Gulf Island Fabrication, Inc. ("Gulf Island" or the "Company")
(NASDAQ: GIFI) today reported a net loss of $5.2 million ($0.34 per
share) on revenue of $80.5 million for the second quarter 2019,
compared to a net loss of $3.0 million ($0.20 per share) on revenue
of $67.6 million for the first quarter 2019 and net income of $0.5
million ($0.04 per share) on revenue of $54.0 million for the
second quarter 2018. At June 30, 2019, the Company's cash and
short-term investments totaled $76.0 million and backlog totaled
$476.4 million.
"Results for the second quarter 2019 reflect
revenue growth on a sequential and year over year basis, continued
improvement in the utilization of our facilities, and positive
operating cash flow," said Kirk Meche, Gulf Island’s President and
Chief Executive Officer. "We also significantly added to our
backlog with the execution of contract options by Oregon State
University and the U.S. Navy, providing our highest quarter-end
backlog since 2012. In spite of these accomplishments, we
unfortunately experienced charges on two of our Shipyard projects,
which negatively impacted our quarterly results. Although I'm
disappointed in these project impacts, we completed the third and
fourth harbor tug vessels in the quarter, continued to make
progress on our remaining Shipyard projects, and commenced
construction activities on the ferries being constructed by our
Fabrication Division."
Backlog
The Company’s backlog at June 30, 2019 of $476.4
million represents an increase of $141.7 million from March 31,
2019, and an increase of $120.0 million from December 31, 2018.
Backlog by operating segment was $410.1 million for the Shipyard
Division, $53.5 million for the Fabrication Division, and $12.8
million for the Services Division. Backlog for the Shipyard
Division excludes customer options on contracts of approximately
$333.0 million, which include deliveries through 2025 should all
options be exercised. See "Non-GAAP Measures" below for the
Company's definition of Backlog.
Cash and Liquidity
The Company's cash and short-term investments at
June 30, 2019 of $76.0 million represents an increase of $5.7
million from March 31, 2019, and a decrease of $3.2 million from
December 31, 2018. The Company ended the quarter with no debt and
total working capital of $99.1 million, which includes $18.7
million of assets held for sale. On May 1, 2019, the Company
amended its $40.0 million credit facility ("Credit Agreement") to
extend its maturity to June 2021. At June 30, 2019, the
Company's total available liquidity was as follows (in
thousands):
|
Available Liquidity |
|
Total |
|
Cash and cash equivalents |
|
$ |
30,192 |
|
| Short-term investments |
|
45,791 |
|
|
Total cash, cash equivalents and short-term investments |
|
75,983 |
|
| Credit Agreement total
capacity |
|
40,000 |
|
| Outstanding letters of
credit |
|
(10,737 |
) |
|
Availability under Credit Agreement |
|
29,263 |
|
|
Total available liquidity |
|
$ |
105,246 |
|
Results of Operations(1) (in
thousands, except per share data)
| |
Three Months Ended |
|
Six Months Ended |
| |
June 30, |
|
March 31, |
|
June 30, |
|
June 30, |
|
June 30, |
| |
2019 |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
Revenue |
$ |
80,456 |
|
|
$ |
67,605 |
|
|
$ |
54,014 |
|
|
$ |
148,061 |
|
|
$ |
111,304 |
|
| Cost of revenue |
82,054 |
|
|
67,052 |
|
|
54,713 |
|
|
149,106 |
|
|
111,324 |
|
|
Gross profit (loss) |
(1,598 |
) |
|
553 |
|
|
(699 |
) |
|
(1,045 |
) |
|
(20 |
) |
| General and administrative
expense |
3,987 |
|
|
3,834 |
|
|
5,092 |
|
|
7,821 |
|
|
9,801 |
|
| Asset impairments and (gain) loss
on assets held for sale, net |
— |
|
|
(70 |
) |
|
(6,579 |
) |
|
(70 |
) |
|
(5,829 |
) |
| Other (income) expense, net |
(201 |
) |
|
71 |
|
|
64 |
|
|
(130 |
) |
|
375 |
|
|
Operating income (loss) (2) |
(5,384 |
) |
|
(3,282 |
) |
|
724 |
|
|
(8,666 |
) |
|
(4,367 |
) |
| Interest income (expense),
net |
126 |
|
|
262 |
|
|
(92 |
) |
|
388 |
|
|
(238 |
) |
|
Net income (loss) before income taxes |
(5,258 |
) |
|
(3,020 |
) |
|
632 |
|
|
(8,278 |
) |
|
(4,605 |
) |
| Income tax (expense) benefit |
10 |
|
|
(22 |
) |
|
(83 |
) |
|
(12 |
) |
|
(142 |
) |
|
Net income (loss) |
$ |
(5,248 |
) |
|
$ |
(3,042 |
) |
|
$ |
549 |
|
|
$ |
(8,290 |
) |
|
$ |
(4,747 |
) |
| Per share data: |
|
|
|
|
|
|
|
|
|
|
Basic and diluted income (loss) per share - common
shareholders |
$ |
(0.34 |
) |
|
$ |
(0.20 |
) |
|
$ |
0.04 |
|
|
$ |
(0.55 |
) |
|
$ |
(0.32 |
) |
________________
(1) See "Results of Operations by Segment" below
for results by division and discussion of the Company's realigned
segments.
(2) Operating loss for the three and six months
ended June 30, 2019 includes project charges of $2.3 and $2.0
million, respectively, associated with the harbor tug projects and
a separate Shipyard project. Operating loss for the three months
ended June 30, 2019, March 31, 2019 and June 30, 2018, and six
months ended June 30, 2019 and 2018, includes legal fees and other
costs of $1.0 million, $0.3 million, $1.1 million, $1.3 million,
and $1.3 million, respectively, associated with two customer
disputes.
EBITDA(1) (in thousands)
| |
Three Months Ended |
|
Six Months Ended |
| |
June 30, |
|
March 31, |
|
June 30, |
|
June 30, |
|
June 30, |
| |
2019 |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
Net income (loss) |
$ |
(5,248 |
) |
|
$ |
(3,042 |
) |
|
$ |
549 |
|
|
$ |
(8,290 |
) |
|
$ |
(4,747 |
) |
| Less: Income tax (expense)
benefit |
10 |
|
|
(22 |
) |
|
(83 |
) |
|
(12 |
) |
|
(142 |
) |
| Less: Interest income (expense),
net |
126 |
|
|
262 |
|
|
(92 |
) |
|
388 |
|
|
(238 |
) |
|
Operating income (loss) |
(5,384 |
) |
|
(3,282 |
) |
|
724 |
|
|
(8,666 |
) |
|
(4,367 |
) |
| Add: Depreciation and
amortization |
2,422 |
|
|
2,552 |
|
|
2,593 |
|
|
4,974 |
|
|
5,308 |
|
|
EBITDA |
$ |
(2,962 |
) |
|
$ |
(730 |
) |
|
$ |
3,317 |
|
|
$ |
(3,692 |
) |
|
$ |
941 |
|
________________
(1) EBITDA is a non-GAAP measure. See "Non-GAAP
Measures" below for the Company's definition of EBITDA.
Condensed Cash Flow Information
(in thousands)
| |
Three Months Ended |
|
Six Months Ended |
| |
June 30, |
|
March 31, |
|
June 30, |
|
June 30, |
|
June 30, |
| |
2019 |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
Net cash provided by (used in) operating activities |
$ |
5,593 |
|
|
$ |
(8,477 |
) |
|
$ |
(12,331 |
) |
|
$ |
(2,884 |
) |
|
$ |
(26,427 |
) |
| Net cash provided by (used in)
investing activities |
(25,260 |
) |
|
(11,367 |
) |
|
47,843 |
|
|
(36,627 |
) |
|
50,246 |
|
| Net cash used in financing
activities |
(39 |
) |
|
(715 |
) |
|
(10,000 |
) |
|
(754 |
) |
|
(798 |
) |
Condensed Balance Sheet
Information (in thousands)
| |
June 30, |
|
March 31, |
|
December 31, |
| |
2019 |
|
2019 |
|
2018 |
|
Cash and cash equivalents |
$ |
30,192 |
|
|
$ |
49,898 |
|
|
$ |
70,457 |
|
| Short-term investments |
45,791 |
|
|
20,341 |
|
|
8,720 |
|
| Total current assets |
177,927 |
|
|
157,366 |
|
|
159,955 |
|
| Property, plant and equipment,
net |
75,862 |
|
|
77,660 |
|
|
79,930 |
|
| Total assets |
277,591 |
|
|
258,715 |
|
|
258,290 |
|
| Total current liabilities |
78,780 |
|
|
55,350 |
|
|
56,101 |
|
| Total shareholders’
equity |
193,442 |
|
|
197,904 |
|
|
201,100 |
|
Quarterly Conference Call
Gulf Island will hold a conference call on
Tuesday, August 6, 2019 at 9:00 a.m. Central Time (10:00 a.m.
Eastern Time) to discuss the Company’s financial results. The call
will be available by webcast and can be accessed on Gulf Island’s
website at www.gulfisland.com. Participants may also join the call
by dialing 1.800.353.6461 and requesting the “Gulf Island”
conference call. A replay of the webcast will be available on the
Company's website for seven days after the call.
About Gulf Island
Gulf Island is a leading fabricator of complex
steel structures, modules and marine vessels used in energy
extraction and production, petrochemical and industrial facilities,
power generation, alternative energy and shipping and marine
transportation operations. The Company also provides project
management, installation, hookup, commissioning, repair,
maintenance and civil construction services. The Company operates
and manages its business through three operating divisions:
Fabrication, Shipyard and Services, with its corporate headquarters
located in Houston, Texas and operating facilities located in
Houma, Jennings and Lake Charles, Louisiana.
Non-GAAP Measures
This Release includes certain non-GAAP measures,
including earnings before interest, taxes, depreciation and
amortization ("EBITDA") and Backlog. The Company believes EBITDA is
a useful supplemental measure as it reflects the Company's
operating results excluding the non-cash impacts of depreciation
and amortization. Reconciliations of EBITDA to the most comparable
GAAP measure are presented under "EBITDA" above and "Results of
Operations by Segment" below. The Company believes Backlog is a
useful supplemental measure as it represents work that the Company
is contractually obligated to perform under its current contracts.
Backlog represents the unearned value of new project awards and may
differ from the value of remaining performance obligations for
contracts as determined under GAAP. Backlog at June 30,
2019 of $476.4 million includes the Company's performance
obligations of $454.5 million, plus $21.9 million of backlog
subject to a contract termination dispute with a customer to build
two multi-purpose service vessels that does not meet the criteria
to be reported as remaining performance obligations under GAAP.
Non-GAAP measures are not intended to be
replacements or alternatives to the GAAP measures, and investors
are urged to consider these non-GAAP measures in addition to, and
not in substitution for, measures prepared in accordance with GAAP.
The Company may present or calculate non-GAAP measures differently
from other companies.
Company information
| Kirk J.
Meche |
Westley S.
Stockton |
| Chief Executive Officer |
Chief Financial Officer |
| 713.714.6100 |
713.714.6100 |
Cautionary Statement
This Release contains forward-looking statements
in which we discuss our potential future performance.
Forward-looking statements, within the meaning of the safe harbor
provisions of the U.S. Private Securities Litigation Reform Act of
1995, are all statements other than statements of historical facts,
such as projections or expectations relating to oil and gas prices,
operating cash flows, capital expenditures, liquidity and tax
rates. The words “anticipates,” “may,” “can,” “plans,” “believes,”
“estimates,” “expects,” “projects,” “targets,” “intends,” “likely,”
“will,” “should,” “to be,” “potential” and any similar expressions
are intended to identify those assertions as forward-looking
statements.
We caution readers that forward-looking
statements are not guarantees of future performance and actual
results may differ materially from those anticipated, projected or
assumed in the forward-looking statements. Important factors that
can cause our actual results to differ materially from those
anticipated in the forward-looking statements include the cyclical
nature of the oil and gas industry, competition, consolidation of
our customers, timing and award of new contracts, reliance on
significant customers, financial ability and credit worthiness of
our customers, nature of our contract terms, competitive pricing
and cost overruns on our projects, adjustments to previously
reported profits or losses under the percentage-of-completion
method, weather conditions, changes in backlog estimates,
suspension or termination of projects, ability to raise additional
capital, ability to amend or obtain new debt financing or credit
facilities on favorable terms, ability to remain in compliance with
our covenants contained in our Credit Agreement, ability to
generate sufficient cash flow, ability to sell certain assets,
customer or subcontractor disputes, ability to resolve the dispute
with a customer relating to the purported termination of contracts
to build two MPSVs, operating dangers and limits on insurance
coverage, barriers to entry into new lines of business, ability to
employ skilled workers, loss of key personnel, performance of
subcontractors and dependence on suppliers, changes in trade
policies of the U.S. and other countries, compliance with
regulatory and environmental laws, lack of navigability of canals
and rivers, shutdowns of the U.S. government, systems and
information technology interruption or failure and data security
breaches, performance of partners in our joint ventures and other
strategic alliances, and other factors described in Item 1A in
our Annual Report on Form 10-K for the Year Ended December 31,
2018, as updated by subsequent filings with the U.S. Securities and
Exchange Commission.
Investors are cautioned that many of the
assumptions upon which our forward-looking statements are based are
likely to change after the forward-looking statements are made,
which we cannot control. Further, we may make changes to our
business plans that could affect our results. We caution investors
that we do not intend to update forward-looking statements more
frequently than quarterly notwithstanding any changes in our
assumptions, changes in business plans, actual experience or other
changes, and we undertake no obligation to update any
forward-looking statements.
Results of Operations by Segment (in thousands,
except for percentages)
| Fabrication
Division(1) |
Three Months Ended |
|
Six Months Ended |
| |
June 30, |
|
March 31, |
|
June 30, |
|
June 30, |
|
June 30, |
| |
2019 |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
Revenue |
$ |
22,415 |
|
|
$ |
12,631 |
|
|
$ |
9,472 |
|
|
$ |
35,046 |
|
|
$ |
26,815 |
|
| Cost of revenue |
23,092 |
|
|
13,403 |
|
|
10,596 |
|
|
36,495 |
|
|
28,466 |
|
|
Gross loss |
(677 |
) |
|
(772 |
) |
|
(1,124 |
) |
|
(1,449 |
) |
|
(1,651 |
) |
|
Gross loss percentage |
(3.0 |
)% |
|
(6.1 |
)% |
|
(11.9 |
)% |
|
(4.1 |
)% |
|
(6.2 |
)% |
| General and administrative
expense |
742 |
|
|
767 |
|
|
1,436 |
|
|
1,509 |
|
|
2,477 |
|
| Asset impairments and (gain)
loss on assets held for sale, net |
— |
|
|
(70 |
) |
|
(6,579 |
) |
|
(70 |
) |
|
(5,829 |
) |
| Other (income) expense,
net |
(208 |
) |
|
71 |
|
|
(193 |
) |
|
(137 |
) |
|
(4 |
) |
|
Operating income (loss) |
$ |
(1,211 |
) |
|
$ |
(1,540 |
) |
|
$ |
4,212 |
|
|
$ |
(2,751 |
) |
|
$ |
1,705 |
|
| |
|
|
|
|
|
|
|
|
|
|
EBITDA(2) |
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
$ |
(1,211 |
) |
|
$ |
(1,540 |
) |
|
$ |
4,212 |
|
|
$ |
(2,751 |
) |
|
$ |
1,705 |
|
|
Add: Depreciation and amortization |
891 |
|
|
967 |
|
|
1,047 |
|
|
1,858 |
|
|
2,196 |
|
|
EBITDA |
$ |
(320 |
) |
|
$ |
(573 |
) |
|
$ |
5,259 |
|
|
$ |
(893 |
) |
|
$ |
3,901 |
|
| Shipyard
Division |
Three Months Ended |
|
Six Months Ended |
| |
June 30, |
|
March 31, |
|
June 30, |
|
June 30, |
|
June 30, |
| |
2019 |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
Revenue |
$ |
37,567 |
|
|
$ |
36,587 |
|
|
$ |
23,620 |
|
|
$ |
74,154 |
|
|
$ |
42,185 |
|
| Cost of revenue |
40,479 |
|
|
36,867 |
|
|
26,396 |
|
|
77,346 |
|
|
45,984 |
|
|
Gross loss |
(2,912 |
) |
|
(280 |
) |
|
(2,776 |
) |
|
(3,192 |
) |
|
(3,799 |
) |
|
Gross loss percentage |
(7.8 |
)% |
|
(0.8 |
)% |
|
(11.8 |
)% |
|
(4.3 |
)% |
|
(9.0 |
)% |
| General and administrative
expense |
590 |
|
|
624 |
|
|
597 |
|
|
1,214 |
|
|
1,393 |
|
| Other (income) expense,
net |
62 |
|
|
— |
|
|
4 |
|
|
62 |
|
|
164 |
|
|
Operating loss |
$ |
(3,564 |
) |
|
$ |
(904 |
) |
|
$ |
(3,377 |
) |
|
$ |
(4,468 |
) |
|
$ |
(5,356 |
) |
| |
|
|
|
|
|
|
|
|
|
|
EBITDA(2) |
|
|
|
|
|
|
|
|
|
|
Operating loss |
$ |
(3,564 |
) |
|
$ |
(904 |
) |
|
$ |
(3,377 |
) |
|
$ |
(4,468 |
) |
|
$ |
(5,356 |
) |
|
Add: Depreciation and amortization |
1,047 |
|
|
1,109 |
|
|
1,051 |
|
|
2,156 |
|
|
2,120 |
|
|
EBITDA |
$ |
(2,517 |
) |
|
$ |
205 |
|
|
$ |
(2,326 |
) |
|
$ |
(2,312 |
) |
|
$ |
(3,236 |
) |
| Services
Division |
Three Months Ended |
|
Six Months Ended |
| |
June 30, |
|
March 31, |
|
June 30, |
|
June 30, |
|
June 30, |
| |
2019 |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
Revenue |
$ |
24,065 |
|
|
$ |
19,602 |
|
|
$ |
22,205 |
|
|
$ |
43,667 |
|
|
$ |
44,075 |
|
| Cost of revenue |
21,928 |
|
|
17,861 |
|
|
18,620 |
|
|
39,789 |
|
|
37,876 |
|
|
Gross profit |
2,137 |
|
|
1,741 |
|
|
3,585 |
|
|
3,878 |
|
|
6,199 |
|
|
Gross profit percentage |
8.9 |
% |
|
8.9 |
% |
|
16.1 |
% |
|
8.9 |
% |
|
14.1 |
% |
| General and administrative
expense |
464 |
|
|
452 |
|
|
762 |
|
|
916 |
|
|
1,496 |
|
| Other (income) expense,
net |
(55 |
) |
|
— |
|
|
(12 |
) |
|
(55 |
) |
|
(38 |
) |
|
Operating income |
$ |
1,728 |
|
|
$ |
1,289 |
|
|
$ |
2,835 |
|
|
$ |
3,017 |
|
|
$ |
4,741 |
|
| |
|
|
|
|
|
|
|
|
|
|
EBITDA(2) |
|
|
|
|
|
|
|
|
|
|
Operating income |
$ |
1,728 |
|
|
$ |
1,289 |
|
|
$ |
2,835 |
|
|
$ |
3,017 |
|
|
$ |
4,741 |
|
|
Add: Depreciation and amortization |
363 |
|
|
374 |
|
|
383 |
|
|
737 |
|
|
776 |
|
|
EBITDA |
$ |
2,091 |
|
|
$ |
1,663 |
|
|
$ |
3,218 |
|
|
$ |
3,754 |
|
|
$ |
5,517 |
|
| Corporate
Division |
Three Months Ended |
|
Six Months Ended |
| |
June 30, |
|
March 31, |
|
June 30, |
|
June 30, |
|
June 30, |
| |
2019 |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
Revenue (eliminations) |
$ |
(3,591 |
) |
|
$ |
(1,215 |
) |
|
$ |
(1,283 |
) |
|
$ |
(4,806 |
) |
|
$ |
(1,771 |
) |
| Cost of revenue
(eliminations) |
(3,445 |
) |
|
(1,079 |
) |
|
(899 |
) |
|
(4,524 |
) |
|
(1,002 |
) |
|
Gross loss |
(146 |
) |
|
(136 |
) |
|
(384 |
) |
|
(282 |
) |
|
(769 |
) |
|
Gross loss percentage |
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
| General and administrative
expense |
2,191 |
|
|
1,991 |
|
|
2,297 |
|
|
4,182 |
|
|
4,435 |
|
| Other (income) expense,
net |
— |
|
|
— |
|
|
265 |
|
|
— |
|
|
253 |
|
|
Operating loss |
$ |
(2,337 |
) |
|
$ |
(2,127 |
) |
|
$ |
(2,946 |
) |
|
$ |
(4,464 |
) |
|
$ |
(5,457 |
) |
| |
|
|
|
|
|
|
|
|
|
|
EBITDA(2) |
|
|
|
|
|
|
|
|
|
|
Operating loss |
$ |
(2,337 |
) |
|
$ |
(2,127 |
) |
|
$ |
(2,946 |
) |
|
$ |
(4,464 |
) |
|
$ |
(5,457 |
) |
|
Add: Depreciation and amortization |
121 |
|
|
102 |
|
|
112 |
|
|
223 |
|
|
216 |
|
|
EBITDA |
$ |
(2,216 |
) |
|
$ |
(2,025 |
) |
|
$ |
(2,834 |
) |
|
$ |
(4,241 |
) |
|
$ |
(5,241 |
) |
___________________
(1) During the first quarter 2019, the Company's
former EPC Division was operationally combined with its Fabrication
Division, and accordingly, the Company's current reportable
segments are "Fabrication", "Shipyard", "Services", and
"Corporate". The segment results for the EPC Division for the three
and six months ended June 30, 2018 were combined with the
Fabrication Division to conform to the presentation of the
Company's reportable segments for the 2019 period.
(2) EBITDA is a non-GAAP measure. See "Non-GAAP
Measures" above for the Company's definition of EBITDA.
Gulf Island Fabrication (NASDAQ:GIFI)
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