Cindi Cook - Investor Relations Kirk Meche - President and Chief Executive Officer Jeffrey Favret - Executive Vice President and Chief Financial Officer Todd Ladd - Executive Vice President and Chief Operating Officer.

John Deysher - Pinnacle Value Fund Jeff Geygan - Global Value Investment Corp.

Good morning and welcome ladies and gentlemen to the Q1 2016 Gulf Island Fabrication Incorporated 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 would like to turn the call over to Ms. Cindi Cook for opening remarks and introductions.

Cindi, please go ahead..

Thank you. Good morning. I would like to welcome everyone to Gulf Island Fabrication’s 2016 first 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 9, 2016.

The 10-K was included as part of the Company’s 2015 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. After my opening remarks, we will follow our usual format with Todd providing an update on existing projects and Jeff providing the breakdown of the financials.

Yesterday, for the first quarter 2016 we reported a net income of $1 million or $0.07 diluted earnings per share on revenue of $84 million. With that, let me now focus on some key takeaways for the quarter. Our cash stands at nearly $40 million with zero debt and working capital of $67 million.

Our consolidated revenue backlog stands at $197.1 million with the labor backlog of 1.7 million man-hours at March 31, 2016. On January 1, 2016 we acquired substantially all of the assets of LEEVAC Shipyards, LLC, for $20 million subject to working capital adjustment.

Strategically the acquisition expands our shipyard fabrication capabilities along with adding an additional deepwater location for repair and maintenance of deep-draft vessels. As a result of this transaction effective January 1, 2016, we have begun segmented reporting for three divisions’ fabrication, shipyards, and services.

Jeff will provide further details in his report a little later in the call. Our services group along with our shipyard group provided good revenue and respectful gross profit margins. Opportunities within the shipyards sector for river towboats, river cruise ships, and general repairs associated with dry docking remains fairly strong.

Our services group remains busy with offshore hook-up and commissioning work along with insured municipal projects and we expect this to continue through the next several quarters. Our large fabrication yards have seen revenue drop by over 50% for the first quarter of 2016, as compared to the first quarter of 2015.

Let me now – we have begun focused on reducing costs and streamlining the operations. As we continue to search for new work in this [indiscernible] market. We have reduced our general administrative expenses for this group by nearly half as compared to a year ago.

Fabrication opportunities are present for petrochemical plant upgrades along with wind projects on East Coast and small structures for overseas locations, but these projects still have a ways to go in term of awarding any significant work through the next quarter and we expect these markets to mature later this year into 2017.

We also expect to have plenty of competition for these projects not only from the U.S. competitors, but from our foreign market as well. We will continue to investment in capital projects to support our long range goals for each of our divisions along with monitoring our cash position and opportunities that may present itself.

I will now turn the call over to Todd who will discuss our existing projects..

Thanks, Kirk and good morning everyone. I will start with our fabrication division. Our South Texas facilities continues with fabrication of a jacket and associated piles bound for Trinidad with delivery set for early fourth quarter of this year.

We also continue with fabrication of the tendon support buoys for the Hess Stampede project, which is scheduled for delivery in early 2017, as well as fabrication of suction piles destined for our Gulf of Mexico project.

Our Louisiana facilities continues work associated with the jacket and topsides bound for an overseas location along with a large onshore compression module, also bound for an overseas location. All being delivered in the third quarter of 2016.

Our services division continues to be active with installation support, upgrade, and ongoing maintenance work for various offshore locations within the Gulf of Mexico. Onshore plant expansions and maintenance are also becoming a larger part of the services divisions work load.

Within the various locations of our shipyard division, we continue to work on fabrication of a river towboat scheduled for delivery mid-year in the fabrication of four OSVs scheduled for delivery at various time frames in the year 2017.

Our dockside vessel conversion work remains active and our six dry docks continue working with opportunities for work going forward. I'll now turn the call over to Jeff..

Thank you, Todd and good morning everyone. As Kirk mentioned starting with this quarter, we've included segmented information in our earnings release and we will include this information in our quarterly and annual reports on Form 10-Q and 10-K going forward.

With the acquisition of LEEVAC Shipyards during the quarter which significantly increased our opportunities for growth in shipyard new construction and vessel repair and with the related reorganization of our management team, we’ll now be reporting financial information under our fabrication, shipyards, and services segments.

We believe that this recording appropriately reflects the changes in the way we now manage and analyze our various business units. Now let me turn to our first quarter operating results.

As Kirk highlighted, our net income for the quarter was $1 million or $0.07 per share on revenue of $84 million compared to net income of $83,000 or $0.00 per share on revenue of $99.2 million for the quarter ended March 31, 2015, and a net loss of $14.7 million or $1.01 per share on revenue of $55 million for the sequential quarter.

Results of operations for the quarter includes the operations of LEEVAC contributing $21.8 million of revenue with a loss of $706,000 for the quarter.

Our first quarter results were driven by continued strong performance by our services division primarily due to offshore commissioning and hook-up work garnering stronger margins, and solid performance within our shipyard division offset by losses within our fabrication division due to continued lower levels of utilization as a result of the prolonged downturn in the oil and gas markets.

I’ll now turn to first quarter 2016 results of operations by segment as compared to the first quarter 2015 results. For our fabrication division, revenue was $23.8 million for the first quarter 2016 and $56.9 million for the 2015 quarter, down 58% on a comparable basis.

Gross profit was $41,000 for the quarter versus a loss of $256,000 for the comparable quarter and operating losses were $1.3 million and $3 million for the quarter’s ended March 31, 2016 and 2015 respectively.

As discussed earlier results of operations for our fabrication division were greatly impacted by the oil and gas industry-wide downturn impacting demand for offshore oil and gas project activity.

For our shipyards division revenue was $34.1 million for the quarter 2016 and $19.5 million for the 2015 quarter and an increase of 75% on a comparable basis. Revenue for the quarter included a $1.2 million amortization of deferred revenue related to values assigned to contracts acquired in the LEEVAC transaction.

Gross profit was $2.3 million for the quarter versus gross profit of $2.4 million for the comparable quarter, and operating income was $523,000 and $2 million for the quarter’s ended March 31, 2016 and 2015 respectively.

Results of operations for the shipyard division were impacted somewhat by efforts to integrate LEEVAC operations into our existing shipyard group. For our services division, revenue was $26.6 million for the first quarter 2016 and $24.8 million for the 2015 quarter from increase of 7% on a comparable basis.

The increase in revenue relative to the comparable quarter is due to increases in the scope of two large offshore services products.

Gross profit was $3.3 million for the quarter versus gross profit of $2.3 million for the comparable quarter, and operating income was $2.1 million and $1.3 million for the quarter’s ended March 31, 2016 and 2015 respectively.

Gross profit and results of operations improved over the comparable quarter due to overall higher activity levels for the two offshore campaigns mentioned earlier, resulting in improved utilization of our workforce. Results were also positively impacted by the implementation of cost-cutting measures during the 2016 quarter.

Consolidated revenue backlog was $197.1 million and 1.7 million hours remaining to work at March 31, 2016 compared to revenue backlog of $232.4 million and 1.9 million hours remaining to work at December 31, 2015.

Of the backlog at quarter end, we expect to recognize revenue of approximately $170.1 million during the remainder of 2016 and $26.9 million in 2017 not including change orders, scope growth our new contracts that maybe awarded.

On a by segment basis, backlog at fabrication represented $48.8 million, shipyard represented $120 million, and services represented $28.3 million at March 31, 2015 compared to $62 million at fabrication, $131.7 million at shipyards, and $38.7 million at services at December 31, 2015.

Capital expenditures for the first quarter was $724 million primarily for maintenance CapEx. We expect capital expenditures for 2016 to be at or near $7.5 million year-to-date representing an increase of approximately $3.5 million from our estimates reported last quarter, primarily due to an expansion to one of our existing dry docks.

I will now turn the call over to Kirk for some final comments before taking your questions..

Thanks, Jeff. The market downturn as it related to the oil and gas sector continues to be challenging. We are continuing our efforts to implement cost saving measures are making necessary adjustments were practical. Our cash position remains strong with nearly $40 million cash in hand at quarter’s end and no debt.

We also have $66 million in working capital and an $80 million revolver of which $20 million is poised to letters of credit reducing the unused portion of $60 million.

This strong liquidity position will provide us the ability to withstand this difficult market allowing us to continuing to explore opportunities that will enhance our business model while producing maximum returns to our shareholders. [Parlo], will you may now open the lines for questions from our analysts..

Thank you. [Operator Instructions] And we will take our first question from John Deysher with Pinnacle..

Hi, good morning..

Good morning, John..

Nice quarter..

Thank you..

Couple of quick questions. One is LEEVAC fully integrated at this point.

And if you could tell us perhaps what non-recurring expenses there were in the first quarter regarding with respect to LEEVAC?.

John, good morning. This is Jeff Favret. Now to answer your first question they are not fully integrated. There is some more integration work to be done, were 90 days and or so as these numbers are being reported and so there is certainly some more work to do.

With respect to costs our one-time costs there were several charges that were one-time costs but not significant dollars, really what we see going forward is an opportunity to eliminate duplicative work and eliminate efforts that we find that we can remove and create some synergies.

And so that's really that the nature of what we expect going forward with the LEEVAC transaction..

So, there shouldn't be any significant severance related costs or anything like that going forward?.

No, we’re not anticipating that..

Okay. Fair enough. Regarding the four OSVs I think on the last call you indicated that two are going to be delivered in late 2016 or early 2017 and then two are going to be delivered in 2017. I think you just said that there were all four are going to be delivered in 2017 now.

Has there been some pushback, some delay in terms of the delivery of two of those vessels?.

Hey, John, this is Kirk. What has happened is that change orders associated with the projects have been approved. And with the approval of those change orders the delivery dates have now been adjusted accordingly to reflect that additional scope of work..

Okay.

So, is it fair to assume that two are going to be delivered in early 2017 and then two later in 2017?.

I think that’s good assumption John..

Okay.

So those are definitely money good for a lack of a better term in terms of you getting paid for those and those vessels being delivered?.

Yes, we don't foresee any problems and the projects are current in terms of payments. So we don’t see any problems in that respect..

Okay. That’s good news. And then finally we applaud you with the segments really helps us. Just curious if you're going to segment the balance sheet as well at least in terms of total assets that would be very helpful in terms of knowing how much assets are devoted to each of those segments..

John, yes, to answer your question, yes. You’ll see in the key that they will be selected balance sheet information by segment..

Okay.

Will there be a corporate total asset number as well in terms of cash on the books are – well it would be devoted to each of those segments?.

There will be corporate element to the disclosure..

Okay. Excellent. Thank you very much..

Okay. Thank you, John..

Thanks John..

[Operator Instructions] Moving on we’ll go to Jeff Geygan with Global Value Investment Corp..

Good morning gentlemen. Appreciate your time..

Good morning, Jeff..

Can you give a little bit of detail in terms of the change in your current liabilities year-to-date..

Yes, Jeff. This is Jeff Favert. That the changes in the liabilities year-to-date are really just a timing difference. We are finding that accounts payables while we are paying those timely collection of receivables come a little bit later as you might imagine with the downturn in the industry, everyone is trying to hold on to cash as much as possible.

We want to honor paying our obligations timely and receivables are aging out just a little bit later. I don’t want to create the impression that there is any concern with those receivables, there's not, but they are just a little bit longer in us getting paid..

Understood.

Is there any subsequent of change in your crude contract losses?.

No, they are not that’s just those contract losses working their way through the balance sheet..

Fair enough.

In your prepared comments – no mention of the contract charges or dispute, can you provide any color or update on that historically?.

Yes, Jeff, this is Kirk. We have exercised our rights under the contract, lien has been placed on the platform as well as a lawsuit has been filed and since that timeframe there has been no discussion amongst two companies.

So again, we are pursuing all our legal rights as we move forward with that hopefully resolution of the contract, but again – so that’s where the company stands, the lien has been filed and the suit has been filed as well..

I appreciate, I just wondered if there is any current news on that.

With respect to LEEVAC, the way I am looking at this if you backup $20 million or so in revs to normalize this year versus last year and add back the roughly $700,000 loss, it looks to me like that division of [ex-LEEVAC] actually improved quite a bit and the gross margin of that level was closer to 10%.

And I think that’s the right way and is that about the typical margin we should get use to in the future?.

I think it’s kind of a two-part questions Jeff, so I’ll say yes, you are thinking about that correctly. There maybe some margin pressure going forward, we typically don't like to give a whole lot of forward-looking guidance on that, but I will tell you that there could be some margin pressure on that 10.5% margin that you are seeing..

Understood.

Have you seen any type of synergy from LEEVAC that may have been a surprise or positive as a function of the consolidation of their business?.

Well, I don’t know it’s a surprise, but I think it’s in line with what we modeled; we looked at acquiring LEEVAC through their facilities as well as a management team. Again, mostly it’s a surprise, but I will see it’s meeting our expectations of what we thought, brining that management team on to really enhance the shipyard division.

And so again, I think its right in line, its positive news I believe going forward with those folks now being part of our Company. So again, I think its positive news in that respect and there's no surprises per se as we try and get this thing continue to implemented through our business models..

Understood. Thank you. And Jeff, you ran through your CapEx a little bit quicker than I could write, and [interested] thing in your 8-K here. Can you just go through those numbers again I'm just curious maintenance versus growth type CapEx numbers..

Yes. Are you referring to the spend for the period. It’s really all maintenance CapEx Jeff. Its 724,000 spend for the period all related to maintenance CapEx.

And then I talked about the fact that we expect future – our capital expenditures to be about $7.5 million which is $3.5 million more than we estimated last quarter and that additional $3.5 million relates to an expansion of one of our existing dry docks..

Great. Thank you. I will hop off now. Good luck. Appreciate your time..

Thank you, Jeff. End of Q&A.

[Operator Instructions] And this concludes today's question-and-answer session. At this time I would like to turn the conference back over to our speakers for closing remarks and any additional comments..

Thank you, Parlo. We would like to thank everyone for listening to our first quarter 2016 conference call and your interest in Gulf Island Fabrication. We’ll speak to you guys next quarter. Thank you..

And that does conclude today’s conference. We would like to thank everyone for their participation. You may now disconnect..