Cindi Cook - Accounting Manager Kirk Meche - President and Chief Executive Officer Jeffrey Favret - Chief Financial Officer Todd Ladd - Chief Operating Officer.

Martin Malloy - Johnson Rice.

Good morning and welcome ladies and gentlemen to the Q2 2015 Gulf Island Fabrication Incorporated Earnings Conference. Today’s call is being recorded. All participants will be in a listen-only mode for the duration of the presentation. And at this time, I would like to turn the conference over to Ms. Cindi Cook for opening remarks and introductions.

Please go ahead..

Thank you, Kim. I would like to welcome everyone to Gulf Island Fabrication’s 2015 second 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 6, 2015.

The 10-K was included as part of the company’s 2014 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; Mr. Jeffrey Favret, our Chief Financial Officer; and Mr.

Todd Ladd, our Chief Operating Officer. Mr.

Meche?.

Thank you, Cindi, and good morning to all of our listeners. I will give you a general overview of the market and opportunities that exist for our company. Mr. Todd Ladd will provide an update on existing projects and Mr. Jeff Favret will provide the breakdown of the financials for the second quarter of 2015.

The market continues to be sluggish with oil prices in the 40s. Bidding activity for deepwater projects have not improved and we don’t see much improvement heading into the third quarter of this year.

We have, however, seen an increase in bidding activity as it relates to our marine division, plant upgrades, shallow water projects bound for overseas locations and offshore wind opportunities. Bidding for our marine segment includes OSVs and river cruise ships.

Our proposal for an overseas multiple jacket and deck project remains outstanding, pending governmental funding and it is our hope that it will be funded in the latter part of this year.

Our service side of the business remains steady, offshore and onshore cruise remain busy with maintenance and upgrades to existing facilities with pressure to reduce cost is being put on us by our customers. We are continuing our efforts to evaluate all of our assets. Our cash position remains strong and we have no debt on the books.

This should aid us as we continue to explore opportunities that will enhance our business model while producing maximum returns for our shareholders. I will now turn the call over to Mr. Ladd who will discuss our existing projects..

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 continue the rolling and assembly process for piles associated with the project destined for the Gulf of Mexico.

Delivery of these piles are also scheduled for third quarter of 2015. At our Louisiana facilities, work associated with the fabrication of five shallow water jackets and supporting piles for a wind turbine project located off the East Coast of the United States is nearing completion.

Three of the five units were delivered during the second quarter and are currently being installed as we speak. We continue to work on three river towboats scheduled for delivery in the third quarter of 2015, first quarter of 2016 and second quarter of 2016. Our drydock remains active, with opportunities for work going forward.

Our maintenance and repair services for offshore locations remains strong. I will now turn the call over to Mr. Favret, who will discuss the financials for the first (sic) [second] quarter of 2015..

Thank you, Todd, and good morning everyone. I will discuss highlights from the second quarter, provide specifics on our financial performance and then we will open the call for your questions.

Net income for the quarter was $1.4 million or $0.09 per share compared to net income of $4.3 million or $0.30 per share for the second quarter 2014 and net income of $83,000 or $0.00 per share for the previous quarter.

Our second quarter results reflected improved margins for project incentive bonuses as certain projects neared completion, stronger than expected offshore maintenance and repair activities and overall cost savings realized during the quarter as a result of cost reduction initiatives implemented in the first and second quarter 2015.

This was offset by further progress during the second quarter 2015 on a large deepwater project, netting historically low profit margins and the continuing impact of lower levels of utilization at our fabrication facilities as a result of the prolonged downturn in the oil and gas market.

Revenue for the three months ended June 30, 2015 was $84.3 million compared to $129.2 million for the prior year quarter and $99.2 million for the preceding quarter.

The decrease in revenue was 34.7% for the second quarter 2015 compared to the prior year quarter and 15% compared to the most recent quarter was primarily due to overall lower levels of fabrication activity for the second quarter as I discussed earlier.

Gross profit was $5.8 million for the quarter, representing a 6.9% profit margin compared to gross profit of $10.3 million or 8% for the second quarter 2014 and gross profit of $4.4 million or 4.5% for the preceding quarter.

Comparatively lower gross profit for the second quarter 2015 compared to the prior year quarter was largely due to reduced utilization in our fabrication yards and near breakeven profit margins on a large deepwater project at our Texas facility.

Improvements over the most recent quarter were the result of the realization of completion bonuses, cost cutting initiatives and stronger than expected revenue from our offshore services group as previously mentioned.

Revenue backlog was $126.2 million, with the labor backlog of 1.3 million hours remaining to work at June 30, 2015 compared to a revenue backlog of $135.1 million and labor backlog of 1.2 million hours remaining to work at March 31, 2015.

Revenue backlog for deepwater projects was $50.9 million or approximately 40% compared to $57.8 million or 43% of the total for the preceding quarter.

Of the backlog at June 30, 2015, we expect to recognize revenue of approximately $91.2 million or 72% in the second half of 2015 and $35 million or 28% during calendar year 2016, not including change orders, scope growth or new contracts that may be awarded.

We had approximately 1,460 employees and 90 contract workers at quarter end compared to 1,570 employees and 170 contract workers at March 31, 2015. Labor hours worked during the second quarter 2015 were 716,000 compared to 745,000 hours for the sequential quarter.

Our balance sheet remains strong, with cash and cash equivalents at $53.4 million at June 30, 2015 compared to $50.1 million at March 31, 2015. Working capital was $106.2 million at June 30, 2015 versus $101.8 million at March 31, 2015. We had no outstanding borrowings at June 30, 2015.

CapEx for the second quarter was $2 million primarily for dredging and yard improvements and maintenance.

Approximately $7.2 million of capital expenditures are planned for the remainder of 2015, including approximately $4 million for a drydock extension, $2 million for equipment and facility improvements and $1.2 million for maintenance capital expenditures at our Texas and Louisiana facilities.

We declared and paid cash dividends of $0.10 per share during each of the quarters ended June 30, 2015 and 2014. As we reported yesterday, our Board of Directors authorized the company to repurchase up to 10 million in shares of its common stock under our share repurchase program.

Repurchases may be affected through open market transactions or in privately negotiated transactions at such times and in such amounts as we believe appropriate, depending on market conditions and other factors. The repurchase program does not obligate us to acquire particular amount of stock and maybe modified, suspended or discontinued at any time.

This authorization remains in effect through July 30, 2017. So to recap, we continue to diligently focus our efforts on managing our exposure to the energy sector downturn. In the near term, we will progress our programs to control discretionary spending and monitor our workforce levels relative to anticipated activity levels in our fabrication yards.

We’re using this period of reduced activity to further strengthen our execution improvement strategies, including modernizing information technology systems.

From a sales and marketing perspective, we’re increasing our emphasis on obtaining vessel repair and maintenance work and securing awards for marine and other fabrication projects with customers and industries that are less susceptible to fluctuations in oil prices.

And finally, we will continue to monitor and maintain a financial discipline and conservative capital structure as we navigate through the current oil and gas downturn. Operator, you may now open the call for questions..

[Operator Instructions] Our first question is from Martin Malloy from Johnson Rice..

Congratulations on solid execution in a difficult environment here. A couple of questions this morning. If you could maybe address the deepwater Gulf of Mexico prospects as you look out into 2016, there seem to be a couple of projects that are targeted for FID in 2016.

Are those potential bidding opportunities for you at all?.

We certainly hope so. We’ve been tracking these projects along with everyone else. As Jeff said in his opening remarks, our sales and marketing teams are in these offices and making sure that we get at least opportunity to bid on these projects.

There is a lot of pressure from the overseas markets right now, especially from China, with cheap prices and having a one-stop shop type project.

But nonetheless, we are in there, we are beating the doors and we are taking this time to look at all the processes that we have within the facilities including our programming, our project management and looking for ways to improve as these big projects come about, because they are getting bigger and bigger and demanding more and more of our resources as we go forward.

So yes, unfortunately they are not where we thought they would be, they are pushing to the right, but we are in there trying to secure at least a position to have opportunity to bid on them..

And then when we look on the Gulf Coast, you mentioned being targeting additional vessel repair type work and marine work, can you talk about the industry dynamics and in particular what impact it might have on you with the Signal bankruptcy?.

A couple of things there. First of all, we all know we had a strong building program a couple of years back and it looks like the strong building program is coming down some for some of these big vessels that were offshore. And they’re required by Coast Guard and ABS to have their five-year inspections and whatnot.

And so we are gearing ourselves up for that timeframe. I think that period is going to start next year where these vessels have got to come in. And so as we reported last quarter, we actually are using some CapEx monies to extend our drydock with the emphasis on that for handling some of these bigger vessels.

And even with that, looking at our deepwater access we have at Gulf marine facilities and see how we can better utilize that facility possibly for marine type activities with our graving dock as well as a possibility of maybe even putting our drydock down there as well.

So that aspect of the market, we think, is going to be strong coming up, we're not there yet. But as Jeff said, right now, the business in home of our drydock is very strong and we want to grow that opportunity. The Signal deal, we really didn't have much competition from Signal.

They were in Orange for a period of time and they moved on to Mississippi. They were handling a lot of the big drilling rigs and it may be an opportunity for us with our graving dock in South Texas to pick up some additional work. So we are looking at that in our models going forward and hopefully we can pick up some of the work.

But again, Signal really wasn't a strong competitor of us, against us with some of the tow boats and riverboats that we have been building in the past..

And then one last, get back in queue, what is your booking burn revenue on a quarterly basis right now in terms of work that comes in during the quarter, scope increases that take place during the quarter that type of work that doesn't flow through what we see on the end of quarter backlog numbers?.

We don't always emphasize the amount of work that we have that is coming in through offshore services and that kind of work. So there is a bit of that. I guess probably the best way to look at it is backlog decreased about 7%, which we feel proud of that. We feel pretty strong amount of backlog coming in towards the very end of the quarter.

So we were able to replace that backlog. So the revenue that you see minus the change in backlog really has a lot to do with the offshore services work. So there is a bit of that booking turn work that you guys don't necessarily see reflected in backlog..

Is it maybe $10 million a quarter? Is there a range that it’s running at right now that you could help us with?.

I think it's running a little bit higher than that, Marty. I think we're probably closer to the $15 million range..

Marty, just to emphasize what Jeff said as well, that does fluctuate from quarter to quarter, depending when these big projects are delivered offshore and we have the offshore hook-up commissioning of it.

You need to lay in setting those projects will have an impact on our cruise not being able to get offshore and do our offshore hook-up commissioning. You know which project I am talking about that has – the market has somewhat delayed in trying to get installed.

Until that's really sorted out somebody's projects may or may not be pushed a little bit to the right in terms of offshore installation..

[Operator Instructions] And we will take a follow-up from Martin Malloy..

Could you talk about additional wind energy opportunities that you're looking at? I know on some of these projects, you got an initial reward, but the overall project size that's being contemplated is much, much larger..

That's true, Marty. As Todd gave you a little update on deepwater wind, those projects currently all the jackets have been delivered. As Todd said, they are in the process of installing them offshore as we speak. I think they've got at least one or possibly two set now of all five units. So we’re headed that way.

There is another project out there for Fishermen's Energy; it's off of Atlantic City, New Jersey. That probably has we think the opportunity to be the next project in terms of work and fabrication work going forward. And then there is another one that’s out there as well. For US Wind, that’s off of Maryland, Coastal Maryland.

That could possibly be somewhere around 250 megawatt facilities with 40 to 60 foundation piles possible at some point in time. So there's a lot of emphasis on deepwater wind right now that is getting a lot of publicity on it. It appears that all the comments that are coming back are very favorable, very positive.

So the deepwater wind project is really, it’s a test case for what truly might happen in the future for offshore wind. And again, right now, it appears that everything is going very well there.

They’re very happy with the work that we did certainly and now it's just a matter of getting those five units installed, getting umbilicals run to the shoreline and then see how economical those windmills can be compared to traditional type energy sources..

And then with a number of LNG export facilities under construction here in the US, talk of maybe sending some of these LNG to places, for instance, down to the Caribbean.

Are you all seeing any opportunities on the marine side to benefit from these LNG export facilities being built?.

Yes, Marty, we are. Typically, there's different concepts when you look at the LNG and the conversion of ships and whatnot. And as I mentioned earlier, I think our Gulf marine facility is promptly located, promptly suited to handle some of these conversions of these ships as they come in.

And we have had some opportunity, we've had some discussions with several customers who are looking at these FLNGs and I think there is a future for some work for Gulf marine in particular with these big vessels and possibly our Louisiana operations has the modules get built to facilitate this type of product.

But yes, there is some synergies around it and nothing that we can really hang our head on just as yet, but certainly there is a lot of talk in the market place and they are engaging us in these discussions..

Are there barge opportunities to ship the LNG by a barge?.

Marty, most of what we are seeing so far have really been the conversion of existing ships into some type of FLNG and I think that's where we've seen the majority of opportunities come forward where, again, these ships can be converted in our graving dock or you talked about the processing, the equipment that goes on top of these FLNGs, depending on load out.

That's where we are getting our opportunities going forward..

[Operator Instructions] And this does conclude today's question-and-answer session. At this time, I’d like to turn the conference back to the speakers for additional or closing remarks..

Okay, we like to thank everyone for listening in today and we look forward to speaking with everyone on our next quarter. Everyone, hope you have a good day. Thank you..

It does conclude our conference today. Thank you all for your participation..