| REVENUE, CONTRACT ASSETS AND LIABILITIES AND OTHER CONTRACT MATTERS |
REVENUE, CONTRACT ASSETS AND LIABILITIES AND OTHER CONTRACT MATTERS
As discussed in Note 1, we recognize revenue for our contracts in accordance with Topic 606. Summarized below are required disclosures under Topic 606 and other relevant guidance.
Disaggregation of Revenue
The following tables summarize revenue for each of our operating segments, disaggregated by contract type, for the three and six months ended June 30, 2019 and 2018 (in thousands):
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Three Months Ended June 30, 2019 |
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Fabrication |
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Shipyard |
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Services |
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Eliminations |
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Total |
Contract Type |
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Fixed-price and unit-rate (1)
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$ |
22,415 |
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$ |
36,607 |
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$ |
12,668 |
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$ |
(3,232 |
) |
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$ |
68,458 |
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T&M (2)
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— |
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960 |
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8,187 |
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— |
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9,147 |
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Other |
— |
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— |
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3,210 |
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(359 |
) |
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2,851 |
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Total |
$ |
22,415 |
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$ |
37,567 |
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$ |
24,065 |
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$ |
(3,591 |
) |
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$ |
80,456 |
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Three Months Ended June 30, 2018 |
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Fabrication |
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Shipyard |
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Services |
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Eliminations |
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Total |
Contract Type |
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Fixed-price and unit-rate (1)
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$ |
9,472 |
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$ |
21,259 |
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$ |
10,576 |
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$ |
(1,042 |
) |
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$ |
40,265 |
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T&M (2)
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— |
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2,361 |
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10,486 |
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— |
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12,847 |
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Other |
— |
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— |
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1,143 |
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(241 |
) |
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902 |
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Total |
$ |
9,472 |
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$ |
23,620 |
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$ |
22,205 |
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$ |
(1,283 |
) |
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$ |
54,014 |
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Six Months Ended June 30, 2019 |
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Fabrication |
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Shipyard |
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Services |
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Eliminations |
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Total |
Contract Type |
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Fixed-price and unit-rate (1)
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$ |
35,046 |
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$ |
70,233 |
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$ |
18,899 |
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$ |
(3,846 |
) |
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$ |
120,332 |
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T&M (2)
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— |
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3,921 |
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18,809 |
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— |
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22,730 |
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Other |
— |
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— |
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5,959 |
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(960 |
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4,999 |
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Total |
$ |
35,046 |
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$ |
74,154 |
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$ |
43,667 |
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$ |
(4,806 |
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$ |
148,061 |
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Six Months Ended June 30, 2018 |
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Fabrication |
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Shipyard |
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Services |
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Eliminations |
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Total |
Contract Type |
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Fixed-price and unit-rate (1)
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$ |
26,815 |
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$ |
38,481 |
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$ |
20,866 |
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$ |
(1,495 |
) |
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$ |
84,667 |
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T&M (2)
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— |
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3,704 |
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21,071 |
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— |
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24,775 |
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Other |
— |
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— |
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2,138 |
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(276 |
) |
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1,862 |
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Total |
$ |
26,815 |
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$ |
42,185 |
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$ |
44,075 |
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$ |
(1,771 |
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$ |
111,304 |
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____________
(1) Revenue is recognized as the contract is progressed over time.
(2) Revenue is recognized at contracted rates when the work is performed and costs are incurred.
Future Performance Obligations Required Under Contracts
A summary of our remaining performance obligations by operating segment at June 30, 2019, is as follows (in thousands).
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Segment |
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Performance Obligations |
Fabrication |
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$ |
53,496 |
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Shipyard (1)
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388,239 |
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Services |
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12,787 |
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Total |
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$ |
454,522 |
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_____________
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(1) |
Amount excludes approximately $21.9 million of remaining performance obligations related to contracts for the construction of two MPSVs that are subject to dispute pursuant to a termination notice from our customer. See Note 5 for further discussion of these contracts.
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We expect to recognize revenue for our remaining performance obligations at June 30, 2019, in the following periods (in thousands):
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Year |
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Performance Obligations |
Remainder of 2019 |
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$ |
146,150 |
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2020 |
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205,651 |
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2021 |
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96,481 |
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Thereafter |
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6,240 |
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Total |
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$ |
454,522 |
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Contracts Assets and Liabilities
Revenue recognition and customer invoicing for our fixed-price and unit-rate contracts may occur at different times. Revenue recognition is based upon our estimated percentage-of-completion as discussed in Note 1; however, customer invoicing is generally dependent upon predetermined billing terms, which could provide for customer payments in advance of performing the work, milestone billings based on the completion of certain phases of the work, or billings when services are provided. Revenue recognized in excess of amounts billed is reflected as contract assets on our Balance Sheet. Amounts billed in excess of revenue recognized, and accrued contract losses, are reflected as contract liabilities on our Balance Sheet. Contract assets and contract liabilities included in our Balance Sheet at June 30, 2019 and December 31, 2018, are as follows (in thousands):
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June 30, |
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December 31, |
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2019 |
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2018 |
Contract assets |
$ |
51,334 |
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$ |
29,982 |
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Contract liabilities (1), (2), (3)
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(13,823 |
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(16,845 |
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Contracts in progress, net |
$ |
37,511 |
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$ |
13,137 |
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______________
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(1) |
The decrease in contract liabilities compared to December 31, 2018, was primarily due to the unwind of advance payments on a project in our Fabrication Division, offset partially be an increase in advance payments on two projects in our Shipyard Division.
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(2) |
Revenue recognized during the three months ended June 30, 2019 and 2018 related to amounts included in our contract liabilities balance at March 31, 2019 and 2018, was $7.6 million and $4.1 million respectively. Revenue recognized during the six months ended June 30, 2019 and 2018 related to amounts included in our contract liabilities balance at December 31, 2018 and 2017, was $13.9 million and $4.9 million, respectively.
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(3) |
Contract liabilities at June 30, 2019 and December 31, 2018, includes accrued contract losses of $2.0 million and $2.4 million, respectively. See "Project Changes in Estimates" below for further discussion of our accrued contract losses.
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Allowance for Doubtful Accounts
Our provision for bad debts for the six months ended June 30, 2019 and 2018 was $0.1 million and $8,000, respectively, and is included in other (income) expense, net on our Statement of Operations. Our allowance for doubtful accounts at June 30, 2019 and December 31, 2018 was $0.1 million and $0.4 million, respectively.
Variable Consideration
For the three and six months ended June 30, 2019 and 2018, we had no material amounts in revenue related to unapproved change orders, claims, or incentives. However, at June 30, 2019 and December 31, 2018, certain projects in our Shipyard Division reflected a reduction to our estimated contract price for liquidated damages of $11.3 million and $11.2 million, respectively, of which $11.2 million was recorded during 2017.
Changes in Project Estimates and Other Project Matters
Changes in Project Estimates - For the three and six months ended June 30, 2019, significant changes in estimated margins on projects resulted in an increase in our operating loss of $2.3 million and $2.0 million, respectively. The changes in estimates were associated with our harbor tug projects and ice-breaker tug project.
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• |
The changes in estimates for the harbor tug projects resulted in an increase in our operating loss of $1.4 million and $1.2 million for the three and six months ended June 30, 2019, respectively. The changes in estimates were the result of increased forecast costs, primarily associated with the impact of limitations in craft labor availability and the required use of contract labor in lieu of direct hire labor, resulting in lower than anticipated craft labor productivity and extensions of schedule for the projects. The revised forecasts incorporate actual results obtained from the completion of the third and fourth harbor tugs in the second quarter 2019 and progress achieved on the remaining six harbor tugs, which are scheduled to be completed at various dates ranging from the third quarter 2019 through the fourth quarter 2020. Our forecasts anticipate improved craft labor productivity with the completion of each subsequent vessel. The projects were in a loss position at June 30, 2019 and our reserve for estimated losses on the projects was $1.6 million. If future craft labor productivity differs from our current estimates, we are unable to achieve our progress estimates, our schedules are further extended or the projects incur schedule liquidated damages, the projects would experience further losses.
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• |
The changes in estimates for the ice-breaker tug project resulted in an increase in our operating loss of $0.9 million and $0.8 million for the three and six months ended June 30, 2019, respectively. The changes in estimates were the result of increased forecast costs, primarily associated with the impact of incomplete and deficient subcontracted production engineering, resulting in construction rework and disruption, lower than anticipated craft labor productivity and an extension of schedule for the project. The project was in a loss position at June 30, 2019 and our reserve for estimated losses on the project was $0.1 million. If future craft labor productivity differs from our current estimates, we are unable to achieve our progress estimates, or our schedule is further extended, the project would experience further losses.
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For the three and six months ended June 30, 2018, individual projects with significant changes in estimated margins did not have a material net impact on our loss from operations.
Other Project Matters - Certain imported materials used, or forecast to be used, for our projects are currently subject to existing, new or increased tariffs or duties. We believe such amounts, if incurred, are recoverable from our customers under the contractual provisions of our contracts; however, we can provide no assurances that we will successfully recover such amounts.
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