Todd Shipyards (TOD)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended March 28, 2010

OR

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ____ to ____

Commission File Number 1-5109

Registrant's telephone number, including area code:

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes [ ] No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files ). Yes [ ] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of "accelerated filer", "large accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer [ ]; Accelerated Filer [X]; Non-Accelerated Filer [ ]; Smaller Reporting Company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

The aggregate market value of voting stock held by non-affiliates of the registrant was approximately $88.9 million as of October 1, 2009.

There were 5,775,691 shares of the corporation's $0.01 par value common stock outstanding at June 10, 2010.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement to be delivered to shareholders within 120 days after close of fiscal year are incorporated by reference into Part III of the Annual Report on Form 10-K.

Todd Shipyards Corporation ("we", "us", or "our") was organized in 1916 and has operated a shipyard in Seattle, Washington (the "Shipyard") since incorporation. We are incorporated under the laws of the State of Delaware and operate shipyards through our wholly owned subsidiaries, Todd Pacific Shipyards Corporation ("Todd Pacific") and Everett Shipyard, Inc. ("ESI"). Todd Pacific has historically been engaged in the repair/overhaul, conversion and construction of commercial and military ships. On March 31, 2008, our subsidiary Everett Ship Repair and Drydock, Inc. ("Everett") acquired the assets of ESI and subsequently changed its name to ESI. ESI is engaged in repair, overhaul, and conversion work of commercial and government owned vessels. We consider ourselves to operate under one segment.

Commercial repair and overhaul contracts are generally obtained by competitive bidding or awarded by negotiation. On jobs advertised for competitive bids, owners usually furnish specifications and plans that become the basis for an agreed upon contract. We usually contract commercial repair and overhaul jobs on a fixed-price or time and material basis. Examples of customers in the commercial ship repair category include fishing vessels, cargo shippers, tug and barge operators and cruise lines.

We are awarded the majority of our ship repair and overhaul work for the US Government ("Government") on an option basis under one of our cost-type contracts with the Navy and the Coast Guard. These contracts provide for reimbursement of costs, to the extent allocable and allowable under applicable Government regulations, and payment of an incentive or award fee based on our performance with respect to certain pre-established criteria. We also perform repair and overhaul work for the Navy, the Coast Guard and other Government entities on a fixed-price basis through a formal bidding process.

All of our ship repair and overhaul contracts contain customer payment terms that are determined by mutual agreement. Typically, we are reimbursed periodically through progress payments based on the achievement of certain agreed upon milestones. In some cases, the customer retains an agreed portion of the contract price during the warranty period. Some vessel owners contracting for repair, maintenance, or conversion work also require some form and amount of performance and payment bonding, particularly state agencies. Because of these requirements, we are bonded for certain projects in the cumulative amount of $34.8 million at March 28, 2010.

Although our major focus is on ship repair, overhaul and conversion, we selectively undertake new construction projects when we deem the risks are manageable and the opportunities are commensurate with the risks undertaken. For example, on December 1, 2008 WSF awarded us a $65.5 million firm fixed-price contract for the construction of one 64-Auto Ferry. Construction commenced in fiscal year 2009 and the ferry, currently under construction, is scheduled to be delivered during fiscal year 2011. Our wholly owned subsidiary, Everett, is a subcontractor on the project.

On October 13, 2009, WSF awarded us a $114.1 million contract for the construction of two additional 64-Auto Ferries. As part of this award, WSF has an option for the construction of a third additional vessel for $50.8 million, which they must exercise no later than May 31, 2011. The contract commenced upon receiving the Notice to Proceed from WSF on November 9, 2009. The contract contemplates delivery of the second vessel in the class 18 months after Notice to Proceed, and delivery of the third vessel nine months after the delivery date of the second.

In July 2007, we, as prime contractor, commenced negotiations with WSF for the terms and conditions of a contract to build up to four 144-Auto Ferries. We concluded those negotiations and executed the prime contract with WSF in December 2007. WSF issued the contract in two parts: Part A provides for the design of the ferries and Part B will dictate the terms of the actual construction of the ferries. Part A of the contract, which was awarded for $2.4 million, is performed by us and our primary subcontractor, Guido Perla & Associates of Seattle, Washington ("GPA"), who will provide ferry design services. We reached agreement on the terms and conditions of a subcontract with Martinac Shipbuilding of Tacoma, Washington in December 2007 to be a subcontractor to us for Part B of the contract. Once the design and cost estimate are complete, we are contractually obligated to negotiate a price and delivery schedule for Part B of the contract, covering the construction of the ferry, with WSF. The timetable for the contract execution of Part B is dependent upon the availability of funds from WSF. There are no assurances that we will reach agreement with WSF on a price for construction of the ferries, a mutually acceptable delivery schedule, or that the necessary funding will be available from the State of Washington to build any or all of the ferries.

In the fourth quarter of fiscal year 2010, we negotiated a change order to Part A of the contract with WSF for the execution of the detailed production design of the 144-Auto Ferries in the amount of $8.3 million. The change order was effective January 27, 2010 and the design work is scheduled to be completed by June 2011. We have subcontracted substantial production design services to GPA.

Opportunities for us to serve non-United States ship owners or operators are limited because shipyards in foreign countries are often subsidized by their governments and in some cases enjoy significantly lower labor costs. Subsidies can allow foreign shipyards to enter into production contracts at prices below their actual production costs.

We intend to continue capitalizing on the advantages of our geographic location and the skills of our experienced workforce as we compete for repair, maintenance, new construction, and overhaul opportunities.

In fiscal year 2010, we serviced approximately 84 customers, both as the prime contractor and as a subcontractor to the prime contractor, compared with 109 in 2009. Our three largest customers are the Navy, WSF and the Coast Guard. Our business with the Navy and the Coast Guard is typically done through multi-year cost-type and fixed-priced contracts. Our business with WSF is done with short duration repair contracts and new construction contracts for auto ferries. A loss of any of these significant customers could have an adverse effect upon our business.

The approximate distribution of our shipyard revenues for each of the last three fiscal years is summarized as follows:

Government revenue consists of revenue on only federal, state and local Government jobs for which we were the prime contractor and excludes revenue where we were the subcontractor. Revenues earned as a subcontractor are included in non-Government revenues. Work volumes and revenue are closely tied to the timing of availabilities for certain Navy and Coast Guard vessels covered by our long-term Government contracts. The increase from fiscal year 2009 to fiscal year 2010 in revenue from Government sources was primarily driven by increased work demand by Government customers for the vessel availabilities coinciding with our fiscal year 2010 and the construction of the 64-Auto Ferry for WSF. Revenue continues to be strongly influenced by the amount and timing of repair, maintenance and overhaul work awarded under the remaining Navy cost-type contracts (see Management's Discussion and Analysis of Financial Condition and Results of Operations (Item 7) - "Significant Revenue Contracts").

At March 28, 2010, our backlog consisted of approximately $144.9 million of ship repair, maintenance, new construction, and conversion work. This compares with backlogs of approximately $84.0 million and $12.0 million at March 29, 2009 and March 30, 2008, respectively. Our backlog is primarily attributable to new construction scheduled for completion during fiscal year 2011 and 2012. The increase in backlog from fiscal year 2009 to 2010 is due primarily to the fiscal year 2010 award of a $114.1 million contract to build two additional 64-Auto Ferries for WSF.

The principal materials we use in our Shipyards are steel and aluminum plates and shapes, pipe and fittings, paint and electrical cable and associated fittings. Management believes that each of these items can presently be obtained in the domestic market from a number of different suppliers. In addition, we maintain a small on-site inventory of various materials that are available for emergency ship repairs.

General information about us can be found at www.toddpacific.com. The information contained on or connected to our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered part of this or any other report filed by the Company with the SEC. Our Annual Reports on Form 10-K and our Quarterly Reports on Form 10-Q are available free of charge through our website as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC. Our SEC filings, including any amendments, and our Current Reports on Form 8-K may be obtained at the SEC's public reference room at 100 F Street N.E. Washington, DC 20549. Information on the operation of the public reference room may be obtained by calling the SEC at 1-800-SEC-0330.

The SEC also maintains a website at www.sec.gov that contains reports, proxy statements and other information regarding SEC issuers, including Todd Shipyards Corporation.

The number of people we employ varies considerably and depends primarily on the level of shipyard activity. Employment averaged approximately 800 during fiscal year 2010 and totaled approximately 800 employees on March 28, 2010.

In September 2008, we reached an agreement for a new collective bargaining agreement with the Puget Sound Metal Trades Council (the bargaining umbrella for all unions at Todd Pacific) which was subsequently ratified by the rank and file members at the Seattle shipyard. The five-year agreement, which was retroactive to August 1, 2008, will expire on July 31, 2013. The agreement provides for increases in the wages and fringe benefits at a rate of approximately 4.5% per year. The shipyard workers employed by ESI are represented by the Boilermakers and Carpenters Unions under a separate collective bargaining agreement that will expire July 31, 2010. During fiscal year 2010, an average of approximately 600 of our Shipyard employees were covered by these union contracts. At March 28, 2010, approximately 600 workers were employed under these contracts. We consider our relations with the various unions to be stable.

On March 31, 2008, our subsidiary, Everett, acquired the assets of Everett Shipyard, Inc., and Everett subsequently changed its name to ESI. ESI performs ship repair work for a range of government and commercial customers, including the Navy and WSF, in Everett, Washington.

The acquired assets include a 1,000 ton dry dock which allows ESI to compete in a broader market of marine repair and overhaul opportunities. ESI and Todd Pacific do not generally compete for the same contracts. ESI employs the same workforce as the previous owner and assumed the previous owner's collective bargaining agreements with the International Brotherhood of Boilermakers, Local 104 and the United Brotherhood of Carpenters, Local 1184.

We have an accrued liability of $10.9 million as of March 28, 2010 for environmental and bodily injury matters. As assessments of environmental matters and remediation activities progress, we review these liabilities regularly and adjust them to reflect additional technical, engineering and legal information that becomes available. Our estimate of environmental liabilities is affected by several uncertainties such as, but not limited to, the method and extent of remediation of contaminated sites, the percentage of material attributable to us at the sites relative to that attributable to other parties, and the financial capabilities of the other Potentially Responsible Parties ("PRP") at most sites. Our estimate of bodily injury liabilities is also affected as additional information becomes known regarding alleged damages from past exposure to asbestos at our facilities. We are covered under various insurance policies for some, but not all, potential environmental and bodily injury liabilities.

As of March 28, 2010, we recorded insurance receivables of $7.6 million, which mitigates a major portion of the accrued environmental and bodily injury liabilities.

For further information regarding our environmental and bodily injury matters see Legal Proceedings (Item 3), Management's Discussion and Analysis of Financial Condition and Results of Operations (Item 7) and Note 10 of the Notes to Consolidated Financial Statements (Item 8).

We are also subject to the federal Occupational Safety and Health Act ("OSHA") and similar state statutes.  We have an extensive health and safety program and employ a staff of safety/fire inspectors whose primary functions are to monitor in-process work to assure safety protocols are followed.  Company policies meet or exceed the safety standards set by OSHA.  Production employees are required to attend regularly scheduled safety training meetings.

Set forth below are various risks and uncertainties that could cause our actual results to differ materially from the results contemplated by the forward-looking statements contained in this report or otherwise adversely affect our business.

• Economic downturns and reductions in Government funding could have a negative impact on our business. We derive significant portions of our revenues from contracts that are funded by the Government. Our ability to obtain future Government work at reasonable margins is highly dependent on the amount of work that is available to bid, which is largely a function of the level of Government funding available. The availability of Government funding also affects the long-term contracts we currently have as the contacts are based on options that the Government could choose not to exercise if funding is cut back or not available at all. The availability of funding could also affect whether or not those long-term Government contracts are renewed. We also perform commercial work for customers in the private sector. The availability of this private sector work can be significantly adversely affected by general economic downturns and by fluctuations in specific customers' economic circumstances.

• Our cost-type Government contracts provide the Government with the option to have us perform repair, maintenance and overhaul activities on certain Government ships, and in some cases at certain Government facilities. While work on these ships is typically done at reasonably predictable intervals, those intervals can be substantially altered as a result of changing military priorities and other unexpected deployments. Furthermore, a decision by the Government to redeploy these ships to another permanent geographic location could have a negative impact on our business depending on that location. Additionally, there is no assurance that we will be successful in our efforts to win renewal of any cost-type Government contracts. Even in the absence of geographic reassignment or other necessity, the Government remains free to elect to have work done by other parties that is contemplated to be done under their contracts with us.

• Our fixed-price contracts subject us to the risk of increased project cost. The profitability of fixed-price contracts can be adversely affected by a number of factors that can cause our actual costs to materially exceed the costs estimated at the time of the original bid. Even in situations in which some of such increased costs arise as a result of customer initiated or approved change orders, there may be a delay or dispute as to the amount of increased revenue due to us.

• Our accounting for revenues and costs involves significant estimates. As further described in "Critical Accounting Policies, Estimates, and Judgments" under Management's Discussion and Analysis of Financial Condition and Results of Operation (Item 7), accounting for contract related revenues and costs as well as other cost items requires management to make a variety of significant estimates and assumptions. Although we believe we have sufficient experience and processes to enable us to formulate appropriate assumptions and produce reliable estimates, these assumptions and estimates may change significantly in the future and such changes could have a material adverse effect on our financial position and the results of operations. On a regular basis, we monitor our policies and procedures with respect to our contracts to ensure consistent application under similar terms and conditions as well as compliance with all applicable government regulations. In addition, costs incurred and allocated to contracts with the Government are routinely audited by the Defense Contract Audit Agency ("DCAA"). The Government has the ability to recover or disallow any costs which are improperly charged against or allocated to the contracts. Certain reviews by the Government of our cost accounting in Government contracts are discussed in more detail in "Environmental Matters and Other Contingencies" under Management's Discussion and Analysis of Financial Condition and Results of Operation (Item 7).

• Future profitability depends largely on our ability to maintain an adequate volume of ship repair, overhaul and conversion business to augment our longer-term contracts. The variables affecting our business volume include public support provided to competing Northwest shipyards, excess West Coast and industry-wide shipyard capacity, domestic and foreign competition, governmental legislation and regulatory issues, activity levels of the Navy and other customers, competitors' pricing behavior, and our labor efficiencies, work practices and estimating abilities. Other factors that can contribute to future profitability include the amounts of annual expenditures needed to ensure continuing serviceability of our owned and leased machinery and equipment.

• Our long-term success in managing a profitable operation at ESI will depend on the availability of a sufficient volume of profitable work including pier-side WSF repairs and continued work on small water craft for a variety of customers, both pier-side and in drydock.

• As more fully described in Item 3. Legal Proceedings, we have been named as a defendant in civil actions by parties alleging damages from past exposure to toxic substances, generally asbestos, at our Seattle shipyard and at closed former facilities. We are currently defending approximately 565 such claims, 10 of which are considered significant. We have insurance agreements in place to cover these potential liabilities but we expect a portion of that coverage, based on historical data, to be exhausted in approximately two years. The continued defense and settlement of these claims, after exhaustion of one of the insuring agreements, could have a significant impact on our profitability. We have various insurance policies and agreements that provide coverage of the costs to remediate environmental sites and for the defense and settlement of bodily injury cases. These policies and agreements are primarily with two insurance companies. Based upon the current credit ratings of both these companies, we anticipate both insurers will be able to perform under their respective policy or agreement. However, if this assumption is incorrect and either or both of these companies are unable to meet their future financial commitments, our financial condition and results of operations could be adversely affected.

• We use certain commodity products subject to significant price fluctuations. We use petroleum-based products to fuel and lubricate our equipment. We also use steel and other commodities in projects, which can be subject to significant price fluctuations. We have not been significantly adversely affected by commodity price fluctuations in the past; however, there is no guarantee that we will not be in the future.

• The trading volume in our common stock does not provide significant liquidity which can result in substantial price moves either on the buy side or the sell side in the event there is a change in demand.

The foregoing list is not exhaustive. There can be no assurance that we have correctly identified and appropriately assessed all factors affecting our business or that the publicly available and other information with respect to these matters is complete and correct. Additional risks and uncertainties not presently known to us, or that we currently believe to be immaterial, also may impact us unfavorably. Should any risks and uncertainties develop into actual events, these developments could have material adverse effects on our business, financial condition and results of operations. For these reasons, we caution the reader not to place undue reliance on our forward-looking statements.

None.

The 46-acre Shipyard facility in Seattle offers three operating dry docks. Five piers offer a total of nearly 3,700 feet of berthing space.

The design capacities of our four operating dry docks located at the Seattle and Everett shipyards are as follows:

The lease terms on Dry Dock 10 provide for nominal annual lease payments and minimum amounts of annual maintenance that we must perform. The lease also includes minimum levels of maintenance that we must perform over the life of the lease. We have included the nominal annual lease payments and the costs of the average annual maintenance that must be performed over the life of the lease on this dry dock in the current and future lease commitments in Note 8 of the Notes to Consolidated Financial Statements in Item 8.

We completed the purchase of the YFD-70 dry dock from the Navy in July 2009 and now possess complete ownership of the dock.

We believe that our owned and leased properties at the Shipyard are in reasonable operating condition given their age and usage, although from time to time we are required to incur substantial expenditures to ensure the continuing serviceability of certain owned and leased machinery and equipment. Several older piers have a continued life expectancy of approximately fifteen years. We will make a decision regarding the replacement of those piers at a time closer to the end of the affected piers' useful lives.

During fiscal years 2010 and 2009, we incurred approximately $2.0 million and $2.7 million, respectively, on shipyard capital expenditures.

We are subject to federal, state and local environmental laws and regulations that impose limitations on the discharge of pollutants into the environment and establish standards for the treatment, storage and disposal of toxic and hazardous wastes. Fines and penalties may be imposed for non-compliance with these laws. Such laws and regulations may expose us to liability for our acts, which are or were in compliance with all applicable laws at the time such acts were performed. We face potential liabilities in connection with the alleged presence of hazardous waste materials at our Seattle shipyard, our former closed shipyard sites, and at several sites we used for disposal of alleged hazardous waste.

We are identified as a PRP by the Environmental Protection Agency ("EPA") under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA," commonly known as "Superfund") in connection with matters pending at three Superfund sites. We received information requests in several Superfund cases in which we asserted that our liability was discharged when we emerged from bankruptcy in 1990. Additionally, we have been named in a contribution action under CERCLA and the Washington State Model Toxics Control Act ("MTCA") by a local Port authority.

We are also named as a defendant in a number of civil actions alleging damages from past exposure to toxic substances, generally asbestos, at our Seattle shipyard and closed former facilities.

At March 28, 2010, we maintained aggregate reserves of $10.9 million for pending claims and assessments relating to environmental and bodily injury matters, including $7.9 million associated with the Harbor Island Superfund Site (the "Harbor Island Site") and $3.0 million for asbestos related claims.

We expect to recover significant funding for costs and payments of claims represented by such reserves by receivables due from insurance companies under policies and insurance agreements in place as described below. At March 28, 2010, such receivables aggregated $7.6 million.

Included in the reserves are estimated final sediment remediation costs for Harbor Island of $2.5 million that are expected to occur within the next 15 years after certain piers reach the end of their useful lives. These costs are reflected in our balance sheet under Environmental and Other Reserves. Similarly, the insurance receivable of $2.5 million relating to these reserves is reflected in our balance sheet under Insurance Receivable.

For more information, see Note 10 of the Notes to Consolidated Financial Statements (Item 8) below and the discussion under the heading "Environmental Matters and Contingencies" in Management's Discussion and Analysis of Financial Condition and Results of Operations (Item 7) below.

We, along with several other parties, have been named as PRPs by the EPA pursuant to CERCLA in connection with the documented release or threatened release of hazardous substances, pollutants and contaminants at the Harbor Island Site, upon which the Shipyard is located.

In fiscal year 2001, we entered into a 30-year agreement with an insurance company that provides us with broad-based insurance coverage for the remediation of all our operable units at the Harbor Island Site.

To date, the EPA has separated the Harbor Island Site into three operable units that affect us: the Soil and Groundwater Unit (the "Soil Unit"), the Shipyard Sediments Operable Unit (the "SSOU") and the Sediments Operable Unit (the "SOU"). We, along with a number of other Harbor Island PRPs, received a Special Notice Letter from the EPA on May 4, 1994 pursuant to section 122 (e) of CERCLA. We entered into a Consent Decree for the Soil Unit in September 1994 under which we agreed to remediate the designated contamination on our property. Removal of floating petroleum product from the water table began in October 1998 and is anticipated to continue through fiscal year 2011.

Under the Federal Superfund law, a PRP may have liability for damages to natural resources in addition to liability for remediation. During the fourth quarter of fiscal year 2010, we received a claim for natural resource damages pursuant to CERCLA on behalf of the Elliott Bay Natural Resource Trustees relating to the Site. We have included our best estimate of natural resource damage liability in the environmental remediation reserve. We believe that our estimated potential loss for this claim will be covered by our existing insurance, provided we do not exceed aggregate policy limits, which we do not anticipate.

The Port of Tacoma, Washington filed a civil action against us during the fourth quarter of fiscal year 2008 in the United States District Court (Western District of Washington in Tacoma) for contribution under CERCLA and MTCA. We previously disclosed our involvement with the CERCLA and MTCA remediation efforts in the Hylebos Waterway of Commencement Bay in Tacoma, Washington and subsequent natural resources assessment by the statutorily named trustees ("Commencement Bay Trustees"). A former subsidiary of ours operated a shipbuilding operation on the Hylebos Waterway under contract to the Navy during World War I and World War II. The contract between our subsidiary and the Navy for the operation of the shipyard site included an indemnification clause flowing from the Navy to our subsidiary. We have tendered any potential liability to the Navy pursuant to this contract. The Government to date has not accepted this tender nor has it agreed to indemnify us. In the fourth quarter of fiscal year 2010, we reached a contingent settlement agreement in this litigation with the Port of Tacoma. The agreement is subject to approval by the Government, which is necessary to protect our potential right of indemnification. The agreement resulted in a $1.3 million charge against cost of revenue in fiscal year 2010.

We received notification in November 2006 regarding the discovery of sub surface oil on the property we formerly owned in Galveston, Texas. We sold the property to the Port of Galveston in 1992 and there have been several intervening owners and operators at the site since 1992. We are investigating the factual allegations and any potential liability. We have not established a reserve for this issue as we are unable to estimate the probable outcome.

We are named as a defendant in civil actions by parties alleging damages from past exposure to toxic substances, generally asbestos, at our Seattle shipyard and closed former facilities.

We entered into agreements with several of our insurers to provide coverage for a significant portion of settlements and awards related to these bodily injury claims. These agreements have aggregate limits on amounts to be paid overall and formulas for amounts of payment on individual claims. In addition to providing coverage for assessments or settlements of claims, the agreements also provide for costs of defending and processing such claims. The two most significant agreements provide coverage applicable to claims of exposure to asbestos occurring between 1949 and 1976 and occurring between 1976 through 1987. Insurance coverage for exposures to asbestos was no longer available from the insurance industry after 1987. Due to changes in federal regulations in the 1970s that resulted in the swift decline in commercial and military application of asbestos and increased regulation over the handling and removal of asbestos, there exists minimal risk of claims arising from exposure after 1987. We utilize contractual formulas to determine the amount of coverage from each agreement on each claim settled or litigated. Once the initial date of alleged exposure to asbestos becomes evident, all contractual years subsequent to that date participate in the settlement. Since all known claims involve alleged exposure prior to 1976, the 1976 through 1987 agreement will participate in the settlement or judgment of all outstanding claims that are settled or litigated. As a result and as further discussed below, the 1976 through 1987 agreement will exhaust prior to the 1949 through 1976 agreement. Based on historical claims settlement data only, we project that at March 28, 2010, the 1949 through 1976 agreement will provide coverage for an additional 21.9 years and the 1976 through 1987 agreement will provide coverage for an additional 1.9 years. At March 29, 2009, we projected that these agreements would provide coverage for an additional 21.6 years and 2.1 years, respectively. We resolved 8 malignant claims in fiscal year 2010 compared with 8 in 2009 and 6 in 2008. If historical settlement patterns or the rate of filing for new cases change in future periods, these estimated coverage periods could be shorter or longer than anticipated. Moreover, if one or both of these coverages are exhausted at some future date, our costs related to subsequent claims and associated legal expenses previously covered by these insurance agreements may increase.

The following chart indicates the number of claims filed and resolved in the past two fiscal years, including the number of claims yet to be resolved at the end of each fiscal year. (Resolutions include settlements, adjudications and dismissals.) The claims are further categorized as either malignant or non-malignant.

Due to uncertainties of the number of cases, the extent of alleged damages, the population of claimants and size of any awards and/or settlements, there can be no assurance that the current reserves will be adequate t o cover the costs of resolving the existing cases. Additionally, we cannot predict the eventual number of cases filed against us, or their eventual resolution, and do not include the reserve amounts for cases filed in the future. However, it is probable that if future cases are filed against us they will result in additional costs arising either from their share of costs under current insurance arrangements in place or due to the exhaustion of such coverage. We review the adequacy of existing reserves periodically based upon developments affecting these claims, including new filings and resolutions, and adjust the reserve and related insurance receivable as appropriate.

As we are not able to estimate our potential ultimate exposure for filed and un-filed claims against us, we cannot predict whether the ultimate resolution of the bodily injury cases will have a material effect on our results of operations or stockholders' equity.

Not applicable.

In accordance with paragraph 12(a) of Section 303A of the New York Stock Exchange ("NYSE") Company Manual, Stephen G. Welch, our Chief Executive Officer, has certified to the NYSE our compliance with the NYSE's corporate governance listing standards as of September 8, 2009. The certifications required by the Sarbanes-Oxley Act of 2002 and the regulations thereunder are filed with or furnished to the Securities and Exchange Commission as exhibits to this report on Form 10-K.

The following table sets forth, by quarter, the high and low composite sales prices of the stock as reported by the NYSE.

At June 10, 2010, there were 5,775,691 outstanding shares of common stock. On that date there were 1,029 shareholders of record.

The Board of Directors has authorized a quarterly dividend of $0.075 per share, payable June 23, 2010 to shareholders of record as of June 8, 2010. In fiscal years 2010 and 2009, we paid quarterly dividends of $0.05 per share.

We made no purchases of treasury stock in the fourth quarter of fiscal year 2010.

The following table summarizes certain selected consolidated financial data, which should be read in conjunction with the accompanying Management's Discussion and Analysis of Financial Condition and Results of Operations (Item 7) and Consolidated Financial Statements of the Company (Item 8). These historical results are not necessarily indicative of the results of operations expected for any future period.

(1) Revised due to prior period corrections. See Note 20 of the Notes to Consolidated Financial Statements (Item 8).

We reported comprehensive income of $12.3 million for fiscal year 2010, which primarily consisted of net income of $7.8 million, plus pension and other post retirement benefits adjustments, net of tax, of $4.8 million, and less unrealized losses on available-for sale securities of $0.1 million and foreign currency contracts of $0.2 million. For fiscal year 2009, we reported comprehensive loss of $2.8 million, which primarily consisted of net income of $4.8 million, less pension and other post retirement benefits adjustments of $7.8 million, plus an unrealized gain on available-for sale securities of $0.2 million.

We sponsor the Todd Shipyards Corporation Retirement System (the "Plan"), which is discussed in Note 6 of the Notes to Consolidated Financial Statements (Item 8). We measure the funded status of the Plan as the difference between the fair market value of the Plan assets and the Projected Benefit Obligation ("PBO"). As of March 28, 2010, the Plan assets exceeded the PBO by $11.7 million. This created a positive funded status, which was recognized as a non-current asset in the statement of financial position. We record these amounts in Accumulated Other Comprehensive Income ("AOCI"). These amounts consist of gains or losses, prior service costs or credits and transition obligations, or assets which have not yet been recognized in the net periodic benefit cost. As of March 28, 2010, the Plan had an accumulated actuarial net loss of $15.0 million and an accumulated prior service cost of $0.1 million. We recognized a benefit, net of tax, of $4.2 million in AOCI during fiscal year 2010.

We sponsor a retirement health care plan for certain retired administrative employees (the "Retiree Medical Plan"), which is discussed in Note 6 of the Notes to Consolidated Financial Statements (Item 8). We measure the funded status of the Retiree Medical Plan as the difference between the fair market value of Retiree Medical Plan assets and the Accumulated Post Benefit Obligation ("APBO"). As of March 28, 2010, the APBO exceeded Retiree Medical Plan assets by $6.2 million. This created a negative funded status, which is recognized as a non-current liability in the statement of financial position. We record these amounts in AOCI. These amounts consist of gains or losses, prior service costs or credit and transition obligations or assets, which have not yet been recognized in the net periodic benefit costs. As of March 28, 2010, the Retiree Medical Plan had an accumulated actuarial net gain of $5.5 million. For the fiscal year 2010, we recognized a benefit, net of tax, of $0.6 million associated with the Retiree Medical Plan in AOCI.

As of March 29, 2009, the APBO exceeded Retiree Medical Plan assets by $9.9 million and the Retiree Medical Plan had an accumulated actuarial net gain of $4.6 million. For fiscal year 2009, we recognized a benefit, net of tax, of $0.1 million associated with the Retiree Medical Plan in AOCI.

The Notes to Consolidated Financial Statements (Item 8) are an integral part of Management's Discussion and Analysis of Financial Condition and Results of Operations and should be read in conjunction herewith. The following discussion and analysis of financial condition and results of operations contain forward-looking statements, which involve risks and uncertainties. Our actual results in future periods may differ significantly from the results discussed in or anticipated by such forward-looking statements. Readers should also refer to Risk Factors in Item 1A.

The United States is currently experiencing an economic slowdown. There have been disruptions in the capital and credit markets, and the number of unemployed workers has increased dramatically. Our largest customers are the Unites States Government and the Washington State Department of Transportation. To date, our business volumes from these customers have not been materially impacted by the economic downturn. Although our backlog of scheduled work totaled $144.9 million at the end of our fiscal year 2010, our future business volumes could be impacted in the event that general economic conditions continue to decline and federal, state and commercial spending on vessel maintenance and repair decreases. Continued economic distress could have negative impacts on a variety of financial services that we utilize, including our ability to secure adequate insurance and bonding capacity for our business and/or increase the cost of such security. As disclosed in Note 6 of the Notes to Consolidated Financial Statements (Item 8), the recent turmoil in the financial markets has had a negative impact on the value of the marketable securities held in the Todd Shipyards Corporation Retirement System defined benefit plan (the "Plan"). In spite of these impacts, the Plan remained over-funded at the conclusion of our fiscal year ending March 28, 2010. As a result, we do not anticipate needing to make additional contributions to the Plan to maintain its funded status in the immediate future. To date, the impact of the economic slowdown on our liquidity has been immaterial. During fiscal year 2010, our cash flows from operations were more than sufficient to fund our capital expenditures and dividends. As of March 28, 2010, our line of credit and letter of credit facilities totaled $25.0 million with $12.5 million available. See Item 1A, Risk Factors, in this Form 10-K for additional discussion on the risks to our business associated with economic and financial market conditions.

We are the largest private shipyard in the Pacific Northwest and are engaged in the construction, repair, maintenance, and overhaul of commercial and Government vessels. Our headquarters and Shipyard are in Seattle, Washington on Harbor Island. We also have employees located on-site at Puget Sound Naval Shipyard ("PSNS") in Bremerton, Washington, off-site in Bremerton, and at the Naval Station in Everett, Washington. ESI operates on a site leased from the Port of Everett, Washington.

The majority of our ship repair business is generated from long-term Government contracts, which typically fall into one of two broad categories:

Cost-Type Contracts - Cost-type contracts provide for reimbursement of the contractor's allowable direct and indirect costs incurred and allocable to the contract plus a fee that represents profit. Cost-type contracts generally require that the contractor use its best efforts to accomplish the scope of the work within a specified time frame and a stated cost.

Government cost-type contracts typically include the following negotiated cost elements: direct material, direct labor and subcontracting costs, and certain indirect costs including allowable general, administrative and manufacturing overhead costs. Costs billed to contracts with the Government are regulated by the requirements of the Federal Acquisition Regulations ("FAR") as allowable and allocable costs. Examples of costs we incur and do not bill to the Government in accordance with the requirements of FAR and Cost Accounting Standards ("CAS") include, but are not limited to: certain legal costs, certain travel and entertainment expenses, stock compensation expense, lobbying costs, charitable donations, and advertising costs.

Fixed-Price Contracts - A fixed-price contract is a contract in which the specified scope of work is agreed to for a price that is a pre-determined, negotiated amount and not generally subject to adjustment because of costs incurred by the contractor.

Negotiated contract fee structures, for both cost-type and fixed-price contracts may include, but are not limited to: fixed-fee amounts, cost sharing arrangements to reward or penalize for either under or over cost target performance, positive award fee, and negative penalty arrangements. Profit margins may vary materially depending on the negotiated contract fee arrangements, percentage of completion of the contract, the achievement of performance objectives, and the stage of performance at which the right to receive fees, particularly under incentive and award fee contracts, is finally determined.

Certain cost-type contracts contain provisions consisting of award fees based on performance criteria such as cost, schedule, quality, management and effectiveness in meeting technical goals. Award fees are determined and earned based on the customer's subjective evaluation of our performance against such performance criteria.

On a regular basis, we monitor our policies and procedures with respect to our contracts to ensure consistent application under similar terms and conditions as well as compliance with all applicable government regulations. In addition, the DCAA routinely audits costs incurred and allocated to contracts with the Government. The Government has the ability to recover any costs which are improperly charged against or allocated to the contracts.

The table below summarizes status of our significant long-term contracts and a discussion of each contract follows. The amounts shown under Estimated Value of Contract are the estimated contract revenues at the inception of the contract, and assumes that all options are exercised. There is no assurance that all options will be exercised.

(1) CMT - We were first awarded this five-year contract in fiscal year 2001 for the repair and maintenance of all surface combatants (frigates and destroyers) stationed at the Naval Station in Everett. The Navy extended this cost-plus-award-fee contract by approximately five years in September of 2005. We are the prime contractor and lead a team of subcontractors who at times may perform as much as half of the work. The work is done either at our Seattle shipyard or pier-side at the Naval Station in Everett. We perform the work under this contract at the option of the Navy, which has not established a dollar value for the work. However, the five-year life of the contract may be approximately $75 million.

The ship repair business consists of individual and short duration repair events, some of which the Government exercises under its various multi-ship, multi-option contracts. Consequently, operating results for any period presented are not necessarily indicative of results that may be expected in any other period.

During the first half of fiscal year 2010, we recorded $84.2 million, or 47% of our total fiscal year revenue. Revenues in the second half of the year were higher than the first half due to higher volumes of fixed-price work. Revenues for the third and fourth quarters of the year were $95.8 million. Work volumes in the second half of the fiscal year increased due to continued construction of the WSF 64-Auto Ferries, as well as repair work for WSF and the Coast Guard.

For the full year ended March 28, 2010, we recorded revenue of $180.0 million, an increase of $66.5 million, or approximately 59%, from fiscal year 2009 revenue of $113.5 million. Fiscal year 2010 volumes included repair and overhaul work on the USS Lincoln, USS Davis, USCGC Polar Sea, USCGC Healy and several WSF ferries. Work also continued on the construction of new 64-Auto Ferries for WSF. The year on year revenue increase from fiscal year 2009 to 2010 is primarily attributable to new construction work for WSF.

For the fiscal year ended March 28, 2010, we reported operating income of $10.5 million, which was $7.0 million more than operating income for the fiscal year ended March 29, 2009 of $3.5 million. The increase in operating income for the fiscal year is attributable to the increase in fiscal year 2010 volumes, lower administrative and manufacturing overhead costs as a percentage of revenue and a $3.1 million reserve established during fiscal year 2009 and associated with questioned subcontractor costs, which reduced operating income by that amount in the prior year. We discuss this fiscal year 2009 reserve item further in Government Contracting (Item 7). The increases in operating income in fiscal year 2010 versus the prior year associated with these factors were offset by reductions to operating income resulting from changes in our business mix, whereby new construction activities, which are characterized by higher cost of revenue as a percentage of revenue, contributed a greater share of revenues in fiscal year 2010.

During fiscal year 2010, we experienced higher work volumes related to cost-type contracts as compared to fiscal year 2009. Our direct labor hours increased approximately 111% from fiscal year 2009 on cost-type contracts. The year on year increase is primarily attributable to the USS Lincoln aircraft carrier availability in fiscal year 2010 and the lack of a major aircraft carrier availability in the prior year. Operating income attributable to cost-type contracts increased by approximately 95% from fiscal year 2009 to fiscal year 2010 primarily due to volume increases and $3.1 million reserve recorded in fiscal year 2009 associated with questioned subcontractor costs, which is discussed further in Government Contracting (Item 7). The primary factors that impact operating income on cost-type contracts are work volumes, allowability of costs, the timing of the award fees and our ability to manage project costs.

Work volumes on fixed-price contracts, as measured by direct labor hours, were approximately 75% higher in fiscal year 2010 as compared to the prior year, primarily due to increases in new construction activity under fixed-price contracts. In fiscal year 2010, we continued our work on the construction of the first 64-Auto Ferry project, which started in the last quarter of fiscal year 2009, and began construction of the second vessel in this class. Operating income on fixed-price projects increased by 40% from fiscal year 2009 to fiscal year 2010. The primary drivers of improved profitability in fiscal year 2010 on fixed-price contracts included improved change order management and decreases in the share of revenue associated with administrative and manufacturing overhead costs, which is primarily the result of year-on-year volume increases.

The work we completed under time-and-materials contracts in fiscal year 2010 was 71% lower as compared to fiscal year 2009. Operating income on time-and-materials contracts decreased year on year by approximately 69% from fiscal year 2010 to fiscal year 2009. The year on year decrease in operating income was primarily associated with the decrease in time and material contract work volumes.

(1) Revised due to prior period corrections. See Note 20 of the Notes to Consolidated Financial Statements (Item 8).

We discuss many of the factors that influence our business volumes and revenues in Business (Item 1) and Risk Factors (Item 1A). These include, but are not limited to: general economic conditions; fluctuations in specific private sector customers' economic circumstances; the level of competition in the marketplace from domestic and international shipyards; our ability and willingness to compete for available projects; our capacity and capability to perform available work; the level of Government funding available for ship repair projects; the timing and duration of repair availabilities for Government vessels; Government decisions regarding the allocation of work between public and private shipyards; Government decisions regarding the volumes and types of work that will be solicited; and Government decisions regarding the specific contract vehicles that will be used to solicit work to private sector contractors. Consequently, revenues for any given period are not necessarily indicative of results that may be expected in any other period. We recognize revenue on the percentage-of completion method based upon the percentage of work completed to date compared to the estimate of total work at completion. When adjustments in contract value or estimated costs are determined, we generally reflect any changes from prior estimates in revenue in the current period using the cumulative catch-up method of accounting. As a result, our revenues in any given period may reflect the economic benefit or impact of changes in estimates in the current period for work performed in another period. For cost-type contracts with performance incentives or award fees, we only record revenue associated with incentives and award fees that we can reasonably estimate in the current period. Conversely, incentives and award fees that we cannot reasonably estimate are recognized when awarded. We collect amounts from customers, which under common trade practices are referred to as sales taxes, and record these amounts on a net basis. As a result, our revenues in any given period may reflect incentive and award fee revenue associated with work that was performed in another period. For more information on our revenue recognition methods, see Note 1 of the Notes to Consolidated Financial Statements (Item 8).

2010 - We recorded revenues of $180.0 million during fiscal year 2010, an increase of $66.5 million, or approximately 59%, from fiscal year 2009 when we reported revenues of $113.5 million. The increase in total revenues was primarily due higher new construction volumes as compared with fiscal year 2009. Fiscal year 2010 volumes included repair and overhaul work on the USS Abraham Lincoln, USS Davis, USCGC Polar Sea, USCGC Healy and several WSF ferries. Work also continued on the construction of new 64-Auto Ferries for WSF.

2009 - We recorded revenue of $113.5 million during fiscal year 2009, a decrease of $25.7 million, or approximately 18%, from fiscal year 2008 when we reported revenue of $139.2 million. The decrease in total revenues was primarily due to the lack of a major aircraft carrier availability and lower new construction volumes as compared with fiscal year 2008. Fiscal year 2009 volumes included repair and overhaul work on the Pacific Glacier, USS Lincoln, USS Stennis, USS Ingraham, USCGC Polar Sea, USCGC Healy and several WSF ferries.

Our cost of revenues primarily consist of material costs, subcontractor costs, wages and related payroll benefits associated with our production staff, and depreciation and operating costs associated with our dry docks. We discuss many of the factors that influence our business profitability and cost of revenues in Business (Item 1) and Risk Factors (Item 1A). These include, but are not limited to: our willingness to accept lower profits in order to compete for available projects; our union and non-union wage structures; the mix of labor, materials and subcontractor costs on the projects we execute; our ability to formulate appropriate assumptions and produce reliable estimates for the work that we compete for and perform; our ability to perform at the costs estimated at the time of the original bid; our ability to recover customer initiated cost increases; the degree to which our business volumes adequately absorb costs (as cost of revenues) that would otherwise be recorded as manufacturing and administrative costs; our ability to negotiate Government cost-type reimbursement rates that adequately cover our indirect costs; our ability to effectively manage our operating costs and production efficiency; weather conditions which may benefit or hinder our work during any particular period; our ability to prevent labor actions and work stoppages; our exposure to commodity price fluctuations; and our ability to manage subcontractor performance. Consequently, our cost of revenue for any given period is not necessarily indicative of the cost of revenue that may be expected in any other period. When estimates of total costs incurred on a contract exceed estimates of total revenue to be earned, we record a provision for the entire loss on the contract as cost of revenue in the period the loss becomes evident. As a result, our cost of revenue in any given period may reflect the economic benefit or impact of changes in estimates of profit or loss for work that was or will be performed in another period. For more information on our revenue recognition methods, see Note 1 of the Notes to Consolidated Financial Statements (Item 8). Our cost of revenue as a percentage of revenue is affected by the factors that influence our revenues (as discussed above under "Revenues") as well as factors that influence our cost of revenue.

2010 - Cost of revenues for fiscal year 2010 were $131.4 million, which reflected an increase of $54.8 million, or approximately 72%, from fiscal year 2009. This increase was primarily attributable to an increase in volumes in fiscal year 2010 compared to fiscal year 2009. Cost of revenues as a percentage of revenues was 73% and 67% for fiscal years 2010 and 2009, respectively. The increase in cost of revenues as a percentage of revenue in fiscal year 2010 versus fiscal year 2009 was due to increases in direct material as a percentage of revenue. The largest driver of this increase is the scope of work needed to construct the new auto ferries, which involves a greater percentage of material and subcontractors.

2009 - Cost of revenues for fiscal year 2009 were $76.6 million, which reflected a decrease of $22.0 million, or approximately 22%, from fiscal year 2008. This decrease was primarily attributable to a decrease in volumes in fiscal year 2009 compared to fiscal year 2008. Cost of revenues as a percentage of revenues was 67% and 71% for fiscal years 2009 and 2008, respectively. The decrease in cost of revenues as a percentage of revenue in fiscal year 2009 was due to cost containment measures implemented by management which included staff reductions, enhanced subcontract management, and change order management improvements.

Our administrative and manufacturing overhead expenses primarily consist of wages and related payroll benefits for our internal administrative and production support employees. These expenses also include, but are not limited to: depreciation; telecommunications; material purchases and equipment rentals to support our production activities; employee training and development expenses; maintenance and lease expenses associated with our equipment and facilities; legal and accounting professional fees; insurance; business taxes; general corporate expenses; and other administrative and manufacturing expenses. We discuss many of the factors that influence our operating costs in Business (Item 1) and Risk Factors (Item 1A). These include, but are not limited to: our ability to effectively manage our operating costs; our union and non-union wage structures; our exposure to price fluctuations for purchased materials; the degree to which our business volumes are adequate to absorb costs (as cost of revenues) that would otherwise be recorded as administrative and manufacturing costs; and expenditures needed to ensure continuing service of our owned and leased machinery and equipment. Our administrative and manufacturing overhead includes a mix of fixed costs (e.g. depreciation, facility maintenance, and corporate administration costs), costs which are positively correlated with business volumes (e.g. labor and non-labor production support costs), costs which are negatively correlated with business volumes (e.g. production costs not fully absorbed by our business volumes in a given period), and costs which are variable but otherwise uncorrelated with business volumes (e.g. legal and environmental compliance costs). Consequently, our administrative and manufacturing overhead costs for any given period are not necessarily indicative of the costs that may be expected in any other period. Our administrative and manufacturing overhead costs as a percentage of revenue are affected by the factors that influence our revenues (as discussed above under "Revenues") and the factors that influence our administrative and manufacturing costs.

2010 - Overhead costs for administrative and manufacturing activities for fiscal year 2010 were $38.2 million, which reflected an increase of $4.7 million, or 14%, from fiscal year 2009. Administrative and manufacturing overhead as a percentage of revenue was approximately 21% and 30%, respectively, for fiscal years 2010 and 2009. The increase in administrative and manufacturing overhead costs in fiscal year 2010 was primarily attributable to volume increases from fiscal year 2009 to fiscal year 2010. The decrease in administrative and manufacturing costs as a percentage of revenue was primarily driven by the fact that a significant portion of these costs are fixed.

2009 - Overhead costs for administrative and manufacturing activities decreased by $1.2 million, or 4%, from fiscal year 2008. Administrative and manufacturing overhead expenses, as a percentage of revenue, were approximately 30% and 25% for fiscal years 2009 and 2008, respectively. The decrease in administrative and manufacturing costs was primarily attributable to volume increases from fiscal year 2007 to fiscal year 2008. The increase in administrative and manufacturing overhead costs as a percentage of revenue was primarily driven by the fact that a significant portion of these costs are fixed.

Our investment and other income primarily consists of income and expenses that are not associated with our core marine repair, construction or other industrial production activities. Our investment and other income includes, but is not limited to: income and expenses associated with our cash and securities holdings; losses associated with our securities holdings; interest expense on our borrowings; income and expense associated with facilities that we lease to outside parties; income and expense associated with scrap and salvage materials; reimbursement income from Medicare Part D; various expenses related to retirement benefits paid to certain former employees; and other non-production activities. We discuss many of the factors that influence our income and expense associated with non-production activities in Business (Item 1), Risk Factors (Item 1A), Quantitative and Qualitative Disclosures About Market Risk (Item 7A) and Note 1 of the Notes to the Consolidated Financial Statements (Item 8). These include, but are not limited to fluctuations in the general level of US interest rates, market risks and exposures inherent in our holdings of marketable securities, decisions by our Board of Directors that influence the volume and investment allocation of our cash and securities holdings, fluctuations in market prices for scrap and salvage material, and market demand for long and short term facility leases. Consequently, our investment and other income for any given period are not necessarily indicative of the investment and other income that may be expected in any other period.

2010 - Investment and other income in fiscal year 2010 was $1.6 million, which reflected a decrease of $2.6 million, or approximately 62%, when compared to fiscal year 2009. The decrease in investment and other income reported during fiscal year 2010 was due primarily to the timing of the conclusion of our agreement to lease certain facilities, and provide related services to Kiewit-General in connection with their construction of the Hood Canal Floating Bridge. Also in fiscal year 2010, we recognized $0.4 million of grant award income (net of expenses) from the U.S. Maritime Administration's Assistance to Small Shipyard Grant program.

2009 - Investment and other income for fiscal year 2009 increased from fiscal year 2008 by approximately $0.3 million or 8%. The increase in investment and other income reported during fiscal year 2009 was due primarily to the aforementioned lease arrangement with Kiewit-General.

2010 - During fiscal year 2010, we reported a net gain of $72,000 on the sale of available for sale securities.

2009 - During fiscal year 2009, we reported a net gain of $47,000 on the sale of available-for-sale securities, versus a net gain of $96,000 reported in fiscal year 2008.

2010 - In fiscal year 2010, we recognized federal income tax expense of $4.3 million. This represents an increase of $1.4 million in federal income tax expense when compared to fiscal year 2009. The effective income tax rates recorded in fiscal years 2010 and 2009 were 35.7% and 38.4% respectively. Effective income tax rates were higher in fiscal year 2009 primarily due to the recording of a non-deductable excise tax of $0.5 million in fiscal year 2009.

2009 - In fiscal year 2009, we recognized federal income tax expense of $3.0 million, a decrease of $0.4 million when compared to fiscal year 2008. The effective income tax rates recorded in fiscal years 2009 and 2008 were 38.4% and 33.6%, respectively. Effective income tax rates were higher in fiscal year 2009 than in 2008 primarily due to the recording of the aforementioned non-deductable excise tax in fiscal year 2009.

We reported comprehensive income of $12.3 million for fiscal year 2010, which primarily consisted of net income of $7.8 million, plus pension and other post retirement benefits adjustments, net of tax, of $4.8 million, and less unrealized losses on available-for sale securities of $0.1 million and foreign currency contracts of $0.2 million. For fiscal year 2009, we reported comprehensive loss of $2.8 million, which primarily consisted of net income of $4.8 million, less pension and other post retirement benefits adjustments of $7.8 million, plus an unrealized gain on available-for sale securities of $0.2 million.

We sponsor the Todd Shipyards Corporation Retirement System (the "Plan"), which is discussed in Note 6 of the Notes to Consolidated Financial Statements (Item 8). We measure the funded status of the Plan as the difference between the fair market value of the Plan assets and the Projected Benefit Obligation ("PBO"). As of March 28, 2010, the Plan assets exceeded the PBO by $11.7 million. This created a positive funded status, which was recognized as a non-current asset in the statement of financial position. We record these amounts in Accumulated Other Comprehensive Income ("AOCI"). These amounts consist of gains or losses, prior service costs or credits and transition obligations, or assets which have not yet been recognized in the net periodic benefit cost. As of March 28, 2010, the Plan had an accumulated actuarial net loss of $15.0 million and an accumulated prior service cost of $0.1 million. We recognized a benefit, net of tax, of $4.2 million in AOCI during fiscal year 2010.

As of March 29, 2009, the Plan assets exceeded the PBO by $7.9 million and the Plan had an accumulated actuarial net loss of $21.2 million and an accumulated prior service cost of $0.1 million. For the fiscal year 2009, we recognized a charge, net of tax, of $7.8 million associated with the Plan in AOCI.

We sponsor a retirement health care plan for certain retired administrative employees (the "Retiree Medical Plan"), which is discussed in Note 6 of the Notes to Consolidated Financial Statements (Item 8). We measure the funded status of the Retiree Medical Plan as the difference between the fair market value of Retiree Medical Plan assets and the Accumulated Post Benefit Obligation ("APBO"). As of March 28, 2010, the APBO exceeded Retiree Medical Plan assets by $6.2 million. This created a negative funded status, which is recognized as a non-current liability in the statement of financial position. We record these amounts in AOCI. These amounts consist of gains or losses, prior service costs or credit and transition obligations or assets, which have not yet been recognized in the net periodic benefit costs. As of March 28, 2010, the Retiree Medical Plan had an accumulated actuarial net gain of $5.5 million. For the fiscal year 2010, we recognized a benefit, net of tax, of $0.6 million associated with the Retiree Medical Plan in AOCI.

As of March 29, 2009, the APBO exceeded Retiree Medical Plan assets by $9.9 million and the Retiree Medical Plan had an accumulated actuarial net gain of $4.6 million. For fiscal year 2009, we recognized a benefit, net of tax, of $0.1 million associated with the Retiree Medical Plan in AOCI.

As of March 28, 2010 and March 29, 2009 our cash, cash equivalents, and marketable securities primarily consisted of cash, government and government agency securities, money market funds and other investment grade securities. We record such amounts at fair value.

We do not amortize goodwill but rather test it for impairment annually, and when an event occurs or circumstances change such that it is reasonably possible that an impairment may exist. The test for goodwill impairment is a two-step process. First, we use a discounted cash flow model to determine if the carrying value of our related reporting unit exceeds fair value, which would indicate that goodwill may be impaired. If we determine that goodwill may be impaired, we compare the implied fair value of the goodwill to its carrying value to determine if there is an impairment. As of March 28, 2010, the fair value of our goodwill significantly exceeded the carrying value of our related reporting unit and we therefore did not have to perform the second step. Management does not believe that a material impairment charge is likely to occur in the near future for goodwill.

At March 28, 2010, our backlog consisted of approximately $144.9 million of ship repair, maintenance, new construction and conversion work. This compares with backlogs of approximately $84.0 million and $12.0 million at March 29, 2009 and March 30, 2008, respectively. Our backlog was primarily attributable to firm fixed-price repair, maintenance, new construction and conversion work scheduled for completion during fiscal year 2011 and 2012. The increase in backlog from 2009 to 2010 is due primarily to the award of a contract to build two additional new 64-Auto Ferries.

Since work under our Navy and Coast Guard multi-year maintenance contracts are at the option of the Navy and the Coast Guard, we cannot provide assurance as to the timing or level of work that we may perform under these contracts. Therefore, projected revenues from these contracts are not included in our backlog until the customers exercise the contract options.

We provided total aggregate reserves of $10.9 million as of March 28, 2010 for our contingent environmental and bodily injury liabilities. Due to the complexities and extensive history of our environmental and bodily injury matters, the amounts and timing of future expenditures is uncertain. As a result, there can be no assurance that the ultimate resolution of these environmental and bodily injury matters will not have a material adverse effect on our financial position, cash flows or results of operations.

Included in the reserves are estimated final sediment remediation costs for Harbor Island of $2.5 million that we expect to occur within the next 15 years after certain piers reach the end of their useful lives. We reflect these costs in our balance sheet under Environmental and Other Reserves. Similarly, we reflect the insurance receivable of $2.5 million relating to these reserves in our balance sheet under Insurance Receivable.

We continue to negotiate with our insurance carriers and certain prior landowners and operators for past and future remediation costs. We have not recorded any receivables for any amounts that may be recoverable from such negotiations or other claims.

We expense recurring costs associated with our environmental compliance program as incurred.

We face significant potential liabilities in connection with the alleged presence of hazardous waste materials at our Seattle shipyard and at several sites we allegedly used for disposal of alleged hazardous waste. We have also been named as a defendant in civil actions by parties alleging damages from past exposure to toxic substances at our facilities. We provide information with respect to these contingencies and claims in Item 3 in this report.

Our policy is to accrue costs for environmental matters in the accounting period in which the responsibility is established and the cost is estimable. We base our estimates of our liabilities for environmental matters on evaluations of currently available facts with respect to each individual situation and take into consideration factors such as existing technology, presently enacted laws and regulations, and the results of negotiations with regulatory authorities. We do not discount these liabilities.

In the fourth quarter of fiscal year 2001, we entered into a 30-year agreement with an insurance company that will provide us with broad-based insurance coverage for the remediation of our operable units at the Harbor Island Superfund Site. Additionally, we entered into a 15-year agreement for coverage of any new environmental conditions discovered at the Shipyard property that would require environmental remediation.

In fiscal year 2010, we spent $0.2 million for environmental site remediation. All of these costs are reimbursable through our insurance coverage. Expenses for environmental remediation directed by our management and performed by third party vendors are paid directly to the third party vendors under our insurance policies. Most of our environmental site remediation expenditures in fiscal year 2010 were related to the Harbor Island Site.

We are named as a defendant in civil actions by parties alleging damages from past exposure to toxic substances, generally asbestos, at our Seattle shipyard and closed former facilities.

In addition to us, the cases generally include other ship builders and repairers, ship owners, asbestos manufacturers, distributors and installers, and equipment manufacturers as defendants, and arise from injuries or illnesses allegedly caused by exposure to asbestos or other toxic substances. We assess claims as they are filed and as the cases develop, dividing them into three different categories based on severity of illness and whether the claim is considered to be active or inactive litigation. Based on current fact patterns, we categorize certain active claims for diseases including mesothelioma, lung cancer and fully developed asbestosis as "malignant" claims. We categorize all other active claims of a less medically serious nature as "non-malignant." We are currently defending approximately 10 "malignant" claims and approximately 184 "non-malignant" claims. Additional information about our claims inventory became available that allowed us to re-classify 371 cases in the fourth quarter of fiscal year 2010, previously classified as "non-malignant" claims, into a new category of "inactive" claims. Our improved ability to track these "inactive" claims, and to accrue for them accordingly, did not have a material impact on our stated reserves. We now include in our reserves acknowledgement of these 371 known inactive claims that could become active upon the presentation of additional evidence of disease and/or exposure by those claimants and/or renewed prosecution of their claims.

The relief sought in all cases varies greatly by jurisdiction and claimant. Included in the approximate 490 cases open as of March 28, 2010 are approximately 565 claimants. The exact number of claimants is not determinable as approximately 87 of the open cases include multiple claimant filings against 20-100 defendants. The filings do not indicate which claimants allege liability against us. Considering known facts, the previously stated 565 claimants is our best estimate.

Approximately 245 cases do not assert any specific amount of relief sought.

Approximately 153 cases assert on behalf of each claimant a claim for compensatory damages of $2 million and punitive damages of $20 million against 20-100 defendants. Approximately 39 cases assert $5-20 million in compensatory and $5-20 million in punitive damages on behalf of each claimant against 20-100 defendants. Approximately 50 cases assert $1-5 million in compensatory and $5-10 million in punitive damages on behalf of each claimant against 20-100 defendants. Approximately three cases seek compensatory damages of less than $1 million per claim. The claims involved in the foregoing cases do not specify against which defendants made which claims or alleged dates of exposure.

Based upon settled or concluded claims to date, we have not identified any correlation between the amount of the relief sought in the complaint and the final value of the claim. We and our insurers are vigorously defending these actions.

Bodily injury reserves decreased from $5.0 million at March 29, 2009 to $3.0 million at March 28, 2010. Bodily injury insurance receivables also decreased from $3.8 million at March 29, 2009 to $2.1 million at March 28, 2010. We classified these bodily injury liabilities and receivables within our consolidated balance sheets as environmental and other reserves, and insurance receivables, respectively.

We entered into agreements with several of our insurers to provide coverage for a significant portion of settlements and awards related to these bodily injury claims. These agreements have aggregate limits on amounts to be paid overall and formulas for amounts of payment on individual claims. In addition to providing coverage for assessments or settlements of claims, the agreements also provide for costs of defending and processing such claims. The two most significant agreements provide coverage applicable to claims of exposure to asbestos occurring between 1949 and 1976 and occurring between 1976 through 1987. Insurance coverage for exposures to asbestos was no longer available from the insurance industry after 1987. Due to changes in federal regulations in the 1970s that resulted in the swift decline in commercial and military application of asbestos and increased regulation over the handling and removal of asbestos, there exists minimal risk of claims arising from exposure after 1987. We utilize contractual formulas to determine the amount of coverage from each agreement on each claim settled or litigated. Once the initial date of alleged exposure to asbestos becomes evident, all contractual years subsequent to that date participate in the settlement. Since all known claims involve alleged exposure prior to 1976, the 1976 through 1987 agreement will participate in the settlement or judgment of all outstanding claims that are settled or litigated. As a result and as further discussed below, the 1976 through 1987 agreement will exhaust prior to the 1949 through 1976 agreement. Based on historical claims settlement data only, we project that at March 28, 2010, the 1949 through 1976 agreement will provide coverage for an additional 21.9 years and the 1976 through 1987 agreement will provide coverage for an additional 1.9 years. At March 29, 2009, we projected that these agreements would provide coverage for an additional 21.6 years and 2.1 years, respectively. We resolved 8 malignant claims in fiscal year 2010 compared with 8 in 2009 and 6 in 2008. If historical settlement patterns or the rate of filing for new cases change in future periods, these estimated coverage periods could be shorter or longer than anticipated. Moreover, if one or both of these coverages are exhausted at some future date, our costs related to subsequent claims and associated legal expenses previously covered by these insurance agreements may increase.

Due to uncertainties of the number of cases, the extent of alleged damages, the population of claimants and size of any awards and/or settlements, there can be no assurance that the current reserves will be adequate t o cover the costs of resolving the existing cases. Additionally, we cannot predict the eventual number of cases filed against us, or their eventual resolution, and do not include the reserve amounts for cases filed in the future. However, it is probable that if future cases are filed against us they will result in additional costs arising either from their share of costs under current insurance arrangements in place or due to the exhaustion of such coverage. We review the adequacy of existing reserves periodically based upon developments affecting these claims, including new filings and resolutions, and adjust the reserve and related insurance receivable as appropriate.

As we are not able to estimate our potential ultimate exposure for filed and un-filed claims against us, we cannot predict whether the ultimate resolution of the bodily injury cases will have a material effect on our results of operations or stockholders' equity.

We previously reported that we received notice from the DCAA questioning the reasonableness of a payment to one of our subcontractors on the 2005 dPIA of the aircraft carrier USS John C. Stennis. During the first quarter of our fiscal year 2009 the DCAA issued its final report disapproving $3.1 million of costs related to payments made to the subcontractor and costs incurred by us to perform work which was contracted to the subcontractor. The Navy contracting officer then issued the decision to disallow the costs and withhold the above stated amount from payments due on our current contracts with the Navy. In response, we filed a Request for Equitable Adjustment ("REA") with the Navy contracting officer to allow the $3.1 million in incurred costs. In the event of an unfavorable decision on our REA, we will file an appeal to the Armed Services Board of Contract Appeals or directly to federal court. We established a reserve for this item in the amount of $3.1 million and recorded the resulting transaction as a reduction in revenue in the first quarter of fiscal year 2009. The Navy collected the entire amount in the second quarter of fiscal year 2009 through the non-payment of other outstanding project receivables. In the third quarter of fiscal year 2009, the Navy agreed to return the $3.1 million while the REA and additional information we have provided is under consideration. There are no assurances that the Navy will agree with our REA. Our current financial statements continue to reflect a reserve in billings in excess of sales for the $3.1 million in question.

Subsequent to the end of fiscal year 2010, in June 2010, we received a Notice of Noncompliance with CAS from the Navy's Puget Sound contracting office relating to our five-year phased maintenance contract to perform repair work on the aircraft carriers located in the Puget Sound. This contract was completed in fiscal year 2009. During the fourth quarter of fiscal year 2007, we reported that the Navy's Puget Sound contracting office notified us of several potential noncompliance issues. The Notice of Noncompliance primarily focuses on our cost allocation methods applicable to our Navy contracts and the allocation methods we use for indirect costs for our work on cost-type contracts. We will begin negotiations with the Navy in the first quarter of fiscal year 2011 in an effort to reach a conclusion acceptable to us and the Navy. There is no assurance that an acceptable resolution will be reached. We believe that we have valid positions and defenses to the findings of noncompliance and will pursue all available avenues of appeal in the event an acceptable resolution is not reached. An unfavorable outcome in this matter could have a significant impact on our cost structure with the Navy and, depending upon the scope of any retroactive relief sought by the Navy, could be material in the period recorded. At this time, we are unable to estimate our potential exposure for this item.

Additionally, in the current fiscal year, the Navy and the DCAA have questioned several modifications we made to our cost allocation methods and the degree to which we allocate indirect costs to work performed under our government cost-type contracts. We believe that we are in compliance with the Federal Acquisition Regulations and are making every effort to resolve these outstanding issues with the Navy's Puget Sound contracting officer. We have submitted proposals for consideration by the Navy to resolve all outstanding government cost accounting issues and began discussions with the Navy during the second quarter of fiscal year 2010. These discussions continued throughout the second half of fiscal year 2010. An unfavorable outcome in these matters could have a significant impact on our cost structure with the Navy and, depending upon the scope of any retroactive relief sought by the Navy, could be material in the period recorded. At the end of the third quarter, we recorded a reserve of $1.1 million to cover our estimated exposure for these unresolved government cost accounting issues.

During the first quarter of fiscal year 2004, we recorded a reserve of $2.5 million related to the unanticipated bankruptcy of one of our previous insurance carriers. The remaining balance as of March 28, 2010 was $1.1 million. The reserve, which reflects our best estimate of the known liabilities associated with unpaid workers compensation claims arising from the two-year coverage period commencing October 1, 1998, is subject to change as additional facts are uncovered. These claims have reverted to us due to the liquidation of the insurance carrier. Although we expect to recover at least a portion of these costs from the liquidation and other sources, we cannot currently estimate the amount and the timing of any such recovery and therefore no estimate of amounts recoverable is included in the current financial results. Since establishing the reserve, we made claims payments of approximately $0.4 million in fiscal year 2010 and $0.1 million in each of fiscal years 2009 and 2008, and charged such payments against the reserve. It is unlikely that any distribution from the liquidation will occur in the next 12 months.

The following table presents information about our cash and securities balances (as of fiscal year end), sources and uses of cash (for the respective fiscal years) and working capital balances (as of fiscal year end):

(1) Investing activities for 2009 included the purchase the assets of Everett Shipyard, Inc.

Our primary sources of liquidity are cash from operations and investments in securities. We expect that the principal use of funds for the foreseeable future will be for working capital, capital expenditures and dividends to shareholders. The primary drivers of cash flow are operating profit on contracts, timing of invoicing, which is based on contract terms, and timing of capital acquisitions.

We anticipate that our cash, cash equivalents and marketable securities position, expected fiscal year 2011 cash flow, access to credit facilities and capital markets, taken together, will provide sufficient liquidity to fund operations for fiscal year 2011. Accordingly, we expect to finance shipyard capital expenditures and operations from existing working capital. A change in the composition or timing of projected work could cause planned capital expenditures and shipyard repair and maintenance expenditures to change.

During the first quarter of fiscal year 2009, we purchased the assets of ESI, which was funded with cash balances and the sale of available for sale securities.

In the long-term, our liquidity could be impacted by default of our insurers on environmental or bodily injury claims. However, we anticipate that we will meet our long-term liquidity needs due to our available cash reserves, ability to generate profits and debt financing.

2010 - Net cash provided by operating activities was $10.1 million for the fiscal year ended March 28, 2010. This reflects a $1.5 million, or approximately 13%, decrease from net cash provided by operating activities in fiscal year 2009. The decrease was primarily attributable to an increase in accounts payable and billings in excess of sales, offset by an increase in accounts receivable and sales in excess of billings, compared to fiscal year 2009.

2009 - Net cash provided by operating activities was $11.6 million for the year ended March 29, 2009. This represents a $0.9 million increase from net cash provided by operating activities in 2008. The increase was primarily attributable to an increase in accounts payable and billings in excess of sales, offset by an increase in accounts payable, compared to fiscal year 2008.

2010 - Net cash used in financing activities for fiscal year 2010 was $3.1 million. This consisted primarily of normal dividends paid on common stock of $1.3 million and an increase in restricted cash of $1.8 million associated with WSF new construction retention.

2009 - Net cash used in financing activities for fiscal year 2009 was $1.2 million. This consisted primarily of normal dividends paid on common stock of $1.2 million.

In July 2009, we renegotiated certain terms of our $10.0 million revolving credit facility, which expires July 31, 2011. In July 2009, we also added a new $15.0 million credit facility, which expires July 31, 2013, to support the issuance of letters of credit to meet our performance security obligations on our WSF 64-Auto Ferry new construction contracts and other commercial new construction projects when performance security is required. As of March 28, 2010, we have letters of credit outstanding of $1.1 million on our revolving credit facility and $11.4 million on our performance letter of credit facility. These reduced our available revolving credit facility and performance letter of credit facility to $8.9 million and $3.6 million, respectively. The revolving credit facility and the performance letter of credit facility, which are renewable on a bi-annual basis, provide us with flexibility in funding our operating cash flow needs. We have certain financial debt covenants that we must meet in order to maintain these credit lines. We were in compliance with all debt covenants as of fiscal year end 2010. We had no outstanding borrowings as of March 28, 2010 and March 29, 2009.

Our cash flow hedges consist of foreign currency forward contracts. We use these forward contracts to manage currency risk associated with purchases made in foreign currencies. Our foreign currency forward contracts are normally for periods less than two years. We do not expect to convert the foreign currencies to U.S. dollars at maturity because we have entered into banking arrangements to deposit these foreign currency funds until the point in time at which we will fulfill our liability commitments.

During fiscal year 2010, we did not repurchase any stock. We held 6,052,614 shares of treasury stock as of March 28, 2010.

We do not engage in off balance sheet financing transactions.

The following table presents information about our future contractual obligations as of March 28, 2010 based on the timing of future cash payments (in thousands):

* This represents other long-term liabilities on our balance sheet, including the current portion of long-term liabilities. Our estimates of the projected timing of cash flows associated with these obligations are largely based on historical experience. The amount also includes all liabilities under our environmental reserves and all liabilities under our retirement plans, which we discuss in the Notes to Consolidated Financial Statement (Item 8).

Our significant accounting policies are outlined in Note 1 to the Consolidated Financial Statements (Item 8). The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, and expenses, as well as the disclosure of contingent assets and liabilities. As part of our oversight responsibilities, management evaluates the propriety of our estimates, judgments, and accounting methods as new events occur. Management believes that our policies, judgments, and assessments are consistently applied in a manner that provides the reader of our financial statements with a fair presentation of information, in all material respects, in accordance with accounting principles generally accepted in the United States of America. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other sources. We evaluate our estimates on an ongoing basis, including those related to long-term contracts and projects, income taxes, pensions and other post retirement benefits, workers' compensation, warranty obligations, environmental and bodily injury reserves, other reserves, inventory, contingencies and litigation. Actual results may differ from the estimates under different assumptions or conditions.

Management periodically reviews our critical accounting policies and estimates with the Audit Committee of our Board of Directors. Principal accounting practices that involve a higher degree of judgment or complexity are outlined below.

We recognize revenue, contract costs, and profit on the percentage-of-completion method based upon costs incurred. Using the percentage-of-completion method requires us to make certain estimates of the total cost to complete a project, estimates of project schedule and completion dates, estimates of the percentage at which the project is complete, estimates of award fees earned, estimates of annual overhead rates and estimates of amounts of any probable unapproved claims and/or change orders. These estimates are continuously evaluated and updated by experienced project management and accounting personnel assigned to these activities, and senior management also reviews them on a periodic basis. When adjustments in contract value or estimated costs are determined, any changes from prior estimates are generally reflected as a cumulative catch-up in revenue and/or direct costs in the current period.

The percentage-of-completion method of accounting involves the use of multiple estimating techniques to project costs at completion, and in some cases includes estimates of recoveries asserted against the customer for changes or work delays. Contract estimates involve various assumptions and projections relative to the future outcome of events over a period of several months or years, including future labor productivity and availability, the complexity and nature of the work to be performed, the cost and availability of materials, the impact of delayed performance, the impact of weather conditions, the impact of timing of deliveries and the impact of late or early arrival of vessels. We use our best judgment to predict the impact to the profitability of the work. Management bases its estimates on actual past performance of similar projects and our anticipated performance on these projects. A significant change in one or more of these estimates could affect the profitability of one or more of our contracts.

Many contracts contain positive and negative profit incentives based upon performance relative to predetermined targets that may occur during or subsequent to completion of the job. Estimates of award or incentive fees are based on actual award experience and anticipated performance. These incentives take the form of potential additional fees earned or penalties incurred. We record incentives and award fees that we can reasonably estimate over the performance period of the contract. We record incentives and award fees that we cannot reasonably estimate when they are awarded. Estimates of award or incentive fees are based on past fee experience and our anticipated performance on these projects.

When estimates of total costs incurred on a contract exceed estimates of total revenue to be earned, we record a provision for the entire loss on the contract as cost of revenues in the period the estimated loss becomes evident. We recognize a potential loss on a claim only when we can reasonably estimate the amount of the claim and management considers that the claim loss is probable. Anticipated losses cover all costs allocable to the contracts, including manufacturing overhead. In evaluating these criteria, we consider the contractual and legal basis for the claim, the cause of the additional cost incurred, the reasonableness of the costs and the objective evidence to support the claim.

We perform a substantial share of our work on a fixed-price basis. Under fixed-price contracts, we execute the work with a risk that we may not be able to perform all of the work profitably for the specified contract amount. We bear the risk of increases in costs due to inflation, inefficiency, faulty estimates, and labor productivity, unless otherwise provided for in the contract. We track information about the bid process and the historical results of prior fixed-price contracts, evaluate the availability of materials and labor and other factors on an ongoing basis. We use our best judgment to predict the impact to the profitability on the work. A significant change in one or more of these estimates could affect the reported or future profitability of one or more of our contracts.

We recognize revenue from claims as either income or as an offset against a potential loss when the amount of the claim is known and is realizable. In evaluating these criteria, we consider the contractual and legal basis for the claim, the cause of any additional costs incurred, the reasonableness of those costs and the objective evidence available to support the claim.

We recognize other changes in estimates of revenue, costs, and profits using the cumulative catch-up method of accounting. This method recognizes in the current period the cumulative effect of the changes on current and prior periods. Hence, we recognize the effect of the changes on future periods of contract performance as if the revised estimate had been the original estimate. A significant change in an estimate of revenues earned or costs incurred or allocated to one or more contracts could have a material effect on our financial position or results of operations and the catch-up method of accounting could render periodic results misleading.

We face potential liabilities in connection with the alleged presence of hazardous waste materials at the Shipyard and at several sites we allegedly used for disposal of alleged hazardous waste. We are also named as a defendant in a number of civil actions alleging damages from past exposure to toxic substances, generally asbestos, at former facilities that are now closed. At March 28, 2010, we maintained aggregate reserves of $10.9 million for pending claims and assessments relating to these environmental matters, including $7.9 million associated with our Seattle shipyard and $3.0 million for asbestos or bodily injury related claims.

We have various insurance policies and agreements that provide coverage on the costs to remediate these environmental sites and for the defense and settlement of bodily injury claims. At March 28, 2010, we recorded an insurance receivable of $7.6 million relating to these environmental and bodily injury matters, including $5.5 million associated with our Seattle shipyard and $2.1 million for bodily injury related claims. We accrue for the estimated ultimate liability for incurred losses, based on historic trends modified, if necessary, by recent events. Changes in our loss assumptions caused by changes in actual experience would result in a change in our assessment of the ultimate liability that could have a material effect on our operating results and financial position.

Included in the reserves are estimated final sediment remediation costs for Harbor Island of $2.5 million that we expect to occur within the next 15 years after certain piers reach the end of their useful lives. We reflect these costs in our balance sheet under Environmental and Other Reserves. Similarly, we reflect the insurance receivable of $2.5 million relating to these reserves in our balance sheet under Insurance Receivable.

We review these matters on a continual basis and revise our estimates of known liabilities and insurance recoveries when appropriate. The ultimate resolution of any exposure to us may change as additional facts and circumstances become known.

Estimating environmental remediation liabilities requires judgments and assessments based upon independent professional knowledge, the experience of our management and legal counsel. Environmental liabilities are based on judgments that include calculating the cost of alternative remediation methods and disposal sites, changes in the boundaries of the remediation areas, and the impact of regulatory changes. We base bodily injury liabilities on judgments that include the number of outstanding claims, the expected outcome of claim litigation and anticipated settlement amounts for open claims based on historical experience. We do not accrue liabilities for unknown bodily injury claims that may be asserted in the future due to uncertainties of the number of cases that may be filed and the extent of damages that may be alleged. We recognize the liability for environmental remediation when we have a basis to reasonably estimate the basis for the claim. Estimates for these liabilities are based on historical experience and anticipated future settlement amounts.

The development of liability estimates that support both environmental remediation and bodily injury reserves involve complex matters that include the development of estimates and the use of judgments. The actual outcome of these matters may differ from our estimates. To the extent not covered by insurance, increases to environmental remediation and bodily injury liabilities would unfavorably impact future earnings.

Our insurance recoveries for environmental remediation and bodily injury claims are estimated independently from the associated liabilities and are based on insurance coverage or contractual agreements negotiated with our former insurance companies. These policies and agreements are primarily with two insurance companies. Based upon the current credit rating of both of these companies, we anticipate that both insurance companies will be able to satisfy their respective obligations under the policy or agreement. However, if this assumption is incorrect and either of these companies is unable to meet its future financial commitments, our financial condition and results of operation could be adversely affected.

The accounting for employee pension and other post retirement benefit costs and obligations requires us to provide reasonable assumptions about the future. Actuaries use our assumptions in combination with actuary-defined assumptions to estimate net costs and liabilities. These assumptions include discount rates, health care cost trends, inflation rates, long-term rates of return on plan assets, retirement rates, mortality rates and other factors. Key assumptions relate to the interest rates used to discount estimated future liabilities, the number of recipients remaining in the plan receiving benefits and the projected long-term rates of return on the plan assets. We base these assumptions on historical results, the current environment, and reasonable expectations of future events. While we believe the assumptions used are appropriate, significant differences in actual experience or significant changes in assumptions would affect pension and other post retirement benefits costs and obligations. Our key assumptions relate to the interest rates used to discount estimated future liabilities and projected long-term rates of return on plan assets. We determine the discount rate used each year based on the rate of return currently available on a portfolio of high-quality fixed-income investments with a maturity consistent with the projected benefit payout period. We determine the long-term rate of return on assets based on historical returns and current and expected asset allocation strategy. These estimates are based on our best judgment, including consideration of current and future market conditions. In the event a change in any assumption is warranted, future pension and post-retirement benefits costs could increase or decrease.

The Plan was amended as of April 6, 2007, to freeze membership in the Plan effective for new hires and employees transferring from union to non-union employment status on and after April 10, 2007, and to provide that employees rehired on and after April 10, 2007, are ineligible to accrue benefits on and after that date. See Note 6 of the Notes to Consolidated Financial Statements (Item 8) for more information regarding costs and assumptions for employee pension and other post retirement benefits and the future impact of changes in key assumptions.

We are exposed to potential interest rate risk on our revolving credit facility. Interest charged on our credit facility is based on the prime lending rate, which may fluctuate based on changes in market interest rates. Increases in the prime lending rate could increase our borrowing costs under our existing credit facility. We believe that the risk associated with interest rate fluctuations related to our credit facility is not material.

We have shipbuilding contracts requiring material purchases that are priced in foreign currencies, primarily the Australian dollar and the Euro. We attempt to manage the risk posed by fluctuations in these currencies through the purchase of forward contracts on these currencies. As such, we are exposed to market risk on these hedging instruments due to changes in foreign currency exchange rates, primarily the Australian dollar and the Euro. Based upon our March 28, 2010 currency hedge exposures, a hypothetical ten-percent weakening of the U.S. dollar against the Australian dollar and the Euro would cause an approximate $0.3 million decrease in the fair values of these foreign currency instruments. This sensitivity analysis assumes a parallel shift in the foreign currency exchange rates. Because exchange rates rarely move in lockstep, our assumption that the Australian dollar and the Euro exchange rates would change in a parallel fashion may overstate the impact of changing exchange rates on our hedging instruments. Due to the fact that these instruments are primarily entered into for hedging purposes, the gains or losses on the hedging contracts would be largely offset by losses and gains on the underlying firm commitment or forecasted transaction.

Board of Directors and Shareholders

Todd Shipyards Corporation

We have audited the accompanying balance sheets of Todd Shipyards Corporation and subsidiaries ("Todd Shipyards Corporation") as of March 28, 2010 and March 29, 2009, and the related consolidated statements of income, stockholders' equity and comprehensive income, and cash flows for each of the three years in the period ended March 28, 2010. Our audits of the basic consolidated financial statements include the financial statement schedule listed in the index appearing under Item 15(a). These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Todd Shipyards Corporations of March 28, 2010 and March 29, 2009, and the results of its operations and its cash flows for each of the three years in the period ended March 28, 2010, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth herein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Todd Shipyards Corporation's internal control over financial reporting as of March 28, 2010, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated June 10, 2010, expressed an adverse opinion on the effectiveness of the Company's internal control over financial reporting.

/s/ Grant Thornton LLP

Seattle, Washington

June 10, 2010

Board of Directors and Shareholders

Todd Shipyards Corporation

We have audited Todd Shipyards Corporation and subsidiaries' ("Todd Shipyards Corporation") internal control over financial reporting as of March 28, 2010, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Todd Shipyards Corporation's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management. Our responsibility is to express an opinion on Todd Shipyards Corporation's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a deficiency, or combination of control deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management's assessment. Exceptions were identified in the operation of the Company's internal controls over accounting for pension assets related to the transmission of pension information to the Company's actuaries and proper controls surrounding the period end processing of payments of certain accrued expenses.

In our opinion, because of the effect of the material weaknesses described above on the achievement of the objectives of the control criteria, Todd Shipyards Corporation has not maintained effective internal control over financial reporting as of March 28, 2010, based on criteria established in Internal Control-Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Todd Shipyards Corporation as of March 28, 2010 and March 29, 2009 and related consolidated statements of income, stockholders' equity and comprehensive income, and cash flows for each of the three years in the period ended March 28, 2010. The material weaknesses identified above were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2010 financial statements, and this report does not affect our report dated June 10, 2010, which expressed an unqualified opinion on those financial statements.

/s/ Grant Thornton LLP

Seattle, Washington

June 10, 2010

The management of Todd Shipyards Corporation is responsible for the preparation, fair presentation, and integrity of the information contained in the financial statements in this Annual Report on Form 10-K. These statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include amounts determined using management's best estimates and judgments.

We maintain a system of internal controls to provide reasonable assurance that assets are safeguarded and that transactions are recorded properly to produce reliable financial records. The system of internal controls includes appropriate divisions of responsibility, established policies and procedures (including a code of conduct to promote strong ethics) that are communicated throughout the Company, and careful selection, training and development of our people. For the reasons described in Item 9A of this report, management has concluded that our internal control over financial reporting was not effective as of March 28, 2010. In making its assessment of the effectiveness of our internal control over financial reporting, management used the criteria set forth in Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Our internal control over financial reporting, as of March 28, 2010, has been audited by Grant Thornton LLP, an independent registered public accounting firm, as stated in their report, which appears on the proceeding page.

The Board of Directors provides oversight to the financial reporting process through its Audit Committee, which meets regularly with management, corporate audit staff, and the independent registered public accounting firm to review the activities of each and to ensure that each is meeting its responsibilities with respect to financial reporting and internal controls.

/s/ Stephen G. Welch
Stephen G. Welch
President and Chief Executive Officer

/s/ Berger A. Dodge
Berger A. Dodge
Chief Financial Officer

(1) Revised due to prior period corrections. See Note 20 of the Notes to Consolidated Financial Statements.

(1) Revised due to prior period corrections. See Note 20 of the Notes to Consolidated Financial Statements.

(1) Revised due to prior period corrections. See Note 20 of the Notes to Consolidated Financial Statements.

(1) Revised due to prior period corrections. See Note 20 of the Notes to Consolidated Financial Statements.

(A) Business -Todd Shipyards Corporation ("we", "us", or "our") was organized in 1916 and has operated a shipyard in Seattle, Washington (the "Shipyard") since incorporation. We are incorporated under the laws of the State of Delaware and operate shipyards through our wholly owned subsidiaries, Todd Pacific Shipyards Corporation ("Todd Pacific") and Everett Shipyard, Inc. ("ESI"). Todd Pacific has historically been engaged in the repair/overhaul, conversion and construction of commercial and military ships. On March 31, 2008, our subsidiary Everett Ship Repair and Drydock, Inc. ("Everett") acquired the assets of ESI and subsequently changed its name to ESI. ESI is engaged in repair, overhaul, and conversion work of commercial and government owned vessels. We consider ourselves to operate under one segment.

Today, we are the largest private (or non-Governmental) shipyard operator in the Pacific Northwest. A substantial amount of our business is repair and maintenance work on commercial and federal government vessels engaged in various maritime activities in the Pacific Northwest. We also provide new construction and industrial fabrication services for a wide variety of customers. Our customers include the US Navy ("Navy"), the US Coast Guard ("Coast Guard"), Military Sealift Command, National Oceanic & Atmospheric Administration ("NOAA"), Washington State Ferries ("WSF"), the Alaska Marine Highway System, fishing fleets, cargo shippers, tug and barge operators and cruise lines.

(B) Basis of Presentation - The Consolidated Financial Statements include our accounts and those of our wholly owned subsidiaries, Todd Pacific, ESI, and TSI Management, Inc. ("TSI"). We eliminated all inter-company transactions. In accordance with our policy of ending our fiscal year on the Sunday nearest March 31, our fiscal year 2010 ended on March 28, 2010, fiscal year 2009 ended on March 29, 2009, and fiscal year 2008 ended on March 30, 2008 and each of these fiscal years included 52 weeks.

(C) Estimates - The preparation of financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We evaluate our estimates on an ongoing basis, including those related to long term contracts and projects, income taxes, pensions and other post retirement benefits, workers' compensation, warranty obligations, environmental and bodily injury reserves, other reserves, inventory, contingencies and litigation. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. The results of our estimates form the basis for making judgments about the carrying value of assets and liabilities that are not readily available from other sources. Actual results may differ from the estimates under different assumptions or conditions.

(D) Revenue Recognition - We recognize revenue, contract costs, and profit on the percentage-of-completion method based upon the percentage of work completed to date compared to the estimate of total work at completion. Using the percentage-of-completion method requires us to make certain estimates of the total cost to complete a project, estimates of project schedule and completion dates, estimates of the percentage at which the project is complete, estimates of award fees earned, estimates of annual overhead rates and estimates of amounts of any probable unapproved claims and/or change orders. These estimates are continuously evaluated and updated by experienced project management and accounting personnel assigned to these activities, and senior management also reviews them on a periodic basis. When adjustments in contract value or estimated costs are determined, we generally reflect any changes from prior estimates in revenue in the current period. We collect amounts from customers, which under common trade practices are referred to as sales taxes, and record these amounts on a net basis.

We generally enter into three types of contracts: cost-type contracts, time-and-materials contracts and fixed-price contracts.

• Cost-type: We recognize revenue, costs, and profit on government cost-type contracts based on direct expenses (determined based on allowable costs incurred and estimates of costs otherwise allocable to the contract).

• Time-and-materials: We record revenue, costs, and profits on time-and-material contracts based upon direct labor hours at fixed hourly rates and cost of materials as incurred.

• Fixed-price: We recognize revenue and profits on fixed-price contracts on the percentage-of-completion method based on percentage of work completed to date compared to the estimate of total work at completion.

Performance Incentives and Award Fees - Many contracts contain positive and negative profit incentives based upon performance relative to predetermined targets that may occur during or subsequent to completion of the job. These incentives take the form of potential additional fees earned or penalties incurred. We record incentives and award fees that we can reasonably estimate over the performance period of the contract. We recognize incentives and award fees that we cannot reasonably estimate when they are awarded.

Loss Provisions - When estimates of total costs incurred on a contract exceed estimates of total revenue to be earned, we record a provision for the entire loss on the contract as cost of revenue in the period the loss becomes evident.

Claims - We recognize revenue from claims as either income or as an offset against a potential loss when the amount of the claim can be reliably estimated and its realization is probable. In evaluating this criteria, we consider the contractual/legal basis for the claim, the cause of any additional costs incurred, the reasonableness of those costs and the objective evidence available to support the claim.

Other Changes in Estimates - We recognize other changes in estimates of revenue, costs, and profits using the cumulative catch-up method of accounting. This method recognizes in the current period the cumulative effect of the changes on current and prior periods. Hence, we recognize the effect of the changes on future periods of contract performance as if the revised estimate had been the original estimate. A significant change in an estimate on one or more contracts could have a material effect on our financial position or results of operations.

(E) Cash and Cash Equivalents - We consider all highly liquid debt and equity instruments with a stated maturity at the date of purchase of three months or less to be cash equivalents. Cash equivalents consist primarily of money market instruments, investment grade commercial paper and US Government securities. The carrying amounts reported in the balance sheet are stated at cost, which approximates fair value.

(F) Securities Available-for-Sale - We include all debt instruments purchased with a maturity of more than three months at the date of purchase as securities available-for-sale. Securities available-for-sale consist primarily of US Government securities, investment grade commercial paper, corporate debt securities and equities and are valued based upon market quotes.

We determine the appropriate classification of debt and equity securities at the time of purchase and reevaluate such designation as of each balance sheet date. We report all of our available-for-sale investments as of the balance sheet date at fair value, with unrealized gains and losses excluded from earnings and presented as accumulated other comprehensive income or loss, net of related deferred income taxes. We account for net realized investment gains (losses) by identifying the cost and calculating the gain (loss) of each specific security sold.

We monitor our investment portfolio for other than temporary impairment of securities. When an other than temporary decline in the value below cost or amortized cost is identified, we reduce the reported value of the investment to its fair value, which becomes the new cost basis of the investment. We report the amount of reduction as a realized loss in the Consolidated Statements of Income. We recognize any recovery of value in excess of the investment's new cost basis as a realized gain only on sale, maturity or other disposition of the investment.

Factors that we evaluate in determining the existence of an other than temporary decline in value include (1) the length of time and extent to which the fair value has been less than cost or carrying value, (2) the circumstances contributing to the decline in fair value (including a change in interest rates or spreads to benchmarks), (3) recent performance of the investment, (4) the financial strength of the issuer, and (5) our intent and ability to retain the investment for a period of time sufficient to allow for anticipated recovery. Additionally, for asset-backed securities, we consider the security rating and the amount of credit support available for the security.

(G) Accounts Receivable and Costs in Excess of Billings - Accounts receivable represents primarily Government and commercial receivables, net of allowance for doubtful accounts. The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. We determine the allowance based on historical customer experience and other currently available evidence. When we deem a specific account to be uncollectible, the account is written off against the allowance. We did not establish a reserve for fiscal years 2010 or 2008, but did reserve $0.3 million in fiscal year 2009.

Costs in excess of billings on incomplete contracts represent recoverable costs and, where applicable, accrued profit related to long-term government contracts on which revenue has been recognized, but for which the customer has not yet been billed (unbilled receivables).

(H) Inventory - We value inventories, consisting of materials and supplies, at the lower of cost (principally average) or market.

(I) Property, Plant and Equipment - We value property, plant and equipment at cost, net of accumulated depreciation. We capitalize certain major overhaul activities when such activities are determined to increase the useful life or operating capacity of the asset. We determine depreciation and amortization on the straight-line method based upon the shorter of the estimated useful lives ranging from 5 to 31 years or the term of any associated lease. We expense maintenance and overhaul costs on owned and leased property as incurred.

(J) Long-lived Assets - We recognize impairment losses relating to long-lived assets based on several factors, including, but not limited to, our plans for future operations, recent operating results and projected cash flows. We evaluate long-lived assets, including intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable based on the expected undiscounted cash flow attributable to that asset or group of assets. The amount of any impairment is measured as the difference between the carrying value and the fair value of the subject asset. We do not have any long-lived assets, including intangible assets, that we consider impaired. For the fiscal years ended March 28, 2010, March 29, 2009 and March 30, 2008 we indicated no such impairment for long-lived assets.

(K) Goodwill and Intangible Assets - We recorded $1.1 million of goodwill and $2.2 million of intangible assets when we acquired the assets of Everett Shipyard, Inc. on March 31, 2008. The acquired intangible assets include customer base, non-compete agreements, and trade name.