Gulf Island Fabrication, Inc. (GIFI)

GIFI 
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Gulf Island Fabrication (GIFI)

Q1 2013 Earnings Call

April 26, 2013 10:00 am ET

Executives

Deborah Kern-Knoblock - Secretary

Kirk J. Meche - Chief Executive Officer, President, Interim Chief Financial Officer, Treasurer and Director

Analysts

Martin W. Malloy - Johnson Rice & Company, L.L.C., Research Division

John A. Allison - BB&T Corporation

Presentation

Operator

Good morning, and welcome, ladies and gentlemen, to the Gulf Island Fabrication Inc. 2013 First Quarter Earnings Release Conference Call. [Operator Instructions] 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.

Deborah Kern-Knoblock

Thank you, Tiffany. I would like to welcome everyone to Gulf Island Fabrication's 2013 First 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 13, 2013. The 10-K was included as part of the company's 2012 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. Kirk Meche, President, CEO and Interim CFO; Mrs. Carol Berger [ph], our Financial Controller; and Mr. CJ Gas [ph], our Operational Controller. Mr. Meche?

Kirk J. Meche

Thank you, Deborah, and good morning, everyone. I'd like to review Gulf Island's press release issued for the first quarter of 2013. The press release consists of 2 pages: Page 1 is text, and Page 2 is an income statement. I would like to review Page 2, which is the income statement, first.

The following are the results of operations for the 3 months ended March 31, 2013, compared to the 3 months ended March 31, 2012. Revenue was $150.4 million compared to $113.1 million. The cost of revenue was $143.7 million compared to $100.4 million. Gross margin was $6.7 million or 4.5% of revenue compared to a gross margin of $12.7 million. The decrease in gross profit was due to $84.7 million in revenue recognized from pass-through cost and an additional $28 million in revenue recognized from 2 lowest deepwater projects which have little to no gross profit recognized during the quarter. These 2 lowest deepwater projects are scheduled for delivery in the third and fourth quarters of 2013. Additionally, $2.9 million of gross profit earned during the quarter was for a management fee on a project that is on a full pass-through of cost. This project is scheduled for delivery in the second quarter of 2013.

General and administrative expenses were $2.3 million or 1.6% of revenue compared to $2.6 million or 2.3% of revenue. Operating income was $4.3 million compared to income of $10.1 million.

We had net interest expense of $63,000 compared to net interest income of $152,000 (sic) [$215,000]. The decrease in net interest income for the period ended March 31, 2013, was primarily related to the discounted accretion of a discount associated with the financing arrangement of retainer's balance that was paid in full on January 30, 2013. In addition, interest expense increased for the 3-month period ended March 31, 2013, as a result of borrowing from a revolving line of credit. There was no other income for the period ended March 31, 2013. Other income for the period ended March 31, 2012, represented a $63,000 gain resulting from the sales of miscellaneous equipment.

Income before taxes was $4.3 million compared to income of $10.3 million. Income tax expense was $1.5 million compared to a tax of $3.5 million. The income tax rates were 35% compared to 34%. Net income was $2.8 million compared to a net income of $6.8 million.

Basic and diluted earnings per share were $0.19 for the period ended March 31, 2013, and $0.47 for the period ended March 31, 2012.

Weighted average and adjusted weighted shares outstanding were 14.5 million shares for the period ending March 31, 2013. Weighted average and adjusted weighted shares outstanding were 14.4 million shares for the period ended March 31, 2012. We declared and paid cash dividends of $0.10 per share during this quarter ended March 31, 2013, and March 31, 2012.

Please refer to Page 1 of the press release for a review.

We had a revenue backlog of $453.2 million, with a labor backlog of 3.5 million man-hours remaining to work at March 31, 2013, as compared to revenue backlog of $537 million, with a labor backlog of 4.4 million man-hours remaining to work at December 31, 2012, including projects totaling 220 -- $230 million and 2 million man-hours awarded in 2013 through March 13, 2013.

The following represent selected balance sheet information for March 31, 2013, compared to December 31, 2012.

Cash and cash equivalents were $12.3 million compared to $24.9 million. Total current assets were $229.4 million compared to $173.6 million. Property, plant and equipment, net of depreciation, was $227.3 million compared to $229.2 million. Total assets were $457.4 million compared to $403.5 million.

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