| REVENUE, CONTRACT ASSETS AND LIABILITIES AND OTHER CONTRACT MATTERS |
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2.
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REVENUE, CONTRACT ASSETS AND LIABILITIES AND OTHER CONTRACT MATTERS
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As discussed in Note 1, we recognize revenue from 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, 2021 and 2020 (in thousands):
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Three Months Ended June 30, 2021
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Contract Type
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F&S
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Shipyard
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Eliminations
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Total
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Fixed-price and unit-rate(1)
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$
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11,041
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$
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3,129
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$
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—
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$
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14,170
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T&M(2)
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9,254
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—
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—
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9,254
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Other
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932
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—
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(88
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)
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844
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Total
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$
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21,227
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$
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3,129
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$
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(88
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)
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$
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24,268
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Six Months Ended June 30, 2021
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Contract Type
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F&S
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Shipyard
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Eliminations
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Total
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Fixed-price and unit-rate(1)
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$
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22,198
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$
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8,259
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$
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(8
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)
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$
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30,449
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T&M(2)
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15,523
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—
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—
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15,523
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Other
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2,566
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—
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(485
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)
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2,081
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Total
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$
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40,287
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$
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8,259
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$
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(493
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$
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48,053
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Three Months Ended June 30, 2020
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Contract Type
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F&S
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Shipyard
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Eliminations
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Total
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Fixed-price and unit-rate(1)
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$
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20,853
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$
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5,902
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$
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(239
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)
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$
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26,516
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T&M(2)
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4,455
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—
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—
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4,455
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Other
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1,298
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—
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(281
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)
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1,017
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Total
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$
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26,606
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$
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5,902
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$
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(520
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$
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31,988
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Six Months Ended June 30, 2020
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Contract Type
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F&S
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Shipyard
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Eliminations
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Total
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Fixed-price and unit-rate(1)
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$
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45,410
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$
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10,585
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$
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(324
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)
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$
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55,671
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T&M(2)
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11,380
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—
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—
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11,380
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Other
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3,259
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—
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(643
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)
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2,616
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Total
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$
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60,049
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$
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10,585
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$
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(967
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)
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$
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69,667
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(1)
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Revenue is recognized as the contract progresses over time.
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(2)
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Revenue is recognized at contracted rates when the work is performed and costs are incurred.
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Future Performance Obligations Required Under Contracts
The following table summarizes our remaining performance obligations by operating segment at June 30, 2021 (in thousands):
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Segment
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Performance
Obligations
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Fabrication & Services
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$
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9,326
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Shipyard
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14,588
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Total(1)
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$
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23,914
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(1)
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We expect to recognize revenue of approximately $17.6 million and $6.3 million for the remainder of 2021 and thereafter, respectively, associated with our remaining performance obligations at June 30, 2021.
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Contracts Assets and Liabilities
Revenue recognition and customer invoicing for our fixed-price and unit-rate contracts may occur at different times. Revenue recognition is based upon our estimated percentage-of-completion as discussed in Note 1; however, customer invoicing is generally dependent upon contractual billing terms, which could provide for customer payments in advance of performing the work, milestone billings based on the completion of certain phases of the work, or when services are provided. Revenue recognized in excess of amounts billed is reflected as contract assets on our Balance Sheet. Amounts billed in excess of revenue recognized, and accrued contract losses, are reflected as contract liabilities on our Balance Sheet. Information with respect to contracts that were incomplete at June 30, 2021 and December 31, 2020 is as follows (in thousands):
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June 30,
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December 31,
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2021
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2020
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Contract assets(1)
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$
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2,371
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$
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5,098
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Contract liabilities(2), (3), (4)
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(8,206
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)
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(10,262
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)
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Contracts in progress, net
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$
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(5,835
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)
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$
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(5,164
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)
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(1)
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The decrease in contract assets compared to December 31, 2020, was primarily due to decreased unbilled positions for various projects within our Fabrication & Services Division and our seventy-vehicle ferry project within our Shipyard Division.
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(2)
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The decrease in contract liabilities compared to December 31, 2020, was primarily due to a decrease in accrued contract losses and the unwind of advance payments on our two forty-vehicle ferry projects within our Shipyard Division.
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(3)
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Revenue recognized during the three months ended June 30, 2021 and 2020, related to amounts included in our contract liabilities balance at March 31, 2021 and 2020, was $2.8 million and $4.0 million, respectively. Revenue recognized during the six months ended June 30, 2021 and 2020, related to amounts included in our contract liabilities balance at December 31, 2020 and 2019, was $2.8 million and $8.6 million, respectively.
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(4)
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Contract liabilities at June 30, 2021 and December 31, 2020, includes accrued contract losses of $4.8 million and $5.4 million, respectively. See “Changes in Project Estimates” below for further discussion of our accrued contract losses.
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Allowance for Doubtful Accounts
Our provision for bad debts is included in other (income) expense, net on our Statement of Operations. Our provision for bad debts for the three and six months ended June 30, 2021 and 2020, and our allowance for doubtful accounts at June 30, 2021 and December 31, 2020, were not significant.
Variable Consideration
For the three and six months ended June 30, 2021 and 2020, we had no material amounts in revenue related to unapproved change orders, claims or incentives. However, at June 30, 2021 and December 31, 2020, certain projects reflected a reduction to our estimated contract price for liquidated damages of $0.9 million and $0.6 million, respectively.
Changes in Project Estimates
We determine the impact of changes in estimated margins on projects for a given period by calculating the amount of revenue recognized in the period that would have been recognized in a prior period had such estimated margins been forecasted in the prior period. The total impact of changes in estimated margins for a project as disclosed on a quarterly basis may be different from the applicable year-to-date impact due to the application of the percentage-of-completion method and the changing progress of the project at each period end. Such impacts may also be different when a project is commenced and completed within the applicable year-to-date period but spans multiple quarters.
Changes in Estimates for 2021 – For the three and six months ended June 30, 2021, significant changes in estimated margins on projects positively impacted operating results for our Fabrication & Services Division by $1.9 million and $2.0 million, respectively, and negatively impacted operating results for our Shipyard Division by $0.9 million and $1.7 million, respectively. The changes in estimates were associated with the following:
Fabrication & Services Division
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•
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Offshore Modules Project, Material Supply Project and Subsea Structures Project – Positive impact for the three and six months ended June 30, 2021 of $1.9 million and $2.0 million, respectively, for our offshore modules project, material supply project and a subsea structures project, resulting from increased contract price and reduced forecast costs, primarily associated with reduced contingency associated with schedule-related liquidated damages and reduced craft labor and subcontracted services costs. The impacts were primarily due to better than anticipated labor productivity and progress on the projects and favorable resolution of change orders with the customers. At June 30, 2021, the offshore modules project was complete and the material supply project and subsea structures project were completed in July 2021.
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Shipyard Division
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•
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Seventy-Vehicle Ferry Project – Negative impact for the three and six months ended June 30, 2021 of $0.9 million and $1.7 million, respectively, for our seventy-vehicle ferry project, resulting from increased forecast costs and forecast liquidated damages, primarily associated with extensions of schedule and associated duration related costs, including supervision and subcontracted services costs. The impacts were primarily due to customer-directed changes, higher forecast costs to launch the vessel, and engineering delays and lower than anticipated progress on the project, due in part to COVID-19. We have submitted a claim to our customer to extend our project schedule and recover the increased forecast costs associated with the impacts of the customer-directed changes and COVID-19; however, we can provide no assurances that we will be successful recovering these costs. Our forecast at June 30, 2021 does not reflect potential future benefits, if any, from the favorable resolution of the claim. At June 30, 2021, the vessel was approximately 73% complete and is forecast to be completed in the second quarter 2022. The project was in a loss position at June 30, 2021 and our reserve for estimated losses was $0.8 million. If future craft labor productivity and subcontractor costs differ from our current estimates, piping or other construction activities are determined to be more complex than anticipated upon finalization of production engineering, we are unable to achieve our progress estimates, our schedule is further extended or we incur additional schedule liquidated damages, the project would experience further losses.
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Changes in Estimates for 2020 – For the three and six months ended June 30, 2020, significant changes in estimated margins on projects positively impacted operating results for our Fabrication & Services Division by $1.0 million and $1.9 million, respectively, and for the six months ended June 30, 2020, negatively impacted operating results for our Shipyard Division by $1.2 million. The changes in estimates were associated with the following:
Fabrication & Services Division
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•
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Paddle Wheel Riverboat Project and Subsea Components Project – Positive impact for the three and six months ended June 30, 2020 of $0.5 million and $1.4 million, respectively, for our paddle wheel riverboat project and subsea components project, resulting from reduced forecast costs and increased contract price, primarily associated with reduced craft labor and subcontracted services costs and change orders. The impacts were primarily due to better than anticipated labor productivity and favorable resolution of change orders with subcontractors and the customers. At June 30, 2021, the projects were both complete.
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•
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Jacket and Deck Project – Positive impact for both the three and six months ended June 30, 2020 of $0.5 million for our jacket and deck project, resulting from increased contract price, primarily associated with project incentives earned during the second quarter 2020. At June 30, 2021, the project was complete.
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Shipyard Division
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•
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Forty-Vehicle Ferry Projects – Negative impact for the six months ended June 30, 2020 of $1.2 million for our two forty-vehicle ferry projects, resulting from increased forecast costs and forecast liquidated damages, primarily associated with increased craft labor and material costs and extensions of schedule. The impacts occurred during the first quarter 2020 and were primarily due to anticipated rework for the first vessel, including potential reconstruction of previously completed portions of the vessel resulting from the determination that portions of the vessel structure were outside of acceptable tolerance levels. The projects had no significant changes in estimated margins in the second quarter 2020.
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