Gulf Island Fabrication, Inc. Reports Third Quarter Earnings

HOUSTON, Oct. 26, 2017 (GLOBE NEWSWIRE) -- Gulf Island Fabrication, Inc. (NASDAQ:GIFI) today reported a net loss of $3.1 million ($0.21 basic and diluted loss per share) on revenue of $49.9 million for the three months ended September 30, 2017, compared to net income of $0.5 million ($0.04 basic and diluted earnings per share) on revenue of $65.4 million for the three months ended September 30, 2016 and a net loss of $10.9 million ($0.73 basic and diluted loss per share) on revenue of $45.9 million for the three months ended June 30, 2017. For the nine months ended September 30, 2017, the Company reported a net loss of $20.5 million ($1.38 basic and diluted loss per share) on revenue of $133.7 million compared to net income of $7.1 million ($0.48 basic and diluted earnings per share) on revenue of $230.9 million during the comparable 2016 period.

Kirk Meche, the Company's CEO and President, commented, "Results for the third quarter of 2017 are reflective of continuing suppressed market conditions along with revised estimates to complete two vessel construction projects within our Shipyards division. Additionally, we incurred holding costs of $1.1 million during the quarter related to our South Texas facilities which are for sale. Year-to-date holding costs in South Texas were $3.6 million plus another $1.9 million in depreciation which was incurred during the first quarter.

"As stated in prior earnings calls, we are focused on managing our balance sheet and rebuilding contract backlog in new markets. Our revenue backlog of $251.7 million has remained comparable to our last quarter which includes new awards from our Services and Shipyards divisions and is at its highest level in over three years. The majority of our backlog remains in markets primarily outside of oil and gas."

He continued, "On August 25, 2017, our South Texas facilities were impacted by Hurricane Harvey, which made landfall as a category 4 hurricane. We are working diligently with our insurance agents and adjusters to finalize the estimated damages. Based upon our initial assessment of the damages and insurance coverage, we believe that there is no basis to record a net loss at this time."

The Company had revenue backlog of $251.7 million and labor backlog of approximately 1.6 million labor hours at September 30, 2017, compared to revenue backlog of $251.0 million and labor backlog of 1.7 million labor hours reported as of June 30, 2017.

  September 30, 2017   December 31, 2016
                 
  (in thousands)
     
Cash and cash equivalents   $ 17,792     $ 51,167  
Total current assets   209,608     113,360  
Property, plant and equipment, net   90,989     206,222  
Total assets   303,380     322,408  
Total current liabilities   45,639     35,348  
Total shareholders’ equity   243,847     263,032  
             

Our balance sheet position at September 30, 2017, includes $17.8 million in cash, no debt, and working capital of $164.0 million which includes $107.0 million in assets held for sale, primarily related to our South Texas assets. We continue to monitor and maintain a conservative capital structure as we navigate through the current oil and gas industry downturn and further expand our efforts to secure additional project awards in markets with greater demand.

Declaration of Quarterly Dividend

The Company's board of directors declared a dividend of $0.01 per share on Gulf Island Fabrication, Inc.’s approximately 14.9 million shares of common stock outstanding. The dividend was declared during a regular meeting of the board held on October 26, 2017, and is payable November 24, 2017, to shareholders of record on November 10, 2017.

Quarterly Earnings Conference Call

The management of Gulf Island Fabrication, Inc. will hold a conference call on Friday, October 27, 2017, at 9:00 a.m. Central Time (10:00 a.m. Eastern Time) to discuss the Company’s financial results for the quarter ended September 30, 2017. The call is being webcast through CCBN and can be accessed at Gulf Island's website at http://www.gulfisland.com. Participants may also join the conference call by dialing 1.866.564.2842 and requesting the “Gulf Island” conference call. A digital replay of the call will be available from a link on our website two hours after the call and ending November 3, 2017.

Gulf Island Fabrication, Inc. is a leading fabricator of complex steel structures and marine vessels used in energy extraction and production, petrochemical and industrial facilities, power generation, alternative energy projects and shipping and marine transportation operations. The Company also provides related installation, hookup, commissioning, repair and maintenance services with specialized crews and integrated project management capabilities. The Company is currently fabricating complex modules for the construction of a new petrochemical plant, completing newbuild construction of a technologically advanced offshore support and two multi-purpose service vessels and recently fabricated wind turbine pedestals for the first offshore wind power project in the United States. The Company also constructed one of the largest lift boats servicing the Gulf of Mexico ("GOM"), one of the deepest production jackets in the GOM and the first SPAR fabricated in the United States. The Company’s customers include U.S. and, to a lesser extent, international energy producers, petrochemical, industrial, power and marine operators.  Our corporate headquarters is located in Houston, Texas, with fabrication facilities located in Houma, Jennings and Lake Charles, Louisiana, and Aransas Pass and Ingleside, Texas.

 
 
GULF ISLAND FABRICATION, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share data)
       
  Three Months Ended   Nine Months Ended
  September 30,   June 30,   September 30,   September 30,   September 30,
  2017   2017   2016   2017   2016
Revenue (1) $ 49,884     $ 45,868     $ 65,384     $ 133,745     $ 230,864  
Cost of revenue 50,378     57,488     60,125     150,755     205,839  
Gross profit (loss) (494 )   (11,620 )   5,259     (17,010 )   25,025  
General and administrative expenses 4,370     4,640     5,086     12,940     14,633  
Asset impairment             389      
Operating income (loss) (4,864 )   (16,260 )   173     (30,339 )   10,392  
Other income (expense):                  
Interest expense (45 )   (158 )   (110 )   (262 )   (248 )
Interest income     12     12     12     20  
Other income, net 38     (266 )   599     (221 )   1,039  
Total other income (expense) (7 )   (412 )   501     (471 )   811  
Income (loss) before income taxes (4,871 )   (16,672 )   674     (30,810 )   11,203  
Income taxes (benefit) (2) (1,761 )   (5,749 )   133     (10,322 )   4,134  
Net income (loss) $ (3,110 )   $ (10,923 )   $ 541     $ (20,488 )   $ 7,069  
Per share data:                  
Basic and diluted earnings (loss) per share - common shareholders $ (0.21 )   $ (0.73 )   $ 0.04     $ (1.38 )   $ 0.48  
Cash dividend declared per common share $ 0.01     $ 0.01     $ 0.01     $ 0.03     $ 0.03  


________________
(1) Revenue includes non-cash amortization of deferred revenue related to the values assigned to contracts acquired in the 2016 shipyard  asset acquisition of $0.5 million, $0.3 million, and $1.5 million for the three months ended September 30, 2017, June 30, 2017, and September 30, 2016 and $2.4 million and $4.1 million for the nine months ended September 30, 2017 and 2016, respectively.
   
(2) We adopted Accounting Standards Update (ASU) No. 2016-09 on January 1, 2017, which requires the recognition of the excess tax benefit or deficiency related to the difference between the deduction for tax purposes and the compensation cost recognized for financial reporting purposes created when stock grants vest as an income tax benefit or expense in the Company’s statement of income. Under previous GAAP, this difference was recognized in additional paid-in capital.
   

 

Operating Segments

Backlog (in thousands)

Segments   September 30, 2017   December 31, 2016
    $'s (1)   Labor hours   $'s   Labor hours
Fabrication   $ 29,554     254   $ 65,444     707
Shipyards   200,909     1,045   59,771     457
Services   21,918     265   7,757     101
Intersegment eliminations   (649 )        
Total backlog (1)   $ 251,732     1,564   $ 132,972     1,265


________________
(1) We exclude suspended projects from contract backlog when they are expected to be suspended more than twelve months because resumption of work and timing of revenue recognition for these projects are difficult to predict.
   

Results of Operations (in thousands, except percentages)

During the three and nine months ended September 30, 2017, management reduced its allocation of corporate administrative costs and overhead expenses to its operating divisions such that a significant portion of its corporate expenses are retained in its non-operating Corporate division. In addition, it has also allocated certain personnel previously included in the operating divisions to the Corporate division. In doing so, management believes that it has created a fourth reportable segment with each of its three operating divisions and its Corporate division each meeting the criteria of reportable segments under GAAP. During the three and nine months ended September 30, 2016, we allocated substantially all of our corporate administrative costs and overhead expenses to our three operating divisions. We have recast our 2016 segment data below in order to conform to the current period presentation. Our results of our operations by segment for the three and nine months ended September 30, 2017, and 2016, are presented below (in thousands, except for percentages).

Fabrication   Three Months Ended
 September 30,
  Nine Months Ended
September 30,
    2017   2016   2017   2016
Revenue   $ 18,318     $ 22,311     $ 42,517     $ 70,436  
Gross profit (loss)   1,250     601     216     4,564  
Gross profit (loss) percentage   6.8 %   2.7 %   0.5 %   6.5 %
General and administrative expenses   778     885     2,432     2,821  
Operating income (loss)   472     (284 )   (2,216 )   1,743  
                         


Shipyards   Three Months Ended
 September 30,
  Nine Months Ended
September 30,
    2017   2016   2017   2016
Revenue (1)   $ 15,074     $ 23,060     $ 51,798     $ 86,553  
Gross profit (loss) (1)   (3,504 )   1,945     (19,061 )   9,742  
Gross profit (loss) percentage   (23.2 )%   8.4 %   (36.8 )%   11.3 %
General and administrative expenses   888     1,468     2,835     4,218  
Asset impairment           389      
Operating income (loss) (1)   (4,392 )   477     (22,285 )   5,524  
                         


Services   Three Months Ended
 September 30,
  Nine Months Ended
September 30,
    2017   2016   2017   2016
Revenue   $ 17,651     $ 20,928     $ 43,758     $ 76,179  
Gross profit (loss)   1,912     2,918     2,335     11,158  
Gross profit (loss) percentage   10.8 %   13.9 %   5.3 %   14.6 %
General and administrative expenses   695     943     2,008     2,462  
Operating income   1,217     1,975     327     8,696  
                         


Corporate   Three Months Ended
 September 30,
  Nine Months Ended
September 30,
    2017   2016   2017   2016
Revenue   $     $     $     $  
Gross profit (loss)   (152 )   (205 )   (500 )   (439 )
Gross profit (loss) percentage     n/a       n/a       n/a       n/a  
General and administrative expenses   2,009     1,790     5,665     5,132  
Operating income         (2,161 )         (1,995 )         (6,165 )         (5,571 )


________________
(1) Revenue includes non-cash amortization of deferred revenue related to the values assigned to contracts acquired in the 2016 shipyard asset acquisition of $510,000 and $1.5 million for the three months ended September 30, 2017 and 2016 and $2.4 million and $4.1 million for the nine months ended September 30, 2017 and 2016, respectively.
   


 
 
GULF ISLAND FABRICATION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, in thousands)
   
  Nine Months Ended
 September 30,
  2017   2016
               
  (in thousands)
Cash flows from operating activities:      
Net income (loss) $ (20,488 )   $ 7,069  
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:      
Bad debt expense 19     422  
Depreciation and amortization 10,141     19,262  
Amortization of deferred revenue (2,397 )   (4,114 )
Asset impairment 389      
Loss (gain) on sale of assets 224     (924 )
Deferred income taxes (10,235 )   3,651  
Compensation expense - restricted stock 2,636     2,452  
Changes in operating assets and liabilities:      
Contracts receivable and retainage (5,363 )   22,287  
Contracts in progress (15,981 )   (5,834 )
Prepaid expenses, inventory, and other assets (26 )   1,050  
Accounts payable 12,436     (13,654 )
Advance billings on contracts 390     (20 )
Deferred revenue (5,825 )   (8,928 )
Deferred Compensation 590      
Accrued expenses and other liabilities 2,336     4,713  
Accrued contract losses 1,595     (8,001 )
Net cash (used in) provided by operating activities (29,559 )   19,431  
Cash flows from investing activities:      
Capital expenditures (4,515 )   (5,415 )
Net cash received in acquisition     1,588  
Proceeds on the sale of equipment 2,120     5,813  
Net cash (used in) provided by investing activities (2,395 )   1,986  
Cash flows from financing activities:      
Tax payments made on behalf of employees from withheld, vested shares of common stock (1) (885 )   (163 )
Payment of financing costs (88 )    
Payment of dividends on common stock (448 )   (440 )
Proceeds received from borrowings under our line of credit 2,000      
Repayments of debt (2,000 )    
Net cash (used in) provided by financing activities (1,421 )   (603 )
Net change in cash and cash equivalents (33,375 )   20,814  
Cash and cash equivalents at beginning of period 51,167     34,828  
Cash and cash equivalents at end of period $ 17,792     $ 55,642  


________________
(1) We adopted Accounting Standards Update (ASU) No. 2016-09 on January 1, 2017, which clarifies that cash paid by the Company to taxing authorities on behalf of an employee from the value of withheld vested shares should be classified as a financing activity in the Company’s statement of cash flows. We have reported $0.9 million within financing activities within our Statement of Cash Flows for the nine months ended September 30, 2017, and reclassified $0.2 million from cash used in operating activities to cash used in financing activities for the nine months ended September 30, 2016, to conform with the current period presentation.
   

For further information contact:

Kirk J. Meche
Chief Executive Officer
713.714.6100

David S. Schorlemer
Chief Financial Officer
713.714.6106

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Source: Gulf Island Fabrication, Inc.