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, 2018

We have structured our operations with four operating divisions, and one corporate non-operating division, which represent our reportable segments. As part of our efforts to strategically reposition the Company as discussed in Note 1, we may change how we manage the business which could result in changes to our reportable segments in future periods. Our reportable segments at September 30, 2018 are discussed below.

Fabrication Division - Our Fabrication Division fabricates offshore drilling and production platforms and other steel structures for customers in the oil and gas industry including jackets and deck sections of fixed production platforms, hull, tendon, and/or deck sections of floating production platforms (such as TLPs, SPARs, FPSOs and MinDOCs), piles, wellhead protectors, subsea templates, and various production, compressor, and utility modules along with pressure vessels. Our Fabrication Division also fabricates structures for alternative energy customers (such as the five jackets and piles we constructed for the first offshore wind power project in the U.S.) as well as modules for petrochemical and industrial facilities. We perform these activities at our fabrication yard in Houma, Louisiana. As of September 30, 2018, our Texas North Yard is held for sale and our Texas South Yard had been sold. See Note 2 for further discussion of our South Texas Properties.

Shipyard Division - Our Shipyard Division fabricates newbuild vessels and repairs various steel marine vessels including offshore supply vessels, anchor handling vessels and liftboats to support the construction and ongoing operation of offshore oil and gas production platforms, tug boats, towboats, barges, drydocks and other marine vessels. 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. In addition, we perform conversion projects that consist of lengthening vessels, modifying vessels to permit their use for a different type of activity, and other modifications to enhance the capacity or functionality of a vessel. We perform these activities at our shipyards in Houma, Jennings and Lake Charles, Louisiana.

Services Division - Our Services Division provides interconnect piping and related services for offshore platforms and inland structures, which includes sending crews to offshore platforms in the GOM 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 southeastern U.S. for various on-site construction and maintenance activities. In addition, our Services Division fabricates packaged skid units and performs various civil and drainage projects, such as pump stations, levee reinforcement, bulkheads and other work for state and local governments. We perform these services at customer facilities or at our services yard in Houma, Louisiana.

EPC Division - Our EPC Division was created during the fourth quarter 2017 to manage expected work we will perform for the SeaOne Project and other projects that may require EPC project management services. During the fourth quarter 2017, SeaOne selected us as the prime contractor for the engineering, procurement, construction, installation, commissioning and start-up operations for its SeaOne Project. This project will include execution of engineering, construction and installation of modules for an export facility in Gulfport, Mississippi, and import facilities in the Caribbean and South America. Our current activities include pricing, planning and scheduling for the project. SeaOne’s selection of the Company is non-binding and commencement of the project remains subject to a number of conditions, including agreement on terms of the engagement with SeaOne. We understand that SeaOne is in the process of securing financing for the project. We continue to enhance our internal project management capabilities through the hiring of additional personnel to service this potential project.

Corporate Division - Our Corporate Division represents expenses that do not directly relate to our four operating divisions and are not allocated to our operating divisions. Such expenses include, but are not limited to, costs related to executive management and directors' fees, clerical and administrative salaries, costs of maintaining our corporate office and costs associated with overall governance and being a publicly traded company.

We generally evaluate the performance of, and allocate resources to, our operating divisions based upon revenue, gross profit (loss) and operating income (loss). Division assets are comprised of all assets attributable to each division. Corporate administrative and overhead expenses directly related to our operating divisions, or costs related to shared services incurred by our Corporate Division on behalf of our operating divisions, are allocated to the four operating divisions. Shared services include human resources, insurance, business development, information technology and accounting. Intersegment revenue is priced at the estimated fair value of work performed.

Summarized financial information for each of our divisions for the three and nine months ended September 30, 2018 and 2017, is as follows (in thousands):



	Three Months Ended September 30, 2018
	Fabrication			Shipyard			Services		EPC			Corporate			Eliminations			Consolidated
Revenue	$	2,311		$	24,492		$	22,617	$	1,071		$	—		$	(779	)	$	49,712
Gross profit (loss)	(4,032		)	(1,764		)	3,191		(205		)	(402		)	—			(3,212		)
Operating income (loss)	(7,708		)	(2,460		)	2,486		(708		)	(2,494		)	—			(10,884		)
Total assets ⁽¹⁾	100,115			92,839			37,201		2,217			30,585			—			262,957
Depreciation and amortization expense	1,023			1,050			365		—			36			—			2,474
Capital expenditures	—			783			545		142			1			—			1,471



	Three Months Ended September 30, 2017
	Fabrication		Shipyard			Services		EPC	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 ⁽¹⁾	164,677		96,614			33,024		—	9,065			—			303,380
Depreciation and amortization expense	1,133		1,030			413		—	95			—			2,671
Capital expenditures	1,479		1,054			94		—	25			—			2,652



	Nine Months Ended September 30, 2018
	Fabrication			Shipyard			Services		EPC			Corporate			Eliminations			Consolidated
Revenue	$	28,171		$	66,677		$	66,692	$	2,026		$	—		$	(2,550	)	$	161,016
Gross profit (loss)	(5,918		)	(5,563		)	9,390		30			(1,171		)	—			(3,232		)
Operating income (loss)	(12,529		)	(7,652		)	7,189		(1,375		)	(7,698		)	—			(22,065		)
Total assets ⁽¹⁾	100,115			92,839			37,201		2,217			30,585			—			262,957
Depreciation and amortization expense	3,219			3,170			1,141		—			304			—			7,834
Capital expenditures	—			1,442			708		142			70			—			2,362



	Nine Months Ended September 30, 2017
	Fabrication			Shipyard			Services		EPC		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 ⁽¹⁾	164,677			96,614			33,024		—		9,065			—			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

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(1) Intercompany balances have been excluded.