Gulf Island Fabrication, Inc. (GIFI)

GIFI 
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Gulf Island Fabrication, Inc. (GIFI)

Q4 2008 Earnings Call Transcript

March 6, 2009 10:00 am ET

Executives

Deborah Knoblock – IR Coordinator

Robin Seibert – CFO, VP Finance & Treasurer

Kerry Chauvin – Chairman and CEO

Analysts

Jim Rollyson – Raymond James

Herb Buchbinder – Wachovia

Joe Agular – Johnson Rice

Katherine Schmidt [ph] – Cecille Mercurier [ph]

Presentation

Operator

Good morning and welcome, ladies and gentlemen, to the Gulf Island Fabrication 2008 fourth quarter release earnings conference call. All participants will be in a listen-only mode for the duration of the presentation. This call is being recorded. At this time, I would like to turn the conference over to Ms. Deborah Knoblock for opening remarks and introductions. Deborah, please go ahead, ma'am.

Deborah Knoblock

I would like to welcome everyone to Gulf Island Fabrication's 2008 fourth quarter teleconference. Please keep in mind that any statements made in this conference that are not statements of historical fact are considered forward-looking statements. These statements are subject to factors that could cause actual results to differ materially from the results predicted in the forward-looking statements.

These factors include the timing and extent of changes in 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 obligation to update these forward-looking statements.

Today we have Mr. Kerry Chauvin, Chairman and CEO; Mr. Kirk Meche, President and COO; and Mr. Robin Seibert, our CFO. Robin?

Robin Seibert

Thank you, Deborah. I would like to review Gulf Island's press release issued for the fourth quarter of 2008. The press release consists of two pages. Page one is tax, and page two is an 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 December 31, 2008 compared to the three months ended December 31, 2007. Revenue was $86.2 million compared to $100.9 million. The cost of revenue was $83.5 million compared to $84.7 million. Gross margin was $2.7 million, or 3.1% of revenue, compared to $16.2 million, or 16.0% of revenue.

As mentioned in previous quarters, certain projects include cost for additions or improvements to our infrastructure that are necessary to fabricate or complete a project. Since these additions or improvement provide future benefit 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 $63,000 compared to $3.5 million, thus more beneficial to the quarter-ended December 31, 2007. The amounts included in project revenue mentioned above were capitalized net of depreciation expense.

General and administrative expenses were $2.1 million, or 2.4% of revenue, compared to $2.5 million, or 2.5% of revenue. Operating income was $621,000 compared to $13.7 million. Net interest income was $16,000 compared to $74,000. Income before taxes was $637,000 compared to $13.8 million. Income tax benefit was $237,000 compared to an expense of $4.9 million. The income tax rates were 37.2% benefit compared to 35.8% expense. The fourth quarter adjustment for the tax rate was related to the extension and retroactive application of the federal work opportunity tax credits.

Basic earnings per share were $0.06 compared to $0.62. Diluted earnings per share were $0.06 compared to $0.62. 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 $4.4 million compared to depreciation expense of $3.7 million. We declared and paid cash dividends of $0.10 per share for both quarters ended December 31, 2008 and 2007.

The following are the results of operations for the 12 months ended December 31, 2008 compared to December 31, 2007. Revenue was $420.5 million compared to $472.7 million. The cost of revenue was $368.2 million compared to $415.9 million. Gross margin was $52.3 million, or 12.4% of revenue, compared to $56.8 million, or 12.0% of revenue.

Capitalized costs net of depreciation included in project revenue was $5.3 million compared to $8.3 million, again providing a larger benefit for the 12 months ended December 31, 2007. General and administrative expenses were at $9.5 million, or 2.2% of revenue, compared to $10.4 million, or 2.2% of revenue.

Operating income was $42.8 million compared to $46.5 million. Net interest income was $172,000 compared to $384,000. Interest rates were considerably lower, accompanied with lower cash balances available for investing. Other income/expense were losses of $97,000 and $10,000 respectively. Losses for both periods were for the sale of miscellaneous equipment.

Income before taxes was $42.9 million compared to $46.9 million. Income tax expense was $13.9 million compared to $15.7 million. The income tax rates were 32.4% compared to 33.5%. Net income was $29.0 million compared to $31.2 million. Basic earnings per share were $2.04 compared to $2.20. Diluted earnings per share were $2.03 compared to $2.18.

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