Gulf Island Fabrication Inc (GIFI) 2014 Q1 法說會逐字稿

Good morning and welcome, ladies and gentlemen, to the Gulf Island Fabrication, Incorporated's Q1 2014 Gulf Island Fabrication, Incorporated earnings conference call. (Operator Instructions)

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

Thank you, Lexi. I would like to welcome everyone to Gulf Island Fabrication's 2014 first-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 statement concerning forward-looking information and elsewhere in the Company's 10-K, filed March 7, 2014.

The 10-K was included as part of the Company's 2013 annual report filed with the Securities and Exchange Commission earlier this year. The Company assumes no obligation to update these forward-looking statements.

Today we have Mr. Kirk Meche, President and CEO; Mr. Jeffery Favret, our Chief Financial Officer; and Mr. Todd Ladd, our Chief Operating Officer. Mr. Meche?

Thank you, Deborah, and good morning to all. In keeping with the format that we had implemented last quarter, I will provide updates on existing projects, a general overview of the market, and opportunities that exist for our Company.

I will then turn the call over to Mr. Jeff Favret, our Vice President of Finance and Chief Financial Officer, for a breakdown of the financial for the first quarter of 2014. At the conclusion of Mr. Favret's report, we will open the lines for questions.

I will begin with an update on the projects currently under contract. At our Texas facility, we successfully delivered the first classic SPAR hull ever built in the United States in the first quarter of this year. The hull has been installed offshore and we are in the process of finalizing our contract value as well as documentation to close out this project.

We also continue to fabricate a 1200-foot jacket destined for the Gulf of Mexico as well as topsides for this jacket. Deliveries for these units are scheduled for late summer 2015. We are in the process of receiving materials for the piles and will commence fabrication activities later this summer.

We also continue to fabricate the two tank barges with deliveries set for third-quarter 2014. At our Louisiana facilities, the 7000-ton topsides for the classic SPAR hull we fabricated at our Texas facility was successfully delivered in late February of this quarter. Like the hull, we are in the process of finalizing our contract value as well as documentation to close out this project.

Work continues on several jackets and topsides for shallow water projects, which include domestic and foreign locations. Planning, scheduling, and related efforts for a major offshore hookup and integration project for a large deep water platform in the Gulf of Mexico is gearing up and set to commence in the second quarter of this year.

We continue to work on several vessels, including the large lift boat scheduled for delivery in the latter part of third quarter this year, as well as two offshore supply vessels scheduled for delivery this summer and the latter part of this year, respectively.

Our drydock remains active with opportunities for work going forward. We expect bids for deepwater projects to be available in the second half of 2014. Bidding activities for nontraditional Gulf of Mexico marine-related projects, overseas shallow water projects, and support work associated with deepwater structures are expected to increase from current levels over the next three quarters.

We continue to work with several companies, including partnering opportunities that exist for the latter part of this year and into 2015.

At this time, I would also like to acknowledge our three new Board members: Mr. Murray Burns, Mr. William Bill Chiles, and Mr. Michael Keeffe. We feel that the addition of these gentlemen to our Board will greatly enhance our strategies for the continued growth of our Company.

I would now like to turn the call over to Mr. Jeff Favret, who will discuss our financial performance for the first-quarter 2014. Jeff?

Thank you, Kirk. And good morning, everyone. I will discuss highlights from the quarter, provide specifics on our financial performance, and then we'll open the call for your questions.

We had a solid first quarter with net income of $3.5 million or $0.24 per share compared to net income of $2.8 million or $0.19 per share for the first quarter 2013. Revenue for the three-months ended March 31, 2014, was $134.7 million compared to $150.4 million for the three-months ended March 31, 2013.

Gross profit was $8.8 million for the first-quarter 2014, representing a 6.5% profit margin compared to $6.7 million or a 4.5% profit margin for the first quarter of 2013. Operating income was $5.4 million for the three-months ended March 31, 2014, compared to operating income of $4.3 million for the comparable period 2013.

The decrease in revenue of 10.5% for the first-quarter 2014 compared to the first-quarter 2013 was primarily due to substantial revenue for a large deepwater project recognized during the first-quarter 2013, partially offset by higher levels of revenue from pass-through costs in 2014. Pass-through costs as a percentage of total revenue was 68.9% and 56.3% for the three-month period ended March 31, 2014, and 2013, respectively.

The increase in gross profit for the three-months ended March 31, 2014, compared to the three-months ended March 31, 2013, is primarily due to stronger margins associated with the fabrication and installation of offshore skids and other short duration projects during the first-quarter 2014, as well as continued margin lift associated with the latter stages of fabrication of topsided hull projects for a large deepwater customer that we discussed on our call in connection with the fourth-quarter 2013 earnings.

The following represents selected balance sheet information from March 31, 2014, compared to December 31, 2013. Cash and cash equivalents were $23.2 million compared to $36.6 million. Working capital was $79.8 million versus $89.7 million. Net property plant and equipment was $234.7 million compared to $223.6 million and total assets were $408.5 million and $426.2 million, respectively.

CapEx for the first-quarter 2014 was $10.6 million, primarily for the purchase of a 660-ton capacity crawler lift crane and other equipment. Approximately $20 million of capital expenditures are planned for the remainder of 2014, including approximately $5.4 million of maintenance capital expenditures at our Texas and Louisiana facilities; $1.1 million for yard improvements at our Texas facility; $6.9 million for a second crawler lift crane at our Texas facility; and $1.2 million for forklifts, also at our Texas facility. We declared and paid cash dividends of $0.10 per share during each of the quarters ended March 31, 2014, and 2013.

I will now turn to our backlog information. Revenue backlog was $271.4 million with a labor backlog of 2.5 million hours remaining to work at March 31, 2014, compared to a revenue backlog of $358.7 million and labor backlog of 3.3 million hours remaining to work at December 31, 2013.

Additional backlog information for March 31, 2014, compared to December 31, 2013, is as follows: revenue backlog for deepwater projects was $171.1 million or 63.1% compared to $224.5 million or 62.6%. Of the backlog at March 31, 2014, we expect to recognize revenue of approximately $236 million or 87% during the remaining nine months of 2014 and $35.7 million or 13% during the calendar year 2015, not including change orders, scope growth, or new contracts that may be awarded.

We had approximately 2000 employees and 250 contract employees at March 31, 2014, compared to approximately 1900 employees and 470 contract employees at December 31, 2013. For the three-months ended March 31, 2014, labor hours worked were 953,000 compared to 1.0 million for the same period 2013.

With respect to our assets held for sale associated with the Cheviot project, I can report that we continue to actively market the asset. A factor in the first-quarter 2014, we entered into an agreement with the manufacture of certain equipment, representing approximately 50% of the fair value of assets held for sale, whereby the manufacture has agreed to assist with preparing the assets for sale and marketing efforts in return for a percentage of the sale proceeds.

Based on this development and continued interest in the assets, we have no reason to doubt that the ultimate disposition will net at a minimum a recorded value of $13.5 million.

Operator, you may now open the call for questions.

(Operator Instructions) Will Gabrielski, Stephens.

Good morning. Can you talk about -- now that you are finishing up the big jobs that were in your backlog -- what the margins might look like post-Q1 on what is remaining in backlog and how the bid environment and pricing market is for the new stuff that you are winning, the smaller book-and-burn stuff? How should we think about that playing out?

Well, Will, again, we try not to give too much forward-looking information on our margins going forward. I think we talked about in the past that we are trying to get the margins up. Obviously, this quarter, the margin was a little higher than we have seen in the past. Again, we talked about the smaller projects, the shorter durations, the less risk associated with it.

Again, there's a lot of competition out there, especially in the deepwater markets right now. There's a lot of overseas competition. So margins will be very tight going forward, again, with a lot of competition out there.

And as I think some of the shipbuilding industry is starting to come down a little bit, you are going to start seeing a little more pressure coming from those guys in terms of trying to get that small structure fabrication work done.

So, again, it is our effort to try to get margins as high as we can, but I don't think it is fair that I sit here and comment on what I believe a margin may be in coming quarters.

Okay. The volume of work on the marine side that you see over the next 12 months, do you think it is more or less of an addressable market then we saw a year ago at this time?

I think it is a little less. Again, I think some of these guys have peaked out in terms of new construction going forward. There still are some opportunities out there for us and some very strong ones going forward, but again, you don't see some of these boat builders going out and booking 40 and 50 vessels at a time. It is more of the two or three type vessel packages we are looking at now going forward.

And, again, our marine division is doing well, but we are really doing well with our dry docking. There's a lot of opportunities out there for vessel repairs, and certainly as these vessels get into the marketplace, they are going to have to be repaired, inspected, and whatnot going forward. So we are gearing up for that as well in terms of our repair.

Okay and then lastly, now being in that seat for a while, when you look at the assets that the Company has and maybe some of these skill sets that you have, how is your strategic thinking evolving or any major repositioning of the Company over the next couple of years that you can talk about, that you think might add value here and make potentially -- just create a better profitability stream for you guys?

We are challenged by our Board of Directors for always looking at different opportunities, as well as our shareholders. There are several things we are looking at. Nothing that is imminent at the time, but we have got a strategic plan out there, Will, and I think with, especially with, the addition of our three new Board members, who are adding some much-needed contact information from our Houston market.

These three guys are going to help us identify what projects and what opportunities we have for our Company going forward. And, hopefully, in the next couple of years or so, you will see some movement in that respect.

But, again, we are always looking for new adventures and new opportunities going forward and certainly even now I think it is more prevalent as we go forward.

Okay. Really appreciate it. Look forward to catching up afterwards. Thank you.

(Operator Instructions) Maddie Everett, Johnson Rice.

Good morning. Can you talk about what you are seen as far as timing for deepwater topside awards?

Yes. Maddie, this is Kirk. Again, we are seeing some of the topsides, the big, large topsides as we expected. They are being pushed a little bit to the right as these guys are looking at other options in terms of possible tiebacks and strategic (technical difficulty) -- Maddie, are you still there?

Yes.

Okay, sorry, had a little interference there. Again, so some of the big top water projects, again, we are seeing them push a little bit to the right. And, again, I think as they try and figure out exactly what is the best options available out there, whether it is some type of classic SPAR hull or if it is some semi-submersible or if it is even a tieback to an existing platform, that is starting to affect these large projects.

And again, they are getting bigger and bigger and there's a lot of pressure being put on these guys to go overseas and look at competitive pricing there.

So again, it is about what we expected, quite honestly. We won't see any of these big projects come out for bid probably until the latter part of this year and going forward.

Okay. Can you update us on the $11 million payment from the deepwater topside customer that is expected, I think, to be collected in March related to the final change order?

Yes, Maddie, we actually collected that payment last week. And so that finalizes the payments that are due to us.

Okay, great. Thank you.

(Operator Instructions) It appears this concludes today's question-and-answer session. At this time, I would like to turn the conference back over to Mr. Meche for any additional comments.

Well, again, we would like to thank everyone for listening in today. And I would also like to take this opportunity to thank Ms. Deborah Knoblock; she is retiring with our Company. Ms. Cindy Cook will be handling the calls going forward.

So, Deborah, thank you on behalf of all of us, the shareholders, for your valuable contribution to our Corporation.

And with that, we will talk to everyone next quarter. Thank you for listening in.

This concludes today's conference. A replay of today's conference will be available starting April 25, 2014, at 12 PM Central, 1 PM Eastern Time through May 2, 2014. To listen to today's replay, please dial the toll-free number 1-888-203-1112. Again, that number is 1-888-203-1112 and reference passcode 1867876. Again, reference passcode 1867876. We thank you for joining and we appreciate your participation.