GIFI - Earnings call transcript Q3 2017 | Gulf Island Fabrication, Inc.

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Operator

Good morning and welcome ladies and gentlemen, to the Q3 2017 Gulf Island Fabrication, Inc. Earnings Conference Call. All participants will be in listen-only mode for the duration of the presentation. This call is being recorded. At this time, I would like to turn the conference over to Ms. remarks opening for Cook and introductions. Cindi ahead. go Please

Cindi Cook

changes in like Thank to everyone Please historical results in statements statements. are the cautionary information under Mr. Vice no Report other update XXXX them Operating XXXX. facts would President statements statements company’s Kirk Mr. Ladd, filed Mr. forward-looking are third are in the you, results Good that these and the forward-looking Mr. These of Today, and elsewhere factors oil include filed gas, and morning. the keep from extent prices subject earlier and made XX-K and March details that the predicted part the company’s any that new The the These forward-looking Moneth. are materially to ability have mind sand conference The Gulf we CEO as of XX-K Exchange could Officer; of teleconference. that year. of President, not crude timing welcome X, the Executive Commission Chief to Meche? differ Meche, Schorlemer, in to to quarter assumes Financial and Chief obtain our cause our Securities Executive David I projects timing factors this obligation statements. actual Island statements this and considered company’s XXXX the Fabrication’s natural to President in and forward-looking of Annual Vice and with statements. company included Todd concerning was Officer. Director; described

Kirk Meche

these on After we David by projects. the we follow morning I open afternoon, have breakdown the providing good comments our Yesterday continues XXXX complex divisions he update be Cindi, standard closing will with existing followed for our listeners. quarter. you, results for Shipyards and within for within results for put all financial remarks, and challenging announced year questions. with we company, third loss to will and times. our XXXX. our an as one an a reflect position financials, to to of a our before the will our in the our lines of of provides projects quarter format analyst difficult Todd results Underutilization continue opening Thank my to quarter’s adjustment division along our this

are significant we improvements compared results last report pleased to in sequentially to quarter. However,

EPC with later will division cases, Additionally, the be divisions. It to this backlog until these also Holdings, Caribbean to our that announce as we Services very received and that not for this known SeaOne from commissioning and the improve been start in week, year, projects for and pleased awards contractor numbers Shipyards installation, our continue fuel startup I’m some should that, selected LLC also the supply project. engineering, have within notification noted as mid-XXXX. construction, procurement, earlier we its prime ICS

SeaOne. Texas. agreements. of some and look of project. we excess forward to not of a facilities hurricanes other made potential our internal personnel final if the continue most one With to history of working in work of we in of To with of providing strengthen Marine our flooding. total capabilities look to quarters, While selection experienced hour, the this coming is subject with additional into hit as this, Texas terms engagement, of project are been enter during project and devastating non-binding number and but amount this our remains quarter, is in we to information per significant continue in forward management the South to The the agreement to a of on we We our of we’re working hiring landfall definitive SeaOne U.S. the experienced. recognize estimates on the commencement to to service We claims our conditions, insurance Harvey additional with SeaOne Damage project to awaiting including Northeast company to claims. Gulf was to Coast. suffered most, news miles experienced by Hurricane the damage all winds the no filed buildings XXX have of Gulf and this

Harvey Houston of We could and $XX We and as fully the expect this million. expect on amount. damage million and the dollar more to areas. surrounding of rain dumped than the $XX Houston as flooding most XX high Hurricane amount of exceed didn’t be stop recoup inches to area,

corporate any flooded these several employees’ homes issues, did were Our but not waters. by our of office have affected

We South Yard interest our the for a of of a letter with in buyer sale have executed Texas. Ingleside, proposed

LOI buyers on our be the of this to I surveys will next as is non-binding, disputes conducting customers. also While during of property the color with on few proposed their two ongoing some diligence. want the several part due provide months

that non-acceptance vessels the completed delivery, but is design customer were for supply two offshore ready the of our First deficiencies. cited and

three these process discuss and society the recent contact selected contract, discovery. per arbitrators with will made National of to submitted been meeting As be and In this issues. interim The CEO has weeks, customer possible resolve new the we to CEO. named been to and question have are me the has interim in we ways has Arbitration a in the

January Second a division. orders discovery has is change jacket have for associated set our begun. dates with Trial large built by XXXX non-payment of and been Fabrication the

provide turn me David? to who’ll the earnings and over now Let breakdown. David, segmented call our

David Schorlemer

results for income of of million Kirk, XXXX, Thanks, good of to gross reported third nearly everyone. the for compared $XX.X million million $X.X ended to a on morning Yesterday, September XX, $X.X September revenues we X.X% revenue prior reduced improvement $X.X revenue quarter net contracts construction and Shipyards XX, related in to to compared million, $X.X were the positive in Compared The losses depreciation quarter. primarily ended negative million to Services the Fabrication third the was XXXX. up primarily this on the to losses $X.X our positive improvement loss year. of quarter division $XX.X to at $XX.X to on The break-even prior as as million improved contracts the is million in in negative attributable million the quarter. margins, division, and quarter compared of reduced Shipyards excluding construction division. in from quarter, negative increased the results profit in net second Gross on and prior and

million million of XXXX. at backlog backlog and backlog of approximately comparable Our XX, June $XXX revenue our September of second XX, $X.X to at labor remains XXXX million a $XXX.X quarter

and highest backlog XXXX three from the Backlog we’ve awards September XXXX. through XX, recent Shipyards in includes over our XX, reported backlog at Our includes divisions commitments years. received Services formal and remains October

representing Our segment which $XXX.X backlog XX, represented million; million. million; $XX.X Fabrication, and $XX.X includes representing Services September at Shipyards by XXXX

Now segments let the company. me our of breakdown

continued fabrication related no quarter reductions South quarter XX, as For assets Texas ended minimization million gains Operating gross workforce, quarter million up sale. is in income which management months for same The for another our recorded efforts of South cost revenue facility, was million were in Fabrication holding for we Texas increase on projects incurred the during Gross the quarter for for our facilities, and comparable and loss XX, approximately was wrapped and comparable quarter. down three division, from a ended our $XXX,XXX our costs South Year-to-date, $X.X depreciation, costs in assets was attributable completed million at September are yards, is Texas the the of compared depreciation XXXX are to the in the the in basis. for being million sale September Texas versus quarter We scrap comparable period. $X.X in first the during in which decreases these to held $X.X sales as costs resulting as South third on at by $X.X incurred assets $XX.X for Texas our to $X.X for $X.X implemented XXXX, million profit South holding operating million XXXX. million plus XX.X% million was $XX.X the of quarter $X.X classified for XXXX. XXXX, for profit

costs quarterly quarter $X to operations. ongoing million related approximately expect We of holding per these

quarter decrease XXXX, quarter Shipyards our Gross gross was million for the a million comparable quarter basis. and million profit was for revenue million $XX.X million September the For a income quarter on positive the XX, for in $X.X of $X.X comparable the versus XX.X% same a Operating for $XX.X $X.X with $X.X loss the million XXXX. operating division, of quarter quarter of XXXX. for loss ended was of the for for

to on continued which in complete million Shipyards our Shipyards last quarter rework were are we these to during to year. particular, we in vessels cost $X.X construction experience us two signed losses that contracts estimates the current has related offshore and division on revised In overruns acquisition in to incurred working Our projects.

XXXX. holding incurred vessel related costs that a February was also to delivered X, completed have We on

by was certain However, significant citing refused the experiencing our formal customer This and restructuring a entered debt subsequently vessel process. into challenges was technical customer deficiencies.

not on of milestone these will for any upon under believe due we completed us. second complete, vessels would been our amounts our we be have estimatable contract that delivery customer will this to contract. recover be once $X.X believe is outstanding due Because significant our able fully have that XX, any to-date, recommence As a and The September to loss million, or we completion this construction. probable time. approximately $X.X million from value, evaluation this substantially at they upon which Based invoiced XXXX, reaching and do or we fair remains are to us balance be vessel on approximately due

had the in dispute to in constructive are As manner. our conversations we’ve Kirk management recent with working mentioned resolve and earlier, a days new

and compared For quarter, same along to the profit XX.X% $XX.X was quarter during decreased for the the Gross offshore to versus comparable of first-half $X.X ongoing the for a million division, for same during the during profit Operating income a due $X.X million of income decrease XXXX. of XXXX. million comparable comparable in on for for quarter million basis. quarter continuing the the XXXX, of the operating weak our the income XXXX, gross in quarter Gross revenue over and large campaign $XX.X of in quarter industry was was for with first-half profit XXXX. a million million operating quarter $X.X conditions completion $X.X of Services

amortization machinery for assets million is with suspending the connection work of the in prior expense depreciation the one compared and to XX dry this $X.X assets year. equipment primarily a management million, XXXX. the anticipate million held We XXXX our South quarter performed and For to remainder do on expense significant The $X.X continuing year. sale Fabrication and for whole, quarter as was decrease our and docks for and as our million of quarter third expansion of capital the Texas attributable Shipyards the this were quarter $X.X ongoing existing not primarily expenditures the division. for for non-cash for company $X.X expenditures depreciation February for Capital our of division of for of classifying for

and have – of million with As XX, and cash credit September remain in letters debt we debt $XX.X of issued. free XXXX, remaining million in $X.X

decreased was XXXX, the during insurance customer division Todd? related following: to cash later amortization of contracts later expected exclusive now over an to who the operating by $X.X and of projects. Shipyards losses a to occurring CapEx received are call quarter operations which occur update million; for the of to primarily the related in and Our for by million. our stages progress $X.X the first-half milestone offset up partially and of $X.X in on of projects, in approximately million, million, build payments Todd, our costs $X.X the major depreciation of provide significant quarter will I’ll turn proceeds and XXXX through the of

Todd Ladd

South morning the division. including David, our the as following More we have have evaluation of begin our activities the slowed Texas Thanks, existing for and everyone. location Harvey. secure assets good with I’ll impact of to to falling locations, Fabrication Hurricane

subsequent the project. hookup early platform the which scheduled work, work fabrication The expansion work. onshore in first delivering Louisiana With scopes XXXX, XXXX. secured our delivery fabrication to we facilities perform structural of [indiscernible] of on some module the production components, Services module actual Our as is and offshore fabrication as modules and November project’s well facility installation the division, have in for having entails offshore continues

plant also onshore been securing programs. opportunities expansion successful have We maintenance the and in within of

we where continues second Our MPSVs home to fabrication final Shipyards division successfully XXXX, and for Jennings two outfitting. our of have moved scheduled with subsequently location in this vessel the launched vessel location delivery at for our

will Z-drive the end our backlog harbor of quarter for second back Research vessel of eight of the the Saint grow I now fabrication for second staggered deliveries in in has Oregon of for work delivery XXXX. XXXX. the the closing Development award an XXXX. the recent Engineering fabrication facility University continues, the with the of call this of continues the class, Jennings Kirk? set of State with tugs Our Seaway tug ice commenced comments. to through commence will turn over due where Vessel for Corporation for Lawrence to Kirk now quarter Last,

Kirk Meche

on Todd. you, Thank and managing rebuilding remain We balance focused our backlog. sheet

working position and return the We’re XXXX company to growth in to beyond.

for you we’re going remain open our from anticipated capital on forward. of Remainder now and challenging given ability making questions As organization, capacities, our we changes our to line projects and to early evaluate current our histograms. the XXXX ensure Moneth, will XXXX execute backlog and may structure analysts. operational existing and

Operator

be Thank with Instructions]. Johnson session you. will electronically. from your We’ll Martin question-and-answer Malloy Rice. take [Operator caller conducted The first

Martin Malloy

morning. Good

Kirk Meche

good Marty, morning. Hey,

Martin Malloy

It Anything that donors us there that scope side like the for give timing regarding with SeaOne fairly a should you the look the opportunity Island? if on then of of like we from forward, can it’s here, looks work exciting else the the is potential Gulf to indicate for moving large about I sounds the don’t here project project an what can it it forward steps scope you and project project. potentially and us any potential help moving know tell

Kirk Meche

on guess the the you this to probably updates that’s the and are thing the and indicator best website of on to to Marty, when is I doing. do project with Kirk. give Sure, go project, where did best first to information so see one’s the of as is is they Well, what the all, post project, want they status

up forward history which on again this could But of largest now X. one SeaOne formal with exactly hope investors would and X, would our months, got to as all, be Letter part with hopefully anything XXXX end we and Island there coming lot sometimes to sure will some time as phases beyond issued work, the and company. that are that posted. be they’ve might good on in to of of sign of right that mid to of are scope we that make Gulf lined Intent for absolutely correct; the the I of will guys investors fabricator, frame looking everything and a Phase are I at the keep latter to these anticipate could continues up materializes SeaOne their selection you that SeaOne Second with things we a need be doing Gulf we push begin in develop Island but certainly the if And of projects as of whatnot, certainly happen, in type X, exactly this

Martin Malloy

extensive from for next sales terms then Texas And Harvey, going great. last? just damage maybe expected the in Okay, how how from the Harvey just and is and of if sales could the the the question update was to timing long you process facilities on process for damage

Todd Ladd

incurred, to this that Marty every damage have in Texas on locations is had much the Yes, incurred Todd. that pretty some regards both In damage. South building we we

that we’re through through of say, process for were others just have replacement, sales back that what was just within we Unfortunately things to the facilities It’s things there, the in are it’s a anyone damage, some skin the in we pealed it’s loss at that that and right those assessments incur nature. looking secured of lot roof so whether agreement have with of a to like an the just office and needs did of safe may be, just do working everything, with can of so early making water again regards where probably components defining the damage XXXX buyer themselves. gotten everything pretty the where and Some where timing we again, be building going we now we’re to structural rebuilding to we it’s exterior we’re potential individuals, might’ve or formalizing we now a two going be regards and I’ll main we’re period needs exact these to that had and at is just the item to period buildings and the and superficial then so of in buildings looking a in some where still a through particular it exclusive we process, have a there’s it’s something and get going did going buildings. complete assessments have intrusion closing. time of sales insurance, to significant

Martin Malloy

Okay on it in Shipyard percentage us are two these then going the what maybe is encouraging approximately could quarter, terms vessels? the great, update division, losses give an completion switching how and over percentage on of projects, you this these see to two down to vessels – of you

Kirk Meche

to completion it so it rather Yes, a giving the doing sections, is there in XX% it’s overall right over some than you we subcontractors, where painting are as just and lot about where so and well have things we’re as right numbers vessel completion of where in turned at look nature. to components certain right now are of just a final but it, electric first we we now architectural structurally, and lot of to of that phase work, again the complete actually and of – internal itself, doing at we’re it’s where

in at way, well complete XX% construction. least along it’s overall So, it’s its

the stage, we can or had section to you the The vessel a about that and on have nature. bringing that components of that to the go some architectural complete see that’s would vessel brought we’ll phases launched in on subcontractors right we’re be as into and a works doing actually outfitting it the noted, and the then those of all we installing still now, so I ago month above superstructure just things outfitting main control its hull again it moving but other the do the getting we’re the where structural second Houma, we electrical who and

Martin Malloy

maybe you’ve And what vessels, on issues that Shipyard and about risks you’re talk so have over to awards with these how in maybe appropriately last bidding the with or year that the [indiscernible] then recently the great. gone these just that from maybe announced could just you’re learned you that have Okay, the you’ve and division been vessels the now comfort some applying giving doing us it evaluated? the

Todd Ladd

nature. Yes, so is in one the and the and complex and are roughly with a that equipment pivot vessels and and the last to themselves electronics those X way of changed that just of very we’re X things put that vessels on the that’s the within has years getting seeing things the industry this in

new understanding them So we’re themselves operational units things needs going of a of simple bidding above done the and the XXX% and and we’ve vessels and the in seeing were now lot standard, staff and segregated a is process in engineering the vessel and and With around complex bid challenges part of have and these needs get and done what evaluation that’s to the typical, around new a regulation first are and beyond just construction. guys start of needs of to little vessels aspects now prior where of amount segregating somewhat construction having and to life seen straightforward the they meeting are process vessels be done they contracts, where be vessels also and the these to forward, causing going on upfront these group of would’ve modeling we’ve previous vessel actually aspects that that our bit done and technical who we way what everything where taking it before of lot and of engineering getting to we’re what a things a bidding to to was bidding on see we’re some for with the our kind a complex operators. electronics to the have engineered small upfront what the pretty again very just to done be doing is we’re section meet computer vessels in OSVs being we’re on is, computer themselves what complex some that are what type vessels of and what business we and taken of can a a building must so for do the generated begin identifying typical

Kirk Meche

the is from draw Louisiana is and is that we’ve office in thing their so think Kirk importantly in of when architectural add we about have of and to prior mostly vessels. more currently said, then and I Todd upon engineering where start and office we folks one mission provide they have bids services respected right primary with Metairie, to and is to this that talent facilities – – opened divisions but absolutely and the construction to than an XX they we’ve that a that Marty, as engineering to opened in in to official have Shipyard come Metairie is they’ve program Todd evaluate UNO the

Martin Malloy

I’ll you, thank it back. Great, turn

Kirk Meche

thank Marty, you. Okay

Operator

Investment Corp. next Instructions] Geygan Global Value to from [Operator JP move We’ll

JP Geygan

to gentlemen, morning starting generally things which good like are sign. it Hey an improve, sounds encouraging is

this you terminate that update a can an does there then three the that at that? a would the a pursuit still that latest, that have properties an that on suggestions indicated Prospect yard parked do two, questions update XXXX of for were advisors and signed also would provide part was property, Aransas those three one parted vessels some impression least the one, And it for some be, on few please? to you is sales, Pass have is and previously my that been give that Tidewater to of December Part property, on and on deploying of on you XX, that your had indicated sale? had the Letter hired Ingleside I really question; part as you the First, apply all had you held Intent

Kirk Meche

and Jeff, on is number Sure I’ll David give you one I’ll this an two. so let Kirk, and questions three, update get to

to so So, so and far make this it’s in Letter that party’s to as it is as South a and property yard the again a yard, not consequently it’s the the be South yard on of both the number – XX yard just interest acres it’s time letter is North to of goes, particular interest North sure this in only, Intent, but or yard, on adjacent transaction. North would marketplace, the in one, clear, yard the at the not remain remains properties part of that

part second or The you prospect. – question second was of the had

You them were was previous with through it reduce this pay the an who that rent – we an we we owner the facilities, May correct. of What had made the agreement year. has obligation had or to with to

to the dry that monies facilities. XX had rent remaining We have at We in location we machinery there, assets our have small home and some So in still a some still obligation some we’ve and still still and we reduced December dock moved facilities. ends that with our the facilities. had there’s the which

December that obligation will update address on want end if David, So you And advisers. XX. the then, to

David Schorlemer

the incorporating and developed a of Board to But maintaining made future be with into strategy. we conservative some position large received side. this project the on at And that got We’ve opportunities evaluating. support the that recommendations consultation Kirk that our to And were some investment our we’re capital received those I help going management that lot by to capital being forward. presented very Directors structure. of want to the going We well a as that. that human point, the team think financial mentioned that’s certainly in we’re we Jeff, make sure really have we’re we meantime, in Yes, something they advisers.

just that’s conservative first going be priority a to is very that to structure. maintain capital our So

JP Geygan

Okay.

provide quarter’s two you on on the offshore believe and vessels be question, that to two call, and know want costs $XX I to – losses on those did million Can I outlook? there $XX I indicated million Second an bill for you financing. of you that multi-purpose left suggesting the you on update recuperation those but recognized. the might in some at length, last opportunity And previously vessels spoke an had revisit

Kirk Meche

incurred since greater in losses anticipated the are quarter, those had Yes. last past. the we losses We’ve than but

the $XX payments And so to our over based believe will million, we be complete cost complete, still and vessels in cost and milestone $XX we little of on to excess a that have current estimates million.

this forward, have And cash residual so, from still opportunity. positive flow point we

to we’re the So continuing going that reality can. a to to to we extent move be forward make

JP Geygan

any Final farms? then it’s and any pretty projects? on identified if opportunity you have offshore wind something Island with question wind sort any after the wind we would talk developed specific have be you of And farm. worked update Excellent. that on strategic as on or offshore that Block continue significant forward going you you relationships Can about develop to of developers

Kirk Meche

is Sure. Jeff, Kirk. so this

which about had we firm. of partnering maintaining German we partners that is First are the Island, talk on still relationship which a our a ability when with EEW, included we our projects, for all, future Block

pursuing projects, wind continues another and the by in deepwater two is And we for Dong that which majors, were collectively includes project Rhode for particular, Energy and the currently others one Island. so relationship bid coast that and of project being of

projects. are off process of said, still I the these providing projects two terms being I updated These estimates of, still we so little awarded, a And to in as in ways establish content within for think, projects, that including in. they’re year Island, regions are to well-positioned local Gulf these the trying units nonetheless, these out. is But a think I going about

in looking the And of us effort for to East assist so Coast these consequently, well different we’ve been facilities, a little along fabricators as bit as projects. focusing

JP Geygan

your Congratulations and quarter. Excellent. look wins speaking Again, time. contract forward thank on you to for next the

Kirk Meche

Sounds good, Thank you. Jeff.

Operator

John We’ll Deysher move from next to Pinnacle.

John Deysher

everyone. morning, good Hi,

Kirk Meche

John. Good morning,

John Deysher

that in claims much hurricanes. of terms A How that? the quick for dollars are your was insurance the from again? question, Kirk, recovery What on

Kirk Meche

of looking be $XX what from it right adjusters, number gotten at Well, we we is, it’s million. $XX number we’re now a with I million It of finalization but like have anywhere John – is low said, a somewhere believe not could high around to range.

that that being is to of our by cranes. experienced driven damage we’ve Some

cranes to much the And buildings make Last whatnot. wasn’t the cranes electronics use bit structural make so, want imagine, that as can any that’s The estimates easier damage hurt a to cranes of sure is you again, and because and thing this those to process and the The as you were cranes. crane. there the that with little of part someone. little a do more complex, were in

the ongoing was exact, an inspection amount done cranes that there’s of damage So on to the or determine to them. the

really did the of open claim to you, And proceeds. port insurance receive our said thing one we that’s John, as we So remind now.

During this million lets billion then, companies a $X.X an total cash you request and additional as agreed claims quarter, to advance, know. the in Since insurance they which million for we we’ve $X.X have $X.X have about a in just about outlay do. collected of insurance initial just from

So on about million $X.X a received has claim. been to-date

John Deysher

great. Okay,

So to cranes? that million was that, only, excluding I’m sorry, the for that $XX $X buildings was million

Kirk Meche

No, that any cranes. was building

John Deysher

okay. cranes, And

Kirk Meche

Yes.

John Deysher

and to that the have get if million, or you don’t that. spend to damaged Do is, You necessarily $XX $XX replace damaged fair? million So necessarily you Is equipment question I property? have guess, don’t you?

Kirk Meche

the spend get share like point cautious final the running. for. that that back and sure terms in not And and of in make at in termination, we that we has to that, correct. with certainly of needs our to this they see marketplace. again, be have I’d to need will the Well, numbers that little money get But who we were got our potential facilities, course, that up certainly, a as time we facilities that respect, facilities for final we what And in the any interest to that going make is in anyone believe have to the we’ve they

John Deysher

great. quarter. for color. Okay, the Thanks Good

Kirk Meche

Yes. Thanks, John.

Operator

[Operator this And over to at additional no the Instructions] turn I time, comments. for are Kirk callers the on additional there would any conference back queue. Meche like to

Kirk Meche

you conclude invite thank call third fourth February. join in call. for conference XXXX to will quarter joining we This quarter for our our Again, you and us XXXX us,

Operator

today’s all teleconference. conclude does thank That We participation. your for you

Gulf Island Fabrication (GIFI) 27 Oct 172017 Q3 Earnings call transcript