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Gulf Island Fabrication Inc. (GIFI)
Q3 2008 Earnings Call
October 24, 2008 10:00 am ET
Kerry Chauvin - President and Chief Executive Officer
Robert Seibert - Chief Financial Officer
Deborah Knoblock - Investor Relations Coordinator
Jim Rollyson - Raymond James
Joe Aguilar - Johnson Rice
Joe Gibney - Capital One
Herb Bookbinder - Wachovia Securities
Robert Kosowsky - OFI Institutional
Previous Statements by GIFI
» Gulf Island Fabrication Inc. Q3 2009 Earnings Call Transcript
» Gulf Island Fabrication, Inc. Q4 2008 Earnings Call Transcript
» Gulf Island Fabrication, Inc. Q2 2008 Earnings Call Transcript
I would like to welcome everyone to Gulf Island Fabrication 2008 third quarter teleconference. Please keep in mind that any statements made in this conference that are not statements of historical facts are considered forward-looking statements. These statements are subject to factors that could cause actual results to differ materially from the results presented in the forward-looking statements.
These statements include the timing and extent of changes and the prices of crude oil and natural gas, the timing of new projects and the company’s ability to obtain them and other details that are described under cautionary statements concerning forward-looking information and elsewhere in the company’s 10-K filed March 3, 2008.
The 10-K was included as part of the company’s 2007 annual report filed with the Securities and Exchange Commission earlier this year. The company assumes no obligations to update these forward-looking statements.
Today we have Mr. Kerry Chauvin, President and CEO; and Mr. Robert Seibert, our CFO; Robin.
Thank you, Deborah. I’d like to review Gulf Island’s press release issued for the third quarter of 2008. The press release consists of two pages; page one is tax and page two is the income statement. I’d like to review page two, which is the income statement first.
The following are the results of operations for the three months ended September 30, 2008, compared to the three months ended September 30, 2007. Revenue was $92.7 million compared to $124.9 million. The cost of revenue was $86.3 million compared to $106.9 million. Gross margin was $6.3 million or 6.8% of revenue, compared to $18.0 million or 14.4% of revenue.
As mentioned in previous quarters, certain projects include costs for additions or improvements for our infrastructure that are necessary to fabricate and complete the project. Since additions or improvements provide future benefits to us, the cost to build these projects is capitalized. Thus costs removed from project costs and subsequently capitalized directly increases the estimated profit on the project.
Amounts included in project revenue that were capitalized are $207,000 compared to $1.9 million. Thus more benefit was received by the quarter ended September 30, 2007 opposed to 2008. The amounts included in project revenue mentioned above, capitalize net of depreciation expense.
General and administrative expenses were $2.1 million or 2.2% of revenue compared to $2.8 million or 2.2% of revenue. Operating income was $4.2 million compared to $15.2 million. Net interest income was $24,000 compared to $49,000. Other income expense was a loss of $42,000 and a loss of $5000 respectively. For both periods the losses were related to sales of miscellaneous equipment.
Income before taxes was $4.2 million compared to $15.3 million. Income tax expense was $1.4 million compared to $5.3 million. The income tax rates were 32.8% compared to 34.2%. Net income was $2.8 million compared to $10.0 million. Basic earnings per share were $0.20 compared to $0.71. Diluted earnings per share were $0.20 compared to $0.70.
Weighted average shares outstanding were $14.3 million shares compared to $14.2 million shares. Adjusted weighted average shares outstanding were $14.3 million shares compared to $14.3 million shares. Depreciation expense was $4.6 million compared to depreciation and amortization expense of $3.5 million. We declared and paid cash dividends of $0.10 for both quarters ended September 30, 2008 and 2007.
The following are the results of operations for the nine months ended September 30, 2008 compared to September 30, 2007. Revenue was $334.3 million compared to $371.8 million. The cost of revenue was $284.7 million compared to $331.2 million. Gross margin was $49.6 million or 14.8% of revenue, compared to $40.6 million or 10.9% of revenue.
Capitalized costs net of depreciation included in project revenue was $5.3 million compared to $4.8 million, given the larger benefit for the nine months ended September 30, 2008. General and administrative expenses were $7.3 million or 2.2% of revenue compared to $7.9 million or 2.1% of revenue. Operating income was $42.2 million compared to $32.8 million.
Net interest income was $156,000 compared to $310,000. Interest rates were considerably lower accompanied with lower cash balances available for investing. Other income expenses were losses of $97,000 and $10,000 respectively. Again, those losses for both periods were related to the sales of miscellaneous equipment.
Income before taxes was $42.3 million compared to $33.1 million. Income tax expense was $14.1 million compared to $10.7 million. The income tax rates were 33.4% compared to 32.5%. We currently expect tax rates to be 33% to 34% for the remainder of the year. Net income was $28.1 million compared to $22.3 million. Basic earnings per share were $1.98 compared to $1.58. Diluted earnings per share were $1.97 compared to $1.56.