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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
GULF ISLAND FABRICATION, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
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Notes:
<PAGE>
[Logo of Gulf Island Fabrication, Inc. Appears Here]
GULF ISLAND FABRICATION, INC.
583 THOMPSON ROAD
HOUMA, LOUISIANA 70363
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 30, 1998
----------------
TO THE SHAREHOLDERS OF GULF ISLAND FABRICATION, INC.:
The annual meeting of shareholders of Gulf Island Fabrication, Inc. (the
"Company") will be held at 10:00 a.m., local time, on Thursday, April 30,
1998, at the office of the Company, 583 Thompson Road, Houma, Louisiana for
the following purposes, more fully described in the accompanying proxy
statement:
1.To elect three Class I directors.
2. To ratify the appointment of Ernst & Young LLP as the independent
auditors to audit the financial statements of the Company and its
subsidiaries for the year 1998.
3. To transact such other business as may properly come before the meeting
and any adjournments thereof.
The Board of Directors has fixed the close of business on March 13, 1998 as
the record date for the determination of shareholders entitled to notice of
and to vote at the annual meeting and all adjournments thereof.
Your vote is important regardless of the number of shares you own. Whether
or not you plan to attend the annual meeting, PLEASE MARK, DATE AND SIGN THE
ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED STAMPED ENVELOPE.
Furnishing the enclosed proxy will not prevent you from voting in person at
the meeting should you wish to do so.
By Order of the Board of Directors
/s/ Joseph P. Gallagher, III
-----------------------------------
Joseph P. Gallagher, III
Secretary
Houma, Louisiana
March 25, 1998
<PAGE>
GULF ISLAND FABRICATION, INC.
583 THOMPSON ROAD
HOUMA, LOUISIANA 70363
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 30, 1998
This Proxy Statement is furnished to shareholders of Gulf Island
Fabrication, Inc. (the "Company") in connection with the solicitation of
proxies on behalf of the Company's Board of Directors for use at its annual
meeting of shareholders to be held at the date, time and place set forth in
the accompanying notice and at any adjournments thereof (the "Meeting"). The
date of this Proxy Statement is March 25, 1998.
On March 13, 1998, the record date for determining shareholders entitled to
notice of and to vote at the Meeting, the Company had outstanding 11,623,400
shares of common stock ("Common Stock"), each of which is entitled to one vote
on all matters to be considered at the Meeting.
Shares represented by all properly executed proxies on the enclosed form
received in time for the Meeting will be voted at the Meeting. A proxy may be
revoked at any time before it is exercised by filing with the Secretary of the
Company an instrument revoking it or a duly executed proxy bearing a later
date, or by attending the Meeting and voting in person. Unless revoked, the
proxy will be voted as specified and, if no specifications are made, will be
voted in favor of the proposed nominees and for the ratification of the
appointment of auditors as described herein.
The cost of soliciting proxies in the enclosed form will be borne by the
Company. In addition to the use of the mails, proxies may be solicited by
personal interview, telephone, telefax and telegraph. Banks, brokerage houses
and other institutions, nominees and fiduciaries will be requested to forward
solicitation materials to the beneficial owners of the shares of Common Stock
of the Company; upon request, the Company will reimburse such persons for
reasonable out-of-pocket expenses incurred in connection therewith.
ELECTION OF DIRECTORS
The Company's Amended and Restated Articles of Incorporation provide for a
Board of Directors consisting of three classes, with the number of directors
to be set forth in the By-laws. The By-laws provide for a Board of Directors
of eight persons. The term of office of the Class I directors will expire at
the Meeting, and the persons listed as the Class I nominees in the table below
will be nominated for election to the Board of Directors for a term expiring
in 2001. The term of office of the Class II directors will expire at the 1999
annual meeting. The term of office of the Class III directors will expire at
the 2000 annual meeting.
The Board of Directors has nominated three candidates for election at the
Meeting and recommends that shareholders vote FOR the election of the
nominees. Proxies cannot be voted for more than three candidates. In the
absence of contrary instructions, the proxy holders will vote for the election
of the three nominees listed below. In the unanticipated event that either
person is unavailable as a candidate for director, the persons named in the
accompanying proxy will vote for a substitute candidate nominated by the Board
of Directors.
The following table sets forth as of December 31, 1997, for each nominee,
each other director of the Company whose term will continue after the Meeting
and each of the executive officers of the Company, the age, positions with the
Company, and principal occupations and employment during the past five years
of each such person, any family relationships among such persons, and, if a
nominee or a director, each person's directorships in other public
corporations and the year that he was first elected a director of the Company
or its predecessor. All executive officers serve at the pleasure of the Board
of Directors of the Company.
<PAGE>
POSITIONS WITH THE COMPANY,
PRINCIPAL OCCUPATIONS,
DIRECTORSHIPS IN OTHER PUBLIC
CORPORATIONS, AND FAMILY DIRECTOR
NAME AND AGE RELATIONSHIPS SINCE
------------ --------------------------------- --------
NOMINEES FOR ELECTION AS CLASS I DIRECTORS (FOR TERM EXPIRING IN
2001)
Stephen G. Benton, Jr., 39... Director of the Company 1998
(appointed by the Board of
Directors on February 4, 1998).
President of Southport, Inc.
("Southport"), a manufacturer of
offshore platform living
quarters, since 1996 and Chief
Executive Officer of Southport
since 1998. Vice President of
Southport until 1996.
Thomas E. Fairley, 49........ Director of the Company. Direc- 1997
tor, President and Chief Execu-
tive Officer of Trico Marine
Services, Inc. ("Trico"), a ma-
rine vessel operator, since 1993.
President and Chief Executive Of-
ficer of Trico Marine Operators,
Inc., the predecessor to Trico,
until 1993.
Hugh J. Kelly, 72............ Director of the Company. 1997
Consultant to the oil and gas
industry. Chief Executive Officer
of ODECO, Inc., an offshore
drilling contractor, until 1989.
Director of Tidewater Inc.
("Tidewater"), a supplier of
offshore marine transportation
and other services; Chieftain
International, Inc., an oil and
gas exploration and development
company; and Central Louisiana
Electric Co., an electric utility
company.
CONTINUING CLASS II DIRECTORS (TERM EXPIRES IN 1999)
Gregory J. Cotter, 49........ Director and financial advisor to 1985
the Company. Director, President
and Chief Operating and Financial
Officer of Huey Wilson Interests,
Inc. ("Wilson Interests"), a
financial and business management
company. Director, President, and
Chief Financial Officer of Wilson
Jewelers, Inc. ("Wilson
Jewelers"), a jewelry store
chain.
John P. ("Jack") Laborde, 48. Director of the Company. Chief 1997
Executive Officer of All Aboard
Development Corporation ("All
Aboard"), an independent oil and
gas exploration and production
company, since 1996 and President
of All Aboard since 1997. Vice
President of All Aboard from No-
vember, 1993, to March, 1996.
Consultant to the Company from
March, 1996, to April, 1996, and
International Marketing Manager
of the Company from April, 1992,
to March, 1996. Son of Alden J.
("Doc") Laborde.
CONTINUING CLASS III DIRECTORS (TERM EXPIRES IN 2000)
Kerry J. Chauvin, 50......... Director, President and Chief 1985
Executive Officer of the Company.
Alden J. ("Doc") Laborde, 82. Director and Chairman of the 1985
Board of the Company. Father of
John P. ("Jack") Laborde.
Huey J. Wilson, 69........... Director of the Company. Chairman 1997
of the Board and Chief Executive
Officer of Wilson Interests and
of Wilson Jewelers.
EXECUTIVE OFFICERS NOT SERVING AS DIRECTORS
Murphy A. Bourke, 53......... Vice President--Marketing of the N/A
Company.
William A. Downey, 51........ Vice President--Operations of the N/A
Company.
Joseph P. Gallagher, III, 47. Vice President--Finance, Chief N/A
Financial Officer, Treasurer and
Secretary of the Company.
2
<PAGE>
The effective date of the Company's initial public offering was April 4,
1997. Thomas E. Fairley, Hugh J. Kelly, John P. Laborde and Huey J. Wilson
became directors of the Company shortly prior to that date. On January 1, 1998
the Company acquired Southport, Inc., of which Stephen G. Benton, Jr. had been
president and a major shareholder since 1996 and chief executive officer since
1998; Mr. Benton was appointed a director by the Board of Directors of the
Company on February 4, 1998. In 1993, Great American Corporation filed a
petition under the federal bankruptcy laws, at which time Huey J. Wilson was
chairman of the board and chief executive officer and Mr. Cotter was a
director and president of such corporation.
During 1997, the Board of Directors of the Company held 10 meetings. The
Board of Directors has an Audit Committee, of which Mr. Cotter, Mr. Fairley,
and John P. Laborde are members, and a Compensation Committee, of which Mr.
Kelly, Alden J. Laborde, and Mr. Wilson are members. The Board of Directors
does not have a Nominating Committee. The Audit Committee, which met four
times during 1997, 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 Compensation Committee, which
met twice during 1997, 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 composition of Board committees is reviewed and redetermined
each year at the initial meeting of the Board after the annual meeting of
shareholders. Each of the present directors attended 75% or more of the 1997
meetings of the Board and of the committees on which he served during the
periods of his Board membership and committee service.
For services as Chairman of the Board, Alden J. Laborde receives an annual
fee of $100,000. Each other non-employee director receives an annual fee of
$12,000 for his services as a director and an attendance fee of $1,000 for
each Board or committee meeting. All directors are reimbursed for reasonable
out-of-pocket expenses incurred in attending Board and committee meetings.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers, controller, and beneficial owners of more than
10% of the Common Stock to file certain beneficial ownership reports with the
Securities and Exchange Commission. Alden J. Laborde, a director and Chairman
of the Board of the Company, failed to include timely on a statement on Form 4
in 1997 one purchase of a small number of shares held by an investment
partnership in which his wife owned a 10% interest; the purchase was reported
on an amended Form 4. John P. Laborde, a director of the Company, failed to
include timely on his statement on Form 3 in 1997 one holding by his adult son
attending college and failed to include timely on a statement on Form 4 in
1997 one purchase by the same son; the holding and the purchase were reported
on an amended Form 3 and an amended Form 4, respectively.
3
<PAGE>
STOCK OWNERSHIP
The following table sets forth, as of December 31, 1997, certain information
regarding beneficial ownership of Company Common Stock by (i) each director of
the Company, (ii) each executive officer of the Company, (iii) all directors
and executive officers of the Company as a group, and (iv) each other
shareholder known by the Company to be the beneficial owner of more than 5% of
the outstanding Common Stock. 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.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) OUTSTANDING COMMON STOCK
------------------------ -------------------- ------------------------
<S> <C> <C>
Stephen G. Benton, Jr........... 0 *
Murphy A. Bourke................ 30,200 *
Kerry J. Chauvin................ 84,800(2) *
Gregory J. Cotter............... 3,000(3) *
William A. Downey............... 38,000 *
Thomas E. Fairley............... 10,000 *
Joseph P. Gallagher, III........ 46,400 *
Hugh J. Kelly................... 4,000 *
Alden J. ("Doc") Laborde(4)..... 1,582,500(5) 13.6%
John P. ("Jack") Laborde........ 86,400(6) *
Huey J. Wilson(7)............... 2,201,000(8) 19.0%
All directors and executive
officers as a group (11
persons)....................... 4,086,300 35.1%
Pilgrim Baxter & Associates,
Ltd.(9)........................ 1,063,000(10) 9.2%
</TABLE>
- --------
* Less than one percent.
(1) Includes shares that could be acquired within sixty days after December
31, 1997 upon the exercise of options granted pursuant to the Company
stock option plan, as follows: Mr. Bourke, 8,000 shares; Mr. Chauvin,
19,200 shares; Mr. Downey, 9,000 shares; Mr. Gallagher, 6,400 shares; all
directors and executive officers as a group, 42,600 shares.
(2) Includes 1,400 shares owned by Mr. Chauvin's spouse and 200 shares owned
by one of his children. Mr. Chauvin disclaims beneficial ownership of
these shares.
(3) Does not include any of the shares referred to in note (8) below.
(4) The address of Mr. Laborde is 210 Baronne Street, Suite 822, New Orleans,
Louisiana 70112.
(5) Includes 200 shares owned by Mr. Laborde's spouse and 100 shares owned by
an investment club in which his spouse has a 10% interest.
(6) Includes 2,000 shares owned by Mr. Laborde's spouse and a total of 48,800
shares owned by his two children. Mr. Laborde disclaims beneficial
ownership of these shares.
(7) The address of Mr. Wilson is 3636 South Sherwood Forest Boulevard, Suite
650, Baton Rouge, Louisiana 70816.
(8) Includes 100,000 shares held by a charitable foundation of which Messrs.
Cotter and Wilson are trustees. Messrs. Cotter and Wilson disclaim
beneficial ownership of these shares.
(9) The address of Pilgrim Baxter & Associates, Ltd. is 825 Duportail Road,
Wayne, Pennsylvania 19087.
(10) Based on the Schedule 13G dated February 12, 1998 that Pilgrim Baxter &
Associates, Ltd. filed with the Securities and Exchange Commission,
Pilgrim Baxter & Associates, Ltd. has sole voting power with respect to
768,400 of those shares and shared voting power with respect to the
remaining 294,600 shares.
4
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid in 1997 and 1996 by the
Company to its Chief Executive Officer and each of its most highly compensated
executive officers for 1997 (collectively, the "Named Executive Officers"). No
other Company employee's salary and bonus exceeded $100,000 in 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION SECURITIES
----------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) OPTIONS(#) COMPENSATION(2)
--------------------------- ---- -------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Kerry J. Chauvin.............. 1997 $237,709 $410,002 96,000 $7,824
President and Chief Executive 1996 199,370 162,783 0 8,220
Officer
William A. Downey............. 1997 134,416 205,001 45,000 7,824
Vice President--Operations 1996 124,400 81,392 0 7,562
Murphy A. Bourke.............. 1997 129,493 205,001 40,000 7,824
Vice President--Marketing 1996 120,417 81,392 0 7,320
Joseph P. Gallagher, III...... 1997 117,773 136,667 32,000 7,222
Vice President--Finance and 1996 80,860 27,131 0 4,670
Chief Financial Officer
</TABLE>
- --------
(1) For 1997 and 1996, the Company's executive officers were paid bonuses
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") for each such year. In 1997, Messrs. Chauvin,
Downey, Bourke and Gallagher were paid bonuses equal to 2%, 1%, 1% and
2/3%, respectively, of the Profit Participation Amount for 1997, and, 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 for 1996.
(2) Includes (i) matching and profit-sharing contributions of $7,414, $7,414,
$7,414 and $6,812 in 1997 and $7,810, $7,152, $6,910 and $4,358 in 1996 to
the Company's 401(k) plan on behalf of Messrs. Chauvin, Downey, Bourke and
Gallagher, respectively, and (ii) premium payments of $410, $410, $410 and
$410 in 1997 and $410, $410, $410 and $312 in 1996 for Messrs. Chauvin,
Downey, Bourke and Gallagher, respectively, under a long-term disability
insurance plan, which premium payments are attributable to benefits in
excess of those benefits provided generally for other employees.
5
<PAGE>
STOCK OPTION GRANTS
The following table sets forth information with respect to all stock options
granted in 1997 by the Company to each of the Named Executive Officers. The
information set forth below has been adjusted to give effect to the two-for-
one split of Company Common Stock effective October 28, 1997.
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS VALUE
- --------------------------------------------------------------------------------------- ----------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANTED GRANT DATE
UNDERLYING OPTIONS TO EMPLOYEES IN EXERCISE OF BASE EXPIRATION PRESENT
NAME GRANTED (#)(1) 1997 PRICE ($/SH) DATE VALUE $(2)
- ------------------------ ------------------ --------------- ---------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Kerry J. Chauvin........ 96,000 23.2% $7.50 02/13/07 $559,680
William A. Downey....... 45,000 10.9% $7.50 02/13/07 $262,350
Murphy A. Bourke........ 40,000 9.7% $7.50 02/13/07 $233,200
Joseph P. Gallagher,
III.................... 32,000 7.7% $7.50 02/13/07 $186,560
</TABLE>
- --------
(1) Each of the stock options granted in 1997 by the Company to the Named
Executive Officers will become exercisable over a five-year period. The
stock options will become immediately exercisable in their entirety 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 Alden J.
Laborde or Huey J. 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 of Directors in a
contested election (a "Significant Transaction"). The Compensation
Committee also has the authority to take several actions regarding
outstanding stock options upon the occurrence of a Significant
Transaction, including requiring that outstanding stock options remain
exercisable only for a limited time, providing for mandatory conversion of
outstanding stock options in exchange for either a cash payment or Common
Stock, making equitable adjustments to stock options or providing that
outstanding stock options will become stock options relating to securities
to which a participant would have been entitled in connection with the
Significant Transaction if the stock options had been exercised.
(2) The Black-Scholes option pricing model was used to determine the grant
date present value of the stock options granted in 1997 by the Company to
the Named Executive Officers. Under the Black-Scholes option pricing
model, the grant date present value of each stock option referred to in
the table was calculated to be $5.83. The following facts and assumptions
were used in making such calculation: (i) an exercise price of $7.50 for
each such stock option; (ii) a fair market value of $7.50 for one share of
Common Stock on the date of grant; (iii) no dividend payments on Common
Stock; (iv) a stock option term of 10 years; (v) a stock volatility of
74.5%, based on an analysis of monthly closing stock prices of shares of
Common Stock during a 10-month period; and (vi) an assumed risk-free
interest rate of 6.59%, which is equivalent to the yield on a ten-year
treasury note on the date of grant. No other discounts or restrictions
related to vesting or the likelihood of vesting of stock options were
applied. The resulting grant date present value of $5.83 for each stock
option was multiplied by the total number of stock options granted to each
of the Named Executive Officers to determine the total grant date present
value of such stock options granted to each Named Executive Officer,
respectively.
6
<PAGE>
OUTSTANDING STOCK OPTIONS
The following table sets forth information with respect to all outstanding
Company stock options held by each of the Named Executive Officers as of
December 31, 1997. None of the Named Executive Officers exercised Company
stock options in 1997.
AGGREGATED OPTION VALUES AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT 12/31/97 (#) OPTIONS AT 12/31/97 ($)
------------------------- -------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Kerry J. Chauvin............ 0 96,000 0 1,200,000
William A. Downey........... 0 45,000 0 562,500
Murphy A. Bourke............ 0 40,000 0 500,000
Joseph P. Gallagher, III.... 0 32,000 0 400,000
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Alden J. Laborde, Hugh J. Kelly, and Huey J. Wilson, who comprise the
Compensation Committee, are non-employee directors of the Company. Alden J.
Laborde has been Chairman of the Board of the Company since 1986 and was Chief
Executive Officer of the Company from 1986 to 1990. 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.
In connection with the initial public offering of its Common Stock, the
Company entered into registration rights agreements (the "Registration Rights
Agreements") with Alden J. Laborde and Huey J. Wilson, pursuant to which they
have limited rights to require the Company to register shares of Common Stock
owned by them under the Securities Act. Pursuant to their rights under the
Registration Rights Agreements, Messrs. Laborde and Wilson obtained the
registration by the Company of a total of 2,300,000 shares of Common Stock
sold by them in a public offering in November, 1997. The Company incurred
expenses of approximately $233,000 in this offering. Messrs. Laborde and
Wilson are entitled to one additional demand registration under the
Registration Rights Agreements. If either one of them makes such a demand, the
other one 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 under the Registration Rights
Agreements to pay all the expenses of registration, other than underwriting
discounts and commissions.
CERTAIN TRANSACTIONS
In January, 1998, the Company purchased from the Southport shareholders all
the outstanding Southport capital stock (the "Southport Stock"). The Southport
shareholders included Stephen G. Benton, Jr., currently a director of the
Company; his sister, Lisette K. Benton; his brothers, Frank J.B. Benton and
Bush Benton; and his father, Stephen G. Benton, Sr. Their percentage holdings
in the Southport Stock were approximately 21%, 5%, 13%, 5%, and 26%,
respectively. The purchase price of the Southport Stock, which was determined
by the parties to the transaction in arm's length negotiations, consists of a
maximum initial purchase price of $6,000,000 and a maximum possible deferred
purchase price of $5,000,000 payable over a four-year period. The amount of
the deferred purchase price, if any, payable by the Company in installments
over a four-year period ending December 31, 2001 could range from $0 to
$5,000,000, depending on the amount of the net after-tax income of Southport
during that period, as determined in accordance with the agreement between the
parties. If at any time during the four-year period the Company should no
longer retain a majority equity interest in Southport, it will be obligated to
pay, on a present value basis, the maximum possible deferred purchase price
remaining unpaid at that time. In connection with the purchase of the
Southport Stock, Stephen G. Benton, Sr. was released from his guaranty of
Southport obligations under its credit facility.
7
<PAGE>
In connection with the purchase of the Southport Stock, Stephen G. Benton,
Jr. and Frank J.B. Benton entered into employment agreements with the Company.
The term of Stephen G. Benton, Jr.'s employment agreement is from January 1,
1998 to January 1, 2002, and it provides that he will serve as President and
Chief Executive Officer of Southport and will perform such other duties as may
be assigned to him by the Board of Directors of the Company. In accordance
with the provisions of his employment agreement, Stephen G. Benton, Jr. will
be paid a base salary of $115,000 per year throughout the term of his
employment agreement. Stephen G. Benton Jr.'s employment agreement will
terminate immediately upon his death or disability, without any obligation of
the Company for payment of his salary for the remainder of the original term
of the agreement. If, however, Stephen G. Benton, Jr.'s employment agreement
is terminated by the Company for any reason other than cause, as defined in
the agreement, or if he terminates his employment agreement for good reason,
as defined in the agreement, the Company must promptly pay him his salary for
the remainder of the original term of his agreement and it must also pay the
Southport shareholders, on a present value basis, the maximum possible
deferred purchase price for the Southport Stock remaining unpaid at that time.
The term of Frank J.B. Benton's employment agreement is from January 1, 1998
to January 1, 2000, and it provides that he will serve as Vice President--
Marketing of Southport and will perform such other duties as may be assigned
to him by the Board of Directors of the Company. In accordance with the
provisions of his employment agreement, Frank J.B. Benton will be paid a base
salary of $71,989 per year throughout the term of his employment agreement.
Frank J.B. Benton's employment agreement will terminate immediately upon his
death or disability, without any obligation of the Company for payment of his
salary for the remainder of the original term of the agreement. If, however,
Frank J.B. Benton's employment agreement is terminated by the Company for any
reason other than cause, as defined in the agreement, or if he terminates his
employment agreement for good reason, as defined in the agreement, the Company
must promptly pay him his salary for the remainder of the original term of his
agreement.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Prior to January 31, 1997, the Board of Directors did not have a
Compensation Committee and the Board of Directors established the levels and
criteria for executive compensation. In each case, the levels and criteria for
executive compensation depended on a subjective evaluation of the performance
of the officer under consideration and was based in part on compensation
levels necessary to retain officers of the Company.
On January 31, 1997, the Compensation Committee was organized and granted
the authority, among other things, to review, analyze, and recommend
compensation programs to the Board of Directors and to administer and grant
awards under the Company's employee benefit plans. Although the Board of
Directors performed the functions of the Compensation Committee prior to
January 31, 1997, the Compensation Committee will be responsible for
determining executive compensation in the future.
Three directors of the Company, Hugh J. Kelly, Alden J. "Doc" Laborde, and
Huey J. Wilson, comprise the Compensation Committee. Mr. Laborde is Chairman
of the Board of the Company and was Chief Executive Office of the Company from
1986 to 1990. Neither Mr. Kelly nor Mr. Wilson are present or former officers
of the Company, and none of the members of the Compensation Committee are
employees of the Company.
The Company's executive compensation is comprised primarily of (i) salaries,
(ii) annual cash incentive bonuses and (iii) long-term incentive compensation
in the form of stock options granted under the Long-Term Incentive Plan of the
Company. The salaries of Kerry J. Chauvin, the President and Chief Executive
Officer, and the other executive officers of the Company are based on their
levels of responsibility and the subjective assessment of their performance.
The Company has adopted an executive compensation program that ties a
portion of executive compensation to the short-term performance of the
Company. The Company paid 1997 bonuses based on a percentage of the Company's
income before taxes, adjusted for the bonuses (the "Profit Participation
Amount"). The Profit Participation Amount percentages for 1997 ranged from
2/3% to 2%, the latter being the percentage
8
<PAGE>
awarded to Mr. Chauvin. The selection of the percentages for Mr. Chauvin and
the other executive officers was based on their levels of responsibility. The
Profit Participation Amount and percentage awarded to each of the executive
officers in 1997 and 1996 are included in the "Summary Compensation Table"
under the heading "Executive Compensation."
The Company also provides long-term incentives to executive officers in the
form of stock options granted under the Long-Term Incentive Plan. The stock
option awards are intended to reinforce the relationship between compensation
and increases in the market price of the Company's common stock and to align
the executive officers' financial interests with that of the Company's
stockholders. The size of awards is based upon the position of each
participating officer and a subjective assessment of each participant's
individual performance. The table entitled "Option Grants in 1997" under the
heading "Executive Compensation" sets forth the stock options granted in 1997
to four executive officers, including Mr. Chauvin, the Chief Executive
Officer, based upon position and subjective assessment.
Section 162(m) of the Internal Revenue Code limits the tax deduction to $1
million for compensation paid to certain highly compensated executive
officers. Qualified performance-based compensation is excluded from this
deduction limitation if certain requirements are met. No executive officer of
the Company reached the deductibility limitation for 1997. The Compensation
Committee believes that the stock options granted to executive officers, as
discussed above, qualify for the exclusion from the deduction limitation under
Section 162(m). The Compensation Committee anticipates that the remaining
components of individual executive compensation that do not qualify for an
exclusion from Section 162(m) should not exceed $1 million in any year and
therefore will continue to qualify for deductibility.
The Compensation Committee
Huey J. Wilson, Chairman Hugh J. Kelly Alden J. Laborde
9
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PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Common Stock from April 3, 1997, which is the date that the Common Stock was
initially offered to the public and registered pursuant to Section 12 of the
Securities Exchange Act of 1934, to December 31, 1997, with the cumulative
total return of the Standard & Poor's 500 Stock Index and the Standard & Poor's
500 Oil & Gas (Drilling & Equipment) Index for the same period. The returns are
based on an assumed investment of $100 on April 3, 1997 in Common Stock and in
each of the indexes and on the assumption that dividends were reinvested.
COMPARISON OF CUMULATIVE TOTAL RETURN*
GULF ISLAND FABRICATION, INC., S&P 500 INDEX &
S&P 500 OIL & GAS (DRILLING & EQUIPMENT) INDEX
[CHART APPEARS HERE]
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APRIL 3, DECEMBER 31,
1997 1997
------- ------------
<S> <C> <C>
Gulf Island Fabrication, Inc................................... $100.00 $266.67
S&P 500........................................................ 100.00 130.90
S&P 500 Oil & Gas (Drilling & Equipment) Index................. 100.00 151.14
</TABLE>
ASSUMES $100 INVESTED ON APRIL 3, 1997 IN GULF ISLAND FABRICATION, INC. COMMON
STOCK, S&P 500 INDEX & S&P 500 OIL & GAS (DRILLING & EQUIPMENT) INDEX
* TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS
10
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RATIFICATION OF THE APPOINTMENT OF AUDITORS
The Board of Directors seeks shareholder ratification of the Board's
appointment of Ernst & Young LLP to act as the independent auditors of the
financial statements of the Company and its subsidiaries for 1998. The Board
has not determined what, if any, action would be taken should the appointment
of Ernst & Young LLP not be ratified. One or more representatives of Ernst &
Young LLP will be available at the Meeting to respond to appropriate
questions, and those representatives will also have an opportunity to make a
statement.
OTHER MATTERS
QUORUM AND VOTING
The presence, in person or by proxy, of a majority of the outstanding shares
of Common Stock of the Company is necessary to constitute a quorum.
Shareholders voting, or abstaining from voting, by proxy on any issue will be
counted as present for purposes of constituting a quorum. If a quorum is
present, (i) the election of the three directors to be elected at the Meeting
will be determined by plurality vote (that is, the three nominees receiving
the largest number of votes will be elected) and (ii) a majority of votes
actually cast will decide any other matter properly brought before the Meeting
for a vote of shareholders. Shares for which proxy authority to vote for any
nominee for election as a director is withheld by the shareholder and shares
that have not been voted by brokers who may hold shares on behalf of the
beneficial owners ("broker non-votes") will not be counted as voted for the
affected nominee. With respect to all other matters, shares not voted as a
result of abstentions will have the same effect as votes against those
matters, but broker non-votes will not be considered as voted for purposes of
determining whether or not a majority of votes were cast for such matters.
OTHER BUSINESS
Management is unaware of any matter for action by shareholders at the
Meeting other than that described in the accompanying notice. The enclosed
proxy will, however, confer discretionary authority with respect to any other
matter that may properly come before the Meeting or any adjournment thereof.
It is the intention of the persons named in the enclosed proxy to vote in
accordance with their best judgment on any such matter.
SHAREHOLDER PROPOSALS
Any shareholder who desires to present a proposal qualified for inclusion in
the Company's proxy materials for the annual meeting of shareholders to be
held in 1999 must forward the proposal in writing to the Secretary of the
Company at the address shown on the first page of this proxy statement in time
to arrive at the Company no later than November 25, 1998.
By Order of the Board of Directors
/s/ Joseph P. Gallagher, III
---------------------------------
Joseph P. Gallagher, III
Secretary
Houma, Louisiana
March 25, 1998
11
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This Proxy is Solicited on Behalf of the Board of Directors of
GULF ISLAND FABRICATION, INC.
The undersigned hereby constitutes and appoints Kerry J. Chauvin and
Joseph P. Gallagher, III or either of them proxy for the undersigned, with full
power of substitution, to represent the undersigned and to vote, as designated
on the reverse side, all of the shares of Common Stock of Gulf Island
Fabrication, Inc. (the "Company") that the undersigned is entitled to vote held
of record by the undersigned on March 13, 1998, at the annual meeting of
shareholders of the Company to be held on April 30, 1998 (the "Annual Meeting"),
and at all adjournments thereof.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted FOR the nominees and FOR the proposal listed on the reverse side. The
individuals designated above will vote in their discretion on any other matter
that may properly come before the meeting.
(Please See Reverse Side)
<PAGE>
Please mark, sign, date and return your
proxy card as soon as possible!
Annual Meeting of Shareholders
GULF ISLAND FABRICATION, INC.
April 30, 1998
*Please Detach and Mail in the Envelope Provided*
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<S> <C> <C>
A [X] Please mark your __
votes as in this |
example.
FOR all nominees WITHHOLD
listed to the right AUTHORITY The Board of Directors recommends a vote FOR the nominees
(except as marked to to vote for all nominees listed below and FOR Proposal 2.
the contrary below) listed to the right
1. Election of the [ ] [ ] Nominees: Stephen G. Benton, Jr.
nominees for Thomas E. Fairley
directors. Hugh J. Kelly
INSTRUCTIONS: To withhold authority to vote for any
individual nominee, strike a line through the nominee's
name in the list to the right.
FOR AGAINST ABSTAIN
2. Ratification of appointment of Ernst & Young [ ] [ ] [ ]
LLP as independent auditors.
3. In their discretion to vote upon such other business as may properly come before the
Annual Meeting or any adjournment thereof.
Please mark, sign, date and return this proxy promptly using the enclosed envelope.
Signature of Shareholder ______________________________ Signature if held jointly _________________________ Date:____________, 1998
Note: Please sign exactly as name appears on the certificate or certificates representing shares to be voted by this proxy, as
shown on the label above. When signing as executor, administrator, attorney, trustee or guardian, please give full title as
such. If a corporation, please sign full corporate name by president or other authorized officer. If a partnership, please
sign in partnership name by authorized persons.
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