Gulf Island Fabrication, Inc. ("Gulf Island" or the "Company")
(NASDAQ: GIFI) today reported a net loss of $10.9 million ($0.73
per share) on revenue of $49.7 million for the third quarter 2018,
compared to a net loss of $3.1 million ($0.21 per share) on revenue
of $49.9 million for the third quarter 2017, and net income of $0.5
million ($0.04 per share) on revenue of $54.0 million for the
second quarter 2018. Operating cash flows for the third quarter
2018 were $7.8 million and the Company’s cash and short-term
investments totaled $54.5 million at September 30, 2018.
"Results for the third quarter 2018 reflect our
previously discussed challenges with the underutilization of our
Fabrication and Shipyard Divisions. However, awarded backlog is set
to ramp up over the next several quarters within our Shipyard
Division and we expect to realize improvement in the overall
utilization of our facilities. Our results were also impacted by
lower than desired margins due to competitive pricing on previously
awarded backlog and bad debt expense of $2.8 million for a
receivable reserve recorded during the quarter,” said Kirk Meche,
Gulf Island’s President and Chief Executive Officer. “In spite of
these challenges we had many positive accomplishments during the
quarter. Our Services Division once again delivered solid results
as demand for its services remains strong. We also increased
backlog across our Divisions, generated positive operating cash
flows, and entered into an agreement to sell our Texas North Yard
and certain associated equipment for $28.0 million.”
Backlog(1)
The Company’s revenue backlog was $370.3 million
at September 30, 2018, which includes deliveries through 2021, and
represents an increase of $33.8 million from June 30, 2018. Backlog
by operating segment at September 30, 2018, was $313.1 million for
Shipyard, $44.7 million for Fabrication, $11.7 million for Services
and $0.8 million for EPC. Backlog excludes approximately $28.4
million of new project awards received subsequent to September 30,
2018, through November 8, 2018. Backlog also excludes options on
contracts of approximately $534.0 million, which include deliveries
through 2025 should all options be exercised._____________
| (1) |
Backlog, a
non-GAAP financial measure, provides useful information to
investors. Backlog includes future performance obligations at
September 30, 2018, of $340.2 million, as defined by generally
accepted accounting principles in the United States ("GAAP"), plus
$30.1 million subject to a contract termination dispute with a
customer to build two MPSVs that does not meet the criteria to be
reported as future performance obligations under GAAP. Pending
resolution of the dispute, the Company has ceased all work and the
partially completed vessels and associated equipment and materials
remain at its shipyard in Houma, Louisiana. |
Cash and Liquidity
The Company generated $7.8 million in operating
cash flows during the third quarter 2018, and at September 30,
2018, had cash and short-term investments of $54.5 million and no
debt. Working capital at September 30, 2018, totaled $124.0 million
and includes $42.7 million of assets held for sale. During the
third quarter 2018, the Company amended its $40.0 million Credit
Agreement to extend its maturity to June 2020 and at
September 30, 2018, the Company's total available liquidity
was as follows:
|
Available Liquidity |
|
Total |
| |
|
(in thousands) |
| Cash and cash
equivalents |
|
$ |
45,020 |
|
| Short-term investments
(1) |
|
9,494 |
|
| Total cash, cash
equivalents and short-term investments |
|
54,514 |
|
| Credit Agreement
capacity |
|
40,000 |
|
| Less: Outstanding
letters of credit |
|
2,475 |
|
| Availability under
Credit Agreement |
|
37,525 |
|
| Total
available liquidity |
|
$ |
92,039 |
|
_____________
| (1) |
Short-term
investments include U.S. Treasuries and other investment-grade
commercial paper with original maturity dates of six months or less
that are traded on active markets with quoted prices. |
Condensed Cash Flow
Information
| |
Three months ended September 30, |
|
Nine months ended September 30, |
| |
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
| |
(in thousands) |
| Net cash provided by
(used in) operating activities |
$ |
7,761 |
|
|
$ |
(1,623 |
) |
|
$ |
(18,666 |
) |
|
$ |
(29,559 |
) |
| Net cash provided by
(used in) investing activities |
5,296 |
|
|
(2,691 |
) |
|
55,542 |
|
|
(2,395 |
) |
| Net cash used in
financing activities |
(41 |
) |
|
(177 |
) |
|
(839 |
) |
|
(1,421 |
) |
Condensed Balance Sheet
Information
| |
September 30, 2018 |
|
December 31, 2017 |
|
|
|
| |
(in thousands) |
| |
|
|
| Cash and cash
equivalents |
$ |
45,020 |
|
|
$ |
8,983 |
|
| Short-term
investments |
9,494 |
|
|
— |
|
| Total current
assets |
176,328 |
|
|
179,164 |
|
| Property, plant and
equipment, net |
80,707 |
|
|
88,899 |
|
| Total assets |
262,957 |
|
|
270,840 |
|
| Total current
liabilities |
52,297 |
|
|
48,665 |
|
| Total shareholders’
equity |
205,136 |
|
|
219,493 |
|
| |
|
|
|
|
|
Quarterly Earnings Conference
Call
Gulf Island management will hold a conference
call on Friday, November 9, 2018, at 9:00 a.m. Central Time (10:00
a.m. Eastern Time) to discuss the Company’s financial results for
the third quarter 2018. The call will be available by webcast which
can be accessed on Gulf Island’s website at www.gulfisland.com.
Participants may also join the conference call by dialing
1.800.289.0438 and requesting the “Gulf Island” conference call. A
digital replay of the call will be available from a link on our
Company's website two hours after the call and ending November 17,
2018.
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 for EPC projects along with installation, hookup,
commissioning and repair and maintenance services. In addition, the
Company performs civil, drainage and other work for state and local
governments. The Company operates and manages its business through
four operating divisions: Fabrication, Shipyard, Services and EPC,
with its corporate headquarters located in Houston, Texas and
fabrication facilities located in Houma, Jennings and Lake Charles,
Louisiana.
| Company
information:Kirk J. MecheChief Executive
Officer713.714.6100 |
Investor Relations:Westley S. StocktonChief
Financial Officer713.714.6106 |
| |
|
CAUTIONARY STATEMENT
This press release contains forward-looking
statements. Forward-looking statements are all statements other
than statements of historical facts, such as projections or
expectations relating to such topics as 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, changes in backlog estimates,
suspension or termination of projects, timing and award of new
contracts, financial ability and credit worthiness of our customers
and consolidation of our customers, competitive pricing and cost
overruns, entry into new lines of business, ability to raise
additional capital, ability to sell certain assets, advancement on
the SeaOne Project, ability to resolve dispute with a customer
relating to a purported termination of contracts to build MPSVs,
ability to remain in compliance with our covenants contained in our
credit agreement, ability to employ skilled workers, operating
dangers and limits on insurance coverage, weather conditions,
competition, customer disputes, adjustments to previously reported
profits under the percentage-of-completion method, loss of key
personnel, compliance with regulatory and environmental laws,
ability to utilize navigation canals, performance of
subcontractors, systems and information technology interruption or
failure and data security breaches and other factors described in
more detail in “Risk Factors” in Item 1A of our annual report on
Form 10-K for the year ended December 31, 2017, as updated by our
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.
GULF ISLAND FABRICATION,
INC.CONSOLIDATED STATEMENTS OF
OPERATIONS(UNAUDITED)(in thousands, except per share
data)
| |
Three Months Ended |
|
Nine months ended |
| |
September 30, |
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
| |
2018 |
|
2017 |
|
2018 |
|
2018 |
|
2017 |
| Revenue (1) |
$ |
49,712 |
|
|
$ |
49,884 |
|
|
$ |
54,014 |
|
|
$ |
161,016 |
|
|
$ |
133,745 |
|
| Cost of revenue |
52,924 |
|
|
50,378 |
|
|
54,713 |
|
|
164,248 |
|
|
150,755 |
|
| Gross
loss |
(3,212 |
) |
|
(494 |
) |
|
(699 |
) |
|
(3,232 |
) |
|
(17,010 |
) |
| General and
administrative expenses |
7,672 |
|
|
4,370 |
|
|
5,092 |
|
|
17,473 |
|
|
12,940 |
|
| Asset impairment |
— |
|
|
— |
|
|
610 |
|
|
1,360 |
|
|
389 |
|
| Operating
loss |
(10,884 |
) |
|
(4,864 |
) |
|
(6,401 |
) |
|
(22,065 |
) |
|
(30,339 |
) |
| Interest income
(expense), net |
72 |
|
|
(45 |
) |
|
(92 |
) |
|
(166 |
) |
|
(262 |
) |
| Other income (expense),
net |
140 |
|
|
38 |
|
|
7,125 |
|
|
6,954 |
|
|
(209 |
) |
| Net
income (loss) before income taxes |
(10,672 |
) |
|
(4,871 |
) |
|
632 |
|
|
(15,277 |
) |
|
(30,810 |
) |
| Income taxes
(benefit) |
277 |
|
|
(1,761 |
) |
|
83 |
|
|
419 |
|
|
(10,322 |
) |
| Net
income (loss) |
$ |
(10,949 |
) |
|
$ |
(3,110 |
) |
|
$ |
549 |
|
|
$ |
(15,696 |
) |
|
$ |
(20,488 |
) |
| Per share data: |
|
|
|
|
|
|
|
|
|
| Basic and
diluted earnings (loss) per share - common shareholders |
$ |
(0.73 |
) |
|
$ |
(0.21 |
) |
|
$ |
0.04 |
|
|
$ |
(1.05 |
) |
|
$ |
(1.38 |
) |
| Cash
dividends declared per common share |
$ |
— |
|
|
$ |
0.01 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
0.03 |
|
________________
| (1) |
Revenue
includes non-cash amortization of deferred revenue related to
values assigned to contracts in a previous acquisition of $15,000,
$0.5 million and $0.1 million for the three months ended
September 30, 2018 and 2017 and June 30, 2018, respectively,
and $0.5 million and $2.4 million for the nine months ended
September 30, 2018 and 2017, respectively. |
Operating Results by Segment
The Company has structured its operations with
four operating divisions and one corporate non-operating division,
which represent its reportable segments. The Company's EPC Division
was created in December 2017 to manage work it expects to perform
for the SeaOne Project and other projects that may require EPC
project management services. The Company's results of operations by
segment for the three and nine months ended September 30, 2018 and
2017, are presented below (in thousands, except for
percentages).
|
Fabrication |
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
| |
2018 |
|
2017 |
|
2018 |
|
2017 |
| Revenue |
$ |
2,311 |
|
|
$ |
18,318 |
|
|
$ |
28,171 |
|
|
$ |
42,517 |
|
| Gross profit
(loss) |
(4,032 |
) |
|
1,250 |
|
|
(5,918 |
) |
|
216 |
|
| Gross
profit (loss) percentage |
(174.5 |
)% |
|
6.8 |
% |
|
(21.0 |
)% |
|
0.5 |
% |
| General and
administrative expenses |
3,676 |
|
|
778 |
|
|
5,251 |
|
|
2,432 |
|
| Asset impairment |
— |
|
|
— |
|
|
1,360 |
|
|
— |
|
| Operating income
(loss) |
(7,708 |
) |
|
472 |
|
|
(12,529 |
) |
|
(2,216 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
Shipyard |
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
| |
2018 |
|
2017 |
|
2018 |
|
2017 |
| Revenue |
$ |
24,492 |
|
|
$ |
15,074 |
|
|
$ |
66,677 |
|
|
$ |
51,798 |
|
| Gross loss |
(1,764 |
) |
|
(3,504 |
) |
|
(5,563 |
) |
|
(19,061 |
) |
| Gross
loss percentage |
(7.2 |
)% |
|
(23.2 |
)% |
|
(8.3 |
)% |
|
(36.8 |
)% |
| General and
administrative expenses |
696 |
|
|
888 |
|
|
2,089 |
|
|
2,835 |
|
| Asset impairment |
— |
|
|
— |
|
|
— |
|
|
389 |
|
| Operating loss |
(2,460 |
) |
|
(4,392 |
) |
|
(7,652 |
) |
|
(22,285 |
) |
|
Services |
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
| |
2018 |
|
2017 |
|
2018 |
|
2017 |
| Revenue |
$ |
22,617 |
|
|
$ |
17,651 |
|
|
$ |
66,692 |
|
|
$ |
43,758 |
|
| Gross profit |
3,191 |
|
|
1,912 |
|
|
9,390 |
|
|
2,335 |
|
| Gross
profit percentage |
14.1 |
% |
|
10.8 |
% |
|
14.1 |
% |
|
5.3 |
% |
| General and
administrative expenses |
705 |
|
|
695 |
|
|
2,201 |
|
|
2,008 |
|
| Operating income |
2,486 |
|
|
1,217 |
|
|
7,189 |
|
|
327 |
|
|
EPC |
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
| |
2018 |
|
2017 |
|
2018 |
|
2017 |
| Revenue |
$ |
1,071 |
|
|
$ |
— |
|
|
$ |
2,026 |
|
|
$ |
— |
|
| Gross profit
(loss) |
(205 |
) |
|
— |
|
|
30 |
|
|
— |
|
| Gross
profit (loss) percentage |
(19.1 |
)% |
|
|
n/a |
|
|
1.5 |
% |
|
|
n/a |
|
| General and
administrative expenses |
503 |
|
|
— |
|
|
1,405 |
|
|
— |
|
| Operating loss |
(708 |
) |
|
— |
|
|
(1,375 |
) |
|
— |
|
|
Corporate |
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
| |
2018 |
|
2017 |
|
2018 |
|
2017 |
| Revenue |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
| Gross loss |
(402 |
) |
|
(152 |
) |
|
(1,171 |
) |
|
(500 |
) |
| Gross
loss percentage |
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
| General and
administrative expenses |
2,092 |
|
|
2,009 |
|
|
6,527 |
|
|
5,665 |
|
| Operating loss |
(2,494 |
) |
|
(2,161 |
) |
|
(7,698 |
) |
|
(6,165 |
) |
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