Gulf Island Fabrication, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

SEGMENT DISCLOSURES

SEGMENT DISCLOSURES

9 Months Ended

Sep. 30, 2017

We have structured our operations with three operating divisions and a corporate non-operating division. Beginning in 2017, management reduced its allocation of corporate administrative costs and overhead expenses from its corporate, non-operating division to its operating divisions in order to individually evaluate corporate administrative costs and overhead within our Corporate division as well as to not overly burden our operating divisions with costs that do not directly relate to their operations. Accordingly, a significant portion of our corporate administrative costs and overhead expenses are retained within the results of our corporate division. In addition, we have also allocated certain personnel previously included in the operating divisions to our 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. Our operating divisions and Corporate division are discussed below.

Fabrication - Our Fabrication division primarily fabricates structures such as offshore drilling and production platforms and other steel structures for customers in the oil and gas industries including jackets and deck sections of fixed production platforms along with pressure vessels. Our Fabrication division also fabricates structures for alternative energy customers (such as the five jackets and piles we constructed for a shallow water wind turbine project off the coast of Rhode Island during 2015) as well as modules for an LNG facility. We have historically performed these activities out of our fabrication yards in Houma, Louisiana and formerly out of our fabrication yards in Aransas Pass and Ingleside, Texas.

Shipyards - Our Shipyards division primarily fabricates and repairs marine vessels including offshore supply vessels, anchor handling vessels, lift boats, tugboats and towboats. Our Shipyards division also constructs and owns drydocks to lift marine vessels out of the water in order to make repairs or modifications. Our marine repair activities include steel repair, blasting and painting services, electrical systems repair, machinery and piping system repairs and propeller, shaft and rudder reconditioning. Our Shipyards division also performs conversion projects that consist of lengthening or modifying the use of existing vessels to enhance their capacity or functionality. We perform these activities out of our facilities in Houma, Jennings and Lake Charles, Louisiana.

Services - Our Services division primarily provides interconnect piping services on offshore platforms and inshore structures. Interconnect piping services involve sending employee crews to offshore platforms in the Gulf of Mexico to perform welding and other activities required to connect production equipment, service modules and other equipment on a platform. We also contract with oil and gas companies that have platforms and other structures located in the inland lakes and bays throughout the Southeast for various on-site construction and maintenance activities. In addition, our Services division can fabricate packaged skid units and construct various municipal and drainage projects, such as pump stations, levee reinforcement, bulkheads and other projects for state and local governments.

Corporate - Our Corporate division primarily includes expenses that do not directly relate to the operations or shared services provided to our three operating divisions. Expenses for shared services, which include human resources, insurance, business development, accounting salaries, etc., are allocated to the operating divisions. Expenses that are not allocated include, but are not limited to, costs related to executive management and directors' fees, clerical and administrative salaries, costs of maintaining the corporate office and costs associated with being a publicly traded company and its overall governance.

We generally evaluate the performance of, and allocate resources to, our segments based upon gross profit (loss) and operating income (loss). Segment assets are comprised of all assets attributable to each segment. Corporate administrative costs and overhead are allocated to our three operating divisions for expenses that directly relate to the operations or relate to shared services as discussed above. During 2016, we allocated substantially all of our corporate administrative costs and overhead to our three operating divisions. We have recast our 2016 segment data below in order to conform to the current period presentation. Intersegment revenues are priced at the estimated fair value of work performed. Summarized financial information concerning our segments as of and for the three and nine months ended September 30, 2017 and 2016, is as follows (in thousands):



	Three Months Ended September 30, 2017
	Fabrication		Shipyards ⁽¹⁾			Services		Corporate			Eliminations			Consolidated
Revenue	$	18,318	$	15,074		$	17,651	$	—		$	(1,159	)	$	49,884
Gross profit (loss)	1,250		(3,504		)	1,912		(152		)	—			(494		)
Operating income (loss)	472		(4,392		)	1,217		(2,161		)	—			(4,864		)
Total assets	205,463		96,614			100,820		364,016			(463,533		)	303,380
Depreciation and amortization expense	1,133		1,030			413		95			—			2,671
Capital expenditures	1,479		1,054			94		25			—			2,652



	Three Months Ended September 30, 2016
	Fabrication			Shipyards ⁽¹⁾		Services		Corporate			Eliminations			Consolidated
Revenue	$	22,311		$	23,060	$	20,928	$	—		$	(915	)	$	65,384
Gross profit (loss)	601			1,945		2,918		(205		)	—			5,259
Operating income (loss)	(284		)	477		1,975		(1,995		)	—			173
Total assets	285,320			75,779		100,781		332,617			(457,285		)	337,212
Depreciation and amortization expense	4,637			1,183		443		123			—			6,386
Capital expenditures	1,228			318		565		14			—			2,125



	Nine Months Ended September 30, 2017
	Fabrication			Shipyards ⁽¹⁾			Services		Corporate			Eliminations			Consolidated
Revenue	$	42,517		$	51,798		$	43,758	$	—		$	(4,328	)	$	133,745
Gross profit (loss)	216			(19,061		)	2,335		(500		)	—			(17,010		)
Operating income (loss)	(2,216		)	(22,285		)	327		(6,165		)	—			(30,339		)
Total assets	205,463			96,614			100,820		364,016			(463,533		)	303,380
Depreciation and amortization expense	5,420			3,034			1,266		421			—			10,141
Capital expenditures	2,327			1,872			199		117			—			4,515



	Nine Months Ended September 30, 2016
	Fabrication		Shipyards ⁽¹⁾		Services		Corporate			Eliminations			Consolidated
Revenue	$	70,436	$	86,553	$	76,179	$	—		$	(2,304	)	$	230,864
Gross profit (loss)	4,564		9,742		11,158		(439		)	—			25,025
Operating income (loss)	1,743		5,524		8,696		(5,571		)	—			10,392
Total assets	285,320		75,779		100,781		332,617			(457,285		)	337,212
Depreciation and amortization expense	14,081		3,507		1,342		332			—			19,262
Capital expenditures	2,539		534		1,612		730			—			5,415

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(1)	Revenue includes non-cash amortization of deferred revenue related to the values assigned to contracts acquired in the LEEVAC transaction 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.