<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
Commission File Number 0-22303
GULF ISLAND FABRICATION, INC.
(Exact name of registrant as specified in its charter)
LOUISIANA 72-1147390
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
583 THOMPSON ROAD,
HOUMA, LOUISIANA 70363
(Address of principal executive offices) (Zip Code)
(504) 872-2100
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [_]
The number of shares of the Registrant's common stock, no par value per
share, outstanding at August 7, 1998 was 11,638,400.
<PAGE>
GULF ISLAND FABRICATION, INC.
INDEX
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at June 30, 1998 and
December 31, 1997 1
Consolidated Statements of Income for the Three and
Six Months Ended June 30, 1998 and 1997 2
Consolidated Statement of Changes in Shareholders' Equity
for the Six Months Ended June 30, 1998 3
Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1998 and 1997 4
Notes to Consolidated Financial Statements 5-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-10
PART II OTHER INFORMATION
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
EXHIBIT INDEX E-1
<PAGE>
GULF ISLAND FABRICATION, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
1998 1997
----------- ------------
(in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 3,623 $ 6,879
Contracts receivable, net 32,193 21,204
Retainage 5,177 1,556
Costs and estimated earnings in excess of billings
on uncompleted contracts 3,716 903
Prepaid expenses 508 914
Inventory 1,072 968
Recoverable income taxes - 321
-------- --------
Total current assets 46,289 32,745
Property, plant and equipment, net 39,831 34,505
Excess of cost over fair value of net assets acquired
less accumulated amortization of $141,725 at June 30, 1998 3,976 -
Other assets 497 428
-------- --------
Total assets $ 90,593 $ 67,678
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,875 $ 3,368
Billings in excess of costs and estimated
earnings on uncompleted contracts 10,755 5,925
Accrued employee costs 4,210 3,068
Accrued expenses 1,855 2,829
Income taxes payable 705 -
-------- --------
Total current liabilities 28,400 15,190
Deferred income taxes 1,911 1,878
-------- --------
Total liabilities 30,311 17,068
Shareholders' equity:
Preferred stock, no par value, 5,000,000 shares
authorized, no shares issued and outstanding - -
Common stock, no par value, 20,000,000 shares authorized, 11,638,400
and 11,600,000 shares issued and outstanding at June 30, 1998
and December 31, 1997, respectively 4,162 4,133
Additional paid-in capital 35,124 34,865
Retained earnings 20,996 11,612
-------- --------
Total shareholders' equity 60,282 50,610
-------- --------
$ 90,593 $ 67,678
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
1
<PAGE>
GULF ISLAND FABRICATION, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1998 1997 1998 1997
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Revenue $ 50,641 $ 35,023 $ 97,555 $ 65,247
Cost of revenue 40,874 28,599 79,477 53,958
-------- -------- -------- --------
Gross profit 9,767 6,424 18,078 11,289
General and administrative expenses 1,460 1,144 3,074 2,146
-------- -------- -------- --------
Operating income 8,307 5,280 15,004 9,143
Other expense (income):
Interest expense 15 55 57 310
Interest income (22) (16) (89) (35)
-------- -------- -------- --------
(7) 39 (32) 275
-------- -------- -------- --------
Income before income taxes 8,314 5,241 15,036 8,868
Income taxes 3,163 1,976 5,652 1,976
Cumulative deferred tax provision - 1,144 - 1,144
-------- -------- -------- --------
Net income $ 5,151 $ 2,121 $ 9,384 $ 5,748
======== ======== ======== ========
Pro forma data (Note 3):
Income before income taxes $ 8,314 $ 5,241 $ 15,036 $ 8,868
Income taxes 3,163 1,976 5,652 1,976
Pro forma income taxes related to operations as
S Corporation - - - 1,379
-------- -------- -------- --------
Pro forma net income $ 5,151 $ 3,265 $ 9,384 $ 5,513
======== ======== ======== ========
Pro forma per share data:
Pro forma basic earnings per share $ 0.44 $ 0.28 $ 0.81 $ 0.57
======== ======== ======== ========
Pro forma diluted earnings per share $ 0.44 $ 0.28 $ 0.80 $ 0.57
======== ======== ======== ========
Pro forma weighted-average shares 11,632 11,477 11,622 9,666
Effect of dilutive securities: employee stock options 89 39 97 19
-------- -------- -------- --------
Pro forma adjusted weighted-average shares 11,721 11,516 11,719 9,685
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE>
GULF ISLAND FABRICATION, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
Additional Total
Common Stock Paid-In Retained Shareholders'
Shares Amount Capital Earnings Equity
-------- -------- ----------- -------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1998 11,600 $ 4,133 $ 34,865 $ 11,612 $ 50,610
Exercise of stock options 38 29 259 - 288
Net income - - - 9,384 9,384
------ ------- -------- -------- --------
Balance at June 30, 1998 11,638 $ 4,162 $ 35,124 $ 20,996 $ 60,282
====== ======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
GULF ISLAND FABRICATION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six months ended June 30,
1998 1997
-------------------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 9,384 $ 5,748
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 1,889 1,339
Amortization 141 -
Deferred income taxes (168) 1,144
Changes in operating assets and liabilities:
Contracts receivable (3,085) (8,065)
Retainage (2,376) 1,001
Costs and estimated earnings in excess of billings on uncompleted contracts (1,653) (1,964)
Other assets 427 673
Accounts payable and accrued expenses 2,728 4,620
Income taxes payable 959 1,523
Billings in excess of costs and estimated earnings on uncompleted contracts 2,385 1,894
------- -------
Net cash provided by operating activities 10,631 7,913
Cash flows from investing activities:
Capital expenditures, net (5,601) (7,481)
Payment for purchase of Dolphin Services, net of cash acquired - (5,803)
Payment for purchase of Southport, net of cash acquired (5,922) -
Other (52) 253
------- -------
Net cash used in investing activities (11,575) (13,031)
Cash flows from financing activities:
Cost associated with initial public offering - (143)
Borrowings against notes payable 8,000 41,900
Principal payments on notes payable (10,600) (48,524)
Proceeds from initial public offering - 31,471
Proceeds from exercise of stock options 288 -
Dividends - (16,641)
------- -------
Net cash provided by (used in) financing activities (2,312) 8,063
------- -------
Net increase (decrease) in cash (3,256) 2,945
Cash at beginning of period 6,879 1,357
------- -------
Cash at end of period $ 3,623 $ 4,302
======= =======
Supplemental cash flow information:
Interest paid $ 38 $ 236
======= =======
Income taxes paid $ 4,827 $ -
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
GULF ISLAND FABRICATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTH AND SIX MONTH PERIODS
ENDED JUNE 30, 1998 AND 1997
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING PRINCIPLES
Gulf Island Fabrication, Inc. ("Gulf Island"), located in Houma, Louisiana,
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. The Company also offers offshore interconnect pipe hook-up,
inshore marine construction, and steel warehousing and sales. With the
acquisition of Southport, Inc., effective January 1, 1998, the Company also
provides the fabrication of living quarters for offshore platforms for the oil
and gas industry. Gulf Island's principal markets are concentrated in the
offshore regions of the Gulf of Mexico. The consolidated financial statements
include the accounts of Gulf Island and its wholly owned subsidiaries
(collectively "the Company"). All significant intercompany balances and
transactions have been eliminated in consolidation.
Effective January 1, 1998, the Company acquired all of the outstanding
shares of Southport, Inc. and its wholly owned subsidiary Southport
International, Inc. (collectively "Southport"). Southport specializes in the
fabrication of living quarters for offshore platforms. The purchase price was
$6.0 million cash, plus contingent payments of up to an additional $5.0 million
based on Southport's net income over a four-year period ending December 31,
2001. The purchase price plus $130,000 of direct expenses exceeded the fair
value of the assets acquired of $12.3 million and liabilities assumed of $10.3
million with the acquisition being accounted for under the purchase method of
accounting. Goodwill of $4.1 million is being amortized over 15 years on a
straight-line basis. Accordingly, the operations of Southport are included in
the Company's consolidated operations from January 1, 1998.
The information presented at June 30, 1998 and for the three months and six
months ended June 30, 1998 and 1997, is unaudited. In the opinion of the
Company's management, the accompanying unaudited financial statements contain
all adjustments (consisting of normal recurring adjustments) which the Company
considers necessary for the fair presentation of the Company's financial
position at June 30, 1998 and the results of its operations for the three months
and six months ended June 30, 1998 and 1997, and its cash flows for the six
months ended June 30, 1998 and 1997. The results of operations for the three
months and six months ended June 30, 1998 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1998.
In the opinion of management, the financial statements included herein have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. For further information, refer to the consolidated
financial statements and footnotes thereto included
5
<PAGE>
GULF ISLAND FABRICATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
in the Registrant Company's annual report on Form 10-K for the year ended
December 31, 1997.
Certain items included in the financial statements for the periods ended
December 31, 1997 and June 30, 1997 have been reclassified to conform to the
June 30, 1998 financial statement presentation.
NOTE 2-- ACQUISITION OF SOUTHPORT, INC.
The following unaudited pro forma information presents a summary of
consolidated results of operations of the Company and Southport as if the
acquisition had occurred on January 1, 1997. Pro forma adjustments include (1)
adjustments for the increase in interest expense as a result of the acquisition,
(2) additional depreciation on property, plant and equipment, (3) adjustments to
record the amortization of cost in excess of fair value of net assets acquired,
(4) the elimination of certain general and administrative expenses, and (5) the
related tax effects. The effects of the termination of the S Corporation status
(Note 3) are included.
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, 1997 June 30, 1997
(in thousands, except per share data)
-------------------------------------
<S> <C> <C>
Revenue............................................... $40,619 $74,972
Pro forma net income.................................. 3,260 5,699
Pro forma basic and diluted net income per share...... 0.28 .59
</TABLE>
NOTE 3-- PRO FORMA PER SHARE DATA
On April 4, 1997, the Company's shareholders elected to terminate the
Company's status as an S Corporation, and the Company became subject to federal
and state income taxes. The 1997 periods reflect an expense of $1,144,000
related to the cumulative deferred income taxes resulting form the conversion to
a C Corporation on April 4, 1997. The pro forma income statement presentation
reflects income taxes related to operations as an S Corporation as if the
Company had been subject to federal and state income taxes since January 1, 1997
using an assumed effective tax rate of approximately 38%. Further, the pro forma
weighted-average share calculations for 1997 include the assumed issuance of
additional shares sufficient to pay the distributions made to shareholders in
connection with the Company's Initial Public Offering, to the extent such
distributions exceeded net income for the year ended December 31, 1996.
6
<PAGE>
GULF ISLAND FABRICATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
NOTE 4 -- STOCK SPLIT
On October 6, 1997, the Company's Board of Directors authorized a two-for-
one stock split effected in the form of a stock dividend that became effective
on October 28, 1997 to shareholders of record on October 21, 1997. All share and
per share data included in the financial statements prior to the stock split
have been restated to reflect the stock split.
NOTE 5 -- CONTINGENCIES
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 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. The Company is vigorously contesting the plaintiff's claims and,
based on the Company's analysis of those claims, the Company's defenses thereto,
and the Court's rulings received to date, the Company believes that its
liability for such claims, if any, will not have a material adverse effect on
the financial position or results of operations of the Company. 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 subject to claims arising through the normal conduct of its
business. While the ultimate outcome of such claims cannot be determined,
management does not expect that these matters will have a material adverse
effect on the financial position or results of operations of the Company.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Effective January 1, 1998, the Company acquired all of the outstanding
stock of Southport, Inc. and its wholly owned subsidiary Southport
International, Inc. (collectively, "Southport"). The acquisition is being
accounted for under the purchase method of accounting, and accordingly, the
operations of Southport are included in the Company's consolidated operations
starting January 1, 1998. The Statement of Income included in the unaudited
financial statements presents the consolidated results of operations of the
Company for the three months and six months ended June 30, 1998, compared to the
results of operations of the Company for the three months and six months ended
June 30, 1997, without giving effect to the Southport acquisition.
The Company's revenue for the three month and six month periods ended June
30, 1998 was $50.6 million and $97.6 million, an increase of 44.6% and 49.5%,
respectively, compared to $35.0 million and $65.2 million in revenue for the
three month and six month periods ended June 30, 1997. Revenue increased as a
result of the Southport Acquisition, the on-going labor recruiting and retention
efforts by the Company which generated an increase in the volume of direct labor
hours applied to contracts, and the implementation of productivity enhancing
equipment for the three month and six month periods ended June 30, 1998,
compared to the same periods in 1997.
The increased employment levels and the utilization of labor saving
equipment enabled the Company to increase volume and improve profit margins and
generate a gross profit of $9.8 million (19.3% of revenue) and $18.1 million
(18.5% of revenue) for the three and six month periods ended June 30, 1998,
respectively, compared to the $6.4 million (18.3% of revenue) and $11.3 million
(17.3% of revenue) of gross profit for the three and six month periods ended
June 30, 1997.
The Company's general and administrative expenses were $1.5 million for the
three month period ended June 30, 1998 and $3.1 million for the six month period
ended June 30, 1998. This compares to $1.1 million for the three month period
ended June 30, 1997 and $2.1 million for the six month period ended June 30,
1997. These increases of $400,000 and $1.0 million, respectively, were caused
by additional general and administrative costs associated with the operating
activities of Southport, additional costs associated with increased production
levels and public company reporting requirements.
The Company had net interest income of $7,000 for the three months ended
June 30, 1998 and $32,000 for the six months ended June 30, 1998, compared to
net interest expense of $39,000 and $275,000 for the three months and six months
ended June 30, 1997. The Company completed its Initial Public Offering in April
1997 and used the proceeds to eliminate all of its outstanding bank debt and
provide working capital to the Company. Since that time, the Company's cash
provided by operations has increased to a level which has allowed the Company to
make capital expenditures and acquisitions with little or no debt.
8
<PAGE>
The Company converted from S Corporation to C Corporation status on April
4, 1997. Pro forma income taxes and pro forma net income give effect to federal
and state income taxes as if the Company had been taxed as a C Corporation
during the three and six month periods ended June 30, 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 $10.6 million for the six months ended June 30,
1998 with working capital remaining stable at $17.9 million. Net cash used in
investing activities for the six months ended June 30, 1998 was $11.6 million,
of which $5.9 million related to the purchase of Southport and $5.6 million
related to capital expenditures made during the period. Approximately 50% of
the Company's capital expenditures were for improvements to its production
facilities and for equipment designed to increase the capacity of its facilities
and the productivity of its labor force. The remaining 50% was for the purchase
of two new Manitowoc cranes which replace two cranes previously rented.
Net cash used in financing activities was $2.3 million for the six months
ended June 30, 1998. The Company received $288,000 from the proceeds of
exercised stock options and made $2.6 million net payments on the Company's Bank
Credit Facility.
The Company's Bank Credit Facility currently provides for a revolving line
of credit (the "Revolver") of up to $20.0 million which bears interest equal to,
at the Company's option, the prime lending rate established by Citibank, N.A. or
LIBOR plus 1 1/2%. The Revolver matures December 31, 1999 and is secured by a
mortgage on the Company's real estate, equipment and fixtures, and by the stock
of its subsidiary, Dolphin Services, Inc. As additional security, the Company
has caused Dolphin Services Inc. to guarantee the Company's obligations under
the Revolver. At June 30, 1998 the Company had no outstanding borrowings under
the credit facility.
Capital expenditures for the remaining six months of 1998 are estimated to
be approximately $10.0 million, including the purchase of three additional new
Manitowoc crawler cranes, improvements to the west yard fabrication area and
various other fabrication equipment purchases and facility expansions.
Management believes that its available funds, cash generated by operating
activities and funds available under the Revolver will be sufficient to fund
these capital expenditures and its working capital needs. However, the Company
may expand its operations through future acquisitions that may require
additional equity or debt financing.
GENERAL
The Company has developed a plan to modify its information technology to
recognize the year 2000. The Company has committed to purchase software and
upgrade its hardware to address the year 2000. The project is to be
substantially complete and operational by late 1998 and is expected to cost
approximately $77,000. Management does not expect this project to have a
significant effect on the Company's operations. The Company is currently
evaluating its position with significant suppliers and large customers to ensure
that those parties have appropriate plans to address year 2000 issues where they
may otherwise impact the operations
9
<PAGE>
of the Company. The Company does not have any significant suppliers or large
customers that directly interface with the Company's information technology
systems. There is no guarantee that the systems of the Company's suppliers and
customers will be 2000 compliant and that such non-compliance will not have an
adverse effect on the Company.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On July 22, 1998 the Company announced its 1998 second quarter earnings and
related matters. The press release making this announcement is attached hereto
as Exhibit 99.1.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
27.1 Financial Data Schedule.
99.1 Press release issued by the Company on July 22, 1998
announcing its 1998 second quarter earnings and related matters.
(b) The Company filed no reports on Form 8-K during the quarter for which
this report is filed.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GULF ISLAND FABRICATION, INC.
By: /s/ Joseph P. Gallagher, III
---------------------------------
Joseph P. Gallagher, III
Vice President Finance,
Chief Financial Officer,
Treasurer and Secretary
(Principal Financial Officer
and Duly Authorized Officer)
Date: August 10, 1998
12
<PAGE>
GULF ISLAND FABRICATION, INC.
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- ------- ----------------------
27.1 Financial Data Schedule.
99.1 Press release issued by the Company on July 22, 1998 announcing its
1998 second quarter earnings and related matters.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from consolidated
financial statements and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 3,623
<SECURITIES> 0
<RECEIVABLES> 37,370
<ALLOWANCES> 0
<INVENTORY> 1,072
<CURRENT-ASSETS> 46,289
<PP&E> 59,260
<DEPRECIATION> 19,429
<TOTAL-ASSETS> 90,593
<CURRENT-LIABILITIES> 28,400
<BONDS> 0
0
0
<COMMON> 4,162
<OTHER-SE> 56,120
<TOTAL-LIABILITY-AND-EQUITY> 90,593
<SALES> 97,555
<TOTAL-REVENUES> 97,555
<CGS> 79,477
<TOTAL-COSTS> 82,551
<OTHER-EXPENSES> (89)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57
<INCOME-PRETAX> 15,036
<INCOME-TAX> 5,652
<INCOME-CONTINUING> 9,384
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,384
<EPS-PRIMARY> 0.81
<EPS-DILUTED> 0.80
</TABLE>
<PAGE>
NEWS RELEASE EXHIBIT 99.1
For further information contact:
Kerry J. Chauvin Joseph "Duke" Gallagher
Chief Executive Officer Chief Financial Officer
(504) 872-2100 (504) 872-2100
FOR IMMEDIATE RELEASE
WEDNESDAY, JULY 22, 1998
GULF ISLAND FABRICATION, INC.
REPORTS SECOND QUARTER AND YEAR-TO-DATE 1998 EARNINGS
Houma, LA -- Gulf Island Fabrication, Inc. (NASDAQ: GIFI) today reported
pro forma net income of $5.2 million ($.44 diluted EPS) on revenue of $50.6
million for its second quarter ended June 30, 1998, compared to pro forma net
income of $3.3 million ($.28 diluted EPS) on revenues of $35.0 million for the
second quarter of 1997. Pro forma net income for the first six months of 1998
was $9.4 million ($.80 diluted EPS) on revenue of $97.6 million, compared to pro
forma net income of $5.5 million ($.57 diluted EPS) on revenues of $65.2 million
for the first six months of 1997.
Pro forma net income gives effect to federal and state income taxes as if
the company had been a C corporation for tax purposes during all the periods
presented. Pro forma net income excludes the non-recurring charge of $1.1
million to record the cumulative deferred income tax provision upon the election
on April 4, 1997 to convert from S Corporation status to C Corporation status.
On October 6, 1997 the Company's Board of Directors authorized a two-for-one
stock split effected in the form of a stock dividend that was distributed on
October 28, 1997 to shareholders of record on October 21, 1997. All share and
per share data presented reflects the stock split. At June 30, 1998, the
company had a revenue backlog of $84.5 million and a labor backlog of 1.4
million manhours remaining to work.
Gulf Island Fabrication, Inc., based in Houma, Louisiana, 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. The Company also offers offshore interconnect pipe hook-up, inshore
marine construction, and steel warehousing and sales. With the acquisition of
Southport, Inc., effective January 1, 1998, the Company also provides the
fabrication of living quarters for offshore platforms for the oil and gas
industry.
<PAGE>
EXHIBIT 99.1(a)
GULF ISLAND FABRICATION, INC.
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
----------------------------- --------------------------------
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenue $50,641 $35,023 $97,555 $65,247
Cost of revenue 40,874 28,599 79,477 53,958
------- ------- ------- -------
Gross profit 9,767 6,424 18,078 11,289
General and administrative expenses 1,460 1,144 3,074 2,146
------- ------- ------- -------
Operating income 8,307 5,280 15,004 9,143
Other expense (income):
Interest expense 15 55 57 310
Interest income (22) (16) (89) (35)
------- ------- ------- -------
(7) 39 (32) 275
------- ------- ------- -------
Income before income taxes 8,314 5,241 15,036 8,868
Income taxes 3,163 1,976 5,652 1,976
Cumulative deferred tax provision(1) 1,144 1,144
------- ------- ------- -------
Net income $ 5,151 $ 2,121 $ 9,384 $ 5,748
======= ======= ======= =======
Pro forma data: (2)
Income before income taxes $ 8,314 $ 5,241 $15,036 $ 8,868
Income taxes 3,163 1,976 5,652 1,976
Pro forma income taxes related to operations
as S Corporation - - - 1,379
------- ------- ------- -------
Pro forma net income $ 5,151 $ 3,265 $ 9,384 $5,513
======= ======= ======= =======
Pro forma per share data:
Pro forma basic earnings per share (3) $ 0.44 $ 0.28 $ 0.81 $ 0.57
======= ======= ======= =======
Pro forma diluted earnings per share (3) (4) $ 0.44 $ 0.28 $ 0.80 $ 0.57
======= ======= ======= =======
Weighted-average shares (3) 11,632 11,477 11,622 9,666
======= ======= ======= =======
Adjusted weighted-average shares (3) (4) 11,721 11,516 11,719 9,685
======= ======= ======= =======
Depreciation and amortization
included in expense above $ 1,037 $ 692 $ 2,030 $1,339
======= ======= ======= =======
</TABLE>
(1) Cumulative deferred tax provision charged upon election on April 4, 1997 to
convert from an S Corporation status to a C Corporation Status.
(2) Pro forma information gives effect to federal and state income taxes as if
the Company had been a C Corporation for tax purposes during all periods
presented.
(3) Includes the initial public offering completed on April 9, 1997 and
retroactively restates the two-for-one stock split effective October 28,
1997.
(4) The calculation of diluted earnings per share assumes that all stock
options are exercised and that the assumed proceeds are used to purchase
shares at the average market price for the period.
