Quarterly report pursuant to Section 13 or 15(d)

SHIPYARD TRANSACTION AND DISCONTINUED OPERATIONS

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SHIPYARD TRANSACTION AND DISCONTINUED OPERATIONS
3 Months Ended
Mar. 31, 2022
Discontinued Operations And Disposal Groups [Abstract]  
Shipyard Transaction and Discontinued Operations

3. SHIPYARD TRANSACTION AND DISCONTINUED OPERATIONS

Shipyard Transaction 

Transaction Summary On April 19, 2021 (“Transaction Date”), we entered into a definitive agreement and sold our Shipyard Division operating assets and certain construction contracts (“Shipyard Transaction”) to Bollinger Houma Shipyards, L.L.C. and Bollinger Shipyards Lockport, L.L.C. (collectively, “Bollinger”) for approximately $28.6 million (“Transaction Price”) ($26.1 million, net of transaction and other costs). We received $27.7 million of the Transaction Price during 2021 and the remaining $0.9 million (“Deferred Transaction Price”) will be received upon Bollinger’s collection of certain customer payments associated with the Divested Shipyard Contracts (defined below). The Deferred Transaction Price is anticipated to be received in the second quarter 2022, and has been reflected within prepaid expenses and other assets on our Balance Sheet at March 31, 2022. We also received $7.8 million during the second quarter 2021 associated with changes in working capital for the Divested Shipyard Contracts from December 31, 2020 through the Transaction Date (“Working Capital True-Up”).

Included in the Shipyard Transaction were the Shipyard Division’s:

 

Shipyard Facility and inventory and equipment in Houma, Louisiana;

 

Contracts and related obligations for our three research vessel projects and five towing, salvage and rescue ship projects (collectively, the “Divested Shipyard Contracts”);

 

Contract retentions, contract assets, contract liabilities and certain accounts payable associated with the Divested Shipyard Contracts as of the Transaction Date; and

 

Four drydocks (three of which previously supported our Shipyard Division operations in our Lake Charles Facility and Jennings Facility).

Bollinger offered employment to most of the employees of our Shipyard Division associated with the Divested Shipyard Contracts.

Excluded from the Shipyard Transaction were the Shipyard Division’s:

 

Accounts receivable, certain accounts payable and other accrued liabilities associated with the Divested Shipyard Contracts as of the Transaction Date;

 

Contracts and related obligations for our seventy-vehicle ferry project and two forty-vehicle ferry projects that are under construction (“Active Retained Shipyard Contracts”) and two multi-purpose supply vessel (“MPSV”) projects that are subject to dispute (collectively with the Active Retained Shipyard Contracts, the “Retained Shipyard Contracts”), together with the associated accounts receivable, accounts payable and other accrued liabilities;

 

Lake Charles Facility and Jennings Facility (which were closed in the fourth quarter 2020) and related lease obligations; and

 

Remaining assets and liabilities of the Shipyard Division.

We retained those employees of our Shipyard Division associated with the Active Retained Shipyard Contracts.

Impairment and Transaction Loss – During the first quarter 2021, events and changes in circumstances indicated that the carrying amount of our Shipyard Division’s long-lived assets may not be recoverable. These changes in circumstances were primarily attributable to a reassessment of our asset groups within our Shipyard Division as well as revisions to our probability assessment of net future cash flows of the applicable asset group based on the likelihood, that existed as of March 31, 2021, of the Shipyard Transaction occurring. Based on these assessments, we determined that an impairment of our Shipyard Division’s property, plant and equipment had occurred during the first quarter 2021. We measured the impairment by comparing the carrying amount of the applicable asset group at March 31, 2021 to an estimate of its fair value (which represents a Level 3 fair value measurement), resulting in an impairment charge of $22.8 million during three months ended March 31, 2021. We based our fair value estimate on the Transaction Price, inclusive of an estimate of the Working Capital True-Up, associated with the Shipyard Transaction. In addition, we incurred transaction costs of $0.7 million during the three months ended March 31, 2021 associated with the Shipyard Transaction.

Other At March 31, 2022 and December 31, 2021, the net liabilities on our Balance Sheet associated with the Retained Shipyard Contracts and other retained Shipyard Division operations totaled $6.2 million and $8.7 million, respectively. We are completing construction of the Active Retained Shipyard Contracts within our Houma Facilities and are winding down our Shipyard Division operations, which is anticipated to occur by the third quarter 2022.


 

Discontinued Operations

The Shipyard Transaction (which included, among other things, our owned Shipyard Facility, Divested Shipyard Contracts and drydocks), and the fourth quarter 2020 closures of our leased Lake Charles Facility and Jennings Facility, represented the disposal and closure of a substantial portion of our Shipyard Division operations and the culmination of a strategic shift that will have a major effect on our ongoing operations and financial results. Therefore, we determined the assets, liabilities and operations associated with the Shipyard Transaction, and associated with the previously closed Shipyard Division facilities, to be discontinued operations in the second quarter 2021. Accordingly, such operating results for the three months ended March 31, 2021 have been classified as discontinued operations on our Statement of Operations. We had no material operating results of discontinued operations for the three months ended March 31, 2022, and no material assets and liabilities of discontinued operations at March 31, 2022 or December 31, 2021. The assets, liabilities and operating results attributable to the Retained Shipyard Contracts and remaining assets and liabilities of our Shipyard Division operations that were excluded from the Shipyard Transaction, and are not associated with the previously closed facilities, represent our Shipyard Division and are classified as continuing operations on our Balance Sheet and Statement of Operations. Discontinued operations are presented separately from continuing operations on our Balance Sheet and Statement of Operations; however, they are not presented separately on our Statement of Cash Flows.

 

A summary of the operating results and cash flows from discontinued operations for the three months ended March 31, 2021, is as follows (in thousands):

 

 

Three Months Ended March 31, 2021

 

Revenue

 

$

35,166

 

Cost of revenue

 

 

27,506

 

Gross profit(1)

 

 

7,660

 

General and administrative expense

 

 

340

 

Impairments and (gain) loss on assets held for sale, net(2)

 

 

23,428

 

Other (income) expense, net

 

 

13

 

Operating loss

 

 

(16,121

)

Income tax (expense) benefit(3)

 

 

 

Loss from discontinued operations, net of taxes

 

$

(16,121

)

 

 

 

Three Months Ended March 31, 2021

 

Operating cash flows from discontinued operations

 

$

4,774

 

Investing cash flows from discontinued operations

 

$

(261

)

 

 

(1)

Gross profit was positively impacted by changes in estimated margins on projects of $8.4 million for our towing, salvage and rescue ship projects.

 

(2)

Includes impairments of $22.8 million and transaction and other costs of $ 0.7 million associated with the Shipyard Transaction (see discussion above).   

 

(3)

Income taxes attributable to discontinued operations were not material.