Cindy Cook - Accounting Manager Kirk Meche - President & CEO Jeff Favret - VP - Finance, CFO Todd Ladd - COO.

Martin Malloy - Johnson Rice Doug Dyer - Heartland Advisors.

Good morning and welcome, ladies and gentlemen, to the Gulf Island Fabrication, Inc. Q3 2014 Earnings Conference Call. All participants will be in a listen-only mode for the duration of the presentation. This call is being recorded. At this time, I'd like to turn the conference over to Ms. Cindy Cook for opening remarks and introductions.

Cindy, please go ahead..

Thank you. I would like to welcome everyone to Gulf Island Fabrication's 2014 third quarter teleconference. Please keep in mind that any statements made in this conference that are not statements of historical fact are considered forward-looking statements.

These statements are subject to factors that could cause actual results to differ materially from the results predicted in the forward-looking statements.

These factors include the timing and extent of changes in the prices of crude oil and natural gas, the timing of new projects and the company's ability to obtain them, and other details that are described under Cautionary Statements Concerning Forward-looking Information and elsewhere in the company's 10-K filed March 7, 2014.

The 10-K was included as part of the company's 2013 annual report filed with the Securities and Exchange Commission earlier this year. The company assumes no obligation to update these forward-looking statements. Today, we have Mr. Kirk Meche, President and CEO; and Mr. Jeffrey Favret, our Chief Financial Officer; and Mr.

Todd Ladd, our Chief Operating Officer. Mr.

Meche?.

Thank you, Cindy, and good morning to all of our listeners. I will provide updates on existing projects, a general overview of the market and opportunities that exist for our company. I will then turn the call over to Mr.

Jeff Favret, our Vice President of Finance and Chief Financial Officer for a breakdown of the financial information for the third quarter 2014. At the conclusion of Mr. Favret's report, we will open the lines to our analysts for questions. I will begin with an update on the projects currently under contract.

At our Texas facilities, we continue to fabricate a 1,200-foot jacket, the associated piles and topsides for our Gulf of Mexico destination. Deliveries for these units are scheduled for third quarter of 2015.

We are in the process of receiving materials in early stages of rolling the material for the pile associated with the project for the Gulf of Mexico. Delivery of these piles are scheduled for third quarter 2015. Delivery of two tank barges for our U.S. customer was also completed during this quarter.

At our Louisiana facilities, work continues on several jackets and topsides for shallow water projects, which include domestic and foreign locations. Efforts for a major offshore hookup and integration project for a large deepwater platform in the Gulf of Mexico continues with work anticipated to complete in latter part of this year.

We continue to work on several vessels, including a large lift boat which is currently scheduled for sea trials as well as two offshore supply vessels of which one is scheduled for sea trials with the second vessel scheduled for delivery in late first quarter 2015.

We're also in the early stage of construction for two river towboats scheduled for delivery in the third quarter 2015 and first quarter 2016. Our drydock remains active with opportunities for work going forward.

Included in our backlog numbers for this quarter is a project for fabrication of five shallow water jackets and supporting piles for a wind turban project located off the East Coast of United States. Now on to market conditions.

Bids for deepwater projects continue to slip to the right and we believe that outstanding bids for these projects will be in the mid to latter part of 2015.

Bidding activity for shallow water projects, non-traditional Gulf of Mexico marine related projects, wind projects and support work associated with deepwater structures are expected to increase from current levels over the next two to three quarters.

We're also seeing an increase in prequalification of requests for quotation for fabrication of modules associated with the petrochemical industry. We also continue to explore the best solutions for a variety of customer needs through existing and future teaming agreements, joint ventures and acquisitions. I would now like to turn the call over to Mr.

Favret who will discuss our financial performance for the third quarter of 2014.

Jeff?.

Thank you, Kirk, and good morning everyone. We're obviously very pleased with our third quarter operational performance with net income of $7.6 million or $0.52 per share compared to net income of $3.3 million or $0.23 per share for the third quarter 2013 and $4.3 million or $0.30 per share for the consecutive quarter.

Revenue for the three months ended September 30, 2014 was $118 million compared to $168.2 million for the prior year quarter and $129.2 million for the consecutive quarter.

Gross profit was $14.7 million for the quarter, representing a 12.4% profit margin compared to gross profit of $9.1 million or 5.4% for the second quarter 2013 and $10.3 million or 8% for the sequential quarter.

The decrease in revenue of 29.8% for the third quarter 2014 compared to the prior year quarter, which primarily due to substantial revenue for three large deep water projects recognized during the third quarter 2013.

As expected, we experienced increased gross profit for each of the last three consecutive quarters, primarily as a result of higher levels of offshore commissioning and hook-up activity for the year and a return to traditional jacket and topside projects.

Though the offshore services work performed on a timely materials basis, in our project execution on a current mix of jacket and topside projects, garnered higher profit margin as compared to our mix of projects performed in the prior year quarter and last quarter.

Our balance sheet remains solid with cash and cash equivalents of $26.7 million at September 30, 2014, compared to $31.6 million at June 30, 2014. Working capital was $93.1 million at September 30, 2014, versus $81.6 million at June 30, 2014. We had no outstanding borrowings at September 30, 2014.

Capital expenditures for the third quarter 2014 was $5.4 million, primarily for the purchase of plate roller at our Texas facility and yard improvement.

Approximately $2.7 million of capital expenditures are planned for the remainder of 2014, including $1 million of maintenance capital expenditures at our Texas and Louisiana facilities, $700,000 for yard improvement and another $400,000 for other equipment.

We declared and paid cash dividends of $0.10 per share during each of the quarters ended September 30, 2014 and 2013.

Revenue backlog was $252.9 million with a labor backlog of 2.0 million hours remaining to work at September 30, 2014, compared to a revenue backlog of $223.8 million and labor backlog of 2.1 million hours remaining to work at June 30, 2014.

Revenue backlog for deepwater projects was $111.7 million or 44.2% compared to $129.8 million or 58.1% for the sequential quarter.

Of the backlog at September 30, 2014, we expect to recognize revenue of approximately $137.6 million or 54.4% during the remaining three months of 2014 and $114.0 million or 45.1% during the calendar year 2015, and $1.3 million or 0.5% for 2016, not including change orders, scope growth or new contracts that may be awarded.

We had approximately 1,730 employees and 150 contract employees at September 30, 2014, compared to approximately 1,900 employees and 200 contract employees as of June 30, 2014. Labor hours worked during the third quarter 2014 were 898,000 compared to 978,000 hours for the sequential quarter. Operator, you may now open the call for questions..

Thank you. The question and answer session will be electronically. (Operator Instructions) We will hear first from Martin Malloy from Johnson Rice..

Good morning..

Good morning Martin..

Good morning, Martin..

Good morning, Martin..

Congratulations on the strong quarter..

Thank you..

Could you talk a little bit more about the five jackets that you booked for the project done on the East Coast? Any help that you can give us in terms of magnitude of that award, timeframe of which it will be worked off and how it compares to traditional jacket structures that you’ve done before may be about potential future award size for this project..

Marty this is Kirk. Sure as we've been talking about through our conferences and through obviously with conversation with you, this is five traditional type jackets, which are very similar to what we've seen here in the Gulf of Mexico. So while this project is a first of a kind for the U.S.

in terms of alternative energy sources, its very much in line with the traditional full power jacket that we have built and currently have quite a few under construction in our Louisiana facilities and of course the big one in South Texas.

We actually will have more of a press release on this Monday with specific details of location and owner and customer and what not. So at this time, we're going to be a little limited on what we can tell you but know that its traditional type full power jacket piles in a small little topside that go on with this.

We scheduled to start this project I believe in the later part of this quarter. Delivery is scheduled for mid year, next year 2015. And certainly we hope that this is the start of a lot of the projects that are looking at alternative sources for energy in terms of wind for offshore.

So we're hoping that this can lead to bigger and better things obviously than the just five jackets that we're awarded in this project..

Okay. And just to be clear the five jackets went into 3Q backlog..

Yes they were included in the backlog..

All right. And then with respect to the third quarter results you talked about higher level of commissioning work on some Gulf of Mexico oil and gas projects and return to traditional shallow water, oil and gas structures in terms of fabrication and it sounds like these are trends that you expect to continue in the next two or three quarters.

Was there anything unusual about the third quarter that maybe we should think about when we're modeling out the next couple of quarter?.

You know, Marti I think when you look at the third quarter compared to subsequent orders coming out. You look at -- we keep talking about this large off-shore campaign we have and obviously that is starting to wind down some as we go forward. We're looking for additional work in that type of arena. So again seasonality plays a part in this as well.

Traditionally our third quarter is our best weather windows for fabrication. We start getting a little bit in the rainy season coming up and cold temperatures and what not, but again certainly our large fabrication facility our large shops we try and scheduled as much of that work indoors as we can.

And I think with the magnitude and the size of the project that may lend itself to taking a little bit of seasonality out, but certainly will still be subject to some seasonality within work scopes coming up..

Okay. And then one last question.

Could you talk about may be some of discussions or just can you give some better feel for the discussions that you're having regarding potential module fabrication projects for petrochemical and LNG facilities along the Gulf Coast?.

Yeah Marty, again similar to the deep water projects, these projects were scheduled to come out, it's bidding was supposed to happen somewhere in the late '13, early part of '14.

We saw those projects slip to the right for multitude of reasons, primarily due to permitting and now we're starting to see our bidding activity increase in terms of these modules for obvious locations like Charles and Geismar and what not.

So we are actively involved in our prequels as I said in my opening statements as well as bidding opportunities going forward. So it looks like those are -- the bidding activity is starting to pick up some.

I don't think that fabrication of these units will start immediately, but it is good news for us that we actually are seeing some movement in that respect in the petrochemical industry..

Okay. Thank you very much..

Okay Marty. Thank you for calling in..

(Operator Instructions) We'll hear next from Doug Dyer from Heartland Advisors..

Hey guys. Just a couple of questions. Kirk you lost me a little bit there when you were discussing the increase in pre qualifications and I didn’t know what that related to..

Sure, what happens Doug on these projects before you're allowed to submit a bid for the projects, you have to go through a pre qualification and what that is, is these companies will come in and make sure that we have our quality projects, our processes in place, safety programs, pricing.

So it’s a pretty, I guess exhaustive type effort that we go through in order to make sure that -- or the owner goes through to make sure that we can adhere to the scope of works that are coming out because they are pretty large in nature. And these are not just a couple of thousand tons [technical difficulty] coming forward.

So we have to go through the prequalification process and that's what I talk about when I say that..

Okay.

That part I understand, but what business lines is this in? Where you're seeing the request for more prequalification?.

Oh! I am sorry. This is in petrochemical. This is for the modules for different developments here in Louisiana..

Okay. All right. And then another question I had is when I look at the backlog and I look at the current man hour backlog, it looks like the backlog went up without a corresponding increase in the amount of man hours.

So does that mean that we're putting some better margin projects in the backlog? How to explain that discrepancy between man hours and backlog?.

Well, part of what we booked into our backlog is some municipal type work through one of our subsidiary companies and there is a high amount of pass through cost on that and so consequently the revenue side of it went a little higher than traditionally you would see with the man hour increase..

Okay. All right.

And then if you could -- looking further out I think when people think of deep water and Gulf, they also think just South of you guys there in Louisiana, but can you talk about what you see happening in the Western Gulf?.

Sure. We actually -- we presented a couple weeks ago in New Orleans and one thing that part of our presentation we had was the Western part of Gulf of Mexico and certainly there was more activity in the bidding activities for the Western part of the Gulf of Mexico.

There was actually 81 bids that were received for tracks of land in the Western part and of that, there was a pretty large concentration of bids received within a three mile boundary between the Gulf of Mexico -- between Mexico and the U.S. and obviously as that area begins to open, there is interest there.

We definitely believe that our Corpus Christi facility with Gulf Marine becomes more attractive as the location becomes a lot closer than other areas that may be within Louisiana and even on the Mississippi Gulf Coast.

So we think that's a ways off there, but I don't think that there is something that's going to happen within the next year or so, probably about a three to five years cycle out, but it is encouraging to see the Western part of the Gulf of Mexico stating to open up for us..

All right. Thank you..

Okay. Doug. Thank you..

(Operator Instructions) And with no further questions in the queue, that will conclude our question-and-answer session. At this time, I'd like to turn the conference over to your host for any additional comments..

Okay. Again, we would like to thank everyone for listening today. And we look forward to speaking with everyone on our next quarter. Thank you..

And that does conclude today's teleconference. We thank you all for your participation..