As filed with the Securities and Exchange Commission on February 14, 1997.
Registration No. 333-__________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
GULF ISLAND FABRICATION, INC.
(Exact name of registrant as specified in its charter)
Louisiana 3441 72-1147390
(State or other (Primary Standard Industrial I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation
583 Thompson Road
Houma, Louisiana 70363
(504) 872-2100
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
Kerry J. Chauvin
President and Chief Executive Officer
Gulf Island Fabrication, Inc.
583 Thompson Road
Houma, Louisiana 70363
(504) 872-2100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Carl C. Hanemann Thomas P. Mason
Jones, Walker, Waechter, Poitevent, Andrews & Kurth L.L.P.
Carrere & Denegre, L.L.P. 4200 Texas Commerce Tower
201 St. Charles Avenue 600 Travis, Suite 4200
New Orleans, Louisiana 70170 Houston, Texas 77002
(504) 582-8000 (713) 220-4200
__________________________
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes
effective.
__________________________
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=================================================================================================
Title of each class of Proposed Proposed
securities to be Amount to be maximum price maximum aggregate Amount of
registered registered<F1> per share<F2> offering price<F2> registration fee
_________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Common Stock, no par
value per share 2,300,000 Shares $ 16.00 $ 36,800,000 $ 11,152
=================================================================================================
<FN>
<F1> Includes 300,000 shares which the Underwriters have the option to
purchase to cover over-allotments.
<F2> Estimated solely for the purpose of calculating the registration fee.
</FN>
</TABLE>
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to
Section 8(a), may determine.
<PAGE>
Photograph 1: Aerial view of the Company's main and west yards.
Photograph 2: Platform fabricated at the Company's facilities.
Photograph 3: Large jacket in the construction process.
Photograph 4: Deck under construction at Company's facility.
Photograph 5: Artist's rendition of a tension leg platform.
________________
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT
OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF
THE COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE NASDAQ
NATIONAL MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFCERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER
TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Subject to Completion, Dated February 14, 1997
2,000,000 Shares
[Logo] GULF ISLAND FABRICATION, INC.
Common Stock
All of the shares of common stock, no par value per share
(the "Common Stock"), of Gulf Island Fabrication, Inc. ("Gulf Island" or
the "Company") offered hereby are being sold by the Company. Prior to
this offering (the "Offering"), there has been no public market for the
Common Stock. It is currently estimated that the initial public
offering price per share will be between $________ and $________. See
"Underwriting" for information relating to the factors to be considered
in determining the initial public offering price.
Application has been made to list the Common Stock on the
Nasdaq National Market under the symbol "GIFI."
See "Risk Factors" beginning on page ____ for a
discussion of certain factors that should be considered in
connection with an investment in the Common Stock offered
hereby.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
===========================================================================
Price Underwriting Proceeds to
to Public Discount<F1> Company<F2>
___________________________________________________________________________
Per Share $ $ $
___________________________________________________________________________
Total<F3> $ $ $
===========================================================================
<F1> The Company has agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
<F2> Before deducting expenses payable by the Company estimated at
$__________.
<F3> The Company has granted to the several Underwriters an option
for 30 days to purchase up to an additional 300,000 shares of
Common Stock at the Price to Public, less Underwriting
Discount, solely to cover over-allotments, if any. If such
option is exercised in full, the Price to Public, Underwriting
Discount and Proceeds to Company will be $_____, $_____ and
$_____, respectively. See "Underwriting."
The shares of Common Stock are offered by the several
Underwriters, subject to prior sale, when, as and if issued to and
accepted by them, and subject to certain other conditions. The
Underwriters reserve the right to withdraw, cancel or modify such offer
and to reject orders in whole or in part. It is expected that delivery
of the shares of Common Stock will be made on or about ________________,
1997.
____________________
MORGAN KEEGAN & COMPANY, INC.
RAYMOND JAMES & ASSOCIATES, INC.
JOHNSON RICE & COMPANY L.L.C.
The date of this Prospectus is _______, 1997.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information and financial statements and the notes thereto
included elsewhere in this Prospectus. Unless otherwise indicated, the
information in this Prospectus assumes that the Underwriters' over-
allotment option will not be exercised. Certain technical terms are
defined in the "Glossary of Certain Technical Terms" appearing
immediately before the Index to Financial Statements. As used herein,
unless the context requires otherwise, the "Company" refers to Gulf
Island Fabrication, Inc., its predecessor and subsidiaries.
The Company
Gulf Island is a leading fabricator of offshore drilling and
production platforms and other specialized structures used in the
development and production of offshore oil and gas reserves. Structures
and equipment fabricated by the Company include jackets and deck
sections of fixed production platforms, hull and deck sections of
floating production platforms (such as tension-leg platforms), piles,
wellhead protectors, subsea templates and various production, compressor
and utility modules. The Company believes it is one of only three
domestic companies capable of fabricating offshore production platforms
for installation in water depths greater than 300 feet. The Company's
focus on controlling costs and providing high quality, reliable products
and services has enabled it to be profitable for each year since 1988.
Demand for the Company's products and services are primarily a
function of the level of offshore oil and gas activity in the U.S. Gulf
of Mexico (the "Gulf of Mexico") and, to a lesser extent, offshore areas
in West Africa and Latin America. Over the past four years,
improvements in seismic and drilling technology, production techniques
and oil and gas prices have resulted in more intensive drilling activity
in and around mature oil and gas fields located in shallow water areas
as well as increased exploration of deepwater areas of the Gulf of
Mexico. The number of active drilling rigs in the Gulf of Mexico
increased from less than 60 in May of 1992 to more than 150 at the end
of 1996.
Due to the time required to drill an exploratory offshore well,
formulate a comprehensive development plan and design a drilling and
production platform, the fabrication and installation of such platforms
usually lag exploratory drilling by one to three years. As a result,
the higher levels of drilling activity in the Gulf of Mexico have only
recently impacted the demand for the Company's products. The Company's
revenue, cash flow and backlog improved moderately in 1995, but improved
significantly in 1996. Revenue in 1996 increased 24% to $79.0 million,
and earnings before interest, taxes, depreciation and amortization
("EBITDA") increased 172% to $9.3 million, in each case as compared to
1995. The Company's backlog at December 31, 1996 was $87.1 million as
compared to $22.0 million at the end of 1995. At March 1, 1997, the
Company's backlog was $____ million.
The Company was founded in 1985 by a group of investors including
Alden J. Laborde and Huey J. Wilson and began operations at its main
fabrication yard on the Houma Navigation Canal in southern Louisiana,
approximately 30 miles from the Gulf of Mexico. The Company's
facilities are located on 577 acres, of which 230 acres are currently
developed for fabrication activities with 347 acres available for
expansion. These facilities allow the Company to build jackets for
fixed production platforms for use in water depths up to 800 feet and in
certain cases, depending on the design and weight of the jacket, for use
in water depths greater than 800 feet. The Company is capable of
constructing deck sections for fixed or floating production platforms
for use in unlimited water depths. In addition, the Company is able to
build certain hull sections of tension-leg platforms, typically for use
in water depths greater than 1,000 feet.
Acquisition of Dolphin Services
On January 2, 1997, the Company completed the acquisition of
Dolphin Services, Inc. and related companies ("Dolphin Services") for
approximately $5.9 million (the "Dolphin Acquisition"). Dolphin
Services performs offshore and inshore fabrication and other
construction services for the oil and gas industry in the Gulf of Mexico
and generated $27.0 million in revenue and $2.7 million in EBITDA for
the year ended December 31, 1996. Dolphin Services' facility is
located a quarter of a mile from the Company's main yard. Management
believes that the Dolphin Acquisition allows for more efficient use of
both companies' facilities, equipment and personnel. With the addition
of the 360 employees of Dolphin Services, the Company's combined
workforce is currently approximately 930 employees. The acquisition
provides an entrance for the Company into new market segments, in
particular offshore interconnect piping hook-up, inshore marine
construction and steel warehousing and sales, which allows the Company
to provide a more integrated array of services to its customers.
Growth Strategy
The Company's growth strategy is to capitalize on the positive
trends and opportunities in the marine fabrication and construction
industry. Key elements of this strategy are to:
* Increase Production Capacity. In order to capitalize on the
increased demand for its fabrication services, the Company is taking
actions to increase the production capacity of its fabrication yards
by (i) purchasing additional equipment, (ii) upgrading its existing
buildings and equipment and (iii) increasing the size and capability
of its workforce. In 1996, the Company spent approximately $5.9
million to purchase equipment and modify its fabrication yards in
order to increase capacity and improve productivity. The Company
anticipates that it will spend approximately $15 million during 1997
and 1998 for additional capital improvements to its fabrication
yards. During 1996, prior to the Dolphin Acquisition, the Company
increased its workforce by approximately 80 production employees and
has recently expanded programs to attract additional workers.
* Maintain a Low Cost Structure. The Company believes it is a low-
cost fabricator of offshore structures due to its state-of-the-art
production techniques, skilled and motivated workforce, efficient
management and low overhead costs. The Company plans to continue to
emphasize cost savings while providing high quality products and
reliable services to its customers.
* Acquire Related Businesses. The Dolphin Acquisition significantly
increases the Company's revenue, cash flow and number of employees
and broadens the Company's product and service offerings.
Management believes that there are additional opportunities to
acquire companies that have related or complementary products or
services to those currently provided by the Company. Immediately
after the Offering, the Company will be substantially free of debt,
and management believes that its capital structure will enable it to
pursue such opportunities as they arise.
* Pursue Additional International Opportunities. There are
significant opportunities to supply platforms outside the Gulf of
Mexico. Over the past five years, approximately 25% of the
Company's revenue was derived from the fabrication of structures
exported to foreign destinations, including offshore West Africa and
Latin America. Many of the Company's customers who operate in the
Gulf of Mexico also have extensive operations in international
areas. Management believes that its established relations with such
customers, combined with its recent certification as an ISO 9002
fabricator, will continue to facilitate the Company's development of
its international presence. The Company believes that some foreign
operators will continue to utilize U.S. fabricators to build
platforms for use in foreign markets because of the higher quality
and lower costs available from U.S. fabricators, despite additional
transportation costs. In the future, the Company may pursue joint
venture relationships or other cooperative arrangements in order to
increase its participation in fabrication projects in foreign
markets.
The Company is incorporated under the laws of the State of
Louisiana and its principal executive offices are located at 583
Thompson Road, Houma, Louisiana 70363, its telephone number is (504)
872-2100, and its mailing address is P.O. Box 310, Houma, Louisiana
70361-0310.
<PAGE>
The Offering
Common Stock offered by the Company 2,000,000 shares
Common Stock to be outstanding after
the Offering 5,500,000 shares<F1>
Use of Proceeds To repay approximately
$27.0 million of indebtedness
expected to be outstanding at
the time of the Offering, a
portion of which (approximately
$15.0 million) will be incurred
to fund a distribution to the
Company's current shareholders in
connection with the termination of
the Company's S Corporation status.
See "Prior S Corporation Status." Any
remaining proceeds will be used for
working capital and general corporate
purposes. See "Use of Proceeds."
Nasdaq National Market Symbol GIFI
<F1> Excludes any shares issuable upon exercise of the Underwriters'
over-allotment option and 106,500 shares issuable upon exercise of
outstanding options. See "Management - Compensation Pursuant to
Plans -- Long-Term Incentive Plan."
Risk Factors
An investment in the Common Stock offered hereby involves a high
degree of risk. In particular, prospective investors should be aware of
the effect on the Company of the risks presented by the factors listed
under "Risk Factors."
<PAGE>
Summary Financial and Operating Data
The following table sets forth summary historical financial and
operating data as of the dates and for the periods indicated. The
historical financial data for each year in the five-year period ended
December 31, 1996 are derived from the audited financial statements of
the Company. The following table also sets forth pro forma financial
information as of and for the period presented that gives effect to
significant events, including the Dolphin Acquisition and the
termination of the Company's S Corporation status, subsequent to
December 31, 1996, as further explained in the notes thereto. The
following data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's financial statements and notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Year ended December 31,
__________________________________________________________
Pro Forma
(unaudited)
1992 1993 1994 1995 1996 1996<F1>
________ ______ _______ ________ _______ ___________
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Revenue $ 51,462 $ 65,435 $ 60,984 $ 63,779 $ 79,004 $ 103,007
Cost of revenue 45,457 60,599 57,519 60,034 68,673 88,843
_________ _________ _________ _________ _________ _________
Gross profit 6,005 4,836 3,465 3,745 10,331 14,164
General and
administrative expenses 1,566 1,585 1,567 1,730 2,161 3,813
_________ _________ _________ _________ _________ _________
Operating income 4,439 3,251 1,898 2,015 8,170 10,351
Net interest expense 208 70 328 430 384 899
Non-recurring
compensation charge<F2> - - - - 500 500
_________ _________ _________ _________ _________ _________
Income before income taxes 4,231 3,181 1,570 1,585 7,286 8,952
Pro forma provision for
income taxes<F3> 1,596 1,193 594 602 2,934 3,553<F4>
_________ _________ _________ _________ _________ _________
Pro forma net income<F3> $ 2,635 $ 1,988 $ 976 $ 983 $ 4,352 $ 5,399
========= ========= ========= ========= ========= =========
Pro forma net income per
shares<F3> $ .75 $ .57 $ .28 $ .28 $ 1.24 $ 1.54
========= ========= ========= ========= ========= =========
Weighted average common
shares 3,500 3,500 3,500 3,500 3,500 3,500
Supplemental pro forma net
income per share<F5> $
=========
Other Financial Data:
Depreciation and
amortization $ 1,351 $ 1,415 $ 1,370 $ 1,382 $ 1,586 $ 2,013
Capital expenditures $ 445 $ 367 $ 676 $ 992 $ 5,838 $ 6,722
EBITDA<F6> $ 5,790 $ 4,666 $ 3,268 $ 3,397 $ 9,256 $ 11,864
EBITDA margin<F7> 11.2% 7.1% 5.4% 5.3% 11.7% 11.5%
Operating Data:
Direct labor hours
worked<F8> 878 981 1,037 920 1,074
Backlog<F9>
In direct labor hours 457 404 400 427 1,058
In dollars $ 27,472 $20,832 $20,740 $22,003 $87,093
Gulf of Mexico Industry Data:
Drilling rigs under
contract<F10> 75 115 129 133 148
Offshore platforms
installed<F11>
</TABLE>
<TABLE>
<CAPTION>
As of December 31, 1996
_________________________________________________________
(unaudited)
__________________________________
Pro Forma
Historical Pro Forma<F1><F3> as Adjusted<F12>
___________ ______________ _________________
Balance Sheet Data: (In thousands)
<S> <C> <C> <C>
Working capital, excluding current
maturities of long-term debt $ 11,532 $ 14,637 $
Property, plant and equipment, net 17,735 21,292
Total assets 35,909 46,026
Debt, including current
maturities<F13> 6,187 25,803
Shareholders' equity 23,498 9,240
____________________
<FN>
<F1> Gives effect to the Dolphin Acquisition as if consummated at the end
of the period presented for balance sheet data and as of the
beginning of the period presented for all other data, and should be
read in conjunction with the unaudited pro forma financial
statements of the Company and the notes thereto included elsewhere
in this Prospectus.
<F2> In December 1996, the Company's principal shareholders sold an
aggregate of 49,000 shares of Common Stock to the Company's
executive officers at a total purchase price of $350,000. The
Company is required to recognize a non-cash expense equal to the
difference between the aggregate purchase price for such shares
(adjusted for certain distributions with respect to such shares that
will be paid in 1997) and the estimated value of such shares at the
time of the Offering.
<F3> Gives pro forma effect to the application of federal and state
income taxes to the Company as if it were a C Corporation for tax
purposes for the periods presented. For all periods presented
herein, the Company has operated as an S Corporation for federal and
state income tax purposes. Immediately prior to the Offering, the
Company's current shareholders intend to make an election
terminating the Company's S Corporation status. As a result, the
Company will become subject to corporate level income taxation. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Pro Forma Results of Operations; Tax
Adjustments," and notes 1 and 2 to the Company's financial
statements included elsewhere in this Prospectus.
<F4> Includes approximately $619,000 in federal and state income taxes,
net of acquisition adjustments, accrued in 1996 by Dolphin Services,
which operated as a C corporation until January 1, 1997, at which
time it was converted to an S Corporation.
<F5> Calculated by dividing the pro forma net income, increased by the
interest expense, net of tax, on the debt incurred to acquire
Dolphin Services, by the 3,500,000 weighted average shares, as
increased to reflect sufficient additional shares to retire
debt incurred to acquire Dolphin Services (________ shares) and to
pay the Shareholder Distributions (________ shares). All such
additional shares are based on an assumed offering price of
$________, net of offering expenses.
<F6> EBITDA (earnings before interest expense, income taxes, depreciation
and amortization) is presented here to provide additional
information about the Company's operations. EBITDA should not be
considered as an alternative to net income, as an indicator of the
Company's operating performance or as an alternative to cash flows
as a measure of liquidity.
<F7> EBITDA margin is calculated by dividing EBITDA by revenue.
<F8> Direct labor hours are hours worked by employees directly involved
in the production of the Company's products.
<F9> Backlog information is as of December 31 for each of the periods
presented. The Company's backlog is based on management's estimate
of the number of direct labor hours required to complete, and the
remaining amounts to be invoiced with respect to, those projects on
which a customer has authorized the Company to begin work or
purchase materials. Backlog at December 31, 1996 included
approximately 34,800 direct labor hours and $1.4 million
attributable to portions of orders expected to be completed after
December 31, 1997. See "Risk Factors - Backlog" and "Business -
Backlog."
<F10>Represents the average number of drilling rigs under contract in the
Gulf of Mexico for the period presented. Data obtained from
Offshore Data Services.
<F11>Represents the number of development drilling and production
platforms installed in the Gulf of Mexico in the period presented.
Data obtained from Offshore Data Services.
<F12>Assumes the public offering of 2,000,000 shares of Common Stock at
an assumed price of $_____ per share resulting in net proceeds of
$_____ million (after deducting underwriting discounts and expenses
of the Offering estimated at $_____ million) and the application
thereof as described herein. See "Use of Proceeds."
<F13>Each of historical, pro forma and pro forma as adjusted
information includes $530,000 of current maturities of debt. In
addition, each of pro forma and pro forma as adjusted information
includes approximately $13.2 million of debt expected to be incurred
(as of December 31, 1996) to fund a distribution to the Company's
existing shareholders prior to the completion of the Offering and
$206,000 of current maturities of debt of Dolphin Services.
See "Prior S Corporation Status" and "Certain Transactions."
</FN>
</TABLE>
<PAGE>
RISK FACTORS
Prospective purchasers of the Common Stock should carefully consider
the investment considerations set forth below, as well as the other
information contained in this Prospectus.
Cyclicality; Dependence on Activity in the Oil and Gas Industry
The demand for the Company's services has traditionally been
cyclical, depending on the condition of the oil and gas industry and, in
particular, the level of capital expenditures of oil and gas companies
who operate in the Gulf of Mexico. These capital expenditures are
influenced by prevailing oil and natural gas prices, expectations about
future prices, the cost of exploring for, producing and delivering oil
and gas, the sale and expiration dates of offshore leases in the United
States and overseas, the discovery rate of new oil and gas reserves in
offshore areas, local and international political and economic
conditions, and the ability of oil and gas companies to access or
generate capital sufficient to fund capital expenditures for offshore
exploration, development and production activities. Although the trend
of oil and natural gas prices over the past year has been generally
favorable, over the past several years, oil and natural gas prices and
the level of offshore drilling and exploration activity have fluctuated
substantially, resulting in significant fluctuations in demand for the
Company's services. A significant or prolonged reduction in oil or
natural gas prices in the future would likely depress offshore drilling
and development activity. A substantial reduction of such activity
would reduce demand for the Company's services and could have a material
adverse effect on the Company's financial condition and results of
operations.
Need for Skilled Workers
The Company's ability to remain productive and profitable depends
substantially on its ability to retain and attract skilled construction
workers, primarily welders, fitters and equipment operators. The
Company's ability to expand its operations depends primarily on its
ability to increase its labor force. The demand for such workers is
high and the supply is extremely limited. While the Company believes
that its wage rates are competitive and that its relationship with its
skilled labor force is good, a significant increase in the wages paid by
competing employers could result in a reduction in the Company's skilled
labor force, increases in the wage rates paid by the Company, or both.
If either of these events occurred, in the near-term, the profits
realized by the Company from work in progress would be reduced or
eliminated and, in the long-term, the production capacity and
profitability of the Company could be diminished and the growth
potential of the Company could be impaired.
Backlog
The Company's backlog is based on management's estimate of the
direct labor hours required to complete, and the remaining amounts to be
invoiced with respect to, those projects on which a customer has
authorized the Company to begin work or purchase materials pursuant to
written contracts, letters of intent, or other forms of authorization.
All projects currently included in the Company's backlog are subject to
change and/or termination at the option of the customer, either of which
could substantially change the amount of backlog currently reported. In
the case of a termination, the customer is generally required to pay the
Company for work performed and materials purchased through the date of
termination, and in some cases, pay the Company termination fees;
however, due to the large dollar amounts of backlog estimated for each
of a small number of projects, amounts included in the Company's backlog
could decrease substantially if one or more of these projects were to be
terminated by the Company's customers. In particular, approximately 88%
and _____% of the Company's backlog at December 31, 1996 and March 1,
1997, respectively, were attributable to three projects, two of which
were for the same customer. A termination of one or more of these large
projects could have a material adverse effect on the Company's revenue,
net income and cash flow for 1997.
Operating Risks
The Company's fabrication of large steel structures involves
certain operating hazards that can cause personal injury or loss of
life, severe damage to and destruction of property and equipment and
suspension of operations. The failure of such structures during and
after installation can result in similar injuries and damages. In
addition, as a result of the Dolphin Acquisition, the Company now has
employees engaged in offshore operations which are covered by provisions
of the Jones Act, the Death on the High Seas Act and general maritime
law, which laws operate to make the liability limits established by
state workers' compensation laws inapplicable to these employees and,
instead, permit them or their representatives to pursue actions against
the Company for damages or job-related injuries, with generally no
limitations on the Company's potential liability. The ownership and
operation of the vessels acquired in the Dolphin Acquisition can give
rise to large and varied liability risks, such as risks of collisions
with other vessels or structures, sinkings, fires and other marine
casualties, which can result in significant claims for damages against
both the Company and third parties for, among other things, personal
injury, death, property damage, pollution and loss of business.
Litigation arising from any such occurrences may result in the Company's
being named as a defendant in lawsuits asserting large claims. In
addition, due to their proximity to the Gulf of Mexico, the Company's
facilities are subject to the possibility of physical damage caused by
hurricanes or flooding. Although the Company maintains such insurance
protection as it considers economically prudent, there can be no
assurance that any such insurance will be sufficient or effective under
all circumstances or against all claims or hazards to which the Company
may be subject. A successful claim or damage resulting from a hazard
for which the Company is not fully insured could have a material adverse
effect on the Company. Moreover, no assurance can be given that the
Company will be able to maintain adequate insurance in the future at
rates that it considers reasonable. See "Business -- Insurance" and "--
Legal Proceedings."
To the extent the Company's future operations involve
international expansion, those operations would be subject to a number
of risks inherent in business operations in foreign countries, including
political, social and economic instability, potential seizure or
nationalization of assets, currency restrictions and exchange rate
fluctuations, nullification, modification or renegotiation of contracts,
import-export quotas and other forms of public and governmental
regulation, all of which are beyond the control of the Company.
Additionally, the ability of the Company to compete in international
markets may be adversely affected by import duties and fees, by foreign
taxes, by foreign governmental regulations that favor or require the
awarding of contracts to local contractors, or by regulations requiring
foreign contractors to employ citizens of, or purchase supplies from, a
particular jurisdiction.
Contract Bidding Risks
Due to the nature of the marine construction industry, a
substantial number of the Company's projects are performed on a fixed-
price basis, although some projects are performed on an
alliance/partnering or cost-plus basis. Under fixed-price contracts,
the Company receives the price fixed in the contract, subject to
adjustment only for change orders placed by the customer. As a result,
the Company is responsible for all cost overruns. Under typical
alliance/partnering arrangements, the Company and the customer agree in
advance to a target price that includes specified levels of labor and
material costs and profit margins. If the project is completed at less
cost than those targeted in the contract, the contract price is reduced
by a portion of the savings. If the cost to completion is greater than
target costs, the contract price is increased, but generally to the
target price plus the actual incremental cost of materials and direct
labor. Accordingly, under alliance/partnering arrangements, the Company
has some protection against cost overruns but must share a portion of
any cost savings with the customer. Under cost-plus arrangements, the
Company receives a specified fee in excess of its direct labor and
material cost and so is protected against cost overruns but does not
benefit directly from cost savings. The revenue, costs and gross profit
realized on a contract will often vary from the estimated amounts on
which such contracts were originally based because of various reasons,
including errors in estimates or bidding, changes in the availability
and cost of labor and material and variations in productivity from the
original estimates. These variations and the risks inherent in the
marine construction industry may result in revenue and gross profits
different from those originally estimated and reduced profitability or
losses on projects. Depending on the size of a project, variations from
estimated contract performance can have a significant impact on the
Company's operating results for any particular fiscal quarter or year.
Percentage-of-Completion Accounting
Most of the Company's revenue is recognized on a percentage-of-
completion basis based on the ratio of direct labor hours worked to the
total estimated direct labor hours required for completion.
Accordingly, contract price and cost estimates are reviewed monthly as
the work progresses, and adjustments proportionate to the percentage of
completion are reflected in revenue for the period when such estimates
are revised. To the extent that these adjustments result in a reduction
or elimination of previously reported profits, the Company would have to
recognize a charge against current earnings, which may be significant
depending on the size of the project or the adjustment. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations."
Seasonality
The Company's operations are subject to seasonal variations in
weather conditions and daylight hours. Since most of the Company's
construction activities take place outdoors, the number of direct labor
hours worked generally declines in the winter months due to an increase
in rainy and cold conditions and a decrease in daylight hours. In
addition, the Company's customers often schedule the completion of their
projects during the summer months in order to take advantage of the
milder weather during such months for the installation of their
platforms. As a result, a disproportionate amount of the Company's net
income and, to a lesser extent, revenue and gross profit, has
historically been earned during the second and third quarters of the
year, and the Company has occasionally incurred losses during the fourth
and first quarters of its fiscal year. For example, the portion of net
income earned during the second and third quarters amounted to 103%, 81%
and 58% of the Company's total net income for fiscal 1994, 1995 and
1996, respectively. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Dependence on Significant Customers
A large portion of the Company's revenue has historically been
generated by a few customers, although not necessarily the same
customers from year to year. For example, the Company's largest
customers (those which individually accounted for more than 10% of
revenue in a given year) collectively accounted for 38% (2 customers),
40% (2 customers) and 35% (3 customers) of revenue for fiscal 1994, 1995
and 1996, respectively. In addition, at March 1, 1997, ____% of the
Company's backlog was attributable to three projects, two of which were
for the same customer. Because the level of fabrication that the
Company may provide to any particular customer depends, among other
things, on the size of that customer's capital expenditure budget
devoted to platform construction plans in a particular year and the
Company's ability to meet the customer's delivery schedule, customers
that account for a significant portion of revenue in one fiscal year may
represent an immaterial portion of revenue in subsequent years.
However, the loss of a significant customer for any reason, including a
sustained decline in that customer's capital expenditure budget or
competitive factors, can result in a substantial loss of revenue and
could have a material adverse effect on the Company's operating
performance.
Competition
Marine construction companies servicing the oil and gas industry
compete intensely for available projects. Contracts for the Company's
services are generally awarded on a competitive bid basis and, while
customers may consider, among other things, the availability and
capabilities of equipment, the reputation, experience and safety record
of the contractor, price and the contractor's ability to meet a
customer's delivery schedule are the principal factors in determining
which qualified contractor is awarded the job. The Company competes
with both large and small companies, and certain of these competitors
have greater financial and other resources than the Company. In
addition, because of subsidies, import duties and fees, taxes imposed on
foreign operators and lower wage rates in foreign countries along with
fluctuations in the value of the U.S. dollar and other factors, the
Company may not be able to remain competitive with foreign contractors
for projects designed for use in international locations as well as
those designed for use in the Gulf of Mexico. See "Business --
Competition."
Integration and Availability of Acquisitions
The Company has recently increased its revenue, cash flow and
workforce through the Dolphin Acquisition. As the Dolphin Acquisition
occurred in January 1997, the Company has not fully integrated the
operations of Dolphin Services with those of the Company. As a result,
the Company could experience difficulties or additional expenses as it
seeks to coordinate the activities and operations of Dolphin Services
with those of the Company, including the possible loss of production
workers currently employed by Dolphin Services. In addition, to the
extent the success of the Company's strategy is contingent on making
further acquisitions, there can be no assurance that the Company will be
able to identify and acquire acceptable acquisition candidates on terms
favorable to the Company or that the Company will be able to integrate
such acquisitions successfully.
Regulatory and Environmental Matters
The Company's operations and properties are subject to and
affected by various types of governmental regulation, including numerous
federal, state and local environmental protection laws and regulations,
compliance with which is becoming increasingly complex, stringent and
expensive. These laws may provide for "strict liability" for damages to
natural resources or threats to public health and safety, rendering a
party liable for the environmental damage without regard to its
negligence or fault. Sanctions for noncompliance may include revocation
of permits, corrective action orders, administrative or civil penalties
and criminal prosecution. Certain environmental laws provide for
strict, joint and several liability for remediation of spills and other
releases of hazardous substances. In addition, companies may be subject
to claims alleging personal injury or property damage as a result of
alleged exposure to hazardous substances. Such laws and regulations may
also expose the Company to liability for the conduct of or conditions
caused by others, or for acts of the Company that were in compliance
with all applicable laws at the time such acts were performed. In
addition, the Company depends on the demand for its services from the
oil and gas industry and is affected by changing taxes, price controls
and other laws and regulations relating to the oil and gas industry
generally. The adoption of laws and regulations curtailing exploration
and development drilling for oil and gas for economic, environmental and
other policy reasons would adversely affect the Company's operations by
limiting demand for its services. The Company cannot determine to what
extent future operations and earnings of the Company may be affected by
new legislation, new regulations or changes in existing regulations.
See "Business -- Government and Environmental Regulation."
Dependence on Key Personnel
The Company's success depends on, among other things, the
continued active participation of Kerry J. Chauvin, President and Chief
Executive Officer, and certain of the Company's other officers and key
operating personnel. The loss of the services of any one of these
persons could have a material adverse effect on the Company. See
"Management."
Control by Principal Shareholders
After the Offering, Alden J. Laborde and Huey J. Wilson will
beneficially own an aggregate of approximately 57% of the issued and
outstanding Common Stock (54% if the Underwriters' over-allotment option
is exercised in full). Although they have no agreements, arrangements
or understandings to do so, to the extent Messrs. Laborde and Wilson act
in concert, they will be able to control the election of directors and
the outcome of certain matters requiring shareholder approval. See
"Principal Shareholders."
Shares Eligible for Future Resale; Registration Rights
Upon completion of the Offering, the Company will have outstanding
5,500,000 shares of Common Stock (excluding 106,500 shares issuable upon
the exercise of outstanding options). All of the 2,000,000 shares of
Common Stock offered hereby will be eligible for sale in the public
market without restriction upon completion of the Offering. All of the
remaining 3,500,000 shares of Common Stock are "restricted securities"
as that term is defined in Rule 144 under the Securities Act of 1933, as
amended (the "Securities Act"). The Company, each of its directors and
officers and certain shareholders of the Company have agreed not to
offer, sell or otherwise dispose of any shares of Common Stock in the
public market for 180 days from the date of this Prospectus without the
prior consent of the Underwriters. Subject to this agreement, after the
completion of the Offering, the Company's existing shareholders,
including Messrs. Alden Laborde and Wilson, may sell shares of Common
Stock pursuant to Rule 144 under the Securities Act or otherwise. In
addition, each of Messrs. Laborde and Wilson has been granted certain
demand and "piggy-back" registration rights by the Company with respect
to all of the shares of Common Stock owned by him. Although the Company
cannot predict the timing or amount of future sales of Common Stock or
the effect that the availability of such shares for sale will have on
the market price prevailing from time to time, sales of substantial
amounts of Common Stock in the public market following this offering
could adversely affect the market price of the Common Stock. See
"Principal Shareholders," "Certain Transactions" and "Shares Eligible
for Future Sale."
No Prior Market; Possible Volatility of Market Price; Dilution
Prior to the Offering, there has been no public market for the
Common Stock. Although application has been made to list the Common
Stock offered hereby on the Nasdaq National Market, there can be no
assurance that a market for the Common Stock will develop or, if
developed, will be sustained. The initial public offering price of the
Common Stock will be determined by negotiations between the Company and
the Underwriters. For the factors considered in such negotiations, see
"Underwriting." There can be no assurance that future market prices at
which the Common Stock will sell in the public market after the Offering
will not be lower than the initial public offering price. Following the
Offering, the market price of the Common Stock may fluctuate depending
on various factors, including the general economy, stock market
conditions, general trends in the marine construction business,
fluctuations in oil and gas prices, announcements by the Company or its
competitors and variations in the Company's quarterly and annual
operating results. In addition, purchasers of the Common Stock offered
hereby will incur immediate dilution of $________ ($_____ per share) in
the pro forma net tangible book value of their investment. See
"Dilution."
Dividends
The Company currently intends to retain earnings, if any, to meet
its working capital requirements and to finance the future operation and
growth of the Company's business and, therefore, does not plan to pay
cash dividends to holders of its Common Stock in the foreseeable future.
In addition, the agreement governing the Bank Credit Facility (as
hereinafter defined) limits the Company's ability to pay dividends on
its Common Stock. See "Dividend Policy."
<PAGE>
PRIOR S CORPORATION STATUS
Since April 1989, the Company has operated as an S Corporation for
federal and state income tax purposes. As a result, the Company
currently pays no federal or state income tax, and the entire earnings
of the Company are subject to tax directly at the shareholder level.
Immediately prior to the Offering, the Company's current shareholders
intend to make an election terminating the Company's S Corporation
status. Therefore, the Company will become subject to corporate level
income taxation. The Company will be required to record a one-time
deferred tax liability in the amount of approximately $1.2 million in
the second quarter of 1997. See the Company's financial statements and
notes thereto included elsewhere in this Prospectus and "Management's
Discussion and Analysis of Financial Condition and Results of Operations
- -- Pro Forma Results of Operations; Tax Adjustments."
In the past, the Company has made distributions to its
shareholders in order to provide a cash return to them and to fund their
federal and state income tax liability that resulted from the Company's
S Corporation status. In accordance with this practice, since January
1, 1997, the Company has distributed $3.0 million to its current
shareholders and, prior to the completion of the Offering, intends to
make an additional distribution to its current shareholders of
approximately $12.0 million (the "Shareholder Distributions"), which
amount represents undistributed earnings of the Company on which the
Company's current shareholders will have incurred federal and state
income taxes at the date of their election to terminate the Company's S
Corporation status. The Company intends to fund this distribution with
borrowings under its Bank Credit Facility (as hereinafter defined),
which will be repaid with proceeds of the Offering. See "Use of
Proceeds," "Dividend Policy" and "Certain Transactions."
<PAGE>
USE OF PROCEEDS
The estimated net proceeds to the Company from the sale of the
shares of Common Stock offered hereby, after deducting underwriting
discounts and offering expenses, will be approximately $_____ million
($_____ million if the Underwriters' over-allotment option is exercised
in full) assuming an initial offering price of $_____ per share. The
Company intends to use approximately $27.0 million of the net proceeds
to repay indebtedness that will be outstanding under the Company's Bank
Credit Facility (as hereinafter defined) at the time of the Offering.
This indebtedness represents borrowings to fund (i) the Dolphin
Acquisition, (ii) certain capital expenditures that were made in 1996
and 1997 to improve the Company's facilities and the productivity of its
workforce and (iii) the Shareholder Distributions, totaling
approximately $15.0 million. See "Prior S Corporation Status" and
"Certain Transactions." The Company intends to use any remaining
proceeds for working capital and general corporate purposes. Until
used, the Company intends to invest the net proceeds in money market
obligations, certificates of deposit or short-term, interest bearing
securities.
The Company's credit facility (the "Bank Credit Facility")
currently provides for (i) a revolving line of credit of up to $12.0
million and (ii) a non-revolving facility of $15.0 million. Prior to
the Offering, it is anticipated that the revolving portion, which
matures on December 31, 1998, will be increased to provide a $20.0
million line of credit that will be available to fund the Shareholder
Distributions. The non-revolving facility, which was originated on
October 24, 1996 and was amended and increased on January 2, 1997 in
connection with the Dolphin Acquisition, may be drawn upon by the
Company until June 30, 1997, at which time the non-revolving facility
will convert to a term loan with a final maturity of June 30, 2004.
Both portions bear interest equal to, at the Company's option, the prime
lending rate established by Citibank, N.A. or LIBOR plus 2%. The
weighted average interest rate on the indebtedness outstanding under the
Bank Credit Facility as of March 1, 1997 was ___%. After the Offering
and the application of the estimated net proceeds as described herein,
the Company expects to have approximately $_____ million available under
the revolving portion of the Bank Credit Facility. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations
- -- Liquidity and Capital Resources."
DIVIDEND POLICY
The Company currently intends to retain earnings, if any, to meet
its working capital requirements and to finance the future operation and
growth of its business and, therefore, does not plan to pay cash
dividends to holders of its Common Stock in the foreseeable future. In
addition, the agreements governing the Bank Credit Facility limit the
Company's ability to pay dividends on its Common Stock. See "Risk
Factors -- Dividends."
The Company has made cash distributions to its current
shareholders in order to provide a cash return to them as well as to
fund their federal and state income tax liability that resulted from the
Company's status as an S Corporation. These distributions totaled
$433,671 and $2,691,708 in the fiscal years ended December 31, 1995 and
1996, respectively. Since January 1, 1997, the Company has made similar
distributions to its shareholders of $3.0 million. Prior to the
completion of the Offering and in connection with the termination of the
Company's S Corporation status, the Company intends to make an
additional distribution to its current shareholders of approximately
$12.0 million, which amount represents undistributed earnings of the
Company on which the current shareholders will have incurred federal and
state income taxes as of the date of their election to terminate the
Company's S Corporation status. See "Prior S Corporation Status" and
"Certain Transactions."
<PAGE>
DILUTION
After giving pro forma effect to the Dolphin Acquisition, the
Shareholder Distribution and the deferred income tax liability resulting
from the termination of the Company's S Corporation status, the pro
forma net tangible book value of the Company at December 31, 1996 would
have been $9.2 million, or $2.64 per share of Common Stock. Net
tangible book value per share of Common Stock represents the amount of
the Company's tangible net worth (total assets less total liabilities)
divided by the total number of shares of Common Stock outstanding.
After further giving effect to the Offering (assuming an initial public
offering price of $_____ per share and deducting underwriting discounts
and offering expenses estimated at $________), the pro forma net
tangible book value of the Company at December 31, 1996 would have been
approximately $________ or $________ per share of Common Stock. This
represents an immediate increase in net tangible book value of $_____
per share of Common Stock to current holders of Common Stock and an
immediate dilution of approximately $_____ per share to the new
investors purchasing shares in the Offering.
The following table illustrates this per share dilution to new
investors:
Initial public offering price per share $
Pro forma net tangible book value per share
at December 31, 1996 (without taking into
account the Offering)<F1> $ 2.64
Increase in net tangible book value per
share attributable to the sale of Common
Stock in the Offering
Adjusted pro forma net tangible book value per
share after giving effect to the Offering<F1> $
Dilution in pro forma net tangible book value
per share to the purchasers of Common Stock
offered hereby<F1> $
The following table summarizes, on a pro forma basis, at December
31, 1996, the number of shares of Common Stock issued by the Company,
the total consideration received by the Company and the average price
per share of Common Stock paid by existing shareholders and by investors
in the Offering (assuming an initial public offering price of $_____ per
share) before deducting the estimated underwriting discounts and
offering expenses.
Shares Purchased Total Consideration Average
__________________ __________________ Price Per
Number Percent Amount Percent Share
_________ _______ ________ _________ _________
Existing
shareholders<F1> 3,500,000 64% $ 7,670,000 % $2.19
New investors 2,000,000 36% % $
____________ ______ ___________ _______ _______
Total 5,500,000 100% 100%
============ ====== =========== =======
________________
<F1> Excludes any shares issuable upon exercise of the Underwriters'
over-allotment option and 106,500 shares issuable upon the
exercise of outstanding options. See "Management -- Compensation
Pursuant to Plans -- Long-Term Incentive Plan."
<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt and
capitalization of the Company at December 31, 1996; on a pro forma
basis, as of December 31, 1996, giving effect to (i) the Dolphin
Acquisition, (ii) the incurrence of additional debt under the Bank
Credit Facility, (iii) the Shareholder Distributions and (iv) the
recording by the Company of deferred income tax liability in connection
with its conversion to a C Corporation, all as if completed on December
31, 1996; and as adjusted to reflect the sale by the Company of the
2,000,000 shares of Common Stock offered hereby at an assumed initial
public offering price of $_____ per share and the application of the
estimated net proceeds thereof as described in "Use of Proceeds." The
table set forth below should be read in conjunction with the Company's
historical and pro forma financial statements and the notes thereto
included elsewhere in this Prospectus.
As of December 31, 1996
________________________________
(unaudited)
______________________
Pro Forma
Actual Pro Forma as Adjusted
_________ __________ ____________
(In thousands)
Short-term debt $ 530 $ 13,894
========== =========== ==========
Long-term debt, less current
maturities $ 5,657 $ 11,909 $
Shareholders' equity: ========== =========== ==========
Preferred Stock, no par value per
share, 5,000,000 shares
authorized; none issued or
outstanding --- --- ---
Common Stock, no par value per
share, 20,000,000 shares
authorized; 3,500,000 million
shares issued and outstanding;
5,500,000 million shares issued
and outstanding as adjusted<F1> 1,000 1,000
Additional paid-in capital 6,670 6,670
Retained earnings 15,828 1,570 1,570
___________ ___________ __________
Total shareholders' equity 23,498 9,240
___________ ___________ __________
Total capitalization $ 29,155 $ 21,149 $
=========== =========== ===========
_____________________
<F1>Excludes any shares issuable upon exercise of the Underwriters'
over-allotment option and 106,500 shares issuable upon exercise of
outstanding options. See "Management -- Compensation Pursuant to
Plans -- Long-Term Incentive Plan."
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
The following table sets forth selected historical financial and
operating data, as of the dates and for the periods indicated. The
historical financial data for each year in the five-year period ended
December 31, 1996 are derived from the audited financial statements of
the Company. The table also sets forth pro forma financial information
as of and for the periods presented that gives effect to significant
events, including the Dolphin Acquisition and the termination of the
Company's S Corporation status, that occurred subsequent to December 31,
1996, as further explained in the notes thereto. The following
information should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
Company's financial statements and notes thereto included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
Year ended December 31,
__________________________________________________________
Pro Forma
(unaudited)
1992 1993 1994 1995 1996 1996<F1>
________ ______ _______ ________ _______ ___________
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Revenue $ 51,462 $ 65,435 $ 60,984 $ 63,779 $ 79,004 $ 103,007
Cost of revenue 45,457 60,599 57,519 60,034 68,673 88,843
_________ _________ _________ _________ _________ _________
Gross profit 6,005 4,836 3,465 3,745 10,331 14,164
General and
administrative expenses 1,566 1,585 1,567 1,730 2,161 3,813
_________ _________ _________ _________ _________ _________
Operating income 4,439 3,251 1,898 2,015 8,170 10,351
Net interest expense 208 70 328 430 384 899
Non-recurring
compensation charge<F2> - - - - 500 500
_________ _________ _________ _________ _________ _________
Income before income taxes 4,231 3,181 1,570 1,585 7,286 8,952
Pro forma provision for
income taxes<F3> 1,596 1,193 594 602 2,934 3,553<F4>
_________ _________ _________ _________ _________ _________
Pro forma net income<F3> $ 2,635 $ 1,988 $ 976 $ 983 $ 4,352 $ 5,399
========= ========= ========= ========= ========= =========
Pro forma net income per
shares<F3> $ .75 $ .57 $ .28 $ .28 $ 1.24 $ 1.54
========= ========= ========= ========= ========= =========
Weighted average common
shares 3,500 3,500 3,500 3,500 3,500 3,500
Supplemental pro forma net
income per share<F5> $
=========
Other Financial Data:
Depreciation and
amortization $ 1,351 $ 1,415 $ 1,370 $ 1,382 $ 1,586 $ 2,013
Capital expenditures $ 445 $ 367 $ 676 $ 992 $ 5,838 $ 6,722
EBITDA<F6> $ 5,790 $ 4,666 $ 3,268 $ 3,397 $ 9,256 $ 11,864
EBITDA margin<F7> 11.2% 7.1% 5.4% 5.3% 11.7% 11.5%
Operating Data:
Direct labor hours
worked<F8> 878 981 1,037 920 1,073
Backlog<F9>
In direct labor hours 457 404 400 427 1,038
In dollars $ 27,472 $20,832 $20,740 $22,003 $87,093
Year ended December 31,
__________________________________________________________
Pro Forma
(unaudited)
1992 1993 1994 1995 1996 1996<F1>
________ ______ _______ ________ _______ ___________
(In thousands)
Balance Sheet Data:
Working capital, excluding
current maturities of
long-term debt $ 3,593 $ 8,217 $ 7,437 $10,048 $11,532 $14,637
Property, plant and
equipment, net 15,550 14,567 13,873 13,483 17,735 21,292
Total assets 24,678 29,225 25,665 30,414 35,909 46,026
Debt, including current
maturities<F10> 425 2,424 4,477 5,545 6,187 25,803
Shareholders' equity 19,136 20,782 17,251 18,403 23,498 9,240
___________________________
(notes follow on next page)
<FN>
<F1> Gives effect to the Dolphin Acquisition as if consummated at the end
of the period presented for balance sheet data and as of the
beginning of the period presented for all other data, and should be
read in conjunction with the unaudited pro forma financial
statements of the Company and the notes thereto included elsewhere
in this Prospectus.
<F2> In December 1996, the Company's principal shareholders sold an
aggregate of 49,000 shares of Common Stock to the Company's
executive officers at a total purchase price of $350,000. As a
result, the Company is required to recognize a non-cash expense
equal to the difference between the aggregate purchase price for
such shares (adjusted for certain distributions with respect to such
shares that will be paid in 1997) and the estimated value of such
shares at the time of the Offering.
<F3> Gives pro forma effect to the application of federal and state
income taxes to the Company as if it were a C Corporation for tax
purposes for the periods presented. For all periods presented
herein, the Company has operated as an S Corporation for federal and
state income tax purposes. Immediately prior to the Offering, the
Company's current shareholders intend to make an election
terminating the Company's S Corporation status. As a result, the
Company will become subject to corporate level income taxation. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Pro Forma Results of Operations; Tax
Adjustments," and notes 1 and 2 to the Company's financial
statements included elsewhere in this Prospectus.
<F4> Includes approximately $619,000 in federal and state income taxes,
net of acquisition adjustments, incurred in 1996 by Dolphin Services,
which operated as a C Corporation until January 1, 1997, at which
time it was converted to an S Corporation.
<F5> Calculated by dividing the pro forma net income, increased by the
interest expense, net of tax, on the debt incurred to acquire
Dolphin Services, by the 3,500,000 weighted average shares, as
increased to reflect sufficient additional shares to retire
debt incurred to acquire Dolphin Services (________ shares) and to
pay the Shareholder Distributions (________ shares). All such
additional shares are based on an assumed offering price of
$________, net of offering expenses.
<F6> EBITDA (earnings before interest expense, income taxes, depreciation
and amortization) is presented here to provide additional
information about the Company's operations. EBITDA should not be
considered as an alternative to net income, as an indicator of the
Company's operating performance or as an alternative to cash flows
as a measure of liquidity.
<F7> EBITDA margin is calculated by dividing EBITDA by revenue.
<F8> Direct labor hours are hours worked by employees directly involved
in the production of the Company's products.
<F9> Backlog information is as of December 31 for each of the periods
presented. The Company's backlog is based on management's estimate
of the number of direct labor hours required to complete, and the
remaining amounts to be invoiced with respect to, those projects on
which a customer has authorized the Company to begin work or
purchase materials. Backlog at December 31, 1996 included
approximately 34,800 direct labor hours and $1.4 million
attributable to portions of orders expected to be completed after
December 31, 1997. See "Risk Factors- Backlog" and "Business-
Backlog."
<F10> Historical information for 1992, 1993, 1994, 1995 and 1996 includes
$421,000, $324,000, $477,000, $434,000, and $530,000, respectively,
of current maturities of debt. Pro forma information includes
$530,000 in current maturities of debt, $13.2 million of debt
expected to be incurred (as of December 31, 1996) to fund a
distribution to the Company's existing shareholders prior to the
completion of the Offering and $206,000 of current maturities of debt
of Dolphin Services. See "Prior S Corporation Status" and "Certain
Transactions."
</FN>
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Company's results of operations are affected primarily by (i)
the level of oil and gas exploration and development activity
maintained by oil and gas companies in the Gulf of Mexico, and to a
lesser extent, West Africa and Latin America; (ii) the Company's ability
to win contracts through competitive bidding or alliance/partnering
arrangements and (iii) the Company's ability to manage those contracts
to successful completion. The level of exploration and development
activity is related to several factors, including trends of oil and gas
prices, expectations of future oil and gas prices, and changes in
technology which reduce costs and improve expected returns on
investment. Over the past four years, favorable trends in these factors
have led to increased activity levels in the Gulf of Mexico. In
addition to higher oil and gas prices, improvements in three-dimensional
seismic, directional drilling, production techniques, and other advances
in technology have increased drilling success rates and reduced costs.
Drilling activity has increased in and around existing fields in shallow
water (less than 300 feet) where technology has allowed for the
identification of smaller, previously overlooked oil and gas deposits.
Technology improvements have also led to larger discoveries of oil and
gas in subsalt geological formations (which generally are located in 300
to 800 feet of water) and in deep water (800 to 6,000 feet) areas of the
Gulf of Mexico. Increased activity in water depths greater than 300
feet, where larger structures requiring more steel tonnage are needed,
has placed increased demand on the available capacity of the major
platform fabricators serving the Gulf of Mexico with a resulting
improvement in pricing levels for their services.
Due to the time required to drill an exploratory offshore well,
formulate a comprehensive development plan and design a drilling and
production platform, the fabrication and installation of such platforms
usually lag exploratory drilling by one to three years. As a result,
the higher levels of drilling activity in the Gulf of Mexico have only
recently impacted the demand for the Company's products. The Company's
revenue, cash flow and backlog improved moderately in 1995, but improved
significantly in 1996. Revenue in 1996 increased 24% to $79.0 million
and EBITDA increased 172% to $9.3 million, in each case as compared to
1995. The Company's backlog at December 31, 1996 was $87.1 million as
compared to $22.0 million at the end of 1995. At March 1, 1997, the
Company's backlog was $_____ million.
Most of the Company's contracts are awarded on a fixed-price or
alliance/partnering basis although some contracts are bid on a cost-plus
basis. Under fixed-price contracts, the Company receives the price
fixed in the contract, subject to adjustment only for change orders
placed by the customer. As a result, the Company retains all cost
savings but is also responsible for all cost over-runs. Under typical
alliance/partnering arrangements, the Company and the customer agree in
advance to a target price that includes specified levels of labor and
materials costs and profit margins. If the project is completed at a
lower cost than those targeted in the contract, the contract price is
reduced by a portion of the savings. If the cost to completion is
greater than target costs, the contract price is increased, but
generally to the target price plus the actual cost of incremental
materials and direct labor. Accordingly, under alliance/partnering
arrangements, the Company has some protection from cost overruns but
also must share a portion of any cost savings with the customer. Under
cost-plus arrangements, the Company receives a specified fee in excess
of its direct labor and materials cost and so is protected against cost
overruns but does not benefit directly from cost savings. Because the
Company generally prices materials as pass-through items on its
contracts, the cost and productivity of the Company's labor force are
key factors affecting the Company's operating profits. Consequently, it
is essential that the Company control the cost and productivity of the
direct labor hours worked on the Company's projects. See "Business -
Customers and Contracting."
The ability of the Company to operate profitably and to expand its
operations depends substantially on its ability to attract skilled
production workers, primarily welders, fitters and equipment operators.
Through its recruiting efforts, the Company was able to add 88
production employees to its workforce in 1996. As part of an effort to
increase and improve its workforce, the Company recently hired a full-
time recruiter responsible for coordinating all aspects of the Company's
recruiting efforts, instituted and enhanced several recruitment
incentive programs for its current employees and expanded its training
facility. While the supply of production workers is limited, the demand
for their services has increased as oil and gas development and
production activity has increased. As a result, the Company has
increased the average hourly wages of its employees and, in some
circumstances, has subcontracted work to others on a fixed-price basis
and, in 1994 and 1995, engaged contract labor. Because the Company has
succeeded in increasing its production workforce through the Dolphin
Acquisition and recruiting efforts, the Company does not anticipate the
need to engage contract labor in the foreseeable future.
The Company's operations are subject to seasonal variations in
weather conditions and daylight hours. Because most of the Company's
construction activities take place outdoors, the number of direct labor
hours worked generally declines in winter months due to an increase in
rainy and cold conditions and a decrease in daylight hours. In
addition, the Company's customers often schedule the completion of their
projects during the summer months in order to take advantage of the
milder weather during such months for the installation of their
platforms. As a result, a disproportionate amount of the Company's net
income and, to a lesser extent, revenue and gross profit, has
historically been earned during the second and third quarters of the
year, and the Company has occasionally incurred losses during the first
and fourth quarters of its fiscal year. Because of this seasonality,
full year results are not likely to be a direct multiple of any
particular quarter or combination of quarters. The table below
indicates for each quarter of the Company's last three fiscal years the
percentage of the annual revenue, gross profit and net income, and the
number of direct labor hours worked.
<TABLE>
<CAPTION>
1994 1995 1996
_________________________ _______________________ ______________________
1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th
Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr.
____ _____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue .......... 23% 27% 31% 19% 22% 26% 30% 22% 25% 27% 24% 24%
Gross profit...... 24% 39% 35% 2% 9% 25% 38% 28% 13% 26% 30% 31%
Net income........ 27% 54% 49% (30%) (12%) 26% 55% 31% 10% 26% 32% 32%
Direct Labor Hours
(in 000's)...... 258 291 298 190 219 256 245 200 249 304 264 256
</TABLE>
Most of the Company's revenue is recognized on a percentage-of-
completion basis based on the ratio of direct labor hours worked to the
total estimated direct labor hours required for completion.
Accordingly, contract price and cost estimates are reviewed monthly as
the work progresses, and adjustments proportionate to the percentage of
completion are reflected in revenue for the period when such estimates
are revised. To the extent that these adjustments result in a reduction
of previously reported profits, the Company would have to recognize a
charge against current earnings, which may be significant depending on
the size of the project or the adjustment.
Results of Operations
Comparison of the Years Ended December 31, 1996 and 1995
During the year ended December 31, 1996, the Company generated
revenue of $79.0 million, an increase of 24% compared to the $63.8
million generated in 1995. This increase was caused by a 16.6% increase
in production volume (1.07 million direct labor hours worked in 1996
versus 920,000 in 1995) and an increase of 6.2% in the Company's average
selling rate. The Company's average selling rate is computed by
dividing revenue for any period by the number of direct labor hours
worked in such period. As a result of stronger demand for fabricated
structures in the oil and gas industry, the Company was able to increase
the number of direct labor hours worked by hiring additional employees
and increase its average selling rate by raising the prices charged to
its customers. The 6.2% increase in average selling rate is not fully
indicative of the prices charged by the Company on all of its projects
since it includes work performed and projects completed in the early
part of 1996 for contracts awarded during 1995 as well as work performed
and projects completed in late 1996 for projects awarded during the
improving market conditions of early 1996.
Cost of revenue was $68.7 million in 1996 compared to $60.0
million in 1995. Cost of revenue consists of costs associated with the
fabrication process, including direct costs (such as direct labor hours
and raw materials) allocated to specific projects and indirect costs
(such as supervisory labor, utilities, welding supplies and equipment
costs) that are associated with production but are not directly related
to a specific project. These costs depend upon the volume of
fabrication activity and decreased from 94.1% of revenue in 1995 to
86.9% of revenue in 1996, primarily as a result of the increase in
pricing discussed above and a decrease in the cost of revenue that
resulted primarily from (i) productivity increases caused by labor
saving equipment and production incentives, (ii) a reduction in
equipment rental costs which was partially offset by increased
depreciation expense which resulted from equipment purchases and (iii)
an increase in the amount of scrap steel sold.
General and administrative expense was $2.1 million in 1996
compared to $1.7 million in 1995, remaining a constant 2.7% of revenue
for each period.
Interest expense decreased to $384,000 in 1996 from $430,000 in
1995 as the weighted average of the Company's borrowings decreased.
Comparison of the Years Ended December 31, 1995 and 1994
During the year ended December 31, 1995, the Company generated
revenue of $63.8 million, an increase of 4.6% compared to $61.0 million
generated in 1994. This increase resulted from an increase in total
labor hours worked (including contract labor hours) and a greater
average selling rate for the Company's direct labor hours. Cost of
revenue was $60.0 million for 1995 as compared to $57.5 million in 1994
(94% of revenue for both years). Materials and indirect costs remained
relatively constant in 1995 as compared to 1994. An increase in
contract labor costs in 1995 was offset by a reduction in direct labor
costs.
General and administrative expense was $1.7 million (2.7% of
revenue) in 1995 compared to $1.6 million (2.6% of revenue) in 1994.
This increase was primarily due to increased legal and other
professional fees.
Interest expense increased to $430,000 in 1995 from $328,000 in
1994 due to increases in the amount of borrowings under the Company's
Bank Credit Facility and a higher interest rate charged on such
borrowings.
Pro Forma Results of Operations; Tax Adjustments
On January 2, 1997 the Company completed the Dolphin Acquisition.
On a pro forma basis, giving effect to the Dolphin Acquisition as if
completed on January 1, 1996, the Company's revenue for the year ended
December 31, 1996, would have been $103.0 million (giving effect to the
pro forma elimination of sales from Dolphin Services to Gulf Island in
1996). Pro forma cost of revenue would have been $88.9 (86.2% of pro
forma revenue for the year ended December 31, 1996), and general and
administrative expense would have been $3.8 million (3.7% of pro forma
revenue). Pro forma interest expense would have been $899,000 due to
the increased level of indebtedness resulting from the debt incurred to
finance the Dolphin Acquisition. Pro forma income before taxes would
have been $9.0 million. Because Dolphin Services was a C Corporation
for income tax purposes, it incurred income tax expense of $619,000 in
1996.
If Gulf Island had been a C Corporation during 1994, 1995 and
1996, income tax expense would have amounted to approximately $594,000,
$602,000 and $2.9 million, respectively. As a result, net income would
have decreased to $976,000 ($0.28 per share), $983,000 ($0.28 per
share) and $4.4 million ($1.24 per share) for fiscal 1994, 1995 and
1996, respectively. On a pro forma basis, giving effect to the Dolphin
Acquisition, as if it were completed on January 1, 1996, and assuming
the Company had operated as a C Corporation for the year ended December
31, 1996, the provision for income taxes and net income would have been
$3.6 million and $5.4 million ($1.54 per share), respectively.
Since April 1989, the Company has operated as an S Corporation for
federal and state income tax purposes. As a result, the Company
currently pays no federal or state income tax, and the entire earnings
of the Company are subject to tax directly at the shareholder level.
Immediately prior to the Offering, the Company's current shareholders
intend to make an election terminating the Company's S corporation
status. As a result, the Company will be required to record a one-time
deferred tax liability in the amount of approximately $1.2 million in
the second quarter of 1997.
Liquidity and Capital Resources
Historically, the Company has funded its business activities
through funds generated from operations and borrowings under its Bank
Credit Facility. Net cash provided by operations was $3.4 million, $2.3
million and $7.2 million for 1994, 1995 and 1996, respectively. Net
borrowings under the Bank Credit Facility were $2.0 million, $1.1
million and $642,000 for 1994, 1995 and 1996, respectively.
The Company's capital requirements historically have been
primarily for improvements to its production facilities and for
equipment designed to increase the capacity of its facilities and the
productivity of its labor force. During 1996, the Company made $5.8
million of capital expenditures, including approximately $2.8 million
for the purchase of four used Manitowoc 4100W cranes, $1.3 million for
the installation of skidways, $800,000 for modifications to the Company's
pipehandling facility and $900,000 for various fabrication equipment.
During 1995, the Company made approximately $992,000 in capital
expenditures, primarily for improvements to its facilities, including
bulkhead repairs and stabilization of portions of both the west and east
yards, and in 1994 made approximately $676,000 in capital expenditures,
primarily for facility improvements.
At December 31, 1996, the Company had approximately $6.2 million
of outstanding indebtedness, including $5.8 million under its Bank
Credit Facility. Subsequent to December 31, 1996, the Company borrowed
an additional $6.0 million to fund the purchase price of the Dolphin
Acquisition and $3.0 million to fund a portion of the Shareholder
Distributions. In addition, prior to the completion of the Offering,
the Company intends to borrow approximately an additional $12.0 million
under the Bank Credit Facility to fund the remainder of the Shareholder
Distributions.
The Company's Bank Credit Facility provides for (i) a revolving
line of credit of up to $12.0 million and (ii) a non-revolving facility
of $15.0 million. Prior to the completion of the Offering, it is
anticipated that the revolving portion of the Bank Credit Facility,
which matures December 31, 1998, will be increased to provide a $20.0
million line of credit that will be available to fund the Shareholder
Distributions. See "Prior S Corporation Status" and "Certain
Transactions." The non-revolving portion, which was originated on
October 24, 1996 and was amended and increased on January 2, 1997 in
connection with the Dolphin Acquisition, may be drawn upon by the
Company until June 30, 1997, at which time the non-revolving portion
will convert to a term loan with a final maturity on June 30, 2004.
Both portions may bear interest equal to, at the Company's option, the
prime lending rate established by Citibank, N.A. or LIBOR plus 2%. The
weighted average interest rate on the indebtedness outstanding under the
Bank Credit Facility as of March 1, 1997 was ___%. The Company
expects to use the proceeds of the Offering to repay all outstanding
indebtedness as of the completion of the Offering under the Bank Credit
Facility (approximately $27.0 million). After completion of the
Offering, the Company expects to have $_____ million available under the
Bank Credit Facility.
Capital expenditures for 1997, in addition to the Dolphin
Acquisition, are estimated to be approximately $7.8 million. Management
believes that the net proceeds of the Offering, its available funds,
cash generated by operating activities and funds available under its
Bank Credit Facility will be sufficient to fund these capital
expenditures and its working capital needs. However, the Company may
expand its operations through acquisitions in the future, which may
require additional equity or debt financing.
<PAGE>
BUSINESS
General. The Company is a leading fabricator of offshore drilling
and production platforms and other specialized structures used in the
development and production of offshore oil and gas reserves. Structures
and equipment fabricated by the Company include jackets and deck
sections of fixed production platforms, hull and deck sections of
floating production platforms (such as tension-leg platforms), piles,
wellhead protectors, subsea templates and various production, compressor
and utility modules. The Company believes it is one of only three
domestic companies capable of fabricating offshore production platforms
for installation in water depths greater than 300 feet. The Company's
focus on controlling costs and providing high quality, reliable products
and services has enabled it to be profitable for each year since 1988.
Demand for the Company's products and services is primarily a
function of the level of offshore oil and gas activity in the Gulf of
Mexico and, to a lesser extent, offshore areas in West Africa and Latin
America. Over the past four years, improvements in seismic and drilling
technology, production techniques and oil and gas prices have resulted
in more intensive drilling activity in and around mature oil and gas
fields located in shallow water areas as well as increased exploration
of deepwater areas of the Gulf of Mexico. The number of active drilling
rigs in the Gulf of Mexico increased from less than 60 in May of 1992 to
more than 150 at the end of 1996.
Due to the time required to drill an exploratory offshore well,
formulate a comprehensive development plan and design a drilling and
production platform, the fabrication and installation of such platforms
usually lag exploratory drilling by one to three years. As a result,
higher levels of drilling activity in the Gulf of Mexico have only
recently impacted the demand for the Company's products. The Company's
revenue, cash flow, and backlog improved moderately in 1995, but
improved significantly in 1996. Revenue in 1996 increased 24% to $79.0
million, and EBITDA increased 172% to $9.3 million, in each case as
compared to 1995. The Company's backlog at December 31, 1996 was $87.1
million as compared to $22.0 million at the end of 1995. At March 1,
1997, the Company's backlog was $_____ million.
The Company's predecessor was founded in 1985 by a group of
investors including Alden J. Laborde and Huey J. Wilson, and shortly
thereafter acquired the assets of Delta Fabrication, a division of Delta
Services Industries, Inc., for approximately $5.2 million. The acquired
assets included what is now the Company's main fabrication yard on the
east bank of the Houma Navigation Canal in southern Louisiana,
approximately 30 miles from the Gulf of Mexico.
In 1989, Messrs. Laborde and Wilson incorporated the Company under
the laws of Louisiana and caused the Company to purchase certain
property and equipment from Park Corporation for $2.5 million. In this
transaction, the Company acquired approximately 437 acres across the
Houma Navigation Canal from the Company's main yard, of which 130 acres
were developed as a fabrication yard comprising the Company's west yard.
The Company leased this facility to the Company's predecessor until
1990, when the Company's predecessor was merged into the Company. The
Company's facilities are located on 577 acres, of which 230 acres are
currently developed for fabrication activities with 347 acres available
for expansion. These facilities allow the Company to build jackets for
fixed production platforms for use in water depths up to 800 feet and in
certain cases, depending on the design and weight of the jacket, for use
in water depths greater than 800 feet. The Company is capable of
constructing deck sections for fixed or floating production platforms
for use in unlimited water depths. In addition, the Company is able to
build certain hull sections of tension leg platforms, typically for use
in water depths greater than 1,000 feet.
Acquisition of Dolphin Services, Inc. On January 2, 1997, the
Company completed the Dolphin Acquisition for approximately $5.9
million. Dolphin Services performs offshore and inshore fabrication and
other construction services for the oil and gas industry in the Gulf of
Mexico and generated $27.0 million in revenue and $2.7 million in EBITDA
for the year ended December 31, 1996. Dolphin Services' facility
is located a quarter of a mile from the Company's main yard. Management
believes that the Dolphin Acquisition allows for more efficient use of
both companies' facilities, equipment and personnel. With the addition
of the 360 employees of Dolphin Services, the Company's combined
workforce is currently approximately 930 employees. The acquisition
provides an entrance for the Company into new market segments, in
particular offshore interconnect piping hook-up, inshore marine
construction and steel warehousing and sales, which allows the Company
to provide a more integrated array of services to its customers.
Growth Strategy. The Company's growth strategy is to capitalize
on the positive trends and opportunities in the marine fabrication and
construction industry. Key elements of the Company's growth strategy
are to:
* Increase Production Capacity. In order to capitalize on the
increased demand for its fabrication services, the Company is taking
actions to increase the production capacity of its fabrication yards
by (i) purchasing additional equipment, (ii) upgrading its existing
buildings and equipment and (iii) increasing the size and capability
of its workforce. In 1996, the Company spent approximately $5.9
million to purchase equipment and modify its fabrication yards in
order to increase capacity and improve productivity. The Company
anticipates that it will spend approximately $15 million during 1997
and 1998 for additional capital improvements to its fabrication
yards. During 1996, prior to the Dolphin Acquisition, the Company
increased its workforce by approximately 80 production employees and
has recently expanded programs to attract additional workers.
* Maintain a Low Cost Structure. The Company believes it is a low-cost
fabricator of offshore structures due to its state-of-the-art
production techniques, skilled and motivated workforce, efficient
management and low overhead costs. The Company plans to continue to
emphasize cost savings while providing high quality products and
reliable services to its customers.
* Acquire Related Businesses. The Dolphin Acquisition significantly
increases the Company's revenue, cash flow and number of employees
and broadens the Company's product and service offerings. Management
believes that there are additional opportunities to acquire companies
that have related or complementary products or services to those
currently provided by the Company. Immediately after the Offering,
the Company will be substantially free of debt, and management
believes that its capital structure will enable it to pursue such
opportunities as they arise.
* Pursue Additional International Opportunities. There are significant
opportunities to supply platforms outside the Gulf of Mexico. Over
the past five years, approximately 25% of the Company's revenue was
derived from the fabrication of structures exported to foreign
destinations, including offshore West Africa and Latin America. Many
of the Company's customers who operate in the Gulf of Mexico also
have extensive operations in international areas. Management
believes that its established relations with such customers, combined
with its recent certification as an ISO 9002 fabricator, will
continue to facilitate the Company's development of its international
presence. The Company believes that some foreign operators will
continue to utilize U.S. fabricators to build platforms for use in
foreign markets because of the higher quality and lower costs
available from U.S. fabricators, despite additional transportation
costs. In the future, the Company may pursue joint venture
relationships or other cooperative arrangements in order to increase
its participation in fabrication projects in foreign markets.
Description of Operations
The Company's primary activity is the fabrication of offshore
drilling and production platforms, including jackets and deck sections
of fixed production platforms, hull and deck sections of floating
production platforms (such as tension-leg platforms), piles, wellhead
protectors, subsea templates and various production, compressor and
utility modules. The Company also has the ability to produce and repair
pressure vessels used in the oil and gas industry, refurbish existing
platforms and fabricate various other types of steel structures.
The Company uses the latest welding and fabrication technology
available, and all of the Company's products are manufactured in
accordance with industry standards and specifications, including those
published by the American Petroleum Institute, the American Welding
Society and the American Society of Mechanical Engineers. The Company
has also been certified as an ISO 9002 fabricator for its quality
assurance programs. This certification is based on a review of the
Company's programs and procedures designed to maintain and enhance
quality production and is subject to annual review and recertification.
This certification is often a criterion for prequalification of
contractors, especially by potential international customers. Dolphin
Services is currently in the process of applying for ISO 9002
certification.
Fabrication of Offshore Platforms. The Company fabricates
structural components of fixed platforms for use in the offshore
development and production of oil and gas. A fixed platform is the
traditional type of platform used for the offshore development and
production of oil and gas, although recently there has been an increase
in the use of floating production platforms and tension-leg platforms as
a result of increased drilling and production activities in deeper
waters. As of December 31, 1996, approximately 3,300 fixed platforms
were located in the Gulf of Mexico, of which 15 are installed in water
depths greater than 800 feet. Most fixed platforms built today can
accommodate both drilling and production operations. These combination
platforms are large and generally more costly than single-purpose
structures. However, because directional drilling techniques permit a
number of wells to be drilled from a single platform and because
drilling and production can take place simultaneously, combination
platforms are often more efficient.
The most common type of fixed platform consists of a jacket (a
tubular steel, braced structure extending from the mudline on the seabed
to a point above the water surface) which is supported on tubular
pilings driven deep into the seabed and supports the deck structure
located above the level of storm waves. The deck structure, extending
above the surface of the water and attached to the top end of the
jacket, is designed to accommodate multiple functions, including
drilling, production, separating, gathering, piping, compression, well
support and quartering. Platforms can be joined by bridges to form
complexes of platforms for very large developments or to improve safety
by dividing functions among specialized platforms. Jacket-type
platforms are generally the most viable solution for water depths of
1,000 feet or less. Although there is no height limit to the size of
the jackets that can be fabricated at the Company's facilities, the
dimensions of the Houma Navigation Canal prevent the transportation to
the Gulf of Mexico of most jackets designed for water depths exceeding
800 feet. Management believes, however, that certain jackets designed
for water depths over 800 feet, depending on weight and design, can be
fabricated at the Company's facilities and transported through the Houma
Navigation Canal. The Company can also build decks, piles and other
structures for installation in any water depth. Often, customers split
projects among fabricators, contracting with different companies for
the fabrication of the jacket, deck sections and piles for the same
platform. Therefore, the Company is able, through the construction of
decks, piles, compliant tower sections and floating production
facilities, to participate in the construction of platforms requiring
jackets that are larger than those the Company can transport through the
Houma Navigation Canal.
Most of the steel used in the Company's operations arrives at the
Company's fabrication yards as steel plate. The plate is cut and rolled
into tubular sections at rolling mills in the fabrication yards. The
tubular sections (which vary in diameter, up to 12 feet) are welded
together in long straight tubes to become legs or into shorter tubes to
become part of the network of bracing that supports the legs. Various
cuts and welds in the fabrication process are made by computer-
controlled equipment that operates from data developed during the design
of the structure. The Company's two rolling mills and its ability to
fabricate the large tubular sections needed for jackets built for use in
water depths over 300 feet distinguish the Company from all but two of
its domestic competitors.
Jackets are built on skidways (which are long parallel rails along
which the jacket will slide when it is transferred to a barge for towing
out to sea) and are generally built in sections so that, to the extent
possible, much of their fabrication is done on the ground. As each
section of legs and bracing is complete, large crawler cranes pick up an
entire side and "roll up" the section, which is then joined to another
uprighted section. When a jacket is complete and ready for launch, it
is pulled along the skidway onto a launch barge, which is gradually
deballasted to compensate for the weight of the structure as more of it
moves aboard the barge. Using ocean-going tugs, the barge and jacket
are transported to the offshore installation site.
Decks are built either as single structures or in sections and are
installed on location by marine construction contractors. The
composition and quantity of petroleum in the well stream generally
determine the makeup of the production deck on a processing platform.
Typical deck equipment includes crude oil pumps, gas and oil separators
and gas compressors. The only limitation on the Company's ability to
fabricate decks is the weight capacity of the barges that take the decks
from the Company's yard to the installation site. Management believes
that currently there are no decks installed in the Gulf of Mexico that
could not have been constructed at the Company's facilities.
The Company can also fabricate sections of, and structures used in
connection with, tension-leg platforms ("TLPs"). TLPs, which are
generally better suited than fixed platforms for water depths greater
than 1,000 feet, consist of a deck that sits atop one or more column-
shaped semisubmersible hulls, which are positioned on site with vertical
tendons running from the hulls to the seabed. The tendons hold the
hulls partially submerged and are highly tensioned using the buoyancy of
the hulls. This system develops a restoring force against wave, wind
and current actions in proportion to the lateral displacement of the
vessel. Wells for a TLP are often predrilled through a subsea template.
Long, flexible production risers, which carry the petroleum to the deck
of the TLP, are supported in tension by mechanical tensioner machines on
the platform's deck and are directly subject to wave, wind and current
forces. The Company has fabricated subsea templates for use in
connection with TLPs, which are structures that are installed on the
seabed before development drilling begins. As exploration and drilling
move into the deep water of the Gulf of Mexico, the Company believes
that there will be increased opportunities to fabricate subsea
templates, as well as decks and other structures for use in connection
with TLPs.
The Company also fabricates piles and other rolled goods,
templates, bridges for connecting offshore platforms, wellhead
protectors, various production, compressor and utility modules and other
structures used in offshore oil and gas production and development
activities. All of the Company's products are installed by marine
construction contractors.
Dolphin Services, acquired by the Company in January 1997,
performs many of the same services as the Company. Dolphin Services
also provides several services currently not available from Gulf Island,
including piping interconnect services on offshore platforms, inshore
steel and wood structure construction, and steel warehousing and sales.
At its existing facility, a quarter of a mile from the Company's main
yard, Dolphin Services can fabricate jackets up to 100 feet tall along
with decks and other steel structures. Dolphin Services has also been
active in the refurbishment of existing platforms. Management believes
that the Dolphin Acquisition will allow for more efficient use of both
companies' facilities, equipment and personnel. In addition, the
acquisition will provide an entrance for the Company into new market
segments, in particular offshore piping interconnect, inshore marine
construction and steel warehousing and sales, which will also allow the
Company to provide a more integrated array of services to its customers.
Facilities and Equipment
Facilities. The Company's corporate headquarters and main
fabrication yard are located on the east bank of the Houma Navigation
Canal at Houma, Louisiana, approximately 30 miles from the Gulf of
Mexico. That facility includes approximately 140 acres with 96 acres
developed for fabrication, one 13,200 square foot building that houses
administrative staff, approximately 110,000 square feet of covered
fabrication area, and over 18,000 square feet of warehouse storage area.
The main yard also has approximately 2,800 linear feet of water
frontage, of which 1,500 feet is steel bulkhead which permits outloading
of heavy structures.
The Company's west yard is located across the Houma Navigation
Canal from the main yard and includes 437 acres, with 130 acres
developed for fabrication and over 300 acres of unimproved land, which
could be used for expansion. The west yard, which has approximately
65,000 square feet of covered fabrication area and 2,500 square feet of
warehouse storage area, spans 6,750 linear feet of the Houma Navigation
Canal, of which 2,350 feet is steel bulkhead. During 1997, the Company
intends to expand its covered fabrication areas in its main yard which,
when completed, will provide the Company with a total of approximately
199,000 square feet of covered fabrication space.
Dolphin Services occupies a 20-acre site located approximately a
quarter of a mile from the Company's main yard on a channel adjacent to
the Houma Navigation Canal. The facility includes a 7,000-square foot
building that houses administrative staff, approximately 14,000 square
feet of covered fabrication area, 1,500 square feet of warehouse storage
area and a 10,000-square foot blasting and coating facility.
Equipment. The Company's main yard houses its Bertsch Model 34
and Model 20 plate bending rolls, a Frye Wheelabrator grit blast system,
a hydraulic plate shear, a hydraulic press brake, and various other
equipment needed to build offshore structures and fabricate steel
components. The Company's west yard has a Bertsch Model 38 plate
bending roll, a computerized Vernon brace coping machine used for
cutting steel in complex geometric sections and various other equipment
used in the Company's fabrication business. The Company also currently
uses 18 crawler cranes, which range in tonnage capacity from 150 to 300
tons and service both of the Company's yards. The Company owns six
such crawler cranes and rents the remaining 12 cranes on a monthly
basis. The Company recently purchased and installed a plasma-arc
cutting system that cuts steel up to one inch thick at a rate of two
hundred inches per minute. The Company performs routine maintenance on
all of its equipment.
The Company's plate bending rolls allow it to roll approximately
150,000 tons of pipe per year. By having such capacity at its
fabrication facility, the Company is able to coordinate all aspects of
platform construction, which can reduce the risk of cost overruns,
delays in project completion and labor costs. In addition, these
facilities often allow the Company to participate as subcontractors on
projects awarded to other contractors. The Company's grit blast system
can blast steel at a rate approximately ten times faster than
conventional sandblasting. This greatly reduces labor costs and also
decreases the Company's use of conventional sandblasting, which is
considered to be a more hazardous and slower method of preparing steel
for painting.
For use in connection with its inshore construction activities
Dolphin Services owns two spud barges. Dolphin Services also leases
four barges for use with inshore construction activities. Each barge is
equipped with a crane with a lifting capacity of 80 to 100 tons. Dolphin
Services also owns two Manitowoc 4100 cranes with lifting capacities of
200 to 230 tons.
Materials
The principal materials used by the Company in its fabrication
business, standard steel shapes, steel plate, welding gases, fuel oil,
gasoline and paint, are currently available in adequate supply from many
sources. The Company does not depend upon any single supplier or
source.
Safety and Quality Assurance
Management is concerned with the safety and health of the
Company's employees and maintains a stringent safety assurance program
to reduce the possibility of costly accidents. The Company's safety
department establishes guidelines to ensure compliance with all
applicable state and federal safety regulations and provides training
and safety education through orientations for new employees and
subcontractors, weekly crew safety meetings and first aid and CPR
training. The Company also employs a registered nurse as an in-house
medic. The Company has a comprehensive drug program and conducts
periodic employee health screenings. A safety committee, whose members
consist of management representatives and peer elected field
representatives, meet monthly to discuss safety concerns and suggestions
that could prevent future accidents. The Company also rewards its
supervisory employees with safety bonuses based on the amount that the
Company saves under its self-insured workers' compensation program
compared to the existing rates of the Louisiana Worker's Compensation
Corporation. The Company has contracted with a third party safety
consultant to provide training and suggestions and a licensed emergency
medical technician in its ongoing commitment to a safe and healthy work
environment. The Company believes that its safety program and
commitment to quality are vital to attracting and retaining customers
and employees.
The Company fabricates to the standards of the American Petroleum
Institute, the American Welding Society, the American Society of
Mechanical Engineers and specific customer specifications. The Company
uses welding and fabrication procedures in accordance with the latest
technology and industry requirements. Training programs have been
instituted to upgrade skilled personnel and maintain high quality
standards. In addition, the Company maintains on-site facilities for
the x-ray of all pipe welds, which process is performed by an
independent contractor. Management believes that these programs
generally enhance the quality of its products and reduce their repair
rate.
The Company has also been certified as an ISO 9002 fabricator.
ISO 9002 is an internationally recognized verification system for
quality management overseen by the International Standard Organization
based in Geneva, Switzerland. The certification is based on a review of
the Company's programs and procedures designed to maintain and enhance
quality production and is subject to annual review and recertification.
Dolphin Services is currently applying for ISO 9002 certification.
Customers and Contracting
The Company's customers are primarily major and independent oil
and gas companies. Over the past five years, sales of structures used
in the Gulf of Mexico by oil and gas companies accounted for
approximately 75% of the Company's revenue. The balance of its revenue
was derived from the fabrication of structures exported to foreign
destinations, including offshore West Africa and Latin America.
A large portion of the Company's revenue has historically been
generated by a few customers, although not necessarily the same
customers from year-to-year. For example, the Company's largest
customers (those which individually accounted for more than 10% of
revenue in a given year) collectively accounted for 38% (Anadarko
Petroleum and British Gas), 40% (Texaco and British Gas) and 35% (Shell
Offshore, Global Offshore, Coastal Offshore), of revenue for fiscal
1994, 1995 and 1996, respectively. In addition, at March 1, 1997, ____%
of the Company's backlog was attributable to three projects, two of
which were for the same customer. Because the level of fabrication that
the Company may provide to any particular customer depends, among other
things, on the size of that customer's capital expenditure budget
devoted to platform construction plans in a particular year and the
Company's ability to meet the customer's delivery schedule, customers
that account for a significant portion of revenue in one fiscal year may
represent an immaterial portion of revenue in subsequent years.
Most of the Company's projects are awarded on a fixed-price or
alliance/partnering basis, and while customers may consider other
factors, including the availability, capability, reputation and safety
record of a contractor, price and the ability to meet a customer's
delivery schedule are the principal factors on which the Company is
awarded contracts. The Company's contracts generally vary in length
from one month to eighteen months depending on the size and complexity
of the project.
Under fixed price contracts, the Company receives the price fixed
in the contract, subject to adjustment only for change orders placed by
the customer. As a result, the Company retains all cost savings but is
also responsible for all cost overruns. Under typical
alliance/partnering arrangements, the Company and the customer agree in
advance to a target price that includes specified levels of labor and
material costs and profit margins. If the project is completed at less
cost than those targeted in the contract, the contract price is reduced
by a portion of the savings. If the cost to completion is greater than
those targeted in the contract, the contract price is increased, but
generally to the target price plus the actual incremental cost of
materials and direct labor costs. Accordingly, under
alliance/partnering arrangements, the Company has some protection from
cost overruns but also shares a portion of any cost savings with the
customer. Under cost-plus arrangements, the Company receives a
specified fee in excess of its direct labor and material cost and so is
protected against cost overruns but does not benefit directly from cost
savings. Because the Company generally prices materials as pass-through
items on its contracts, the cost and productivity of the Company's labor
force are the primary factors affecting the Company's operating costs.
Consequently, it is essential that the Company control the cost and
productivity of the direct labor hours worked on the Company's projects.
As an aid to achieving this control, the Company places a single project
manager in charge of the production operations related to each project
and gives significant discretion to the project manager, with oversight
by the Company's Vice President for Operations. As an incentive to
control man-hours, the Company gives production bonuses to its
supervisory employees if the actual hours worked on a contract are less
than the estimated hours used to formulate a bid for the project.
Although no assurance can be given that the Company will realize profits
on its current or future contracts, the Company believes that its single
project manager and incentive policies reduce the likelihood of
significant cost overruns.
Seasonality
The Company's operations are subject to seasonal variations in
weather conditions and daylight hours. Since most of the company's
construction activities take place outdoors, the number of direct labor
hours worked generally declines in the winter months due to an increase
in rainy and cold conditions and a decrease in daylight hours. In
addition, the Company's customers often schedule the completion of their
projects during the summer months in order to take advantage of the
milder weather during such months for the installation of their
platforms. As a result, a disproportionate portion of the Company's
income has historically been earned during the second and third quarters
of the year, and the Company has occasionally incurred losses during the
first and fourth quarters of its fiscal year. For example, the portion
of net income earned during the second and third quarters amounted to
103%, 81% and 58% of the Company's total net income for fiscal 1994,
1995 and 1996, respectively. Because of this seasonality, full year
results are not likely to be a direct multiple of any particular quarter
or combination of quarters. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
Competition
The offshore platform fabrication industry is highly competitive
and influenced by events largely outside of the control of offshore
platform fabrication companies. Although oil and natural gas prices
have generally increased since late 1994, as a result of the substantial
declines in oil and gas prices in 1992, 1993 and parts of 1994, many oil
and gas companies significantly decreased their expenditures for
development projects in the Gulf of Mexico during those years. During
that period, there was consolidation in the industry as a number of
marine construction companies combined with other companies or ceased
operations altogether. The remaining companies compete intensely for
available projects, which are generally awarded on a competitive bid
basis with customers usually requesting bids on projects one to three
months prior to commencement. The Company's marketing staff contacts
oil and gas companies believed to have fabrication projects scheduled to
allow the Company an opportunity to bid for the projects. Although
price and the contractor's ability to meet a customer's delivery
schedule are the principal factors in determining which qualified
fabricator is awarded a contract for a project, customers also consider,
among other things, the availability of technically capable personnel
and facility space, a fabricator's efficiency, condition of equipment,
reputation, safety record and customer relations.
The Company currently has two primary competitors, Aker Gulf
Marine and J.Ray McDermott, S.A., for the fabrication of platform
jackets to be installed in the Gulf of Mexico in water depths greater
than 300 feet. In addition to these two companies, the Company
primarily competes with five other fabricators for platform jackets for
intermediate water depths from 150 feet to 300 feet. A number of other
companies compete for projects designed for shallower waters. Certain
of the Company's competitors have greater financial and other resources
than the Company. At least one of the Company's competitors also has
fabrication yards located throughout the world, can offer a customer
engineering, design and installation services in addition to fabrication
services and has deep water access that enables it to build and
transport jackets for use in water depths greater than 800 feet.
The Company believes that certain barriers exist that prevent new
companies from competing with the Company for platforms designed for use
in water depths greater than 300 feet, including the substantial
investment required to establish an adequate facility, the difficulty of
locating a facility adjacent to an adequate waterway due to
environmental and wetland regulations, and the limited availability of
experienced supervisory and management personnel. Although new
companies can enter the market for small structures more easily,
management believes these factors will likely prevent an increase in
domestic competition for larger structures, especially jackets.
The Company believes that its competitive pricing, expertise in
fabricating offshore marine structures and its certification as an ISO
9002 fabricator will enable it to continue to compete effectively for
projects destined for international waters. The Company recognizes,
however, that foreign governments often use subsidies and incentives to
create jobs where oil and gas production is being developed. In
addition, the additional transportation costs that will be incurred when
exporting structures from the U.S. to foreign locations may hinder the
Company's ability to successfully bid for projects against foreign
competitors. Because of subsidies, import duties and fees, taxes on
foreign operators and lower wage rates in foreign countries along with
fluctuations in the value of the U.S. dollar and other factors, the
Company may not be able to remain competitive with foreign contractors
for projects designed for use in international waters as well as those
designed for use in the Gulf of Mexico.
Backlog
As of December 31, 1996, the Company's backlog was approximately
$87.1 million, $85.7 of which management expects to be performed by
December 31, 1997. Of the $87.1 million backlog at December 31, 1996,
approximately 88% was attributable to three projects, two of which were
for the same customer. The Company's backlog as of March 1, 1997 was
$____ million.
The Company's backlog is based on management's estimate of the
direct labor hours required to complete, and the remaining amounts to be
invoiced with respect to, those projects as to which a customer has
authorized the Company to begin work or purchase materials pursuant to
written contracts, letters of intent or other forms of authorization.
Often, however, management's estimates are based on incomplete
engineering and design specifications. As engineering and design plans
are finalized or changes to existing plans are made, management's
estimate of the direct labor hours required to complete and price at
completion for such projects is likely to change. In addition, all
projects currently included in the Company's backlog are subject to
termination at the option of the customer, although the customer in that
case is generally required to pay the Company for work performed and
materials purchased through the date of termination and, in some
instances, pay the Company termination fees.
Government and Environmental Regulation
Many aspects of the Company's operations and properties are
materially affected by federal, state and local regulation, as well as
certain international conventions and private industry organizations.
The exploration and development of oil and gas properties located on the
outer continental shelf of the United States is regulated primarily by
the Minerals Management Service ("MMS"). The MMS has promulgated
federal regulations under the Outer Continental Shelf Lands Act
requiring the construction of offshore platforms located on the outer
continental shelf to meet stringent engineering and construction
specifications. Violations of these regulations and related laws can
result in substantial civil and criminal penalties as well as
injunctions curtailing operations. The Company believes that its
operations are in compliance with these and all other regulations
affecting the fabrication of platforms for delivery to the outer
continental shelf of the United States. In addition, the Company
depends on the demand for its services from the oil and gas industry
and, therefore, is affected by changing taxes, price controls and other
laws and regulations relating to the oil and gas industry. In addition,
offshore construction and drilling in certain areas have been opposed by
environmental groups and, in certain areas, has been restricted. To the
extent laws are enacted or other governmental actions are taken that
prohibit or restrict offshore construction and drilling or impose
environmental protection requirements that result in increased costs to
the oil and gas industry in general and the offshore construction
industry in particular, the business and prospects of the Company could
be adversely affected. The Company cannot determine to what extent
future operations and earnings of the Company may be affected by new
legislation, new regulations or changes in existing regulations.
The Company's operations and properties are subject to a wide
variety of increasingly complex and stringent foreign, federal, state
and local environmental laws and regulations, including those governing
discharges into the air and water, the handling and disposal of solid
and hazardous wastes, the remediation of soil and groundwater
contaminated by hazardous substances and the health and safety of
employees. These laws may provide for "strict liability" for damages to
natural resources and threats to public health and safety, rendering a
party liable for the environmental damage without regard to negligence
or fault on the part of such party. Sanctions for noncompliance may
include revocation of permits, corrective action orders, administrative
or civil penalties and criminal prosecution. Certain environmental laws
provide for strict, joint and several liability for remediation of
spills and other releases of hazardous substances, as well as damage to
natural resources. In addition, the Company may be subject to claims
alleging personal injury or property damage as a result of alleged
exposure to hazardous substances. Such laws and regulations may also
expose the Company to liability for the conduct of or conditions caused
by others, or for acts of the Company that were in compliance with all
applicable laws at the time such acts were performed.
The Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, and similar laws provide for
responses to and liability for releases of hazardous substances into the
environment. Additionally, the Clean Air Act, the Clean Water Act, the
Resource Conservation and Recovery Act, the Safe Drinking Water Act, the
Emergency Planning and Community Right to Know Act, each as amended, and
similar foreign, state or local counterparts to these federal laws,
regulate air emissions, water discharges, hazardous substances and
wastes, and require public disclosure related to the use of various
hazardous substances. Compliance with such environmental laws and
regulations may require the acquisition of permits or other
authorizations for certain activities and compliance with various
standards or procedural requirements. The Company believes that its
facilities are in substantial compliance with current regulatory
standards.
The Company's operations are also governed by laws and regulations
relating to workplace safety and worker health, primarily the
Occupational Safety and Health Act and regulations promulgated
thereunder. In addition, various other governmental and quasi-
governmental agencies require the Company to obtain certain permits,
licenses and certificates with respect to its operations. The kind of
permits, licenses and certificates required in the Company's operations
depend upon a number of factors. The Company believes that it has all
material permits, licenses and certificates necessary to the conduct of
its existing business.
The Company's compliance with these laws and regulations has
entailed certain additional expenses and changes in operating
procedures. The Company believes that compliance with these laws and
regulations will not have a material adverse effect on the Company's
business or financial condition for the foreseeable future. However,
future events, such as changes in existing laws and regulations or their
interpretation, more vigorous enforcement policies of regulatory
agencies, or stricter or different interpretations of existing laws and
regulations, may require additional expenditures by the Company, which
expenditures may be material.
Pursuant to the Dolphin Acquisition, the Company also has
employees engaged in the offshore operations which are covered by
provisions of the Jones Act, the Death on the High Seas Act and general
maritime law, which laws operate to make the liability limits
established under state workers' compensation laws inapplicable to these
employees and, instead, permit them or their representatives to pursue
actions against the Company for damages or job related injuries, with
generally no limitations on the Company's potential liability. The
Company's ownership and operation of vessels can give rise to large and
varied liability risks, such as risks of collisions with other vessels
or structures, sinkings, fires and other marine casualties, which can
result in significant claims for damages against both the Company and
third parties for, among other things, personal injury, death, property
damage, pollution and loss of business.
In addition to government regulation, various private industry
organizations, such as the American Petroleum Institute, the American
Society of Mechanical Engineers and the American Welding Society,
promulgate technical standards that must be adhered to in the
fabrication process.
Insurance
The Company maintains insurance against property damage caused by
fire, flood, explosion and similar catastrophic events that may result
in physical damage or destruction to the Company's facilities. All
policies are subject to deductibles and other coverage limitations. The
Company also maintains a builder's risk policy for its construction
projects and general liability insurance. The Company is self-insured
for workers' compensation liability except for losses in excess of
$300,000 per occurrence for Louisiana workers' compensation and for U.S.
longshoreman and harbor workers' coverage. The Company also maintains
maritime employer's liability insurance. Although management believes
that the Company's insurance is adequate, there can be no assurance that
the Company will be able to maintain adequate insurance at rates which
management considers commercially reasonable, nor can there be any
assurance such coverage will be adequate to cover all claims that may
arise.
Legal Proceedings
The Company is one of four defendants in a lawsuit (AGIP Petroleum
Co. Inc. v. Gulf Island Fabrication, Inc., McDermott Incorporated,
Snamprogetti USA, Inc. and Petro-Marine Engineering of Texas, Inc.,
Civil Action No. H-94-3382, United States Federal District Court for the
Southern District of Texas) in which AGIP Petroleum Co. Inc. (the
"Plaintiff") claims that the Company improperly installed certain
attachments to a jacket that it had fabricated for the Plaintiff. The
Plaintiff and its installation contractor decided to remove the
attachments prior to placing the jacket in its intended location in the
Gulf of Mexico and modified the offshore installation plan. The
installation was unsuccessful and the jacket, after retrieval, required
repair and refurbishment. The Plaintiff, which has recovered most of
its out-of-pocket losses from its own insurer, seeks to recover the
remainder of its claimed out-of-pocket losses (approximately $1 million)
and approximately $63 million for economic losses which it alleges
resulted from the delay in oil and gas production that was caused
by these events and punitive damages. Co-defendants with the
Company include the installation contractor, the firm that acted as the
Plaintiff's agent in supervising the fabrication and installation of the
jacket and the design engineer that provided engineering services
related to the design and installation of the jacket. The Company has
received certain favorable rulings from the Court, particularly the
Court's ruling that the Company is not liable for economic losses with
respect to certain of the Plaintiff's principal causes of action;
however, the Plaintiff could appeal these rulings in the future. The
Company believes that it has meritorious defenses to the remaining
claims of the Plaintiff. In addition, the Company believes that it
should be entitled to coverage as an additional named insured under the
Plaintiff's builders risk insurance policy relating to this project,
although the insurer has not admitted coverage. The Company is
vigorously contesting the Plaintiff's claims and, based on the Company's
analysis of the Plaintiff's claims and the Company's defenses thereto,
the Court's rulings received to date and the availability of insurance
coverage under the Plaintiff's builders risk policy, the Company
believes that its liability for such claims, if any, will not be
material to its financial position. In view of the uncertainties
inherent in litigation, however, no assurance can be given as to the
ultimate outcome of such claims.
The Company is a party to various other routine legal proceedings
primarily involving commercial claims, workers' compensation claims, and
claims for personal injury under the General Maritime Laws of the United
States and the Jones Act. While the outcome of these lawsuits, legal
proceedings and claims cannot be predicted with certainty, management
believes that the outcome of all such proceedings, even if determined
adversely, would not have a material adverse effect on the Company's
business or financial condition.
Employees
The Company's workforce varies based on the level of ongoing
fabrication activity at any particular time. During 1996, the number of
Company employees ranged from approximately 420 to more than 520. As of
March 1, 1997, the Company had approximately _____ employees. None of
the Company's employees is employed pursuant to a collective bargaining
agreement, and the Company believes that its relationship with its
employees is good.
The Company's ability to remain productive and profitable depends
substantially on its ability to attract and retain skilled construction
workers, primarily welders, fitters and equipment operators. In
addition, the Company's ability to expand its operations depends
primarily on its ability to increase its labor force. The demand for
such workers is high and the supply is extremely limited. While the
Company believes its relationship with its skilled labor force is good,
a significant increase in the wages paid by competing employers could
result in a reduction in the Company's skilled labor force, increases in
the wage rates paid by the Company, or both. If either of these
occurred, in the near-term, the profits expected by the Company from
work in progress could be reduced or eliminated and, in the long-term,
to the extent such wage increases could not be passed on to the
Company's customers, the production capacity of the Company could be
diminished and the growth potential of the Company could be impaired.
As part of an effort to increase and improve its workforce, the
Company recently hired a full-time recruiter responsible for
coordinating all aspects of the Company's recruiting efforts, instituted
and enhanced several incentive programs for its current employees and
expanded its training facility. The Company has facilities to train its
employees on productivity and safety matters. The Company is committed
to training its employees and offers advancement through in-house
training programs.
<PAGE>
MANAGEMENT
Directors and Executive Officers
The following table sets forth, as of January 31, 1997, certain
information with respect to the Company's directors and executive
officers.
Name Age Position
__________ ________ ________________
Alden J. Laborde 81 Chairman of the Board of Directors
Kerry J. Chauvin 49 President, Chief Executive Officer
and Director
William A. Downey 50 Vice President - Operations
Murphy A. Bourke 51 Vice President - Marketing
Joseph P. Gallagher, III 46 Vice President - Finance, Chief
Financial Officer, Treasurer and
Secretary
Gregory J. Cotter 48 Director
Thomas E. Fairley 48 Director
Hugh J. Kelly 71 Director
John P. "Jack" Laborde 47 Director
Huey J. Wilson 68 Director
Alden J. "Doc" Laborde has served as Chairman of the Board of the
Company since 1986 and as a director since 1985. He also served as the
Company's Chief Executive Officer from 1986 to January 1990. Mr.
Laborde founded ODECO, Inc., an offshore drilling contractor ("ODECO"),
and served as its Chairman of the Board and Chief Executive Officer from
1953 to 1977. In 1954, Mr. Laborde founded Tidewater Inc.
("Tidewater"), a supplier of offshore marine transportation and other
services, and served as a director of Tidewater from 1978 to 1986 and as
director emeritus from 1986 to September 1993. Mr. Laborde graduated
from the United States Naval Academy with a degree in engineering and
served in World War II as a combat officer. Mr. Laborde is the father
of John P. "Jack" Laborde.
Kerry J. Chauvin has served as the Company's President and as a
director since the Company's inception and has served as Chief Executive
Officer since January 1990. Mr. Chauvin also served as the Company's
Chief Operating Officer from January 1989 to January 1990. He has over
20 years of experience in the fabrication industry including serving
from 1979 to 1984 as President of Delta Fabrication, the assets of which
were purchased by the Company in 1985, and as Executive Vice President,
General Manager and Manager of Engineering with Delta Fabrication from
1977 to 1979. From 1973 to 1977, he was employed by Delta Shipyard as
Manager of New Construction and as a Project Manager. Mr. Chauvin holds
both an M.B.A. degree and a B.S. degree in Mechanical Engineering from
Louisiana State University. Mr. Chauvin is on the board of directors of
First National Bank of Houma, the parent company of which, First
National Bancshares, has securities listed on the American Stock
Exchange.
William A. Downey has been Vice President - Operations of the
Company since 1985. From 1980 to 1984, Mr. Downey served as the Vice
President of Engineering of Delta Fabrication. With over 20 years of
experience in the fabrication industry, he has served in various
capacities with Avondale Industries, Inc., including Senior Project
Manager and Senior Cost & Design Analyst, and has also been employed by
Sanderson Enterprises, Inc. and Mission Drilling & Exploration Corp.
Mr. Downey received his B.S. degree in Industrial Technology from
Southeastern Louisiana University in 1971.
Murphy A. Bourke has been Vice President - Marketing since the
Company began operations in 1985. Mr. Bourke also served as Vice
President Marketing for Delta Fabrication from 1979 to 1984 and as the
General Sales Manager of Louisiana State Liquor Distributors, Inc., a
beverage distributor, from 1972 to 1979. He holds a B.A. degree in
marketing from Southeastern Louisiana University.
Joseph P. "Duke" Gallagher, III was elected Vice President -
Finance and Chief Financial Officer of the Company in January 1997. Mr.
Gallagher has been the Company's Controller since 1985, the Treasurer
since 1986 and Secretary since January 1993. Mr. Gallagher also served
as Secretary from 1986 to 1990. From 1981 to 1985, he was employed as
the Controller of TBW Industries, Incorporated, a manufacturer of
machinery and pressure vessels, and from 1979 to 1981 as the Assistant
Controller of Brock Exploration Corporation, a publicly traded oil and
gas exploration company. Mr. Gallagher, a Certified Public Accountant,
also worked as a Senior Auditor for the accounting firm A.A. Harmon &
Co., CPA's Inc. He received a B.S. degree in Production Management in
1973 from the University of Southwestern Louisiana.
Gregory J. Cotter has been a director of the Company since 1985
and has served as a non-compensated financial advisor to the Company
since its formation. Mr. Cotter has also been President, Chief
Operating and Financial Officer and a director of Huey Wilson Interests,
Inc. since January 1989. Mr. Cotter also served in that capacity from
1985 through 1986. During 1987 and 1988, Mr. Cotter was President,
Chief Operating Officer and a director of Great American Corporation,
then a publicly traded multibank holding company. Since October 1989,
Mr. Cotter has served as President, Chief Financial Officer and a
director of Wilson Jewelers, Inc. From 1977 to 1985, Mr. Cotter was
Senior Vice President and Chief Financial Officer of H. J. Wilson, Co.,
Inc., then a publicly traded jewelry and retail merchandising chain.
Mr. Cotter received his B.S. degree in Chemical Engineering in 1970 and
his M.B.A. in 1972, both from Tulane University.
Thomas E. Fairley has served as a director of the Company since
January 1997 and is the Chairman of the Board, Chief Executive Officer
and President of Trico Marine Services, Inc. ("Trico"), a publicly
traded marine vessel operator. He has served in that capacity since
October 1993 and as President of Trico Marine Operations, the
predecessor of Trico, since 1980. From 1978 to 1980, Mr. Fairley served
as Vice President of Trans Marine International, an offshore marine
service company and wholly-owned subsidiary of GATX Leasing Corporation.
From 1975 to 1978, Mr. Fairley served as General Manager of
International Logistics, Inc., a company engaged in the offshore marine
industry. Prior to 1975, Mr. Fairley held various positions with Petrol
Marine Company, an offshore marine service company.
Hugh J. Kelly has served as a director of the Company since
January 1997, and has been an oil and gas consultant since 1989. From
1977 to 1989, Mr. Kelly served as the Chief Executive Officer of ODECO.
Mr. Kelly is a director of Tidewater, Hibernia Corporation (regional
bank holding company), Chieftain International, Inc. (oil and gas
exploration and development concern), Baroid Corporation (an energy
services and equipment provider) and Central Louisiana Electric Co.
(electric utility company).
John P. "Jack" Laborde has served as a director of the Company
since January 1997. Mr. Laborde is the Chief Executive Officer of All
Aboard Development Corporation, an independent oil and gas exploration
and production company. He has served in that capacity since April 1996
and as a Vice President since April 1992. Mr. Laborde served as a
consultant to the Company from April 1996 to December 1996. From April
1992 to March 1996, Mr. Laborde served as the International Marketing
Manager of the Company. From 1978 to 1992, Mr. Laborde served in
various capacities, including Vice President - International Operations
and Marketing Manager, for ODECO. Mr. Laborde received his B.S. in
Civil Engineering in 1971 and his M.B.A. in 1973, both from Tulane
University. Jack Laborde is the son of Alden J. Laborde.
Huey J. Wilson, one of the Company's founding shareholders, was
elected director in January 1997. Mr. Wilson founded H.J. Wilson, Co.,
Inc. ("Wilson's"), a jewelry and retail merchandising chain that grew to
become the largest publicly traded company headquartered in Baton Rouge,
Louisiana. He was Chairman of the Board and Chief Executive Officer of
Wilson's from 1957 to 1985, when it was sold to Service Merchandise
Company. Until June 1993, Mr. Wilson served as Chairman of the Board
since 1982, Chief Executive Officer since 1983, and a director since
1973 of Great American Corporation, a then publicly traded multibank
holding company. Currently, Mr. Wilson is the Chairman of the Board and
Chief Executive Officer of Huey Wilson Interests, Inc., a financial and
business management company he founded in 1985, and Chairman of the
Board and Chief Executive Officer of Wilson Jewelers, Inc., a jewelry
store chain he established in 1989.
The Company's Articles of Incorporation ("Articles") and By-laws
provide for the Board of Directors to be divided into three classes of
directors with each class to be as nearly equal in number of directors
as possible, with directors serving staggered three-year terms. The
terms of the Class I directors, Messrs. Fairley and Kelly, will expire
in 1998. The terms of the Class II directors, Messrs. Cotter and Jack
Laborde, will expire in 1999, and the terms of the Class III directors,
Messrs. Chauvin, Wilson and Alden Laborde, will expire in 2000. Each
director serves until the end of his term or until his successor is
elected and qualified. See "Description of Capital Stock -- Certain
Anti-Takeover and Other Provisions of the Articles and By-laws."
Director Compensation
Each director who is not an employee of the Company is paid an
annual director's fee of $12,000 plus $1,000 for each board or committee
meeting attended. All directors are reimbursed for reasonable out-of-
pocket expenses incurred in attending board and committee meetings.
Committees
The Company's Board of Directors has established an Audit
Committee and a Compensation Committee. The Audit Committee reviews the
Company's annual audit and meets with the Company's independent public
accountants to review the Company's internal controls and financial
management practices. The current members of the Audit Committee are
Messrs. Cotter, Fairley and Jack Laborde.
The Compensation Committee recommends to the Board of Directors
compensation for the Company's key employees, administers the Company's
stock incentive plan and performs such other functions as may be
prescribed by the Board of Directors. The current members of the
Compensation Committee are Messrs. Alden Laborde, Wilson and Kelly.
Executive Compensation
The following table summarizes the compensation paid to its Chief
Executive Officer and each of its most highly compensated executive
officers for the year ended December 31, 1996. No other employee of the
Company earned more than $100,000 in 1996.
<TABLE>
<CAPTION>
Name and Principal Position Year Annual Compensation
____________________________ ______ _____________________ All Other
Salary Bonus<F1> Compensation<F2>
______ __________ _____________
<S> <C> <C> <C> <C>
Kerry J. Chauvin, President and
Chief Executive Officer .......... 1996 $199,370 $162,777 $5,736
William A. Downey, Vice President -
Operations ....................... 1996 124,400 81,389 11,540
Murphy A. Bourke, Vice President -
Marketing ........................ 1996 120,417 81,389 4,582
Joseph P. Gallagher, III, Vice
President - Finance and Chief
Financial Officer................. 1996 80,860 26,858 2,943
_________________________
<FN>
<F1> For fiscal 1996, the Board of Directors voted to pay bonuses to
the Company's executive officers based on a percentage of the
Company's income before taxes, adjusted for the bonuses and a non-
recurring compensation charge (the "Profit Participation Amount").
In 1996, Messrs. Chauvin, Downey, Bourke and Gallagher were paid
bonuses equal to 2%, 1%, 1% and 1/3%, respectively, of the Profit
Participation Amount. The Compensation Committee presently
intends to pay 1997 bonuses to these executive officers that will
be similarly calculated, except that it has been recommended that
Mr. Gallagher's bonus be 2/3% of the Profit Participation Amount
in 1997.
<F2> Includes (i) matching contributions of $4,750, $4,289, $4,172 and
$2,631 to the Company's 401(k) plan on behalf of Messrs. Chauvin,
Downey, Bourke and Gallagher, respectively, (ii) premium payments
in the amount of $410, $410, $410 and $312 for Messrs. Chauvin,
Downey, Bourke and Gallagher, respectively, under a long-term
disability insurance plan, which premium payments are attributable
to benefits in excess of those provided generally for other
employees, and (iii) personal use of a company vehicle in the
amount of $576 and $6,841 for Messrs. Chauvin and Downey,
respectively.
</FN>
</TABLE>
Compensation Committee Interlocks and Insider Participation
Prior to January 31, 1997, the Board of Directors had no
compensation committee, and Mr. Chauvin participated in deliberations of
the Company's Board of Directors concerning executive officer
compensation.
Compensation Pursuant to Plans
Retirement Plan. In 1988, the Company implemented the Gulf Island
Fabrication, Inc. Qualified Retirement Plan (the "Retirement Plan"),
which has both a profit sharing and a 401(k) savings plan feature. The
Retirement Plan permits each employee (other than non-resident alien
employees and employees covered by collective bargaining agreements, of
which the Company has none) to become a participant in the Retirement
Plan on the first day of each month (an entry date) following the latest
of the employee's completion of three months of employment or the
attainment of age 18.
The Company makes an annual contribution, if any, to the profit
sharing feature in an amount determined by the Board of Directors.
Subject to certain limitations required by law, the Company's
contribution is allocated to each participant in the proportion that the
total compensation paid by the Company to such participant during the
plan year bears to the aggregate compensation paid by the Company to all
participants during the plan year.
Under the savings plan feature of the Retirement Plan, each active
participant may elect, subject to certain limitations required by law,
to defer, on a pre-tax basis, payment of up to 15% of his or her
compensation and have this amount credited to the participant's Plan
account. The Company contributes to the account of each participant a
matching contribution equal to 50% of such participant's contributions
that are not in excess of 6% of compensation. The savings plan feature
also provides for additional Company contributions, if any, at the
discretion of the Board. Subject to certain limitations required by
law, the Company's discretionary match is allocated to each participant
in the proportion that the total matching contribution paid by the
Company to such participant during the plan year bears to the aggregate
matching contribution paid by the Company to all participants during the
plan year.
In accordance with the employee's instructions, all funds in a
participant's account are invested in one or more of the four investment
alternatives of Invesco Trust Company, the Plan's trustee, which are
designated by the plan administrator.
Employee contributions to the savings plan feature and earnings
thereon are 100% vested at all times. Contributions by the Company, and
earnings thereon, vest based on the participant's years of service with
the Company, vesting 20% after two years of service and increasing in
20% increments with each additional year of service, thus becoming 100%
vested following six years of service. All contributions vest,
regardless of years of service, upon termination of employment by reason
of death or disability, attainment of age 65 or the termination or
discontinuance of the Retirement Plan. After termination of employment,
an employee is entitled to receive a lump-sum distribution of his or her
entire vested interest in the Retirement Plan.
During the 1996 plan year, the Company made contributions of
$125,000 to the profit sharing feature, contributions of $292,000 to the
match feature, and contributions of $125,000 to the discretionary match
feature of the Retirement Plan. For amounts credited to the accounts of
Messrs. Chauvin, Downey, Bourke and Gallagher, see "-- Compensation of
Executive Officers."
Long-Term Incentive Plan. In February 1997, the Company adopted
and its shareholders approved the Long-Term Incentive Plan (the "1997
Plan") to provide long-term incentives to its key employees, including
officers and directors who are employees of the Company (the "Eligible
Employees"). Under the 1997 Plan, which is administered by the
Compensation Committee of the Board of Directors, the Company may grant
incentive stock options, non-qualified stock options, restricted stock,
stock awards or any combination thereof (the "Incentives") to Eligible
Employees. The Compensation Committee will establish the exercise price
of any stock options granted under the Incentive Plan, provided that the
exercise price may not be less than the fair market value of the Common
Stock on the date of grant. The option exercise price may be paid in
cash, in Common Stock held for at least six months, in a combination of
cash and Common Stock, or through a broker-assisted exercise arrangement
approved by the Compensation Committee.
A total of 500,000 shares of Common Stock are available for
issuance under the 1997 Plan. Incentives with respect to no more than
200,000 shares of Common Stock may be granted to any single Eligible
Employee in one calendar year. Proportionate adjustments will be made
to the number of shares subject to the 1997 Plan, including the shares
subject to outstanding Incentives, in the event of any recapitalization,
stock dividend, stock split, combination of shares or other change in
the Common Stock. In the event of such adjustments, the purchase price
of any outstanding option will be adjusted as and to the extent
appropriate, in the reasonable discretion of the compensation Committee,
to provide participants with the same relative rights before and after
such adjustment.
All outstanding Incentives will automatically become exercisable
and fully vested and all performance criteria will be deemed to be
waived by the Company upon (i) a reorganization, merger or consolidation
of the Company in which the Company is not the surviving entity, (ii)
the sale of all or substantially all of the assets of the Company, (iii)
a liquidation or dissolution of the Company, (iv) a person or group of
persons, other than Messrs. Alden Laborde or Wilson or any employee
benefit plan of the Company, becoming the beneficial owner of 30% or
more of the Company's voting stock or (v) the replacement of a majority
of the Board in a contested election (a "Significant Transaction"). The
Committee also has the authority to take several actions regarding
outstanding Incentives upon the occurrence of a Significant Transaction,
including requiring that outstanding options remain exercisable only for
a limited time, providing for mandatory conversion of outstanding
options in exchange for either a cash payment or Common Stock, making
equitable adjustments to Incentives or providing that outstanding
options will become options relating to securities to which a
participant would have been entitled in connection with the Significant
Transaction if the options had been exercised.
As of the date of this Prospectus, options to purchase 106,500
shares of Common Stock have been granted under the 1997 Plan to
employees of the Company, including options to purchase 48,000, 22,500,
20,000, and 16,000 shares to Messrs. Chauvin, Downey, Bourke and
Gallagher, respectively. All of the options granted as of the date of
this Prospectus under the 1997 Plan have a ten-year term, an exercise
price equal to the initial public offering price per share and will
become exercisable five years from the date of grant.
Limitation of Directors' and Officers' Liability and Indemnification
In accordance with Louisiana law, the Company's Articles
(described further below) contain provisions eliminating the personal
liability of directors and officers to the Company and its shareholders
for monetary damages for breaches of their fiduciary duties as directors
or officers, except for (i) a breach of a director's or officer's duty
of loyalty to the Company or its shareholders, (ii) acts or omissions
not in good faith or that involve intentional misconduct or a knowing
violation of law, (iii) dividends or stock repurchases or redemptions
that are illegal under Louisiana law and (iv) any transaction from which
a director or officer receives an improper personal benefit. As a
result of the inclusion of such provisions, shareholders may be unable
to recover monetary damages against directors or officers for actions
taken by them that constitute negligence or gross negligence or that are
in violation of their fiduciary duties, although it may be possible to
obtain injunctive or other equitable relief with respect to such
actions. If equitable remedies are found not to be available to
shareholders in any particular case, shareholders may not have any
effective remedy against the challenged conduct.
The Company believes that these provisions are necessary to
attract and retain qualified individuals to serve as directors and
officers. In addition, such provisions will allow directors and
officers to perform their duties in good faith without undue concern
about personal liability if a court finds their conduct to have been
negligent or grossly negligent. On the other hand, the potential
remedies available to a Company shareholder will be limited, and it is
possible, although unlikely, that directors or officers protected by
these provisions may not demonstrate the same level of diligence or care
that they would otherwise demonstrate.
The Company's By-laws require the Company to indemnify its
officers and directors against certain expenses and costs, judgments,
settlements and fines incurred in the defense of any claim, including
any claim brought by or in the right of the Company, to which they were
made parties by reason of being or having been officers or directors,
subject to certain conditions and limitations. The By-law provisions
that govern such indemnification are included as an exhibit to the
Company's Registration Statement, of which this Prospectus forms a part.
Each of the Company's directors and executive officers has entered
into an indemnity agreement with the Company, pursuant to which the
Company has agreed under certain circumstances to purchase and maintain
directors' and officers' liability insurance. The agreements also
provide that the Company will indemnify the directors and executive
officers against any costs and expenses, judgments, settlements and
fines incurred in connection with any claim involving a director or
executive officer by reason of his position as director or executive
officer that are in excess of the coverage provided by any such
insurance, provided that the director or executive officer meets certain
standards of conduct. A form of indemnity agreement containing such
standards of conduct is included as an exhibit to the Company's
Registration Statement, of which this Prospectus forms a part. Under
the indemnity agreements, the Company is not required to purchase and
maintain directors' and officers' liability insurance if it is not
reasonably available or, in the reasonable judgment of the Board of
Directors, there is insufficient benefit to the Company from the
insurance.
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of February 13, 1997, certain
information regarding beneficial ownership of the Common Stock by (i)
each shareholder known by the Company to be the beneficial owner of more
than 5% of the outstanding Common Stock, (ii) each director of the
Company, (iii) each of the Company's executive officers and (iv) all of
the Company's directors and executive officers as a group. Unless
otherwise indicated, the Company believes that the shareholders listed
below have sole investment and voting power with respect to their shares
based on information furnished to the Company by such shareholders.
Name of Beneficial Owner Number of Shares Percent of Outstanding
Beneficially Owned Common Stock
__________________ ______________________
Before After
Offering Offering
__________ __________
Alden J. Laborde<F1> 1,416,100 36% 23%
Huey J. Wilson<F1> 1,725,500 49% 31%
Kerry J. Chauvin 21,000 * *
William A. Downey 10,500 * *
Murphy A. Bourke 10,500 * *
Joseph P. Gallagher, III 7,000 * *
John P. "Jack" Laborde 28,000<F2> * *
All directors and executive officers
as a group (10 persons) 3,190,600 91% 58%
________________
*Less than one percent.
<F1> The address of Alden J. Laborde is 210 Baronne Street, Suite 1042,
New Orleans, Louisiana 70112. The address of Huey J. Wilson is
Suite 650, 3636 S. Sherwood Forest Boulevard, Baton Rouge,
Louisiana 70816.
<F2> Includes 11,200 shares which Mr. Jack Laborde may be deemed to
beneficially own that are owned by his minor child.
CERTAIN TRANSACTIONS
Prior to the completion of the Offering, the Company intends to
distribute to its current shareholders in connection with the
termination of the Company's S Corporation status approximately $15.0
million, which amount represents undistributed earnings of the Company
on which the current shareholders will have incurred federal and state
income taxes. Directors and executive officers of the Company who are
also shareholders will receive, in the aggregate, approximately $13.5
million as a result of this distribution.
The Company has entered into a registration rights agreement (the
"Registration Rights Agreement") with Messrs. Alden Laborde and Wilson,
pursuant to which Messrs. Alden Laborde and Wilson have limited rights
to require the Company to register shares of Common Stock owned by them
under the Securities Act. Under the Registration Rights Agreement,
after the consummation of the Offering, each of Messrs. Alden Laborde
and Wilson is entitled to two demand registrations. If either of
Messrs. Laborde or Wilson makes such a demand, the other is entitled to
include his shares in such registration.
If the Company proposes to register any Common Stock under the
Securities Act in connection with a public offering, each of Messrs.
Laborde and Wilson may require the Company to include all or a portion
of the shares of Common Stock held by such shareholder. The Company has
agreed to pay all the expenses of registration under the Registration
Rights Agreement, other than underwriting discounts and commissions.
See "Risk Factors--Shares Eligible for Future Resale; Registration
Rights."
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 20,000,000
shares of Common Stock, no par value per share, and 5,000,000 shares of
preferred stock, no par value per share, issuable in series (the
"Preferred Stock"). As of February 14, 1997, 3,500,000 shares of Common
Stock were outstanding and held of record by approximately 33 persons,
and no shares of Preferred Stock were outstanding. Prior to the
Offering, there has been no public market for the Common Stock.
Although application has been made to have the Common Stock listed on
the Nasdaq National Market, there can be no assurance that a market for
the Common Stock will develop or, if developed, will be sustained. See
"Risk Factors -- No Prior Market; Possible Volatility of Market Price;
Dilution." The following description of the capital stock of the
Company is qualified in its entirety by reference to the Company's
Articles and By-laws, copies of which are filed as exhibits to the
Registration Statement of which this Prospectus forms a part.
Common Stock
Each holder of Common Stock is entitled to one vote for each share
of Common Stock held of record on all matters on which shareholders are
entitled to vote; shareholders may not cumulate votes for the election
of directors. Subject to any preferences accorded to the holders of the
Preferred Stock, if and when issued by the Board of Directors, holders
of Common Stock are entitled to dividends at such times and in such
amounts as the Board of Directors may determine. The Company currently
does not intend to pay dividends for the foreseeable future. In
addition, the Company's Bank Credit Facility contains provisions that
limit the Company from paying dividends to holders of its Common Stock.
See "Risk Factors -- Dividends" and "Dividend Policy." Upon the
dissolution, liquidation or winding up of the Company, after payment of
debts, expenses and the liquidation preference plus any accrued
dividends on any outstanding shares of Preferred Stock, the holders of
Common Stock will be entitled to receive all remaining assets of the
Company ratably in proportion to the number of shares held by them.
Holders of Common Stock have no preemptive, subscription or conversion
rights and are not subject to further calls or assessments, or rights of
redemption by the Company. The outstanding shares of Common Stock are,
and the shares of Common Stock being sold in the Offering will be,
validly issued, fully paid and nonassessable.
Preferred Stock
The Company's Board of Directors has the authority, without
approval of the stockholders, to issue shares of Preferred Stock in one
or more series and to fix the number of shares and rights, preferences
and limitations of each series. Among the specific matters with respect
to the Preferred Stock that may be determined by the Board of Directors
are the dividend rights, the redemption price, if any, the terms of a
sinking fund, if any, the amount payable in the event of any voluntary
liquidation, dissolution or winding up of the affairs of the Company,
conversion rights, if any, and voting powers, if any.
One of the effects of the existence of authorized but unissued
Common Stock and undesignated Preferred Stock may be to enable the Board
of Directors to make more difficult or to discourage an attempt to
obtain control of the Company by means of a merger, tender offer, proxy
contest or otherwise, and thereby to protect the continuity of the
Company's management. If, in the exercise of its fiduciary obligations,
the Board of Directors were to determine that a takeover proposal was
not in the Company's best interest, such shares could be issued by the
Board of Directors without stockholder approval in one or more
transactions that might prevent or make more difficult or costly the
completion of the takeover transaction by diluting the voting or other
rights of the proposed acquiror or insurgent stockholder group, by
creating a substantial voting block in institutional or other hands that
might undertake to support the position of the incumbent Board of
Directors, by effecting an acquisition that might complicate or preclude
the takeover, or otherwise. In this regard, the Company's Articles
grant the Board of Directors broad power to establish the rights and
preferences of the authorized and unissued Preferred Stock, one or more
series of which could be issued that would entitle holders (i) to vote
separately as a class on any proposed merger or consolidation, (ii) to
cast a proportionately larger vote together with the Common Stock on any
such transaction or for all purposes, (iii) to elect directors having
terms of office or voting rights greater than those of other directors,
(iv) to convert Preferred Stock into a greater number of shares of
Common Stock or other securities, (v) to demand redemption at a
specified price under prescribed circumstances related to a change of
control or (vi) to exercise other rights designated to impede a
takeover. The issuance of shares of Preferred Stock pursuant to the
Board of Directors' authority described above may adversely effect the
rights of holders of the Common Stock.
In addition, certain other charter provisions that are described
below may have the effect of, either alone or in combination with each
other or with the existence of authorized but unissued capital stock, of
making more difficult or discouraging an acquisition of the Company
deemed undesirable by the Board of Directors.
Certain Anti-takeover and Other Provisions of the Articles and By-laws
Classified Board of Directors. The Articles and By-laws divide
the members of the Board of Directors who are elected by the holders of
the Common Stock into three classes with each class to be as nearly
equal in number of directors as possible, serving three-year staggered
terms. See "Management -- Executive Officers and Directors."
Advance Notice of Intention to Nominate a Director. The Articles
and By-laws permit a stockholder to nominate a person for election as a
director only if written notice of such stockholder's intent to make a
nomination has been given to the Secretary of the Company not less than
45 days or more than 90 days prior to an annual meeting, unless less
than 55 days notice is given of the meeting, in which case notice by the
stockholder must be received on the 10th day after notice of the meeting
was given. This provision also requires that the stockholder's notice
set forth, among other things, a description of all arrangements or
understandings between the nominee and the stockholder pursuant to which
the nomination is to be made or the nominee is to be elected and such
other information regarding the nominee as would be required to be
included in a proxy statement filed pursuant to the proxy rules
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), had the nominee been nominated by the Board of
Directors of the Company. Any nomination that fails to comply with these
requirements may be disqualified.
Shareholders' Right to Call Special Meeting. The Articles and By-
laws provide that a special shareholders' meeting may be requested by a
shareholder or group of shareholders holding in the aggregate 50% or
more of the Company's total voting power.
Shareholder Action by Unanimous Consent. Under Louisiana law,
unless a corporation's articles of incorporation specify otherwise,
shareholders may only act at a duly called meeting or by unanimous
written consent. The Company's Articles do not contain a provision
permitting action by a consent signed by less than all shareholders;
therefore, the Company's shareholders can only act at a duly called
meeting or by unanimous written consent.
Removal of Directors; Filling Vacancies on Board of Directors.
The Articles and By-laws provide that any director elected by holders of
the Common Stock may be removed at any time by a two-thirds vote of the
entire Board of Directors. In addition, any director or the entire Board
may be removed at any time for cause by a vote of the holders of not
less than two-thirds of the total voting power held by all holders of
voting stock present or represented at a special stockholders' meeting
called for that purpose. "Cause" is defined for these purposes as
conviction of a felony involving moral turpitude or adjudication of gross
negligence or misconduct in the performance of duties in a matter of
substantial importance to the Company. The Articles and By-laws also
provide that any vacancies on the Board of Directors (including any
resulting from an increase in the authorized number of directors) may
be filled by the affirmative vote of two-thirds of the directors,
provided the shareholders shall have the right, at any special meeting
called for that purpose prior to such action by the Board, to fill the
vacancy.
Adoption and Amendment of By-laws. The Articles provide that the
By-laws may be (i) adopted only by a majority vote of the Board of
Directors and (ii) amended or repealed by either a two-thirds vote of
the Board of Directors or the holders of at least 80% of the total
voting power present or represented at any shareholders' meeting. Any
provisions amended or repealed by the stockholders may be re-amended or
re-adopted by the Board of Directors.
Consideration of Tender Offers and Other Extraordinary
Transactions. Under Louisiana law, the Board of Directors, when
considering a tender offer, exchange offer, merger or consolidation, may
consider, among other factors, the social and economic effects of the
proposal on the Company, its subsidiaries and their respective
employees, customers, creditors and communities.
Amendment of Certain Provisions of the Articles; Other Corporate
Action. Under Louisiana law, unless a corporation's articles of
incorporation specify otherwise, a corporation's articles of
incorporation may be amended by the affirmative vote of the holders of
two-thirds of the voting power present at a meeting of the shareholders.
The Company's Articles require the affirmative vote of not less than 80%
of the total voting power of the Company to amend, alter or repeal
certain provisions of the Company's Articles with respect to (i) the
classification, filling of vacancies and removal of the Board of
Directors, (ii) amendments to the By-laws, (iii) the application of
certain anti-takeover provisions of the Louisiana law by which the
Company has elected not to be governed, (iv) changes to shareholder vote
requirements, (v) limitation of liability of directors and (vi)
requirements for special meetings called by shareholders. Unless
approved by a vote of at least two-thirds of the Board of Directors, a
merger, consolidation, sale of all or substantially all of the assets or
a voluntarily dissolution of the Company may be authorized only by the
affirmative vote of the holders of 80% of the total voting power.
The provisions of the Company's Articles and By-laws summarized in
the preceding paragraphs may have anti-takeover effects and may delay,
defer or prevent a tender offer or takeover attempt that a shareholder
might consider in such shareholder's best interest, including those
attempts that might result in the payment of a premium over the market
price for the shares of Common Stock held by such shareholder.
Transfer Agent and Registrar
The Transfer Agent and Registrar for the Common Stock is __________.
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement
among the Company and the Underwriters named below (the "Underwriting
Agreement"), the Company has agreed to sell to each of such Underwriters
named below, and each of such Underwriters, for whom Morgan Keegan &
Company, Inc., Raymond James & Associates, Inc. and Johnson Rice &
Company L.L.C. are acting as representatives (the "Representatives"),
has severally agreed to purchase from the Company, the respective number
of shares of Common Stock set forth opposite its name below.
Underwriter Number of
shares of
Common Stock
Morgan Keegan & Company, Inc. ....................
Raymond James & Associates, Inc. .................
Johnson Rice & Company L.L.C. ....................
________
Total ...................................... 2,000,000
=========
The Underwriting Agreement provides that the Underwriters'
obligation to pay for and accept delivery of the shares of Common Stock
offered hereby is subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all such shares, excluding
shares covered by the over-allotment option, if any are purchased. The
Underwriters have informed the Company that no sales of Common Stock
will be confirmed to discretionary accounts.
The Company has been advised by the Underwriters that they propose
initially to offer the shares of Common Stock in part directly to the
public at the public offering price set forth on the cover page of this
Prospectus, and in part to certain securities dealers at such price less
a concession of $___ per share. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of $_____ per share to
certain brokers and dealers. After the shares of Common Stock are
released for sale to the public, the offering price and other selling
terms may from time to time be varied by the Representatives.
The Company has granted the Underwriters an option exercisable for
30 days after the date of this Prospectus to purchase up to an aggregate
of 300,000 additional shares of Common Stock solely to cover
overallotments, if any. If the Underwriters exercise their
overallotment option, the Underwriters have severally agreed, subject to
certain conditions, to purchase approximately the same percentage
thereof that the number of shares of Common Stock to be purchased by
each of them, as shown in the table above, bears to the 2,000,000 shares
of Common Stock offered hereby.
The Company, all of its officers and directors, and certain of its
existing shareholders, who beneficially own an aggregate of 3,500,000
shares of Common Stock, have agreed, during the period beginning from
the date of this Prospectus and continuing to and including the date 180
days after the date of the Prospectus, not to offer, sell, contract to
sell or otherwise dispose of any securities of the Company (other than,
with respect to the Company, pursuant to employee stock option plans
existing, or on the conversion or exchange of convertible or
exchangeable securities outstanding, on the date of this Prospectus)
which are substantially similar to the shares of the Common Stock or
which are convertible or exchangeable into securities which are
substantially similar to the shares of the Common Stock without the
prior consent of the Representatives.
Prior to this Offering, there has been no public market for the
Common Stock. The initial public offering price of the Common Stock
will be negotiated between the Company and the Representatives. Among
the factors to be considered in determining the initial public offering
price of the Common Stock will be prevailing market and economic
conditions, revenues and earnings of the Company, the state of the
Company's business operations, an assessment of the Company's management
and consideration of the above factors in relation to market valuation
of companies in related businesses and other factors deemed relevant.
There can be no assurance, however, that the prices at which the Common
Stock will sell in the public market after the Offering will not be
lower than the initial public offering price.
At the request of the Company, the Underwriters have reserved up
to 200,000 shares of Common Stock for sale at the initial public
offering price to directors, officers, employees, business associates
and related persons of the Company. The number of shares of Common
Stock available for sale to the general public will be reduced to the
extent such persons purchase such reserved shares. Any reserved shares
which are not purchased will be offered by the Underwriters to the
general public on the same basis as the other shares offered hereby.
The Company has agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities
Act.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 5,500,000
shares of Common Stock outstanding. The 2,000,000 shares of Common
Stock sold in the Offering (plus any additional shares sold upon the
Underwriters' exercise of their over-allotment option) will be freely
transferable without restriction under the Securities Act by persons who
are not deemed to be affiliates of the Company or acting as
underwriters, as those terms are defined in the Securities Act. The
remaining 3,500,000 shares of Common Stock held by existing stockholders
were acquired in transactions not requiring registration under the
Securities Act and will be "restricted stock" within the meaning of Rule
144. Consequently, such shares may not be resold unless they are
registered under the Securities Act or are sold pursuant to an
applicable exemption from registration, such as Rule 144 under the
Securities Act.
In general, under Rule 144 as currently in effect, if at least two
years have elapsed since shares of Common Stock that constitute
restricted stock were last acquired from the Company or an affiliate of
the Company, the holder is entitled to sell within any three-month
period a number of shares that does not exceed the greater of one
percent of the total shares of Common Stock then outstanding or the
average weekly trading volume of the Common Stock in the over-the-
counter market during the four calendar weeks preceding the date on
which notice of the sale is filed with the Securities and Exchange
Commission. Sales under Rule 144 are subject to certain manner of sale
provisions, notice requirements and the availability of current public
information about the Company. If at least three years have elapsed
since the shares were last acquired from the Company or an affiliate, a
person who has not been an affiliate of the Company at any time during
the three months preceding the sale is entitled to sell such shares
under Rule 144(i) without regard to volume limitations, manner of sale
provisions, notice requirements or the availability of current public
information concerning the Company. All of the 3,500,000 shares of
restricted stock within the meaning of Rule 144 held by existing
shareholders of the Company will be eligible for sale following the
Offering in reliance on Rule 144, subject to volume limitations with
respect to an aggregate of 3,190,600 shares of Common Stock held by
affiliates and subject to the contractual "lock-up" restrictions
described below.
The Company has granted Messrs. Alden, Laborde and Wilson certain
registration rights with respect to the Common Stock held by each of
them including the rights, subject to certain conditions and
limitations, to demand registration of shares of Common Stock held by
them and to include shares of Common Stock held by them in any
registration of securities proposed by the Company. The exercise of
such registration rights is subject to the contractual "lock-up"
restrictions described below. See "Certain Transactions."
The Company, its directors and its executive officers, and certain
of its existing shareholders have agreed that they will not, with
certain limited exceptions, issue, offer for sale, sell, transfer, grant
options to purchase or otherwise dispose of any shares of Common Stock
(other than stock issued or options granted pursuant to the Company's
stock incentive plans) without the prior written consent of the
Representatives for a period of 180 days from the date of this
Prospectus.
Prior to the Offering, there has been no public market for the
Common Stock, and there can be no assurance that a significant public
market for the Common Stock will develop or be sustained after the
Offering. Any future sale of substantial amounts of Common Stock in the
open market may adversely affect the market price of the Common Stock
offered hereby.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby is being
passed upon for the Company by Jones, Walker, Waechter, Poitevent,
Carrere & Denegre, L.L.P., New Orleans, Louisiana. Certain legal
matters in connection with the shares of Common Stock offered hereby are
being passed upon for the Underwriters by Andrews & Kurth L.L.P.,
Houston, Texas.
EXPERTS
The financial statements of the Company as of December 31, 1995
and 1996 and for each of the three years in the period ended December
31, 1996, and the combined financial statements of Dolphin Services as
of and for the year ended December 31, 1996, included in this
Prospectus, and the financial statement schedule of the Company included
in the Registration Statement of which this Prospectus forms a part,
have been so included in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of such firm as experts
in auditing and accounting.
OTHER INFORMATION
The Company has filed with the Securities and Exchange Commission
a Registration Statement on Form S-1 under the Securities Act with
respect to the Common Stock being offered pursuant to this Prospectus.
This Prospectus does not contain all information set forth in the
Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. Statements contained
herein concerning the provisions of any documents are not necessarily
complete and, in each instance, reference is made to the copy of such
document filed or incorporated by reference as an exhibit to the
Registration Statement. The Registration Statement may be inspected and
copied at the public reference facilities maintained by the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's regional offices at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511 and 7 World Trade Center, Suite 1300, New
York, New York 10048. Copies of such material can be obtained at
prescribed rates from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
maintains a Web site that contains reports, proxy and information
statements and other information regarding issuers that file
electronically with the Commission (http://www.sec.gov). The Company
intends to furnish its shareholders with annual reports containing
audited financial statements certified by independent public
accountants.
<PAGE>
GLOSSARY OF CERTAIN TECHNICAL TERMS
blasting and coating
facility: Building and equipment used to clean steel
products and prepare them for coating with
marine paints and other coatings.
compliant tower: A fixed platform designed for certain deep
water drilling and production.
coping machine: A computerized machine that cuts ends of
tubular pipe sections to allow for changes in
weld bevel angles and fits onto other
tubular pipe sections.
deck: The component of a platform on which development
drilling, production, separating, gathering,
piping, compression, well support, crew
quartering and other functions related to
offshore oil and gas development are conducted.
direct labor hours: Direct labor hours are hours worked by employees
directly involved in the production of the
Company's products. These hours do not include
contractor labor hours and support personnel
hours such as maintenance, warehousing and
drafting.
fixed platform: A platform consisting of a rigid jacket which
rests on tubular steel pilings driven into the
seabed and which supports a deck structure above
the water surface.
floating production
platform: Floating structure that supports offshore oil
and gas production equipment (tension leg, semi
submersible, SPAR).
grit blast system: System of preparing steel for coating by
using steel grit rather than sand as a
blasting medium.
hydraulic plate shear: Machine that cuts steel by a mechanical system
similar to scissors.
inshore: Inside coastlines, typically in bays,
lakes and marshy areas.
ISO 9002: International Standards of Operations 9002 -
Defines quality management system of procedures
and goals for certified companies.
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 supported on
tubular steel pilings driven into the seabed.
modules: Packaged equipment usually consisting of major
production, utility or compression equipment
with associated piping and control system.
offshore: In unprotected waters outside coastlines.
piles: Rigid tubular pipes that are driven into the
seabed to support platforms.
plasma-arc cutting
system: Steel cutting system that uses a ionized gas
cutting rather than oxy-fuel system.
platform: A structure from which offshore oil and gas
development drilling and production are
conducted.
spud barge: Construction barge rigged with vertical tubular or
square lengths of steel pipes that are lowered to
anchor the vessel.
subsea templates: Tubular frames which are placed on the seabed
and anchored with piles. Usually a series of
oil and gas wells are drilled through these underwater
structures.
tension-leg platform
(TLP): A platform consisting of a floating hull and
deck anchored by vertical tensioned cables or
pipes connected to pilings driven into the
seabed. A tension-leg platform is typically
used in water depths exceeding 1,000 feet.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
Pro Forma Combined Financial Statements (unaudited):
Pro Forma Combined Balance Sheet as of December 31, 1996. . . . . F-3
Pro Forma Combined Statement of Income for the year ended
December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . F-5
Notes to Pro Forma Combined Balance Sheet . . . . . . . . . . . . F-6
Notes to Pro Forma Combined Statement of Income . . . . . . . . . F-7
Audited Financial Statements:
Gulf Island Fabrication, Inc.
Report of Independent Accountants . . . . . . . . . . . . . . . . F-8
Balance Sheet as of December 31, 1995 and 1996. . . . . . . . . . F-9
Statement of Income for the years ended December 31, 1994, 1995
and 1996. . . . . . . . . . . . . . . . . . . . . . . . . . . . F-10
Statement of Changes in Shareholders Equity for the years
ended December 31, 1994, 1995 and 1996. . . . . . . . . . . . . F-11
Statement of Cash Flows for the years ended December 31, 1994,
1995 and 1996. . . . . . . . . . . . . . . . . . . . . . . . . F-12
Notes to Financial Statements . . . . . . . . . . . . . . . . . . F-13
Dolphin Services, Inc. and Related Companies
Report of Independent Accountants . . . . . . . . . . . . . . . . F-20
Combined Balance Sheet as of December 31, 1996. . . . . . . . . . F-21
Combined Statement of Income and Retained Earnings for the year
ended December 31, 1996. . . . . . . . . . . . . . . . . . . . F-22
Combined Statement of Cash Flows for the year ended
December 31, 1996. . . . . . . . . . . . . . . . . . . . . . . F-23
Notes to Combined Financial Statements. . . . . . . . . . . . . . F-24
<PAGE>
Gulf Island Fabrication, Inc.
Pro Forma Combined Financial Statements
(unaudited)
The following unaudited pro forma combined financial statements reflect
termination of Gulf Island Fabrication, Inc.'s (the "Company") status as
an S Corporation, assuming that such termination occurred on December
31, 1996. The pro forma financial statements also reflect the
acquisition by the Company of Dolphin Services, Inc., Dolphin Steel
Sales, Inc. and Dolphin Sales and Rentals, Inc. (collectively, "Dolphin
Services"), using the purchase method of accounting. The pro forma
combined balance sheet combines the Company's pro forma balance sheet,
as adjusted for the termination of the status as an S Corporation, and
the historical statement of Dolphin Services, assuming the acquisition
occurred on December 31, 1996. The pro forma combined statement of
income combines the historical statements of the Company and Dolphin
Services assuming the acquisition had occurred on January 1, 1996 and
further reflects a pro forma provision for income taxes that would have
been recorded had the Company operated as a C Corporation during the
year ended December 31, 1996.
The unaudited pro forma combined financial statements do not purport to
present the actual financial condition or results of operation of the
Company as if the termination of the Company's S Corporation status and
the acquisition of Dolphin Services had occurred on the dates specified.
The unaudited pro forma combined financial statements should be read in
conjunction with the historical financial statements of the Company and
Dolphin Services included elsewhere in this document.
<PAGE> F-3
GULF ISLAND FABRICATION, INC.
PRO FORMA COMBINED BALANCE SHEET (UNAUDITED)
DECEMBER 31, 1996
(in thousands)
<TABLE>
<CAPTION>
Pro Forma Adjustments
For conversion from Pro Forma
Gulf Island Subchapter S Dolphin Pro Forma Balance Sheet,
Fabrication Inc. Corporation to Pro Forma Combined Historical Acquisition As Adjusted
Historical C Corporation Balance Balance Sheet Adjustments for Dolphin
Balance Sheet (Note 1) Sheet (Note 2) (Note 2) Acquisition
______________ _________________ ___________ __________________ ___________ ______________
ASSETS
________
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash $ 1,357 $ - $ 1,357 $ 83 $ - $ 1,440
Contracts receivable, net 11,674 - 11,674 4,513 - 16,187
Contract retainage 1,806 - 1,806 193 - 1,999
Other receivables - - - 616 - 616
Costs and estimated
earnings in excess
of billings on
uncompleted contracts 1,306 - 1,306 55 - 1,361
Prepaid expenses 500 - 500 53 - 553
Inventory 1,113 - 1,113 767 26(a) 1,906
____________ ______________ ____________ ____________ __________ __________
Total current assets 17,756 - 17,756 6,280 26 24,062
Property, plant and
equipment, net 17,735 - 17,735 3,172 385(a) 21,292
Other assets 418 - 418 254 - 672
____________ ______________ ____________ ____________ __________ __________
$ 35,909 $ - $ 35,909 $ 9,706 $ 411 $ 46,026
============ ============== ============ ============ ========== ==========
</TABLE>
<PAGE> F-4
GULF ISLAND FABRICATIONS, INC.
PRO FORMA COMBINED BALANCE SHEET (UNAUDITED)
DECEMBER 31, 1996
(in thousands)
<TABLE>
<CAPTION>
Pro Forma Adjustments
For conversion from Pro Forma
Gulf Island Subchapter S Dolphin Pro Forma Balance Sheet,
Fabrication Inc. Corporation to Pro Forma Combined Historical Acquisition As Adjusted
Historical C Corporation Balance Balance Sheet Adjustments for Dolphin
Balance Sheet (Note 1) Sheet (Note 2) (Note 2) Acquisition
______________ _________________ ___________ __________________ ___________ ______________
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities:
Accounts payable $1,081 $ - $ 1,081 $ 1,455 $ - $2,536
Billings in excess of costs and
estimated earnings on
uncompleted contracts 2,204 - 2,204 488 - 2,692
Accrued employee costs 1,903 - 1,903 562 - 2,465
Accrued expenses 1,036 - 1,036 151 - 1,187
Other liabilities - - - 92 - 92
Current portion of notes payable 530 - 530 206 - 736
Income taxes payable - - - 453 - 453
Notes payable - distribution
to shareholders - 13,158(b) 13,158 - - 13,158
_____________ _____________ ___________ ___________ ____________ _________
Total current liabilities 6,754 13,158 19,912 3,407 - 23,319
Deferred income taxes - 1,100(a) 1,100 301 157(a) 1,558
Notes payable, less current portion 5,657 - 5,657 366 5,886(b) 11,909
_____________ _____________ ___________ ___________ ____________ _________
Total liabilities 12,411 14,258 26,669 4,074 6,043 36,786
Shareholders equity:
Gulf Island Fabrication, Inc.
- Common stock 1,000 - 1,000 - - 1,000
Dolphin entities - Common stock - - - 479 (479)(c) -
Dolphin treasury stock, at cost - - - (303) 303 (c) -
Additional paid-in capital 6,670 - 6,670 - - 6,670
Retained earnings 15,828 (14,258)(b) 1,570 5,456 (5,456)(c) 1,570
_____________ _____________ ___________ ___________ ____________ _________
Total shareholders equity 23,498 (14,258) 9,240 5,632 (5,632) 9,240
_____________ _____________ ___________ ___________ ____________ _________
Total liabilities and
shareholders equity $ 35,909 $ - $ 35,909 $ 9,706 $ 411 $46,026
============= ============= =========== =========== ============ =========
</TABLE>
<PAGE> F-5
GULF ISLAND FABRICATION, INC.
PRO FORMA COMBINED STATEMENT OF INCOME (UNAUDITED)
YEAR ENDED DECEMBER 31, 1996
(in thousands except share and per share data)
<TABLE>
<CAPTION>
Pro Forma
Gulf Island _______________________
Fabrication Inc. Dolphin Acquisition
Historical Combined Historical Adjustments
Statement of Income Statement of Income (Note 1) Combined
___________________ ____________________ _____________ ____________
<S> <C> <C> <C> <C>
Revenue $ 79,004 $ 26,802 $(2,799)(d) $103,007
Cost of revenue 68,673 22,950 (2,770)(b)(d) 88,853
______________ _____________ _________ __________
Gross profit 10,331 3,852 (29) 14,154
General and administrative
expense 2,161 1,642 - 3,803
______________ _____________ _________ __________
Operating income 8,170 2,210 (29) 10,351
______________ _____________ _________ __________
Other expense:
Net interest expense 384 4 511(a) 899
Non-recurring compensation
charge 500 - - 500
______________ _____________ _________ __________
884 4 511 1,399
Income before income taxes 7,286 2,206 (540) 8,952
Provision for income taxes - (822) 203(c) (619)
______________ _____________ _________ __________
Net income $ 7,286 $ 1,384 $ (337) $ 8,333
============== ============= ========= ==========
Additional pro forma data
(Note 2):
Net income reported above $ 7,286 $ 8,333
=========== ==========
Pro forma provision for
income taxes related to
operations as S Corporation (2,934) (2,934)
____________ __________
Pro forma net income $ 4,352 $ 5,399
============ ==========
Pro forma per share data
(Note 3):
Weighted average shares
outstanding 3,500,000
==========
Pro forma net income per share $ 1.54
========
Supplemental pro forma
net income per
share (using 4,885,024
shares outstanding) $ 1.17
=======
</TABLE>
<PAGE> F-6
GULF ISLAND FABRICATION, INC.
NOTES TO PRO FORMA COMBINED BALANCE SHEET (UNAUDITED)
NOTE 1
The Company has operated as an S Corporation since 1989. Shortly before
closing of the contemplated public offering, the Company's shareholders
will elect to terminate the Company's status as an S Corporation and the
Company will thereafter be subject to federal and state income taxation
as a C Corporation. In connection with the S Corporation termination,
the Company will distribute to its shareholders previously undistributed
S Corporation tax basis earnings.
Pro forma adjustments to record the assumed S Corporation termination
and distribution of previously undistributed earnings reflect:
(a)Net deferred income tax liability at December 31, 1996 resulting from
change to a C Corporation from an S Corporation is comprised of the
following:
Differences between book and tax bases
of property and equipment $1,420,000
Accrual for workers' compensation (150,000)
Accrual for health insurance (159,000)
Other differences (11,000)
____________
$1,100,000
============
The deferred tax liability that will be recorded as a charge to income
in the second quarter of 1997 will be calculated based on the book and
tax differences on the date of termination of S Corporation status.
(b)Accrual of dividend to shareholders of undistributed S Corporation
tax basis earnings at December 31, 1996. The pro forma balance sheet
does not give effect to distributions that may be paid for S
Corporation earnings subsequent to December 31, 1996. The remaining
retained earnings of the Company at December 31, 1996 of $1,570,000
represent primarily C Corporation earnings prior to the Company
becoming an S Corporation in 1989.
NOTE 2
Effective January 2, 1997, the Company acquired all of the outstanding
shares of Dolphin Services, Inc., Dolphin Steel Sales, Inc. and Dolphin
Sales and Rentals, Inc. for a cash purchase price of $5,886,083, (the
"Dolphin Acquisition") including $55,000 of direct expenses, which
exceeds the book value of assets acquired and liabilities acquired by
$255,000. The purchase price was allocated to acquired assets and
liabilities based on estimated fair values.
Pro forma adjustments to record the Dolphin Acquisition under the
purchase method of accounting reflect:
(a)Allocation of purchase price based on estimated fair values of assets
acquired and liabilities assumed.
(b)Borrowings under Company's line of credit to acquire shares of
Dolphin Services.
(c)Elimination of shareholders' equity accounts of Dolphin Services.
<PAGE> F-7
GULF ISLAND FABRICATION, INC.
NOTES TO PRO FORMA COMBINED STATEMENT OF INCOME (UNAUDITED)
NOTE 1
Pro forma adjustments to record the Dolphin Acquisition reflect:
(a)Interest charges on additional borrowings of $5,886,083 at an
estimated average interest rate of 8.69%.
(b)Additional depreciation of property, plant and equipment using the
straight-line method over estimated useful lives of 3 to 5 years for
machinery and equipment and 30 years for buildings.
(c)Tax benefit related to interest and additional depreciation charges.
(d)Elimination of intercompany sales between the Company and Dolphin
Services.
NOTE 2
Additional pro forma data includes a pro forma adjustment to reflect the
provision for income taxes assuming the Company had operated as a C
Corporation.
NOTE 3
Pro forma per share data has been computed as follows:
- - Weighted average shares outstanding gives retroactive effect to the
recapitalization that was authorized on February 14, 1997 whereby
1,000,000 shares of outstanding common stock were exchanged for
3,500,000 shares of common stock.
- - Pro forma net income per share is calculated by dividing the pro
forma net income ($5,399,000) by the weighted average shares
outstanding (3,500,000).
- - Supplemental pro forma net income per share is calculated by dividing
the pro forma net income, increased by the interest expense, net of
tax, on the debt incurred to acquire Dolphin Services, by the
3,500,000 weighted average shares outstanding, as increased to
reflect sufficient additional shares to retire the debt incurred to
acquire Dolphin Services (428,079 shares) and to pay the
distributions to shareholders (956,945 shares). All such additional
shares are based on an assumed offering price of $15 per share, net
of offering expenses.
<PAGE> F-8
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Gulf Island Fabrication, Inc.
In our opinion, the accompanying balance sheet and the related
statements of income, of changes in shareholders' equity and of cash
flows present fairly, in all material respects, the financial position
of Gulf Island Fabrication, Inc. (the "Company") at December 31, 1995
and 1996, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
New Orleans, Louisiana
January 23, 1997, except for
the third paragraph of Note 1 and
the second paragraph of Note 9
which are as of February 13, 1997,
and the third paragraph of Note
9 which is as of February 14, 1997
<PAGE> F-9
GULF ISLAND FABRICATION, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
_________________________________________
Pro Forma
____________
1996 (Note 2)
1995 1996 (unaudited)
____________ ___________ _______________
<S> <C> <C> <C>
ASSETS
Current assets:
Cash $ 2,083,809 $ 1,357,232 $ 1,357,232
Contracts receivable, net 10,877,491 11,673,883 11,673,883
Contract retainage 2,064,565 1,806,211 1,806,211
Costs and estimated earnings in
excess of billings
on uncompleted contracts 505,096 1,306,341 1,306,341
Prepaid expenses 541,722 499,782 499,782
Inventory 440,645 1,112,913 1,112,913
_____________ ______________ ____________
Total current assets 16,513,328 17,756,362 17,756,362
Property, plant and equipment, net 13,482,529 17,734,642 17,734,642
Other assets 417,760 417,760 417,760
_____________ ______________ ____________
$30,413,617 $35,908,764 $35,908,764
============= ============== ============
LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities:
Accounts payable $ 2,162,127 $ 1,080,567 $ 1,080,567
Billings in excess of costs and
estimated earnings on uncompleted
contracts 2,509,877 2,204,482 2,204,482
Accrued employee costs 1,267,013 1,903,114 1,903,114
Accrued expenses 526,553 1,036,305 1,036,305
Current portion of notes payable 433,502 529,752 529,752
Notes payable - distribution to shareholders - - 13,158,000
_____________ _____________ _____________
Total current liabilities 6,899,072 6,754,220 19,912,220
Deferred income taxes - - 1,100,000
Notes payable, less current portion 5,111,900 5,657,142 5,657,142
_____________ _____________ _____________
Total liabilities 12,010,972 12,411,362 26,669,362
______________ _____________ _____________
Commitments and contingent liabilities
(Note 10)
Shareholders equity (Note 9):
Common stock, no par value, 20,000,000 shares
authorized, 3,500,000 shares issued and
outstanding 1,000,000 1,000,000 1,000,000
Additional paid-in capital 6,170,000 6,670,000 6,670,000
Retained earnings 11,232,645 15,827,402 1,569,402
______________ _____________ _____________
Total shareholders equity 18,402,645 23,497,402 9,239,402
______________ _____________ _____________
$30,413,617 $35,908,764 $35,908,764
============== ============= =============
See accompanying notes to financial statements.
</TABLE>
<PAGE> F-10
GULF ISLAND FABRICATION, INC.
STATEMENT OF INCOME
Year ended December 31,
____________________________________________
1994 1995 1996
Revenue $60,983,704 $63,778,740 $79,004,536
Cost of revenue 57,519,192 60,033,442 68,672,909
___________ ____________ ___________
Gross profit 3,464,512 3,745,298 10,331,627
General and administrative expense 1,567,097 1,730,059 2,161,348
___________ ____________ ___________
Operating income 1,897,415 2,015,239 8,170,279
___________ _____________ ___________
Other expense:
Net interest expense 327,780 429,981 383,814
Non-recurring compensation
charge - - 500,000
___________ _____________ ___________
327,780 429,981 883,814
___________ _____________ ___________
Net income $1,569,635 $ 1,585,258 $ 7,286,465
=========== ============= ===========
Unaudited pro forma data (Note 2):
Net income, reported above $1,569,635 $ 1,585,258 $ 7,286,465
Pro forma provision for
income taxes related to
operations as S Corporation 594,000 602,000 2,934,000
____________ ______________ __________
Pro forma net income $ 975,635 $ 983,258 $ 4,352,465
============ ============== ==========
Unaudited pro forma per share data (Note 2):
Weighted average share outstanding 3,500,000
=========
Pro forma net income per share $ 1.24
=========
Supplemental pro forma net income per share $ .98
=========
See accompanying notes to financial statements.
<PAGE> F-11
GULF ISLAND FABRICATION, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
<TABLE>
<CAPTION>
Common Stock Additional
________________________ Paid-in Retained
Shares Amount Capital Earnings Total
__________ _________ __________ ___________ ___________
<S> <C> <C> <C> <C>
Balance at December 31, 1993 3,500,000 $ 1,000,000 $ 6,170,000 $ 13,612,089 $20,782,089
Dividends paid -- -- -- (5,100,666) (5,100,666)
Net income -- -- -- 1,569,635 1,569,635
______________ _______________ _______________ _________________ ______________
Balance at December 31, 1994 3,500,000 1,000,000 6,170,000 10,081,058 17,251,058
Dividends paid -- -- -- (433,671) (433,671)
Net income -- -- -- 1,585,258 1,585,258
______________ _______________ _______________ __________________ ______________
Balance at December 31, 1995 3,500,000 1,000,000 6,170,000 11,232,645 18,402,645
Dividends paid -- -- -- (2,691,708) (2,691,708)
Non-recurring compensation
charge (Note 9) -- -- 500,000 -- 500,000
Net income -- -- -- 7,286,465 7,286,465
______________ _______________ _______________ __________________ ______________
Balance at December 31, 1996 3,500,000 $ 1,000,000 $6,670,000 $ 15,827,402 $23,497,402
============== =============== =============== ================== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE> F-12
GULF ISLAND FABRICATION, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
_____________________________________
1994 1995 1996
___________ ___________ ___________
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers $62,702,694 $60,262,661 $ 78,208,144
Cash paid to suppliers and employees (59,069,196) (57,491,434) (70,631,705)
Interest paid (228,018) (447,364) (414,963)
_____________ ____________ ______________
Net cash provided by
operating activities 3,405,480 2,323,863 7,161,476
_____________ ____________ ______________
Cash flows from investing activities:
Capital expenditures, net (675,571) (991,714) (5,837,837)
_____________ ____________ ______________
Cash flows from financing activities:
Proceeds from issuance of notes payable 20,877,844 21,595,186 24,353,157
Principal payments on notes payable (18,825,455) (20,526,383) (23,711,665)
Dividends paid (5,100,666) (433,671) (2,691,708)
_____________ ____________ ______________
Net cash provided by (used in)
financing activities (3,048,277) 635,132 (2,050,216)
_____________ ____________ ______________
Net increase (decrease) in cash (318,368) 1,967,281 (726,577)
Cash at beginning of year 434,896 116,528 2,083,809
_____________ ____________ ______________
Cash at end of year $ 116,528 $ 2,083,809 $ 1,357,232
============= ============ ==============
Supplemental cash flow information:
Year Ended December 31,
_________________________________________
1994 1995 1996
___________ ____________ __________
Reconciliation of net income to net cash provided by
operating activities:
Net income $1,569,635 $1,585,258 $7,286,465
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 1,369,767 1,381,935 1,585,723
Non-recurring non-cash
compensation charge - - 500,000
(Increase) decrease in contracts
receivable 1,937,978 (3,516,079) (796,391)
(Increase) decrease in contract
retainage (506,962) (1,302,499) 258,354
(Increase) decrease in costs and estimated
earnings in excess of billings on
uncompleted contracts 1,125,284 1,572,933 (801,245)
(Increase) decrease in prepaid expenses
and other assets (9,629) 74,495 (630,328)
Increase (decrease) in accounts payable (1,077,013) 933,458 (1,081,560)
Increase (decrease) in accrued expenses
and employee costs (847,702) 422,885 1,145,853
Increase (decrease) in billings in
excess of costs and estimated earnings
on uncompleted contracts (155,878) 1,171,477 (305,395)
______________ _____________ _____________
Net cash provided by
operating activities $ 3,405,480 $2,323,863 $7,161,476
============== ============= =============
See accompanying notes to financial statements.
</TABLE>
<PAGE> F-13
GULF ISLAND FABRICATION, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Gulf Island Fabrication, Inc. (the "Company"), located in Houma,
Louisiana, is engaged in the fabrication and refurbishment of offshore
oil and gas platforms for oil and gas industry companies. The Company's
principal markets are concentrated in the offshore regions of the coast
of the Gulf of Mexico.
On January 2, 1997, the Company acquired all outstanding shares of
Dolphin Services, Inc., Dolphin Steel Sales Inc. and Dolphin Sales and
Rentals Inc. (collectively, "Dolphin Services") for $5,886,083.
Dolphin Services performs fabrication, sandblasting, painting and
construction for offshore oil and gas platforms in inland and offshore
regions of the coast of the Gulf of Mexico. (See Note 3.)
On February 13, 1997, the Board of Directors approved the filing of an
initial registration statement on Form S-1 with the Securities and
Exchange commission to register and sell 2,000,000 shares of common
stock. Shortly before the closing of the offering, the Company's
current shareholders will elect to terminate its status as an S
Corporation and will become subject to federal and state income taxes
thereafter. (See Note 2.)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent liabilities at the date of the financial
statements and the reported amounts of revenue and expense during the
reporting period. Actual results could differ from those estimates.
Inventory
Inventory consists of materials and production supplies and is stated at
the lower of cost or market determined on the first-in, first-out basis.
Property, Plant and Equipment
Property, plant and equipment is stated at cost less accumulated
depreciation. Depreciation is computed on the straight-line basis over
the estimated useful lives of the assets, which range from 3 to 25
years. Ordinary maintenance and repairs which do not extend the
physical or economic lives of the plant or equipment are charged to
expense as incurred.
Revenue Recognition
Revenue from fixed-price and cost-plus construction contracts is
recognized on the percentage-of-completion method, computed by the
efforts-expended method which measures percentage of labor hours
incurred to date as compared to estimated total labor hours for each
contract.
Contract costs include all direct material, labor and subcontract costs
and those indirect costs related to contract performance, such as
indirect labor, supplies and tools. Also included in contract costs are
a portion of those indirect contract costs related to plant capacity,
such as depreciation, insurance and repairs and maintenance. These
indirect costs are allocated to jobs based on actual direct labor hours
incurred. Provisions for estimated losses on uncompleted contracts are
made in the period in which such losses are determined.
<PAGE> F-14
GULF ISLAND FABRICATION, INC.
NOTES TO THE FINANCIAL STATMENTS (CONTINUED)
The asset caption entitled "costs and estimated earnings in excess of
billings on uncompleted contracts," represents revenue recognized in
excess of the amounts billed. The liability caption entitled "billings
in excess of costs and estimated earnings on uncompleted contracts,"
represents billings in excess of revenue recognized.
Income Taxes
The Company's shareholders have elected to have the Company taxed as an
S Corporation for federal and state income tax purposes whereby
shareholders are liable for individual federal and state income taxes on
their allocated portions of the Company's taxable income. Accordingly,
the historical financial statements do not include any provision for
income taxes.
Shortly before the closing of the public offering, the Company's
shareholders will elect to terminate the Company's status as an S
Corporation, and the Company will become subject to federal and state
income taxes. This will result in the establishment of a net deferred
tax liability calculated at applicable federal and state income tax
rates. (See Note 2.)
Fair Value of Financial Instruments
The carrying amount of the Company's financial instruments at December
31, 1996, including cash, contracts receivable, and notes payable,
closely approximates fair value.
Basis for Cash Flows
For purposes of the statement of cash flows, the Company includes cash
on hand and cash in banks.
NOTE 2 - TERMINATION OF S CORPORATION STATUS (UNAUDITED)
Shortly before the closing of the offering (Note 1), the Company's
shareholders will elect to terminate the Company's status as an S
Corporation and the Company will become subject to federal and state
income taxes. Prior to its termination as an S Corporation, the Company
intends to declare a distribution to its current shareholders
representing substantially all of the Company's remaining undistributed
S Corporation earnings through such date.
The pro forma balance sheet of the Company as of December 31, 1996
reflects a deferred income tax liability of $1,100,000 resulting from
the assumed termination of the S Corporation status and an accrual of
$13,158,000 for distribution of S Corporation undistributed tax basis
earnings at that date. The pro forma balance sheet does not give effect
to distributions that might be paid from S Corporation earnings
generated subsequent to December 31, 1996. The amount of the Company's
retained earnings that is not reclassified represents primarily the C
Corporation earnings prior to the Company's election of subchapter S
Corporation status in 1989.
Pro forma net income per share consists of the Company's historical
income as an S Corporation, adjusted for income taxes that would have
been recorded had the Company operated as a C Corporation. This amount
is divided by the weighted average shares of common stock outstanding
after giving retroactive effect to the stock split described in Note 9.
Supplemental pro forma net income per share of $.98 assumes the issuance
of 956,945 additional shares to repay borrowings incurred in connection
with the distribution to shareholders. These additional shares are
assumed to have been issued at the net offering price.
<PAGE> F-15
GULF ISLAND FABRICATION, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 - ACQUISITION OF DOLPHIN SERVICES
On January 2, 1997, the Company acquired all outstanding shares of
Dolphin Services, Inc., Dolphin Steel Sales Inc., and Dolphin Sales and
Rentals Inc. for $5,886,083 (the "Dolphin Acquisition"), which includes
$55,000 of direct acquisition costs. The purchase price exceeded book
value of the assets and liabilities acquired by $255,000. The
acquisition was financed by borrowings under the Company's line of
credit and will be accounted for under the purchase method of accounting
subsequent to January 2, 1997.
The following unaudited pro forma information presents a summary of
consolidated results of operations of the Company and Dolphin Services
as if the acquisition had occurred on January 1, 1996. Pro forma
adjustments include (1) elimination of intercompany sales between the
Company and Dolphin Services, (2) adjustments for the increase in
interest expense on acquisition debt, (3) additional depreciation on
property, plant and equipment and (4) related tax effects. The effects
of termination of the S corporation status (Note 2) are excluded.
Year ended
December 31, 1996
__________________
Revenue $103,007,964
Net income 8,332,880
Net income per share 2.38
NOTE 4 - CONTRACTS RECEIVABLE
Amounts due on contracts as of December 31, are as follows:
1995 1996
___________ ___________
Completed contracts $ 763,617 $ 2,993,275
Contracts in progress:
Current 10,118,194 8,684,928
Retainage due within one year 2,064,565 1,806,211
Less: Allowance for doubtful accounts (4,320) (4,320)
____________ ____________
$12,942,056 $13,480,094
============= ============
The portion of the retainage due in excess of one year is not
significant.
<PAGE> F-16
GULF ISLAND FABRICATION, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Information with respect to uncompleted contracts as of December 31, is
as follows:
1995 1996
___________ ___________
Costs incurred on uncompleted contracts $31,469,005 $23,419,376
Estimated profit earned to date 3,981,149 2,296,505
___________ ___________
35,450,154 25,715,881
Less: Billings to date (37,454,935) (26,614,022)
____________ ____________
$(2,004,781) $ (898,141)
============ ============
The above amounts are included in the accompanying
balance sheet under the following captions:
Costs and estimated earnings in excess of
billings on uncompleted contracts $ 505,096 $ 1,306,341
Billings in excess of costs and estimated
earnings on uncompleted contracts (2,509,877) (2,204,482)
_____________ _____________
$(2,004,781) $ (898,141)
============= =============
NOTE 6 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at December 31:
1995 1996
__________ __________
Land $2,123,447 $ 2,123,447
Buildings 5,143,537 5,159,744
Machinery and equipment 7,332,982 10,813,566
Improvements 7,100,252 9,385,147
Furniture and fixtures 397,773 425,991
Transportation equipment 403,879 404,286
Construction in progress 152,742 127,651
___________ ___________
22,654,612 28,439,832
Less: Accumulated depreciation (9,172,083) (10,705,190)
___________ ____________
$13,482,529 $17,734,642
=========== ============
The Company leases certain equipment used in the normal course of its
operations under month-to-month lease agreements cancelable only by the
Company. During 1994, 1995 and 1996, the Company expensed $2,800,000,
$3,000,000 and $2,801,000, respectively, related to these leases.
<PAGE> F-17
GULF ISLAND FABRICATION, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 - LINES OF CREDIT AND NOTES PAYABLE
Lines of credit consist of the following at December 31:
1995 1996
____________ ___________
Revolving credit agreement with two banks
aggregating $12,000,000 available through
December 31, 1998. Interest at prime rate or
LIBOR plus 2% (9% and 8.25% at December
31, 1995 and 1996), payable quarterly. A fee
on unused commitment of three-eighths of one
percent per annum is payable quarterly. $5,100,000 $3,800,000
Non-revolving line of credit with two banks
aggregating $10,000,000. Principal payable
quarterly commencing June 30, 1997; interest at
prime rate or LIBOR plus 2% (8.25% at December
31, 1996) payable quarterly. - 2,000,000
Other notes payable 445,402 386,894
____________ ___________
5,545,402 6,186,894
Less current portion 433,502 529,752
____________ ___________
$5,111,900 $5,657,142
============ ===========
On January 2, 1997, the amount available under the non-revolving line of
credit was increased to $15,000,000, and amounts outstanding at June 30,
1997 will automatically convert to a term loan due June 30, 2004. All
other provisions remain the same. The revolving credit agreement and
the non-revolving line of credit are secured by substantially all of the
fixed assets of the Company. The Company is required to maintain
certain balance sheet and cash flow ratios, and there are certain
dividend restrictions.
Aggregate maturities of long-term debt in the fiscal years subsequent to
1996 are as follows:
1997 $ 529,752
1998 4,085,714
1999 285,714
2000 285,714
2001 285,714
Thereafter 714,286
___________
$6,186,894
===========
<PAGE> F-18
GULF ISLAND FABRICATION, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 - RETIREMENT PLAN
The Company has a defined contribution plan (the Plan) for all employees
that is qualified under Section 401(k) of the Internal Revenue Code.
Contributions to the Plan by the Company are based on the participants'
contributions, with an additional year end discretionary contribution
determined by the Board of Directors. For the years ended December 31,
1994 and 1995, the Company contributed $347,900 and $239,200. In 1996,
the Company contributed $542,000, including a discretionary contribution
of $250,000. No discretionary contributions were made in 1994 or 1995.
The Company pays expenses associated with the administration of the
Plan.
NOTE 9 - SHAREHOLDERS' EQUITY
On December 1, 1996, the Company's principal shareholders sold 49,000
(1.4%) of their existing shares to officers and management employees at
$7.14 per share (number of shares and per share prices adjusted for
effect of stock split described in following paragraph). The per share
price on that date was based on an independent appraisal that valued the
Company as a privately held business. As a result of the initial public
offering, the Company has determined that it should record a non-
recurring, non-cash compensation charge of $500,000 for the year ended
December 31, 1996 related to the 49,000 shares. This charge was based
on the difference between the net offering price the Company expects to
receive in the public offering and the net cash price recipients of the
49,000 shares expect to have paid. The net cash price to recipients of
$3.57 per share represents the $7.14 per share price charged by the
shareholders, less $3.76 per share of tax-free dividends that the
recipients expect to receive as a result of the shareholder
distributions described in Note 2, increased by the recipient's share of
taxable income for the year of $.19 per share (in each case adjusted for
the effect of the stock split described in the following paragraph).
The compensation charge resulted in a corresponding increase to
additional paid-in capital.
On February 13, 1997, the Board of Directors adopted a long-term
incentive compensation plan under which options for 500,000 shares of common
stock may be granted to officers and key employees. The exercise price
for options may not be less than the fair market value of the common
stock on the date of grant. Options for 106,500 shares were granted at
an exercise price which is to equal the initial public offering price.
On February 14, 1997, the shareholders enacted the following:
(a) Authorized a stock split whereby the 1,000,000 outstanding shares of
no par value common stock were exchanged for 3,500,000 shares of
common stock. This recapitalization is reflected retroactively in
the accompanying financial statements and per share calculations.
(b) Authorized 5,000,000 shares of no par value preferred stock. There
are no preferred shares issued or outstanding.
(c) Increased the authorized common shares from 10,000,000 shares to
20,000,000 shares.
NOTE 10 - COMMITMENTS AND CONTINGENT LIABILITIES
The Company has a commitment to purchase two cranes in 1997
for $4,303,000.
The Company is one of four defendants in a lawsuit in which
the plaintiff claims that the Company improperly installed
certain attachments to a jacket that it had fabricated for
the plaintiff. The plaintiff, which has recovered most of
its out-of-pocket losses from its own insurer, seeks to
recover the remainder of its claimed out-of-pocket losses
(approximately $1 million) and approximately $63 million for
punitive damages and for economic losses which it alleges
resulted from the delay in oil and gas production that was
caused by these events. Management is vigorously defending
its case and, after consultation with legal counsel, does
not expect that the ultimate resolution of this matter will
have a material adverse effect on the financial position or
results of operations of the Company.
The Company is subject to other claims through the normal
conduct of its business. While the outcome of such claims
cannot be determined, management does not expect that
resolution of these matters will have a material adverse
effect on the financial position or results of operations of
the Company.
<PAGE> F-19
GULF ISLAND FABRICATION, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 11 - SALES TO MAJOR CUSTOMERS
The Company's customer base is primarily concentrated in the oil and gas
industry. The Company is not dependent on any one customer, and the
revenue earned from each customer varies from year to year based on the
contracts awarded. Sales to customers comprising 10% or more of the
Company's total revenue are summarized as follows:
1994 1995 1996
_______ ________ ________
Customer A $ 8,008,840 $ - $ -
Customer B 15,018,718 12,035,534 -
Customer C - 13,230,058 -
Customer D - - 8,195,638
Customer E - - 9,378,628
Customer F - - 10,118,798
Total export sales to West Africa and Latin America were $15,935,213,
$25,964,572 and $12,871,693 in 1994, 1995 and 1996, respectively.
<PAGE> F-20
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Dolphin Services, Inc., Dolphin Sales and Rentals, Inc.
and Dolphin Steel Sales, Inc.
In our opinion, the accompanying combined balance sheet and the related
combined statements of income and retained earnings and of cash flows
present fairly, in all material respects, the financial position of
Dolphin Services, Inc., Dolphin Sales and Rentals, Inc. and Dolphin
Steel Sales, Inc. (the "Companies") at December 31, 1996, and the
results of their operations and their cash flows for the year in
conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Companies'
management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of
these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable
basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New Orleans, Louisiana
January 23, 1997
<PAGE> F-21
DOLPHIN SERVICES, INC. DOLPHIN SALES AND RENTALS, INC.
AND DOLPHIN STEEL SALES, INC.
COMBINED BALANCE SHEET
DECEMBER 31, 1996
ASSETS
Current assets:
Cash $82,842
Contracts receivable, net of
allowance for doubtful accounts of $65,856 4,659,266
Contract retainage 193,045
Other receivables 137,387
Costs and estimated earnings in excess of
billings on uncompleted contracts 55,493
Inventory 766,624
Prepaid expenses and other current assets 385,290
___________
Total current assets 6,279,947
Property and equipment, net 3,171,823
Other assets 254,282
___________
Total assets $9,706,052
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,455,096
Billings in excess of costs and
estimated earnings on uncompleted contracts 488,357
Accrued expenses 151,044
Accrued employee costs 561,608
Income taxes payable 453,490
Other liabilities 92,074
Current portion of notes payable 205,959
___________
Total current liabilities 3,407,628
Notes payable, less current portion 366,181
Deferred taxes 301,160
___________
Total liabilities 4,074,969
___________
Commitments and contingent liabilities (Note 8)
Shareholders' equity:
Dolphin Services, Inc.-
Common stock, no par value,
200,000 shares authorized,
132,288 shares issued and
111,898 outstanding
(20,390 held in treasury) 476,971
Dolphin Sales and Rentals Inc.-
Common stock, no par value, 10,000
shares authorized, 1,000 shares issued
and outstanding 1,000
Dolphin Steel Sales Inc.-
Common stock, no par value, 10,000
shares authorized, 1,000 shares issued
and outstanding 1,000
Retained earnings 5,455,961
Treasury stock, at cost (303,849)
___________
Total shareholders' equity 5,631,083
____________
$9,706,052
============
See accompanying notes to the financial statements.
<PAGE> F-22
DOLPHIN SERVICES, INC., DOLPHIN SALES AND RENTALS, INC.
AND DOLPHIN STEEL SALES, INC.
COMBINED STATEMENT OF INCOME AND RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1996
Revenue $26,801,965
Cost of revenue $22,949,869
____________
Gross profit 3,852,096
General and administrative expense 1,641,519
___________
Operating income 2,210,577
Interest expense 4,656
___________
Income before income taxes 2,205,921
Provision for income taxes 822,127
___________
Net income 1,383,794
Retained earnings, beginning of year 4,072,167
___________
Retained earnings, end of year $ 5,455,961
===========
<PAGE> F-23
DOLPHIN SERVICES, INC., DOLPHIN SALES AND RENTALS, INC.
AND DOLPHIN STEEL SALES, INC.
COMBINED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996
Cash flows from operating activities:
Cash received from customers $ 25,574,686
Cash paid to suppliers and employees (24,002,725)
Interest paid (4,656)
______________
Net cash provided by operating activities 1,567,305
______________
Cash flows from investing activities:
Capital expenditures, net (883,844)
Proceeds from sale of assets 17,700
______________
Net cash used in investing activities (866,144)
______________
Cash flows from financing activities:
Proceeds from issuance of notes payable 950,158
Principal payments on notes payable (1,465,905)
Proceeds from issuance of common stock 46,969
Purchase of treasury stock (271,451)
______________
Net cash used in financing activities (740,229)
______________
Net decrease in cash (39,068)
Cash at beginning of year 121,910
______________
Cash at end of year $ 82,842
==============
Supplemental Cash Flow Information:
Net income $1,383,794
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 427,459
Increase in contracts receivable (1,788,344)
Decrease in contract retainage 412,069
Loss on sale of assets 3,599
Increase in other receivables (137,387)
Increase in costs and estimated earnings in
excess of billings on uncompleted contracts (55,493)
Increase in inventory (11,850)
Decrease in prepaid expenses and other
current assets 123,684
Decrease in other assets 202,371
Increase in accounts payable 462,579
Decrease in billings in excess of costs and
estimated earnings on uncompleted contracts (41,926)
Increase in accrued expenses 104,032
Increase in accrued employee costs 7,830
Increase in income taxes payable 406,077
Increase in other liabilities 8,317
Increase in deferred taxes 60,494
_____________
Net cash provided by
operating activities $1,567,305
=============
<PAGE> F-24
DOLPHIN SERVICES, INC. DOLPHIN SALES AND RENTALS, INC.
AND DOLPHIN STEEL SALES, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Companies and Principles of Combination
The financial statements of Dolphin Services, Inc., Dolphin Sales and
Rentals, Inc., and Dolphin Steel Sales, Inc. (the "Companies") are
combined, as each company is substantially owned by identical
shareholders. Intercompany accounts and transactions are eliminated in
the combination.
Dolphin Services, Inc. ("Services"), located in Houma, Louisiana,
performs offshore and inshore fabrication and other construction
services for the oil and gas industry. Services' principal markets are
concentrated on the inland and offshore regions of the coast of the Gulf
of Mexico. Dolphin Sales and Rentals, Inc. owns the land and building
leased by Services. There is no other activity for this Company.
Dolphin Steel Sales, Inc. sells steel plates to Services and third
parties.
For the year ended December 31, 1996, the Companies were owned by
various management personnel and other investors. Effective January 2,
1997, all outstanding shares of common stock were sold to Gulf Island
Fabrication, Inc. ("Gulf Island").
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Inventory
Inventory consists of materials and production supplies not held for
resale, valued at $356,775, and steel inventory held for resale, valued
at $409,849. All inventory is stated at the lower of cost or market
determined on the first-in, first-out basis.
Property, Plant and Equipment
Property, plant and equipment are carried at cost. Depreciation of
assets is computed by the straight-line method over the estimated useful
lives of the related assets. Amortization of leasehold improvements is
computed by the straight-line method over the shorter of the useful life
of the asset or the life of the lease. Useful lives range from 30 years
for buildings; 10 to 20 years for machinery and equipment; 5 years for
furniture and fixtures; 3 to 5 years for vehicles; 10 years for
leasehold improvements and 5 years for other equipment. As the
Companies have not had any construction projects of significant
duration, no interest costs have been capitalized; however, certain
labor and other direct construction costs have been capitalized as part
of the assets.
Assets retired or otherwise disposed of are removed from the accounts
along with any related depreciation and amortization, and the resultant
gain or loss is reflected in income. Maintenance and repairs are
charged to expense as incurred.
<PAGE> F-25
DOLPHIN SERVICES, INC., DOLPHIN SALES AND RENTALS, INC.
AND DOLPHIN STEEL SALES, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
Revenue Recognition
Revenue from fixed-price and time and materials construction contracts
is recognized on the percentage-of-completion method based on the ratio
of costs incurred to total estimated costs at completion.
Contract costs include all direct material and labor costs and those
indirect costs related to contract performance, such as indirect labor,
supplies and tools. Also included in contract costs are a portion of
those indirect contract costs related to plant capacity, such as
depreciation, insurance and repairs and maintenance. These indirect
costs are allocated to jobs based on actual direct labor hours incurred.
Provisions for estimated losses on uncompleted contracts are made in the
period in which such losses are determined.
The asset caption entitled "costs and estimated earnings in excess of
billings on uncompleted contracts" represents revenue recognized in
excess of amounts billed. The liability caption "billings in excess of
cost and estimated earnings on uncompleted contracts" represents amounts
billed in excess of revenue recognized.
Income Taxes
The Companies provide for taxes on the basis of items included in the
determination of income for financial reporting purposes regardless of
the period when such items are reported for tax purposes. Accordingly,
the Companies record deferred tax liabilities and assets for future tax
consequences of events that have been recognized in different periods
for financial and tax purposes.
Immediately prior to the sale of the outstanding stock of the Companies
to Gulf Island on January 2, 1997, the Companies' shareholders elected
to change the Companies' statuses from C Corporations to S Corporations
for federal and state income tax purposes, which is consistent with the
S Corporation status under which Gulf Island has operated. Accordingly,
the shareholders will become liable for all future individual federal
and state income taxes on the allocated portions of the Companies'
taxable income.
Fair Value of Financial Instruments
The carrying amount of the Companies' financial instruments at December
31, 1996 including cash, contracts receivable, and notes payable,
closely approximates fair value.
Basis for Cash Flows
For purposes of the combined statement of cash flows, the Companies
include cash on hand and cash in banks.
<PAGE> F-26
DOLPHIN SERVICES, INC., DOLPHIN SALES AND RENTALS, INC.
AND DOLPHIN STEEL SALES, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - CONTRACTS RECEIVABLE
Amounts due on contracts as of December 31, 1996 are as follows:
Completed contracts $ 2,957,585
Contracts in progress:
Current 1,767,537
Retainage due within one year 193,045
Less: Allowance for doubtful accounts (65,856)
____________
$ 4,852,311
============
NOTE 3 - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Information with respect to uncompleted contracts as of December 31,
1996 is as follows:
Costs incurred on uncompleted contracts $ 2,616,465
Estimated profit earned to date 166,708
____________
$ 2,783,173
Less: Billings to date (3,216,037)
____________
$ (432,864)
============
The above amounts are included in the
accompanying balance sheet under
the following captions:
Costs and estimated earnings in excess of
billings on uncompleted contracts $ 55,493
Billings in excess of costs and estimated
earnings on uncompleted contracts (488,357)
______________
$ (432,864)
==============
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following at December 31,
1996:
Land $ 332,216
Buildings and leasehold improvements 1,197,895
Furniture and fixtures 46,751
Machinery and equipment 4,536,423
Automotive equipment 662,049
Other 123,551
___________
6,898,885
Less: Accumulated depreciation and amortization (3,727,062)
____________
$3,171,823
============
Depreciation expense for 1996 totalled $427,459.
<PAGE> F-27
DOLPHIN SERVICES, INC., DOLPHIN SALES AND RENTALS, INC.
AND DOLPHIN STEEL SALES, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 - NOTES PAYABLE AND LINE OF CREDIT
Notes payable and line of credit consists of the following at December
31, 1996:
Note payable to bank, interest at 8%; monthly principal
installments of $9,047 plus interest through April 30,
2001; secured by a 4100 Series Manitowoc crane $ 474,834
Note payable to bank, interest at a prime rate plus 1%
(9.25% at December 31, 1996); monthly principal
installments of $4,500 plus interest through April
30, 1997; secured by accounts receivable and
inventory 22,306
Revolving credit agreement with a bank, aggregating
$1,500,000 through April 1997. Interest at a prime
rate (8.25% at December 31, 1996), payable monthly;
secured by and limited to certain qualifying accounts
receivable 75,000
___________
Total notes payable 572,140
Less current portion 205,959
___________
Long-term notes payable $ 366,181
===========
Maturities of long-term notes payable and line of credit for years
subsequent to 1996 are as follows:
1997 $205,959
1998 108,564
1999 108,564
2000 108,564
2001 40,489
__________
$ 572,140
==========
In connection with the purchase of the companies on January 2, 1997,
Gulf Island paid all outstanding debt of the Companies in full.
<PAGE> F-28
DOLPHIN SERVICES, INC., DOLPHIN SALES AND RENTALS, INC.
AND DOLPHIN STEEL SALES, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 - INCOME TAXES
The components of the provision for income taxes for the year ended
December 31, 1996 follow:
Current tax expense:
Federal $ 685,880
State 75,753
__________
Total current tax expense 761,633
Deferred tax expense 60,494
__________
Total provision for income taxes $ 822,127
==========
Deferred income taxes are provided for temporary differences between the
financial reporting basis and the tax basis of the Companies' assets and
liabilities. The Companies' temporary differences primarily relate to
differences in depreciation for book and tax purposes and different
methods for recognizing bad debts. The provision for income taxes is
greater than the amount of income tax determined by applying the
applicable federal rate to pre-tax income due to state income taxes.
NOTE 7 - RETIREMENT PLAN
Services has a qualified 401(k) profit sharing plan (the Plan) for
employees. The Plan provides for a 50% match by Services for employee
contributions of up to 6% of gross pay. Such employer contributions
vest over a period of 6 years and totaled $73,852 in 1996. Services
pays expenses associated with the administration of the Plan which
totalled $5,214 in 1996.
NOTE 8 - COMMITMENTS AND CONTINGENT LIABILITIES
From time to time, the Companies are parties to various legal
proceedings arising in the ordinary course of business. The Companies
are not currently party to any material litigation and is not aware of
any litigation threatened against it that could have a material adverse
effect on the financial statements or results of operations.
NOTE 9 - SALES TO MAJOR CUSTOMERS
Services' customer base is primarily concentrated in the oil and gas
industry. Services is not dependent on any one customer, and the
revenue earned from each customer varies from year to year based on the
contracts awarded. Sales to customers comprising 10% or more of the
Companies' total revenue in 1996 are summarized as follows:
Customer A $4,469,607
Customer B 2,794,040
<PAGE>
_______________________________________ ___________________________________
No dealer, salesperson or any other
person has been authorized to give any
information or to make any
representations not contained in this
Prospectus in connection with the offer
contained herein, and, if given or 2,000,000 Shares
made, such information or
representations must not be relied upon
as having been authorized by the
Company or any Underwriter. This
Prospectus does not constitute an offer [LOGO]
to sell or a solicitation of an offer
to buy the shares of Common Stock
offered hereby by anyone in any
jurisdiction in which such offer or
solicitation is not authorized, or in
which the person making such offer or Gulf Island Fabrication, Inc.
solicitation is not qualified to do so,
or to any person to whom it is unlawful
to make such solicitation or offer.
Neither the delivery of this Prospectus Common Stock
nor any sale made hereunder shall,
under any circumstances, create an
implication that there has been no
change in the affairs of the Company
since the date hereof or that the
information contained herein is correct
as of any time subsequent to its date. _____________
_________________
PROSPECTUS
______________
TABLE OF CONTENTS
Page
Prospectus Summary.................
Risk Factors....................... Morgan Keegan & Company, Inc.
Prior S Corporation Status.........
Use of Proceeds.................... Raymond James & Associates, Inc.
Dividend Policy...................
Dilution........................... Johnson Rice & Company L.L.C.
Capitalization.....................
Selected Financial and
Operating Data....................
Management's Discussion
and Analysis of Financial......... __________________, 1997
Condition and Results of
Operations........................
Business Management................
Principal Shareholders.............
Certain Transactions...............
Description of Capital Stock.......
Underwriting.......................
Shares Eligible for Future Sale....
Legal Matters......................
Experts............................
Other Information..................
Glossary of Certain Technical
Terms.............................
Index to Consolidated Financial
Statements........................ F-1
______________________
Until _____________, 1997 (25
days after the date of this
Prospectus), all dealers effecting
transactions in the Common Stock,
whether or not participating in this
distribution, may be required to
deliver a Prospectus. This is in
addition to the obligation of the
dealers to deliver a Prospectus when
acting as Underwriters and with respect
to their unsold allotments or
subscriptions.
________________________________________ ____________________________________
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Estimated expenses payable in connection with the proposed sale
of Common Stock covered hereby are as follows:
SEC registration fee $ 11,152
NASD filing fee 4,180
Printing expenses
Legal fees and expenses
Accounting fees and expenses
Blue Sky fees and expenses
(including counsel fees)
Transfer agent fees and expenses
Miscellaneous expenses
_____________
Total expenses $
Item 14. Indemnification of Directors and Officers.
The Louisiana Business Corporation Law (the "LBCL"), Section 83,
(i) gives Louisiana corporations broad powers to indemnify their present
and former directors and officers and those of affiliated corporations
against expenses incurred in the defense of any lawsuit to which they
are made parties by reason of being or having been such directors or
officers; (ii) subject to specific conditions and exclusions, gives a
director or officer who successfully defends such an action the right to
be so indemnified; and (iii) authorizes Louisiana corporations to buy
directors' and officers' liability insurance. Such indemnification is
not exclusive of any other rights to which those indemnified may be
entitled under any by-law, agreement, authorization of shareholders or
otherwise.
The Company's By-laws make mandatory the indemnification of
directors and officers permitted by the LBCL. The standard to be applied
in evaluating any claim for indemnification (excluding claims for
expenses incurred in connection with the successful defense of any
proceeding or matter therein for which indemnification is mandatory
without reference to any such standard) is whether the claimant acted in
good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the Company. With respect to any
criminal action or proceeding, the standard is that the claimant had no
reasonable cause to believe the conduct was unlawful. No indemnification
is permitted in respect of any claim, issue or matter as to which a
director or officer shall have been adjudged by a court of competent
jurisdiction to be liable for willful or intentional misconduct or to
have obtained an improper personal benefit, unless, and only to the
extent that the court shall determine upon application that, in view of
all the circumstances of the case, he is fairly and reasonably entitled
to indemnity for such expenses that the court shall deem proper.
The Company maintains liability policies to indemnify its officers
and directors against loss arising from claims by reason of their legal
liability for acts as officers and directors, subject to limitations and
conditions to be set forth in the policies.
The Underwriters have also agreed to indemnify the directors and
certain of the Company's officers against certain liabilities, including
liabilities under the Securities Act of 1933, as amended (the
"Securities Act"), or to contribute to payments that such directors and
officers may be required to make in respect thereof.
Each of the Company's directors and executive officers has entered
into an indemnity agreement with the Company, pursuant to which the
Company has agreed under certain circumstances to purchase and maintain
directors' and officers' liability insurance. The agreements also
provide that the Company will indemnify the directors and executive
officers against any costs and expenses, judgments, settlements and
fines incurred in connection with any claim involving a director or
executive officer by reason of his position as director or officer that
are in excess of the coverage provided by any such insurance, provided
that the director or officer meets certain standards of conduct. A form
of indemnity agreement containing such standards of conduct is included
as an exhibit to this Registration Statement. Under the indemnity
agreements, the Company is not required to purchase and maintain
directors' and officers' liability insurance if it is not reasonably
available or, in the reasonable judgment of the Board of Directors,
there is insufficient benefit to the Company from the insurance.
Item 15. Recent Sales of Unregistered Securities
None.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
1.1 Form of Underwriting Agreement.*
2.1 Stock Purchase Agreement with respect to Dolphin Services,
Inc. dated November 27, 1996.*
2.2 Stock Purchase Agreement with respect to Dolphin Steel
Sales, Inc., dated November 27, 1996.*
2.3 Stock Purchase Agreement with respect to Dolphin Sales &
Rentals, Inc. dated November 27, 1996.*
3.1 Amended and Restated Articles of Incorporation of the
Company.
3.2 By-laws of the Company.
4.1 See Exhibits 3.1 and 3.2 for provisions of the Company's
Amended and Restated Articles of Incorporation and By-laws
defining the rights of holders of Common Stock.
4.2 Specimen Common Stock certificate.*
5.1 Opinion of Jones, Walker, Waechter, Poitevent, Carrere &
Denegre L.L.P.*
10.1 Form of Indemnity Agreement by and between the Company and
each of its directors and executive officers.
10.2 Registration Rights Agreement between the Company and Alden
J. Laborde.*
10.3 Registration Rights Agreement between the Company and Huey
J. Wilson.*
10.4 Fifth Amended and Restated Revolving Credit and Term Loan
Agreement among the Company and First National Bank of
Commerce and Whitney National Bank, dated as of October 24,
1996 (the "Bank Credit Facility").*
10.5 First Amendment to the Company's Bank Credit Facility, dated
as of January 2, 1997.*
10.6 The Company's Long-Term Incentive Plan.
10.7 Form of Stock Option Agreement under the Company's Long-Term
Incentive Plan.*
21.1 Subsidiaries of the Company.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Jones, Walker, Waechter, Poitevent, Carrere &
Denegre L.L.P. (included in Exhibit 5.1).*
24.1 Power of Attorney (included in the Signature Page to this
Registration Statement).
27.1 Financial Data Schedule.
(b) Financial Statements Schedule.
Schedule II
*To be filed by amendment.
Item 17. Undertakings.
The undersigned registrant hereby undertakes to provide to the
Underwriters at the closing specified in the underwriting agreement
certificates in such denominations and registered in such names as
required by the Underwriters to permit prompt delivery to each
purchaser.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act, the information omitted from the form of
prospectus filed as part of this Registration Statement in
reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this Registration Statement as of the
time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains
a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described in Item
14 above, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person
of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Houma, State of Louisiana, on February 13, 1997.
GULF ISLAND FABRICATION, INC.
By: /s/ Kerry J. Chauvin
___________________________
Kerry J. Chauvin
President and Chief Executive
Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints each of Alden J. Laborde and
Kerry J. Chauvin, or either one of them, his true and lawful attorney-
in-fact and agent, with full power of substitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and
ratifying and confirming all that said attorney-in-fact and agent or his
substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
_________ _____ _____
/s/ Alden J. Laborde Chairman of the Board February 13, 1997
______________________
Alden J. Laborde
/s/ Kerry J. Chauvin President, Chief Executive Officer February 13, 1997
________________________ and Director (Principal Executive
Kerry J. Chauvin Officer)
/s/ Joseph P. Gallagher,III Vice President - Finance, Chief February 13, 1997
___________________________ Financial Officer, Security and
Joseph P. Gallagher, III Treasurer (Principal Financial and
Accounting Officer)
/s/ Gregory J. Cotter Director February 13, 1997
_________________________
Gregory J. Cotter
/s/ Thomas E. Fairley Director February 13, 1997
_________________________
Thomas E. Fairley
/s/ Hugh J. Kelly Director February 13, 1997
_________________________
Hugh J. Kelly
/s/ John P. Laborde Director February 13, 1997
_________________________
John P. Laborde
/s/ Huey J. Wilson Director February 13, 1997
_________________________
Huey J. Wilson
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
For the Three Years Ended December 31, 1996
<TABLE>
<CAPTION>
=====================================================================================================
Column A Column B Column C Column D Column E
_____________________________________________________________________________________________________
Additions Deductions
______________________ ____________
Balance at Charged to Charged Balance at
Beginning Costs and to Order End of
Description of Period Expenses Accounts (Write-Offs) Period
_____________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1994
Allowance for doubtful accounts $4,290 $ - $ - $ - $ 4,290
Year Ended December 31, 1995
Allowance for doubtful accounts 4,290 30 - - 4,320
Year Ended December 31, 1996
Allowance for doubtful accounts 4,320 - - - 4,320
</TABLE>
<PAGE>
EXHIBIT INDEX
Sequentially
Exhibit Numbered
Number Description of Exhibits Page
1.1 Form of Underwriting Agreement.*
2.1 Stock Purchase Agreement with respect to Dolphin
Services, Inc. dated November 27, 1996.*
2.2 Stock Purchase Agreement with respect to Dolphin
Steel Sales, Inc., dated November 27, 1996.*
2.3 Stock Purchase Agreement with respect to Dolphin
Sales & Rentals, Inc. dated November 27, 1996.*
3.1 Amended and Restated Articles of Incorporation of
the Company.
3.2 By-laws of the Company.
4.1 See Exhibits 3.1 and 3.2 for provisions of the
Company's Amended and Restated Articles of
Incorporation and By-laws defining the rights of
holders of Common Stock.
4.2 Specimen Common Stock certificate.*
5.1 Opinion of Jones, Walker, Waechter, Poitevent,
Carrere & Denegre, L.L.P.*
10.1 Form of Indemnity Agreement by and between the
Company and each of its directors and executive
officers.
10.2 Registration Rights Agreement between the Company
and Alden J. Laborde.*
10.3 Registration Rights Agreement between the Company
and Huey J. Wilson.*
10.4 Fifth Amended and Restated Revolving Credit and
Term Loan Agreement among the Company and First
National Bank of Commerce and Whitney National
Bank, dated as of October 24, 1996 (the "Bank
Credit Facility").*
10.5 First Amendment to the Company's Bank Credit
Facility, dated as of January 2, 1997.*
10.6 The Company's Long-Term Incentive Plan.
10.7 Form of Stock Option Agreement under the
Company's Long-Term Incentive Plan.*
21.1 Subsidiaries of the Company
23.1 Consent of Price Waterhouse LLP
23.2 Consent of Jones, Walker, Waechter, Poitevent,
Carrere & Denegre, L.L.P. (included in Exhibit
5.1).*
24.1 Power of Attorney (included in the Signature Page
to this Registration Statement).
27.1 Financial Data Schedule.
______________________
* To be filed by amendment.
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
GULF ISLAND FABRICATION, INC.
Gulf Island Fabrication, Inc., a Louisiana corporation (the
"Corporation"), acting through its undersigned President and
Secretary and by authority of its shareholders and Board of
Directors, does hereby certify that:
FIRST: The Amended and Restated Articles of Incorporation
set forth in paragraph Fifth below accurately set forth the
articles of incorporation of the Corporation and all amendments
thereto in effect on the date hereof, including the changes made
by the amendments described in Paragraph Fourth below.
Immediately prior hereto, the authorized capital stock of the
Corporation consisted of 10,000,000 shares of capital stock, no
par value per share, all of which shares were denominated as
Common Stock, no par value per share, of which 1,000,000 shares
of Common Stock were issued and outstanding.
SECOND: All such amendments have been effected in
conformity with law.
THIRD: The date of incorporation of the Corporation was
April 26, 1989 and the date of these Amended and Restated
Articles of Incorporation is February 14, 1997.
FOURTH: Acting by written consent of shareholders dated
February 8, 1997 pursuant to Section 76(B) of the Louisiana
Business Corporation Law and Article IV of the Corporation's
articles of incorporation, the holders of 70,600 of the
outstanding shares of Common Stock of the Corporation,
constituting 69% of the issued and outstanding shares of Common
Stock of the Corporation entitled to vote thereon and
constituting more than two-thirds of the shares entitled to be
voted by persons who are not interested shareholders (as defined
in La. R.S. 12:132) of the Corporation, adopted resolutions (i)
amending the Articles of Incorporation of the Corporation as in
effect prior to the date thereof by deleting Articles I through X
in their entirety and replacing such articles with new Articles I
through X as set forth in paragraph Fifth below, (ii) restating
the Articles of Incorporation as so amended in their entirety,
and (iii) reclassifying and splitting each share of Common Stock
outstanding immediately prior hereto into three and 5/10 (3.5)
shares of Common Stock, no par value.
FIFTH: The Amended and Restated Articles of Incorporation
of the Corporation are as follows:
ARTICLE I
Name
The name of the corporation is Gulf Island Fabrication, Inc.
ARTICLE II
Purpose
The purpose of the Corporation is to engage in any lawful
activity for which corporations may be formed under the Business
Corporation Law of Louisiana.
ARTICLE III
Capital
A. Authorized Stock. The Corporation shall have the
authority to issue an aggregate of 25,000,000 shares of capital
stock, of which 20,000,000 shares shall be Common Stock, no par
value per share, and 5,000,000 shares shall be Preferred Stock,
no par value per share.
B. Preferred Stock. Shares of Preferred Stock may be
issued from time to time in one or more series. Authority is
hereby vested in the Board of Directors of the Corporation to
amend these Articles of Incorporation from time to time to fix
the preferences, limitations and relative rights as between the
Preferred Stock and the Common Stock, and to fix variations in
the preferences, limitations and relative rights as between
different series of Preferred Stock.
C. Reclassification. From and after the effective date of
these Amended and Restated Articles of Incorporation, each issued
and outstanding share of Common Stock, no par value per share, of
the Corporation outstanding immediately prior hereto shall be
reclassified into three and 5/10 (3.5) shares of Common Stock, no
par value per share.
ARTICLE IV
Directors
A. Number of Directors. The Board of Directors shall
consist of such number of persons as shall be designated from
time to time in the by-laws of the Corporation, or, if not so
designated, as may be designated from time to time by resolution
of the Board of Directors, provided that no decrease in the
number of directors shall shorten the term of any incumbent
director.
B. Classification. The Board of Directors, other than
those who may be elected by the holders of any class or series of
stock having preference over the Common Stock as to dividends or
upon liquidation (whose terms of office may be determined by the
Board of Directors pursuant to Article III(B)), shall be divided,
with respect to the time during which, they shall bold office,
into three classes as nearly equal in number as possible, with
the initial term of office of the Class I directors expiring at
the annual meeting of shareholders to be held in 1998, of the
Class II directors expiring at the next succeeding annual meeting
of shareholders, and of the Class III directors expiring at the
second succeeding annual meeting, with all such directors to hold
office until their successors are elected and qualified. At each
subsequent annual meeting of shareholders, directors chosen to
succeed those whose terms then expire shall be elected to hold
office for a term expiring at the annual meeting of shareholders
held in the third year following the year of their election and
until their successors are duly elected and qualified. If the
Board of Directors shall appoint any director to fill a vacancy
on the Board, whether resulting from an increase in the number of
directors or otherwise, such Director shall be assigned to a
class by the Board of Directors so that all classes of directors
shall be as nearly equal in number as possible. In the event of
a decrease in the number of directors, the Board of Directors may
reassign the remaining directors to classes so that all classes
of directors shall be as nearly equal in number as possible.
C. Vacancies. Except as provided in Article IV(F) hereof,
any vacancy on the Board (including any vacancy resulting from an
increase in the authorized number of directors or from a failure
of the shareholders to elect the full number of authorized
directors) may, notwithstanding any resulting absence of a quorum
of directors, be filled by a vote of at least two-thirds of the
directors remaining in office, provided that the shareholders
shall have the right to fill the vacancy at any special meeting
called for such purpose prior to any such action by the Board.
Vacancies on the Board may be filled only as provided in this
Article IV(C).
D. Removal. Except as provided in Article IV(F) hereof,
any one or more directors may be removed, at any time, (i) with
or without cause, by the affirmative vote of at least two-thirds
of the directors then constituting the Board of Directors or (ii)
only for cause, by the holders of not less than two-thirds of the
Total Voting Power (as defined in Article VII(C) hereof) that is
present or represented at a special meeting of shareholders
called for such purpose, voting together as a single class. For
purposes of this Article IV(D), "cause" shall mean (i) a
conviction of a director by a court of competent jurisdiction of
a felony involving moral turpitude if such conviction is no
longer subject to direct appeal or (ii) an adjudication by a
court of competent jurisdiction of liability for gross negligence
or gross misconduct in the performance of the director's duty to
the Corporation in a matter of substantial importance to the
Corporation if such adjudication is no longer subject to direct
appeal. At the same meeting in which the directors or
shareholders remove one or more directors, a successor or
successors may be elected for the unexpired term of the director
or directors removed. Except as set forth in this Article IV(D),
or in any provision of these Articles of Incorporation relating
to removal of directors elected by holders of Preferred Stock,
directors shall not be subject to removal.
E. Board Nominations. Except as provided in Article IV(F)
hereof, only persons who are nominated in accordance with the
procedures set forth in this Article IV(E) shall be eligible for
election as directors. Nominations of persons for election to
the Board of Directors of the Corporation may be made at a
meeting of shareholders by or at the direction of the Board of
Directors or by any shareholder of record of the Corporation
entitled to vote at such meeting for the election of directors
who complies with the notice procedures set forth in this Article
IV(E). Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the Corporation. To
be timely, a shareholder's notice shall be delivered to or mailed
and received at the principal office of the Corporation not less
than 45 days nor more than 90 days prior to the meeting,
provided, however, that in the event that less than 55 days
notice or prior public disclosure of the date of the meeting is
given or made to shareholders, notice by the shareholder to be
timely must be so received at the principal executive offices of
the Corporation no later than the close of business on the tenth
day following the day on which such notice of the date of the
meeting was mailed or such public disclosure was made. Such
shareholder's notice shall set forth or include the following:
1. as to each person whom the shareholder proposes to
nominate for election or re-election as a director, (a) the
name, age, business address and residential address of such
person, (b) the principal occupation or employment of such
person, (c) the class and number of shares of capital stock
of the Corporation of which such person is the beneficial
owner (as defined in Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange
"Act")), (d) such person's written consent to being named in
the proxy statement as a nominee and to serve as a director
if elected and (e) any other information relating to such
person that would be required to be disclosed in
solicitations of proxies for the election of directors, or
would be otherwise required, in each case pursuant to
Regulation 14A promulgated under the Exchange Act; and
2. as to the shareholder of record giving the notice,
(a) the name and address of such shareholder and (b) the
class and number of shares of capital stock of the
Corporation of which such shareholder is the beneficial
owner (as defined in Rule 13d-3 promulgated under the
Exchange Act). If requested in writing by the Secretary of
the Corporation at least 15 days in advance of the meeting,
such shareholder shall disclose to the Secretary, within ten
days of such request, whether such person is the sole
beneficial owner of the shares held of record by him, and,
if not, the name and address of each other person known by
the shareholder of record to claim or have a beneficial
interest in such shares.
At the request of the Board of Directors, any person nominated by
the Board of Directors for election as a director shall furnish
to the Secretary of the Corporation that information required to
be set forth in a shareholders notice of nomination which
pertains to the nominee. If a shareholder seeks to nominate one
or more directors, the Secretary shall appoint two inspectors,
who shall not be affiliated with the Corporation, to determine
whether the shareholder has complied with this Article IV(E). If
the inspectors shall determine that the shareholder has not
complied with this Article IV(E), the defective nomination shall
be disregarded and the inspectors shall direct the Chairman of
the meeting to declare at the meeting that such nomination was
not made in accordance with the procedures prescribed by the
Articles of Incorporation.
F. Directors Elected by Preferred Shareholders.
Notwithstanding anything in these Articles of Incorporation to
the contrary, whenever the holders of any one or more classes or
series of stock having a preference over the Common Stock as to
dividends or upon liquidation shall have the right, voting
separately as a class, to elect one or more directors of the
Corporation, the provisions of these Articles of Incorporation
(as they may be duly amended from time to time) fixing the rights
and preferences of such preferred stock shall govern with respect
to the nomination, election, term, removal, vacancies or other
related matters with respect to such directors.
ARTICLE V
By-laws
A. Adoption, Amendment and Repeal. By-laws of the
Corporation may be adopted only by a majority vote of the Board
of Directors. By-laws may be amended or repealed only by (i) a
two-thirds vote of all directors who constitute the Board of
Directors, or (ii) the affirmative vote of the holders of at
least eighty percent of that portion of the Total Voting Power,
as defined in Article VII(C) hereof, voting together as a single
class, that is present or represented at any regular or special
meeting of shareholders, the notice of which meeting of
shareholders expressly states that the proposed amendment or
repeal is to be considered at the meeting.
B. New Matters. Any purported amendment to the By-laws
which would add thereto a matter not expressly covered in the By-
laws prior to such purported amendment shall be deemed to
constitute the adoption of a By-law provision and not an
amendment to the By-laws.
ARTICLE VI
Application of Certain Laws
The Corporation hereby elects not to be governed by Sections
132, 133 and 134 of the Louisiana Business Corporation Law
(La.R.S. 12:132, La.R.S. 12:133 and La.R.S. 12:134).
ARTICLE VII
Special Shareholder Voting Requirements
A. Amendments. Unless approved by vote of at least two-
thirds of the directors constituting the Board of Directors,
Articles IV, V, VI, VII, VIII and X of the Articles of
Incorporation may be amended only by the affirmative vote of not
less than eighty percent of the Total Voting Power of the
Corporation.
B. Other Corporate Actions. If a vote of shareholders is
required to authorize an agreement of merger or consolidation of
the Corporation, the sale of all or substantially all of the
assets of the Corporation or the voluntary dissolution of the
Corporation, then, unless such action has been approved by vote
of at least two-thirds of the directors constituting the Board of
Directors, such action may be authorized only by the affirmative
vote of eighty percent of the Total Voting Power of the
Corporation.
C. Total Voting Power. The term "Total Voting Power"
means the total number of votes that shareholders, and holders of
any bonds, debentures or other obligations granted voting rights
by the Corporation pursuant to La.R.S. 12:75(H), are generally
entitled to cast with respect to the election of directors or, if
such term is used with reference to any other particular matter
properly brought before the shareholders or such other holders
for their consideration and vote, means the total number of such
votes that are entitled to be cast with respect to such matter.
ARTICLE VIII
Limitation of Liability and Indemnification
A. Limitation of Liability. No director or officer of the
Corporation shall be liable to the Corporation or to its
shareholders for monetary damages for breach of his fiduciary
duty as a director or officer, provided that the foregoing
provision shall not eliminate or limit the liability of a
director or officer for (1) any breach of his duty of loyalty to
the Corporation or its shareholders; (2) acts or omissions not in
good faith or which involve intentional misconduct or a knowing
violation of law; (3) liability for unlawful distributions of the
Corporation's assets to, or redemptions or repurchases of the
Corporation's shares from shareholders of the Corporation, under
and to the extent provided in La.R.S. 12:92(D); or (4) any
transaction from which he derived an improper personal benefit.
If, after the date hereof, the Louisiana Business Corporation Law
is amended to authorize further elimination or limitation the
personal liability of directors or officers, then the liability
of a director or an officer of the Corporation shall be
eliminated or limited to the fullest extent permitted by the
Louisiana Business Corporation Law, as so amended.
B. Indemnification. Subject to such limitations as may be
determined by the Board of Directors (provided that no change in
such limitations may adversely affect any claim to
indemnification that arises prior to such change), the
Corporation shall indemnify each of its directors to the full
extent from time to time permitted by law, and may so indemnify
each of its officers, against any expenses or costs, including
attorney's fees, actually or reasonably incurred by him in
connection with any threatened, pending or completed claim
action, suit or proceeding, whether criminal, civil,
administrative or investigative against such person or as to
which he is involved solely as a witness or person required to
give evidence
C. Authorization of Further Actions. The Board of
Directors may (1) cause the Corporation to enter into contracts
with its directors and officers providing for the limitation of
liability set forth in this Article to the fullest extent
permitted by law, (2) adopt By-laws or resolutions, or cause the
Corporation to enter into contracts, providing for
indemnification of directors and officers of the Corporation and
other persons (including but not limited to directors and
officers of the Corporation's direct and indirect subsidiaries)
to the fullest extent permitted by law and (3) cause the
Corporation to exercise the powers set forth in La.R.S. 12:83F,
notwithstanding that some or all of the members of the Board of
Directors acting with respect to the foregoing may be parties to
such contracts or beneficiaries of such By-laws or resolutions or
the exercise of such powers. No repeal or amendment of any such
By-laws or resolutions limiting the right to indemnification
thereunder shall affect the entitlement of any person to
indemnification whose claim thereto results from conduct
occurring prior to the date of such repeal or amendment.
D. Subsidiaries. The Board of Directors may cause the
Corporation to approve for its direct and indirect subsidiaries
limitation of liability and indemnification provisions comparable
to the foregoing.
E. Amendment. In addition to any other votes required by
law or these Articles of Incorporation (and notwithstanding the
fact that a lesser percentage may be specified by law or these
Articles of Incorporation), the affirmative vote of the holders
of at least 80% of the Total Voting Power shall be required to
repeal this Article or to amend this Article so as to reduce the
limitation of liability set forth herein or the rights to
indemnification or the powers of the Board of Directors provided
in this Article, and any amendment or repeal of this Article
shall not adversely affect any indemnification or limitation of
liability of a director or officer of the Corporation under this
Article with respect to any action or inaction occurring prior to
the time of such amendment or repeal.
ARTICLE IX
Reversion
Cash, property or share dividends, shares issuable to
shareholders in connection with a reclassification of stock, and
the redemption price of redeemed shares, that are not claimed by
the shareholders entitled thereto within one year after the
dividend or redemption price became payable or the shares became
issuable, despite reasonable efforts by the Corporation to pay
the dividend or redemption price or deliver the certificates for
the shares to such shareholders within such time, shall at the
expiration of such time, revert in full ownership to the
Corporation, and the Corporation's obligation to pay such
dividend or redemption price or issue such shares, as the case
may be, shall thereupon cease, provided, however, that the Board
of Directors may, at any time, for any reason satisfactory to it,
but need not, authorize (1) payment of the amount of any cash or
property dividend or redemption price or (2) issuance of any
shares, ownership of which has reverted to the Corporation
pursuant to this Article, to the person or entity who or which
would be entitled thereto had such reversion not occurred.
ARTICLE X
Special Meetings of Shareholders
A. Special meetings of shareholders, for any purpose or
purposes, may be called in any manner set forth in the By-laws,
provided that the power of shareholders as such to call or cause
to be called special meetings shall be governed exclusively by
paragraph B of this Article.
B. At any time, upon the written request of any
shareholder or group of shareholders holding in the aggregate at
least a majority of the Total Voting Power, the Secretary of the
Corporation shall call a special meeting of shareholders to be
held at the registered office of the Corporation at such time as
the Secretary may fix not less than 15 nor more than 60 days
after the receipt of said request, and if the Secretary shall
neglect or refuse to fix such time or to give notice of the
meeting, the shareholder or shareholders making the request may
do so. Such requests must state the specific purpose or purposes
of the proposed special meeting, and the business to be conducted
thereat shall be limited to such purpose or purposes.
BY-LAWS
OF
GULF ISLAND FABRICATION, INC.
(Adopted February 13, 1997)
SECTION 1
OFFICES
1.1 Principal Office. The principal office of the
Corporation shall be located at 583 Thompson Road, Houma,
Louisiana 70363.
1.2 Additional Offices. The Corporation may have such
offices at such other places as the Board of Directors may from
time to time determine or the business of the Corporation may
require.
SECTION 2
SHAREHOLDER MEETINGS
2.1 Place of Meetings. Unless otherwise required by law
or these By-laws, all meetings of the shareholders shall be held
at the principal office of the Corporation or at such other
place, within or without the State of Louisiana, as may be
designated by the board of Directors.
2.2 Annual Meetings; Notice Thereof. An annual meeting
of the shareholders shall be held each year on the date and at
the time as the Board of Directors shall designate, for the
purpose of electing directors and of the transaction of such
other business as may be properly brought before the meeting. If
no annual shareholders' meeting is held for a period of eighteen
months, any shareholder may call such meeting to be held at the
registered office of the Corporation as shown on the records of
the Secretary of State of the State of Louisiana.
2.3 Special Meetings. Special meetings of the
shareholders, for any purpose or purposes, may be called by or at
the direction of the Board of Directors. Shareholders may call a
special meeting of shareholders in accordance with the applicable
provisions of the Articles of Incorporation.
2.4 Notice of Meetings. Except as otherwise provided by
law or the Articles of Incorporation, the authorized person or
persons calling a shareholders' meeting shall cause written
notice of the time, place and purpose of the meeting to be given
to all shareholders entitled to vote at such meeting, at least 10
days and not more than 75 days prior to the day fixed for the
meeting. Notice of the annual meeting need not state the purpose
or purposes thereof, unless action is to be taken at the meeting
as to which notice is required by law or the By-laws. Notice of
a special meeting shall state the purpose or purposes thereof,
and the business conducted at any special meeting shall be
limited to the purpose or purposes stated in the notice.
2.5 List of Shareholders. At every meeting of
shareholders, a list of shareholders entitled to vote, arranged
alphabetically and certified by the Secretary or by the agent of
the Corporation having charge of transfers of shares, showing the
number and class of shares held by each such shareholder on the
record date for the meeting and confirming the number of votes
per share as to which each such shareholder is entitled, shall be
produced on the request of any shareholder.
2.6 Quorum. At all meetings of shareholders, the
holders of a majority of the total voting power shall constitute
a quorum; provided, however, that this subsection shall not have
the effect of reducing the vote required to approve any matter
that may be established by law, the Articles of Incorporation or
these By-laws.
2.7 Voting. When a quorum is present at any
shareholders' meeting, the vote of the holders of a majority of
the votes actually cast shall decide each question brought before
such meeting, unless the resolution of the question requires, by
express provision of law, the Articles of Incorporation or these
By-laws, a different vote or one or more separate votes by the
holders of a class or series of capital stock, in which case such
express provision shall apply and control the decision of such
question. Directors shall be elected by plurality vote.
2.8 Proxies. At any meeting of the shareholders, every
shareholder having the right to vote shall be entitled to vote in
person or by proxy appointed by an instrument in writing executed
by such shareholder and bearing a date not more than eleven
months prior to the meeting, unless the instrument provides for a
longer period, but in no case will an outstanding proxy be valid
for longer than three years from the date of its execution. The
person appointed as proxy need not be a shareholder of the
Corporation.
2.9 Adjournments. Adjournments of any annual or special
meeting of shareholders may be taken without new notice being
given unless a new record date is fixed for the adjourned
meeting, but any meeting at which directors are to be elected
shall be adjourned only from day to day until such directors
shall have been elected.
2.10 Withdrawal. If a quorum is present or represented
at a duly organized shareholders' meeting, such meeting may
continue to do business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum as
fixed in Section 2.6 of these By-laws, or the refusal of any
shareholders to vote.
2.11 Lack of Quorum. If a meeting cannot be organized
because a quorum has not attended, those present may adjourn the
meeting to such time and place as they may determine, subject,
however, to the provisions of Section 2.9 hereof. In the case of
any meeting called for the election of directors, those who
attend the second of such adjourned meetings, although less than
a quorum as fixed in Section 2.6 hereof, shall nevertheless be
deemed to constitute a quorum for the purpose of electing
directors.
2.12 Presiding Officer. The Chairman of the Board or a
person designated by the Chairman of the Board, or in their
absence a person designated by the Board of Directors, shall
preside at all shareholders' meetings.
2.13 Definition of Shareholder. As used in these By-
laws, and unless the context otherwise requires, the term
shareholder shall mean a person who is (i) the record holder of
shares of the Corporation's common stock or any other capital
stock of the Corporation granted voting rights, or (ii) a
registered holder of any bonds, debentures or similar obligations
granted voting rights by the Corporation pursuant to La.R.S.
12:75H.
SECTION 3
DIRECTORS
3.1 Number. All of the corporate powers shall be vested
in, and the business and affairs of the Corporation shall be
managed by, a Board of Directors. Except as otherwise fixed by
or pursuant to Article III(B) of the Articles of Incorporation
(as it may be duly amended from time to time) relating to the
rights of the holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon
liquidation to elect additional directors by class vote, the
Board of Directors shall consist of seven natural persons;
provided that, if after the last action of the Board of Directors
with respect to nomination of directors prior to the mailing to
shareholder of proxy materials for any meeting of shareholders at
which directors are to be elected, any person or persons named
therein to be nominated at the direction of the Board of
Directors becomes unable or unwilling to serve, the foregoing
number of authorized directors shall be automatically reduced by
a number equal to the number of such persons unless the Board of
Directors selects a replacement nominee or nominees. No director
need be a shareholder. The Secretary shall have the power to
certify at any time as to the number of directors authorized and
as to the class to which each director has been elected or
assigned.
3.2 Powers. The Board may exercise all such powers of
the Corporation and do all such lawful acts and things which are
not by law, the Articles of Incorporation or these By-laws
directed or required to be done by the shareholders.
3.3 Classes. The Board of Directors, other than those
directors who may be elected by the holders of any class or
series of stock having preference over the Common Stock as to
dividends or upon liquidation (whose term of office may be
determined by the Board of Directors pursuant to Section 3.3),
shall be divided, with respect to the time during which they
shall hold office, into three classes as nearly equal in number
as possible, with the initial term of office of Class I directors
expiring at the annual meeting of shareholders to be held in
1998, of Class II Directors expiring at the next succeeding
annual meeting of shareholders and of Class III directors
expiring at the second succeeding annual meeting of shareholders,
with all such directors to hold office until their successors are
elected and qualified. At each annual meeting of shareholders,
directors chosen to succeed those whose terms then expire shall
be elected to hold office for a term expiring at the annual
meeting of shareholder held in the third year following the year
of their election and until their successors are duly elected and
qualified. If the Board of Directors shall appoint any director
to fill a vacancy on the Board, whether resulting from an
increase in the number of directors or otherwise, such Director
shall be assigned to a class by the Board of Directors so that
all classes of directors shall be as nearly equal in number as
possible. In the event of a decrease in the number of directors,
the Board of Directors may reassign the remaining directors to
classes so that all classes of directors shall be as nearly equal
in number as possible.
3.4 General Election. At each annual meeting of
shareholders, directors shall be elected to succeed those
directors whose terms then expire. No decrease in the number of
directors constituting the Board of Directors shall shorten the
term of any incumbent director.
3.5 Vacancies. Except as otherwise provided in the
Articles of Incorporation or these By-laws, the office of a
director shall become vacant if he dies, resigns or is duly
removed from office.
3.6 Filling Vacancies. Except as otherwise provided in
the Articles of Incorporation or Section 3.8 of these By-laws,
any vacancy on the board (including any vacancy resulting from an
increase in the authorized number of directors or from failure of
the shareholders to elect the full number of authorized
directors) may, notwithstanding any resulting absence of a quorum
of directors, be filled by a majority vote of the Board of
Directors remaining in office, provided that the shareholder
shall have the right, at any special meeting called for such
purpose prior to such action by the Board, to fill the vacancy.
A director elected pursuant to this section shall serve until the
next shareholders' meeting held for the election of directors of
the class to which he shall have been appointed and until his
successor is elected and qualified.
3.7 Notice of Shareholder Nominees. Except as otherwise
provided in Section 3.8 of these By-laws, only persons who are
nominated in accordance with the procedures set forth in Article
IV(E) of the Articles of Incorporation shall be eligible for
election as directors.
3.8 Directors Elected by Preferred Shareholders.
Notwithstanding anything in these By-laws to the contrary,
whenever the holders of any one or more classes or series of
stock having a preference over the Common Stock as to dividends
or upon liquidation shall have the right, voting separately as a
class, to elect one or more directors of the Corporation, the
provisions of the Articles of Incorporation (as they may be duly
amended from time to time) fixing the rights and preferences of
such preferred stock shall govern with respect to the nomination,
election, term, removal, vacancies or other related matters with
respect to such directors.
3.9 Compensation of Directors. Directors shall receive
such compensation for their services, in their capacity as
directors, as may be fixed by resolution of the Board of
Directors; provided, however, that nothing herein contained shall
be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation
therefor.
SECTION 4
MEETINGS OF THE BOARD
4.1 Place of Meetings. The meetings of the Board of
Directors may be held at such place within or without the State
of Louisiana as a majority of the directors may from time to time
appoint.
4.2 Initial Meetings. Except as otherwise determined by
the Board of Directors, the first meeting of each newly-elected
Board shall be held immediately following the shareholders'
meeting at which the Board, or any class thereof, is elected and
at the same place as such meeting, and no notice of such first
meeting shall be necessary for the newly-elected directors in
order legally to constitute the meeting.
4.3 Regular Meetings; Notice. Regular meetings of the
Board may be held at such times as the Board may form time to
time determine. Notice of regular meetings of the Board of
Directors shall be given, but no special form of notice or time
of notice shall be necessary.
4.4 Special Meetings; Notice. Special meetings of the
Board may be called by or at the direction of the Chairman of the
Board or the President on reasonable notice given to each
director, either personally or by telephone, mail, telex,
telecopy or any other comparable form of facsimile communication.
Special meetings shall be called by the Secretary in like manner
and on like notice on the written request of a majority of the
directors and if such officer fails or refuses, or is unable
within 24 hours to call a meeting when requested, then the
directors making the request may call the meeting on two days'
written notice given to each director. The notice of a special
meeting of directors need not state it purpose or purposes, but
if the notice states a purpose or purposes and does not state a
further purpose to consider such other business as may properly
come before the meeting, the business to be conducted at the
special meeting shall be limited to the purpose or purposes
stated in the notice.
4.5 Waiver of Notice. Directors present at any regular
or special meeting shall be deemed to have received, or to have
waived, due notice thereof, provided that a director who
participates in a meeting by telephone (as permitted by Section
4.9 hereof) shall not be deemed to have received or waived due
notice if, at the beginning of the meeting, he objects to the
transaction of any business because the meeting is not lawfully
called.
4.6 Quorum. A majority of the Board shall be necessary
to constitute a quorum for the transaction of business, and
except as otherwise provided by law, the Articles of
Incorporation or these By-laws, the acts of a majority of the
directors present at a duly-called meeting at which a quorum is
present shall be the acts of the board. If a quorum is not
present at any meeting of the Board of Directors, the directors
present may adjourn the meeting from time to time without notice
other than announcement at the meeting, until a quorum is
present.
4.7 Withdrawal. If a quorum was present when the
meeting convened, the directors present may continue to do
business, taking action by vote of a majority of a quorum as
fixed in Section 4.6 hereof, until adjournment, notwithstanding
the withdrawal of enough directors to leave less than a quorum as
fixed in Section 4.6 hereof or the refusal of any director
present to vote.
4.8 Action by Consent. Any action that may be taken at
a meeting of the Board, or any committee thereof, may be taken by
a consent in writing signed by all of the directors or by all
members of the committee, as the case may be, and filed with the
records of proceedings of the Board or committee.
4.9 Meetings by Telephone or Similar Communication.
Members of the Board may participate at and be present at any
meeting of the Board or any committee thereof by means of
conference telephone or similar communications equipment if all
persons participating in such meeting can hear and communicate
with each other.
SECTION 5
COMMITTEES OF THE BOARD
5.1 General. The Board may designate one or more
committees, each committee to consist of two or more of the
directors of the Corporation (and one or more directors may be
named as alternate members to replace any absent or disqualified
regular members), which, to the extent provided by resolution of
the Board or these By-laws, shall have and may exercise the
powers of the Board in the management of the business and affairs
of the Corporation, and may have power to authorize the seal of
the Corporation to be affixed to documents, but no such committee
shall have power or authority to amend the Articles of
Incorporation, adopt an agreement of merger, consolidation or
share exchange, adopt or recommend to the shareholders the sale,
lease or exchange of all or substantially all of the
Corporation's assets, recommend to the shareholders a dissolution
of the Corporation or a revocation of dissolution, remove
directors, or amend these By-laws; and unless the resolution
expressly so provides, no such committee shall have the power or
authority to declare a dividend or authorize the issuance of
stock. Such committee or committees shall have such name or
names as may be stated in these By-laws, or as may be determined,
from time to time, by the Board. Any vacancy occurring in any
such committee shall be filled by the Board, but the President
may designate another director to serve on the committee pending
action by the Board. Each such member of a committee shall hold
office during the term designated by the Board.
5.2 Compensation Committee. The Board shall establish
and maintain a Compensation Committee consisting of two or more
directors, each of whom (i) shall be qualified to the extent
appropriate as a "non-employee director" under Rule 16b-3 of the
Securities Exchange Commission and as an "outside director" under
Section 162(m) of the Internal Revenue Code and (ii) shall meet
any further qualifications designated by the Board. The
Compensation Committee shall review and analyze the compensation
of the Corporation's executive officers; review and provide
general guidance as to compensation of the Corporation's other
managers; evaluate the performance of the Corporation's executive
officers; administer the Corporation's Long-Term Incentive
Compensation Plan, including grants thereunder; and perform such
other services as may be designated by the Board.
5.3 Audit Committee. The Board shall establish an Audit
Committee consisting of at least two directors, a majority of
whom are not officers or employees of the Corporation or any of
its affiliates. The Audit Committee shall (i) facilitate
communication among the Corporation's directors, management,
independent accountants and internal auditing personnel regarding
matters relating to financial accounting, reporting and controls,
(ii) assist the Board of Directors in fulfilling its fiduciary
responsibilities as to accounting policies and reporting
practices of the Corporation and all subsidiaries and the
sufficiency of auditing practices with respect thereto by, among
other things, reviewing the scope of audit coverage, including
consideration of the Corporation's accounting practices and
procedures and system of internal accounting controls and
reporting to the Board with respect thereto, (iii) operate as the
Board's principal agent in ensuring the independence of the
Corporation's independent accountants, the integrity of
management and the adequacy of disclosure to shareholders, and
(iv) perform such other services as may be designated by the
Board.
SECTION 6
REMOVAL OF BOARD MEMBERS
Directors may be removed in accordance with the applicable
provisions of the Articles of Incorporation.
SECTION 7
NOTICES
7.1 Form of Delivery. Whenever under the provisions of
law, the Articles of Incorporation or these By-laws notice is
required to be given to any shareholder or director, it shall not
be construed to mean personal notice unless otherwise
specifically provided in the Articles of Incorporation or these
By-laws, but such notice may be given by mail, addressed to such
shareholder or director at his address as it appears on the
records of the Corporation, with postage thereon prepaid, or in
such other manner as may be specified in these By-laws. Notices
given by mail shall be deemed to have been given at the time they
are deposited in the United States mail, and all other notices
shall be deemed to have been give upon receipt.
7.2 Waiver. Whenever any notice is required to be given
by law, the Articles of Incorporation or these By-laws, a waiver
thereof in writing signed by the person or persons entitled to
such notice, whether before or after the time stated therein,
shall be deemed equivalent thereto.
In addition, notice shall be deemed to have been given to, or
waived by, any shareholder or director who attends a meeting of
shareholders or directors in person, or is represented at such
meeting by proxy, without protesting at the commencement of the
meeting the transaction of any business because the meeting is
not lawfully called or convened.
SECTION 8
OFFICERS
8.1 Designations. The officers of the Corporation shall
be elected by the directors and shall be the President, Secretary
and Treasurer. The Board of Directors may appoint a Chief
Executive Officer, a Chief Operating Officer, a Chief Accounting
Officer, one or more Vice Presidents and such other officers as
it shall deem necessary. Officers shall hold their offices for
such terms and shall exercise such powers and perform such duties
as shall be determined from time to time by the Board. To the
extent permitted by law, more than one office may be held by a
single person.
8.2 Term of Office. The officers of the Corporation
shall hold office at the pleasure of the Board of Directors.
Except as otherwise provided in the resolution of the Board of
Directors electing any officer, each officer shall hold office
until the first meeting of the Board of Directors after the
annual meeting of shareholders next succeeding his or her
election, and until his or her successor is elected and qualified
or until his or her earlier resignation or removal. Any officer
may resign at any time upon written notice to the Board, Chairman
of the Board, President or Secretary of the Corporation. Such
resignation shall take effect at the time specified therein and
acceptance of such resignation shall not be necessary to make it
effective. The Board may remove any officer with or without
cause at any time. Any such removal shall be without prejudice
to the contractual rights of such officers, if any, with the
Corporation, but the election of an officer shall not in and of
itself create contractual rights. Any vacancy occurring in any
office of the Corporation by death, resignation, removal or
otherwise may be filled for the unexpired position of the term by
the Board at any regular or special meeting.
8.3 The Chairman of the Board. The Board may appoint a
Chairman of the Board who shall preside at meetings of the Board
of Directors and the shareholders and perform such other duties
as may be designated by the Board of Directors or these By-laws.
The Chairman of the Board shall not, solely by virtue of such
position, be an officer of the Corporation but may be designated
an officer by the Board of Directors.
8.4 The President. The President shall, unless
otherwise provided by the Board, have general and active
responsibility for the management of the business of the
Corporation, shall be the chief executive and chief operating
officer of the Corporation, shall supervise the daily operations
of the business of the Corporation and shall ensure that all
orders, policies and resolutions of the Board are carried out.
8.5 The Vice Presidents. The Vice Presidents (if any)
shall have such designations and perform such duties as the
President or the Board of Directors shall prescribe.
8.6 The Secretary. The Secretary shall attend all
meetings of the Board of Directors and all meetings of the
shareholders and record all votes and the minutes of all
proceedings in a book to be kept for that purpose. He shall
give, or cause to be given, notice of all meetings of the
shareholders and regular and special meetings of the Board, and
shall perform such other duties as may be prescribed by the Board
or President. He shall keep in safe custody the seal of the
Corporation, if any, and affix such seal to any instrument
requiring it.
8.7 The Assistant Secretary. The Assistant Secretary
shall have the same powers and duties as the Secretary and shall
perform such other duties as may be prescribed by the Board or
President.
8.8 The Treasurer. The Treasurer shall have the custody
of the corporate funds and shall keep or cause to be kept full
and accurate accounts of receipts and disbursements in books
belonging to the Corporation and shall deposit all monies and
other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the
Board of Directors. He shall keep a proper accounting of all
receipts and disbursements and shall disburse the funds of the
Corporation only for proper corporate purposes or as may be
ordered by the Board and shall render to the President and the
Board at the regular meetings of the Board, or whenever they may
require it, an account of all his transactions as Treasurer and
of the financial condition and results of operations of the
Corporation.
SECTION 9
STOCK
9.1 Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed by the
President or a Vice President and the Secretary or an Assistant
Secretary evidencing the number and class (and series, if any) of
shares owned by him, containing such information as required by
law and bearing the seal of the Corporation. As provided in the
Articles of Incorporation, the Board of Directors may approve the
use of dual forms of stock certificates, one for issuance to U.S.
citizen stockholders, and one for issuance to non-U.S. citizen
stockholders. If any stock certificate is manually signed by a
transfer agent or registrar other than the Corporation itself or
an employee of the Corporation, the signature of any such officer
may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be an officer,
transfer agent or registrar of the Corporation before such
certificate is issued, it may be issued by the Corporation with
the same effect as if such person or entity were an officer,
transfer agent or registrar of the Corporation on the date of
issue.
9.2 Missing Certificates. The President or any Vice
President may direct a new certificate or certificates to be
issued in place of any certificate or certificates theretofore
issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the Corporation's receipt of an affidavit of that
fact from the person claiming the certificate of stock to be
lost, stolen or destroyed. As a condition precedent to the
issuance of a new certificate or certificates, the officers of
the Corporation shall, unless dispensed with by the President,
require the owner of such lost, stolen or destroyed certificate
or certificates, or his legal representative, to (i) give the
Corporation a bond or (ii) enter into a written indemnity
agreement, in each case in an amount appropriate to indemnify the
Corporation against any claim that may be made against the
Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
9.3 Transfers. The shares of stock of the Corporation
shall be transferable only on the books of the Corporation by the
holders thereof in person or by their duly authorized attorneys
or legal representatives upon surrender and cancellation of
certificates for a like number of shares. Upon surrender to the
Corporation or the transfer agent of the Corporation of a
certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it
shall be the duty of the Corporation to issue a new certificate
to the person entitled thereto, cancel the old certificate and
record the transaction upon its books, provided that as a
condition precedent to the transfer of shares on the records of
the Corporation, the Corporation may require representations or
other proof of the identity and citizenship of any prospective
stockholder and may restrict transfers to non-U.S. citizens as
provided in the Articles of Incorporation.
SECTION 10
DETERMINATION OF SHAREHOLDERS
For the purpose of determining shareholders entitled to
notice of and to vote at a meeting, or to receive a dividend, or
to receive or exercise subscription or other rights, or to
participate in a reclassification of stock, or in order to make a
determination of shareholders for any other proper purpose, the
Board of Directors may fix in advance a record date for
determination of shareholders for such purpose, such date to be
not more than 60 days and, if fixed for the purpose of
determining shareholders entitled to notice of and to vote at a
meeting, not less than 10 days, prior to the date on which the
action requiring the determination of shareholders is to be
taken.
SECTION 11
INDEMNIFICATION
11.1 Definitions. As used in this section the following
terms shall have the meanings set forth below:
(1) "Board" - the Board of Directors of the
Corporation.
(2) "Claim" - any threatened, pending or completed
claim, action, suit, or proceeding, whether civil, criminal,
administrative or investigative and whether made judicially or
extra-judicially, or any separate issue or matter therein, as the
context requires.
(3) "Determining Body" - (i) those members of the
Board who are not named as parties to the Claim for which
indemnification is being sought ("Impartial Directors"), if there
are at least three Impartial Directors, (ii) a committee of at
least three Impartial Directors appointed by the Board
(regardless whether the members of the Board of Directors voting
on such appointment are Impartial Directors) or (iii) if there
are fewer than three Impartial Directors or if the Board of
Directors or the committee appointed pursuant to clause (ii) of
this paragraph so directs (regardless whether the members thereof
are Impartial Directors), independent legal counsel, which may be
the regular outside counsel of the Corporation.
(4) "Disbursing Officer" - the President of the
Corporation or, if the President is a party to the Claim for
which indemnification is being sought, any officer not a party to
such Claim who is designated by the President to be the
Disbursing Officer with respect to indemnification requests
related to the Claim, which designation shall be made promptly
after receipt of the initial request for indemnification with
respect to such Claim.
(5) "Expenses" - any expenses or costs, including,
without limitation, attorney's fees, judgments, punitive or
exemplary damages, fines and amounts paid in settlement.
(6) "Indemnitee" - each person who is or was a
director or officer of the Corporation.
11.2 Indemnity.
(1) To the extent such Expenses exceed the amounts
reimbursed or paid pursuant to policies of liability insurance
maintained by the Corporation, the Corporation shall indemnify
each Indemnitee against any Expenses actually and reasonably
incurred by him (as they are incurred) in connection with any
Claim either against him or as to which he is involved solely as
a witness or person required to give evidence, by reason of his
position (i) as a director or officer of the Corporation, (ii) as
a director or officer of any subsidiary of the Corporation, (iii)
as a fiduciary with respect to any employee benefit plan of the
Corporation, or (iv) as a director, officer, partner, employee or
agent of another corporation, partnership, joint venture, trust
or other for-profit or not-for-profit entity or enterprise, if
such position is or was held at the request of the Corporation,
whether relating to service in such position before or after the
effective date of this Section, if he (i) is successful in his
defense of the claim on the merits or otherwise or (ii) has been
found by the Determining Body (acting in good faith) to have met
the Standard of Conduct (defined below); provided that (A) the
amount otherwise payable by the Corporation may be reduced by the
Determining Body to such amount as it deems proper if it
determines that the Claim involved the receipt of a personal
benefit by Indemnitee, and (B) no indemnification shall be made
in respect of any Claim as to which Indemnitee shall have been
adjudged by a court of competent jurisdiction, after exhaustion
of all appeals therefrom, to be liable for willful or intentional
misconduct in the performance of his duty to the Corporation or
to have obtained an improper personal benefit, unless, and only
to the extent that, a court shall determine upon application
that, despite the adjudication of liability but in view of all
the circumstances of the case, Indemnitee is fairly and
reasonably entitled to indemnity for such Expenses as the court
deems proper.
(2) For purposes of this Section 11, the Standard of
Conduct is met when the conduct by an Indemnitee with respect to
which a Claim is asserted was conduct that was in good faith and
that he reasonably believed to be in, or not opposed to, the best
interest of the Corporation, and, in the case of a criminal
action or proceeding, that he had no reasonable cause to believe
was unlawful. The termination of any Claim by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that
Indemnitee did not meet the Standard of Conduct.
(3) Promptly upon becoming aware of the existence of
any Claim as to which he may be indemnified hereunder, Indemnitee
shall notify the President of the Corporation of the Claim and
whether he intends to seek indemnification hereunder. If such
notice indicates that Indemnitee does so intend, the President
shall promptly advise the Board thereof and notify the Board that
the establishment of the Determining Body with respect to the
Claim will be a matter presented at the next regularly scheduled
meeting of the Board. Such a meeting is to be held within 90
calendar days of the date of Indemnitee's request. If a meeting
of the Board of Directors is not regularly scheduled within 120
calendar days of such request, the President shall cause a
special meeting of the Board of Directors to be called within
such period in accordance with these By-laws. After the
Determining Body has been established the President shall inform
the Indemnitee thereof and Indemnitee shall immediately provide
the Determining Body with all facts relevant to the Claim known
to him. No later than the 45th day (the "Determination Date")
after its receipt of such information, together with such
additional information as the Determining Body may request of
Indemnitee, the Determining Body shall determine, and shall
advise Indemnitee of its determination, whether Indemnitee has
met the Standard of Conduct.
(4) During such 45-day period, Indemnitee shall
promptly inform the Determining Body upon his becoming aware of
any relevant facts not theretofore provided by him to the
Determining Body, unless the Determining Body has obtained such
facts by other means. The providing of such facts to the
Determining Body shall not begin a new 45-day period.
(5) The Determining Body shall have no authority to
revoke a determination that Indemnitee met the Standard of
Conduct unless Indemnitee (i) submits fraudulent information to
the Determining Body at any time during the 45 days prior to the
Determination Date or (ii) fails to comply with the provisions of
subsections (c) or (d) hereof, including without limitation
Indemnitee's obligation to submit information or documents
relevant to the Claim reasonably requested by the Determining
Body prior to the Determination Date.
(6) In the case of any Claim not involving a proposed,
threatened or pending criminal proceeding,
(1) if Indemnitee has, in the good faith judgment
of the Determining Body, met the Standard of Conduct, the
Corporation may, in its sole discretion after notice to
Indemnitee, assume all responsibility for the defense of the
Claim, and, in any event, the Corporation and the Indemnitee each
shall keep the other informed as to the progress of the defense,
including prompt disclosure of any proposals for settlement;
provided that if the Corporation is a party to the Claim and
Indemnitee reasonably determines that there is a conflict between
the positions of the Corporation and Indemnitee with respect to
the Claim, then Indemnitee shall be entitled to conduct his
defense, with counsel of his choice; and provided further that
Indemnitee shall in any event be entitled at his expense to
employ counsel chosen by him to participate in the defense of the
Claim; and
(2) the Corporation shall fairly consider any
proposals by Indemnitee for settlement of the Claim. If the
Corporation (A) proposes a settlement acceptable to the person
asserting the Claim, or (B) believes a settlement proposed by the
person asserting the Claim should be accepted, it shall inform
Indemnitee of the terms thereof and shall fix a reasonable date
by which Indemnitee shall respond. If Indemnitee agrees to such
terms, he shall execute such documents as shall be necessary to
effect the settlement. If he does not agree he may proceed with
the defense of the Claim in any manner he chooses, but if he is
not successful on the merits or otherwise, the Corporation's
obligation to indemnify him for any Expenses incurred following
his disagreement shall be limited to the lesser of (A) the total
Expenses incurred by him following his decision not to agree to
such proposed settlement or (B) the amount the Corporation would
have paid pursuant to the terms of the proposed settlement. If,
however, the proposed settlement would impose upon Indemnitee any
requirement to act or refrain from acting that would materially
interfere with the conduct of his affairs, Indemnitee may refuse
such settlement and proceed with the defense of the Claim, if he
so desires, at the Corporation's expense without regard to the
limitations imposed by the preceding sentence. In no event,
however, shall the Corporation be obligated to indemnify
Indemnitee for any amount paid in a settlement that the
Corporation has not approved.
(7) In the case of a Claim involving a proposed,
threatened or pending criminal proceeding, Indemnitee shall be
entitled to conduct the defense of the claim, and to make all
decisions with respect thereto, with counsel of his choice;
provided, however, that the Corporation shall not be obligated to
indemnify Indemnitee for an amount paid in settlement that the
Corporation has not approved.
(8) After notifying the Corporation of the existence
of a Claim, Indemnitee may from time to time request the
Corporation to pay the Expenses (other than judgments, fines,
penalties or amounts paid in settlement) that he incurs in
pursuing a defense of the Claim prior to the time that the
Determining Body determines whether the Standard of Conduct has
been met. If the Disbursing Officer believes the amount
requested to be reasonable, he shall pay to Indemnitee the amount
requested (regardless of Indemnitee's apparent ability to repay
such amount) upon receipt of an undertaking by or on behalf of
Indemnitee to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the
Corporation under the circumstances. If the disbursing Officer
does not believe such amount to be reasonable, the Corporation
shall pay the amount deemed by him to be reasonable and
Indemnitee may apply directly to the Determining Body for the
remainder of the amount requested.
(9) After the Determining Body has determined that the
Standard of Conduct was met, for so long as and to the extent
that the Corporation is required to indemnify Indemnitee under
this Agreement, the provisions of paragraph (h) shall continue to
apply with respect to Expenses incurred after such time except
that (i) no undertaking shall be required of Indemnitee and (ii)
the Disbursing Officer shall pay to Indemnitee such amount of any
fines, penalties or judgments against him which have become final
as the Corporation is obligated to indemnify him.
(10) Any determination by the Corporation with respect
to settlements of a Claim shall be made by the Determining Body.
(11) The Corporation and Indemnitee shall keep
confidential, to the extent permitted by law and their fiduciary
obligations, all facts and determinations provided or made
pursuant to or arising out of the operation of this Section, and
the Corporation and Indemnitee shall instruct its or his agents
and employees to do likewise.
11.3 Enforcement.
(1) The rights provided by this Section shall be
enforceable by Indemnitee in any court of competent jurisdiction.
(2) If Indemnitee seeks a judicial adjudication of his
rights under this Section, Indemnitee shall be entitled to
recover from the Corporation, and shall be indemnified by the
Corporation against, any and all Expenses actually and reasonably
incurred by him in connection with such proceeding but only if he
prevails therein. If it shall be determined that Indemnitee is
entitled to receive part but not all of the relief sought, then
the Indemnitee shall be entitled to be reimbursed for all
Expenses incurred by him in connection with such judicial
adjudication if the amount to which he is determined to be
entitled exceeds 50% of the amount of his claim. Otherwise, the
Expenses incurred by Indemnitee in connection with such judicial
adjudication shall be appropriately prorated.
(3) In any judicial proceeding described in this
subsection, the Corporation shall bear the burden of proving that
Indemnitee is not entitled to any Expenses sought with respect to
any Claim.
11.4 Saving Clause. If any provision of this Section is
determined by a court having jurisdiction over the matter to
require the Corporation to do or refrain from doing any act that
is in violation of applicable law, the court shall be empowered
to modify or reform such provision so that, as modified or
reformed, such provision provides the maximum indemnification
permitted by law, and such provision, as so modified or reformed,
and the balance of this Section, shall be applied in accordance
with their terms. Without limiting the generality of the
foregoing, if any portion of this Section shall be invalidated on
any ground, the Corporation shall nevertheless indemnify an
Indemnitee to the full extent permitted by any applicable portion
of this Section that shall not have been invalidated and to the
full extent permitted by law with respect to that portion that
has been invalidated.
11.5 Non-Exclusivity.
(1) The indemnification and advancement of Expenses
provided by or granted pursuant to this Section shall not be
deemed exclusive of any other rights to which Indemnitee is or
may become entitled under any statute, article of incorporation,
by-law, authorization of shareholders or directors, agreement, or
otherwise.
(2) It is the intent of the Corporation by this
Section to indemnify and hold harmless Indemnitee to the fullest
extent permitted by law, so that if applicable law would permit
the Corporation to provide broader indemnification rights than
are currently permitted, the Corporation shall indemnify and hold
harmless Indemnitee to the fullest extent permitted by applicable
law notwithstanding that the other terms of this Section would
provide for lesser indemnification.
11.6 Successors and Assigns. This Section shall be binding
upon the Corporation, its successors and assigns, and shall inure
to the benefit of the Indemnitee's heirs, personal
representatives, and assigns and to the benefit of the
Corporation, its successors and assigns.
11.7 Indemnification of Other Persons. The Corporation may
indemnify any person not covered by Sections 11.1 through 11.6 to
the extent provided in a resolution of the Board or a separate
section of these By-laws.
SECTION 12
ADOPTION AND AMENDMENT OF BY-LAWS
By-laws of the Corporation may be adopted and amended as
provided in the Articles of Incorporation.
SECTION 13
MISCELLANEOUS
13.1 Dividends. Except as otherwise provided by law, the
Articles of Incorporation or these By-laws, dividends upon the
stock of the Corporation may be declared by the Board of
Directors at any regular or special meeting. Dividends may be
paid in cash, property, or shares of stock, subject to the
limitations specified in the Articles of Incorporation.
13.2 Voting of Shares Owned by Corporation. Unless
otherwise directed by the Board, any shares of capital stock
issued by a wholly-owned subsidiary of the Corporation may be
voted by the President of the Corporation, or by any person
authorized to do so by the President, at any shareholders'
meeting of the subsidiary (or in connection with any written
consent in lieu thereof).
13.3 Fiscal Year. The Board of Directors may adopt for and
on behalf of the Corporation a fiscal or a calendar year.
13.4 Seal. The Board of Directors may adopt a corporate
seal, which shall have inscribed thereon the name of the
Corporation. The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
Failure to affix the seal shall not, however, affect the validity
of any instrument.
13.5 Gender. All pronouns and variations thereof used in
these By-laws shall be deemed to refer to the masculine,
feminine or neuter gender, singular or plural, as the identity of
the person, persons, entity or entities referred to may require.
13.6 Control Share Acquisitions. The provisions of Sections
135 through 140.2 of the Louisiana Business Corporation Law
(La.R.S. 12:135 through 140.2) do not apply to control share
acquisitions of shares of the Corporation.
INDEMNITY AGREEMENT
This Agreement is made as of ________________, 1997, by and
between Gulf Island Fabrication, Inc., a Louisiana corporation
(the "Corporation"), and _______________ ("Indemnitee").
In consideration of Indemnitee's continued service after the
date hereof, the Corporation and Indemnitee do hereby agree as
follows:
1. Agreement to Serve. Indemnitee agrees to serve as a
[director/officer] of the Corporation for so long as he is
elected or appointed or until such earlier time as he tenders his
resignation in writing.
2. Definitions. As used in this Agreement:
(a) The term "Expenses" shall mean any expenses or
costs (including, without limitation, attorney's fees, judgments,
punitive or exemplary damages, fines and amounts paid in
settlement). If any of the foregoing amounts paid on behalf of
Indemnitee are not deductible by Indemnitee for federal or state
income tax purposes, the Corporation will reimburse Indemnitee
for tax liability with respect thereto by paying to Indemnitee an
amount which, after taking into account taxes on such amount,
equals Indemnitee's incremental tax liability.
(b) The term "Claim" shall mean any threatened,
pending or completed claim, action, suit, or proceeding, whether
civil, criminal, administrative or investigative and whether made
judicially or extra-judicially, or any separate issue or matter
therein, as the context requires.
(c) The term "Determining Body" shall mean (i) those
members of the Board of Directors who are not named as parties to
the Claim for which indemnification is being sought ("Impartial
Directors"), if there are at least three Impartial Directors, or
(ii) a committee of at least three directors appointed by the
Board of Directors (regardless whether the members of the Board
of Directors voting on such appointment are Impartial Directors)
and composed of Impartial Directors or (iii) if there are fewer
than three Impartial Directors or if the Board of Directors or a
committee appointed thereby so directs (regardless whether the
members thereof are Impartial Directors), independent legal
counsel, which may be the regular outside counsel of the Corpora-
tion.
3. Limitation of Liability.
To the fullest extent permitted by Article VIII of the
Articles of Incorporation of the Corporation in effect on the
date hereof and, if and to the extent such Article VIII is
amended to permit further limitations, in effect at any time
prior to the determination of liability that would exist but for
the provisions of this Agreement, Indemnitee shall not be liable
for breach of his fiduciary duty as a director or officer.
4. Maintenance of Insurance and Self-Insurance.
(a) The Corporation represents that it presently main-
tains in force and effect the following directors and officers
liability insurance ("D&O Insurance") policies (the "Insurance
Policies"):
Insurer Policy No. Coverage
------- ---------- --------
Subject only to the provisions of Section 4(b) hereof, the Corpo-
ration hereby agrees that, so long as Indemnitee shall continue
to serve as a [director or officer] (or shall continue at the
request of the Corporation to serve in any capacity referred to
in Section 5(a) hereof) and thereafter so long as Indemnitee
shall be subject to any possible Claim, the Corporation shall use
its best efforts to purchase and maintain in effect for the
benefit of Indemnitee one or more valid and enforceable policy or
policies of D&O Insurance providing, in all respects, coverage at
least comparable to that currently provided pursuant to the
Insurance Policies, provided that the Corporation shall have no
obligation to provide primary coverage in excess of $_____
million or excess coverage in excess of $_____ million.
(b) The Corporation shall not be required to purchase
and maintain the Insurance Policies in effect if D&O Insurance is
not reasonably available or if, in the reasonable business judg-
ment of the then directors of the Corporation, either (i) the
premium cost for such insurance is excessive in light of the
amount of coverage or (ii) the coverage provided by such insur-
ance is so limited by exclusions, retentions, deductibles or
otherwise that there is insufficient benefit from such insurance.
(c) If the Corporation does not purchase and maintain
in effect the Insurance Policies pursuant to the provisions of
Section 4(b) hereof, the Corporation agrees to hold harmless and
indemnify Indemnitee to the full extent of the coverage that
would otherwise have been provided for the benefit of Indemnitee
pursuant to the Insurance Policies.
5. Additional Indemnity.
(a) To the extent any Expenses incurred by Indemnitee
are in excess of the amounts reimbursed or indemnified pursuant
to the provisions of Section 4 hereof, the Corporation shall
indemnify and hold harmless Indemnitee against any such Expenses
actually and reasonably incurred, as they are incurred, in
connection with any Claim against Indemnitee (whether as a
subject of or party to, or a proposed or threatened subject of or
party to, the Claim) or in which Indemnitee is involved solely as
a witness or person required to give evidence, by reason of his
position
(i) as a director or officer of the Corporation
(ii) as a director or officer of any subsidiary of
the Corporation or as a fiduciary with respect to any employee
benefit plan of the Corporation or
(iii) as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
for profit or not for profit entity or enterprise, if such
position is or was held at the request of the Corporation,
whether relating to service in such position before or after the
effective date of this Agreement, if (i) the Indemnitee is
successful in his defense of the Claim on the merits or otherwise
or (ii) the Indemnitee has been found by the Determining Body
(acting in good faith) to have met the Standard of Conduct;
provided that (a) the amount of Expenses for which the
Corporation shall indemnify Indemnitee may be reduced by the
Determining Body to such amount as it deems proper if it
determines in good faith that the Claim involved the receipt of a
personal benefit by Indemnitee and (b) no indemnification shall
be made in respect of any Claim as to which Indemnitee shall have
been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable for willful or
intentional misconduct in the performance of his duty to the
Corporation or to have obtained an improper personal benefit,
unless, and only to the extent that, a court shall determine upon
application that, despite the adjudication of liability but in
view of all the circumstances of the case, Indemnitee is fairly
and reasonably entitled to indemnity for such Expenses as the
court shall deem proper; and provided further that, if the Claim
involves Indemnitee by reason of his position with an entity or
enterprise described in clause (ii) or (iii) of this Section 5(a)
and if Indemnitee may be entitled to indemnification with respect
to such Claim from such entity or enterprise, Indemnitee shall be
entitled to indemnification hereunder only (x) if he has applied
to such entity or enterprise for indemnification with respect to
the Claim and (y) to the extent that indemnification to which he
would be entitled hereunder but for this proviso exceeds the
indemnification paid by such other entity or enterprise.
(b) For purposes of this Agreement, the Standard of
Conduct is met when conduct by an Indemnitee with respect to
which a Claim is asserted was conduct that he reasonably believed
to be in, or not opposed to, the best interest of the
Corporation, and, in the case of a Claim which is a criminal
action or proceeding, conduct that the Indemnitee had no
reasonable cause to believe was unlawful. The termination of any
Claim by judgment, order, settlement, conviction, or upon a plea
of nolo contendere or its equivalent, shall not, of itself,
create a presumption that Indemnitee did not meet the Standard of
Conduct.
(c) Promptly upon becoming aware of the existence of
any Claim, Indemnitee shall notify the Chief Executive Officer of
the existence of the Claim, who shall promptly advise the members
of the Board of Directors and that establishing the Determining
Body will be a matter presented at the next regularly scheduled
meeting of the Board of Directors. After the Determining Body
has been established the Chief Executive Officer shall inform
Indemnitee thereof and Indemnitee shall immediately notify the
Determining Body of all facts relevant to the Claim known to such
Indemnitee. Within 60 days of the receipt of such notice and
information, together with such additional information as the
Determining Body may request of Indemnitee, the Determining Body
shall report to Indemnitee of its determination whether
Indemnitee has met the Standard of Conduct. The Determining Body
may extend the period of time for determining whether the
Standard of Conduct has been met, but in no event shall such
period of time be extended beyond an additional sixty days.
(d) If, after determining that the Standard of Conduct
has been met, the Determining Body obtains facts of which it was
not aware at the time it made such determination, the Determining
Body on its own motion, after notifying Indemnitee and providing
him an opportunity to be heard, may, on the basis of such facts,
revoke such determination, provided that, in the absence of
actual fraud by Indemnitee, no such revocation may be made later
than thirty days after final disposition of the Claim.
(e) Indemnitee shall promptly inform the Determining
Body upon his becoming aware of any relevant facts not
theretofore provided by him to the Determining Body, unless the
Determining Body has obtained such facts by other means.
(f) In the case of any Claim not involving a proposed,
threatened or pending criminal proceeding,
(i) if Indemnitee has, in the good faith judgment
of the Determining Body, met the Standard of Conduct, the
Corporation may, in its sole discretion, assume all
responsibility for the defense of the Claim, and, in any event,
the Corporation and Indemnitee each shall keep the other informed
as to the progress of the defense of the Claim, including prompt
disclosure of any proposals for settlement; provided that if the
Corporation is a party to the Claim and Indemnitee reasonably
determines that there is a conflict between the positions of the
Corporation and Indemnitee with respect to the Claim, then
Indemnitee shall be entitled to conduct his defense with counsel
of his choice; and provided further that Indemnitee shall in any
event be entitled at his expense to employ counsel chosen by him
to participate in the defense of the Claim; and
(ii) the Corporation shall fairly consider any
proposals by Indemnitee for settlement of the Claim. If the
Corporation proposes a settlement of the Claim and such
settlement is acceptable to the person asserting the Claim or the
Corporation believes a settlement proposed by the person
asserting the Claim should be accepted, it shall inform
Indemnitee of the terms of such proposed settlement and shall fix
a reasonable date by which Indemnitee shall respond. If
Indemnitee agrees to such terms, he shall execute such documents
as shall be necessary to make final the settlement. If
Indemnitee does not agree with such terms, Indemnitee may proceed
with the defense of the Claim in any manner he chooses, provided
that if Indemnitee is not successful on the merits or otherwise,
the Corporation's obligation to indemnify such Indemnitee as to
any Expenses incurred following his disagreement shall be limited
to the lesser of (A) the total Expenses incurred by Indemnitee
following his decision not to agree to such proposed settlement
or (B) the amount that the Corporation would have paid pursuant
to the terms of the proposed settlement. If, however, the
proposed settlement would impose upon Indemnitee any requirement
to act or refrain from acting that would materially interfere
with the conduct of Indemnitee's affairs, Indemnitee shall be
permitted to refuse such settlement and proceed with the defense
of the Claim, if he so desires, at the Corporation's expense in
accordance with the terms and conditions of this Agreement
without regard to the limitations imposed by the immediately
preceding sentence. In any event, the Corporation shall not be
obligated to indemnify Indemnitee for an amount paid in a
settlement that the Corporation has not approved.
(g) In the case of a Claim involving a proposed,
threatened or pending criminal proceeding, Indemnitee shall be
entitled to conduct the defense of the Claim and to make all
decisions with respect thereto, with counsel of his choice;
provided that the Corporation shall not be obligated to indemnify
Indemnitee for an amount paid in settlement that the Corporation
has not approved.
(h) After notification to the Corporation of the ex-
istence of a Claim, Indemnitee may from time to time request of
the Chief Executive Officer or, if the Chief Executive Officer is
a party to the Claim as to which indemnification is being sought,
any officer who is not a party to the Claim and who is designated
by the Chief Executive Officer (the "Disbursing Officer"), which
designation shall be made promptly after receipt of the initial
request, that the Corporation advance to Indemnitee the Expenses
(other than fines, penalties, judgments or amounts paid in
settlement) that he incurs in pursuing a defense of the Claim
prior to the time that the Determining Body determines whether
the Standard of Conduct has been met. The Disbursing Officer
shall pay to Indemnitee the amount requested (regardless of
Indemnitee's apparent ability to repay the funds) upon receipt of
an undertaking by or on behalf of Indemnitee to repay such amount
if it shall ultimately be determined that he is not entitled to
be indemnified by the Corporation under the circumstances,
provided that if the Disbursing Officer does not believe such
amount to be reasonable, he shall advance the amount deemed by
him to be reasonable and Indemnitee may apply directly to the
Determining Body for the remainder of the amount requested.
(i) After a determination that the Standard of Conduct
has been met, for so long as and to the extent that the
Corporation is required to indemnify Indemnitee under this
Agreement, the provisions of Paragraph (h) shall continue to
apply with respect to Expenses incurred after such time except
that (i) no undertaking shall be required of Indemnitee and (ii)
the Disbursing Officer shall pay to Indemnitee the amount of any
fines, penalties or judgments against him which have become final
for which the Corporation is obligated to indemnify him or any
amount of indemnification ordered to be paid to him by a court.
(j) Any determination by the Corporation with respect
to settlement of a Claim shall be made by the Determining Body.
(k) The Corporation and Indemnitee shall keep
confidential to the extent permitted by law and their fiduciary
obligations all facts and determinations provided pursuant to or
arising out of the operation of this Agreement and the
Corporation and Indemnitee shall instruct its or his agents and
employees to do likewise.
6. Enforcement.
(a) The rights provided by this Agreement shall be en-
forceable by Indemnitee in any court of competent jurisdiction.
(b) If Indemnitee seeks a judicial adjudication of his
rights under, or to recover damages for breach of, this
Agreement, Indemnitee shall be entitled to recover from the
Corporation, and shall be indemnified by the Corporation against,
any and all Expenses actually and reasonably incurred by him in
connection with such proceeding, but only if he prevails therein.
If it shall be determined that Indemnitee is entitled to receive
part but not all of the relief sought, then Indemnitee shall be
entitled to be reimbursed for all Expenses incurred by him in
connection with such proceeding if the indemnification amount to
which he is determined to be entitled exceeds 50% of the amount
of his claim. Otherwise, the Expenses incurred by Indemnitee in
connection with such judicial adjudication shall be appropriately
prorated.
(c) In any judicial proceeding described in this Sec-
tion 6, the Corporation shall bear the burden of proving that
Indemnitee is not entitled to Expenses sought with respect to any
Claim.
7. Saving Clause. If any provision of this Agreement is
determined by a court having jurisdiction over the matter to re-
quire the Corporation to do or refrain from doing any act that is
in violation of applicable law, the court shall be empowered to
modify or reform such provision so that, as modified or reformed,
such provision provides the maximum indemnification permitted by
law and such provision, as so modified or reformed, and the
balance of this Agreement, shall be applied in accordance with
their terms. Without limiting the generality of the foregoing,
if any portion of this Agreement shall be invalidated on any
ground, the Corporation shall nevertheless indemnify Indemnitee
to the full extent permitted by any applicable portion of this
Agreement that shall not have been invalidated and to the full
extent permitted by law with respect to that portion that has
been invalidated.
8. Non-Exclusivity.
(a) The indemnification and payment of Expenses
provided by or granted pursuant to this Agreement shall not be
deemed exclusive of any other rights to which Indemnitee is or
may become entitled under any statute, article of incorporation,
by-law, authorization of shareholders or directors, agreement or
otherwise.
(b) It is the intent of the Corporation by this Agree-
ment to indemnify and hold harmless Indemnitee to the fullest ex-
tent permitted by law, so that if applicable law would permit the
Corporation to provide broader indemnification rights than are
currently permitted, the Corporation shall indemnify and hold
harmless Indemnitee to the fullest extent permitted by applicable
law notwithstanding that the other terms of this Agreement would
provide for lesser indemnification.
9. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall constitute the origi-
nal.
10. Applicable Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of
Louisiana.
11. Successors and Assigns. This Agreement shall be
binding upon Indemnitee and upon the Corporation, its successors
and assigns, and shall inure to the benefit of Indemnitee's
heirs, personal representatives, and assigns and to the benefit
of the Corporation, its successors and assigns.
12. Amendment. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless made in
writing signed by the Corporation and Indemnitee. Notwithstand-
ing any amendment or modification to or termination or cancella-
tion of this Agreement or any portion hereof, Indemnitee shall be
entitled to indemnification in accordance with the provisions
hereof with respect to any acts or omissions of Indemnitee which
occur prior to such amendment, modification, termination or can-
cellation.
13. Gender. All pronouns and variations thereof used in
this Agreement shall be deemed to refer to the masculine,
feminine or neuter gender, singular or plural, as the identity of
the person, persons, entity or entities refer to may require.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and signed as of the date and year
first above written.
GULF ISLAND FABRICATION, INC.
By:______________________________
Name:
Office:
_________________________________
Name:
GULF ISLAND FABRICATION, INC.
LONG-TERM INCENTIVE PLAN,
1. Purpose. The purpose of the Long-Term Incentive Plan
(the "Plan") of Gulf Island Fabrication, Inc. ("Gulf Island") is
to increase shareholder value and to advance the interests of
Gulf Island and its subsidiaries (collectively, the "Company") by
furnishing a variety of economic incentives (the "Incentives")
designed to attract, retain and motivate key employees and
officers and to strengthen the mutuality of interests between
such employees and officers and Gulf Island's shareholders.
Incentives may consist of opportunities to purchase or receive
shares of common stock, no par value per share, of Gulf Island
(the "Common Stock"), on terms determined under the Plan. As
used in the Plan, the term "subsidiary" means any corporation or
entity of which Gulf Island owns (directly or indirectly) within
the meaning of Section 425(f) of the Internal Revenue Code of
1986, as amended (the "Code"), 50% or more of the total combined
voting power of all classes of stock.
2. Administration.
2.1. Composition. The Plan shall be administered by
the compensation committee of the Board of Directors of Gulf
Island (the "Committee"). The Committee shall consist of
not fewer than two members of the Board of Directors, each
of whom shall (a) qualify as a "non-employee director" under
Rule 16b-3 under the Securities Exchange Act of 1934 (the
"1934 Act"), or any successor rule, and (b) qualify as
"outside directors" under Section 162(m) of the Code.
2.2. Authority. The Committee shall have plenary
authority to award Incentives under the Plan, to interpret
the Plan, to establish any rules or regulations relating to
the Plan that it determines to be appropriate, to enter into
agreements with participants as to the terms of the
Incentives (the "Incentive Agreements") and to make any
other determination that it believes necessary or advisable
for the proper administration of the Plan. Its decisions in
matters relating to the Plan shall be final and conclusive
on the Company and participants. The Committee may delegate
its authority hereunder to the extent provided in Section 3
hereof. The Committee shall not have authority to award
Incentives under the Plan to directors who are not also
employees of the Company ("Outside Directors").
3. Eligible Participants. Key employees and officers of
the Company (including officers who also serve as directors of
the Company) and persons providing services as consultants or
advisors to the Company shall become eligible to receive
Incentives under the Plan when designated by the Committee.
Employees may be designated individually or by groups or
categories, as the Committee deems appropriate. With respect to
participants not subject to Section 16 of the 1934 Act or Section
162(m) of the Code, the Committee may delegate to appropriate
personnel of the Company its authority to designate participants,
to determine the size and type of Incentives to be received by
those participants and to determine or modify performance
objectives for those participants.
4. Types of Incentives. Incentives may be granted under
the Plan to eligible participants in any of the following forms,
either individually or in combination, (a) incentive stock
options and non-qualified stock options; (b) stock appreciation
rights ("SARs") (c) restricted stock; (d) performance shares; (e)
stock awards; and (f) cash awards.
5. Shares Subject to the Plan.
5.1. Number of Shares. Subject to adjustment as
provided in Section 10.6, a total of 500,000 shares of
Common Stock are authorized to be issued under the Plan.
Incentives with respect to no more than 200,000 shares of
Common Stock may be granted through the Plan to a single
participant in one calendar year. In the event that a stock
option, SAR or performance share granted hereunder expires
or is terminated or cancelled prior to exercise or payment,
any shares of Common Stock that were issuable thereunder may
again be issued under the Plan. In the event that shares of
Common Stock are issued as Incentives under the Plan and
thereafter are forfeited or reacquired by the Company
pursuant to rights reserved upon issuance thereof, such
forfeited and reacquired shares may again be issued under
the Plan. If an Incentive is to be paid in cash by its
terms, the Committee need not make a deduction from the
shares of Common Stock issuable under the Plan with respect
thereto. If and to the extent that an Incentive may be paid
in cash or shares of Common Stock, the total number of
shares available for issuance hereunder shall be debited by
the number of shares payable under such Incentive, provided
that upon any payment of all or part of such Incentive in
cash, the total number of shares available for issuance
hereunder shall be credited with the appropriate number of
shares represented by the cash payment, as determined in the
sole discretion of the Committee. Additional rules for
determining the number of shares granted under the Plan may
be made by the Committee, as it deems necessary or
appropriate.
5.2. Type of Common Stock. Common Stock issued under
the Plan may be authorized and unissued shares or issued
shares held as treasury shares.
6. Stock Options. A stock option is a right to purchase
shares of Common Stock from Gulf Island. Stock options granted
under this Plan may be incentive stock options or non-qualified
stock options. Any option that is designated as a non-qualified
stock option shall not be treated as an incentive stock option.
Each stock option granted by the Committee under this Plan shall
be subject to the following terms and conditions:
6.1. Price. The exercise price per share shall be
determined by the Committee, subject to adjustment under
Section 13.5; provided that in no event shall the exercise
price be less than the Fair Market Value of a share of
Common Stock on the date of grant.
6.2. Number. The number of shares of Common Stock
subject to the option shall be determined by the Committee,
subject to Section 5.1 and subject to adjustment as provided
in Section 13.5.
6.3. Duration and Time for Exercise. Subject to
earlier termination as provided in Section 13.3, the term of
each stock option shall be determined by the Committee.
Subject to Section 13.11, each stock option shall become
exercisable at such time or times during its term as shall
be determined by the Committee. Notwithstanding the
foregoing, the Committee may accelerate the exercisability
of any stock option at any time, in addition to the
automatic acceleration of stock options under Section 13.11.
6.4. Repurchase. Upon approval of the Committee, the
Company may repurchase a previously granted stock option
from a participant by mutual agreement before such option
has been exercised by payment to the participant of the
amount per share by which: (i) the Fair Market Value (as
defined in Section 13.12) of the Common Stock subject to the
option on the business day immediately preceding the date of
purchase exceeds (ii) the exercise price.
6.5. Manner of Exercise. A stock option may be
exercised, in whole or in part, by giving written notice to
the Company, specifying the number of shares of Common Stock
to be purchased. The exercise notice shall be accompanied
by the full purchase price for such shares. The option
price shall be payable in United States dollars and may be
paid by (a) cash; (b) uncertified or certified check; (c)
unless otherwise determined by the Committee, by delivery of
shares of Common Stock held by the optionee for at least six
months, which shares shall be valued for this purpose at the
Fair Market Value on the business day immediately preceding
the date such option is exercised; (d) by delivering a
properly executed exercise notice together with irrevocable
instructions to a broker approved by Gulf Island (with a
copy to Gulf Island) to promptly deliver to Gulf Island the
amount of sale or loan proceeds to pay the exercise price;
(e) in such other manner as may be authorized from time to
time by the Committee. In the case of delivery of an
uncertified check upon exercise of a stock option, no shares
shall be issued until the check has been paid in full.
Prior to the issuance of shares of Common Stock upon the
exercise of a stock option, a participant shall have no
rights as a shareholder.
6.6. Incentive Stock Options. Notwithstanding anything
in the Plan to the contrary, the following additional
provisions shall apply to the grant of stock options that
are intended to qualify as Incentive Stock Options (as such
term is defined in Section 422 of the Code):
(a) Any Incentive Stock Option agreement
authorized under the Plan shall contain such other
provisions as the Committee shall deem advisable, but
shall in all events be consistent with and contain or
be deemed to contain all provisions required in order
to qualify the options as Incentive Stock Options.
(b) All Incentive Stock Options must be granted
within ten years from the date on which this Plan is
adopted by the Board of Directors.
(c) Unless sooner exercised, all Incentive Stock
Options shall expire no later than ten years after the
date of grant.
(d) No Incentive Stock Options shall be granted to
any participant who, at the time such option is
granted, would own (within the meaning of Section 422
of the Code) stock possessing more than 10% of the
total combined voting power of all classes of stock of
the employer corporation or of its parent or subsidiary
corporation.
(e) The aggregate Fair Market Value (determined
with respect to each Incentive Stock Option as of the
time such Incentive Stock Option is granted) of the
Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by a
participant during any calendar year (under the Plan or
any other plan of Gulf Island or any of its
subsidiaries) shall not exceed $100,000. To the extent
that such limitation is exceeded, such options shall
not be treated, for federal income tax purposes, as
Incentive Stock Options.
7. Restricted Stock.
7.1. Grant of Restricted Stock. The Committee may
award shares of restricted stock to such officers and key
employees as the Committee determines pursuant to the terms
of Section 3. An award of restricted stock may be subject
to the attainment of specified performance goals or targets,
restrictions on transfer, forfeitability provisions and such
other terms and conditions as the Committee may determine,
subject to the provisions of the Plan. To the extent
restricted stock is intended to qualify as performance based
compensation under Section 162(m) of the Code, it must meet
the additional requirements imposed thereby.
7.2. The Restricted Period. At the time an award of
restricted stock is made, the Committee shall establish a
period of time during which the transfer of the shares of
restricted stock shall be restricted (the "Restricted
Period"). The Restricted Period shall be a minimum of three
years, except that if the vesting of the shares of
Restricted Stock is based upon the attainment of performance
goals, a minimum Restricted Period of one year is permitted.
Each award of restricted stock may have a different
Restricted Period. The expiration of the Restricted Period
shall also occur as provided under Section 13.3 and under
the conditions described in Section 13.11 hereof.
7.3. Escrow. The participant receiving restricted
stock shall enter into an Incentive Agreement with the
Company setting forth the conditions of the grant.
Certificates representing shares of restricted stock shall
be registered in the name of the participant and deposited
with the Company, together with a stock power endorsed in
blank by the participant. Each such certificate shall bear
a legend in substantially the following form:
The transferability of this certificate and the
shares of Common Stock represented by it are
subject to the terms and conditions (including
conditions of forfeiture) contained in the Gulf
Island Fabrication, Inc. Long-Term Incentive Plan
(the "Plan"), and an agreement entered into
between the registered owner and Gulf Island
Fabrication, Inc. thereunder. Copies of the Plan
and the agreement are on file at the principal
office of the Company.
7.4. Dividends on Restricted Stock. Any and all cash
and stock dividends paid with respect to the shares of
restricted stock shall be subject to any restrictions on
transfer, forfeitability provisions or reinvestment
requirements as the Committee may, in its discretion,
prescribe in the Incentive Agreement.
7.5. Forfeiture. In the event of the forfeiture of any
shares of restricted stock under the terms provided in the
Incentive Agreement (including any additional shares of
restricted stock that may result from the reinvestment of
cash and stock dividends, if so provided in the Incentive
Agreement), such forfeited shares shall be surrendered and
the certificates cancelled. The participants shall have the
same rights and privileges, and be subject to the same
forfeiture provisions, with respect to any additional shares
received pursuant to Section 13.5 due to a recapitalization,
merger or other change in capitalization.
7.6. Expiration of Restricted Period. Upon the
expiration or termination of the Restricted Period and the
satisfaction of any other conditions prescribed by the
Committee or at such earlier time as provided for in Section
7.2 and in the Incentive Agreement or an amendment thereto,
the restrictions applicable to the restricted stock shall
lapse and a stock certificate for the number of shares of
restricted stock with respect to which the restrictions have
lapsed shall be delivered, free of all such restrictions and
legends, except any that may be imposed by law, to the
participant or the participant's estate, as the case may be.
7.7. Rights as a Shareholder. Subject to the terms and
conditions of the Plan and subject to any restrictions on
the receipt of dividends that may be imposed in the
Incentive Agreement, each participant receiving restricted
stock shall have all the rights of a shareholder with
respect to shares of stock during any period in which such
shares are subject to forfeiture and restrictions on
transfer, including without limitation, the right to vote
any shares of voting Common Stock.
8. Stock Appreciation Rights. A SAR is a right to
receive, without payment to the Company, a number of shares of
Common Stock, cash or any combination thereof, the amount of
which is determined pursuant to the formula set forth in Section
8.4. A SAR may be granted (a) with respect to any stock option
granted under the Plan, either concurrently with the grant of
such stock option or at such later time as determined by the
Committee (as to all or any portion of the shares of Common Stock
subject to the stock option), or (b) alone, without reference to
any related stock option. Each SAR granted by the Committee
under the Plan shall be subject to the following terms and
conditions:
8.1. Number. Each SAR granted to any participant shall
relate to such number of shares of Common Stock as shall be
determined by the Committee, subject to Section 5.1 and
subject to adjustment as provided in Section 13.5. In the
case of a SAR granted with respect to a stock option, the
number of shares of Common Stock to which the SAR pertains
shall be reduced in the same proportion that the holder of
the option exercises the related stock option.
8.2. Duration and Time for Exercise. Subject to
Section 13.11, the term and exercisability of each SAR shall
be determined by the Committee. Unless otherwise provided
by the Committee in the Incentive Agreement, each SAR issued
in connection with a stock option shall become exercisable
at the same time or times, to the same extent and upon the
same conditions as the related stock option.
Notwithstanding the foregoing, the Committee may in its
discretion accelerate the exercisability of any SAR at any
time in addition to automatic acceleration of SARs under
Section 13.11.
8.3. Exercise. A SAR may be exercised, in whole or in
part, by giving written notice to the Company, specifying
the number of SARs that the holder wishes to exercise. The
Company shall, within 30 days of receipt of notice of
exercise by the Company, deliver to the exercising holder
certificates for the shares of Common Stock or cash or both,
as determined by the Committee, to which the holder is
entitled pursuant to Section 8.4.
8.4. Payment. Subject to the right of the Committee to
deliver cash in lieu of shares of Common Stock, the number
of shares of Common Stock that shall be issuable upon the
exercise of an SAR shall be determined by dividing:
(a) the number of shares of Common Stock as to
which the SAR is exercised multiplied by the dollar
amount of the appreciation in such shares (for this
purpose, the "appreciation" shall be the amount by
which the Fair Market Value of the shares of Common
Stock subject to the SAR on the Exercise Date exceeds
(1) in the case of a SAR related to a stock option, the
purchase price of the shares of Common Stock under the
stock option or (2) in the case of a SAR granted alone,
without reference to a related stock option, an amount
equal to the Fair Market Value of a share of Common
Stock on the date of grant, which shall be determined
by the Committee at the time of grant, subject to
adjustment under Section 13.5); by
(b) the Fair Market Value of a share of Common
Stock on the Exercise Date.
In lieu of issuing shares of Common Stock upon the
exercise of a SAR, the Committee may elect to pay the holder
of the SAR cash equal to the Fair Market Value on the
Exercise Date of any or all of the shares which would
otherwise be issuable. No fractional shares of Common Stock
shall be issued upon the exercise of a SAR; instead, the
holder of a SAR shall be entitled to receive a cash
adjustment equal to the same fraction of the Fair Market
Value of a share of Common Stock on the Exercise Date or to
purchase the portion necessary to make a whole share at its
Fair Market Value on the Exercise Date.
9. Performance Shares. A performance share consists of an
award that may be paid in shares of Common Stock or in cash, as
described below. The award of performance shares shall be
subject to such terms and conditions as the Committee deems
appropriate.
9.1. Performance Objectives. Each performance share
will be subject to performance objectives for Gulf Island or
one of its subsidiaries, divisions or departments to be
achieved by the end of a specified period. The number of
performance shares awarded shall be determined by the
Committee and may be subject to such terms and conditions as
the Committee shall determine. If the performance objectives
are achieved, each participant will be paid (a) a number of
shares of Common Stock equal to the number of performance
shares initially granted to that participant; (b) a cash
payment equal to the Fair Market Value of such number of
shares of Common Stock on the date the performance
objectives are met or such other date as may be provided by
the Committee or (c) a combination of shares of Common Stock
and cash, as may be provided by the Committee. If such
objectives are not met, each award of performance shares may
provide for lesser payments in accordance with a pre-
established formula set forth in the Incentive Agreement.
To the extent a performance share is intended to qualify as
performance based compensation under Section 162(m) of the
Code, it must meet the additional requirements imposed
thereby.
9.2. Not a Shareholder. The award of performance
shares to a participant shall not create any rights in such
participant as a shareholder of the Company, until the
payment of shares of Common Stock with respect to an award,
at which time such stock shall be considered issued and
outstanding.
9.3. Dividend Equivalent Payments. A performance share
award may be granted by the Committee in conjunction with
dividend equivalent payment rights or other such rights.
Dividend equivalent payments may be made to the participant
at the time of the payment of the dividend or issuance of
the other right or at the end of the specified performance
period or may be deemed to be invested in additional
performance shares at the Fair Market Value of a share of
Common Stock on the date of payment of the dividend or
issuance of the right.
10. Stock Awards. A stock award consists of the transfer by
the Company to a participant of shares of Common Stock,
without other payment therefore, as additional compensation
for services previously provided to the Company. The number
of shares to be transferred by the Company to a participant
pursuant to a stock award shall be determined by the
Committee.
11. Cash Awards. A cash award consists of a monetary
payment made by the Company to a participant as additional
compensation for his services to the Company. Payment of a
cash award may relate to the tax liability of a participant
in connection with the grant, exercise, or payment of an
Incentive or may depend on achievement of performance
objectives by the Company or by individuals. The amount of
any monetary payment constituting a cash award shall be
determined by the Committee in its sole discretion. Cash
awards may be subject to other terms and conditions, which
may vary from time to time among participants, as the
Committee determines to be appropriate.
12. General.
12.1. Duration. Subject to Section 13.10, the Plan
shall remain in effect until all Incentives granted under
the Plan have either been satisfied by the issuance of
shares of Common Stock or the payment of cash or been
terminated under the terms of the Plan and all restrictions
imposed on shares of Common Stock in connection with their
issuance under the Plan have lapsed.
12.2. Transferability of Incentives. Options, SARs and
performance shares granted under the Plan shall not be
transferred, pledged, assigned or otherwise encumbered by
the holder thereof except: (a) by will; (b) by the laws of
descent and distribution; or (c) in the case of non-
qualified stock options only, (i) pursuant to a domestic
relations order, as defined in the Code, if permitted by the
Committee and so provided in the Incentive Agreement or an
amendment thereto, to family members, to a family
partnership, to a family limited liability company, to a
trust for the benefit of family members. Any attempted
assignment, transfer, pledge, hypothecation or other
disposition of an Incentive, or levy of attachment or
similar process upon the Incentive not specifically
permitted herein, shall be null and void and without effect.
12.3. Effect of Termination of Employment or Death.
Except as provided in Section 12.4 with respect to Outside
Directors, in the event that a participant ceases to be an
employee of the Company for any reason, including death,
disability, early retirement or normal retirement, any
Incentives may be exercised, shall vest or shall expire at
such times as may be determined by the Committee in the
Incentive Agreement. The Committee has complete authority
to modify the treatment of an Incentive in the event of
termination of employment of a participant by means of an
amendment to the Incentive Agreement. Consent of the
participant to the modification is required only if the
modification impairs the rights previously provided to the
participant in the Incentive Agreement.
12.4. Additional Condition. Anything in this Plan to
the contrary notwithstanding: (a) the Company may, if it
shall determine it necessary or desirable for any reason, at
the time of award of any Incentive or the issuance of any
shares of Common Stock pursuant to any Incentive, require
the recipient of the Incentive, as a condition to the
receipt thereof or to the receipt of shares of Common Stock
issued pursuant thereto, to deliver to the Company a written
representation of present intention to acquire the Incentive
or the shares of Common Stock issued pursuant thereto for
his own account for investment and not for distribution; and
(b) if at any time the Company further determines, in its
sole discretion, that the listing, registration or
qualification (or any updating of any such document) of any
Incentive or the shares of Common Stock issuable pursuant
thereto is necessary on any securities exchange or under any
federal or state securities or blue sky law, or that the
consent or approval of any governmental regulatory body is
necessary or desirable as a condition of, or in connection
with the award of any Incentive, the issuance of shares of
Common Stock pursuant thereto, or the removal of any
restrictions imposed on such shares, such Incentive shall
not be awarded or such shares of Common Stock shall not be
issued or such restrictions shall not be removed, as the
case may be, in whole or in part, unless such listing,
registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not
acceptable to the Company.
12.5. Adjustment. In the event of any
recapitalization, stock dividend, stock split, combination
of shares or other change in the Common Stock, the number of
shares of Common Stock then subject to the Plan, including
shares subject to outstanding Incentives, shall be adjusted
in proportion to the change in outstanding shares of Common
Stock. In the event of any such adjustments, the purchase
price of any option, the performance objectives of any
Incentive, and the shares of Common Stock issuable pursuant
to any Incentive shall be adjusted as and to the extent
appropriate, in the reasonable discretion of the Committee,
to provide participants with the same relative rights before
and after such adjustment.
12.6. Incentive Agreements. The terms of each
Incentive shall be stated in an agreement approved by the
Committee. The Committee may also determine to enter into
agreements with holders of options to reclassify or convert
certain outstanding options, within the terms of the Plan,
as Incentive Stock Options or as non-qualified stock
options.
12.7. Withholding.
(a) The Company shall have the right to withhold
from any payments made under the Plan or to collect as
a condition of payment, any taxes required by law to be
withheld. At any time that a participant is required
to pay to the Company an amount required to be withheld
under applicable income tax laws in connection with the
issuance of Common Stock, the lapse of restrictions on
Common Stock or the exercise of an option, the
participant may, subject to the approval of the
Committee, satisfy this obligation in whole or in part
by electing (the "Election") to have the Company
withhold shares of Common Stock having a value equal to
the amount required to be withheld. The value of the
shares to be withheld shall be based on the Fair Market
Value of the Common Stock on the date that the amount
of tax to be withheld shall be determined ("Tax Date").
(b) Each Election must be made prior to the Tax
Date. The Committee may disapprove of any Election,
may suspend or terminate the right to make Elections,
or may provide with respect to any Incentive that the
right to make Elections shall not apply to such
Incentive. If a participant makes an election under
Section 83(b) of the Internal Revenue Code with respect
to shares of restricted stock, an Election is not
permitted to be made.
12.8. No Continued Employment. No participant under
the Plan shall have any right, because of his or her par-
ticipation, to continue in the employ of the Company for any
period of time or to any right to continue his or her
present or any other rate of compensation.
12.9. Deferral Permitted. Payment of cash or
distribution of any shares of Common Stock to which a
participant is entitled under any Incentive shall be made as
provided in the Incentive Agreement. Payment may be
deferred at the option of the participant if provided in the
Incentive Agreement.
12.10. Amendment of the Plan. The Board may amend or
discontinue the Plan at any time. In addition, no amendment
or discontinuance shall, subject to adjustments permitted
under Section 12.5, change or impair, without the consent of
the recipient, an Incentive previously granted, except that
the Company retains the right to (a) convert any outstanding
Incentive Stock Option to a non-qualified stock option, (b)
require the forfeiture of an Incentive if a participant's
employment is terminated for cause, and (c) exercise all
rights under Section 13.11.
12.11. Change of Control.
(a) Notwithstanding anything to the contrary in
the Plan or any related Incentive Agreement, if
(1.) Gulf Island shall not be the surviving
entity in any merger, consolidation or other
reorganization (or survives only as a subsidiary
of an entity other than a previously wholly-owned
subsidiary of the Company),
(2.) the Company sells, leases or exchanges
all or substantially all of its assets to any
other person or entity (other than a wholly-owned
subsidiary of the Company),
(3.) Gulf Island is to be dissolved or
liquidated,
(4.) any person or entity, including a
"group" as contemplated by section 13(d)(3) of the
1934 Act (other than an employee benefit plan of
the Company or a related trust and other than any
person who as of the date of adoption of this Plan
owned more than 30% of the outstanding shares of
Gulf Island's voting stock) acquires or gains
ownership or control (including, without
limitation, power to vote) of more than 30% of the
outstanding shares of Gulf Island's voting stock,
or
(5.) as a result of or in connection with a
contested election of directors, the persons who
were directors of Gulf Island before such election
shall cease to constitute a majority of the Board
of Directors of Gulf Island (each such event is
referred to herein as a "Corporate Change"),
then upon the approval by the Board of Directors of
Gulf Island of any Corporate Change of the type
described in clauses (a)(1.) to (a)(3.) or upon a
Corporate Change described in clauses (a)(4.) or
(a)(5.), all outstanding options and SARs shall
automatically become fully exercisable, all
restrictions or limitations on any Incentives shall
lapse and all performance criteria and other conditions
relating to the payment of Incentives shall be deemed
to be achieved or waived by the Company, without the
necessity of any action by any person.
(b) In addition, no later than (i.) 30 days after
the approval by the Board of Directors of Gulf Island
of any Corporate Change of the type described in
clauses (a)(1.) to (a)(3.) or (ii.) 30 days after a
Corporate Change of the type described in clauses
(a)(4.) or (a)(5.), the Committee, acting in its sole
discretion without the consent or approval of any
participant (and notwithstanding any removal or
attempted removal of some or all of the members thereof
as directors or committee members), may act to effect
one or more of the following alternatives, which may
vary among individual participants and which may vary
among Incentives held by any individual participant:
(1.) require that all outstanding options
and/or SARs be exercised on or before a specified
date (before or after such Corporate Change) fixed
by the Committee, after which specified date all
unexercised options and SARs and all rights of
participants thereunder shall terminate,
(2.) provide for mandatory conversion of some
or all of the outstanding options and SARs held by
some or all participants as of a date, before or
after such Corporate Change, specified by the
Committee, in which event such options and SARs
shall be deemed automatically cancelled and the
Company shall pay, or cause to be paid, to each
such participant an amount of cash per share equal
to the excess, if any, of the Change of Control
Value of the shares subject to such option or SAR,
as defined and calculated below, over the exercise
price(s) of such options or SARs, or, in lieu of
such cash payment, the issuance of Common Stock
having a Fair Market Value equal to such excess,
(3.) make such equitable adjustments to
Incentives then outstanding as the Committee deems
appropriate to reflect such Corporate Change
(provided, however, that the Committee may
determine in its sole discretion that no
adjustment is necessary to Incentives then
outstanding) or
(4.) provide that thereafter upon any
exercise of an option or SAR theretofore granted
the participant shall be entitled to purchase
under such option or SAR, in lieu of the number of
shares of Common Stock then covered by such option
or SAR, the number and class of shares of stock or
other securities or property (including, without
limitation, cash) to which the participant would
have been entitled pursuant to the terms of the
agreement providing for the merger, consolidation,
asset sale, dissolution or other Corporate Change
of the type described in clause (a)(1.) to (a)(3.)
above, if, immediately prior to such Corporate
Change, the participant had been the holder of
record of the number of shares of Common Stock
then covered by such options or SARs.
(c) For the purposes of clause B.(ii)) above, the
"Change of Control Value" shall equal the amount
determined by whichever of the following items is
applicable:
(1.) the per share price offered to
shareholders of Gulf Island in any such merger,
consolidation or other reorganization, determined
as of the date of the definitive agreement
providing for such transaction,
(2.) the price per share offered to
shareholders of Gulf Island in any tender offer or
exchange offer whereby a Corporate Change takes
place, or
(3.) in all other events, the Fair Market
Value per share of Common Stock into which such
options or SARs being converted are exercisable,
as determined by the Committee as of the date
determined by the Committee to be the date of
conversion of such options or SARs.
(d) In the event that the consideration offered to
shareholders of Gulf Island in any transaction
described herein consists of anything other than cash,
the Committee shall determine the fair cash equivalent
of the portion of the consideration offered which is
other than cash.
12.12. Definition of Fair Market Value. Whenever "Fair
Market Value" of Common Stock shall be determined for pur-
poses of this Plan, it shall be determined as follows: (i)
if the Common Stock is listed on an established stock
exchange or any automated quotation system that provides
sale quotations, the closing sale price for a share of the
Common Stock on such exchange or quotation system on the
applicable date, or if no sale of the Common Stock shall
have been made on that day, on the next preceding day on
which there was a sale of the Common Stock; (ii) if the
Common Stock is not listed on any exchange or quotation
system, but bid and asked prices are quoted and published,
the mean between the quoted bid and asked prices on the
applicable date, and if bid and asked prices are not
available on such day, on the next preceding day on which
such prices were available; and (iii) if the Common Stock is
not regularly quoted, the fair market value of a share of
Common Stock on the applicable date as established by the
Committee in good faith.
Adopted by the Board of Directors: _______________
Approved by the Shareholders: _______________
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Dolphin Services, Inc.
Dolphin Steel Sales, Inc.
Dolphin Sales and Rentals, Inc.
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part
of this Registration Statement on Form S-1 of our report dated
January 23, 1997, except for the third paragraph of Note 1 and
the second paragraph of Note 9 which are as of February 13, 1997
and the third paragraph of Note 9 which is as of February
14, 1997, relating to the financial statements of Gulf Island
Fabrication, Inc., which appears in such Prospectus.
We also consent to the application of such report to the Financial
Statement Schedule for the three years ended December 31, 1996
listed under Item 16(b) of this Registration Statement when such
schedule is read in conjunction with the financial statements
referred to in our report on the aforementioned financial statements
of Gulf Island Fabrication, Inc. The audits referred to in such
report also include this schedule. We also consent to the use of
our report dated January 23, 1997 relating to the combined financial
statements of Dolphin Services, Inc., Dolphin Sales and Rentals, Inc.
and Dolphin Steel Sales, Inc. which appears in such Prospectus. We also
consent to the reference to us under the headings "Experts" in such
Prospectus.
PRICE WATERHOUSE LLP
New Orleans, Louisiana
February 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FORM CONSOLIDATED FINANCIAL
STATEMENTS FOR THE PERIOD ENDING DECEMBER 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,357,232
<SECURITIES> 0
<RECEIVABLES> 13,484,414
<ALLOWANCES> 4,320
<INVENTORY> 1,112,913
<CURRENT-ASSETS> 17,756,362
<PP&E> 28,439,832
<DEPRECIATION> 10,705,190
<TOTAL-ASSETS> 35,908,764
<CURRENT-LIABILITIES> 6,754,220
<BONDS> 0
0
0
<COMMON> 1,000,000
<OTHER-SE> 22,497,402
<TOTAL-LIABILITY-AND-EQUITY> 35,908,764
<SALES> 79,004,536
<TOTAL-REVENUES> 79,004,536
<CGS> 68,672,909
<TOTAL-COSTS> 70,834,257
<OTHER-EXPENSES> 883,814
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 383,814
<INCOME-PRETAX> 7,286,465
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,286,465
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
