Losses on two Leevac leftovers push Gulf Island into red ink

JULY 28, 2017 — Losses incurred on two shipbuilding contracts inherited as part of its Leevac Shipyards acquisition pushed Gulf Island Fabrication, Inc. (NASDAQ: GIFI) into red ink for the quarter and half year ended June 30, 2017.

The company reported a net loss of $10.9 million ($0.73 basic and diluted loss per share) on revenue of $45.9 million for the three months ended June 30, 2017, compared to net income of $5.5 million ($0.37 basic and diluted earnings per share) on revenue of $81.5 million for the three months ended June 30, 2016. For the six months ended June 30, 2017 and 2016, the company reported a net loss of $17.4 million ($1.17 basic and diluted loss per share) on revenue of $83.9 million compared to net income of $6.5 million ($0.44 basic and diluted earnings per share) on revenue of $165.5 million.

"Results for the second quarter of 2017 are reflective of contract losses of approximately $10.2 million as a result of rework performed and revised estimates to complete two vessel construction projects we assumed as part of our shipyard asset acquisition in 2016," said Kirk Meche, the company's CEO and President. "Additionally, competitive pricing pressures and the continued weakness in demand from our traditional markets in offshore oil and gas contributed to our losses. Finally, we incurred holding costs of $1.2 million during the quarter related to our South Texas facilities which are for sale. Year-to-date holding costs in South Texas were $2.5 million plus another $1.9 million in depreciation which was incurred during the first quarter."

He continued, "As stated in prior earnings calls, we are focused on managing our balance sheet and rebuilding contract backlog in new markets and believe we have made progress on both initiatives. During the quarter, we successfully negotiated a new $40.0 million credit agreement with Whitney Bank with improved flexibility to support our business. Additionally, we increased our revenue backlog to its highest level in over three years to $251.0 million, up $137.8 million from last quarter's total. Finally, the increase in backlog included new project awards totaling $167.0 million in markets primarily outside of oil and gas."

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