GIFI - Earnings call transcript Q1 2019 | Gulf Island Fabrication, Inc.

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Operator

Good morning, and welcome, ladies and gentlemen, to the Gulf Island Fabrication, Inc., First Quarter 2019 Earnings Conference Call. All participants will be in a listen-only mode for the duration of the presentation. This call is being recorded. At this time, I would like to turn the conference over to Ms. Cindi Cook for opening remarks and introductions. ahead. go please Cindi,

Cindi Cook

and Gulf I Teleconference. Island's Shelby, welcome like everyone to First good you, would morning. to Thank Quarter XXXX

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

Kirk Meche

Thank quarter reflect morning you, the year-over-year on divisions. sequential a project across Results growth basis our to our and listeners. execution Cindi, all with revenue for solid of and along good

However, results quarter. for impacted facilities underutilization the our within our

Shipyard Shipyard improvement for our the Fabrication Division activities a and our expected, contracts our to awarded increase in construction costs Specifically, while slower-than-anticipated of our Services Service the and an as due under we experienced Division overhead showed Divisions ramp-up of our in Division. recovery timing of

awarded executed in our our and backlog expect for to We as Service our shipyard future quarters were Division improvement contracts show activities newly increased.

Oregon along third with the our quarter activities, our third with shipyard a to for the growth have Wes, backlog I have the million April vessel T-ATS our vessel $XXX relates segments These Navy for our quality would continued a to and to reportable our program. three posted attention quarter. - to has Division to it and our end As your during second award of bring to State, call vessels. projects build turning for Prior customers to ability the our the deliver attention confidence to over demonstrates your with change Shipyard continued and a like backlog

right SeaOne As what our respect order and offshore Fabrication resources EPC to we a our still the modular have provide combination services that increased petrochemical advantage wind focus in this for with take to and Division. better we the result our ensue uncertainty to make fabrication our and the projects. EPC sure with in have of during will place bidding Division the to We along Project operational project opportunities combined we enabling and project operationally for focus timing management industrial - with an of opportunities, to first quarter, on sector, pursue believe us on the while right opportunities

will I over and that, who of call Wes? details with turn the our results to segment Now Wes additional will provide breakdowns.

Westley Stockton

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

activity by Division. quarter the our a the revenue in our first an reflects quarter increase decrease Fabrication offset Our relative for for in Division, Shipyard increase for in XXXX partially to activity

overall and Fabrication operating with North costs results decrease and and tug to our and recovery and These reversal to general expense incentive The the projects. reflects increase our benefit Yard. current higher Shipyard Fabrication Services impact mix, in an our due in period divisions. the overhead for an respect the of by the our on quarter, lower relative harbor debt with prior experiencing of reduced project to overhead quarter the were lower charges XXXX and Texas loss the relative operating and The sale. period on of under held sale improvements a our prior due Divisions. expense gain revenue, the loss our costs offset both period the lower Our in quarter the higher-margin in and administrative was fourth including partially quarter partially activity loss by of for XXXX the for associated costs legal to These increase prior to the to fourth with to the general overhead associated our lower of operating bad due of impairment associated offset improvements partial decrease plan and reduced the revenue, including certain fees, across higher was changes our administrative in for XXXX estimates recoveries assets for relative were first XXXX revenue a quarter Divisions. net cost, for period the professional including recoveries was period the With

to our Further, of presentation operational the Division XXXX note combined and the Division for like Fabrication Fabrication, have segments that the period. during for EPC Division Shipyard, to prior segments operating providing the of a reportable quarter Division our our reportable are for details our quarters the of the segment, first fourth with our to the Corporate. quarter, first our by result to for Fabrication current former I and been results combination Now XXXX conform Services would as with of additional EPC

with provide by additional segment. So our that me results understanding, some details let of

harbor for million maintenance U.S. activity period tug, to $X.X during for during XXXX. For completed the quarter due revenue for quarter quarter including on for relative decrease profit and and XXXX. was no ice-breaker million and respect in to progress period The rescue rescue fourth versus the position. results to These suspended to the same loss our and to to loss overhead million the to $XX.X in administrative in a increased revenue research tug fourth of first our to and to MPSV revenue Shipyard ship and revenue decrease the operating harbor primarily the fourth estimates two $XXX,XXX XXXX the salvage increased increases in million project and were overhead XXXX. period an loss loss XXXX ship. two Navy. to harbor for assets our period the for progress is quarter, $XX.X quarter the and on salvage and Operating costs associated comparable prior activity quarter quarter fourth of compared by increase repair to were contracts year-ago was due and which first XXXX tug partially partially class and the were that and towing, Division, of for maintenance projects, sale. for of revenue our quarter repair lower projects XXXX for for offset operating for mix regional on costs. under-recovery the our impairment relative was recoveries higher the and in general that in projects, The with $XX.X our costs. relative and for the XXXX improvements changes including our loss partial was was the reduced XXXX our offset two was million an vessels tug With held relative operating increase our quarter a charge quarter OSV due increased These revenue the projects, and tug for our to period $X of operating XXXX prior are the towing, offset the an revenue overhead the gross harbor expense, class at project due due regional The research the revenue, lower-margin loss recoveries partially vessels The was due of higher by by

due our income sale higher-margin was current for higher quarter operating fourth for for fourth of gain $X.X income results same was to of and the period overhead and for revenue the was the reversal XXXX quarter fourth offset offset for riverboat quarter on the the general XXXX of for expense, sale. project respect XXXX, due benefit operating offset operating for in mix, our on first year-ago to The increase costs. quarter the the which period. million $XX.X increase XXXX associated prior of the quarter period with the With costs. partially was relative due fourth and to not a of the quarter partial primarily $X.X period quarter that million period a second by Yard, administrative wheel higher-margin recoveries of relative mix $XX.X loss to also for held million was and overhead The quarter to North to due the revenue was million primarily operating lower the XXXX. the the to completed the comparable XXXX. The loss an by in our debt project, project reduced prior loss the the wheel due of to XXXX of prior our assets revenue revenue our construction progress project and Fabrication for in activity our for versus river operating including project. and our fabrication period quarter bad XXXX For to the the period XXXX recoveries progress was for quarter, first to operating Texas $XX.X prior million the lower the of net under of paddle Division, during paddle relative charges the including impairment $X.X improved compared decrease million period and and loss on XXXX quarter the in operating was under recovery the partially revenue by costs, in Operating including partially overhead of was significant module the versus loss The

quarter XXXX for the For or revenue X.X% and million to $X.X income both the $XX.X our $XX.X revenue million for or operating million XXXX Operating fourth same awards. to X.X% impacted negatively $X.X was our operating of by operating the XXXX new the first and year-ago was of of of of was was was million to quarter of higher-margin income versus expense. primarily for With reduced period project for the the million volume quarter the partial for fourth revenue the $XX.X relative recoveries both in administrative the by period The quarter the and operating overhead timing million lower Services comparable of partially quarter XX% revenue quarter and revenue decrease compared costs, $X.X XXXX. decrease general fourth to income of the our fourth results or respect quarter income the XXXX. and lower recovery XXXX for income to for in of quarter, for quarter mix revenue of Division, costs. relative of The and primarily due overhead and to due operating XXXX offset under

of to lower legal Corporate the loss and For classification decrease due operating period fourth quarter partially to XXXX $X.X $X.X due an relative to business. a between advisory XXXX certain million Division, with the fee increased in and initiatives alternatives for operating The fees of professional corporate to loss plan of and due was higher alternatives same the and for of valuation business. to quarter was operating and increase XXXX. operating in and to costs associated corporate loss to cost, initiatives for the diversify compared our costs The and by certain changes evaluation costs loss the our XXXX primarily segments of segments first million diversify the enhance in strategic the offset was of our million classification and and with in and fourth the to associated legal our operating quarter operating incentive costs quarter relative other the the between primarily changes strategic $X.X

a as year-end or of comments backlog income let end. liquidity quarter few and and Now regarding provide me taxes our -

Our tax tax GAAP income only expense as our state deferred due for for to we tax reflect income have on taxes losses recognizing all any limitations federal not benefit assets. periods recorded

recorded cash benefit on we a receive although have in results, a reminder, not we future our tax income. will tax taxable benefit a As

approximately decrease from totaled to on million Moving from our representing our increase of XX, March million in an year-end At backlog. backlog XXXX, $XXX of XXXX March $XX backlog XXXX. and $XX million, a

Fabrication Division our for backlog $XX million for Our Services million $XX million $XXX by segment our and was quarter Division. Shipyard end operating our Division, for

our excludes end new and Shipyard that year-end April project and represents both XXXX. almost received million Our from Fabrication Division in our awards Divisions backlog for quarter an $XXX increase in for Shipyard were

the remaining awards customer two represent our which, OSU also towing, exercise increase As regional customer quarter Navy, mentioned cash liquidity, projects. timing for salvage our these position and net short-term options vessel a investments quarter billing million, ships of if capital contract decrease Navy. was U.S. the certain asset the Backlog rescue year-end from and of on research working U.S. excludes and in to to by million backlog Kirk, projects on from and million options exercised, due class XXXX. for for milestones for with during $XXX of by to an our the an contracts primarily the respect backlog a million. ended increase the With additional we decrease would the due of on changes The of an increase from to due XXXX in $XX.X $XX $X and March year-end

position ongoing as the these Although capital result future capital second contract the during anticipate progress variability towards the in inflows asset projects net for quarter, in completion. we ultimately projects increase our will including quarterly cash working an in project requirements, working

of on changes, facility Excluding our facility, the our for for to to additional of June XXXX. $XX.X no With overall breakeven. respect million cash of our working of was capital May at And the outstanding extend approximately on million and had $XX we impacts quarter of credit borrowings. liquidity, the credit quarter amended availability million to providing we end, or its letters X, letters borrowings maturity credit flow $X.X operating

investments XXXX. our credit availability of a aforementioned, cash, As liquidity and result our XX, the strong March total of facility under $XXX million remains approximately with at

that liquidity the call equipment the held potential at a and over for proceeds totaling to remains of for turn Kirk I'll machinery Now reminder, comments. from million this excludes as current quarter any end. sale final sale $XX.X now

Kirk Meche

Thanks, Wes.

company's With of the the oil T-ATS diversify reflect options, end our these have of gas Further, to backlog executed largest the after quarter our our history. our and traditional outside options the OSU end one and ongoing Navy addition efforts in reliance quarter of we sector. at and backlogs on

sector. Specifically, oil onshore fabrication industrial is continuing and Having and included, with opportunities XX% backlog well this, of approximately we are of and these as said see executed options to repair. gas outside the our sector oil traditional significant maintenance for the gas as in

Mexico. We associated engineering are also beginning to see increased activity with the Gulf of

this tieback activity and moving In was me our to construction had traditional quarter, provide a had direction. do market a on lower forward and closing, not the structures, which supplier for up. yield the plan our going opportunities, improvement us respect While quarter may a our revenue activities expected increase see may to in our in utilization utilization to itself With first facilities, components our fabricated current bidding significant has lends past. right we liquidity, backlog opportunities construction for the of strategic ramp backlog that of current the which expect we it than sequential been basis as and strong for although convinced

established we on a shareholders. value. company we all a While opportunities conduct everything initiate of the want returns our to and plan to process Board to announced remain of Special shareholder for strategic Directors evaluation the options has reasonably maximize company, the yesterday, available to our available to to our confident that enhance do Committee growth to Accordingly, a possible thorough we

discuss approved further review conclusion the timetable of a set has disclosure that for have course or Special determined strategies, do review developments unless until further not we we appropriate. open specific a to Committee's of of disclose not or alternative otherwise has action of may Board now you questions. publicly the is Shelby, and the Board and the intend Our for our line

Operator

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

Martin Malloy

Good morning.

Kirk Meche

Good morning, Marty.

Martin Malloy

for believe, facility, about exercised you're being your options are construction of the you the additional maybe Houma vessels. the where for you ramp-up I is terms vessels of Could engineering those? at in in see doing to terms Good where the talk and

Kirk Meche

Yes, sure, Marty.

options were OSU. excited So Again, the have protest you're the Navy, and the engineering very not by always through we we executed also right, continuing on process. were only to with but

we on, and will equipment you of specific for engineering ordering were So the whatnot. limited still I continue terms but first will is tell the vessel equipment in But ordered. that

quarter up projects. to two next year will of say this and third I'd We these on expect follow-on as on the quarter the third ramped Navy start the or on the be probably sometime we vessels of get construction second in maybe year,

Martin Malloy

And Oregon projects? on the State University

Kirk Meche

Yes.

third again, one this just engineering were the We quarter about a from vessel, during quarter that would finished probably three. say XXXX State, really and one Construction second Oregon the vessel. time be frame I'd of end should first XXXX. on commence third through first the vessel, on I'd the vessels surrounding somewhere and of for And So aspect second quarter. start standpoint it's that vessels the that repeat the - for the say third piping

Martin Malloy

Any developments those share of the forward? wind of new terms side projects some us on Okay. to in moving with

Kirk Meche

We But the did in a content of Well, this tender in No did results point issued projects to at there for heavy go quite project have have we time. European it is it. one that, frankly, of out been suspect concentration that it. that one bid. was would

or European announced bids really alignment still within chasing receive heavily, a project, next strategic second scheduled the we're with The quarter we've two. what supplier. our which is to we're Again,

part little a year, bit And of the that But into quarter next the out would is we've towards again, fairly say year this one well. going so latter the in interest respect. and the be of first of there's the wind I'd with having good see said whatnot. of still is lot constructability and we're movement a it. in conversation much we in news don't And again, But terms owners always that

moving for us. So still positive it's

Martin Malloy

you. Thank Great.

Kirk Meche

You're welcome.

Operator

take our question Pinnacle. next We'll from Deysher John with

John Deysher

was the and are good EPC I funding. curious Hi, geared know curious movement on of where towards is that, the if Project. Division just I there's SeaOne I morning. with SeaOne of we any been kind was

Kirk Meche

John. This Kirk. is good That's a Sure, question.

you're are the We to much of see right, So moving the project terms that is indication still of of forward, type had some the the with secure don't their first of We've we with obtaining have movement were and as indicated they to as in position them yet not financing. had meetings where at executives, they're the that end we financing needed hoping for in us. several to quarter.

our And so the interest there. to our want I some happen that make efforts have we on of so shortlisted are on amount of again, side being tremendous that we continue SeaOne's call, them as But right of quickest. we bids be these and projects talent on still that out still supporting forward. a as projects tell in We're had were some concentrated we you, sure now to mentioned our received hopefully going best And petrochemical quarters and receive. have the the we to I will opportunities the over that respect. thought last will couple of And move the these business in we and

can again, the to still for those financing. obtain of changes past. an had in but kind of well. if as had involved their on some guys the still as maybe kind not So they Again, quite we're And had to go that to they we're we've it see through waiting level they design the update with SeaOne,

those a pattern in of kind we're with So guys. holding

John Deysher

that it's the forward Division adjust clarification, the to for the Division well as so Fabrication is with XXXX, Understood. combined period EPC apples-to-apples? And just in results prior reflect you'll and going

Westley Stockton

adjusted. have actually That's They been right.

for of So in release those Those a been you'll in combination lack of see both to EPC. press our our and better term, reflect forma the and amounts fab had that XX-Q. pro

John Deysher

under in Good. I right with they are two vessels? the there vessels status think your there? been still XXXX. delivered that there's two the yard your of And QX, mention we any What's in supervision? Okay. And now? to where Is of disputed those are are be QX going movement

Kirk Meche

Yes. there in under our that been John, facilities care still our no, they're custody. in And no movement hasn't respect. and

John Deysher

receivable how Okay. Is there backlog this the embedded at the if so, vessels in those any point, much? amounts accounts related or and to

Westley Stockton

assets, that's for some and at $XX.X have, our long-term it to moved other million We had in what projects, consistent and related time. year-end those hasn't assets, with we

John Deysher

And backlog? about the what

Kirk Meche

And relates... as it

Westley Stockton

And $XX - as million as it backlog, to $XX well. relates backlog million

John Deysher

That's Thanks. helpful.

Operator

with Instructions] Global our next Corp. [Operator Value take We'll question JP Geygan Investment from

James Geygan

gentlemen. morning, good Hey,

Your to Or high what you nicely, level enough backlog facility be in has to but really will need represented is activity of that for profitability? rationalize cited of or utilization facilities And achieve your a your level consistent your At underutilization there several quarters. grown backlog? expense is footprint structure? currently further

Westley Stockton

to I'll Wes. we full that. the currently. don't our on comment We is don't This backlog utilization based get - get Yes. there solely

specifically projects feel to that when of some as we the some at does the Now smaller, and we year, with quicker on the hate success fab we to it too into chasing some to we to to facilities. I book-and-burn we'd work by utilization amounts, of but will But see full a continue specific respect is improvement. like dependent, get that's end we're move And XXXX, chasing. be we improve. And our the then exact very utilization. degree full we're on close it get of have the of

James Geygan

expect Is really cover net not we overhead there XXXX to your achieved late XXXX? enough Or up to level margin built early for to a take SG&A? in to should enough projects profitability gross until or leave be and

Westley Stockton

that Again, - come this the EBIT year. backlog. the targeting at think from We type won't We a on still call. by our the of that's XXXX end point, last Late said that entirely breakeven we're achievable.

shipyard awards to dependent, on to in side, level. the the that But order it is of get to to side where kind our degree, of - of needs some be specifically will fab it timing backlog that the Some on be. on fab

to at from think in breakeven more And quarter, positive. million, expect slightly specific. than quite either, several I as $X not As the an get be EBITDA we perspective, $XXX,XXX end do EBITDA we EBIT less to we'll year, we're get the get breakeven. that saw again, to next the we'll of quarters for But to you the then

James Geygan

Okay.

fabricating present, you away towards definitively this of strategic Your opportunities as does shifted has and more especially structures business offshore contemplate shipyard What from a alternatives? business. much challenges

Kirk Meche

JP, I shipyard sector this, you think margin fabrication Well, have what years. in in on think than work been when right. you're about Shipyard, previous are lower type traditional experiencing the we

activity news some may Houston, opportunities perform be other well but see the higher is those as service the continues optimistic as we Wes there indications may that work that talk we said tiebacks market we get have of within sectors months usually for that ramp-up is don't oil Our are - Division pretty companies in we've there little behind opportunities. the of work, a the in a whatnot. six continues especially that respect, associated Services too group bit be we to here. but these within the with as news especially opportunities, Again, than And they to good very Division. petrochemical, lot as only little of some which are new of ramp-up starting Fabrication engineers will will increased traditional around Pending us shipyard bit in some and build. we gas-type strong signals about that, Division. some the about there our with the higher us fabrication But we said, We is here on. engineering awards a projects. yield hiring seen few that of engineering my is in and not to impact margins. timing here, the news us. would our Again, are shipyard a and engineering awards margins bid projects these put XX to I terms The Again, of increased good especially quite call, no for the see of around good about margins certainly typically activity terms Fabrication I into in with to But companies, with of want with for

James Geygan

strategic realize Okay. that or discuss for that finally, you your strategic but I'm consider forming hoping - how I some to review the Board of of color to provide circumstances And a results review set you alternatives. that's special led can the progressing, on won't the committee

Westley Stockton

think anything of that in don't there's we point that would that decision. to terms events to led No, I

have to will that to enhance everything return. goal a always we're We ensure maximize doing we shareholder can or

and your think the part of can this sense we it today, to everything where doing are I is we're we sure to and course of makes make natural maximize enhance return.

Kirk Meche

for we certain And Yes. that past. us may reached want think, we reach shareholders may we're in assist marketplace, JP. to and in or us. markets to have the out footprint well the the the to not seeing Again, management Hiring in obviously, firm the biggest for I we get, of as can terms going out what's as is good

again, yield So what us. to will I'm see for this looking all forward of

James Geygan

somewhat Island parties? that activity, be a either where in up other I with an interest question And or be follow maybe you M&A any acquirer in to by Gulf you have sit, presumptive. then can But might change from seen as acquired that

Westley Stockton

that's something if know don't we comment can I on.

Kirk Meche

we quite I Yes. on don't that know can comment that.

James Geygan

Okay, Thank very that's fair. you much.

Kirk Meche

Thank you, JP.

Operator

today's time, additional over any like I the session. management to back for concludes to questions-and-answers comments. would At conference turn This this

Kirk Meche

for and end Thank thank us to Gulf interest everyone And second Island. your quarter XXXX. you. in at the of joining our We everyone this we'll speak morning

Operator

conference Island call. Fabrication, Inc. today's Gulf concludes This

disconnect. You may now

Gulf Island Fabrication (GIFI) 11 May 192019 Q1 Earnings call transcript