Gulf Island Fabrication, Inc. Reports Third Quarter Loss

  Gulf Island Fabrication, Inc. Reports Third Quarter Loss

Business Wire

HOUMA, La. -- October 26, 2012

Gulf Island Fabrication, Inc. (NASDAQ: GIFI) today reported a net loss of
$10.4 million ($.72 diluted loss per share) on revenue of $141.8 million for
its third quarter ended September 30, 2012, compared to net income of $1.6
million ($.11 diluted EPS) on revenue of $85.8 million for the third quarter
ended September 30, 2011. Net income for the nine months ended September 30,
2012 was $4.0 million ($.28 diluted EPS) on revenue of $392.1 million,
compared to the net loss of $3.6 million ($.25 diluted loss per share) on
revenue of $219.4 million for the nine months ended September 30, 2011.

The Company had a revenue backlog of $376.1 million and a labor backlog of
approximately 2.9 million man-hours at September 30, 2012, including
commitments received through October 25, 2012 and excluding backlog of $30.0
million relating to a suspended project, compared to a revenue backlog of
$614.5 million and a labor backlog of 4.6 million man-hours reported as of
December 31, 2011. We exclude suspended projects from contract backlog because
resumption of work and timing of backlog revenues are difficult to predict.

SELECTED BALANCE SHEET INFORMATION
(in thousands)
                                              September 30,   December 31,
                                                2012              2011
Cash, cash equivalents and short-term           $   26,366        $   55,287
investments
Total current assets                                184,966           177,913
Property, plant and equipment,net                   226,155           216,722
Total assets                                        412,458           395,935
Total current liabilities                           93,624            75,987
Debt                                                0                 0
Shareholders' equity                                282,667           282,799
Total liabilities and shareholders' equity          412,458           395,935
                                                                  
                                                                  

The management of Gulf Island Fabrication, Inc. will hold a conference call on
Friday, October 26, 2012 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time)
to discuss the Company’s financial results for the quarter ended September 30,
2012. The call is accessible by webcast (www.gulfisland.com) through CCBN and
by dialing 1.888.204.4394. A digital rebroadcast of the call is available two
hours after the call and ending November 2, 2012 by dialing 1.888.203.1112,
replay passcode: 5158427.

Gulf Island Fabrication, Inc., based in Houma, Louisiana, is a leading
fabricator of offshore drilling and production platforms, hull and/or deck
sections of floating production platforms and other specialized structures
used in the development and production of offshore oil and gas reserves. These
structures include: jackets and deck sections of fixed production platforms;
hull and/or deck sections of floating production platforms (such as tension
leg platforms (“TLPs”), “SPARs”, “FPSOs” and “MinDOCs”), piles, wellhead
protectors, subsea templates and various production, compressor and utility
modules, offshore living quarters, towboats, liftboats, tanks and barges. The
Company also provides offshore interconnect pipe hook-up, inshore marine
construction, manufacture and repair of pressure vessels, heavy lifts such as
ship integration and TLP module integration, loading and offloading of jack-up
drilling rigs, semi-submersible drilling rigs, TLPs, SPARs, or other similar
cargo, onshore and offshore scaffolding, piping insulation services, and steel
warehousing and sales.

Business Update

Significant Contract Loss

We recognized contract losses of $20.6 million and $1.8 million in the
three-month periods ended September 30, 2012 and 2011, respectively, which
resulted in an unfavorable reduction in gross margin during such periods of
$26.8 million and $1.8 million, respectively, as required under the accounting
for loss contracts under percentage of completion accounting. We recognized
contract losses of $21.2 million and $2.4 million in the nine-month periods
ended September 30, 2012 and 2011, respectively. The losses recognized in the
three-month and nine-month periods ending September 30, 2012 were mainly due
to the increase in estimated man-hours to complete one of our major deepwater
contracts. We believe these increased man-hours are primarily driven by
revisions and delivery delays to specifications and designs by our customer in
the third quarter of 2012 causing out-of-sequence work schedules to be used
while executing the project. We have notified our customer of what we believe
is our right to recover the costs and lost profits caused by these customer
revisions and delays. The customer extended delivery of the first phase of the
project as a result of their revisions and we are actively negotiating the
recoverable amount with such customer. Any future deliverable delays or
project revisions could result in future revisions to contract estimates and
may be subject to our claim. No revenues for this claim have been recorded as
of September 30, 2012. Any agreed upon recoverable amounts will be recorded in
revenue in the periods when such agreement is reached between us and our
customer.

Customer Requested Slowdown of Work

On July 13, 2012, we received notice from our customer, Bluewater Industries
(“Bluewater”), requesting (i) a slowdown of work on ATP Oil & Gas (UK)
Limited’s (“ATP UK’s”) Cheviot project ordered pursuant to a master service
contract between Bluewater and the Company (the “Contract”), and (ii) an
amendment to the scheduled payment terms under the Contract. On August 16,
2012, we entered into a binding agreement (the “Agreement”) with Bluewater, an
engineering consulting firm engaged by ATP UK to oversee the fabrication of
the Cheviot project, to amend and restate the Contract and suspend the
project. Among other things, the Agreement outlines the revised payment terms
for the contracts receivable balance (the “Balance”) and the limitations on
Bluewater’s ability to request an extended suspension of work. Specifically,
Bluewater must pay $200,000 on or before the last day of each calendar month
until February 28, 2013, with the remaining outstanding Balance due on or
before March 31, 2013. In addition, if Bluewater has fully paid the Balance on
or prior to March 31, 2013, Bluewater has the option to extend the suspension
of work on the Cheviot project to June 30, 2013, after which Bluewater will
have no further rights to request a suspension of work under the Contract
pursuant to the Agreement. If Bluewater fails to make timely payments pursuant
to the revised payment plan, we have the right to terminate the Contract, and
we will continue to retain title to any project deliverables pursuant to the
Agreement.

On August 17, 2012, ATP Oil & Gas, Inc. (“ATP”), the parent company of ATP UK,
filed a voluntary petition for relief under Chapter 11 of the United States
Bankruptcy Code. Although ATP is not our customer and ATP UK is not a party to
the bankruptcy, we believe ATP has historically financed the operations of its
subsidiaries, including ATP UK. We believe Bluewater’s ability to continue to
meet its obligations under the Agreement, including payment of the outstanding
Balance on or before March 31, 2013, largely depends on ATP UK’s ability to
fund the Cheviot project.

As of September 30, 2012, $56.7 million has been billed on the Cheviot project
and its outstanding contracts receivable balance was approximately $32.1
million. All installments due under the Agreement have been paid to-date. Our
work under our Contract is suspended and will remain suspended until the
outstanding Balance is paid, based on our Agreement with Bluewater. Although
it is too early to determine the ultimate outcome of the impact of ATP’s
bankruptcy on the Cheviot project, in the event Bluewater is unable to comply
with its obligations under the Agreement and the Contract is terminated, we
will retain title to all project deliverables. Given the suspension of the
project and the uncertainty around ATP's bankruptcy, events in the future
could change the timing and amount of the remaining contract price we
ultimately recover.

Status of Graving Dock Repairs

The graving dock at our Texas facility has been drained and we have commenced
the necessary repairs. The current estimated cost to repair the graving dock
slab is $7.5 million, all of which will be covered by insurance. We expect to
collect all amounts associated with the slab repair in the fourth quarter of
2012. As of September 30, 2012, we have recorded $2.7 million in other current
assets for recoverable repair expenses under this claim, net of related
deductibles.

Cautionary Notice Regarding Forward-Looking Statements

The Company wishes to caution readers not to place undue reliance on any
forward-looking statements, which speak only as of the date made. No
assurances can be given regarding the future performance of the Company. The
Company wishes to advise readers that factors could affect the Company's
financial performance and could cause the Company's actual results for future
periods to differ materially from any opinions or statements expressed with
respect to future periods in any current statements. The Company does not
undertake, and specifically declines any obligation, to update any
forward-looking statements to reflect events or circumstances occurring after
the date such statements are made.



GULF ISLAND FABRICATION, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
                                                             
                          Three Months Ended         Nine Months Ended
                          September 30,              September 30,
                          2012          2011         2012          2011
                                                                   
Revenue                   $ 141,793     $ 85,827     $ 392,103     $ 219,426
Cost of revenue:
Contract costs              145,688       81,823       369,425       212,454
Anticipated loss on         9,484         -            9,484         -
contract
Asset impairments          -           -          -           7,690   
Total cost of revenue      155,172     81,823     378,909     220,144 
Gross profit (loss)         (13,379 )     4,004        13,194        (718    )
General and
administrative             1,983       1,910      7,177       5,804   
expenses
Operating income            (15,362 )     2,094        6,017         (6,522  )
(loss)
                                                                   
Other income
(expense):
Interest expense            (19     )     (48    )     (138    )     (102    )
Interest income             113           378          541           549
Other                      54          89         139         317     
                           148         419        542         764     
                                                                   
Income (loss) before        (15,214 )     2,513        6,559         (5,758  )
income taxes
                                                                   
Income taxes               (4,842  )    954        2,560       (2,188  )
                                                                   
                                                                   
Net income (loss)         $ (10,372 )   $ 1,559     $ 3,999      $ (3,570  )
                                                                   
                                                                   
                                                                   
Per share data:
                                                                   
Basic earnings (loss)
per share - common        $ (0.72   )   $ 0.11      $ 0.28       $ (0.25   )
shareholders
                                                                   
Diluted earnings
(loss) per share -        $ (0.72   )   $ 0.11      $ 0.28       $ (0.25   )
common shareholders
                                                                   
                                                                   
Weighted-average            14,408        14,351       14,393        14,347
shares
Effect of dilutive
securities: employee       -           25         24          -       
stock options
Adjusted
weighted-average           14,408      14,376     14,417      14,347  
shares
                                                                   
Depreciation and
amortization included     $ 5,982      $ 5,159     $ 17,415     $ 15,215  
in expense above
                                                                   
Cash dividend
declared per common       $ 0.10       $ 0.06      $ 0.30       $ 0.18    
share
                                                                   

Contact:

Gulf Island Fabrication, Inc.
Kerry J. Chauvin, 985-872-2100
Chief Executive Officer
or
Roy F. Breerwood, III, 985-872-2100
Chief Financial Officer
 
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