UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2018~~March 31, 2019



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-34279

GULF ISLAND FABRICATION, INC.

(Exact name of registrant as specified in its charter)



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

(713) 714-6100

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth ~~company.” See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth~~ company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	¨	Accelerated filer	x

Non-accelerated filer	¨	Smaller reporting company	¨x

		Emerging Growth Company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Securities registered pursuant to 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	GIFI	NASDAQ

The number of shares of the registrant’s common stock, no par value per share, outstanding as of ~~November 8, 2018,~~May 7, 2019, was ~~15,083,221~~15,236,377.

GULF ISLAND FABRICATION, INC.

I N D E X



		Page

PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets at ~~September 30, 2018~~March 31, 2019 (unaudited) and December 31, ~~2017~~2018	61
	Consolidated Statements of Operations for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~ (unaudited)	72
	Consolidated Statement of Changes in Shareholders' Equity for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2019 and 2018 (unaudited)	83
	Consolidated ~~Statement~~Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~ (unaudited)	94
	Notes to Consolidated Financial Statements (unaudited)	105
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2117
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3729
Item 4.	Controls and Procedures	3729
PART II	Other Information
Item 1.	Legal Proceedings	3830
Item 1A.	Risk Factors	3830
Item 6.	Exhibits	3830
Signatures		3931

- i -

GLOSSARY OF TERMS

As used in this ~~Report~~report on Form10-Q for the quarter ended ~~September 30, 2018,~~March 31, 2019 ("this Report"), the following abbreviations and terms have the meanings as listed below. ~~Additionally,~~In addition, the terms “Gulf Island,” “the Company,” “we,” “us” and “our” refer to Gulf Island Fabrication, Inc. and its consolidated subsidiaries, unless the context clearly indicates otherwise. Certain terms defined below may be redefined separately within this Report when we believe providing a definition upon the first use of the term will assist users of this Report. Unless and as otherwise stated, any references in this Report to any agreement means such agreement and all schedules, exhibits and attachments in each case as amended, restated, supplemented or otherwise modified to the date of filing this Report.



~~2017~~2018 Annual ~~Report:~~	Report	Our annual report for the year ended December 31, ~~2017,~~2018, filed with the SEC on Form 10-K on March ~~9, 2018.~~1, 2019.

~~ASC:~~		~~FASB Accounting Standards Codification.~~

~~ASU:~~	ASU	Accounting Standards Update.

Balance Sheet	Our Consolidated Balance Sheets, as filed in this Report.

~~Company:~~contract assets		~~Gulf Island Fabrication, Inc.~~Costs and ~~its consolidated subsidiaries.~~estimated earnings recognized to date in excess of cumulative billings.

contract liabilities	Cumulative billings in excess of costs and estimated earnings recognized to date and accrued contract losses.

Credit ~~Agreement:~~Agreement		~~The Company's~~Our $40.0 million revolving credit facility with Hancock Whitney Bank maturing June 9, ~~2020,~~2021, as amended.

~~deck:~~	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	Hours worked by employees directly involved in the production of ~~the Company’s~~our products. These hours do not include support personnel ~~hours~~ such as maintenance ~~warehousing~~ and ~~drafting.~~warehousing.

DTA(s)	Deferred tax asset(s).

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

~~Exchange Act:~~EPS	Earnings per share.

Exchange Act	Securities Exchange Act of 1934, as amended.

~~FASB:~~Fabrication AHFS	The machinery and equipment previously located at our Texas North Yard that was not sold in connection with the sale of the Texas North Yard and continues to be held for sale by our Fabrication Division.

FASB	Financial Accounting Standards Board.

~~FPSO:~~Financial Statements		~~Floating Production Storage~~Our consolidated Financial Statements, including comparative consolidated Balance Sheets, Statements of Operations, Statements of Changes in Shareholders' Equity, and ~~Offloading vessel. A floating vessel used by the offshore oil and gas industry for the production and processing~~Statements of ~~hydrocarbons and for the storage of oil.~~Cash Flows, as filed in this Report.

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

~~GOM:~~	GOM	Gulf of Mexico.

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

- ii -

~~jacket:~~

jacket	A component of a fixed platform consisting of a tubular steel, braced structure extending from the mudline of the seabed to a point above the water surface. The jacket is anchored with tubular steel pilings driven into the seabed. The jacket supports the deck structure located above the water.

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

~~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.



modules		Fabricated structures that include structural steel, piping, valves, fittings, storage vessels and other equipment that are incorporated into a petrochemical or industrial system. These modules are pre-fabricated at our facilities and then transported to the customer's location for final integration.

MPSV		Multi-Purpose Service Vessel.

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

offshore		In unprotected waters outside coastlines.

onshore		Inside the coastline on land.

OSV		Offshore Support Vessel.

Performance Obligation	A contractual obligation to construct and transfer a distinct good or service to a customer. It is the unit of account in Topic 606. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.

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

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

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

SeaOne		SeaOne Caribbean, LLC.

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

SEC		U.S. Securities and Exchange Commission.

Shipyard AHFS	Drydock for our Shipyard Division that is held for sale.

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

South Texas Properties		~~Historically, our~~Our former Texas North Yard and Texas South ~~Yard properties, improvements and equipment located in Aransas Pass and Ingleside, Texas, respectively.~~Yard. The Texas South Yard property ~~together with improvements and related machinery and equipment~~ was sold on April 20, ~~2018. The~~2018 and the Texas North Yard ~~together with improvements and related machinery and equipment is held for sale.~~was sold on November 15, 2018.

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.

Statements of Cash Flows	Our Consolidated Statements of Cash Flows, as filed in this Report.

Statements of Operations	Our Consolidated Statements of Operation, as filed in this Report.

subsea 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.

- iii -



Surety		A financial institution that issues bonds to customers on behalf of the Company for the purpose of providing third-party financial assurance related to ~~our~~the performance of ~~construction~~our contracts.

T&M		Work performed and billed to the customer generally at contracted time and material rates, cost plus or other variable fee arrangements which can include a mark-up.



Texas North Yard		Our ~~Texas North Yard consists of our~~former fabrication yard, and certain related machinery and equipment, located in Aransas Pass, Texas, ~~along the U.S. Intracoastal Waterway approximately three miles north of the Corpus Christi Ship Channel. This property is situated~~which was sold on ~~approximately 196 acres. Our Texas North Yard, together with its improvements and related machinery and equipment is held for sale.~~November 15, 2018.

Texas South Yard		~~Historically, our Texas South Yard consisted of our~~Our former fabrication yard, and certain related machinery and equipment, located in Ingleside, Texas, ~~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. This property~~which was sold on April 20, 2018.

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

TLP		Tension Leg Platform. A floating hull and deck anchored by vertical tensioned cables or pipes connected to pilings driven into the seabed. A tension leg platform is typically used in water depths exceeding 1,200 feet.

Topic 606	The revenue recognition criteria prescribed under ASU 2014-09, Revenue from Contracts with Customers.

U.S.		The United States of America.

- iv -

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

GULF ISLAND FABRICATION, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands)


	September 30, 2018		December 31, 2017		March 31, 2019		December 31, 2018
	(Unaudited)				(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	45,020	$	8,983	$	49,898	$	70,457
Short-term investments	9,494		—		20,341		8,720
Contracts receivable and retainage, net	28,933		28,466		21,658		22,505
Contracts in progress	40,187		28,373
Contract assets					38,707		29,982
Prepaid expenses and other assets					2,558		3,268
Inventory	6,568		4,933		5,568		6,088
Prepaid expenses and other assets	3,456		3,833
Assets held for sale	42,670		104,576		18,636		18,935
Total current assets	176,328		179,164		157,366		159,955
Property, plant and equipment, net	80,707		88,899		77,660		79,930
Other noncurrent assets	5,922		2,777		23,689		18,405
Total assets	$	262,957	$	270,840	$	258,715	$	258,290
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	20,166	$	18,375	$	36,511	$	28,969
Advance billings on contracts	14,930		5,136
Deferred revenue	829		4,676
Accrued contract losses	6,033		7,618
Contract liabilities					9,234		16,845
Accrued expenses and other liabilities	10,339		12,860		9,605		10,287
Total current liabilities	52,297		48,665		55,350		56,101
Deferred revenue, noncurrent	2,489		769
Other noncurrent liabilities	3,035		1,913		5,461		1,089
Total liabilities	57,821		51,347		60,811		57,190
Shareholders’ equity:
Preferred stock, no par value, 5,000 shares authorized, no shares issued and outstanding	—		—		—		—
Common stock, no par value, 20,000 shares authorized, 15,044 shares issued and outstanding at September 30, 2018 and 14,910 at December 31, 2017	10,957		10,823
Common stock, no par value, 20,000 shares authorized, 15,236 shares issued and outstanding at March 31, 2019 and 15,090 at December 31, 2018					11,006		11,021
Additional paid-in capital	101,661		100,456		102,104		102,243
Retained earnings	92,518		108,214		84,794		87,836
Total shareholders’ equity	205,136		219,493		197,904		201,100
Total liabilities and shareholders’ equity	$	262,957	$	270,840	$	258,715	$	258,290

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

GULF ISLAND FABRICATION, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except per share data)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2018			2017			2018			2017			2019			2018
Revenue	$	49,712		$	49,884		$	161,016		$	133,745		$	67,605		$	57,290
Cost of revenue	52,924			50,378			164,248			150,755			67,052			56,611
Gross loss	(3,212		)	(494		)	(3,232		)	(17,010		)
General and administrative expenses	7,672			4,370			17,473			12,940
Asset impairments	—			—			1,360			389
Gross profit													553			679
General and administrative expense													3,834			4,709
Asset impairments and (gain) loss on assets held for sale, net													(70		)	750
Other (income) expense, net													71			310
Operating loss	(10,884		)	(4,864		)	(22,065		)	(30,339		)	(3,282		)	(5,090		)
Interest income (expense), net	72			(45		)	(166		)	(262		)	262			(147		)
Other income (expense), net	140			38			6,954			(209		)
Net loss before income taxes	(10,672		)	(4,871		)	(15,277		)	(30,810		)	(3,020		)	(5,237		)
Income tax expense (benefit)	277			(1,761		)	419			(10,322		)
Income tax (expense) benefit													(22		)	(59		)
Net loss	$	(10,949	)	$	(3,110	)	$	(15,696	)	$	(20,488	)	$	(3,042	)	$	(5,296	)
Per share data:
Basic and diluted loss per common share	$	(0.73	)	$	(0.21	)	$	(1.05	)	$	(1.38	)	$	(0.20	)	$	(0.35	)
Cash dividends per common share	$	—		$	0.01		$	—		$	0.03

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

GULF ISLAND FABRICATION, INC.

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(UNAUDITED)

(in thousands)

Common Stock
Additional
Paid-In
Capital

Retained
Earnings

Total
Shareholders’
Equity

Shares Amount
Balance at January 1, 2018 14,910
$ 10,823
$ 100,456
$ 108,214
$ 219,493
Net loss —
—
—
(15,696 ) (15,696 )
Restricted stock vesting 134
(79 ) (716 ) —
(795 )
Stock based compensation expense —
213
1,921
—
2,134
Balance at September 30, 2018 15,044
$ 10,957
$ 101,661
$ 92,518
$ 205,136



	Common Stock				Additional Paid-In Capital			Retained Earnings			Total Shareholders’ Equity
	Common Stock
	Shares	Amount
Balance at December 31, 2017	14,910	$	10,823		$	100,456		$	108,214		$	219,493
Net loss	—	—			—			(5,296		)	(5,296		)
Vesting of restricted stock	133	(79		)	(708		)	—			(787		)
Stock-based compensation expense	—	69			607			—			676
Balance at March 31, 2018	15,043	$	10,813		$	100,355		$	102,918		$	214,086



	Common Stock				Additional Paid-In Capital			Retained Earnings			Total Shareholders’ Equity
	Common Stock
	Shares	Amount
Balance at December 31, 2018	15,090	$	11,021		$	102,243		$	87,836		$	201,100
Net loss	—	—			—			(3,042		)	(3,042		)
Vesting of restricted stock	146	(71		)	(643		)	—			(714		)
Stock-based compensation expense	—	56			504			—			560
Balance at March 31, 2019	15,236	$	11,006		$	102,104		$	84,794		$	197,904

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

GULF ISLAND FABRICATION, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)


	Nine Months Ended September 30,						Three Months Ended March 31,

	2018			2017			2019			2018
Cash flows from operating activities:
Net loss	$	(15,696	)	$	(20,488	)	$	(3,042	)	$	(5,296	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and lease asset amortization							2,552			2,715
Other amortization, net							12			(357		)
Bad debt expense	2,776			19			53			8
Depreciation and amortization	7,834			10,141
Amortization of deferred revenue	(504		)	(2,397		)
Asset impairments	1,360			389			299			750
(Gain) loss on sale of assets, net	(3,496		)	224
Gain on insurance recoveries, net	(3,342		)	—
Deferred income taxes	—			(10,235		)
Stock based compensation expense	2,134			2,636
(Gain) loss on sale of assets held for sale, net							(369		)	—
(Gain) loss on sale of fixed assets and other assets, net							101			(12		)
Stock-based compensation expense							560			676
Changes in operating assets and liabilities:
Contracts receivable and retainage, net	(6,211		)	(5,363		)	796			(1,494		)
Contracts in progress	(11,814		)	(15,981		)
Prepaid expenses, inventory, and other assets	(2,519		)	(26		)
Contract assets							(8,725		)	(9,136		)
Prepaid expenses, inventory and other current assets							1,095			221
Accounts payable	1,791			12,436			7,542			494
Advance billings on contracts	9,795			390
Deferred revenue	(1,621		)	(5,825		)
Accrued contract losses	(1,585		)	1,595
Contract liabilities							(7,611		)	(3,201		)
Accrued expenses and other liabilities	2,432			2,926			(1,558		)	(164		)
Noncurrent assets and liabilities, net (including long-term retainage)							(182		)	700
Net cash used in operating activities	(18,666		)	(29,559		)	(8,477		)	(14,096		)
Cash flows from investing activities:
Capital expenditures	(2,362		)	(4,515		)	(250		)	(71		)
Purchase of short-term investments	(9,174		)	—			(20,041		)	—
Maturities of short-term investments							8,500			—
Proceeds from sale of property, plant and equipment	57,716			2,120			424			309
Recoveries from insurance claims	9,362			—			—			2,165
Net cash provided by (used in) investing activities	55,542			(2,395		)	(11,367		)	2,403
Cash flows from financing activities:
Tax payments made on behalf of employees from vested stock withholdings	(795		)	(885		)
Payment of financing cost	(44		)	(88		)
Payments of dividends on common stock	—			(448		)
Proceeds from borrowings under Credit Agreement	15,000			2,000			—			15,000
Repayment of borrowings under Credit Agreement	(15,000		)	(2,000		)	—			(5,000		)
Net cash used in financing activities	(839		)	(1,421		)
Net change in cash and cash equivalents	36,037			(33,375		)
Payment of financing cost							—			(11		)
Tax payments made on behalf of employees from vested stock withholdings							(715		)	(787		)
Net cash provided by (used in) financing activities							(715		)	9,202
Net decrease in cash and cash equivalents							(20,559		)	(2,491		)
Cash and cash equivalents, beginning of period	8,983			51,167			70,457			8,983
Cash and cash equivalents, end of period	$	45,020		$	17,792		$	49,898		$	6,492

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

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2018~~March 31, 2019

(Unaudited)

~~NOTE 1 –~~1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

We are a leading fabricator of complex steel structures, modules and marine vessels used in energy extraction and production, petrochemical and industrial facilities, power generation, alternative energy and shipping and marine transportation operations. We also provide ~~related~~ project management, ~~for EPC projects along with installation,~~ hookup, commissioning, repair, maintenance and ~~repair and maintenance~~civil construction services. ~~In addition, we perform civil, drainage and other work for state and local governments.~~ We operate and manage our business through ~~four~~three operating ~~divisions:~~divisions ("Fabrication", "Shipyard" and "Services") and one non-operating division ("Corporate"), which represent our reportable segments. During the first quarter 2019, our former EPC Division was operationally combined with our Fabrication ~~Shipyard, Services~~Division. See Note 7 for discussion of our realigned operating divisions and ~~EPC.~~related financial information. Our corporate headquarters is located in Houston, Texas, with fabrication facilities located in Houma, Jennings and Lake Charles, Louisiana.

~~We recently completed~~Significant projects in our backlog include the ~~fabrication~~expansion of ~~complex modules for~~a paddle wheel riverboat, and the construction of a ~~new petrochemical facility~~jacket and ~~the newbuild construction and delivery of a technologically-advanced OSV. Current significant projects include the construction of ten~~deck, eight harbor tug vessels, two offshore regional class marine research vessels, two vehicle ferries, two towboats, an ice-breaker tug, and ~~the expansion of a paddle wheel riverboat. We were also recently awarded a contract for the construction of~~ a towing, salvage and rescue ship for the U.S. ~~Navy with options~~Navy. Recently completed projects include the fabrication of complex modules for ~~seven additional~~a newbuild petrochemical facility and a meteorological tower and platform for an offshore wind project, and construction of two technologically-advanced OSVs and two harbor tug vessels. Previous projects also include the fabrication of wind turbine ~~pedestals~~foundations for the first offshore wind ~~power~~ project in the U.S., and construction of ~~one~~two of the largest liftboats servicing the ~~GOM,~~Gulf of Mexico ("GOM"), one of the deepest production jackets in the GOM, and the first ~~SPAR~~single point anchor reservoir ("SPAR") hull fabricated in the U.S. ~~Our customers include U.S.~~

In April 2019, our customer for our regional class marine research vessels exercised its option for the construction of a third vessel and our customer for our towing, salvage and rescue ship exercised its option for the construction of five additional vessels (and continues to ~~a lesser extent, international energy producers, petrochemical, industrial, power, and marine operators, EPC companies and certain agencies~~have options for the construction of ~~the U.S. government.~~five additional vessels).

Basis of Presentation

The accompanying unaudited Consolidated Financial Statements ~~include the accounts of Gulf Island Fabrication, Inc. and its~~("Financial Statements") reflect all wholly owned subsidiaries. ~~All significant intercompany~~Intercompany balances and transactions have been eliminated in consolidation. The ~~Consolidated~~ Financial Statements have been prepared in accordance with ~~GAAP~~accounting principles generally accepted in the U.S. ("GAAP") for interim financial statements, the instructions to Form 10-Q and Article 10 of Regulation ~~S-X.~~S-X of the U.S. Securities and Exchange Commission (the "SEC"). Accordingly, the ~~Consolidated~~ Financial Statements do not include all of the information and footnotes required by GAAP for complete financial statements. In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three ~~and nine~~ months ended ~~September 30, 2018,~~March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2018.~~2019.

The Consolidated Balance Sheet ("Balance Sheet") at December 31, ~~2017,~~2018, has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements. Certain ~~balances at December 31, 2017~~amounts for the 2018 period have been reclassified within our Consolidated ~~Balance Sheet~~Statements of Operations ("Statement of Operations") and our Consolidated Statements of Cash Flows ("Statement of Cash Flows") to conform to our ~~September 30, 2018 presentation.~~presentation for the 2019 period. For further information, refer to the ~~Consolidated~~ Financial Statements and ~~notes thereto~~related footnotes included in our ~~2017~~2018 Annual Report.

Business Outlook

We continue to strategically position the Company to participate in the fabrication of petrochemical and industrial facilities, pursue offshore wind opportunities, ~~enter the EPC industry,~~ and diversify our customer base within all ~~of our~~ operating divisions. In addition, we continue to focus on maintaining our liquidity and securing meaningful new ~~contract~~project awards and backlog in the near-term, and generating operating income and cash ~~flow~~flows from operations in the longer-term. We have made significant progress in our efforts to increase our backlog and improve and preserve our liquidity, including cost 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~~sale of underutilized assets.

During the second quarter 2018, we completed the sale our Texas South Yard for $55.0 million, less selling costs of $1.5 million, for total net proceeds during the nine months ended September 30, 2018 of $53.5 million and a gain of approximately $3.9 million. In addition, on September 26, 2018, we entered into an agreement to sell our 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 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. See Note 23 for further discussion of ~~the~~our recent asset sales and assets held for sale ~~of our Texas South Yard and the anticipated sale of our Texas North Yard.~~

at March 31, 2019.

We believe that our cash, cash equivalents and short-term investments at ~~September 30, 2018,~~March 31, 2019, and availability under our Credit Agreement (defined in Note 4), will be sufficient to enable us to fund our operating expenses, meet our working capital and capital

expenditure requirements, and satisfy any debt service obligations or other funding requirements, for at least twelve months from the date of this Report.

~~Cash~~Operating Cycle

The durations of our contracts vary and can extend beyond twelve months from the date of contract award. Consistent with industry practice, assets and liabilities have been classified as current under the operating cycle concept whereby all contract-related items are classified as current regardless of whether cash ~~equivalents~~will be received or paid within a twelve month period. Assets and liabilities classified as current which may not be received or paid within the next twelve months include contract retainage, contract assets and contract liabilities. Variations from normal contract terms may result in the classification of assets and liabilities as noncurrent.

Use of Estimates

The preparation of our Financial Statements in conformity with GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosures of contingent assets and liabilities. We believe our most significant estimates and judgments are associated with revenue recognition for our contracts, including application of the percentage-of-completion method, estimating costs to complete each contract and the recognition of incentives, unapproved change orders, claims, and liquidated damages; fair value and recoverability assessments that must be periodically performed with respect to long-lived assets and our assets held for sale; determination of deferred income tax assets, liabilities and related valuation allowances; reserves for bad debts; and liabilities related to self-insurance programs. If the underlying estimates and assumptions upon which our Financial Statements are based change in the future, actual amounts may differ materially from those included in the Financial Statements.

Earnings Per Share

We report basic and diluted earnings per share ("EPS") using the "two-class" method as required under GAAP. The calculation of EPS using the two-class method is required when a company has two or more classes of common stock or participating securities. Certain of our unvested restricted stock (which are not included in our basic or diluted weighted average shares outstanding) contain the right to receive non-refundable dividends and therefore represent participating securities. See Note 6 for calculations of our basic and diluted EPS.

Cash Equivalents and Short-term Investments

Cash equivalents - We consider ~~all highly liquid~~ investments with original maturities of three months or less when purchased to be cash equivalents.

Short-term investments

~~Short-term~~ - We consider investments with original maturities of more than three months but less than twelve months to be short-term investments. At March 31, 2019, our short-term investments include U.S. Treasuries ~~and other investment-grade commercial paper~~ with original maturities of less than six ~~months or less.~~months. We intend to hold these investments until maturity and have stated them at amortized cost. Due to their near-term maturities, amortized cost approximates fair value. All ~~of our~~ short-term investments are traded on active markets with quoted prices and represent level 1 fair value measurements.

Inventory

Inventory is recorded at the lower of cost or net realizable value determined using the first-in-first-out basis. The cost of inventory includes acquisition costs, production or conversion costs, and other costs incurred to bring the inventory to a current location and condition. Net realizable value is our estimated selling price in the normal course of business, less reasonably predictable costs of completion, disposal and transportation. An allowance for excess or inactive inventory is recorded based on an analysis that considers current inventory levels, historical usage patterns, estimates of future sales and salvage value.

Allowance for Doubtful Accounts

In the normal course of business we extend credit to our customers on a short-term basis and contract receivables are generally not collateralized; however, we typically have the right to place liens on our projects in the event of nonpayment by our customers. We routinely review individual contract receivable balances for collectibility and make provisions for probable uncollectible amounts as necessary. Among the factors considered in our review are the financial condition of our customer and its access to financing, underlying disputes with the customer, the age and value of the receivable balance, and economic conditions in general.

Our customer base historically includes a significant number of energy related companies and their contractors. This concentration of customers in the energy sector may impact our overall exposure to credit risk, either positively or negatively, in that customers may be similarly affected by changes in economic or other conditions. See Note 42 for further discussion of our ~~fair value measurements.~~allowance for doubtful accounts.

~~Income Taxes~~Stock-Based Compensation

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

~~At December 31, 2017,~~Tax payments made on behalf of employees to taxing authorities in order to satisfy employee income tax withholding obligations from the vesting of shares under our stock-based compensation plans are classified as a financing activity in our Statement of Cash Flows.

Assets Held for Sale

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

Depreciation Expense

We depreciate property, plant and equipment on a straight-line basis over estimated useful lives ranging from three to 25 years, absent any indicators of impairment. Ordinary maintenance and repairs, which do not extend the physical or economic lives of the plant or equipment, are charged to expense as incurred.

Long-Lived Assets

We review long-lived assets for impairment, which include property, plant and equipment and finite-lived intangible assets included within other assets, when events or changes in circumstances indicate that the carrying amount may not be recoverable. If a recoverability assessment is required, the estimated future undiscounted cash flow associated with the assets or asset groups are compared to their respective carrying amounts to determine if an impairment exists. An impairment loss is measured by comparing the fair value of the asset or asset group to its carrying amount and recording the excess of the carrying amount of the asset or asset group over its fair value as an impairment charge. An asset group constitutes the minimum level for which identifiable cash flows are principally independent of the cash flows of other assets or asset groups. Fair value is determined based on discounted cash flows, appraised values or third party indications of value, as appropriate. During the first quarter 2019, we ~~had gross federal NOL carryforwards~~identified no indicators of impairment.

Fair Value Measurements

Our fair value determinations for financial assets and liabilities are based on the particular facts and circumstances. Financial instruments are required to ~~offset future taxable income of $62.8 million, of which $4.0 million will expire on December 31, 2035. Our remaining federal NOL carryforwards will expire December 31, 2037. We have provided~~be categorized within a valuation ~~allowance against our deferred tax assets if,~~hierarchy based upon the ~~available evidence, it~~lowest level of input that is ~~more likely than not that some or all~~significant to the fair value measurement. The three levels of the ~~deferred tax assets will~~valuation hierarchy are as follows:

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

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

Level 3 - inputs are based upon model-based valuation techniques for which significant assumptions are generally not ~~be realized. At September 30, 2018~~observable in the market and ~~December 31, 2017, our net deferred tax assets were fully reserved with a~~typically reflect estimates and assumptions that we believe market participants would use in pricing the asset or liability. These include discounted cash flow models and similar valuation ~~allowance.~~techniques.

~~During the fourth quarter 2018, we filed our 2017 federal tax return which did not result in any material adjustment to the provisional tax~~The carrying amounts ~~we recorded under Staff Accounting Bulletin 118 at December 31, 2017, related to our evaluation of the Tax Cuts~~reported for financial instruments, including cash and ~~Jobs Act of 2017. Our overall evaluation of the Tax Cuts~~cash equivalents, short-term investments, contracts receivable and Jobs Act of 2017 is not complete as we expect to file certain remaining state tax returns during the fourth quarter 2018; however, adjustments to our remaining state returns, if any, are not expected to be material.accounts payable, approximate their fair values.

Revenue Recognition

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

Fixed-Price and Unit-Rate Contracts - Revenue for our fixed-price and unit-rate contracts is recognized ~~under~~using the percentage-of-completion method ~~computed by the significant inputs method, which measures the percentage of labor hours~~(an input method), based on contract costs incurred to date as compared to total estimated contract costs. Contract costs include direct costs, such as materials and labor, and indirect costs that are attributable to contract activity. Material costs that are significant to a contract and do not reflect an accurate measure of project completion are excluded from the determination of our contract progress. Revenue for such materials is only recognized to the extent of costs incurred. Revenue and gross profit for contracts accounted for using the percentage-of-completion method can be significantly affected by changes in estimated cost to complete such contracts. Significant estimates impacting the cost to complete a contract include: costs of engineering, materials, components, equipment, labor and subcontracts; labor productivity; schedule durations, including subcontractor and supplier progress; contract disputes, including claims; achievement of contractual performance requirements; and contingency, among others. Although our customers retain the right and ability to change, modify or discontinue further work at any stage of a contract, in the event our customers discontinue work, they are required to compensate us for the work performed to date. The cumulative impact of revisions in total ~~labor hours for each contract.~~cost estimates during the progress of work is reflected in the period in which these changes become known, including, to the extent required, the reversal of profit recognized in prior periods and the recognition of losses expected to be incurred on contracts. Due to the various estimates inherent in our contract accounting, actual results could differ from those estimates, which could result in material changes to our Financial Statements and related disclosures.

T&M Contracts - Revenue for our T&M contracts is recognized at contracted rates when the work is performed, the costs are incurred and collection is reasonably assured. ~~See Note 3~~Our T&M contracts provide for ~~further discussion~~labor and materials to be billed at rates specified within the contract. The consideration from the customer directly corresponds to the value of our ~~revenue recognition policy and related accounting for our contracts.~~performance completed at the time of invoicing.

OnVariable Consideration - Revenue and gross profit for contracts can be significantly affected by variable consideration, which can be in the form of unapproved change orders, claims, incentives, and liquidated damages that may not be resolved until the later stages of the contract or after the contract has been completed and delivery occurs. We estimate variable consideration based on the amount we expect to be entitled and include estimated amounts in transaction price to the extent it is probable that a significant future reversal of cumulative revenue recognized will not occur or when we conclude that any significant uncertainty associated with the variable consideration is resolved. For the three months ended March 31, 2019 and 2018, we had no material amounts in revenue related to unapproved change orders, claims, or incentives. However, at March 31, 2019 and December 31, 2018, certain projects in our Shipyard Division reflected a reduction to our estimated contract price for liquidated damages of $11.2 million. The reductions in contract price were recorded during 2017.

Adoption of Topic 606 - As discussed above, on January 1, 2018 we adopted ~~ASU No. 2014-09,~~ Topic ~~606 “Revenue from Contracts with Customers”, which supersedes the revenue recognition requirements in FASB ASC Topic 605, “Revenue Recognition.” Topic 606 requires entities~~606. Prior to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Ourour adoption of Topic 606, ~~included a detailed review~~our determination of ~~our significant contracts that were not substantially complete as of January 1, 2018. Based on our review, we concluded that revenue recognition~~percentage-of-completion for our fixed-price and unit-rate contracts ~~using the percentage-of-completion method, computed by measuring~~was based on the percentage of direct labor hours incurred to date as compared to total estimated ~~total~~direct labor hours, and revenue for ~~each contract, is still appropriate. Our review also determined that~~materials was recognized only to the extent of costs incurred. However, in our adoption of Topic 606, ~~did not impact~~we adjusted our measure of progress for the ~~timing~~determination of ~~revenue recognition~~percentage-of-completion to include subcontract labor hours in addition to direct labor hours. Accordingly, our determination of percentage-of-completion for ~~our T&M contracts. Based~~the first quarter 2018 was based on this method.

During the ~~aforementioned,~~fourth quarter 2018, we concluded that the ~~impact~~use of labor hours for the determination of percentage-of-completion for our fixed-price and unit-rate contracts was not appropriate based on the changing mix of our contracts, which include an increasing amount of engineered equipment, manufactured materials, and subcontracted services and materials. We also concluded that in our adoption of Topic 606 as of January 1, 2018, our determination of percentage-of-completion for our fixed-price and unit-rate contracts should have been based on total contract costs incurred to date compared to total estimated contact costs. We further concluded that material costs that are significant to a contract and do not reflect an accurate measure of project completion should be excluded from the determination of our contract progress, and revenue for such materials should only be recognized to the extent of costs incurred. Accordingly, during the fourth quarter 2018 we corrected our percentage-of-completion estimates for our fixed-price and unit-rate contracts to be based on total costs incurred to date compared to total estimated contract costs. Accordingly, our determination of percentage-of-completion for the first quarter 2019 was ~~immaterial~~based on this method. The impact of the difference in methods of determining percentage-of-completion between the three months ended March 31, 2019 and 2018 was not material.

During 2018 we also evaluated the required cumulative effect adjustment to retained earnings as of January 1, 2018 for the adoption impact of Topic 606. Based on this evaluation, we determined that the cumulative effect adjustment would have been $0.4 million, which we did not believe was material to our ~~Consolidated~~ Financial ~~Statements~~Statements. Accordingly, no cumulative adjustment to retained earnings as of January 1, 2018 was recorded.

Income Taxes

Income taxes have been provided using the liability method. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and ~~no adjustment was required. See Note 3~~liabilities for ~~further discussion~~financial reporting purposes and the amounts used for income tax purposes using enacted rates expected to be in effect during the year in which the differences are expected to reverse.

A valuation allowance is provided to reserve for deferred tax assets ("DTA(s)") if, based upon the available evidence, it is more likely than not that some or all of the DTAs will not be realized. The realization of our ~~adoption~~DTAs depends on our ability to generate sufficient taxable income of ~~Topic 606.~~the appropriate character and in the appropriate jurisdictions.

Reserves for uncertain tax positions are recognized when we consider it more likely than not that additional tax will be due in excess of amounts reflected in our income tax returns, irrespective of whether or not we have received tax assessments. Interest and penalties on uncertain tax positions are recorded within income tax expense.

Pre-contract Costs

Pre-contract costs are generally charged to cost of revenue as incurred, but in certain cases their recognition may be deferred if specific probability criteria are met. At March 31, 2019 and December 31, 2018, we had no deferred pre-contract costs.

Other (Income) Expense, Net

Other (income) expense, net, generally represents (recoveries) provisions for bad debts, (gains) losses associated with the sale or disposition of property and equipment other than assets held for sale, and (income) expense associated with certain nonrecurring items.

New Accounting Standards

Leases -In ~~February 2016,~~ the ~~FASB issued~~first quarter 2019, we adopted ASU 2016-02, “Leases,” which ~~requires lessees~~required us to record ~~most~~a lease liability on our Balance Sheet equal to the present value of our lease payments for leased assets, and record a lease asset on our Balance Sheet representing our right to use the underlying leased assets for all leases having an original term of longer than 12-months. In our adoption we elected the modified retrospective transition method, and accordingly, prior periods have not been restated and continue to be reported under the lease standard in effect during such periods. We also elected certain practical expedients provided by ASU 2016-02, including not recording an asset or liability for leases having a term of 12-months or less and not separating lease and non-lease components for our leases. Upon adoption, we recorded operating lease assets and lease liabilities of approximately $7.2 million and $5.3 million, respectively, at January 1, 2019. Included in our lease asset was an intangible asset of $1.9 million associated with two favorable lease obligations recorded in connection with a former acquisition, which was reclassified as a lease asset under ASU 2016-02.

The lease asset is reflected within other noncurrent assets, and the current and noncurrent portions of the lease liability are reflected within accrued expenses and other liabilities and other noncurrent liabilities, respectively, on ~~their balance sheet but~~our Balance Sheet. At March 31, 2019, our lease asset, current lease liability and long-term lease liability were $7.0 million, $0.3 million and $4.9 million, respectively. For leases with escalations over the life of the lease, we recognize expense inon a ~~manner similar to current guidance. ASU 2016-02 will be effective~~straight-line basis. See Note 5 for ~~us in~~further discussion of our lease liabilities.

Stock-based grants - In the first quarter ~~2019.~~2019, we adopted ASU 2018-07, "Improvements to Non-employee Share-Based Payment Accounting," which simplifies the accounting for share-based payments granted to non-employees for goods and services. Under the ASU, most of the guidance for such payments to non-employees is now aligned with the requirements for share-based payments to employees. The adoption of the new standard ~~is required to be applied using~~did not have a ~~modified retrospective approach. Upon adoption, we will record a right of use asset and corresponding liability for our operating leases.We continue to evaluate the effect that ASU 2016-02 will have~~material impact on our financial position, results of operations ~~and~~or related disclosures. ~~We are currently designing and implementing process changes and evaluating the information requirements necessary to properly account for ASU 2016-02.~~

Financial instruments - In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses - Measurement of Credit Losses on Financial Instruments,” which changes the way companies evaluate credit losses for most financial assets and certain other instruments. For trade and other receivables, short-term investments, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model to evaluate impairment, potentially resulting in earlier recognition

of allowances for losses. The new standard also requires enhanced disclosures, including the requirement to disclose the information used to track credit quality by year of origination for most financing receivables. ASU 2016-13 will be effective for us in the first quarter 2020. Early adoption of the new standard is permitted; however, we have not elected to early adopt the standard. The new standard is required to be applied using a cumulative-effect transition method. We are currently evaluating the effect that ASU 2016-13 will have on our financial position, results of operations and related disclosures.

~~NOTE 2 –~~2. REVENUE, CONTRACT ASSETS ~~HELD FOR SALE~~

~~A summary of assets included in assets held for sale at September 30, 2018, is as follows (in thousands):~~

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~~

~~Texas South Yard~~ - During the second quarter 2018, we completed the sale of our Texas South Yard for $55.0 million, less selling costs of $1.5 million, for total net proceeds during the nine-months ended September 30, 2018 of approximately $53.5 million and a gain of approximately $3.9 million, which is included within other income (expense), net on our Consolidated Statements of Operations.

~~Texas North Yard -~~ On September 26, 2018, we entered into an agreement to sell our 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 refundable under certain circumstances, and has been recorded as a liability within accrued expenses and other liabilities on our Consolidated Balance Sheet at September 30, 2018. 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 actively market the remaining Texas North Yard assets held for sale, which primarily consist of three 660-ton crawler cranes, a barge, a plate bending roll machine, and panel line equipment.

As a result of the agreement to sell our Texas North Yard, and the separation of such assets from the other remaining Texas North Yard Assets, we reevaluated the fair values of the assets under agreement for sale and the other remaining assets held for sale, giving consideration to previously recorded impairment amounts for such assets. Based on our assessment, we recaptured previously recorded impairments of the assets under agreement for sale and increased their carrying value. We also reduced the carrying value of the other remaining assets held for sale based upon our estimates of fair value using level 3 inputs, including broker estimates of fair value. Our assessment resulted in the recapture of approximately $5.2 million of previously recorded impairments on the assets under agreement for sale, with a similar amount of impairment on the remaining assets, with no net material change to the carrying value of the Texas North Yard assets held for sale.

During the first half of 2018, we recorded impairments of certain equipment that were classified as held for sale, resulting in a $1.4 million charge during the nine-months ended September 30, 2018, which is included within asset impairments on our Consolidated Statements of Operations. Our impairments were based upon our best estimate of the fair value of the related equipment. During the third quarter 2018, we sold assets that were classified as held for sale for proceeds of $1.1 million, which approximated their carrying values.

~~Hurricane Harvey Insurance Recoveries~~ - During the third quarter 2017, buildings and equipment located at our South Texas Properties were damaged by Hurricane Harvey. During the second quarter 2018, we agreed to a global settlement with our insurance carriers for total insurance recoveries of $15.4 million, resulting in a net gain on insurance recoveries of $3.6 million during the nine months ended September 30, 2018, which is included within other income (expense), net on our Consolidated Statements of Operations. As of September 30, 2018, all insurance proceeds had been received, including $7.2 million received during the third quarter 2018. In applying the settlement proceeds and determining our net gain for the nine months ended September 30, 2018, we allocated the claim amounts, less agreed upon deductibles, to the respective groups of assets and reimbursement of costs incurred as follows:

Insurance recoveries of $8.9 million, which offset impairments of damaged assets at our Texas North Yard, resulting in no net gain or loss. Our impairments were based upon our best estimate of the decline in the fair value of the property and related equipment.

Insurance recoveries of $5.2 million, which offset impairments of two buildings and five damaged cranes that were sold during the second quarter 2018, resulting in the aforementioned net gain on insurance recoveries of $3.6 million.

~~Insurance recoveries of $1.3 million, net of deductibles, which offset clean-up and repair related costs incurred directly related to the damage we incurred as a result of Hurricane Harvey.~~

~~Other -~~ We do not expect the sale of our South Texas Properties to impact our ability to operate our Fabrication Division. Further, the sale of our Texas South Yard and the Texas North Yard assets held for sale, do not qualify for discontinued operations presentation as we continue to operate our Fabrication Division at our Houma, Louisiana fabrication facility.

~~Shipyard Division Assets~~

Our Shipyard Division assets held for sale primarily consist of a 2,500-ton drydock located at our Houma Shipyard. During the nine months ended September 30, 2017, we recorded impairments of $0.4 million for these assets based upon their estimated sales price. During the nine months ended September 30, 2017, we sold two drydocks for proceeds of $2.0 million and recorded a loss of $0.3 million. Our assets held for sale for the Shipyard Division do not qualify for discontinued operations presentation.

~~NOTE 3 – REVENUE RECOGNITION~~

Revenue for our fixed-price and unit-rate contracts is recognized using the percentage-of-completion method, computed by the significant inputs method, which measures the percentage of labor hours incurred to date as compared to estimated total labor hours for each contract. Direct materials and subcontract materials and services that represent an insignificant portion of the work to complete a contract or do not reflect an accurate measure of project completion are considered "pass-through costs." Revenue recognized in a period for a contract is the pro rata portion of the contract value (excluding pass-through costs), based upon the labor hour measure of progress, plus pass-through costs incurred during the period. Accordingly, pass-through costs are included in revenue and direct costs of revenue with no impact on gross profit recognized during the period.

Revenue for our T&M contracts is recognized at contracted rates when the work is performed, the costs are incurred and collection is reasonably assured. Our T&M contracts provide for labor and materials to be billed at rates specified within the contract. The consideration from the customer directly corresponds to the value of our performance completed at the time of invoicing. Accordingly, we have elected the “right to invoice” practical expedient under Topic 606 for the recognition of revenue for our T&M contracts. The practical expedient allows us to recognize revenue in the amount we have the right to invoice (at contracted rates when the work is performed and costs are incurred).

Revenue and gross profit for contracts can be significantly affected by variable consideration, which can be in the form of unapproved change orders, claims, incentives, penalties, and liquidated damages that may not be resolved until the later stages of the contract or after the contract has been completed and delivery occurs. We estimate variable consideration based on the most likely amount to which we expect to be entitled and include estimated amounts in the transaction price to the extent it is probable that a significant future reversal of cumulative revenue recognized will not occur or when we conclude that any significant uncertainty associated with the variable consideration is resolved. For the three and nine months ended September 30, 2018 and 2017, we had no material amounts in revenue related to unapproved change orders, claims, or incentives. However certain projects in our Shipyard Division reflect a reduction to our estimated contract price of $11.7 million for variable consideration related to liquidated damages. The reductions in contract price were recorded during the fourth quarter 2017.

Revenue and gross profit for contracts accounted for using the percentage-of-completion method can also be significantly affected by changes in estimated cost to complete such contracts. The cumulative impact of revisions in total cost estimates during the progress of work is reflected in the period in which these changes become known, including, to the extent required, the reversal of profit recognized in prior periods and the recognition of losses expected to be incurred on contracts. Due to the various estimates inherent in our contract accounting, actual results could differ from those estimates, which could result in material changes to our Consolidated Financial Statements and related disclosures.

~~Adoption of Topic 606~~

AND LIABILITIES AND OTHER CONTRACT MATTERS

As discussed in Note 1, ~~on January 1, 2018,~~ we ~~adopted ASU No. 2014-09,~~recognize revenue for our contracts in accordance with Topic 606. Summarized below are required disclosures under Topic 606 ~~“Revenue from Contracts with Customers,” which supersedes the revenue recognition requirements in FASB ASC Topic 605, “Revenue Recognition.” Accordingly, the reported results for the three~~ and ~~nine months ended September 30, 2018, reflect the application of Topic 606 guidance while the comparable reported results for 2017 were prepared under the guidance of Topic 605.~~

Topic 606 requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Our adoption of Topic 606 included a detailed review of our significant contracts that were not substantially complete as of January 1, 2018, to assess if revenue should be recognized "over time" (as the work is performed) or "at a point in time" (upon completion of the work). We determined that ownership and control of the work related to our fixed-price and unit-rate contracts transfer to our customers as the work progresses. Additionally, our customers retain the right and ability to change, modify or discontinue further fabrication or construction at any stage of the project. In the event our customers discontinue work, they are required to compensate us for the work performed to date.

Based on our review, we concluded that revenue recognition for our fixed-price and unit-rate contracts using the percentage-of-completion method, computed by measuring the percentage of labor hours incurred to date as compared to estimated total labor hours for each contract, is still appropriate as it most accurately reflects our primary profit generating activity and best represents our efforts to construct the asset for our customer. However, adoption of Topic 606 did require us to include subcontract labor and certain costs from outside services within our measure of progress and determination of our percentage-of-completion. We previously treated certain of these costs as pass-through costs and excluded such costs from our measure of progress. Our review also determined that Topic 606 did not impact the timing of revenue recognition for our T&M contracts. Based on the aforementioned, we concluded that the impact of the adoption of Topic 606 as of January 1, 2018, was immaterial to our Consolidated Financial Statements and no adjustment was required.

Topic 606 requires additional and enhanced disclosures related to the disaggregation of revenue and the anticipated timing and completion of remaining performance obligations, which are included below.other relevant guidance.

Disaggregation of Revenue -

The following tables summarize revenue for each of our operating segments, disaggregated by contract type, ~~and timing of revenue recognition,~~ for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~ (in thousands):


		Three Months Ended September 30, 2018														Three Months Ended March 31, 2019
		Fabrication		Shipyard		Services		EPC		Eliminations			Total			Fabrication		Shipyard		Services		Eliminations			Total
Contract Type	Contract Type														Contract Type
Fixed-price and unit-rate ⁽¹⁾	Fixed-price and unit-rate ⁽¹⁾	$	2,311	$	23,635	$	12,193	$	—	$	(779	)	$	37,360	Fixed-price and unit-rate ⁽¹⁾	$	12,631	$	33,626	$	6,231	$	(614	)	$	51,874
T&M ⁽²⁾	T&M ⁽²⁾	—		857		10,424		—		—			11,281		T&M ⁽²⁾	—		2,961		10,622		—			13,583
Other ⁽³⁾	Other ⁽³⁾	—		—		—		1,071		—			1,071		Other ⁽³⁾	—		—		2,749		(601		)	2,148
	Total	$	2,311	$	24,492	$	22,617	$	1,071	$	(779	)	$	49,712	Total	$	12,631	$	36,587	$	19,602	$	(1,215	)	$	67,605

Three Months Ended September 30, 2017
Fabrication
Shipyard
Services
EPC
Eliminations
Total
Contract Type
Fixed-price and unit-rate ⁽¹⁾
$ 18,318
$ 13,906
$ 6,147
$ —
$ (1,159 ) $ 37,212
T&M ⁽²⁾
—
1,168
11,504
—
—
12,672
Other —
—
—
—
—
—
Total $ 18,318
$ 15,074
$ 17,651
$ —
$ (1,159 ) $ 49,884

Nine Months Ended September 30, 2018
Fabrication
Shipyard
Services
EPC
Eliminations
Total
Contract Type
Fixed-price and unit-rate ⁽¹⁾
$ 28,171
$ 62,116
$ 35,197
$ —
$ (2,550 ) $ 122,934
T&M ⁽²⁾
—
4,561
31,495
—
—
36,056
Other ⁽³⁾
—
—
—
2,026
—
2,026
Total $ 28,171
$ 66,677
$ 66,692
$ 2,026
$ (2,550 ) $ 161,016


		Nine Months Ended September 30, 2017														Three Months Ended March 31, 2018
		Fabrication		Shipyard		Services		EPC		Eliminations			Total			Fabrication		Shipyard		Services		Eliminations			Total
Contract Type	Contract Type														Contract Type
Fixed-price and unit-rate ⁽¹⁾	Fixed-price and unit-rate ⁽¹⁾	$	42,517	$	47,632	$	20,969	$	—	$	(4,328	)	$	106,790	Fixed-price and unit-rate ⁽¹⁾	$	17,343	$	17,222	$	10,290	$	(453	)	$	44,402
T&M ⁽²⁾	T&M ⁽²⁾	—		4,166		22,789		—		—			26,955		T&M ⁽²⁾	—		1,343		10,585		—			11,928
Other	Other	—		—		—		—		—			—		Other	—		—		995		(35		)	960
	Total	$	42,517	$	51,798	$	43,758	$	—	$	(4,328	)	$	133,745	Total	$	17,343	$	18,565	$	21,870	$	(488	)	$	57,290

____________

(1) Revenue is recognized as the contract is progressed over time.

(2) Revenue is recognized at contracted rates when the work is performed and costs are incurred.

~~(3) Revenue primarily represents early work authorized by SeaOne and is recognized as the contract is progressed over time.~~

Future Performance Obligations Required Under Contracts - ~~The following tables summarize the~~

A summary of our remaining ~~revenue to be earned under~~ performance obligations ~~for the portion of contracts not yet completed~~by operating segment at March 31, 2019 is as ~~of September 30, 2018~~follows (in thousands).


Segment	Performance Obligations at September 30, 2018		Performance Obligations at March 31, 2019
Fabrication	$	44,746	$	71,144
Shipyard ⁽¹⁾	282,912
Shipyard ^{(1) (2)}			226,250
Services	11,699		15,397
EPC	836
Intersegment eliminations	—
Total	$	340,193	$	312,791

_____________

(1) Amount excludes approximately $30.1 million in the aggregate of remaining performance obligations under dispute pursuant to a termination notice from our customer related to contracts for the construction of two MPSVs. See Note 8 for further discussion of these contracts.


(1)	Amount excludes approximately $21.9 million of remaining performance obligations related to contracts for the construction of two MPSVs that are subject to dispute pursuant to a termination notice from our customer. See Note 5 for further discussion of these contracts.


(2)	Amount excludes remaining performance obligations related to contract awards in April 2019 for the construction of a regional class marine research vessel (approximately $70.0 million) and two towing, salvage and rescue ships (approximately $129.0 million).

We expect to recognize revenue for our remaining performance obligations at March 31, 2019 in the following periods (in thousands):


Year	Total		Total
Remainder of 2018	$	56,243
2019	199,922
Remainder of 2019			$	180,172
2020	74,976		101,924
2021	8,405		29,825
2022	647
Thereafter			$	870
Total	$	340,193	$	312,791

Contracts ~~Receivable~~Assets 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, Advance Billings on Contracts and Accrued Contract Losses~~

Liabilities

Revenue recognition and customer invoicing for our fixed-price and unit-rate contracts may occur at different times. Revenue recognition is based upon our estimated percentage-of-completion as discussed ~~above;~~in Note 1; however, customer invoicing ~~will~~is generally ~~depend~~dependent upon predetermined billing terms, which could provide for customer payments in advance ~~payments or invoicing~~of performing the work, milestone billings based ~~upon achievement~~on the completion of certain ~~milestones~~phases of the work, or ~~project progress.~~billings when services are provided. Revenue recognized in excess of amounts billed is reflected as ~~contracts in progress~~contract assets on our ~~Consolidated~~ Balance ~~Sheets.~~Sheet. Amounts billed in excess of revenue recognized, isand accrued contract losses, are reflected as ~~advance billings on contracts~~contract liabilities on our ~~Consolidated~~ Balance ~~Sheets. Contracts~~Sheet. Contract assets and contract liabilities included in ~~progress totaled $40.2 million~~our Balance Sheet at September 30, 2018, with $37.1 million relating to three customers. Advance billings on contracts totaled $14.9 million at September 30, 2018, with $11.2 million relating to one customer. Accrued contract losses totaled $6.0 million and $7.6 million at September 30, 2018March 31, 2019 and December 31, ~~2017, respectively.~~2018, are as follows (in thousands):

~~NOTE 4 – FAIR VALUE MEASUREMENTS~~



	March 31,			December 31,
	2019			2018
Contract assets	$	38,707		$	29,982
Contract liabilities ^{(1), (2), (3)}	(9,234		)	(16,845		)
Contracts in progress, net	$	29,473		$	13,137

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:______________


(1)	The decrease in contract liabilities compared to December 31, 2018, was primarily due to the unwind of advance payments on two separate projects in our Fabrication and Shipyard Divisions.


(2)	Revenue recognized during the three months ended March 31, 2019 and 2018 related to amounts included in our contract liabilities balance at December 31, 2018 and 2017, was $13.5 million and $4.3 million, respectively.


(3)	Contract liabilities at March 31, 2019 and December 31, 2018, includes accrued contract losses of $1.5 million and $2.4 million, respectively. See "Project Changes in Estimates" below for further discussion of our accrued contract losses.

Allowance for Doubtful Accounts

~~Level 1 - inputs are based upon quoted prices~~Our provision for ~~identical instruments traded~~bad debts for the three months ended March 31, 2019 and 2018 was $53,000 and $8,000, respectively, and is included in ~~active markets;~~other (income) expense, net on our Statement of Operations. Our allowance for doubtful accounts at March 31, 2019 and December 31, 2018 was $0.4 million and $0.4 million, respectively.

~~Level 2 - inputs are based upon quoted prices for similar instruments~~

Changes 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 reported for financial instruments, including cash and cash equivalents, short-term investments, contracts receivable and accounts payable, approximate their fair values.~~Project Estimates

~~Assets held~~For the three months ended March 31, 2019 and 2018, individual projects with significant changes in estimated margins did not have a material net impact on our loss from operations. At March 31, 2019, our eight uncompleted harbor tug projects within our Shipyard Division were in a loss position and our reserve for ~~sale~~estimated losses on the projects was ~~- We measure~~$1.3 million. The loss position on the projects is a result of increased forecast costs incurred during the second half of 2018 associated primarily with lower than anticipated craft labor productivity related to pipe installation and ~~record assets held~~testing and extensions of schedule for ~~sale~~the projects. The projects are scheduled to be completed at various dates ranging from the ~~lower of their carrying amount~~second quarter 2019 through 2020. If future craft labor productivity differs from our current estimates, we are unable to achieve our progress estimates, our schedules are further extended or ~~fair value less costs to sell. The determination of fair value generally requires~~ the ~~use of significant judgments. See Note 2 for~~projects incur schedule liquidated damages, the projects would experience further ~~discussion~~losses.

3. ASSETS HELD FOR SALE

A summary of our assets held for sale at March 31, 2019, is as follows (in thousands):




Assets	Fabrication Division			Shipyard Division			Consolidated
Machinery and equipment	$	25,583		$	1,222		$	26,805
Accumulated depreciation	(7,871		)	(298		)	(8,169		)
Total	$	17,712		$	924		$	18,636

Fabrication Division Assets Held for Sale

South Texas Properties - During the first quarter 2017, we classified our fabrication yards and ~~their~~certain associated ~~fair value measurements.~~equipment in Ingleside, Texas ("Texas South Yard") and Aransas Pass, Texas ("Texas North Yard") (collectively, "South Texas Properties") as held for sale. During the second and fourth quarters of 2018, we completed the sale of the Texas South Yard and Texas North Yard, respectively, which included both fabrication yards and certain equipment. At March 31, 2019, our Fabrication Division continued to have $17.7 million of assets held for sale ("Fabrication AHFS") which were initially expected to be sold with the South Texas Properties. These assets consist primarily of three 660-ton crawler cranes, a deck barge, two plate bending roll machines and panel line equipment. The Fabrication AHFS were relocated to our fabrication yard in Houma, Louisiana.

Hurricane Harvey Insurance Recoveries - During the third quarter 2017, buildings and equipment located at our South Texas Properties were damaged by Hurricane Harvey. In connection therewith, during the three months ended March 31, 2018, we received $2.2 million of insurance proceeds as a partial payment from our insurance carriers, which offset impairments of property and equipment, primarily at our Texas North Yard, resulting in no net gain or loss.

~~NOTE 5 – LOSS PER COMMON SHARE~~Other - During the three months ended March 31, 2019, we received proceeds of $0.4 million related to the sale of assets that were held for sale. During the three months ended March 31, 2019 and 2018, we recorded a gain of $70,000 and expense of $0.8 million, respectively, related to the net impact of impairments of assets and (gains) losses on the sale of assets that were held for sale. The net gain and charges are included within asset impairments and (gain) loss on assets held for sale, net on our Statement of Operations.

The ~~following table presents~~sale of our South Texas Properties did not impact our ability to operate our Fabrication Division. Further, the ~~computation~~sale of ~~basic~~our South Texas Properties, and ~~diluted loss per share (in thousands, except~~the Fabrication AHFS, did not qualify for ~~per share amounts):~~

discontinued operations presentation as we continue to operate our Fabrication Division at our fabrication yard in Houma, Louisiana.

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

~~______________~~Shipyard Division Assets Held for Sale

~~(1) We have no dilutive securities.~~

At March 31, 2019, our Shipyard Division had $0.9 million of assets held for sale ("Shipyard AHFS"), which consists of a 2,500-ton drydock located at our shipyard in Houma, Louisiana. The Shipyard AHFS did not qualify for discontinued operations presentation.

~~NOTE 6 – LINE OF~~4. CREDIT FACILITIES

Credit Agreement

We have a $40.0 million ~~Credit Agreement~~revolving credit facility with Hancock Whitney Bank ("Credit Agreement") that can be used for borrowings or letters of credit. On ~~August 27, 2018,~~May 1, 2019, we ~~entered into a third amendment to~~amended our Credit Agreement ~~which extended~~to extend its maturity date from June 9, ~~2019~~2020 to June 9, ~~2020,~~2021 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 amendedamend certain financial covenants. Our quarterly financial covenants ~~during~~at March 31, 2019, and for the remaining term of the Credit Agreement after our amendment, are as follows:

Ratio of current assets to current liabilities at March 31, 2019 of not less than 1.25:~~1.00;~~1.00 (2.0:1.00 subsequent to the amendment);

Minimum tangible net worth at March 31, 2019 of at least the sum of $180.0 million ($170.0 million subsequent to the amendment), plus 100% of the net proceeds from any issuance of stock or other equity after deducting any fees, commissions, expenses and other costs incurred in such offering; and

Ratio of funded debt to tangible net worth at March 31, 2019 of not more than 0.50:~~1.00.~~1.00 (no change subsequent to the amendment).

Our Credit Agreement also includes restrictions regarding our ability to: (i) grant liens; (ii) make certain loans or investments; (iii) incur additional indebtedness or guarantee other indebtedness in excess of specified levels; (iv) make any material change to the nature of our business or undergo a fundamental change; (v) make any material dispositions; (vi) acquire another company or all or substantially all of its assets; (vii) enter into a merger, consolidation, or sale leaseback transaction; or (viii) declare and pay dividends if any potential default or event of default occurs.

Interest on borrowings under the Credit Agreement may be designated, at our option, as either the Wall Street Journal published Prime Rate (5.5% at March 31, 2019) or LIBOR (2.5% at March 31, 2019) plus 2.0% per annum. Commitment fees on the unused portion of the Credit Agreement are 0.4% per annum, and interest on outstanding letters of credit is 2.0% per annum. The Credit Agreement is secured by substantially all our assets ~~(other than the assets held for sale at~~(with a negative pledge on our ~~Texas North Yard)~~real property).

At ~~September 30, 2018,~~March 31, 2019, we had no outstanding borrowings under our Credit Agreement and ~~$2.5~~$2.9 million of outstanding letters of credit, providing ~~$37.5~~$37.1 million of available capacity. At ~~September 30, 2018,~~March 31, 2019, we were in compliance with all of our financial ~~covenants.~~covenants, with a tangible net worth of $196.1 million (as defined by the Credit Agreement), a ratio of current assets to current liabilities of 2.84 to 1.0 and a ratio of funded debt to tangible net worth of 0.01:1.0.

Surety Bonds

We issue surety bonds in the ordinary course of business to support our projects. At March 31, 2019, we had $334.9 million of outstanding surety bonds.

~~NOTE 7 - SEGMENT DISCLOSURES~~

We have structured our operations with four operating divisions, and one corporate non-operating division, which represent our reportable segments. As part of our 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 segments in future periods. Our reportable segments at September 30, 2018 are discussed below.

~~Fabrication Division~~ -Our Fabrication Division fabricates 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 U.S.) as well as modules for petrochemical and industrial facilities. We perform these activities at our fabrication yard in Houma, Louisiana. As of September 30, 2018, our Texas North Yard is held for sale and our Texas South Yard had been sold. See Note 2 for further discussion of our South Texas Properties.

~~Shipyard Division -~~ Our Shipyard Division fabricates newbuild vessels and repairs various steel marine vessels 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 provides interconnect piping and related services for offshore platforms and inland structures, which includes sending 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 U.S. for various on-site construction and maintenance activities. In addition, our Services Division fabricates packaged skid units and performs various civil and drainage projects, such as pump stations, levee reinforcement, bulkheads and other work for state and local governments. We perform these services at customer facilities or at our services yard in Houma, Louisiana.

~~EPC Division -~~ Our EPC Division was created during the fourth quarter 2017 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 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 terms of the engagement with SeaOne. We understand that SeaOne is in the process of 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.

~~Corporate Division~~ - Our Corporate Division represents expenses that do not directly relate to our four operating divisions and are not allocated to our operating divisions. Such expenses include, but are not limited to, costs related to executive management and directors' fees, clerical and administrative salaries, costs of maintaining 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 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 the four operating divisions. Shared services 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 for each of our divisions for the three and nine months ended September 30, 2018 and 2017, is as follows (in thousands):~~

Three Months Ended September 30, 2018
Fabrication Shipyard Services EPC Corporate Eliminations Consolidated
Revenue $ 2,311
$ 24,492
$ 22,617
$ 1,071
$ —
$ (779 ) $ 49,712
Gross profit (loss) (4,032 ) (1,764 ) 3,191
(205 ) (402 ) —
(3,212 )
Operating income (loss) (7,708 ) (2,460 ) 2,486
(708 ) (2,494 ) —
(10,884 )
Total assets ⁽¹⁾
100,115
92,839
37,201
2,217
30,585
—
262,957
Depreciation and amortization expense 1,023
1,050
365
—
36
—
2,474
Capital expenditures —
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

Nine Months Ended September 30, 2017
Fabrication Shipyard Services EPC Corporate Eliminations Consolidated
Revenue $ 42,517
$ 51,798
$ 43,758
$ —
$ —
$ (4,328 ) $ 133,745
Gross profit (loss) 216
(19,061 ) 2,335
—
(500 ) —
(17,010 )
Operating income (loss) (2,216 ) (22,285 ) 327
—
(6,165 ) —
(30,339 )
Total assets ⁽¹⁾
164,677
96,614
33,024
—
9,065
—
303,380
Depreciation and amortization expense 5,420
3,034
1,266
—
421
—
10,141
Capital expenditures 2,327
1,872
199
—
117
—
4,515

~~_______________~~

~~(1) Intercompany balances have been excluded.~~

~~NOTE 8 –~~5. COMMITMENTS AND CONTINGENCIES

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

MPSV Termination Letter

We received notices of termination of the contracts for the construction of two MPSVs from one of our Shipyard Division customers. We dispute the purported terminations and disagree with the customer’s reasons for such terminations. Pending the resolution of the dispute, we have ceased all work and the partially completed MPSVs and associated equipment and materials remain at our shipyard in Houma, Louisiana. The customer also notified our Surety of its purported terminations of the construction contracts and made claims under the bonds issued by the Surety in connection with the construction of the two MPSVs. We have notified and met with our Surety regarding our disagreement with, and objection to, the customer's purported ~~termination~~terminations and its claims. Discussions with the Surety are ongoing. On October 2, 2018, we filed a lawsuit against the customer to enforce our rights and remedies under the applicable construction contracts. Our lawsuit disputes the propriety of the customer’s purported ~~termination~~

terminations of the construction contracts and seeks to recover damages associated with the customer’s actions. The customer filed its response to our lawsuit denying many of the allegations in the lawsuit and asserting a counterclaim against us seeking, among other things, declaratory judgment as to the validity of the customer's purported terminations of the construction contracts and other purported claims for which the customer is seeking damages in an unspecified amount. We have filed a response to the counterclaim denying all of the customer's claims. The customer subsequently filed a motion with the court seeking, among other things, to obtain possession of the two MPSVs. A hearing on that motion is currently scheduled for May 28, 2019.

We are unable to ~~estimate~~determine the probability of a favorable or unfavorable outcome with respect to the dispute or estimate the amount of potential loss, if any, related to this matter. We can provide no assurances that we will not incur additional costs as we pursue our rights and remedies under the contracts and defend against the customer's claims. At March 31, 2019 and December 31, 2018, other noncurrent assets on our Balance Sheet included a net contract asset of $12.5 million, which consisted of our contract asset, accrued contract losses, and deferred revenue balances at the time of the customer's purported termination of the contracts.

Insurance

We may be exposed to future losses through our use of deductibles and self-insured retentions for our exposures related to third party liability and workers' compensation. We expect liabilities in excess of any deductibles and self-insured retentions to

be covered by insurance. To the extent we are self-insured, reserves are recorded based upon our estimates, with input from legal and insurance advisors. Changes in assumptions, as well as changes in actual experience, could cause these estimates to change.

Letters of Credit and Surety Bonds

We obtain letters of credit under our Credit Agreement or surety bonds from financial institutions to provide to our customers in order to secure advance payments or guarantee performance under our contracts, or in lieu of retention being withheld on our contracts. With respect to a letter of credit under our Credit Agreement, any advance payment in the event of non-performance under a contract would become a borrowing under our Credit Agreement and thus a direct obligation. With respect to a surety bond, any advance payment in the event of non-performance is subject to indemnification of the surety by us, which may require us to borrow under our Credit Agreement. When a contract is complete, the contingent obligation terminates and letters of credit or surety bonds are returned. See Note 4 for further discussion of our Credit Agreement and surety bonds.

Leases

Our significant operating leases include our corporate office in Houston, Texas and our shipyard facilities in Lake Charles and Jennings, Louisiana. Our corporate office lease expires in 2025 and our Lake Charles and Jennings leases include renewal options that allow us to extend the lease terms through 2038 and 2045, respectively. We are reasonably certain we will exercise the renewal options and have therefore included the optional renewal periods in our expected lease terms and the measurement of our operating lease assets and liabilities. The table below sets forth the approximate future lease payments related to our operating leases with initial terms of more than one year (in thousands):



Period	Payments
Remainder of 2019	$	489
2020	659
2021	668
2022	677
2023	676
Thereafter	6,173
Total lease payments	9,342
Less interest	(4,181		)
Present value of lease liabilities	$	5,161

The discount rate used to determine the present value of our lease liabilities was based on the interest rate on our Credit Agreement adjusted for terms similar to that of our leased properties. At ~~September 30, 2018,~~March 31, 2019, our ~~net balance sheet position~~weighted-average remaining lease term was approximately 16.1 years and the weighted-average discount rate used to derive our lease liability was 7.5%. Cash paid for lease liabilities for the ~~contracts~~three months ended March 31, 2019 was ~~$12.5~~$0.2 million.

~~Project Award Protest~~Environmental Matters

Our operations are subject to extensive and changing U.S. federal, state and local laws and regulations, as well as the laws of other countries, that establish health and environmental quality standards. These standards, among others, relate to air and water pollutants and the management and disposal of hazardous substances and wastes. We are exposed to potential liability for personal injury or property damage caused by any release, spill, exposure or other accident involving such pollutants, substances or wastes. In connection with the historical operation of our facilities, including those associated with acquired operations, substances which currently are or might be considered hazardous were used or disposed of at some sites that will or may require us to make expenditures for remediation. We believe we are in compliance, in all material respects, with environmental laws and regulations and maintain insurance coverage to mitigate exposure to environmental liabilities. We do not believe any environmental matters will have a material adverse effect on our financial condition, results of operations or cash flow.

~~During~~

6. LOSS PER COMMON SHARE

The following table presents the ~~first quarter 2018, we executed a contract~~computation of basic and diluted loss per share (in thousands, except 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.per share amounts):



	Three Months Ended March 31,
	2019			2018
Net loss attributable to common shareholders	$	(3,042	)	$	(5,296	)
Weighted-average shares⁽¹⁾	15,151			14,964
Basic and diluted loss per common share	$	(0.20	)	$	(0.35	)

______________

(1) We ~~are working with the U.S. Navy to re-establish a timeline for construction under this contract.~~have no dilutive securities.

~~NOTE 9 –~~7. SEGMENT DISCLOSURES

During 2018, we operated and managed our business through four operating divisions ("Fabrication", "Shipyard", "Services" and "EPC") and one non-operating division ("Corporate"), which represented our reportable segments. During the first quarter 2019, our EPC Division was operationally combined with our Fabrication Division. Our EPC Division was previously created to support the pursuit of the SeaOne Project and other projects that require project management of EPC activities. Our operational combination of the EPC Division with the Fabrication Division is a result of our reduced emphasis on the SeaOne Project and greater focus on offshore wind and modular fabrication opportunities. As a result of the aforementioned, we currently operate and manage our business through three operating divisions ("Fabrication", "Shipyard" and "Services") and one non-operating division ("Corporate"), which represent our current reportable segments. The segment results for the EPC Division for the three months ended March 31, 2018 were combined with the Fabrication Division to conform to the presentation of our reportable segments for the 2019 period. We believe that our operating divisions meet the criteria of reportable segments under GAAP. Our three operating divisions and Corporate Division are discussed below:

Fabrication Division -Our Fabrication Division fabricates modules for petrochemical and industrial facilities, foundations for alternative energy developments and other complex structures. Our Fabrication Division also fabricates offshore drilling and production platforms and other offshore structures for customers in the oil and gas industry, including jackets and deck sections of fixed production platforms, hull, tendon, and/or deck sections of floating production platforms (such as TLPs, SPARs, FPSOs and MinDOCs), piles, wellhead protectors, subsea templates, and various production, compressor, and utility modules along with pressure vessels. In addition, our Fabrication Division supports our efforts to pursue offshore wind opportunities and other projects that require project management of EPC activities. These activities are performed at our fabrication yard in Houma, Louisiana.

Shipyard Division - Our Shipyard Division fabricates newbuild vessels, including OSVs, MPSVs, research vessels, tug boats, salvage vessels, towboats, barges, drydocks, anchor handling vessels, lift boats and other marine vessels. Our Shipyard Division also performs marine repair activities, including steel repair, blasting and painting services, electrical systems repair, machinery and piping system repairs, and propeller, shaft, and rudder reconditioning. In addition, our Shipyard Division performs 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. These activities are performed at our shipyards in Houma, Jennings and Lake Charles, Louisiana.

Services Division- Our Services Division provides interconnect piping and related services on offshore platforms and inland structures. Interconnect piping services involve 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. Our Services Division also contracts with oil and gas companies that have platforms and other structures located in the inland lakes and bays throughout the southeastern U.S. for various on-site construction and maintenance activities. In addition, our Services Division fabricates packaged skid units and performs various municipal and drainage projects, such as pump stations, levee reinforcement, bulkheads and other public works projects for state and local governments. These services are performed at customer facilities or at our services yard in Houma, Louisiana.

Corporate Division - Our Corporate Division represents costs that do not directly relate to our three operating divisions. Such costs include, but are not limited to, executive management and directors' fees, clerical and administrative salaries, costs of maintaining our corporate office and costs associated with overall governance and being a publicly traded company. Costs incurred by our Corporate Division on behalf of our operating divisions are allocated to the operating divisions. Such costs include, but are not limited to, costs related to human resources, insurance, sales and marketing, information technology and accounting.

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. Intersegment revenues are priced at the estimated fair value of work performed. Summarized financial information for our segments as of and for the three months ended March 31, 2019 and 2018, is as follows (in thousands):



	Three Months Ended March 31, 2019
	Fabrication			Shipyard			Services		Corporate			Consolidated
Revenue	$	12,631		$	36,587		$	19,602	$	(1,215	)	$	67,605
Gross profit (loss)	(772		)	(280		)	1,741		(136		)	553
Operating income (loss)	(1,540		)	(904		)	1,289		(2,127		)	(3,282		)
Depreciation expense	967			1,109			374		102			2,552
Capital expenditures	14			22			214		—			250
Total assets	63,761			103,703			34,306		56,945			258,715



	Three Months Ended March 31, 2018
	Fabrication			Shipyard			Services		Corporate			Consolidated
Revenue	$	17,343		$	18,565		$	21,870	$	(488	)	$	57,290
Gross profit (loss)	(527		)	(1,023		)	2,614		(385		)	679
Operating income (loss)	(2,506		)	(1,979		)	1,906		(2,511		)	(5,090		)
Depreciation expense	1,149			1,069			393		104			2,715
Capital expenditures	—			6			65		—			71
Total assets	149,116			76,150			35,529		8,327			269,122

8. SUBSEQUENT EVENTS

On ~~October 2, 2018,~~May 1, 2019, we ~~filed a lawsuit against a customer to enforce~~amended our ~~rights and remedies under the applicable construction contracts for the construction of two MPSVs.~~Credit Agreement. See Note 84 for further discussion of our ~~dispute and lawsuit.~~

amendment.

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~~performance. Forward-looking statements, within the ~~section entitled “Management’s Discussion and Analysis~~meaning of ~~Financial Condition and Results~~the safe harbor provisions of ~~Operations.” Forward-looking statements~~the U.S. Private Securities Litigation Reform Act of 1995, 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, competition, consolidation of our customers, timing and award of new contracts, reliance on significant customers, financial ability and credit worthiness of our customers, nature of our contract terms, competitive pricing and cost overruns on our projects, adjustments to previously reported profits or losses under the percentage-of-completion method, weather conditions, 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 amend or obtain new debt financing or credit facilities on favorable terms, ability to remain in compliance with our covenants contained in our Credit Agreement, ability to generate sufficient cash flow, ability to sell certain assets, ~~advancement on the SeaOne Project,~~customer or subcontractor disputes, ability to resolve 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~~barriers to ~~previously reported profits or loss under the percentage-of-completion method,~~entry into new lines of business, ability to employ skilled workers, loss of key personnel, performance of subcontractors and dependence on suppliers, changes in trade policies of the U.S. and other countries, compliance with regulatory and environmental laws, ~~ability to utilize navigation~~lack of navigability of canals ~~performance~~and rivers, shutdowns of ~~sub-contractors,~~the U.S. government, systems and information technology interruption or failure and data security breaches, performance of partners in our joint ventures and other strategic alliances, progress of the SeaOne Project, and other factors described in Item ~~1A. “Risk Factors” included~~1A "Risk Factors" in our ~~2017~~2018 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.

Overview

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

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

During 2018, we operated and managed our business through four operating divisions ("Fabrication", "Shipyard", "Services" and "EPC") and one non-operating division ("Corporate"), which represented our reportable segments. During the first quarter 2019, our EPC Division was operationally combined with our Fabrication Division. Our EPC Division was previously created to support the pursuit of the SeaOne Project and other projects that require project management of EPC activities. Our operational combination of the EPC Division with the Fabrication Division is a result of our reduced emphasis on the SeaOne Project and greater focus on offshore wind and modular fabrication opportunities. As a result of the aforementioned, we now operate and manage our business through ~~four~~three operating divisions ("Fabrication", "Shipyard" and "Services") and one non-operating division ("Corporate"), which represent our reportable segments. ~~Our operating divisions include:~~The segment results for the EPC Division for the three months ended March 31, 2018 were combined with the Fabrication ~~Shipyard, Services and EPC.~~Division to conform to the presentation of our reportable segments for the 2019 period. Our corporate headquarters is located in Houston, Texas, with fabrication facilities located in Houma, Jennings and Lake Charles, Louisiana. ~~At September 30, 2018,~~

Beginning in late 2014, a severe and sustained decline in oil and gas prices led to a significant decline in oil and gas industry drilling activities and capital spending from our ~~Texas North Yard is held for~~traditional offshore customer base. As a result, our operating results and cash flows were negatively impacted as we experienced reductions in revenue, lower margins due to competitive pricing and a significant underutilization of our facilities in our Fabrication and Shipyard Divisions. In addition, during 2017 we incurred losses on a project in our Shipyard Division. As a result of these market changes and project losses, we implemented initiatives to preserve and improve our liquidity through cost reduction efforts and the sale of underutilized assets. Further, to reduce our Fabrication Division's reliance on offshore oil and gas construction and our ~~Texas South Yard had been sold.~~

~~We continue~~Shipyard Division's reliance on marine vessel work related to the oil and gas sector, we began to strategically ~~position~~reposition the Company to participate in the fabrication of petrochemical and industrial facilities, pursue offshore wind opportunities ~~enter the EPC industry~~ and diversify our customer base within all of our operating divisions. In addition, we 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 reposition the Company, increase our backlog and improve and preserve our liquidity, including cost 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~~sale of underutilized assets.

~~Sales~~Ongoing Effort to Divest of Underutilized Assets

South Texas Properties and Fabrication Assets Held for Sale - During the first quarter 2017, we classified our fabrication yards and certain associated equipment in Ingleside, Texas ("Texas South ~~Yard~~ -Yard") and Aransas Pass, Texas ("Texas North Yard") (collectively, "South Texas Properties") as held for sale. During the second ~~quarter~~and fourth quarters of 2018, we completed the sale of ~~our~~the Texas South Yard ~~for $55.0 million, less selling costs of $1.5 million, for total net proceeds during the nine-months ended September 30, 2018 of approximately $53.5 million~~ and ~~a gain of approximately $3.9 million.~~

Texas North Yard, - ~~On September 26, 2018, we entered into an agreement to sell our Texas North Yard~~respectively, which included both fabrication yards and certain ~~associated equipment for $28.0 million. We received $0.5~~equipment. At March 31, 2019, our Fabrication Division continued to have $17.7 million during the third quarter 2018 as a deposit on the property, which is refundable under certain circumstances. The sale is 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 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 actively market the remaining Texas North Yard assets held for sale ("Fabrication AHFS") which were initially expected to be sold with the South Texas Properties. These assets consist primarily ~~consist~~ of three 660-ton crawler cranes, a deck barge, atwo plate bending roll ~~machine~~machines and panel line equipment. The Fabrication AHFS were relocated to our fabrication yard in Houma, Louisiana.

~~Hurricane Harvey Insurance Recoveries~~Shipyard Assets Held for Sale - ~~During the third quarter 2017, buildings and equipment located at~~At March 31, 2019, our ~~South Texas Properties were damaged by Hurricane Harvey. During the second quarter 2018, we agreed to~~Shipyard Division had $0.9 million of assets held for sale, which consists of 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 2018.2,500-ton drydock.

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

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

Pursuit of offshore wind - We continue to believe that future requirements ~~from generators and utilities~~ to provide electricity from renewable and green sources will result in ~~continued~~ growth of offshore wind projects. WeFurther, we believe we possess the expertise and relationships to successfully participate in this growing market. During 2015, we fabricated wind turbine ~~pedestals~~foundations for the first offshore wind power project in the U.S. ~~in 2015,~~, and ~~we believe that we possess the expertise to obtain future work in this sector. During the first quarter~~during 2018, we ~~signed~~fabricated a ~~contract for the fabrication of one~~ meteorological tower and platform for an offshore wind project located off the U.S. coast of Maryland. ~~The fabrication work was completed in the second quarter 2018 and represents~~These projects demonstrate our ~~continued~~ ability to provide structures for this emerging industry. We ~~may~~are also ~~partner with other companies~~strengthening our project management capabilities to ~~take advantage of growth in this area~~support potential offshore wind projects and ~~have~~recently executed a ~~teaming~~cooperation agreement with ~~the EEW Group~~Smulders to jointly pursue ~~future~~ U.S. offshore wind ~~projects. We~~opportunities. Smulders, a Belgian company, is a major fabrication supplier of offshore wind structures in Europe. Although we believe such a relationship will help to strategically position us in our pursuit of offshore wind projects, we can provide no assurances that we will ~~be successful obtaining~~successfully obtain future ~~wind~~ project awards ~~from~~as a result of this arrangement.

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

~~During the first quarter 2018,~~Shipyard Division - Within our Shipyard Division we ~~executed a contract for the construction and delivery of one towing, salvage and rescue ship vessel~~have increased our backlog with ~~the U.S. Navy for $63.6 million, with an option for seven additional vessels, which was subsequently protested by one~~customers outside of the ~~unsuccessful bidders. On July 16, 2018,~~oil and gas sector. At March 31, 2019, projects in our backlog include:

–

The construction of one towing, salvage and rescue ship for the U.S. Navy (project value of approximately $64.0 million). Our customer exercised its option for the construction of two additional vessels in April 2019 (total project value of approximately $129.0 million), which are not included in backlog at March 31, 2019. The customer continues to have options for the construction of five additional vessels;


–	The construction of two regional class research vessels (individual project values of approximately $77.0 million and $69.0 million). Our customer exercised its option for the construction of a third vessel in April 2019 (project value of approximately $70.0 million), which is not included in backlog at March 31, 2019; and


–	The construction of eight harbor tug vessels.

Fabrication Division - Within our Fabrication Division we ~~were notified~~successfully increased our backlog with traditional and non-traditional fabrication work as we continue to pursue petrochemical and industrial fabrication opportunities for modules and structures. At March 31, 2019, projects in our backlog include:


–	The fabrication of a jacket and deck (destined for Trinidad);


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


–	The construction of two, forty vehicle ferries.

These projects represent large steel structures 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~~well suited for ~~construction under this contract.~~our fabrication yard in Houma, Louisiana.

During the second quarter 2018, we signed change orders with two different customers for the construction of one additional harbor tug boat for each customer. Each change order was approximately $13.0 million. We are now constructing a total of five harbor tug boats for each customer.

During the third quarter 2018, we signed a contract for 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 of our services related work~~Services Division - ~~Demand~~Within our Services Division demand for services associated with offshore tie-backs, upgrades and maintenance remains strong, and we anticipate it will continue for the remainder of ~~2018 and into~~ 2019. We will continue to pursue opportunities for offshore and onshore plant expansion and maintenance and have targeted service opportunities within the shale basins in West Texas.

~~Pursuit of EPC work~~ - During the fourth quarter 2017, SeaOne 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 the Company is non-binding and commencement of the project remains subject to a number of conditions, including agreement on terms of the engagement with SeaOne. We understand that SeaOne is in the process of securing financing for the project. We continue to enhance our internal project management capabilities through the hiring of additional personnel to service this potential project.

MPSV ~~contract~~contracts dispute - ~~As discussed in Note 8 to our Consolidated Financial Statements, we~~We received notices of termination of the contracts for the construction of two MPSVs from one of our Shipyard Division customers. We dispute the purported terminations and disagree with the customer’s reasons for such terminations. Pending the resolution of the dispute, we have ceased all work and the partially completed MPSVs and associated equipment and materials remain at our shipyard in Houma, Louisiana. The customer also notified our Surety of its purported terminations of the construction contracts and made claims under the bonds issued by the Surety in connection with the construction of the two MPSVs. We have notified and met with our Surety regarding our disagreement with, and objection to, the customer's purported termination and its claims. Discussions with the Surety are ongoing. On October 2, 2018, we filed a lawsuit against the customer to enforce our rights and remedies under the applicable construction contracts. Our lawsuit disputes the propriety of the customer’s purported termination of the construction contracts and seeks to recover damages associated with the customer’s actions. The customer filed its response to our lawsuit denying many of the allegations in the lawsuit and asserting a counterclaim against us seeking, among other things, declaratory judgment as to the validity of the customer’s purported terminations of the construction contracts and other purported claims for which the customer is seeking damages in an unspecified amount. We have filed a response to the counterclaim denying all of the customer’s claims. The customer subsequently filed a motion with the court seeking, among other things, to obtain possession of the two MPSVs. A hearing on that motion is currently scheduled for May 28, 2019.

assets on our Balance Sheet included a net contract asset of $12.5 million related to these projects. See Note 5 of our Financial Statements for further discussion of our dispute.

Operating Outlook

~~Looking forward, our~~Our results of operations will be affected ~~primarily~~prospectively by the overall demand and market for our services. ~~In recent years, a significant portion of~~Further, our ~~historical customer base has been negatively affected by a decline~~success in ~~offshore oil and gas exploration and 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~~repositioning the Company to participate in the fabrication of petrochemical and industrial facilities, pursue offshore wind opportunities ~~enter the EPC industry,~~ and diversify our ~~customers~~customer base within all of our operating ~~divisions. The success of these initiatives and our future operations~~divisions, will be determined by, among other things:

The level of ~~new~~ construction and fabrication projects in the new markets we are pursuing for our Fabrication Division, including petrochemical and industrial facilities and offshore ~~wind;~~

~~The ability of SeaOne to obtain financing~~wind developments, and our ~~successful execution of an agreement with SeaOne for the SeaOne Project;~~ability to secure new project awards;

Continued growth within our Shipyard and Services Divisions;

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

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

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

We continue to respond to the competitive environment within our industry and actively compete for additional opportunities. WeOur focus remains on our liquidity and securing meaningful new project awards and backlog in the near-term, and generating operating income and cash flows from operations in the longer-term. Operating results for our Services Division have been strong and we have increased our backlog within our Shipyard and Fabrication ~~and Services Divisions and~~Divisions. Further, we believe we will be successful securing new project awards and growing our ~~backlog.~~backlog in the future. However, our ~~operations~~Fabrication Division will be negatively impacted in the ~~near term~~near-term by the underutilization of its facilities due to an anticipated delay in the timing of new project awards and our Shipyard Division will be negatively impacted by the underutilization of its facilities (although to a lesser extent) due to an anticipated lag in the commencement of ~~fabrication~~construction activities for certain projects in our ~~recent and anticipated new awards. Further, our previous~~backlog. Both divisions will also be impacted by lower margin backlog related to project awards ~~were sold during~~bid at competitive pricing. In addition, as discussed below within "Results of Operations", our harbor tug projects within our Shipyard Division are in a ~~period of competitive pricing~~loss position and the projects will result in future revenue with ~~lower than desired margins.~~no gross profit.

Safety

We ~~operate in an environment that exposes~~are committed to the safety and health of our employees and subcontractors. We believe that a strong safety culture is a critical element of our success. We continue to ~~risk of injury. We are committed~~improve and maintain a stringent safety assurance program designed to ensure the safety of our employees and ~~believe it is key~~allow us to remain in compliance with all applicable federal and state mandated safety regulations. We are committed to maintaining a well-trained workforce and providing timely instruction to ensure our ~~success. Poor~~employees have the knowledge and skills to perform their work safely while maintaining the highest standards of quality. We provide continuous safety ~~performance increases~~education and training to employees and subcontractors to ensure they are ready for the challenges inherent in all our ~~costs, results~~projects. Our employees commence training on their first day of employment with a comprehensive orientation class that addresses Company policies and procedures and provides clear expectations for working safely. We have a zero-tolerance policy for drugs and alcohol use in ~~construction delays~~the workplace. We support this policy through the use of a comprehensive drug and ~~limits~~alcohol screening program that includes initial screenings for all employees and periodic random screenings throughout employment. Additionally, we require our ~~ability~~subcontractors to ~~compete for project awards within our market. Safety performance metrics are incorporated into our annual incentive compensation measures for our executives~~follow alcohol and ~~senior management.~~drug screening policies substantially the same as ours.

Critical Accounting Policies

Our Financial Statements are prepared in accordance with generally accepted accounting principles in the U.S. ("GAAP") which require us to make estimates and ~~Estimates~~

judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure of contingent assets and liabilities. We continually evaluate our estimates and judgments based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. We also discuss the development and selection of our critical accounting policies with the Audit Committee of our Board of Directors. For a discussion of critical accounting policies and estimates used in the preparation of our ~~Consolidated~~ Financial Statements, refer to ~~Item 7. “Management’s~~“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 included in our ~~2017~~2018 Annual Report. There have been no changes to our critical accounting policies since December 31, ~~2017.~~2018.

New Awards and Backlog

New project awards represent ~~the~~ expected revenue ~~value~~values of ~~new contract~~ commitments received during a given period, ~~as well as~~including scope growth on existing commitments. ~~New contract commitments represent contracts for which a~~A commitment represents authorization from our customer ~~has authorized us~~ to begin work or purchase materials pursuant to a written agreement, ~~letters~~letter of intent or other ~~forms~~form of authorization. Backlog represents the unearned value of our new project awards and may differ from the value of ~~future~~remaining performance obligations for our contracts required to be disclosed under Topic 606 and presented in Note ~~3 to~~2 of our ~~Consolidated~~ Financial Statements. ~~We believe that backlog,~~In general, a ~~non-GAAP financial measure, provides useful information~~performance obligation is a contractual obligation to ~~investors.~~construct and/or transfer a distinct good or service to a customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Backlog includes our performance obligations at ~~September 30, 2018,~~March 31, 2019, plus signed contracts that are temporarily suspended or under protest that may not meet the criteria to be reported as future performance obligations under Topic 606 but represent future work that we believe will be performed. We believe that backlog, a non-GAAP financial measure, provides useful information to investors. New project awards and backlog may vary significantly each reporting period based on the timing of our major new contract ~~commitments.~~commitments.

~~Our projects~~

Projects in our backlog are generally subject to delay, suspension, termination, or aan increase or 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 backlog when they are expected to be suspended more than twelve 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 delay, suspension, termination ~~postponement~~or increase or reduction in scope of any one contract could significantly ~~reduce~~impact our backlog and ~~could have a material adverse effect on future~~change the expected amount and timing of revenue ~~operating results and cash flows.~~recognized. A reconciliation of our ~~future~~remaining performance obligations under Topic 606 (the most comparable GAAP measure as presented in Note ~~3 to~~2 of our ~~Consolidated~~ Financial Statements) to our reported backlog is provided below (in thousands).



	March 31, 2019
	Fabrication		Shipyard		Services		Consolidated
Remaining performance obligations under Topic 606	$	71,144	$	226,250	$	15,397	$	312,791
Contracts under purported termination ⁽¹⁾	—		21,888		—		21,888
Total Backlog ⁽²⁾	$	71,144	$	248,137	$	15,397	$	334,679

Backlog at March 31, 2019 and December 31, 2018, is as follows (in thousands):

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



	March 31, 2019			December 31, 2018
Division	Amount		Labor hours	Amount		Labor hours
Fabrication	$	71,144	402	$	63,883	369
Shipyard	248,138		1,523	281,531		1,684
Services	15,397		194	11,046		171
Total Backlog ⁽²⁾	$	334,679	2,119	$	356,460	2,224

Backlog at March 31, 2019 is expected to be recognized as revenue in the following periods (in thousands, except for percentages):



Year ⁽³⁾	Total		Percentage
Remainder of 2019	$	180,172	53.8%
2020	101,924		30.5%
2021	29,825		8.9%
Thereafter	870		0.3%
Future performance obligations under Topic 606	312,791		93.5%
Contracts under purported termination ⁽¹⁾	21,888		6.5%
Total Backlog	$	334,679	100.0%

___________

(1)

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

~~Our backlog at September 30, 2018 and December 31, 2017, consisted of the following (in thousands):~~

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 September 30, 2018, six customers represented approximately 89%~~5 of our ~~backlog, and at December 31, 2017, four customers represented approximately 73% of our backlog. At September 30, 2018, backlog from the six customers consisted of:~~


~~(i)~~	~~Newbuild construction of five harbor tugs (to be completed in 2018 through 2020);~~


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


~~(iii)~~	~~Newbuild construction of two regional class research vessels (both to be completed in 2021);~~

~~(iv)~~

Newbuild construction of 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~~

~~(vi)~~

Newbuild construction of two MPSV's. We are currently in dispute with our customer pursuant to a 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)	At March 31, 2019, seven customers represented approximately 86% of our backlog, and at December 31, 2018, seven customers represented approximately 90% of our backlog. At March 31, 2019, backlog from the seven customers consisted of:


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


(ii)	Construction of four harbor tugs within our Shipyard Division (separate from above). The first of five vessels was completed and delivered in the first quarter 2019. We estimate completion of the remaining vessels in 2019 and 2020;


(iii)	Construction of two regional class research vessels within our Shipyard Division. We estimate completion of the vessels in 2021. Our customer exercised its option for the construction of a third vessel in April 2019, which is not included in backlog at March 31, 2019;


(iv)	Construction of one towing, salvage and rescue ship within our Shipyard Division. We estimate completion of the vessel in 2021. Our customer exercised its option for the construction of two additional vessels in April 2019, which are not included in backlog at March 31, 2019. Our customer continues to have options for the construction of five additional vessels;


(v)	Expansion of a 245-guest paddle wheel riverboat within our Fabrication Division. We estimate completion of the project in 2020;

(vi) Construction of two, forty vehicle ferries within our Fabrication Division. We estimate completion of the projects in 2020;

(vii) Construction of two MPSV's within our Shipyard Division. See footnote 1 above for further discussion.


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

Certain of our contracts contain options which grant our customer the right, ~~to our customer,~~ if exercised, for the construction of additional vessels at contracted prices. We do not include options in our backlog. ~~If all~~In April 2019, the customer for our two regional class research vessels exercised its option for the construction of a third research vessel (with a project value of approximately $70.0 million), which is not included in backlog at March 31, 2019 and will be reflected as a new project award in the second quarter 2019. In addition, in April 2019, the customer for our towing, salvage and rescue ship exercised its option for the construction of two additional vessels (with a total project value of approximately $129.0 million), which are not included in backlog at March 31, 2019. The customer continues to have options ~~under our current contracts were~~for the construction of five additional vessels, which if exercised, ~~by our customers,~~would increase our backlog ~~would increase~~ by approximately ~~$534.0~~$333.0 million. We have not received any additional commitments from our customer related to the exercise of these options, and we can provide no assurances that any further options will be exercised. We believe disclosing these options provides investors with useful information 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, and we can provide no assurances that any of these options will be~~ exercised.

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

~~Workforce~~

At September 30, 2018, we had 816 employees compared to 977 employees at December 31, 2017. Labor hours worked were 1.4 million during the nine months ended September 30, 2018, compared to 1.5 million for the nine months ended September 30, 2017. The decrease in labor hours worked is primarily within our Fabrication Division due to completion of complex modules for a new petrochemical facility with no immediate replacement backlog for our Fabrication Division during the 2018 period, as well as the suspension of construction of two MPSVs within our Shipyard Division pending resolution of the dispute with our customer. See Note 8 to our Consolidated Financial Statements for further discussion of the dispute.This decrease was partially offset by improved demand within our Services Division.

Results of Operations

~~Three Months Ended September 30,~~Comparison of 2019 and 2018 ~~Compared to Three Months Ended September 30, 2017~~(in thousands, except for percentages):

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

Consolidated


	Three Months Ended September 30,						Increase (Decrease)				Three Months Ended March 31,						Favorable (Unfavorable) Change
	2018			2017			Amount			Percent	2019			2018			Amount			Percent
Revenue	$	49,712		$	49,884		$	(172	)	(0.3)%	$	67,605		$	57,290		$	10,315		18.0%
Cost of revenue	52,924			50,378			2,546			5.1%	67,052			56,611			(10,441		)	(18.4)%
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%
Gross profit											553			679			(126		)	(18.6)%
Gross profit percentage											0.8		%	1.2		%
General and administrative expense											3,834			4,709			875			18.6%
Asset impairments and (gain) loss on assets held for sale, net											(70		)	750			820			109.3%
Other (income) expense, net											71			310			239			77.1%
Operating loss	(10,884		)	(4,864		)	(6,020		)	(123.8)%	(3,282		)	(5,090		)	1,808			35.5%
Interest income (expense), net	72			(45		)	117			260.0%	262			(147		)	409			278.2%
Other income, net	140			38			102			268.4%
Net loss before income taxes	(10,672		)	(4,871		)	(5,801		)	(119.1)%	(3,020		)	(5,237		)	2,217			42.3%
Income tax expense (benefit)	277			(1,761		)	2,038			115.7%
Income tax (expense) benefit											(22		)	(59		)	37			62.7%
Net loss	$	(10,949	)	$	(3,110	)	$	(7,839	)	(252.1)%	$	(3,042	)	$	(5,296	)	$	2,254		42.6%

Revenue - Revenue for ~~the three months ended September 30,~~2019 and 2018 ~~and 2017,~~ was ~~$49.7~~$67.6 million and ~~$49.9~~$57.3 million, respectively, representing ~~a decrease~~an increase of ~~0.3%~~18.0%. ~~Revenue for the 2018 period approximated revenue for the 2017 period~~The increase was primarily due to ~~lower revenue for our Fabrication Division of $16.0 million attributable to~~ the ~~completion and delivery of four modules for a petrochemical facility in the second quarter 2018, which was substantially offset by:~~net impact of:

~~A $5.0~~Increased revenue of $18.0 million ~~increase in revenue within our Services Division due to additional demand~~ for ~~onshore and offshore oil and gas service related projects; and~~

~~A $9.4 million net increase in revenue within~~ our Shipyard Division, primarily due to ~~additional~~ progress on ~~the construction of ten harbor tug~~our two regional class research vessels, one towing, salvage and rescue ship, an ice-breaker tug ~~that was not under construction during the third quarter 2017,~~and our harbor tug projects, offset partially by ~~lower~~the prior period including revenue ~~from~~on an OSV project that was completed during 2018 and revenue on our two MPSV contracts that were suspended during the first quarter ~~2018.~~ 2018; offset partially by,

Decreased revenue for our Fabrication Division of $4.7 million, primarily due to the completion of modules for a petrochemical facility during the second quarter 2018, offset partially by revenue for our paddle wheel riverboat project which was not under construction in the prior period; and

Decreased revenue for our Services Division of $2.3 million, primarily due to the timing of new project awards.

See Note ~~8 to~~5 of our ~~Consolidated~~ Financial Statements for further discussion of ~~the~~our MPSV contracts.

Gross ~~loss~~Profit - Gross ~~loss~~profit for ~~the three months ended September 30,~~2019 and 2018 ~~and 2017,~~ was ~~$3.2~~$0.6 million ~~(6.5%~~(0.8% of revenue) and ~~$0.5~~$0.7 million ~~(1.0%~~(1.2% of revenue), respectively. ~~The gross loss during~~Gross profit for 2019 was negatively impacted by the ~~2018 period was primarily due to~~ under recovery of ~~our~~ overhead costs ~~(including holding costs for~~across our ~~Texas North Yard of $0.7 million) and the impact of lower margin backlog within our Shipyard Division related to previous project awards sold during a period of competitive pricing.~~divisions. The ~~increase~~decrease in gross ~~loss~~profit for 2019 relative to the prior period was primarily due to ~~a higher gross loss~~reduced recoveries of overhead costs for our Fabrication ~~Division of $5.3 million related to decreased fabrication revenue,~~and Services Divisions, 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 of $1.3 million due to increased~~by higher revenue and a higher ~~recovery of our overhead costs.~~margin project mix.

General and administrative ~~expenses~~expense - General and administrative ~~expenses~~expense for ~~the three months ended September 30,~~2019 and 2018 ~~and 2017, were $7.7~~was $3.8 million ~~(15.4%~~(5.7% of revenue) and ~~$4.4~~$4.7 million ~~(8.8%~~(8.2% of revenue), respectively, representing ~~an increase~~a decrease of ~~75.6%~~18.6%. The ~~increase~~decrease was primarily due ~~to:~~to lower incentive plan costs.

~~Bad debt~~Asset impairments and (gain) loss on assets held for sale, net - Asset impairments and (gain) loss on assets held for sale, net for 2019 and 2018 was a gain of $70,000 and expense of ~~$2.8~~$0.8 million, ~~related~~respectively. The net expense for 2018 was primarily due to ~~a contracts receivable reserve recorded during the third quarter 2018 within~~an impairment of $0.8 million on assets held for sale in our Fabrication ~~Division as we received indications that collectability~~Division. See Note 3 of ~~the receivable was no longer probable;~~

~~Increased legal and advisory fees related to customer disputes;~~our Financial Statements for further discussion of impairments of our assets held for sale.

~~Costs~~ Other (income) expense, net - Other (income) expense, net for the 2019 and 2018 was net expense of $71,000 and $0.3 million, respectively. Other (income) expense, net generally represents (recoveries) provisions for bad debts, (gains) losses

associated with the ~~evaluation~~sale or disposition of ~~strategic alternatives~~property and ~~initiatives~~equipment other than assets held for sale, and (income) expense associated with certain nonrecurring items. The net expense for 2018 was primarily due to ~~diversify our business; and~~

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

~~These increases were offset partially by headcount reductions.~~net losses on the sales of equipment.

Interest income (expense), net - Interest income (expense), net for the ~~three months ended September 30,~~2019 and 2018, ~~and 2017,~~ was income of ~~$72,000~~$0.3 million and expense of ~~$45,000,~~$0.1 million, respectively. The net interest income for ~~the 2018 period~~2019 was primarily due to higher interest ~~earned from~~rates on higher cash equivalents and short-term ~~investments.~~

~~Other income, net -~~ ~~Other income, net for the three months ended September 30,~~investment balances during 2019, and reduced interest expense as we had borrowings under our Credit Agreement during 2018 ~~and 2017, was income of $0.1 million and $38,000, respectively. Other income, net for the period was primarily due to net gains on the sales of assets.~~but no borrowing during 2019.

Income tax ~~expense (benefit)~~(expense) benefit - Income tax ~~expense (benefit)~~(expense) benefit for ~~the three months ended September 30,~~2019 and 2018 ~~and 2017,~~ was expense of~~$0.3 million~~ $22,000 and ~~benefit of $1.8 million,~~$59,000, respectively. ~~Current~~Income tax expense represents state income taxes. No federal tax benefit was recorded for losses during ~~the~~2019 or 2018 ~~period~~ as a full valuation allowance was recorded against our ~~net 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.~~periods.

Operating Segments

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

Fabrication Division⁽¹⁾

Fabrication Three Months Ended September 30, Increase (Decrease)
2018 2017 Amount Percent
Revenue $ 2,311
$ 18,318
$ (16,007 ) (87.4)%
Gross profit (loss) (4,032 ) 1,250
(5,282 ) (422.6)%
Gross profit (loss) percentage (174.5 )% 6.8 %
General and administrative expenses 3,676
778
2,898
372.5%
Operating income (loss) (7,708 ) 472
(8,180 )



	Three Months Ended March 31,						Favorable (Unfavorable) Change
	2019			2018			Amount			Percent
Revenue	$	12,631		$	17,343		$	(4,712	)	(27.2)%
Gross loss	(772		)	(527		)	(245		)	(46.5)%
Gross loss percentage	(6.1		)%	(3.0		)%
General and administrative expense	767			1,041			274			26.3%
Asset impairments and (gain) loss on assets held for sale, net	(70		)	750			820			109.3%
Other (income) expense, net	71			188			117			62.2%
Operating loss	(1,540		)	(2,506		)	966			38.5%

___________

(1)

During the first quarter 2019, our former EPC Division was operationally combined with our Fabrication Division. Accordingly, results for our former EPC Division for the 2018 period have been combined with the Fabrication Division to conform to the presentation of our reportable segments for the 2019 period. See Note 7 of our Financial Statements for further discussion of our realigned operating divisions and related financial information.

Revenue - Revenue for ~~the three months ended September 30,~~2019 and 2018 ~~and 2017,~~ was ~~$2.3~~$12.6 million and ~~$18.3~~$17.3 million, respectively, representing a decrease of ~~87.4%~~27.2%. The decrease was primarily due to the completion ~~and delivery~~ of ~~four~~ modules for a petrochemical facility during the second quarter 2018, ~~with no significant projects under construction during the third quarter 2018. We were awarded a new project~~offset partially by revenue for ~~the expansion of a~~our 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.~~

~~Gross profit (loss) -~~ Gross profit (loss) for the three months ended September 30, 2018 and 2017, was a gross loss of $4.0 million (174.5% of revenue) and a gross profit of $1.3 million (6.8% 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 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, offset partially by a reduction in overhead costs.

~~General and administrative expenses~~ - General and administrative expenses for the three months ended September 30, 2018 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 increase was primarily due to bad debt expense of $2.8 million related to a contracts receivable reserve recorded during the third quarter 2018 as we received indications that collectability of the receivable was no longer probable and higher legal and advisory fees related to the pursuit of claims against a customer for disputed change orders for a project ~~completed prior to 2017, offset partially by headcount reductions.~~

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 September 30, 2018 and 2017, includes $15,000 and $0.5 million, respectively, of non-cash amortization of deferred revenue related to values assigned to contracts acquired in a previous acquisition.

~~Revenue -~~ Revenue for the three months ended September 30, 2018 and 2017, was $24.5 million and $15.1 million, respectively, representing an increase of 62.5%. The increase was primarily due to additional progress on the construction of ten harbor tug vessels and an ice-breaker tug thatwhich was not under construction ~~during~~in 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 further discussion of the MPSV contracts.prior period.

Gross loss - Gross loss for ~~the three months ended September 30,~~2019 and 2018 ~~and 2017,~~ was ~~$1.8~~$0.8 million ~~(7.2%~~(6.1% of revenue) and ~~$3.5~~$0.5 million ~~(23.2%~~(3.0% of revenue), ~~respectively, representing a decrease of 49.7%.~~respectively. The gross loss ~~during the 2018 period~~for 2019 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 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.

~~General and administrative expenses~~ - General and administrative expenses for the three months ended September 30, 2018 and 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 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 our onshore and offshore services.

~~Gross profit -~~ Gross profit for the three months ended September 30, 2018 and 2017, was $3.2 million (14.1% of revenue) and $1.9 million (10.8% of revenue), respectively, representing an increase of 66.9%. The increase was due to higher revenue and improvedunder recovery of overhead costs.

~~General and administrative expenses~~ ~~- General and administrative expenses for the three months ended September 30, 2018 and 2017, were $0.7 million (3.1% of revenue) and $0.7 million (3.9% of revenue), respectively, representing an~~ The increase ~~of 1.4%.~~

EPC Three Months Ended September 30, Increase (Decrease)
2018 2017 Amount Percent
Revenue $ 1,071
$ —
$ 1,071
100.0%
Gross loss (205 ) —
(205 ) (100.0)%
Gross loss percentage (19.1 )% n/a

General and administrative expenses 503
—
503
100.0%
Operating loss (708 ) —
(708 )

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

~~Gross loss -~~ ~~Gross~~in gross loss for ~~the three months ended September 30, 2018, was primarily due to costs incurred that are not yet fully recoverable under our 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 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 2017, was $0.4 million and $0.2 million, respectively, representing an increase of 164.5%. The increase was primarily due to 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 Services Division 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 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. These increases were partially offset by a decrease in revenue of $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~~2019 relative to the prior period was primarily due to ~~a decrease in gross loss within our Shipyard Division~~reduced recoveries of ~~$13.5 million~~overhead costs due to ~~increased~~lower 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.~~higher margin project mix.

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

~~Higher~~lower legal and advisory fees related to a customer ~~disputes;~~

~~Costs associated with~~dispute as the ~~evaluation of strategic alternatives~~costs are reflected within the Corporate Division in 2019, and ~~initiatives to diversify our business;~~

~~An increase in 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~~other cost reductions.

Asset impairments and (gain) loss on assets held for sale, net - Asset impairments and (gain) loss on assets held for ~~the nine months ended September 30,~~sale, net for 2019 and 2018 was a gain of $70,000 and ~~2017, were $1.4 million and $0.4~~expense of $0.8 million, respectively. The ~~impairments were recorded during the first half~~net expense for 2018 was primarily due to an impairment of 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$0.8 million on assets held for sale.

~~Interest~~Other (income) expense, net - ~~- Interest~~Other (income) expense, net for the ~~nine months ended September 30,~~2019 and 2018 ~~and 2017,~~ was expense of ~~$0.2 million~~$71,000 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,~~The net expense for ~~the~~ 2018 ~~period~~ was primarily due to ~~a gain~~net losses on the ~~sale~~sales 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.~~equipment.

~~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).

Shipyard

Fabrication Nine Months Ended September 30, Increase (Decrease)
2018 2017 Amount Percent
Revenue $ 28,171
$ 42,517
$ (14,346 ) (33.7)%
Gross profit (loss) (5,918 ) 216
(6,134 ) (2,839.8)%
Gross profit (loss) percentage (21.0 )% 0.5 %
General and administrative expenses 5,251
2,432
2,819
115.9%
Asset impairments 1,360
—
1,360
100.0%
Operating loss (12,529 ) (2,216 ) (10,313 )



	Three Months Ended March 31,						Favorable (Unfavorable) Change
	2019			2018			Amount		Percent
Revenue	$	36,587		$	18,565		$	18,022	97.1%
Gross loss	(280		)	(1,023		)	743		72.6%
Gross loss percentage	(0.8		)%	(5.5		)%
General and administrative expense	624			796			172		21.6%
Other (income) expense, net	—			160			160		100.0%
Operating loss	(904		)	(1,979		)	1,075		54.3%

Revenue - Revenue for ~~the nine months ended September 30,~~2019 and 2018, ~~and 2017,~~ was ~~$28.2~~$36.6 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 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 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 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~~$18.6 million, respectively, representing an increase of ~~28.7%~~97.1%. The increase was primarily due to additional progress on ~~the construction of ten harbor tug vessels,~~our two regional class research vessels, a towing, salvage and rescue ship, an ice-breaker tug ~~that was not under construction during~~and our harbor tug projects, offset partially by the prior period ~~partially offset by lower~~including revenue ~~from~~on an OSV project that was completed during 2018 and revenue on our two MPSV contracts that were suspended during the first quarter 2018.

Gross loss - Gross loss for ~~the nine months ended September 30,~~2019 and 2018 ~~and 2017,~~ was ~~$5.6~~$0.3 million ~~(8.3%~~(0.8% of revenue) and ~~$19.1~~$1.0 million ~~(36.8%~~(5.5% of revenue), respectively. The gross loss for 2019 was primarily due to the under recovery of overhead costs. The decrease in gross loss for 2019 relative to the prior period was primarily due to higher revenue and increased recoveries of overhead costs, offset partially by a lower margin project mix due to revenue at no gross profit for the harbor tug projects which are in a loss position.

General and administrative expense - General and administrative expense for 2019 and 2018 was $0.6 million (1.7% of revenue) and $0.8 million (4.3% 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%21.6%. The decrease was primarily due to ~~headcount~~lower incentive plan costs, lower legal and advisory fees related to a customer dispute as the costs are reflected within the Corporate Division in 2019, and other cost reductions.

~~Asset impairments~~Other (income) expense, net - ~~Asset impairments~~Other (income) expense, net for 2019 and 2018, was expense of $0 and $0.2 million, respectively. The net expense for 2018 was primarily due to net losses on the ~~nine months ended September 30, 2017 were $0.4 million. The impairments were recorded during the first half~~sales 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.~~equipment.

Services


Services	Nine Months Ended September 30,						Increase (Decrease)
										Three Months Ended March 31,						Favorable (Unfavorable) Change
	2018			2017			Amount		Percent	2019			2018			Amount			Percent
Revenue	$	66,692		$	43,758		$	22,934	52.4%	$	19,602		$	21,870		$	(2,268	)	(10.4)%
Gross profit	9,390			2,335			7,055		302.1%	1,741			2,614			(873		)	(33.4)%
Gross profit percentage	14.1		%	5.3		%				8.9		%	12.0		%
General and administrative expenses	2,201			2,008			193		9.6%
General and administrative expense										452			734			282			38.4%
Other (income) expense, net										—			(26		)	(26		)	(100.0)%
Operating income	7,189			327			6,862			1,289			1,906			(617		)	(32.4)%

Revenue - Revenue for ~~the nine months ended September 30,~~2019 and 2018 ~~and 2017,~~ was ~~$66.7~~$19.6 million and ~~$43.8~~$21.9 million, respectively, representing ~~and increase~~a decrease of ~~52.4%~~10.4%. The ~~increase~~decrease was primarily due to ~~an overall increase in activity resulting from higher demand for our onshore and offshore services.~~the timing of new project awards.

Gross profit - Gross profit for ~~the nine months ended September 30,~~2019 and 2018 ~~and 2017,~~ was ~~$9.4~~$1.7 million ~~(14.1%~~(8.9% of revenue) and ~~$2.3~~$2.6 million ~~(5.3%~~(12.0% of revenue), ~~respectively, representing an increase of 302.1%. The increase~~respectively. Gross profit for 2019 was ~~due to higher revenue and improved~~negatively impacted by the under recovery of overhead costs. The decrease in gross profit for 2019 relative to the prior period was due to lower revenue and reduced recoveries of overhead costs, offset partially by a higher margin project mix.

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 Consolidated Financial Statements for further discussion of our EPC Division 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


Corporate	Nine Months Ended September 30,						Increase (Decrease)
	2018			2017			Amount			Percent	Three Months Ended March 31,						Favorable (Unfavorable) Change
Revenue	$	—		$	—		$	—
											2019			2018			Amount			Percent
Revenue (eliminations)											$	(1,215	)	$	(488	)	$	(727	)	nm
Gross loss	(1,171		)	(500		)	(671		)	(134.2)%	(136		)	(385		)	249			64.7%
Gross loss percentage	n/a			n/a							n/a			n/a
General and administrative expenses	6,527			5,665			862			15.2%
General and administrative expense											1,991			2,138			147			6.9%
Other (income) expense, net											—			(12		)	(12		)	(100.0)%
Operating loss	(7,698		)	(6,165		)	(1,533		)		(2,127		)	(2,511		)	384			15.3%

Gross loss - Gross loss for ~~the nine months ended September 30,~~2019 and 2018 ~~and 2017,~~ was ~~$1.2~~$0.1 million and ~~$0.5~~$0.4 million, ~~respectively, representing an increase in gross loss of 134.2%.~~respectively. The ~~increase in gross loss~~decrease was primarily due to ~~higher~~lower costs related to ~~support~~supporting our ~~strategic initiatives and~~former EPC Division.

General and administrative ~~expenses~~expense - General and administrative ~~expenses~~expense for ~~the nine months ended September 30,~~2019 and 2018 ~~and 2017, were $6.5~~was $2.0 million ~~(4.1%~~(2.9% of consolidated revenue) and ~~$5.7~~$2.1 million ~~(4.2%~~(3.7% of consolidated revenue), respectively, representing ~~and increase~~a decrease of ~~15.2%~~6.9%. The ~~increase~~decrease was primarily due to lower incentive plan costs, offset partially by increased legal and advisory fees related to customer disputes as the costs were reflected within the operating divisions in 2018, and increased professional fees and other costs associated with the evaluation of strategic alternatives and initiatives to diversify and enhance our ~~business,~~business. The customer disputes relate primarily to the pursuit of claims against a customer for disputed change orders for a completed project, and ~~higher long-term incentive plan costs.~~our MPSV projects which are subject to a purported termination and for which construction has been suspended.

Liquidity and Capital Resources

Available Liquidity

Our primary sources of liquidity are our cash and cash equivalents, scheduled maturities of our short-term investments, ~~potential proceeds from the sale of assets held for sale,~~ and availability under our Credit Agreement (discussed below). At March 31, 2019, our cash, cash equivalents and short-term investments totaled $70.2 million, and our immediately available liquidity was as follows (in thousands):



Available Liquidity	Total
Cash and cash equivalents ⁽¹⁾	$	49,898
Short-term investments ⁽²⁾	20,341
Total cash, cash equivalents and short-term investments	70,239
Credit Agreement total capacity	40,000
Outstanding letters of credit	(2,917		)
Credit Agreement available capacity	37,083
Total available liquidity	$	107,322

___________

(1) Includes U.S. Treasuries of $30.5 million with original maturities of three months or less.

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

Working Capital

Our available liquidity is impacted by changes in our working capital ~~(excluding cash and cash equivalents and short-term investments)~~ and our capital expenditure requirements. At ~~September 30, 2018,~~March 31, 2019, our working capital was $102.0 million and included $70.2 million of cash, ~~and~~ cash equivalents and short-term investments ~~totaled $54.5 million~~ and ~~our working capital was $124.0 million. Working capital includes $9.5 million of short-term investments and $42.7~~$18.6 million of assets held for sale. Excluding cash, cash equivalents, short-term investments and assets held for sale, our working capital at March 31, 2019 totaled $13.1 million, and consisted of net contracts assets and contract liabilities (collectively, "Contracts in Progress") of $29.5 million; contracts receivable and retainage of $21.7 million; inventory, prepaid expenses and other assets of $8.1 million; and accounts payable, accrued expenses and other liabilities of $46.1 million. The components of our working capital (excluding cash, cash equivalents, short-term investments and assets held for sale) at March 31, 2019 and December 31, 2018, and changes in such amounts during the three months ended March 31, 2019, were as follows (in thousands):



	March 31,			December 31,
	2019			2018			Change⁽³⁾
Contract assets	$	38,707		$	29,982		$	(8,725	)
Contract liabilities⁽¹⁾	(9,234		)	(16,845		)	(7,611		)
Contracts in progress, net⁽²⁾	29,473			13,137			(16,336		)
Contracts receivable and retainage, net	21,658			22,505			847
Inventory, prepaid expenses and other assets	8,126			9,356			1,230
Accounts payable, accrued expenses and other liabilities	(46,116		)	(39,256		)	6,860
Total	$	13,141		$	5,742		$	(7,399	)

___________


(1)	Contract liabilities at March 31, 2019 and December 31, 2018, include accrued contract losses of $1.5 million and $2.4 million, respectively.


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

(3) Changes referenced in the cash flow activity section below may differ from the changes in this table due to non-cash reclassifications and due to certain changes in balance sheet accounts being reflected within other line items on the Statement of Cash Flows, including bad debt expense and (gain) loss on sale of fixed assets and other assets.

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

~~A summary~~Cash Flow Activity

Operating Activities - During the three months ended March 31, 2019, net cash used in operating activities was $8.5 million, compared to net cash used in operating activities of $14.1 million for the three months ended March 31, 2018. Cash used in operating activities during the 2019 period was primarily due to an operating loss for the period and the following:

Net gains from asset sales of $0.3 million, bad debt expense of $53,000, depreciation and amortization of $2.6 million, asset impairments of $0.3 million, and stock compensation expense $0.6 million;

Increase in contract assets of $8.7 million, primarily due to an increase in unbilled positions on two projects in our ~~immediately available liquidity at September 30, 2018, is as follows (in thousands):~~Shipyard Division;

Decrease in contract liabilities of $7.6 million, primarily due to the partial unwind of advance payments on two separate projects in our Shipyard and Fabrication Divisions;

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
Decrease in contracts receivable and retainage of $0.8 million, primarily due to the timing of billings and collections on our projects;

~~___________~~

~~(1) Includes U.S. Treasuries~~Decrease in prepaid expenses, inventory and other ~~investment-grade commercial paper which can be liquidated quickly~~assets of $1.1 million, primarily due to inventory and prepaid expenses;

Increase in ~~open markets.~~accounts payable, accrued expenses and other current liabilities of $6.0 million, primarily due to increased project activity and the timing of payments for projects in our Shipyard Division; and

Change in noncurrent assets and liabilities, net of $0.2 million.

~~Sales~~Investing Activities - During the three months ended March 31, 2019, net cash used in investing activities was $11.4 million, compared to net cash provided by investing activities of ~~Assets~~

~~As discussed~~$2.4 million for the three months ended March 31, 2018. Cash used in ~~our Overview, we have initiated several strategies~~investing activities during the 2019 period was primarily due to ~~monetize underutilized assets. Specifically, during~~ the

~~second quarter 2018, we completed~~ purchase of short-term investments of $20.0 million and capital expenditures of $0.3 million, offset partially by maturities of short-term investments of $8.5 million and proceeds from the sale of ~~our Texas South Yard for $55.0~~equipment of $0.4 million.

Financing Activities - During the three months ended March 31, 2019, net cash used in financing activities was $0.7 million, ~~less selling costs~~compared to net cash provided by financing activities of ~~$1.5~~$9.2 million for ~~total net proceeds during~~ the ~~nine-months~~three months ended ~~September 30, 2018 of approximately $53.5 million and a gain of approximately $3.9 million.~~March 31, 2018. Cash used in

~~In addition,~~financing activities for the 2019 period was primarily due to tax payments made 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 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 inspectionsbehalf 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 actively market the remaining Texas North Yard assets held for sale, which primarily consist of three 660-ton crawler cranes, a barge, a plate bending roll machine, and panel line equipment.employees from vested stock withholdings.

~~Line of~~ Credit Facilities

Credit Agreement - We have a $40.0 million ~~Credit Agreement~~revolving credit facility with Hancock Whitney Bank ("Credit Agreement") that can be used for borrowings or letters of credit. On ~~August 27, 2018,~~May 1, 2019, we ~~entered into a third amendment to~~amended our Credit Agreement ~~which extended~~to extend its maturity date from June 9, ~~2019~~2020 to June 9, ~~2020,~~2021 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 amendedamend certain financial covenants. Our quarterly financial covenants ~~during~~at March 31, 2019, and for the remaining term of the Credit Agreement after our amendment, are as follows:

Ratio of current assets to current liabilities at March 31, 2019 of not less than 1.25:~~1.00;~~1.00 (2.00:1.00 subsequent to the amendment);

Minimum tangible net worth at March 31, 2019 of at least the sum of $180.0 million ($170.0 million subsequent to the amendment), plus 100% of the net proceeds from any issuance of stock or other equity after deducting of any fees, commissions, expenses and other costs incurred in such offering; and

Ratio of funded debt to tangible net worth at March 31, 2019 of not more than 0.50:~~1.00.~~1.00 (no change subsequent to the amendment).

At ~~September 30, 2018,~~March 31, 2019, we had no outstanding borrowings under our Credit Agreement and ~~$2.5~~$2.9 million of outstanding letters of credit, providing ~~$37.5~~$37.1 million of available capacity. At ~~September 30, 2018,~~March 31, 2019, we were in compliance with all of our financial covenants, with a tangible net worth of ~~$203.2~~$196.1 million (as defined by the Credit Agreement) ~~and~~, a ratio of current assets to current liabilities of ~~3.37~~2.84 to 1.0 and a ratio of funded debt to tangible net worth of 0.01:1.0.

~~Cash Flow Activity~~Surety Bonds - We issue surety bonds in the ordinary course of business to support our projects. At March 31, 2019, we had $334.9 million of outstanding surety bonds. Although we believe there is sufficient bonding capacity available to us from one or more financial institutions, such capacity is uncommitted, and accordingly, we can provide no assurances that necessary bonding capacity will be available to support our future bonding requirements.

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:Liquidity Outlook

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 focus on maintaining liquidity and securing meaningful new ~~contract~~project 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 increase our backlog and improve and preserve our liquidity, including cost 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~~sale of underutilized assets. In addition, at March 31, 2019, we continue to have $18.6 million of assets held for sale; however, we can provide no assurances that we will successfully sell these assets or that we will recover their carrying value. The primary uses of our liquidity for the remainder ~~2018~~of 2019 and the foreseeable future are to ~~fund the~~fund:

The underutilization of our ~~fabrication~~ facilities inwithin our Fabrication Division, and to a lesser extent within our Shipyard ~~and Fabrication Divisions~~Division, until we secure and/or begin to execute sufficient backlog to fully recover our overhead ~~costs, working~~costs;

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

Accrued contract losses recorded at March 31, 2019;

Working capital requirements for our projects ~~capital expenditures~~(including the potential additional projects for the U.S. Navy if the aforementioned options are exercised); and ~~enhancements to our Shipyard facilities, the expansion of our EPC Division, corporate~~

Corporate administrative expenses and strategic initiatives. ~~Future capital expenditures will be highly dependent upon the amount and timing of future new project awards. Capital expenditures for the nine months ended September 30, 2018 were $2.4 million and we~~

We anticipate capital expenditures of ~~approximately $1.0~~$5.0 million to $7.0 million for the remainder of ~~2018.~~2019. Further investments in facilities may be required to win and execute potential offshore wind projects, which are not included in these estimates.

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

We believe that our cash, cash equivalents and short-term investments at ~~September 30, 2018,~~March 31, 2019, 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 debt service obligations or other funding requirements, for at least twelve months from the date of this Report. Our evaluation of the sufficiency of our cash and liquidity is primarily based on our financial forecast for ~~the remainder of 2018~~2019 and ~~2019,~~2020, which is impacted by our existing backlog and estimates of future new project awards. We can provide no assurances that our financial forecast will be achieved or that we will have sufficient cash or availability under our Credit Agreement to meet planned operating expenses and other unforeseen cash requirements. Accordingly, we may be required to obtain new or additional ~~bank financing,~~credit facilities, sell additional assets or conduct equity or debt offerings at a time when it is not beneficial to do so.

Contractual Obligations

There have been no material changes from the information included in our ~~2017~~2018 Annual Report. For more information on our contractual obligations, refer to Part II, Item 7 of our ~~2017~~2018 Annual Report.

Off-Balance Sheet Arrangements

There have been no material changes from the information included in our ~~2017~~2018 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~~three months ended ~~September 30, 2018.~~March 31, 2019. For more information on market risk, refer to Part II, Item 7A of our ~~2017~~2018 Annual 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 ~~quarter~~three months ended ~~September 30, 2018,~~March 31, 2019, 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.

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

On October 2, 2018, we filed a lawsuit against our customer to enforce our rights and remedies under the applicable construction contracts for two MPSVs. The lawsuit was filed in the Twenty-Second Judicial District Court for the Parish of St. Tammany, State of Louisiana and is styled Gulf Island Shipyards, LLC v. Hornbeck Offshore Services, LLC. The customer responded to our lawsuit by denying many of the allegations in the lawsuit and asserting a counterclaim against us. We filed a response to the counterclaim denying all the customer's claims. The customer subsequently filed a motion with the court seeking, among other things, to obtain possession of the two MPSVs. A hearing on that motion is currently scheduled for May 28, 2019. See Note ~~8 to~~5 of our ~~Consolidated~~ Financial Statements for further ~~information relating to~~discussion of 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~~2018 Annual 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 Form 10-Q filed with the SEC on April 23, 2009 (SEC File No. 001-34279).
3.2	Amended and Restated Bylaws of the Company, incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K filed with the SEC on November 6, 2018 (SEC File no. 001-34279).
10.1	~~Third~~Consent and Fourth Amendment to Credit Agreement dated ~~August 27, 2018.~~May 1, 2019. * *
~~10.2~~	~~Agreement of Sale between Berry Contracting, L.P. and Gulf Marine Fabricators, L.P. dated as of September 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. *

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.

*	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/ Westley S. Stockton
	Westley S. Stockton
	Executive Vice President, Chief Financial Officer, Secretary and Treasurer (Principal Financial Officer)

Date: ~~November 8, 2018~~May 7, 2019

- 3931 -




	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



		Three Months Ended September 30, 2017
		Fabrication		Shipyard		Services		EPC		Eliminations			Total
Contract Type
Fixed-price and unit-rate ⁽¹⁾		$	18,318	$	13,906	$	6,147	$	—	$	(1,159	)	$	37,212
T&M ⁽²⁾		—		1,168		11,504		—		—			12,672
Other		—		—		—		—		—			—
	Total	$	18,318	$	15,074	$	17,651	$	—	$	(1,159	)	$	49,884



		Nine Months Ended September 30, 2018
		Fabrication		Shipyard		Services		EPC		Eliminations			Total
Contract Type
Fixed-price and unit-rate ⁽¹⁾		$	28,171	$	62,116	$	35,197	$	—	$	(2,550	)	$	122,934
T&M ⁽²⁾		—		4,561		31,495		—		—			36,056
Other ⁽³⁾		—		—		—		2,026		—			2,026
	Total	$	28,171	$	66,677	$	66,692	$	2,026	$	(2,550	)	$	161,016



	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



	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



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%