GIFI - Gulf Island Reports First Quarter 2021 Results

HOUSTON, May 11, 2021 (GLOBE NEWSWIRE) -- Gulf Island Fabrication, Inc. (NASDAQ: GIFI) (“Gulf Island” or the “Company”), a leading steel fabricator and service provider to the industrial and energy sectors, today announced results for the first quarter 2021.

FIRST QUARTER 2021 SUMMARY (as compared to the first quarter 2020)

• Total revenue of $59.0 million, (25.0%) y/y
• Total net loss of $18.6 million, including impairments and transaction costs of $23.4 million
• Total non-GAAP Adjusted Net Income of $4.8 million, excluding impairments and transaction costs of $23.4 million, (18.9%) y/y
• Total non-GAAP Adjusted EBITDA of $6.9 million, excluding impairments and transaction costs, (15.3%) y/y
• Total cash and short-term investments of $51.0 million as of March 31, 2021
• Completed sale of Shipyard Division assets and long-term construction contracts in April 2021

Consolidated revenue for the first quarter 2021 was $59.0 million, compared to $78.6 million for the first quarter 2020. Consolidated net loss for the quarter was $18.6 million versus consolidated net income of $5.9 million in the prior-year period. The Company reported Adjusted EBITDA of $6.9 million for the current quarter and break-even operating cash flow. See “ Non-GAAP Measures” below for the Company's reconciliation and definition of Adjusted Net Income (Loss), EBITDA and Adjusted EBITDA.

First quarter 2021 results benefited from project improvements of $7.7 million for the Shipyard Division and $0.6 million for the Fabrication & Services Division. First quarter results also included non-cash impairment charges and transaction costs of $23.4 million, resulting from the Company’s previously announced sale of its Shipyard Division assets and long-term construction contracts which was completed in April 2021 (the “Shipyard Transaction”). First quarter 2020 results benefited from project improvements of $0.9 million for the Fabrication & Services Division, as well as a gain of $10.0 million associated with the settlement of a contract dispute, offset partially by project charges of $1.2 million for the Shipyard Division.

The Company’s Backlog as of March 31, 2021 was $339.6 million, with $327.3 million attributable to the Shipyard Division and $12.3 million attributable to the Fabrication & Services Division. Backlog as of March 31, 2021 included $309.5 million of Backlog related to long-term construction contracts included in the Shipyard Transaction. See “Non-GAAP Measures” below for the Company’s definition of Backlog.

MANAGEMENT COMMENTARY

“While our first quarter results were impacted by persistent end-market headwinds, we have begun to see improved trends in bidding activity and positive effects of key strategic actions that have been implemented during the past year,” said Richard Heo, Gulf Island’s President and Chief Executive Officer. “Recent process improvements and consolidation activities in our Fabrication & Services business resulted in another quarter of solid project execution within the segment, driving our third consecutive quarter of positive EBITDA.”

“With the recent sale of our Shipyard Division assets and long-term construction contracts, we have taken another critical step toward improving our financial strength, while positioning the Company to pursue higher-margin opportunities in new growth markets,” continued Heo. “This transaction has positioned Gulf Island to become a more focused specialty fabrication company, one committed to leveraging our unique competitive advantages to pursue profitable growth. Consistent with this strategic focus, we also continue to pursue new opportunities within our services business, which will provide additional stability to our revenue base and further support our ability to hire, develop, motivate and retain our talented craft professionals.”

“The Shipyard Transaction is transformational for Gulf Island, positioning us to better optimize our asset base as we build a pipeline of higher-value opportunities,” stated Westley Stockton, Gulf Island’s Chief Financial Officer. “As a result of the transaction, we have significantly improved the risk profile of the Company by divesting higher-risk contracts that represented approximately 90% of our Backlog, strengthened our liquidity position by reducing our bonding and letters of credit requirements, and lessened our quarterly working capital fluctuations. We expect the financial profile of the new Gulf Island to be more stable, with a higher-margin revenue mix and less volatility in quarterly cash flows.”

“It has been a challenging stretch for Gulf Island, but we have implemented important strategic changes that have allowed us to exit this period as a much stronger company,” noted Heo. “With much of the heavy lifting behind us, we are beginning to shift our focus toward profitability and growth. We intend to capitalize on improving demand trends in our legacy end markets and are actively evaluating new opportunities in higher-growth markets, including LNG and projects supporting sustainable energy. While it is still early in the market recovery and more work remains to be done, we are confident that we have the right plan in place to drive long-term value creation for our shareholders,” concluded Heo.

STRATEGY UPDATE

During 2020, the Company focused on its strategic priorities of improving its financial strength and positioning the Company to pursue higher-margin growth opportunities by improving its risk profile, strengthening its liquidity position, improving resource utilization and project execution and reducing the Company’s reliance on offshore oil & gas markets.

Improve risk profile – With the Shipyard Transaction, the Company divested its higher-risk, long-term construction contracts that represented 90% of its Backlog. The Backlog was generally break-even or in a loss position and extended through 2024.

Strengthen liquidity – The Company implemented cost reduction efforts and sold under-utilized assets to maintain and strengthen its liquidity. The Shipyard Transaction further improved the Company’s financial position by reducing bonding and letters of credit requirements.

Improve resource utilization and project execution – Through the rationalization and integration of its facilities, the Company has taken steps to improve its resource utilization and as end-markets recover, the Company should realize the benefits of these actions through improved operating leverage. The measures taken by the Company to improve project execution have enabled Fabrication & Services to achieve three consecutive quarters of positive EBITDA.

Reduce reliance on offshore oil & gas markets – The Company is focused on becoming a more stable, higher-growth business by reducing its reliance on the offshore oil & gas markets. It is further evaluating opportunities in LNG and sustainable energy end markets, as well as seeking to expand its services offerings. The Company is well-positioned to capitalize on market opportunities in these sectors based on its long history of providing high-quality fabrication and services solutions to its customers.

SEGMENT RESULTS

Fabrication & Services Segment – Revenue for the first quarter 2021 was $19.1 million, a decrease of $14.4 million compared to the first quarter 2020. The decrease was primarily due to the division’s jacket and deck and paddlewheel river boat projects, which were completed prior to the first quarter 2021, lower revenue for its material supply project and a reduced level of small-scale fabrication and onshore services activity. This decrease was partially offset by revenue from its marine docking structures, offshore modules and subsea structures projects, all of which were awarded subsequent to the first quarter 2020.

Operating income was $1.0 million for the first quarter 2021, compared to $10.2 million for the first quarter 2020. Adjusted EBITDA for the current quarter was $2.0 million, compared to $11.5 million for the first quarter 2020. First quarter 2021 results included project improvements of $0.6 million attributable to the division’s offshore modules project. Results for the quarter also reflected the impact of low revenue volume and the partial under-recovery of overhead costs due to the under-utilization of facilities and resources. First quarter 2020 results included project improvements of $0.9 million for the division’s paddlewheel riverboat and subsea components projects, as well as a gain of $10.0 million associated with the settlement of a contract dispute.

Shipyard Segment – Revenue for the first quarter 2021 was $40.3 million, a decrease of $5.3 million compared to the first quarter 2020. The decrease was primarily due to lower revenue for the division’s harbor tug, research vessel and forty-vehicle ferry projects. This decrease was partially offset by higher revenue for its seventy-vehicle ferry and towing, salvage and rescue ship projects.

Operating loss was $17.5 million for the first quarter 2021, compared to an operating loss of $1.9 million for the first quarter 2020. Adjusted EBITDA for the current quarter was $6.8 million, compared to a loss of $1.1 million for the first quarter 2020. First quarter 2021 results included project improvements of $7.7 million attributable to a change order for the division’s towing, salvage and rescue projects, offset partially by project charges on its seventy-vehicle ferry project. Results for the quarter also reflected non-cash impairment charges and transaction costs of $23.4 million resulting from the Shipyard Transaction, as well as the impact of a low margin Backlog and the partial under-recovery of overhead costs due to the under-utilization of facilities and resources. First quarter 2020 results included project charges of $1.2 million on the division’s two forty-vehicle ferry projects.

Corporate Segment – Operating loss was $2.0 million for the first quarter 2021, compared to an operating loss of $2.3 million for the first quarter 2020, with the decrease primarily due to lower legal and advisory fees and cost savings, offset partially by higher incentive plan and insurance costs. Adjusted EBITDA for the current quarter was a loss of $1.9 million, compared to a loss of $2.3 million for the first quarter 2020.

BALANCE SHEET AND LIQUIDITY

The Company’s cash and short-term investments at March 31, 2021 totaled $51.0 million (including $10.3 million of restricted cash) and current and long-term debt totaled $10.0 million related to proceeds received in the second quarter 2020 in connection with the Paycheck Protection Program (“PPP”).

On March 26, 2021, the Company amended its $40.0 million revolving credit facility and converted it into a letter of credit only facility with a capacity of $20.0 million, subject to cash securitization of the letters of credit, with a maturity date of June 30, 2023. At March 31, 2021, the Company had $10.3 million of outstanding letters of credit.

FIRST QUARTER 2021 CONFERENCE CALL

Gulf Island will hold a conference call on Tuesday, May 11, 2021 at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) to discuss the Company’s financial results. The call will be available by webcast and can be accessed on Gulf Island’s website at www.gulfisland.com. Participants may also join the call by dialing 1.866.248.8441 and requesting the “Gulf Island” conference call. A replay of the webcast will be available on the Company's website for seven days after the call.

ABOUT GULF ISLAND

Gulf Island is a leading fabricator of complex steel structures and modules and provider of project management, hookup, commissioning, repair, maintenance and civil construction services to the industrial and energy sectors. The Company’s customers include U.S. and, to a lesser extent, international energy producers; refining, petrochemical, LNG, industrial and power operators; and EPC companies. The Company is headquartered in Houston, Texas and its operating facilities are located in Houma, Louisiana.

NON-GAAP MEASURES

This Release includes certain non-GAAP measures, including earnings before interest, taxes, depreciation and amortization (“EBITDA”), Adjusted EBITDA, Adjusted Net Income (Loss), New Project Awards and Backlog. The Company believes EBITDA is a useful supplemental measure as it reflects the Company's operating results excluding the non-cash impacts of depreciation and amortization. The Company believes Adjusted EBITDA is a useful supplemental measure as it reflects the Company’s EBITDA excluding non-cash impacts of impairments and other impacts which the Company believes are non-recurring. The Company believes Adjusted Net Income (Loss) is a useful supplemental measure as it reflects the Company’s net income (loss) excluding non-cash impacts of impairments and other impacts which the Company believes are non-recurring. Reconciliations of EBITDA, Adjusted EBITDA and Adjusted Net Income (Loss) to the most comparable GAAP measure are presented under “Consolidated Results of Operations” and “ Results of Operations by Segment” below.

The Company believes New Project Awards and Backlog are useful supplemental measures as they represent work that the Company is contractually obligated to perform under its current contracts. New Project Awards represent the expected revenue value of contract commitments received during a given period, including scope growth on existing commitments. Backlog represents the unrecognized revenue value of New Project Awards and at March 31, 2021, was comparable to the value of remaining performance obligations for contracts as determined under GAAP.

Non-GAAP measures are not intended to be replacements or alternatives to GAAP measures, and investors are urged to consider these non-GAAP measures in addition to, and not in substitution for, measures prepared in accordance with GAAP. The Company may present or calculate non-GAAP measures differently from other companies.

CAUTIONARY STATEMENTS

This Release contains forward-looking statements in which the Company discusses its potential future performance. Forward-looking statements, within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, are all statements other than statements of historical facts, such as projections or expectations relating to diversification and entry into new end markets, improvement of risk profile, industry outlook, oil and gas prices, operating cash flows, capital expenditures, liquidity and tax rates. The words “anticipates,” “may,” “can,” “plans,” “believes,” “estimates,” “expects,” “projects,” “targets,” “intends,” “likely,” “will,” “should,” “to be,” “potential” and any similar expressions are intended to identify those assertions as forward-looking statements.

The Company cautions readers that forward-looking statements are not guarantees of future performance and actual results may differ materially from those anticipated, projected or assumed in the forward-looking statements. Important factors that can cause its actual results to differ materially from those anticipated in the forward-looking statements include: the duration and scope of, and uncertainties associated with, the ongoing global pandemic caused by COVID-19 and the corresponding weakened demand for, and volatility of prices of, oil and the impact thereof on its business and the global economy; the potential forgiveness of any portion of the PPP Loan; its ability to secure new project awards, including fabrication projects for refining, petrochemical, LNG and industrial facilities and offshore wind developments; the Company’s ability to improve project execution; its inability to realize the expected financial benefits of the Shipyard Transaction; the cyclical nature of the oil and gas industry; competition; consolidation of its customers; timing and award of new contracts; reliance on significant customers; financial ability and credit worthiness of its customers; nature of its contract terms; competitive pricing and cost overruns on its projects; adjustments to previously reported profits or losses under the percentage-of-completion method; weather conditions; changes in contract estimates; suspension or termination of projects; its ability to raise additional capital; its ability to amend or obtain new debt financing or credit facilities on favorable terms; its ability to generate sufficient cash flow; its ability to sell certain assets; any future asset impairments; utilization of facilities or closure or consolidation of facilities; customer or subcontractor disputes; its ability to resolve the dispute with a customer relating to the purported terminations of contracts to build two MPSVs and the dispute with a customer related to contracts to build two seventy-vehicle ferries; operating dangers and limits on insurance coverage; barriers to entry into new lines of business; its ability to employ skilled workers; loss of key personnel; performance of subcontractors and dependence on suppliers; changes in trade policies of the U.S. and other countries; compliance with regulatory and environmental laws; lack of navigability of canals and rivers; systems and information technology interruption or failure and data security breaches; performance of partners in any future joint ventures and other strategic alliances; shareholder activism; focus on environmental, social and governance factors by institutional investors; and other factors described in Part I, Item 1A “Risk Factors” in the Company’s 2020 Annual Report and as may be further updated by subsequent filings with the SEC.

Additional factors or risks that the Company currently deems immaterial, that are not presently known to the Company or that arise in the future could also cause the Company’s actual results to differ materially from its expected results. Given these uncertainties, investors are cautioned that many of the assumptions upon which the Company’s forward-looking statements are based are likely to change after the date the forward-looking statements are made, which it cannot control. Further, the Company may make changes to its business plans that could affect its results. The Company cautions investors that it undertakes no obligation to publicly update or revise any forward-looking statements, which speak only as of the date made, for any reason, whether as a result of new information, future events or developments, changed circumstances, or otherwise, and notwithstanding any changes in its assumptions, changes in business plans, actual experience or other changes.

COMPANY INFORMATION

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