GIFI - Earnings call transcript Q4 2018 | Gulf Island Fabrication, Inc.

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Operator

Good morning and welcome ladies and gentlemen to the Gulf Island Fourth Quarter 2018 Results Conference Call. All participants will be in a listen-only mode for the duration of the presentation. This call is being recorded. At this time, I'd like to turn the conference over to Ms. Cindi Cook for opening remarks and introductions. ahead. go please Cindi,

Cindi Cook

and Gulf I teleconference. Island's Sandy, welcome like everyone to fourth good you, would morning. to Thank quarter XXXX

materially. actual results forward-looking later on release on afternoon like language refer the may Vice Officer. press yesterday call the Executive to will results included Mr. A were press copy on Kirk our subsequent today's everyone in described Chief Mr. and statements keep Our Mr. the our President, to this Meche? President have in and available of that website XXXX replay Meche, Factors and of comments release and We Please Wes website call and and our SEC CEO a to available Stockton, would and we Director Financial certain the filings. Form XX-K be include at our our cautionary today. press gulfisland.com. differ is Risk released mind Today, in release and

Kirk Meche

Cindi Thank and our listeners. all of you, morning to good

for had quarter. would discusses several I were which before noteworthy address to like financial quarter results results for our the factors the that Our Wes

in we cost on related systems on experienced XX First, press adjustments installation projects as incurred to harbor of forecast tug during we the piping our our challenges the discussed testing release, and the projects.

facilities on Jennings required entire piping similar facility. the our for system, on constructed based problems the connection results in which the related that incurred was estimate of Specifically, vessels on achieved performed type to our historical was

pipe the the in and and the added base of vessels. identified between during labor the the subsequent associated underestimated the specifications increased the installation, quarter and piping the as projects first testing systems fourth and during were interconnectivity of repairs of and The issues second These we we commissioning impacts. early completed of required systems. installation of resulted impact differences the differences and the testing and accordingly, on the However, XXXX impacts complexity increased XXXX full these hydro to cost schedule with

The anticipate second first in XXXX. the delivered quarter fourth the quarter the of and first we was vessel in vessel XXXX delivery

increase resources, to eight the revised on in cost experience vessels Our taking estimated two the estimating lessons two based the by vessels. our these all remaining the our vessels. have well prevent remaining broadly, in estimates corrective centralizing cost reflects shipyard, actions two function learned first More impacts to our an we as efforts taken vessels the as the action actual vessels impacts oversight such procedures forecast to first processes on prior by We're and of has proper in Houma from which improve mitigate future.

facilities. harbor of Fabrication facilities was of as and In represents in year extent and in a the ramps our overall ago our on our utilization project, lesser the quarter. underutilization unexpected the improvement sequential backlog to addition to within up tug from the fabrication This not a by division basis. our continued in quarterly our underutilization and impacted Houma We anticipate utilization an our Shipyard specifically was improvement quarter a this impacts division during

to Carolina Now We for ferries upon favor notification quarter. Transportation. receipt of this fabrication commence program the Court allowing during of it us award of Navy were T-ATS Federal two of specific of Claims quarter, enter Navy's let projects Department relates U.S. thus an the received the passenger material. as engineering awarded judgment in the we discuss me received for completion and that vehicle to Also North during this of

historic work piles jacket coast is off for the the we be Trinidad. traditional for a of project. intent fabrication of installed be work to part construction of received the addition, this deck a and we yesterday our to our were division In for a for This division a of structure consistent letter thrilled and with Fabrication

and equipment delivery this associated our Louisiana. results MPSVs segment and quarter and towards now a Wes, provide of and continue continue and to call to vessels company relates as As the we our turn to division report material we shipyard it our of in nothing work have the shipyard who in will be breakdown. details at and customer, with custody construction to two resolution. bonding to Houma, significant care I'll our a The for over

Wes Stockton

good on for was a of $X.X This Kirk revenue the a additional or XXXX I million provide details everyone. $X.XX. $X.XX. of $XX.X loss would some million for and quarter million now XXXX with like fourth to $XX.X revenue fourth the or diluted net results of diluted and of morning, Consolidated loss million net share $XX.X Thanks our quarter, to per the loss compares loss per of for the quarter share

partially Our activity increase revenue in shipyard by offset for a division. construction our fabrication quarter the decrease reflects our activities for division in for an

of results for held impacted division tug operating quarter Our by on debt from fabrication forecast our recovery assets net our was XXXX and our of during our impacts in projects costs the revenue and Services shipyard recovery certain associated under continued volume overhead our partially that quarter our impairments are of for cost by the primarily our lower million a the in of and Fabrication of $X.X sale. the third division a Texas increases harbor bad for a offset that gain division. sale $X.X yard partial and of million North were for from inventory strong These million were results benefit division and reserved $X.X

held on for and costs loss comparable suspended. MPSV provide prior quarter a Shipyard of in relative period, and comparable by revenue changes net for recoveries reductions associated The our including including provide in primarily which me of to period operating benefit division insight due segment. impairments with of division into increased the assets loss debt To have across estimates the our details more and for our the also results inventory recovery decreased mentioned Fabrication to in been overhead sale. projects, due improved and some little to let our the additional costs previously operating bad charges our quarter, decreased divisions. Our The our certain

for For $XXX,XXX MPSV tug the tug division, with associated associated $X.X prior in our The of costs our to compared result relative to cost quarter improved reversal changes for same project the including project in price. increased impairment due construction operating of $X the of with due changes MPSV the million revenue a primarily XXXX $XX.X harbor comparable in of versus and and loss to due as for aforementioned for reflecting recoveries -- projects. Shipyard held to the million a higher was icebreaker and XXXX. activities the $XX.X including the of operating XXXX. of was for related reductions reductions projects, estimates our loss period the on million in revenue of period aforementioned to loss harbor sale. and period quarter $X.X decrease significant the in period vessels our to The overhead period was an on The assets was operating revenue, was tug the estimates our in revenue for XXXX XX the to due projects our for million on Operating loss the charge and prior increase two period an

period $X.X relative of debt million third sale during million the revenue activities Fabrication of that XXXX, from Texas were previously mentioned a for million XXXX, benefits was the an for as activity and the from was yard our were These our quarter improvement period the in inventory. reflecting and XX%. and inventory for loss awarded our just of representing of results net for to to bad operating recovery was benefited period income of in gain the division, to the due of benefit fabrication the XXXX module by costs. in reduced period impairments million primarily partially versus XXXX. revenue offset quarter quarters for of for comparable including a prior that by commencing income the the decrease the XXXX for $X.X certain the construction bad operating the was of of $X.X For reserved was quarter the $X.X during Operating of due the overhead XXXX. quarter same period recovery fourth The compared including million our third under debt of impairment million prior period the $X.X The significant $XX.X decrease of current of recovery the Operating was XXXX quarter completed to second revenue the the period and projects North project for in million. prior $X.X the

overhead our in We revenue phases. expect through in recently backlog our improvement costs projects the construction the of to in awarded an progressed and as increase the recovery see

of million for our period comparable recovery $XX.X Operating XX% $X.X division the million associated the increased operating of XXXX. costs. in was was due or million for of income compared the operating and was XXXX. for increase of Services million to overhead The $X.X same period X.X% income of quarter For or income revenue revenue the revenue to of for margins our versus quarter $XX.X

of our revenue to period for Revenue $XX,XXX planning and pricing, period comparable the continues the division, XXXX. same scheduling $XXX,XXX operating for For quarter compared to of of $XXX,XXX quarter, our division was income EPC was XXXX. loss SeaOne consist the the $XXX,XXX, for for EPC for Operating the work for versus project. of

the that Our authorized not scope and are of fully by cost loss recoverable incurred was to work for current period due SeaOne. our

liquidity yearend. regarding provide and me few our our and let comments of a as income Now backlog taxes

assets. recognizing for tax limitations taxes recorded our expense we've federal tax the state as tax reflects on only due income for GAAP losses deferred to not any Our XXXX quarter benefit income

in Although taxable we've will cash benefit a not future income. tax recorded a results, receive on benefit tax we our

million, to December year backlog our million of backlog, increase representing on from our XXXX, approximately ago an backlog. $XXX Moving at totaled $XXX XX,

our of year million division, for $XXX segment $XXX operating on Fabrication million, Services new that XXXX September also our of project subsequent through and investments was division, award division $XX our that deliveries respect options XXXX. Please our note which million increase $XX by includes backlog backlog division. our increase excludes received $XX.X prior fabrication the almost yearend our cash an $XX exercised million approximately of for from for we and million ended approximately Shipyard will million balance million division division, within an $XX excludes yearend. $XXX,XXX by our $XX to With and for Backlog liquidity, was project to our within yearend. EPC for short-term from million Our of backlog Shipyard if with increase contracts

$X.X of was for partially expenditures Our result primarily of for cash the million $XX.X and million of our $X.X by capital the in proceeds yard and investments increase negative million. the operating net cash flows offset sale North quarter of Texas of

negative months positive we for cash fourth of Although flows we the of $X million quarter, over last experienced XXXX. operating realized flows cash operating six the

credit for we no million for credit our no million our yearend, additional outstanding borrowings. at borrowings and of had addition In letters of credit credit $X.X borrowings -- facility, $XX.X providing of on letters on availability

of for As totaling note under our and any that sale the with $XX.X liquidity current a at excludes total proceeds and $XXX investments approximately credit XXXX of million cash liquidity result our the remains machinery yearend. equipment potential please aforementioned, December sale availability at of XX, held facility remains from million, our strong and

turn the for comments. to I'll over that back final now Kirk with So call

Kirk Meche

Wes. Thanks

future learned the divisions. Although to tug lessons with pleased within negative the all opportunities on we impact of in our implying were we project, remaining work not were

underutilized projects all see to of the our our Jacket We positive and during Again and the and plans projects continue future Sandy, piles, we target. division optimistic lines activity. strategic our business for quarter several you our questions. now of prove award another on significant along our quarter, recovery for overheads continue open our lines. remain respect opportunities Fabrication divisions to the of with for for efforts with may with that are awarded for The the targeted bidding deck and

Operator

from question Johnson of [Operator Rice. We'll first Martin take the Instructions] Malloy

Martin Malloy

and ramp vessels? to spend Could right how a pace and awards the being now types Navy the vessel potential expect about none you guess for on further time talking guess for the are both vessels you Navy work the exercised up options are vessels, Oregon of maybe little the also for of I I the

Kirk Meche

Navy start let's Sure Marty, so vessels. the with

We negotiating that was anticipate but with positive now final can As got we've as have we green protest proceed but engineering so relates that this we starting probably well and to the a it We times final reset to later and Navy I somewhere on year. as had light. we Oregon engineering still the going and on, that actual material. whatnot, guess as to currently Navy reported, cost and start -- the ruling we're got the targets

probably specifics the year contracts anticipate would remaining knowing we options, get I and we'll the this believe somewhere So within again the as quarter there as something Navy and in or and Navy. quarter on our we two year. with negotiations we two of complete third storing fourth options the this about seven finalized number of The get more anticipate hopefully we that maybe couple three quarters, next second within eminent talked maybe that remaining, of quarter vessel

State University two again vessels have projects, As have it relates under that the contract. we to Oregon we

well. probably to as later second third year will held option in The second the believe as option sometimes quarter I would be ceremony vessel the keel this it, actually in it laying on year this relates and the

in believe going relates but two we customer as positive vessel. and the there is of those especially projects, our way again we're on we T-ATS but track, some the there first customers both guarantees through comments no is the on to as are get options So Navy's from synergies terms try that we it getting forward,

Martin Malloy

progress look we timing think one-time type quarter of that? results turning the 'XX, out and at the towards back of here if charges, a profitable making we you And in of should some about are profitability. fourth How the lot

Wes Stockton

it's we Marty, early mentioned longer think this the What last the story. to this is talked, is overhead Wes. of an we and time next utilization we year, the shipyard part I expect see no

our recover to lower going margins. dealing still will So be We're the overheads. with we

more the the lower the it into the of margin course a to of fab $XX in associated start fourth from challenge of and quarter EBITDA. third will be including of with a part we but so quarter in as little work ramping of mentioned. Some we're no And recovery them. that had this third went black or latter into quarter is up XXXX, last the question. expect operating we the your backlog the as relates backlog fabrication ourselves Kirk -- have in tug margin it'll is I the going the revenue the year, we Did of with of business, note finding backlog plus back one get recent million on or that this no we business, perspective, to still things that When to quarter into of last this to versus answer income quarter award but quarter

Martin Malloy

Thank Yes. you.

Operator

comes The Investment next question from Value Jeff Corporation. Geygan at Global

Jeff Geygan

recently? can as the involved secondarily, projects the Thank morning. changes I'm the this you what a like put hoping talk had doing few you profitability per Good you some And and you vessel or color then or either mitigate overall a margins around on they’ve like changes for basis on about your it to with seems been time. are tugs project. in

Kirk Meche

within let So what that address the to me eminent doing tugs. are issue we're these address

that available are centralizing put to remarks, balances checks one opening my past where the that to in location we're and and resources estimating make to similarities between together we amount products efforts, there's Houma sure greater completing and and it we're said as of relates I our projects on. As bidding the that estimates we move

simple when did have to each and just what of So tug, to recurring. piping slight one associated to or the there going systems. loss is each we is that's want its this in we said XX the tugs tail them. into happen one been the not don't problem is related might aspect. to of remarks in and specific was of tugs. we so we the a them the on terms change as earlier going to all related It's of is tugs, end bid under efficiencies to pretty improvement efficiency Again implied it I Board problem one the a not not this towards an the two it across it an Again, get that we want estimate as biggest math, too an is submitted but of of of There emphasize not that that as a it labor but forward. the -- the I it's don't have relates the to This

Jeff Geygan

whole still XX all Is a as that vessels project across profitable?

Kirk Meche

No.

Jeff Geygan

Fabrication qualitatively? utilization then Fabrication affects to division the what million, on work about you I talk it's see Can sense of the be you project a might the that of All and $XX right, heard good in and that division. some I kind jacket in I might profitability that give have projects. mistaken margins but us we or the expect how scope of thought

Kirk Meche

what am compiles. is the contract, This disclose This in to value done you, our tell that of going about Jeff this complexity what past. the so of in excited of terms size the jacket, not it. close I core pretty Yeah, I'll We're fairly we and -- the we've you're is business.

establishing So seen last year work It's almost it's you it a one-off not. I project, continue because less, several future market I the quarters, for us that type certainly is some Renaissance probably that we won't but we're customer of as in not and that think now. Mexico, a a much the much but haven't of may again. primarily not in Gulf of certainly for with to tell the pursue, relationship is for the the Trinidadian the overseas they have structure markets quarters project, benefit

our idle [indiscernible] underutilization facilities had of of period So to of as We time pretty out some which excited we're in takes up. things now. been very get it of a our factors quite a for mills, have the lot that back those including

continue excited the of trying terms in the have and the they in step to with a their relationship even projects project more on the these customer right about around it's said, We're we get to the structures installed with as world. very it's excited as So direction.

was that in us that So good for respect.

Wes Stockton

facility various help noise numbers, clearly give in to for question for us a any the income with quarter and breakeven for looking but we kind our the operating something the specific unfortunately, EBITDA adjust do and of year, towards will the back we next of have we into because to it as the get about goal us that's don't that takes, move of half we're And utilization a and a in similar the the year. is Marty's we push lot follow-on first want a to with but as and benefit just part puts our and definitely at of quarter if and to

Jeff Geygan

of project in is the award The division certainly fabrication a exciting.

stands As you in offshore your domestically like gas, EPC the seeing provide or some can maybe in and or specifically oil SeaOne look of the forward wind SeaOne, talk about relationship with as ongoing projects around it internationally either or what with today? market offshore for you're and division you size color and

Kirk Meche

deals to Driftwood Pass, you [ph] with award, there's got other these are whatnot. Golden chasing McDermott In we an something that Right but that of me products an and is said activity big finally so the Jeff, in with majority in that the it's my now comment lot we're fruition, maybe clients high. including talk and levels come about facilities as read probably a speak, all-time that about let of the closing that it's my bidding address work industry of also at or there The other petrochemical out we it. the I opening estimating comments, departments products our had

trying we and are get they our and activities to contractor to think this that if come renaissance I is pricing they can see as thing starting move recognizing are are these secured bidding ramping all the get up guys So so forward. and

and respect. but as their it to of on overhead of not time it be, try says. quarter, we of They validity relates to being The these and is frankly, much all unfortunately our again on sure report them be coming not Wes down and they see, really it SeaOne, utilization products some to told so team is number there we the financing. the quite to quarter time. the us, multitasking the do would running that again status as concentrate a assist As facilities needed these us bids We're some on get bids some back we're going are letting quite it facilities we're another up because with efforts same SeaOne, the to that has this we in where the

think strengthen trying pick we're choose the to and with better not have we we the they us to once opportunity relationship have customers as only go to So forward. for but margins,

Jeff Geygan

and Good very color. XXXX. look to you time much forward your Thank we for

Operator

more be [Operator at questions time. Instructions] There to this appears no

Kirk Meche

conference Okay. Thank Island day. Have This concludes you. good Gulf call. We listening. the everyone thank for a

Operator

today's Ladies call. for participation. and gentlemen, concludes Thank your this you

disconnect. may You now

Gulf Island Fabrication (GIFI) 1 Mar 192018 Q4 Earnings call transcript