GULF ISLAND FABRICATION INC [GIFI] Filings

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging Growth Company

10-Q 1 gifi-10q_20220930.htm 10-Q gifi-10q_20220930.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

September 30, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File Number 001-34279

Gulf Island Fabrication, Inc.

(Exact name of registrant as specified in its charter)

Louisiana

72-1147390

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

2170 Buckthorne Place, Suite 420

The woodlands, Texas

77380

(Address of principal executive offices)

(Zip Code)

(713) 714-6100

(Registrant’s telephone number, including area code)

Securities registered pursuant to 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	Gifi	Nasdaq

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s common stock, no par value per share, outstanding as of October 31, 2022, was 15,923,199.

GULF ISLAND FABRICATION, INC.

I N D E X


		Page

PART I	FINANCIAL INFORMATION	1
Item 1.	Financial Statements	1
	Consolidated Balance Sheets at September 30, 2022 (unaudited) and December 31, 2021	1
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)	2
	Consolidated Statements of Changes in Shareholders' Equity for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)	3
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 (unaudited)	4
	Notes to Consolidated Financial Statements (unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 4.	Controls and Procedures	47

PART II	Other Information	47
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 6.	Exhibits	48
Signatures		49

GLOSSARY OF TERMS

As used in this report filed on Form 10-Q for the quarter ended September 30, 2022 (“this Report”), the following abbreviations and terms have the meanings listed below. In addition, the terms “Gulf Island,” “the Company,” “we,” “us” and “our” refer to Gulf Island Fabrication, Inc. and its consolidated subsidiaries, unless the context clearly indicates otherwise. Certain terms defined below may be redefined separately within this Report when we believe providing a definition upon the first use of the term will assist users of this Report. Unless and as otherwise stated, any references in this Report to any agreement means such agreement and all schedules, exhibits and attachments in each case as amended, restated, supplemented or otherwise modified to the date of filing this Report.

2021 Annual Report	Our annual report for the year ended December 31, 2021, filed with the SEC on Form 10-K on March 22, 2022.

Acquisition Date	The closing date of the DSS Acquisition of December 1, 2021.

Active Retained Shipyard Contracts	Contracts and related obligations for our seventy-vehicle ferry and two forty-vehicle ferry projects that are under construction, which were excluded from the Shipyard Transaction. The Active Retained Shipyard Contracts do not include the contracts and related obligations for the two MPSV projects that are subject to dispute.

ASC	Accounting Standards Codification.

ASU	Accounting Standards Update.

Balance Sheet	Our Consolidated Balance Sheets, as filed in this Report.

Bollinger	Bollinger Houma Shipyards, L.L.C. and Bollinger Shipyards Lockport, L.L.C.

CARES Act	The Coronavirus Aid, Relief and Economic Security Act, as amended.

contract assets	Costs and estimated earnings recognized to date in excess of cumulative billings.

contract liabilities	Cumulative billings in excess of costs and estimated earnings recognized to date and accrued contract losses.

cost-reimbursable	Work is performed and billed to the customer at cost plus a profit margin or other variable fee arrangements which can include a mark-up.

COVID-19	The ongoing global coronavirus pandemic.

deck	The component of a platform on which drilling, production, separating, gathering, piping, compression, well support, crew quartering and other functions related to offshore oil and gas development are conducted.

Divested Shipyard Contracts	Contracts and related obligations for our three research vessel projects and five towing, salvage and rescue ship projects, which were included in the Shipyard Transaction.

DSS Acquisition	The acquisition of the DSS Business from Dynamic on December 1, 2021.

DSS Business	The services and industrial staffing businesses of Dynamic, which were acquired in connection with the DSS Acquisition.

DTA(s)	Deferred Tax Asset(s).

Dynamic	Dynamic Industries, Inc.

EPC	Engineering, Procurement and Construction.

Exchange Act	Securities Exchange Act of 1934, as amended.

Fabrication Division	Our Fabrication reportable segment.

Facilities	Our Houma Facilities, Ingleside Facility and other facilities that support our operations.

FASB	Financial Accounting Standards Board.

Financial Statements	Our Consolidated Financial Statements, including comparative consolidated Balance Sheets, Statements of Operations, Statements of Changes in Shareholders' Equity and Statements of Cash Flows, as filed in this Report.

GAAP	Generally Accepted Accounting Principles in the U.S.

GOM	Gulf of Mexico.

Gulf Coast	Along the coast of the Gulf of Mexico.

Harvey Facility	Our leased facility located in Harvey, Louisiana assumed in connection with the DSS Acquisition that was subject to the Harvey Option.

Harvey Option	Purchase option entered into in connection with the DSS Acquisition that enabled us to buy the Harvey Facility prior to December 2, 2022 for a nominal amount. The option was sold to a third-party in the third quarter 2022.

Houma Facilities	Our owned facilities located in Houma, Louisiana that support our Fabrication Division and Services Division and represent our primary operating facilities.

Ingleside Facility	Our owned facility located in Ingleside, Texas that supports our Services Division, which was acquired in connection with the DSS Acquisition.

inland	Typically, bays, lakes and marshy areas.

Insurance Finance Arrangement	Short-term finance arrangement for insurance premiums associated with our property and equipment insurance coverages.

jacket	A component of a fixed platform consisting of a tubular steel, braced structure extending from the mudline of the seabed to a point above the water surface. The jacket is anchored with tubular steel piles driven into the seabed. The jacket supports the deck structure located above the water.

Jennings Facility	Our leased facility located near Jennings, Louisiana that previously supported our Shipyard Division and was closed in the fourth quarter 2020, which has been subleased to a third-party for the duration of the lease.

labor hours	Hours worked by employees directly involved in the fabrication of our products or delivery of our services.

Lake Charles Facility	Our leased facility located near Lake Charles, Louisiana that previously supported our Shipyard Division and was closed in the fourth quarter 2020. The lease was terminated in the third quarter 2022.

LC Facility	Our $20.0 million letter of credit facility with Whitney Bank maturing June 30, 2023, as amended.

LNG	Liquified Natural Gas.

Mortgage Agreement	Multiple indebtedness mortgage arrangement with one of our Sureties, to secure our obligations and liabilities under our general indemnity agreement with the Surety associated with outstanding surety bonds for certain contracts, which encumbers the real estate associated with our Houma Facilities and includes certain covenants and events of default.

modules	Fabricated structures that include structural steel, piping, valves, fittings, storage vessels and other equipment that are incorporated into a refining, petrochemical, LNG or industrial system.

MPSV(s)	Multi-Purpose Supply Vessel(s).

NOL(s)	Net operating loss(es) that are available to offset future taxable income, subject to certain limitations.

offshore	In unprotected waters outside coastlines.

onshore	Inside the coastline on land.

performance obligation	A contractual obligation to construct and transfer a distinct good or service to a customer. It is the unit of account in Topic 606. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.

piles	Rigid tubular pipes that are driven into the seabed to anchor a jacket.

platform	A structure from which offshore oil and gas development drilling and production are conducted.

POC	Percentage-of-completion.

PPP	Paycheck Protection Program administered by the SBA under the CARES Act.

PPP Loan	Our $10.0 million loan from Whitney Bank issued pursuant to the PPP.

iii

Pro Forma Information	The condensed combined financial information that gives effect to the DSS Acquisition as if it had occurred on January 1, 2020 (the earliest period presented in our 2021 Annual Report).

Purchase Price	The purchase price of $7.6 million associated with the DSS Acquisition.

Restrictive Covenant Agreement	Restrictive covenant arrangement with one of our Sureties, to secure our obligations and liabilities under our general indemnity agreement with the Surety associated with its outstanding surety bonds for certain contracts, which precludes us from paying dividends or repurchasing shares of our common stock.

Retained Shipyard Contracts	Contracts and related obligations for the Active Retained Shipyard Contracts and two MPSV projects that are subject to dispute, which were excluded from the Shipyard Transaction.

SAB	Staff Accounting Bulletin.

SBA	Small Business Administration.

SEC	U.S. Securities and Exchange Commission.

Services Division	Our Services reportable segment.

Shipyard Division	Our Shipyard reportable segment.

Shipyard Facility	Our owned facility located in Houma, Louisiana that previously supported our Shipyard Division, which was sold in connection with the Shipyard Transaction.

Shipyard Transaction	The sale of our Shipyard Division’s operating assets and certain construction contracts on April 19, 2021, which included the Divested Shipyard Contracts and our Shipyard Facility.

Statement of Cash Flows	Our Consolidated Statements of Cash Flows, as filed in this Report.

Statement of Operations	Our Consolidated Statements of Operations, as filed in this Report.

Statement of Shareholders’ Equity	Our Consolidated Statements of Changes in Shareholders’ Equity, as filed in this Report.

Surety or Sureties	A financial institution that issues bonds to customers on behalf of the Company for the purpose of providing third-party financial assurance related to the performance of our contracts.

T&M	Time and materials. Work is performed and billed to the customer at contracted time and material rates.

Topic 606	The revenue recognition criteria prescribed under ASU 2014-09, Revenue from Contracts with Customers.

Transaction Date	The closing date of the Shipyard Transaction of April 19, 2021.

Transaction Price	The base sales price of $28.6 million associated with the Shipyard Transaction.

U.S.	The United States of America.

Whitney Bank	Hancock Whitney Bank.

Working Capital True-Up	The $7.8 million received in the second quarter 2021 in connection with the Shipyard Transaction associated with changes in working capital for the Divested Shipyard Contracts from December 31, 2020 through the Transaction Date.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

GULF ISLAND FABRICATION, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands)

	September 30, 2022			December 31, 2021
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	26,257		$	52,886
Restricted cash, current		1,703			1,297
Short-term investments		9,809			—
Contract receivables and retainage, net		33,012			15,986
Contract assets		7,807			4,759
Prepaid expenses and other assets		7,435			6,971
Inventory		1,661			1,779
Assets held for sale		—			1,800
Total current assets		87,684			85,478
Restricted cash, noncurrent		—			406
Property, plant and equipment, net		30,868			32,866
Goodwill		2,217			2,217
Other intangibles, net		877			984
Other noncurrent assets		13,093			13,322
Total assets	$	134,739		$	135,273
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	12,664		$	9,280
Contract liabilities		4,293			6,648
Accrued expenses and other liabilities		15,244			14,026
Total current liabilities		32,201			29,954
Other noncurrent liabilities		1,188			1,411
Total liabilities		33,389			31,365
Shareholders’ equity:
Preferred stock, no par value, 5,000 shares authorized, no shares issued and outstanding		—			—
Common stock, no par value, 30,000 shares authorized, 15,923 shares issued and outstanding at September 30, 2022 and 15,622 at December 31, 2021		11,518			11,384
Additional paid-in capital		106,720			105,511
Accumulated deficit		(16,888	)		(12,987	)
Total shareholders’ equity		101,350			103,908
Total liabilities and shareholders’ equity	$	134,739		$	135,273

The accompanying notes are an integral part of these financial statements.

- 1 -

GULF ISLAND FABRICATION, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Revenue	$	39,593		$	19,587		$	104,181		$	67,640
Cost of revenue		35,373			19,722			98,709			66,529
Gross profit (loss)		4,220			(135	)		5,472			1,111
General and administrative expense		4,510			3,211			12,965			9,086
Other (income) expense, net		(944	)		260			(3,698	)		(649	)
Operating income (loss)		654			(3,606	)		(3,795	)		(7,326	)
Gain on extinguishment of debt		—			9,061			—			9,061
Interest (expense) income, net		(46	)		(58	)		(104	)		(347	)
Income (loss) before income taxes		608			5,397			(3,899	)		1,388
Income tax (expense) benefit		(10	)		(9	)		(2	)		6
Income (loss) from continuing operations		598			5,388			(3,901	)		1,394
Loss from discontinued operations, net of taxes		—			—			—			(17,372	)
Net income (loss)	$	598		$	5,388		$	(3,901	)	$	(15,978	)
Per share data:
Basic and diluted income (loss) from continuing operations	$	0.04		$	0.35		$	(0.25	)	$	0.09
Basic and diluted loss from discontinued operations		—			—			—			(1.12	)
Basic and diluted income (loss) per share	$	0.04		$	0.35		$	(0.25	)	$	(1.03	)

The accompanying notes are an integral part of these financial statements.

- 2 -

GULF ISLAND FABRICATION, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(UNAUDITED)

(in thousands)

	Common Stock					Additional Paid-In			Retained Earnings (Accumulated			Total Shareholders’
	Shares		Amount			Capital			Deficit)			Equity
Balance at December 31, 2020		15,359	$	11,223		$	104,072		$	9,181		$	124,476
Net loss		—		—			—			(18,537	)		(18,537	)
Vesting of restricted stock		158		(9	)		(91	)		—			(100	)
Stock-based compensation expense		—		31			282			—			313
Balance at March 31, 2021		15,517		11,245			104,263			(9,356	)		106,152
Net loss		—		—			—			(2,829	)		(2,829	)
Vesting of restricted stock		18		(1	)		(7	)		—			(8	)
Stock-based compensation expense		—		37			327			—			364
Balance at June 30, 2021		15,535		11,281			104,583			(12,185	)		103,679
Net income		—		—			—			5,388			5,388
Vesting of restricted stock		17		—			—			—			—
Stock-based compensation expense		—		50			453			—			503
Balance at September 30, 2021		15,552	$	11,331		$	105,036		$	(6,797	)	$	109,570

	Common Stock					Additional Paid-In			Accumulated			Total Shareholders’
	Shares		Amount			Capital			Deficit			Equity
Balance at December 31, 2021		15,622	$	11,384		$	105,511		$	(12,987	)	$	103,908
Net loss		—		—			—			(5,027	)		(5,027	)
Vesting of restricted stock		153		(6	)		(53	)		—			(59	)
Stock-based compensation expense		—		57			514			—			571
Balance at March 31, 2022		15,775		11,435			105,972			(18,014	)		99,393
Net income		—		—			—			528			528
Vesting of restricted stock		148		(6	)		(56	)		—			(62	)
Stock-based compensation expense		—		49			440			—			489
Balance at June 30, 2022		15,923		11,478			106,356			(17,486	)		100,348
Net income		—		—			—			598			598
Vesting of restricted stock		—		—			—			—			—
Stock-based compensation expense		—		40			364			—			404
Balance at September 30, 2022		15,923	$	11,518		$	106,720		$	(16,888	)	$	101,350

The accompanying notes are an integral part of these financial statements.

- 3 -

GULF ISLAND FABRICATION, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

	Nine Months Ended September 30,
	2022			2021
Cash flows from operating activities:
Net loss	$	(3,901	)	$	(15,978	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		3,764			4,282
Asset impairments		484			22,750
Loss on Shipyard Transaction		—			2,581
(Gain) loss on sale of fixed assets, net		(79	)		60
Gain on extinguishment of debt		—			(9,061	)
Gain on insurance recoveries		(1,200	)		—
Stock-based compensation expense		1,464			1,180
Changes in operating assets and liabilities:
Contract receivables and retainage, net		(17,026	)		7,164
Contract assets		(3,048	)		(4,436	)
Prepaid expenses, inventory and other current assets		1,203			(471	)
Accounts payable		2,811			(13,261	)
Contract liabilities		(2,355	)		(6,342	)
Accrued expenses and other current liabilities		(288	)		904
Noncurrent assets and liabilities, net		(654	)		(600	)
Net cash used in operating activities		(18,825	)		(11,228	)
Cash flows from investing activities:
Capital expenditures		(1,032	)		(1,080	)
Proceeds from Shipyard Transaction, net of transaction costs		886			31,677
Proceeds from sale of property and equipment		2,035			4,439
Recoveries from insurance claims		1,200			—
Purchases of short-term investments		(9,809	)		—
Maturities of short-term investments		—			8,000
Net cash provided by (used in) investing activities		(6,720	)		43,036
Cash flows from financing activities:
Repayment of borrowings		—			(1,050	)
Payments on Insurance Finance Arrangement		(963	)		—
Tax payments for vested stock withholdings		(121	)		(108	)
Net cash used in financing activities		(1,084	)		(1,158	)
Net increase (decrease) in cash, cash equivalents and restricted cash		(26,629	)		30,650
Cash, cash equivalents and restricted cash, beginning of period		54,589			43,159
Cash, cash equivalents and restricted cash, end of period	$	27,960		$	73,809
Supplemental cash flow information: