UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

[X] Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934

For the fiscal year ended December 31, 1999

[_] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the transition period from to

Commission File Number 0-22303

GULF ISLAND FABRICATION, INC.
(Exact name of registrant as specified in its charter)

Louisiana 72-1147390
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

583 Thompson Road, Houma, Louisiana 70363
(Address of principal executive offices) (zip code)

(504) 872-2100
(Registrant's telephone number,
including area code)

Securities registered pursuant to Section 12(g) of the Act: Common Stock, no
par value per share.

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]

The aggregate market value of the voting stock held by non-affiliates of the
Registrant at March 2, 2000 was approximately $92,338,438.

The number of shares of the Registrant's common stock, no par value per
share, outstanding at March 2, 2000 was 11,638,400.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive Proxy Statement prepared for use in
connection with the registrant's 2000 Annual Meeting of Shareholders to be
held April 27, 2000 have been incorporated by reference into Part III of this
Form 10-K.

GULF ISLAND FABRICATION, INC.
ANNUAL REPORT ON FORM 10-K FOR
THE FISCAL YEAR ENDED DECEMBER 31, 1999

TABLE OF CONTENTS

Page
----

PART I

Items 1 and 2. Business and Properties.............................. 1
Item 3. Legal Proceedings.................................... 11
Item 4. Submission of Matters to a Vote of Security Holders.. 11
Item 4A. Executive Officers of the Registrant................. 11

PART II

Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters................................. 12
Item 6. Selected Financial Data.............................. 13
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 14
Item 7A. Quantitative and Qualitative Disclosure About Market
Risk................................................ 17
Item 8. Financial Statements and Supplementary Data.......... 17
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................. 17

PART III

Item 10. Directors and Executive Officers of the Registrant... 17
Item 11. Executive Compensation............................... 17
Item 12. Security Ownership of Certain Beneficial Owners and
Management.......................................... 18
Item 13. Certain Relationships and Related Transactions....... 18

PART IV

Item 14. Exhibits, Financial Statements Schedules, and Reports
on Form 8-K......................................... 18

GLOSSARY OF CERTAIN TECHNICAL TERMS..................................... G1
FINANCIAL STATEMENTS.................................................... F1
SIGNATURES.............................................................. S1
EXHIBIT INDEX........................................................... E1

PART I

Items 1 and 2. Business and Properties

Certain technical terms are defined in the "Glossary of Certain Technical
Terms" appearing at the end of this Report.

General

Gulf Island Fabrication, Inc. (the "Company") together with its
subsidiaries, is a leading fabricator of offshore drilling and production
platforms and other specialized structures used in the development and
production of offshore oil and gas reserves. Structures and equipment
fabricated by the Company include jackets and deck sections of fixed
production platforms; hull and deck sections of floating production platforms
(such as tension leg platforms ("TLPs")); piles, wellhead protectors, subsea
templates and various production, compressor and utility modules; and offshore
living quarters. Services provided by the Company include offshore
interconnect pipe hook-up; inshore marine construction; manufacture and repair
of pressure vessels; and steel warehousing and sales.

The Company was founded in 1985 by a group of investors, including Alden J.
"Doc" Laborde and Huey J. Wilson, and began operations at its fabrication yard
on the Houma Navigation Canal in Southern Louisiana, approximately 30 miles
from the Gulf of Mexico. The Company's primary facilities are located on 608
acres, of which 261 are currently developed for fabrication activities with
347 acres available for future expansion. These facilities allow the Company
to build jackets for installation in water depth of up to 800 feet and deck
sections for fixed or floating production platforms for use in unlimited water
depth. In addition, the Company is able to build certain hull sections of
floating production platforms, typically for use in water depth greater than
1,000 feet.

On January 2, 1997, Gulf Island Fabrication, Inc. acquired Dolphin Services,
Inc. and two related companies (collectively, "Dolphin Services"), which
perform offshore and inshore fabrication and construction services (the
"Dolphin Acquisition"), and in April 1997, completed the initial public
offering (the "Initial Public Offering") of its common stock, no par value per
share (the "Common Stock"). Effective January 1, 1998, the Company acquired
all of the outstanding shares of Southport, Inc. and its wholly owned
subsidiary Southport International, Inc. (collectively "Southport"). Southport
specializes in the fabrication of living quarters for offshore platforms. The
purchase price was $6.0 million cash, plus contingent payments of up to an
additional $5.0 million based on Southport's net income over a four-year
period ending December 31, 2001.

In April, 1998, the Company, formed a limited liability company called
MinDOC, L.L.C., to patent, design and market a deepwater floating drilling and
production concept. The Company currently owns a one-third interest in the LLC
and the balance is owned by four engineering companies. Design and marketing
of the project was pursued during the remainder of 1998. Although there have
been no sales to date, the group anticipates that as the design progresses,
the concept can be successfully marketed to the oil industry for development
of deepwater offshore oil and gas fields.

In November, 1999 the Company announced that it had formed a wholly owned
subsidiary to develop and market deepwater oil and gas production structures,
including MinDOC, the deepwater floating production concept that the Company
has a proprietary interest in. The subsidiary will be headquartered in
Houston, Texas.

Effective as of January 1, 2000, all of the operating assets, buildings and
properties owned directly by the Company were placed in Gulf Island, L.L.C., a
wholly owned subsidiary formed to conduct all of the fabrication and other
operations previously conducted directly by the Company. As a result, the
existing Gulf Island Fabrication, Inc. now serves as a holding company and
conducts all of its operations through its subsidiaries.

Description of Operations

The Company's primary activity is the fabrication of offshore drilling and
production platforms, including jackets and deck sections of fixed production
platforms, hull and deck sections of floating production platforms (such as
TLPs), piles, wellhead protectors, subsea templates and various production,
compressor and utility modules. The Company also has the ability to produce
and repair pressure vessels used in the oil and gas industry, refurbish
existing platforms and fabricate various other types of steel structures. With
its acquisition of Southport, the Company has also increased its presence in
the market for the fabrication of living quarters for installation on such
platforms.

The Company uses the latest welding and fabrication technology available,
and all of the Company's products are manufactured in accordance with industry
standards and specifications, including those published by the American
Petroleum Institute, the American Welding Society and the American Society of
Mechanical Engineers. Gulf Island Fabrication is certified as an ISO 9002
fabricator for its quality assurance programs. See "--Safety and Quality
Assurance."

Fabrication of Offshore Platforms. The Company fabricates structural
components of fixed platforms for use in the offshore development and
production of oil and gas. A fixed platform is the traditional type of
platform used for the offshore development and production of oil and gas,
although recently there has been an increase in the use of floating production
platforms and TLPs as a result of increased drilling and production activities
in deeper waters. Most fixed platforms built today can accommodate both
drilling and production operations. These combination platforms are large and
generally more costly than single-purpose structures. However, because
directional drilling techniques permit a number of wells to be drilled from a
single platform and because drilling and production can take place
simultaneously, combination platforms are often more cost effective.

The most common type of fixed platform consists of a jacket (a tubular
steel, braced structure extending from the mudline on the seabed to a point
above the water surface) which is supported on tubular pilings driven deep
into the seabed and supports the deck structure located above the level of
storm waves. The deck structure, extending above the surface of the water and
attached to the top end of the jacket, is designed to accommodate multiple
functions, including drilling, production, separating, gathering, piping,
compression, well support and crew quartering. Platforms can be joined by
bridges to form complexes of platforms for very large developments or to
improve safety by dividing functions among specialized platforms. Jacket-type
platforms are generally the most viable solution for water depths of 1,000
feet or less. Although there is no height limit to the size of the jackets
that can be fabricated at the Company's facilities, the dimensions of the
Houma Navigation Canal prevent the transportation to the Gulf of Mexico of
most jackets designed for water depths exceeding 800 feet. The Company can,
however, build decks, piping and equipment modules, living quarters, piles and
other components of platforms for installation in any water depth. Often,
customers split projects among fabricators, contracting with different
companies for the fabrication of the jacket, deck sections, living quarters
and piles for the same platform. Through the construction of these components
the Company participates in the construction of platforms requiring jackets
that are larger than those the Company can transport through the Houma
Navigation Canal.

Most of the steel used in the Company's operations arrives at the Company's
fabrication yards as steel plate. The plate is cut and rolled into tubular
sections at rolling mills in the fabrication yards. The tubular sections
(which vary in diameter, up to 12 feet) are welded together in long straight
tubes to become legs or into shorter tubes to become part of the network of
bracing that supports the legs. Various cuts and welds in the fabrication
process are made by computer-controlled equipment that operates from data
developed during the design of the structure. The Company's ability to
fabricate and assemble the large tubular sections needed for jackets built for
use in water depths over 300 feet distinguish the Company from all but two of
its domestic competitors.

Jackets are built on skidways (which are long parallel rails along which the
jacket will slide when it is transferred to a barge for towing out to sea) and
are generally built in sections so that, to the extent possible, much of their
fabrication is done on the ground. As each section of legs and bracing is
complete, large crawler

cranes pick up an entire side and "roll up" the section, which is then joined
to another uprighted section. When a jacket is complete and ready for launch,
it is pulled along the skidway onto a launch barge, which is gradually
deballasted to compensate for the weight of the structure as more of it moves
aboard the barge. Using ocean-going tugs, the barge and jacket are transported
to the offshore installation site.

Decks are built either as single structures or in sections and are installed
on location by marine construction contractors. The composition and quantity
of petroleum in the well stream generally determine the makeup of the
production deck on a processing platform. Typical deck equipment includes
crude oil pumps, gas and oil separators and gas compressors. Unlike large
jackets, which are transported in a horizontal position, decks are transported
upright and, as a result, are not subject to the width restrictions of the
Houma Navigation Canal. Therefore, the only limitation on the Company's
ability to fabricate decks is the weight capacity of the barges that transport
the decks from the Company's yard, to the installation site. Barges currently
exist that have the weight capacity and other characteristics required to
transport even the largest of the decks currently installed in the Gulf of
Mexico, and management believes that currently there are no decks installed in
the Gulf of Mexico that could not have been constructed at the Company's
facilities. While larger deck structures to be built in the future could
exceed the capacities of currently existing barges, management does not
believe that this will materially affect its share of the market for deck
construction.

The Company can also fabricate sections of, and structures used in
connection with, TLPs. TLPs consist of a deck that sits atop one or more
column-shaped hulls, which are positioned on site with vertical tendons
running from the hulls to the seabed. The tendons hold the hulls partially
submerged and are highly tensioned using the buoyancy of the hulls. This
system develops a restoring force against wave, wind and current actions in
proportion to the lateral displacement of the vessel. Wells for a TLP are
often pre-drilled through a subsea template. Long, flexible production risers,
which carry the petroleum to the deck of the TLP, are supported in tension by
mechanical tensioner machines on the platform's deck and are directly subject
to wave, wind and current forces. TLPs can be used in any water depth and are
generally better suited than fixed platforms for water depth greater than
1,000 feet.

The size of a TLP depends on a number of factors, including the intended
scope of production of the platform, the length of the production risers
connected to the platform, the size of the deck to be installed on the
platform and the water depth for which the platform is designed. The Company
can fabricate deck sections for use with TLPs of any size. The constraints of
the Houma Navigation Canal, however, limit the Company's ability to deliver
certain hulls for use with TLPs, depending on the size and weight of the hull
sections. In July 1998, the Company completed the fabrication of the deck
section and floating hull of a TLP designed for installation in 1,800 feet of
water. In August the Company completed the construction of a similar hull that
was installed in 3,200 feet of water. To the Company's knowledge, these are
the first two TLPs of this size to be constructed entirely in the United
States. With TLP's and other floating concepts as the alternative of choice
for deepwater drilling and production platforms, and the Company's
participation in this arena firmly established, the Company will participate
in the continued expansion into the deepwater areas.

The Company has fabricated subsea templates for use in connection with TLPs,
which are structures that are installed on the seabed before development
drilling begins. As exploration and drilling move into the deepwater of the
Gulf of Mexico, the Company believes that there will be increased
opportunities to fabricate subsea templates, as well as decks and other
structures, for use in connection with TLPs.

The Company also fabricates piles and other rolled goods, templates, bridges
for connecting offshore platforms, wellhead protectors, various production,
compressor and utility modules and other structures used in offshore oil and
gas production and development activities. All of the Company's products are
installed by marine construction contractors.

Through Dolphin Services, the Company also provides interconnect piping
services on offshore platforms, inshore steel and wood structure construction,
fabrication of pressure vessels and large and small packaged skid units, and
steel warehousing and sales. Interconnect piping services involve sending
employee crews to offshore

platforms that have been installed in the Gulf of Mexico in order to perform
welding and other activities required to connect production equipment, service
modules and other equipment to a platform prior to its becoming operational.
Dolphin Services also contracts with oil and gas companies that have platforms
and other structures located in the inland lakes and bays throughout the
Southeast for various on-site construction and maintenance activities. At its
existing facility, a quarter of a mile from the Company's main yard, Dolphin
Services can fabricate jackets up to 100 feet tall along with decks and other
steel structures. Dolphin Services has also been active in the refurbishment
of existing platforms. Platform operators occasionally remove platforms
previously installed in the Gulf of Mexico and return the platforms to a
fabricator for refurbishment, which usually consists of general repairs,
maintenance work and modification.

Through Southport, the Company fabricates living quarters, primarily for
offshore platforms, ranging in size from 4 to 250 beds.

Facilities and Equipment

Facilities. The Company's corporate headquarters and main fabrication yard
are located on the east bank of the Houma Navigation Canal at Houma,
Louisiana, approximately 30 miles from the Gulf of Mexico. That facility
includes approximately 140 acres with approximately 100 acres developed for
fabrication, one 13,200 square foot building that houses administrative staff,
approximately 180,000 square feet of covered fabrication area, and over 17,000
square feet of warehouse storage area and 8,000 square feet of training and
medical facilities. The main yard also has approximately 2,800 linear feet of
water frontage, of which 1,500 feet is steel bulkhead which permits outloading
of heavy structures.

On the east bank of the Houma Navigation Canal across Thompson Road from the
main fabrication yard, the Company owns a 11.3 acre facility that includes a
two-story 5,000 square feet administration building with an attached 5,300
square foot warehouse. Also located on the property in an additional two-story
2,100 square foot administration building. The property has approximately 570
linear feet of water frontage, of which 380 linear feet is steel bulkhead
which permits docking of large ocean going vessels and the outloading of heavy
loads.

The Company's west yard is located across the Houma Navigation Canal from
the main yard and includes 437 acres, with 130 acres developed for fabrication
and over 300 acres of unimproved land, which could be used for expansion. The
west yard, which has approximately 72,000 square feet of covered fabrication
area and 3,500 square feet of warehouse storage area, spans 6,750 linear feet
of the Houma Navigation Canal, of which 2,350 feet is steel bulkhead.

Dolphin Services operates from a 20-acre site located approximately a
quarter of a mile from the Company's main yard on a channel adjacent to the
Houma Navigation Canal. The facility includes a 8,400 square foot building
that houses administrative staff, approximately 14,000 square feet of covered
fabrication area, 1,500 square feet of warehouse storage area, a 10,000 square
foot blasting and coating facility and 600 linear feet of steel bulkhead.
Dolphin Services also operates a commercial steel sales division and a
pressure vessel shop. The steel sales division, which recently moved to a new
three acre facility adjacent to the Company's main yard, has expanded its
product lines to include pressure vessel plates and other products that
utilize Gulf Island , L.L.C.'s capability to process the steel by cutting,
shaping, forming and painting.

The vessel shop can manufacture pressure vessels up to eleven feet in
diameter and eight inches in thickness. The shop is equipped with a Cypress
Circle Cutter and auto core flux and submerged arc welding equipment. The
vessel shop can also accommodate the construction of a 50 ton skid unit inside
the facility.

Southport is located on a 13-acre site located in Harvey, Louisiana, a
suburb of New Orleans, on the Harvey Canal, which has access to the Gulf of
Mexico through the Intracoastal Canal. The facility includes 7,550 square feet
of administrative offices, 22,300 square feet of covered fabrication area and
1,450 linear feet of steel bulkhead.

The Company owns all of the foregoing properties.

Equipment. The Company's main yard houses its Model 34 and Model 20 plate
bending rolls, a Frye Wheelabrator grit blast system, a hydraulic plate shear,
a hydraulic press brake and various other equipment needed to build offshore
structures and fabricate steel components. The Company's west yard has a
Bertsch Model 38 plate bending roll, a computerized Vernon brace coping
machine used for cutting steel in complex geometric sections and various other
equipment used in the Company's fabrication business. The Company also
currently uses 14 crawler cranes, which range in tonnage capacity from 150 to
300 tons and service both of the Company's yards. The Company owns these
cranes which can thus avoid having to rent cranes on a monthly basis except in
times of very high activity levels. The Company has a plasma-arc cutting
system that cuts steel up to one inch thick at a rate of two hundred inches
per minute. The Company performs routine repairs and maintenance on all of its
equipment.

The Company's plate bending rolls allow it to roll and weld into tubular
pipe sections approximately 50,000 tons of plate per year. By having such
capacity at its fabrication facility, the Company is able to coordinate all
aspects of platform construction, which can reduce the risk of cost overruns,
delays in project completion, and labor costs. In addition, these facilities
allow the Company to participate as subcontractor on projects awarded to other
contractors. In January 1999 the Company commissioned a state of the art,
fully enclosed, and environmentally friendly blast and coating facility. The
facility is automated and provides blasting and coating activities in support
of the Company's fabrication projects. The design output of the facility also
allows the Company to provide blast and paint services to the local
shipbuilding industry. The use of this equipment provides the company a
competitive advantage by reducing labor costs and signifies the Company's
commitment to being a good neighbor to our community and our environment.

For use in connection with its inshore construction activities, Dolphin
Services owns three spud barges. Dolphin Services also leases three barges for
use with inshore construction activities. Each barge is equipped with a crane
with a lifting capacity of 60 to 100 tons. Dolphin Services also owns two
Manitowoc 4100 cranes with lifting capacities of 200 to 230 tons and five
smaller crawler cranes ranging from 60 to 100 tons lifting capacity. Southport
rents one crawler crane with lifting capacity of 125 tons.

Materials and Supplies

The principal materials and supplies used by the Company in its fabrication
business, standard steel shapes, steel plate, welding gases, fuel oil,
gasoline and paint, are currently available in adequate supply from many
sources. The Company does not depend upon any single supplier or source.

Safety and Quality Assurance

Management is concerned with the safety and health of the Company's
employees and maintains a stringent safety assurance program to reduce the
possibility of costly accidents. The Company's safety department establishes
guidelines to ensure compliance with all applicable state and federal safety
regulations and provides training and safety education through orientations
for new employees and subcontractors, daily crew safety meetings and first aid
and CPR training. The Company also employs two in-house medical personnel. The
Company has a comprehensive drug program and conducts periodic employee health
screenings. A safety committee, whose members consist of management
representatives and peer-elected field representatives, meet monthly to
discuss safety concerns and suggestions that could prevent accidents. The
Company also rewards its employees with safety awards every three months if
the actual workmen's compensation recordable case rate is less than a pre-
determined benchmark case rate for the three month period.

The Company fabricates to the standards of the American Petroleum Institute,
the American Welding Society, the American Society of Mechanical Engineers and
specific customer specifications. The Company uses welding and fabrication
procedures in accordance with the latest technology and industry requirements.
Training programs have been instituted to upgrade skilled personnel and
maintain high quality standards. In addition, the Company maintains on-site
facilities for the non-destructive testing of all welds, which process is
performed by an independent contractor.

Gulf Island Fabrication is certified as an ISO 9002 fabricator. ISO 9002 is
an internationally recognized verification system for quality management
overseen by the International Standard Organization based in Geneva,
Switzerland. The certification is based on a review of the Company's programs
and procedures designed to maintain and enhance quality production and is
subject to annual review and recertification. Dolphin Services and Southport
are evaluating procedures to begin the process of applying for ISO 9002
certification.

Customers and Contracting

The Company's customers are primarily major and independent oil and gas
companies. Over the past five years, sales of structures used in the Gulf of
Mexico by oil and gas companies accounted for approximately 80% of the
Company's revenue. The balance of its revenue was derived from the fabrication
of structures installed outside the Gulf of Mexico, including offshore West
Africa and Latin America.

A large portion of the Company's revenue has historically been generated by
a few customers, although not necessarily the same customers from year-to-
year. For example, the Company's largest customers (those which individually
accounted for more than 10% of revenue in a given year) collectively accounted
for 33% (Texaco, Inc., and Global Industries), 38% (Texaco, Inc. and Atlantia
Corporation), and 58% (Texaco, Inc., Atlantia Corporation and British
Petroleum Company) of revenue for fiscal 1999, 1998 and 1997, respectively. In
addition, at December 31, 1999, 40% of the Company's backlog was attributable
to two projects. Because the level of fabrication that the Company may provide
to any particular customer depends, among other things, on the size of that
customer's capital expenditure budget devoted to platform construction plans
in a particular year and the Company's ability to meet the customer's delivery
schedule, customers that account for a significant portion of revenue in one
fiscal year may represent an immaterial portion of revenue in subsequent
years.

Most of the Company's projects are awarded on a fixed-price or
alliance/partnering basis, and while customers may consider other factors,
including the availability, capability, reputation and safety record of a
contractor, price and the ability to meet a customer's delivery schedule are
the principal factors on which the Company is awarded contracts. The Company's
contracts generally vary in length from one month to twenty-four months
depending on the size and complexity of the project. Generally, the Company's
contracts and projects are subject to termination at any time prior to
completion, at the option of the customer. Upon termination, however, the
customer is generally required to pay the Company for work performed and
materials purchased through the date of termination and, in some instances,
cancellation fees.

Under fixed price contracts, the Company receives the price fixed in the
contract, subject to adjustment only for change orders approved by the
customer. As a result, the Company retains all cost savings but is also
responsible for all cost overruns. Under typical alliance/partnering
arrangements, the Company and the customer agree in advance to a target price
that includes specified levels of labor and material costs and profit margins.
If the project is completed at less cost than those targeted in the contract,
the contract price is reduced by a portion of the savings. If the cost of
completion is greater than those targeted in the contract, the contract price
is increased, but generally to the target price plus the actual incremental
cost of materials and direct labor costs. Accordingly, under
alliance/partnering arrangements, the Company has some protection from cost
overruns but also shares a portion of any cost savings with the customer.
Under cost-plus arrangements, the Company receives a specified fee in excess
of its direct labor and material cost and so is protected against cost
overruns but does not benefit directly from cost savings. Because the Company
generally prices materials as pass-through items on its contracts, the cost
and productivity of the Company's labor force are the primary factors
affecting the Company's operating costs. Consequently, it is essential that
the Company control the cost and productivity of the direct labor hours worked
on the Company's projects. As an aid to achieving this control, the Company
places a single project manager in charge of the production operations related
to each project and gives significant discretion to the project manager, with
oversight by the Company's Vice President of Operations. As an incentive to
reduce cost and increase productivity, the Company gives bonuses to its
employees totaling up to 5% of the Company's income before taxes.

Seasonality

Although high activity levels in the oil and gas industry and capacity
limitations can somewhat diminish the seasonality of the Company's operations,
the Company's operations have historically been subject to seasonal variations
in weather conditions and daylight hours. Since most of the Company's
construction activities take place outdoors, the number of direct labor hours
worked generally declines during the winter months due to an increase in rainy
and cold conditions and a decrease in daylight hours. In addition, the
Company's customers often schedule the completion of their projects during the
summer months in order to take advantage of the milder weather during such
months for the installation of their platforms. As a result, a
disproportionate portion of the Company's income has historically been earned
during the second and third quarters of the year, and the Company has
occasionally incurred losses during the first and fourth quarters of its
fiscal year.

The table below indicates for each quarter of the Company's last three
fiscal years the percentage of the annual revenue, gross profit and net
income, and the number of direct labor hours worked.

1999 1998 1997
------------------- ------------------- -------------------
1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th
Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr.
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----

Revenue................. 25% 23% 24% 28% 24% 26% 28% 22% 21% 26% 27% 26%
Gross profit............ 29% 28% 25% 18% 23% 27% 27% 23% 20% 26% 29% 25%
Net income.............. 29% 29% 26% 16% 22% 27% 29% 22% 19% 27% 30% 24%
Direct labor hours (in
000's)................. 500 459 459 433 642 697 670 606 497 542 588 523

Because of this seasonality, full year results are not likely to be a direct
multiple of any particular quarter or combination of quarters. Reductions in
industry activity levels may tend to increase the seasonality of the Company's
operations.

Competition

The offshore platform fabrication industry is highly competitive and
influenced by events largely outside of the control of offshore platform
fabrication companies. Platform fabrication companies compete intensely for
available projects, which are generally awarded on a competitive bid basis
with customers usually requesting bids on projects one to three months prior
to commencement. The Company's marketing staff contacts oil and gas companies
believed to have fabrication projects scheduled to allow the Company an
opportunity to bid for the projects. Although price and the contractor's
ability to meet a customer's delivery schedule are the principal factors in
determining which qualified fabricator is awarded a contract for a project,
customers also consider, among other things, the availability of technically
capable personnel and facility space, a fabricator's efficiency, condition of
equipment, reputation, safety record and customer relations.

The Company currently has two primary competitors, Aker Gulf Marine and J.
Ray McDermott, S.A., for the fabrication of platform jackets to be installed
in the Gulf of Mexico in water depths greater than 300 feet. In addition to
these two companies, the Company primarily competes with five other
fabricators for platform jackets for intermediate water depths from 150 feet
to 300 feet. A number of other companies compete for projects designed for
shallower waters as well as for the projects typically performed by Southport.
Certain of the Company's competitors have greater financial and other
resources than the Company.

Management believes that, while new competitors can enter the market for
smaller structures relatively easily, it is more difficult for several reasons
to enter the market for jackets designed for use in water depths greater than
300 feet, including the substantial investment required to establish an
adequate facility, the difficulty of locating a facility adjacent to an
adequate waterway due to environmental and wetland regulations, and the
limited availability of experienced supervisory and management personnel.

Management believes that the Company's competitive pricing, expertise in
fabricating offshore structures and its certification as an ISO 9002
fabricator will enable it to continue to compete effectively for projects

destined for international waters. The Company recognizes, however, that
foreign governments often use subsidies and incentives to create jobs where
oil and gas production is being developed. In addition, the additional
transportation costs that are incurred when exporting structures from the U.S.
to foreign locations may hinder the Company's ability to successfully bid for
projects against foreign competitors. Because of subsidies, import duties and
fees, taxes on foreign operators and lower wage rates in foreign countries
along with fluctuations in the value of the U.S. dollar and other factors, the
Company may not be able to remain competitive with foreign contractors for
projects designed for use in international waters as well as those designed
for use in the Gulf of Mexico.

Backlog

As of December 31, 1999 the Company's backlog was $38.9 million, all of
which management expects to be performed during 2000. Of the $38.9 million
backlog at December 31, 1999, approximately 40% was attributable to two
projects.

The Company's backlog is based on management's estimate of the direct labor
hours required to complete, and the remaining revenue to be recognized with
respect to, those projects as to which a customer has authorized the Company
to begin work or purchase materials pursuant to written contracts, letters of
intent or other forms of authorization received by our company. Often,
however, management's estimates are based on incomplete engineering and design
specifications. As engineering and design plans are finalized or changes to
existing plans are made, management's estimate of the direct labor hours
required to complete and price at completion for such projects is likely to
change. In addition, all projects currently included in the Company's backlog
are subject to termination at the option of the customer, although the
customer in that case is generally required to pay the Company for work
performed and materials purchased through the date of termination and, in some
instances, pay the Company cancellation fees.

Government and Environmental Regulation

Many aspects of the Company's operations and properties are materially
affected by federal, state and local regulation, as well as certain
international conventions and private industry organizations. The exploration
and development of oil and gas properties located on the outer continental
shelf of the United States is regulated primarily by the Minerals Management
Service (United States Department of the Interior) ("MMS"). The MMS has
promulgated federal regulations under the Outer Continental Shelf Lands Act
requiring the construction of offshore platforms located on the outer
continental shelf to meet stringent engineering and construction
specifications. Violations of these regulations and related laws can result in
substantial civil and criminal penalties as well as injunctions curtailing
operations. The Company believes that its operations are in compliance with
these and all other regulations affecting the fabrication of platforms for
delivery to the outer continental shelf of the United States. In addition, the
Company depends on the demand for its services from the oil and gas industry
and, therefore, can be affected by changes in taxes, price controls and other
laws and regulations relating to the oil and gas industry. Offshore
construction and drilling in certain areas has also been opposed by
environmental groups and, in certain areas, has been restricted. To the extent
laws are enacted or other governmental actions are taken that prohibit or
restrict offshore construction and drilling or impose environmental protection
requirements that result in increased costs to the oil and gas industry in
general and the offshore construction industry in particular, the business and
prospects of the Company could be adversely affected, although such
restrictions in the areas of the Gulf of Mexico where the Company's products
are used have not been substantial. The Company cannot determine to what
extent future operations and earnings of the Company may be affected by new
legislation, new regulations or changes in existing regulations.

The Houma Navigation Canal provides the only means of access for the
Company's products from the Company's facilities to open waters. The Houma
Navigation Canal is considered to be a navigable waterway of the United States
and, as such, is protected by federal law from unauthorized obstructions that
would hinder water-borne traffic. Federal law also authorizes federal
maintenance of the canal by the United States Corps of Engineers. The canal
requires annual dredging to maintain its water depth and, while federal
funding for this

dredging has been provided for over 30 years, no assurance that Congressional
appropriations sufficient for adequate dredging and other maintenance of the
canal will be continued indefinitely. If sufficient funding were not
appropriated for that purpose, the Houma Navigation Canal could become
impassable by barges required to transport many of the Company's products,
with the result that the Company's operations and financial position could be
materially and adversely affected.

The Company's operations and properties are subject to a wide variety of
increasingly complex and stringent foreign, federal, state and local
environmental laws and regulations, including those governing discharges into
the air and water, the handling and disposal of solid and hazardous wastes,
the remediation of soil and groundwater contaminated by hazardous substances
and the health and safety of employees. These laws may provide for "strict
liability" for damages to natural resources and threats to public health and
safety, rendering a party liable for the environmental damage without regard
to negligence or fault on the part of such party. Sanctions for noncompliance
may include revocation of permits, corrective action orders, administrative or
civil penalties and criminal prosecution. Certain environmental laws provide
for strict, joint and several liability for remediation of spills and other
releases of hazardous substances, as well as damage to natural resources. In
addition, the Company may be subject to claims alleging personal injury or
property damage as a result of alleged exposure to hazardous substances. Such
laws and regulations may also expose the Company to liability for the conduct
of or conditions caused by others, or for acts of the Company that were in
compliance with all applicable laws at the time such acts were performed.

The Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, and similar laws provide for responses to and liability for
releases of hazardous substances into the environment. Additionally, the Clean
Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, the
Safe Drinking Water Act, the Emergency Planning and Community Right to Know
Act, each as amended, and similar foreign, state or local counterparts to
these federal laws, regulate air emissions, water discharges, hazardous
substances and wastes, and require public disclosure related to the use of
various hazardous substances. Compliance with such environmental laws and
regulations may require the acquisition of permits or other authorizations for
certain activities and compliance with various standards or procedural
requirements. The Company believes that its facilities are in substantial
compliance with current regulatory standards.

The Company's operations are also governed by laws and regulations relating
to workplace safety and worker health, primarily the Occupational Safety and
Health Act and regulations promulgated thereunder. In addition, various other
governmental and quasi-governmental agencies require the Company to obtain
certain permits, licenses and certificates with respect to its operations. The
kind of permits, licenses and certificates required in the Company's
operations depend upon a number of factors. The Company believes that it has
all material permits, licenses and certificates necessary to the conduct of
its existing business.

The Company's compliance with these laws and regulations has entailed
certain additional expenses and changes in operating procedures, which
historically have resulted in approximately $150,000 in expenditures per year.
The Company believes that compliance with these laws and regulations will not
have a material adverse effect on the Company's business or financial
condition for the foreseeable future. However, future events, such as changes
in existing laws and regulations or their interpretation, more vigorous
enforcement policies of regulatory agencies, or stricter or different
interpretations of existing laws and regulations, may require additional
expenditures by the Company, which expenditures may be material.

Certain activities engaged in by employees of the Company, including
interconnect piping and other service activities conducted on offshore
platforms and activities performed on the spud barges owned by the Company,
are covered by the provisions of the Jones Act, the Death on the High Seas Act
and general maritime law, which laws operate to make the liability limits
established under state workers' compensation laws inapplicable to these
employees and, instead, permit them or their representatives to pursue actions
against the Company for damages or job related injuries, with generally no
limitations on the Company's potential liability. The Company's ownership and
operation of vessels can give rise to large and varied liability risks, such
as risks of collisions with other vessels or structures, sinkings, fires and
other marine casualties, which can result in significant claims for damages
against both the Company and third parties for, among other things, personal
injury, death, property damage, pollution and loss of business.

In addition to government regulation, various private industry
organizations, such as the American Petroleum Institute, the American Society
of Mechanical Engineers and the American Welding Society, promulgate technical
standards that must be adhered to in the fabrication process.

Insurance

The Company maintains insurance against property damage caused by fire,
flood, explosion and similar catastrophic events that may result in physical
damage or destruction to the Company's facilities. All policies are subject to
deductibles and other coverage limitations. The Company also maintains a
builder's risk policy for its construction projects and general liability
insurance. Gulf Island Fabrication, Inc. is self-insured for workers'
compensation liability except for losses in excess of $300,000 per occurrence
for Louisiana workers' compensation and for U.S. longshoreman and harbor
workers' coverage. Dolphin Services and Southport are conventionally insured
for workers' compensation liability with deductibles of $100,000 and $25,000
respectively. The Company also maintains maritime employer's liability
insurance. Although management believes that the Company's insurance is
adequate, there can be no assurance that the Company will be able to maintain
adequate insurance at rates which management considers commercially
reasonable, nor can there be any assurance that such coverage will be adequate
to cover all claims that may arise.

Employees

The Company's workforce varies based on the level of ongoing fabrication
activity at any particular time. During 1999, the number of Company employees
ranged from approximately 850 to 1,100. As of March 1, 2000, the Company had
approximately 800 employees. Although the seasonality of the Company's
operations may cause a decline in Company output during the winter months, the
Company generally does not lay off employees during those months but reduces
the number of hours worked per day by many employees to coincide with the
reduction in daylight hours during that period. None of the Company's
employees is employed pursuant to a collective bargaining agreement, and the
Company believes that its relationship with its employees is good.

The Company's ability to remain productive and profitable depends
substantially on its ability to attract and retain skilled construction
workers, primarily welders, fitters and equipment operators. In addition, the
Company's ability to expand its operations depends not only upon customer
demand but also the Company's ability to increase its labor force. The demand
for such workers is high and the supply is extremely limited, especially
during periods of high activity in the oil and gas industry. While the Company
believes its relationship with its skilled labor force is good, a significant
increase in the wages paid by competing employers could result in a reduction
in the Company's skilled labor force, increases in the wage rates paid by the
Company, or both. If either of these occurred, in the near-term, the profits
expected by the Company from work in progress could be reduced or eliminated
and, in the long-term, to the extent such wage increases could not be passed
on to the Company's customers, the production capacity of the Company could be
diminished and the growth potential of the Company could be impaired.

As part of an effort to maintain its workforce, the Company has instituted
and enhanced several incentive programs for its current employees and expanded
its training facility. The Company has facilities to train its employees on
productivity and safety matters. The Company is committed to training its
employees and offers advancement through in-house training programs.

Cautionary Statement Concerning Forward-Looking Information

Certain statements included in this report and in oral statements made from
time to time by management of the Company that are not statements of
historical fact are forward-looking statements. In this report, forward-
looking statements are included primarily in the sections entitled "Business
and Properties," "Legal Proceedings," and "Management's Discussion and
Analysis of Financial Condition and Results of Operations." The words
"expect," "believe," "anticipate," "project," "plan," "estimate," "predict"
and similar expressions often identify forward-looking statements. All such
statements are subject to factors that could cause actual results and outcomes
to differ materially from the results and outcomes predicted in the statements
and investors are cautioned not to place undue reliance upon them. These
factors include, among others, 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, competitive factors in the
heavy marine fabrication industry; and the Company's ability to successfully
complete the testing, production and marketing of the MinDOC and other
deepwater production systems and to develop and provide financing for them.

Item 3. Legal Proceedings

The Louisiana Department of Environmental Quality (the "LDEQ") has required
the Company to update its reports and modify its state air permit with respect
to emissions from chemicals that are components of the steel and paint used by
Gulf Island, L.L.C. in its fabrication operations, and Gulf Island, L.L.C. has
done so. The LDEQ has advised Gulf Island, L.L.C. that it is considering the
assessment of a penalty for exceeding permitted limits and inaccurate
reporting. Gulf Island L.L.C. does not believe that any actions of the LDEQ in
this matter will be material to its financial position or require any changes
to its operations other than the monitoring of the content of certain
purchased materials, the cost of which is expected to be negligible.

The Company is one of four defendants in a lawsuit in which the plaintiff
claims that the Company improperly installed certain attachments to a jacket
that it had fabricated for the plaintiff. The plaintiff, which has recovered
most of its out-of-pocket losses from its own insurer, seeks to recover from
the four defendants the remainder of its claimed out-of-pocket losses
(approximately $1 million) and approximately $65 million for economic losses
which it alleges resulted from the delay in oil and gas production that was
caused by these events. The trial court has issued rulings and is expected to
issue additional rulings, all of which could be appealed by the plaintiff, the
effect of which would be to prevent plaintiff's recovery of any damages from
defendants, including the Company. In connection with the additional rulings
of the court, the parties have entered into agreements that eliminate the
possibility of plaintiff's recovery of any out-of-pocket damages and preserve
for appeal only those questions bearing on plaintiff's recovery of its
economic losses from delay in production. The Company continues to defend the
case vigorously, leaving open the possibility of reasonable settlement. After
consultation with the legal counsel, the Company does not expect that the
ultimate resolution of this matter will have a material adverse effect on the
financial position or results of operations of the Company, although no
assurances can be given as to the ultimate outcome of the claims.

The Company is subject to other claims arising primarily in the normal
conduct of its business. While the outcome of such claims cannot be
determined, management does not expect that resolution of these matters will
have a material adverse effect on the financial position or results of
operations of the Company.

Item 4. Submission of Matters to a Vote of Security Holders

Not applicable.

Item 4A. Executive Officers of the Registrant

Listed below are the names, ages and offices held by each of the executive
officers of the Company as of March 1, 2000. All officers of the Company serve
at the pleasure of the Company's Board of Directors.

Name Age Position
---- --- --------

Kerry J. Chauvin.................... 52 President, Chief Executive Officer
and Director
William A. Downey................... 53 President of Gulf Island, L.L.C.
(fabrication subsidiary)
Murphy A. Bourke.................... 55 Executive Vice President--Marketing
Joseph P. Gallagher, III............ 49 Vice President--Finance, Chief
Financial Officer, and Treasurer

Kerry J. Chauvin has served as the Company's President and as a director
since the Company's inception and has served as Chief Executive Officer since
January 1990. Mr. Chauvin also served as the Company's Chief Operating Officer
from January 1989 to January 1990. He has over 20 years of experience in the
fabrication industry including serving from 1979 to 1984 as President of Delta
Fabrication, the assets of which were purchased by the Company in 1985, and as
Executive Vice President, General Manager and Manager of

Engineering with Delta Fabrication from 1977 to 1979. From 1973 to 1977, he
was employed by Delta Shipyard as Manager of New Construction and as a Project
Manager. Mr. Chauvin holds both a M.B.A. degree and a B.S. degree in
Mechanical Engineering from Louisiana State University.

William A. Downey became president of Gulf Island, L.L.C., the subsidiary
that performs the Company's major fabrication operations, effective January 1,
2000. From 1985 through 1999 Mr. Downey served as Vice President--Operations
of the Company. From 1980 to 1984, he served as the Vice President of
Engineering of Delta Fabrication. With over 20 years of experience in the
fabrication industry, he has served in various capacities with Avondale
Industries, Inc., including Senior Project Manager and Senior Cost & Design
Analyst, and has also been employed by Sanderson Enterprises, Inc. and Mission
Drilling & Exploration Corp. Mr. Downey received his B.S. degree in Industrial
Technology from Southeastern Louisiana University in 1971.

Murphy A. Bourke has been Vice President--Marketing since the Company began
operations in 1985 and, effective January 1, 2000, he became Executive Vice
President--Marketing. Mr. Bourke also served as Vice President Marketing for
Delta Fabrication from 1979 to 1984 and as the General Sales Manager of
Louisiana State Liquor Distributors, Inc., a beverage distributor, from 1972
to 1979. He holds a B.A. degree in marketing from Southeastern Louisiana
University.

Joseph P. "Duke" Gallagher, III was elected Vice President--Finance and
Chief Financial Officer of the Company in January 1997 and in that capacity he
also serves as chief accounting officer of the Company. Mr. Gallagher served
as the Company's Controller from 1985 until 1997. He has been the Company's
Treasurer since 1986 and served as the Company's Secretary from January 1993
until April 1999. From 1981 to 1985, he was employed as the Controller of TBW
Industries, Incorporated, a manufacturer of machinery and pressure vessels,
and from 1979 to 1981 as the Assistant Controller of Brock Exploration
Corporation, a publicly traded oil and gas exploration company. Mr. Gallagher,
a Certified Public Accountant, also worked as a Senior Auditor for the
accounting firm A.A. Harmon & Co., CPA's Inc. He received a B.S. degree in
Production Management in 1973 from the University of Southwestern Louisiana.

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

The Company's common stock, no par value per share (the "Common Stock"), is
traded on the Nasdaq Stock Market under the symbol "GIFI." At March 10, 2000,
the Company had approximately 5,200 holders of record of Common Stock.

The following table sets forth the high and low bid prices per share of the
Common Stock, as reported by the Nasdaq Stock Market, for each fiscal quarter
of the two most recent fiscal years.

High Low
------ ------

Fiscal Year 1999
First Quarter................................................... $11.50 $ 6.50
Second Quarter.................................................. 15.50 9.50
Third Quarter................................................... 14.50 11.75
Fourth Quarter.................................................. 13.25 8.06
Fiscal Year 1998
First Quarter................................................... $23.81 $15.50
Second Quarter.................................................. 27.50 17.25
Third Quarter................................................... 20.50 10.00
Fourth Quarter.................................................. 18.00 7.19

The Company has not paid dividends since its Initial Public Offering in
1997. The Company currently intends to retain earnings, if any, to meet its
working capital requirements and to finance the future operation and growth of
its business and, therefore, does not plan to pay cash dividends to holders of
its Common Stock in the foreseeable future.

Item 6. Selected Financial Data

The following table sets forth selected historical financial data as of the
dates and for the periods indicated. The historical financial data for each
year in the five-year period ended December 31, 1999 are derived from the
audited financial statements of the Company. The table also sets forth
unaudited pro forma financial information as of and for the years ended
December 31, 1997, and 1996 that gives effect to the termination of the
Company's S Corporation status, as further explained in the notes to the
Company's audited financial statements included elsewhere in this report. The
following information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's financial statements and notes thereto included elsewhere in
this report.

Year Ended December 31,
----------------------------------------------
1999 1998(1) 1997(2) 1996 1995
-------- -------- -------- ------- -------
(in thousands, except per share data)

Income Statement Data:
Revenue...................... $120,241 $192,372 $136,355 $79,004 $63,779
Cost of revenue.............. 105,813 156,326 112,033 68,673 60,034
-------- -------- -------- ------- -------
Gross profit................. 14,428 36,046 24,322 10,331 3,745
General and administrative
expenses.................... 4,210 6,023 4,670 2,161 1,730
Non-recurring compensation
charge(3)................... -- -- -- 500 --
-------- -------- -------- ------- -------
Operating income............. 10,218 30,023 19,652 7,670 2,015
Net interest expense
(income).................... (565) (168) 109 384 430
-------- -------- -------- ------- -------
Income before income taxes... 10,783 30,191 19,543 7,286 1,585
Income taxes................. 4,097 11,359 5,973 -- --
Cumulative deferred tax
provision................... -- -- 1,144 -- --
-------- -------- -------- ------- -------
Net income................... $ 6,686 $ 18,832 $ 12,426 $ 7,286 $ 1,585
======== ======== ======== ======= =======
Income Summary Data (Pro Forma
1997 and 1996 (unaudited)):
Income before provision for
income taxes................ $ 19,543 $ 7,286
Provision for income taxes... 5,973 --
Provision for income
taxes(4).................... 1,379 2,934
-------- -------
Net income................... $ 12,191 $ 4,352
======== =======
Basic earnings per share..... $ 0.57 $ 1.62 $ 1.15 $ 0.55
======== ======== ======== =======
Diluted earnings per share... $ 0.57 $ 1.61 $ 1.14 $ 0.55
======== ======== ======== =======
Weighted-average common
shares...................... 11,638 11,630 10,633 7,854
======== ======== ======== =======
Adjusted weighted-average
common shares............... 11,691 11,703 10,700 7,854
======== ======== ======== =======

As of December 31,
----------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- ------- -------
(in thousands)

Balance Sheet Data:
Working capital, excluding
current maturities of long-
term debt................... $ 31,787 $ 25,239 $ 17,555 $11,001 $10,048
Property, plant and
equipment, net.............. 43,664 45,418 34,505 17,735 13,483
Total assets................. 95,049 97,740 67,678 35,909 30,414
Debt, including current
maturities(5)............... -- 3,000 -- 6,187 5,545

Year Ended December 31,
----------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- ------- -------
(in thousands)

Operating Data:
Direct labor hours
worked(6)................... 1,851 2,615 2,150 1,073 920
Backlog(7)
Direct labor hours......... 682 1,079 1,341 1,038 427
Dollars.................... $38,900 $67,300 $86,300 $87,000 $22,000

- --------
(1) Includes results of operations of Southport, Inc. from January 1, 1998.
(2) Includes results of operations of Dolphin Services from January 2, 1997.
(3) In December 1996, the Company's principal shareholders sold an aggregate
of 98,000 shares of Common Stock to the Company's executive officers at a
total purchase price of $350,000. As a result, the Company was required
to recognize a non-cash expense equal to the difference between the
aggregate purchase price for such shares (adjusted for certain
distributions with respect to such shares that were paid in 1997 before
completion of the Initial Public Offering) and the estimated value of
such shares at the time of the Initial Public Offering.
(4) Includes pro forma effect for the application of federal and state income
taxes to the Company as if it were a C Corporation for tax purposes.
Prior to the Initial Public Offering, the Company elected to terminate
its S Corporation status. As a result, the Company became subject to
corporate level income taxation. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Tax
Adjustments," and Notes 1 and 3 to the Company's financial statements
included elsewhere in this Report.
(5) Information for 1996 and 1995 includes $530,000 and $434,000,
respectively, of current maturities of debt.
(6) Direct labor hours are hours worked by employees directly involved in the
production of the Company's products.
(7) The Company's backlog is based on management's estimate of the number of
direct labor hours required to complete, and the remaining revenues to be
recognized with respect to, those projects on which a customer has
authorized the Company to begin work or purchase materials.

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations

Introduction and Outlook

The Company's results of operations are affected primarily by (i) the level
of exploration and development activity maintained by oil and gas companies in
the Gulf of Mexico, and to a lesser extent, North Africa, West Africa, Latin
America, and the Middle East; (ii) the Company's ability to win contracts
through competitive bidding or alliance/partnering arrangements and (iii) the
Company's ability to manage those contracts to successful completion. The
level of exploration and development activity is related to several factors,
including trends of oil and gas prices, exploration and production companies'
expectations of future oil and gas prices, and changes in technology which
reduce costs and improve expected returns on investment, especially in subsalt
geological formations (which generally are located in 300 to 800 feet of
water) and in deepwater (800 to 6,000 feet) areas of the Gulf of Mexico. Over
the first three of the past five years, generally favorable trends in these
factors led to increased activity levels in the Gulf of Mexico. In the past
two years, however, the distraction caused by consolidation activity by the
oil and gas exploration and production companies and generally unfavorable
trends in the exploration and development activity factors have caused a
corresponding reduction in the level of oil and gas exploration and
development activity.

Development activity in water depths greater than 300 feet, where larger
structures requiring more steel tonnage are needed, has declined during 1999
and has had a negative effect on the demand on the available capacity of the
major platform fabricators serving the Gulf of Mexico, with a resulting
decline in pricing levels for their services through the end of 1999.

Demand for the Company's products and services has remained low for the past
two years. The resultant low level of backlog of projects, with reduced profit
margins, resulted in a weak performance for 1999. Revenue in 1999 was $120.2
million, a 37.5% decrease compared to 1998 revenue, and net income was $6.7
million, a 64.5% decrease compared to 1998 net income. The continued low
activity levels in the oil and gas industry is reflected in the Company's
backlog at December 31, 1999 which was $38.9 million as compared to $67.3
million at the end of 1998.

The dollar value of projects available in the market is significantly below
those levels of two to three years ago and the Company's backlog is being
similarly eroded. Competition for available projects has become more intense
and margins may remain low. Cost reduction measures have been instituted to
meet these conditions. In the longer term, demand for the Company's services
will continue to depend largely upon actual or anticipated prices for oil and
gas, which are difficult to predict. At some point, however, it is expected
that demand for the Company's products and services should recover as supplies
are reduced and the Company's customers are forced to replace them.

During 1999, the Company's workforce declined from approximately 1,100 to
850 employees. Due to recent reduced demand for the Company's products and
services, the Company does not anticipate the need to engage a material amount
of contract labor in the foreseeable future.

Most of the Company's revenue is recognized on a percentage-of-completion
basis based on the ratio of direct labor hours worked to the total estimated
direct labor hours required for completion. Accordingly, contract price and
cost estimates are reviewed monthly as the work progresses, and adjustments
proportionate to the percentage of completion are reflected in revenue for the
period when such estimates are revised. If these adjustments were to result in
a reduction of previously reported profits, the Company would have to
recognize a charge against current earnings, which may be significant
depending on the size of the project or the adjustment.

Year 2000 Issues

In prior years, the Company discussed the nature and progress of its plans
to become Year 2000 ready. In late 1999, the Company completed its remediation
and testing of systems. As a result of those planning and implementation
efforts, the Company experienced no significant disruptions in mission
critical information technology and non-information technology systems and
believes those systems successfully responded to the Year 2000 date change.
The Company expensed approximately $77,000 during 1998 in connection with
remediating its systems. The Company is not aware of any material problems
resulting from Year 2000 issues, either with its products, its internal
systems, or the products and services of third parties. The Company will
continue to monitor its mission critical computer applications and those of
its suppliers and vendors throughout the year 2000 to ensure that any latent
Year 2000 matters that may arise are addressed promptly.

Results of Operations

Comparison of the Years Ended December 31, 1999 and 1998

The Company's revenue for the year ended December 31, 1999 was $120.2
million, a decrease of 37.5%, compared to $192.4 million in revenue for the
year ended December 31, 1998. Revenue decreased as a result of low activity
levels in the oil and gas industry during 1999 which created reduced demand
and, thus, downward pressure on the pricing of the Company's goods and
services. These factors also generated a decrease in the volume of direct
labor hours applied to contracts for the year ended December 31, 1999,
compared to 1998 (1.9 million in 1999 versus 2.6 million in 1998). The
combination of reduced volume and lower pricing caused a decrease in gross
profit by 60.0% to $14.4 million (12.0% of revenue) for the year ended
December 31, 1999, compared to the $36.0 million (18.7% of revenue) of gross
profit for the year ended December 31, 1998.

Cost of revenue was $105.8 million in 1999 compared to $156.3 million in
1998. Cost of revenue consists of costs associated with the fabrication
process, including direct costs (such as direct labor hours and raw materials)
allocated to specific projects and indirect costs (such as supervisory labor,
utilities, welding supplies and equipment costs) that are associated with
production but are not directly related to a specific project. As a percentage
of revenue, these costs increased to 88.0% in 1999 compared to 81.3% in 1998.

The Company's general and administrative expenses were $4.2 million for the
year ended December 31, 1999, compared to $6.0 million for the year ended
December 31, 1998. Although the absolute dollar cost of the Company's general
and administrative expenses decreased by $1.8 million for 1999, these expenses
as a

percentage of revenue, increased to 3.5% in 1999 from 3.1% in 1998. The
savings of $1.8 million of general and administrative expenses for the year
was produced by (i) consolidating general and administrative costs associated
with the subsidiaries, (ii) reduced costs associated with decreased production
levels, and (iii) substantial reduction in incentive pay.

The Company's net interest income increased to $681,000 for 1999 compared to
$172,000 for 1998. The Company completed its Initial Public Offering in April,
1997 and used the proceeds to eliminate all of its outstanding bank debt and
provide working capital to the Company. Since that time, the Company's cash
provided by operations has increased to a level that has allowed the Company
to make capital expenditures and acquisitions with little or no debt and to
increase its cash and short term investment balances.

Other expense increased to $116,000 in 1999 from $4,000 in 1998. This
expense is primarily comprised of the Company's portion of the net loss of
MinDoc, LLC as it continues to design and market the MinDoc floating platform
concept for deepwater drilling and production.

Comparison of the Years Ended December 31, 1998 and 1997

The Company's revenue for the year ended December 31, 1998 was $192.4
million, an increase of 41.1%, compared to $136.4 million in revenue for the
year ended December 31, 1997. Revenue increased as a result of the Southport
acquisition, the on-going labor recruiting and retention efforts by the
Company which generated an increase in the volume of direct labor hours
applied to contracts and the implementation of productivity enhancing
equipment for the year ended December 31, 1998 compared to the year ended
December 31, 1997.

The increased employment levels and the utilization of labor saving
equipment enabled the Company to increase volume and profit margins. The
volume of direct labor hours applied to contracts increased to 2.6 million for
the year ended December 31, 1998 compared to 2.2 million for 1997. Gross
profit increased by 48.2% to $36.0 million (18.7% of revenue) for 1998
compared to $24.3 million (17.8% of revenue) of gross profit for the year
ended December 31, 1997.

Cost of revenue was $156.3 million and $112.0 million for the years ended
December 31, 1998 and 1997, respectively. Cost of revenue consists of cost
associated with the fabrication process, including direct cost (such as direct
labor hours, subcontractor cost and raw materials) allocated to specific jobs
and indirect cost (such as supervisory labor, utilities, welding supplies and
equipment costs) that are associated with production but are not directly
related to a specific project. As a percentage of revenue, these costs
decreased to 81.3% for 1998 compared to 82.2% for 1997.

The Company's general and administrative expenses were $6.0 million for the
year ended December 31, 1998 compared to $4.7 million for the year ended
December 31, 1997. Although general and administrative expenses increased by
$1.3 million, as a percentage of revenue, these expenses decreased to 3.1%
from 3.4% of revenue for the years ended December 31, 1998 and 1997,
respectively. This increase of $1.3 million for the year was caused by the
additional general and administrative costs associated with Southport, Inc and
the additional costs associated with increased production levels.

The Company had net interest income of $172,000 for the year ended December
31, 1998 compared to net interest expense of $118,000 for the year ended
December 31, 1997. The Company completed its Initial Public Offering in April,
1997 and used the proceeds to eliminate all of its outstanding bank debt and
provide working capital to the Company. Since that time, the Company's cash
provided by operations has increased to a level that has allowed the Company
to make capital expenditures and acquisitions with little or no debt.

The Company converted to C Corporation status on April 4, 1997. The pro
forma provision for income taxes and pro forma net income give effect to
federal and state income taxes as if all entities presented had been taxed as
C Corporations during all of 1997. Pro forma net income for 1997 excludes a
non-recurring charge of $1.1 million to record the cumulative deferred income
tax provision upon the election on April 4, 1997 to convert from S Corporation
status to C Corporation status.

Liquidity and Capital Resources

Historically the Company has funded its business activities through funds
generated from operations and borrowings under its revolving line of credit
("the Revolver"). Net cash provided by operations increased by 31.4% to $19.0
million for the year ended December 31, 1999, primarily attributable to the
reduced balances of accounts receivable and retainage related to decreased
sales. Net cash used in investing activities for the year ended December 31,
1999 was $14.3 million, primarily related to the $11.2 million purchase of
short term investments and $2.9 million of capital expenditures. The Company's
capital expenditures during 1999 were for improvements to its production
facilities and for equipment designed to increase the capacity of its
facilities and the productivity of its labor force.

The Company's Revolver provides for a revolving line of credit of up to
$20.0 million which bears interest equal to, at the Company's option, the
prime lending rate established by Bank One Corporation or LIBOR plus 1.5%. The
Revolver matures December 31, 2001 and is secured by a mortgage on the
Company's real estate, equipment and fixtures. The Company pays a fee
quarterly of three-eighths of one percent per annum on the average unused
portion of the line of credit. The Company is required to maintain certain
covenants, including balance sheet and cash flow ratios. At December 31, 1999,
the Company was in compliance with these covenants. Net cash used in financing
activities of $3.0 million during 1999 represented the payment of borrowings
under the Revolver. At December 31, 1999, the Company had no borrowings under
the Revolver.

The Company's Board of Directors has approved a capital budget of $4.1
million for 2000, including additional bulkheading and automated welding and
steel cutting systems. Management believes that its available funds, cash
generated by operating activities and funds available under the bank credit
facility will be sufficient to fund these capital expenditures and its working
capital needs. However, the Company may expand its operations through
acquisitions in the future, which may require additional equity or debt
financing.

Item 7A. Quantitative and Qualitative Disclosure About Market Risk

The Company does not have operations subject to material risk of foreign
currency fluctuations, nor does it use derivative financial instruments in its
operations or investment portfolio. The Company has a $20.0 million line of
credit with its primary commercial bank. Under the terms of the revolving
credit agreement, the Company may elect to pay interest at either a
fluctuating base rate established by the bank from time to time or at a rate
based on the rate established in the London interbank market. The Company does
not believe that it has any material exposure to market risk associated with
interest rates.

Item 8. Financial Statements and Supplementary Data

In this report the consolidated financial statements of the Company appear
on pages F-1 through F-16 and are incorporated herein by reference. See Index
to Consolidated Financial Statements on Page 18.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

Not applicable.

PART III

Item 10. Directors and Executive Officers of the Registrant

Information called for by this item will be included in the Company's
definitive Proxy Statement prepared in connection with the 2000 Annual Meeting
of Shareholders and in Item 4A of this report on Form 10-K. Such information
is incorporated herein by reference.

Item 11. Executive Compensation

Information called for by this item will be included in the Company's
definitive Proxy Statement prepared in connection with the 2000 Annual Meeting
of Shareholders and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

Item 13. Certain Relationships and Related Transactions

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) The following financial statements, schedules and exhibits are filed as
part of this Report:

(i) Financial Statements Page

Page
----

Report of Independent Auditors..................................... F-1
Consolidated Balance Sheets at December 31, 1999 and at December
31, 1998.......................................................... F-2
Consolidated Statements of Income for the Years Ended December 31,
1999, 1998 and 1997............................................... F-3
Consolidated Statements of Changes in Shareholders' Equity for the
Years Ended December 31, 1999, 1998 and 1997...................... F-4
Consolidated Statements of Cash Flows for the Years Ended December
31, 1999, 1998 and 1997........................................... F-5
Notes to Consolidated Financial Statements......................... F-6

(ii) Schedules

Other schedules have not been included because they are not required, not
applicable, immaterial or the information required has been included
elsewhere herein.

(iii) Exhibits

See Exhibit Index on page E-1. The Company will furnish to any eligible
stockholder, upon written request, a copy of any exhibit listed upon
payment of a reasonable fee equal to the Company's expenses in furnishing
such exhibit. Such requests should be addressed to Mrs. Valarae Bates,
Investor Relations, Gulf Island Fabrication, Inc., P.O. Box 310, Houma, LA
70361-0310.

GLOSSARY OF CERTAIN TECHNICAL TERMS

blasting and coating Building and equipment used to clean steel
facility: products and prepare them for coating with marine
paints and other coatings.

coping machine: A computerized machine that cuts ends of tubular
pipe sections to allow for changes in weld bevel
angles and fits onto other tubular pipe sections.

deck: The component of a platform on which development
drilling, production, separating, gathering,
piping, compression, well support, crew quartering
and other functions related to offshore oil and
gas development are conducted.

direct labor hours: Direct labor hours are hours worked by employees
directly involved in the production of the
Company's products. These hours do not include
contractor labor hours and support personnel hours
such as maintenance, warehousing and drafting.

fixed platform: A platform consisting of a rigid jacket which
rests on tubular steel pilings driven into the
seabed and which supports a deck structure above
water surface.

floating production Floating structure that supports offshore oil and
platform: gas production equipment (TLP, FPSO, SPAR).

grit blast system: System of preparing steel for coating by using
steel grit rather than sand as a blasting medium.

hydraulic plate shear: Machine that cuts steel by a mechanical system
similar to scissors.

inshore: Inside coastlines, typically in bays, lakes and
marshy areas.

ISO 9002: International Standards of Operations 9002--
Defines quality management system of procedures
and goals for certified companies.

jacket: A component of a fixed platform consisting of a
tubular steel, braced structure extending from the
mudline of the seabed to a point above the water
surface. The jacket is supported on tubular steel
pilings driven into the seabed and supports the
deck structure located above the level of storm
waves.

modules: Packaged equipment usually consisting of major
production, utility or compression equipment with
associated piping and control system.

offshore: In unprotected waters outside coastlines.

piles: Rigid tubular pipes that are driven into the
seabed to support platforms.

plasma-arc cutting system: Steel cutting system that uses an ionized gas
cutting rather than oxy-fuel system.

platform: A structure from which offshore oil and gas
development drilling and production are conducted.

pressure vessel: A metal container generally cylindrical or
spheroid, capable of withstanding various internal
pressure loadings.

spud barge: Construction barge rigged with vertical tubular or
square lengths of steel pipes that are lowered to
anchor the vessel.

skid unit: Packaged equipment usually consisting of major
production, utility or compression equipment with
associated piping and control system.

G-1

subsea templates: Tubular frames which are placed on the seabed and
anchored with piles. Usually a series of oil and
gas wells are drilled through these underwater
structures.

tension leg platform A platform consisting of a floating hull and deck
(TLP): anchored by vertical tensioned cables or pipes
connected to pilings driven into the seabed. A
tension leg platform is typically used in water
depths exceeding 1,000 feet.

G-2

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders
Gulf Island Fabrication, Inc.

We have audited the accompanying consolidated balance sheets of Gulf Island
Fabrication, Inc. as of December 31, 1999 and 1998, and the related
consolidated statements of income, shareholders' equity, and cash flows for
each of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Gulf Island
Fabrication, Inc. at December 31, 1999 and 1998, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1999 in conformity with accounting principles generally
accepted in the United States.

ERNST & YOUNG LLP

New Orleans, Louisiana
January 28, 2000

F-1

GULF ISLAND FABRICATION, INC.

CONSOLIDATED BALANCE SHEETS

December 31,
---------------
1999 1998
------- -------
ASSETS (in thousands)

Current Assets:
Cash and cash equivalents.................................... $ 4,535 $ 2,808
Short-term investments....................................... 11,215 --
Contract receivable, net..................................... 22,739 34,682
Contract retainage........................................... 3,251 5,837
Costs and estimated earnings in excess of billings on
uncompleted contracts....................................... 3,438 2,061
Prepaid expenses............................................. 749 878
Inventory.................................................... 1,227 1,137
Recoverable income taxes..................................... -- 531
------- -------
Total current assets....................................... 47,154 47,934
Property, plant and equipment, net............................. 43,664 45,418
Excess of cost over fair value of net assets acquired less
accumulated amortization of $553,025 and $278,825 at December
31, 1999 and 1998, respectively............................... 3,565 3,839
Other assets................................................. 666 549
------- -------
Total assets............................................... $95,049 $97,740
======= =======

LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------

Current liabilities:
Accounts payable............................................. $ 4,167 $ 7,151
Billings in excess of costs and estimated earnings on
uncompleted contracts....................................... 6,473 9,476
Accrued employee costs....................................... 1,790 4,085
Accrued expenses............................................. 1,475 1,983
Income taxes payable......................................... 1,462 --
------- -------
Total current liabilities.................................. 15,367 22,695
Deferred income taxes.......................................... 3,064 2,315
Notes payable.................................................. -- 3,000
------- -------
Total liabilities.......................................... 18,431 28,010
Shareholders' equity:
Preferred stock, no par value, 5,000,000 shares authorized,
no shares issued and outstanding............................ -- --
Common stock, no par value, 20,000,000 shares authorized,
11,638,400 and 11,638,400 shares issued and outstanding at
December 31, 1999 and 1998, respectively.................... 4,162 4,162
Additional paid-in capital................................... 35,326 35,124
Retained earnings............................................ 37,130 30,444
------- -------
Total shareholders' equity................................. 76,618 69,730
------- -------
Total liabilities and shareholders' equity................. $95,049 $97,740
======= =======

See accompanying notes.

F-2

GULF ISLAND FABRICATION, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

Year ended December 31,
----------------------------
1999 1998 1997
-------- -------- --------

Revenue.......................................... $120,241 $192,372 $136,355
Cost of revenue.................................. 105,813 156,326 112,033
-------- -------- --------
Gross profit..................................... 14,428 36,046 24,322
General and administrative expenses.............. 4,210 6,023 4,670
-------- -------- --------
Operating income................................. 10,218 30,023 19,652
Other expense (income):
Interest expense............................... 58 93 348
Interest income................................ (739) (265) (230)
Other, net..................................... 116 4 (9)
-------- -------- --------
(565) (168) 109
-------- -------- --------
Income before income taxes....................... 10,783 30,191 19,543
Income taxes..................................... 4,097 11,359 5,973
Cumulative deferred tax provision................ -- -- 1,144
-------- -------- --------
Net income....................................... $ 6,686 $ 18,832 $ 12,426
======== ======== ========
Pro forma data:
Income before income taxes..................... $ 19,543
Income taxes................................... 5,973
Income taxes related to operations as S
Corporation................................... 1,379
--------
Net income..................................... $ 12,191
========
Earnings per share data (pro forma 1997):
Basic.......................................... $ 0.57 $ 1.62 $ 1.15
======== ======== ========
Diluted........................................ $ 0.57 $ 1.61 $ 1.14
======== ======== ========

See accompanying notes.

F-3

GULF ISLAND FABRICATION, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(in thousands, except share data)

Common Stock Additional Total
----------------- Paid-In Retained Shareholders
Shares Amount Capital Earnings Equity
---------- ------ ---------- -------- ------------

Balance at January 1,
1997..................... 7,000,000 $1,000 $ 6,670 $15,827 $23,497
Issuance of common stock.. 4,600,000 3,133 28,195 -- 31,328
Dividends................. -- -- -- (16,641) (16,641)
Net income................ -- -- -- 12,426 12,426
---------- ------ ------- ------- -------
Balance at December 31,
1997..................... 11,600,000 4,133 34,865 11,612 50,610
Exercise of stock
options.................. 38,400 29 259 -- 288
Net income................ -- -- -- 18,832 18,832
---------- ------ ------- ------- -------
Balance at December 31,
1998..................... 11,638,400 4,162 35,124 30,444 69,730
Income tax benefit from
exercise of stock
options.................. -- -- 202 -- 202
Net income................ -- -- -- 6,686 6,686
---------- ------ ------- ------- -------
Balance at December 31,
1999..................... 11,638,400 $4,162 $35,326 $37,130 $76,618
========== ====== ======= ======= =======

See accompanying notes.

F-4

GULF ISLAND FABRICATION, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Year ended December 31,
----------------------------
1999 1998 1997
-------- -------- --------

Operating activities:
Net income..................................... $ 6,686 $ 18,832 $ 12,426
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation................................. 4,699 3,893 2,932
Amortization................................. 274 279 --
Deferred income taxes........................ 749 437 1,878
Changes in operating assets and liabilities:
Contracts receivable....................... 11,943 (5,604) (4,734)
Contract retainage......................... 2,586 (3,036) 443
Costs and estimated earnings in excess of
billings on uncompleted contracts......... (1,377) 2 458
Income taxes............................... 2,195 (478) (774)
Prepaid expenses, inventory and other
assets.................................... 39 21 883
Accounts payable........................... (2,984) (690) 832
Billings in excess of costs and estimated
earnings on uncompleted contracts......... (3,003) 1,106 3,233
Accrued employee costs..................... (2,295) 655 1,550
Accrued expenses........................... (508) (965) (804)
-------- -------- --------
Net cash provided by operating
activities.............................. 19,004 14,452 18,323
Investing activities:
Capital expenditures, net...................... (2,945) (13,192) (15,179)
Purchase of short-term investments............. (11,215) -- --
Purchase of subsidiaries, net of cash
acquired...................................... -- (5,915) (5,803)
Other.......................................... (117) (104) 253
-------- -------- --------
Net cash used in investing activities.......... (14,277) (19,211) (20,729)
Financing activities:
Proceeds from initial public offering.......... -- -- 31,328
Proceeds from issuance of notes payable........ -- 11,000 41,900
Principal payments on notes payable............ (3,000) (10,600) (48,659)
Proceeds from exercise of stock options........ -- 288 --
Dividends...................................... -- -- (16,641)
-------- -------- --------
Net cash provided by (used in) financing
activities.................................. (3,000) 688 7,928
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents..................................... 1,727 (4,071) 5,522
Cash and cash equivalents at beginning of year... 2,808 6,879 1,357
-------- -------- --------
Cash and cash equivalents at end of year......... $ 4,535 $ 2,808 $ 6,879
======== ======== ========
Supplemental cash flow information:
Interest paid.................................. $ 82 $ 100 $ 408
======== ======== ========
Income taxes paid, net of refunds.............. $ 1,153 $ 11,388 $ 5,861
======== ======== ========
Property, plant and equipment acquired through
accrued expenses.............................. $ -- $ -- $ 1,408
======== ======== ========

See accompanying notes.

F-5

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1999

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Gulf Island Fabrication, Inc. ("the Company"), located in Houma, Louisiana,
is engaged in fabrication and refurbishment of offshore oil and gas platforms
for oil and gas industry companies. The Company's principal markets are
concentrated in the offshore regions of the coast of the Gulf of Mexico. The
consolidated financial statements include the accounts of Gulf Island
Fabrication, Inc. and its wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.

On January 2, 1997, the Company acquired all outstanding shares of Dolphin
Services, Inc., Dolphin Steel Sales, Inc., and Dolphin Sales and Rentals, Inc.
for $5.9 million (the Dolphin Acquisition). The acquired corporations perform
fabrication, sandblasting, painting and construction services for offshore oil
and gas platforms in inland and offshore regions of the coast of the Gulf of
Mexico. On April 30, 1997, Dolphin Steel Sales, Inc. and Dolphin Sales and
Rentals, Inc. merged into Dolphin Services, Inc. The three corporations are
referred to hereinafter collectively as "Dolphin Services". The Dolphin
Acquisition was financed by borrowings under the Company's line of credit. The
Company acquired assets with a fair value of $9.7 million and assumed
liabilities of $3.8 million. The acquisition was accounted for under the
purchase method of accounting. Accordingly, the operations of Dolphin Services
are included in the Company's consolidated financial statements from January
2, 1997.

On February 13, 1997, the board of directors approved the filing of an
initial registration statement on Form S-1 with the Securities and Exchange
Commission to register and sell 4.6 million shares of common stock. Shortly
before closing of the offering on April 9, 1997, the Company's shareholders
elected to terminate its status as an S Corporation, and the Company became
subject to federal and state income taxes. (See Note 3.)

On April 3, 1997, the Securities and Exchange Commission declared the
Company's Registration Statement of Form S-1 (Registration No. 333-21863)
effective. On April 9, 1997, the Company sold 4.6 million common shares
pursuant to the registration statement, increasing the total shares
outstanding to 11.6 million (the Initial Public Offering). The Company
received $34.5 million from the sale of the shares and paid $3.2 million for
underwriting and other fees related to the Initial Public Offering resulting
in net proceeds from the sale of $31.3 million.

Effective January 1, 1998, the Company acquired all of the outstanding
shares of Southport, Inc. and its wholly owned subsidiary, Southport
International, Inc. (collectively, "Southport"). Southport specializes in the
fabrication of living quarters for offshore platforms. The purchase price was
$6.0 million cash, plus contingent payments of up to an additional $5.0
million based on Southport's net income over a four-year period ending
December 31, 2001. The purchase price plus $130,000 of direct expenses
exceeded the fair value of the assets acquired of $12.3 million and
liabilities assumed of $10.3 million by $4.1 million. The acquisition was
accounted for under the purchase method of accounting. Accordingly, the
operations of Southport are included in the Company's consolidated financial
statements from January 1, 1998.

In April, 1998, the Company formed a limited liability company called
MinDOC, L.L.C. ("MinDOC"), to patent, design and market a deepwater floating
drilling and production concept. The Company currently owns a one-third
interest in the LLC and the balance is owned by four engineering companies.
The Company's investment in MinDOC is accounted for under the equity method.
The Company's share of operating results is included in other income as
expense in the statements of income.

F-6

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the reported amounts of revenue and expense during
the reporting period. Actual results could differ from those estimates.

Concentration of Credit Risk

The principal customers of the Company are the major and large independent
oil and gas companies. This concentration of customers may impact the
Company's overall exposure to credit risk, either positively or negatively, in
that customers may be similarly affected by changes in economic or other
conditions. However, the Company's management believes that the portfolio of
receivables is diversified and that such diversification minimizes any
potential credit risk. Receivables are generally not collateralized.

The Company believes that its allowance for doubtful accounts is adequate
for its credit loss exposure.

Revenue Recognition

Revenue from fixed-price and cost-plus construction contracts is recognized
on the percentage-of-completion method, computed by the efforts-expended
method which measures the percentage of labor hours incurred to date as
compared to estimated total labor hours for each contract.

Contract costs include all direct material, labor and subcontract costs and
those indirect costs related to contract performance, such as indirect labor,
supplies and tools. Also included in contract costs are a portion of those
indirect contract costs related to plant capacity, such as depreciation,
insurance and repairs and maintenance. These indirect costs are allocated to
jobs based on actual direct labor hours incurred. Profit incentives are
included in revenue when their realization is reasonably assured. Claims for
extra work or changes in scope of work are included in revenue when collection
is probable. Provisions for estimated losses on uncompleted contracts are made
in the period in which such losses are determined.

The asset caption entitled "costs and estimated earnings in excess of
billings on uncompleted contracts," represents revenue recognized in excess of
the amounts billed. The liability caption entitled "billings in excess of
costs and estimated earnings on uncompleted contracts" represents billings in
excess of revenue recognized.

Inventory

Inventory consists of materials and production supplies and is stated at the
lower of cost or market determined on the first-in, first-out basis.

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated
depreciation. Depreciation is computed on the straight-line basis over the
estimated useful lives of the assets, which range from 3 to 25 years. Ordinary
maintenance and repairs, which do not extend the physical or economic lives of
the plant or equipment, are charged to expense as incurred.

Long-Lived Assets

In accordance with FASB Statement No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, the Company
records impairment losses on long-lived assets used in

F-7

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

operations when events and circumstances indicate that the assets might be
impaired and the undiscounted cash flows estimated to be generated by those
assets are less than the carrying amounts of those assets.

Income Taxes

Income taxes have been provided using the liability method in accordance
with the Financial Accounting Standards Board's Statement No. 109, Accounting
for Income Taxes. Prior to April 4, 1997, the Company's shareholders had
elected to have the Company taxed as an S Corporation for federal and state
income tax purposes whereby shareholders were liable for individual federal
and state income taxes on their allocated portions of the Company's taxable
income. Accordingly, the historical financial statements do not include any
provision for income taxes during the period the Company was an S Corporation
(see Note 3).

Excess of Cost Over Fair Value of Net Assets Acquired

Excess of cost over the fair value of the net assets acquired (goodwill) is
being amortized on the straight-line method over 15 years.

Cash Equivalents

The Company considers all highly liquid investments with maturities of three
months or less when purchased to be cash equivalents.

Short-Term Investments

Short-term investments consist of highly liquid debt securities with a
maturity of greater than three months, but less than twelve months. The
securities are classified as available-for-sale and the fair value of these
investments approximated their carrying value at December 31, 1999.

Reclassifications

Certain items included in the consolidated financial statements for the
years ended December 31, 1998 and 1997 have been reclassified to conform to
the December 31, 1999 consolidated financial statement presentation.

2. ACQUISITIONS

The Company completed the following business combination during the fiscal
year 1998:

Acquisition of Southport, Inc.

The following unaudited pro forma information presents a summary of
consolidated results of operations of Gulf Island and Southport as if the
acquisition had occurred on January 1, 1997. Pro forma adjustments include (1)
adjustments for the increase in interest expense as a result of the
acquisition, (2) additional depreciation on property, plant and equipment, (3)
adjustments to record the amortization of cost in excess of fair value of net
assets acquired, (4) the elimination of certain general and administrative
expenses, and (5) the related tax effects.

Year ended
December 31, 1997
(in thousands,
except per
share data)
-----------------

Revenue................................................. $158,239
Pro forma net income.................................... 13,218
Pro forma basic earnings per share...................... 1.24
Pro forma diluted earnings per share.................... 1.24

F-8

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

3. TERMINATION OF S CORPORATION STATUS

On April 4, 1997, the Company's shareholders elected to terminate the
Company's status as an S Corporation, and Company became subject to federal
and state income taxes. In conjunction with the termination of S Corporation
status, the Company paid a distribution of $14 million to its shareholders
representing substantially all of the Company's remaining undistributed S
Corporation earnings through April 4, 1997. The S Corporation earnings for the
period April 1, 1997 to April 4, 1997 were an immaterial part of the total
distribution. The balance sheet of the Company as of December 31, 1997
reflected a deferred income tax liability of $1.9 million, which included $1.1
million of deferred income tax liability which resulted from the termination
of the S Corporation status.

The pro forma income statement presentation reflects an additional provision
for income taxes as if the Company had been subject to federal and state
income taxes since January 1, 1997 using as assumed effective tax rate of
approximately 38%.

4. SHAREHOLDERS' EQUITY

On February 14, 1997, the shareholders enacted the following:

(a) Authorized the issuance of 2.5 shares of no par value common stock
for each of the then outstanding 2,000,000 shares, which resulted in
7,000,000 total outstanding shares. This recapitalization is reflected
retroactively in the accompanying financial statements and per share
calculations.

(b) Authorized 5,000,000 shares of no par value preferred stock. There
are no preferred shares issued or outstanding.

On October 6, 1997, the Company's board of directors authorized a two-for-
one stock split effected in the form of a stock dividend that became effective
on October 28, 1997 to shareholders of record on October 21, 1997. All share
and per share data included in the financial statements have been restated to
reflect the stock split.

5. PRO FORMA PER SHARE DATA

Pro forma per share data as shown in the statements of income consist of the
Company's historical income, adjusted to reflect income taxes as if the
Company had operated as a C Corporation during all periods presented. This
calculation for the year ended December 31, 1997 excludes the charge of $1.1
million related to cumulative deferred income taxes resulting from conversion
to a C Corporation on April 4, 1997. Further, the weighted-average share
calculations for 1997 include the assumed issuance of additional shares
sufficient to pay the distributions made to shareholders in connection with
the Company's Initial Public Offering, to the extent such distributions
exceeded net income for the year ended December 31, 1996.

6. EARNINGS PER SHARE

In 1997, the Financial Accounting Standards Board issued Statement No. 128,
Earnings Per Share. Statement No. 128 replaced APB Opinion No. 15 for the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share exclude any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. All earnings per share amounts for
all periods have been presented, and where appropriate, restated to conform to
the Statement No. 128 requirements.

F-9

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The following table sets forth the computation of basic and diluted earnings
per share (in thousands, except per share data):

1999 1998 1997
------ ------- -------

Numerator for basic and diluted earnings per share
(pro forma 1997)...................................... $6,686 $18,832 $12,191
====== ======= =======
Denominator:
Denominator for basic earnings per share--
weighted-average shares............................. 11,638 11,630 10,633
Effect of dilutive securities:
Employee stock options............................... 53 73 67
------ ------- -------
Dilutive potential common shares:
Denominator for diluted earnings per share--
adjusted weighted-average shares.................. 11,691 11,703 10,700
====== ======= =======
Basic earnings per share (pro forma 1997).............. $ 0.57 $ 1.62 $ 1.15
====== ======= =======
Diluted earnings per share (pro forma 1997)............ $ 0.57 $ 1.61 $ 1.14
====== ======= =======

7. CONTRACTS RECEIVABLE

Amounts due on contracts as of December 31 were as follows (in thousands):

1999 1998
------- -------

Completed contracts...................................... $ 3,480 $ 2,605
Contracts in progress:
Current................................................ 19,310 32,155
Retainage due within one year.......................... 3,251 5,837
Less allowance for doubtful accounts..................... 51 78
------- -------
$25,990 $40,519
======= =======

8. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

Information with respect to uncompleted contracts as of December 31 is as
follows (in thousands):

1999 1998
------- --------

Costs incurred on uncompleted contracts............... $84,395 $177,698
Estimated profit earned to date....................... 3,145 34,409
------- --------
87,540 212,107
Less billings to date................................. 90,575 219,522
------- --------
$(3,035) $ (7,415)
======= ========

The above amounts are included in the accompanying consolidated balance
sheets under the following captions (in thousands):

1999 1998
------- -------

Costs and estimated earnings in excess of billings on
uncompleted contracts............................... $ 3,438 $ 2,061
Billings in excess of costs and estimated earnings on
uncompleted contracts............................... (6,473) (9,476)
------- -------
$(3,035) $(7,415)
======= =======

F-10

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

9. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following at December 31 (in
thousands):

1999 1998
------- -------

Land..................................................... $ 4,369 $ 4,369
Buildings................................................ 9,841 9,841
Machinery and equipment.................................. 38,528 35,840
Furniture and fixtures................................... 1,358 1,176
Transportation equipment................................. 1,370 1,185
Improvements............................................. 14,135 13,743
Construction in progress................................. 153 697
------- -------
69,754 66,851
Less accumulated depreciation............................ 26,090 21,433
------- -------
$43,664 $45,418
======= =======

The Company leases certain equipment used in the normal course of its
operations under month-to-month lease agreements cancelable only by the
Company. During 1999, 1998, and 1997, the Company expensed $1,679,807,
$3,084,000, and $3,203,000, respectively, related to these leases.

10. INCOME TAXES

On April 4, 1997, the Company's shareholders elected to terminate the
Company's status as an S Corporation, and the Company became subject to
federal and state income taxes (see Note 3). In conjunction with the Company's
change in tax status, the Company recorded a $1.1 million deferred tax
liability.

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax assets and liabilities as of December 31, 1999
and 1998 are as follows (in thousands):

1999 1998
------ ------

Deferred tax liabilities:
Depreciation............................................. $4,418 $3,464
Other.................................................... 26 --
------ ------
Total deferred liabilities............................. 4,444 3,464
Deferred tax assets:
Employee benefits........................................ 390 827
Uncompleted contracts.................................... 990 306
Other benefits........................................... -- 16
------ ------
Total deferred assets.................................. 1,380 1,149
------ ------
Net deferred tax liabilities............................... $3,064 $2,315
====== ======

F-11

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Significant components of income taxes for the years ended December 31,
1999, 1998 and 1997 were as follows (in thousands):

1999 1998 1997
------ ------- ------

Current:
Federal........................................... $3,125 $10,190 $4,451
State............................................. 223 732 788
------ ------- ------
Total current................................... 3,348 10,922 5,239
Deferred:
Federal........................................... 699 408 1,731
State............................................. 50 29 147
------ ------- ------
Total deferred.................................. 749 437 1,878
------ ------- ------
Income taxes........................................ $4,097 $11,359 $7,117
====== ======= ======

A reconciliation of income taxes computed at the U.S. federal statutory tax
rate to the Company's income tax expense for 1999 and 1998 and pro forma
income tax expense for 1997 is as follows (in thousands):

1999 % 1998 % 1997 %
------ ----- ------- ----- ------ -----

U.S. statutory rate............ $3,774 35.0% $10,567 35.0% $6,840 35.0%
Increase (decrease) resulting
from:
State income taxes........... 273 2.5 761 2.5 478 2.5
Foreign sales corporation.... (135) (1.3) (95) (0.3) --
Other........................ 185 1.7 126 0.4 34 0.2
------ ---- ------- ---- ------ ----
Income tax expense............. $4,097 37.9% $11,359 37.6% $7,352 37.7%
====== ==== ======= ==== ====== ====

11. LINE OF CREDIT AND NOTES PAYABLE

The Company's bank credit facility provides for a revolving line of credit
(the Revolver) of up to $20.0 million which bears interest equal to, at the
Company's option, the prime lending rate established by BankOne Corporation or
LIBOR plus 1.5%. The Revolver matures December 31, 2001 and is secured by a
mortgage on the Company's real estate, equipment and fixtures. The Company
paid a fee quarterly of three-eighths of one percent per annum on the average
unused portion of the line of credit. At December 31, 1999, there were no
borrowings outstanding under the credit facility, but the Company did have
letters of credit totaling $1,642,744 which reduces the unused portion of the
Revolver. The Company is required to maintain certain covenants, including
balance sheet and cash flow ratios. At December 31, 1999, the Company was in
compliance with these covenants.

12. LONG-TERM INCENTIVE PLAN

The Company has elected to follow Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees, (APB 25) and related
interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
Statement No. 123, Accounting For Stock-Based Compensation, (Statement 123)
requires use of option valuation models that were not developed for use in
valuing employee stock options. Under APB 25, because the exercise price of
the Company's employee stock options equals the market price of the underlying
stock on the date of grant, no compensation expense is recognized.

F-12

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

On February 13, 1997, the board of directors adopted the Long-Term Incentive
Plan (the Plan). The Plan has authorized the grant of options to purchase an
aggregate of 1,000,000 shares of the Company's common stock to certain
officers and key employees of the Company chosen by a committee appointed by
the board of directors (the Compensation Committee) to administer such plan.
Under the Plan, all options granted have 10-year terms, and conditions
relating to the vesting and exercise of option are "nonstatutory options"
(options which do not afford income tax benefits to recipients, but the
exercise of which may provide tax deductions for the Company). Each option
will have an exercise price per share not less than the fair market value of a
share of common stock on the date of grant and no individual employee may be
granted options to purchase more than an aggregate of 400,000 shares of common
stock.

Pro forma information regarding net income and earnings per share is
required by Statement 123 and has been determined as if the Company had
accounted for its employee stock options under the fair value method of that
statement. The fair value for these options was estimated at the date of grant
using the Black-Scholes option-pricing model with the following weighted-
average assumptions. For 1999, a risk-free interest rate of 6.93%; dividend
yield of zero; volatility factor of the expected market price of the Company's
common stock of .641. For 1998, a risk-free interest rate of 5.50% on the
January options and a risk-free interest rate of 5.63% on the July options;
dividend yield of zero; volatility factor of the expected market price of the
Company's common stock of .652; and a weighted-average expected life of the
options of eight years. For 1997, a risk-free interest rate of 6.36%; dividend
yield of zero; volatility factor of the expected market price of the Company's
common stock of .745; and a weighted-average expected life of the options of
eight years.

The Black-Scholes option valuation model was developed for use in estimating
the fair value of trade options, which have no vesting restrictions and are
fully transferable. In addition; option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value
estimated, in management's option, the existing models do not necessarily
provide a reliable single measure of the fair value of its employee stock
options.

For purpose of pro forma disclosures, the estimated fair value of the
options (net of expected tax benefits) is amortized to expense over the
options' vested period. Since the Company's options generally vest over a
five-year period, the pro forma disclosures are not indicative of future
amounts until Statement 123 is applied to all outstanding non-vested options.
The Company's pro forma information for 1999, 1998 and 1997 is as follows (in
thousands, except per share data):

1999 1998 1997
------ ------- -------

Net income:
Pro forma as reported........................... $6,686 $18,832 $12,191
Pro forma including the effect of options....... $6,125 $18,295 $11,927
Basic earnings per share:
Pro forma as reported........................... $ 0.57 $ 1.62 $ 1.15
Pro forma including the effect of options....... $ 0.53 $ 1.57 $ 1.12
Diluted earnings per share:
Pro forma as reported........................... $ 0.57 $ 1.61 $ 1.14
Pro forma including the effect of options....... $ 0.52 $ 1.56 $ 1.11

F-13

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

A summary of the Company's stock options activity and related information
for the years ended December 31, 1997, 1998 and 1999 is as follows (in
thousands, except per share data):

1997 1998 1999
------------------ ------------------ ------------------
Weighted- Weighted- Weighted-
Average Average Average
Options Exercise Options Exercise Options Exercise
(000s) Price (000s) Price (000s) Price
------- --------- ------- --------- ------- ---------

Outstanding--beginning
of year................ -- -- 393 $11.790 446 $13.529
Granted................. 413 $12.040 105 18.263 115 7.125
Exercised............... -- -- (38) 7.500 -- --
Expired................. -- -- -- -- -- --
Forfeited............... (20) 16.875 (14) 16.875 (50) 16.543
------ ------- ------- ------- ------ -------
Outstanding--end of
year................... 393 $11.790 446 $13.529 511 $11.785
====== ======= ======= ======= ====== =======
Exercisable at end of
year................... -- $ -- 37 $15.822 124 $13.485
====== ======= ======= ======= ====== =======
Weighted-average fair
value of options
granted during the
year................... $9.130 $13.083 $5.180
====== ======= ======

The 511,000 options outstanding at December 31, 1999 fall into two general
exercise-price ranges as follows:

Exercise Price Range
----------------------------------
$7.125 to $7.50 $16.875 to $19.625
--------------- ------------------

Options outstanding at December 31,
1999................................ 283,000 228,000
Weighted-average exercise price...... $7.35 $17.28
Weighted-average remaining
contractual life.................... 8.1 years 8.1 years
Options exercisable at December 31,
1999................................ 46,800 77,200
Weighted-average exercise price of
options exercisable at December 31,
1999................................ $7.50 $17.11

13. RETIREMENT PLAN

The Company has a defined contribution plan (the Plan) for all employees
that are qualified under Section 401(k) of the Internal Revenue Code.
Contributions to the Plan by the Company are based on the participants'
contributions, with an additional year-end discretionary contribution
determined by the board of directors. For the years ended December 31, 1999,
1998, and 1997, the Company contributed $865,100, $1,428,000, and $844,000,
respectively.

14. CONTINGENT LIABILITIES

F-14

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

production. The Company continues to defend the case vigorously, leaving open
the possibility of reasonable settlement. After consultation with legal
counsel, the Company does not expect that the ultimate resolution of this
matter will have a material adverse effect on the financial position or
results of operations of the Company, although no assurances can be given as
to the ultimate outcome of the claims.

15. SALES TO MAJOR CUSTOMERS

The Company's customer base is primarily concentrated in the oil and gas
industry. The Company is not dependent on any one customer, and the revenue
earned from each customer varies from year to year based on the contracts
awarded. Sales to customers comprising 10% or more of the Company's total
revenue are summarized as follows (in thousands):

1999 1998 1997
------- ------- -------

Customer A........................................ $26,336 $42,638 $44,467
Customer B........................................ -- 30,088 21,603
Customer C........................................ 13,765 -- --
Customer D........................................ -- -- 13,383

16. INTERNATIONAL SALES

The Company's structures are used worldwide by U.S. customers operating
abroad and by foreign customers. Sales outside the United States accounted for
20%, 17%, and 15% of the Company's revenues during 1999, 1998, and 1997,
respectively.

1999 1998 1997
------ ------ ------
(in Millions)

Location:
United States...................................... $ 96.5 $160.6 $116.4
International...................................... 23.7 31.8 20.0
------ ------ ------
Total............................................ $120.2 $192.4 $136.4
====== ====== ======

F-15

GULF ISLAND FABRICATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

17. QUARTERLY OPERATING RESULTS (UNAUDITED)

A summary of quarterly results of operations for the years ended December
31, 1999 and 1998 were as follows (in thousands, except per share data):

March 31, June 30, September 30, December 31,
1999 1999 1999 1999
--------- -------- ------------- ------------

Revenue....................... $30,329 $28,106 $29,034 $32,772
Gross profit.................. 4,226 4,013 3,641 2,548
Net income.................... 1,925 1,955 1,734 1,072
Basic earnings per share...... 0.17 0.17 0.15 0.09
Diluted earnings per share.... 0.17 0.17 0.15 0.09

March 31, June 30, September 30, December 31,
1998 1998 1998 1998
--------- -------- ------------- ------------

Revenue....................... $46,914 $50,641 $51,866 $42,951
Gross profit.................. 8,311 9,767 9,830 8,138
Net income.................... 4,233 5,151 5,312 4,136
Basic earnings per share...... 0.36 0.44 0.46 0.36
Diluted earnings per share.... 0.36 0.44 0.45 0.35

Quarterly data may not sum to the full year data reported in the Company's
consolidated financial statements due to rounding.

F-16

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on March 23,
2000.

GULF ISLAND FABRICATION, INC.
(Registrant)

/s/ Kerry J. Chauvin
By: _________________________________
Kerry J. Chauvin
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 23, 2000.

Signature Title
--------- -----

/s/ Alden J. Laborde Chairman of the Board
______________________________________
Alden J. Laborde

/s/ Kerry J. Chauvin President, Chief Executive Officer and Director
______________________________________ (Principal Executive Officer)
Kerry J. Chauvin

/s/ Joseph P. Gallagher, III Vice President--Finance, Chief Financial Officer,
______________________________________ and Treasurer (Principal Financial and Accounting
Joseph P. Gallagher, III Officer)

/s/ Gregory J. Cotter Director
______________________________________
Gregory J. Cotter

/s/ Thomas E. Fairley Director
______________________________________
Thomas E. Fairley

/s/ Hugh J. Kelly Director
______________________________________
Hugh J. Kelly

/s/ John P. Laborde Director
______________________________________
John P. Laborde

/s/ Huey J. Wilson Director
______________________________________
Huey J. Wilson

S-1

GULF ISLAND FABRICATION, INC.

EXHIBIT INDEX

Sequentially
Exhibit Numbered
Number Pages
------- ------------

2.1 Stock Purchase Agreement with respect to Dolphin
Services, Inc. dated November 27, 1996. *

2.2 Stock Purchase Agreement with respect to Dolphin Steel
Sales, Inc. dated as of November 27, 1996. *

2.3 Stock Purchase Agreement with respect to Dolphin Sales
& Rentals, Inc. dated as of November 27, 1996. *

2.4 Stock Purchase Agreement, dated as of November 12,
1997, between the Company and the shareholders of
Southport, Inc. **

3.1 Amended and Restated Articles of Incorporation of the
Company. *

3.2 Bylaws of the Company as Amended and Restated through
March 10, 1999, incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1998.

4.1 Specimen Common Stock Certificate. *

10.1 Form of Indemnity Agreement by and between the Company
and each of its directors and executive officers. *

10.2 Registration Rights Agreement between the Company and
Alden J. Laborde. *

10.3 Registration Rights Agreement between the Company and
Huey J. Wilson. *

10.4 The Company's Long-Term Incentive Plan. * +

10.5 Form of Stock Option Agreement under the Company's
Long-Term Incentive Plan, as amended. incorporated by
reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997. +

10.6 Form of Reimbursement Agreement. * +

10.7 Employment Agreement dated as of January 1, 1998
between Southport, Inc. and Stephen G. Benton, Jr. ** +

10.8 Seventh Amended and Restated Revolving Credit and Term
Loan Agreement among the Company and First National
Bank of Commerce and Whitney National Bank, dated as of
August 21, 1998 (the "Bank Credit Facility"),
incorporated by reference to the Company's Quarterly
Report on Form 10-Q for the period ended September 30,
1998.

21.1 Subsidiaries of the Company--The Company's significant
subsidiaries, Gulf Island, L.L.C., Dolphin Services,
Inc. and Southport, Inc., all of which are organized
under Louisiana law, and wholly owned subsidiaries and
included in the Company's consolidated financial
statements.

23.1 Consent of Ernst & Young LLP

27.1 Financial Data Schedule

99.1 Press release issued by the Company on December 16,
1999 announcing the forming of a new wholly owned
operating subsidiary allowing the Company to act in the
capacity of a holding company.

E-1

Sequentially
Exhibit Numbered
Number Pages
------- ------------

99.2 Press release issued by the Company on February 2, 2000
announcing its 1999 fourth quarter and year earnings.

- --------
+ Management Contract or Compensatory Plan.

* Incorporated by reference to the Company's Registration Statement on Form
S-1 filed with the Commission on February 14, 1997 (Registration Number
333-21863).

** Incorporated by reference to the Company's Current Report on Form 8-K
dated January 1, 1998.

E-2