Year

Contracts Receivable and Retainage

Our customers include U.S. and, to a lesser extent, international energy producers, petrochemical, industrial, power, and marine operators, EPC companies and certain agencies of the U.S. government. Of our contracts receivable balance at September 30, 2018, $18.4 million was with two customers.

At September 30, 2018, we had an allowance for bad debt of $3.7 million within our contract receivable balance. During the three months ended September 30, 2018, we increased our allowance for bad debts by $2.8 million, which is included in general and administrative expenses on our Consolidated Statements of Operations and primarily relates to a customer within our Fabrication Division.

Contracts in Progress, ~~and~~ Advance Billings on Contracts and Accrued Contract Losses

Revenue recognition and customer invoicing for our fixed-price and unit-rate contracts may occur at different times. Revenue recognition is based upon our ~~calculation of percent complete;~~estimated percentage-of-completion as discussed above; however, customer invoicing will generally depend upon a predetermined billing ~~schedule as stated in the contract~~terms which could ~~allow~~provide for customer advance payments or invoicing based upon achievement of certain ~~milestones.~~milestones or project progress. Revenue ~~earned but not yet invoiced~~recognized in excess of amounts billed is reflected as contracts in progress ~~and included in current assets~~ on our ~~consolidated balance sheet. Billings made to our customers~~Consolidated Balance Sheets. Amounts billed in ~~advance~~excess of revenue ~~being earned are~~recognized is reflected as advance billings on contracts ~~and included in current liabilities~~ on our ~~balance sheet.~~Consolidated Balance Sheets. Contracts in progress totaled $40.2 million at ~~March 31,~~September 30, 2018, ~~totaled $37.5 million~~ with ~~$27~~$37.1 million relating to ~~two major~~three customers. Advance billings on contracts totaled $14.9 million at ~~March 31,~~September 30, 2018, ~~was $4.3~~with $11.2 million ~~and included advances of $2.8 million from three major customers.~~relating to one customer. Accrued contract losses ~~were $6.3~~totaled $6.0 million and $7.6 million ~~as of March 31,~~at September 30, 2018 and December 31, 2017, respectively.

~~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 and agencies of the U.S. Government. Of our contracts receivable balance at March 31, 2018, $18.5 million, or 67.7%, was with three customers. The significant projects for these three customers consist of:

~~The fabrication of four modules for a customer within our Fabrication Division associated with a U.S. ethane cracker project (completed in April 2018);~~

~~Offshore services related to repair, installation and hook-up work for a customer within our Services Division; and~~

~~Inshore service repair and installation work for a customer within our Services Division.~~

As of March 31, 2018, we included an allowance for bad debt of $2 million in our contract receivable balance which primarily relates to a customer within our Fabrication Division for the storage of an offshore drilling platform that was fully reserved in 2016.

NOTE 54 – FAIR VALUE MEASUREMENTS

~~The Company makes~~We make fair value determinations by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

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; and

Level 3 - inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. These include discounted cash flow models and similar valuation techniques.

Recurring fair value measurements and financial instruments - The carrying amounts ~~that we have~~ reported for financial instruments, including cash and cash equivalents, ~~accounts receivables~~short-term investments, contracts receivable and accounts ~~payables,~~payable, approximate their fair values.

Assets held for sale - We measure and record assets held for sale at the lower of their carrying amount or fair value less costs to sell. The determination of fair value generally requires the use of significant ~~judgment. We have classified our assets at our South Texas Properties and our Shipyard Division assets that were at our former Prospect Shipyard as assets held for sale at March 31, 2018.~~judgments. See Note 2 for further ~~disclosure relating to~~discussion of our assets held for ~~sale. During the three months ended March 31, 2017, we recorded an impairment of $389,000 related to the Shipyard Division assets held for sale.~~sale and their associated fair value measurements.

Our South Texas facilities were impacted by Hurricane Harvey, which made landfall as a Category 4 hurricane. During the first quarter of 2018, we determined that we do not expect to repair the buildings and equipment at the Texas North Yard in conjunction with its planned sale. Accordingly, we impaired our Texas North Yard by $5.1 million for damage and loss and recorded a corresponding insurance recovery offsetting the impairment.

We recorded an impairment of $750,000 during the three months ended March 31, 2018, related to a piece of equipment at our Texas 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 less its net book value.NOTE 5 – LOSS PER COMMON SHARE

~~NOTE 6 – EARNINGS PER SHARE AND SHAREHOLDERS' EQUITY~~

~~Earnings per Share:~~

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


	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017			2018			2017
Basic and diluted:
Numerator:
Basic and diluted
Net loss	$	(5,296	)	$	(6,454	)	$	(10,949	)	$	(3,110	)	$	(15,696	)	$	(20,488	)
Less: Distributed and undistributed loss (unvested restricted stock)	—			(34		)	—			(14		)	—			(100		)
Net loss attributable to common shareholders	$	(5,296	)	$	(6,420	)	$	(10,949	)	$	(3,096	)	$	(15,696	)	$	(20,388	)
Denominator:
Weighted-average shares⁽¹⁾	14,964			14,758			15,044			14,852			15,017			14,821
Basic and diluted loss per share - common shareholders	$	(0.35	)	$	(0.44	)
Basic and diluted loss per common share							$	(0.73	)	$	(0.21	)	$	(1.05	)	$	(1.38	)

______________

(1) We have no dilutive securities.

NOTE 76 – LINE OF CREDIT

We have a ~~$40~~$40.0 million Credit Agreement ~~maturing June 9, 2019. The Credit Agreement allows the Company to use up to the full amount of the available borrowing base~~with Hancock Whitney Bank that can be used for borrowings or letters of ~~credit and general corporate purposes. We believe that~~credit. On August 27, 2018, we entered into a third amendment to our Credit Agreement, ~~will provide us with additional working capital flexibility~~which extended its maturity date from June 9, 2019 to ~~expand operations~~June 9, 2020, and reduced the base tangible net worth requirement from $185.0 million to $180.0 million. The third amendment also removed the inclusion of 50% of Consolidated Net Income (as defined in the Credit Agreement) for each fiscal quarter and the inclusion of 50% of the gain on the sale of our South Texas Properties from our minimum tangible net worth covenant. Accordingly, our amended quarterly financial covenants during the term of the Credit Agreement are as ~~backlog improves, respond~~follows:

Ratio of current assets to ~~market opportunities~~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 any fees, commissions, expenses and ~~support our ongoing operations.~~ other costs incurred in such offering; and

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

Interest on ~~drawings~~borrowings under the Credit Agreement may be designated, at our option, as either ~~Base~~the Wall Street Journal published Prime Rate ~~(as defined in the Credit Agreement)~~ or LIBOR plus 2%2.0% per annum. ~~Our outstanding balance of $10 million at March 31, 2018, is designated as a LIBOR rate loan. Unused commitment~~Commitment fees on the ~~undrawn~~unused portion of the Credit Agreement are 0.4% per annum, and interest on ~~undrawn stated amounts under~~outstanding letters of credit ~~issued by the lender~~ is ~~2% per annum. At March 31, 2018, the interest rate on our outstanding borrowings was 3.75%~~2.0% per annum. The Credit Agreement is secured by substantially all of our assets (other than the ~~South~~assets held for sale at our Texas ~~Properties)~~North Yard).

At ~~March 31,~~September 30, 2018, ~~$10 million was~~we had no outstanding borrowings under ~~the~~our Credit Agreement and ~~we had~~$2.5 million of outstanding letters of credit, providing $37.5 million 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 each quarter during the term of the Credit Agreement:~~


i.	~~Ratio of current assets to current liabilities of not less than 1.25:1.00;~~


~~ii.~~	~~Minimum tangible net worth requirement of at least the sum of:~~


a)	~~$185 million, plus~~


b)	~~An amount equal to 50% of consolidated net income for each fiscal quarter ending after June~~available capacity. At September 30, ~~2017, including 50% of any gain attributable to the sale of our South Texas Properties (with no deduction for a net loss in any such fiscal quarter), plus~~


c)	~~100% of the proceeds of any issuance of any stock or other equity after deducting of any fees, commissions, expenses and other costs incurred in such offering; and~~


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

~~As of March 31,~~ 2018, we were in compliance with all of our financial covenants.

NOTE 87 - SEGMENT DISCLOSURES

We have structured our operations with four operating divisions, ~~including our newly formed EPC Division,~~ and one corporate non-operating ~~division. We believe that~~division, which represent our ~~operating divisions and~~reportable segments. As part of our ~~corporate non-operating division each represent a~~efforts to strategically reposition the Company as discussed in Note 1, we may change how we manage the business which could result in changes to our reportable ~~segment under GAAP.~~segments in future periods. Our newly formed EPC Division was created in December 2017 to manage expected work we will perform for the SeaOne Project and other projects that may require EPC project management services. Our operating divisions and Corporate Divisionreportable segments at September 30, 2018 are discussed below.

Fabrication Division - Our Fabrication Division ~~primarily~~ fabricates ~~structures such as~~ offshore drilling and production platforms and other steel 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. Our Fabrication Division also fabricates structures for alternative energy customers (such as the five jackets and piles we constructed for the first offshore wind power project in the ~~United States during 2015)~~U.S.) as well as modules for petrochemical and industrial facilities. We perform these activities ~~out of~~at our fabrication ~~yards~~yard in Houma, Louisiana. As of ~~the date of this Report, our Texas South Yard has been sold and~~September 30, 2018, our Texas North Yard is ~~marketed~~held for ~~sale.~~sale and our Texas South Yard had been sold. See Note 2 for further ~~disclosure relating to~~discussion of our South Texas Properties.

Shipyard Division - Our Shipyard Division ~~primarily manufactures~~fabricates newbuild vessels and repairs various steel marine vessels ~~in the United States~~ including offshore supply vessels, anchor handling vessels and liftboats to support the construction and ongoing operation of offshore oil and gas production platforms, tug boats, towboats, barges, drydocks and other marine vessels. Our marine repair activities include steel repair, blasting and painting services, electrical systems repair, machinery and piping system repairs, and propeller, shaft, and rudder reconditioning. In addition, we perform conversion projects that consist of lengthening vessels, modifying vessels to permit their use for a different type of activity, and other modifications to enhance the capacity or functionality of a vessel. We perform these activities at our shipyards in Houma, Jennings and Lake Charles, Louisiana.

Services Division - Our Services Division ~~primarily~~ provides interconnect piping and related services onfor offshore platforms and ~~inshore structures. Interconnect piping services involve~~inland structures, which includes sending ~~employee~~ crews to offshore platforms in the GOM to perform welding and other activities required to connect production equipment, 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~~U.S. for various on-site construction and maintenance activities. In addition, our Services Division fabricates packaged skid units and performs various ~~municipal~~civil and drainage projects, such as pump stations, levee reinforcement, bulkheads and other ~~public works projects~~work for state and local governments. We perform these services at customer facilities or at our services yard in Houma, ~~Services Yard.~~Louisiana.

EPC Division - ~~Late in~~Our EPC Division was created during the fourth quarter of2017 to manage expected work we will perform for the SeaOne Project and other projects that may require EPC project management services. During the fourth quarter 2017, SeaOne selected us as the prime contractor for the engineering, procurement, construction, installation, commissioning and start-up operations for ~~their~~its SeaOne Project. This project will include execution of engineering, construction and installation of modules for 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 ~~the~~ terms of the engagement with SeaOne. ~~We have created our EPC Division to manage this project and future similar projects.~~ We understand that SeaOne is in the process of securing financing ~~to move forward with its~~for the project. We ~~are hopeful that the SeaOne Project will initiate planning and start-up efforts mid-2018 with construction~~continue to ~~start in early 2019. We are strengthening~~enhance our internal project management capabilities through the hiring of additional personnel to service this potential project.

Corporate Division - Our Corporate Division ~~primarily includes~~represents expenses that do not directly relate to ~~the operations or shared services provided to~~ our four operating ~~divisions. Expenses for shared services such as human resources, insurance, business development~~divisions and ~~accounting salaries~~ are not allocated to ~~the~~our operating divisions. ~~Expenses that are not allocated~~Such expenses include, but are not limited to, costs related to executive management and directors' fees, clerical and administrative salaries, costs of maintaining ~~the~~our corporate office and costs associated with overall governance and being a publicly traded company.

We generally evaluate the performance of, and allocate resources to, our operating divisions based upon revenue, gross profit (loss) and operating income (loss). Division assets are comprised of all assets attributable to each division. Corporate administrative ~~costs~~ and overhead expenses directly related to our operating divisions, or costs related to shared services incurred by our Corporate Division on behalf of our operating divisions, are allocated to ~~our~~the four operating ~~divisions for expenses that directly relate to the operations or relate to shared~~divisions. Shared services ~~as discussed above.~~include human resources, insurance, business development, information technology and accounting. Intersegment revenue is priced at the estimated fair value of work performed.

Summarized financial information ~~concerning~~for each of our divisions ~~as of and~~ for the three and nine months ended ~~March 31,~~September 30, 2018 and 2017, is as follows (in thousands):


	Three Months Ended March 31, 2018																				Three Months Ended September 30, 2018
	Fabrication			Shipyard			Services		EPC			Corporate			Eliminations			Consolidated			Fabrication			Shipyard			Services		EPC			Corporate			Eliminations			Consolidated
Revenue	$	17,270		$	18,565		$	21,870	$	73		$	—		$	(488	)	$	57,290		$	2,311		$	24,492		$	22,617	$	1,071		$	—		$	(779	)	$	49,712
Gross profit (loss)	(219		)	(1,023		)	2,614		(308		)	(385		)	—			679			(4,032		)	(1,764		)	3,191		(205		)	(402		)	—			(3,212		)
Operating income (loss)	(1,593		)	(1,819		)	1,880		(725		)	(2,523		)	—			(4,780		)	(7,708		)	(2,460		)	2,486		(708		)	(2,494		)	—			(10,884		)
Total assets(1)	184,263			76,150			105,632		12			318,137			(415,072		)	269,122			100,115			92,839			37,201		2,217			30,585			—			262,957
Depreciation and amortization expense	1,149			1,069			393		—			138			—			2,749			1,023			1,050			365		—			36			—			2,474
Capital expenditures	—			6			65		—			—			—			71			—			783			545		142			1			—			1,471



	Three Months Ended September 30, 2017
	Fabrication		Shipyard			Services		EPC	Corporate			Eliminations			Consolidated
Revenue	$	18,318	$	15,074		$	17,651	—	$	—		$	(1,159	)	$	49,884
Gross profit (loss)	1,250		(3,504		)	1,912		—	(152		)	—			(494		)
Operating income (loss)	472		(4,392		)	1,217		—	(2,161		)	—			(4,864		)
Total assets ⁽¹⁾	164,677		96,614			33,024		—	9,065			—			303,380
Depreciation and amortization expense	1,133		1,030			413		—	95			—			2,671
Capital expenditures	1,479		1,054			94		—	25			—			2,652



	Nine Months Ended September 30, 2018
	Fabrication			Shipyard			Services		EPC			Corporate			Eliminations			Consolidated
Revenue	$	28,171		$	66,677		$	66,692	$	2,026		$	—		$	(2,550	)	$	161,016
Gross profit (loss)	(5,918		)	(5,563		)	9,390		30			(1,171		)	—			(3,232		)
Operating income (loss)	(12,529		)	(7,652		)	7,189		(1,375		)	(7,698		)	—			(22,065		)
Total assets ⁽¹⁾	100,115			92,839			37,201		2,217			30,585			—			262,957
Depreciation and amortization expense	3,219			3,170			1,141		—			304			—			7,834
Capital expenditures	—			1,442			708		142			70			—			2,362


	Three Months Ended March 31, 2017																			Nine Months Ended September 30, 2017
	Fabrication			Shipyard			Services			EPC	Corporate			Eliminations			Consolidated			Fabrication			Shipyard			Services		EPC		Corporate			Eliminations			Consolidated
Revenue	$	10,209		$	18,422		$	10,712		—	$	—		$	(1,350	)	$	37,993		$	42,517		$	51,798		$	43,758	$	—	$	—		$	(4,328	)	$	133,745
Gross profit (loss)	(2,966		)	(1,704		)	33			—	(260		)	—			(4,897		)	216			(19,061		)	2,335		—		(500		)	—			(17,010		)
Operating income (loss)	(3,787		)	(3,057		)	(633		)	—	(1,739		)	—			(9,216		)	(2,216		)	(22,285		)	327		—		(6,165		)	—			(30,339		)
Total assets(1)	197,834			88,489			95,562			—	349,917			(427,142		)	304,660			164,677			96,614			33,024		—		9,065			—			303,380
Depreciation and amortization expense	3,135			1,009			432			—	124			—			4,700			5,420			3,034			1,266		—		421			—			10,141
Capital expenditures	102			272			—			—	17			—			391			2,327			1,872			199		—		117			—			4,515

_______________

(1) Intercompany balances have been excluded.

NOTE 98 – COMMITMENTS AND CONTINGENCIES

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

MPSV Termination Letter

We received ~~a notice~~notices of ~~purported~~ termination ~~from a customer within our Shipyard Division related to~~of the contracts for the construction of two ~~MPSVs.~~MPSVs from one of our Shipyard Division customers. We dispute the purported ~~termination~~terminations and disagree with the customer’s reasons for ~~same.~~such terminations. Pending the resolution of the dispute, we have ceased all work ~~has been stopped~~ and the ~~vessels~~partially completed MPSVs and associated equipment and ~~material are in our care and custody~~materials remain at our shipyard in Houma, Louisiana. The customer ~~has~~also notified our Surety of its ~~intent to require completion~~purported terminations of the ~~vessel~~construction contracts and made claims under the ~~Surety's~~

~~bond.~~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, ~~our~~and objection to, the customer's purported termination and its claims. ~~The Company will continue~~Discussions with the Surety are ongoing. On October 2, 2018, we filed a lawsuit against the customer to enforce ~~its~~our rights and remedies under the ~~agreements~~applicable construction contracts. Our lawsuit disputes the propriety of the customer’s purported termination

of the construction contracts and ~~defend any claims asserted against~~seeks to recover damages associated with the ~~Company by its customer. Management is~~customer’s actions. We are unable to estimate the probability of a favorable or unfavorable outcome ~~a well as an~~with respect to the dispute or estimate the amount of potential loss, if any, atrelated to this ~~time.~~matter. We ~~cannot guarantee~~can provide no assurances that we will not incur additional costs as we ~~negotiate with this customer.~~pursue our rights and remedies under the contracts. At ~~March 31,~~September 30, 2018, our net balance sheet ~~exposure~~position for the contracts was ~~$12~~$12.5 million.

Project Award Protest

During the first quarter 2018, we executed a contract for the construction and delivery of one towing, salvage and rescue ship vessel with the U.S. Navy for $63.6 million, with an option for seven additional vessels, which was subsequently protested by one of the unsuccessful bidders. On July 16, 2018, we were notified that the award was upheld by the U.S. Government Accountability Office and we were given a notification to proceed. On August 6, 2018, we were notified that the unsuccessful bidder had filed a subsequent protest with the Department of Justice. On August 9, 2018, we were granted a partial stay, which allows us to proceed with pre-construction design development, planning, scheduling and material ordering. Construction of the vessel cannot begin until a final ruling is issued by the U.S. Court of Federal Claims. We are working with the U.S. Navy to re-establish a timeline for construction under this contract.

NOTE 109 – SUBSEQUENT EVENTS

On October 2, 2018, we filed a lawsuit against a customer to enforce our rights and remedies under the applicable construction contracts for the construction of two MPSVs. See Note ~~2 regarding the sale~~8 for further discussion of our ~~Texas South Yard on April 20, 2018.~~dispute and lawsuit.

Item 2. 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 Consolidated Financial Statements and the related notes thereto.

Cautionary Statement on Forward-Looking Information

This Report contains forward-looking statements in which we discuss our potential future performance, primarily in the ~~sections~~section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements are all statements other than statements of historical facts, 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.

We caution readers that forward-looking statements are not guarantees of future performance and actual results may differ materially from those anticipated, projected or assumed in the forward-looking statements. Important factors that can cause our actual results to differ materially from those anticipated in the forward-looking statements include the cyclical nature of the oil and gas industry, changes in backlog estimates, suspension or termination 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~~the dispute with a customer relating to the purported termination of contracts to build two 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 or loss under the percentage-of-completion method, loss of key personnel, compliance with regulatory and environmental laws, ability to utilize navigation canals, performance of ~~subcontractors,~~sub-contractors, systems and information technology interruption or failure and data security breaches and other factors described in Item 1A. “Risk Factors” included in our 2017 Annual Report as may be updated by subsequent filings with the SEC.

Investors are cautioned that many of the assumptions upon which our forward-looking statements are based are likely to change after the forward-looking statements are made, which we cannot control. Further, we may make changes to our business plans that could affect our results. We caution investors that we do not intend to update forward-looking statements more frequently than quarterly notwithstanding any changes in our assumptions, changes in business plans, actual experience or other changes, and we undertake no obligation to update any forward-looking statements.

~~Executive Summary~~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, ~~and~~ alternative energy ~~projects~~ and shipping and marine transportation operations. We also provide related project management for EPC projects along with installation, hookup, commissioning and repair and maintenance ~~services with specialized crews~~services. In addition, we perform civil, drainage and ~~integrated project management capabilities. We recently completed of the fabrication of complex modules~~other work for ~~the construction of a new petrochemical plant,~~state and we are completing newbuild construction of a technologically-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 GOM, one of the deepest production jackets in the GOM and the first SPAR hull fabricated in the United States.local governments. Our customers include U.S. and, to a lesser extent, international energy producers, petrochemical, industrial, power, and marine operators, EPC companies and agencies of the ~~United States Government.~~U.S. Government. We operate and manage our business through four operating ~~divisions:~~divisions, and one non-operating division, which represent our reportable segments. Our operating divisions include: Fabrication, Shipyard, Services and ~~our recently formed EPC Division.~~EPC. Our corporate headquarters is located in Houston, Texas, with fabrication facilities located in Houma, Jennings and Lake Charles, Louisiana. ~~As of the date of this Report,~~At September 30, 2018, our Texas North Yard is held for sale and our Texas South Yard ~~in Ingleside, Texas has~~had been ~~sold and our Texas North Yard in Aransas Pass, Texas is marketed for sale.~~sold.

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 initiativesWe continue to strategically ~~reposition~~position the Company to ~~attract new customers,~~ participate in the ~~buildup~~fabrication of petrochemical and industrial facilities, pursue offshore wind ~~markets,~~opportunities, enter the EPC industry and diversify our ~~customers~~customer base within all of our ~~Shipyard Division. Additionally,~~operating divisions. In addition, we ~~initiated~~continue to focus on maintaining liquidity and securing meaningful new contract awards and backlog in the near-term, and generating operating income and cash flow from operations in the longer-term. We have made significant progress in our efforts to ~~rebuild~~improve our liquidity, ~~preserve cash and lower~~including reductions in costs ~~including~~(including reducing our workforce and reducing the cash compensation paid to our directors and the salaries of our executive ~~officers as well as developing a plan to sell certain~~officers) and the divestiture of underutilized assets.

Sales of Assets

~~In early 2017, we announced our plan to rationalize underutilized assets including~~Texas South Yard - During the ~~two fabrication yards and related equipment located at our South Texas Properties.~~

~~On April 20,~~second quarter 2018, we ~~closed on~~completed the sale of our Texas South Yard for ~~$55~~$55.0 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~~for total net proceeds ~~to rebuild our liquidity, to support upcoming projects, continue investing in our newly created EPC Division~~during the nine-months ended September 30, 2018 of approximately $53.5 million 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~~$3.9 million. ~~Completing the sale of the Texas South Yard is an important liquidity generating event and will facilitate the Company’s continued strategic repositioning from offshore oil and gas markets.~~

We will continue to incur costs associated with holding and maintaining 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.

~~Hurricane Harvey and Insurance Recoveries~~

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.

To date, our insurance underwriters have made advance insurance claim payments of $8.2 million in the aggregate, including $2.2 million that was received during three months ended March 31, 2018. We have applied the $8.2 million received to date as follows:

~~Clean-up and repair related costs of $1.6 million that we have incurred since August 25, 2017, through March 31, 2018;~~

~~A building at our Texas South Yard and a building at our~~ Texas North Yard were determined to be total losses. As a result, we impaired the remaining net book value of $1.5 million related to these buildings and recorded a corresponding insurance recovery offsetting the impairment during the fourth quarter of 2017; and

~~During the first quarter of~~- On September 26, 2018, we determined that we do not expect to repair the damaged buildings and equipment at the Texas North Yard. Accordingly, we impaired our Texas North Yard by $5.1 million, which represents our best estimate of the decline in the fair value of the property and equipment as a result of our decision to not repair the facility and recorded a corresponding insurance recovery offsetting the impairment.

As we work with our insurance agents and adjusters to finalize our estimate of the damage, it is our belief that final settlement of our claim will most likely be based upon a global settlement. Our final assessment of the damages incurred to our South Texas Properties as well as the amount of insurance proceeds we actually receive could be less than our estimate of the claim above when it is ultimately settled and such differences could be material.

~~We recorded~~entered into an impairment of $750,000 during the three months ended March 31, 2018, related to a 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 damages and insurance coverage and the fair value of the assets held for sale. Management believes that there is no basis to record additional impairment at this time.

~~Preservation of Cash~~

We will continue to monitor and preserve our cash. At March 31, 2018, we had $6.5 million in cash, debt of $10 million and working capital of $137.1 million which includes $98.4 million in assets held for sale, primarily related to our South 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 currently believe that cash on hand and funds available under our Credit Agreement will be sufficient to meet our working capital and capital expenditure requirements, any future debt service and other funding requirements for at least 12 months from the date of this Report. Our view regarding sufficiency of cash and liquidity is primarily based on our financial forecast for 2018 and early 2019, which is impacted by various assumptions regarding the sale of our Texas North Yard, our existing backlog and a reasonable amount of forecasted, non-contractual backlog. There is no guarantee that our financial forecast will be attainable or that we will have sufficient cash, including funds available under our Credit Agreement, to meet planned operating expenses and other unforeseen cash needs.

~~If industry conditions for offshore oil and gas do not improve, or we are unable~~agreement to sell our Texas North Yard orand certain associated equipment for $28.0 million. We received $0.5 million during the third quarter 2018 as a deposit on the property, which is refundable under certain circumstances. The sale is ~~delayed, or~~anticipated to close during the fourth quarter 2018 and is subject to customary closing conditions, including the purchaser’s right to conduct inspections of the property related to confirmation of title, surveys, environmental conditions, easements and access rights and third-party consents. Based on the sales price and estimated closing and other costs, we ~~are unable to increase our backlog, we would~~ expect to ~~take additional measures to preserve our cash flows until such time when we are able to generate cash flows from operations. Since~~realize a gain on the ~~beginning of 2016, we have implemented wage adjustments along with employee benefit and overall cost reductions within all of our divisions.~~transaction upon closing. We ~~have reduced the level of our workforce in the past and~~can provide no assurances that we will successfully close the transaction, that closing will occur under our expected timeline or that we will achieve our estimated net proceeds or a gain on the sale. We continue to ~~do so based on booked work in all of our facilities. We have reduced~~actively market the ~~compensation paid to our directors and the salaries of our executive officers, and we have reduced our capital expenditures and placed~~remaining Texas North Yard assets ~~that are either underutilized, under-performing or not expected to provide sufficient long-term value~~held for sale, which ~~include~~primarily consist of three 660-ton crawler cranes, a barge, a plate bending roll machine and panel line equipment.

Hurricane Harvey Insurance Recoveries - During the third quarter 2017, buildings and equipment located at our South Texas ~~Properties.~~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 of $15.4 million, resulting in a net gain on insurance recoveries of $3.6 million during the nine months ended September 30, 2018. As of September 30, 2018, all insurance proceeds had been received, including $7.2 million received during the third quarter 2018.

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

~~Petrochemical~~Pursuit of petrochemical and industrial fabrication work - ~~We recently~~During the second quarter 2018, we completed the fabrication and timely delivery of four modules for a new petrochemical facility. We ~~delivered these~~currently have several bids outstanding for the fabrication of modules ~~on time~~ and ~~within budget. We~~ continue to ~~search for~~pursue additional fabrication work in the petrochemical ~~industry to add to our current backlog.~~and industrial industries.

Pursuit of offshore wind - We believe that future requirements from generators and utilities to provide electricity from renewable and green sources will result in continued growth of offshore wind projects. We fabricated ~~the first-of-a-kind~~ wind turbine pedestals for the first offshore wind power project in the ~~United States~~U.S. in 2015, and we believe that we possess the expertise

to obtain ~~significant~~ future work in this sector. During the first quarter of 2018, we signed a contract for the fabrication of one ~~Meteorological~~meteorological tower and platform for ~~a customer's~~an offshore wind project located off the U.S. coast of Maryland. ~~This project is small; however, it~~The fabrication work was completed in the second quarter 2018 and represents our continued ability to provide structures for this emerging industry. ~~There are currently 28 offshore wind projects in various planning stages.~~ We may also partner with other companies to take advantage of growth in this area. We have a non-binding letter of intent with the EEW Group as it relates to their letter of intent with their customer for structures off the coast of Maryland. Along with this letter of intent, wearea and have executed a teaming agreement with the EEW Group ~~for~~to pursue future U.S. offshore wind projects. ~~There is~~We can provide no ~~guarantee~~assurances that we will be successful ~~in participating in any of these planned projects.~~obtaining future wind project awards from this arrangement.

Diversification of our ~~Shipyard Division~~ customer base - We ~~continue to be successful in our efforts~~are continuing to diversify our ~~capabilities~~customer base within our ~~Shipyard Division.~~ operating divisions. Specifically:

During the first quarter of 2018, we executed a contract for the construction and delivery of one towing, salvage and rescue ship ~~("T-ATS")~~ vessel with the U.S. Navy for $63.6 million, with an option for seven additional vessels, with an additional value of approximately $459.1 million if all options are exercised. Our T-ATS vessel contract is currently under a bid protest from a competitor. Bid protests can result in an award decision being overturned, requiring a re-bidwhich was subsequently protested by one of the ~~contract. Even when~~unsuccessful bidders. On July 16, 2018, we were notified that the award was upheld by the U.S. Government Accountability Office, and we were given a ~~bid~~notification to proceed. On August 6, 2018, we were notified that the unsuccessful bidder had filed a subsequent protest ~~does not result in~~with the Department of Justice. On August 9, 2018, we were granted a ~~re-bid, resolution~~partial stay, which allows us to proceed with pre-construction design development, planning, scheduling and material ordering. Construction of the ~~matter typically extends~~vessel cannot begin until a final ruling is issued by the ~~time until contract performance can begin, which may reduce our earnings in~~U.S. Court of Federal Claims. We are working with the ~~period in which~~U.S. Navy to re-establish a timeline for construction under this contract.

During the ~~contract would otherwise be performed. Further,~~second quarter 2018, we signed change orders ~~on May 1, 2018,~~ with two different customers ~~each~~ for the construction of one additional harbor tug boat for each customer. Each change order was approximately ~~$13 million each with the option for one more harbor tug boat for approximately $12.2 million each. This is in addition to the eight~~$13.0 million. We are now constructing a total of five harbor tug boats for each customer.

During the third quarter 2018, we ~~are currently constructing~~signed a contract for ~~these two customers.~~

the expansion and delivery of a 245-guest paddle wheel riverboat. The paddle wheel boat will be built using the existing hull of a former gaming vessel built in 1995.

Continued growth ~~within~~of our ~~Services Division~~services related work - ~~Generally, we expect demand~~Demand for ~~our Services Division to increase in 2018 beyond the contractual backlog amount in place as of March 31, 2018. Work~~services associated with offshore tie-backs, upgrades and maintenance remains ~~strong.~~strong, and we anticipate it will continue for the remainder of 2018 and into 2019. We will continue to pursue opportunities ~~within the offshore/inshore~~for offshore and onshore plant expansion and maintenance ~~programs as well as targeting growth of developing fields~~and have targeted service opportunities within the shale basins in West Texas.

~~Our newly formed~~Pursuit of EPC ~~Division~~work - ~~As discussed in our~~During the fourth quarter 2017, ~~Annual Report, we were~~SeaOne selected us as the prime contractor for the engineering, procurement, construction, installation, commissioning and start-up operations for their SeaOne Project. This project will include execution of engineering, construction and installation of modules for 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 usthe 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. ~~In anticipation~~We understand that SeaOne is in the process of ~~this project advancing, we are enhancing~~securing financing for the project. We continue to enhance our internal project management capabilities through the hiring of additional personnel to service this potential project. Subsequent to March 31, 2018, we received an early works purchase order from SeaOne for approximately $1.0 million. We continue to work with SeaOne on finalizing Initial Engineering Design and project pricing. We understand that SeaOne is in the process of securing financing to move forward with its project. We are hopeful that the SeaOne Project will initiate planning and start-up efforts mid-2018 with construction to start in early 2019.

~~Completion of our~~ MPSV contract dispute - As ~~previously disclosed, on March 19, 2018,~~discussed in Note 8 to our Consolidated Financial Statements, we received ~~a notice~~notices of ~~purported~~termination ~~from a customer within our Shipyard Division related to~~of the contracts for the construction of two ~~MPSVs.~~MPSVs from one of our Shipyard Division customers. We dispute the purported ~~termination~~terminations and disagree with the customer’s reasons for ~~same.~~such terminations. Pending the resolution of the dispute, we have ceased all work ~~has been stopped~~ and the ~~vessels~~partially completed MPSVs and associated equipment and ~~material are in our care and custody~~materials remain at our shipyard in Houma, Louisiana. The customer ~~has~~also notified our Surety of its ~~intent to require completion~~purported terminations of the ~~vessel~~construction contracts and made claims under the ~~Surety's bond.~~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, ~~our~~and objection to, the customer's purported termination and its claims. ~~The Company will continue~~Discussions with the Surety are ongoing. On October 2, 2018, we filed a lawsuit against the customer to enforce ~~its~~our rights and remedies under the ~~agreements~~applicable construction contracts. Our lawsuit disputes the propriety of the customer’s purported termination of the construction contracts and ~~defend any claims asserted against~~seeks to recover damages associated with the ~~Company by its customer. Management is~~customer’s actions. We are unable to estimate the probability of a favorable or unfavorable outcome ~~a well as an~~with respect to the dispute or estimate the amount of potential loss, if any, atrelated to this ~~time.~~matter. We ~~cannot guarantee~~can provide no assurances that we will not incur additional costs as we ~~negotiate with this customer.~~pursue our rights and remedies under the contracts.

Outlook

Looking forward, our results of operations will be affected primarily ~~by:~~

~~Our ability to execute on projects in accordance with our cost estimates~~by the overall demand and ~~manage them to successful completion;~~

~~Our ability to win contracts through competitive bidding or alliance/partnering arrangements;~~

~~Demand~~market for our ~~services and the overall number of projects in the market place. As discussed above,~~services. In recent years, a significant portion of our historical customer base has been ~~impacted~~negatively affected by ~~the level of exploration and development activity maintained by~~a decline in offshore oil and gas exploration and ~~production~~development activity as companies focus on onshore development opportunities. As a result, and as discussed above, we have implemented a number of initiatives to strategically reposition the Company to participate in the ~~GOM,~~fabrication of petrochemical and ~~to a lesser extent, overseas locations, which is dependent upon~~industrial facilities, pursue offshore wind opportunities, enter the ~~price~~EPC industry, and diversify our customers within all of ~~oil~~our operating divisions. The success of these initiatives and ~~gas;~~our future operations will be determined by, among other things:

The level of ~~petrochemical facility~~new construction and ~~improvements;~~fabrication projects in the new markets we are pursuing, including petrochemical and industrial facilities and offshore wind;

~~Our~~The ability of SeaOne to obtain financing and our successful execution of an agreement with ~~SeaOne;~~SeaOne for the SeaOne Project;

Continued growth within our Shipyard and Services Divisions;

Our ability to secure contracts through competitive bidding or alliance/partnering arrangements;

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

Our ability to resolve our ~~disputes~~dispute with ~~our~~a customer ~~for~~related to the ~~completion~~construction of ~~the~~ two ~~MPSV vessels; and~~

~~Our ability to secure additional fabrication offshore wind projects.~~MPSVs.

We continue to respond to the competitive ~~forces~~environment within our industry and ~~continue to~~ actively compete for additional ~~bidding~~ opportunities. We have increased our backlog within our Shipyard, Fabrication and Services Divisions and believe ~~that~~ we will be successful securing new project awards and growing our backlog. However, our operations will be negatively impacted in ~~obtaining~~the near term due to an anticipated lag in the commencement of fabrication activities for our recent and anticipated new additional backlog awards in 2018 and 2019; however, management believes that even if we are successful in obtaining these awards there is an expected lag of several months before these awards will materialize. While we have been successful in obtaining new backlog in recent months, primarily inawards. Further, our ~~Shipyard and Services Divisions, these backlog~~previous project awards were ~~received~~sold during a period of competitive pricing with lower than desired margins. ~~Additionally, revenue from these awards will not be realized until later in 2018 and beyond.~~

Safety

We operate in an environment that exposes our employees to risk of ~~injury, and we~~injury. We are committed to ~~safety. We~~the safety of our employees and believe ~~safety~~it is a key ~~metric for~~to our success. Poor safety performance increases our costs, results in construction delays and limits our ability to compete for project awards within our market. Safety performance ~~measures~~metrics 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~~used 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. There have been no changes ~~in our evaluation of~~to our critical accounting policies since December 31, 2017.

New Awards and Backlog

New project awards represent the expected revenue value of new contract commitments received during a given period, as well as scope growth on existing commitments. New contract commitments represent contracts for which a customer has authorized us 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 3 to our Consolidated Financial Statements. We believe that backlog, a non-GAAP financial measure, provides useful information to investors. Backlog ~~differs from the GAAP requirement to disclose future~~includes our performance obligations required under fixed-price contracts as required under Topic 606 of the ASC. See Note 3 of the Notes to Consolidated Financial Statements for further discussion of Topic 606. Backlog includes future work that has been entered into subsequent to the balance sheet date, from letters of intent or other forms of authorization as well asat September 30, 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, ~~(the most comparable GAAP measure); however, represents~~but represent future work that ~~management believes is probable~~we believe will be performed. New project awards and backlog may vary significantly each reporting period based on the timing of ~~being performed.~~our major new contract commitments.

Our ~~backlog is based on management’s estimate of the direct labor hours required to complete, and the remaining revenue to be recognized with respect to those~~ projects for which a customer has authorized us to begin work or purchase materials pursuant to written contracts, letters of intent or other forms of authorization. As engineering and design plans are finalized or changes to existing plans are made, management’s estimate of the direct labor hours required to complete a project and the price of a project at completion is likely to change.

~~All projects currently included~~ in ~~our~~ backlog are generally subject to suspension, termination, or a reduction in scope at the option of the customer, although the customer is required to pay us for work performed and materials purchased through the date of termination, suspension, or reduction in scope. In addition, customers have the ability to delay the execution of projects. We generally exclude suspended projects from ~~contract~~ backlog when they are expected to be suspended more than 12twelve months, because resumption of work and timing of revenue recognition for these projects are difficult to predict. Depending on the size of the project, the termination, postponement or reduction in scope of any one ~~project~~contract could significantly reduce our backlog and could have a material adverse effect on future revenue, ~~net income (loss)~~operating results and cash ~~flow.~~flows. A reconciliation of our future ~~revenue~~ performance obligations under Topic 606 ~~of the ASC~~ (the most comparable GAAP measure as ~~included~~presented in Note 3 ~~of the Notes~~ to our Consolidated Financial Statements) to our reported backlog is provided below (in thousands).

March 31, 2018
Fabrication Shipyard Services EPC Eliminations Consolidated
Future performance obligations required under fixed-price contracts under Topic 606 of ASC $ 6,706
$ 149,590
$ 11,858
$ —
$ (990 ) $ 167,164
Contracts signed subsequent to March, 31, 2018 —
29,874
—
1,037
—
30,911
Signed contracts under purported termination or third party protest ^{(1), (2)}
—
94,176
—
—
—
94,176
Backlog $ 6,706
$ 273,640
$ 11,858
$ 1,037
$ (990 ) $ 292,251



	September 30, 2018
	Fabrication		Shipyard		Services		EPC		Eliminations		Consolidated
Future performance obligations under Topic 606	$	44,746	$	282,912	$	11,699	$	836	$	—	$	340,193
Signed contracts under purported termination ⁽¹⁾	—		30,148		—		—		—		30,148
Backlog	$	44,746	$	313,060	$	11,699	$	836	$	—	$	370,341

___________

(1)

Includes backlog ~~for a customer for which we have received a notice of purported termination~~ within our Shipyard Division pursuant to a purported notice of termination from our customer related to contracts for the construction of two MPSVs. We dispute the purported termination and disagree with the customer’s reasons for ~~same.We cannot guarantee~~the same. We can provide no assurances that we ~~be able to favorably negotiate~~will reach a favorable resolution with the customer for completion of the ~~MPSVs with this customer.~~MPSVs. See Note 98 to our Consolidated Financial Statements for further discussion of the ~~Notes to Consolidated Financial Statements.~~dispute.

~~(2)~~

Includes our signed contract with the U.S. Navy for the construction of the T-ATS Salvage vessel which is under bid protest from a competitor. Bid protests can result in an award decision being overturned, requiring a re-bid of the contract. Even when a bid protest does not result in a re-bid, resolution of the matter typically extends the time until contract performance can begin, which may reduce our earnings in the period in which the contract would otherwise be performed.

Our backlog at ~~March 31,~~September 30, 2018 ~~as compared to~~and December 31, 2017, consisted of the following (in ~~thousands, except for percentages)~~thousands):

March 31, 2018 December 31, 2017
Division $'s Labor hours $'s Labor hours
Fabrication $ 6,706
54 $ 15,771
150
Shipyard 273,640
1,493 184,035
1,104
Services 11,858
130 23,181
290
EPC 1,037
— —
—
Intersegment eliminations (990 ) — (370 ) —
Total backlog $ 292,251
1,677 $ 222,617
1,544

Number Percentage Number Percentage
Major customers ⁽¹⁾
5 85.4% 4 73.0%

Backlog is expected to be recognized in revenue during:⁽²⁾

$'s Percentage
2018 $ 90,879
31.1%
2019 142,274
48.7%
2020 59,098
20.2%
Total $ 292,251
100.0%



	September 30, 2018			December 31, 2017
Division	Amount		Labor hours	Amount			Labor hours
Fabrication	$	44,746	220	$	15,771		150
Shipyard	313,060		1,741	184,035			1,104
Services	11,699		158	23,181			290
EPC	836		—	—			—
Intersegment eliminations	—		—	(370		)	—
Total ⁽¹⁾	$	370,341	2,119	$	222,617		1,544

Backlog at September 30, 2018 is expected to be recognized as revenue in the following periods (in thousands):



Year ⁽²⁾	Total		Percentage
Remainder of 2018	56,243		15.2%
2019	199,922		54.0%
2020	105,124		28.4%
2021	8,405		2.2%
2022	647		0.2%
Thereafter	—		—%
Total	$	370,341	100.0%

___________


(1)	At ~~March~~September 30, 2018, six customers represented approximately 89% of our backlog, and at December 31, 2017, four customers represented approximately 73% of our backlog. At September 30, 2018, ~~projects for our five largest~~backlog from the six customers ~~in terms of revenue backlog~~ consisted of:


(i)	~~Two large MPSVs for one customer for which we have received a purported notice~~Newbuild construction of ~~termination as discussed above;~~five harbor tugs (to be completed in 2018 through 2020);


(ii)	Newbuild construction of five harbor tugs ~~for one customer~~(separate from above) (to be completed in ~~2018~~2019 through 2020);


(iii)	Newbuild construction of ~~five harbor tugs for one customer (separate from above) (to~~two regional class research vessels (both to be completed in ~~2018 through 2020)~~2021);

(iv)

Newbuild construction of ~~an offshore research~~one towing, salvage and rescue ship vessel (to be completed in 2021). During the first quarter 2018, we executed a contract with the U.S. Navy for $63.6 million, with an option for seven additional vessels, which was subsequently protested by one of the unsuccessful bidders. Construction of the vessel cannot begin until a final ruling is issued by the U.S. Court of Federal Claims. See Note 8 to our Consolidated Financial Statements for further discussion. We are working with the U.S. Navy to re-establish a timeline for construction under this contract;


(v)	Expansion of a 245-guest paddle wheel riverboat (to be competed in 2020); and

~~(v)~~(vi)

Newbuild construction of ~~one T-ATS vessel (to be completed~~two MPSV's. We are currently in ~~2020). This contract is currently under~~dispute with our customer pursuant to a ~~bid protest.~~purported notice of termination related to these contracts. 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 MPSVs. See Note 8 to our Consolidated Financial Statements for further discussion of the dispute.


(2)	The timing of recognition of the revenue represented in our backlog is based on ~~management’s~~our current estimates to complete the projects. Certain factors and circumstances could cause changes in the amounts ultimately recognized and the timing of ~~the~~ recognition of revenue from our backlog.

Certain of our contracts contain options which grant the right to our customer, if exercised, for the construction of additional vessels at contracted ~~prices.We~~prices. We do not include options in our ~~backlog above.~~backlog. If all options under our current contracts were exercised by our customers, our backlog would increase by ~~$626.2~~approximately $534.0 million. We believe disclosing these options provides investors with useful information ~~in order~~ to evaluate additional potential work that we would be contractually obligated to perform under our current contracts as well as the potential significance of these options, if exercised. We have not received any commitments from our customers related to the exercise of these options, ~~from our customers,~~ and we can provide no ~~assurance~~assurances that any ~~or all~~ of these options will be exercised.

As ~~we add~~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 ~~well~~ and to support our project risk mitigation discipline for all ~~new~~ projects. This may negatively impact near-term results.

~~As of March 31,~~Workforce

At September 30, 2018, we had ~~961~~816 employees compared to 977 employees ~~as of~~at December 31, 2017. Labor hours worked were ~~496,000~~1.4 million during the ~~three~~nine months ended ~~March 31,~~September 30, 2018, compared to ~~479,000~~1.5 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2017. The ~~overall increase~~decrease in labor hours worked for the three months ended March 31, 2018, was due to improved offshore demand within our Services Division. As of April 29, 2018, we had 870 employees. The decrease in our workforce subsequent to March 31, 2018, is primarily within our Fabrication Division due to completion of complex modules for ~~the construction of~~ a new petrochemical ~~plant~~facility with no ~~significant future~~immediate replacement backlog for our Fabrication ~~backlog forecasted in~~Division during the ~~near-term~~2018 period, as well as the ~~stoppage~~suspension of construction of ~~the~~ two MPSVs within our Shipyard Division pending resolution of ~~our~~the dispute ~~over termination~~ with our ~~MPSV~~ customer. See Note ~~9 of the Notes~~8 to our Consolidated Financial Statements ~~related to~~for further discussion of the dispute.This decrease was partially offset by improved demand within our ~~MPSV contract termination dispute.~~Services Division.

Results of Operations

Three Months Ended ~~March 31,~~September 30, 2018, Compared to Three Months Ended ~~March 31,~~September 30, 2017(in thousands, except for percentages):

Consolidated

Three Months Ended March 31, Increase or (Decrease)
2018 2017 Amount Percent
Revenue $ 57,290
$ 37,993
$ 19,297
50.8%
Cost of revenue 56,611
42,890
13,721
32.0%
Gross profit (loss) 679
(4,897 ) 5,576
113.9%
Gross profit (loss) percentage 1.2 % (12.9 )%
General and administrative expenses 4,709
3,930
779
19.8%
Asset impairment 750
389
361
92.8%
Operating income (loss) (4,780 ) (9,216 ) (4,436 )
Other income (expense):
Interest expense (469 ) (59 ) (410 ) (694.9)%
Other income (expense), net 12
9
3
33.3%
Total other income (expense) (457 ) (50 ) (407 ) (814.0)%
Net loss before income taxes (5,237 ) (9,266 ) (4,029 ) (43.5)%
Income tax expense (benefit) 59
(2,812 ) 2,871
102.1%
Net loss $ (5,296 ) $ (6,454 ) $ 6,900



	Three Months Ended September 30,						Increase (Decrease)
	2018			2017			Amount			Percent
Revenue	$	49,712		$	49,884		$	(172	)	(0.3)%
Cost of revenue	52,924			50,378			2,546			5.1%
Gross loss	(3,212		)	(494		)	(2,718		)	(550.2)%
Gross loss percentage	(6.5		)%	(1.0		)%
General and administrative expenses	7,672			4,370			3,302			75.6%
Operating loss	(10,884		)	(4,864		)	(6,020		)	(123.8)%
Interest income (expense), net	72			(45		)	117			260.0%
Other income, net	140			38			102			268.4%
Net loss before income taxes	(10,672		)	(4,871		)	(5,801		)	(119.1)%
Income tax expense (benefit)	277			(1,761		)	2,038			115.7%
Net loss	$	(10,949	)	$	(3,110	)	$	(7,839	)	(252.1)%

Revenue - ~~Our revenue~~Revenue for the three months ended ~~March 31,~~September 30, 2018 and 2017, was ~~$57.3~~$49.7 million and ~~$38.0~~$49.9 million, respectively, representing ~~an increase~~a decrease of ~~50.8%~~0.3%. ~~The increase is~~Revenue for the 2018 period approximated revenue for the 2017 period primarily due to lower revenue for our Fabrication Division of $16.0 million attributable ~~to:~~to the completion and delivery of four modules for a petrochemical facility in the second quarter 2018, which was substantially offset by:

AnA $5.0 million increase ~~of $11.2 million~~in revenue within our Services Division ~~from~~due to additional demand for onshore and offshore oil and gas service related projects; and

AnA $9.4 million net increase ~~of $7.1 million~~in revenue within our ~~Fabrication~~Shipyard Division ~~primarily attributable~~due to additional progress on the construction of ~~four modules~~ten harbor tug vessels and an ice-breaker tug that was not under construction during the third quarter 2017, offset partially by lower revenue from our two MPSV contracts that were suspended during the first quarter 2018. See Note 8 to our Consolidated Financial Statements for ~~a petrochemical plant.~~further discussion of the MPSV contracts.

Gross ~~profit (loss)~~loss - ~~Our gross profit~~Gross loss for the three months ended ~~March 31,~~September 30, 2018 and 2017, was ~~$679,000 compared to a~~$3.2 million (6.5% of revenue) and $0.5 million (1.0% of revenue), respectively. The gross loss during the 2018 period was primarily due to under recovery of ~~$4.9 million~~our overhead costs (including holding costs for our Texas North Yard of $0.7 million) and the ~~three months ended March 31, 2017.~~impact of lower margin backlog within our Shipyard Division related to previous project awards sold during a period of competitive pricing. The increase in gross ~~profit~~loss relative to the prior period was primarily due to a higher gross loss for our Fabrication Division of $5.3 million related to decreased fabrication revenue, offset partially by:

A decrease in gross loss within our Shipyard Division of $1.7 million due to increased revenue, a reduction in overhead costs, and the prior period including $2.1 million in contract losses related to cost increases on the construction of two MPSVs; and

Increased gross profit within our Services Division ~~as discussed above~~of $1.3 million due to increased revenue and ~~decreased expenses within~~higher recovery of our Fabrication Division which included $1.9 million of depreciation expense for the three months ended March 31, 2017, related to our South Texas Properties with no depreciation expense during the three months ended March 31, 2018, for our South Texas Properties as these assets are classified as held for sale.overhead costs.

General and administrative expenses - ~~Our general and administrative expenses were $4.7 million for the three months ended March 31, 2018, compared to $3.9 million for the three months ended March 31, 2017. The increase in general~~General and administrative expenses for the three months ended ~~March 31,~~September 30, 2018 and 2017, were $7.7 million (15.4% of revenue) and $4.4 million (8.8% of revenue), respectively, representing an increase of 75.6%. The increase was primarily ~~attributable to~~due to:

~~Build-up~~Bad debt expense of ~~additional personnel for~~$2.8 million related to a contracts receivable reserve recorded during the third quarter 2018 within our ~~newly created EPC Division;~~Fabrication Division as we received indications that collectability of the receivable was no longer probable;

Increased legal and advisory fees related to customer ~~disputes, strategic planning and diversification of our business;~~

Increased employee incentive accruals of approximately $300,000 for all divisions related to our safety incentive program and higher employee profitability incentives within our Services Division as well as the addition of personnel as we build up our EPC Division in anticipation of the SeaOne Project; and

~~Higher stock compensation expense of approximately $220,000.~~disputes;

~~This was partially offset by cost reductions~~Costs associated with the evaluation of strategic alternatives and ~~continued cost minimization efforts implemented by management~~initiatives to diversify our business; and

An increase in administrative personnel for ~~the period.~~our newly created EPC Division.

~~Asset impairment~~ - We recorded an impairment of $750,000 during the three months ended March 31, 2018, related to a piece of equipment at our Texas North Yard that we intend to sell at auction. This piece of equipment was not damagedThese increases were offset partially by

Hurricane Harvey. The impairment was calculated as management's estimated net proceeds from the sale less its net book value. See also Note 2 of the Notes to Consolidated Financial Statements for additional information regarding our assets held for sale. During the three months ended March 31, 2017, we recorded an impairment of $389,000 related to the Shipyard Division assets held for sale. headcount reductions.

Interest ~~expense~~income (expense), net - Interest ~~expense increased due to drawings under our Credit Agreement~~income (expense), net for the three months ended ~~March 31,~~September 30, 2018 ~~with no such drawings under our Credit Agreement~~and 2017, was income of $72,000 and expense of $45,000, respectively. The net interest income for the 2018 period was primarily due to interest earned from cash equivalents and short-term investments.

Other income, net - Other income, net for the three months ended ~~March 31,~~September 30, 2018 and 2017, ~~as well as increased amortization~~was income of ~~deferred financing costs during~~$0.1 million and $38,000, respectively. Other income, net for the ~~three months ended March 31, 2018.~~period was primarily due to net gains on the sales of assets.

Income tax expense (benefit) - ~~Our effective income~~Income tax ~~rate~~expense (benefit) for the three months ended ~~March 31,~~September 30, 2018 and 2017, was ~~(1.1)%, compared to an effective tax rate~~expense of$0.3 million and benefit of ~~30.3% for the comparable period during 2017.~~$1.8 million, respectively. Current expense represents state ~~taxes within our Services Division. The decrease in~~income taxes. No federal tax benefit was recorded during the ~~effective tax rate is the result of~~2018 period as a full valuation allowance was recorded against our net NOL deferred tax ~~assets.~~assets generated during the period. See Note 1 ~~of the Notes~~ to our Consolidated Financial Statements ~~regarding~~for further discussion of our NOLs and deferred tax assets.

Operating Segments

The results of our four operating divisions and ~~Corporate Division~~non-operating corporate division for the three months ended ~~March 31,~~September 30, 2018 and 2017, are presented below (in thousands, except for percentages).


Fabrication	Three Months Ended March 31,						Increase or (Decrease)				Three Months Ended September 30,						Increase (Decrease)
	2018			2017			Amount			Percent	2018			2017			Amount			Percent
Revenue	$	17,270		$	10,209		$	7,061		69.2%	$	2,311		$	18,318		$	(16,007	)	(87.4)%
Gross profit (loss)	(219		)	(2,966		)	(2,747		)	(92.6)%	(4,032		)	1,250			(5,282		)	(422.6)%
Gross profit (loss) percentage	(1.3		)%	(29.1		)%					(174.5		)%	6.8		%
General and administrative expenses	624			821			(197		)	(24.0)%	3,676			778			2,898			372.5%
Asset impairment	750			—			750			100.0%
Operating income (loss)	$	(1,593	)	$	(3,787	)	$	(2,194	)		(7,708		)	472			(8,180		)

Revenue - Revenue ~~from our Fabrication Division increased $7.1 million~~ for the three months ended ~~March 31,~~September 30, 2018 ~~compared~~and 2017, was $2.3 million and $18.3 million, respectively, representing a decrease of 87.4%. The decrease was primarily due to the ~~three months ended March 31, 2017. The increase is attributable to the construction~~completion and delivery of four modules for a petrochemical ~~plant~~facility during the ~~three months ended March 31,~~second quarter 2018, ~~and lower revenue~~with no significant projects under construction during the ~~three months ended March 31, 2017, resulting from depressed oil and gas prices and~~third quarter 2018. We were awarded a new project for the ~~corresponding reduction in customer demand for offshore fabrication projects~~expansion of a paddle wheel riverboat during the ~~period. This was partially offset,~~third quarter 2018 that will be constructed by ~~decreased revenue of $2.4 million for~~our Fabrication Division; however, construction did not commence until the ~~three months ended March 31, 2018, at our South Texas Properties as these were placed for sale during the first~~fourth quarter ~~of 2017 and project work completed or transfered to our Houma Fabrication Yard during 2017.~~2018.

Gross profit (loss) - Gross ~~loss from our Fabrication Division~~profit (loss) for the three months ended ~~March 31,~~September 30, 2018 and 2017, was ~~$219,000 compared to~~ a gross loss of ~~$3.0~~$4.0 million ~~for the three months ended March 31, 2017.~~(174.5% of revenue) and a gross profit of $1.3 million (6.8% of revenue), respectively. The ~~decrease in~~ gross loss during the 2018 period was primarily due to ~~increased~~under recovery of our overhead costs (including holding costs for our Texas North Yard of $0.7 million). The gross loss for 2018 relative to the prior period gross profit was primarily due to decreased revenue, ~~as discussed above and~~offset partially by a reduction in ~~depreciation expense of $1.9 million in depreciation expense during the three months ended March 31, 2018 for our South Texas Properties as these assets are classified as held for sale.~~overhead costs.

General and administrative expenses - General and administrative expenses for ~~our Fabrication Division decreased $197,000 for~~ the three months ended ~~March 31,~~September 30, 2018 ~~compared to the three months ended March 31, 2017.~~and 2017, were $3.7 million (159.1% of revenue) and $0.8 million (4.2% of revenue), respectively, representing an increase of 372.5%. The ~~decrease is~~increase was primarily due to ~~decreases in workforce at our South Texas Properties, decreases in corporate allocations as a portion~~bad debt expense of ~~these are now allocated to our EPC Division and continued cost minimization efforts implemented by management for the period.~~

~~Asset impairment~~ ~~- We recorded an impairment of $750,000 during the three months ended March 31, 2018,~~$2.8 million related to a ~~piece of equipment at our Texas North Yard~~contracts receivable reserve recorded during the third quarter 2018 as we received indications 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. See Note 2collectability of the ~~Notes~~receivable was no longer probable and higher legal and advisory fees related to ~~Consolidated Financial Statements~~the pursuit of claims against a customer for ~~additional information regarding our assets held~~disputed change orders for ~~sale. We did not record any asset impairments during the three months ended March 31,~~a project completed prior to 2017, ~~within our Fabrication Division.~~offset partially by headcount reductions.

Shipyard Three Months Ended March 31, Increase or (Decrease)
2018 2017 Amount Percent
Revenue ⁽¹⁾
$ 18,565
$ 18,422
$ 143
0.8%
Gross profit (loss) ⁽¹⁾
(1,023 ) (1,704 ) (681 ) (40.0)%
Gross profit (loss) percentage (5.5 )% (9.2 )%
General and administrative expenses 796
964
(168 ) (17.4)%
Asset impairment —
389
(389 ) (100.0)%
Operating income (loss) ⁽¹⁾
$ (1,819 ) $ (3,057 ) $ (1,238 )



Shipyard	Three Months Ended September 30,						Increase (Decrease)
	2018			2017			Amount			Percent
Revenue ⁽¹⁾	$	24,492		$	15,074		$	9,418		62.5%
Gross loss	(1,764		)	(3,504		)	1,740			49.7%
Gross loss percentage	(7.2		)%	(23.2		)%
General and administrative expenses	696			888			(192		)	(21.6)%
Operating loss ⁽¹⁾	(2,460		)	(4,392		)	1,932

___________


(1)	Revenue for the three months ended ~~March 31,~~September 30, 2018 and 2017, includes ~~$390,000~~$15,000 and ~~$1.6~~$0.5 million, respectively, of non-cash amortization of deferred revenue related to ~~the~~ values assigned to ~~the~~ contracts acquired in ~~the LEEVAC transaction, respectively.~~a previous acquisition.

Revenue - Revenue ~~from our Shipyard Division increased $143,000~~ for the three months ended ~~March 31,~~September 30, 2018 ~~compared~~and 2017, was $24.5 million and $15.1 million, respectively, representing an increase of 62.5%. The increase was primarily due to ~~the three months ended March 31, 2017. During the first quarter of 2018, we were able to make~~additional progress on the construction of ~~eight~~ten harbor ~~tugs~~tug vessels and an ~~offshore research vessel which were~~ice-breaker tug that was not under construction during the ~~first~~third quarter ~~of 2017. This was~~2017, offset partially ~~offset~~ by lower revenue from ~~construction of~~ our two ~~OSV and two~~ MPSV ~~vessel~~ contracts that were suspended during the first quarter 2018. See Note 8 to our Consolidated Financial Statements for further discussion of ~~2018.~~the MPSV contracts.

~~During~~Gross loss - Gross loss for the ~~first quarter~~three months ended September 30, 2018 and 2017, was $1.8 million (7.2% of ~~2017, we completed~~revenue) and $3.5 million (23.2% of revenue), respectively, representing a decrease of 49.7%. The gross loss during the ~~first of the OSVs and tendered it for delivery on February 6, 2017, and suspended construction of the second OSV~~2018 period was primarily due to ~~a customer dispute. We recommenced construction~~under recovery of our overhead costs and the ~~second OSV during the fourth quarter~~impact of ~~2017 which is scheduled for completion during the second quarter of 2018. During the first quarter of 2018, we received a notice of purported termination from a customer within our Shipyard Division~~lower margin backlog related to previous project awards sold during a period of competitive pricing.

The decrease in gross loss relative to the 2017 period was primarily due to higher revenue, a reduction in overhead costs, and the prior period including $2.1 million in contract losses related to cost increases on the construction of two MPSVs. ~~We dispute~~

General and administrative expenses - General and administrative expenses for the ~~purported termination~~three months ended September 30, 2018 and ~~disagree with~~2017, were $0.7 million (2.8% of revenue) and $0.9 million (5.9% of revenue), respectively, representing a decrease of 21.6%. The decrease was primarily due to headcount reductions.



Services	Three Months Ended September 30,						Increase (Decrease)
	2018			2017			Amount		Percent
Revenue	$	22,617		$	17,651		$	4,966	28.1%
Gross profit	3,191			1,912			1,279		66.9%
Gross profit percentage	14.1		%	10.8		%
General and administrative expenses	705			695			10		1.4%
Operating income	2,486			1,217			1,269

Revenue - Revenue for the ~~customer’s reasons~~three months ended September 30, 2018 and 2017, was $22.6 million and $17.7 million, respectively, representing an increase of 28.1%. The increase was due to an overall increase in activity resulting from higher demand for ~~same. Pending resolution of the dispute, all work has been stopped~~our onshore and the vessels and associated equipment and material are in our care and custody at our shipyard in Houma, Louisiana. See Note 9 of the Notes to Consolidated Financial Statements for additional information relating to this customer dispute.offshore services.

Gross profit ~~(loss)~~ - Gross ~~loss from our Shipyard Division was $1.0 million~~profit for the three months ended ~~March 31,~~September 30, 2018 ~~compared to a gross loss~~and 2017, was $3.2 million (14.1% of ~~$1.7~~revenue) and $1.9 million ~~for the three months ended March 31, 2017.~~(10.8% of revenue), respectively, representing an increase of 66.9%. The ~~decrease~~increase was due to higher revenue and improved ~~cost management efforts and efficiencies learned from the construction~~recovery of ~~two OSV and two MPSV vessels during the three months ended March 31, 2017, and applied to the construction of eight harbor tugs during the three months ended March 31, 2018.~~overhead costs.

General and administrative expenses - General and administrative expenses for ~~our Shipyard Division decreased $168,000 for~~ the three months ended ~~March 31,~~September 30, 2018 ~~compared to the three months ended March 31,~~and 2017, ~~primarily due to reductions in workforce, decreases in corporate allocations as a portion~~were $0.7 million (3.1% of ~~these are now allocated to our EPC Division~~revenue) and ~~decreased construction activity.~~$0.7 million (3.9% of revenue), respectively, representing an increase of 1.4%.

~~Asset impairment~~ - During the three months ended March 31, 2017, we recorded an impairment of $389,000 related to the Shipyard Division assets held for sale. See Note 2 of the Notes to Consolidated Financial Statements for additional information relating to our assets held for sale. We did not record any asset impairment during the three months ended March 31, 2018, in our Shipyard Division.

Services Three Months Ended March 31, Increase or (Decrease)
2018 2017 Amount Percent
Revenue $ 21,870
$ 10,712
$ 11,158
104.2%
Gross profit (loss) 2,614
33
2,581
7,821.2%
Gross profit (loss) percentage 12.0 % 0.3 %
General and administrative expenses 734
666
68
10.2%
Operating income (loss) $ 1,880
$ (633 ) $ 2,513

~~Revenue -~~ Revenue from our Services Division increased $11.2 million for the three months ended March 31, 2018, compared to the three months ended March 31, 2017, due to an overall increase in work experienced due to increases in customer demand for offshore oil and gas related service projects.

~~Gross profit -~~ ~~Gross profit from our Services Division increased $2.6 million for the three months ended March 31, 2018, compared to the three months ended March 31, 2017, due to increased revenue discussed above.~~

~~General and administrative expenses~~ - General and administrative expenses for our Services Division increased $68,000 for the three months ended March 31, 2018, compared to the three months ended March 31, 2017, due to support of increased work as well as increases in employee incentive compensation of approximately $120,000 resulting from increased operating income. This was partially offset by decreases in corporate allocations as a portion of these are now allocated to our EPC Division and continued cost minimization efforts implemented by management for the period.


EPC	Three Months Ended March 31,					Increase or (Decrease)				Three Months Ended September 30,					Increase (Decrease)
	2018			2017		Amount			Percent	2018			2017		Amount			Percent
Revenue	73			$	—	$	73		100.0%	$	1,071		$	—	$	1,071		100.0%
Gross profit (loss)	(308		)	—		(308		)	(100.0)%
Gross profit (loss) percentage	n/a			n/a
Gross loss										(205		)	—		(205		)	(100.0)%
Gross loss percentage										(19.1		)%	n/a
General and administrative expenses	417			—		417			100.0%	503			—		503			100.0%
Operating income (loss)	$	(725	)	$	—	$	(725	)
Operating loss										(708		)	—		(708		)

Revenue - Our EPC Division did not exist at ~~March 31,~~September 30, 2017. Revenue for the three months ended ~~March 31,~~September 30, 2018 consists of ~~early~~pricing, planning and scheduling work ~~and engineering studies authorized by SeaOne.~~for the SeaOne Project. See Note ~~8 of the Notes~~7 to our Consolidated Financial Statements for further discussion of our EPC Division and the SeaOne Project.

Gross ~~profit (loss)~~loss - Gross loss ~~from~~for the three months ended September 30, 2018, was primarily due to costs incurred that are not yet fully recoverable under our ~~EPC Division occurred~~current scope of work authorized by SeaOne.

General and administrative expenses - General and administrative expenses include the addition of administrative personnel and other costs as we ~~added personnel~~invest in this new business.



Corporate	Three Months Ended September 30,						Increase (Decrease)
	2018			2017			Amount			Percent
Revenue	$	—		$	—		$	—
Gross loss	(402		)	(152		)	(250		)	(164.5)%
Gross loss percentage	n/a			n/a
General and administrative expenses	2,092			2,009			83			4.1%
Operating loss	(2,494		)	(2,161		)	(333		)

Gross loss - Gross loss for the three months ended September 30, 2018 and ~~overhead infrastructure related~~2017, was $0.4 million and $0.2 million, respectively, representing an increase of 164.5%. The increase was primarily due to ~~the anticipated SeaOne project.~~higher costs to support our strategic initiatives and EPC Division.

General and administrative expenses - General and administrative expenses for the three months ended September 30, 2018 and 2017, were $2.1 million (4.2% of consolidated revenue) and $2.0 million (4.0% of consolidated revenue), respectively, representing an increase of 4.1%.

Nine Months Ended September 30, 2018, Compared to Nine Months Ended September 30, 2017(in thousands, except for percentages):

Consolidated



	Nine Months Ended September 30,						Increase (Decrease)
	2018			2017			Amount		Percent
Revenue	$	161,016		$	133,745		$	27,271	20.4%
Cost of revenue	164,248			150,755			13,493		9.0%
Gross loss	(3,232		)	(17,010		)	13,778		81.0%
Gross loss percentage	(2.0		)%	(12.7		)%
General and administrative expenses	17,473			12,940			4,533		35.0%
Asset impairments	1,360			389			971		249.6%
Operating loss	(22,065		)	(30,339		)	8,274		27.3%
Interest expense, net	(166		)	(262		)	96		36.6%
Other income (expense), net	6,954			(209		)	7,163		3,427.3%
Net loss before income taxes	(15,277		)	(30,810		)	15,533		50.4%
Income tax expense (benefit)	419			(10,322		)	10,741		104.1%
Net loss	$	(15,696	)	$	(20,488	)	$	4,792	23.4%

Revenue - Revenue for the nine months ended September 30, 2018 and 2017, was $161.0 million and $133.7 million, respectively, representing an increase of 20.4%. The increase was primarily due to a $22.9 million increase within our ~~EPC~~Services Division ~~include~~from additional demand for both onshore and offshore services and a $14.9 million increase within our Shipyard Division primarily due to additional progress on the ~~addition~~construction of ~~personnel~~ten harbor tug vessels, two regional class research vessels and ~~allocations~~an ice-breaker tug that was not under construction during the prior period. These increases were partially offset by a decrease in revenue of ~~corporate~~$14.3 million within our Fabrication Division primarily due to the completion and delivery of four modules for a petrochemical facility during the second quarter 2018 and lower revenue from our two MPSV contracts that were suspended during the first quarter 2018.

Gross loss - Gross loss for the nine months ended September 30, 2018 and 2017, was $3.2 million (2.0% of revenue) and $17.0 million (12.7% of revenue), respectively, representing a decrease of 81.0%. The gross loss during the 2018 period was primarily due to under recovery of our overhead costs (including holding costs for our South Texas Properties of $1.6 million) and the impact of lower margin backlog within our Shipyard Division related to previous project awards sold during a period of competitive pricing.

The decrease in gross loss relative to the prior period was primarily due to a decrease in gross loss within our Shipyard Division of $13.5 million due to increased revenue, a reduction in overhead costs, and the prior period including $12.7 million in contract losses related to cost increases on the construction of two MPSVs, and increased gross profit within our Services Division of $7.1 million due to increased revenue and higher recovery of our overhead costs, offset partially by a gross loss for our Fabrication Division of $5.9 million related to decreased fabrication revenue.

General and administrative expenses - General and administrative expenses for the nine months ended September 30, 2018 and 2017, were $17.5 million (10.9% of revenue) and $12.9 million (9.7% of revenue), respectively, representing and increase of 35.0%. The increase was primarily due to:

Bad debt expense of $2.8 million related to a contracts receivable reserve recorded during the third quarter 2018 within our Fabrication Division as we ~~invest~~received indications that collectability of the receivable was no longer probable;

Higher legal and advisory fees related to customer disputes;

Costs associated with the evaluation of strategic alternatives and initiatives to diversify our business;

An increase in ~~this new line~~administrative personnel for our newly created EPC Division; and

Higher short term incentive plan costs for certain divisions and higher long-term incentive plan costs.

These increases were offset partially by headcount reductions.

Asset impairments - Asset impairments for the nine months ended September 30, 2018 and 2017, were $1.4 million and $0.4 million, respectively. The impairments were recorded during the first half of ~~business.~~2018 and 2017, respectively, and were related to certain assets that were held for sale within our Fabrication and Shipyard Divisions. See Note 2 to our Consolidated Financial Statements for further discussion of our assets held for sale.

Interest expense, net - Interest expense, net for the nine months ended September 30, 2018 and 2017, was expense of $0.2 million and $0.3 million, respectively. Interest expense, net deceased for the period primarily due to interest earned from cash equivalents and short-term investments, partially offset by interest expense on borrowings outstanding earlier in 2018.

Other income (expense), net - Other income (expense), net for the nine months ended September 30, 2018 and 2017, was income of $7.0 million and expense of $0.2 million, respectively. Other income, net for the 2018 period was primarily due to a gain on the sale of our Texas South Yard of $3.9 million and a gain from insurance recovery proceeds related to Hurricane Harvey of $3.6 million recorded during the first half of 2018.

Income tax expense (benefit) - Income tax expense (benefit) for the nine months ended September 30, 2018 and 2017, was expense of $0.4 million and a benefit of $10.3 million, respectively. Current expense represents state income taxes. No federal tax benefit was recorded during the 2018 period as a full valuation allowance was recorded against our NOL deferred tax assets generated during the period. See Note 1 to our Consolidated Financial Statements for further discussion of our NOLs and deferred tax assets.

Operating Segments

The results of our four operating divisions and non-operating corporate division for the nine months ended September 30, 2018 and 2017, are presented below (amounts in thousands, except for percentages).


Corporate	Three Months Ended March 31,						Increase or (Decrease)
Fabrication										Nine Months Ended September 30,						Increase (Decrease)
	2018			2017			Amount		Percent	2018			2017			Amount			Percent
Revenue	$	—		$	—		$	—	—%	$	28,171		$	42,517		$	(14,346	)	(33.7)%
Gross profit (loss)	$	(385	)	(260		)	125		48.1%	(5,918		)	216			(6,134		)	(2,839.8)%
Gross profit (loss) percentage	n/a			n/a						(21.0		)%	0.5		%
General and administrative expenses	2,138			1,479			659		44.6%	5,251			2,432			2,819			115.9%
Operating income (loss)	$	(2,523	)	$	(1,739	)	$	784
Asset impairments										1,360			—			1,360			100.0%
Operating loss										(12,529		)	(2,216		)	(10,313		)

Revenue - Revenue for the nine months ended September 30, 2018 and 2017, was $28.2 million and $42.5 million, respectively, representing a decrease of 33.7%. 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 during the remaining period of 2018. We were awarded a new project for the expansion of a paddle wheel riverboat during the third quarter 2018 that will be constructed by our Fabrication Division; however, construction did not commence until the fourth quarter 2018. In addition, revenue from our South Texas Properties decreased $3.5 million as these properties were either sold and/or marketed for sale during all of 2018. See Note 2 to our Consolidated Financial Statements for further discussion of our South Texas Properties.

Gross profit (loss) - Gross profit (loss) for the nine months ended September 30, 2018 and 2017, was a gross loss ~~from our Corporate Division increased~~of $5.9 million (21.0% of revenue) and a gross profit of $0.2 million (0.5% of revenue), respectively. The gross loss during the 2018 period was primarily due to under recovery of our overhead costs (including holding costs for our South Texas Properties of $1.6 million). The gross loss for 2018 relative to the prior period gross profit was primarily due to decreased revenue, offset partially by a reduction in overhead costs and lower ~~allocation~~depreciation expense for our South Texas Properties as these assets were classified as held for sale during all of 2018.

General and administrative expenses - General and administrative expenses for the nine months ended September 30, 2018 and 2017, were $5.3 million (18.6% of revenue) and $2.4 million (5.7% of revenue), respectively, representing an increase of 115.9%. The increase is primarily due to:

Bad debt expense of $2.8 million related to a contracts receivable reserve recorded during the third quarter 2018 as ~~well as increased insurance~~we received indications that collectability of the receivable was no longer probable;

Legal and advisory fees related to pursuit of claims against a customer for disputed change orders for a project completed prior to 2017; and

Legal expenses incurred to market and sell our South Texas Properties.

These increases were offset partially by headcount reductions.

Asset impairments - Asset impairments for the nine months ended September 30, 2018 were $1.4 million. The impairments were recorded during the first half of 2018 and were related to certain assets that were held for sale. See Note 2 to our Consolidated Financial Statements for further discussion of our assets held for sale.



Shipyard	Nine Months Ended September 30,						Increase (Decrease)
	2018			2017			Amount			Percent
Revenue ⁽¹⁾	$	66,677		$	51,798		$	14,879		28.7%
Gross loss ⁽¹⁾	(5,563		)	(19,061		)	13,498			70.8%
Gross loss percentage	(8.3		)%	(36.8		)%
General and administrative expenses	2,089			2,835			(746		)	(26.3)%
Asset impairments	—			389			(389		)	(100.0)%
Operating loss ⁽¹⁾	(7,652		)	(22,285		)	14,633

___________


(1)	Revenue for the nine months ended September 30, 2018, and 2017, includes $0.5 million and $2.4 million, respectively, of non-cash amortization of deferred revenue related to values assigned to contracts in a previous acquisition.

Revenue - Revenue for the nine months ended September 30, 2018 and 2017, was $66.7 million and $51.8 million, respectively, representing an increase of 28.7%. The increase was primarily due to additional progress on the construction of ten harbor tug vessels, two regional class research vessels and an ice-breaker tug that was not under construction during the prior period, partially offset by lower revenue from our two MPSV contracts that were suspended during the first quarter 2018.

Gross loss - Gross loss for the nine months ended September 30, 2018 and 2017, was $5.6 million (8.3% of revenue) and $19.1 million (36.8% of revenue), respectively, representing a decrease of 70.8%. The gross loss during the 2018 period was primarily due to under recovery of our overhead costs and the impact of lower margin backlog related to previous project awards sold during a period of competitive pricing. The decrease in gross loss relative to the prior period was primarily due to:

Higher revenue and a reduction in overhead costs;

Contract losses of $12.7 million during the prior period related to cost increases on the construction of two MPSVs; and

Holding and closing costs during the prior period of approximately $0.8 million related to our Prospect shipyard, for which our lease of the facility was terminated during the fourth quarter 2017.

General and administrative expenses - General and administrative expenses for the nine months ended September 30, 2018 and 2017, were $2.1 million (3.1% of revenue) and $2.8 million (5.5% of revenue), respectively, representing a decrease of 26.3%. The decrease was primarily due to headcount reductions.

Asset impairments - Asset impairments for the nine months ended September 30, 2017 were $0.4 million. The impairments were recorded during the first half of 2017 and were related to certain assets that were held for sale. See Note 2 to our Consolidated Financial Statements for additional discussion of our assets held for sale.



Services	Nine Months Ended September 30,						Increase (Decrease)
	2018			2017			Amount		Percent
Revenue	$	66,692		$	43,758		$	22,934	52.4%
Gross profit	9,390			2,335			7,055		302.1%
Gross profit percentage	14.1		%	5.3		%
General and administrative expenses	2,201			2,008			193		9.6%
Operating income	7,189			327			6,862

Revenue - Revenue for the nine months ended September 30, 2018 and 2017, was $66.7 million and $43.8 million, respectively, representing and increase of 52.4%. The increase was due to an overall increase in activity resulting from higher demand for our onshore and offshore services.

Gross profit - Gross profit for the nine months ended September 30, 2018 and 2017, was $9.4 million (14.1% of revenue) and $2.3 million (5.3% of revenue), respectively, representing an increase of 302.1%. The increase was due to higher revenue and improved recovery of overhead costs.

General and administrative expenses - General and administrative expenses for the nine months ended September 30, 2018 and 2017, were $2.2 million (3.3% of revenue) and $2.0 million (4.6% of revenue), respectively, representing an increase of 9.6%. The increase was due to additional costs to support higher activity and higher employee incentive compensation costs.



EPC	Nine Months Ended September 30,					Increase (Decrease)
	2018			2017		Amount			Percent
Revenue	$	2,026		$	—	$	2,026		100.0%
Gross profit	30			—		30			100.0%
Gross profit percentage	1.5		%	n/a
General and administrative expenses	1,405			—		1,405			100.0%
Operating loss	(1,375		)	—		(1,375		)

Revenue - Our EPC Division did not exist at September 30, 2017. Revenue for the nine months ended September 30, 2018, consists of pricing, planning and scheduling work for the SeaOne Project. See Note 7 to our ~~Corporate~~Consolidated Financial Statements for further discussion of our EPC Division ~~increased~~and the SeaOne Project.

General and administrative expenses - General and administrative expenses include the addition of administrative personnel and other costs as we invest in this new business.



Corporate	Nine Months Ended September 30,						Increase (Decrease)
	2018			2017			Amount			Percent
Revenue	$	—		$	—		$	—
Gross loss	(1,171		)	(500		)	(671		)	(134.2)%
Gross loss percentage	n/a			n/a
General and administrative expenses	6,527			5,665			862			15.2%
Operating loss	(7,698		)	(6,165		)	(1,533		)

Gross loss - Gross loss for the nine months ended September 30, 2018 and 2017, was $1.2 million and $0.5 million, respectively, representing an increase in gross loss of 134.2%. The increase in gross loss was primarily due to higher costs to support our strategic initiatives and EPC Division.

General and administrative expenses - General and administrative expenses for the nine months ended September 30, 2018 and 2017, were $6.5 million (4.1% of consolidated revenue) and $5.7 million (4.2% of consolidated revenue), respectively, representing and increase of 15.2%. The increase was primarily due to increased legal and advisory fees related to customer disputes, costs associated with the evaluation of strategic ~~planning~~alternatives and ~~diversification of~~initiatives to diversify our business, ~~increased employee incentive accruals~~ and higher ~~stock compensation expense of approximately $220,000.~~long-term incentive plan costs.

Liquidity and Capital Resources

Our ~~immediate~~primary sources of liquidity ~~remains dependent on~~are our cash on hand, anticipated proceeds from the sales of assets, availability of future drawings from our Credit Agreement and collections of accounts receivable. At March 31, 2018, we had $10 million outstanding under our Credit Agreement, $2.5 million in outstanding letters of credit, and cash and cash equivalents, ~~totaling $6.5 million compared to $9.0 million at December 31, 2017. As~~scheduled maturities of ~~May 4, 2018,~~ our ~~liquidity has significantly improved due to~~short-term investments, potential proceeds from the sale of ~~our Texas South Yard the net proceeds of which will be used to rebuild our liquidity, to support upcoming projects, continue investing in our newly created EPC Division~~assets held for sale, and ~~for other general corporate purposes. After the sale of our Texas South Yard, our cash balance was $55.0 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~~(discussed below). Our available liquidity ~~of approximately $82.5 million.~~

~~Working~~is impacted by changes in our working capital ~~was $137.1~~(excluding cash and cash equivalents and short-term investments) and our capital expenditure requirements. At September 30, 2018, our cash and cash equivalents and short-term investments totaled $54.5 million and our ~~ratio of current assets to current liabilities~~working capital was ~~4.34 to 1 at March 31, 2018, compared to $130.5 million and 3.68 to 1, respectively, at December 31, 2017.~~$124.0 million. Working capital ~~at March 31, 2018,~~ includes ~~$98.4~~$9.5 million ~~related to~~of short-term investments and $42.7 million of assets held for ~~sale, primarily related to~~sale. Fluctuations in our ~~South Texas Properties which decreased after~~working capital balance, and its components, are not unusual in our business and are impacted by the ~~sale~~size of our ~~Texas South Yards to $48.5 million. At March 31, 2018,~~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 progress billings on backlog as we complete certain phases of work. Working capital is also impacted at period-end by the timing of contracts receivable ~~balance was $27.4 million~~collections and accounts payable payments on our projects.

A summary of ~~which we have subsequently collected $14.9 million through May 4, 2018.~~

~~Our primary use of cash during the three months ended March 31,~~our immediately available liquidity at September 30, 2018, is ~~referenced~~as follows (in thousands):



Available Liquidity	Total
Cash and cash equivalents	$	45,020
Short-term investments ⁽¹⁾	9,494
Total cash, cash equivalents and short-term investments	54,514
Credit Agreement capacity	40,000
Less: Outstanding letters of credit	2,475
Credit Agreement availability	37,525
Total available liquidity	$	92,039

___________

(1) Includes U.S. Treasuries and other investment-grade commercial paper which can be liquidated quickly in ~~the Cash Flow Activities section below.~~open markets.

Sales of Assets

As discussed in our ~~Executive Summary,~~Overview, we ~~are implementing~~have initiated several strategies to ~~diversify our business, increase backlog, reduce operating expenses and~~ monetize underutilized assets. ~~Our South Texas Properties are held for sale. A significant portion of our near-term plan is to generate liquidity from~~Specifically, during the ~~sale of these assets.~~

~~On April 20,~~second quarter 2018, we ~~closed on~~completed the sale of our Texas South Yard for ~~a sale price of $55~~$55.0 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~~for total net proceeds ~~to rebuild our liquidity, to support upcoming projects, continue investing in our newly created EPC Division~~during the nine-months ended September 30, 2018 of approximately $53.5 million and ~~for other general corporate purposes. See further discussion~~a gain of the sale of our Texas South Yard in Note 2 of the Notes to Consolidated Financial Statements. 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 the twelve months from the date of this Report.approximately $3.9 million.

~~As of the date of this Report our Texas North Yard remains held for sale. The book value of~~In addition, on September 26, 2018, we entered into an agreement to sell the Texas North Yard and certain associated equipment for $28.0 million. We received $0.5 million during the third quarter 2018 as a deposit on the property, which is ~~$46.6 million at March 31, 2018.~~refundable under certain circumstances. The sale is anticipated to close in the fourth quarter 2018 and is subject to customary closing conditions, including the purchaser’s right to conduct inspections of the property related to confirmation of title, surveys, environmental conditions, easements and access rights, and third-party consents. Based on the sales price and estimated closing and other costs, we expect to realize a gain on the transaction upon closing. We can provide no assurances that we will successfully close the transaction, that closing will occur under our expected timeline or that we will achieve our estimated net proceeds or a gain on the sale. We continue to ~~incur costs associated with holding and maintaining our~~actively market the remaining Texas North ~~Yard. These costs include insurance, general maintenance~~Yard assets held for sale, which primarily consist of ~~the properties in their current state, property taxes~~three 660-ton crawler cranes, a barge, a plate bending roll machine, and ~~retained employees which will be expensed as incurred.~~panel line equipment.

Line of Credit

Ratio of current assets to ~~market opportunities~~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 ~~support our ongoing operations.~~ other costs incurred in such offering; and

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

Interest on ~~drawings~~borrowings under the Credit Agreement may be designated, at our option, as either ~~Base~~the Wall Street Journal published Prime Rate ~~(as defined in the credit facility)~~ or LIBOR plus 2%2.0% per annum. ~~Our outstanding balance of $10 million at March 31, 2018, is designated as a LIBOR rate loan. Unused commitment~~Commitment fees on the ~~undrawn~~unused portion of the Credit Agreement are 0.4% per annum, and interest on ~~undrawn stated amounts under~~outstanding letters of credit ~~issued by the lender~~ is ~~2% per annum. At March 31, 2018, the interest rate on our outstanding borrowings was 3.75%~~2.0% per annum. The Credit Agreement is secured by substantially all of our assets (other than the ~~South~~assets held for sale at our Texas ~~Properties)~~North Yard).

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


i.	~~Ratio of current assets to current liabilities of not less than 1.25:1.00;~~


~~ii.~~	~~Minimum tangible net worth requirement of at least the sum of:~~


a)	~~$185 million, plus~~


b)	~~An amount equal to 50% of consolidated net income for each fiscal quarter ending after June~~available capacity. At September 30, ~~2017, including 50% of any gain attributable to the sale of our South Texas Properties (with no deduction for a net loss in any such fiscal quarter), plus~~


c)	~~100% of the proceeds of any issuance of any stock or other equity after deducting of any fees, commissions, expenses and other costs incurred in such offering; and~~


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

~~As of March 31,~~ 2018, we were in compliance with all of our financial ~~covenants.~~covenants, with a tangible net worth of $203.2 million (as defined by the Credit Agreement) and a ratio of current assets to current liabilities of 3.37 to 1.0.

~~We will~~Cash Flow Activity

During the nine months ended September 30, 2018 and 2017, net cash used in operating activities was $18.7 million and $29.6 million, respectively. During the three months ended September 30, 2018 and 2017, net cash provided by operating activities was $7.8 million, compared to cash used in operating activities of $1.6 million, respectively. The use of cash during the nine months ended September 30, 2018, was primarily due to the following:

Operating losses for the period, excluding gains from asset sales and insurance recoveries of $6.8 million, bad debt expense of $2.8 million, non-cash amortization of deferred revenue of $0.5 million, and non-cash depreciation and amortization, asset impairments, and stock compensation expense totaling $11.3 million;

Increase in contracts receivable and retainage of $6.2 million (exclusive of bad debt expense of $2.8 million and 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). The increase in contracts receivable, net of the reclassification, is primarily due to slower collections of receivables for our T&M work;

Increase in contracts in progress of $11.8 million, primarily related to the net billing positions on projects in our Shipyard Division;

Increase in prepaid expenses, inventory and other assets of $2.5 million, primarily due to the aforementioned reclassification of retainage to other noncurrent assets; and

Decrease in accrued contract losses and noncurrent deferred revenue of $3.2 million.

These uses of cash were partially offset by:

Increase in advance billings on contracts of $9.8 million, primarily related to the net billing position on projects in our Fabrication Division; and

Increase in accounts payable and accrued expenses of $4.2 million;

During the nine months ended September 30, 2018, net cash provided by investing activities was $55.5 million, compared to net cash used in investing activities of $2.4 million for the nine months ended September 30, 2017. Cash provided by investing activities during the 2018 period was due to proceeds received from asset sales of $57.7 million, primarily related to the sale of our Texas South Yard and insurance proceeds of $9.4 million resulting from hurricane damage to our facilities, offset partially by the purchase of short-term investments of $9.2 million and capital expenditures of $2.4 million.

During the nine months ended September 30, 2018 and 2017, net cash used in financing activities was $0.8 million and $1.4 million, respectively. Cash used in financing activities primarily related to tax payments made on behalf of employees from vested stock withholdings.

Future Liquidity Outlook

As discussed in our Overview, we continue to ~~monitor~~focus on maintaining liquidity and ~~preserve~~securing meaningful new contract awards and backlog in the near-term, and generating operating income and cash flow from operations in the longer-term. We have made significant progress in our ~~cash. Our~~efforts to improve our liquidity, including reductions in costs (including reducing our workforce and reducing the cash compensation paid to our directors and the salaries of our executive officers) and the divestiture of underutilized assets. The primary uses of our liquidity for the remainder 2018 and the foreseeable future are to fund the underutilization of our fabrication facilities in our Shipyard and Fabrication Divisions until we secure and/or begin to execute sufficient backlog to fully recover our overhead costs, working capital requirements for ~~2018 and beyond are for the costs associated with fabrication and shipyard~~our projects, capital expenditures ~~related~~and enhancements to our Shipyard facilities, the ~~creation~~expansion of our EPC Division, corporate administrative expenses and ~~enhancements to our shipyards.~~strategic initiatives. Future capital expenditures will be highly dependent upon the amount and timing of future ~~projects.~~new project awards. Capital expenditures for the ~~quarter~~nine months ended ~~March 31,~~September 30, 2018 were ~~$71,000. We do not~~$2.4 million and we anticipate ~~significant~~ capital expenditures of approximately $1.0 million for the remainder of 2018.

If industry conditions for offshore oil and gas do not improve, we are unable to ~~sell~~increase our ~~Texas North Yard or the sale is delayed,~~backlog, or we are unable to ~~increase~~diversify our ~~backlog,~~customer base, we would ~~expect to~~ take additional measures to reduce costs and preserve our cash ~~flows~~ until ~~such time~~ we are able to generate cash flows from operations. Since the beginning of 2016, we have implemented wage adjustments along with employee benefit and overall cost reductions within all of our divisions. We have reduced the level of our workforce in the past and we will continue to do so based on booked work in all of our facilities. We have reduced the compensation paid to our directors and the salaries of our executive officers, and we have reduced our capital expenditures and placed assets that are either underutilized, under-performing or not expected to provide sufficient long-term value for sale, which include our South Texas Properties.

We ~~currently~~ believe that our cash, ~~on hand~~cash equivalents and ~~funds available~~short-term investments at September 30, 2018, and availability under our Credit Agreement, will be sufficient to enable us to fund our operating expenses, meet our working capital and capital expenditure requirements, and satisfy any ~~future~~ debt service ~~and~~obligations or other funding requirements, for at least twelve months from the date of this Report. Our ~~view regarding~~evaluation of the sufficiency of our cash and liquidity is primarily based on our financial forecast for the remainder of 2018 and ~~early~~ 2019, which is impacted by ~~various assumptions regarding the sale of our Texas North Yard,~~ our existing backlog and ~~a reasonable amount~~estimates of ~~forecast, non-contractual backlog. There is~~future new project awards. We can provide no ~~guarantee~~assurances that our financial forecast will be ~~attainable~~achieved or that we will have sufficient cash ~~including funds available~~or availability under our Credit Agreement to meet planned operating expenses and other unforeseen cash requirements. Accordingly, we may be required to ~~further draw on our Credit Agreement,~~ obtain additional bank financing, sell additional assets or conduct equity or debt offerings at a time when it is not beneficial to do so.

~~Cash Flow Activities~~

For the three months ended March 31, 2018, net cash used in operating activities was $14.1 million, compared to net cash used in operating activities of $15.1 million for the three months ended March 31, 2017. The use of cash in operations during the period was primarily due to the following:

~~Operating losses for the three months ended March 31, 2018, in excess of non-cash depreciation, amortization, impairment and stock compensation expense of approximately $1.5 million;~~

~~Build-up of costs for contracts in progress of $9.1 million;~~

~~Build-up of retainage on projects of $1.5 million; and~~

~~Payment of property taxes related to our South Texas Properties of $2 million.~~

Net cash provided by investing activities for the three months ended March 31, 2018, was $2.4 million, compared to cash used in investing activities of $391,000 for the three months ended March 31, 2017. The change in cash used in investing activities is primarily due to the insurance proceeds received for hurricane damage to assets at our South Texas Properties.

Net cash provided by financing activities for the three months ended March 31, 2018, and 2017, was $9.2 million compared to $1.0 million in cash used in financing activities, respectively. The increase in cash provided by financing activities is due to $10 million in net borrowings under our Credit Agreement.

Contractual Obligations

There have been no material changes from the information included in our 2017 Annual Report. For more information on our contractual obligations, refer to Part II, Item 7 of our 2017 Annual Report.

Off-Balance Sheet Arrangements

There have been no material changes from the information included in our 2017 Annual Report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have been no material changes in the Company’s market risks during the quarter ended ~~March 31,~~September 30, 2018. For more information on market risk, refer to Part II, Item ~~7A.~~7A of our 2017 Annual ~~Report on Form 10-K for the year ended December 31, 2017.~~Report.

Item 4. Controls and Procedures.

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits 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 the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, have 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.

There have been no changes during the ~~fiscal~~ quarter ended ~~March 31,~~September 30, 2018, in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

~~The Company is~~We are subject to various routine legal proceedings in the normal conduct of ~~its~~our business primarily involving commercial claims, workers’ compensation claims, and claims for personal injury under general maritime laws of the ~~United States~~U.S. and the Jones Act. While the outcome of these lawsuits, legal proceedings and claims cannot be predicted with certainty, ~~management believes~~we believe that the outcome of any such proceedings, even if determined adversely, would not have a material adverse effect on ~~the~~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 ~~the Company.~~St. Tammany, State of Louisiana and is styled Gulf Island Shipyards, LLC v. Hornbeck Offshore Services, LLC. See Note 8 to our Consolidated Financial Statements for further information relating to this recent litigation.

Item 1A. Risk Factors.

There have been no material changes from the information included in Item 1A “Risk Factors” included in our 2017 Annual ~~Report on Form 10-K for the year ended December 31, 2017.~~Report.

Item 6. Exhibits.



Exhibit Number	Description of Exhibit

3.1	Composite Articles of Incorporation of the Company incorporated by reference to Exhibit 3.1 of the ~~Company’s~~Company's Form 10-Q filed with the SEC on April 23, ~~2009.~~2009 (SEC File No. 001-34279).
3.2	Amended and Restated Bylaws of the Company, incorporated by reference to Exhibit ~~3.2~~3.1 of the Company’s Form 8-K filed with the SEC on November ~~4, 2016.~~6, 2018 (SEC File no. 001-34279).
10.1	~~Second~~Third Amendment to Credit Agreement dated ~~February 26, 2018, incorporated by reference to Exhibit 10.15 to the Company’s Form 10-K filed March 9,~~August 27, 2018. *
10.2	~~Change~~Agreement of ~~Control Agreement, effective March 1, 2018,~~Sale between ~~the Company~~Berry Contracting, L.P. and ~~Kirk J. Meche, incorporated by reference to Exhibit 10.1~~Gulf Marine Fabricators, L.P. dated as of ~~the Company’s Form 8-K filed February~~September 26, 2018. †*
~~10.3~~	~~Change of Control Agreement, effective March 1, 2018, between the Company and David S. Schorlemer, incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K filed February 26, 2018.~~ †
~~10.4~~	~~Change of Control Agreement, effective March 1, 2018, between the Company and Todd F. Ladd, incorporated by reference to Exhibit 10.3 of the Company’s Form 8-K filed February 26, 2018.~~ †
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 Certification furnished pursuant to 18 U.S.C. Section ~~1350.~~1350. *

101	Attached as Exhibit 101 to this report are the following items formatted in XBRL (Extensible Business Reporting Language):
	(i)	Consolidated Balance Sheets,
	(ii)	Consolidated Statements of Operations,
	(iii)	Consolidated Statement of Changes in Shareholders’ Equity,
	(iv)	Consolidated Statements of Cash Flows, and
	(v)	Notes to Consolidated Financial Statements.

†*	~~Management Contract or Compensatory Plan.~~Filed herewith.

SIGNATURES

Pursuant to the requirements 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.



GULF ISLAND FABRICATION, INC.

BY:	/s/ ~~David~~Westley S. ~~Schorlemer~~Stockton
	~~David~~Westley S. ~~Schorlemer~~Stockton
	Executive Vice President, Chief Financial Officer, Secretary and Treasurer (Principal Financial Officer)

Date: ~~May 4,~~November 8, 2018

- 3539 -

Total

Remainder of 2018

88,573

56,243

2019

59,231

199,922

2020

19,360

74,976

2021

8,405

2022

647

Total

167,164

340,193

Liquidity and Capital Resources

A summary of ~~which we have subsequently collected $14.9 million through May 4, 2018.~~

~~Our primary use of cash during the three months ended March 31,~~our immediately available liquidity at September 30, 2018, is ~~referenced~~as follows (in thousands):



Available Liquidity	Total
Cash and cash equivalents	$	45,020
Short-term investments ⁽¹⁾	9,494
Total cash, cash equivalents and short-term investments	54,514
Credit Agreement capacity	40,000
Less: Outstanding letters of credit	2,475
Credit Agreement availability	37,525
Total available liquidity	$	92,039

___________

(1) Includes U.S. Treasuries and other investment-grade commercial paper which can be liquidated quickly in ~~the Cash Flow Activities section below.~~open markets.

Sales of Assets

Line of Credit

Ratio of current assets to ~~market opportunities~~current liabilities of not less than 1.25:1.00;

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

Interest on ~~drawings~~borrowings under the Credit Agreement may be designated, at our option, as either ~~Base~~the Wall Street Journal published Prime Rate ~~(as defined in the credit facility)~~ or LIBOR plus 2%2.0% per annum. ~~Our outstanding balance of $10 million at March 31, 2018, is designated as a LIBOR rate loan. Unused commitment~~Commitment fees on the ~~undrawn~~unused portion of the Credit Agreement are 0.4% per annum, and interest on ~~undrawn stated amounts under~~outstanding letters of credit ~~issued by the lender~~ is ~~2% per annum. At March 31, 2018, the interest rate on our outstanding borrowings was 3.75%~~2.0% per annum. The Credit Agreement is secured by substantially all of our assets (other than the ~~South~~assets held for sale at our Texas ~~Properties)~~North Yard).

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


i.	~~Ratio of current assets to current liabilities of not less than 1.25:1.00;~~


~~ii.~~	~~Minimum tangible net worth requirement of at least the sum of:~~


a)	~~$185 million, plus~~


b)	~~An amount equal to 50% of consolidated net income for each fiscal quarter ending after June~~available capacity. At September 30, ~~2017, including 50% of any gain attributable to the sale of our South Texas Properties (with no deduction for a net loss in any such fiscal quarter), plus~~


c)	~~100% of the proceeds of any issuance of any stock or other equity after deducting of any fees, commissions, expenses and other costs incurred in such offering; and~~


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

~~We will~~Cash Flow Activity

Increase in contracts in progress of $11.8 million, primarily related to the net billing positions on projects in our Shipyard Division;

Increase in prepaid expenses, inventory and other assets of $2.5 million, primarily due to the aforementioned reclassification of retainage to other noncurrent assets; and

Decrease in accrued contract losses and noncurrent deferred revenue of $3.2 million.

These uses of cash were partially offset by:

Increase in advance billings on contracts of $9.8 million, primarily related to the net billing position on projects in our Fabrication Division; and

Increase in accounts payable and accrued expenses of $4.2 million;

Future Liquidity Outlook

~~Cash Flow Activities~~

~~Operating losses for the three months ended March 31, 2018, in excess of non-cash depreciation, amortization, impairment and stock compensation expense of approximately $1.5 million;~~

~~Build-up of costs for contracts in progress of $9.1 million;~~

~~Build-up of retainage on projects of $1.5 million; and~~

~~Payment of property taxes related to our South Texas Properties of $2 million.~~

Contractual Obligations

There have been no material changes from the information included in our 2017 Annual Report. For more information on our contractual obligations, refer to Part II, Item 7 of our 2017 Annual Report.

Off-Balance Sheet Arrangements

There have been no material changes from the information included in our 2017 Annual Report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Item 4. Controls and Procedures.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

Item 1A. Risk Factors.

There have been no material changes from the information included in Item 1A “Risk Factors” included in our 2017 Annual ~~Report on Form 10-K for the year ended December 31, 2017.~~Report.

Item 6. Exhibits.



Exhibit Number	Description of Exhibit

3.1	Composite Articles of Incorporation of the Company incorporated by reference to Exhibit 3.1 of the ~~Company’s~~Company's Form 10-Q filed with the SEC on April 23, ~~2009.~~2009 (SEC File No. 001-34279).
3.2	Amended and Restated Bylaws of the Company, incorporated by reference to Exhibit ~~3.2~~3.1 of the Company’s Form 8-K filed with the SEC on November ~~4, 2016.~~6, 2018 (SEC File no. 001-34279).
10.1	~~Second~~Third Amendment to Credit Agreement dated ~~February 26, 2018, incorporated by reference to Exhibit 10.15 to the Company’s Form 10-K filed March 9,~~August 27, 2018. *
10.2	~~Change~~Agreement of ~~Control Agreement, effective March 1, 2018,~~Sale between ~~the Company~~Berry Contracting, L.P. and ~~Kirk J. Meche, incorporated by reference to Exhibit 10.1~~Gulf Marine Fabricators, L.P. dated as of ~~the Company’s Form 8-K filed February~~September 26, 2018. †*
~~10.3~~	~~Change of Control Agreement, effective March 1, 2018, between the Company and David S. Schorlemer, incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K filed February 26, 2018.~~ †
~~10.4~~	~~Change of Control Agreement, effective March 1, 2018, between the Company and Todd F. Ladd, incorporated by reference to Exhibit 10.3 of the Company’s Form 8-K filed February 26, 2018.~~ †
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 Certification furnished pursuant to 18 U.S.C. Section ~~1350.~~1350. *

101	Attached as Exhibit 101 to this report are the following items formatted in XBRL (Extensible Business Reporting Language):
	(i)	Consolidated Balance Sheets,
	(ii)	Consolidated Statements of Operations,
	(iii)	Consolidated Statement of Changes in Shareholders’ Equity,
	(iv)	Consolidated Statements of Cash Flows, and
	(v)	Notes to Consolidated Financial Statements.

†*	~~Management Contract or Compensatory Plan.~~Filed herewith.

SIGNATURES

Pursuant to the requirements 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.



GULF ISLAND FABRICATION, INC.

BY:	/s/ ~~David~~Westley S. ~~Schorlemer~~Stockton
	~~David~~Westley S. ~~Schorlemer~~Stockton
	Executive Vice President, Chief Financial Officer, Secretary and Treasurer (Principal Financial Officer)

Date: ~~May 4,~~November 8, 2018

- 3539 -



LOUISIANA		72-1147390
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
		(I.R.S. Employer Identification No.)



16225 PARK TEN PLACE, SUITE ~~280~~300 HOUSTON, TEXAS		77084
16225 PARK TEN PLACE, SUITE ~~280~~300 HOUSTON, TEXAS		77084
(Address of principal executive offices)		(Zip Code)



Large accelerated filer	¨	Accelerated filer	x

Non-accelerated filer	¨	Smaller reporting company	¨

		Emerging Growth Company	¨



2017 Annual Report:		Our annual report for the year ended December 31, 2017, ~~on Form 10-K as~~ filed with the SEC on Form 10-K on March 9, 2018.

ASC:		FASB Accounting Standards Codification.

ASU:		Accounting Standards Update.

Company:		Gulf Island Fabrication, Inc. and its consolidated subsidiaries.

Credit Agreement:		The Company's $40.0 million revolving credit facility with ~~a third party financial institution~~ Hancock Whitney Bank maturing June 9, ~~2019,~~2020, as amended.

deck:		The component of a platform on which development 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 the Company’s products. These hours do not include support personnel hours such as maintenance, warehousing and drafting.

EPC:		Engineering, procurement and construction phases of a complex project; EPC typically refers to a contract that requires the project management and coordination of these significant activities.

Exchange Act:		~~U.S.~~ Securities Exchange Act of 1934, as amended.

FASB:		Financial Accounting Standards Board.

FPSO:		Floating Production Storage and Offloading vessel. A floating vessel used by the offshore oil and gas industry for the production and processing of hydrocarbons and for the storage of oil.

GAAP:		Generally accepted accounting principles in the U.S.

GOM:		Gulf of Mexico.

inland or inshore:		Inside coastlines, typically in bays, lakes and marshy areas.

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.

LIBOR:		London ~~Inter-bank~~Inter-Bank Offered Rate.

~~modules:~~

modules		~~Packaged~~Fabricated structures that include structural steel, piping, valves, fittings, storage vessels and other equipment ~~usually consisting of major production, utility~~that are incorporated into a petrochemical or ~~compression equipment with associated piping~~industrial system. These modules are pre-fabricated at our facilities and ~~control systems.~~then transported to the customer's location for final integration.

~~MPSV:~~MPSV		Multi-Purpose Service Vessel.

NOL(s):		Net operating loss(es). that are available to offset future taxable income, subject to certain limitations.

~~offshore:~~offshore		In unprotected waters outside coastlines.

~~OSV:~~onshore		Inside the coastline on land.

OSV		Offshore Support Vessel.

~~piles:~~piles		Rigid tubular pipes that are driven into the seabed to support platforms.

~~platform:~~platform		A structure from which offshore oil and gas development drilling and production are conducted.

pressure ~~vessel:~~vessel		A metal container generally cylindrical or spheroid, capable of withstanding various internal pressure loads.

~~SeaOne:~~SeaOne		SeaOne Caribbean, LLC.

SeaOne ~~Project:~~Project		The engineering, procurement, construction, installation, commissioning and start-up work for SeaOne's Compressed Gas Liquids Caribbean Fuels Supply Project. This project will include execution of engineering, construction and installation of modules for an export facility in Gulfport, Mississippi, and import facilities in the Caribbean and South America.

~~SEC:~~SEC		U.S. Securities and Exchange Commission.

skid ~~unit:~~unit		Packaged equipment usually consisting of major production, utility or compression equipment with associated piping and control system.

South Texas ~~Properties:~~Properties		~~Collectively,~~Historically, our Texas North Yard and Texas South Yard properties, improvements and equipment located in Aransas Pass and Ingleside, Texas, respectively. ~~These properties,~~The Texas South Yard property, together with improvements and related machinery and equipment ~~are~~was sold on April 20, 2018. The Texas North Yard, together with improvements and related machinery and equipment is held for sale.

~~SPAR:~~SPAR		Single Point Anchor Reservoir. A floating vessel 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.

subsea ~~templates:~~templates		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 ~~support~~assurance related to our performance of construction 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.



x	QUARTERLY 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

PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets at ~~March 31,~~September 30, 2018 (unaudited) and December 31, 2017	6
	Consolidated Statements of Operations for the Three and Nine Months Ended ~~March 31,~~September 30, 2018 and 2017 (unaudited)	7
	Consolidated Statement of Changes in Shareholders' Equity for the ~~Three~~Nine Months Ended ~~March 31,~~September 30, 2018 (unaudited)	8
	Consolidated ~~Statements~~Statement of Cash Flows for the ~~Three~~Nine Months Ended ~~March 31,~~September 30, 2018 and 2017 (unaudited)	9
	Notes to Consolidated Financial Statements (unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2021
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3337
Item 4.	Controls and Procedures	3337
PART II	Other Information
Item 1.	Legal Proceedings	3438
Item 1A.	Risk Factors	3438
Item 6.	Exhibits	3438
Signatures		3539




MinDOC:		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.



~~T&M:~~		~~Work performed and billed to the customer generally at contracted time and materials rates which can include a mark-up.~~

Texas North ~~Yard:~~Yard		Our Texas North Yard ~~represents~~consists of our fabrication yard located in Aransas Pass, Texas, ~~is located~~ along the U.S. Intracoastal Waterway ~~and is~~ approximately three miles north of the Corpus Christi Ship Channel. This ~~facility~~property is situated on approximately 196 acres. ~~This facility,~~Our Texas North Yard, together with its improvements and ~~its~~ related machinery and equipment ~~are~~is held for sale.

Texas South ~~Yard:~~Yard		~~Our~~Historically, our Texas South Yard ~~represents~~consisted of our fabrication yard located in Ingleside, Texas ~~and located~~ on the northwest corner of the Corpus Christi Ship Channel at the intersection of the Corpus Christi Ship Channel and the U.S. Intracoastal Waterway. ~~It consists of approximately 212 acres.~~ This ~~facility, its improvements and its related machinery and equipment~~property was sold on April 20, 2018.

this Report		This quarterly report filed on Form 10-Q for the ~~quarterly period~~quarter ended ~~March 31,~~September 30, 2018.

~~TLP:~~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.

U.S.		The United States of America.


	March 31, 2018		December 31, 2017		September 30, 2018		December 31, 2017
	(Unaudited)		(Audited)		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	6,492	$	8,983	$	45,020	$	8,983
Short-term investments					9,494		—
Contracts receivable and retainage, net	27,359		28,466		28,933		28,466
Contracts in progress	37,509		28,373		40,187		28,373
Inventory					6,568		4,933
Prepaid expenses and other assets	3,311		3,833		3,456		3,833
Inventory	5,053		4,933
Assets held for sale	98,386		104,576		42,670		104,576
Total current assets	178,110		179,164		176,328		179,164
Property, plant and equipment, net	86,006		88,899		80,707		88,899
Other assets	5,006		2,777
Other noncurrent assets					5,922		2,777
Total assets	$	269,122	$	270,840	$	262,957	$	270,840
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	18,869	$	18,375	$	20,166	$	18,375
Advance billings on contracts	4,301		5,136		14,930		5,136
Deferred revenue, current	2,312		4,676
Deferred revenue					829		4,676
Accrued contract losses	6,320		7,618		6,033		7,618
Accrued expenses and other liabilities	9,006		12,741		10,339		12,860
Income tax payable	232		119
Total current liabilities	41,040		48,665		52,297		48,665
Deferred revenue, noncurrent	1,674		769		2,489		769
Outstanding borrowings under our Credit Agreement	10,000		—
Other liabilities	2,322		1,913
Other noncurrent liabilities					3,035		1,913
Total liabilities	55,036		51,347		57,821		51,347
Shareholders’ equity:
Preferred stock, no par value, 5,000,000 shares authorized, no shares issued and outstanding	—		—
Common stock, no par value, 20,000,000 shares authorized, 15,043,068 issued and outstanding at March 31, 2018, and 14,910,498 at December 31, 2017, respectively	10,813		10,823
Preferred stock, no par value, 5,000 shares authorized, no shares issued and outstanding					—		—
Common stock, no par value, 20,000 shares authorized, 15,044 shares issued and outstanding at September 30, 2018 and 14,910 at December 31, 2017					10,957		10,823
Additional paid-in capital	100,355		100,456		101,661		100,456
Retained earnings	102,918		108,214		92,518		108,214
Total shareholders’ equity	214,086		219,493		205,136		219,493
Total liabilities and shareholders’ equity	$	269,122	$	270,840	$	262,957	$	270,840


	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017			2018			2017
Revenue	$	57,290		$	37,993		$	49,712		$	49,884		$	161,016		$	133,745
Cost of revenue	56,611			42,890			52,924			50,378			164,248			150,755
Gross profit (loss)	679			(4,897		)
Gross loss							(3,212		)	(494		)	(3,232		)	(17,010		)
General and administrative expenses	4,709			3,930			7,672			4,370			17,473			12,940
Asset impairment	750			389
Operating income (loss)	(4,780		)	(9,216		)
Other income (expense):
Interest expense	(469		)	(59		)
Asset impairments							—			—			1,360			389
Operating loss							(10,884		)	(4,864		)	(22,065		)	(30,339		)
Interest income (expense), net							72			(45		)	(166		)	(262		)
Other income (expense), net	12			9			140			38			6,954			(209		)
Total other income (expense)	(457		)	(50		)
Net loss before income taxes	(5,237		)	(9,266		)	(10,672		)	(4,871		)	(15,277		)	(30,810		)
Income tax expense (benefit)	59			(2,812		)	277			(1,761		)	419			(10,322		)
Net loss	$	(5,296	)	$	(6,454	)	$	(10,949	)	$	(3,110	)	$	(15,696	)	$	(20,488	)
Per share data:
Basic and diluted loss per share - common shareholders	$	(0.35	)	$	(0.44	)
Cash dividend declared per common share	$	—		$	0.01
Basic and diluted loss per common share							$	(0.73	)	$	(0.21	)	$	(1.05	)	$	(1.38	)
Cash dividends per common share							$	—		$	0.01		$	—		$	0.03



	Common Stock				Additional Paid-In Capital			Retained Earnings			Total Shareholders’ Equity
	Common Stock
	Shares	Amount
Balance at January 1, 2018	14,910,498	$	10,823		$	100,456		$	108,214		$	219,493
Net loss	—	—			—			(5,296		)	(5,296		)
Vesting of restricted stock	132,570	(79		)	(708		)	—			(787		)
Compensation expense - restricted stock	—	69			607			—			676
Balance at March 31, 2018	15,043,068	$	10,813		$	100,355		$	102,918		$	214,086




	Texas North Yard Assets
Assets	Assets Under Agreement For Sale			Remaining Assets			Shipyard Division Assets			Consolidated
Land	$	2,157		$	—		$	—		$	2,157
Buildings and improvements	31,798			189			—			31,987
Machinery and equipment	13,856			27,754			2,187			43,797
Less: accumulated depreciation	(24,176		)	(10,797		)	(298		)	(35,271		)
Total assets held for sale	$	23,635		$	17,146		$	1,889		$	42,670



	South Texas Properties
Assets	Texas South Yard⁽¹⁾			Texas North Yard			Shipyard Division Assets			Consolidated
Land	$	3,335		$	2,157		$	—		$	5,492
Buildings and improvements	90,370			30,692			—			121,062
Machinery and equipment	—			66,305			2,187			68,492
Less: accumulated depreciation	(43,808		)	(52,554		)	(298		)	(96,660		)
Total assets held for sale	$	49,897		$	46,600		$	1,889		$	98,386



	Three Months Ended March 31, 2018
	Fabrication Division		Shipyard Division		Services Division		EPC Division		Eliminations			Total
Contract Type
Lump sum and fixed-price construction ⁽¹⁾	$	17,270	$	17,222	$	11,285	$	—	$	(488	)	$	45,289
Service contract revenue ⁽²⁾	—		1,343		10,585		—		—			11,928
Other ⁽³⁾	—		—		—		73		—			73
Total	$	17,270	$	18,565	$	21,870	$	73	$	(488	)	$	57,290



By Segment	Performance Obligations as of March 31, 2018
Fabrication Division	$	6,706
Shipyard Division ⁽¹⁾	149,590
Services Division	11,858
EPC Division	—
Intersegment eliminations	(990		)
Total	$	167,164



Segment	Performance Obligations at September 30, 2018
Fabrication	$	44,746
Shipyard ⁽¹⁾	282,912
Services	11,699
EPC	836
Intersegment eliminations	—
Total	$	340,193



	March 31, 2018
	Fabrication		Shipyard		Services		EPC		Eliminations			Consolidated
Future performance obligations required under fixed-price contracts under Topic 606 of ASC	$	6,706	$	149,590	$	11,858	$	—	$	(990	)	$	167,164
Contracts signed subsequent to March, 31, 2018	—		29,874		—		1,037		—			30,911
Signed contracts under purported termination or third party protest ^{(1), (2)}	—		94,176		—		—		—			94,176
Backlog	$	6,706	$	273,640	$	11,858	$	1,037	$	(990	)	$	292,251