ASSETS HELF FOR SALE |
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| Disposal Group, Not Discontinued Operation, Disposal Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ASSETS HELD FOR SALE |
ASSETS HELD FOR SALE
South Texas Properties:
On February 23, 2017, our Board of Directors approved management's recommendation to place our South Texas Properties and related equipment located in Aransas Pass and Ingleside, Texas, up for sale. Our South Yard in Ingleside, Texas, is located on the northwest corner of the intersection of the U.S. Intracoastal Waterway and the Corpus Christi Ship Channel. The 45-foot deep Corpus Christi Ship Channel provides direct and unrestricted access to the GOM. Our North Yard in Aransas Pass, Texas, is located along the U.S. Intracoastal Waterway and is approximately three miles north of the Corpus Christi Ship Channel. Our net book value of property, plant and equipment for these assets was $102.7 million at December 31, 2017. We measure and record assets held for sale at the lower of their carrying amount or fair value less cost to sell.
These properties are underutilized and represent excess capacity within our Fabrication Division. We have ceased all fabrication activities at these locations and re-allocated any remaining backlog and workforce to our Houma fabrication operations as necessary.
On August 25, 2017, our South Texas Properties and related equipment were impacted by Hurricane Harvey, which made landfall as a Category 4 hurricane. As a result, we suffered damages to our buildings and equipment at our South Texas Properties. Through December 31, 2017, we have incurred approximately $1.3 million in clean-up, inspection and repair related costs. We maintain coverage on these assets up to a maximum of $25.0 million, subject to a 3.0% deductible with a minimum deductible of $500,000. One building at our South Yard and one building at our North Yard were determined to be total losses. As a result we expensed the remaining net book value of $1.5 million related to these buildings and recorded a corresponding insurance recovery of $1.5 million fully offsetting the loss. We are working diligently with our insurance agents and adjusters to finalize our estimate of the damage; however, it may be several months, or even longer, before we can finalize our assessment and receive final payment from our insurance underwriters. Our insurance underwriters have made an initial payment of $6.0 million, and we have recorded a liability for future repairs of $3.3 million which is included in accrued expenses and other liabilities on our balance sheet at December 31, 2017. Our initial estimate of the claim due to us approximates $21.5 million; however, our insurance carrier has not approved these amounts. Based upon our initial assessment of the damages and insurance coverage, management believes that there is no basis to record a net loss at this time and that insurance proceeds will at a minimum be sufficient to reimburse us for any loss of value and repair costs. Our final assessment of the loss incurred to our South Texas Properties and related equipment as well as the amount of insurance proceeds we will receive could be more or less than our initial estimate when the claim is ultimately settled and such differences could be material.
On December 20, 2017, we granted an exclusive option to a third party for the purchase of our South Yard which consists of approximately 212 acres for a purchase price of $55 million. This option runs through April 25, 2018, which may be extended through May 25, 2018, if proper written notice and additional earnest monies are provided in accordance with the agreement. The terms of the agreement are subject to normal and customary conditions, including the third party's right to conduct inspections of the property related to confirmation of title, surveys, environmental conditions, easements and access rights. In consideration for the option to purchase the South Yard, the third party deposited $750,000 of earnest money on January 3, 2018, which is nonrefundable in the event the third party cancels the agreement.
As a result of the decision to place our South Texas Properties up for sale, we have and will continue to incur costs associated with maintaining these facilities. These costs include insurance, general maintenance of the properties in their current state and property taxes which will be expensed as incurred. We do not expect the sale of these assets to impact our ability to operate our Fabrication Division. Our South Texas Properties held for sale do not qualify for discontinued operations presentation.
Prospect Shipyard Assets:
We formerly leased a 35-acre complex 26 miles from the GOM in Houma, Louisiana that was acquired in the LEEVAC Transaction as further discussed in Note 11 "LEEVAC Transaction". We terminated the lease on December 31, 2017, with the owner of the property (currently a senior vice president within the Company and the former chief executive officer of LEEVAC Shipyards, LLC). During the first quarter of 2017, management placed the assets at this facility up for sale, and we recorded an impairment of $389,000 related to assets based upon their estimated sale price. During the second quarter of 2017, we sold two drydocks from our Prospect Shipyard for proceeds of $2.0 million and recorded a loss on sale of $259,000. Prior to terminating the lease, we moved the significant assets, which primarily consist of a 2,500-ton drydock to our Houma Shipyard and evaluated the remaining assets for impairment. Based upon our evaluation of the remaining fair value less the costs to sell, we recorded additional impairment of $600,000. The remaining $1.9 million, primarily represents the estimated fair value of the drydock. We do not expect the sale of these assets to impact our ability to service our shipyard customers. Our Prospect Shipyard assets held for sale do not qualify for discontinued operations presentation.
A summary of the significant assets included in assets held for sale as of December 31, 2017, at our South Texas Properties and our Prospect Shipyard is as follows (in thousands):
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