services, weather-related damage to facilities and equipment, resulting in suspension of operations, inability to deliver equipment, personnel and products to job sites in accordance with contract ~~schedules;~~schedules, and loss of productivity. Our suppliers and subcontractors are also subject to severe weather and natural or environmental disasters that could affect their ability to deliver products or services or otherwise perform under their contracts. Furthermore, our customers’ operations may be materially and adversely affected by severe weather and seasonal weather conditions, resulting in reduced demand for services. Accordingly, our operating results may vary from quarter to quarter, depending on factors outside of our control. As a result, full year results are not likely to be a direct multiple of any quarter or combination of quarters. We believe that we maintain adequate insurance coverage related to potential damage from weather. See ~~"Executive Overview~~Note 2 of our Financial Statements in Item 8 and ~~Summary"~~“Overview” in Item 7 for further ~~discussion.~~

discussion of the impacts of adverse weather conditions.

Our backlog is subject to change as a result of delay, suspension, termination or ~~termination of~~an increase or decrease in scope for projects currently in ~~backlog or our failure to secure additional projects.~~

backlog.

Projects included in our backlog are generally subject to delay, suspension, termination, or an increase or ~~reduction~~decrease in scope at the option of the ~~customer, although~~customer; however, the customer is required to pay us for work performed and materials purchased through the date of termination, suspension, or ~~reduction~~decrease in scope. Certain of our customers have requested to renegotiate pricing, and in some cases temporarily suspended, contracts in our backlog as a result of COVID-19 and low and volatile oil and gas prices. Depending on the size of the project, the delay, suspension, termination,

increase or ~~reduction~~decrease in scope of any project could significantly impact our backlog and change the expected amount and timing of revenue recognized. WeFurther, for certain projects we may be at greater risk of delays (or further delays, as applicable), suspensions and cancellations in light of the ongoing global pandemic caused by COVID-19 and the current low and volatile oil and gas price environment. In addition, where a project proceeds as scheduled, it is possible that the customer may default by failing to pay amounts owed to us. Accordingly, our backlog as of any date is an uncertain indicator of future results of operations.

We may need to obtain debt financing or ~~new~~ credit facilities or raise equity capital in the future for working capital, capital expenditures, contract commitments and/or acquisitions, and we may not be able to do so or do so on favorable terms, which would impair our ability to operate our business or execute our strategy.

Our primary sources of liquidity are our ~~existing~~ cash, cash equivalents and scheduled maturities of our short-term ~~investments~~investments. If such amounts and cash flows from operating activities are not sufficient to fund our working capital requirements, capital expenditures, contract commitments, and/or acquisition opportunities, we would be required to reduce our capital expenditures and/or forego certain contracts and/or acquisition opportunities, or we would be required to fund such needs through debt or equity issuances or through other financing alternatives, including the sale of assets.

We have created our EPC Division to manage the potential SeaOne Project, offshore wind opportunities and other projects that may require engineering, procurement and construction and project management services. We are working to strengthen our internal project management capabilities through the hiring of additional personnel to service such projects. Additionally, we may be required to make capital investments in our existing or new facilities and increase our working capital to support our backlog or new project ~~awards, including potential additional projects for the U.S. Navy, the potential SeaOne Project and potential offshore wind projects.~~awards. The capital outlays and working capital required by us to execute such projects could exceed ~~the availability under~~ our ~~Credit Agreement~~existing, cash, cash equivalents, scheduled maturities of our short-term investments and cash flows from operating activities, and we may not be able to obtain ~~alternative~~ debt financing or ~~new~~ credit facilities to fund any such capital investment or working capital requirements.

Our ability to successfully obtain debt financing or ~~new~~ credit facilities or raise equity capital in the future will depend in part upon prevailing capital market conditions, as well as conditions in our business and our operating results, and those factors may affect our efforts to obtain additional capital on terms that are satisfactory to us. If adequate capital is not available, or not available on beneficial terms, we may not be able to make future investments, take advantage of acquisitions or other investment opportunities, or respond to competitive challenges. This could limit our ability to bid on new project opportunities, thereby limiting our potential growth and profitability.

We may not be able to ~~amend our Credit Agreement or~~ obtain debt financing, ~~or new~~ credit facilities or surety bonds if and when needed on favorable terms, if at all.

Our primary sources of liquidity are our cash, cash equivalents, scheduled maturities of our short-term investments, and availability under our $40.0 million revolving credit facility with Hancock Whitney Bank (“Credit Agreement”). Our available liquidity is impacted by changes in our working capital (excluding cash, cash equivalents and short-term investments) and our capital expenditure requirements. At December 31, 2018, our cash, cash equivalents and short-term investments totaled $79.2 million and we had $37.1 million of available capacity under our Credit Agreement.

There are a number of potential negative consequences for the energy sector that may result if oil and gas prices remain depressed or decline or if oil and gas companies continue to de-prioritize investments in exploration, development and production, including the continued or worsening of outflow of credit and capital from the energy sector and/or energy focused companies, further efforts by lenders to reduce their exposure to the energy sector, the imposition of increased lending standards for the energy sector, higher borrowing costs and collateral requirements, or a refusal to extend new credit or amend existing credit facilities in the energy sector. These potential negative consequences may be exacerbated by the pressure exerted on financial institutions by regulatory agencies to respond quickly and decisively to credit risk that develops in distressed industries. All these factors may complicate our ability to achieve a favorable outcome in obtaining debt financing ~~negotiating new~~or credit ~~facilities or amending or extending our Credit Agreement.~~

facilities.

In order to ~~extend our Credit Agreement or~~ secure debt financing or ~~new~~ credit facilities with borrowing capacity, if available, we may be required to provide further collateral, pay higher interest rates and otherwise agree to more restrictive terms. Collateral requirements and higher borrowing costs may limit our long- and short-term financial flexibility, and any failure to ~~obtain amendments to our Credit Agreement or to~~ secure debt financing or ~~new~~ credit facilities on terms that are acceptable to us could jeopardize our ability to fund, among other things, capital expenditures and general working capital needs or meet our other financial commitments.

In addition, we have provided one of our Sureties a letter of credit of $7.0 million as partial collateral in support of the performance bonds issued by the Surety in connection with our contracts for the construction of two MPSVs that are subject to purported termination by our customer. We ~~may obtain~~could be required to provide additional collateral to the Surety in support of these performance bonds or other performance bonds issued by the Surety or other Sureties.

Our LC Facility currently provides for letters of credit, which are subject to cash securitization. We provide our customers letters of credit under our ~~Credit Agreement (which will reduce our availability under our Credit Agreement) or~~LC Facility and surety bonds from financial institutions ~~to provide to our customers in order~~ to secure advance payments or guarantee performance under our contracts, or in lieu of retention being withheld on our contracts. With respect to a letter of credit under

our ~~Credit Agreement,~~LC Facility, any advance in the event of non-performance under a contract would become a ~~borrowing under~~direct obligation and reduction in our ~~Credit Agreement and thus a direct obligation.~~cash. With respect to a surety bond, any advance payment in the event of non-performance is subject to indemnification of the ~~surety~~Surety by us, which may require us to ~~borrow under~~use our ~~Credit Agreement.~~cash, cash equivalents or short-term investments. When a contract is complete, the contingent obligation terminates, and letters of credit or surety bonds are returned. ~~Although we believe there is sufficient~~It has been increasingly difficult to obtain letter of credit and bonding capacity ~~available~~and identify potential financing sources, due to, usamong other things, losses from ~~one~~our operations in recent years, including recent project charges, and given a majority of our backlog is at, or ~~more financial institutions, such capacity~~near, break-even or is ~~uncommitted, and accordingly, we~~in a loss position. We can provide no assurances that necessary letters of credit or bonding capacity will be available to support ~~our~~ future ~~bonding~~project requirements. See Note 75 and Note 8 of our Financial Statements in Item 8 and "“Liquidity and Capital ~~Resources"~~Resources” in Item 7 for further discussion of our ~~Credit Agreement~~LC Facility and surety ~~bonds.~~

~~Our Credit Agreement contains operating~~bonds and ~~financial restrictions and covenants that may restrict our financial and operating flexibility.~~

Operating and financial restrictions and covenants in our Credit Agreement could restrict our ability to finance future operations or capital needs or to engage, expand or pursue our business activities. For example, our Credit Agreement restricts our ability to: (i) grant liens; (ii) make certain loans or investments; (iii) incur additional indebtedness or guarantee other indebtedness in excess of specified levels; (iv) make any material change to the nature of our business or undergo a fundamental change; (v) make any material dispositions; (vi) acquire another company or all or substantially all of its assets; (vii) enter into a merger, consolidation, or sale leaseback transaction; or (viii) declare and pay dividends if any potential default or event of default occurs.

Our ability to comply with the covenants and restrictions contained in our Credit Agreement may be affected by events beyond our control, including prevailing economic, financial and industry conditions. If market or other economic conditions deteriorate, our ability to comply with these covenants may be impaired. If we breach any of our covenants under our Credit Agreement, repayment of any amounts borrowed could be accelerated when potentially we would not have the liquidity to do so and our credit capacity for the issuance of letters of credit may be terminated. If this were to happen, we could be required to seek additional debt financing or new credit facilities at higher capital costs, significantly curtail our operations, defer execution of our strategy, sell assets at discounted prices, or a combination of any of the aforementioned. In addition, our obligations under our Credit Agreement are secured by substantially all of our assets (with a negative pledge on our real property), and if we are unable to repay our indebtedness under our Credit Agreement, our lender could seek to foreclose on such assets. See Note ~~7 of our Financial Statements in Item~~ 8 ~~and "Liquidity and Capital Resources" in Item 7~~ for further discussion of our ~~Credit Agreement.~~

~~In addition, if we were to borrow under our Credit Agreement it could have a significant impact on our operations, including:~~

~~increasing our vulnerability to adverse economic or industry conditions;~~

~~limiting our flexibility in operating our business;~~

requiring us to dedicate a portion of our cash flow from operations to payments on any debt, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, strategic initiatives and general corporate purposes;

~~making it more difficult for us to satisfy our obligations under our Credit Agreement and increasing the risk that we may default on our Credit Agreement;~~

~~limiting our ability to obtain debt financing or new credit facilities for working capital, capital expenditures, acquisitions, general corporate purposes and other activities;~~

~~placing us at a competitive disadvantage against less leveraged competitors; and~~

~~making us vulnerable to increases in interest rates, as borrowings under our Credit Agreement are subject to variable interest rates.~~

MPSV dispute.

We may not be able to generate sufficient cash flow to meet our obligations.

Lower levels of offshore exploration and development activity and spending by our customers globally has had a direct and significant impact on our financial performance, financial condition and financial outlook.

Our ability to fund ~~our~~ operations depends on our ability to generate future cash flows from operations. This, to a large extent, is subject to conditions in the oil and gas industry, including commodity prices, demand for our services and the prices we are able to charge for our services, general economic and financial conditions, competition in the markets in which we operate, the impact of legislative and regulatory actions on how we conduct our business and other factors, all of which are beyond our control. During ~~2018,~~2020, we ~~had~~experienced negative cash flows from operations, and this trend could continue if conditions in our industry continue or ~~worsen.~~worsen or if we were to experience losses on our projects. See "“Liquidity and Capital ~~Resources"~~Resources” in Item 7 for further discussion of our business outlook.

In addition, On April 17, 2020, we entered into a $10.0 million PPP Loan with Whitney Bank. The PPP Loan, and accrued interest, may be forgiven partially or in full, if certain conditions are met. On September 29, 2020, we submitted our application to Whitney Bank, requesting PPP Loan forgiveness of $8.9 million. Whitney Bank approved our application for forgiveness on December 14, 2020, and our application was forwarded to the SBA for review. As of the filing of this Report, we have not received an approval or denial of our application for forgiveness from the SBA; in the absence of such action and based on guidance we received from our external advisors, we have taken the position that the date for commencement of loan payments has not yet occurred, and we have made no loan payments. Because the amount borrowed exceeded $2.0 million, the PPP Loan and our loan forgiveness application is subject to audit by the SBA. Any portion of the PPP Loan that is not forgiven, together with accrued interest, will be repaid based on the terms and conditions of the PPP Loan and in accordance with the PPP, as amended by the Flexibility Act, unless the SBA were to determine that we were not eligible to participate in the PPP, in which case the SBA could seek immediate repayment of the PPP Loan. While we believe we are a qualifying business and have met the eligibility requirements for the PPP Loan, and believe we have used the loan proceeds only for Permissible Expenses, we can provide no assurances that we will be eligible for forgiveness of the PPP Loan, in whole or in part. See Note 5 of our Financial Statements in Item 8 and “Liquidity and Capital Resources” in Item 7 for further discussion of our PPP Loan and related loan forgiveness application.

If we do not receive forgiveness of the portion of the PPP Loan anticipated, it could have a significant impact on our operations, including requiring us to dedicate more of our cash balance and any cash flow from operations to payments on the PPP Loan, thereby reducing our liquidity and available cash flow to fund overhead costs and general corporate administrative expenses, working capital, capital expenditures, and initiatives to diversify and enhance our business.

Our strategy to monetize under-utilized assets, including the sale of assets held for sale, and rationalize under-utilized facilities to improve our facility utilization, could result in future losses or impairments and may not ~~be able~~produce our desired results.

We are taking actions to ~~sell~~monetize under-utilized assets. At December 31, 2020, our assets held for sale totaled $8.2 million and primarily consisted of three 660-ton crawler cranes and two drydocks. Further, our ongoing evaluation of under-utilized assets could result in the identification of additional assets for sale. During 2020, we recorded impairments associated with our assets held for sale and ~~/ or any sales we consummate may not produce the desired results.~~

~~At December 31, 2018, our~~ assets classified as held for sale ~~total $18.9 million and primarily consist of three 660-ton crawler cranes, a deck barge, two plate bending roll machines, panel line equipment and a 2,500-ton drydock.~~during the period. We can provide no assurances that we will successfully sell ~~these~~our assets held for sale, that we will be able to do so in accordance with our expected timeline or that we will recover the carrying value of the ~~assets.~~ assets, which could result in additional impairments or losses. Additionally, any decisions made regarding our deployment or use of any sales proceeds we receive in any sale involves risks and uncertainties. As a result, our decisions with respect to such proceeds may not lead to increased long-term shareholder value. See Note 3 of our Financial Statements in Item 8 for further discussion of our assets held for sale.

We are also taking actions to relocate assets, consolidate operations and rationalize under-utilized facilities to improve our facility and personnel utilization. Such actions may include the closure or consolidation of one or more of our facilities and the termination of facility employees. During the fourth quarter 2020, we closed our Jennings Yard and Lake Charles Yard and relocated certain assets to our Houma Yards. We also relocated certain assets from our Shipyard Division to our Fabrication & Services Division, and we abandoned certain assets, within our Houma Yards to improve operational efficiency. In connection therewith, during 2020, we recorded impairments of certain assets associated with our Lake Charles Yard and Houma Yards. See Note 3 of our Financial Statements in Item 8 for further discussion of our closure of the Jennings Yard and Lake Charles Yard. A facility closure or consolidation could result in future impairments of facility assets and other restructuring or exits costs, including retention, severance or other costs associated with terminated personnel. Further, we can provide no assurances that any facility closure or consolidation will result in an improvement in our overall utilization or that the costs of doing so will not exceed the benefits expected to be gained from the closure or consolidation of a facility.

If we continue to be unable to maintain satisfactory utilization of our facilities or personnel, our results of operations and financial condition would be adversely affected.

In recent years we have experienced an under-utilization of our facilities and personnel and have not fully recovered our fixed overhead costs, due in part to the high fixed costs of our operations and the impact of the ongoing global pandemic caused by COVID-19 and low and volatile oil and gas prices. This has resulted in losses from our operations. If current or future facility and personnel capacity fails to match current or future customer demands for our services, our facilities would continue to be under-utilized, which could result in less profitable operations or ongoing losses from our operations.

We may be unable to successfully defend against claims made against us by customers or subcontractors, or recover claims made by us against customers or subcontractors.

Our projects are generally complex, and we may encounter difficulties in design, engineering, schedule changes and other factors, some of which may be beyond our control, that affect our ability to complete projects in accordance with contracted delivery schedules or to otherwise meet contractual performance obligations. We may bring claims against customers for additional costs incurred by us as a result of customer-caused delays or changes in project scope initiated by our customers that are not part of the original contract scope. In addition, claims may be brought against us by customers relating to, among other things, alleged defective or incomplete work, breaches of warranty and/or late completion of work. We may also incur claims with our subcontractors that are similar to those described above. These claims may be subject to lengthy and/or expensive litigation or arbitration proceedings and may require us to invest significant working capital in projects to cover cost increases pending resolution of the claims.

See “Legal Proceedings” in Item 3 for further discussion of our ongoing dispute with a customer related to the construction of two MPSVs.

Our employees and subcontractors work on projects that are inherently dangerous. If we fail to maintain safe work sites, we can be exposed to significant financial losses and reputational harm.

~~Safety is a leading focus of our business, and our safety record is critical to our reputation and is of paramount importance to our employees, customers and shareholders.~~

We work on projects with large mechanized equipment, moving vehicles, and dangerous processes, which can place our employees and ~~others~~subcontractors in challenging environments. ~~In addition,~~We maintain a safety assurance program designed to ensure the ~~failure~~safety of ~~structures during~~our employees and ~~after installation can also result~~subcontractors and to ensure that we remain in ~~personal injury or loss of life, severe damage to~~compliance with all applicable federal and ~~destruction of property and equipment and suspension of operations. Management is focused on the implementation of effective quality, health,~~state mandated safety ~~environmental and security procedures.~~regulations. If ~~we fail to implement these procedures,~~our safety assurance program fails, our employees, subcontractors and others may become injured, disabled or lose their lives, and our projects may be delayed, causing exposure to litigation or investigations by regulators.

Unsafe conditions at project work sites also have the potential to increase employee turnover, increase project costs and ~~raise~~increase our operating costs. In addition, our customers often require that we meet certain safety criteria ~~for eligibility~~in order to be eligible to bid ~~for~~ contracts. Our failure to maintain adequate safety standards, could result in lost project awards and customers ~~and our ability to tender~~or preclude us from tendering future bids.

These risks may be greater should we acquire companies that have ~~not allocated sufficient resources and management focus on safety and have~~ poor safety ~~records~~performance, requiring corrective actions during the integration process. This may result in liabilities before such corrective actions are implemented.

The limits on our insurance coverage could expose us to potentially significant liability and costs.

The fabrication of structures and the services we provide involves operating hazards that can cause accidents resulting in personal injury or loss of life, severe damage to and destruction of property and equipment and suspension of operations. In addition, due to the proximity to the GOM, our facilities are subject to the possibility of physical damage caused by hurricanes or flooding.

In addition, our employees may engage in certain activities, including interconnect piping and other service activities conducted on offshore platforms, activities performed on ~~spud~~ barges owned or chartered by us, and marine vessel fabrication and repair activities performed at our facilities, ~~and barges owned by us,~~ that are covered in either the provisions of the Jones Act or USL&H. These laws make the liability limits established under state workers’ compensation laws inapplicable to these employees and, instead, permit them or their representatives to pursue actions against us for damages or job-related injuries, with generally no limitations on our potential liability. ~~For example, our~~Our ownership and operation of vessels and our fabrication and repair of customer vessels can also give rise to large and varied liability risks, such as risks of collisions with other vessels or structures, sinking, fires and other marine casualties, which can result in significant claims for damages against both us and third parties. Litigation arising from any such occurrences may result in our being named as a defendant in lawsuits asserting large claims.

We may be exposed to future losses through our use of deductibles and self-insured retentions for our exposures related to third party liability and workers' compensation. We expect liabilities in excess of any deductible to be covered by insurance. Although we believe that our insurance coverage is adequate, there can be no assurance that we will be able to maintain adequate insurance at rates we consider reasonable or that our insurance coverage will be adequate to cover claims that may arise. To the extent we are self-insured, reserves are recorded based upon our estimates, with input from legal and insurance advisors. Changes in assumptions, as well as changes in actual experience, could cause these estimates to change.

Changes in the insurance industry have generally led to higher insurance costs and decreased availability of coverage. The availability of insurance that covers risks we typically insure against may decrease, and the insurance that we are able to obtain may have higher deductibles, higher premiums and more restrictive policy terms.

Our ~~entry into a new line of business~~efforts to strategically reposition the Company to diversify our service offerings and customer base may not result in increased shareholder value.

Our operations have historically been focused on ~~offshore~~ fabrication and services for the offshore oil and gas industry. We have diversified our ~~fabrication~~ business through the pursuit of onshore fabrication opportunities, ~~expanded~~the pursuit of marine vessel opportunities outside of the oil and ~~diversified our shipyard capability through~~gas industry and the ~~acquisition~~pursuit of ~~a shipyard business in 2016, and expanded our EPC capability through the creation of our EPC Division to manage the potential SeaOne Project,~~ offshore wind opportunities and other projects that ~~may require EPC services.~~are not related to our traditional offshore oil and gas markets. We may pursue additional markets or lines of business to expand our ~~capabilities~~service offerings and further ~~and enter into additional lines of business.~~diversify our customer base. Entry into, or further development of, new lines of business ~~in which we have not historically operated~~ may expose us to ~~business and operational~~ risks that are different from those we have experienced historically. We may not be able to effectively manage these additional risks or implement successful business ~~strategies in new lines of business.~~strategies. Additionally, our competitors in these expanded lines of business may possess greater operational knowledge, resources and experience than we do. These diversification initiatives may not ~~result in an~~ increase in shareholder value and could result in a reduction in shareholder value depending upon our required capital investment and success.

We may be unable to employ a sufficient number of skilled personnel to execute our projects.

Our operations require personnel with specialized skills and experience. In recent years we have reduced our skilled workforce in response to decreases in the utilization of our facilities. Our productivity and profitability are significantly dependent upon our ability to attract and retain skilled construction ~~supervision~~supervisors and craft labor, primarily welders, pipe fitters and equipment operators. Reductions in our labor force may make it more difficult to increase our labor force to desirable levels during periods of expanding customer demand and increases in our backlog. ~~Our ability~~During 2020, we began increasing our skilled workforce within our Shipyard Division to ~~expand~~execute the division’s backlog, and in connection therewith, and in part due to COVID-19, we experienced an increase in employee absenteeism and turnover as well as challenges recruiting and hiring craft labor, which has impacted our ~~operations to support growth in our backlog is highly dependent on our ability to increase our labor force when necessary with an appropriate skilled construction workforce.~~

productivity.

In ~~addition, in~~ periods of increased demand for construction labor, the supply of ~~such~~skilled labor becomes increasingly limited resulting in higher costs of labor, including increases in ~~the~~ wage rates ~~as well as~~and the costs of recruiting or training ~~costs~~ to attract and retain qualified employees. ~~During previous periods of high activity, we have enhanced several incentive programs and expanded our training facility to maintain our workforce and attract new employees. During~~Further, during times of higher demand for our services, if ~~qualified personnel~~skilled labor become scarce, it could also increase our use of contract labor, which may have a higher cost and lower levels of productivity. ~~Further, if~~

If we ~~fail~~are unable to ~~attract~~hire and retain ~~qualified personnel,~~necessary skilled labor, we ~~could incur difficulties performing our contracts and attracting~~may be unable to win new project ~~awards. Moreover,~~awards and expand our operations. Further, any shortage of ~~qualified personnel~~skilled labor or ~~the inability to obtain~~ongoing challenges hiring and ~~retain qualified personnel~~retaining skilled labor could negatively affect the quality, safety, timeliness and ~~timeliness~~profitability of our ~~operations.~~projects.

Our success is dependent on key personnel.

~~Part of our~~

Our success ~~depends on~~is dependent upon the abilities of our executives, management, and other key employees who have significant experience within our industry. Our success also depends on our ability to attract, retain and motivate highly-skilled personnel in various areas, including engineering, ~~skilled laborers and craftsmen,~~construction supervision, project management, procurement, project controls and finance. The loss of one or more key personnel or our inability to attract, retain and motivate necessary personnel could impact our operations. In addition, we may not be able to retain key employees assumed in an acquisition, which may impact our ability to successfully integrate or operate the business acquired.

We depend on third parties to provide services to perform our contractual obligations and supply raw materials.

We rely on third parties to provide raw materials, and major components and to perform certain services required by our contracts. ~~For example, we rely on steel purchased from domestic and foreign steel mills as well as subcontractors for the installation of electrical and mechanical testing of equipment.~~ Disruptions and performance problems caused by our suppliers and subcontractors, or a misalignment between our contractual obligations to our customers and our agreements with our subcontractors and suppliers, could have an adverse effect on our ability to meet our commitments to customers. Our ability to perform our obligations on a timely basis could be adversely affected if one or more of our suppliers or subcontractors are unable

to provide the agreed-upon products or materials or perform the agreed-upon services in a timely, compliant and cost-effective manner or otherwise fail to satisfy contractual requirements. The inability of our suppliers or subcontractors to perform could also result in the need to transition to alternate suppliers or subcontractors, which could result in significant incremental cost and delay, or the need for us to provide other supplemental means to support our existing suppliers and subcontractors.

We depend upon subcontractors for a variety of reasons, including:

(i) to perform work we would otherwise perform with our employees but are unable to do so as a result of scheduling demands;

(ii) to supervise and/or perform certain aspects of the contract more efficiently considering the conditions of the contract; and

(iii) to perform certain services that we are unable to do or which we believe can be performed ~~more efficiently or~~ at a lower cost by subcontractors.

We work closely with these subcontractors to monitor progress and address our customer requirements. However, the inability of our subcontractors to perform under the terms of their contracts could cause us to incur additional costs that reduce profitability or ~~create~~result in losses on projects.

~~The costs to provide our products and services can increase over the terms of our contracts, including any increases in material costs.~~

We may be protected from increases in material costs through cost escalation provisions in some of our contracts. ~~Even with these provisions, however,~~However, the difference between our actual material costs and these escalation provisions may expose us to cost uncertainty. In addition, we may experience significant delays in deliveries of key raw materials, which may occur as a result of availability or price.

Systems and information technology interruption or failure and data security breaches could adversely impact our ability to operate or expose us to significant financial losses and reputational harm.

We rely heavily on computer information, communications technology and related systems in order to properly operate our business. From time to time, we experience occasional system interruptions and delays. In the event we are unable to deploy software and hardware, effectively upgrade our systems and network infrastructure, and take other steps to maintain or improve the efficiency and efficacy of our systems, the operation of such systems could be interrupted or result in the loss, corruption or release of data. In addition, our computer and communications systems and operations could be damaged or interrupted by natural disasters, force majeure events, telecommunications failures, power loss, acts of war or terrorism, physical or electronic security breaches, intentional or inadvertent user misuse or error, or similar events or disruptions. Any of these or other events could cause interruptions, delays, loss of critical and/or sensitive data or similar effects.

In addition, we face the threat to our computer systems of unauthorized access, computer hackers, computer viruses, malicious code, organized cyber-attacks and other security problems and system disruptions. If we were to be subject to a cyber incident or attack, it could result in the disclosure of confidential or proprietary customer information, theft, loss, corruption or misappropriation of intellectual property, damage to our reputation with our customers and the market, failure to meet customer requirements or customer dissatisfaction, theft, exposure to litigation, damage to equipment and other financial costs and losses. We rely on industry accepted security measures and technology to securely maintain all confidential and proprietary information on our computer systems, but these systems are still vulnerable to these threats. In addition, as cybersecurity threats continue to evolve, we may be required to expend significant resources to protect against the threat of these system disruptions and security breaches or to alleviate problems caused by these disruptions and breaches.

~~Recent~~

We may conduct a portion of our operations through joint ventures and strategic alliances over which we may have limited control, and our partners in such arrangements may not perform.

We may conduct a portion of our operations through joint ventures and strategic alliances with business partners. In any such arrangement, differences in views among the participants may result in delayed decisions or in failures to reach agreement on certain matters, or to do so in a timely manner. In any joint venture or strategic alliance in which we hold a non-controlling interest, we may have limited control over many decisions relating to joint venture operations and internal controls relating to operations. We also cannot control the actions of our partners, including any non-performance, default, or bankruptcy of our partners, and we would likely share liability or have joint and/or several liability with our partners for joint venture matters.

Actions of activist shareholders could create uncertainty about our future strategic direction, be costly and divert the attention of our management and board. In addition, some institutional investors may be discouraged from investing in the industries that we service.

In recent years, activist shareholders have placed increasing pressure on publicly-traded companies to effect changes to corporate governance practices, executive compensation practices or social and environmental practices or to undertake certain corporate actions or reorganizations. There can be no assurances that activist shareholders will not publicly advocate for us to make additional corporate governance changes or engage in certain corporate actions. Responding to challenges from activist shareholders, such as proxy contests, media campaigns or other public or private means, could be costly and time consuming and could have an adverse effect on our reputation and divert the attention and resources of management and our board, which could have an adverse effect on our business and operational results. Additionally, shareholder activism could create uncertainty about our leadership or our future strategic direction, resulting in loss of future business opportunities, which could adversely affect our business, future operations, profitability and our ability to attract and retain qualified personnel. As of December 31, 2020, based on our review of public filings with the SEC, we believe over half of our stock is held by a combination of institutional investors, pooled investment funds, and certain other investors with a history of shareholder activism. One such investor has a Schedule 13D on file with the SEC that reserves that investor’s rights to pursue corporate governance changes, board structure changes, changes to capitalization, potential business combinations or dispositions involving the Company or certain of its businesses, or suggestions for improving the Company’s financial and/or operational performance. We have a Cooperation Agreement in place with our largest shareholder that is set to expire at the 2021 annual meeting, if not terminated sooner.

In addition to risks associated with activist shareholders, some institutional investors are increasingly focused on environmental, social and governance (“ESG”) factors when allocating their capital. These investors may be seeking enhanced ESG disclosures or may implement policies that discourage investment in certain of the industries that we service. To the extent that certain institutional investors implement policies that discourage investments in industries that we service, it could have an adverse effect our financing costs and access to sources of capital.

Legal and Regulatory Risks

Any changes in U.S. trade policies and retaliatory responses from other countries may significantly increase the costs or limit supplies of materials and products used in our fabrication projects.

The federal government ~~recently~~has imposed new or increased tariffs or duties on an array of imported materials and goods that are used in connection with our fabrication business, including steel, raising our costs for these items (or products made with them), and has threatened to impose further tariffs, duties and/or trade restrictions on imports. Foreign governments, including China and Canada, and trading blocs, such as the European Union, have responded by imposing or increasing tariffs, duties and/or trade restrictions on U.S. goods, and are reportedly considering other measures. These trading conflicts and related escalating governmental actions that result in additional tariffs, duties and/or trade restrictions could increase our costs, ~~further,~~ cause disruptions or shortages in our supply chains and/or negatively impact the U.S., regional or local economies.

The nature of our industry subjects us to compliance with regulatory and environmental laws.

Our operations and properties are subject to a wide variety of existing foreign, federal, state and local laws and other regulations, including those governing discharges into the air and water, the handling and disposal of solid and hazardous wastes, the remediation of soil and groundwater contaminated by hazardous substances and the health and safety of employees. In addition, we could be affected by future laws or regulations, including those imposed in response to concerns over climate change, other aspects of the environment, or natural resources. For example, because of concerns that carbon dioxide, methane and certain other greenhouse gases may produce climate changes that have significant impacts on public health and the environment, various governmental authorities have considered and are continuing to consider the adoption of regulatory strategies and controls designed to reduce the emission of greenhouse gases resulting from regulated activities, which if adopted in areas where we conduct business, could require us or our customers to incur additional compliance costs, may result in delays in pursuit of regulated activities and could adversely affect demand for the oil and natural gas that some of our customers produce, thereby potentially limiting demand for our services.

Compliance with many of these laws is becoming increasingly complex, stringent and expensive. These laws may impose “strict liability” for damages to natural resources or threats to public health and safety, rendering a party liable for the environmental damage without regard to its negligence or fault. Certain environmental laws provide for strict, joint and several liability for remediation of spills and other releases of hazardous substances, as well as damage to natural resources. In addition, we could be subject to claims alleging personal injury or property damage as a result of alleged exposure to hazardous substances. Such laws and regulations may also expose us to liability for the conduct of others or conditions caused by others, or acts for which we were in compliance with applicable laws at the time such acts were performed. We believe that our present operations materially comply with applicable federal and state pollution control and environmental protection laws and regulations. We also believe that compliance with such laws has not resulted in a material adverse effect on our operations. However, such environmental laws are changed frequently. Sanctions for noncompliance may include revocation of permits, corrective action orders, administrative or civil penalties and criminal prosecution. It is also possible that the new Biden Administration will impose additional environmental regulations that will restrict federal oil and gas leasing, permitting or drilling practices on public lands, which could result in more stringent or costly restrictions, delays or cancellations to our operations. For example, President Biden has already issued orders temporarily suspending leasing or permitting of oil and gas activities on federal lands and waters, and the President has also proposed a moratorium on hydraulic fracturing on federal lands and waters. We are currently unable to predict whether these and other environmental ~~laws~~regulations will have a material adverse effect on our future operations and financial results. See “~~Business and Properties - Government~~“Government and Environmental ~~Regulation~~”Regulation” in Item 1 for further discussion.

The demand for our services is also affected by changing taxes, price controls and other laws and regulations related to the oil and gas, chemicals, commodities, marine and ~~marine~~alternative energy industries. We may not be able to pass any potential increases in taxes on to our customers.

Offshore construction and drilling in certain areas is opposed by many environmental groups and, in certain areas, has been restricted. To the extent laws are enacted or other governmental actions are taken that prohibit or restrict offshore construction

and drilling or impose environmental protection requirements that result in increased costs to the oil and gas industry in general and the offshore construction industry, our business and prospects could be adversely affected. We cannot determine to what extent future operations and results of operations may be affected by new legislation, new regulations or changes in existing regulations.

Our business is highly dependent on our ability to utilize the navigation canals adjacent to our facilities.

Our ~~shipyard and fabrication yards~~facilities in Houma, Louisiana are located on the Houma Navigation Canal approximately 30 miles from the GOM and ~~our services yard is located~~ on a slip adjacent to the Houma Navigation Canal. The Houma Navigation Canal provides the shortest and least restrictive means of access from our facilities to open waters. Our shipyard in Jennings, Louisiana, is located on the west bank of the Mermentau River approximately 25 miles north of the U.S. Intracoastal Waterway and our shipyard near Lake Charles located 17 miles from the GOM on the Calcasieu River. All theseThese waterways are navigable waterways of the U.S. and, as such, are protected by federal law from unauthorized obstructions that would hinder water-borne traffic. Federal law also authorizes maintenance of these waterways by the U.S. Army Corps of Engineers. These waterways are dredged from time to time to maintain water depth and, while federal funding for dredging has historically been provided, there is no assurance that Congressional appropriations sufficient for adequate dredging and other maintenance of these waterways will be continued. If funding were not appropriated for that purpose, some or all of these waterways could become impassable by barges or other vessels required to transport many of our products.

~~Any additional government shutdowns may adversely affect our business.~~

A government shutdown could impact inspections, regulatory review and certifications, grants or approvals. In addition, during the first quarter 2018, we executed a contract for the construction and delivery of one towing, salvage and rescue ship for the U.S. Navy with customer options for seven additional vessels. A government shutdown could result in a delay or cancellation of this project or result in our incurring substantial labor or other costs without reimbursement from the government.

~~Systems and information technology interruption or failure and data security breaches could adversely impact our ability to operate or expose us to significant financial losses and reputational harm.~~

We rely heavily on computer information, communications technology and related systems in order to properly operate our business. From time to time, we experience occasional system interruptions and delays. In the event we are unable to deploy software and hardware, effectively upgrade our systems and network infrastructure, and take other steps to maintain or improve the efficiency and efficacy of our systems, the operation of such systems could be interrupted or result in the loss, corruption or release of data. In addition, our computer and communications systems and operations could be damaged or interrupted by natural disasters, force majeure events, telecommunications failures, power loss, acts of war or terrorism, computer viruses, malicious code, physical or electronic security breaches, intentional or inadvertent user misuse or error, or similar events or disruptions. Any of these or other events could cause interruptions, delays, loss of critical and/or sensitive data or similar effects, which could have a material adverse impact on us and our clients.

In addition, we face the threat to our computer systems of unauthorized access, computer hackers, computer viruses, malicious code, organized cyber-attacks and other security problems and system disruptions. If we were to be subject to a cyber incident or attack, it could result in the disclosure of confidential or proprietary customer information, theft or loss of intellectual property, damage to our reputation with our customers and the market, failure to meet customer requirements or customer dissatisfaction, theft or exposure to litigation, damage to equipment and other financial costs and losses. We rely on industry accepted security measures and technology to securely maintain all confidential and proprietary information on our computer systems, but they are still vulnerable to these threats. In addition, as cybersecurity threats continue to evolve, we may be required to expend significant resources to protect against the threat of these system disruptions and security breaches or to alleviate problems caused by these disruptions and breaches.

~~We may conduct a portion of our operations through joint ventures and strategic alliances over which we may have limited control, and our partners in such arrangements may not perform.~~

We recently entered into a cooperation agreement with Smulders. In the future we may conduct a portion of our operations through joint ventures and strategic alliances with business partners. In any such arrangement, differences in views among the participants may result in delayed decisions or in failures to reach agreement on certain matters, or to do so in a timely manner. In any joint ventures or strategic alliance in which we hold a non-controlling interest, we may have limited control over many decisions relating to joint venture operations and internal controls relating to operations. We also cannot control the actions of our partners, including any non-performance, default, or bankruptcy of our partners, and we would likely share liability or have joint and/or several liability with our partners for joint venture matters.

Item 1B. Unresolved Staff Comments

None.

Item 3. Legal Proceedings

We are subject to various routine legal proceedings in the normal conduct of our business, primarily involving commercial disputes and claims, workers’ compensation claims, and claims for personal injury under general maritime laws of the U.S. and the Jones Act. While the outcome of these lawsuits, legal proceedings and claims cannot be predicted with certainty, we believe that the outcome of any such proceedings, even if determined adversely, would not have a material adverse effect on our financial position, results of operations or cash ~~flows~~

flows.

On October 2, 2018, we filed a lawsuit against our customer to enforce our rights and remedies under the applicable construction contracts for two MPSVs. The lawsuit was filed in the Twenty-Second Judicial District Court for the Parish of St. Tammany, State of Louisiana and is styled Gulf Island Shipyards, LLC v. Hornbeck Offshore Services, LLC. The customer responded to our lawsuit by denying many of the allegations in the lawsuit and asserting a counterclaim against us. We filed a response to the counterclaim denying all of the ~~customer's~~customer’s claims. ~~Subsequent~~The customer subsequently filed an amendment to ~~December 31, 2018,~~its counterclaim to add claims by the customer against the Surety. The customer also filed a motion for partial summary judgment with the trial court seeking, among other things, to obtain possession of the ~~two MPSVs. We intend to respond to~~vessels. A hearing on the motion atwas held on May 28, 2019, and the ~~appropriate time.~~

customer's request to obtain possession of the vessels was denied by the trial court. The customer subsequently filed a second motion for partial summary judgment re-urging its previously denied request to obtain possession of the vessels. A hearing on the second motion was held on November 5, 2019, and the customer’s request to obtain possession of the vessels was again denied by the trial court. Thereafter, the customer requested that the appellate court exercise its discretion and review and reverse the trial court’s denial of the customer’s second motion. We opposed the discretionary appellate review request of the customer, and that review, as well as the pending lawsuit, were stayed during the pendency of the customer’s Chapter 11 bankruptcy case that is referenced below. However, the customer’s Chapter 11 bankruptcy plan was confirmed, and accordingly, the appellate matter and the lawsuit are no longer stayed. The appellate court has since denied the customer’s appellate review request and the lawsuit will proceed in the ordinary course. Discovery in connection with that lawsuit is ongoing and no trial date or other deadlines have been scheduled in connection with that lawsuit.

On May 19, 2020, the customer filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code. The customer’s prepackaged Chapter 11 plan of reorganization was subsequently confirmed by the bankruptcy court and that plan of reorganization is effective. In connection with its bankruptcy case, on June 3, 2020, the customer filed a separate bankruptcy adversary proceeding against us in which it again sought to obtain possession of the vessels. In response, we filed a motion to dismiss the adversary proceeding and to allow the dispute regarding the vessels and the construction contracts to continue in state court where our lawsuit against the customer is currently pending. On September 1, 2020, a hearing was held in connection with the motion to dismiss; however, the bankruptcy court’s decision was delayed to allow the parties an opportunity to mediate their dispute. The parties engaged in mediation until January 26, 2021 when the customer unilaterally and voluntarily dismissed its adversary proceeding seeking possession of the vessels. The mediation between the parties was not successful.

See Note 118 of our Financial Statements in Item 8 for further discussion of this litigation.

Item 4. Mine Safety Disclosures

Not applicable.

~~Item 4A. Executive Officers of the Registrant~~

~~Listed below are the names, ages and offices held by each of our executive officers as of March 1, 2019. All officers serve at the pleasure of our Board of Directors.~~



~~Name~~	~~Age~~	~~Position~~
~~Kirk J. Meche~~	56	~~President, Chief Executive Officer and Director~~
~~Westley S. Stockton~~	47	~~Executive Vice President, Chief Financial Officer, Treasurer and Secretary~~
~~Todd F. Ladd~~	52	~~Executive Vice President and Chief Operating Officer~~

~~Kirk J. Meche~~ became Chief Executive Officer in January 2013. Mr. Meche has served as President since January 2009. He served as Chief Operating Officer from January 2009 to December 2012. Mr. Meche served as Executive Vice President – Operations from 2001 to 2009. Mr. Meche was also President and Chief Executive Officer of Gulf Marine, a subsidiary of the Company, from February 2006 to October 2006. Mr. Meche served as President and Chief Executive Officer of Gulf Island, L.L.C., a subsidiary of the Company, from February 2001 to January 2006. Prior to that, Mr. Meche served as President and Chief Executive Officer of Southport, Inc., a subsidiary of the Company, from 1999 to 2001. Mr. Meche was a project manager of the Company from 1996 to 1999. Mr. Meche held various engineering positions for J. Ray McDermott, Inc. from 1985 to 1996. Mr. Meche has been a director of the Company since 2012.

~~Westley S. Stockton~~ became Executive Vice President of Finance, Chief Financial Officer, Treasurer and Secretary on September 12, 2018. Prior to joining the Company, Mr. Stockton served as Senior Vice President and Chief Accounting Officer for Chicago Bridge & Iron Company N.V. (“CB&I”), an engineering, procurement and construction company, and prior to that served in senior leadership positions within financial operations and mergers and acquisitions for CB&I beginning in 2002. From 1994 to 2002, Mr. Stockton, a certified public accountant, worked in public accounting for PricewaterhouseCoopers and Arthur Andersen in audit-related roles.

~~Todd F. Ladd~~ became Chief Operating Officer in February 2014 and was appointed Executive Vice President in February 2015. Mr. Ladd previously served as Vice President and General Manager of the Company from July 2013 to February 2014. Mr. Ladd has over 25 years industry experience in the offshore fabrication industry. From 2001 to 2013, Mr. Ladd served as a partner and Senior Project Manager with Paloma Energy Consultants, an offshore construction project management firm. From April 1996 to August 2001, Mr. Ladd served as a Project Manager for Gulf Island, L.L.C., a subsidiary of the Company. Mr. Ladd also served as Production Engineer and Facility Engineer at McDermott Marine Construction from January 1988 through March 1996.

PART II

Item 5. Market for ~~Registrant's~~Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

Our common stock is traded on the Nasdaq Global Select Market, under the symbol “GIFI.” ~~As of~~At February ~~22, 2019, we had approximately 2,835~~23, 2021, there were 2,640 holders ~~of record~~ of our common ~~stock.~~

~~Issuer Purchases~~stock (including 86 registered holders on the books and records of ~~Equity Securities~~

~~The following table sets forth~~our transfer agent (excluding CEDE & Co.) and 2,554 accounts of banks, brokers, trustees or other nominees participating in the DTC system that hold shares of our common stock ~~repurchased~~beneficially owned by usothers).

Issuer Purchases of Equity Securities

We had no repurchases of securities during the fourth quarter ~~2018.~~

Current Program
Period
Total
Number of
Shares
Purchased

Average
Price
Paid per
Share

Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs

Maximum
Number of Shares
that May Yet Be
Purchased Under the
Plans or Programs
October 1 to 31, 2018 — $ —
—
—
November 1 to 30, 2018 — —
—
—
December 1 to 31, 2018 1,738 7.85
—
—
Total 1,738
^(a)
7.85
—
—

~~_______________~~


~~(a)~~	~~Represents shares withheld by the Company in order to satisfy employee tax obligations for vesting of restricted stock awards.~~

2020. Information as to the securities authorized for issuance under our equity compensation plans is incorporated herein by reference to Item 12.

~~Stock Performance Graph~~

The following graph compares the cumulative total shareholder return on our common stock for the five-year period ended December 31, 2018, with the cumulative total return of the Standard & Poor’s 500 Index and the Standard & Poor’s 500 Oil & Gas Equipment & Services Index for the same period. The returns are based on an assumed investment of $100 on January 1, 2014, at closing prices on December 31, 2013, in our common stock and in each of the indexes and on the assumption that dividends were reinvested.

~~Total Return To Shareholders~~

~~(Includes reinvestment of dividends)~~

ANNUAL RETURN PERCENTAGE
Years Ending
Company / Index Dec 14 Dec 15 Dec 16 Dec 17 Dec 18
Gulf Island (14.9)% (44.2)% 14.3% 13.2% (46.2)%
S&P 500 Index 13.7 1.4 12.0 21.8 (4.4)
S&P 500 Oil & Gas Equipment & Services Index (7.8) (18.8) 31.9 (14.7) (41.5)

Base
Period
Dec 13

INDEXED RETURNS ($'s)
Years Ending
Company / Index Dec 14 Dec 15 Dec 16 Dec 17 Dec 18
Gulf Island $ 100.00
$ 85.15
$ 47.50
$ 54.29
$ 61.47
$ 33.06
S&P 500 Index 100.00
113.69
115.26
129.05
157.22
150.33
S&P 500 Oil & Gas Equipment & Services Index 100.00
92.20
74.91
98.83
84.32
49.36

Item 6. Selected Financial Data

The following table presents selected historical financial data as of the dates and for the periods indicated. The historical financial data for each year in the five-year period ended December 31, 2018, is derived from our audited financial statements. The following information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Financial Statements and notes thereto included elsewhere in this 2018 Annual Report.

Years Ended December 31,
2018 2017 2016 2015 2014
(in thousands, except per share data)
Statement of Operations Data:
Revenue $ 221,247
$ 171,022
$ 286,326
$ 306,120
$ 506,639
Cost of revenue 228,443
213,947
261,473
321,276
462,083
Gross profit (loss) ^{(1) (3) (5)}
(7,196 ) (42,925 ) 24,853
(15,156 ) 44,556
General and administrative expense 19,015
17,800
19,670
16,256
17,409
Asset impairments and (gain) loss on assets held for sale, net ^{(2) (4) (6)}
(6,850 ) 7,931
—
7,202
3,200
Other (income) expense, net 304
(46 ) (681 ) (20 ) 99
Operating income (loss) (19,665 ) (68,610 ) 5,864
(38,594 ) 23,848
Interest expense, net (142 ) (349 ) (308 ) (139 ) (24 )
Income (loss) before income taxes (19,807 ) (68,959 ) 5,556
(38,733 ) 23,824
Income tax (expense) benefit (571 ) 24,193
(2,041 ) 13,369
(8,504 )
Net income (loss) $ (20,378 ) $ (44,766 ) $ 3,515
$ (25,364 ) $ 15,320
Income Summary Data:
Basic and diluted income (loss) per common share $ (1.36 ) $ (3.02 ) $ 0.24
$ (1.75 ) $ 1.05
Basic and diluted weighted-average common shares 15,032
14,838
14,631
14,546
14,505
Cash dividends per common share $ —
$ 0.04
$ 0.40
$ 0.40
$ 0.40

~~_____________~~


~~(1)~~	Gross loss for 2018 includes changes in estimates and project losses of $9.1 million for projects within our Fabrication and Shipyard Divisions and $2.1 million of costs related to our South Texas Properties within our Fabrication Division.


~~(2)~~	Asset impairments and (gain) loss on assets held for sale, net for 2018 includes a gain on the sale of our South Texas Properties of $8.0 million and a gain on insurance recoveries of $3.6 million, offset partially by impairments of $4.4 million related to inventory and assets that were held for sale and a loss on assets sold of $0.3 million within our Fabrication and Shipyard Divisions.


~~(3)~~	Gross loss for 2017 includes changes in estimates and project losses of $34.5 million for projects within our Shipyard Division and $5.5 million of costs related to our South Texas Properties within our Fabrication Division.


~~(4)~~	Asset impairments and (gain) loss on assets held for sale, net for 2017 includes impairments of $7.7 million related to inventory and assets that were held for sale within our Fabrication and Shipyard Divisions.


~~(5)~~	~~Gross loss for 2015 includes changes in estimates and project losses of $33.9 million for projects within our Fabrication Division.~~


~~(6)~~	~~Asset impairments and (gain) loss on assets held for sale, net for 2015 includes impairments of $7.2 million related to assets that were held for sale within our Fabrication Division.~~

Not applicable.

December 31,
2018 2017 2016 2015 2014
(in thousands)
Balance Sheet Data:
Working capital $ 103,854
$ 130,499
78,012
$ 77,968
$ 97,084
Property, plant and equipment, net 79,930
88,899
206,222
200,384
224,777
Total assets 258,290
270,840
$ 322,408
316,923
395,297
Debt —
—
—
—
—
Cash Flow Data:
Net cash provided by (used in) operating activities $ (20,392 ) $ (39,385 ) $ 14,568
$ 10,694
$ 32,110
Net cash provided by (used in) investing activities 82,718
(1,135 ) 2,698
(6,007 ) (26,729 )
Net cash used in financing activities (852 ) (1,664 ) (927 ) (5,944 ) (5,865 )
Operating Data:
Direct labor hours worked for the year ended December 31, ⁽¹⁾
1,947
1,926
2,784
2,655
3,646
Backlog as of December 31, ⁽²⁾

Direct labor hours 2,224
1,544
1,265
1,914
1,654
Dollars $ 356,460
$ 222,617
$ 132,972
$ 232,411
$ 184,667

~~_______________~~


~~(1)~~	~~Direct labor hours are hours worked by employees and contractors directly involved in the production of our products.~~

~~(2)~~

New project awards represent expected revenue values of commitments received during a given period, including scope growth on existing commitments. A commitment represents authorization from our customer to begin work or purchase materials pursuant to written agreement, letters of intent or other forms of authorization. Backlog represents the unearned value of our new project awards and may differ from the value of future performance obligations for our contracts required to be disclosed under Topic 606, and presented in Note 2 of our Financial Statements in Item 8. Backlog includes our performance obligations at December 31, 2018, plus signed contracts that are temporarily suspended or under protest that may not meet the criteria to be reported as future performance obligations under Topic 606, but represent future work that we believe will be performed. For balance sheet dates December 31, 2014 - 2017, backlog also includes commitments received subsequent to December 31, of each year through the date of the respective annual reports. We believe that backlog, a non-GAAP financial measure, provides useful information to investors. New project awards and backlog may vary significantly each reporting period based on the timing of our major new contract commitments.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is provided to assist readers in understanding our financial performance during the periods presented and significant trends that may impact our future performance. This discussion should be read in conjunction with our Financial Statements and the related notes thereto.

Certain terms are defined in the “Glossary of Terms” beginning on page ii.

Overview

We are a leading fabricator of complex steel structures, modules and marine vessels, ~~used in energy extraction~~ and ~~production, petrochemical and industrial facilities, power generation, alternative energy and shipping and marine transportation operations. We also provide related~~a provider of project management, ~~for EPC projects along with installation,~~ hookup, commissioning, repair, maintenance and ~~repair and maintenance~~civil construction services. ~~In addition, we perform civil, drainage and other work for state and local governments.~~ Our customers include ~~United States ("~~U.S.") and, to a lesser extent, international energy producers; refining, petrochemical, LNG, industrial, power, and marine operators; EPC companies; and certain agencies of the U.S. Government. We

During 2019, we operated and managed our business through three operating divisions (“Fabrication,” “Shipyard” and “Services”) and one non-operating division (“Corporate”), which represented our reportable segments. In the first quarter 2020, our Fabrication and Services Divisions were operationally combined to form an integrated new division called Fabrication & Services. As a result, we operate and manage our business through ~~four~~two operating divisions ~~("Fabrication", "Shipyard", "Services"~~(“Shipyard” and ~~"EPC"~~“Fabrication & Services”) and one non-operating division ~~("Corporate"~~(“Corporate”), which represent our reportable segments. Accordingly, the segment results (including the effects of eliminations) for our Fabrication and Services Divisions for each of 2019 and 2018 were combined to conform to the presentation of our reportable segments for 2020. In addition to the division combination, in the first quarter 2020, management and project execution responsibility for our two forty-vehicle ferry projects were transferred from our former Fabrication Division to our Shipyard Division. Accordingly, results for these projects for 2019 (the projects had no results for 2018) were reclassified from our former Fabrication Division to our Shipyard Division to conform to the presentation of these projects for 2020. See Note 10 of our Financial Statements in Item 8 for further discussion of our realigned operating divisions.

Our corporate headquarters is located in Houston, Texas, with ~~fabrication~~operating facilities located in Houma, Louisiana. In the fourth quarter 2020, we closed our Jennings Yard and Lake Charles ~~Louisiana.~~

~~Beginning~~Yard within our Shipyard Division. See Note 3 of our Financial Statements in ~~late~~Item 8 and below for further discussion of our closure of the Jennings Yard and Lake Charles Yard.

Since 2014, the price of oil has been at depressed levels, resulting in a ~~severe~~significant and sustained ~~decline~~reduction in ~~oil~~capital spending and ~~gas prices led to a significant decline in oil and gas industry~~ drilling activities ~~and capital spending~~ from our traditional offshore oil and gas customer base. ~~As a result,~~Consequently, our operating results and cash flows were negatively impacted as we experienced reductions in revenue, lower margins due to competitive pricing, ~~and a~~ significant ~~underutilization~~under-utilization of our operating facilities ~~in our Fabrication~~ and ~~Shipyard Divisions. In addition, during 2017 we incurred~~ losses on certain projects.

During the first quarter 2020, oil prices declined even further to historical lows due to a ~~project~~decline in demand for oil resulting in part from an unprecedented global health crisis caused by COVID-19. On June 8, 2020, the National Bureau of Economic Research indicated that the U.S. economy entered a recession in February 2020, and the duration and severity of this recession, which is ongoing, remains unclear at this time. We operate in a critical infrastructure industry, as defined by the U.S. Department of Homeland Security. Consistent with federal guidelines and with state and local orders to date, we have continued to operate across our footprint. However, the progression of and global response to COVID-19, and related contraction in oil demand, combined with depressed and volatile crude oil prices have had and may continue to have negative impacts on our operations. The extent to which COVID-19 and the related contraction in oil demand and the resulting reduction and volatility in crude oil prices may adversely impact our business, prospects, financial condition, operating results and cash flows depends on future developments that are highly uncertain and unpredictable. This current level of uncertainty means the ultimate business and financial impacts of COVID-19 and the related contraction in oil demand and the depressed crude oil prices cannot be reasonably estimated at this time.

During 2020, COVID-19 significantly impacted our operations. Specifically, as we have ramped up our workforce to support our longer duration projects, we have been impacted by physical distancing measures, higher employee absenteeism and turnover, as well as challenges recruiting and hiring craft labor, particularly within our Shipyard ~~Division~~Division. Further, certain deliverables from third-party engineering firms supporting our projects have been delayed and our suppliers and subcontractors are being impacted by COVID-19, resulting in schedule delays and higher cost estimates for subcontracted services and materials. The more significant impacts to our projects associated with COVID-19 during 2020 are summarized below:

•

Towing, salvage and rescue ship projects – The cumulative effect of COVID-19 related impacts has resulted in disruptions, inefficiencies and lower than anticipated productivity and progress on our five towing, salvage and rescue ship projects, which are expected to have compounding effects over the duration of the projects and result in extensions of schedules and the re-sequencing of construction activities on the projects. The re-sequencing of construction activities will require us to perform construction activities on a concurrent basis, which is less efficient and reduces our ability to incorporate the benefits of previous experience into each follow-on vessel. These impacts have resulted in forecast cost increases on the projects. We have submitted a request for equitable adjustment to our customer, the U.S. Navy, to extend our project schedules and recover the increased forecast costs associated with the impacts of COVID-19; however, we can provide no assurances that we will be successful in recovering these costs.

•

Research Vessel Projects – Construction activities for our three research vessel projects have been delayed until production engineering achieves a satisfactory level of completion to limit impacts on construction, including disruption and rework. These construction delays are expected to continue in the near term due to production engineering delays experienced by our customer’s engineering subcontractor as a result of COVID-19. We are working with the customer to collectively assess the execution and schedule impacts to the projects due to these production engineering delays.

•

Harbor Tug Projects – Physical distancing measures associated with COVID-19 resulted in lower than anticipated productivity and progress on our final two harbor tug projects, resulting in extensions of schedules and forecast cost increases on the projects. The final two projects were completed in October 2020 and January 2021, respectively.

•

Seventy-Vehicle Ferry Project and Two Forty-Vehicle Ferry Projects – The cumulative effect of COVID-19 related impacts has resulted in disruptions, inefficiencies and lower than anticipated productivity and progress on our seventy-vehicle ferry project and two forty-vehicle ferry projects, resulting in extensions of schedules and forecast cost increases on the projects. Although we have received extensions of the project schedules, we have been unable to recover the cost impacts of COVID-19 on the projects.

While we believe it is likely that there will continue to be an impact from COVID-19 for the foreseeable future, as ~~described in~~discussed above, we are unable to estimate the ~~"Results of Operations"~~ ~~section below. As~~ultimate impacts on our productivity, schedules and costs on our projects over the longer-term if mitigation measures, employee absenteeism and turnover, craft labor hiring challenges, engineering delays and supplier and subcontractor disruptions continue as a result of these market changes and project losses, we implemented initiatives to preserve and improve our liquidity through cost reduction efforts and the sale of underutilized assets. Further, to reduce our Fabrication Division's reliance on offshore oil and gas construction and our Shipyard Division's reliance on marine vessel work related to the oil and gas sector, we began to strategically reposition the Company to participate in the fabrication of petrochemical and industrial facilities, pursue offshore wind opportunities, enter the engineering, procurement and construction ("EPC") industry, and diversify our customer base within allCOVID-19. See Note 2 of our ~~operating divisions. We have made significant progress~~Financials in our efforts to reposition the Company, increase our backlog and improve and preserve our liquidity, including ongoing cost reductions (including reducing the cash compensation paid to our directors and the salaries of our executive officers) and the sale of underutilized assets. See~~below~~Item 8 for further discussion of the ~~status of our key initiatives, operating outlook and operating results and liquidity.~~

~~Ongoing Efforts to Increase Our Backlog, Diversify Our Customer Base and Resolve Customer Dispute~~

~~Pursuit of petrochemical and industrial fabrication work~~ - We continue to focus our business development efforts on petrochemical and industrial fabrication opportunities in response to the depressed offshore fabrication market. Although we have been impacted by the timing and delay of project opportunities, our volume of bidding activity for onshore modules and structures is at its highest level since we commenced our initiative. Further, during the second quarter 2018, we completed the fabrication and timely delivery of four large modules for a new petrochemical facility in the U.S., providing increased confidence to our customers that we can successfully compete and execute in the onshore fabrication market.

~~Pursuit of offshore wind~~ - We continue to believe that future requirements from generators and utilities to provide electricity from renewable and green sources will result in growth of offshore wind projects. Further, we believe we possess the expertise and relationships to successfully participate in this growing market. During 2015, we fabricated wind turbine foundations for the first offshore wind power project in the U.S., and during 2018, we fabricated a meteorological tower and platform for an offshore wind project located off the U.S. coast of Maryland. These projects demonstrate our ability to provide structures for this emerging industry. We are also leveraging our EPC Division (discussed below) to strengthen our project management capabilities, and we recently executed a cooperation agreement with Smulders to jointly pursue U.S. offshore wind opportunities. Smulders, a Belgian company, is a major fabrication supplier of offshore wind structures in Europe. Although we believe such a relationship will help to strategically position us in our pursuit of offshore wind projects, we can provide no assurances that we will successfully obtain future project awards as a result of this arrangement.

~~Diversification and Growth of our Customer Base -~~ ~~We are continuing to diversify our customer base within our operating divisions.~~

~~Shipyard Division~~ ~~- Within our Shipyard Division we have increased our backlog with customers outside~~impacts of the ~~oil and gas sector.~~

–

During the first quarter 2018, we received a new project award for the construction and delivery of one towing, salvage and rescue ship for the U.S. Navy for approximately $64.0 million, with customer options for seven additional vessels. During the third quarter 2018, this award was protested by one of the unsuccessful bidders and we were granted a partial stay, which allowed us to proceed with only pre-construction design development, planning, scheduling and material ordering. During the fourth quarter 2018, the U.S. Court of Federal Claims ruled in favor of the U.S. Navy, thus allowing us to proceed in accordance with the terms of the contract. Accordingly, we are working with the U.S. Navy to re-establish a timeline for construction.


–	During the second quarter 2018, our customer for our regional class research vessel exercised its option for a second vessel for approximately $69.0 million. The customer has an option for one additional vessel.

–

During the second quarter 2018, we signed change orders with two different customers for the construction of one additional harbor tug vessel for each customer. Each change order was approximately $13.0 million. During the fourth quarter 2018, we completed and delivered the first of five harbor tug vessels to one of the customers, and we anticipate completion and delivery of the first harbor tug vessel to the second customer in the first quarter 2019.

~~Fabrication Division -~~ Within our Fabrication Division we successfully increased our backlog with non-traditional fabrication work as we continue to pursue petrochemical and industrial fabrication opportunities for modules and structures.


–	During the third quarter 2018, we received a new project award for the expansion and delivery of a 245-guest paddle wheel riverboat. The riverboat will be reconfigured using the existing hull of a former gaming vessel built in 1995.


–	~~During the fourth quarter 2018, we received a new project award for the construction of two, forty vehicle ferries for the North Carolina Department of Transportation.~~

~~These projects represent large steel structures that are well suited for our Houma Fabrication Yard and our Fabrication Division capabilities.~~

~~Services Division~~ - Within our Services Division demand for services associated with offshore tie-backs, upgrades and maintenance remains strong, and we anticipate it will continue into 2019. We will continue to pursue opportunities for offshore and onshore plant expansion and maintenance and have targeted service opportunities within the shale basins in West Texas.

~~Pursuit of EPC work~~ - During the fourth quarter 2017, SeaOne Caribbean, LLC ("SeaOne") selected us as the prime contractor for the engineering, procurement, construction, installation, commissioning and start-up operations for their SeaOne Project. This project is expected to consist of an export facility in Gulfport, Mississippi and import facilities in the Caribbean and South America. Our current activities include pricing, planning and scheduling for the project. SeaOne’s selection of the Company is non-binding and commencement of the project remains subject to a number of conditions, including agreement on terms of the engagement with SeaOne. We understand that SeaOne is in the process of securing financing for the project.

~~MPSV contracts dispute~~ - We received notices of termination of the contracts for the construction of two MPSVs from one of our Shipyard Division customers. We dispute the purported terminations and disagree with the customer’s reasons for such terminations. Pending the resolution of the dispute, we have ceased all work and the partially completed MPSVs and associated equipment and materials remain at our shipyard in Houma, Louisiana. The customer also notified our Surety of its purported terminations of the construction contracts and made claims under the bonds issued by the Surety in connection with the construction of the two MPSVs. We have notified and met with our Surety regarding our disagreement with, and objection to, the customer's purported termination and its claims. Discussions with the Surety are ongoing. On October 2, 2018, we filed a lawsuit against the customer to enforce our rights and remedies under the applicable construction contracts. Our lawsuit disputes the propriety of the customer’s purported termination of the construction contracts and seeks to recover damages associated with the customer’s actions. The customer filed its response to our lawsuit denying many of the allegations in the lawsuit and asserting a counterclaim against us seeking, among other things, declaratory judgment as to the validity of the customer’s purported terminations of the construction contracts and other purported claims for which the customer is seeking damages in an unspecified amount. We have filed a response to the counterclaim denying all of the customer’s claims. Subsequent to December 31, 2018, the customer filed a motion with the court seeking, among other things, to obtain possession of the two MPSVs. We intend to respond to the motion at the appropriate time.

We are unable to estimate the probability of a favorable or unfavorable outcome with respect to the dispute or estimate the amount of potential loss, if any, related to this matter. We can provide no assurances that we will not incur additional costs as we pursue our rights and remedies under the contracts and defend against the customer’s claims. At December 31, 2018, other noncurrent assetsaforementioned on our ~~Balance Sheet included a net contract asset of $12.5 million related to these projects. See~~projects, and “Risk Factors” in Item 1A and Note 111 of our Financial Statements in Item 8 for further discussion of the impacts of COVID-19 and reductions and volatility in crude oil prices.

In addition to the impacts of COVID-19 during 2020, our ~~dispute.~~projects and operations were further impacted by the following:

•

Hurricanes – During the third quarter 2020, Hurricane Laura made landfall near our Lake Charles Yard as a high-end Category 4 hurricane, damaging primarily drydocks, warehouses, bulkheads and our ninth harbor tug project at our Lake Charles Yard. In the fourth quarter 2020, we closed our Lake Charles Yard. See Note 2 of our Financials in Item 8 for further discussion of the impacts of Hurricane Laura on our operations.

•

Overhead Crane Incident – During the third quarter 2020, our first forty-vehicle ferry project was damaged by an overhead crane, which disengaged from its tracks, and landed on the hull that was under construction. See Note 2 of our Financial Statements in Item 8 for further discussion of the crane incident and the impact on our first forty-vehicle ferry project.

We continue to address these operational, market and economic challenges through a strategy focused on the following initiatives to:

•

Mitigate the impacts of COVID-19 on our operations, employees and contractors;

•

Improve and maintain our liquidity through cost reduction efforts and the sale of under-utilized assets;

•

Improve our resource utilization and centralize key project resources through the rationalization and integration of our facilities and operations;

•

Improve our competitiveness and project execution by enhancing our proposal, estimating and operations resources, processes and procedures; and

•

Reduce our reliance on the fabrication of structures and marine vessels associated with the offshore oil and gas sector by repositioning the Company to:

–

Fabricate modules, piping systems and other structures for onshore refining, petrochemical, LNG and industrial facilities;

–

Fabricate newbuild marine vessels for the government and other customers unrelated to the offshore oil and gas sector;

–

Fabricate foundations, secondary steel components and support structures for offshore wind developments; and

–

Fabricate structures in support of our customers as they make energy transitions away from fossil fuels.

See below for further discussion of these initiatives.

Progress on our Initiatives

Efforts to mitigate the impacts of COVID-19 on our operations, employees and contractors – We are continuing to take actions to mitigate the impacts of COVID-19 on our operations while ensuring the safety and well-being of our employees and contractors.

•

COVID-19 measures – We have initiated measures that include ongoing communications with our leadership teams to anticipate and proactively address COVID-19 impacts, work-place distancing of employees (including allowing some employees to work remotely) and regular monitoring of office and yard personnel for compliance. We are also monitoring employee and visitor temperatures prior to entering our facilities, implemented employee and visitor wellness questionnaires, increased monitoring of employee absenteeism and the reasons for such absences, and initiated protocols for employees returning from absences, including employees that have tested positive for COVID-19, or have come in contact with

individuals that tested positive for COVID-19. In addition, we have installed hand sanitizing stations and taken additional actions to more frequently sanitize our facilities.

•

Pursuit of force majeure – We are providing appropriate notices to our customers and making the appropriate claims for extensions of schedule for our projects which have been impacted by COVID-19.

~~Ongoing Effort~~

•

Loanagreement – In April 2020, we entered into a loan agreement for proceeds of $10.0 million (“PPP Loan”) pursuant to the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The proceeds were used for payroll costs, rent and utilities, of which approximately 93% was used for payroll costs. See “Liquidity and Capital Resources” below and Note 5 of our Financial Statements in Item 8 for further discussion of the PPP Loan.

Efforts to ~~Divest~~preserve and improve our liquidity – We continue to take actions to preserve and improve our liquidity, and at December 31, 2020, our cash and short-term investments totaled $51.2 million. To preserve our liquidity position, we have undertaken cost reduction initiatives (including reducing the compensation of ~~Underutilized Assets~~

~~Texas South Yard~~ - our directors and executive officers and reducing the size of our board), monetized under-utilized assets and facilities and are maintaining an ongoing focus on project cash flow management. During 2020, we received proceeds of $1.7 million from the sale of assets held for sale, and at December 31, 2020, our assets held for sale totaled $8.2 million. Further, as discussed above, we received the PPP Loan in the second quarter ~~2018,~~2020, which provided funding necessary to offset the immediate and anticipated impacts of COVID-19. It also provided us important additional liquidity as a strong balance sheet is required to execute our backlog and compete for new project awards, and we ~~completed~~experience significant monthly fluctuations in our working capital.

Efforts to improve our resource utilization and centralize our key project resources – We are improving our resource utilization and centralizing our key project resources through the ~~sale~~rationalization and integration of our ~~fabrication yard~~facilities and ~~certain associated equipment~~operations.

•

Closure of Jennings Yard and Lake Charles Yard – During the fourth quarter 2020, we closed our Jennings Yard and Lake Charles Yard. The closures will consolidate our marine vessel construction and repair and maintenance activities in our Houma Yards, enabling us to maximize the utilization of our facilities and resources (including reducing overhead costs), combine our management and supervision talent in a single location, and improve our project execution. See Note 3 of our Financial Statements in Item 8 for further discussion of our closure of the Jennings Yard and Lake Charles Yard.

•

Combination of our Fabrication Division and Services Division and Realignment of Projects – As discussed above, in the first quarter 2020, we combined our Fabrication and Services Divisions to form an integrated new division called Fabrication & Services. The integration will enable us to capitalize on the best practices and execution experience of the former divisions, conform processes and procedures, maximize the utilization of our resources (including reducing overhead costs) and improve project execution. In addition, as discussed above, in the first quarter 2020, management and project execution responsibility for our two forty-vehicle ferry projects was transferred from our former Fabrication Division to our Shipyard Division to better align the supervision and construction of these vessels with the capabilities and expertise of our Shipyard Division.

Efforts to improve our competitiveness and project execution – We have taken, and continue to take, actions to improve our competitiveness and project execution by enhancing our proposal, estimating and operations resources, processes and procedures. Our actions include strategic changes in ~~Ingleside, Texas ("Texas South Yard")~~management and key personnel, the addition of functional expertise, project management training, development of a formal “lessons learned” program to incorporate experiences gained from previous projects into current and future projects, and other measures designed to strengthen our personnel, processes and procedures. Further, we are taking a disciplined approach to pursuing and bidding project opportunities, putting more rigor around our bid estimates to provide greater confidence that our estimates are achievable, increasing accountability and providing incentives for ~~$55.0 million, less selling costs~~the execution of ~~$1.2 million, for total net proceeds of $53.8 million and a gain of $3.9 million.~~

~~Texas North Yard -~~ ~~During the fourth quarter 2018, we completed the sale of our fabrication yard and certain associated equipment~~projects in Aransas Pass, Texas ("Texas North Yard") for $28.0 million, less selling costs of $0.6 million for total net proceeds of $27.4 million and a gain of $4.1 million. Remaining equipment from the Texas North Yard not included in the sale continues to be held for sale ("Fabrication AHFS") and totaled $18.0 million at December 31, 2018. The Fabrication AHFS primarily consists of three 660-ton crawler cranes, a deck barge, two plate bending roll machines and panel line ~~equipment, which were relocated to our fabrication yard in Houma, Louisiana.~~

~~Hurricane Harvey Insurance Recoveries~~ - During the third quarter 2017, buildings and equipment located at our Texas South Yard and Texas North Yard (collectively, "South Texas Properties") were damaged by Hurricane Harvey. During the second quarter 2018, we agreed to a global settlement with our ~~insurance carriers for total insurance recoveries~~original estimates and subsequent forecasts, and incorporating previous experience into the bidding and execution of ~~$15.4 million (of which $6.0 million was received during 2017~~future projects.

Efforts to reduce our reliance on the offshore oil and ~~$9.4 million was received during 2018), resulting in a net gain~~gas sector – We are pursuing several initiatives to reduce our reliance on ~~insurance recoveries of $3.6 million during 2018.~~

~~Operating Outlook~~

~~Our results of operations will be affected prospectively by the overall demand and market for our services. Further, our success in strategically repositioning the Company to participate in~~ the fabrication of ~~petrochemical~~structures and ~~industrial facilities, pursue~~marine vessels associated with the offshore ~~wind opportunities, enter the EPC industry,~~oil and ~~diversify our customers within all of our operating divisions, will be determined by, among other things:~~gas sector.

•

Fabrication of onshore modules, piping systems and structures – We continue to focus our business development efforts on the fabrication of modules, piping systems and other structures for onshore refining, petrochemical, LNG and industrial facilities. We have experienced success with several smaller project opportunities, and our volume of bidding activity for onshore modules, piping systems and structures is increasing; however, our pursuit of large project opportunities has been impacted by the timing and delay of certain opportunities due in part to COVID-19, volatile oil prices and an ongoing competitive market environment. We also continue to believe that our strategic location in Houma, Louisiana and track record of quality and on-time completion of onshore modules position us well to compete in the onshore fabrication market. However, we do not expect large project opportunities to be awarded by customers until late 2021 or 2022. This timing may be impacted by ongoing uncertainty created by the volatility of oil prices and COVID-19. In the interim, we continue to strengthen our relationships with key customers and strategic partners and enhance our resources as discussed above.

The level of construction and fabrication projects in the new markets we are pursuing for our Fabrication Division, including petrochemical and industrial facilities and offshore wind developments, and our ability to secure new project awards;

•

Fabrication of newbuild marine vessels for the government and other non-oil and gas related customers – We continue to pursue newbuild marine vessel opportunities for customers unrelated to the offshore oil and gas sector. During the first quarter 2020, the U.S. Navy exercised its options for the construction of two additional towing, salvage and rescue ships. At December 31, 2020, nearly all of the backlog within our Shipyard Division was attributable to government and other customers unrelated to the offshore oil and gas sector, including the construction of three research vessels, five towing, salvage and rescue ships and three vehicle ferries. During 2020, we also made capital improvements to our facilities associated primarily with erection sites and warehouse storage to support our backlog and future new project awards.

~~Our ability to secure new project awards for our EPC Division, including the ability of SeaOne to obtain financing and our successful execution of an agreement with SeaOne for the SeaOne Project;~~

•

Fabrication of offshore wind foundations, secondary steel components and support structures – We continue to believe that current initiatives, and potential future requirements, to provide electricity from renewable and green sources will result in growth of offshore wind projects. Furthermore, we believe that we possess the expertise to fabricate foundations, secondary steel components and support structures for this emerging market. This is demonstrated by our previous fabrication of wind turbine foundations for the first offshore wind project in the U.S. and the fabrication of a meteorological tower and platform for an offshore wind project. While we believe we have the capability to participate in this emerging market, we do not expect meaningful opportunities in the near term.

~~Continued growth within our Shipyard and Services Divisions;~~

•

Fabricate structures in support of our customers as they make energy transitions away from fossil fuels– We believe that our expertise and capabilities provide us with the necessary foundation to fabricate steel structures in support of our customers as they transition away from fossil fuels to green energy end markets. Examples of these opportunities involve refiners who are looking to process biofuels and customers looking to embrace the growing hydrogen economy.

~~Our ability to secure new project awards through competitive bidding and/or alliance and partnering arrangements;~~

~~Our ability to execute projects within our cost estimates and successfully manage them through completion; and~~

~~Our ability to resolve our dispute with our customer related to the construction of two MPSVs.~~

~~We continue to respond to the competitive environment within our industry and actively compete for additional opportunities.~~

Operating Outlook

Our focus remains on ~~our liquidity and~~ securing ~~meaningful~~profitable new project awards and backlog in the near-term and generating operating income and cash flows ~~from operations~~ in the ~~longer-term. Operating results~~longer-term while ensuring the safety and well-being of our employees and contractors, which has been further challenged due to COVID-19. Our success, including achieving the aforementioned initiatives, will be determined by, among other things:

•

Oil and gas prices and the level of volatility in such prices, including the impact of environmental regulations that restrict the oil and gas industry under the Biden Administration;

•

COVID-19, for which the ultimate business and financial impacts cannot be reasonably estimated at this time;

•

The level of fabrication opportunities in our traditional offshore markets and the new markets we are pursuing, including refining, petrochemical, LNG and industrial facilities, offshore wind developments and green energy;

•

The level of new build marine vessel activity within, and outside of, the oil and gas sector;

•

Our ability to secure new project awards through competitive bidding and/or alliance and partnering arrangements;

•

Our ability to execute projects within our cost estimates and successfully manage them through completion;

•

Our ability to hire, motivate and retain key personnel and craft labor to execute our projects;

•

The successful integration of our Fabrication Division and Services Division; and

•

Our ability to resolve our dispute with a customer related to the construction of two MPSVs. See Note 8 of our Financial Statements in Item 8 and “Legal Proceedings” in Item 3 for further discussion of the dispute.

In addition, in the near-term: (i) the utilization of our Shipyard Division will be adversely affected by temporary delays in construction activities for our three research vessel projects until engineering achieves further completion, (ii) the utilization of our Fabrication & Services Division ~~have been strong and we have increased our backlog within our Shipyard and Fabrication Divisions. Further, we believe we~~ will be ~~successful securing~~impacted by the delay in timing of new project awards, and ~~growing~~(iii) the utilization of both divisions and our ~~backlog in the future. However, our Fabrication Division~~projects will be ~~negatively~~impacted by inefficiencies and disruptions associated with COVID-19 related health and safety mitigation measures, employee absenteeism and turnover, craft labor hiring challenges, engineering delays, and supplier and subcontractor disruptions. Our near-term results may also be adversely affected by costs associated with investments in key personnel and process improvement efforts to support our aforementioned initiatives. In addition, our gross profit for both divisions will be impacted in the near-term ~~by the underutilization~~as certain projects within our backlog are in a loss position and a majority of ~~its facilities~~our remaining backlog is at, or near, break-even gross profit. Specifically, due to an anticipated delay in the timing of new project awards. Our Shipyard Division will also be negatively impacted by the underutilization of its facilities (although to a lesser extent) due to an anticipated lag in the commencement of construction activities for our recentprevious new project awards bid at competitive pricing (including the option exercises by our customer in the first quarter 2020 for two additional towing, salvage and ~~due to lower margin backlog related to~~rescue ships) and recent and previous project ~~awards bid during~~charges, approximately 30% of our backlog is in a ~~period~~loss position, 65% of ~~competitive pricing. In addition, as discussed below within~~ ~~"Results~~our backlog is at, or near, break-even, and a majority of ~~Operations", during 2018 we experienced losses on~~ our ~~harbor tug projects within our Shipyard Division, which negatively impacted our operating results and~~remaining backlog is at a low gross profit margin. Accordingly, this backlog will result in future revenue ~~on the projects~~ with low or no gross profit; however, we continue to focus on improvements to our personnel, processes and procedures to improve project gross profit.

Further, we have submitted a request for equitable adjustment to our customer, the U.S. Navy, to extend our project schedules and recover increased forecast costs associated with the impacts of COVID-19 on our five towing, salvage and rescue ship projects; however, we can provide no assurances that we will be successful in recovering these costs. Lastly, as discussed further within “New Awards and Backlog” below, during the first quarter 2021, the U.S. Navy determined it would not exercise the three remaining options under our contract, and accordingly, future new project awards are required to replace the previously anticipated U.S. Navy options for our Shipyard Division. See Note 2 of our Financial Statements in Item 8 and “Results of Operations” below for further discussion of our project charges and losses on projects.

New Awards and Backlog

each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Backlog includes our performance obligations at December 31, 2018, plus signed contracts that are temporarily suspended or under protest that may not meet the criteria to be reported as future performance obligations under Topic 606 but represent future work that we believe will be performed. We believe that backlog, a non-GAAP financial measure, provides useful information to ~~investors.~~investors as it represents work that we are contractually obligated to perform under our current contracts. New project awards and backlog may vary significantly each reporting period based on the timing of our major new contract commitments.

Projects in our backlog are generally subject to delay, suspension, termination, or an increase or ~~reduction~~decrease in scope at the option of the ~~customer, although~~customer; however, the customer is required to pay us for work performed and materials purchased through the date of termination, suspension, or ~~reduction~~decrease in scope. Depending on the size of the project, the delay, suspension, termination or increase or reduction in scope of any one contract could significantly impact our backlog and change the expected amount and timing of revenue recognized. ~~A reconciliation of our future performance obligations under Topic 606 (the most comparable GAAP measure~~New project awards by Division for 2020 and 2019, are as ~~presented in Note 2 of our Financial Statements in Item 8) to our reported backlog~~follows (in thousands):

	Years Ended December 31,
Division	2020		2019
Shipyard	$	140,428	$	251,424
Fabrication & Services		66,654		132,659
Total New Awards	$	207,082	$	384,083

Backlog by Division at December 31, 2020 and 2019, is ~~provided below~~as follows (in thousands).:

	December 31,
	2020				2019⁽²⁾
Division	Amount		Labor hours		Amount		Labor hours
Shipyard	$	352,181		2,784	$	373,969		2,507
Fabrication & Services		19,381		236		63,357		630
Total Backlog^{(1), (3)}	$	371,562		3,020	$	437,326		3,137

December 31, 2018
Fabrication Shipyard Services EPC Consolidated
Future performance obligations under Topic 606 $ 63,498
$ 259,644
$ 11,046
$ 385
$ 334,573
Signed contracts under purported termination⁽¹⁾
— 21,887
— — 21,887
Backlog $ 63,498
$ 281,531
$ 11,046
$ 385
$ 356,460

~~_______________~~

~~(1)~~

Includes backlog within our Shipyard Division related to contracts for the construction of two MPSVs that are subject to a purported notice of termination by our customer. We dispute the purported termination and disagree with the customer’s reasons for the same. We can provide no assurances that we will reach a favorable resolution with the customer for completion of the two MPSVs. See Item 3 and Note 11 of our Financial Statements in Item 8 for further discussion of the dispute.

Backlog at December 31, ~~2018 and 2017, is as follows (in thousands, except for percentages):~~

December 31,
2018 2017
Division Amount Labor hours Amount Labor hours
Fabrication $ 63,498
369
$ 15,771
150
Shipyard 281,531
1,684
184,035
1,104
Services 11,046
171
23,181
290
EPC 385
—
—
—
Intersegment eliminations —
—
(370 ) —
Total Backlog ⁽¹⁾
$ 356,460
2,224
$ 222,617
1,544

~~Backlog at December 31, 2018,~~2020, is expected to be recognized as revenue in the following periods (in thousands):

Year⁽⁴⁾	Total		Percentage
2021	$	161,370		43.4	%
2022		140,018		37.7	%
Thereafter		70,174		18.9	%
Total Backlog ^{(1), (3)}	$	371,562		100.0	%

Year ⁽²⁾
Total Percentage
2019 $ 233,987
65.6%
2020 103,351
29.0%
2021 19,122
5.4%
Total Backlog $ 356,460
100.0%

~~________________~~


(1)	At December 31, ~~2018,~~2020, seven customers represented approximately ~~90%~~98% of our backlog and at December 31, ~~2017, four~~2019, eleven customers represented approximately ~~73%~~96% of our backlog. At December 31, ~~2018,~~2020, backlog from the seven customers consisted of:


(i)	~~Newbuild construction~~ Construction of ~~four harbor tugs within our Shipyard Division. The first of five vessels was completed and delivered in the fourth quarter 2018. We estimate completion of the remaining vessels in 2019 through 2020;~~


~~(ii)~~	Newbuild construction of five harbor tugs within our Shipyard Division (separate from above). The first vessel is scheduled for completion in the first quarter 2019. We estimate completion of the remaining vessels in 2019 through 2020;


~~(iii)~~	~~Newbuild construction of two~~three regional class research vessels within our Shipyard ~~Division (with a customer option for a third vessel).~~Division. We estimate completion of the vessels in ~~2021;~~2022 and 2023, subject to potential schedule impacts discussed further in “Overview” above and Note 2 of our Financial Statements in Item 8;

~~(iv)~~

(ii)

~~Newbuild construction~~

Construction of ~~one~~five towing, salvage and rescue ~~ship~~ships within our Shipyard ~~Division for the U.S. Navy (with customer options for seven additional vessels). During the third quarter 2018, this award was protested by one~~Division. We estimate completion of the ~~unsuccessful bidders~~vessels in 2022, 2023 and ~~we were granted a partial stay, which allowed us~~2024, subject to ~~proceed with only pre-construction design development, planning, scheduling~~the potential schedule impacts discussed further in “Overview” above and ~~material ordering. During the fourth quarter 2018, the U.S. Court~~Note 2 of ~~Federal Claims ruled~~our Financial Statements in ~~favor~~Item 8;

(iii)

Construction of two forty-vehicle ferries within our Shipyard Division. We estimate completion of the ~~U.S. Navy, thus allowing us~~vessels in 2021 and 2022, subject to ~~proceed~~the potential schedule impacts discussed further in ~~accordance with the terms~~“Overview” above and Note 2 of ~~the contract. Accordingly, we are working with the U.S. Navy to re-establish~~our Financial Statements in Item 8;

(iv)

Construction of a ~~timeline for construction.~~seventy-vehicle ferry within our Shipyard Division. We estimate completion of the vessel in 2021;


(v)	~~Expansion~~ Fabrication of ~~a 245-guest paddle wheel riverboat~~modules for an offshore facility within our ~~Fabrication~~F&S Division. We estimate completion of the project in ~~2020;~~2021;


(vi)	~~Newbuild construction of two, forty vehicle ferries~~ Material supply for an offshore jacket and deck within our ~~Fabrication Division for the North Carolina Department of Transportation.~~F&S Division. We estimate completion of the ~~projects~~project in ~~2020;~~2021; and

(vii)

Fabrication of marine docking structures within our F&S Division. We estimate completion of the project in 2021.

~~(vii)~~

~~Newbuild~~

(2)

In the first quarter 2020, our Fabrication and Services Divisions were operationally combined to form a new division called Fabrication & Services. Accordingly, backlog as of December 31, 2019 for our former Fabrication and Services Divisions has been combined to conform to the presentation of our reportable segments for 2020. In addition, in the first quarter 2020, management and project execution responsibility for our two forty-vehicle ferry projects were transferred from our former Fabrication Division to our Shipyard Division. Accordingly, $13.4 million of backlog and 0.1 million labor hours associated with these projects as of December 31, 2019 were reclassified from our former Fabrication Division to our Shipyard Division to conform to the presentation of these projects for 2020. See “Description of Operations” in Item 1 and Note 10 of our Financial Statements in Item 8 for further discussion of our realigned operating divisions.

(3)

Backlog at December 31, 2019 for our Shipyard Division was $21.9 million higher than our remaining performance obligations under Topic 606 (the most comparable GAAP measure as presented in Note 2 of our Financial Statements in Item 8), as it included contracts for the construction of two ~~MPSV's within~~MPSVs that are subject to purported notices of termination by our ~~Shipyard Division.~~customer. We dispute the purported terminations and disagree with the customer’s reasons for the same. However, given the prolonged nature of the dispute we have removed the contracts from our backlog at December 31, 2020, and accordingly, backlog at December 31, 2020 is comparable to our performance obligations under Topic 606. See ~~footnote (1)~~Note 8 of our Financial Statements in ~~the performance obligation table above~~Item 8 and “Legal Proceedings” in Item 3 for further ~~discussion.~~discussion of the dispute.

~~(2)~~

(4)

The timing of recognition of the revenue ~~represented~~presented in our backlog is based on our current estimates to complete the projects. Certain factors and circumstances could cause changes in the amounts ultimately recognized and the timing of recognition of revenue from our backlog. See “~~Our backlog is subject to change as a result of suspension or termination of projects currently in backlog or our failure to secure additional projects”~~ Risk Factors” in Item 1A for further discussion of our backlog.

~~Certain~~

Our contract for the construction of ~~our contracts contain~~five towing, salvage and rescue ships contains options which grant our customer, the U.S. Navy, the right, ~~to our customer,~~ if exercised, for the construction of three additional vessels at contracted prices. ~~We do~~During the first quarter 2021, the U.S. Navy determined it would not ~~include options in our backlog. If all~~exercise the three remaining options under our ~~current contracts were exercised by~~contract. In connection therewith, we agreed to a change order with our ~~customers, our backlog would increase by approximately $534.0 million. We believe disclosing these options provides investors with useful information~~customer to ~~evaluate additional potential work that we would be contractually obligated to perform under our current contracts as well as~~facilitate the ~~potential significance~~transfer of ~~these options, if exercised. We have not received any commitments from our customers related~~technology, plans and know-how to the ~~exercise~~U.S. Navy to enable it to contract with other contractors for the construction of ~~these options, and we can provide no assurances that any of these options will be exercised.~~

As our backlog increases, we will add personnel with critical project management and fabrication skills to ensure we have the resources necessary to properly execute our projects and support our project risk mitigation discipline for all projects. This may negatively impact near-term results.

additional vessels.

Critical Accounting Policies

Our Financial Statements are prepared in accordance with generally accepted accounting principles in the U.S. ~~("GAAP"~~(“GAAP”) which require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure of contingent assets and liabilities. We continually evaluate our estimates and judgments based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. We also discuss the development and selection of our critical accounting policies with the Audit Committee of our Board of Directors. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our Financial Statements.

Revenue Recognition

General – Our revenue is derived from customer contracts and agreements that are awarded on a competitively bid and negotiated basis using a range of contracting options, including fixed-price, unit-rate and T&M. Our contracts primarily relate to the fabrication and construction of steel structures, modules and marine vessels, and project management services and other service arrangements. We recognize revenue for our contracts in accordance with Accounting Standards Update ~~("ASU"~~(“ASU”) 2014-09, Topic 606 “Revenue from Contracts with Customers” ("Topic 606"), which was adopted by us on January 1, 2018, and supersedes previous revenue recognition guidance, including industry-specific guidance. Accordingly, the reported results for 2018 reflect the application of Topic 606 guidance, while the comparable results for 2017 and 2016 were prepared under previous revenue recognition guidance.

Customers.”

Fixed-Price and Unit-Rate Contracts - – Revenue for our fixed-price and unit-rate contracts is recognized using the percentage-of-completion method (an input method), based on contract costs incurred to date compared to total estimated contract costs. Contract costs include direct costs, such as materials and labor, and indirect costs ~~that are~~ attributable to contract activity. Material costs that are significant to a contract and do not reflect an accurate measure of project completion are excluded from the determination of our contract progress. Revenue for such materials is only recognized to the extent of costs incurred. Prior to our adoption of Topic 606, revenue for our fixed-price and unit-rate contracts was recognized using the percentage-of-completion method, based on the percentage of direct labor hours incurred to date compared to total estimated direct labor hours, and revenue for materials was recognized only to the extent of costs incurred. Revenue and gross profit for contracts accounted for using the percentage-of-completion method can be significantly affected by changes in estimated cost to complete such contracts. Significant estimates impacting the cost to complete a contract include: forecast costs of engineering, materials, ~~components,~~ equipment and subcontracts; forecast costs of labor and ~~subcontracts;~~ labor productivity; schedule durations, including subcontractor and supplier progress; contract disputes, including claims ~~and~~ achievement of contractual performance requirements, and contingency, among others. Although our customers retain the right and ability to change, modify or discontinue further work at any stage of a contract, in the event our customers discontinue work, they are required to compensate us for the work performed to date. The cumulative impact of revisions in total cost

estimates during the progress of work is reflected in the period in which these changes become known, including, to the extent required, the reversal of profit recognized in prior periods and the recognition of losses expected to be incurred on contracts. Due to the various estimates inherent in our contract accounting, actual results could differ from those estimates, which could result in material changes to our Financial Statements and related disclosures. See Note 2 of our Financial Statements in Item 8 for discussion of projects with significant changes in estimated margins during ~~2018, 2017~~2020, 2019 and ~~2016, including projects in a significant loss position at December 31,~~ 2018.

T&M Contracts -– Revenue for our T&M contracts is recognized at contracted rates when the work is performed, the costs are incurred and collection is reasonably assured. Our T&M contracts provide for labor and materials to be billed at rates specified within the contract. The consideration from the customer directly corresponds to the value of our performance completed at the time of invoicing. ~~Our current revenue recognition method for T&M contracts is consistent with the method used prior to adoption of Topic 606.~~

See Note 1 and Note 2 of our Financial Statements in Item 8 for further discussion of our ~~adoption of Topic 606 and our~~ revenue recognition policy.

Long-Lived Assets

~~We depreciate property,~~

Property, plant and equipment are depreciated on a straight-line basis over estimated useful lives ranging from three to 25 ~~years, absent any indicators of impairment. We review long-lived~~years. Long-lived assets, which include property, plant and equipment and our lease assets included within other noncurrent assets, are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. If a recoverability assessment is required, we compare the estimated future undiscounted cash flow associated with the ~~assets or asset groups are compared to their respective carrying amounts to determine if an impairment exists. An impairment loss is measured by comparing the fair value of the~~ asset or asset group to its carrying amount ~~and recording the excess of the carrying amount of the asset or asset group over its fair value as~~to determine if an impairment ~~charge.~~exists. An asset group constitutes the minimum level for which identifiable cash flows are principally independent of the cash flows of other assets or asset groups. An impairment loss is measured by comparing the fair value of the asset or asset group to its carrying amount and the excess of the carrying amount of the asset or asset group over its fair value is recorded as an impairment charge. Fair value is determined based on discounted cash flows, appraised values or ~~third party~~third-party indications of value, as appropriate. See Note 3 of our Financial Statements in Item 8 for ~~further~~ discussion of impairments ~~recorded for~~of our long-lived assets.

Assets Held for Sale

Assets held for sale are measured at the lower of their carrying amount or fair value less cost to sell. See Note 3 of our Financial Statements in Item 8 for ~~further~~ discussion of impairments of our assets held for sale.

Income Taxes

Income taxes have been provided using the liability method. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes using enacted rates expected to be in effect during the year in which the differences are expected to reverse. Due to changing tax laws, significant judgment is required to estimate the effective tax rate expected to apply to tax differences that are expected to reverse in the future.

A valuation allowance is provided to reserve for deferred tax assets ("(“DTA(s)"”) if, based upon the available evidence, it is more likely than not that some or all of the DTAs will not be realized. The realization of our DTAs depends on our ability to generate sufficient taxable income of the appropriate character and in the appropriate jurisdictions.

Reserves for uncertain tax positions are recognized when we consider it more likely than not that additional tax will be due in excess of amounts reflected in our income tax returns, irrespective of whether or not we have received tax assessments. Interest and penalties on uncertain tax positions are recorded within income tax expense. ~~Tax returns subject to examination by the U.S. Internal Revenue Service are open for years after 2014. At December 31, 2018 and 2017, we had no material reserves for uncertain tax positions.~~ See Note 86 of our Financial Statements in Item 8 for further discussion of our income taxes, DTAs, and valuation allowance.

Stock-Based Compensation

Awards under our stock-based compensation plans are calculated using a fair ~~value based~~value-based measurement method. ~~Compensation expense for share-based awards is recognized only for those awards that are expected to vest.~~ We use the straight-line method to recognize share-based compensation expense over the requisite service period of the award. We recognize the excess tax benefit or tax deficiency resulting from the difference between the deduction we receive for tax purposes and the stock-based compensation expense we recognize for financial reporting purposes created when common stock vests, as an income tax benefit or expense in our Statement of Operations. See Note 97 of our Financial Statements in Item 8 for further discussion of our stock-based and other compensation plans.

Insurance

We maintain insurance coverage for various aspects of our business and operations. However, we may be exposed to future losses through our use of deductibles and self-insured retentions for our exposures related to third party liability and ~~workers' compensation.~~workers’ compensation claims. We expect liabilities in excess of any deductibles and self-insured retentions to be covered by insurance. To the extent we are self-insured, reserves are recorded based upon our estimates, with input from legal and insurance advisors. Changes in assumptions, as well as changes in actual experience, could cause these estimates to change.

See Note 2 of our Financial Statements in Item 8 for discussion of insurance deductibles incurred during 2020 associated with damage caused by Hurricane Laura.

Fair Value Measurements

Our fair value determinations for financial assets and liabilities are based on the particular facts and circumstances. Financial instruments are required to be categorized within a valuation hierarchy based upon the lowest level of input that is significant to the fair value measurement. The three levels of the valuation hierarchy are as follows:

•

Level 1 – inputs are based upon quoted prices for identical instruments traded in active markets.

•

Level 2 – inputs are based upon quoted prices for similar instruments in active markets and model-based valuation techniques for which all significant assumptions are observable in the market.

~~Level 1 - inputs are based upon quoted prices for identical instruments traded in active markets.~~

•

Level 3 – inputs are based upon model-based valuation techniques for which significant assumptions are generally not observable in the market and typically reflect estimates and assumptions that we believe market participants would use in pricing the asset or liability. These include discounted cash flow models and similar valuation techniques.

~~Level 2 - inputs are based upon quoted prices for similar instruments in active markets and model-based valuation techniques for which all significant assumptions are observable in the market.~~

Level 3 - inputs are based upon model-based valuation techniques for which significant assumptions are generally not observable in the market and typically reflect estimates and assumptions that we believe market participants would use in pricing the asset or liability. These include discounted cash flow models and similar valuation techniques.

See Note 51 of our Financial Statements in Item 8 for further discussion of our fair value measurements.

Results of Operations

Comparison of ~~2018~~2020 and ~~2017~~ 2019 (in thousands, except for percentages):

In the comparative tables below, percentage changes that are not considered meaningful are shown below as “nm” (generally when the prior period amount is immaterial or when the percentage change is significantly greater than 100%) ~~are shown below as "~~nm~~" (not meaningful)~~.

Consolidated

	Years Ended December 31,						Favorable (Unfavorable) Change
	2020			2019			Amount			Percent
New Awards	$	207,082		$	384,083		$	(177,001	)		(46.1	)%

Revenue	$	250,959		$	303,308		$	(52,349	)		(17.3	)%
Cost of revenue		268,710			320,307			51,597			16.1	%
Gross loss		(17,751	)		(16,999	)		(752	)		(4.4	)%
Gross loss percentage		(7.1	)%		(5.6	)%
General and administrative expense		13,858			15,628			1,770			11.3	%
Impairments and (gain) loss on assets held for sale		4,130			17,528			13,398		nm
Other (income) expense, net		(8,580	)		(134	)		8,446		nm
Operating loss		(27,159	)		(50,021	)		22,862			45.7	%
Interest (expense) income, net		(268	)		531			(799	)	nm
Loss before income taxes		(27,427	)		(49,490	)		22,063			44.6	%
Income tax (expense) benefit		52			96			(44	)		(45.8	)%
Net loss	$	(27,375	)	$	(49,394	)	$	22,019			44.6	%

New Project Awards – New project awards for 2020 and 2019 were $207.1 million and $384.1 million, respectively. Significant new project awards for 2020 include:

•

The exercise of options by the U.S. Navy for a fourth and fifth towing, salvage and rescue ship in the first quarter 2020 within our Shipyard Division,

•

Additional scopes of work for our research vessel projects in the fourth quarter 2020 within our Shipyard Division, and

•

A marine docking structures project and additional scopes of work for our offshore jacket and deck project in the second quarter 2020 within our Fabrication & Services Division.

Significant new project awards for 2019 include:

•

The exercise of options by the U.S. Navy for a second and third towing, salvage and rescue ship in the second quarter 2019 within our Shipyard Division,

•

The exercise of an option by Oregon State University for a third research vessel in the second quarter 2019 within our Shipyard Division,

•

A seventy-vehicle ferry in the third quarter 2019 within our Shipyard Division,

•

An offshore jacket and deck project and subsea components project in the first quarter 2019 within our Fabrication & Services Division,

~~Consolidated~~

•

Additional scopes of work for an onshore maintenance project in the third quarter 2019 within our Fabrication & Services Division, and

•

A material supply project and offshore modules project in the fourth quarter 2019 within our Fabrication & Services Division.

Years Ended December 31, Favorable (Unfavorable) Change
2018 2017 Amount Percent
Revenue $ 221,247
$ 171,022
$ 50,225
29.4 %
Cost of revenue 228,443
213,947
(14,496 ) (6.8 )%
Gross loss (7,196 ) (42,925 ) 35,729
83.2 %
Gross loss percentage (3.3 )% (25.1 )%
General and administrative expense 19,015
17,800
(1,215 ) (6.8 )%
Asset impairments and (gain) loss on assets held for sale, net (6,850 ) 7,931
14,781
nm
Other (income) expense 304
(46 ) (350 ) nm
Operating loss (19,665 ) (68,610 ) 48,945
71.3 %
Interest income (expense), net (142 ) (349 ) 207
59.3 %
Net loss before income taxes (19,807 ) (68,959 ) 49,152
71.3 %
Income tax (expense) benefit (571 ) 24,193
(24,764 ) (102.4 )%
Net loss $ (20,378 ) $ (44,766 ) $ 24,388
54.5 %

Revenue -– Revenue for ~~2018~~2020 and ~~2017~~2019 was ~~$221.2~~$251.0 million and ~~$171.0~~$303.3 million, respectively, representing ~~an increase~~a decrease of ~~29.4%.~~$52.3 million. The ~~increase~~decrease was primarily due ~~to the net impact of:~~

~~Increased~~to:

Decreased revenue ~~of $22.8 million~~ for our Fabrication & Services Division of $37.7 million, primarily ~~due to additional demand for both onshore and offshore services;~~attributable to:

•

Lower revenue for our paddlewheel river boat and subsea components projects that were completed in the first quarter 2020, and

~~Increased~~

•

Reduced offshore services activity and small fabrication project activity, offset partially by,

•

Higher revenue for our offshore jacket and deck project, and

•

Higher revenue for our marine docking structures project, material supply project and offshore modules project.

Decreased revenue ~~of $43.7 million~~ for our Shipyard Division of $14.8 million, primarily due to the net impact of additional progress on the construction of our ten harbor tugs, two regional class research vessels and an ice-breaker tug that was not under construction during the prior period, offset partially by lower revenue from our two MPSV contracts that were suspended during the first quarter 2018; offset partially by,attributable to:

•

Lower revenue for our harbor tug projects as we had fewer vessels under construction,

Decreased revenue of $19.9 million for our Fabrication Division, primarily due to the completion and delivery of four modules for a petrochemical facility during the second quarter 2018 with no other significant projects under construction for the division until the fourth quarter 2018.

•

Lower revenue for our ice-breaker tug project which was completed in the second quarter 2020 and towboat projects which were completed in 2019,

•

Lower revenue for our research vessel projects due to construction delays associated with the previously disclosed temporary suspension of construction activities on the projects until engineering achieves further completion, and

•

Lower revenue associated with less repair and maintenance activity, offset partially by,

•

Higher revenue for our towing, salvage and rescue ship projects associated with increased construction activities and procurement progress on engineered equipment, and

•

Higher revenue for our seventy-vehicle ferry project associated with increased construction activities and procurement progress on engineered equipment.

Gross loss -– Gross loss for 2020 and 2019 was ~~$7.2~~$17.8 million ~~(3.3%~~(7.1% of revenue) ~~for 2018, compared to a gross loss~~and $17.0 million (5.6% of ~~$42.9 million (25.1% of~~ revenue) ~~for 2017.~~, respectively. The gross loss ~~during 2018~~for 2020 was primarily due to under recovery of overhead costs for our Shipyard and Fabrication Divisions (including holding costs for our South Texas Properties of $2.1 million), the impact of lower margin backlog for our Shipyard Division related to previous project awards bid during a period of competitive pricing, and changes in estimates and project losses within our Fabrication and Shipyard Divisions (see below). to:

•

Project charges of $16.6 million for our Shipyard Division,

•

A low margin backlog for our Shipyard Division and low revenue for our Fabrication & Services Division,

•

The partial under-recovery of overhead costs, primarily associated with the under-utilization of our facilities and resources within our Fabrication & Services Division, and to a lesser extent within our Shipyard Division, including:

−

Costs associated with retaining salaried overhead and hourly craft employees to perform process improvements, special projects and facility maintenance and repairs, and

−

Lower utilization of our facilities and resources due to, and costs incurred to prepare for, Hurricane Laura, Hurricane Marco and Hurricane Sally in the third quarter 2020.

•

Holding costs of $0.7 million related to the two MPSV vessels which remain in our possession and are subject to dispute, and

•

Incremental direct costs associated with work-place monitoring, enhanced sanitization efforts and other measures related to COVID-19, offset partially by,

•

Project improvements of $2.7 million for our Fabrication & Services Division.

The ~~decrease~~increase in gross loss for 2020 relative to ~~the prior period~~2019 was primarily due ~~to the net impact of:~~to:

•

The aforementioned project charges of $16.6 million for 2020 for our Shipyard Division,

•

Lower revenue and an increase in the under-recovery of overhead costs for our Fabrication & Services Division, and

~~Decreased gross loss of $34.4 million for our Shipyard Division, primarily due to increased revenue, reductions in overhead costs~~

•

A lower margin mix (excluding the aforementioned project charges) for our Shipyard Division, offset partially by,

•

Project charges of $12.3 million and $4.9 million for 2019 for our Shipyard Division and Fabrication & Services Division, respectively,

•

The aforementioned project improvements of $2.7 million for 2020 for our Fabrication & Services Division, and

•

A higher margin mix (excluding the aforementioned project improvements) for our Fabrication & Services Division.

See “Operating Segments” below and improved recoveries of overhead costs, and the 2017 period including project losses of $34.5 million related to cost increases and liquidated damages on the construction of two MPSVs which are in dispute and for which construction has been suspended; offset partially by changes in estimates and project losses in the 2018 period on our harbor tug projects of $6.7 million; and

~~Increased gross profit of $7.9 million for our Services Division, primarily due to increased revenue and improved recovery of our overhead costs; offset partially by,~~

Increased gross loss of $5.9 million for our Fabrication Division, primarily due to the net impact of decreased fabrication revenue and changes in estimates and losses on our petrochemical module project of $2.4 million, offset partially by reductions in overhead costs and improved recoveries of overhead costs.

~~See~~ Note 2 of our Financial Statements in Item 8 for further discussion of ~~changes in estimates~~our project impacts.

General and ~~losses on~~administrative expense – General and administrative expense for 2020 and 2019 was $13.9 million (5.5% of revenue) and $15.6 million (5.2% of revenue), respectively, representing a decrease of 11.3%. The decrease was primarily due to:

•

Cost reduction initiatives including combining our former Fabrication and Services Divisions,

•

Reduced professional fees associated with the evaluation of strategic alternatives, and

•

Other costs savings including reductions in board size and the salaries of our executives, offset partially by,

•

Higher incentive plan costs (due primarily to the 2019 period benefiting from the partial reversal of long-term incentives that were accrued in periods prior to 2019 but ultimately not earned), and

•

Higher legal and advisory fees and insurance costs.

General and administrative expense includes legal and advisory fees related to a contract dispute for a completed project that was settled during the first quarter 2020 and a contract dispute associated with our MPSV projects which are subject to purported termination and for which construction has been suspended. Legal and advisory fees related to such disputes totaled $1.3 million and $1.4 million for 2020 and 2019, respectively, and are reflected within our Corporate Division. See Note 111 of our Financial Statements in Item 8 for further discussion of our settlement of the completed project dispute and Note 8 for further discussion of our MPSV dispute.

~~General and administrative expense~~ - General and administrative expense for 2018 and 2017 was $19.0 million (8.6% of revenue) and $17.8 million (10.4% of revenue), respectively, representing an increase of 6.8%. The increase was primarily due to the net impact of:

~~Higher legal and advisory fees related to customer disputes and shareholder matters;~~

~~Professional fees associated with the evaluation of strategic alternatives and initiatives to diversify our business; and~~

~~Addition of administrative personnel for our newly created EPC Division; offset partially by,~~

~~Headcount reductions, lower incentive plan costs, executive management salary reductions and other cost saving initiatives.~~

~~Asset impairments~~

Impairments and (gain) loss on assets held for sale ~~net~~ ~~- Asset impairments~~– Impairments and ~~gain (loss)~~(gain) loss on assets held for sale ~~net~~ for ~~2018~~2020 and ~~2017~~2019 was ~~a gain~~loss of ~~$6.9~~$4.1 million and a$17.5 million, respectively. The loss ~~of $7.9 million, respectively.~~

~~The gain~~ for ~~2018~~2020 was primarily due ~~to the net impact of:~~to:

•

Impairments of $1.4 million associated with assets held for sale within our Fabrication & Services Division,

•

Impairments of $0.9 million for certain fixed assets associated with the relocation and consolidation of such assets to improve operational efficiency within our Fabrication & Services Division,

~~A gain of $3.9 million from the sale of our Texas South Yard and a gain of $4.1 million from the sale of our Texas North Yard;~~

•

Impairments of $1.0 million for lease assets and fixed assets (primarily drydocks) attributable to the closure of our Lake Charles Yard in the fourth quarter 2020 within our Shipyard Division,

~~A gain of $3.6 million from the settlement of our insurance claim related to Hurricane Harvey damage at our South Texas Properties incurred during 2017; offset partially by,~~

•

Costs of $0.6 million primarily associated with the closures of our Jennings Yard and Lake Charles Yard in the fourth quarter 2020 within our Shipyard Division, and

~~Impairments of $4.4 million and a loss of $0.3 million related to inventory and assets that were held for sale and/or sold within our Fabrication and Shipyard Divisions.~~

•

A loss of $0.2 million on the sale of a barge and other assets held for sale within our Fabrication & Services Division.

The loss for ~~2017~~2019 was primarily due ~~to the impact of:~~to:

•

Impairments of $9.3 million for assets held for sale, assets removed from held for sale and inventory within our Fabrication & Services Division,

•

Impairments of $4.6 million for lease assets and fixed assets attributable to our Jennings Yard within our Shipyard Division,

~~Impairments of $6.7 million associated with inventory within our Fabrication Division;~~

•

Impairments of $3.0 million for lease assets and fixed assets (primarily drydocks) attributable to our Lake Charles Yard within our Shipyard Division, and

~~Impairments of $1.0 million and a loss of $0.3 million related to assets that were held for sale and/or sold within our Shipyard Division.~~

•

An impairment of $0.3 million for an asset that was held for sale and sold within our Shipyard Division, offset partially by,

•

A gain of $0.4 million from the sale of assets held for sale within our Fabrication & Services Division.

See~~"Overview"~~ ~~above and~~ Note 3 of our Financial Statements in Item 8 for further discussion of our impairments and assets held for sale and ~~related impairments~~closures of the Jennings Yard and ~~Note 5 of our Financial Statements in Item 8 for further discussion of our inventory impairments.~~

Lake Charles Yard.

Other (income) expense, net -– Other (income) expense, net for ~~2018~~2020 and ~~2017~~2019 was income of $8.6 million and $0.1 million, respectively. Other (income) expense, net generally represents recoveries or provisions for bad debts, gains or losses associated with the sale or disposition of property and equipment other than assets held for sale, and income or expense associated with certain nonrecurring items. Other income for 2020 was primarily due to:

•

A gain of $10.0 million associated with the settlement of a contract dispute for a project completed in 2015. See Note 1 of our Financial Statements in Item 8 for further discussion of our settlement of the completed project dispute. The gain was offset partially by,

•

Charges of $1.3 million associated with damage caused by Hurricane Laura to our drydocks, warehouses, bulkheads and ninth harbor tug project at our Lake Charles Yard in the third quarter 2020. The charges relate to deductibles associated with our insurance coverages and our estimates of cost associated with uninsurable damage. See Note 2 of our Financial Statements in Item 8 for further discussion of the impacts of Hurricane Laura.

Other income for 2019 was primarily due to net gains on the sales of equipment.

Interest (expense) income, net – Interest (expense) income, net for 2020 and 2019 was expense of $0.3 million and income ~~of $46,000, respectively. Other (income) expense primarily represents gains and losses on the sales of fixed assets other than assets held for sale.~~

~~Interest income (expense), net -~~ ~~Interest expense, net for 2018 and 2017, was expense of $0.1 million and $0.3~~$0.5 million, respectively. Interest (expense) income, net consists of interest earned on our cash and short-term investment balances, interest incurred on our PPP Loan and the unused portion of our LC Facility, and interest amortization associated with our long-term lease liability. The expense ~~net decreased~~ for ~~the period~~2020 relative to income for 2019 was primarily due to interest ~~earned~~ on ~~higher~~our PPP Loan and lower interest rates and lower average cash ~~equivalents~~ and short-term investment balances ~~during 2018.~~

for the 2020 period.

Income tax (expense) benefit - –Income tax (expense) benefit for ~~2018~~2020 and 2019 was ~~expense of $0.6 million compared to an income tax~~a benefit of ~~$24.2~~$0.1 million and $0.1 million, respectively. The tax benefits for ~~2017. Tax expense for 2018 represents~~2020 and 2019 represent state income taxes. No federal income tax benefit was recorded for losses during ~~2018~~2020 or 2019 as a full valuation allowance was recorded against our net deferred tax assets generated during the ~~period.~~periods. See Note 86 of our Financial Statements in Item 8 for further discussion of our NOLs, deferred tax assets and valuation allowance.

Operating Segments

Shipyard Division⁽¹⁾

	Years Ended December 31,						Favorable (Unfavorable) Change
	2020			2019			Amount			Percent
New Awards	$	140,428		$	251,424		$	(110,996	)		(44.1	)%

Revenue	$	153,698		$	168,466		$	(14,768	)		(8.8	)%
Gross loss		(19,274	)		(16,025	)		(3,249	)		(20.3	)%
Gross loss percentage		(12.5	)%		(9.5	)%
General and administrative expense		1,980			2,445			465			19.0	%
Impairments and (gain) loss on assets held for sale		1,639			7,920			6,281		nm
Other (income) expense, net		1,450			38			(1,412	)	nm
Operating loss		(24,343	)		(26,428	)		2,085			7.9	%

(1)

In the first quarter 2020, management and project execution responsibility for our two forty-vehicle ferry projects was transferred from our former Fabrication Division to our Shipyard Division. Accordingly, revenue of $9.2 million and gross loss and operating loss of $5.1 million associated with these projects for 2019 were reclassified from our former Fabrication Division to our Shipyard Division to conform to the presentation of these projects for 2020. See Note 10 of our Financial Statements in Item 8 for further discussion of our realigned operating divisions.

New Project Awards – New project awards for 2020 and 2019 were $140.4 million and $251.4 million, respectively. Significant new project awards for 2020 include:

•

The exercise of options by the U.S. Navy for a fourth and fifth towing, salvage and rescue ship in the first quarter 2020, and

~~Fabrication Division~~

•

Additional scopes of work for our research vessel projects in the fourth quarter 2020.

Significant new project awards for 2019 include:

•

The exercise of options by the U.S. Navy for a second and third towing, salvage and rescue ship in the second quarter 2019,

•

The exercise of an option by Oregon State University for a third research vessel in the second quarter 2019, and

Years Ended December 31, Favorable (Unfavorable) Change
2018 2017 Amount Percent
Revenue $ 37,943
$ 57,880
$ (19,937 ) (34.4 )%
Gross loss (7,794 ) (1,941 ) (5,853 ) nm
Gross loss percentage (20.5 )% (3.4 )%
General and administrative expense 3,134
3,416
282
8.3 %
Asset impairments and (gain) loss on assets held for sale, net (7,896 ) 6,683
14,579
nm
Other (income) expense, net (82 ) (30 ) 52
nm
Operating loss (2,950 ) (12,010 ) 9,060
75.4 %

•

A seventy-vehicle ferry in the third quarter 2019.

~~Revenue -~~

Revenue – Revenue for ~~2018~~2020 and ~~2017~~2019 was ~~$37.9~~$153.7 million and ~~$57.9~~$168.5 million, respectively, representing a decrease of ~~34.4%.~~$14.8 million. The decrease was primarily due to the completion and delivery of four modules for a petrochemical facility during the second quarter 2018 with no other significant projects under construction for the division until the fourth quarter 2018 when the paddle wheel riverboat construction commenced.to:

•

Lower revenue for our harbor tug projects as we had fewer vessels under construction,

•

Lower revenue for our ice-breaker tug project which was completed in the second quarter 2020 and towboat projects which were completed in 2019,

~~Gross loss~~ -

•

Lower revenue associated with less repair and maintenance activity, offset partially by,

•

Higher revenue for our towing, salvage and rescue ship projects associated with increased construction activities and procurement progress on engineered equipment, and

•

Higher revenue for our seventy-vehicle ferry project associated with increased construction activities and procurement progress on engineered equipment.

Gross loss – Gross loss for 2020 and 2019 was ~~$7.8~~$19.3 million ~~(20.5%~~(12.5% of revenue) ~~for 2018, compared to a gross loss~~and $16.0 million (9.5% of ~~$1.9 million (3.4% of~~ revenue) ~~for 2017.~~, respectively. The gross loss ~~during 2018~~for 2020 was primarily due to under recovery of our overhead costs (including holding costs for our South Texas Properties of $2.1 million) and changes in estimates and losses on our petrochemical module project of $2.4 million. to:

•

Project charges of $7.3 million related to forecast cost increases on our towing, salvage and rescue ship projects,

•

Project charges of $7.2 million related to forecast cost increases and liquidated damages on our two forty-vehicle ferry projects,

•

Project charges of $1.0 million related to forecast cost increases on our final two harbor tug projects,

•

Project charges of $1.1 million related to forecast cost increases on our seventy-vehicle ferry project,

•

A low margin backlog as all of our Shipyard Division’s backlog is at, or near, break-even or is in a loss position, and accordingly, results in revenue with low or no gross profit,

•

The partial under-recovery of overhead costs primarily due to:

−

The under-utilization of our facilities and resources due to construction delays for our three research vessel projects,

−

The under-utilization of our Jennings Yard and Lake Charles Yard which were closed in the fourth quarter 2020, and

−

Lower utilization of our facilities and resources due to, and costs incurred to prepare for, Hurricane Laura, Hurricane Marco and Hurricane Sally in the third quarter 2020.

•

Holding costs of $0.7 million related to the two MPSV vessels which remain in our possession and are subject to dispute.

The increase in gross loss for 2020 relative to ~~the prior period~~2019 was primarily due ~~to the net impact of:~~to:

•

The aforementioned project charges of $16.6 million for 2020, and

•

A lower margin mix (excluding the aforementioned project charges), offset partially by,

~~Decreased revenue related to the completion of the petrochemical module project and changes in estimates on the project; offset partially by,~~

•

Project charges of $12.3 million for 2019 on our forty-vehicle ferry projects, harbor tug projects, ice-breaker tug project and research vessel projects.

~~Reductions in overhead costs and lower depreciation expense for our South Texas Properties as these assets were classified as held for sale during all of 2018; and~~

•

~~Reductions in overhead costs and improved recoveries of overhead costs.~~

~~General and administrative expense~~ - General and administrative expense for 2018 and 2017 was $3.1 million (8.3% of revenue) and $3.4 million (5.9% of revenue), respectively, representing a decrease of 8.3%. The decrease was primarily due to the net impact of:

~~Headcount reductions and lower incentive plan costs; offset partially by,~~

~~Higher legal and advisory fees related to the pursuit of claims against a customer for disputed change orders for a project completed prior to 2017.~~

~~Asset impairments and (gain) loss on assets held for sale, net~~ - Asset impairments and (gain) loss on assets held for sale, net for 2018 and 2017 was a gain of $7.9 million and a loss of $6.7 million, respectively. The gain for 2018 was primarily due to the net impact of:

~~A gain of $3.9 million from the sale of our Texas South Yard and a gain of $4.1 million from the sale of our Texas North Yard; and~~

~~A gain of $3.6 million from the settlement of our insurance claim related to Hurricane Harvey damage at our South Texas Properties during 2017; offset partially by,~~

~~Impairments of $3.4 million and a loss of $0.3 million related to inventory and assets that were held for sale and/or sold.~~

~~The loss for 2017 was primarily due to impairments of $6.7 million related to inventory.~~

~~Shipyard Division~~

Years Ended December 31, Favorable (Unfavorable) Change
2018 2017 Amount Percent
Revenue $ 96,424
$ 52,699
$ 43,725
83.0 %
Gross loss (10,472 ) (44,870 ) 34,398
76.7 %
Gross loss percentage (10.9 )%
(85.1 )%
General and administrative expense 2,801
3,926
1,125
28.7 %
Asset impairments and (gain) loss on assets held for sale, net 964
1,248
284
22.8 %
Other (income) expense, net 159
—
(159 ) nm
Operating loss (14,396 ) (50,044 ) 35,648
71.2 %

~~Revenue - Revenue for 2018 and 2017 was $96.4 million and $52.7 million, respectively, representing an increase of 83.0%. The increase was primarily due to:~~

Additional progress on the construction of our ten harbor tugs (including the delivery of one vessel in the fourth quarter 2018), two regional class research vessels and our ice-breaker tug that was not under construction during the prior period; offset partially by,

~~Lower revenue from our two MPSV contracts that were suspended during the first quarter 2018.~~

~~Gross loss~~ - Gross loss was $10.5 million (10.9% of revenue) for 2018, compared to a gross loss of $44.9 million (85.1% of revenue) for 2017. The gross loss during 2018 was primarily due to under recovery of our overhead costs and changes in estimates and project losses on our harbor tug projects (see below). The decrease in gross loss relative to the prior period was primarily due to the net impact of:

~~Increased revenue related to our harbor tug vessels, two regional class research vessels and our ice-breaker tug;~~

~~Reductions in overhead costs and improved recoveries of overhead costs; and~~

The 2017 period including project losses of $34.5 million related to cost increases and the recording of liquidated damages on the construction of two MPSVs which are in dispute and for which construction has been suspended; offset partially by,

~~The 2018 period including changes in estimates and project losses on our harbor tug projects of $6.7 million.~~

~~General and administrative expense~~ - General and administrative expense for 2018 and 2017 was $2.8 million (2.9% of revenue) and $3.9 million (7.4% of revenue), respectively, representing a decrease of 28.7%. The decrease is primarily due to headcount reductions and lower incentive plan costs, offset partially by higher legal and advisory fees related to customer disputes.

~~Asset impairments and (gain) loss on assets held for sale, net~~ - Asset impairments and gain (loss) on assets held for sale, net for 2018 and 2017 was a loss of $1.0 million and $1.2 million, respectively. The impairments were related to assets that were held for sale and/or sold.

~~Services Division~~

Years Ended December 31, Favorable (Unfavorable) Change
2018 2017 Amount Percent
Revenue $ 88,230
$ 65,445
$ 22,785
34.8 %
Gross profit 12,447
4,575
7,872
172.1 %
Gross profit percentage 14.1 %
7.0 %
General and administrative expense 3,022
2,701
(321 ) (11.9 )%
Asset impairments and (gain) loss on assets held for sale, net 82
—
(82 ) nm
Other (income) expense, net (28 ) —
28
nm
Operating income 9,371
1,874
7,497
nm

~~Revenu~~e - Revenue for 2018 and 2017 was $88.2 million and $65.4 million, respectively, representing an increase of 34.8%. The increase was due to an overall increase in activity resulting from higher demand for our onshore and offshore services.

~~Gross profit~~ - Gross profit was $12.4 million (14.1% of revenue) for 2018, compared to gross profit of $4.6 million (7.0% of revenue) for 2017. The increase in gross profit relative to the prior period was primarily due to higher revenue and improved recoveries of overhead costs.

~~General and administrative expense~~ - General and administrative expense for 2018 and 2017 was $3.0 million (3.4% of revenue) and $2.7 million (4.1% of revenue), respectively, representing an increase of 11.9%. The increase was due to additional costs to support higher activity and increased incentive plan costs.

~~EPC Division~~

Years Ended December 31, Favorable (Unfavorable) Change
2018 2017 Amount Percent
Revenue $ 2,477
$ 198
$ 2,279
nm
Gross profit (loss) (46 ) 41
(87 ) nm
Gross profit (loss) percentage (1.9 )%
20.7 %
General and administrative expense 1,817
—
(1,817 ) nm
Operating (loss) income (1,863 ) 41
(1,904 ) nm

~~Revenue -~~ Revenue for 2018 and 2017 was $2.5 million and $0.2 million, respectively. Our EPC Division was formed in the fourth quarter 2017 and all revenue consists of pricing, planning and scheduling work for the SeaOne Project.

See Note 122 of our Financial Statements in Item 8 for further discussion of our ~~EPC Division and the SeaOne Project.~~

project impacts.

General and administrative expense ~~- General and administrative expense includes the addition of administrative personnel and other costs as we invest in this new division.~~

~~Corporate Division~~

Years Ended December 31, Favorable (Unfavorable) Change
2018 2017 Amount Percent
Revenue (eliminations) $ (3,827 ) $ (5,200 ) $ 1,373
26.4 %
Gross loss (1,331 ) (730 ) (601 ) (82.3 )%
Gross loss percentage n/a

n/a

General and administrative expense 8,241
7,757
(484 ) (6.2 )%
Other (income) expense, net 255
(16 ) (271 ) nm
Operating loss (9,827 ) (8,471 ) (1,356 ) (16.0 )%

~~Gross loss~~ - Gross loss was $1.3 million for 2018, compared to a gross loss of $0.7 million for 2017. The increase in gross loss relative to the prior period was primarily due to higher costs to support our strategic initiatives and EPC Division.

~~General and administrative expense~~ - – General and administrative expense for ~~2018~~ 2020��and ~~2017~~2019 was ~~$8.2~~$2.0 million ~~(3.7%~~(1.3% of revenue) and $2.4 million (1.5% of revenue), respectively, representing a decrease of 19.0%. The decrease was primarily due to our cost reduction initiatives.

Impairments and (gain) loss on assets held for sale – Impairments and (gain) loss on assets held for sale for 2020 and 2019 was a loss of $1.6 million and $7.9 million respectively. The loss for 2020 was primarily due to:

•

Impairments of $1.0 million for lease assets and fixed assets (primarily drydocks) attributable to the closure of our Lake Charles Yard in the fourth quarter 2020, and

•

Costs of $0.6 million primarily associated with the closures of our Jennings Yard and Lake Charles Yard in the fourth quarter 2020.

The loss for 2019 was primarily due to:

•

Impairments of $4.6 million for lease assets and fixed assets attributable to our Jennings Yard,

•

Impairments of $3.0 million for lease assets and fixed assets (primarily drydocks) attributable to our Lake Charles Yard, and

•

An impairment of $0.3 million for an asset that was held for sale and sold.

See Note 3 of our Financial Statements in Item 8 for further discussion of our impairments and assets held for sale.

Other (income) expense, net – Other (income) expense, net for 2020 was expense of $1.5 million, primarily due to charges of $1.3 million associated with damage caused by Hurricane Laura to our drydocks, warehouses, bulkheads and ninth harbor tug project at our Lake Charles Yard in the third quarter 2020. The charges relate to deductibles associated with our insurance coverages and our estimates of cost associated with uninsurable damage. See Note 2 of our Financial Statements in Item 8 for further discussion of the impacts of Hurricane Laura.

Fabrication & Services Division⁽¹⁾

	Years Ended December 31,						Favorable (Unfavorable) Change
	2020			2019			Amount			Percent
New Awards	$	66,654		$	132,659		$	(66,005	)		(49.8	)%

Revenue	$	99,485		$	137,169		$	(37,684	)		(27.5	)%
Gross profit (loss)		1,523			(657	)		2,180		nm
Gross profit (loss) percentage		1.5	%		(0.5	)%
General and administrative expense		3,172			4,308			1,136			26.4	%
Impairments and (gain) loss on assets held for sale		2,491			8,933			6,442		nm
Other (income) expense, net		(10,033	)		(202	)		9,831		nm
Operating income (loss)		5,893			(13,696	)		19,589		nm

(1)

In the first quarter 2020, our Fabrication and Services Divisions were operationally combined to form a new division called Fabrication & Services. Accordingly, segment results (including the effects of eliminations) for our Fabrication and Services Divisions for 2019 have been combined to conform to the presentation of our reportable segments for 2020. In addition, in the first quarter 2020, management and project execution responsibility for our two forty-vehicle ferry projects was transferred from our former Fabrication Division to our Shipyard Division. Accordingly, revenue of $9.2 million and gross loss and operating loss of $5.1 million associated with these projects for 2019 were reclassified from our former Fabrication Division to our Shipyard Division to conform to the presentation of these projects for 2020. See Note 10 of our Financial Statements in Item 8 for further discussion of our realigned operating divisions.

New Project Awards – New project awards for 2020 and 2019 were $66.7 million and $132.7 million, respectively. Significant new project awards for 2020 include:

•

A marine docking structures project in the second quarter 2020, and

•

Additional scopes of work for our offshore jacket and deck project in the second quarter 2020.

Significant new project awards for 2019 include:

•

An offshore jacket and deck project in the first quarter 2019,

•

A subsea components project in the first quarter 2019,

•

Additional scopes of work for an onshore maintenance project in the third quarter 2019, and

•

A material supply project and offshore modules project in the fourth quarter 2019.

Revenue – Revenue for 2020 and 2019 was $99.5 million and $137.2 million, respectively, representing a decrease of $37.7 million. The decrease was primarily due to:

•

Lower revenue for our paddlewheel river boat and subsea components projects that were completed in the first quarter 2020, and

•

Reduced offshore services activity and small fabrication project activity, offset partially by,

•

Higher revenue for our offshore jacket and deck project, and

•

Higher revenue for our marine docking structures project, material supply project and offshore modules project.

Gross profit (loss) – Gross profit for 2020 was $1.5 million (1.5% of revenue) and gross loss for 2019 was $0.7 million (0.5% of revenue), respectively. Gross profit for 2020 was primarily impacted by:

•

Project improvements of $1.2 million related to cost decreases, earned project incentives and the favorable resolution of change orders on our offshore jacket and deck project, and

•

Project improvements of $1.5 million related to cost decreases and the favorable resolution of change orders on our paddlewheel riverboat and subsea components projects, offset partially by,

•

Low revenue due to low backlog levels, and

•

The partial under-recovery of overhead costs primarily due to:

−

The under-utilization of our facilities and resources due to low workhours,

−

Higher overhead costs associated with retaining salaried overhead and hourly craft employees to perform process improvements, special projects and facility maintenance and repairs, and

−

Lower utilization of our facilities and resources due to, and costs incurred to prepare for, Hurricane Laura, Hurricane Marco and Hurricane Sally.

Our Fabrication & Services Division utilization for 2020 and 2019 benefited by $1.2 million and $0.9 million, respectively, from providing resources and facilities to our Shipyard Division for our seventy-vehicle ferry project and two forty-vehicle ferry projects.

The gross profit for 2020 relative to the gross loss for 2019 was primarily due to:

•

The aforementioned project improvements of $2.7 million for 2020,

•

A higher margin mix (excluding the aforementioned project improvements), and

•

Project charges of $4.9 million for 2019 on our offshore jacket and deck project, subsea components project and paddlewheel riverboat project, offset partially by,

•

Lower revenue and an increase in the under-recovery of overhead costs due to lower activity.

See Note 2 of our Financial Statements in Item 8 for further discussion of our project impacts.

General and administrative expense – General and administrative expense for 2020 and 2019 was $3.2 million (3.2% of revenue) and $4.3 million (3.1% of revenue), respectively, representing a decrease of 26.4%. The decrease was primarily due to our cost reduction initiatives including combining our former Fabrication and Services Divisions.

Impairments and (gain) loss on assets held for sale – Impairments and (gain) loss on assets held for sale for 2020 and 2019 was a loss of $2.5 million and $8.9 million, respectively. The loss for 2020 was primarily due to:

•

Impairments of $1.4 million associated with assets held for sale,

•

Impairments of $0.9 million for certain fixed assets associated with the relocation and consolidation of such assets to improve operational efficiency, and

•

A loss of $0.2 million on the sale of a barge and other assets held for sale.

The loss for 2019 was primarily due:

•

Impairments of $9.3 million for assets held for sale, assets removed from held for sale and inventory, offset partially by,

•

A gain of $0.4 million from the sale of assets held for sale.

See Note 3 of our Financial Statements in Item 8 for further discussion of our impairments and assets held for sale.

Other (income) expense, net – Other (income) expense, net for 2020 and 2019 was income of $10.0 million and $0.2 million, respectively. Other income for 2020 was primarily due to a gain of $10.0 million associated with the settlement of a contract dispute for a project completed in 2015. See Note 1 of our Financial Statements in Item 8 for further discussion of our settlement of the completed project dispute. Other income for 2019 was primarily due to net gains on the sales of equipment.

Corporate Division

	Years Ended December 31,						Favorable (Unfavorable) Change
	2020			2019			Amount		Percent
Revenue (eliminations)	$	(2,224	)	$	(2,327	)	$	103		4.4	%
Gross loss		—			(317	)		317	nm
Gross loss percentage	n/a			n/a
General and administrative expense		8,706			8,875			169		1.9	%
Impairments and (gain) loss on assets held for sale		—			675			675	nm
Other (income) expense, net		3			30			27	nm
Operating loss		(8,709	)		(9,897	)		1,188		12.0	%

(1)

In the first quarter 2020, our Fabrication and Services Divisions were operationally combined to form a new division called Fabrication & Services. Accordingly, the effects of related eliminations on our Corporate Division for 2019 have been conformed to the presentation of our reportable segments for 2020. See Note 10 of our Financial Statements in Item 8 for further discussion of our realigned operating divisions.

Gross loss –Gross loss for 2019 was $0.3 million and represents costs incurred by the Corporate Division to support our operating divisions. Such costs are reflected within the operating divisions in 2020.

General and administrative expense– General and administrative expense for 2020 and 2019 was $8.7 million (3.5% of consolidated revenue) and ~~$7.8~~$8.9 million ~~(4.5%~~(2.9% of consolidated revenue), respectively, representing ~~an increase~~a decrease of ~~6.2%~~1.9%. The ~~increase~~decrease was primarily due ~~to the net impact of:~~to:

•

Reduced professional fees associated with the evaluation of strategic alternatives, and

•

Other cost savings including reductions in board size and the salaries of our executives, offset partially by,

~~Increased~~

•

Higher incentive plan costs (due primarily to the 2019 period benefiting from the partial reversal of long-term incentives that were accrued in periods prior to 2019 but ultimately not earned), and

•

Higher legal and advisory fees and insurance costs.

General and administrative expense includes legal and advisory fees related to ~~customer disputes~~ a contract dispute for a completed project that was settled during the first quarter 2020 and ~~shareholder matters; and~~

~~Professional fees~~a contract dispute associated with our MPSV projects which are subject to purported termination and for which construction has been suspended. Legal and advisory fees related to such disputes totaled $1.3 million and $1.4 million for 2020 and 2019, respectively. See Note 1 of our Financial Statements in Item 8 for further discussion of our settlement of the ~~evaluation~~completed project dispute and Note 8 for further discussion of ~~strategic alternatives and initiatives to diversify~~ our ~~business; offset partially by,~~

~~Lower incentive plan costs, executive management salary reductions and other cost saving initiatives.~~

MPSV dispute.

Comparison of ~~2017~~2019 and ~~2016~~ 2018 (in thousands, except for percentages):

Consolidated

	Years Ended December 31,						Favorable (Unfavorable) Change
	2019			2018			Amount			Percent
New Awards	$	384,083		$	355,090		$	28,993			8.2	%

Revenue	$	303,308		$	221,247		$	82,061			37.1	%
Cost of revenue		320,307			228,443			(91,864	)		(40.2	)%
Gross loss		(16,999	)		(7,196	)		(9,803	)		(136.2	)%
Gross loss percentage		(5.6	)%		(3.3	)%
General and administrative expense		15,628			19,015			3,387			17.8	%
Impairments and (gain) loss on assets held for sale		17,528			(6,850	)		(24,378	)	nm
Other (income) expense, net		(134	)		304			438		nm
Operating loss		(50,021	)		(19,665	)		(30,356	)		(154.4	)%
Interest (expense) income, net		531			(142	)		673		nm
Loss before income taxes		(49,490	)		(19,807	)		(29,683	)		(149.9	)%
Income tax (expense) benefit		96			(571	)		667		nm
Net loss	$	(49,394	)	$	(20,378	)	$	(29,016	)		(142.4	)%

New Project Awards – New project awards for 2019 and 2018 were $384.1 million and $355.1 million, respectively. Significant new project awards for 2019 include:

•

The exercise of options by the U.S. Navy for a second and third towing, salvage and rescue ship in the second quarter 2019 within our Shipyard Division,

•

The exercise of an option by Oregon State University for a third research vessel in the second quarter 2019 within our Shipyard Division,

•

A seventy-vehicle ferry in the third quarter 2019 within our Shipyard Division,

•

An offshore jacket and deck project and a subsea components project in the first quarter 2019 within our Fabrication & Services Division,

•

Additional scopes of work for an onshore maintenance project in the third quarter 2019 within our Fabrication & Services Division, and

•

A material supply project and offshore modules project in the fourth quarter 2019 within our Fabrication & Services Division.

Significant new project awards for 2018 include:

•

A towing, salvage and rescue ship for the U.S. Navy in the first quarter 2018 within our Shipyard Division,

•

The exercise of an option by Oregon State University for a second research vessel in the second quarter 2018 within our Shipyard Division,

•

The exercise of customer options for a ninth and tenth harbor tug in the second quarter 2018 within our Shipyard Division,

~~Consolidated~~

•

A towboat in the second quarter 2018 and the exercise of a customer option for a second towboat in the third quarter 2018 within our Shipyard Division,

•

Two forty-vehicle ferries in the fourth quarter 2018 within our Shipyard Division,

Years Ended December 31, Favorable (Unfavorable) Change
2017 2016 Amount Percent
Revenue $ 171,022
$ 286,326
$ (115,304 ) (40.3 )%
Cost of revenue 213,947
261,473
47,526
18.2 %
Gross (loss) profit (42,925 ) 24,853
(67,778 ) nm
Gross (loss) profit percentage (25.1 )% 8.7 %
General and administrative expense 17,800
19,670
1,870
9.5 %
Asset impairments and (gain) loss on assets held for sale, net 7,931
—
(7,931 ) nm
Other (income) expense, net (46 ) (681 ) (635 ) (93.2 )%
Operating (loss) income (68,610 ) 5,864
(74,474 ) nm
Interest expense, net (349 ) (308 ) (41 ) (13.3 )%
(Loss) income before income taxes (68,959 ) 5,556
(74,515 ) nm
Income tax (expense) benefit 24,193
(2,041 ) 26,234
nm
Net (loss) income $ (44,766 ) $ 3,515
$ (48,281 ) nm

•

A meteorological tower and platform for an offshore wind project in the first quarter 2018 within our Fabrication & Services Division, and

•

The expansion of a paddlewheel riverboat in the third quarter 2018 within our Fabrication & Services Division.

Revenue -– Revenue for ~~2017~~2019 and ~~2016~~2018 was ~~$171.0~~$303.3 million and ~~$286.3~~$221.2 million, respectively, representing ~~a decrease~~an increase of ~~40.3%~~37.1%. The ~~decrease~~increase was primarily due ~~to an overall decrease in work as a result of depressed oil and gas prices and the corresponding reduction in customer demand within all of our operating divisions. Additionally, we recorded reduced~~to:

Increased revenue ~~due to contract losses of $34.5 million related to cost overruns and delays that we encountered in the newbuild construction of two MPSVs and reductions of price of $11.2 million~~ for ~~liquidated damages (representing the maximum amount of liquidated damages under the contracts) which are in dispute.~~

~~Gross profit (loss) -~~ Gross loss was $42.9 million (25.1% of revenue) for 2017, compared to a gross profit of $24.9 million (8.7% of revenue) for 2016. The decrease was primarily due to $34.5 million of contract losses incurred by our Shipyard Division ~~related to the construction~~ of two MPSVs, $5.5 million of costs related to our South Texas Properties which were held for sale and lower margins on current work due to competitive pressures. This was partially offset by decreases in costs resulting from:

~~Reductions in workforce as we completed projects at our South Texas Properties and one of our formerly leased shipyards,~~

~~Reduced depreciation for our South Texas Properties and assets in our Shipyard Division as these assets were classified as assets held for sale, and~~

~~Continued cost reduction efforts implemented during the period.~~

~~General and administrative expense~~ - General and administrative expense for 2017 and 2016 was $17.8 million (10.4% of revenue) and $19.7 million (6.9% of revenue), respectively, representing a decrease of 9.5%. The decrease was primarily due to lower incentive plan costs, employee headcount reductions and continued cost reduction efforts implemented during the period.

~~Asset impairments and (gain) loss on assets held for sale, net~~ ~~- Asset impairments and (gain) loss on assets held for sale, net for 2017 was a loss of $7.9 million. During 2017, we recorded asset impairment charges of $7.7~~$62.8 million, primarily related to inventory in our Fabrication Division and our assets held for sale. See Note 3 and Note 5 of our Financial Statements in Item 8 for a further discussion of impairments of our assets held for sale and our inventory, respectively. We had no asset impairment charges for 2016.attributable to:

•

Progress on our research vessel projects, towing, salvage and rescue ship projects and forty-vehicle ferry projects, offset partially by,

•

Lower revenue for our harbor tug projects, and

~~Other (income) expense, net~~ ~~- Other (income) expense, net for 2017 and 2016 was income of $46,000 and $0.7 million, respectively. Other income for 2016 was primarily due to gains on sales of assets~~

•

No revenue for our two MPSV contracts which were suspended during the first quarter 2018.

Increased revenue for our Fabrication ~~Division.~~& Services Division of $29.6 million, primarily attributable to:

•

Progress on our paddle wheel riverboat project and jacket and deck project, offset partially by,

•

No revenue for our petrochemical modules project which was completed in 2018.

~~Income tax (expense) benefit -~~ Income tax (expense) benefit for 2017 was a benefit of $24.2 million compared to income tax expense of $2.0 million for 2016. Our effective tax rate decreased to 35.1% for 2017, as compared to 36.7% for 2016. The decrease in our effective rate is primarily due to increases in executive compensation expense in excess of amounts that are tax deductible and $0.3 million related to the recognition of the excess tax deficiency resulting from the difference between the deduction for tax purposes and the compensation cost recognized for financial reporting purposes created when common stock vests.

See Note 8 of our Financial Statements in Item 8 for further ~~discussion.~~

~~Operating Segments~~

~~Fabrication Division~~

Years Ended December 31, Favorable (Unfavorable) Change
2017 2016 Amount Percent
Revenue $ 57,880
$ 88,683
$ (30,803 ) (34.7 )%
Gross (loss) profit (1,941 ) 5,276
(7,217 ) (136.8 )%
Gross (loss) profit percentage (3.4 )% 5.9 %
General and administrative expense 3,416
3,776
360
9.5 %
Asset impairments and (gain) loss on assets held for sale, net

6,683
—
(6,683 ) nm
Other (income) expense, net (30 ) (509 ) (479 ) (94.1 )%
Operating (loss) income (12,010 ) 2,009
(14,019 ) nm

~~Revenue - Revenue~~discussion of our MPSV dispute.

Gross loss – Gross loss for ~~2017~~2019 and ~~2016~~2018 was ~~$57.9~~$17.0 million (5.6% of revenue) and ~~$88.7~~$7.2 million ~~respectively, representing a decrease~~(3.3% of ~~34.7%.~~revenue), respectively. The ~~decrease~~gross loss for 2019 was primarily due to an overall decrease in work as a result of depressed oil and gas prices and the corresponding reduction in customer demand for offshore fabrication projects. We classified our South Texas Properties as held for sale in the first quarter 2017, in response to the underutilization of our Fabrication assets. At December 31, 2017, all of our projects at our South Texas Properties were completed or transferred to our fabrication yard in Houma, Louisiana.to:

•

Project charges of $12.3 million and $4.9 million within our Shipyard Division and Fabrication & Services Division, respectively,

•

The partial under-recovery of overhead costs (primarily associated with the under-utilization of our facilities within our Fabrication & Services Division, and to a lesser extent within our Shipyard Division), and

~~Gross profit (loss)~~ ~~- Gross loss was $1.9 million (3.4% of revenue) for 2017, compared to a gross profit of $5.3 million (5.9% of revenue) for 2016.~~

•

Holding costs of $1.2 million related to the two MPSV vessels which remain in our possession and are subject to dispute.

The ~~decrease~~increase in gross ~~profit~~loss relative to 2018 was primarily due ~~to lower revenue from decreased fabrication work related to decreases in fabrication demand~~to:

•

The aforementioned project charges of $17.2 million for 2019,

•

A lower margin mix for our Shipyard Division (excluding the aforementioned project charges), offset partially by,

•

Higher revenue and a reduction in the under-recovery of overhead costs due to higher activity,

•

A higher margin mix for our Fabrication & Services Division (excluding the aforementioned project charges), and

•

Project charges of $6.7 million and $2.4 million for 2018 within our Shipyard Division and Fabrication & Services Division, respectively.

See “Operating Segments” below and approximately $5.5 million of costs for our South Texas Properties that were held for sale. This was partially offset by decreases in costs resulting from reductions in workforce, gains on scrap sales as we completed projects at our South Texas Properties, reduced depreciation for our South Texas Properties as these assets were classified as held for sale in the first quarter 2017, and additional cost minimization efforts implemented during the period.

~~General and administrative expense~~ - General and administrative expense for 2017 and 2016 was $3.4 million (5.9% of revenue) and $3.8 million (4.3% of revenue), respectively, representing a decrease of 9.5%. The decrease was primarily due to decreases in costs resulting from reductions in workforce as we completed projects at our South Texas Properties and lower incentive plan costs due to a reduced workforce and our operating loss. This was partially offset by expenses incurred to market our South Texas Properties for sale and payment of termination benefits during the first quarter 2017 as we reduced the workforce and completed operations at our South Texas Properties.

~~Asset impairments and (gain) loss on assets held for sale, net~~ ~~- Asset impairments and gain (loss) on assets held for sale, net for 2017 was a loss of $6.7 million related to impairments of inventory. See~~ Note 52 of our Financial Statements in Item 8 for further ~~discussion.~~

~~Other (income)~~ ~~expense, net - Other (income) expense, net for 2017 and 2016 was income of $30,000 and $0.5 million, respectively. Other income for 2016 was primarily due to gains on sales of assets.~~

~~Shipyard Division~~

Years Ended December 31, Favorable (Unfavorable) Change
2017 2016 Amount Percent
Revenue $ 52,699
$ 109,502
$ (56,803 ) (51.9 )%
Gross (loss) profit (44,870 ) 7,801
(52,671 ) (675.2 )%
Gross profit (loss) percentage (85.1 )% 7.1 %
General and administrative expense 3,926
5,426
1,500
27.6 %
Asset impairments and (gain) loss on net assets sold, net 1,248
—
(1,248 ) nm
Other (income) expense, net —
(61 ) (61 ) nm
Operating (loss) income (50,044 ) 2,436
(52,480 ) nm

~~Revenu~~e - Revenue for 2017 and 2016 was $52.7 million and $109.5 million, respectively, representing a decrease of 51.9%. The decrease was primarily due to the reduction in customer demand for shipbuilding and repair services supporting the oil and gas industry and due to:

~~A reduction in our estimate of the final contract price for the construction of two MPSVs by $11.2 million representing the maximum liquidated damages under the contracts which are in dispute.~~

The completion of a vessel that we tendered for delivery in February 2017 that was rejected by the customer alleging certain technical deficiencies. We subsequently suspended work on the second vessel under contract with this customer. We successfully resolved our dispute with the customer and the customer accepted delivery of the first vessel less a reduction in the amounts owed under the contract of $0.2 million in November 2017. We also recommenced construction of the second vessel to be delivered in 2018 for the remaining contract price less $0.2 million.

~~Gross profit (loss)~~ - Gross loss was $44.9 million (85.1% of revenue) for 2017, compared to gross profit of $7.8 million (7.1% of revenue) for 2016. The decrease in gross profit was primarily due to $34.5 million of contract losses related to the constructiondiscussion of our ~~two MPSVs.~~

project impacts.

General and administrative expense -– General and administrative expense for ~~2017~~2019 and ~~2016~~2018 was ~~$3.9~~$15.6 million ~~(7.4%~~(5.2% of revenue) and ~~$5.4~~$19.0 million ~~(5.0%~~(8.6% of revenue), respectively, representing a decrease ~~27.6%~~of 17.8%. The decrease was primarily due ~~to reductions~~to:

•

Lower incentive plan costs and board of director compensation costs, and

•

Lower legal and advisory fees related to customer disputes and shareholder matters, offset partially by,

•

Higher professional fees and other costs associated with the evaluation of strategic alternatives and initiatives to diversify and enhance our business.

General and administrative ~~personnel~~expense includes legal and advisory fees related to ~~consolidation of personnel duties from the LEEVAC acquisition and lower incentive plan costs due to~~ a ~~reduced workforce, our operating loss and cost reduction efforts implemented~~contract dispute for a completed project that was settled during the first ~~part~~quarter 2020 and a contract dispute associated with our MPSV projects which are subject to purported termination and for which construction has been suspended. Legal and advisory fees related to such disputes totaled $1.4 million and $1.7 million for 2019 and 2018, respectively, and were reflected within our Corporate Division in 2019 and our operating divisions in 2018. See Note 1 of ~~2016.~~

our Financial Statements in Item 8 for further discussion of our settlement of the completed project dispute and Note 8 for further discussion of our MPSV dispute.

~~Asset~~

Impairments and (gain) loss on ~~net~~assets held for sale – Impairments and (gain) loss on assets held for sale ~~net~~ ~~- Asset impairments~~for 2019 and ~~(gain)~~2018 was a loss ~~on net assets held~~of $17.5 million and a gain of $6.9 million, respectively.

The loss for ~~sale, net~~2019 was primarily due to:

•

Impairments of $9.3 million for assets held for sale, assets removed from held for sale and inventory within our Fabrication & Services Division,

•

Impairments of $4.6 million for lease assets and fixed assets attributable to our Jennings Yard within our Shipyard Division,

•

Impairments of $3.0 million for lease assets and fixed assets (primarily drydocks) attributable to our Lake Charles Yard within our Shipyard Division, and

•

An impairment of $0.3 million for an asset that was held for sale and sold within our Shipyard Division, offset partially by,

•

A gain of $0.4 million from the sale of assets held for sale within our Fabrication & Services Division.

The gain for ~~2017~~2018 was ~~an impairment of $1.2 million related to certain assets held for sale. We had no asset impairments during 2016.~~ primarily due to:

•

A gain of $3.9 million from the sale of our Texas South Yard and a gain of $4.1 million from the sale of our Texas North Yard within our Fabrication & Services Division; and

•

A gain of $3.6 million from the settlement of an insurance claim related to Hurricane Harvey damage at our South Texas Properties incurred during 2017 within our Fabrication & Services Division; offset partially by,

•

Impairments of $4.4 million and a loss of $0.3 million related to inventory and assets held for sale and/or sold within our Fabrication & Services Division and Shipyard Division.

See Note 3 of our Financial Statements in Item 8 for further discussion of our impairments and assets held for sale.

~~Services Division~~

Years Ended December 31, Favorable (Unfavorable) Change
2017 2016 Amount Percent
Revenue $ 65,445
$ 91,414
$ (25,969 ) (28.4 )%
Gross profit 4,575
12,420
(7,845 ) (63.2 )%
Gross profit percentage 7.0 % 13.6 %
General and administrative expense 2,701
3,314
613
18.5 %
Other (income) expense, net —
(111 ) (111 ) nm
Operating income 1,874
9,217
(7,343 ) (79.7 )%

~~Revenue - Revenue~~

Other (income) expense, net– Other (income) expense, net for ~~2017~~2019 and ~~2016~~2018 was ~~$65.4~~income of $0.1 million and ~~$91.4~~expense of $0.3 million, ~~respectively, representing a decrease~~respectively. Other (income) expense, net generally represents recoveries or provisions for bad debts, gains or losses associated with the sale or disposition of ~~28.4%.~~property and equipment other than assets held for sale, and income or expense associated with certain nonrecurring items. The ~~decrease~~income for 2019 and expense for 2018 was primarily due to ~~an overall decrease in work~~net gains and net losses, respectively, on the sales of equipment.

Interest (expense) income, net –Interest (expense) income, net for 2019 and 2018 was income of $0.5 million and expense of $0.1 million, respectively. The net interest income for 2019 was primarily due to interest earned on our cash and short-term investment balances, offset partially by interest amortization associated with our long-term lease liability. The net interest expense for 2018 was primarily due to borrowings under our LC Facility during 2018.

Income tax (expense) benefit –Income tax (expense) benefit for 2019 and 2018 was a benefit of $0.1 million and expense of $0.6 million, respectively. The tax benefit for 2019 and expense for 2018 represent state income taxes. No federal income tax benefit was recorded for losses during 2019 or 2018 as a ~~result~~full valuation allowance was recorded against our deferred tax assets generated during the periods. See Note 6 of ~~depressed oil~~our Financial Statements in Item 8 for further discussion of our NOLs, deferred tax assets and ~~gas prices and the corresponding reduction in customer demand for oil and gas related service projects.~~valuation allowance.

Operating Segments

Shipyard Division⁽¹⁾

	Years Ended December 31,						Favorable (Unfavorable) Change
	2019			2018			Amount			Percent
New Awards	$	251,424		$	216,771		$	34,653			16.0	%

Revenue	$	168,466		$	96,424		$	72,042			74.7	%
Gross loss		(16,025	)		(10,472	)		(5,553	)		(53.0	)%
Gross loss percentage		(9.5	)%		(10.9	)%
General and administrative expense		2,445			2,801			356			12.7	%
Impairments and (gain) loss on assets held for sale		7,920			964			(6,956	)	nm
Other (income) expense, net		38			159			121		nm
Operating loss		(26,428	)		(14,396	)		(12,032	)		(83.6	)%

(1)

In the first quarter 2020, management and project execution responsibility for our two forty-vehicle ferry projects was transferred from our former Fabrication Division to our Shipyard Division. Accordingly, revenue of $9.2 million and gross loss and operating loss of $5.1 million associated with these projects for 2019 was reclassified from our former Fabrication Division to our Shipyard Division to conform to the presentation of these projects for 2020. See Note 10 of our Financial Statements in Item 8 for further discussion of our realigned operating divisions.

New Project Awards – New project awards for 2019 and 2018 were $251.4 million and $216.8 million, respectively. Significant new project awards for 2019 include.

•

The exercise of options by the U.S. Navy for a second and third towing, salvage and rescue ship in the second quarter 2019,

•

The exercise of an option by Oregon State University for a third research vessel in the second quarter 2019, and

•

A seventy-vehicle ferry in the third quarter 2019.

Significant new project awards for 2018 include:

•

A towing, salvage and rescue ship for the U.S. Navy in the first quarter 2018,

•

The exercise of an option by Oregon State University for a second research vessel in the second quarter 2018,

•

The exercise of customer options for a ninth and tenth harbor tug in the second quarter 2018,

•

A towboat in the second quarter 2018 and the exercise of a customer option for a second towboat in the third quarter 2018, and

•

Two forty-vehicle ferries in the fourth quarter 2018.

Revenue – Revenue for 2019 and 2018 was $168.5 million and $96.4 million, respectively, representing an increase of 74.7%. The increase was primarily due to:

•

Progress on our research vessel projects, towing, salvage and rescue ship projects and forty-vehicle ferry projects, offset partially by,

•

Lower revenue for our harbor tug projects, and

•

No revenue for our two MPSV contracts which were suspended during the first quarter 2018.

See Note 8 of our Financial Statements in Item 8 for further discussion of our MPSV dispute.

Gross ~~profit~~ -loss– Gross ~~profit~~loss for 2019 and 2018 was ~~$4.6~~$16.0 million ~~(7.0%~~(9.5% of revenue) ~~for 2017, compared to $12.4~~and $10.5 million ~~(13.6%~~(10.9% of revenue), respectively. The ~~decrease~~gross loss for 2019 was primarily due to:

•

Project charges of $4.9 million related to forecast cost increases and liquidated damages on our harbor tug projects,

•

Project charges of $5.1 million related to forecast cost increases and liquidated damages on our forty-vehicle ferry projects,

•

Project charges of $1.5 million related to forecast cost increases on our ice-breaker tug project,

•

Project charges of $0.8 million related to the reversal of gross profit recognized prior to 2019 on our research vessel projects,

•

Holding costs of $1.2 million related to the two MPSV vessels which remain in our possession and are subject to dispute, and

•

The partial under-recovery of overhead costs.

The increase in gross loss for 2019 relative to ~~decreased revenue and lower margins on new work performed during 2017.~~2018 was primarily due to:

•

The aforementioned project charges of $12.3 million for 2019, and

•

A lower margin mix (excluding the aforementioned project charges) as project gross profit on our research vessel projects and towing, salvage and rescue ship projects was not material because the projects were approximately break-even, offset partially by,

•

Higher revenue and a reduction in the under-recovery of overhead costs due to higher activity, and

•

Project charges of $6.7 million for 2018 on our harbor tug projects.

See Note 2 of our Financial Statements in Item 8 for further discussion of our project impacts.

General and administrative expense -– General and administrative expense for ~~2017~~2019 and ~~2016~~2018 was ~~$2.7~~$2.4 million ~~(4.1%~~(1.5% of revenue) and ~~$3.3~~$2.8 million ~~(3.6%~~(2.9% of revenue), respectively, representing a decrease of ~~18.5%~~12.7%. The decrease was primarily due to lower ~~incentive plan~~legal and advisory fees related to a customer dispute as the costs are reflected within the Corporate Division in 2019.

Impairments and (gain) loss on assets held for sale – Impairments and (gain) loss on assets held for sale for 2019 and 2018 was a loss of $7.9 million and $1.0 million, respectively. The loss for 2019 was primarily due to:

•

Impairments of $4.6 million for lease assets and fixed assets attributable to our Jennings Yard,

•

Impairments of $3.0 million for lease assets and fixed assets (primarily drydocks) attributable to our Lake Charles Yard, and

•

An impairment of $0.3 million for an asset that was held for sale and sold.

The loss for 2018 was primarily due to ~~a reduced workforce~~impairments of assets held for sale and/or sold.

See Note 3 of our Financial Statements in Item 8 for further discussion of our impairments and ~~our consolidated operating loss.~~

assets held for sale.

Fabrication & Services Division⁽¹⁾

~~Corporate~~

	Years Ended December 31,						Favorable (Unfavorable) Change
	2019			2018			Amount			Percent
New Awards	$	132,659		$	138,319		$	(5,660	)		(4.1	)%

Revenue	$	137,169		$	126,695		$	10,474			8.3	%
Gross profit (loss)		(657	)		4,607			(5,264	)	nm
Gross profit (loss) percentage		(0.5	)%		3.6	%
General and administrative expense		4,308			7,973			3,665			46.0	%
Impairments and (gain) loss on assets held for sale		8,933			(7,814	)		(16,747	)	nm
Other (income) expense, net		(202	)		(110	)		92		nm
Operating income (loss)		(13,696	)		4,558			(18,254	)	nm

(1)

In the first quarter 2020, our Fabrication and Services Divisions were operationally combined to form a new division called Fabrication & Services. Accordingly, segment results (including the effects of eliminations) for our Fabrication and Services Divisions for 2019 have been combined to conform to the presentation of our reportable segments for 2020. In addition, in the first quarter 2020, management and project execution responsibility for our two forty-vehicle ferry projects was transferred from our former Fabrication Division to our Shipyard Division. Accordingly, revenue of $9.2 million and gross loss and operating loss of $5.1 million associated with these projects for 2019 was reclassified from our former Fabrication Division to our Shipyard Division to conform to the presentation of these projects for 2020. See Note 10 of our Financial Statements in Item 8 for further discussion of our realigned operating divisions.

New Project Awards – New project awards for 2019 and 2018 were $132.7 million and $138.3 million, respectively. Significant new project awards for 2019 include:

•

An offshore jacket and deck project in the first quarter 2019,

•

A subsea components project in the first quarter 2019,

Years Ended December 31, Favorable (Unfavorable) Change
2017 2016 Amount Percent
Revenue (eliminations) $ (5,200 ) $ (3,273 ) $ (1,927 ) (58.9 )%
Gross loss (730 ) (644 ) (86 ) (13.4 )%
Gross loss percentage n/a
n/a

General and administrative expense 7,757
7,154
(603 ) (8.4 )%
Other (income) expense (16 ) —
16
nm
Operating loss (8,471 ) (7,798 ) (673 ) (8.6 )%

•

Additional scopes of work for an onshore maintenance project in the third quarter 2019, and

•

A material supply project and offshore modules project in the fourth quarter 2019 within our Fabrication & Services Division.

Significant new project awards for 2018 include:

•

A meteorological tower and platform for an offshore wind project in the first quarter 2018, and

•

The expansion of a paddlewheel riverboat in the third quarter 2018.

Revenue –Revenue for 2019 and 2018 was $137.2 million and $126.7 million, respectively, representing an increase of 8.3%. The increase was primarily due to:

•

Progress on our paddle wheel riverboat project and jacket and deck project, offset partially by,

•

No revenue for our petrochemical modules project which was completed in 2018.

Gross loss (profit)– Gross loss for 2019 was $0.7 million (3.1% of revenue) and gross profit for 2018 was $4.6 million (6.3% of revenue), respectively. The gross loss for 2019 was primarily due to:

•

Project charges of $2.0 million related to forecast cost increases on our jacket and deck project,

•

Project charges of $1.3 million related to forecast cost increases on our paddle wheel riverboat project,

•

Project charges of $1.6 million related to forecast cost increases and liquidated damages on our subsea components project, and

•

The partial under-recovery of overhead costs.

The gross loss for 2019 relative to the gross profit for 2018 was primarily due to:

•

The aforementioned project charges of $4.9 million for 2019 (with no gross profit recognized on these projects during 2019), and

•

A lower margin mix (excluding the aforementioned project charges), offset partially by,

•

Higher revenue and a reduction in the under-recovery of overhead costs due to higher activity, and

•

Project charges of $2.4 million for 2018 on our petrochemical modules project.

See Note 2 of our Financial Statements in Item 8 for further discussion of our project impacts.

General and administrative expense -– General and administrative expense for ~~2017~~2019 and ~~2016~~2018 was $4.3 million (3.1% of revenue) and $8.0 million (6.3% of revenue), respectively, representing a decrease of 46%. The decrease was primarily due to:

•

Lower costs associated with our former EPC Division (which was combined with our Fabrication & Services Division in 2019),

•

Lower legal and advisory fees related to a customer dispute as the costs are reflected within the Corporate Division in 2019, and

•

Lower incentive plan costs and other cost reductions.

Impairments and (gain) loss on assets held for sale – Impairments and (gain) loss on assets held for sale for 2019 and 2018 was a loss of $8.9 million and a gain of $7.8 million, ~~(4.5%~~respectively. The loss for 2019 was primarily due:

•

Impairments of $9.3 million for assets held for sale, assets removed from held for sale and inventory, offset partially by,

•

A gain of $0.4 million from the sale of assets held for sale.

The gain for 2018 was primarily due to:

•

A gain of $3.9 million from the sale of our Texas South Yard and a gain of $4.1 million from the sale of our Texas North Yard, and

•

A gain of $3.6 million from the settlement of an insurance claim related to Hurricane Harvey damage at our South Texas Properties incurred during 2017, offset partially by,

•

Impairments of $3.5 million and a loss of $0.3 million related to inventory and assets held for sale and/or sold.

See Note 3 of our Financial Statements in Item 8 for further discussion of our impairments and assets held for sale.

Corporate Division

	Years Ended December 31,						Favorable (Unfavorable) Change
	2019			2018			Amount			Percent
Revenue (eliminations)	$	(2,327	)	$	(1,872	)	$	(455	)		(24.3	)%
Gross loss		(317	)		(1,331	)		1,014			76.2	%
Gross loss percentage	n/a			n/a
General and administrative expense		8,875			8,241			(634	)		(7.7	)%
Impairments and (gain) loss on assets held for sale		675			-			(675	)	nm
Other (income) expense, net		30			255			225		nm
Operating loss		(9,897	)		(9,827	)		(70	)		(0.7	)%

(1)

In the first quarter 2020, our Fabrication and Services Divisions were operationally combined to form a new division called Fabrication & Services. Accordingly, the effects of related eliminations on our Corporate Division for 2019 and 2018 have been conformed to the presentation of our reportable segments for 2020. See Note 10 of our Financial Statements in Item 8 for further discussion of our realigned operating divisions.

Gross loss– Gross loss for 2019 and 2018 was $0.3 million and $1.3 million, respectively. The decrease in gross loss relative to the 2018 period was primarily due to lower costs associated with supporting our former EPC Division (which was combined with our Fabrication & Services Division in 2019).

General and administrative expense – General and administrative expense for 2019 and 2018 was $8.9 million (2.9% of consolidated revenue) and ~~$7.2~~$8.2 million ~~(2.5%~~(3.7% of consolidated revenue), respectively, representing an increase of ~~8.4%~~7.7%. The increase was primarily due to:

•

Increased legal and advisory fees related to customer disputes as the costs were reflected within the operating divisions in 2018, and

•

Higher professional fees and other cost associated with the evaluation of strategic alternatives and initiatives to diversify and enhance our business, offset partially by,

•

Lower incentive plan costs and board of director compensation costs.

General and administrative expense for 2019 includes legal and advisory fees related to a contract dispute for a completed project that was settled during the first quarter 2020 and a contract dispute associated with our MPSV projects which are subject to ~~reductions~~purported termination and for which construction has been suspended. Legal and advisory fees related to such disputes were reflected within our Corporate Division in ~~the allocation of personnel costs to~~2019 and our operating divisions in 2018. See Note 1 of our Financial Statements in Item 8 for further discussion of our settlement of the completed project dispute and Note 8 for further discussion of our MPSV dispute.

Impairments and (gain) loss on assets held for sale – Impairments and (gain) loss on assets held for sale for 2019 was a loss of $0.7 million, primarily related to ~~shared services that are now included within our Corporate Division. The increase was also due to professional fees associated with the evaluation~~$0.5 million of strategic alternatives in anticipation of the proceeds to be received from the sale of our South Texas Properties and legal fees related to the pursuit of claims against two customers. The increase was offset partially by lower incentive plan costs dueamounts payable to our ~~consolidated operating loss.~~

former chief executive officer in connection with his retirement during the fourth quarter 2019. Such amounts were paid during 2020 and did not require any future service.

Liquidity and Capital Resources

Available Liquidity

Our primary sources of liquidity are our cash, ~~and~~ cash equivalents and scheduled maturities of our short-term investments, ~~and availability under our Credit Agreement (discussed below). At~~which totaled $51.2 million at December 31, ~~2018, our cash, cash equivalents and short-term investments totaled $79.2 million, and our immediately available liquidity was as follows (in thousands):~~

Available Liquidity Total
Cash and cash equivalents ⁽¹⁾
$ 70,457
Short-term investments ⁽²⁾
8,720
  Total cash, cash equivalents and short-term investments 79,177
Credit Agreement total capacity 40,000
Outstanding letters of credit (2,917 )
  Credit Agreement available capacity 37,083
  Total available liquidity $ 116,260

~~___________~~

~~(1) Includes U.S. Treasuries of $41.8 million with original maturities of three months or less.~~

~~(2) Includes U.S. Treasuries with original maturities of more than three months but less than six months.~~

~~Working Capital~~

2020. Our available liquidity is impacted by changes in our working capital and our capital expenditure requirements. At December 31, ~~2018,~~2020, our working capital was ~~$103.9~~$49.0 million and included ~~$79.2~~$51.2 million of cash, cash equivalents and short-term investments, ~~and $18.9~~$8.2 million of assets held for ~~sale.~~sale and $5.5 million of current maturities of long-term debt. Excluding cash, cash equivalents, short-term investments, ~~and~~ assets held for sale and current maturities of long-term debt, our working capital at December 31, ~~2018 totaled $5.7~~2020 was negative $4.9 million, and consisted of net ~~contracts~~contract assets and contract liabilities

~~(collectively, "Contracts~~ (collectively, “Contracts in ~~Progress"~~Progress”) of ~~$13.1~~$52.4 million; ~~contracts receivable~~contract receivables and retainage of ~~$22.5~~$15.4 million; inventory, prepaid expenses and other assets of ~~$9.4~~$5.1 million; and accounts payable, accrued expenses and other liabilities of ~~$39.3~~$77.8 million. The components of our working capital (excluding cash, cash equivalents, short-term investments, ~~and~~ assets held for ~~sale)~~sale and current maturities of long-term debt) at December 31, ~~2018~~2020 and ~~2017,~~2019, and changes in such amounts during ~~2018~~2020 and ~~2017,~~2019, was as follows (in thousands):

	December 31,						Change During the Period⁽³⁾
	2020			2019			2020			2019
Contract assets	$	67,521		$	52,128		$	(15,393	)	$	(22,146	)
Contract liabilities⁽¹⁾		(15,129	)		(26,271	)		(11,142	)		9,426
Contracts in progress, net⁽²⁾		52,392			25,857			(26,535	)		(12,720	)
Contract receivables and retainage, net		15,393			26,095			10,702			(3,590	)
Inventory, prepaid expenses and other assets		5,077			6,624			1,547			2,732
Accounts payable, accrued expenses and other liabilities		(77,784	)		(71,573	)		6,211			32,317
Total	$	(4,922	)	$	(12,997	)	$	(8,075	)	$	18,739

December 31, Change During the Period
2018 2017 2018 2017
Contract assets $ 29,982
$ 28,373
$ (1,609 ) $ (1,544 )
Contract liabilities⁽¹⁾
(16,845 ) (12,754 ) 4,091
8,390
Contracts in progress, net⁽²⁾
13,137
15,619
2,482
6,846
Contracts receivable and retainage, net 22,505
28,466
5,961
(8,297 )
Inventory, prepaid expenses and other assets 9,356
8,766
(590 ) 6,429
Deferred revenue, current —
(4,676 ) (4,676 ) (7,205 )
Accounts payable, accrued expenses and other liabilities (39,256 ) (31,235 ) 8,021
12,132
Total $ 5,742
$ 16,940
$ 11,198
$ 9,905

~~___________~~


(1)	Contract liabilities at December 31, ~~2018~~2020 and ~~2017,~~2019, include accrued contract losses of ~~$2.4~~$8.6 million and ~~$7.6~~$6.4 million, respectively.


(2)	Represents our cash position relative to revenue recognized on projects, with contract assets representing unbilled amounts that reflect future cash inflows on projects, and contract liabilities representing (i) advance payments that reflect future cash expenditures and non-cash earnings on projects and (ii) accrued contract losses that represent future cash expenditures on projects.

(3)

Changes referenced in the cash flow activity section below may differ from the changes in this table due to non-cash reclassifications and due to certain changes in balance sheet accounts being reflected within other line items on the Statement of Cash Flows, including bad debt expense, gains and losses on sales of fixed assets and other assets, and accruals for capital expenditures.

(4)

Accounts payable includes progress accruals associated with engineered equipment manufactured by vendors, and services provided by subcontractors, that are not contractually billable or have not been billed by the vendors and subcontractors. Such accruals totaled $48.5 million and $34.7 million at December 31, 2020 and December 31, 2019, respectively, and result in an increase in percentage of completion on our projects and an increase in our contract assets.

Fluctuations in our working capital, and its components, are not unusual in our business and are impacted by the size of our projects and the mix of our backlog. Our working capital is particularly impacted by the timing of new project awards and related payments in advance of performing work, and the subsequent achievement of billing milestones or project progress on ~~backlog as we complete certain phases of work.~~backlog. Working capital is also impacted at period-end by the timing of ~~contracts receivable~~contract receivables collections and accounts payable payments on our projects.

Cash Flow Activity (in thousands):

	Years Ended December 31,
	2020			2019
Net cash used in operating activities	$	(19,008	)	$	(7,140	)
Net cash provided by (used in) investing activities	$	2,609		$	(12,771	)
Net cash provided by (used in) financing activities	$	9,855		$	(843	)

December 31,
2018 2017
Net cash used in operating activities $ (20,392 ) $ (39,385 )
Net cash provided by (used in) investing activities $ 82,718
$ (1,135 )
Net cash used in financing activities $ (852 ) $ (1,664 )

Operating Activities ~~- The use of cash by~~– Cash used in operating activities ~~during 2018~~for 2020 and 2019 was $19.0 million and $7.1 million, respectively, and was primarily due to the net ~~impact of:~~impacts of the following:

2020 Activity

•

Operating loss excluding depreciation and amortization of $8.7 million, non-cash asset impairments of $3.3 million, net losses from asset sales of $0.2 million, and stock-based compensation expense of $1.1 million;

•

Increase in contract assets of $15.4 million related to the timing of billings on projects, primarily due to increased unbilled positions on our second and third towing, salvage and rescue ship projects and seventy-vehicle ferry project within our Shipyard Division, offset partially by decreased unbilled positions on our harbor tug projects within our Shipyard Division and paddlewheel riverboat project within our Fabrication & Services Division;

~~Operating losses,~~

•

Decrease in contract liabilities of $11.1 million, primarily due to the unwind of advance payments on our third towing, salvage and rescue ship project and forty-vehicle ferry projects within our Shipyard Division and our offshore jacket and deck project and material supply project within our Fabrication & Services Division, offset partially by advance payments on our fifth towing, salvage and rescue ship project within our Shipyard Division;

•

Decrease in contract receivables and retainage of $10.7 million related to the timing of billings and collections on projects, primarily due to collections on our two forty-vehicle ferry projects within our Shipyard Division and our material supply project within our Fabrication & Services Division, offset partially by increased receivable positions on various other projects within our Fabrication & Services Division;

•

Decrease in prepaid expenses, inventory and other assets of $1.6 million, primarily due to prepaid expenses and the associated timing of certain prepayments;

•

Increase in accounts payable, accrued expenses and other current liabilities of $7.6 million, primarily due to increased procurement activity and progress accruals for engineered equipment manufactured by vendors for our three research vessel projects, fourth and fifth towing, salvage and rescue ship projects, and seventy-vehicle ferry project within our Shipyard Division, offset partially by decreased accounts payable positions for our two forty-vehicle ferry projects within our Shipyard Division and various other projects within our Fabrication & Services Division; and

•

Change in noncurrent assets and liabilities, net of $1.6 million, primarily due to the collection of long-term retention that was billed and collected during 2020.

2019 Activity

•

Operating loss excluding depreciation and amortization expense of $9.6 million, bad debt expense of $0.1 million, non-cash asset impairments of $17.2 million, net gains from asset sales of $1.0 million, and stock-based compensation expense of $1.8 million;

•

Increase in contract assets of $22.1 million related to the timing of billings on projects, primarily due to increased unbilled positions on our three research vessel projects and first towing, salvage and rescue ship project within our Shipyard Division, offset partially by decreased unbilled positions on our harbor tug projects within our Shipyard Division;

•

Increase in contract liabilities of $9.4 million, primarily due to advance payments on our third towing, salvage and rescue ship project and advance payments and an increase in accrued contract losses on our forty-vehicle ferry projects within our Shipyard Division, and advance payments on two projects within our Fabrication & Services Division, offset partially by the unwind of advance payments on a project within our Fabrication & Services Division;

•

Increase in contract receivables and retainage of $3.7 million related to the timing of billings and collections on projects, primarily due to an increase in billings on two projects within our Fabrication & Services Division;

•

Decrease in prepaid expenses, inventory and other assets of $2.6 million, primarily due to lower inventory for our Fabrication & Services Division;

•

Increase in accounts payable, accrued expenses and other current liabilities of $29.9 million, primarily due to the timing of payments and increased procurement activities and progress accruals for engineered equipment manufactured by vendors, for our three research vessel projects and three towing, salvage and rescue ship projects within our Shipyard Division; and

•

Change in noncurrent assets and liabilities, net of $1.5 million.

Investing Activities – Cash provided by investing activities for 2020 was $2.6 million, and cash used in investing activities for 2019 was $12.8 million. Cash provided by investing activities for 2020 was primarily due to the net ~~gains on assets held for sale~~maturities of short-term investments of $11.8 million and ~~insurance recoveries of $11.2 million, loss on~~proceeds from the sale of fixed assets and ~~other assets of $0.3 million, depreciation expense of $10.4 million, non-cash asset impairments of $4.4 million, and stock-based compensation expense of $2.8 million;~~

Decrease in contracts in progress, net of $2.5 million. The decrease reflects a $17.1 million reclassification of contracts in progress, net (net contract assets and contract liabilities) to other noncurrent assets during the period for our two MPSV projects which are subject to dispute. Excluding the reclassification, contracts in progress, net increased by $14.6 million, primarily due to increases in unbilled positions on our harbor tug projects in our Shipyard Division and the two MPSV projects prior to the reclassification of their contracts in progress balances to noncurrent assets, offset partially by increases in contract liabilities from advanced payments on two separate projects in our Fabrication and Shipyard Divisions;

Decrease in contracts receivable and retainage of $6.0 million. The decrease reflects a $3.0 million reclassification of retainage to other noncurrent assets during the period as we do not anticipate collection within the next twelve months. Excluding the reclassification, contracts receivable and retainage decreased by $3.0 million, primarily due to collections on a completed project in our Fabrication Division;

~~Increase in prepaid expenses, inventory and other assets of $0.6 million, primarily due to increased inventory for our Services Division;~~

Decrease in deferred revenue of $4.7 million. The decreases reflects a $3.8 million reclassification of deferred revenue to other noncurrent assets, which was netted with the contract in progress reclassification discussed above. Excluding the reclassification, deferred revenue decreased by $0.8 million, primarily due to project progress; and

~~Increase in accounts payable and accrued expenses of $8.0 million, primarily due to increased activity and the timing of payments for projects in our Shipyard Division.~~

~~The use of cash by operating activities during 2017 was primarily due to:~~

~~Operating losses, excluding net loss on~~ assets held for sale of ~~$0.3 million, depreciation expense of $12.9 million, non-cash asset impairments of $7.7 million, amortization of deferred revenue of~~ $2.0 million, ~~changes in deferred income taxes of $23.2 million, and stock-based compensation expense of $2.7 million;~~

~~Decrease in contracts in progress, net of $6.8 million, primarily related to increases in accrued contract losses on our two MPSV projects;~~

~~Increase in contracts receivable and retainage of $8.3 million, primarily due to the timing of billings and collections for projects in our Shipyard Division;~~

~~Decrease in inventory, prepaid expenses and other assets of $6.4 million, primarily due to impairments of inventory;~~

~~Decrease in deferred revenue of $7.2 million, primarily due to project progress; and~~

~~Increase in accounts payable and accrued expenses of $12.1 million, primarily due to the timing of payments for projects in our Shipyard Division.~~

~~Investing Activities~~ - Cash provided by investing activities for 2018 was primarily due to proceeds from the sale of our South Texas Properties and other fixed assets of $85.2 million, insurance proceeds of $9.4 million from the final settlement of hurricane damage to our South Texas Properties, and $1.2 million related to the maturity of short-term securities, offset partially by capital expenditures of ~~$3.5 million and purchases of short-term investments of $9.6~~$11.2 million. ~~The sale of our South Texas Properties consisted of the following:~~

~~The second quarter sale of our Texas South Yard for $55.0 million, less selling costs of $1.5 million, for total net proceeds of $53.5 million and a gain of $3.9 million; and~~

~~The fourth quarter sale of our Texas North Yard for $28.0 million, less selling cost of $0.6 million, for total net proceeds of $27.4 million, and a gain of $4.1 million.~~

Cash used in investing activities for ~~2017~~2019 was primarily due to the net purchase of short-term investments of $11.2 million and capital expenditures of ~~$4.8~~$3.8 million, offset partially by proceeds from the sale of ~~equipment~~fixed assets and assets held for sale of $2.2 million.

Financing Activities – Cash provided by financing activities for 2020 was $9.9 million, and ~~insurance recoveries of $1.5 million.~~

~~Financing Activities~~ ~~- During 2018 and 2017, net~~ cash used in financing activities for 2019 was ~~$0.9 million and $1.7 million, respectively.~~$0.8 million. Cash provided by financing activities for 2020 was due to our PPP Loan discussed further below. Cash used in financing activities for ~~both 2018 and 2017~~2019 was primarily due to tax payments made on behalf of employees from vested stock ~~withholdings and dividends for 2017 of $0.6 million.~~

withholdings.

Credit Facilities

~~Credit Agreement~~ ~~- We have a $40.0 million~~

LC Facility – On March 26, 2021, we amended our revolving credit facility with Hancock Whitney Bank ~~("Credit Agreement"~~(“Whitney Bank”) ~~that can be used~~. The facility previously provided for up to $40.0 million of borrowings or letters of ~~credit. On August 27, 2018, we amended our Credit Agreement which, among other things, extended its maturity date to June 9, 2020. Our amended~~credit and included certain quarterly financial covenants ~~during~~and restrictions on our ability to take certain actions. In connection with the ~~remaining term~~amendment, the facility was modified to provide for up to $20.0 million of letters of credit, subject to our cash securitization of existing and future letters of credit, and the ~~Credit Agreement are as follows:~~

~~Ratio~~maturity date was extended to June 30, 2023. The amended letter of ~~current assets to current liabilities of not less than 1.25:1.00;~~

~~Minimum tangible net worth of at least the sum of $180.0 million, plus 100% of the proceeds from any issuance of stock or other equity after deducting of any fees, commissions, expenses~~credit facility (“LC Facility”) removed all financial covenants and other ~~costs incurred in such offering; and~~

~~Ratio of funded debt to tangible net worth of not more than 0.50:1.00.~~

Our Credit Agreement also includes restrictions regarding our ability to: (i) grant liens; (ii) make certain loans or investments; (iii) incur additional indebtedness or guarantee other indebtedness in excess of specified levels; (iv) make any material change to the nature of our business or undergo a fundamental change; (v) make any material dispositions; (vi) acquire another company or

all or substantially all of its assets; (vii) enter into a merger, consolidation, or sale leaseback transaction; or (viii) declare and pay dividends if any potential default or event of default occurs.

~~Interest on borrowings under the Credit Agreement may be designated, at our option, as either the~~ ~~Wall Street Journal~~ ~~published Prime Rate (5.5% at December 31, 2018) or LIBOR (2.5% at December 31, 2018) plus 2.0% per annum.~~restrictions. Commitment fees on the unused portion of the ~~Credit Agreement~~LC Facility are 0.4% per annum and interest on outstanding letters of credit is 2.0% per annum. ~~The Credit Agreement is secured by substantially all of our assets (with a negative pledge on our real property).~~

At December 31, ~~2018,~~2020, we had ~~no outstanding borrowings under our Credit Agreement and $2.9~~$10.7 million of outstanding letters of credit under the LC Facility. See “Risk Factors” in Item 1A and Note 5 and Note 8 of our Financial Statements in Item 8 for further discussion of our LC Facility.

Loan Agreement–On April 17, 2020, we entered into an unsecured loan in the aggregate amount of $10.0 million (“PPP Loan”) with Whitney Bank pursuant to ~~support~~the Paycheck Protection Program (“PPP”), which is sponsored by the Small Business Administration (“SBA”), and is part of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), as amended by the Paycheck Protection Program Flexibility Act of 2020 (“Flexibility Act”). The PPP provides for loans to qualifying businesses, the proceeds of which may only be used for payroll costs, rent, utilities, mortgage interest, and interest on other pre-existing indebtedness (the “Permissible Expenses”). The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. The PPP Loan, and accrued interest, may be forgiven partially or in full, if certain conditions are met. The most significant of the conditions are:

•

Only amounts expended for Permissible Expenses during the eight-week or 24-week period, as elected by us, following April 17, 2020 (the “Covered Period”) are eligible for loan forgiveness. We have elected an eight-week Covered Period;

•

Of the total amount of Permissible Expenses for which forgiveness can be granted, at least 60% must be for payroll costs, or a proportionate reduction of the maximum loan forgiveness amount will occur; and

•

If employee headcount is reduced, or employee compensation is reduced by more than 25%, during the Covered Period, a further reduction of the maximum loan forgiveness amount will occur, subject to certain safe harbors added by the Flexibility Act.

The PPP Loan matures on April 17, 2022, bears interest at a fixed rate of 1.0 percent per annum and is payable in monthly installments commencing on the earlier of the date on which the amount of loan forgiveness is determined or March 17, 2021. During the Covered Period the PPP Loan proceeds were used only for Permissible Expenses, of which approximately 93% was related to payroll costs. On September 29, 2020, we submitted our ~~projects, providing $37.1~~application to Whitney Bank, requesting PPP Loan forgiveness of $8.9 million. Whitney Bank approved our application for forgiveness on December 14, 2020, and our application was forwarded to the SBA for review. As of the filing of this Report, we have not received an approval or denial of our application for forgiveness from the SBA; in the absence of such action and based on guidance we received from our external advisors, we have taken the position that the date for commencement of loan payments has not yet occurred, and we have made no loan payments. Because the amount borrowed exceeded $2.0 million, the PPP Loan and our loan forgiveness application is subject to audit by the SBA. Any portion of ~~available capacity. At~~the PPP Loan that is not forgiven, together with accrued interest, will be repaid based on the terms and conditions of the PPP Loan and in accordance with the PPP as amended by the Flexibility Act, unless the SBA were to determine that we were not eligible to participate in the PPP, in which case the SBA could seek immediate repayment of the PPP Loan. While we believe we are a qualifying business and have met the eligibility requirements for the PPP Loan, and believe we have used the loan proceeds only for Permissible Expenses, we can provide no assurances that we will be eligible for forgiveness of the PPP Loan, in whole or in part. Accordingly, we have recorded the full amount of the PPP Loan as debt, which is included in long-term debt, current and long-term debt, noncurrent on our Balance Sheet at December 31, ~~2018,~~2020. The current and noncurrent debt classification is based on the terms and conditions of the PPP Loan and in accordance with the PPP as amended by the Flexibility Act, and timing of required repayment absent any loan forgiveness. We intend to reflect the benefit of any loan forgiveness if, and when, our loan forgiveness application is approved by the SBA and after we ~~were in compliance with all~~have reasonable assurance from the SBA that we have met the eligibility and loan forgiveness requirements of the PPP. See Note 5 of our ~~financial covenants, with a tangible net worth~~Financial Statements in Item 8 for further discussion of ~~$199.2 million (as defined by~~ the ~~Credit Agreement), a ratio of current assets to current liabilities of 2.85 to 1.0 and a ratio of funded debt to tangible net worth of 0.01:1.00.~~

PPP Loan.

Surety Bonds - – We issue surety bonds in the ordinary course of business to support our projects. At December 31, ~~2018,~~2020, we had ~~$396.6~~$291.2 million of outstanding surety bonds, of which $50.0 million relates to ~~support~~ our ~~projects. Although we believe there is sufficient~~MPSV projects which are subject to purported termination and for which construction has been suspended. It has been increasingly difficult to obtain additional bonding capacity ~~available~~and identify potential financing sources, due to, usamong other things, losses from ~~one~~our operations in recent years, including recent project charges, and given a majority of our backlog is at, or ~~more financial institutions, such capacity~~near, break-even or is ~~uncommitted, and accordingly, we~~in a loss position. We can provide no assurances that necessary bonding capacity will be available to support our future bonding requirements.

See “Risk Factors” in Item 1A and Note 8 of our Financial Statements in Item 8 for further discussion of our surety bonds and MPSV dispute.

Registration Statement

We have a shelf registration statement that is effective with the SEC that expires on November 27, ~~2020.~~2023. The shelf registration statement enables us to issue up to $200.0 million in either debt or equity securities, or a combination thereof, from time to time subsequent to the filing of a prospectus supplement, which among other things, identifies the sales agent, specifies the number and value of securities that may be sold, and provides a time frame over which the securities may be offered.

Liquidity Outlook

As discussed in our Overview, we continue to focus on ~~maintaining liquidity and~~ securing ~~meaningful~~profitable new project awards and backlog in the near-term and generating operating income and cash ~~flow from operations~~flows in the longer-term. We have made significant progress in our efforts to ~~increase our backlog~~preserve and improve ~~and preserve~~ our liquidity, including ~~ongoing~~ cost reductions (including reducing the ~~cash~~size of our board and reducing the compensation ~~paid to~~of our directors and ~~the salaries of our~~ executive officers) ~~and~~, the sale of ~~underutilized assets.~~under-utilized assets and facilities and an improved overall cashflow position on our projects in backlog. In addition, at December 31, ~~2018,~~2020, we continue to have ~~$18.9~~$8.2 million of assets held for sale; however, we can provide no assurances that we will successfully sell these assets or that we will recover their carrying value. Further, as discussed above, we received the PPP Loan in the second quarter 2020, which provided funding necessary to offset the immediate and anticipated impacts of COVID-19. It also provided us important additional liquidity as a strong balance sheet is required to execute our backlog and compete for new projects awards, and we experience significant monthly fluctuations in our working capital. The primary uses of our liquidity for ~~2019~~2021 and the foreseeable future are to fund:

•

Overhead costs associated with the under-utilization of our facilities within our Fabrication & Services Division and Shipyard Division, until we secure and/or begin to execute sufficient backlog to fully recover our overhead costs;

•

Capital expenditures (including enhancements to our Shipyard Division facilities to execute our backlog);

~~The underutilization~~

•

Accrued contract losses recorded at December 31, 2020;

•

Working capital requirements for our projects (including the unwind of advance payments on projects);

•

Legal and other costs associated with our MPSV dispute; and

•

Corporate administrative expenses and initiatives to diversify and enhance our business.

A significant portion of our ~~facilities within~~capital expenditures of $11.2 million for 2020 represent capital investments required by our ~~Fabrication Division,~~contract for our five towing, salvage and rescue ships, primarily for the construction of vessel erection sites and a warehouse for storage. While the capital investments were required by the contracts, the assets will benefit our construction operations going forward. In addition, $0.9 million of our capital expenditures for 2020 were associated with retaining hourly craft employees to ~~a lesser extent within our Shipyard Division, until we secure and/or begin to execute sufficient backlog to fully recover our overhead costs;~~

~~Capital expenditures (including potential enhancements~~perform capital improvements to our ~~Shipyard Division facilities);~~

~~Accrued contract losses recorded at December 31, 2018;~~

~~Working capital requirements for our projects (including the potential SeaOne project~~facilities and ~~potential additional projects for the U.S. Navy if the aforementioned options are exercised);~~

~~The expansion of our EPC Division; and~~

~~Corporate administrative expenses and strategic initiatives.~~

drydocks. We anticipate capital expenditures of $3.0 million to $5.0 million ~~to $10.0 million~~ for ~~2019.~~2021. Further investments in equipment and facilities may be required to win and execute potential ~~offshore wind projects,~~new project awards, which are not included in these estimates.

If conditions for the oil and gas industry do not improve, we are unable to increase our backlog, we are unable to diversify our customer base, or we are unsuccessful in our strategic repositioning of the Company, we would take additional measures to reduce costs and preserve our liquidity until we are able to generate cash flows from operations.

We believe that our cash, cash equivalents and short-term investments at December 31, ~~2018, and availability under our Credit Agreement,~~2020, will be sufficient to enable us to fund our operating expenses, meet our working capital and capital expenditure requirements, and satisfy any debt service obligations or other funding requirements, for at least twelve months from the date of this Report. Our evaluation of the sufficiency of our cash and liquidity is primarily based on our financial forecast for ~~2019~~2021 and ~~2020,~~2022, which is impacted by our existing backlog and estimates of future new project ~~awards.~~awards and may be further impacted by COVID-19 and low and volatile oil prices. We can provide no assurances that

our financial forecast will be achieved or that we will have sufficient cash ~~or availability under our Credit Agreement~~and short-term investments to meet planned operating expenses and other unforeseen cash requirements. Accordingly, we may be required to obtain new or additional credit facilities, sell additional assets or conduct equity or debt offerings at a time when it is not beneficial to do so.

~~Contractual Obligations and Commitments~~

~~The following table sets forth our contractual obligations and commitments as of December 31, 2018 (in thousands).~~

Total
Payments Due by Period
Less Than
1 Year
1 to 3
Years
3 to 5
Years
Thereafter
Purchase commitment – equipment ⁽¹⁾
$ 577

$ 577

$ —

$ —

$ —
Purchase commitment – material and services ⁽²⁾
132,299

96,967

35,332

—

—
Operating leases ⁽³⁾
3,624

660

1,352
1,055

557
Total $ 136,500

$ 98,204

$ 36,684

$ 1,055

$ 557

~~___________~~


~~(1)~~	~~“Purchase commitment – equipment” are capital expenditure commitments related to purchase order agreements for equipment.~~


~~(2)~~	~~“Purchase commitment – material and services” are commitments related to purchase order agreements for materials and outside services related to our backlog at December 31, 2018.~~


~~(3)~~	~~"Operating leases" are commitments for office space and facilities.~~

Off-Balance Sheet Arrangements

We are not a party to any contract or other obligation not included on our Balance Sheet that has, or is reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

~~Other Matters~~

~~Not applicable.~~

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

As of December 31, 2018, we had cash and cash equivalents of approximately $70.5 million and short-term investments of approximately $8.7 million. We do not have operations subject to material risk of foreign currency fluctuations, nor do we use derivative financial instruments in our operations or investment portfolio.

~~Interest on borrowings under our Credit Agreement may be designated, at our option, as either the~~ ~~Wall Street Journal~~ published Prime Rate (5.5% at December 31, 2018) or LIBOR (2.5% at December 31, 2018) plus 2.0% per annum. Commitment fees on the unused portion of the Credit Agreement are 0.4% per annum and interest on outstanding letters of credit is 2.0% per annum. The Credit Agreement is secured by substantially all of our assets (excluding real property). At December 31, 2018, we had no outstanding borrowings under our Credit Agreement and $2.9 million of outstanding letters of credit to support of our projects, providing $37.1 million of available capacity.

~~We issue surety bonds in the ordinary course of business to support our projects. At December 31, 2018, we had $396.6 million of outstanding surety bonds in support of our projects.~~

Not applicable.

Item 8. Financial Statements and Supplementary Data

In this Report our Financial Statements and the accompanying notes appear on pages F-1 through ~~F-25~~F-30 and are incorporated herein by reference. See Index to Financial Statements on ~~Page~~page 48.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the design and operation of our disclosure controls and procedures were effective as of the end of the period covered by this Report.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of management, including our ~~principal executive officer~~Chief Executive Officer and ~~principal financial officer,~~Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on our evaluation under the framework in Internal Control – Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, ~~2018.~~

~~Attestation Report of the Independent Registered Public Accounting Firm~~

The effectiveness of our internal control over financial reporting as of December 31, 2018, has been audited by Ernst & Young LLP, an independent registered public accounting firm, as indicated in their report dated March 1, 2019, which is included herein.

2020.

Changes in Internal Controls Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the fourth quarter ~~2018,~~2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~Report of Independent Registered Public Accounting Firm~~

~~To the Shareholders and Board of Directors of Gulf Island Fabrication, Inc.~~

~~Opinion on Internal Control over Financial Reporting~~

We have audited Gulf Island Fabrication, Inc.’s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the COSO criteria). In our opinion, Gulf Island Fabrication, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2018 and 2017, the related consolidated statements of operations, changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2018, and the related notes and our report dated March 1, 2019, expressed an unqualified opinion thereon.

~~Basis for Opinion~~

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

~~Definitions and Limitations of Internal Control over Financial Reporting~~

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

~~/s/ Ernst & Young LLP~~

~~New Orleans, Louisiana~~

~~March 1, 2019~~

Item 9B. Other Information

Not applicable.

~~On February 27, 2019, our board of directors approved May 9, 2019 as the date of our 2019 annual meeting of shareholders.~~

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information regarding executive officers called for by this item may be found following Item 4 of this 2018 Annual Report under the caption “Executive Officers of the Registrant” and is incorporated herein by reference.

We have adopted a Code of Ethics for the Chief Executive Officer, the Chief Financial Officer, ~~(the principal financial officer),~~ and the Chief Accounting Officer ~~(the principal accounting officer)~~ and persons performing similar functions (the “Code of Ethics”) and a Code of Business Conduct and Ethics, which applies to all employees and directors, including the Chief Executive Officer, the Chief Financial Officer, the Chief Accounting Officer and persons performing similar functions. These codes are available to the public on our Internet website at www.gulfisland.com. Any substantive amendments to the Code of Ethics or any waivers granted under the Code of Ethics will be disclosed within four business days of such event on our website. Such information will remain available on our website for at least 12twelve months.

The remaining information called for by this item may be found in our definitive proxy statement prepared in connection with our ~~2019~~2021 annual meeting of shareholders and is incorporated herein by reference.

Item 11. Executive Compensation

Information called for by this item may be found in our definitive proxy statement prepared in connection with our ~~2019~~2021 annual meeting of shareholders and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters

Information regarding security ownership of certain beneficial owners and management called for by this item may be found in our definitive proxy statement prepared in connection with our ~~2019~~2021 annual meeting of shareholders and is incorporated herein by reference.

Equity Compensation Plan Information

The following table provides information about our shares of common stock that may be issued upon the exercise of options, warrants and rights under all of our existing equity compensation plans as of December 31, ~~2018.~~2020.

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights			Weighted- average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column 1)
Equity compensation plans approved by security holders		615,644		N/A		1,611,928
Equity compensation plans not approved by security holders		—				—
Total		615,644	⁽¹⁾			1,611,928	⁽²⁾

Plan Category
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights

Weighted-average
exercise price of
outstanding
options, warrants
and rights

Number of securities remaining
available for future issuance
under equity compensation
plans (excluding securities
reflected in column 1)

Equity compensation plans approved by security holders 526,438 N/A 527,357
Equity compensation plans not approved by security holders — —
Total 526,438
⁽¹⁾
527,357
⁽²⁾


(1)	Represents shares issuable pursuant to the terms of outstanding restricted stock awards. These awards are not reflected in the next column as they do not have an exercise price.


(2)	~~At December 31, 2018, we had 527,357~~ Represents aggregate shares available for future issuance under our Incentive ~~Plans.~~Plans at December 31, 2020.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Information called for by this item may be found in our definitive proxy statement prepared in connection with our ~~2019~~2021 annual meeting of shareholders and is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services

Information called for by this item may be found in our definitive proxy statement prepared in connection with our ~~2019~~2021 annual meeting of shareholders and is incorporated herein by reference.

PART IV

Item 15. Exhibits, Financial Statement Schedules

~~The following~~

Our required financial ~~statements,~~statement schedules and exhibits are filed as part of this ~~Report:~~

Report as detailed in our Exhibit Index on page E-1.

(i) Financial Statements



	Page
Report of Independent Registered Public Accounting Firm	F-1
Consolidated Balance Sheets at December 31, ~~2018~~2020 and ~~2017~~2019	~~F-2~~ F-3
Consolidated Statements of Operations for the Years Ended December 31, ~~2018, 2017,~~2020, 2019 and ~~2016~~2018	~~F-3~~ F-4
Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, ~~2018, 2017,~~2020, 2019 and ~~2016~~2018	~~F-4~~ F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, ~~2018, 2017,~~2020, 2019 and ~~2016~~2018	~~F-5~~ F-6
Notes to Consolidated Financial Statements	~~F-6~~ F-7

(ii) Schedules

Other schedules have not been included because they are not required, not applicable, immaterial, or the information required has been included elsewhere herein.

(iii) Exhibits

See Exhibit Index on page E-1. We will furnish to any eligible shareholder, upon written request, a copy of any exhibit listed upon payment of a reasonable fee equal to the Company’s expenses in furnishing such exhibit. Such requests should be addressed to:

Investor Relations

Gulf Island Fabrication, Inc.

16225 Park Ten Place, Suite 300

Houston, Texas 77084

Item 16. Form 10-K Summary

None.

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Gulf Island Fabrication, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Gulf Island Fabrication, Inc. (the Company) as of December 31, ~~2018~~2020 and ~~2017,~~2019, the related consolidated statements of operations, changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, ~~2018,~~2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, ~~2018~~2020 and ~~2017,~~2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2018,~~2020, in conformity with U.S. generally accepted accounting principles.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 1, 2019, expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the ~~Company‘s~~Company’s management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the ~~PCAOB~~Public Company Accounting Oversight Board (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.



		Revenue recognition for fixed-price and unit-rate contracts
Description of the Matter		As described in Note 1 to the consolidated financial statements, the Company recognizes revenue for fixed-price and unit-rate contracts over time using the percentage-of-completion method based on contract costs incurred to date compared to total estimated contract costs (an input method). Under this approach, the determination of the progress towards completion requires management to prepare estimates of the costs to complete the contracts. Significant estimates impacting the costs to complete a contract include: forecast costs of engineering, materials, equipment and subcontracts; forecast costs of labor and labor productivity; schedule durations, including subcontractor and supplier progress; contract disputes, including claims; achievement of contractual performance requirements; and contingency, among others. Auditing management’s estimate of the progress towards completion of fixed-price and unit-rate contracts was complex and subjective because of the judgment required to evaluate management’s determination of the estimated costs to complete such contracts.Further, the evaluation of significant estimates impacting the costs to complete a contract discussed above involved significant auditor judgment.



How We Addressed the Matter in Our Audit		To test the Company’s estimated costs to complete fixed-price and unit-rate contracts, our audit procedures included, among others, evaluating the significant estimates discussed above used to develop the estimated costs to complete and testing the completeness and accuracy of the underlying data. To evaluate the significant estimates, we performed audit procedures that included, among others, comparing amounts to supporting documentation, conducting interviews with project personnel, analyzing trends of labor productivity, inspecting support for estimates of project contingencies, and performing lookback analyses by comparing historical actual costs to previous estimates. We also involved our specialists in evaluating the estimated costs to complete certain contracts.

/s/ Ernst & Young LLP

We have served as the Company's auditor since 1997.

New Orleans, Louisiana

March ~~1, 2019~~

29, 2021

GULF ISLAND FABRICATION, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands)

	December 31,
	2020		2019
ASSETS
Current assets:
Cash and cash equivalents	$	43,159	$	49,703
Short-term investments		7,998		19,918
Contract receivables and retainage, net		15,393		26,095
Contract assets		67,521		52,128
Prepaid expenses and other assets		2,815		3,948
Inventory		2,262		2,676
Assets held for sale		8,214		9,006
Total current assets		147,362		163,474
Property, plant and equipment, net		67,458		70,484
Other noncurrent assets		16,523		18,819
Total assets	$	231,343	$	252,777
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	70,114	$	61,542
Contract liabilities		15,129		26,271
Accrued expenses and other liabilities		7,670		10,031
Long-term debt, current		5,499		—
Total current liabilities		98,412		97,844
Long-term debt, noncurrent		4,501		—
Other noncurrent liabilities		2,068		2,248
Total liabilities		104,981		100,092
Shareholders’ equity:
Preferred stock, no par value, 5,000 shares authorized, 0 shares issued and outstanding		—		—
Common stock, no par value, 30,000 shares authorized, 15,359 issued and outstanding at December 31, 2020 and 15,263 at December 31, 2019		11,223		11,119
Additional paid-in capital		104,072		103,124
Retained earnings		11,067		38,442
Total shareholders’ equity		126,362		152,685
Total liabilities and shareholders’ equity	$	231,343	$	252,777

December 31,
2018 2017
ASSETS
Current assets:
Cash and cash equivalents $ 70,457
$ 8,983
Short-term investments 8,720
—
Contracts receivable and retainage, net 22,505
28,466
Contract assets 29,982
28,373
Prepaid expenses and other assets 3,268
3,833
Inventory 6,088
4,933
Assets held for sale 18,935
104,576
Total current assets 159,955
179,164
Property, plant and equipment, net 79,930
88,899
Other noncurrent assets 18,405
2,777
Total assets $ 258,290
$ 270,840
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 28,969
$ 18,375
Contract liabilities 16,845
12,754
Deferred revenue —
4,676
Accrued expenses and other liabilities 10,287
12,860
Total current liabilities 56,101
48,665
Deferred revenue, noncurrent —
769
Other noncurrent liabilities 1,089
1,913
Total liabilities 57,190
51,347
Shareholders’ equity:
Preferred stock, no par value, 5,000 shares authorized, no shares issued and outstanding —
—
Common stock, no par value, 20,000 shares authorized, 15,090 issued and outstanding at December 31, 2018 and 14,910 at December 31, 2017 11,021
10,823
Additional paid-in capital 102,243
100,456
Retained earnings 87,836
108,214
Total shareholders’ equity 201,100
219,493
Total liabilities and shareholders’ equity $ 258,290
$ 270,840

The accompanying notes are an integral part of these financial statements.

GULF ISLAND FABRICATION, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	Years Ended December 31,
	2020			2019			2018
Revenue	$	250,959		$	303,308		$	221,247
Cost of revenue		268,710			320,307			228,443
Gross loss		(17,751	)		(16,999	)		(7,196	)
General and administrative expense		13,858			15,628			19,015
Impairments and (gain) loss on assets held for sale		4,130			17,528			(6,850	)
Other (income) expense, net		(8,580	)		(134	)		304
Operating loss		(27,159	)		(50,021	)		(19,665	)
Interest (expense) income, net		(268	)		531			(142	)
Loss before income taxes		(27,427	)		(49,490	)		(19,807	)
Income tax (expense) benefit		52			96			(571	)
Net loss	$	(27,375	)	$	(49,394	)	$	(20,378	)
Per share data:
Basic and diluted loss per common share	$	(1.79	)	$	(3.24	)	$	(1.36	)

Years Ended December 31,
2018 2017 2016
Revenue $ 221,247
$ 171,022
$ 286,326
Cost of revenue 228,443
213,947
261,473
       Gross profit (loss) (7,196 ) (42,925 ) 24,853
General and administrative expense 19,015
17,800
19,670
Asset impairments and (gain) loss on assets held for sale, net (6,850 ) 7,931
—
Other (income) expense, net 304
(46 ) (681 )
       Operating income (loss) (19,665 ) (68,610 ) 5,864
Interest income (expense), net (142 ) (349 ) (308 )
       Net income (loss) before income taxes (19,807 ) (68,959 ) 5,556
Income tax (expense) benefit (571 ) 24,193
(2,041 )
       Net income (loss) $ (20,378 ) $ (44,766 ) $ 3,515
Per share data:
Basic and diluted income (loss) per common share $ (1.36 ) $ (3.02 ) $ 0.24
Cash dividends per common share $ —
$ 0.04
$ 0.04

The accompanying notes are an integral part of these financial statements.

GULF ISLAND FABRICATION, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(in thousands)

	Common Stock					Additional Paid-In			Retained			Total Shareholders'
	Shares		Amount			Capital			Earnings			Equity
Balance at January 1, 2018		14,910	$	10,823		$	100,456		$	108,214		$	219,493
Net loss		—		—			—			(20,378	)		(20,378	)
Vesting of restricted stock		180		(81	)		(729	)		—			(810	)
Stock-based compensation expense		—		279			2,516			—			2,795
Balance at December 31, 2018		15,090	$	11,021		$	102,243		$	87,836		$	201,100
Net loss		—		—			—			(49,394	)		(49,394	)
Vesting of restricted stock		173		(79	)		(716	)		—			(795	)
Stock-based compensation expense		—		177			1,597			—			1,774
Balance at December 31, 2019		15,263	$	11,119		$	103,124		$	38,442		$	152,685
Net loss		—		—			—			(27,375	)		(27,375	)
Vesting of restricted stock		96		(8	)		(66	)		—			(74	)
Stock-based compensation expense		—		112			1,014			—			1,126
Balance at December 31, 2020		15,359	$	11,223		$	104,072		$	11,067		$	126,362

Common Stock
Additional
Paid-In
Capital

Retained
Earnings

Total
Shareholders’
Equity
Shares Amount
Balance at January 1, 2016 14,580
$ 10,352
$ 96,194
$ 150,651
$ 257,197
Net income —
—
—
3,515
3,515
Vesting of restricted stock 115
(23 ) (194 ) —
(217 )
Stock-based compensation expense —
312
2,813
—
3,125
Dividends on common stock —
—
—
(588 ) (588 )
Balance at December 31, 2016 14,695
$ 10,641
$ 98,813
$ 153,578
$ 263,032
Net loss —
—
—
(44,766 ) (44,766 )
Vesting of restricted stock 215
(92 ) (824 ) —
(916 )
Stock-based compensation expense —
274
2,467
—
2,741
Dividends on common stock —
—
—
(598 ) (598 )
Balance at December 31, 2017 14,910
$ 10,823
$ 100,456
$ 108,214
$ 219,493
Net loss —
—
—
(20,378 ) (20,378 )
Vesting of restricted stock 180
(81 ) (729 ) —
(810 )
Stock-based compensation expense —
279
2,516
—
2,795
Balance at December 31, 2018 15,090
$ 11,021
$ 102,243
$ 87,836
$ 201,100

The accompanying notes are an integral part of these financial statements.

GULF ISLAND FABRICATION, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Years Ended December 31,
	2020			2019			2018
Cash flows from operating activities:
Net loss	$	(27,375	)	$	(49,394	)	$	(20,378	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and lease asset amortization		8,617			9,564			10,350
Other amortization, net		63			50			80
Bad debt expense		—			59			30
Asset impairments		3,310			17,223			4,445
(Gain) loss on assets held for sale, net		228			(369	)		(7,724	)
Gain on insurance recoveries		—			—			(3,571	)
(Gain) loss on sale of fixed assets and other assets, net		(2	)		(584	)		268
Stock-based compensation expense		1,126			1,774			2,795
Changes in operating assets and liabilities:
Contract receivables and retainage, net		10,702			(3,650	)		2,962
Contract assets		(15,393	)		(22,145	)		(26,932	)
Prepaid expenses, inventory and other current assets		1,644			2,556			(3,162	)
Accounts payable		10,042			30,950			10,515
Contract liabilities		(11,142	)		9,425			12,371
Accrued expenses and other current liabilities		(2,427	)		(1,099	)		(3,352	)
Noncurrent assets and liabilities, net (including long-term retainage)		1,599			(1,500	)		911
Net cash used in operating activities		(19,008	)		(7,140	)		(20,392	)
Cash flows from investing activities:
Capital expenditures		(11,212	)		(3,790	)		(3,481	)
Proceeds from sale of property, plant and equipment		2,020			2,217			85,247
Purchases of short-term investments		(58,751	)		(65,284	)		(9,610	)
Maturities of short-term investments		70,552			54,086			1,200
Recoveries from insurance claims		—			—			9,362
Net cash provided by (used in) investing activities		2,609			(12,771	)		82,718
Cash flows from financing activities:
Proceeds from borrowings		10,000			—			15,000
Repayment of borrowings		—			—			(15,000	)
Payment of financing cost		(71	)		(48	)		(42	)
Tax payments for vested stock withholdings		(74	)		(795	)		(810	)
Net cash provided by (used in) financing activities		9,855			(843	)		(852	)
Net increase (decrease) in cash and cash equivalents		(6,544	)		(20,754	)		61,474
Cash and cash equivalents, beginning of period		49,703			70,457			8,983
Cash and cash equivalents, end of period	$	43,159		$	49,703		$	70,457
Supplemental cash flow information:
Interest paid	$	376		$	470		$	352
Income taxes paid (refunds received), net	$	(971	)	$	63		$	6
Reclassification of property, plant and equipment to assets held for sale	$	2,115		$	294		$	—
Reclassification of assets held for sale to property, plant and equipment	$	—		$	1,162		$	866
Accounts payable included in capital expenditures	$	153		$	1,623		$	—
Reclassification of accrued expenses to assets held for sale	$	—		$	—		$	3,245

Years Ended December 31,
2018 2017 2016
Cash flows from operating activities:
Net income (loss) $ (20,378 ) $ (44,766 ) $ 3,515
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization 10,430
12,909
25,448
Amortization of deferred revenue —
(2,008 ) (5,223 )
Bad debt expense 30
21
493
Asset impairments 4,363
7,672
—
(Gain) loss on assets held for sale, net (7,642 ) 259
—
Gain on insurance recoveries (3,571 ) —
—
Loss (gain) on the sale of fixed assets and other assets 268
(35 ) (757 )
Deferred income taxes 200
(23,234 ) 1,409
Stock-based compensation expense 2,795
2,741
3,125
Changes in operating assets and liabilities:
Contracts receivable and retainage, net 2,962
(8,319 ) 28,067
Contract assets (26,932 ) (1,544 ) (13,984 )
Prepaid expenses, inventory and other assets (3,294 ) 744
6,731
Accounts payable 10,515
9,354
(12,757 )
Contract liabilities 12,371
8,390
(12,305 )
Deferred revenue (852 ) (4,917 ) (11,656 )
Deferred compensation 843
1,608
305
Accrued expenses and other liabilities (2,500 ) 1,740
2,157
Net cash (used in) provided by operating activities (20,392 ) (39,385 ) 14,568
Cash flows from investing activities:
Cash received in acquisition —
—
3,035
Capital expenditures (3,481 ) (4,834 ) (6,795 )
Purchase of short-term investments (9,610 ) —
—
Maturities of short-term investments 1,200
—
—
Proceeds from the sale of property, plant and equipment 85,247
2,155
6,458
Recoveries from insurance claims 9,362
1,544
—
Net cash provided by (used in) investing activities 82,718
(1,135 ) 2,698
Cash flows from financing activities:
Proceeds from borrowings under Credit Agreement 15,000
2,000
—
Repayment of borrowings under Credit Agreement (15,000 ) (2,000 ) —
Payment of financing cost (42 ) (150 ) (122 )
Tax payments made on behalf of employees from vested stock withholdings (810 ) (916 ) (217 )
Payments of dividends on common stock —
(598 ) (588 )
Net cash used in financing activities (852 ) (1,664 ) (927 )
Net increase (decrease) in cash and cash equivalents 61,474
(42,184 ) 16,339
Cash and cash equivalents, beginning of period 8,983
51,167
34,828
Cash and cash equivalents, end of period $ 70,457
$ 8,983
$ 51,167
Supplemental cash flow information:
Interest paid $ 352
$ 349
$ 332
Income taxes paid (refunds received), net $ 6
$ 189
$ 377
Reclassification of property, plant and equipment to assets held for sale $ —
$ 109,488
$ —
Reclassification of assets held for sale to property, plant and equipment $ 866
$ —
$ —
Reclassification of accrued expenses to assets held for sale $ 3,245
$ —
$ —

The accompanying notes are an integral part of these financial statements.

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2018~~

2020

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Gulf Island Fabrication, Inc. ~~("Gulf Island"), together~~(together with its subsidiaries, ~~("the~~“Gulf Island,” “the Company,~~" "we," "us"~~” “we,” “us” and ~~"our"~~“our”), is a leading fabricator of complex steel structures, modules and marine vessels, ~~used in energy extraction~~ and ~~production, petrochemical and industrial facilities, power generation, alternative energy and shipping and marine transportation operations. We also provide~~a provider of project management, ~~for engineering, procurement and construction ("EPC") projects along with installation,~~ hookup, commissioning, repair, maintenance and ~~repair and maintenance~~civil construction services. ~~In addition, we perform civil, drainage and other work for state and local governments.~~ Our customers include ~~United States ("~~U.S.") and, to a lesser extent, international energy producers; refining, petrochemical, LNG, industrial, power and marine operators; EPC companies; and certain agencies of the U.S. government. We operate and manage our business through ~~four~~2 operating divisions ~~("Fabrication", "Shipyard", "Services"~~(“Shipyard” and ~~"EPC"~~“Fabrication & Services”) and ~~one~~1 non-operating division ~~("Corporate"~~(“Corporate”), which represent our reportable segments. Our corporate headquarters is located in Houston, Texas ~~with fabrication~~and our operating facilities are located in Houma, Louisiana. See Note 3 for discussion of our closures of the Jennings Yard and Lake Charles ~~Louisiana.~~

Yard.

Significant projects in our backlog include the ~~expansion~~fabrication of ~~a paddle wheel riverboat, the~~modules for an offshore facility and marine docking structures; material supply for an offshore jacket and deck; and construction of ~~nine remaining harbor tug vessels, two offshore~~3 regional class ~~marine~~ research vessels, ~~(with a customer option for a third vessel), two~~3 vehicle ferries, ~~two towboats, an ice-breaker tug,~~ and a5 towing, salvage and rescue ~~ship for the U.S. Navy (with customer options for seven additional vessels). Recently~~ships. Projects completed ~~projects~~in recent years include the expansion of a paddlewheel riverboat; fabrication of ~~complex~~an offshore jacket and deck, modules for a ~~newbuild~~ petrochemical facility, and a meteorological tower and platform for an offshore wind project, and construction of ~~two technologically-advanced OSVs,~~10 harbor tugs, an ice-breaker tug and ~~a harbor tug vessel. Previous~~2 towboats. Other completed projects ~~also~~ include the fabrication of wind turbine foundations for the first offshore wind project in the U.S.,; and construction of 2 technologically advanced OSVs, two of the largest liftboats servicing the Gulf of Mexico ~~("GOM"~~(“GOM”), one of the deepest production jackets in the GOM, and the first single point anchor reservoir ~~("SPAR")~~ hull fabricated in the U.S.

Basis of Presentation

The accompanying Consolidated Financial Statements ("(“Financial ~~Statements"~~Statements”) reflect all wholly owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. The Financial Statements have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (the ~~"SEC"~~“SEC”) and accounting principles generally accepted in the U.S. ~~("GAAP"~~(“GAAP”). ~~The Financial Statements reflect all majority owned subsidiaries. Intercompany balances~~

Liquidity Outlook

In recent years our operating results and ~~transactions~~cash flows have been ~~eliminated in consolidation. Certain balances at December 31, 2017, have been reclassified within~~impacted by lower margins due to competitive pricing, a significant under-utilization of our ~~Consolidated Balance Sheets ("Balance Sheet")~~facilities and losses on certain projects. As a result, we implemented initiatives to ~~conform to~~improve and maintain our ~~presentation at December 31, 2018,~~liquidity (including further reducing the compensation of our executive officers and ~~certain amounts for 2017~~directors and ~~2016 have been reclassified within~~reducing the size of our ~~Consolidated Statements of Operations ("Statement of Operations") to conform to~~board), reduce our ~~presentation for 2018. See below for further discussion of the reclassification of certain balances for prior years.~~

~~Business Outlook~~

~~We continue to strategically position the Company to participate in~~reliance on the fabrication of ~~petrochemical~~structures and ~~industrial facilities, pursue~~marine vessels associated with the offshore ~~wind opportunities, enter~~oil and gas sector, improve our resource utilization and centralize key project resources (including the ~~EPC industry,~~closures of our Jennings Yard and ~~diversify~~Lake Charles Yard and combination of our ~~customer base within all our operating divisions. In addition, we continue to focus on maintaining our liquidity~~former Fabrication and securing meaningful new project awards and backlog in the near-term, and generating operating income and cash flows from operations in the longer-term. We have made significant progress in our efforts to increase our backlogServices Divisions), and improve our competitiveness and ~~preserve our liquidity, including ongoing cost reductions (including reducing the cash compensation paid to our directors and the salaries~~project execution. See Note 10 for discussion of our ~~executive officers)~~realigned reportable segments and ~~the sale of underutilized assets. See~~ Note 3 for ~~further~~ discussion of our ~~recent asset sales~~closures of the Jennings Yard and ~~assets held for sale at December 31, 2018.~~

WeLake Charles Yard. These initiatives are ongoing, and while our ability to achieve our goals has been negatively impacted by the ongoing global coronavirus pandemic (“COVID-19”) and volatile oil prices (discussed further below) and while we can provide no assurances that the initiatives will achieve our desired results, we believe our cash, cash equivalents and short-term investments ~~and availability under our Credit Agreement (defined in Note 7),~~ will be sufficient to enable us to fund our operating expenses, meet our working capital and capital expenditure requirements, and satisfy any debt service obligations or other funding requirements, for at least twelve months from the filing date of this Report.

Operating Cycle

The durations of our contracts vary, but typically extend beyond twelve months from the date of contract award. Consistent with industry practice, assets and liabilities have been classified as current under the operating cycle concept whereby all contract-related items are classified as current regardless of whether cash will be received or paid within a ~~twelve month~~twelve-month period. Assets and liabilities classified as current which may not be received or paid within the next twelve months include contract retainage,

~~GULF ISLAND FABRICATION, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)~~

contract assets, deferred revenue and contract liabilities. Variations from normal contract terms may result in the classification of assets and liabilities as long-term.

F-7

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Use of Estimates

General – The preparation of our Financial Statements in conformity with GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosures of contingent assets and liabilities. We believe our most significant estimates and judgments are associated with revenue recognition for our contracts, including application of the percentage-of-completion method, estimating costs to complete each contract and the recognition of incentives, unapproved change orders, claims and liquidated damages; fair value and recoverability assessments that must be periodically performed with respect to long-lived assets and our assets held for sale; determination of deferred income tax assets, liabilities and related valuation allowances; reserves for bad debts; ~~and~~ liabilities related to self-insurance ~~programs.~~programs; and the impacts of COVID-19 and volatile oil prices on our business, estimates and judgments as discussed further below. If the underlying estimates and assumptions upon which our Financial Statements are based change in the future, actual amounts may differ materially from those included in the Financial Statements.

~~Earnings~~

COVID-19 and Volatile Oil Prices – COVID-19 is a widespread public health crisis that continues to adversely affect global economies and financial markets. In March 2020, the World Health Organization declared COVID-19 a pandemic and the U.S. President announced a national emergency relating to COVID-19. National, state and local authorities recommended physical distancing and many authorities imposed quarantine and isolation measures on large portions of the population, including mandatory business closures. Authorities in some areas of the U.S. began to relax these restrictions in the second quarter 2020. However, the country, including areas where we have our headquarters and operating facilities, experienced multiple periods of resurgence in the numbers of cases of the virus in both the third and fourth quarters of 2020. Authorities have reacted to these resurgences by deferring the phasing out of these restrictions and, in some instances, re-imposing quarantine and isolation measures during the fourth quarter 2020. The measures taken, while intended to protect human life, have had and are expected to continue to have a serious adverse impact on domestic and foreign economies of uncertain severity and duration. Moreover, governmental and commercial responses to COVID-19 have exacerbated the already weakened condition of the energy industry, further reducing the demand for oil, and further depressing and creating volatility in oil prices. On June 8, 2020, the National Bureau of Economic Research indicated that the U.S. economy entered a recession in February 2020, and the duration and severity of this recession, which is ongoing, remains unclear at this time. Any prolonged period of economic slowdown or recession could have a significant adverse effect on our financial condition and financial condition of our customers, subcontractors and other counterparties. The longer-term effectiveness of economic stabilization efforts, including government payments to impacted citizens and industries, is uncertain. Although the U.S. Food and Drug Administration has authorized three COVID-19 vaccines for emergency use, the overall supply of these vaccines may be limited or otherwise hampered by delivery issues, and distribution may therefore be delayed. Even with widespread distribution and acceptance of these vaccines, their long-term efficacy is unknown. The extent to which COVID-19 and the related contraction in oil demand and the resulting reduction and volatility in crude oil prices may adversely impact our business, prospects, financial condition, operating results and cash flows depends on future developments that are highly uncertain and unpredictable. This current level of uncertainty means the ultimate business and financial impacts of COVID-19 and reduction and volatility in crude oil prices cannot be reasonably estimated at this time, but have included, or may include, among other things, reduced bidding activity, suspension or termination of backlog, deterioration of customer financial condition, potential supply disruptions and unanticipated project costs due to project disruptions and schedule delays, lower labor productivity, increased employee and contractor absenteeism and turnover, craft labor hiring challenges, lack of performance by subcontractors and suppliers, and contract disputes. Events and changes in circumstances arising after this Report resulting from the impacts of COVID-19 and volatile oil prices, if any, will be reflected in management’s estimates for future periods.

Income (Loss) Per Share

~~We report basic and diluted earnings~~

Basic income (loss) per share ~~("EPS") using~~is calculated by dividing net income or loss by the ~~"two-class" method as required under GAAP. The calculation of EPS using the two-class method is required when a company has two or more classes~~weighted average number of common ~~stock or participating securities. Certain~~shares outstanding for the period. Diluted income (loss) per share reflects the assumed conversion of our unvested restricted stock (which are not included in our basic or diluted weighted average shares outstanding) contain the right to receive non-refundable dividends and therefore represent participatingdilutive securities. See Note 69 for calculations of our basic and diluted ~~EPS.~~

income (loss) per share.

Cash Equivalents

and Short-term Investments

Cash Equivalents – We consider investments with original maturities of three months or less when purchased to be cash equivalents.

Short-term ~~investments~~

Investments – We consider investments with original maturities of more than three months but less than twelve months to be short-term investments. At December 31, ~~2018,~~2020, our short-term investments include U.S. Treasuries with original maturities of less than six months. We intend to hold these investments until maturity, and ~~have~~it is not more likely than not that we would be required to sell the investments prior to their maturity. The investments are stated ~~them~~ at amortized ~~cost. Due~~costs, which approximates fair value due to their near-term ~~maturities, amortized cost approximates fair value.~~ maturities. All short-term investments are traded on active markets with quoted prices and represent level 1 fair value measurements. ~~See Note 5 for further discussion of our fair value measurements.~~

F-8

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Inventory

Inventory is recorded at the lower of cost or net realizable value determined using the first-in-first-out basis. The cost of inventory includes acquisition costs, production or conversion costs, and other costs incurred to bring the inventory to a current location and condition. Net realizable value is our estimated selling price in the normal course of business, less reasonably predictable costs of completion, disposal and transportation. An allowance for excess or inactive inventory is recorded based on an analysis that considers current inventory levels, historical usage patterns, estimates of future sales and salvage value. See Note 53 for further discussion of our ~~inventory.~~

inventory impairments.

Allowance for Doubtful Accounts

In the normal course of business, we extend credit to our customers on a short-term basis and contract receivables are generally not collateralized; however, we typically have the right to place liens on our projects in the event of nonpayment by our customers. We routinely review individual contract receivable balances for ~~collectibility~~collectability and make provisions for probable uncollectible amounts as necessary. Among the factors considered in our review are the financial condition of our customer and its access to financing, underlying disputes with the customer, the age and value of the receivable balance, and economic conditions in general.

Our customer base historically includes a significant number of energy related companies and their contractors. This concentration of customers in the energy sector may impact our overall exposure to credit risk, either positively or negatively, in that customers may be similarly affected by changes in economic or other conditions. See Note 2 for further discussion of our allowance for doubtful accounts.

Stock-Based Compensation

Awards under our stock-based compensation plans are calculated using a fair ~~value based~~value-based measurement method. ~~Compensation expense for share based awards is recognized only for those awards that are expected to vest.~~ We use the ~~straight-~~

~~GULF ISLAND FABRICATION, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)~~

~~line~~straight-line method to recognize share-based compensation expense over the requisite service period of the award. We recognize the excess tax benefit or tax deficiency resulting from the difference between the deduction we receive for tax purposes and the stock-based compensation expense we recognize for financial reporting purposes created when common stock vests, as an income tax benefit or expense inon our Consolidated Statements of Operations (“Statement of ~~Operations.~~Operations”). See Note 97 for further discussion of our stock-based and other compensation plans.

Tax payments made on behalf of employees to taxing authorities in order to satisfy employee income tax withholding obligations from the vesting of shares under our stock-based compensation plans are classified as a financing activity inon our Consolidated Statements of Cash Flows (“Statement of Cash ~~Flows ("Statement of Cash Flows"~~Flows”).

Assets Held for Sale

Assets held for sale are measured at the lower of their carrying amount or fair value less cost to sell. See Note 3 for further discussion of our assets held for sale.

Depreciation Expense

~~We depreciate property,~~

Property, plant and equipment are depreciated on a straight-line basis over estimated useful lives ranging from three to 25 ~~years, absent any indicators of impairment.~~years. Ordinary maintenance and repairs, which do not extend the physical or economic lives of the plant or equipment, are charged to expense as incurred. See Note 4 for further discussion of our property, plant and equipment.

Long-Lived Assets

~~We review long-lived~~

Long-lived assets, ~~for impairment,~~ which include property, plant and equipment and ~~finite-lived intangible~~our lease assets included within other noncurrent assets, are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. If a recoverability assessment is required, we compare the estimated future undiscounted cash flow associated with the ~~assets or asset groups are compared to their respective carrying amounts to determine if an impairment exists. An impairment loss is measured by comparing the fair value of the~~ asset or asset group to its carrying amount ~~and recording the excess of the carrying amount of the asset or asset group over its fair value as~~to determine if an impairment ~~charge.~~exists. An asset group constitutes the minimum level for which identifiable cash flows are principally independent of the cash flows of other assets or asset groups. An impairment loss is measured by comparing the fair value of the asset or asset group to its carrying amount and the excess of the carrying amount of the asset or asset group over its fair value is recorded as an impairment charge. Fair value is determined based on discounted cash flows, appraised values or ~~third party~~third-party indications of value, as appropriate. See Note 53 for further discussion of ~~impairments recorded~~our long-lived asset impairments.

Leases

We record a right-of-use asset and an offsetting lease liability on our Balance Sheet equal to the present value of our lease payments for leases with an original term of longer than twelve months. We do not record an asset or liability for leases with an original term of twelve months or less and we do not separate lease and non-lease components for our ~~long-lived assets.~~

leases. Our lease assets are reflected within other noncurrent assets, and the current and noncurrent portions of our lease liabilities are reflected within accrued expenses and other liabilities, and other noncurrent liabilities, respectively, on our Balance Sheet. For leases with escalations over the life of the lease, we recognize expense on a straight-line basis. See Note 4 for further discussion of our lease assets and liabilities.

F-9

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Fair Value Measurements

~~Our fair~~

Fair value determinations for financial assets and liabilities are based on the particular facts and circumstances. Financial instruments are required to be categorized within a valuation hierarchy based upon the lowest level of input that is significant to the fair value measurement. The three levels of the valuation hierarchy are as follows:

•

Level 1 – inputs are based upon quoted prices for identical instruments traded in active markets.

~~Level 1 -~~

•

Level 2 – inputs are based upon quoted prices for similar instruments in active markets and model-based valuation techniques for which all significant assumptions are observable in the market.

•

The carrying amounts of our financial instruments, including cash and cash equivalents, short-term investments, accounts receivable and accounts payable approximate their fair values. We determined that our impairments of inventory, long-lived assets and assets held for sale are ~~based upon quoted prices for identical instruments traded in active markets.~~

~~Level 2 - inputs are based upon quoted prices for similar instruments in active markets and model-based valuation techniques for which all significant assumptions are observable in the market.~~

non-recurring fair value measurements that fall within Level 3 ~~- inputs are based upon model-based valuation techniques for which significant assumptions are generally not observable in~~of the market and typically reflect estimates and assumptions that we believe market participants would use in pricing the asset or liability. These include discounted cash flow models and similar valuation techniques.

fair value hierarchy. See Note 53 for ~~additional~~further discussion of impairments of our ~~fair value measurements.~~

inventory, long-lived assets and assets held for sale.

Revenue Recognition

General - – Our revenue is derived from customer contracts and agreements that are awarded on a competitively bid and negotiated basis using a range of contracting options, including fixed-price, unit-rate and T&M. Our contracts primarily relate to the fabrication and construction of steel structures, modules and marine vessels, and project management services and other service arrangements.

We recognize revenue ~~for~~from our contracts in accordance with Accounting Standards Update ~~("ASU"~~(“ASU”) 2014-09, Topic 606 “Revenue from Contracts with Customers” ("(“Topic ~~606"~~606”), which was adopted by us on January 1, 2018, and supersedes previous revenue recognition guidance, including industry-specific guidance. Accordingly, the reported results for 2018 reflect the application of Topic 606 guidance, while the comparable results for 2017 and 2016 were prepared under previous revenue recognition guidance. See further discussion of our adoption of Topic 606 below.

~~GULF ISLAND FABRICATION, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)~~

Topic 606 requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, provisions of Topic 606 specify which goods and services are distinct and represent separate performance obligations (representing the unit of account in Topic 606) within a contract and which goods and services (which could include multiple contracts or agreements) should be aggregated. In general, a performance obligation is a contractual obligation to construct and/or transfer a distinct good or service to a customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Revenue for performance obligations satisfied over time are recognized as the work progresses. Revenue for performance obligations that do not meet the criteria for over time recognition are recognized at a point-in-time when a performance obligation is complete and athe customer has obtained control of a promised asset.

Fixed-Price and Unit-Rate Contracts - – Revenue for our fixed-price and unit-rate contracts is recognized using the percentage-of-completion method ~~(an input method),~~ based on contract costs incurred to date compared to total estimated contract ~~costs.~~costs (an input method). Contract costs include direct costs, such as materials and labor, and indirect costs ~~that are~~ attributable to contract activity. Material costs that are significant to a contract and do not reflect an accurate measure of project completion are excluded from the determination of our contract progress. Revenue for such materials is only recognized to the extent of costs incurred. Prior to our adoption of Topic 606, revenue for our fixed-price and unit-rate contracts was recognized using the percentage-of-completion method, based on the percentage of direct labor hours incurred to date compared to total estimated direct labor hours, and revenue for materials was recognized only to the extent of costs incurred. Revenue and gross profit for contracts accounted for using the percentage-of-completion method can be significantly affected by changes in estimated cost to complete such contracts. Significant estimates impacting the cost to complete a contract include: forecast costs of engineering, materials, ~~components,~~ equipment and subcontracts; forecast costs of labor and ~~subcontracts;~~ labor productivity; schedule durations, including subcontractor and supplier progress; contract disputes, including claims; achievement of contractual performance requirements; and contingency, among others. Although our customers retain the right and ability to change, modify or discontinue further work at any stage of a contract, in the event our customers discontinue work, they are required to compensate us for the work performed to date. The cumulative impact of revisions in total cost estimates during the progress of work is reflected in the period in which these changes become known, including, to the extent required, the reversal of profit recognized in prior periods and the recognition of losses expected to be incurred on contracts. Due to the various estimates inherent in our contract accounting, actual results could differ from those estimates, which could result in material changes to our Financial Statements and related disclosures.

See Note 2 for further discussion of projects with significant changes in estimated margins during 2020, 2019 and 2018.

F-10

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Variable Consideration - – Revenue and gross profit for contracts can be significantly affected by variable consideration, which can be in the form of unapproved change orders, claims, incentives and liquidated damages that may not be resolved until the later stages of the contract or after the contract has been ~~completed and delivery occurs.~~completed. We estimate variable consideration based on the amount we expect to be entitled and include estimated amounts in transaction price to the extent it is probable that a significant future reversal of cumulative revenue recognized will not occur or when we conclude that any significant uncertainty associated with the variable consideration is resolved. ~~For 2018, 2017, and 2016, we had no material amounts in revenue related to~~See Note 2 for further discussion of our unapproved change orders, claims, ~~or incentives. However, at December 31, 2018~~incentives and ~~2017, certain projects in our Shipyard Division reflected a reduction to our estimated contract price for~~ liquidated ~~damages of $11.2 million and $11.7 million, respectively. The reductions in contract price were recorded during 2017.~~

~~Adoption of Topic 606~~ - As discussed above, on January 1, 2018 we adopted Topic 606. Our adoption of Topic 606 included a detailed review of our significant contracts that were not substantially complete as of January 1, 2018. Based on our review, we determined that Topic 606 did not impact the timing or method of revenue recognition for our T&M contracts. We also concluded that the continued use of the percentage-of-completion method was appropriate for our fixed-price and unit-rate contracts given ownership and control of the work transfers to our customers as the work is performed. Although our customers retain the right and ability to change, modify or discontinue further work at any stage of the project, in the event our customers discontinue work, they are required to compensate us for the work performed to date.

Prior to our adoption of Topic 606, our determination of percentage-of-completion for our contracts was based on the percentage of direct labor hours incurred to date compared to total estimated direct labor hours, and revenue for materials was recognized only to the extent of costs incurred. However, in our adoption of Topic 606, we adjusted our measure of progress for the determination of percentage-of-completion to include subcontract labor hours in addition to direct labor hours. The impact of this change was not material to our Financial Statements and no cumulative effect adjustment to retained earnings as of January 1, 2018 was recorded (based on the application of the modified retrospective method under Topic 606).

~~GULF ISLAND FABRICATION, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)~~

During the fourth quarter 2018, we concluded that the use of labor hours for the determination of percentage-of-completion for our contracts was not appropriate based on the changing mix of our contracts, which include an increasing amount of engineered equipment, manufactured materials, and subcontracted services and materials. We further concluded that in our adoption of Topic 606 as of January 1, 2018, our determination of percentage-of-completion for our fixed-price and unit-rate contracts should have been based on total contract costs incurred to date compared to total estimated contact costs. We further concluded that material costs that are significant to a contract and do not reflect an accurate measure of project completion should be excluded from the determination of our contract progress, and revenue for such materials should only be recognized to the extent of costs incurred. Accordingly, during the fourth quarter 2018 we corrected our percentage-of-completion estimates for our fixed-price and unit-rate contracts to be based on total costs incurred to date compared to total estimated contract costs. As result of this correction, we reevaluated the required cumulative effect adjustment to retained earnings as of January 1, 2018 for the adoption impact of Topic 606. Based on this evaluation, we determined that the cumulative effect adjustment would have been $0.4 million, which we do not believe is material to our Financial Statements for 2018. Accordingly, no cumulative adjustment to retained earnings as of January 1, 2018 was recorded. We further evaluated the quarterly impacts to 2018 resulting from the correction during the fourth quarter 2018 and concluded that the impacts were not material to our quarterly Financial Statements.

damages.

Additional Disclosures - – Topic 606 also requires ~~enhanced~~ disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. See Note 2 for required disclosures under Topic 606.

~~Pre-contract~~

Pre-Contract Costs

Pre-contract costs are generally charged to cost of revenue as incurred, but in certain cases their recognition may be deferred if specific probability criteria are met. At December 31, ~~2018~~2020 and ~~2017,~~2019, we had no0 deferred pre-contract costs.

Other (Income) Expense, Net

Other (income) expense, net, generally represents ~~(gains)~~recoveries or provisions for bad debts, gains or losses associated with the sale or disposition of property and equipment other than assets held for ~~sale.~~

sale, and income or expense associated with certain nonrecurring items. For 2020, other (income) expense also includes a gain of $10.0 million associated with the settlement of a contract dispute for a project completed in 2015 and charges of $1.3 million associated with damage caused by Hurricane Laura. See Note 2 for further discussion of the impacts of Hurricane Laura.

Income Taxes

~~Reclassifications~~

~~We made the following reclassifications to prior periods presented in our Financial Statements to conform with our presentation for 2018 and at December 31, 2018:~~

Accrued contract losses of $7.6 million at December 31, 2017, were combined with contract liabilities on our Balance Sheet, and accrued contract losses was removed as a separate line item on our Balance Sheet.

Losses on the sale of assets held for sale of $0.3 million for 2017 were reclassified from other income (expense), net to asset impairments and (gain) loss on assets held for sale, net on our Statement of Operations

Increase in accrued contract losses of $7.2 million for 2017 and a decrease in accrued contract losses of $9.1 million for 2016, were combined with changes in contract liabilities on our Statement of Cash Flows, and changes in accrued contract losses was removed as a separate line item on our Statement of Cash Flows.

~~GULF ISLAND FABRICATION, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)~~

In addition to the above, other (income) expense, net on our Statement of Operations for 2017 and 2016 was previously presented as a separate line item outside of operating income (loss) but is now presented as a separate line item within operating income (loss).

New Accounting Standards

~~Revenue Recognition -~~ ~~In the first quarter 2018, we adopted Topic 606. See the~~ ~~"Revenue Recognition"~~ ~~section above and Note 2 for further discussion.~~

~~Leases -~~ ~~In February 2016, the FASB issued ASU 2016-02,~~ ~~“Leases,”~~ which requires lessees to record most leases on their balance sheet but recognize expense in a manner similar to current guidance. ASU 2016-02 will be effective for us in the first quarter 2019. The new standard is required to be applied using a modified retrospective approach. Upon adoption, we will record a right of use asset and corresponding liability for our operating leases. We completed the evaluation of our significant lease contracts as of December 31, 2018 and expect adoption of this ASU will result in our recognition of a right of use asset and corresponding lease liability of approximately $4.0 million to $6.0 million as of January 1, 2019.

Financial instruments -– In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses - Measurement of Credit Losses on Financial Instruments,” which changes the way companies evaluate credit losses for most financial assets and certain other instruments. For trade and other receivables, short-term investments, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model to evaluate impairment, potentially resulting in earlier recognition of allowances for losses. The new standard also requires enhanced disclosures, including the requirement to disclose the information used to track credit quality by year of origination for most financing receivables. ASU 2016-13 will be effective for us in the first quarter ~~2020.~~2023. Early adoption of the new standard is permitted; however, we have not elected to early adopt the standard. The new standard is required to be applied using a cumulative-effect transition method. We are ~~currently~~ evaluating the effect that ~~ASU 2016-13~~the new standard will have on our financial position, results of operations and related disclosures.

Income taxes – In December 2019, the FASB issued ASU 2019-12, “Income Taxes,” to simplify the accounting for income taxes by removing certain exceptions to the general principles and simplify areas such as franchise taxes, step-up in tax basis goodwill, separate entity financial statements and interim recognition of enacted tax laws or rate changes. The new standard will be effective for us in the first quarter 2021. We do not believe the new standard will have a material effect on our financial position, results of operations or related disclosures.

F-11

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

2. REVENUE, CONTRACT ASSETS AND LIABILITIES AND OTHER CONTRACT MATTERS

As discussed in Note 1, we recognize revenue for our contracts in accordance with Topic ~~606, which was adopted by us on January 1, 2018, and supersedes previous revenue recognition guidance, including industry-specific guidance.~~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 2020, 2019 and ~~timing of revenue recognition, for~~ 2018 ~~2017 and 2016~~ (in thousands):

	Year Ended December 31, 2020
Contract Type	Shipyard		F&S		Eliminations			Total
Fixed-price and unit-rate ⁽¹⁾	$	151,508	$	66,790	$	(148	)	$	218,150
T&M ⁽²⁾		2,190		25,294		(388	)		27,096
Other		—		7,401		(1,688	)		5,713
Total	$	153,698	$	99,485	$	(2,224	)	$	250,959

	Year Ended December 31, 2019 ⁽³⁾
Contract Type	Shipyard		F&S		Eliminations			Total
Fixed-price and unit-rate ⁽¹⁾	$	161,839	$	86,211	$	(430	)	$	247,620
T&M ⁽²⁾		6,627		41,014		—			47,641
Other		—		9,944		(1,897	)		8,047
Total	$	168,466	$	137,169	$	(2,327	)	$	303,308

	Year Ended December 31, 2018 ⁽³⁾
Contract Type	Shipyard		F&S		Eliminations			Total
Fixed-price and unit-rate ⁽¹⁾	$	88,887	$	77,318	$	(700	)	$	165,505
T&M ⁽²⁾		7,537		43,481		—			51,018
Other		—		5,896		(1,172	)		4,724
Total	$	96,424	$	126,695	$	(1,872	)	$	221,247

(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.

2018
Fabrication Shipyard Services EPC Eliminations Total
Contract Type
Fixed-price and unit-rate ⁽¹⁾
$ 37,943
$ 88,887
$ 38,612
$ 2,477
$ (2,414 ) $ 165,505
T&M ⁽²⁾
—
7,537
43,481
—
—
51,018
Other —
—
6,137
—
(1,413 ) 4,724
Total $ 37,943
$ 96,424
$ 88,230
$ 2,477
$ (3,827 ) $ 221,247

(3)

See Note 10 for discussion of our realigned operating divisions.

2017

Fabrication
Shipyard
Services
EPC
Eliminations
Total
Contract Type

Fixed-price and unit-rate ⁽¹⁾
$ 57,880

$ 47,787

$ 28,465

$ 198

$ (5,096 )
$ 129,234
T&M ⁽²⁾
—

4,912

35,180

—

—

40,092
Other —

—

1,800

—

(104 )
1,696

Total $ 57,880

$ 52,699

$ 65,445

$ 198

$ (5,200 )
$ 171,022

~~GULF ISLAND FABRICATION, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)~~

2016
Fabrication Shipyard Services EPC Eliminations Total
Contract Type
Fixed-price and unit-rate ⁽¹⁾
$ 88,683
$ 95,958
$ 31,191
$ —
$ (3,062 ) $ 212,770
T&M ⁽²⁾

13,544
58,882
—
—
72,426
Other —
—
1,341
—
(211 ) 1,130
Total $ 88,683
$ 109,502
$ 91,414
$ —
$ (3,273 ) $ 286,326

~~____________~~

~~(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.~~

Our fabricated structures are used worldwide by U.S. customers operating abroad and by foreign customers. Revenue associated with fabricated structures for delivery outside the U.S. accounted 0%, 0% and 14% of our revenue for 2018, 2017 and 2016, respectively.

Future Performance Obligations Required Under Contracts

The following ~~tables summarize the remaining revenue to be earned under performance obligations for the portion of contracts not yet completed as of December 31, 2018 (in thousands).~~

Segment Performance Obligations at December 31, 2018
Fabrication $ 63,498
Shipyard ⁽¹⁾
259,644
Services 11,046
EPC 385
Total $ 334,573

~~_____________~~

~~(1) Amount excludes approximately $21.9 million of~~table summarizes our remaining performance obligations ~~related to contracts for the construction of two MPSVs that are subject to dispute pursuant to a termination notice from our customer. See Note 11 for further discussion of these contracts.~~by operating segment at December 31, 2020 (in thousands).

Segment	Performance Obligations
Shipyard	$	352,181
F&S		19,381
Total	$	371,562

We expect to recognize revenue for our remaining performance obligations at December 31, 2020, in the following periods (in thousands):

Year	Total
2021	$	161,370
2022		140,018
2022 and beyond		70,174
Total	$	371,562

Year Total
2019 $ 233,987
2020 81,464
2021 19,122
Total $ 334,573

F-12

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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 predetermined 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 ~~contracts~~contract assets 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 uncompleted contracts at December 31, ~~2018~~2020 and ~~2017~~2019 is as follows (in thousands):

	December 31,
	2020			2019
Costs incurred on uncompleted contracts	$	328,229		$	386,932
Estimated loss incurred to date		(19,617	)		(48,895	)
Sub-total		308,612			338,037
Billings to date		(256,220	)		(295,136	)
Deferred revenue ⁽¹⁾		—			(4,592	)
Total	$	52,392		$	38,309

~~GULF ISLAND FABRICATION, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)~~

December 31,
2018 2017
Costs incurred on uncompleted contracts $ 253,871
$ 266,902
Estimated profit (loss) earned to date (35,470 ) (26,954 )
Prepaid subcontractor costs 2,368
—
Sub-total 220,769
239,948
Billings to date (190,588 ) (224,329 )
Deferred revenue⁽¹⁾
(4,592 ) —
Total $ 25,589
$ 15,619

~~______________~~


~~(1)~~	~~Deferred revenue is included within other noncurrent assets as further discussed below.~~

The above amounts are included inwithin the ~~accompanying~~following captions on our Balance Sheet at December 31, ~~2018~~2020 and ~~2017 under the following captions~~2019 (in thousands):

	December 31,
	2020			2019
Contract assets⁽²⁾	$	67,521		$	52,128
Contract liabilities ^{(2), (3), (4)}		(15,129	)		(26,271	)
Sub-total		52,392			25,857
Contract assets, noncurrent ⁽¹⁾		—			12,452
Total	$	52,392		$	38,309

December 31,
2018 2017
Contract assets $ 29,982
$ 28,373
Contract liabilities ^{(1), (2), (3)}
(16,845 ) (12,754 )
Sub-total 13,137
15,619
Contract assets, noncurrent ⁽¹⁾
12,452
—
Total $ 25,589
$ 15,619

~~______________~~

(1)

~~The increase in contract liabilities compared to December 31, 2017, was primarily due to advance payments~~

We have contracts for ~~two separate projects in our Fabrication and Shipyard Divisions, offset partially by~~ the ~~reclassification~~construction of ~~accrued contract losses (included within contract liabilities) to other noncurrent assets. The accrued contract losses relate to our MPSV projects~~2 MPSVs that are subject to ~~dispute. In addition to the~~purported termination by our customer. Our net contract asset, accrued contract losses ~~that were reclassified to other noncurrent assets, contract assets~~ and deferred revenue ~~for these projects were also reclassified to other noncurrent assets, resulting in a net contract asset balance~~balances at the time of the customer’s purported terminations of the contracts totaled $12.5 million ~~for these projects~~and such amount has been reflected within other noncurrent assets on our Balance Sheet at December 31, ~~2018.~~2020 and 2019. Although the net contract asset of $12.5 million was included within other noncurrent assets on our Balance Sheet at December 31, 2020, the information with respect to such contracts is not presented in the tables above at December 31, 2020 given the prolonged nature of the dispute. See Note 118 for further discussion of ~~the dispute.~~our MPSV contracts.

(2)

The increase in contract assets compared to December 31, 2019, was primarily due to increased unbilled positions on three projects in our Shipyard Division, offset partially by decreased unbilled positions on four projects in our Shipyard Division and a project in our Fabrication & Services Division. The decrease in contract liabilities compared to December 31, 2019, was primarily due to the unwind of advance payments on two projects in our Shipyard Division and two projects in our Fabrication & Services Division, offset partially by advance payments on a project in our Shipyard Division.

~~(2)~~

(3)

Revenue recognized during 2020, 2019 and 2018 related to amounts included in our contract liabilities balance at December 31, 2019, 2018 and 2017, was $18.2 million, $14.3 million and $5.1 ~~million.~~million, respectively.

(4)

F-13

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

~~(3)~~

Contract liabilities at December 31, ~~2018~~2020 and ~~2017,~~2019, includes accrued contract losses of ~~$2.4~~$8.6 million and ~~$7.6~~$6.4 million, respectively. See ~~"Project~~ “Changes in ~~Estimates"~~Project Estimates” below for further discussion of our accrued contract losses.

Significant Customers

We are not dependent on any one customer, and the revenue derived from each customer varies from year to year based on new project awards for each customer. However, for ~~2018, 2017~~2020, 2019 and ~~2016,~~2018, certain customers individually accounted for 10% or more of our consolidated revenue as follows (in thousands):

	Years Ended December, 31
Customer	2020		2019		2018
A	$	37,986	$	52,310	*
B		77,342		39,897	*
C	*			36,175		49,123
D	*			34,448	*
E	*		*			25,873
F	*		*			23,279
G	*		*		*

The customer revenue was less than 10% of consolidated revenue for the year.

December 31,
Customer 2018 2017 2016
A $ 49,123
$ 21,781
*
B 25,873
*
*
C 23,279
*
*
D *
44,724
*
E *
65,981

~~_____________~~

* The customer revenue was less than 10% of consolidated revenue for the year.

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 2020, 2019 and 2018, ~~2017~~ and ~~2016 was $30,000, $21,000 and $0.5 million, respectively. Our~~our allowance for doubtful accounts at December 31, 2020 and 2019, were not significant.

Variable Consideration

For 2019, 2018 and 2017, ~~was $0.4 million and $1.9 million, respectively. Our allowance~~we had no material amounts in revenue related to unapproved change orders, claims or incentives. However, at December 31, ~~2018 was primarily~~2020 and 2019, certain uncompleted projects reflected a reduction in contract price for liquidated damages of $0.6 million and $12.9 million, respectively, of which $11.2 million of the liquidated damages at December 31, 2019 relate to purported liquidated damages on our contracts for the construction of 2 MPSVs that are subject to purported notices of termination by our customer. As discussed under “Contract Assets and Liabilities” above, we had a net contract asset at December 31, 2020 and 2019, of $12.5 million (inclusive of the impact of the purported liquidated damages previously recorded) related to ~~storage~~these contracts; however, the liquidated damages with respect to these contracts is not presented in our variable consideration disclosure at December 31, 2020. See Note 8 for further discussion of ~~a vessel for a customer within~~ our ~~Fabrication Division, and our allowance at December~~

~~GULF ISLAND FABRICATION, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)~~

~~31, 2017, was primarily related to work performed for an offshore drilling platform within our Fabrication Division which was fully reserved in 2016.~~

MPSV contracts.

Changes in Project Estimates

~~Significant~~

Changes in ~~Project~~ Estimates ~~- The following summarizes our significant changes in estimated margins on our projects during 2018, 2017 and 2016.~~

for 2020 – For ~~2018,~~2020, significant changes in estimated margins on projects negatively impacted operating results for our Shipyard Division by $16.6 million and positively impacted operating results for our Fabrication & Services Division by $2.7 million. The changes in estimates were associated with the following:

Shipyard Division

•

Towing, Salvage and Rescue Ship Projects – Negative impact for 2020 of $7.3 million resulting from increased forecast costs for our 5 towing, salvage and rescue ship projects, primarily associated with increased craft labor and subcontracted services costs and extensions of schedules. The impacts were primarily due to lower than anticipated craft labor productivity and progress on the projects and higher cost estimates for subcontracted services resulting from the current and forecasted impacts of COVID-19 associated primarily with engineering delays, increased employee and contractor absenteeism and turnover, challenges recruiting and hiring craft labor, physical distancing measures, and disruption and inefficiencies related to the aforementioned and the need to re-sequence construction activities. The impacts were also due to additional anticipated craft labor associated with more complex piping and other construction activities identified as we achieved further completion of production engineering. We have submitted a request for equitable adjustment to our customer, the U.S. Navy, to extend our project schedules and recover the increased forecast costs associated with the impacts of COVID-19; however, we can provide no assurances that we will be successful recovering these costs. Our forecasts at December 31, 2020 do not reflect potential future benefits, if any, from the favorable resolution of the request for equitable adjustment. Our forecasts reflect minimal craft labor productivity improvements from the first vessel to each follow-on vessel. At December 31, 2020, the projects were at varying stages of completion ranging from approximately 10% to 60% and are forecast to be completed at varying dates from 2022 through 2024, subject to the potential schedule impacts referenced above. The first three vessels were in a loss position at December 31, 2020 and our reserve for estimated losses was $3.2 million. The last two vessels were approximately break-even. If future craft labor productivity and subcontractor costs differ from our current estimates, piping or other construction activities are determined to be more complex than anticipated upon finalization of production engineering, we are unable to achieve our progress estimates or our schedules are further extended, the projects would experience further losses. See “Other Project Matters” below for further discussion of our towing, salvage and rescue ship projects.

F-14

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

•

Harbor Tug Projects – Negative impact for 2020 of $1.0 million resulting from increased forecast costs for our final 2 (ninth and tenth) harbor tug projects in our Jennings Yard, primarily associated with increased craft labor and subcontracted services costs and extensions of schedules. The impacts were primarily due to lower than anticipated craft labor productivity and progress on the projects resulting from the wind down of the Jennings Yard in connection with its closure in the fourth quarter 2020 and the impacts of COVID-19 associated primarily with physical distancing measures. The ninth vessel was completed in the fourth quarter 2020 and the tenth vessel was completed in January 2021.

•

Forty-Vehicle Ferry Projects – Negative impact for 2020 of $7.2 million resulting from increased forecast costs and forecast liquidated damages for our 2 forty-vehicle ferry projects ($6.2 million for the first vessel and $1.0 million for the second vessel), primarily associated with increased craft labor and material costs and extensions of schedules. The impacts were primarily due to lower than anticipated craft labor productivity and progress on the projects resulting from the current and forecasted impacts of COVID-19 and additional factors specific to each vessel as described further below:

Second Forty-Vehicle Ferry Project (see discussion of first vessel below) –The impacts for the second vessel were also due to construction rework and disruptions caused by structural design deficiencies for the vessel, which resulted in deflection issues within the plating of the vessel. We believe the impacts of the design deficiencies should be the responsibility of the customer. Accordingly, we will be submitting a claim to our customer to extend our project schedules and recover the increased forecast costs associated with the impacts of the design deficiencies; however, we can provide no assurances that we will be successful recovering these costs. Our forecast at December 31, 2020 does not reflect potential future benefits, if any, from the favorable resolution of the claim. At December 31, 2020, the second vessel was approximately 80% complete and is forecast to be completed in the second quarter 2021.

First Forty-Vehicle Ferry Project –The impacts for the first vessel were also due to construction rework, including reconstruction of previously completed portions of the vessel, resulting from the determination that portions of the vessel structure were outside of acceptable tolerance levels. The previous construction activities were performed by our former Fabrication Division prior to transferring management and project execution responsibility of the vessels to our Shipyard Division in the first quarter 2020 as discussed further in Note 10. The impacts were also due to the determination that construction of a new hull for the vessel is the most appropriate course of action as further discussed below.

During the third quarter 2020, the first vessel was damaged by an overhead crane, which disengaged from its tracks, and landed on the hull that was under construction. As a result of this damage to the hull, coupled with prior rework on the vessel, and associated concerns regarding the acceptable tolerance levels of the hull, in October 2020 our customer issued a rejection letter indicating that they would not accept a reconstructed hull, and requested the fabrication of a new hull. Accordingly, we ceased construction activities on the vessel as we evaluated our options, including remediation actions that could potentially be taken in lieu of fabricating a new hull. We also began discussions with our insurer regarding the impacts of the crane incident and the coverage that would apply to any cost increases for remediation actions or the fabrication of a new hull. Based on our preliminary estimates, we believed the incremental forecast costs resulting from the aforementioned could range from $1.0 million to $4.0 million (before consideration of insurance coverage), with such range of cost being highly dependent on the course of action ultimately taken with respect to the hull, which ranged from remediation actions to repair the hull to the fabrication of a new hull. Further, the ultimate cost to us was dependent upon any insurance proceeds received in connection with the crane incident. Due to the uncertainty with respect to the corrective actions that potentially could be taken regarding the hull and any insurance coverage that would apply, we were unable to estimate the amount we would likely incur from the crane incident. Accordingly, at September 30, 2020, we accrued our deductible of $0.1 million associated with our insurance coverage, representing the minimum amount we would incur for the crane incident. However, we have now determined that fabrication of a new hull is the most appropriate course of action due to, among other things, quality and cost uncertainties associated with repairing the hull, resulting in an increase in ~~our operating loss~~forecast costs of ~~$9.1~~$4.1 million ~~($2.4 million for our petrochemical module project within our Fabrication Division and $6.7 million for our ten harbor tug projects within our Shipyard Division).~~

~~The changes~~(included in ~~estimates~~the above referenced impacts for the ~~petrochemical module~~year), inclusive of insurance proceeds, which were not material. We have ceased all work on the vessel and are in discussions with the customer regarding a path forward for recommencement of construction of the vessel.

We have also determined that the structural design deficiencies identified for the second vessel are applicable to the first vessel, which contributed to the aforementioned rework and construction challenges experienced on the first vessel. We will be submitting a claim to our customer to extend our project ~~were~~schedules and recover the ~~result of~~ increased costs associated ~~primarily~~ with ~~subcontracted work scopes. The project was complete as~~the impacts of the design deficiencies; however, we can provide no assurances that we will be successful recovering these costs. Our forecast at December 31, ~~2018.~~

The changes in estimates for the harbor tug projects were the result of increased forecast costs associated primarily with lower than anticipated craft labor productivity related to pipe installation and testing and extensions of schedule for the projects. The revised forecasts incorporate actual results obtained2020 does not reflect potential future benefits, if any, from the favorable resolution of the claim. The completion date of the first ~~harbor tug in~~vessel is uncertain due to the ~~fourth quarter 2018 and~~ongoing discussions with the ~~progress achieved on the second harbor tug which is scheduled for~~customer; however, we currently do not anticipate completion in ~~the first quarter 2019. Our forecasts anticipate improved craft labor productivity with the completion of each subsequent vessel.~~ 2021.

F-15

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

The ~~harbor tug~~ projects were in a loss position at December 31, ~~2018~~2020 and our reserve for estimated losses ~~on the projects totaled $2.1~~was $4.8 million. ~~The nine uncompleted vessels are scheduled to be completed at various dates ranging from the first quarter 2019 through 2020.~~ If future craft labor productivity ~~differs~~and subcontractor costs differ from our current estimates, we are unable to achieve our progress estimates, our schedules are further extended or the projects incur additional schedule liquidated damages, the projects would experience further losses. We would also experience further losses if we were to incur further unanticipated costs associated with the design deficiencies, including fabrication of the new hull for the first vessel.

•

Seventy-Vehicle Ferry Project – Negative impact for 2020 of $1.1 million resulting from increased forecast costs for our seventy-vehicle ferry project, primarily associated with increased craft labor and subcontracted services costs and extensions of schedule. The impacts were primarily due to lower than anticipated craft labor productivity and progress on the projects resulting from the current and forecasted impacts of COVID-19 and our inability to achieve previously anticipated improvements in productivity. The impacts were also due to additional anticipated craft labor associated with more complex piping and other construction activities identified as we achieved further completion of production engineering. At December 31, 2020, the vessel was approximately 55% complete and is forecast to be completed in the fourth quarter 2021. The project was in a loss position at December 31, 2020 and our reserve for estimated losses was $0.5 million. If future craft labor productivity and subcontractor costs differ from our current estimates, piping or other construction activities are determined to be more complex than anticipated upon finalization of production engineering, we are unable to achieve our progress estimates, our schedules are further extended or the project incurs schedule liquidated damages, the project would experience further losses.

•

Research Vessel Projects – As discussed further below, we agreed to a change order with our customer for our research vessel projects that, among other things, provided for the customer’s assumption of responsibility for production engineering for the project. Further, we made a collective decision with our customer to delay construction activities on the projects until production engineering achieves a satisfactory level of completion to limit the impacts on construction, including disruption and rework. These construction delays are expected to continue in the near term due to production engineering delays experienced by our customer’s engineering subcontractor as a result of COVID-19. We are currently working collaboratively with the customer to identify opportunities to commence construction activities in advance of full completion of production engineering to minimize the schedule impacts to the projects. Based on our current forecast cost to complete the projects, the change order and collaborative nature of our discussions with the customer, we are not forecasting losses on the projects. However, as discussed further below, we are continuing to recognize revenue equal to costs on the projects until we are able to reasonably estimate the amount of gross profit, if any, expected to be realized on the projects. We anticipate being able to make such an estimate upon substantial completion of production engineering. If the projects experience further delays associated with production engineering or other matters, we are unable to achieve our progress estimates, piping or other construction activities are determined to be more complex than anticipated upon finalization of production engineering, our schedules are further extended or the projects incur schedule liquidated damages, future craft labor productivity and subcontractor costs differ from our current estimates, or we are unable to recover the costs of any of the aforementioned from our customer, the projects would experience losses.

Fabrication & Services Division

•

Jacket and Deck Project – Positive impact for 2020 of $1.2 million resulting from reduced forecast costs and increased contract price for our jacket and deck project, primarily associated with reduced subcontracted services costs, approved change orders and incentives. The impacts were primarily due to favorable resolution of customer and subcontractor change orders and realization of project incentives. At December 31, 2020, the project was complete.

•

Paddlewheel Riverboat and Subsea Components Projects – Positive impact for 2020 of $1.5 million resulting from reduced forecast costs and increased contract price for our paddlewheel riverboat and subsea components projects, primarily associated with reduced craft labor and subcontracted services costs and approved change orders. The impacts were primarily due to better than anticipated labor productivity and favorable resolution of customer and subcontractor change orders. At December 31, 2020, both projects were complete.

Changes in Estimates for 2019 – For ~~2017,~~2019, significant changes in estimated margins on ~~our two multi-purpose service vessel (“MPSV”)~~ projects ~~resulted in an increase in our~~negatively impacted operating ~~loss of $34.5 million~~results for our Shipyard ~~Division.~~Division by $12.3 million and negatively impacted operating results for our Fabrication & Services Division by $4.9 million. The changes in estimates were associated with the following:

Shipyard Division

•

Harbor Tug Projects – Negative impact for 2019 of $4.9 million resulting from increased forecast costs and forecast liquidated damages for our harbor tug projects, primarily associated with increased craft labor, subcontracted services costs and extensions of schedule. The impacts were primarily due to lower than anticipated craft labor productivity and progress resulting from limitations in craft labor availability and the required use of contract labor in lieu of direct hire labor, the need to supplement and re-perform work for an under-performing paint subcontractor, higher than anticipated costs for paint scopes that were assumed by us from our paint subcontractor, higher cost estimates from our electrical and instrumentation subcontractor, our inability to achieve previously anticipated labor productivity improvements, and expectations of future labor productivity. The projects were in a loss position at December 31, 2019 and our reserve for estimated losses was $1.6 million. See “Changes in Estimates for 2020” above for further discussion of the status of these projects.

F-16

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

•

Forty-Vehicle Ferry Projects – Negative impact for 2019 of $5.1 million resulting from increased forecast costs and forecast liquidated damages for our 2 forty-vehicle ferry projects, primarily associated with increased craft labor and subcontracted services and materials costs. The impacts were primarily due to greater than anticipated rework, lower than anticipated productivity experienced primarily during the fourth quarter 2019, and our expectations of future labor productivity. The projects were in a loss position at December 31, 2019 and our reserve for estimated losses was $3.0 million. See “Changes in Estimates for 2020” above for further discussion of the status of these projects.

•

Ice-Breaker Tug Project – Negative impact for 2019 of $1.5 million resulting from increased forecast costs for our ice-breaker tug project, primarily associated with increased craft labor, subcontracted services costs and extension of schedule. The impacts were primarily due to construction rework and disruption and lower than anticipated craft labor productivity and progress on the project resulting from incomplete and deficient subcontracted production engineering, higher cost estimates from our various subcontractors, difficulties encountered to launch the vessel, and anticipated higher costs to deliver the vessel. The project was in a loss position at December 31, 2019 and our reserve for estimated losses was $0.1 million. At December 31, 2020, the project was complete.

•

Research Vessel Projects – Negative impact for 2019 of $0.8 million resulting from the reversal of gross profit recognized prior to 2019 for our 3 research vessel projects. The projects experienced difficulties with subcontracted production engineering, due in part to vessel size constraints and complexities associated with vessel functionality, which resulted in incomplete and deficient production engineering and construction delays, disruption and rework. As a result, we made a collective decision with our customer to delay construction activities on the projects until production engineering achieves a satisfactory level of completion to limit further impacts on construction, including disruption and rework. In addition, we agreed to a change order with the customer that included the following:

The replacement of the current subcontracted production engineering firm with a different engineering subcontractor that was contracted directly by the customer;

Extensions of the schedule liquidated damages dates for the projects; and

Increases in project price for the contracts to account for the estimated cost impacts of the production engineering and construction delays.

Based on our forecast cost to complete the projects, the change order and collaborative nature of increased forecast costs associated primarily with complexities related to the installation of the power and communications systems and reductions in project price of $11.2 million for liquidated damages (representing the maximum amount of liquidated damages under the contracts) which are in dispute. The projects were in a loss position at December 31, 2018 and 2017. We are currently in a disputeour discussions with the customer, ~~regarding~~we are not forecasting losses on the ~~two MPSV~~ projects. ~~As a result of our dispute and uncertainty~~However, due to uncertainties with respect to the timing of ~~resolution, all contract assets, accrued contract losses,~~completion of production engineering and ~~deferred revenue balances associated~~the potential impacts on our construction schedules and costs, as well as ongoing discussions with the customer, we are unable to reasonably estimate the amount of gross profit, if any, that will ultimately be realized on the projects. Accordingly, during the fourth quarter 2019 we reversed all previously recognized gross profit on the projects ~~have~~ ~~been reclassified~~(including the reversal of $2.5 million of gross profit that was recognized prior to ~~other noncurrent assets, resulting~~the fourth quarter 2019) and are recognizing revenue equal to costs on the projects until we are able to reasonably estimate the amount of gross profit, if any, expected to be realized on the projects. See “Changes in ~~a net contract asset balance of $12.5 million~~Estimates for ~~these projects within other noncurrent assets on our Balance Sheet at December 31, 2018. See Note 11~~2020” above for further discussion of the ~~dispute.~~status of these projects.

Fabrication & Services Division

•

Paddle Wheel River Boat Project – Negative impact for 2019 of $1.3 million resulting from increased forecast costs for our paddle wheel river boat project, primarily associated with increased craft labor costs. The impacts were primarily due to difficulties encountered in commissioning the vessel and the need to accelerate our schedule, including performing out of sequence work scopes, to enable subcontracted works scopes to commence and mitigate the schedule and cost impacts of delaying the subcontracted work scopes. The project was in a loss position at December 31, 2019 and our reserve for estimated losses was $0.2 million. At December 31, 2020, the project was complete.

•

Jacket and Deck Project – Negative impact for 2019 of $2.0 million resulting from increased forecast costs and forecast liquidated damages for our jacket and deck project, primarily associated with increased subcontracted services costs and extensions of schedule. The impacts were primarily due to higher than anticipated cost estimates from our commissioning subcontractors and delays associated with customer related directives. The project was in a loss position at December 31, 2019 and our reserve for estimated losses was $1.1 million. At December 31, 2020, the project was complete.

•

Subsea Components Project – Negative impact for 2019 of $1.6 million resulting from increased forecast costs and liquidated damages for our subsea components project, primarily associated with increased craft labor, subcontracted services and materials costs and extensions of schedule. The impacts were primarily due to additional craft labor, materials costs and subcontracted services costs and support resulting from stringent welding procedure requirements and customer specifications. The project was in a loss position at December 31, 2019 and our reserve for estimated losses was $0.2 million. At December 31, 2020, the project was complete.

F-17

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Changes in estimates for 2018 – For ~~2016, individual projects with~~2018, significant changes in estimated margins ~~resulted in a decrease in~~on projects negatively impacted operating results for our ~~income from operations~~Shipyard Division by $2.4 million and negatively impacted operating results of ~~$1.8~~our Fabrication & Services Division by $6.7 million. The changes in estimates were associated with the following:

Shipyard Division

•

Harbor Tug Projects – Negative impact for 2018 of $6.7 million resulting from increased forecast costs and liquidated damages for our harbor tug projects, primarily associated with craft labor costs and extensions of schedule. The impacts were primarily due to lower than anticipated craft labor productivity related to pipe installation and testing. See “Changes in Estimates for 2020” above for further discussion of the status of these projects.

Fabrication & Services Division

•

Petrochemical Modules Project – Negative impact for 2018 of $2.4 million resulting from increased forecast costs for our petrochemical modules project, primarily associated with increased subcontracted services costs. The impacts were primarily due to higher cost estimates from our insulation and other subcontractors. At December 31, 2020, the project was complete.

Other Project Matters

Hurricane Laura – In August 2020, Hurricane Laura made landfall as a high-end Category 4 hurricane in Lake Charles, Louisiana, where its high winds and flooding caused significant damage throughout the region. At our Lake Charles Yard, Hurricane Laura primarily damaged drydocks, warehouses, bulkheads and our ninth harbor tug project which was nearing completion and subsequently completed in the fourth quarter 2020. As a result, during 2020, we recorded charges of $1.3 million related to deductibles associated with our ~~Fabrication~~builder’s risk, equipment, property and ~~Shipyard Divisions~~marine liability insurance coverages, and our preliminary estimates of cost associated with uninsurable damage, primarily for bulkheads. The charges are included in other (income) expense, net on our Statement of Operations.

Project Tariffs –Certain imported materials used, or forecast to be used, for our projects are currently subject to existing, new or increased tariffs or duties. We believe such amounts, if incurred, are recoverable from our customers under the contractual provisions of our contracts; however, we can provide no assurances that we will successfully recover such amounts.

Towing, Salvage and Rescue Ship Project Change Order– Our contract for the construction of our 5 towing, salvage and rescue ships contains options which grant our customer, the U.S. Navy, the right, if exercised, for the construction of 3 additional vessels at contracted prices. During the first quarter 2021, the U.S. Navy determined it would not exercise the 3 remaining options under our contract. In connection therewith, we agreed to a change order of $13.1 million with the U.S. Navy to facilitate the transfer of technology, plans and know-how to the customer to enable it to contract with other contractors for the construction of additional vessels. The majority of the change order will be included within contract price for our existing vessel projects and recognized as revenue on a percentage-of-completion basis as the projects progress and the ~~projects were complete~~remainder will be recognized as revenue as we facilitate the transfer of ~~December 31, 2018.~~

the technology, plans and know-how during 2021.

3. IMPAIRMENTS AND (GAIN) LOSS ON ASSETS HELD FOR SALE

Impairments and (gain) loss on assets held for sale – Impairments and (gain) loss on assets held for sale (“AHFS”) generally represents asset impairments, gains or losses on the sale of assets held for sale and certain nonrecurring items. A summary of our impairments and (gain) loss on assets held for sale ~~at December 31,~~for 2020, 2019 and 2018, is as ~~follows (in thousands):~~follows:

	Year Ended December 31, 2020
Impairments and (gain) loss on assets held for sale	Shipyard		F&S		Corporate		Total
Impairments of AHFS	$	—	$	1,400	$	—	$	1,400
Impairments of Jennings Yard assets		29		—		—		29
Impairments of Lake Charles Yard assets		1,006		—		—		1,006
Impairments of other assets		6		868		—		874
Loss on AHFS and other		598		223		—		821
Total	$	1,639	$	2,491	$	—	$	4,130

•

Impairments of AHFS – At December 31, 2020, our assets held for sale totaled $8.2 million and primarily consisted of 3 660-ton crawler cranes and 2 drydocks (which were classified as held for sale for sale in the fourth quarter 2020). As discussed below, during 2019 we recorded partial impairments of the crawler cranes. During 2020, we recorded additional impairments of $1.4 million associated with the partial impairment of the cranes. Our estimates of fair value for the cranes were based on broker opinions of value, which were lower than our previous estimates due to changes in market conditions (including the impacts of COVID-19), the limited interest received in the cranes during the period, the specific use nature and

Assets Fabrication Division Shipyard Division Total
Machinery and equipment $ 25,882
$ 1,222
$ 27,104
Accumulated depreciation (7,871 ) (298 ) (8,169 )
Total assets held for sale $ 18,011
$ 924
$ 18,935

~~South Texas Properties and Fabrication Division Assets Held for Sale~~

~~South Texas Properties~~ - During the first quarter 2017, we classified our fabrication yards and certain associated equipment in Ingleside, Texas ("Texas South Yard") and Aransas Pass, Texas ("Texas North Yard") (collectively, "South Texas Properties") as held for sale. During 2018, we completed the sale of portions of the South Texas Properties, which consisted of the following:

~~The sale of certain equipment prior to the sale of the Texas South Yard and Texas North Yard for proceeds of $1.3 million, and a loss of approximately $0.3 million.~~

F-18

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

size of the cranes, and our expectation of a shorter marketing period due to concerns regarding future deterioration of the cranes. See “Impairments of Lake Charles Yard assets” below for discussion of the partial impairments of our drydocks in connection with their classification as held for sale.

•

Impairments of Jennings Yard assets – During the fourth quarter 2020, we closed our Jennings Yard, which is subject to a long-term lease. As discussed below, during 2019 we recorded full impairments of our lease asset and non-moveable facility improvements and partial impairments of our moveable equipment. In connection with the facility’s fourth quarter 2020 closure, we had no material additional impairments of moveable equipment, which was relocated to our Houma Yards. See below for further discussion of the impairments recorded in 2019 and Note 4 for discussion of our Jennings Yard lease. We do not believe the closure of the Jennings Yard will impact our ability to operate our Shipyard Division, and it does not qualify for discontinued operations presentation as we will continue to operate our Shipyard Division from our Houma Yards.

The sale of our Texas South Yard during the second quarter 2018 for $55.0 million, less selling costs of $1.2 million, for total net proceeds received during 2018 of $53.8 million and a gain of $3.9 million.

•

Impairment of Lake Charles Yard assets – During the fourth quarter 2020, we closed our Lake Charles Yard, which is subject to a long-term lease. As discussed below, during 2019 we recorded a full impairment of our non-moveable facility improvements and partial impairments of the lease asset, three drydocks and moveable equipment. In connection with the facility’s fourth quarter 2020 closure, we recorded additional impairments of $1.0 million associated with the full impairment of the lease asset and partial impairment of our moveable equipment and drydocks. The moveable equipment and one of the drydocks were relocated to our Houma Yards to be used in our Shipyard Division operations. The remaining two drydocks were relocated to our Houma Yards and are held for sale at December 31, 2020. Our estimates of fair value for the drydocks were based on appraisals for such assets. See below for further discussion of impairments recorded in 2019 and discussion of our assets held for sale and Note 4 for discussion of our Lake Charles Yard lease. We do not believe the closure of the Lake Charles Yard will impact our ability to operate our Shipyard Division, and it does not qualify for discontinued operations presentation as we will continue to operate our Shipyard Division from our Houma Yards.

•

Impairments of other assets – During the fourth quarter 2020, we relocated and consolidated certain assets (including our pipe mill) between our Shipyard Division and F&S Division, and abandoned certain other assets, within our Houma Yards to improve operational efficiency. As a result, during 2020 we recorded impairments of $0.9 million associated with the partial or full impairment of such assets. We determined our impairments of the assets based on scrap value estimates of fair value.

~~The sale of our Texas North Yard during the fourth quarter 2018 for $28.0 million, less selling costs of $0.6 million, for total net proceeds of $27.4 million during 2018 and a gain of $4.1 million.~~

•

Loss on AHFS and other – During 2020, we incurred costs of $0.6 million, primarily associated with the closures of our Jennings Yard and Lake Charles Yard, as discussed above. We also sold a deck barge, 2 plate roll machines and certain other assets which were classified as held for sale for total proceeds of $1.7 million, resulting in a loss of $0.2 million.

	Year Ended December 31, 2019
Impairments and (gain) loss on assets held for sale	Shipyard		F&S			Corporate		Total
Impairments of AHFS	$	324	$	7,842		$	—	$	8,166
Impairments of assets removed from AHFS		—		1,060			—		1,060
Impairments of Jennings Yard assets		4,578		—			—		4,578
Impairments of Lake Charles Yard assets		2,998		—			—		2,998
Impairments of inventory and other assets		—		400			21		421
(Gain) loss on AHFS and other		20		(369	)		654		305
Total	$	7,920	$	8,933		$	675	$	17,528

•

Impairments of AHFS – At December 31, 2019, our assets held for sale totaled $9.0 million and primarily consisted of 3 660-ton crawler cranes, 2 plate bending roll machines and a deck barge. During 2019, we revised our estimates of fair value for the crawler cranes based on updated broker opinions of value and revised our estimates of fair value for the plate bending roll machines based on third party indications of value. Our revised estimates of fair value for these assets were lower than our previous estimates due to changes in market conditions, the limited interest received in the assets during the period, the specific use nature of the assets (and the size of the assets in the case of the cranes), and our expectation of a shorter marketing period due to concerns regarding future deterioration of the assets. As a result of the aforementioned, during 2019 we recorded impairments of $7.8 million associated with the partial impairment of the crawler cranes and plate bending roll machines. During 2019, we also recorded an impairment of $0.3 million associated with the partial impairment of a drydock that was held-for-sale and sold during 2019 for proceeds of $0.6 million.

•

Impairments of assets removed from AHFS – During 2019, we determined that we no longer intended to sell a deck barge (separate from the aforementioned deck barge) and panel line equipment that was previously classified as held for sale, and the assets were reclassified as property, plant and equipment. In connection therewith, the assets were recorded at the lower of their fair value or net book value as if they had been depreciated while being classified as held for sale, which resulted in impairments of $1.1 million during 2019.

F-19

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

•

Impairments of Jennings Yard assets – During 2019, we reassessed our previous estimates of the future cashflows expected to be generated by our leased Jennings Yard. Our revised forecast gave consideration to recent operating losses experienced on our harbor tug projects in the Jennings Yard and our intention to close the facility. Based on our revised forecast, we determined that the net book value of the Jennings Yard assets exceeded our estimates of future cashflows, which indicated that the assets were impaired. Our Jennings Yard assets primarily consisted of a lease asset, non-moveable facility improvements and certain moveable equipment. We based our impairments of the lease asset and non-moveable facility improvements on our expectation to close the facility, and we based our impairments of the moveable equipment on broker opinions of value for such assets. As a result of the aforementioned, during 2019 we recorded impairments of $4.6 million associated with the full impairment of the lease asset and non-moveable facility improvements and partial impairment of moveable equipment. See above for discussion of our closure of the Jennings Yard in the fourth quarter 2020 and Note 4 for further discussion of our Jennings Yard lease.

•

Impairments of Lake Charles Yard assets – During 2019, we reassessed our previous estimates of the future cashflows expected to be generated by our leased Lake Charles Yard. Our revised forecast gave consideration to previous and then current under-utilization of the facility, our expectations of future work for the facility and the required future capital investment in the facility and its assets. Based on our revised forecast, we determined that the net book value of the Lake Charles Yard assets exceeded our estimates of future cashflows, which indicated that the assets were impaired. Our Lake Charles Yard assets primarily consisted of a lease asset, non-moveable facility improvements, three drydocks and certain moveable equipment. We based our impairments of the lease asset and non-moveable facility improvements on our anticipated cashflows from such assets, and we based our impairments of the drydocks and moveable equipment on appraisals and broker opinions of value for such assets. As a result of the aforementioned, during 2019 we recorded impairments of $3.0 million associated with the full impairment of the non-moveable facility improvements and partial impairment of the lease asset, drydocks and moveable equipment. See above for discussion of our closure of the Lake Charles Yard in the fourth quarter 2020 and Note 4 for further discussion of our Lake Charles Yard lease.

•

Impairments of inventory and other assets – During 2019, we abandoned certain inventory and fixed assets and recorded impairments of $0.4 million associated with the partial impairment of the assets. We determined our impairments of the assets based on scrap value estimates of fair value.

•

Loss on AHFS and other – During 2019, we recorded charges of $0.5 million associated with amounts payable to our former chief executive officer in connection with his retirement during the fourth quarter 2019. Such amounts were paid during 2020 and did not require any future service. We also recorded a gain of $0.4 million associated with the sale of assets held for sale.

	Year Ended December 31, 2018
Impairments and (gain) loss on assets held for sale	Shipyard		F&S			Corporate		Total
Gain on sale of South Texas Properties, net	$	—	$	(7,724	)	$	—	$	(7,724	)
Impairments of AHFS		964		1,387			—		2,351
Impairments of inventory and other assets		—		2,094			—		2,094
Gain from insurance proceeds		—		(3,571	)		—		(3,571	)
Total	$	964	$	(7,814	)	$	—	$	(6,850	)

•

South Texas Properties and Gain on Sale of South Texas Properties, net – During 2017, we classified our fabrication yards and certain associated equipment in Ingleside, Texas (“Texas South Yard”) and Aransas Pass, Texas (“Texas North Yard”) (collectively, “South Texas Properties”) as held for sale. During 2018, we completed the sale of portions of the South Texas Properties, which consisted of the following:

The sale of certain equipment prior to the sale of the South Texas Properties for proceeds of $1.3 million, and a loss of $0.3 million;

The sale of our Texas South Yard for $55.0 million, less selling costs of $1.2 million, for total net proceeds received during 2018 of $53.8 million and a gain of $3.9 million; and

The sale of our Texas North Yard for $28.0 million, less selling costs of $0.6 million, for total net proceeds of $27.4 million during 2018 and a gain of $4.1 million.

Remaining equipment from the Texas North Yard totaling $18.8 million was not included in the Texas North Yard sale, of which $0.8 million was placed back in use and reclassified to property, plant and equipment, net and $18.0 million ~~continues to be~~was classified as held for sale. The assets held for sale ~~("Fabrication AHFS") at December 31, 2018. The Fabrication AHFS~~ primarily ~~consist of three~~consisted of3 660-ton crawler cranes, a deck barge, ~~two~~2 plate bending roll machines and panel line equipment, which were relocated to our ~~fabrication yard in~~ Houma ~~Louisiana. See~~ ~~"Impairments"~~ ~~section below for further discussion of the determination of the carrying value of the Fabrication AHFS.~~

The gains and loss above resulted in a net gain of $7.7 million for 2018, and are included within asset impairments and (gain) loss on assets held for sale, net on our Statement of Operations. In addition to the above, during 2018 and 2017, additional activity occurred with respect the South Texas Properties prior to, or in connection with, their sale, which is summarized below.

~~Hurricane Harvey Insurance Recoveries~~ - During the third quarter 2017, buildings and equipment located at our South Texas Properties were damaged by Hurricane Harvey, and in connection therewith, during 2017 we received $6.0 million of insurance proceeds as an initial payment from our insurance carriers. We allocated the insurance recoveries as follows:

~~$1.3 million, which offset clean-up and repair related costs incurred directly related to the damage we incurred as a result of Hurricane Harvey, resulting in no net gain or loss;~~

~~$1.5 million, which offset impairments of two buildings which were determined to be a total loss as a result of Hurricane Harvey, resulting in no net gain or loss; and~~

~~$3.2 million, which was related to estimated future repairs associated with Hurricane Harvey and was included in accrued expenses and other liabilities on our Balance Sheet at December 31, 2017.~~

During the second quarter 2018, we agreed to a global settlement with our insurance carriers for total insurance payments of $15.4 million (inclusive of the $6.0 million received during 2017), of which $9.4 million was received during 2018. In applying the settlement proceeds (which were inclusive of agreed upon deductibles), we allocated the additional recoveries and the liability accrued at December 31, 2017, as follows:

$9.0 million, which offset impairments of property and equipment, primarily at our Texas North Yard, resulting in no net gain or loss. Our evaluation considered the Texas North Yard as a single asset group given the sale of our Texas South Yard had been completed. The impairments were based upon our best estimate of the decline in fair value of the asset group as a result of Hurricane Harvey; and

~~$3.6 million gain, which is included within asset impairments and (gain) loss on assets held for sale, net on our Statement of Operations.~~

~~Impairments -~~ In addition to the impairments recorded in connection with our evaluation of the Hurricane Harvey impacts to the South Texas Properties, which were offset by insurance recoveries, during 2018 we recorded impairments of $1.4 million for certain equipment previously associated with the South Texas Properties prior to their sale but not sold through either the Texas South Yard or Texas North Yard transactions. The impairments are included within asset impairments and (gain) loss on assets held for sale, net on our Statement of Operations. Our impairments were based upon our best estimate of the fair value of the related equipment.

Further, in connection with the sale of our Texas North Yard discussed above, and the separation of the assets sold from the Fabrication AHFS, we reevaluated the fair values of the Texas North Yard assets and the Fabrication AHFS, giving consideration to impairment amounts previously recorded in connection with the allocation of our insurance proceeds associated with Hurricane Harvey. Based on our assessment, during the third quarter 2018 we recaptured previously recorded impairments of the Texas North Yard assets and increased their carrying value. We also reduced the carrying value of the Fabrication AHFS based upon our estimates of fair value using level 3 inputs, including broker estimates of fair value. Our assessment resulted in the recapture of approximately $5.2 million of previously recorded impairments on the Texas North Yard assets, with a similar amount of impairment on the Fabrication AHFS, with no material net impact to our Statement of Operations. The aforementioned net gain on the sale of the Texas North Yard during the fourth quarter 2018 is based on its adjusted carrying value after the recapture of the previously recorded impairments.

~~Other -~~ We do not believe the sale of our South Texas Properties will impact our ability to operate our Fabrication Division. Further, the sale of our South Texas Properties do not qualify for discontinued operations presentation as we continue to operate our Fabrication Division at our fabrication yard in Houma, Louisiana.

Yards.

F-20

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

•

Impairments of AHFS –During 2018, we recorded impairments of $1.4 million for certain equipment previously associated with the South Texas Properties prior to their sale, but not sold in connection with the Texas South Yard or Texas North Yard transactions. In addition, during 2018 we recorded an impairment of $1.0 million for a drydock that was held for sale. Our impairments were based on our best estimate of the fair value of the assets.

•

Impairments of inventory and other assets – During 2018, we abandoned certain inventory and other assets and recorded impairments of $2.1 million. We determined our impairments of the assets based on scrap value estimates of fair value.

•

Gain from insurance proceeds – During 2017, buildings and equipment located at our South Texas Properties were damaged by Hurricane Harvey. During 2018, we agreed to a global settlement with our insurance carriers for total insurance payments of $15.4 million, of which $6.0 million had been received in 2017 and $9.4 million was received during 2018. We allocated the insurance recoveries as follows:

~~Shipyard~~

$1.3 million, recorded during 2017, which offset clean-up and repair related costs incurred directly related to the damage as a result of Hurricane Harvey, resulting in 0 net gain or loss,

$1.5 million recorded during 2017, which offset impairments of 2 buildings which were determined to be a total loss as a result of Hurricane Harvey, resulting in 0 net gain or loss;

$9.0 million, recorded during 2018, which offset impairments of property and equipment, primarily at our Texas North Yard, resulting in 0 net gain or loss. The impairments were based upon our best estimate of the decline in fair value of the asset group as a result of Hurricane Harvey; and

$3.6 million gain recorded during 2018.

Assets held for sale – As discussed above, at December 31, 2020, our assets held for sale primarily consisted of 3 660-ton crawler cranes within our Fabrication & Services Division ~~Assets Held for Sale~~

~~During 2017, we recorded impairments of $1.0 million associated with three~~and 2 drydocks within our Shipyard ~~Division. Two~~Division, which were classified as held for sale during 2020. A summary of ~~the drydocks were sold during 2017 for proceeds of $2.0 million and a loss of $0.3 million, and the remaining drydock was classified as~~our assets held for sale at December 31, ~~2017 ("Shipyard AHFS"). During 2018, we recorded an additional impairment of $1.0 million for the Shipyard AHFS based on our best estimate of the fair value of the asset,~~2020 and at December 31, 2018 our Shipyard AHFS totaled $0.9 million. The impairments and loss are included within asset impairments and (gain) loss on assets held for sale, net on our Statement of Operations. The Shipyard AHFS do not qualify for discontinued operations presentation.2019, is as follows (in thousands):

	December 31,
	2020									2019
Assets	Shipyard			F&S			Total			Shipyard		F&S			Total
Machinery and equipment	$	3,619		$	12,780		$	16,399		$	—	$	17,618		$	17,618
Accumulated depreciation		(1,605	)		(6,580	)		(8,185	)		—		(8,612	)	$	(8,612	)
Total assets held for sale	$	2,014		$	6,200		$	8,214		$	—	$	9,006		$	9,006

4. PROPERTY, PLANT AND EQUIPMENT AND LEASED FACILITIES AND EQUIPMENT

Property, plant and equipment

Property, plant and equipment consisted of the following at December 31, ~~2018~~2020 and ~~2017~~2019 (in thousands):

	Estimated		December 31,
	Useful Life		2020			2019
	(in Years)
Land		—	$	4,972		$	4,972
Buildings		25		36,581			35,580
Machinery and equipment	3 to 25			99,621			126,622
Furniture and fixtures	3 to 5			1,375			2,288
Transportation equipment	3 to 5			2,195			2,521
Improvements		15		38,934			40,377
Construction in progress		—		8,120			2,636
Total property, plant and equipment				191,798			214,996
Accumulated depreciation				(124,340	)		(144,512	)
Property, plant and equipment, net			$	67,458		$	70,484

December 31,

Estimated
Useful Life
2018 2017
(in Years)
Land - $ 4,972
$ 4,972
Buildings 25 34,696
34,653
Machinery and equipment 3 to 25 132,155
141,704
Furniture and fixtures 3 to 5 2,497
4,450
Transportation equipment 3 to 5 2,627
2,667
Improvements 15 42,182
42,975
Construction in progress - 1,944
96
Total property, plant and equipment 221,073
231,517
Accumulated depreciation (141,143 ) (142,618 )
Property, plant and equipment, net $ 79,930
$ 88,899

Depreciation expense for 2020, 2019 and 2018 ~~2017 and 2016,~~ was ~~$10.4~~$8.6 million, ~~$12.9~~$9.6 million and ~~$25.4~~$10.4 million, respectively. The ~~reduction~~decrease in depreciation expense for ~~2018~~2020 compared to 2019 was due to assets becoming fully depreciated and ~~2017 is~~assets being impaired in the ~~result of classifying our South Texas Properties as assets held for sale during the first~~fourth quarter ~~of 2017, and suspending the recognition of~~2019. The decrease in depreciation expense for ~~those assets.~~

2019 compared to 2018 was due to assets becoming fully depreciated.

F-21

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Leased Facilities and Equipment

~~Lease expense for 2018, 2017 and 2016, was $1.9 million, $2.0 million and $2.5 million, respectively, related to~~

At December 31, 2020, our ~~leased facilities and equipment. Our~~ significant leases subject to long-term agreements ~~are~~were as follows:

•

Corporate office in Houston, Texas consisting of approximately 17,000 square feet of office space. The lease expires in May 2025.

~~Corporate~~

•

Jennings Yard located near Jennings, Louisiana, consisting of a 180-acre yard on the west bank of the Mermentau River approximately 25 miles north of the U.S. Intracoastal Waterway. The lease expires in January 2025 with 2 ten-year renewal options that would extend the lease through January 2045. During the fourth quarter 2020, we closed our Jennings Yard and do not intend to exercise our renewal options. See Note 3 for discussion of our closure of the Jennings Yard.

•

Lake Charles Yard located near Lake Charles, Louisiana, consisting of a 10-acre yard on the Calcasieu River approximately 17 miles from the GOM, that we sublease from a third party. The sublease expires in July 2023 with 3, five-year renewal options (subject to sublessor renewals) that would extend the lease through July 2038. During the fourth quarter 2020, we closed our Lake Charles Yard and do not intend to exercise our renewal options. See Note 3 for discussion of our closure of the Lake Charles Yard.

•

Engineering office in Metairie, Louisiana, consisting of approximately 7,600 square feet of office space. The lease expires in December 2025.

At December 31, 2020, our lease ~~in Houston, Texas consisting of approximately 17,000 square feet of office space. The~~asset, current lease ~~expires in May 2025.~~

~~Shipyard five miles east of Jennings, Louisiana, consisting of an 180-acre complex on~~liability and long-term lease liability were $1.7 million, $0.6 million and $2.0 million, respectively. As discussed above, we do not intend to exercise the ~~west bank of the Mermentau River approximately 25 miles north of the U.S. Intracoastal Waterway that we lease from a third party. The lease expires in January 2025 with two, ten-year~~ renewal options ~~that allows us to extend~~for our Jennings Yard and Lake Charles Yard, and accordingly, our lease obligations for these facilities exclude the lease ~~through January 2045.~~

~~Shipyard near Lake Charles, Louisiana, consisting~~renewal options. See Note 3 for discussion of a ten-acre complex 17 miles from the GOM on the Calcasieu River, that we sublease from a third party. The sublease expires in July 2023 with three, five-year renewal options (subject to sublessor renewals), that allows us to extend theour lease ~~through July 2038.~~

asset impairments recorded during 2020 and 2019.

Future minimum payments under leases having initial terms of ~~one year or~~ more than twelve months are as follows (in thousands):

	Minimum Payments
2021	$	726
2022		737
2023		653
2024		564
2025		219
Total lease payments		2,899
Less: interest		(278	)
Present value of lease liabilities	$	2,621

~~GULF ISLAND FABRICATION, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)~~

Minimum Payments
2019 $ 660
2020 672
2021 680
2022 578
2023 477
Thereafter 557
Total $ 3,624

~~5. FAIR VALUE MEASUREMENTS~~

~~Recurring fair value measurements~~

Total lease expense for our leased facilities and ~~financial instruments -~~ equipment, which includes lease asset amortization expense and expense for leases with original terms that are twelve months or less, for 2020, 2019 and 2018, was $1.5 million, $1.8 million and $1.9 million, respectively. Cash paid for interest and lease expense for 2020 and 2019 was $1.8 million and $2.0 million, respectively.

The ~~carrying amounts~~discount rate used to determine the present value of our ~~financial instruments, including cash and cash equivalents, accounts receivables and accounts payables approximate their fair values.~~

~~Long-lived assets~~ ~~- We had no indicators of impairment and recorded no impairments of long-lived asset during 2018, 2017 and 2016.~~

~~Assets held~~lease liabilities was based on the interest rate on our LC Facility adjusted for ~~sale~~ ~~- During 2018 and 2017, we recorded impairments~~terms similar to that of our ~~assets held for sale of $2.4 million~~leased properties. At December 31, 2020, our weighted-average remaining lease term was approximately 4.0 years and ~~$1.0 million, respectively, which are included within asset impairments and (gain) loss on assets held for sale, net on~~the weighted-average discount rate used to derive our ~~Statement of Operations. See Note 3 for further discussion of our asset held for sale and associated impairments.~~

~~Inventory~~ - During 2018 and 2017, we recorded impairments of our inventory of $2.0 million and $6.7 million, respectively, which are included within asset impairments and (gain) loss on assets held for sale, net on our Statement of Operations. The impairments consisted of the following:

~~During 2018, we recorded an impairment of $82,000 related to pre-manufactured inventory in our Services Division to reduce its carrying value to its estimated net realizable value.~~

~~During 2017, we recorded an impairment of $3.7 million related to inventory in our Fabrication Division that~~lease liability was originally received in connection with a settlement with a vendor in 2014. The inventory consisted of specialty and high-grade copper nickel and steel materials as well as lower-grade carbon steel pipe and valve fittings. During 2017, we performed our annual inspection of this inventory and determined that the high-grade stainless steel and copper nickel components remained in good condition; however; much of the lower-grade carbon steel pipe and valve fittings had deteriorated significantly due to exposure to the elements. As a result, we recorded an impairment to reduce the carrying value of the lower-grade inventory to scrap value and reduced the carrying value of the high-grade inventory to its estimated net realizable value based on its good condition. During 2018, we recorded an additional impairment of $1.9 million for the high-grade inventory based on third party indications of value for the inventory, which reduced the carrying value of the inventory to its scrap value of $0.2 million.

During 2017, we recorded an impairment of $2.9 million related to inventory in our Fabrication Division that was originally received in connection with a settlement with a customer in 2013 related to a deepwater construction project. The inventory consisted of specialty piping and valves for which demand for the inventory was negatively impacted by the lack of offshore construction activity. As a result, we recorded an impairment to reduce the carrying value of the inventory to scrap value.

~~The inventory impairments are included within asset impairments and gain (loss) on assets held for sale, net on our Statement of Operations.~~

~~Other -~~ ~~We have determined that our impairments of assets held for sale and inventory are non-recurring fair value measurements that fall within Level 3 of the fair value hierarchy.~~

~~GULF ISLAND FABRICATION, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)~~

~~6. INCOME (LOSS) PER COMMON SHARE~~

~~The following table presents the computation of basic and diluted income (loss) per share (in thousands, except per share data):~~

Years Ended December 31,
2018 2017 2016
Net income (loss) $ (20,378 ) $ (44,766 ) $ 3,515
Less: distributed and undistributed income (loss) from unvested restricted stock —
3
30
Net income (loss) attributable to common shareholders $ (20,378 ) $ (44,769 ) $ 3,485
Weighted average shares ⁽¹⁾
15,032
14,838
14,631
Basic and diluted income (loss) per common share $ (1.36 ) $ (3.02 ) $ 0.24

~~______________~~

~~(1) We have no dilutive securities.~~

7.6.7%.

5. CREDIT FACILITIES

~~Credit Agreement~~

~~We have a $40.0 million~~

LC Facility

On March 26, 2021, we amended our revolving credit facility with Hancock Whitney Bank ~~("Credit Agreement"~~(“Whitney Bank”) ~~that can be used~~, which previously provided for up to $40.0 million of borrowings or letters of ~~credit. On August 27, 2018, we amended our Credit Agreement which, among other things, extended its~~credit, had a maturity date toof June ~~9, 2020. Our amended~~30, 2022, included certain quarterly financial covenants ~~during the remaining term of the Credit Agreement are as follows:~~

~~Ratio of current assets to current liabilities of not less than 1.25:1.00;~~

~~Minimum tangible net worth of at least the sum of $180.0 million, plus 100% of the proceeds from any issuance of stock or other equity after deducting of any fees, commissions, expenses~~ and ~~other costs incurred in such offering; and~~

~~Ratio of funded debt to tangible net worth of not more than 0.50:1.00.~~

~~Our Credit Agreement also includes~~ restrictions ~~regarding~~on our ability ~~to: (i) grant liens; (ii) make~~to take certain loans or investments; (iii) incur additional indebtedness or guarantee other indebtedness in excess of specified levels; (iv) make any material change to the nature of our business or undergo a fundamental change; (v) make any material dispositions; (vi) acquire another company or all oractions, and was secured by substantially all of ~~its assets; (vii) enter into~~our assets with a ~~merger, consolidation, or sale leaseback transaction; or (viii) declare~~negative pledge on our real property. In connection with the amendment, the facility was modified to remove our ability to make cash borrowings and ~~pay dividends if any potential default or event~~provides for up to $20.0 million of ~~default occurs.~~

~~Interest~~letters of credit, subject to our cash securitization of future letters of credit and the full amount of outstanding letters of credit, and the maturity date was extended to June 30, 2023. The amended letter of credit facility (“LC Facility”) removed all financial covenants and other restrictions, as well as the pledge of all our assets and the negative pledge on ~~borrowings under the Credit Agreement may be designated, at~~ our ~~option, as either the~~ ~~Wall Street Journal~~ ~~published Prime Rate (5.5% at December 31, 2018) or LIBOR (2.5% at December 31, 2018) plus 2.0% per annum.~~real property. Commitment fees on the unused portion of the ~~Credit Agreement~~LC Facility are 0.4% per annum and interest on outstanding letters of credit is 2.0% per annum. ~~The Credit Agreement is secured by substantially all of our assets (with a negative pledge on our real property).~~

At December 31, ~~2018,~~2020, we had ~~no outstanding borrowings under our Credit Agreement and $2.9~~$10.7 million of outstanding letters of credit under the LC Facility.

F-22

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Loan Agreement

On April 17, 2020, we entered into an unsecured loan in the aggregate amount of $10.0 million (“PPP Loan”) with Whitney Bank pursuant to ~~support~~the Paycheck Protection Program (“PPP”), which is sponsored by the Small Business Administration (“SBA”), and is part of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), as amended by the Paycheck Protection Program Flexibility Act of 2020 (“Flexibility Act”). The PPP provides for loans to qualifying businesses, the proceeds of which may only be used for payroll costs, rent, utilities, mortgage interest, and interest on other pre-existing indebtedness (the “Permissible Expenses”). The PPP Loan may be prepaid at any time prior to maturity with 0 prepayment penalties. The PPP Loan, and accrued interest, may be forgiven partially or in full, if certain conditions are met. The most significant of the conditions are:

•

The PPP Loan matures on April 17, 2022, bears interest at a fixed rate of 1.0 percent per annum and is payable in monthly installments commencing on the earlier of the date on which the amount of loan forgiveness is determined or March 17, 2021. During the Covered Period the PPP Loan proceeds were used only for Permissible Expenses, of which approximately 93% was related to payroll costs. On September 29, 2020, we submitted our ~~projects, providing $37.1~~application to Whitney Bank, requesting PPP Loan forgiveness of $8.9 million. Whitney Bank approved our application for forgiveness on December 14, 2020, and our application was forwarded to the SBA for review. As of the filing of this Report, we have not received an approval or denial of our application for forgiveness from the SBA; in the absence of such action and based on guidance we received from our external advisors, we have taken the position that the date for commencement of loan payments has not yet occurred, and we have made 0 loan payments. Because the amount borrowed exceeded $2.0 million, the PPP Loan and our loan forgiveness application is subject to audit by the SBA. Any portion of ~~available capacity. At~~the PPP Loan that is not forgiven, together with accrued interest, will be repaid based on the terms and conditions of the PPP Loan and in accordance with the PPP as amended by the Flexibility Act, unless the SBA were to determine that we were not eligible to participate in the PPP, in which case the SBA could seek immediate repayment of the PPP Loan. While we believe we are a qualifying business and have met the eligibility requirements for the PPP Loan, and believe we have used the loan proceeds only for Permissible Expenses, we can provide no assurances that we will be eligible for forgiveness of the PPP Loan, in whole or in part. Accordingly, we have recorded the full amount of the PPP Loan as debt, which is included in long-term debt, current and long-term debt, noncurrent on our Balance Sheet at December 31, ~~2018, we were~~2020. The current and noncurrent debt classification is based on the terms and conditions of the PPP Loan and in ~~compliance~~accordance with ~~all of our financial covenants, with a tangible net worth of $199.2 million (as defined~~the PPP as amended by the ~~Credit Agreement), a ratio~~Flexibility Act, and timing of ~~current assets~~required repayment absent any loan forgiveness. We intend to ~~current liabilities~~reflect the benefit of ~~2.85 to 1.0~~any loan forgiveness if, and ~~a ratio~~when, our loan forgiveness application is approved by the SBA and after we have reasonable assurance from the SBA that we have met the eligibility and loan forgiveness requirements of ~~funded debt to tangible net worth of 0.01:1.00.~~

the PPP.

Surety Bonds

We issue surety bonds in the ordinary course of business to support our projects. At December 31, ~~2018,~~2020, we had ~~$396.6~~$291.2 million of outstanding surety ~~bonds to support our projects.~~

bonds.

F-23

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

6. INCOME TAXES

Income Tax (Expense) Benefit

A reconciliation of the U.S. federal statutory tax rate to our income tax (expense) benefit for ~~2018, 2017~~2020, 2019 and ~~2016,~~2018, is as follows (in thousands):

	Years Ended December 31,
	2020			2019			2018
U.S. statutory rate		21.0	%		21.0	%		21.0	%
Increase (decrease) resulting from:
Permanent differences		0.0	%		(0.2	)%		(1.0	)%
State income taxes		9.0	%		0.4	%		(2.9	)%
Other		0.0	%		0.0	%		1.9	%
Discrete items
Vesting of common stock		(0.7	)%		0			(0.1	)%
Change in valuation allowance		(29.1	)%		(21.0	)%		(21.7	)%
Income tax (expense) benefit		0.2	%		0.2	%		(2.8	)%

Years Ended December 31,
2018 2017 2016
Amount % Amount % Amount %
U.S. statutory rate $ 4,159
21.0% $ 24,136
35.0% $ (1,945 ) 35.0%
Increase (decrease) resulting from:
Permanent differences (206 ) (1.0)% (330 ) 0.5% (64 ) 1.1%
State income taxes (571 ) (2.9)% 366
(0.5)% (32 ) 0.6%
Other 374
1.9% (118 ) 0.2% —
—%
Discrete items
Vesting of common stock (19 ) (0.1)% (253 ) 0.4% —
—%
Change in valuation allowance (4,308 ) (21.7)% 392
(0.5)% —
—%
Income tax (expense) benefit $ (571 ) (2.8)%
$ 24,193
35.1% $ (2,041 ) 36.7%

~~Income Tax (Expense) Benefit~~ -

Significant components of our income tax (expense) benefit for ~~2018, 2017~~2020, 2019 and ~~2016,~~2018, were as follows (in thousands):

	Years Ended December 31,
	2020			2019			2018
Current
Federal	$	0		$	0		$	0
State		(20	)		86			(317	)
Total current		(20	)		86			(317	)
Deferred
Federal		5,553			10,308			3,410
State		2,487			87			644
Valuation allowance		(7,968	)		(10,385	)		(4,308	)
Total deferred		72			10			(254	)
Income tax (expense) benefit	$	52		$	96		$	(571	)

Years Ended December 31,
2018 2017 2016
Current
Federal $ —
$ —
$ (302 )
State (317 ) (83 ) (361 )
Total current (317 ) (83 ) (663 )
Deferred
Federal 3,410
24,219
(1,549 )
State 644
449
171
Valuation allowance (4,308 ) (392 ) —
Total deferred (254 ) 24,276
(1,378 )
Income tax (expense) benefit $ (571 ) $ 24,193
$ (2,041 )

~~GULF ISLAND FABRICATION, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)~~

Deferred Taxes -

Significant components of our deferred tax assets and liabilities at December 31, ~~2018~~2020 and ~~2017,~~2019, were as follows (in thousands):

	December 31,
	2020			2019
Deferred tax assets
Impairments of lease assets and inventory	$	184		$	644
Employee benefits		751			724
Accrued losses on uncompleted contracts		3,716			3,335
Stock based compensation expense		225			312
Federal net operating losses		19,345			14,885
State net operating losses		3,620			1,678
R&D and other tax credits		806			806
Other		631			437
Total deferred tax assets		29,278			22,821
Deferred tax liabilities
Property, plant and equipment and AHFS		(5,825	)		(7,523	)
Prepaid insurance		(512	)		(402	)
Total deferred tax liabilities		(6,337	)		(7,925	)
Net deferred tax assets		22,941			14,896
Valuation allowance		(23,054	)		(15,086	)
Net deferred taxes ⁽¹⁾	$	(113	)	$	(190	)

(1)

Amounts are included in other noncurrent liabilities on our Balance Sheet.

December 31,
2018 2017
Deferred tax assets
Employee benefits $ 758
$ 962
Uncompleted contracts 2,380
2,664
Stock based compensation expense 266
350
Allowance for doubtful accounts 84
99
Long-term incentive awards 150
280
Federal net operating losses 9,962
13,190
State net operating losses 1,155
511
Other 395
394
Total deferred tax assets 15,150
18,450
Deferred tax liabilities
Property, plant and equipment (10,199 ) (17,605 )
Prepaid insurance (450 ) (453 )
Total deferred tax liabilities (10,649 ) (18,058 )
Net deferred tax assets 4,501
392
Valuation allowance (4,701 ) (392 )
Net deferred taxes ⁽¹⁾
$ (200 ) $ —

~~______________~~

~~(1) Amounts are included in other noncurrent liabilities on our Balance Sheet.~~

F-24

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

At December 31, ~~2018~~2020 and ~~2017,~~2019, we had total DTAs of ~~$15.2~~$29.3 million and ~~$18.5~~$22.8 million, respectively (including U.S. federal net operating loss(es) ("(“NOL(s)"”) DTAs of ~~$10.0~~$19.3 million and ~~$13.2~~$14.9 million, respectively). On a periodic and ongoing basis, we evaluate our DTAs (including our NOL DTAs) and assess the appropriateness of our valuation allowance(s) ("(“VA(s)"”). In assessing the need for a VA, we consider both positive and negative evidence related to the likelihood of realizing our DTAs. If, based upon the available evidence, our assessment indicates that it is more likely than not that some or all of the DTAs will not be realized, we record a VA. Our assessments include, among other things, the amount of taxable temporary differences that will result in future taxable income, the value and quality of our backlog, evaluations of existing and anticipated market conditions, analysis of recent and historical operating results (including cumulative losses over multiple periods) and projections of future results and strategic plans, as well as asset expiration dates. As a result of our assessment and due to cumulative losses for the three years ended December 31, ~~2018,~~2020, we believe the negative evidence outweighs the positive evidence with respect to our ability to realize our U.S. federal NOL DTAs, and accordingly, at December 31, ~~2018~~2020 and ~~2017,~~2019, we had VAs of ~~$4.7~~$23.1 million and ~~$0.4~~$15.1 million, respectively, offsetting our total DTAs.

At December 31, ~~2018,~~2020, we had gross U.S. federal NOL carryforwards (excluding VAs) of ~~$47.4~~$92.1 million, of which $42.3 million will expire in 2037 ~~and we~~with the remaining U.S. federal NOL carryforwards eligible to be carried forward indefinitely, subject to an 80% limitation on taxable income in each year. We had gross state NOL carryforwards (excluding VAs) of ~~$24.5~~$45.1 million, which will expire infrom 2035 through ~~2038.~~

2040.

Uncertain Tax Positions-

Reserves for uncertain tax positions are recognized when we consider it more likely than not that additional tax will be due in excess of amounts reflected in our income tax returns, irrespective of whether or not we have received tax assessments. Interest and penalties on uncertain tax positions are recorded within income tax expense. At December 31, 2020 and 2019, we had no material reserves for uncertain tax positions. Tax returns subject to examination by the U.S. Internal Revenue Service are open for years after 2014. ~~At December 31, 2018 and 2017, we had no material reserves for uncertain tax positions.~~

~~Tax Cuts and Jobs Act~~ - In December 2017, the Tax Cuts and Jobs Act was signed into law which, among other things, reduced the U.S. federal corporate income tax rate from a maximum of 35.0% to 21.0% (effective January 1, 2018). As a result, in accordance with Staff Accounting Bulletin 118, during 2017 we recorded provisional amounts related to the impacts of the Tax Cuts and Jobs Act. Such impacts were immaterial to our deferred tax position at December 31, 2017. During 2018, we filed our 2017 U.S. federal tax return and applicable state tax returns, which did not result in any material adjustment to the provisional amounts we recorded during 2017.

~~GULF ISLAND FABRICATION, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)~~

7. RETIREMENT AND LONG-TERM INCENTIVE PLANS

Defined Contribution Plan

We sponsor a defined contribution plan for eligible employees that is qualified under Section 401(k) of the Internal Revenue Code, which includes voluntary employee pre-tax contributions and ~~a Company matching contribution,~~Company-matching contributions, with potential additional discretionary contributions determined by ~~the~~our Board of Directors. ~~Effective April 1, 2016, we~~Our matching contributions were temporarily suspended ~~our matching contribution in response to the downturn~~ in the ~~oil~~second quarter 2016 and ~~gas industry.~~reinstated in the second quarter 2019. For ~~2018, 2017~~2020 and ~~2016,~~2019, we contributed ~~$0, $0,~~$0.7 million and ~~$0.7~~$0.8 million, respectively to the plan.

Long-Term Incentive Plans

Under our long-term incentive plans ("(“Incentive ~~Plans"~~Plans”), the Compensation Committee of our Board of Directors may grant cash-based and equity-based awards to eligible employees and non-employee directors, including restricted stock awards, stock option awards and ~~restricted stock units, stock options~~cash-based and stock-based performance awards. The Compensation Committee determines the ~~number~~value of ~~shares or stock options subject to~~ each award, as well as the terms, conditions, performance measures, and other provisions of the award. A summary of our Incentive Plans, and the number of shares of our common stock that may be issued under each plan, is as follows:

•

Long-Term Incentive Plan (approved on February 13, 1997) –1,000,000 shares;

•

2002 Long-Term Incentive Plan (approved on April 24, 2002 and amended on April 26, 2006) –500,000 shares;

~~Long-Term Incentive Plan (approved on February 13, 1997) -~~ ~~1,000,000 shares;~~

•

2011 Stock Incentive Plan (approved on April 28, 2011) –500,000 shares; and

~~2002 Long-Term Incentive Plan (approved on April 24, 2002, and amended on April 26, 2006) -~~ ~~500,000 shares;~~

•

2015Stock Incentive Plan (approved on April 23, 2015 and amended on May 22, 2020) – 2,500,000 shares.

~~2011 Stock Incentive Plan (approved on April 28, 2011) -~~ ~~500,000 shares; and~~

~~2015Stock Incentive Plan (approved on April 23,2015)~~ ~~- 1,000,000 shares.~~

At December 31, ~~2018,~~2020, we had ~~527,357~~1,611,928 aggregate shares available for future issuance under our Incentive Plans. ~~We issue new shares through our transfer agent in connection with issuances under the Incentive Plans.~~

Restricted Stock and Stock Option Awards - –Restricted stock awards ~~represent~~include shares of restricted stock and restricted stock units and are subject to transfer restrictions, ~~forfeit~~forfeiture provisions and other terms and conditions of the Incentive Plans. Restricted stock awards to our employees generally have a three-year graded vesting period and awards to our non-employee directors vest over a six-month period. The total initial fair value for these awards is determined based upon the closing price of our stock ~~(typically subject to a minimum price)~~ on the date of grant applied to the total number of shares ~~that we anticipate will vest.~~granted. The fair value is expensed on a straight-line basis over the applicable vesting period.

F-25

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

A summary of activity for our restricted stock awards for ~~2018, 2017~~2020, 2019 and ~~2016~~2018 is as follows:

	2020					2019					2018
	Number of Shares			Weighted- Average Grant-Date Fair Value Per Share		Number of Shares			Weighted- Average Grant-Date Fair Value Per Share		Number of Shares			Weighted- Average Grant-Date Fair Value Per Share
Restricted shares, beginning of period		286,148		$	8.30		526,438		$	11.56		445,126		$	12.83
Granted		470,004			3.80		170,936			6.09		440,185			11.16
Vested		(113,988	)		8.89		(255,449	)		11.41		(250,219	)		10.93
Forfeited		(26,520	)		12.14		(155,777	)		11.81		(108,654	)		12.01
Restricted shares, end of period		615,644			4.61		286,148			8.30		526,438			11.56

Years Ended December 31,
2018 2017 2016

Number
of Shares

Weighted-
Average
Grant-Date
Fair Value
Per Share

Number
of Shares

Weighted-
Average
Grant-Date
Fair Value
Per Share

Number
of Shares

Weighted-
Average
Grant-Date
Fair Value
Per Share
Restricted shares, beginning of period 445,126
$ 12.83
370,565
$ 12.99
262,964
$ 18.33
Granted 440,185
11.16
383,121
13.02
259,699
8.55
Vested (250,219 ) 10.93
(215,478 ) 12.52
(114,804 ) 14.37
Forfeited (108,654 ) 12.01
(93,082 ) 12.53
(37,294 ) 15.48
Restricted shares, end of period 526,438
11.56
445,126
12.83
370,565
12.99

Compensation expense for our restricted stock awards was $1.1 million, $1.8 million and $2.8 million ~~$2.7 million~~for 2020, 2019 and ~~$3.1 million for~~ 2018, ~~2017 and 2016, respectively. The total income tax benefit (expense) recognized for our share-based compensation arrangements was $19,000, $0.3 million and $0 for 2018, 2017 and 2016,~~ respectively. At December 31, ~~2018,~~2020, we had ~~$3.4~~$1.9 million of unrecognized compensation expense related to our restricted stock awards. This cost is expected to be recognized over a weighted-average period of ~~two~~1.9 years. The total fair value of restricted stock awards granted during ~~2018~~2020 was ~~$4.9~~$1.8 million and the total fair value of restricted stock awards that vested during ~~2018~~2020 was ~~$2.7~~$0.4 million. At December 31, ~~2018~~2020, we had no0 outstanding stock option awards and no0 stock option awards were made during ~~2018, 2017~~2020, 2019 or ~~2016.~~

~~GULF ISLAND FABRICATION, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)~~

2018. The income tax benefit (expense) associated with our share-based compensation arrangements was not significant for 2020, 2019 or 2018.

Stock-Based Performance Awards - – Stock-based performance awards represent awards ~~that are settled~~payable in cash ~~and~~ for which the amount payable is determined based upon our total shareholder return during the performance period compared to an industry peer group as determined by our Compensation Committee. The ~~awards have a three-year performance period with grants outstanding for 2016, 2017 and 2018 having performance periods ending December 31, 2018, 2019, and 2020, respectively. The~~ cash payment occurs in the period immediately following the completion of the performance period. The fair value of the awards is calculated each reporting period using a Monte Carlo simulation model and is expensed on a straight-line basis over the applicable performance period, with cumulative adjustments for changes in the fair value between reporting periods.

~~Compensation~~ During 2018 and 2017, stock-based performance awards were granted with a three-year performance period ending December 31, 2020 and 2019, respectively.

During 2020, we did 0t recognize any compensation expense ~~for~~related to our stock-based performance awards with a performance period ended December 31, 2020, as the minimum target for pay-out was not achieved. During 2019, we recognized a benefit of $1.7 million (due to the reversal of previously recognized expense) and during 2018 we recognized compensation expense of $1.1 million, ~~$1.5 million and $1.3 million for 2018, 2017 and 2016, respectively. The total fair value of~~related to our stock-based performance awards ~~granted during 2018, 2017 and 2016 was $3.8 million, $4.7 million and $1.6 million, respectively, as determined using~~with a ~~Monte Carlo simulation model.~~

~~10. ACQUISITIONS~~

~~On January 1, 2016, we acquired substantially all~~performance period ending December 31, 2019.

Cash-Based Performance Awards – Cash-based performance awards represent awards payable in cash based on the achievement of annual income targets. The cash payment occurs in the period immediately following the completion of the ~~assets and assumed certain liabilities of LEEVAC Shipyards, L.L.C. and its affiliates for~~performance period. During 2019, cash-based performance awards were granted with a ~~purchase price of $20.0 million, subject to a working capital adjustment whereby we received a dollar-for-dollar reduction for the assumption of certain net liabilities~~three-year performance period ending December 31, 2021. One-third of the ~~seller and settlement payments applied from sureties on certain ongoing projects that were assigned to us~~award is earned each year in the ~~transaction. After taking into account these adjustments,~~performance period, provided the applicable annual income target is achieved, or is forfeited if the applicable annual income target is not achieved. During 2020 and 2019, we ~~received approximately $3.0 million in cash from~~recognized 0 compensation expense related to cash-based performance awards as the ~~seller. In connection~~minimum income target for 2020 and 2019 was not achieved. The target amount payable associated with the ~~transaction, we acquired~~2021 performance period is approximately ~~$121.2~~$0.5 million ~~of backlog, inclusive of approximately $9.2 million of fair value adjustments and seller reimbursements allocated to four newbuild construction projects for two customers.~~

~~11.~~if the target income metric is achieved.

8. COMMITMENTS AND CONTINGENCIES

MPSV Termination Letter

During the first quarter 2018, we received notices of termination from our customer of the contracts for the construction of ~~two~~2 MPSVs ~~from one of~~within our Shipyard ~~Division customers.~~Division. We dispute the purported terminations and disagree with the customer’s reasons for such terminations. Pending the resolution of the dispute, we have ceased all work and the partially completed ~~MPSVs~~vessels and associated equipment and materials remain at our ~~shipyard~~facility in Houma, Louisiana. The customer also ~~notified our Surety of its purported terminations of the construction contracts and~~ made claims under the performance bonds issued by the Surety in connection with the construction of the ~~two MPSVs.~~vessels, which total $50.0 million. We have ~~notified and met~~discussed with ~~our~~the Surety ~~regarding~~ our disagreement with ~~and objection to,~~ the customer's purported ~~termination~~terminations and its ~~claims. Discussions~~claims and continue to confer with the Surety ~~are ongoing.~~ regarding the dispute with the customer.

F-26

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

On October 2, 2018, we filed a lawsuit against the customer to enforce our rights and remedies under the applicable construction contracts. Our lawsuit disputes the propriety of the customer’s purported ~~termination~~terminations of the construction contracts and seeks to recover damages associated with the customer’s actions. The customer filed its response to our lawsuit denying many of the allegations in the lawsuit and asserting a counterclaim against us seeking, among other things, declaratory judgment as to the validity of the customer’s purported terminations of the construction contracts and other purported claims for which the customer is seeking damages in an unspecified amount. We ~~have~~ filed a response to the counterclaim denying all of the customer’s claims. ~~Subsequent~~The customer subsequently filed an amendment to ~~December 31, 2018,~~its counterclaim to add claims by the customer against the Surety. The customer also filed a motion for partial summary judgment with the trial court seeking, among other things, to obtain possession of the ~~two MPSVs. We intend to respond to~~vessels. A hearing on the motion atwas held on May 28, 2019, and the ~~appropriate time.~~

We are unable to estimate the probability of a favorable or unfavorable outcome with respect to the dispute or estimate the amount of potential loss, if any, related to this matter. We can provide no assurances that we will not incur additional costs as we pursue our rights and remedies under the contracts and defend against the customer’s claims. At December 31, ~~2018,~~2020 and December 31, 2019, other noncurrent assets on our Balance Sheet included a net contract asset of $12.5 million, which consisted of our contract asset, accrued contract losses, and deferred revenue balances at the time of the customer's purported ~~termination~~terminations of the contracts.

We continue to hold first priority security interests and liens against the vessels that secure the obligations owed to us by the customer.

Insurance

We maintain insurance coverage for various aspects of our business and operations. However, we may be exposed to future losses through our use of deductibles and self-insured retentions for our exposures related to third party liability and workers' ~~compensation.~~compensation claims. We expect liabilities in excess of any deductibles and self-insured retentions to be covered by insurance. To the extent we are self-insured, reserves are recorded based upon our estimates, with input from legal and insurance advisors. Changes in assumptions, as well as changes in actual experience, could cause these estimates to change.

~~GULF ISLAND FABRICATION, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)~~

See Note 2 for discussion of insurance deductibles incurred during 2020 associated with damage caused by Hurricane Laura.

Letters of Credit and Surety Bonds

We obtain letters of credit under our ~~Credit Agreement~~LC Facility or surety bonds from financial institutions to provide to our customers in order to secure advance payments or guarantee performance under our contracts, or in lieu of retention being withheld on our contracts. ~~With respect to a letter~~Letters of credit under our ~~Credit Agreement, any advance payment in~~LC Facility are subject to cash securitization of the full amount of the outstanding letters of credit. In the event of non-performance under a contract, our cash securitization with respect to the letter of credit supporting such contract would become ~~a borrowing under our Credit Agreement and thus a direct obligation.~~property of Whitney Bank. With respect to a surety bond, any ~~advance~~ payment in the event of non-performance is subject to indemnification of the ~~surety~~Surety by ~~us, which may require us to borrow under our Credit Agreement.~~us. When a contract is complete, the contingent obligation terminates, and letters of credit or surety bonds are returned. See Note 75 for further discussion of our ~~Credit Agreement~~LC Facility and surety bonds.

Environmental Matters

Our operations are subject to extensive and changing U.S. federal, state and local laws and regulations, as well as the laws of other countries, that establish health and environmental quality standards. These standards, among others, relate to air and water pollutants and the management and disposal of hazardous substances and wastes. We are exposed to potential liability for personal injury or property damage caused by any release, spill, exposure or other accident involving such pollutants, substances or wastes.

In connection

F-27

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

with the historical operation of our facilities, including those associated with acquired operations, substances which currently are or might be considered hazardous were used or disposed of at some sites that will or may require us to make expenditures for remediation.

We believe we are in compliance, in all material respects, with environmental laws and regulations and maintain insurance coverage to mitigate exposure to environmental liabilities. We do not believe any environmental matters will have a material adverse effect on our financial condition, results of operations or cash flow.

Leases

We maintain operating leases for our corporate office and certain operating facilities and equipment. See Note 4 for further discussion of our leases.

9. INCOME (LOSS) PER SHARE

The following table presents the computation of basic and diluted loss per share for 2020, 2019 and 2018 (in thousands, except per share data):

	Years Ended December 31,
	2020			2019			2018
Net loss	$	(27,375	)	$	(49,394	)	$	(20,378	)
Weighted average shares ⁽¹⁾		15,308			15,227			15,032
Basic and diluted loss per common share	$	(1.79	)	$	(3.24	)	$	(1.36	)

~~12.~~

(1) We have 0 dilutive securities.

10. OPERATING SEGMENTS

During 2019, we operated and managed our business through 3 operating divisions (“Fabrication”, “Shipyard”, and “Services”) and 1 non-operating division (“Corporate”), which represented our reportable segments. In the first quarter 2020, our Fabrication and Services Divisions were operationally combined to form an integrated new division called Fabrication & Services. The operational combination will enable us to capitalize on the best practices and execution experience of the former divisions and maximize the utilization of our resources. As a result, we currently operate and manage our business through ~~four~~2 operating divisions ~~("Fabrication", "Shipyard", "Services"~~(“Shipyard” and ~~"EPC"~~“Fabrication & Services”) and ~~one~~1 non-operating division ~~("Corporate"~~(“Corporate”), which represent our reportable ~~segments.We believe that~~segments. Accordingly, the segment results (including the effects of eliminations) for our ~~operating divisions~~Fabrication and Services Divisions for each ~~meet~~of 2019 and 2018 were combined to conform to the ~~criteria~~presentation of our reportable segments ~~under GAAP.~~for 2020. In addition to the division combination, in the first quarter 2020, management and project execution responsibility for our 2 forty-vehicle ferry projects was transferred from our former Fabrication Division to our Shipyard Division to better align the supervision and construction of these vessels with the capabilities and expertise of our Shipyard Division. Accordingly, results for these projects for 2019 (the projects had no results for 2018) were reclassified from our former Fabrication Division to our Shipyard Division to conform to the presentation of these projects for 2020. Our ~~four~~two operating divisions and Corporate Division are discussed ~~below.~~

~~Fabrication Division~~ -Our Fabrication Division fabricates modules for petrochemical and industrial facilities, foundations for alternative energy developments and other complex steel structures. Our Fabrication Division also fabricates offshore drilling and production platforms and other offshore structures for customers in the oil and gas industry, including jackets and deck sections of fixed production platforms, hull, tendon, and/or deck sections of floating production platforms (such as TLPs, SPARs, FPSOs and MinDOCs), piles, wellhead protectors, subsea templates, and various production, compressor, and utility modules along with pressure vessels. We perform these activities at our fabrication yard in Houma, Louisiana.

below:

Shipyard Division - –Our Shipyard Division fabricates newbuild marine vessels, including OSVs, MPSVs, research vessels, ~~tug boats,~~tugboats, salvage vessels, towboats, barges, drydocks, anchor handling vessels, and lift ~~boats and other marine vessels. Our Shipyard Division also performs~~boats; provides marine repair ~~activities,~~and maintenance services, including steel repair, blasting and painting services, electrical systems repair, machinery and piping system repairs, and propeller, shaft, and rudder ~~reconditioning. In addition, we perform~~reconditioning; and performs conversion projects ~~that consist of lengthening~~to lengthen vessels ~~modifying~~and modify vessels to permit their use for a different type of activity ~~and other modifications to~~or enhance ~~the~~their capacity or ~~functionality of a vessel. We perform these~~functionality. These activities are performed at our ~~shipyards in~~ Houma Yards. See Note 3 for discussion of our closure of the Jennings Yard and Lake Charles ~~Louisiana.~~

Yard.

Fabrication & Services Division- –Our Fabrication & Services (“F&S”) Division fabricates modules, skids and piping systems for onshore refining, petrochemical, LNG and industrial facilities and offshore facilities; fabricates foundations, secondary steel components and support structures for alternative energy developments and coastal mooring facilities; fabricates offshore production platforms and associated structures, including jacket foundations, piles and topsides for fixed production and utility platforms, as well as hulls and topsides for floating production and utility platforms; fabricates other complex steel structures and components; provides ~~interconnect piping~~ services on offshore platforms, ~~and inshore structures. Interconnect~~including welding, interconnect piping ~~services involve sending employee crews to offshore platforms in the GOM to perform welding~~ and other ~~activities~~services required to connect production equipment and service modules and other equipment on a platform. We also contract with oil and gas companies that have platforms and other structures located in the inland lakes and bays throughout the southeastern United States for variousequipment; provides on-site construction and maintenance ~~activities. In addition, we fabricate packaged skid units~~services on inland platforms and ~~perform various~~structures and industrial facilities; and performs municipal and drainage projects, ~~such as~~including pump stations, levee reinforcement, bulkheads and other public ~~works projects for state and local governments. We perform these services~~works. These activities are performed at our ~~customer's facilities or at our services yard in~~ Houma ~~Louisiana.~~

~~EPC Division -~~ Our EPC Division was created during the fourth quarter 2017 to manage potential work for the SeaOne Project, offshore wind opportunities and other projects that may require project management of EPC activities. During the fourth

Yards.

F-28

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

quarter 2017, SeaOne selected us as the prime contractor for the engineering, procurement, construction, installation, commissioning and start-up operations for its SeaOne Project. This project is expected to consist of an export facility in Gulfport, Mississippi and import facilities in the Caribbean and South America. Our current activities include pricing, planning and scheduling for the project. SeaOne’s selection of the Company is non-binding and commencement of the project remains subject to a number of conditions, including agreement on terms of the engagement with SeaOne. We understand that SeaOne is in the process of securing financing for the project.

Corporate Division - –Our Corporate Division ~~represents expenses~~includes costs that do not directly relate to our ~~four operating divisions and are not allocated to our~~two operating divisions. Such ~~expenses~~costs include, but are not limited to, costs ~~related to executive management and directors' fees, clerical and administrative salaries, costs~~ of maintaining our corporate office, executive management salaries and incentives, board of directors' fees, litigation related costs, and costs associated with overall corporate governance and being a publicly traded company.

Costs incurred by our Corporate Division on behalf of our operating divisions are allocated to the operating divisions. Such costs include, but are not limited to, human resources, insurance, information technology and accounting.

We generally evaluate the performance of, and allocate resources to, our divisions based upon gross profit ~~(loss)~~or loss and operating income ~~(loss).~~or loss. Segment assets are comprised of all assets attributable to each division. Intersegment revenues are priced at the estimated fair value of work performed. Summarized financial information for our segments as of and for the three-year period ended December 31, ~~2018,~~2020, is as follows (in thousands):

	Year Ended December 31, 2020
	Shipyard			F&S		Corporate			Total
Revenue	$	153,698		$	99,485	$	(2,224	)	$	250,959
Gross profit (loss) ⁽¹⁾		(19,274	)		1,523		—			(17,751	)
Operating income (loss) ⁽¹⁾		(24,343	)		5,893		(8,709	)		(27,159	)
Depreciation and amortization expense		3,254			5,061		302			8,617
Capital expenditures		6,499			4,522		191			11,212
Total assets ⁽⁴⁾		121,992			54,966		54,385			231,343

	Year Ended December 31, 2019
	Shipyard ⁽⁵⁾			F&S ⁽⁵⁾			Corporate			Total
Revenue	$	168,466		$	137,169		$	(2,327	)	$	303,308
Gross loss ⁽²⁾		(16,025	)		(657	)		(317	)		(16,999	)
Operating loss ⁽²⁾		(26,428	)		(13,696	)		(9,897	)		(50,021	)
Depreciation and amortization expense		4,167			4,984			413			9,564
Capital expenditures		1,827			1,963			—			3,790
Total assets ⁽⁴⁾		103,409			77,402			71,966			252,777

	Year Ended December 31, 2018
	Shipyard			F&S		Corporate			Total
Revenue	$	96,424		$	126,695	$	(1,872	)	$	221,247
Gross profit (loss) ⁽³⁾		(10,472	)		4,607		(1,331	)		(7,196	)
Operating income (loss) ⁽³⁾		(14,396	)		4,558		(9,827	)		(19,665	)
Depreciation and amortization expense		4,229			5,826		295			10,350
Capital expenditures		2,003			1,460		18			3,481
Total assets ⁽⁴⁾		97,197			102,719		58,374			258,290

2018

Fabrication⁽¹⁾
Shipyard ⁽¹⁾
Services EPC Corporate Eliminations Consolidated
Revenue $ 37,943
$ 96,424
$ 88,230
$ 2,477
$ —
$ (3,827 ) $ 221,247
Gross profit (loss) (7,794 ) (10,472 ) 12,447
(46 ) (1,331 ) —
(7,196 )
Operating income (loss) (2,950 ) (14,396 ) 9,371
(1,863 ) (9,827 ) —
(19,665 )
Depreciation expense 4,310
4,229
1,511
5
295
—
10,350
Capital expenditures 73
2,003
1,244
143
18
—
3,481
Total Assets 62,138
97,197
38,643
1,938
58,374
—
258,290

2017
Fabrication
Shipyard ⁽²⁾
Services EPC Corporate Eliminations Consolidated
Revenue $ 57,880
$ 52,699
$ 65,445
$ 198
$ —
$ (5,200 ) $ 171,022
Gross profit (loss) (1,941 ) (44,870 ) 4,575
41
(730 ) —
(42,925 )
Operating income (loss) (12,010 ) (50,044 ) 1,874
41
(8,471 ) —
(68,610 )
Depreciation expense 6,592
4,073
1,676
—
404
—
12,745
Capital expenditures 2,395
1,909
403
—
127
—
4,834
Total Assets 155,731
74,516
32,487
198
7,908
—
270,840

2016
Fabrication Shipyard Services EPC Corporate Eliminations Consolidated
Revenue $ 88,683
$ 109,502
$ 91,414
$ —
$ —
$ (3,273 ) $ 286,326
Gross profit (loss) 5,276
7,801
12,420
—
(644 ) —
24,853
Operating income (loss) 2,009
2,436
9,217
—
(7,798 ) —
5,864
Depreciation expense 18,566
4,686
1,775
—
421
—
25,448
Capital expenditures 2,633
1,861
1,495
—
806
—
6,795
Total Assets 195,901
81,928
37,102
—
7,477
—
322,408

~~_______________~~

(1)

Gross profit (loss) and operating income (loss) for 2020 includes project charges of $16.6 million for our Shipyard Division and project improvements of $2.7 million for our F&S Division. Operating income (loss) also includes impairment charges and net losses on the sales of assets held for sale of $1.6 million and $2.5 million for our Shipyard Division and F&S Division, respectively, charges of $1.3 million associated with damage caused by Hurricane Laura at our Lake Charles Yard for our Shipyard Division, and a gain of $10.0 million associated with the settlement of a contract dispute for our F&S Division. See Note 2 for further discussion of our project and hurricane impacts and Note 3 for further discussion of our facility closures and impairments.

~~(1)~~

(2)

Gross loss and operating loss for ~~2018~~2019 includes project charges of $12.3 million and $4.9 million for ~~our Fabrication Division includes a $2.4 million impact from increased costs on a petrochemical module project and~~ our Shipyard Division ~~includes a $6.7 million impact from increased forecast costs on our harbor tug projects.~~and F&S Division, respectively. Operating loss also includes impairment charges and net gains on the sales of assets held for sale of $7.9 million and $8.9 million for our Shipyard Division and F&S Division, respectively, and restructuring costs of $0.7 million for our Corporate Division. See Note 2 for further discussion of our project impacts and Note 3 for further discussion of our impairments.

(3)

Gross profit (loss) and operating income (loss) for 2018 includes project charges of $6.7 million and $2.4 million for our Shipyard Division and F&S Division, respectively. Operating income (loss) also includes impairment charges of $1.0 million for our Shipyard Division and a net benefit of ~~$6.9~~$7.8 million for our F&S Division, primarily related to a gain on the sale of our South Texas Properties of ~~$8.0~~$7.7 million and a gain on insurance recoveries of $3.6 million, offset partially by impairments of ~~$4.4 million related to inventory and assets that were held for sale and a loss on assets sold of $0.3 million within our Fabrication and Shipyard Divisions.~~$3.5 million. See Note 2 for further discussion of ~~the~~our project ~~charges~~impacts and Note 3 ~~and Note 5~~ for further discussion of our asset ~~impairments~~impairments.

(4)

Cash and ~~gains on assets held for sale.~~short-term investments are reported within our Corporate Division.

~~(2)~~

(5)

~~Gross~~

Revenue of $9.2 million and gross loss and operating loss of $5.1 million for ~~2017 for~~2019, and contract assets and contract receivables of $6.0 million as of December 31, 2019, associated with our 2 forty-vehicle ferry projects were reclassified from our former Fabrication Division to our Shipyard Division ~~includes a $34.5 million impact from increased forecast costs on our MPSV projects. See Note 2~~to conform to the presentation of these projects for ~~further discussion of the MPSV projects.~~2020.

F-29

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

~~13.~~

11. QUARTERLY OPERATING RESULTS (UNAUDITED)

The following table presents selected unaudited consolidated financial information on a quarterly basis for ~~2018~~2020 and ~~2017~~2019 (in thousands, except per share data):


	March 31, 2018			June 30, 2018			September 30, 2018			December 31, 2018 ⁽¹⁾			March 31, 2020			June 30, 2020			September 30, 2020			December 31, 2020 ⁽¹⁾
Revenue	$	57,290		$	54,014		$	49,712		$	60,231		$	78,555		$	59,974		$	54,869		$	57,561
Gross profit (loss)	679			(699		)	(3,212		)	(3,964		)
Gross loss														(254	)		(1,703	)		(7,817	)		(7,977	)
Net income (loss)	(5,296		)	549			(10,949		)	(4,682		)	��	5,905			(5,537	)		(12,337	)		(15,406	)
Basic and diluted EPS	(0.36		)	0.04			(0.73		)	(0.31		)
Basic and diluted income (loss) per share														0.39			(0.36	)		(0.81	)		(1.01	)


	March 31, 2017			June 30, 2017			September 30, 2017			December 31, 2017 ⁽²⁾			March 31, 2019			June 30, 2019			September 30, 2019			December 31, 2019 ⁽²⁾
Revenue	$	37,993		$	45,868		$	49,884		$	37,277		$	67,605		$	80,456		$	75,802		$	79,445
Gross loss	(4,897		)	(11,620		)	(494		)	(25,914		)
Gross profit (loss)														553			(1,598	)		(2,685	)		(13,269	)
Net loss	(6,454		)	(10,923		)	(3,110		)	(24,279		)		(3,042	)		(5,248	)		(6,779	)		(34,325	)
Basic and diluted EPS	(0.45		)	(0.73		)	(0.21		)	(1.63		)
Basic and diluted loss per share														(0.20	)		(0.34	)		(0.44	)		(2.26	)

~~______________~~

(1)

Gross loss and net loss for the fourth quarter ~~2018~~2020 includes project charges of $8.8 million for our Shipyard Division. Net loss for the fourth quarter 2020 also includes impairment charges and net losses on the sales of assets held for sale of $1.6 million and $2.4 million for our Shipyard Division and F&S Division, respectively. The fourth quarter 2020 was ~~primarily due to under recovery~~also impacted by the under-recovery of ~~our~~ overhead costs ~~within~~for our ~~Fabrication~~F&S Division, and to a ~~$5.8 million impact from increased forecast costs on our harbor tug projects within~~lesser extent, our Shipyard Division. See Note 2 for further discussion of ~~these projects. Net loss benefited from the reversal of a bad debt reserve of $2.8 million established during the third quarter 2018~~our project impacts and Note 3 for ~~a receivable that was collected during the fourth quarter 2018. Net loss also includes a $4.1 million gain on the sale~~further discussion of our ~~Texas North Yard, offset partially by impairments of $3.0 million.~~impairments.

(2)

Gross loss and net loss for the fourth quarter ~~2017~~2019 includes project charges of $10.2 million and $3.8 million for our Shipyard Division and F&S Division, respectively. Net loss for the fourth quarter 2019 also includes impairment charges of $7.6 million, $9.0 million and $0.7 million for our Shipyard Division, F&S Division and Corporate Division, respectively. The fourth quarter 2019 was also impacted by the under-recovery of overhead costs for our F&S Division, and to a ~~$34.5 million impact from increased forecast costs on our MPSV projects within~~lesser extent, our Shipyard Division. See Note 2 for further discussion of ~~the MPSV projects.~~our project impacts and Note 3 for further discussion of our impairments.

12. SUBSEQUENT EVENTS

On March 26, 2021, we amended our revolving credit facility with Whitney Bank. See Note 5 for further discussion of our amendment.

GULF ISLAND FABRICATION, INC.

EXHIBIT INDEX

EXHIBIT NUMBER

~~EXHIBIT~~ ~~NUMBER~~ 3.1

~~2.1~~		~~Asset Purchase Agreement, dated December 23, 2015, among the Company, LEEVAC~~Amended and ~~certain other parties thereto, incorporated by reference to Exhibit 2.1 of the Company’s Form 8-K filed on December 23, 2015.~~

~~3.1~~		~~Composite~~Restated Articles of Incorporation of the Company, incorporated by reference to Exhibit 3.1 of the Company’s ~~Quarterly Report~~Form 8-K filed with the SEC on ~~Form 10-Q for the quarter ended March 31, 2009~~May 22, 2020 (SEC File No. 001-34279).

3.2		Amended and Restated Bylaws of the Company, incorporated by reference to Exhibit 3.1 of the ~~Company's~~Company’s Form 8-K filed with the SEC on November ~~6, 2018.~~10, 2020 (SEC File No. 001-34279).

4.1		Specimen Common Stock Certificate, incorporated by reference to the Company’s Form S-1/A filed with the SEC on March 19, 1997 (Registration No. 333-21863). ^

~~10.1~~ 4.2		Description of Common Stock of the Company.*

10.1		Form of ~~Indemnity~~Indemnification Agreement by and between the Company and each of its directors and executive officers, incorporated by reference to Exhibit 10.1 of the ~~Company's~~Company’s Form 8-K filed with the SEC on November 4, 2016.†

10.2		The Company's Long-Term Incentive Plan, incorporated by reference to the ~~Company's~~Company’s Form S-1 filed with the SEC on February 14, 1997 (Registration Number 333-21863).†^

10.3		The Company’s 2002 Long-Term Incentive Plan, as amended and restated, incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 filed with the SEC on July 27, 2006.† ^

10.4		The Company’s 2011 Stock Incentive Plan, incorporated by reference to Exhibit 99 to the Company’s Form S-8 filed with the SEC on August 9, 2011 (Registration No. 333-176187) (SEC File No. 001-34279).†

10.5		The Company’s 2015 Stock Incentive Plan Amended and Restated, incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed with the SEC on ~~April 28, 2015.~~ May 22, 2020.†

10.6		Form of ~~Performance Share Unit~~Long-Term Performance-Based Cash Award Agreement (adopted in 2019), incorporated by reference to Exhibit 10.6 of the ~~Company's Annual Report on~~Company’s Form 10-K for the year ended December 31, ~~2016.~~2019 filed with the SEC on March 5, 2020.†

10.7		Form of Long-Term Performance-Based Cash Award Agreement (adopted in 2017), incorporated by reference to Exhibit 10.7 of the Company’s Form 10-K filed with the SEC on March 5, 2020.†

10.8		Form of Restricted Stock Unit Agreement, incorporated by reference to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 filed with the SEC on May 5, 2015.†

~~10.8~~ 10.9		~~Form of Long-Term Performance-Based Cash Award Agreement, incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2016. †~~

~~10.9~~		The Company’s Amended and Restated Annual Incentive Program, incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed with the SEC on March 5, 2015.†

10.10		~~Form of Restricted Stock Agreement, incorporated by reference to Exhibit 10.8 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005. † ^~~

~~10.11~~		Form of non-employee director award agreement, incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 filed with the SEC on August 9, 2018.†



~~EXHIBIT~~ ~~NUMBER~~ 10.11
~~10.12~~		Change of Control Agreement effective December 12, 2018 between the Company and Westley S. Stockton, incorporated by reference to Exhibit 10.13 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on March 1, ~~2018~~2019.†

10.12		Change of Control Agreement effective November 14, 2019 between the Company and Richard W. Heo, incorporated by reference to Exhibit 10.12 of the Company’s Form 10-K for the year ended December 31, 2019 filed with the SEC on March 5, 2020.†

10.13		Separation and Transition Agreement, dated October 18, 2019, between the Company and Kirk J. Meche, incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed with the SEC on ~~February 26, 2018.~~ October 21, 2019 (SEC File No. 001-34279).†

~~10.13~~ 10.14		~~Change~~Form of ~~Control~~Retention Bonus Agreement ~~effective December 12, 2018 between the Company and Westley S. Stockton.*†~~

~~10.14~~		~~Change of Control Agreement effective~~dated March ~~1, 2018 between the Company and Todd F. Ladd~~3, 2020, incorporated by reference to Exhibit 10.3 of the ~~Company's~~Company’s quarterly report on Form ~~8-K~~10-Q for the quarter ended March 31, 2020 filed with the SEC on ~~February 26, 2018.~~ May 7, 2020.†

10.15		Credit Agreement dated June 9, 2017, incorporated by reference to Exhibit 10.1 of the ~~Company's~~Company’s Form 8-K filed with the SEC on June 12, 2017.

10.16		First Amendment to Credit Agreement dated December 29, 2017, incorporated by reference to Exhibit 10.14 to the ~~Company's~~Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2017 filed with the SEC on March 9, 2018.

10.17		Second Amendment to Credit Agreement dated February 26, 2018, incorporated by reference to Exhibit 10.15 to the ~~Company's~~Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2017 filed with the SEC on March 9, 2018.

EXHIBIT NUMBER

10.18		Third Amendment to Credit Agreement dated August 27, 2018, incorporated by reference to Exhibit 10.1 to the ~~Company's~~Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 filed with the SEC on November 9, 2018.

10.19		~~Real Estate Purchase~~Consent and ~~Option Contract~~Fourth Amendment to Credit Agreement dated ~~December 20, 2017,~~May 1, 2019, incorporated by reference to Exhibit ~~10.16 of~~10.1 to the ~~Company's Annual Report on Form 10-K for the year ended December 31, 2017.~~

~~10.20~~		~~Agreement of Sale between Berry Contracting, L.P. and Gulf Marine Fabricators, L.P., dated as of September 26, 2018, incorporated by reference to Exhibit 10.2 of the Company's~~Company’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2018.~~March 31, 2019 filed with the SEC on May 7, 2019 (SEC File No. 001-34279).

~~10.21~~ 10.20		Fifth Amendment to Credit Agreement dated February 28, 2020, incorporated by reference to Exhibit 10.21 of the Company’s Form 10-K for the year ended December 31, 2019 filed with the SEC on March 5, 2020.

10.21		Sixth Amendment to Credit Agreement dated August 3, 2020, incorporated by reference to Exhibit 10.5 of the Company’s Form 10-Q for the quarter ended June 30, 2020 filed with the SEC on August 5, 2020.

10.22		Waiver and Seventh Amendment to Credit Agreement dated March 26, 2021.*

10.23		Cooperation Agreement dated November 2, 2018, by and among Gulf island Fabrication, Inc., Piton Capital Partners, LLC and Kokino LLC, incorporated by reference to Exhibit 10.1 of the ~~Company's~~Company’s Form 8-K filed with the SEC on November 6, 2018.

~~21.1~~ 10.24		First Amendment to Cooperation Agreement dated February 25, 2020, by and among Gulf Island Fabrication, Inc., Piton Capital Partners, LLC and Kokino LLC, incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed with the SEC on February 26, 2020.

10.25		Promissory Note, dated April 17, 2020, by and between Hancock Whitney Bank and Gulf Island Fabrication, Inc., incorporated by reference to Exhibit 10.2 of the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2020 filed with the SEC on May 7, 2020.

21		Subsidiaries of the Company - The ~~Company's~~Company’s significant subsidiaries, Gulf Island Works, L.L.C., Gulf Island, L.L.C., Gulf Island Shipyards, L.L.C. (with trade name Gulf Island Marine Fabricators), ~~Gulf Island EPC, LLC,~~ Gulf Island Services, L.L.C. (with trade names Gulf Island Steel Sales, Dolphin Services and Dolphin Steel Sales) (each organized under Louisiana law) and Gulf Island Marine Fabricators, L.P. (a Texas limited partnership) are wholly owned and are included in the Company's consolidated financial statements.

~~23.1~~ 22		Subsidiary guarantors and issuers of guaranteed securities – From time to time, the Company may issue debt securities under a registration statement on Form S-3 filed with the SEC that are fully and unconditionally guaranteed by Gulf Island, L.L.C., Gulf Island Shipyards, LLC and Gulf Island Services, L.L.C., each a wholly-owned subsidiary of the Company.

23.1		Consent of Ernst & Young LLP.*

31.1		CEO Certifications pursuant to Rule 13a-14 under the Securities Exchange Act of 1934.*

31.2		CFO Certifications pursuant to Rule 13a-14 under the Securities Exchange Act of 1934.*

32		Section 906 Certifications furnished pursuant to 18 U.S.C. Section 1350.*

101 INS		~~Attached as Exhibit 101 to this report~~ Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the ~~following items~~Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema Linkbase Document.

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104		The cover page for the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, has been formatted in Inline XBRL ~~(Extensible Business Reporting Language):~~
		~~(i) Consolidated Balance Sheets,~~ ~~(ii) Consolidated Statements of Operations,~~ ~~(iii) Consolidated Statement of Changes~~and is contained in ~~Shareholders’ Equity,~~ ~~(iv) Consolidated Statements of Cash Flows and~~ ~~(v) Notes to Consolidated Financial Statements.~~ Exhibit 101.


†
†	Management Contract or Compensatory Plan.

*	Filed herewith.


^
*	~~Filed herewith.~~



^	SEC File Number 000-22303.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March ~~1, 2019.~~

29, 2021.




		GULF ISLAND FABRICATION, INC. (Registrant)

By:	~~By:~~	/S/ ~~KIRK J. MECHE~~RICHARD W. HEO
		~~Kirk J. Meche~~ Richard W. Heo
		President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March ~~1, 2019.~~

29, 2021.

Signature		Title


~~Signature~~		~~Title~~

/S/ ~~KIRK J. MECHE~~RICHARD W. HEO		President, Chief Executive Officer and Director (Principal Executive Officer)
~~Kirk J. Meche~~ Richard W. Heo	��

/S/ WESTLEY S. STOCKTON		Executive Vice President, Chief Financial Officer, Treasurer and Secretary (Principal Financial Officer)
Westley S. Stockton

/S/ ROBERT A. WALLIS		Chief Accounting Officer (Principal Accounting Officer)
Robert A. Wallis		Chief Accounting Officer (Principal Accounting Officer)

/S/ ROBERT M. AVERICK		Director
Robert M. Averick

/S/ MURRAY W. BURNS		Director
Murray W. Burns

/S/ WILLIAM E. CHILES		Director
William E. Chiles

~~/S/ GREGORY J. COTTER~~		~~Director~~
~~Gregory J. Cotter~~

/S/ MICHAEL A. FLICK		~~Director~~ Chairman of the Board
Michael A. Flick

~~/S/ CHRISTOPHER M. HARDING~~		~~Director~~
~~Christopher M. Harding~~

/S/ MICHAEL J. KEEFFE		Director
Michael J. Keeffe

~~/S/ JOHN P. LABORDE~~		~~Chairman of the Board~~
~~John P. Laborde~~

/S/ CHERYL D. RICHARD		Director
Cheryl D. Richard

~~S-2~~

S-1

Louisiana		72-1147390

~~Louisiana~~		~~72-1147390~~
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

16225 Park Ten Place, Suite 300 Houston, Texas		77084
(Address of principal executive offices)		(Zip code)



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock ~~no par value~~	GIFI	~~The Nasdaq Stock Market LLC~~ ~~(Nasdaq Global Select Market)~~ NASDAQ



Large accelerated filer ¨	☐	Accelerated filer x	☐
Non-accelerated filer ¨	☒	Smaller reporting company x	☒
		Emerging growth company ¨	☐


ASU
~~ASU~~		Accounting Standards Update.

Balance Sheet		Our Consolidated Balance Sheets, as filed in this Report.

CARES Act	The Coronavirus Aid, Relief and Economic Security Act.

COVID-19	The ongoing global coronavirus pandemic.

contract assets		Costs and estimated earnings recognized to date in excess of cumulative billings.

contract liabilities		Cumulative billings in excess of costs and estimated earnings recognized to date and accrued contract losses.

~~Credit Agreement~~ Covered Period		~~Our $40.0 million revolving credit facility with Hancock Whitney Bank~~ ~~maturing June 9, 2020, as amended.~~ The eight-week period following the date of the PPP Loan of April 17, 2020.

deck		The component of a platform on which drilling, production, separating, gathering, piping, compression, well support, crew quartering and other functions related to offshore oil and gas development are conducted.

~~direct~~ labor hours		Hours worked by employees directly involved in the production of our ~~products. These hours do not include support personnel such as maintenance and warehousing.~~products or delivery of our services.

DTA(s)		Deferred ~~tax asset(s)~~Tax Asset(s).

EPC		Engineering, procurement and construction phases of a complex project that requires project management and coordination of these significant activities.

~~EPS~~ ESG		~~Earnings per share.~~ Environmental, Social and Governance.

Exchange Act		Securities Exchange Act of 1934, as amended.

Fabrication ~~AHFS~~& Services		~~The remaining machinery and equipment previously located at our Texas North Yard that was not sold in connection with the sale of the Texas North Yard and continues~~ Our Fabrication & Services Division (also referred to ~~be held for sale by our Fabrication Division.~~herein as F&S).

FASB		Financial Accounting Standards Board.

Financial Statements		Our Consolidated Financial Statements, including comparative consolidated Balance Sheets, Statements of Operations, Statements of Changes in Shareholders' Equity and Statements of Cash Flows, as filed in this Report.

~~FPSO~~ Flexibility Act		~~Floating Production Storage and Offloading vessel. A floating vessel used by~~ The Paycheck Protection Program Flexibility Act of 2020, which amended the ~~offshore oil and gas industry for the production and processing of hydrocarbons and for the storage of oil.~~CARES Act.

GAAP		Generally ~~accepted accounting principles~~Accepted Accounting Principles in the U.S.

GOM		Gulf of Mexico.

Gulf Coast	Along the coast of the Gulf of Mexico.

Houma Yards	Our Shipyard Division and Fabrication ~~Yard~~		~~Our Fabrication Division's fabrication yard~~& Services Division facilities located in Houma, Louisiana.



~~Houma Shipyard~~		~~Our Shipyard Division's shipyard located in Houma, Louisiana.~~

Incentive Plans		Long-term incentive plans under which equity or cash-based awards may be made to eligible employees and non-employee directors.

inland ~~or inshore~~		Typically, in bays, lakes and marshy areas.

~~jacket:~~ jacket		A component of a fixed platform consisting of a tubular steel, braced structure extending from the mudline of the seabed to a point above the water surface. The jacket is anchored with tubular steel pilings driven into the seabed. The jacket supports the deck structure located above the water.

Jennings ~~Shipyard~~Yard		Our Shipyard Division's ~~shipyard~~facility located near Jennings, Louisiana.

Lake Charles ~~Shipyard~~Yard		Our Shipyard Division's ~~shipyard~~facility located near Lake Charles, Louisiana.

~~LIBOR~~ LC Facility	Our $20.0 million letter of credit facility with Hancock Whitney Bank maturing June 30, 2023, as amended.



x ☒	Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



¨ ☐	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



	Page
Glossary of Terms	ii
~~PART I~~	2
PART I	2
Items 1 and 2. Business and Properties	2
Item ~~1A.~~1A Risk Factors	10 8
Item 1B. Unresolved Staff Comments	20
Item 3. Legal Proceedings	20
Item 4. Mine Safety Disclosures	20
~~Item 4A. Executive Officers of the Registrant~~	20
PART II	21
~~PART II~~	21
Item 5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	21
Item 6. Selected Financial Data	23 21
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	25 22
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	44 45
Item 8. Financial Statements and Supplementary Data	44 45
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	44 45
Item 9A. Controls and Procedures	45 46
Item 9B. Other Information	47 46

PART III	47
Item 10. Directors, Executive Officers and Corporate Governance	47
Item 11. Executive Compensation	47
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	47
Item 13. Certain Relationships and Related Transactions, and Director Independence	47
Item 14. Principal Accounting Fees and Services	47

PART IV	48
Item 15. Exhibits, Financial Statement Schedules	48
~~FINANCIAL STATEMENTS~~Item 16. Form 10-K Summary	~~F-1~~ 48
~~EXHIBIT INDEX~~	~~E-1~~
~~SIGNATURES~~FINANCIAL STATEMENTS	F-1
EXHIBIT INDEX	E-1
SIGNATURES	S-1


LIBOR	London Inter-Bank Offered Rate.

~~MinDOC~~ LNG		Minimum Deepwater Operating Concept. A floating production platform designed for stability and dynamic positioning response to waves consisting of three vertical columns arranged in a triangular shape connected to upper and lower pontoon sections. Liquified Natural Gas.

modules		Fabricated structures that include structural steel, piping, valves, fittings, storage vessels and other equipment that are incorporated into a refining, petrochemical, LNG or industrial system. These modules are ~~pre-fabricated~~prefabricated at our facilities and then transported to the customer's location for final integration.

MPSV		Multi-Purpose Service Vessel.

NOL(s)		Net operating loss(es) that are available to offset future taxable income, subject to certain limitations.

offshore		In unprotected waters outside coastlines.

onshore		Inside the coastline on land.

OSV		Offshore Support Vessel.

OPEC		Organization of the Petroleum Exporting Countries.

~~Performance Obligation~~ performance obligation		A contractual obligation to construct and transfer a distinct good or service to a customer. It is the unit of account in Topic 606. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.

~~piles~~ Permissible Expenses	Expenses which may be paid using proceeds from the PPP Loan. Such expenses are limited to payroll costs, rent, utilities, mortgage interest and interest on other pre-existing indebtedness.

piles	Rigid tubular pipes that are driven into the seabed to support platforms.

~~platform~~ PPP	Paycheck Protection Program administered by the SBA under the CARES Act.

PPP Loan	Our $10.0 million loan from Whitney Bank issued pursuant to the PPP.

platform	A structure from which offshore oil and gas development drilling and production are conducted.

~~pressure vessel~~ SBA		~~A metal container generally cylindrical or spheroid, capable of withstanding various internal pressure loads.~~ Small Business Administration.

~~SeaOne~~ SEC		~~SeaOne Caribbean, LLC.~~

~~SeaOne Project~~		The engineering, procurement, construction, installation, commissioning and start-up work for SeaOne's Compressed Gas Liquids Caribbean Fuels Supply Project. This project is expected to consist of an export facility in Gulfport, Mississippi and import facilities in the Caribbean and South America.




~~SEC~~		U.S. Securities and Exchange Commission.

~~Shipyards~~ Shipyard		Our ~~Houma~~ Shipyard ~~Jennings Shipyard and Lake Charles Shipyard.~~Division.

~~Shipyard AHFS~~		~~Drydock of our Shipyard Division that is held for sale.~~

~~skid unit~~		~~Packaged equipment usually consisting of major production, utility or compression equipment with associated piping and control system.~~

South Texas Properties		Our former Texas North Yard and Texas South Yard. ~~The Texas South Yard was sold on April 20, 2018 and the Texas North Yard was sold on November 15, 2018.~~

~~SPAR~~ Spud barge		Single Point Anchor Reservoir. A floating structure with a circular cross-section that sits vertically in the water and is used for infield flow lines and associated subsea infrastructure. The SPAR connects subsea production and injection wells for oil and gas production in deepwater environments.

~~spud barge~~		Construction barge rigged with vertical tubular or square lengths of steel pipes that are lowered to anchor the vessel.

Statement of Cash Flows		Our Consolidated Statements of Cash Flows, as filed in this Report.

Statement of Operations		Our Consolidated Statements of Operations, as filed in this Report.

~~subsea templates~~ Surety		~~Tubular frames which are placed on the seabed and anchored with piles. Usually a series of oil and gas wells are drilled through these underwater structures.~~

~~Surety~~		A financial institution that issues bonds to customers on behalf of the Company for the purpose of providing third-party financial assurance related to the performance of our contracts.

T&M		Work performed and billed to the customer generally at contracted time and material rates, cost plus or other variable fee arrangements which can include a mark-up.

Texas North Yard		Our former fabrication yard, and certain related machinery and equipment, located in Aransas Pass, Texas, which was sold on November 15, 2018.

Texas South Yard		Our former fabrication yard, and certain related machinery and equipment, located in Ingleside, Texas, which was sold on April 20, 2018.

~~TLP~~		Tension Leg Platform. A floating hull and deck anchored by vertical tensioned cables or pipes connected to pilings driven into the seabed. A tension leg platform is typically used in water depths exceeding 1,200 feet.

Topic 606		The revenue recognition criteria prescribed under ASU 2014-09, Revenue from Contracts with Customers.

U.S.		The United States of America.

USL&H		United States Longshoreman and Harbor Workers Act.

VA(s)	Valuation Allowance(s).
	~~Valuation allowance(s).~~
Whitney Bank	Hancock Whitney Bank.



					Current Program
Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
October 1 to 31, 2018	—		$	—	—	—
November 1 to 30, 2018	—		—		—	—
December 1 to 31, 2018	1,738		7.85		—	—
Total	1,738	^(a)	7.85		—	—



			ANNUAL RETURN PERCENTAGE Years Ending
Company / Index			Dec 14		Dec 15		Dec 16		Dec 17		Dec 18
Gulf Island			(14.9)%		(44.2)%		14.3%		13.2%		(46.2)%
S&P 500 Index			13.7		1.4		12.0		21.8		(4.4)
S&P 500 Oil & Gas Equipment & Services Index			(7.8)		(18.8)		31.9		(14.7)		(41.5)

	Base Period Dec 13		INDEXED RETURNS ($'s) Years Ending
Company / Index			Dec 14		Dec 15		Dec 16		Dec 17		Dec 18
Gulf Island	$	100.00	$	85.15	$	47.50	$	54.29	$	61.47	$	33.06
S&P 500 Index	100.00		113.69		115.26		129.05		157.22		150.33
S&P 500 Oil & Gas Equipment & Services Index	100.00		92.20		74.91		98.83		84.32		49.36



	Years Ended December 31,
	2018			2017			2016			2015			2014
	(in thousands, except per share data)
Statement of Operations Data:
Revenue	$	221,247		$	171,022		$	286,326		$	306,120		$	506,639
Cost of revenue	228,443			213,947			261,473			321,276			462,083
Gross profit (loss) ^{(1) (3) (5)}	(7,196		)	(42,925		)	24,853			(15,156		)	44,556
General and administrative expense	19,015			17,800			19,670			16,256			17,409
Asset impairments and (gain) loss on assets held for sale, net ^{(2) (4) (6)}	(6,850		)	7,931			—			7,202			3,200
Other (income) expense, net	304			(46		)	(681		)	(20		)	99
Operating income (loss)	(19,665		)	(68,610		)	5,864			(38,594		)	23,848
Interest expense, net	(142		)	(349		)	(308		)	(139		)	(24		)
Income (loss) before income taxes	(19,807		)	(68,959		)	5,556			(38,733		)	23,824
Income tax (expense) benefit	(571		)	24,193			(2,041		)	13,369			(8,504		)
Net income (loss)	$	(20,378	)	$	(44,766	)	$	3,515		$	(25,364	)	$	15,320
Income Summary Data:
Basic and diluted income (loss) per common share	$	(1.36	)	$	(3.02	)	$	0.24		$	(1.75	)	$	1.05
Basic and diluted weighted-average common shares	15,032			14,838			14,631			14,546			14,505
Cash dividends per common share	$	—		$	0.04		$	0.40		$	0.40		$	0.40



	December 31, 2018
	Fabrication		Shipyard		Services		EPC		Consolidated
Future performance obligations under Topic 606	$	63,498	$	259,644	$	11,046	$	385	$	334,573
Signed contracts under purported termination⁽¹⁾	—		21,887		—		—		21,887
Backlog	$	63,498	$	281,531	$	11,046	$	385	$	356,460



Year ⁽²⁾	Total		Percentage
2019	$	233,987	65.6%
2020	103,351		29.0%
2021	19,122		5.4%
Total Backlog	$	356,460	100.0%



	Years Ended December 31,						Favorable (Unfavorable) Change
	2018			2017			Amount			Percent
Revenue	$	221,247		$	171,022		$	50,225		29.4	%
Cost of revenue	228,443			213,947			(14,496		)	(6.8	)%
Gross loss	(7,196		)	(42,925		)	35,729			83.2	%
Gross loss percentage	(3.3		)%	(25.1		)%
General and administrative expense	19,015			17,800			(1,215		)	(6.8	)%
Asset impairments and (gain) loss on assets held for sale, net	(6,850		)	7,931			14,781			nm
Other (income) expense	304			(46		)	(350		)	nm
Operating loss	(19,665		)	(68,610		)	48,945			71.3	%
Interest income (expense), net	(142		)	(349		)	207			59.3	%
Net loss before income taxes	(19,807		)	(68,959		)	49,152			71.3	%
Income tax (expense) benefit	(571		)	24,193			(24,764		)	(102.4	)%
Net loss	$	(20,378	)	$	(44,766	)	$	24,388		54.5	%



Available Liquidity	Total
Cash and cash equivalents ⁽¹⁾	$	70,457
Short-term investments ⁽²⁾	8,720
Total cash, cash equivalents and short-term investments	79,177
Credit Agreement total capacity	40,000
Outstanding letters of credit	(2,917		)
Credit Agreement available capacity	37,083
Total available liquidity	$	116,260



	December 31,						Change During the Period
	2018			2017			2018			2017
Contract assets	$	29,982		$	28,373		$	(1,609	)	$	(1,544	)
Contract liabilities⁽¹⁾	(16,845		)	(12,754		)	4,091			8,390
Contracts in progress, net⁽²⁾	13,137			15,619			2,482			6,846
Contracts receivable and retainage, net	22,505			28,466			5,961			(8,297		)
Inventory, prepaid expenses and other assets	9,356			8,766			(590		)	6,429
Deferred revenue, current	—			(4,676		)	(4,676		)	(7,205		)
Accounts payable, accrued expenses and other liabilities	(39,256		)	(31,235		)	8,021			12,132
Total	$	5,742		$	16,940		$	11,198		$	9,905



	Total		Payments Due by Period
	Total		Less Than 1 Year		1 to 3 Years		3 to 5 Years		Thereafter
Purchase commitment – equipment ⁽¹⁾	$	577	$	577	$	—	$	—	$	—
Purchase commitment – material and services ⁽²⁾	132,299		96,967		35,332		—		—
Operating leases ⁽³⁾	3,624		660		1,352		1,055		557
Total	$	136,500	$	98,204	$	36,684	$	1,055	$	557



Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column 1)
Equity compensation plans approved by security holders	526,438		N/A	527,357
Equity compensation plans not approved by security holders	—			—
Total	526,438	⁽¹⁾		527,357	⁽²⁾



	Common Stock				Additional Paid-In Capital			Retained Earnings			Total Shareholders’ Equity
	Shares	Amount			Additional Paid-In Capital			Retained Earnings			Total Shareholders’ Equity
Balance at January 1, 2016	14,580	$	10,352		$	96,194		$	150,651		$	257,197
Net income	—	—			—			3,515			3,515
Vesting of restricted stock	115	(23		)	(194		)	—			(217		)
Stock-based compensation expense	—	312			2,813			—			3,125
Dividends on common stock	—	—			—			(588		)	(588		)
Balance at December 31, 2016	14,695	$	10,641		$	98,813		$	153,578		$	263,032
Net loss	—	—			—			(44,766		)	(44,766		)
Vesting of restricted stock	215	(92		)	(824		)	—			(916		)
Stock-based compensation expense	—	274			2,467			—			2,741
Dividends on common stock	—	—			—			(598		)	(598		)
Balance at December 31, 2017	14,910	$	10,823		$	100,456		$	108,214		$	219,493
Net loss	—	—			—			(20,378		)	(20,378		)
Vesting of restricted stock	180	(81		)	(729		)	—			(810		)
Stock-based compensation expense	—	279			2,516			—			2,795
Balance at December 31, 2018	15,090	$	11,021		$	102,243		$	87,836		$	201,100



Segment	Performance Obligations at December 31, 2018
Fabrication	$	63,498
Shipyard ⁽¹⁾	259,644
Services	11,046
EPC	385
Total	$	334,573




Assets	Fabrication Division			Shipyard Division			Total
Machinery and equipment	$	25,882		$	1,222		$	27,104
Accumulated depreciation	(7,871		)	(298		)	(8,169		)
Total assets held for sale	$	18,011		$	924		$	18,935



		December 31,
	Estimated Useful Life	2018			2017
	(in Years)
Land	-	$	4,972		$	4,972
Buildings	25	34,696			34,653
Machinery and equipment	3 to 25	132,155			141,704
Furniture and fixtures	3 to 5	2,497			4,450
Transportation equipment	3 to 5	2,627			2,667
Improvements	15	42,182			42,975
Construction in progress	-	1,944			96
Total property, plant and equipment		221,073			231,517
Accumulated depreciation		(141,143		)	(142,618		)
Property, plant and equipment, net		$	79,930		$	88,899



	Minimum Payments
2019	$	660
2020	672
2021	680
2022	578
2023	477
Thereafter	557
Total	$	3,624



	2018
	Fabrication⁽¹⁾			Shipyard ⁽¹⁾			Services		EPC			Corporate			Eliminations			Consolidated
Revenue	$	37,943		$	96,424		$	88,230	$	2,477		$	—		$	(3,827	)	$	221,247
Gross profit (loss)	(7,794		)	(10,472		)	12,447		(46		)	(1,331		)	—			(7,196		)
Operating income (loss)	(2,950		)	(14,396		)	9,371		(1,863		)	(9,827		)	—			(19,665		)
Depreciation expense	4,310			4,229			1,511		5			295			—			10,350
Capital expenditures	73			2,003			1,244		143			18			—			3,481
Total Assets	62,138			97,197			38,643		1,938			58,374			—			258,290



	2017
	Fabrication			Shipyard ⁽²⁾			Services		EPC		Corporate			Eliminations			Consolidated
Revenue	$	57,880		$	52,699		$	65,445	$	198	$	—		$	(5,200	)	$	171,022
Gross profit (loss)	(1,941		)	(44,870		)	4,575		41		(730		)	—			(42,925		)
Operating income (loss)	(12,010		)	(50,044		)	1,874		41		(8,471		)	—			(68,610		)
Depreciation expense	6,592			4,073			1,676		—		404			—			12,745
Capital expenditures	2,395			1,909			403		—		127			—			4,834
Total Assets	155,731			74,516			32,487		198		7,908			—			270,840