<PAGE>
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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 (S) 240.14a-11(c) or (S) 240.14a-12
Gulf Island Fabricatin, 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:
-------------------------------------------------------------------------
Notes:
<PAGE>
[GULF ISLAND LOGO APPEARS HERE]
GULF ISLAND FABRICATION, INC.
583 THOMPSON ROAD
HOUMA, LOUISIANA 70363
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 29, 1999
----------------
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 29,
1999, at the office of the corporation, 583 Thompson Road, Houma, Louisiana
for the following purposes, more fully described in the accompanying proxy
statement:
1. To elect two Class II 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 1999.
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 12, 1999 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, 1999
<PAGE>
GULF ISLAND FABRICATION, INC.
583 THOMPSON ROAD
HOUMA, LOUISIANA 70363
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 29, 1999
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, 1999.
On March 12, 1999, the record date for determining shareholders entitled to
notice of and to vote at the Meeting, the Company had outstanding 11,638,400
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 seven persons. The term of office of the Class II directors will expire at
the Meeting, and the persons listed as the Class II nominees in the table
below will be nominated for election to the Board of Directors for a term
expiring in 2002. The term of office of the Class III directors will expire at
the 2000 annual meeting. The term of office of the Class I directors will
expire at the 2001 annual meeting.
The Board of Directors has nominated two candidates for election at the
Meeting and recommends that shareholders vote FOR the election of both
nominees. Proxies cannot be voted for more than two candidates. In the absence
of contrary instructions, the proxy holders will vote for the election of the
two 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, 1998, 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>
<TABLE>
<CAPTION>
Positions with the Company, Principal Occupations,
Directorships in Other Public Corporations, and Family Director
Name and Age Relationships Since
------------ ------------------------------------------------------- --------
Nominees for Election as Class II Directors (for term expiring in 1999)
<S> <C> <C>
Gregory J. Cotter, 50... Director and financial advisor to the Company. 1985
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") Director of the Company. Chief Executive Officer of All 1997
Laborde, 49............ Aboard Development Corporation ("All Aboard"), an
independent oil and gas exploration and production
company, since 1996 and President of All Aboard since
1998. Vice President of All Aboard from November, 1993,
to March, 1996. Consultant to the Company from April,
1996, to December, 1996, and International Marketing
Manager of the Company from April, 1992, to March,
1996. Son of Alden J. Laborde.
Continuing Class III Directors (term expires in 2000)
Kerry J. Chauvin, 51.... Director, President and Chief Executive Officer of the 1985
Company.
Alden J. ("Doc") Director and Chairman of the Board of the Company. 1985
Laborde, 83............ Father of John P. Laborde.
Huey J. Wilson, 70...... Director of the Company. Chairman of the Board and 1997
Chief Executive Officer of Wilson Interests and of
Wilson Jewelers.
Continuing Class I Directors (term expires in 2001)
Thomas E. Fairley, 50... Director of the Company. Director, President and Chief 1997
Executive Officer of Trico Marine Services, Inc. , a
marine vessel operator.
Hugh J. Kelly, 73....... Director of the Company. Consultant to the oil and gas 1997
industry. Chief Executive Officer of ODECO, Inc., an
offshore drilling contractor, until 1989. Director of
Tidewater Inc., a supplier of offshore marine
transportation and other services; and Chieftain
International, Inc., an oil and gas exploration and
development company.
Executive Officers not Serving as Directors
Murphy A. Bourke, 54.... Vice President--Marketing of the Company N/A
William A. Downey, 52... Vice President--Operations of the Company N/A
Joseph P. Gallagher, Vice President--Finance, Chief Financial Officer, N/A
III, 48................ Treasurer and Secretary of the Company
</TABLE>
During 1998, the Board of Directors of the Company held five meetings. The
Board of Directors has an Audit Committee, of which Mr. Cotter, Chairman, Mr.
Fairley, and John P. Laborde are members, and a Compensation Committee (the
"Compensation Committee"), of which Mr. Wilson, Chairman, Mr. Cotter, Mr.
Kelly, and Alden J. Laborde, are members. The Board of Directors does not have
a Nominating Committee. The Audit Committee, which met twice during 1998,
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 four times during
1998, recommends to the Board of Directors compensation for the Company's key
employees, administers the Company's stock incentive plan, and
2
<PAGE>
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 all of the 1998 meetings of the Board
and of the committees on which he served during the periods of his Board
membership and committee service except Mr. Fairley, who attended one of the
two Audit Committee meetings.
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. Kerry J. Chauvin, a director and President
and Chief Executive Officer of the Company, failed to file timely a statement
on Form 4 in 1998 reporting three transactions: the exercise of employee stock
options for 15,000 shares, the receipt of those shares, and the sale of those
shares on the open market. Alden J. Laborde, a director and Chairman of the
Board of the Company, failed to report on Form 4 in 1998 one sale of a small
number of shares held by an investment partnership in which his wife owned a
10% interest; the sale was reported on a Form 4 filed in 1999.
3
<PAGE>
STOCK OWNERSHIP
The following table sets forth, as of February 5, 1999, 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>
Percent of
Number of Shares Outstanding
Name of Beneficial Owner Beneficially Owned(1) Common Stock
------------------------ --------------------- ------------
<S> <C> <C>
Murphy A. Bourke........................... 31,400 *
Kerry J. Chauvin........................... 90,600(2) *
Gregory J. Cotter.......................... 3,000(3) *
William A. Downey.......................... 39,300 *
Thomas E. Fairley.......................... 10,000 *
Joseph P. Gallagher, III................... 47,600 *
Hugh J. Kelly.............................. 4,000 *
Alden J. Laborde(4)........................ 1,582,400(5) 13.5%
John P. Laborde............................ 75,600(6) *
Huey J. Wilson(7).......................... 2,201,000(8) 19.0%
All directors and executive officers as a
group (10 persons)........................ 4,084,900 35.0%
</TABLE>
- --------
* Less than one percent.
(1) Includes shares that could be acquired within sixty days after February 5,
1999 upon the exercise of options granted pursuant to the Company stock
option plan, as follows: Mr. Bourke, 9,200 shares; Mr. Chauvin, 26,400
shares; Mr. Downey, 10,300 shares; Mr. Gallagher, 7,600 shares; all
directors and executive officers as a group, 53,500 shares.
(2) Includes 200 shares owned by one of Mr. Chauvin's 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.
(6) Includes 46,000 shares owned by Mr. Laborde's 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.
4
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid in 1998, 1997, and 1996
by the Company to its Chief Executive Officer and each of its most highly
compensated executive officers whose salary and bonus exceeded $100,000 for
1998 (collectively, the "Named Executive Officers").
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............. 1998 $262,917 $271,994 15,000 $7,974
President an Chief Executive
Officer 1997 237,709 410,002 96,000 7,824
1996 199,370 162,783 0 8,220
William A. Downey............ 1998 146,917 121,525 6,500 7,974
Vice President--Operations 1997 134,416 205,001 45,000 7,824
1996 124,400 81,392 0 7,562
Murphy A. Bourke............. 1998 139,167 114,956 6,000 7,974
Vice President--Marketing 1997 129,493 205,001 40,000 7,824
1996 120,417 81,392 0 7,320
Joseph P. Gallagher, III..... 1998 131,000 108,387 6,000 7,974
Vice President--Finance and
Chief Financial 1997 117,773 136,667 32,000 7,222
Officer 1996 80,860 27,131 0 4,670
</TABLE>
- --------
(1) For 1998, the Company's executive officers were paid bonuses equal to a
percentage of their base salary (the "Target Portion of Base Salary")
using a ratio of actual income before taxes to a designated benchmark of
income before taxes (the "Benchmark"). The Target Portion of Base Salary
used for 1998 was 50% for Mr. Chauvin and 40% for each of Messrs. Downey,
Bourke and Gallagher. The Benchmark for 1998 was approximately $23.9
million. As bonuses for 1998, each executive officer, including Mr.
Chauvin, received 2% of his Target Portion of Base Salary for each
percentage point by which actual consolidated income before taxes exceeded
50% of the Benchmark and, in addition, received 4% of his Target Portion
of Base Salary for each percentage point by which actual consolidated
income before taxes exceeded 100% of the Benchmark.
(2) Includes (i) matching and profit-sharing contributions of $7,574, $7,574,
$7,574 and $7,574 in 1998, $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 $400, $400, $400 and $400 in 1998, $410, $410,
$410 and $410 in 1997 and $410, $410, $410 and $312 in 1996 for Messrs.
Chauvin, Downey, Bourke and Gallagher, respectively, under a long-term
disability insurance plan, which premium payments are attributable to
benefits in excess of those benefits provided generally for other
employees.
5
<PAGE>
Stock Option Grants
The following table sets forth information with respect to all stock options
granted in 1998 by the Company to each of the Named Executive Officers.
Option Grants in 1998
<TABLE>
<CAPTION>
Grant
Individual Grants Date Value
- --------------------------------------------------------------------------------------- ----------
Number of % of Total
Securities Options Granted Grant Date
Underlying Options to Employees in Exercise or Base Expiration Present
Name Granted (#)(1) 1998 Price ($/Sh) Date Value $(2)
- ------------------------ ------------------ --------------- ---------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Kerry J. Chauvin........ 15,000 14.3% 18.00 01/22/08 193,350
William A. Downey....... 6,500 6.2% 18.00 01/22/08 83,785
Murphy A. Bourke........ 6,000 5.7% 18.00 01/22/08 77,340
Joseph P. Gallagher,
III.................... 6,000 5.7% 18.00 01/22/08 77,340
</TABLE>
- --------
(1) Each of the stock options granted in 1998 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 1998 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 $12.89. The following facts and assumptions
were used in making such calculation: (i) an exercise price of $18.00 for
each such stock option; (ii) a fair market value of $18.00 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
65.2%, based on an analysis of monthly closing stock prices of shares of
Common Stock during a 24-month period; and (vi) an assumed risk-free
interest rate of 5.5%, 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 $12.89 for each stock
option was multiplied by the total number of stock options granted to each
of the Named Executive Officers to determine the total grant date present
value of such stock options granted to each Named Executive Officer,
respectively.
6
<PAGE>
Outstanding Stock Options
The following table sets forth information with respect to all outstanding
Company stock options held by each of the Named Executive Officers as of
December 31, 1998.
Aggregated Option Values as of December 31, 1998
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Number of Underlying Unexercised In-the-Money Options
Shares Options at 12/31/98 (#) at 12/31/98 ($)
Acquired Value ------------------------- -------------------------
on Exercise Realized ($) Exercisable Unexercisable Exercisable Unexercisable
----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kerry J. Chauvin........ 15,000 254,050 4,200 91,800 1,050 19,200
William A. Downey....... 9,000 124,306 0 42,500 0 9,000
Murphy A. Bourke........ 8,000 110,494 0 38,000 0 8,000
Joseph P. Gallagher,
III.................... 6,400 88,395 0 31,600 0 6,400
</TABLE>
Compensation Committee Interlocks and Insider Participation
Huey J. Wilson, Chairman, Gregory J. Cotter, Hugh J. Kelly, and Alden J.
Laborde 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.
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 each
of them has one remaining right to require the Company to register shares of
Common Stock owned by him under the Securities Act. 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 shareholders of Southport,
Inc. ("Southport") all the outstanding shares of Southport capital stock. The
Southport shareholders included Stephen G. Benton, Jr., a director of the
Company from February 1998 to February 1999; 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, consisted of an initial purchase price of $6.0
million and a deferred purchase price of up to a maximum of $5.0 million that
is payable over a four-year period ending December 31, 2001 and is based on
the net income of Southport during each of those four years. Because Southport
did not achieve the required level of net income for 1998, no portion of the
deferred purchase price was paid for that year. In connection with the
Southport acquisition, Stephen G. Benton, Sr. was released from his guarantee
of Southport obligations under its credit facility and Stephen G. Benton, Jr.
and Frank J.B. Benton entered into employment agreements with the Company.
Stephen G. Benton, Jr.'s employment under his employment agreement began
January 1, 1998 and ended February 1, 1999. As provided in the agreement, Mr.
Benton served as President and Chief Executive Officer of Southport and was
paid a salary at the rate of $115,000 per year and a bonus of $47,000 with
respect to the year 1998. When his status as an employee of Southport ended,
Mr. Benton resigned as a director of the Company. Stephen G. Benton, Jr.'s
employment agreement provides that if his employment is terminated by
Southport without cause, as defined in the agreement, Southport must promptly
pay his salary for the remaining three years of its original term and the
Southport acquisition agreement provides that, in that event, the Company must
pay the former Southport shareholders the present value of the deferred
purchase price. After Mr. Benton had asserted that his employment
7
<PAGE>
had been terminated by Southport without cause, Southport and the Company
instituted litigation seeking a declaratory judgement that Mr. Benton's
employment had been terminated by Mr. Benton and not by Southport. The Company
intends to pursue this litigation vigorously. Management of the Company does
not believe that the ultimate resolution of this litigation will be materially
adverse to the financial position or results of operations of the Company. 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 at a base salary of $71,989 per year. 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
The Compensation Committee has 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.
Four directors of the Company, Huey J. Wilson, Gregory J. Cotter, Hugh J.
Kelly, and Alden J. Laborde, comprise the Compensation Committee. Mr. Laborde
is Chairman of the Board of the Company and was Chief Executive Officer of the
Company from 1986 to 1990. Neither Mr. Wilson, Mr. Cotter, nor Mr. Kelly 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 no formal bonus plan, but it has adopted an executive
compensation policy that ties a portion of executive compensation to the
short-term performance of the Company. This policy is described in footnote 1
to the "Summary Compensation Table".
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 1998" under the
heading "Executive Compensation" sets forth the stock options granted in 1998
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 1998. 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 Gregory J. Cotter Hugh J. Kelly Alden J. Laborde
8
<PAGE>
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, 1998, 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.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
April 3, December 31, December 31,
1997 1997 1998
-------- ------------ ------------
<S> <C> <C> <C>
Gulf Island Fabrication, Inc............... $100.00 $266.67 $103.33
S&P 500.................................... 100.00 130.90 168.31
S&P 500 Oil & Gas (Drilling & Equipment)
Index..................................... 100.00 151.14 86.43
</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
9
<PAGE>
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 1999. 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 two directors to be elected at the Meeting
will be determined by plurality vote (that is, the two 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 has not received any notice that a shareholder desires to present
any matter for action by shareholders at the meeting and is unaware of any
matter for action by shareholders at the Meeting other than the matters
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 2000 (the "2000 Annual Meeting") 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 26,
1999. The Amended and Restated Articles of Incorporation of the Company
provide that shareholders intending to nominate a director must furnish timely
written notice containing specified information concerning, among other
things, information about the nominee and the shareholder making the
nomination. In general, to be timely a shareholder's notice must be received
by the Secretary of the Company not less than 45 days nor more than 90 days
prior to the shareholder's meeting. The Company will be permitted to disregard
any nomination that fails to comply with these procedures. Proxies solicited
on behalf of the Board of Directors for the 2000 Annual Meeting will confer
discretionary authority to vote with respect to any other matter properly
submitted by a shareholder for action at the 2000 Annual Meeting if the
Company does not, on or before February 9, 2000, receive written notice,
addressed to the Secretary of the Company at the address shown on the first
page of this proxy statement, that the shareholder intends to do so.
By Order of the Board of Directors
/s/ Joseph P. Gallagher, III
Joseph P. Gallagher, III
Secretary
Houma, Louisiana
March 25, 1999
10
<PAGE>
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 12, 1999, at the annual meeting of
shareholders of the Company to be held on April 29, 1999 (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 29, 1999
Please Detach and Mail in the Envelope Provided
<TABLE>
<CAPTION>
Please mark your
[X] votes as in this
example.
<S> <C> <C> <C>
FOR all nominees WITHHOLD The Board of Directors recommends a vote FOR the nominees listed
listed to the right AUTHORITY below and FOR Proposal 2.
(except as market to to vote for all nominees
the contrary below) listed to the right
FOR AGAINST ABSTAIN
1. Election of the Nominees: 2. Ratification os appointment
nominees for [_] [_] Gregory J. Cotter of Ernst & Young LLP as [_] [_] [_]
directors. John P. "Jack" Laborde independent auditors.
INSTRUCTIONS: To withhold authority to vote for any 3. In their discretion to vote upon such other
individual nominee, strike a line through the nominee's business as may properly come before the
name in the list to the right. 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:_____________ 1999
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.
</TABLE>
