Gulf Island Fabrication Inc (GIFI) 2009 Q4 法說會逐字稿

Good morning and welcome, ladies and gentlemen, to the Gulf Island Fabrication Incorporated 2009 fourth quarter release conference call. (Operator instructions)

At this time, I would like to turn the conference over to Ms. Deborah Knoblock for opening remarks and introductions. Please go ahead.

I would like to welcome everyone to Gulf Island Fabrication's 2009 fourth quarter teleconference.

Please keep in mind that any statements made in this conference, that are not statements of historical fact, are considered forward-looking statements. These statements are subject to factors that could cause actual results to differ materially from the results predicted in the forward-looking statements. These factors include the timing and extent of changes in the prices of crude oil and natural gas, the timing of new projects, and the company's ability to obtain them, and other details that are described under cautionary statements concerning forward-looking information and elsewhere in the company's 10K filed March 6, 2009. The 10K was included as part of the company's 2008 annual report, filed with the Securities and Exchange Commission earlier this year. The company assumes no obligations to update these forward-looking statements.

Today we have Mr. Kerry Chauvin, Chairman and CEO, Mr. Kirk Meche, President and COO, and Mr. Robin Seibert, our CFO. Robin?

Thank you, Deborah. I would like to review Gulf Island's press release for the quarter -- fourth quarter of 2009. The press release consists of two pages. Page one is text, page two is an income statement. I'd like to review page two, which is the income statement, first.

The following are the results of operations for the three months ended December 31, 2009 compared to the three months ended December 31, 2008. Revenue was $70.8 million, compared to $86.2 million. Cost of revenue was $62.6 million, compared to $83.5 million. Gross margin was $8.2 million or 11.6% of revenue, compared to $2.7 million or 3.1% of revenue. General administrative expenses were $2.0 million or 2.8% of revenue, compared to $2.1 million or 2.5% of revenue. Operating income was $6.1 million compared to $621,000.

We had net interest income of $943,000 compared to net interest income of $16,000. The increase in interest income is related to the amortization of the discount resulting from the payment agreement we have with Blue Water ATP. Income before taxes was $7.0 million, compared to $637,000. Income tax expense was $2.4 million compared to a benefit of $237,000 for the fourth quarter of 2008. The income tax rates were 44 -- I'm sorry -- 34.4%, compared to a 37.2% reduction in taxes, because the fourth quarter of 2008 was a benefit. And that benefit was the result of a retroactive adjustment for work opportunity tax credits. So we had essentially 17 months of credits that were allowed in the fourth quarter of last year.

Net income was $4.6 million compared to $874,000. Basic earnings per share were $0.32 compared to $0.06. Diluted earnings per share were $0.32 compared to $0.06. Weighted average shares and adjusted weighted average shares outstanding were 14.3 million shares for both periods. Depreciation expense was $4.7 million compared to $4.4 million. We declared and paid cash dividends of $0.01 per share for the quarter ended December 31, 2009, compared to $0.10 for the quarter ended December 31, 2008.

The following are the results of operations for the 12 months ended December 31, 2009, compared to December 31, 2008. Revenue was $311.5 million, compared to $420.5 million. he cost of revenue was $272.1 million, compared to $368.2 million. Gross margin was $39.5 million or 12.7% of revenue, compared to $52.3 million or 12.4% of revenue. General administrative expenses were $8.3 million or 2.7% EF revenue, compared to $9.5 million or 2.2% of revenue. Operating income was $31.2 million compared to $42.8 million. We had interest income of $986,000 compared to net interest income of $172,000.

Again, the increase in interest income was related to the amortization of the discount, resulting from the agreement with Blue Water ATP. The remaining interest income, which is approximately $10 million, is going to be recognized with $7 million being in -- recognized in 2010, and then the remainder of $3 million being recognized in 2011.

Income before taxes was $32.1 million, compared to $42.9 million. Income tax expense was $11.3 million, compared to $13.9 million. Income tax rates were 35.2%, compared to 32.4%. The change in the tax rates are related to limitations on certain federal manufacturing tax credits, and an increase in the state tax apportionment, caused by a greater portion of our revenue being related to marine fabrication.

Net income was $20.8 million, compared to $29.0 million. Basic earnings per share were $1.44 compared to $2.03. Diluted earnings per share were $1.44 compared to $2.02. Weighted average shares and adjusted weighted average shares outstanding were 14.3 million for both periods. Depreciation expense was $18.5 million, compared to depreciation expense of $17.5 million.

We declared and paid cash dividends of $0.13 per share for the 12 months ended December 31, 2009, and $0.40 for the 12 months ended December 31, 2008. Please refer to page one of the press release for review.

We had a revenue back-log of $136.8 million and a labor back log of 1.5 million man hours remaining to work. Cash and short term investments were $8.8 million, compared to $13.8 million. Total current assets were $114.1 million, compared to $136.4 million. Property plant and equipment was $200.5 million, compared to $204.7 million. Total assets were $334.4 million, compared to $349.3 million. Total current liabilities were $33.6 million, compared to $73.3 million. Long term debt was zero for both periods. Shareholders equity was $273.8 million, compared to $254.2 million. And total liabilities and shareholders equity was $333.4 million, compared to $349.3 million.

Other financial information for the three months ended December 31, 2009 compared to December 31, 2008, consists of pass-through cost was 37.2% of revenue, compared to 44.1% of revenue. Man hours worked were 687,000 compared to 903,000. Deep water revenue represented 25% of revenue, compared to 67% of revenue for last year. Foreign revenue for the fourth quarter of 2009 was zero, compared to 18% for the fourth quarter of 2008.

Other financial information for the year ended December 31, 2009 compared to December 31, 2008, consists of pass-through cost was 36.6% of revenue compared to 41.2% of revenue. Man hours worked were 3.2 million compared to 3.8 million. Deep water revenue represented 36% of revenue, compared to 67% of revenue. Foreign revenue represented 1% of revenue compared to 20% of revenue.

Other financial information for December 31, 2009, compared to December 31, 2008, consists of revenue backlog was $136.8 compared to $209.8 million. Remaining man hours to work was 1.5 million compared to 2.3 million. Revenue backlog for deep water was $19.9 million or 14.5%, compared to $50.4 million or 24.0%. Revenue for foreign locations was $2.0 million or less than 1%, compared to $83.0 million or 19.7%. Of the backlog at December 31, 2009, we expect to recognize revenue of approximately $109 million during 2010 and approximately $27.8 million in 2011.

We had approximately 1400 employees and 20 contract employees. That compares to 1850 employees and 150 contract employees. CapEx for the 12 months of 2009 was $15.3 million. Board-approved CapEx for 2010 is approximately $11.5 million, which includes $4.5 million on a gate for our [graven] dock at our Gulf Marine facility in Texas.

Just a few other items. In mid-year 2009, we mentioned we had an agreement with Blue Water Industries to restructure the payment terms for the remainder of the amounts they owed us on the MinDOC project. Since then we have received $36 million in payments, which is in accordance with our agreement.

Now, I'd just like to open up to calls -- to questions of the analysts.

Thank you. (Operator instructions)

We'll go first to Jim Rollyson with Raymond James.

Good morning, guys.

Good morning, Jim.

Well, I must say, nice quarter. And I'm pleasantly surprised to see your backlog actually up in this environment we've been in here recently. Curious, Kerry, what projects or what drove the uptick -- small uptick, but still pretty good, and what you guys are seeing, you know, the standard quarterly question.

Yes, Jim, no problem. Basically, what we've done is we've been awarded some marine work, which one vessel is in the 30 million range which is below our threshold to put a press release out. But we also have some small oil and gas work that was also awarded within the last couple of months. That's what helped our backlog at this point in time. No major jobs at this point in time. However, there are, it looks like, three major deep water projects will probably be bid this year. And we are in the process of working on prequal and bidding these particular projects. So it looks like these may go -- have a good possibility of going this year to be worked on probably later on this year. Not in the first half, but probably in the second half of the year sometimes.

Okay. In the mean time it seems like your business or your revenues have been holding up maybe better than what your traditional backlog to revenue relationship would normally imply. And I'm guessing that that's somewhere between Dolphin and the shipyard work you're doing. And kind of curious, I think you guys have stepped up the shipyard side of the business and sounds like, from our last conversation, that that's kind of a place you hope to continue to expand. Just kind of curious as to what you are doing in that arena. How that's going, and how the margins are going, because that seems to be a lot better than what you started off thinking. Just maybe a little color on the shipyard side.

Sure. Jim, basically on the shipyard side, we have been meeting our target goals of keeping our profit margins on the new construction, especially, equivalent to what we've seen in the oil and gas. And we have been very successful in that, at least up until this point. So we do have a history of that, and we hope to continue that. Also on the repair side, we've expanded our repair side now that the dry-dock is in operation. So we are actually able to see a little higher margins on the repair side than what you typically see in the new construction and even in the oil and gas side. So that's been helping to prop up our margins at this point in time. How much that continues in the future we don't know, but at least a lot of the revenues were generated through the marine side of our business.

The oil and gas side is still somewhat active. We still have a small backlog in oil and gas, which we are working on at this point in time. And is continuing to be worked on. We are seeing also some smaller jacket work for the shallow water Gulf of Mexico now. Nothing really excites you in terms of numbers. At least there are a few projects that's coming to bid and could possibly be awarded in the near future. So we're kind of a little excited that we're finally seeing some activity in that side.

Yes, Dolphin has continued to keep their employment levels pretty stable on the offshore side of our business by working crews offshore and even some of the in-shore projects. We've been very fortunate that Dolphin's labor levels have been rather stable through the last year and we hope to continue that in the very near future.

Last question for me, I guess. The -- given your backlog is similar to what it was a quarter ago and it sounds like still prospective marine work. Do you suspect your first quarter level of business is probably going to look something similar to your fourth quarter?

Jim, we don't give guidance. But, no, it won't. Needless to say, we're going to have a tough first quarter and it's going to be pretty rough going through that first quarter. We hope to maintain our employment levels where they are. We're actually doing a little hiring, at this point in time. But we -- to expect those type of numbers, I don't think that would be practical at this point in time, until we can get some larger projects under our belt and move forward.

Okay. That's very helpful. Thanks.

Okay.

And we'll take our next question from Martin Malloy with Johnson Rice.

Good morning.

Morning, Marty.

Could you give us an update as far as some of your internation oil and gas opportunities, and in particular, the North Sea?

Well, we've missed out on one. We weren't considered on one of the bids. In fact, it hasn't been awarded yet but we understand we are out of the running. There are two other projects that we're looking at this point in time, and there's been some delay in these projects. One of them specifically will be delayed at least six weeks, and the other one we're not necessarily sure how long it will be delayed. But there possibly will be some delays in that one.

Okay. And then with respect to some of the deep water Gulf of Mexico opportunities, that you mentioned three for this year, with work possibly to begin by the end of this year. Does that mean they would need to be awarded in either the second or third quarter?

Well, it's possible that it could be the second quarter but more likely it will be in the third quarter.

Okay. Thank you.

Okay, Marty.

And we'll take our next question from Will Gabrielski with Broadpoint.

Sure, thank you. Good morning, guys.

Most of the big questions have been asked and answered. What would your cash balance be today assuming the Blue Water payments that you received year-to-date?

What our cash balance would be right now assuming what we received?

Yes.

Probably a little higher than it was at the end of the year, a couple million.

Okay. And then, how much of the work was actually booked in the fourth quarter versus through February 25 since the end of the year?

The project was completed in November. The only thing --

No, I'm asking with respect to the backlog man hours and backlog number you reported today, how much of that showed up since the beginning of year versus showed up during the fourth quarter?

Well, we don't give that information out. Every quarter we give what's awarded up until time of our press release. We don't break it up by year end, and in the first month, or something after that. So it's actually all work that has been booked is up until this point, is put into our backlog. We can't break that out.

Okay. Fair enough.

And, lastly, if you look at the Gulf of Mexico deep water projects that you're referring to, can you maybe characterize if all three of those actually went forward over the next six to 12 months, what the utilization rates might look like at the three bigger yards and your expectations for the international companies that could show up and how competitive they might be?

Well, that's looking forward pretty much. But I'd say at this point in time, we hope that all of the projects do move forward and we hope that it would be in the US fabrication yards. But again, there is no guarantee on that, and depends -- a lot depends on how much of the project would be awarded to US yards versus foreign yards on the actual capacity constraints. And we're -- even though we keep track of our competitors, we can't speak for them as far as their capacity. It sure would be nice to have a couple of these projects hit the Gulf Coast fabricators.

You are absolutely -- okay,thank you very much, guys.

And we'll take our next question from Joe Gibney with Capital One.

Thanks. Morning, Kerry and Robin.

Morning, Joe.

Just a question on the vessel you indicated you booked here in the quarter, for the $30 million range on the marine side, is this OSC body work like you've done with [Shwest] in the past or this tow boat work? Just curious if you could give a little more color there.

It's a lift boat.

Okay.

It's a lift boat, construction-type boat.

If you could, where do we stand on the tow boat backlog now? I think we stood around 50 million out of your backlog in the third quarter. Was curious where we stand on it now here, exiting fourth quarter.

I don't have any specific numbers on that right now, Joe. We do have five boats to deliver. Basically all five boats are in some phase of fabrication in the yard now, and I think the last two boats will be delivered in 2011. So we're delivering roughly one a quarter. Or a quarter and a half.

Okay. That's helpful.

And just to follow up on the cost, I appreciate the color on the repair capability and how that's aiding some of your margins. Could you repeat what the contracted employee count was? You guys obviously have reined in your contract labor pool. I'm sure that's helped margins a little bit.

We're down to 20 contract employees, compared to 150 that we had last year at this time.

Last year, fourth quarter. Okay. Great.

Thanks, guys. I appreciate it. Nice quarter.

Thank you.

(Operator instructions) We'll go next to Brian Uhlmer with Pritchard Capital.

Good morning, gentlemen.

Hey, Brian.

I had a very simple question for you. The lift that you booked in, was that one of the ones sitting in the yard that was waiting on an order? Or is this a new--

No, no. This is a -- no, a new one.

A new one. So those ones that you did have were booked and were finally shipped out? Or are those still waiting on a decision from the customer?

We're still waiting on decisions from the customer.

Okay. So,I need to talk to him about whether or not they're going to order those.

Well, we can't talk about that very much.

You 're not going to discuss that, right? Absolutely.

That's all the color I needed. Great quarter. Thanks, guys.

(Operator instructions) And it appears we have no further questions at this time.

Okay. Not even from the general audience?

No, sir.

Okay. We appreciate everybody listening in and we will be back next quarter.

Thank you.

A replay of today's presentation will be available starting today at 12 p.m. central time until March 12. You may access the replay by dialing 888-208-1112. Or 719-457-0820 and entering confirmation code 217-4197. That does conclude today's presentation. We thank you for your participation.

Thank you very much.