UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

The accompanying notes are an integral part of these financial statements.

The accompanying notes are an integral part of these financial statements.

The accompanying notes are an integral part of these financial statements.

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Gulf Island Fabrication, Inc. ("Gulf Island," and together with its subsidiaries "the Company," "we" or "our"), isWe are a leading fabricator of complex steel structures and marine vessels used in energy extraction and production, petrochemical and industrial facilities, power generation, alternative energy projects and shipping and marine transportation operations. We also provide related installation, hookup, commissioning, repair and maintenance services with specialized crews and integrated project management capabilities.capabilities for EPC projects. We are currently fabricatingrecently completed the fabrication of complex modules for the construction of a new petrochemical plant, and we are completing newbuild construction of a technologically advanced offshore support and two multi-purpose service vessels and recentlytechnologically-advanced OSV with scheduled delivery in the second quarter of 2018. We fabricated wind turbine pedestals for the first offshore wind power project in the United States. We also constructed one of the largest liftboats servicing the Gulf of Mexico ("GOM"),GOM, one of the deepest production jackets in the GOM and the first SPAR hull fabricated in the United States. Our customers include U.S. and, to a lesser extent, international energy producers, petrochemical, industrial, power and marine operators. We operate and manage our business through threefour operating divisions: Fabrication, ShipyardsShipyard, Services and Services.our recently formed EPC Division. Our corporate headquarters is located in Houston, Texas, with fabrication facilities located in Houma, Jennings and Lake Charles, Louisiana. Our fabrication facilitiesAs of the date of this Report, our Texas South Yard in Ingleside, Texas, has been sold and our Texas North Yard in Aransas Pass, and Ingleside, Texas, are currently beingis marketed for sale.

The consolidated financial statements include the accounts of Gulf Island Fabrication, Inc. and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

The accompanying unaudited, consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”)GAAP for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2017,2018, are not necessarily indicative of the results that may be expected for the year endedending December 31, 2017.2018.

The balance sheet at December 31, 2016,2017, has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s 2017 Annual Report.

Given the ongoing challenging business environment in several of our core segments, our primary focus continues to be generating liquidity and securing meaningful backlog in the near-term and generating cash flows from operations in the longer-term. Beginning in 2015 and through the date of this Report, we have implemented a number of initiatives to strategically reposition the Company to attract new customers, participate in the buildup of petrochemical facilities, pursue offshore wind markets, enter the EPC industry and diversify our customers within our Shipyard Division. Additionally, we initiated efforts to rebuild liquidity, preserve cash and lower costs including reducing our workforce, reducing the compensation paid to our directors and the salaries of our executive officers as well as developing a plan to sell certain underutilized assets.

On April 20, 2018, we closed the sale of our Texas South Yard for a sales price of $55 million, less selling costs of $1.5 million. We received approximately $52.7 million at closing, which was in addition to the $750,000 of earnest money previously received on Form 10-KJanuary 3, 2018, related to the option to purchase the Texas South Yard. We plan to use the net proceeds to rebuild our liquidity, to support upcoming projects, continue investing in our newly created EPC Division and for other general corporate purposes. See further discussion of our the year endedsale of our Texas South Yard in Note 2. We currently believe that cash on hand coupled with proceeds received from the sale of our Texas South Yard and funds available under our Credit Agreement will enable the Company to meet its working capital needs, capital expenditure requirements, any debt service obligations and other funding requirements for at least twelve months from the date of this Report.

As of December 31, 2016.2017 we had gross, federal net operating losses that are eligible for carryforward to offset future net income of $62.8 million, of which $4 million will expire on December 31, 2035. Our remaining federal net operating loss carryforwards will expire December 31, 2037. We have provided a valuation allowance to reserve for deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. As of March 31, 2018 and December 31, 2017, we had a valuation allowance of $1.4 million and $392,000, respectively offsetting our deferred tax assets.

We madecontinue to evaluate the following reclassifications to our financial statements forimpact of the Tax Cuts and Jobs Act of 2017. No revisions were recorded during the three months ended March 31, 2016, to conform to current period presentation:

New Accounting Standards

On May 28, 2014, the Financial Accounting Standards Board ("FASB")FASB issued Accounting Standards Update ("ASU")ASU No. 2014-09, Topic 606 “Revenue from Contracts with Customers” (Topic 606), which supersedes the revenue recognition requirements in FASB Accounting Standard Codification (ASC)ASC Topic 605, “Revenue Recognition.” ASU No. 2014-09Topic 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

In September 2015, the FASB issued ASU 2015-16, “Simplifying the Accounting for Measurement-Period Adjustments,” which eliminates the requirement that an acquirer in a business combination account for measurement-period adjustments retrospectively. Instead, an acquirer will recognize a measurement-period adjustment during the period in which it determines the amount of the adjustment. ASU 2015-16 is effective for annual periods beginning after December 15, 2016. We adopted this guidanceTopic 606, as required, effective January 1, 2017, which2018. Our implementation included a detailed review of our significant contracts that were not substantially complete. We concluded that Topic 606 did not impact the timing of recognition of revenue from T&M contracts which is recognized as the work is performed and the costs are incurred at the contracted rates. Our evaluation concluded revenue from our fixed-price and unit-rate contracts using the percentage-of-completion method, computed by measuring the percentage of labor hours incurred to date as compared to estimated total labor hours for each contract is still appropriate. Adoption of Topic 606, however, did require us to include contract labor amounts and certain costs from outside services within our measure of progress of percent complete in order to comply with Topic 606. Previously, we treated certain of these costs as "pass-through costs." Our assessment of these costs for the significant contracts in place at the time of adoption concluded that adoption of Topic 606 effective January 1, 2018, was immaterial to the consolidated financial statements and no cumulative adjustment was required. To the extent our contracts in future periods have an impact on our financial position, resultssignificant contract labor and outside services, the timing of operationsrecognition of revenues and related disclosures.costs of revenues could be materially impacted. See Note 3 for further discussion regarding the adoption of Topic 606.

In February 2016, the FASB issued ASU 2016-02, “Leases,” which requires lessees to record most leases on their balance sheetssheet but recognize expenses in a manner similar to current guidance. ASU 2016-02 will be effective for annual periods beginning after December 15, 2018. The guidance is required to be applied using a modified retrospective approach. We are currently evaluating the effect that ASU 2016-02 will have on our financial position, results of operations and related disclosures; however, we expect to record our lease obligations on our balance sheet.

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, held-to-maturity debt securities, 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 annual periods beginning after December 15, 2019. Early adoption is permitted for all entities for annual periods beginning after December 15, 2018. We have not elected to early adopt this guidance. The guidance must be applied using a cumulative-effect transition method. We are currently evaluating the effect that ASU 2016-13 will have on our financial position, results of operations and related disclosures.

NOTE 2 – ASSETS HELD FOR SALE

Our South Texas Assets:Properties:

On February 23, 2017, our BoardWe measure and record assets held for sale at the lower of Directors approved management's recommendationtheir carrying amount or fair value less costs to place our South Texas facilities located in Aransas Pass and Ingleside, Texas, up for sale. Our Texas South Yard in Ingleside, Texas, is located on the northwest intersection of the U.S. Intracoastal Waterway and the Corpus Christi Ship Channel. The 45-foot deep Corpus Christi Ship Channel provides direct and unrestricted access to the Gulf of Mexico.sell. Our Texas North Yard in Aransas Pass, Texas, is located along the U.S. Intracoastal Waterway and is approximately three miles north of the Corpus Christi Ship Channel. These properties are currently underutilized and representThis property represents excess capacity within our Fabrication division. Our net book valueDivision.

On April 20, 2018, we closed the sale of property, plant and equipmentour Texas South Yard for these assets was $105.0a sale price of $55 million, less selling costs of $1.5 million. We received approximately $52.7 million at closing which was in addition to the $750,000 of earnest money previously received on January 3, 2018, related to the option to purchase the Texas South Yard. We plan to use the net proceeds to rebuild liquidity, to support upcoming projects, continue investing in our newly created EPC Division and for other general corporate purposes. We expect to recognize a gain of approximately $3.8 million from the sale during the second quarter of 2018; however, we do not anticipate any material cash tax liability given our NOLs. Subsequent to March 31, 2017. We measure2018, and recordin connection with the sale, our cash increased approximately $52.7 million and our assets held for sale atdecreased approximately $49.9 million.

As of the lowerdate of their carrying amount or fair value less cost to sell.this Report, our Texas North Yard and machinery and equipment remains held for sale. We have compared the net book value of this asset group to the fair value less cost to sell based upon appraisals obtained which did not result in impairment.

Shipyard Division Assets:

Our Shipyard Division assets held for sale at February 6, 2017.March 31, 2018, primarily consist of a 2,500-ton drydock located at our Houma Shipyard. During the first quarter of 2017, management placed the assets at our former Prospect Shipyard for sale, and we recorded an impairment of $389,000 related to those assets based upon their estimated sale price. During the second quarter of 2017, we sold two drydocks for proceeds of $2 million and recorded a loss on sale of $259,000. During the fourth quarter of 2017, we recorded an additional impairment of $600,000 as we terminated the former Prospect Shipyard lease. Our net book value of property, plant and equipment for these assets was $5.5$1.9 million at March 31, 2017. We measure and record assets held for sale at the lower of their carrying amount or fair value less cost to sell. We have compared the net book value of this asset group to estimates of fair value less cost to sell and recorded an impairment of $389,000 for the three months ended March 31, 2017. We do not expect the sale of these assets to impact our ability to service our Shipyards customers. The future anticipated costs expected to be incurred prior to the termination of this lease are not significant to our consolidated financial statements.2018. Our Prospect Shipyardshipyard assets held for sale do not qualify for discontinued operations presentation.

A summary of the significant assets included in assets held for sale as of March 31, 2018, at our South Texas facilitiesProperties and our Prospectthe Shipyard Division assets is as follows (in thousands):

NOTE 3 – REVENUE AND CONTRACT COSTSRECOGNITION

The Company uses the percentage-of-completion accounting method for fabrication contracts. Revenueto recognize revenue from fixed-price or unit rateand unit-rate contracts is recognized on the percentage-of-completion method, computed by the efforts-expended method using the percentage of labor hours incurred as compared to estimated total labor hours to complete each contract. This progress percentage is applied to our estimate of total anticipated gross profit for each contract to determine gross profit earned to date. Revenue recognized in a period for a contract is the amountpro rata portion of gross profit recognized for that periodthe contract value (excluding pass-through costs) based upon the labor hours incurred to the total labor hours estimated to complete the contract plus labor costs and pass-through costs incurred on the contract during the period. We define

Materials and subcontractor services that represent an insignificant portion of the work to complete the project do not reflect an accurate measure of project completion are considered pass-through costs. Prior to the adoption of Topic 606, we defined pass-through costs as material, freight, equipment rental, and sub-contractor services thatwhen they are not significant to the progress of the project. Pass-through costs are included in therevenue and direct costs of revenue associated with projects. Consequently, pass-through costs are

Revenue and gross profit on contracts can be significantly affected by variable consideration, which can be in the form of unpriced change orders, claims, incentives, penalties, and claimsliquidating damages that may not be resolved until the later stages of the contract or after the contract has been completed and delivery occurs. AtWe estimate variable consideration based on the most likely amount to which we expect to be entitled and include estimated amounts in the 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 the three months ended March 31, 2018 and 2017, we included no amounts in revenue related to unpriced change orders, claims, or incentives. As disclosed in our 2017 Annual Report, we recorded a reduction to our estimated contract price of $11.7 million of variable consideration related to liquidating damages on projects which have been approved as to scope but not price. Duringin our Shipyard Division.

As discussed in Note 1, we adopted Topic 606 on January 1, 2018. The reported results for the three months ended March 31, 2016, we recorded2018, reflect the application of Topic 606 guidance while the reported results for 2017 were prepared under the guidance of Topic 605. Topic 606 represents a loss of $488,000 for a single customerchange in accounting principle and also requires enhanced disclosures related to the disaggregation of revenue onand the anticipated timing and completion of remaining performance obligations.

Our adoption of Topic 606 required us to review our fixed-price and unit-rate contracts to assess if revenue should be recognized "over time" (as the work is performed) or "at a point in time" (upon completion of the work). We determined that ownership and control of the work related to our fixed-price and unit-rate contracts transfer to our customers as the work progresses. Additionally, our customers retain the right and ability to change, orders recognized in prior periodsmodify or discontinue further fabrication or construction 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. We determined that were not recovered inthe significant inputs based upon labor hours most accurately reflects our final settlement withprimary profit generating activity as it best represents our efforts to construct the asset for our customer.

NOTE 4 – CONTRACTS RECEIVABLE AND RETAINAGE

Our customers include major and large independent oil and gas companies, petrochemical and industrial facilities, marine companies and their contractors.contractors and agencies of the U.S. Government. Of our contracts receivable balance at March 31, 2017, $9.42018, $18.5 million, or 44.6%67.7%, was with twothree customers. The significant projects for these twothree customers consist of:

NOTE 5 – FAIR VALUE MEASUREMENTS

We recorded an impairment of $750,000 during the three months ended March 31, 2018, related to a piece of equipment at our Prospect shipyard. See Note 2. We had no assets held forTexas North Yard that we intend to sell at auction. This piece of equipment was not damaged from Hurricane Harvey. The impairment was calculated as management's estimated net proceeds from the sale at December 31, 2016. We have determined that the fair values of these assets fall within Level 3 of the fair value hierarchy.less its net book value.

NOTE 6 – EARNINGS PER SHARE AND SHAREHOLDERS' EQUITY

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):

NOTE 7 – LINE OF CREDIT

We have a credit agreement with Whitney Bank and JPMorgan Chase Bank N.A. that provides for an $40.0$40 million revolving credit facilityCredit Agreement maturing November 29, 2018.June 9, 2019. The credit agreementCredit Agreement allows the Company to use up to the full amount of the available borrowing base for letters of credit and for general corporate purposes. Our obligationsWe believe that our Credit Agreement, will provide us with additional working capital flexibility to expand operations as backlog improves, respond to market opportunities and support our ongoing operations. Interest on drawings under the Credit Agreement may be designated, at our option, as either Base Rate (as defined in the Credit Agreement) or LIBOR plus 2% per annum. Our outstanding balance of $10 million at March 31, 2018, is designated as a LIBOR rate loan. Unused commitment fees on the undrawn portion of the Credit Agreement are 0.4% per annum, and interest on undrawn stated amounts under letters of credit agreement areissued by the lender is 2% per annum. At March 31, 2018, the interest rate on our outstanding borrowings was 3.75% per annum. The Credit Agreement is secured by substantially all of our assets (other than real estate)the South Texas Properties). Amounts borrowed

At March 31, 2018, $10 million was outstanding under the Credit Agreement and, we had letters of credit agreement bear interest, at our option, at either the prime lending rate established by JPMorgan Chase Bank, N.A. or LIBOR plus 2.0 percent. of $2.5 million outstanding leaving availability of $27.5 million. Subsequent to March 31, 2018, we re-issued a letter of credit for $3 million related to outstanding contractual obligations which we expect to remain outstanding until July of 2018.

We must comply with the following financial covenants:covenants each quarter during the term of the Credit Agreement:

At March 31, 2017, no amounts were outstanding under the credit facility, and we had outstanding letters of credit totaling $4.6 million, reducing the unused portion of our credit facility for additional letters of credit and borrowings to $35.4 million. As of March 31, 2017,2018, we were in compliance with all of our financial covenants.

We have structured our operations with threefour operating divisions, including our newly formed EPC Division, and one corporate non-operating division. We believe that our operating divisions and a corporate non-operating division. During the three months ended March 31, 2017, management reduced its allocation of corporate administrative costs and overhead expenses from itsour corporate non-operating division to its operating divisions in order to individually evaluate corporate administrative costs and overhead within our Corporate division as well as to not overly burden our operating divisions with costs that do not directly relate to their operations. Accordingly,each represent a significant portion of our corporate administrative costs and overhead expenses are retained within the results of our corporate division. In addition, we have also allocated certain personnel previously included in the operating divisions to our Corporate division. In doing so, management believes that it has created a fourth reportable segment with each

We generally evaluate the performance of, and allocate resources to, our segmentsdivisions based upon gross profit (loss) and operating income (loss). SegmentDivision assets are comprised of all assets attributable to each segment.division. Corporate administrative costs and overhead are allocated to our threefour operating divisions for expenses that directly relate to the operations or relate to shared services as discussed above. During 2016, we allocated substantially all of our corporate administrative costs and overhead to our three operating divisions. We have recast our 2016 segment data below in order to conform to the current period presentation. Intersegment revenues arerevenue is priced at the estimated fair value of work performed. Summarized financial information concerning our segmentsdivisions as of and for the three months ended March 31, 20172018, and 2016,2017, is as follows (in thousands):

We received a notice of purported termination from a customer within our Shipyard Division related to a decrease in the contract price due to final weight re-measurementsconstruction of two MPSVs. We dispute the purported termination and our inability to recover certain costs on disputed change orders related to a large deepwater project we delivered to our customer in November 2015. No amountsdisagree with respect to these disputed change ordersthe customer’s reasons for same. Pending resolution of the dispute, all work has been stopped and the vessels and associated equipment and material are included on our consolidated balance sheet or recognized in revenue in our consolidated statementcare and custody at our shipyard in Houma, Louisiana. The customer has notified our Surety of operationsits intent to require completion of the vessel under the Surety's

bond. We have notified and met with our Surety regarding our disagreement with our customer's claims. The Company will continue to enforce its rights under the agreements and defend any claims asserted against the Company by its customer. Management is unable to estimate the probability of a favorable or unfavorable outcome a well as an estimate of and for the three months ended March 31, 2017 and 2016. In the second quarter of 2016, we initiated legal action to recover our costs from these disputed change orders.potential loss, if any, at this time. We can give no assurance that our actions will be successful orcannot guarantee that we will recover all or any portion of these contract losses from ournot incur additional costs as we negotiate with this customer.

Cautionary Statement on Forward-Looking StatementsInformation

Statements under “Backlog,” “Results of Operations” and “Liquidity and Capital Resources” and otherThis Report contains forward-looking statements in this reportwhich we discuss our potential future performance, primarily in the sections entitled “Management’s Discussion and the exhibits hereto thatAnalysis of Financial Condition and Results of Operations.” Forward-looking statements are notall statements other than statements of historical factfacts, such as projections or expectations relating to oil and gas prices, operating cash flows, capital expenditures, liquidity and tax rates. The words “anticipates,” “may,” “can,” “plans,” “believes,” “estimates,” “expects,” “projects,” “targets,” “intends,” “likely,” “will,” “should,” “to be,” “potential” and any similar expressions are intended to identify those assertions as forward-looking statements. These

We caution readers that forward-looking statements are subject to certain risksnot guarantees of future performance and uncertainties that could cause actual results and outcomes tomay differ materially from the results and outcomes predictedthose anticipated, projected or assumed in such forward-looking statements. Investors are cautioned not to place undue reliance upon suchthe forward-looking statements. Important factors that maycan cause our actual results to differ materially from expectationsthose anticipated in the forward-looking statements include the cyclical nature of the oil and gas industry, changes in backlog estimates, suspension or projections include thosetermination of projects, timing and award of new contracts, financial ability and credit worthiness of our customers, consolidation of our customers, competitive pricing and cost overruns, entry into new lines of business, ability to raise additional capital, ability to sell certain assets, receipt of additional insurance proceeds, advancement on the SeaOne Project, ability to resolve disputes with a customer relating to the contracts to build MPSVs, ability to remain in compliance with our covenants contained in our Credit Agreement, ability to employ skilled workers, operating dangers and limits on insurance coverage, weather conditions, competition, customer disputes, adjustments to previously reported profits under the percentage-of-completion method, loss of key personnel, compliance with regulatory and environmental laws, ability to utilize navigation canals, performance of subcontractors, systems and information technology interruption or failure and data security breaches and other factors described in Item 1A. Risk Factors“Risk Factors” included in our 2017 Annual Report on Form 10-K foras may be updated by subsequent filings with the year ended December 31, 2016.SEC.

Executive Summary

We are a leading fabricator of complex steel structures and marine vessels used in energy extraction and production, petrochemical and industrial facilities, power generation and alternative energy projects and shipping and marine transportation operations. We also provide related installation, hookup, commissioning, repair and maintenance services with specialized crews and integrated project management capabilities. We are currently fabricatingrecently completed of the fabrication of complex modules for the construction of a new petrochemical plant, and we are completing newbuild construction of a technologically advanced offshore support and two multi-purpose service vessels and recentlytechnologically-advanced OSV with scheduled delivery in the second quarter of 2018. We fabricated wind turbine pedestals for the first offshore wind power project in the United States. We have also constructed one of the largest liftboats servicing the Gulf of Mexico ("GOM"),GOM, one of the deepest production jackets in the GOM and the first SPAR hull fabricated in the United States. Our customers include U.S. and, to a lesser extent, international energy producers, petrochemical, industrial, power and marine operators.

Given the U.S. Intracoastal Waterwayongoing challenging business environment in several of our core segments, our primary focus continues to be generating liquidity and is approximately three miles northsecuring meaningful backlog in the near-term and generating cash flows from operations in the longer-term. Beginning in 2015 and through the date of this Report, we have implemented a number of initiatives to strategically reposition the Corpus Christi Ship Channel. TheseCompany to attract new customers, participate in the buildup of petrochemical facilities, are currently underutilizedpursue offshore wind markets, enter the EPC industry and represent excess capacitydiversify our customers within our Fabrication division. Our net book value of for these assets was $105.0 million at March 31, 2017. We are workingShipyard Division. Additionally, we initiated efforts to wind down all fabrication activities at these locationsrebuild liquidity, preserve cash and re-allocate remaining backlog andlower costs including reducing our workforce, reducing the compensation paid to our Houma Fabrication Yarddirectors and the salaries of our executive officers as necessary. Aswell as developing a resultplan to sell certain underutilized assets.

Sales of Assets

In early 2017, we announced our plan to rationalize underutilized assets including the decision to markettwo fabrication yards and related equipment located at our South Texas facilitiesProperties.

On April 20, 2018, we closed on the sale of our Texas South Yard for $55 million, less selling costs of $1.5 million. We received approximately $52.7 million at closing, which was in addition to the $750,000 of earnest money previously received on January 3, 2018, related to the option to purchase the Texas South Yard. We plan to use the net proceeds to rebuild our liquidity, to support upcoming projects, continue investing in our newly created EPC Division and for other general corporate purposes. See Note 2 of the Notes to Consolidated Financial Statements for further discussion of the sale of our Texas South Yard. We expect to record a gain on sale during the second quarter of 2018 related to this transaction of approximately $3.8 million. Completing the sale of the Texas South Yard is an important liquidity generating event and will facilitate the underutilization currently being experienced, we expectCompany’s continued strategic repositioning from offshore oil and gas markets.

We will continue to incur costs associated with theholding and maintaining of the facility through its sale that will not be recoverable.our Texas North Yard. These costs include insurance, general maintenance of the property in its current state, property taxes and retained employees which will be expensed as incurred. We do not expect the sale of these assets to impact our ability to service our deepwater customers or operate our Fabrication division.

On August 25, 2017, our South Texas Properties were impacted by Hurricane Harvey, which made landfall as a Category 4 hurricane. As a result, we suffered damages to buildings and equipment at our South Texas Properties. We maintain coverage on these assets up to a maximum of $25 million, subject to a 3% deductible with a minimum deductible of $500,000. Our estimate of the claim that we believe is recoverable through our property and casualty insurance is approximately $17.8 million; however, final settlement with our insurance carrier could be less and such difference could be material. We have not accrued for any insurance recovery at March 31, 2018, in excess of insurance claim payments received to date.

We recorded an impairment of $389 for$750,000 during the three months ended March 31, 20172018, related to these assets. See Note 2a piece of equipment at our Texas North Yard that we intend to sell at auction. This piece of equipment was not damaged by Hurricane Harvey. The impairment was calculated as management's estimated net proceeds from the sale less its net book value.

Based upon our initial assessment of the Notesdamages and insurance coverage and the fair value of the assets held for sale. Management believes that there is no basis to Consolidated Financial Statements. The future anticipated costs expectedrecord additional impairment at this time.

We will continue to be incurred prior to the terminationmonitor and preserve our cash. At March 31, 2018, we had $6.5 million in cash, debt of this lease are not significant$10 million and working capital of $137.1 million which includes $98.4 million in assets held for sale, primarily related to our consolidated financial statements. We do not expectSouth Texas Properties. As of May 4, 2018, our liquidity has significantly improved due to the sale of our Texas South Yard, the proceeds of which will be used to rebuild our liquidity, to support upcoming projects, continue investing in our newly created EPC Division and for other general corporate purposes. After the sale of our Texas South Yard, our cash balance was $55 million, and the amount outstanding under our Credit Agreement was $10 million with remaining availability under our Credit Agreement of approximately $27.5 million for total liquidity of approximately $82.5 million. Our primary liquidity requirements for 2018 and beyond are for costs associated with fabrication and shipyard projects, capital expenditures related to our EPC Division and enhancements to our shipyards.

We operate in an environment that exposes our employees to risk of injury, and we are committed to safety. We believe safety is a key metric for our success. Poor safety performance increases our costs, results in construction delays and limits our ability to service Shipyards customers.compete for project awards within our market. Safety performance measures are incorporated into our annual incentive compensation measures for our executives and senior management.

Critical Accounting Policies and Estimates

For a discussion of critical accounting policies and estimates we use in the preparation of our Consolidated Financial Statements, refer to  Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2017 Annual Report on Form 10-K for the year ended December 31, 2016.Report. There have been no changes in our evaluation of our critical accounting policies since December 31, 2016.2017.

Backlog

Our backlog at March 31, 2017, and2018, as compared to December 31, 2016,2017, consisted of the following (in thousands, except for percentages):

Results of Operations

Consolidated

Hurricane Harvey. The impairment was calculated as well as lower bonuses accrued during 2017 as a resultmanagement's estimated net proceeds from the sale less its net book value. See also Note 2 of a combination of a smaller workforce andthe Notes to Consolidated Financial Statements for additional information regarding our consolidated gross loss.

The results of our threefour operating divisions and Corporate divisionDivision for the three months ended March 31, 20172018 and 2016,2017, are presented below (in thousands, except for percentages).

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