| LEEVAC TRANSACTION |
LEEVAC TRANSACTION
On January 1, 2016, we acquired substantially all of the assets and assumed certain specified liabilities of LEEVAC Shipyards, L.L.C. and its affiliates (“LEEVAC”). The purchase price for the acquisition was $20.0 million, subject to a working capital adjustment whereby we received a dollar-for-dollar reduction for the assumption of certain net liabilities of LEEVAC and settlement payments received from sureties on certain ongoing fabrication projects that were assigned to us in the transaction. After taking into account these adjustments, we received approximately $1.6 million in cash at closing.
Included in our consolidated balance sheet as of June 30, 2016 are assets of $25.1 million and liabilities of $24.3 million related to the LEEVAC transaction. The results of LEEVAC are included in our consolidated statements operations for the three and six months ended June 30, 2016. Revenue and net income included in our results of operations and attributable to the assets and operations acquired in the LEEVAC transaction were $17.3 million and $1.5 million for the three months ended June 30, 2016 and $39.1 million and $751,000 for the six months ended June 30, 2016, respectively. Included in revenue and results of operations was recognition of $1.5 million and $2.7 million of deferred revenue for the three and six months ended June 30, 2016, respectively related to the values assigned to the contracts acquired in the LEEVAC transaction.
The facilities acquired in the LEEVAC transaction are leased and operated under lease and sublease agreements as follows:
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Jennings - Leased facilities from a third party for a 180 acre complex five miles east of Jennings, LA on the west bank of the Mermentau River approximately 25 miles north of the Intracoastal waterway. The Jennings complex includes over 100,000 square feet of covered fabrication area and 3,000 feet of water frontage with two launch ways. The lease, including exercisable renewal options, extends through January 2045.
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Lake Charles - Subleased facilities from a third party for a 10 acre complex 17 miles from the Gulf of Mexico on the Calcasieu River near Lake Charles, Louisiana. The Lake Charles complex includes 1,100 feet of bulkhead water frontage with a water depth of 40 feet located one mile from the Gulf Intracoastal Waterway and is located near multiple petrochemical plants. The sublease, including exercisable renewal options (subject to sublessor renewals), extends through July 2038.
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Houma - Leased facilities from the former owner of LEEVAC Shipyards, currently the Senior Vice President of our Shipyards division, for a 35 acre complex 26 miles from the Gulf of Mexico near Houma, Louisiana. Payment terms are approximately $67,000 per month. The lease expires on the later of December 31, 2016 or 90 days following the completion of the two vessels currently under construction at the facility, but no later than August 31, 2017. Upon expiration, we have the option to extend the lease at market rates.
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Strategically, the LEEVAC transaction expands our marine fabrication and repair and maintenance presence in the Gulf South market. We acquired approximately $119.1 million of new build construction backlog inclusive of approximately $7.1 million of purchase price fair value allocated to four, new build construction projects to be delivered in 2016 and 2017 for two customers. Additionally, we hired 380 employees representing substantially all of the former LEEVAC employees.
The tables below represents the total cash received as reported in our consolidated statements of cash flows and the corresponding preliminary fair values assigned to the assets and liabilities acquired from LEEVAC.
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Assets: |
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Accounts receivable |
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$ |
3,544 |
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Inventory |
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4,938 |
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Machinery and equipment |
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23,056 |
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Intangible assets (leasehold interests) |
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2,123 |
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Liabilities: |
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Accounts payable and accrued expenses |
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6,003 |
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Deferred revenue and below market contracts |
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29,246 |
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Net cash received upon the acquisition of LEEVAC |
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$ |
1,588 |
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Cash received upon acquisition of LEEVAC: |
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Seller payment for prepaid contracts (1)
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$ |
16,942 |
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Surety payments related to assigned contracts (2)
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7,125 |
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24,067 |
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Less: |
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Working capital assumed (3)
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2,479 |
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Net cash due to the Company at closing |
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1,588 |
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4,067 |
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Purchase price |
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$ |
20,000 |
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__________
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(1) |
Payment from sellers for customer payments received in advance of progress on contracts assigned to us concurrent with the closing of the LEEVAC transaction. |
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(2) |
Payments from sellers' surety in connection with the release of further obligations related to contracts assigned to us concurrent with the closing of the LEEVAC transaction. |
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(3) |
Amounts settled for working capital are subject to a working capital true up between us and LEEVAC. |
Pro Forma Results of Acquisitions
The table below presents our pro forma results of operations for the three and six months ended June 30, 2015 assuming that we acquired substantially all of the assets and certain specified liabilities of LEEVAC on January 1, 2015 (in thousands):
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Three Months Ended June 30, 2015 |
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Pro forma adjustments |
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Historical results |
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LEEVAC |
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Adj |
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Pro forma results |
Revenue |
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$ |
84,338 |
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$ |
24,375 |
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$ |
— |
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$ |
108,713 |
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Net income (loss) |
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$ |
1,357 |
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$ |
(2,166 |
) |
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$ |
860 |
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(1) |
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$ |
51 |
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Six Months Ended June 30, 2015 |
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Pro forma adjustments |
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Historical results |
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LEEVAC |
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Adj |
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Pro forma results |
Revenue |
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$ |
183,571 |
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$ |
49,093 |
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$ |
— |
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$ |
232,664 |
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Net income (loss) |
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$ |
1,440 |
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$ |
(6,574 |
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$ |
1,823 |
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(1) |
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$ |
(3,311 |
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(1) Adjustments to historical results are as follows:
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Three Months Ended June 30, 2015 |
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Six Months Ended June 30, 2015 |
Effect of purchase price depreciation |
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$ |
337 |
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$ |
537 |
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Elimination of interest expense |
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523 |
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1,286 |
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$ |
860 |
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$ |
1,823 |
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