Cindy Cook – Accounting Manager Kirk Meche – President, Chief Executive Officer and Director Jeff Favret – Chief Financial Officer Todd Ladd – Chief Operating Officer.

Martin Malloy – Johnson Rice Doug Dyer – Heartland Advisors Walter Winnitzki – Buckley Capital Partners Michael Melby – Gate City Capital Management Jenifer Taylor – Royce Associates.

Good morning and welcome ladies and gentlemen to the Fourth Quarter 2014 Gulf Island Fabrication, Inc. 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, Sallie. Good morning. I would like to welcome everyone to Gulf Island Fabrication's 2014 fourth 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 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 fourth quarter of 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 early stages of rolling the materials for the piles associated with a separate project for the Gulf of Mexico.

Delivery of these piles are scheduled for third quarter of 2015. At our Louisiana facilities, work continues on several jackets for shallow water projects, which include domestic and foreign locations.

Work associated with the fabrication of five shallow water jackets and supporting piles for a wind turban project located off the East Coast of United States is underway with the delivery scheduled for third quarter of 2015.

We completed the majority of our scope for an offshore hook-up and integration for a large deepwater platform in the Gulf of Mexico, and we’ll be gearing up shortly for another deepwater platform hook-up, but with a lesser scope.

We continue to work on a floodgate that is scheduled for completion in the first quarter of 2015 along with our second oversea vessel scheduled for delivery also in the first quarter of 2015.

We’re also in our early stages of construction for two river towboats scheduled for delivery in the third quarter of 2015 and first quarter of 2016 respectively. Our drydock remains active with opportunities for work going forward. Now on the market conditions. The market has taken a drastic turn over the last several months.

Oil and gas companies have slashed budgets with the price of per barrel of oil ranging from low-$40 to mid-$50 per barrel. We in turn are beginning to feel the effects of these budge reductions as several of the projects we were tracking have been put on hold or canceled.

Bids for deepwater projects continue to move to the right and we expect to see a few of these bids in the mid-to-late 2015. Bid inquiries for petrochemical, offsite installation and marine segments remain very strong for us.

As there is a possibility to ship several shallow water structures and decks for non-related oil and gas fields for overseas destinations. Our plan forward. Like most companies experiencing slowdown, we are evaluating all of our assets whether equipment or personnel and making tough decisions to reduce our cost structure.

We’re also looking at our capital expenditures and cutting where practical. We have no debt on the books and we closely guard our cash and continue to explore opportunities that will enhance our business model while producing maximum returns for our shareholders.

We’re stepping up our efforts for marketing in the marine fabrication, as well as repair sector, petrochemical plant and other activities, which are currently to a lesser extent not as affected by fluctuations in oil prices. I would now like to turn the call over to Mr.

Jeff Favret, who will discuss our financial performance for the fourth quarter of 2014.

Jeff?.

Thank you, Kirk, and good morning, everyone. I’ll briefly discuss our financial performance and then will open the call for your questions.

Net loss for the quarter was $100,000, or $0.01 per share, compared to a net loss of $3.1 million or $0.22 per share for the fourth quarter 2013, and net income of $7.6 million, or $0.52 per share for the third quarter 2014.

Our fourth quarter results were adversely affected by a charge of $3.6 million or $0.16 per share for a reserve on a receivable balance for a spar hull project completed in the first quarter of 2014, a $3.2 million impairment of assets held for sale, representing $0.14 per share, and a change to our effective tax rate impacting quarterly earnings by $0.04 per share.

Revenue for the three month ended December 31, 2014 was $124.8 million, compared to $135.1 million for the prior year quarter and $118 million for the preceding quarter.

The decrease in revenue of 8.3% for the fourth quarter 2014 compared to the prior year quarter was primarily due to a slightly higher level of activity in the prior quarter, primarily as a result of completion efforts on a spar hull for a large deepwater customer.

Gross profit was $10.8 million for the quarter, representing an 8.7% profit margin compared to a loss of $1.8 million or 1.3% for the fourth quarter 2013 and gross profit of $14.7 million or 12.4% for the preceding quarter.

We experience solid gross profit margins for each of the last four consecutive quarters, with an overall 8.8% gross profit margin for the full year 2014 as compared to 3.9% gross profit margin for the year ended December 31, 2013.

Improvements in 2014 relative to 2013 was a result of our execution improvement strategies implemented during the year, return to traditional jacket in topside projects and higher level of offshore commissioning and hook-up activity performed on a time and material basis.

Revenue backlog was $184.7 million, with a labor backlog of 1.7 million hours remaining to work at December 31, 2014, compared to a revenue backlog of $252.9 million and labor backlog of 2.0 million hours remaining to work at September 30, 2014.

Revenue backlog for deepwater projects was $78.3 million or 42.4%, compared to $11.7 million or 44.2% for the sequential quarter.

Of the backlog at December 31, 2014, we expect to recognize revenue of approximately $176.7 million or 95.7% during 2015, and $8 million or 4.3% during the calendar year 2016, not including change orders, scope growth or new contracts that may be awarded.

We had 1,711 employees and 247 contract employees at December 31, 2014 and 1,730 employees and 150 contract employees at September 30, 2014. Labor hours worked during the fourth quarter were 818,000 hours, compared to 898,000 hours for the sequential quarter.

Our balance sheet remains solid with cash and cash equivalent of $36.1 million at December 31, 2014, compared to $26.7 million at September 30, 2014. Working capital was $99.7 million at December 31, 2014 versus $93.1 million at September 30, 2014. We had no outstanding borrowings at December 31, 2014.

CapEx for the fourth quarter 2014 was $950,000, primarily for yard improvements and maintenance.

Approximately, $4.8 million of capital expenditures are planned for 2015, including $1.7 million of maintenance capital expenditures at our Texas and Louisiana facilities., $1.1 million for bulkhead and yard improvements, and another $2 million for equipment.

We declared and paid cash dividends of $0.10 per share during each of the quarters ended December 31, 2014 and 2013. Operator, you may now open the call for questions..

Thank you. [Operator Instructions] And we will take our first question from Martin Malloy with Johnson Rice..

Good morning..

Good morning, Marty.

How you are doing?.

Good. I was wondering could you talk a little bit more in terms of what you are seeing out there on the bidding front with respect to some of your non-traditional offshore oil and gas work and maybe touch on the wind farm opportunities as well as maybe a little more detail on the petrochemical side along the U.S.

Gulf Coast LNG modules, anything like that, and the timing of potential awards there..

Sure. Marty, this is Kirk. And what I’ll do is, we actually are going to let Mr. Todd Ladd, who has not previously on our calls said very much, but this time we want him to have some input into this, so I’m going to let him answer that call – or answer the question.

Todd?.

Yes. So, Marty, some of the stuff that we are looking at right now, again, wind farm is a big item that we see as a bit traditional in the work that we do, although, the end product is not traditional for what we fabricate.

But with that, doing those structures, we are seeing that there is a potential of two other bids that are going to be coming in by the end of the second quarter and we are tracing them right now, trying to make sure that we get those opportunities.

Also from there on the petrochemical side, we are looking at some other modular work and we actually currently have some bids pending where we’re looking at doing some pipe wreck, pipe modules and things that are going to support the petrochemical industry.

From there, we have some items on flood control gates and other things that are a little non-traditional for us, but again, looking at every avenue to get bids in-house that are for metal fabrication..

Okay.

And the wind farm, the two bids, are they similar in size to the one that you are awarded last year in terms of the amount?.

Very close. Most of the – they are staring out, trying to get into the industry with a smaller scope, seeing how it fits and then they will be going into larger expended scopes hopefully sometime in the future..

And then on the one that you are awarded last year, it appear as though, there were – looking at the website online, that there were some potential extension opportunities for that project.

And what would be the timing on some of those additional awards?.

We are hearing about probably sometime next year. But again, that’s all going to go through what they needed to do for their financing and permits and things of that such to be prepared..

Okay. I’ll get back in queue. Thank you..

Okay, Martin. Thank you..

We’ll take our next question from Doug Dyer with Heartland Advisors..

Hi, good morning, gentlemen..

Hey, good morning, Doug..

With regard to the current project where you are working on the five jackets, are there some regulatory approvals that we are waiting on before we get pass this initial five?.

No. Those are already in place and we’re moving forward with fabrication..

Right.

But as far as additional orders pass that first five, are there some regulatory approvals that need to take place?.

Hey, this is Kirk. We are not sure. I don’t believe regulatory needs to be approved. I think what needs to be approved is the base model itself needs to prove that the concept is solid and it’s going to work.

I don’t think it’s a regulatory approval process they needed at this point, it’s really just a fact the first five need to produce the energy, and then from that point I think the financing will be put in place as well.

No, I don’t think it’s a regulatory – any regulatory issues that need to be head for obtaining 100 or so platforms behind the first five..

Okay.

And in this current energy environment what is being presented to you in terms of potential acquisitions, is that coming through right now?.

This is Jeff Favret. We are seeing some questions and some interest for potential opportunities. We certainly would look at value deals and we are seeing some potential opportunities where we do have – where we are conserving cash, we have $36 million as we said earlier. We have strong working capital of close to $100 million.

And so we think that that could be a good opportunity for us and we are getting inquiries..

Yeah, this is Kirk. And just to expand a little bit on what Jeff said, again, we are always keeping our eyes and ears open in terms of what’s out there in the marketplace for may be some distress asset hanging out there. As I said in my opening remarks, we continue to look for those opportunities that would have maximum effect on our shareholders.

So, as Jeff said, we find ourselves in a very good position with zero debt on the books and $36 million plus in cash. And so – but we are going to take the opportunity to look further into the market segment and see what makes sense for us going forward..

And can you discuss a maximum amount or what type of size commitment you’d be willing to make to acquisitions..

Doug, as we’ve said, we’re kind of continuing to look at anything that presents itself to us, but we don’t generally disclose that..

Alright, thank you..

Okay. Thank you, Doug..

[Operator Instructions] And we’ll take our next question from Walter Winnitzki with Buckley Capital Partners. .

Yes, thank you. Good morning..

Good morning Walt. .

I want to see if you can provide a little more color on the market environment, particularly as it’s in reference to your vessel construction and the barge business. In light of some of the information I hear indicates that production seems to still be at record levels and exploration is where a lot of the cut backs have taken place.

Is that something that’s impacting that side of the business more or less so than kind of what you’re seeing in the overall market?.

Yes, from what we’re seeing – this is Todd Ladd. Right now, it’s taken a little bit of a shift not so much in the strong OSV market that we recently saw in the last couple of years.

Now we’re seeing some of the towboat market has actually increased, and then also looking at some other opportunities of different vessels and the luxury cruise line type that’s actually coming out and would be part of the U.S. market..

Okay. So some impact, but there is still some opportunities that you’re seeing in other areas, okay..

Oh, yes, there is definitely opportunities for us that Walter – I think the marine segment still remains one of the strongest segments we have within the entire makeup of the company.

If you may or may not know, several years ago, when we started our shipyard division, the oil and gas industry had gotten little slow, so what we did is we fabricated those marine vessels in our typical oil and gas fabrication facilities and we’re still in that mode. So the bidding is still very robust for the marine segment.

And so what we’re doing is, we’re looking at opportunities to put that work in different locations whether it’s South Texas or even our home [ph] location to support that market. So, again it’s a very strong market.

It has slowed down some, but there is still plenty of opportunities out there and we want to emphasize the fact that our dry dock is currently very well booked into the future and we see a lot of opportunities come about with the utilization of the dry dock..

Just if I could follow-up, a lot of that from what I read, which may or may not be correct, has been kind of driven by the barge business.

Is that still the case or are we starting to see a shift over to other vessels?.

I think, we’re probably seeing a little bit of a shift to other vessels, as Todd has said. We fabricate some barges, it’s not the business, quite honestly, that we had been in, in the past that has been a very successful market for us. We still have some challenges facing us when we get into that market.

But we are seeing more inquires towards integrated tug barge for pushing products along the Intercoastal Waterway system or Inland [indiscernible] around here. So we see that becoming a little stronger and I think that will be – going into the future, I think that will be a market that we need to look and get a little more involved in..

Thank you very much..

Okay Walter, thank you..

We’ll take our next question from Michael Melby with the Gate City Capital Management..

Good morning, gentlemen, thanks for talking my questions..

Good morning, Michael..

Talking general, something you talk in general about your comfort with your accounts receivable balance, especially with oil and gas customers given the fall in prices. Thanks..

Sure Michael, I’ll address that one. This is Jeff. The receivables reserve of $3.6 million that we recently took is related to a very particular customer and an item that we’re working through. With respect to the remainder of our receivable balance, we are not concerned about any of the balances there. We expect whole collection.

We’re not seeing anything to indicate otherwise on our end..

Okay, great. Thank you..

Michael, this is Kirk. There is nothing hanging on the sheets that are beyond 90 days past due, so all that’s hanging on the sheets are actually current..

Perfect. I appreciate the color..

Okay. Thank you, Michael..

And we’ll take our next question from Martin Malloy..

One more question if I could, the labor cost environment on the Gulf Coast, could you talk a little bit about what’s happening there? Are you seeing labor cost pressures ease at all with some labor being let go from oil and gas activities or is the ramp up on the petrochemical plants and the LNG plant still putting a lot of pressure?.

No. I don’t think we – right now, we currently don’t see the pressure. Certainly, the petrochemical industries, while they’re in the bid process now, trying to get these modules fabricated, they are not inside the plans as of yet. I don’t anticipate that for another 18 months or so. So you’re right. There is not much pressure on the labor here.

There have been lay-offs in some respect with multiple companies around the Louisiana area and some in Texas as well. So there is no pressure right now on the marketplace in terms of labor availability or wages..

Thank you..

Yeah..

And we’ll take our next question from Jenifer Taylor with Royce Associates..

Hi, good morning.

Couple of quick questions., I guess, just for starters on the acquisition front, could you just reconcile for me a little bit more about the thinking of management behind opportunities to diversify maybe a little bit more away from oil and gas, from an end market standpoint and sort of where you are thinking or looking where there might be value.

I guess my concern just being I think that might start to look cheap with the less interesting from a macro standpoint from a near term basis and I’m just wondering, how you are thinking about that?.

Well, as Jeff has said earlier Jenifer, we’re going to look at all opportunities. I don’t know that there is any particular segment we’re going to concentrate on whether it’s within the oil and gas segment, outside oil and gas segment.

Again, we’re going to look at every opportunity that’s presented to us and there are some unique ones that we have looked at in the past that, quite frankly, we have turned down. There are a few of them on the table that we are looking at now, that may be a little bit outside of what we do.

But again, we’re just going to evaluate all of them and see what makes sense going forward for all of us. So I can’t give any more than that, but again, every opportunity that’s put in front of us, we’re doing evaluation on those opportunities..

So what make sense in terms of, if you were to prioritize what you view as to be the [indiscernible], could you just kind of broadly illuminate sort of the one, two, quantitatively or strategically? Yeah..

Yeah. Again, we talk about the marine segment of our businesses and we think there is some potential growth for marine. Certainly as the oil and gas industry moves to the western part of the Gulf of Mexico and I know there is a lot of activity in terms of the bidding and the agreements with Mexico.

Certainly it opens up our Gulf Marine facilities in South Texas as multiple, I guess, support basis for either fabrication work or support work of the vessels or something along those lines.

So again, when we talk about diversification of the company, we could also do some in house diversification where we take some of our assets and convert them to little bit different portion of the segment of the business as we go forward..

Okay.

And I guess just a follow-up a little bit – on light of sort of assessing cost, utilization, labor, sort of potential acquisition, could you just review the four [ph] dimensions thinking on the dividend policy, you expect it remain sort of as it was been or –?.

Sure..

Yes Jenifer, this is Jeff. Yeah, from a dividend perspective, we don’t plan on making any changes currently. The current thinking is that we won’t change the dividend policy. We have ridden through these cycles in the past. We do have a strong balance sheet.

We expect cash to be adequate to get us through this cycle and we don’t expect to make any dramatic changes such as changing dividend policy..

Okay, great. Thank you..

Hey Jenifer. Thank you..

And this concludes today’s question and answer session. At this time, I’d like to turn the conference back over to our speakers for additional comments..

Okay. Well, again, we certainly appreciate everyone listening into our conference call this morning and we look forward to speaking to everyone in the next quarter. Thank you..

This does conclude today’s presentation. We thank you all for your participation..