Cindi Cook - Executive Administrative Assistant Kirk Meche - President, CEO & Interim CFO Todd Ladd - EVP & COO.

Martin Malloy - Johnson Rice John Deysher - Pinnacle.

Good morning and welcome ladies and gentlemen to the Q3 2016 Gulf Island Fabrication Inc. Earnings Conference Call. All participants will be in a listen-only mode for the duration of today's conference. Today's call is being recorded. At this time, I would like to turn the conference over to Ms. Cindi Cook for opening remarks and introductions.

Cindi, please go ahead..

Thank you, Anthony. I would like to welcome everyone to Gulf Island Fabrication's 2016 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 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, Chief Executive Officer and Interim Chief Financial Officer; and Mr.

Todd Ladd, our Chief Operating Officer. Mr.

Meche?.

Thank you, Cindy and good morning, to all of our listeners. Yesterday for the third quarter 2016, we reported a net income of $541,000 or $0.04 diluted earnings per share on revenue of $65.4 million compared to a net loss of $12.1 million or a negative $0.84 diluted earnings loss per share on revenue of $67.5 million for the same quarter 2015.

Our cash stands at $55.6 million with zero debt and working capital was $79.8 million. Consolidated revenue backlog is $181.2 million with $1.6 million hours remaining to work at September 30, 2016 including commitments received through October 27, 2016 as compared to $157.5 million and 1.3 million hours remaining to work at June 30, 2016.

Of the backlog at quarter end, we expect to recognize revenue of approximately $71.8 million during the remainder of 2016, $87.3 million in 2017 and $22.1 million in 2018 not including change orders, growth or new contracts that maybe awarded. Now let be break down the segment of our company.

For our fabrication division, revenue was $22.3 million for the third quarter 2016 and $32.1 million for the same quarter 2015, down 30.6% on a comparable basis. Gross profit was $532,000 or 2.4% for the quarter versus a loss of $14 million for the comparable quarter 2015.

Operating loss was $949,000 compared to a loss of $22.7 million for the comparable quarter 2015. The decrease in revenue as compared to the same quarter 2015 is primarily due to continued effects of the downturn in oil and gas sector.

For our shipyards division revenue was $23.1 million for the quarter and $12.9 million for the same quarter 2015 for an increase of 79% on a comparable basis. Revenue for the quarter included a $1.5 million non-cash amortization of deferred revenue related to values assigned to contracts acquired in LEEVAC transaction.

Gross profit was $1.88 million or 8.1% for the quarter versus gross profit of $1.94 million or 15% for the comparable quarter 2015. Operating loss was $188,000 for the third quarter 2016 with operating income of $1.54 million for the quarter ended September 30, 2015.

The legacy LEEVAC operations contributed $16.8 million of revenue and operating loss of $471,000 for the quarter. In late July, early August of this quarter our Jennings facility was impacted by the flooding that affected Central Louisiana.

The facility was not accessible for nearly a week and when it became accessible, it took another week to get the facilities operating. During this period Management made a decision to pay all of our employees at this location for the two weeks they were unable to work. This had a negative $400,000 impact of our pretax income for the quarter.

For our Services Division, revenue was $20.9 million for the quarter and $23.5 million for the same quarter 2015 for a decrease of 10.9% on comparable basis. Gross profit was $2.9 million or 13.6% for the quarter versus gross profit of $4.2 million or 18% for the comparable quarter 2015.

Operating income was $1.3 million and $3.2 million for the quarters ended September 30, 2016 and 2015 respectively. Gross profit end results of operations increased over the comparable quarter due to one of our large offshore campaigns coming to a successful completion.

On a segment by segment basis, backlog at fabrication represent $84.9 million, shipyards represent $78.9 million and services represents $17.4 million at September 30, 2016, including commitments received through October 27, 2016, which Todd will expand on later in our call.

Capital expenditures for the quarter were $2.1 million primarily for work performed in conjunction with expansion of one of our existing dry docks and repairs are bulk in Houma Louisiana.

During the fourth quarter, we expect entering to a two-year $40 million amended and restated credit facility with our current lenders that will become -- that will continue to be secured by substantially all of our assets other than real property.

We anticipate the amended credit facility will allow us to use the full $40 million borrowing base for both letters of credit and general corporate purposes.

Given the historically low levels or borrowing under our credit facility and our cash position, we requested a reduction in the amount of available credit under our revolver from $80 million to $40 million to decrease the commitment fees payable on undrawn portions of the facility.

We expect capital expenditures for the remainder of 2016 to be at or near $1.8 million, primarily related to the dry dock expansion work. I will now turn the call over to Todd who will discuss our existing projects.

Todd?.

Thanks Kirk and good morning, everyone. I'll begin with our fabrication division. Our South Texas facilities has commenced into the completion phase for the fabrication of a jacket and associated piles bound for Trinidad with delivery set for the 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 early 2017, along with miscellaneous fabrication associated with plant expansion projects in the Corpus Christi area.

Our Louisiana facilities remain active with work associated with the fabrication and assembly of various onshore plant piping modules along with piles required for a river offloading terminal, scheduled for delivery at the end of the fourth quarter of 2016.

The fabrication of a prototype alternative energy generating vessel continues to progress with the current schedule delivery in early 2017. Yesterday as announced in the press release, we received a Letter of Intent for the fabrication of four modules associated with a U.S. ethane cracker project.

This project will be constructed in our Louisiana facilities. With our services division winding down on one of the large offshore installation projects and with the cyclical wintertime slowdown in offshore maintenance, we have begun shifting our focus and cruise to onshore plant expansions and maintenance.

Our shipyard division continues with the fabrication of four OSVs schedule for delivery at various timeframes in the year 2017 and 2018. As stated earlier by Kirk, our Jennings facility was involved in the flooding that struck Central Louisiana where a force majeure event impacted the two vessels under construction.

After a complete evaluation of the facilities there was no significant damage and our facilities were up and running after a two-week disruption in operations. Our dockside vessel conversion work continues to remain fairly active.

We have relocated and completed upgrades to one of our larger dry docks to our Lake Charles facility and begun securing work Lord vessel docking. The main part of our long range plan, we anticipate generating more work as this area continues to grow.

Kirk?.

Thanks Todd. The market downturn as it relates to the oil and gas sector continues to be challenging with no immediate indications for turnaround. We will continue to evaluate opportunities to dispose off assets that are not expected to provide sufficient long-term value.

Opportunities within the shipyard sector for river towboats, river cruise ships and general repairs associated with dry docking remain. Our services group remains busy with offshore assistance along with inshore municipal projects. However we expect to see a slow decrease over the next few quarters as these projects conclude.

Our large fabrication yards continue to operate well below capacity levels. However with the recent award of modules for the petrochemical plant expansion projects our levels will increase for our Louisiana facilities.

Opportunities remain for additional petrochemical projects and other plant upgrades as well as wind projects on East Coast and small structures for overseas locations. We expect these markets to mature later this year into 2017. Anthony you may now open the lines for questions from our analysts..

Thank you. [Operator Instructions] Our first question comes from Martin Malloy with Johnson Rice..

Good morning..

Hey Marty, good morning.

How are you doing?.

Good. Congratulations on the module award..

Thank you..

I just wanted to maybe just try to get a better idea of the prospects out there for some of the different types of projects that I think you're pursuing in terms of the wind -- additional wind farm work of the East Coast to the U.S. maybe on the marine side and cruise boats and then also additional module work..

Okay. I'll tell you what, let's break each one down by segment as you stated. So our fabrication division in additional modules, they are -- they continue to be opportunities for us not only in the petrochemical side of the business, but other areas as well and we're starting to see these projects come up for bid.

We have tendered a few of these projects from the bidding standpoint and again as we said, we would anticipate these projects to be awarded pending no delay early part of 2017. So we think that there's quite a bit of activities out there associated with these petrochemical plant upgrades as well as offshore win.

Again we were successful with deepwater wind with Block Island.

There continues to be some continued discussions that are happening amongst the players in the market along the East Coast and even some in the Great Lakes and certainly we've been part of those discussions and conversations but again I think there will be some minimal awards that may happen later this year, first part of next year, but I still think the mega wind projects are still couple years out, but we are preparing ourselves to be a player in that market and we've had numerous discussions associated with it.

On the river cruise side, again there were opportunities there that still exist. There has not been any formal commitments as of yet. We're still working with one individual or one company as we go forward with it. From the services side, again we are winding down on our offshore campaigns with the hookup that we're providing currently.

There is some additional tie back projects that are coming on the table for us to look at and bid with the partners we've had before and certainly we're going to focus our efforts and our energies on, on shore hookup with these big modules and plant upgrades that we're seeing come to balance.

We're going to probably shift a little bit from into the offshore sector into the inshore sector, but again we think there's some opportunities out there that exists for all three of our sectors in the business..

Okay. And just regarding Deepwater Wind it looks like from their website, that they've got another project off of Long Island a bigger project that seems to be moving forward and it looks it might get sanctioned in 2017 according to some of the press reports I've seen.

Is that something that's still out there for you all?.

Absolutely. We've had a very successful relationship and project with Deepwater Wind and certainly we continue to build that relationship as we go forward. So absolutely it is one of things that we have -- projects that we've identified to really go after in 2017..

Okay. And then just my last question, in terms of I guess the balance sheet and the potential uses of cash, maybe types of acquisition opportunities that you might be looking at I suppose, potential asset monetization opportunities..

Yeah Marty certainly, we're going to always look within the marketplace for acquisition possibilities that exist and whether it's enhancing the business model we currently have now or looking outside the sector a little bit as it relates to the possible offshore wind and even the petrochemical side, something that Todd and I really have been focused on trying to see exactly what we're going to do moving forward.

So nothing at this point really to report, but we are evaluating some opportunities that may be in the marketplace..

Great. Thank you and congratulations again on the module award..

Thank you, Marty..

[Operator Instructions] It appears our next question comes from John Deysher with Pinnacle..

Hi. Good morning..

Good morning, John..

Just curious on the impact of the floods at Jennings, I think you said that you paid the employees $400,000 or so, should we true up in the operating income the shipyards by $400,000 or was there business interruption insurance that cover that or how exactly should we adjust your P&L for that $400,000 negative?.

No, I think your first statement was correct. We do have business interruption insurance, but our deductible are such that it did not warrant us put the claim in on business interruption. So yeah you should look at it such that the $400,000 directly impact the bottom line on the shipyard sectors..

Okay.

So the $188,000 loss was actually, it sounds like a couple hundred thousand dollars profit is at fair?.

That's fair, yes..

Okay. Good.

And my second question is regarding the litigation with Walters, I think you filed your complaint back on April 21 or thereabouts, that was six months ago and I'm just curious if you've heard anything from Walters regarding the complaint? What the status of that is right now?.

We've filed our lean in Louisiana and so where we stand with it now is it's before the judge and Walter has contested the venue sector of the lawsuit and so the judge is scheduled to render a decision as to his findings if this should stay in Louisiana or move to Texas per the contract and so at this point we're still in a holding pattern.

We still keep an eye on all our options and our rights per the contract intact, but it's in the judicial system. So we're waiting on the judge..

Okay.

And when do you expect to hear from the judge regarding the selection of the venue?.

Any day now but it's at his pleasure. We thought quite honestly that he would render a decision last week, but it could be any day -- any day now is what we're expecting..

Okay. So there's no negotiations going on at this point. Both sides are just waiting to see whether that U.S..

I think that's a fair statement..

Okay.

Good and regarding the jacket itself, has it been deployed and has stacking been installed? What's the status of that actual jacket at this point?.

Yeah this is Todd. It has been installed.

The deck was installed and put on also, everything from what we understand on our standpoint, it's all complete and I believe they're starting to get into what's going to get set up for their drilling phase, but again I'm not up on all their operations on what's going on there, but everything else is actually in place on location..

Okay. So they're ramping up for the drilling phase it sounds like..

Yes..

Okay. Good. All right. Thanks very much..

Thank you, John..

[Operator Instructions] It appears we have no phone questions at this time..

Okay, Anthony, I'll wrap this up. We would like to thank everyone for listening to our third quarter 2016 conference call and your interest in Gulf Island Fabrication. We invite everyone to join us for our fourth quarter conference call in February 2017. Thank you and have a good day..

That does conclude today's conference. Thank you for your participation..