Gulf Island Fabrication, Inc. (NASDAQ:GIFI) Q4 2021 Earnings Conference Call March 22, 2022 5:00 PM ET Company Participants Cindi Cook - Executive Assistant to CEO Richard Heo - President and CEO Wes Stockton - EVP and CFO Conference Call Participants Martin Malloy - Johnson Rice & Company Operator Good afternoon, ladies and gentlemen and welcome to the Gulf Island's Conference Call to discuss Fourth Quarter 2021 Results. All participants will be in listen-only mode for the duration of the call. This call i ...

Financial Data and Key Metrics Changes - Consolidated revenue for Q3 2021 was $19.6 million, a 19% sequential decrease compared to Q2 2021 and a 23% decline from Q3 2020, primarily due to the Shipyard division [32] - Consolidated operating loss for Q3 was $3.7 million, with an EBITDA loss of $2.6 million, reflecting a positive contribution from the Fabrication & Services division offset by losses from Shipyard operations [32] - Fabrication & Services division revenue for Q3 was $17.3 million, a decrease of $952,000 compared to Q3 2020, attributed to the completion of two large projects and lower revenue from marine docking structures [33] Business Line Data and Key Metrics Changes - Fabrication & Services EBITDA for Q3 was $1.4 million, benefiting from a favorable margin mix and strong project performance despite a year-over-year revenue decline [34] - Shipyard division revenue was $2.3 million for Q3, entirely related to three ferry projects, with an operating loss of $1.9 million [36] - Corporate division operating loss for Q3 was $2.2 million, impacted by costs to diversify and enhance the business [37] Market Data and Key Metrics Changes - The LNG market is identified as the most attractive near-term opportunity, with significant bidding activity expected in Texas and Louisiana [19] - Increased inquiries in hydrogen and renewable fuels are noted, driven by energy transition initiatives [13][20] - The services business is experiencing growth due to increased activity from existing offshore customers and new customer opportunities [22] Company Strategy and Development Direction - The company is shifting focus to generating predictable and profitable growth through initiatives in new growth end markets, diversifying services, and expanding the skilled craft workforce [11][12] - The strategic plan includes improving risk profiles, strengthening liquidity, and reducing reliance on offshore oil and gas [11] - The company aims to maintain discipline in bidding and project execution to ensure adequate returns and manage labor risks effectively [23][24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing a strong position to take advantage of improving market trends and internal initiatives [29] - The company anticipates sequentially lower fourth-quarter revenue due to low backlog and underutilization of resources, but expects to exit the year with a cash balance of $60 million to $65 million [41] - Management is actively working with insurance providers to assess damages from Hurricane Ida and expects cash flow impacts related to deductibles [40] Other Important Information - The company reported receiving forgiveness of $8.9 million of its PPP loan, ending the quarter with a cash balance of almost $74 million and no debt [39] - The company is facing challenges in attracting skilled labor, which is critical for project execution and growth [16][22] Q&A Session Summary Question: What has really moved the needle in business development over the past four to six quarters? - Management emphasized discipline in bidding and execution plans, leading to better-than-expected project performance [45] Question: Can you characterize your bidding activities or early customer engagement by type of end project? - Management indicated that LNG and petrochemical projects will dominate near-term opportunities, while hydrogen and sustainable energy projects are further out [47][49] Question: Can you provide insights on cash balance and capital allocation? - Management stated that cash will be used for deductibles related to Hurricane Ida impacts and to wind down Shipyard operations, with a focus on growth opportunities [51][53] Question: Is all equipment functional post-Hurricane Ida? - Management confirmed that equipment is nearly 100% operational, with minor damages being assessed [61] Question: What is the size and number of contracts currently in the bidding process? - Management noted that large LNG projects could represent contract values between $50 million to $100 million, with significant opportunities expected [75]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-34279 GULF ISLAND FABRICATION, INC. (Exact name of registrant as specified in its charter) LOUISIANA 72-1147390 (State or other jurisdi ...

Gulf Island Fabrication, Inc. (NASDAQ:GIFI) Q2 2021 Earnings Conference Call August 10, 2021 5:00 PM ET Company Representatives Richard Heo - President & Chief Executive Officer Westley Stockton - Executive Vice President & Chief Financial Officer Cindi Cook - Executive Assistant to CEO Conference Call Participants Marty Malloy - Johnson Rice Operator Good afternoon, ladies and gentlemen. And welcome to the Gulf Island's Conference Call to discuss the Second Quarter 2021 results. All participants will be in ...

[Company Information](index=1&type=section&id=Company%20Information) This section provides basic corporate information for Gulf Island Fabrication, Inc, including its stock exchange listing and filer status - Gulf Island Fabrication, Inc (GIFI) is filing its Quarterly Report on Form 10-Q for the period ended June 30, 2021, with its common stock traded on NASDAQ[2](index=2&type=chunk)[3](index=3&type=chunk) Company Profile | Metric | Detail | | :--- | :--- | | **Company Name** | GULF ISLAND FABRICATION, INC | | **State of Incorporation** | LOUISIANA | | **Headquarters Address** | 16225 PARK TEN PLACE, SUITE 300 HOUSTON, TEXAS 77084 | | **Telephone** | (713) 714-6100 | | **Ticker Symbol** | GIFI | | **Stock Exchange** | NASDAQ | | **Accelerated Filer Status** | Non-accelerated filer | | **Smaller Reporting Company Status** | Smaller reporting company | | **Shares Outstanding (as of August 10, 2021)** | 15,535,225 shares | [GLOSSARY OF TERMS](index=3&type=section&id=GLOSSARY%20OF%20TERMS) This section defines abbreviations and terms used throughout the Form 10-Q report to ensure clarity for the reader - This section provides definitions for abbreviations and terms used in this 10-Q report to aid reader comprehension, including company names, accounting standards, legal regulations, project types, and transaction-related terminology[8](index=8&type=chunk)[9](index=9&type=chunk)[10](index=10&type=chunk) [PART I FINANCIAL INFORMATION](index=8&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=8&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements and related notes for the period ended June 30, 2021 [Consolidated Balance Sheets](index=8&type=section&id=Consolidated%20Balance%20Sheets) The balance sheet shows a significant decrease in total assets and shareholders' equity due to the Shipyard Transaction Key Consolidated Balance Sheet Data (in thousands of U.S. dollars) | Metric | June 30, 2021 (Unaudited) | December 31, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $64,834 | $43,159 | | Restricted cash, current | $9,637 | — | | Short-term investments | — | $7,998 | | Current assets of discontinued operations | $2 | $66,116 | | **Total current assets** | **$100,115** | **$147,362** | | Non-current assets of discontinued operations | — | $39,169 | | **Total assets** | **$143,679** | **$231,343** | | **Liabilities and Shareholders' Equity** | | | | Accounts payable | $9,427 | $12,362 | | Contract liabilities | $8,206 | $10,262 | | Current liabilities of discontinued operations | $771 | $63,607 | | **Total current liabilities** | **$27,651** | **$98,412** | | **Total liabilities** | **$38,340** | **$104,981** | | **Total shareholders' equity** | **$105,339** | **$126,362** | | **Total liabilities and shareholders' equity** | **$143,679** | **$231,343** | - As of June 30, 2021, the company's **total assets were $143.7 million**, a sharp decline from $231.3 million on December 31, 2020, primarily due to the reduction in assets from discontinued operations following the Shipyard Transaction, with total shareholders' equity also decreasing from $126.4 million to **$105.3 million**[18](index=18&type=chunk) [Consolidated Statements of Operations](index=9&type=section&id=Consolidated%20Statements%20of%20Operations) The company reported net losses for both the second quarter and first half of 2021, driven by losses from both continuing and discontinued operations Key Consolidated Statements of Operations Data (in thousands of U.S. dollars, except per share data) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $24,268 | $31,988 | $48,053 | $69,667 | | Operating income (loss) | $(1,609) | $(4,099) | $(3,946) | $2,156 | | Net income (loss) from continuing operations | $(1,700) | $(4,210) | $(4,220) | $2,014 | | Loss from discontinued operations, net of tax | $(1,251) | $(1,327) | $(17,372) | $(1,646) | | **Net income (loss)** | **$(2,951)** | **$(5,537)** | **$(21,592)** | **$368** | | Basic and diluted income (loss) per share | $(0.19) | $(0.36) | $(1.40) | $0.02 | - The company recorded net losses of **$3.0 million** and **$21.6 million** for the second quarter and first half of 2021, respectively, compared to a $5.5 million loss and $0.4 million profit in the prior-year periods, driven by losses from continuing operations and significant losses from discontinued operations, particularly the **$17.4 million loss** in the first half[20](index=20&type=chunk) [Consolidated Statements of Changes in Shareholders' Equity](index=10&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) Shareholders' equity decreased during the first half of 2021, primarily as a result of the net loss incurred during the period Key Consolidated Shareholders' Equity Data (in thousands of U.S. dollars) | Metric | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | **Beginning Balance, Shareholders' Equity (December 31)** | $126,362 | $152,685 | | Net loss | $(21,592) | $(5,537) | | Vesting of restricted stock | $(108) | $(74) | | Stock-based compensation expense | $677 | $440 | | **Ending Balance, Shareholders' Equity** | **$105,339** | **$153,419** | - As of June 30, 2021, the company's shareholders' equity was **$105.3 million**, a decrease from $126.4 million on December 31, 2020, primarily impacted by the **$21.6 million net loss** in the first half of the year[23](index=23&type=chunk) [Consolidated Statements of Cash Flows](index=11&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash increased significantly in the first half of 2021, as cash inflows from investing activities more than offset outflows from operations Key Consolidated Cash Flow Data (in thousands of U.S. dollars) | Metric | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(11,369) | $(3,758) | | Net cash provided by (used in) investing activities | $43,195 | $(6,656) | | Net cash (used in) provided by financing activities | $(108) | $9,895 | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $31,718 | $(519) | | Cash, cash equivalents, and restricted cash at end of period | $74,877 | $49,184 | - In the first half of 2021, the company experienced a cash outflow from operations of **$11.4 million**, but a cash inflow from investing activities of **$43.2 million**, primarily due to net proceeds from the Shipyard Transaction, resulting in a significant increase in total cash, cash equivalents, and restricted cash to **$74.9 million**[26](index=26&type=chunk) [Notes to Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) [1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=12&type=section&id=1.%20ORGANIZATION%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note details the company's business, basis of presentation, accounting policies, and the impact of market conditions - The company specializes in fabricating complex steel structures and modules, providing a range of project management and field services to energy, industrial, and EPC clients[29](index=29&type=chunk) - On April 19, 2021, the company completed the **sale of its Shipyard Division's operating assets** and certain construction contracts (the "Shipyard Transaction") and plans to wind down the remaining shipyard operations by mid-2022[29](index=29&type=chunk) - The company has retrospectively classified the assets, liabilities, and operations associated with the Shipyard Transaction and previously closed shipyard facilities as **discontinued operations** to reflect a major strategic shift[31](index=31&type=chunk)[83](index=83&type=chunk) - The **COVID-19 pandemic and oil price volatility** continue to adversely affect operations and financial performance, leading to reduced revenue, lower margins, under-utilization of facilities, and project losses[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk) - Revenue is primarily derived from fixed-price, unit-rate, and T&M contracts, recognized over time using percentage-of-completion or as work is performed, involving significant estimates for costs, change orders, and claims[50](index=50&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk)[55](index=55&type=chunk) - In the first quarter of 2021, the company adopted ASU 2019-12 "Income Taxes" with no material impact, while ASU 2016-13 "Financial Instruments—Credit Losses" will be effective in the first quarter of 2023[62](index=62&type=chunk)[63](index=63&type=chunk) [2. REVENUE, CONTRACT ASSETS AND LIABILITIES AND OTHER CONTRACT MATTERS](index=17&type=section&id=2.%20REVENUE,%20CONTRACT%20ASSETS%20AND%20LIABILITIES%20AND%20OTHER%20CONTRACT%20MATTERS) This note provides a breakdown of revenue by segment and contract type, details contract balances, and discusses the impact of project estimate changes Revenue by Contract Type (in thousands of U.S. dollars) | Contract Type | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Fixed-price and unit-rate | $14,170 | $26,516 | $30,449 | $55,671 | | T&M | $9,254 | $4,455 | $15,523 | $11,380 | | Other | $844 | $1,017 | $2,081 | $2,616 | | **Total** | **$24,268** | **$31,988** | **$48,053** | **$69,667** | - As of June 30, 2021, the company's total remaining performance obligations were **$23.9 million**, with approximately $17.6 million expected to be recognized in the remainder of 2021 and $6.3 million thereafter[67](index=67&type=chunk)[68](index=68&type=chunk) Contract Assets and Liabilities (in thousands of U.S. dollars) | Metric | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Contract assets | $2,371 | $5,098 | | Contract liabilities | $(8,206) | $(10,262) | | **Net contracts in progress** | **$(5,835)** | **$(5,164)** | - The decrease in contract assets was primarily due to reduced unbilled positions in the Fabrication & Services and Shipyard divisions, while the decrease in contract liabilities was mainly due to lower accrued contract losses and advance payments in the Shipyard Division[72](index=72&type=chunk) - In the first half of 2021, project estimate changes had a **positive impact of $1.9 million** on the Fabrication & Services Division's operating results, whereas they had a **negative impact of $1.7 million** on the Shipyard Division, mainly related to increased costs and liquidated damages forecasts for a 70-vehicle ferry project[73](index=73&type=chunk)[74](index=74&type=chunk) [3. SHIPYARD TRANSACTION AND DISCONTINUED OPERATIONS](index=20&type=section&id=3.%20SHIPYARD%20TRANSACTION%20AND%20DISCONTINUED%20OPERATIONS) This note details the sale of the Shipyard Division's assets, the resulting pre-tax loss, and the reclassification of these operations as discontinued - On April 19, 2021, the company sold the operating assets and certain construction contracts of its Shipyard Division to Bollinger Houma Shipyards, LLC and Bollinger Shipyards Lockport, LLC for approximately **$28.6 million** ($26.1 million net of transaction costs)[77](index=77&type=chunk) - The Shipyard Transaction included shipyard facilities, inventory, equipment, and contracts for three research vessels and five towing, salvage, and rescue ships, while excluding contracts for two 40-vehicle ferries, one 70-vehicle ferry, and two MPSVs[79](index=79&type=chunk) - The company recorded a total **pre-tax loss of $25.3 million** in the first half of 2021 from the Shipyard Transaction, comprising a $22.8 million impairment of the Shipyard Division's long-lived assets and $1.9 million in transaction and other costs[80](index=80&type=chunk)[82](index=82&type=chunk) - Operations from the Shipyard Transaction and previously closed facilities have been classified as **discontinued operations**, with prior period financial information retrospectively adjusted; as of June 30, 2021, the net liabilities of discontinued operations were **$11.9 million**[81](index=81&type=chunk)[83](index=83&type=chunk) Operating Results of Discontinued Operations (in thousands of U.S. dollars) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $6,471 | $27,986 | $41,637 | $68,862 | | Operating loss | $(1,251) | $(1,327) | $(17,372) | $(1,646) | | **Loss from discontinued operations, net of tax** | **$(1,251)** | **$(1,327)** | **$(17,372)** | **$(1,646)** | Assets and Liabilities of Discontinued Operations (in thousands of U.S. dollars) | Metric | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Current assets | $2 | $66,116 | | Non-current assets | — | $39,169 | | **Total assets** | **$2** | **$105,285** | | Current liabilities | $771 | $63,607 | | **Total liabilities** | **$771** | **$63,607** | - In the first half of 2021, discontinued operations had a cash outflow from operations of **$8.5 million** and a cash inflow from investing of **$31.4 million**, with project estimate changes positively impacting operating results by **$8.4 million**, primarily from the towing, salvage, and rescue ship projects[86](index=86&type=chunk) [4. IMPAIRMENTS AND (GAIN) LOSS ON ASSETS HELD FOR SALE](index=23&type=section&id=4.%20IMPAIRMENTS%20AND%20(GAIN)%20LOSS%20ON%20ASSETS%20HELD%20FOR%20SALE) This note discloses the status of assets held for sale, primarily consisting of a crawler crane, and the proceeds from asset sales during the period Assets Held for Sale (in thousands of U.S. dollars) | Asset Class | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Machinery and equipment | $4,587 | $11,877 | | Accumulated depreciation | $(2,787) | $(5,677) | | **Total** | **$1,800** | **$6,200** | - In the first half of 2021, the company received **$4.5 million** in proceeds ($4.4 million net of transaction costs) from the sale of two crawler cranes, with no significant gain or loss recognized[89](index=89&type=chunk) [5. CREDIT FACILITIES AND DEBT](index=23&type=section&id=5.%20CREDIT%20FACILITIES%20AND%20DEBT) This note details the company's credit facilities, PPP loan status, surety bonds, and related collateral and covenant agreements - The company maintains a **$20.0 million** letter of credit facility (LC Facility) with Whitney Bank, which requires cash collateralization; as of June 30, 2021, **$10.0 million** in letters of credit were outstanding, of which $7.0 million expired in July 2021, releasing the cash restriction[90](index=90&type=chunk) - The company received a **$10.0 million PPP loan** on April 17, 2020; in July 2021, the SBA approved **$8.9 million in loan forgiveness**, and the company repaid the remaining balance plus accrued interest on July 29, with the gain to be recognized in Q3 2021[91](index=91&type=chunk)[111](index=111&type=chunk) - As of June 30, 2021, the company had **$110.8 million** in outstanding surety bonds, including **$50.0 million** related to the disputed MPSV projects, and faces challenges in obtaining additional surety capacity[93](index=93&type=chunk)[207](index=207&type=chunk) - To secure consent for the Shipyard Transaction, the company entered into a **Pledge Agreement and a Negative Covenants Agreement** with its surety on April 19, 2021, to collateralize obligations for the MPSV and two 70-vehicle ferry projects; the covenants prohibit dividend payments and common stock repurchases[94](index=94&type=chunk)[208](index=208&type=chunk) [6. COMMITMENTS AND CONTINGENCIES](index=24&type=section&id=6.%20COMMITMENTS%20AND%20CONTINGENCIES) This note discusses legal proceedings, including a significant dispute over two MPSV contracts, and other commitments such as insurance and surety bonds - The company is involved in various legal proceedings arising in the ordinary course of business, which are not expected to have a material adverse effect on its financial condition, results of operations, or cash flows[95](index=95&type=chunk)[216](index=216&type=chunk) - A **significant dispute** exists with a customer regarding the termination of construction contracts for two MPSVs; the company has filed a lawsuit, the customer has filed counterclaims, and the case is currently in discovery with a trial date set for March 6, 2023, but the ultimate outcome and potential loss cannot be estimated[96](index=96&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk) - The company manages third-party liability and workers' compensation risks through deductibles and self-insured retentions, maintaining insurance coverage, and uses letters of credit and surety bonds to secure advance payments or performance[101](index=101&type=chunk)[102](index=102&type=chunk) - The company operates in compliance with environmental laws and regulations and maintains insurance to mitigate environmental liability risks, with no material adverse effect anticipated from environmental matters[103](index=103&type=chunk) [7. INCOME (LOSS) PER SHARE](index=25&type=section&id=7.%20INCOME%20(LOSS)%20PER%20SHARE) This note presents the calculation of basic and diluted earnings per share, which are identical due to the absence of dilutive securities Earnings (Loss) Per Share Calculation (in thousands of U.S. dollars, except per share data) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Income (loss) from continuing operations | $(1,700) | $(4,210) | $(4,220) | $2,014 | | Loss from discontinued operations, net of tax | $(1,251) | $(1,327) | $(17,372) | $(1,646) | | **Net income (loss)** | **$(2,951)** | **$(5,537)** | **$(21,592)** | **$368** | | Weighted-average shares outstanding | 15,528 | 15,301 | 15,466 | 15,288 | | Basic and diluted income (loss) per share from continuing operations | $(0.11) | $(0.28) | $(0.27) | $0.13 | | Basic and diluted loss per share from discontinued operations | $(0.08) | $(0.09) | $(1.12) | $(0.11) | | **Basic and diluted income (loss) per share** | **$(0.19)** | **$(0.36)** | **$(1.40)** | **$0.02** | - The company reported a **loss per share of $0.19** for the second quarter and **$1.40** for the first half of 2021, reflecting the combined impact of losses from both continuing and discontinued operations[104](index=104&type=chunk) [8. OPERATING SEGMENTS](index=25&type=section&id=8.%20OPERATING%20SEGMENTS) This note describes the company's operating segments and provides a summary of their financial performance, reflecting reclassifications due to the Shipyard Transaction - The company manages its business through two operating segments, **Fabrication & Services (F&S) and Shipyard**, and a non-operating Corporate segment; the F&S segment focuses on module and steel structure fabrication and field services, while the Shipyard segment historically built new vessels and provided marine repair services[105](index=105&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk) - Following the Shipyard Transaction, the Shipyard Division's operating assets and certain contracts were sold, with the associated business classified as **discontinued operations**, while the remaining shipyard business (retained shipyard contracts) is classified as continuing operations[107](index=107&type=chunk) - Due to the Shipyard Transaction and discontinued operations classification, certain expense allocations for the 2020 periods have been reclassified from the Shipyard Division to the Corporate and F&S segments, and legal fees for the MPSV dispute were reclassified from Corporate to the Shipyard segment[109](index=109&type=chunk) Segment Financial Information Summary (in thousands of U.S. dollars) | Metric | F&S (Q2 2021) | Shipyard (Q2 2021) | Corporate (Q2 2021) | Consolidated (Q2 2021) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $21,227 | $3,129 | $(88) | $24,268 | | Gross profit (loss) | $2,241 | $(1,059) | $(78) | $1,104 | | Operating income (loss) | $1,656 | $(1,119) | $(2,146) | $(1,609) | | **Total Assets** | **$47,199** | **$17,524** | **$78,954** | **$143,677** | - In the second quarter of 2021, the **F&S segment generated $21.2 million in revenue** and $2.2 million in gross profit, while the **Shipyard segment had revenue of $3.1 million** and a gross loss of $1.1 million; the Corporate segment held the largest portion of total assets at **$79.0 million**[110](index=110&type=chunk) [9. SUBSEQUENT EVENTS](index=27&type=section&id=9.%20SUBSEQUENT%20EVENTS) This note discloses the forgiveness and repayment of the company's PPP loan, which occurred after the reporting period - In July 2021, the SBA approved the company's application for **$8.9 million in forgiveness** of its PPP loan, and the company has since repaid the remaining balance; the related gain will be recognized in the third quarter of 2021[111](index=111&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides a detailed analysis of the company's financial performance, strategic initiatives, operating outlook, and liquidity position [Overview](index=28&type=section&id=Overview) The company is a leading fabricator of complex steel structures and modules, currently undergoing a strategic shift away from its shipyard business - The company is a leading fabricator of complex steel structures and modules, providing project management, hook-up, commissioning, repair, maintenance, and civil construction services to energy, industrial, and EPC clients[117](index=117&type=chunk) - On April 19, 2021, the company **sold the operating assets and certain contracts of its Shipyard Division** and plans to wind down the remaining shipyard operations by mid-2022, with these operations retrospectively classified as discontinued[117](index=117&type=chunk)[118](index=118&type=chunk) - The Fabrication & Services Division's backlog includes materials for a marine docking structure and an offshore jacket and deck, while the Shipyard Division's backlog consists of the construction of three vehicle ferries[119](index=119&type=chunk) [COVID-19 and Oil Price Impacts to Operations](index=29&type=section&id=COVID-19%20and%20Oil%20Price%20Impacts%20to%20Operations) The company's operations continue to be negatively impacted by the COVID-19 pandemic and volatile oil prices, leading to financial and operational challenges - Persistently low and volatile oil prices, combined with the COVID-19 pandemic, continue to **negatively impact the company's operations and financial performance**, resulting in reduced revenue, lower margins, under-utilization of facilities, and project losses[120](index=120&type=chunk) - The pandemic has caused operational disruptions for the company, its customers, and subcontractors due to social distancing, quarantines, and business closures, with uncertainty remaining around vaccine distribution and potential resurgences[121](index=121&type=chunk) - The ongoing uncertainty from COVID-19 and oil price volatility may lead to **reduced bidding activity**, project suspensions, customer financial distress, supply chain disruptions, increased costs, and labor productivity issues[122](index=122&type=chunk) [Initiatives to Improve Operating Results](index=30&type=section&id=Initiatives%20to%20Improve%20Operating%20Results) The company is implementing several strategic initiatives to mitigate market challenges, reduce risk, and improve profitability and liquidity - The company is addressing operational and market challenges through initiatives including **COVID-19 mitigation**, risk reduction via the Shipyard Transaction, liquidity improvement through cost cuts and asset sales, facility consolidation, enhanced project execution, workforce expansion, and business diversification[124](index=124&type=chunk) - To mitigate COVID-19 impacts, the company implemented workplace safety measures and applied for a PPP loan, which was forgiven and repaid in July 2021[125](index=125&type=chunk) - The completion of the **Shipyard Transaction significantly reduced the company's risk profile** by eliminating potential future risks associated with the divested contracts, allowing a focus on higher-margin markets within the Fabrication & Services Division[125](index=125&type=chunk) - The company is preserving and improving liquidity through cost reductions, the sale of idle assets (generating **$4.4 million in net proceeds** in Q2 2021), and project cash flow management, with the Shipyard Transaction also reducing bonding and working capital needs[126](index=126&type=chunk) - The company is improving resource utilization by integrating its fabrication and services divisions, closing its Jennings and Lake Charles facilities, and completing the Shipyard Transaction to centralize key project resources[127](index=127&type=chunk)[131](index=131&type=chunk) - The company is working to enhance competitiveness and project execution by strengthening its proposal, estimating, and operational resources and processes, including management changes and project management training[128](index=128&type=chunk) - The company is actively pursuing **diversification to reduce its reliance on the offshore oil and gas industry**, targeting onshore module fabrication for refining, petrochemical, LNG, and industrial facilities, expanding its services business, and entering the green energy and offshore wind markets[130](index=130&type=chunk)[132](index=132&type=chunk) [Operating Outlook](index=32&type=section&id=Operating%20Outlook) The company's future success depends on securing profitable new work and effectively managing market uncertainties and operational challenges - The company remains focused on securing profitable new awards and backlog to generate operating income and cash flow over the long term, while ensuring the safety of its employees and contractors[133](index=133&type=chunk) - Future success is contingent on factors such as oil and gas price volatility, COVID-19 impacts, opportunities in new markets like **LNG, industrial, and green energy**, project execution capabilities, and the resolution of the MPSV dispute[133](index=133&type=chunk)[135](index=135&type=chunk) - Near-term utilization for the Fabrication & Services Division will be impacted by delays in new project awards, COVID-19 related inefficiencies, employee absenteeism, and disruptions from suppliers and subcontractors[133](index=133&type=chunk) [Critical Accounting Policies](index=32&type=section&id=Critical%20Accounting%20Policies) The company's critical accounting policies have remained unchanged since its last annual report - There have been no changes to the company's critical accounting policies since December 31, 2020[134](index=134&type=chunk) [New Awards and Backlog](index=33&type=section&id=New%20Awards%20and%20Backlog) This section details the company's new project awards and backlog, which have decreased significantly following the sale of shipyard contracts - New project awards represent expected revenue commitments received during a period, while backlog represents unrecognized revenue, which is comparable to the remaining performance obligations disclosed under Topic 606[136](index=136&type=chunk) New Project Awards (in thousands of U.S. dollars) | Division | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Fabrication & Services | $18,192 | $27,442 | $29,739 | $39,642 | | Shipyard | — | $20 | — | $152 | | **Total New Awards** | **$18,192** | **$27,462** | **$29,739** | **$39,794** | Backlog (in thousands of U.S. dollars and labor hours) | Division | June 30, 2021 (Amount) | June 30, 2021 (Labor Hours) | December 31, 2020 (Amount) | December 31, 2020 (Labor Hours) | | :--- | :--- | :--- | :--- | :--- | | Fabrication & Services | $9,326 | 112 | $19,381 | 236 | | Shipyard | $14,588 | 159 | $23,187 | 263 | | **Total Backlog** | **$23,914** | **271** | **$42,568** | **499** | - As of June 30, 2021, total backlog was **$23.9 million**, a significant decrease from $42.6 million at December 31, 2020, primarily due to the sale of **$303.1 million** of backlog as part of the Shipyard Transaction[139](index=139&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) [Comparison of the Three Months Ended June 30, 2021 and 2020](index=34&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20June%2030,%202021%20and%202020) Consolidated revenue declined in the second quarter of 2021, but gross profit improved significantly due to better performance in the Fabrication & Services segment Consolidated Results of Operations (Three Months, in thousands of U.S. dollars) | Metric | June 30, 2021 | June 30, 2020 | Change Amount | Change Percent | | :--- | :--- | :--- | :--- | :--- | | New project awards | $18,192 | $27,462 | $(9,270) | (33.8)% | | Revenue | $24,268 | $31,988 | $(7,720) | (24.1)% | | Gross profit (loss) | $1,104 | $(728) | $1,832 | nm | | Gross profit (loss) percent | 4.5% | (2.3)% | | | | Operating loss | $(1,609) | $(4,099) | $2,490 | 60.7% | | Loss from continuing operations | $(1,700) | $(4,210) | $2,510 | 59.6% | | Loss from discontinued operations, net of tax | $(1,251) | $(1,327) | $76 | 5.7% | | **Net loss** | **$(2,951)** | **$(5,537)** | **$2,586** | **46.7%** | - In Q2 2021, consolidated revenue **decreased by 24.1% to $24.3 million** due to lower revenue in both the Fabrication & Services and Shipyard divisions; however, gross profit improved from a loss of $0.7 million in 2020 to a **profit of $1.1 million** in 2021, driven by project improvements in the Fabrication & Services division[143](index=143&type=chunk)[144](index=144&type=chunk) Fabrication & Services Division Results of Operations (Three Months, in thousands of U.S. dollars) | Metric | June 30, 2021 | June 30, 2020 | Change Amount | Change Percent | | :--- | :--- | :--- | :--- | :--- | | Revenue | $21,227 | $26,606 | $(5,379) | (20.2)% | | Gross profit (loss) | $2,241 | $(492) | $2,733 | nm | | Gross profit (loss) percent | 10.6% | (1.8)% | | | | Operating income (loss) | $1,656 | $(1,484) | $3,140 | nm | - The Fabrication & Services division's revenue **decreased by 20.2%**, but its gross profit improved from a loss to a **profit of $2.2 million**, primarily due to project improvements of $1.9 million and a more favorable project mix[151](index=151&type=chunk) Shipyard Division Results of Operations (Three Months, in thousands of U.S. dollars) | Metric | June 30, 2021 | June 30, 2020 | Change Amount | Change Percent | | :--- | :--- | :--- | :--- | :--- | | Revenue | $3,129 | $5,902 | $(2,773) | (47.0)% | | Gross loss | $(1,059) | $(183) | $(876) | nm | | Gross loss percent | (33.8)% | (3.1)% | | | | Operating loss | $(1,119) | $(422) | $(697) | nm | - The Shipyard division's revenue **decreased by 47.0%**, and its gross loss widened from $0.2 million to **$1.1 million**, mainly due to increased cost estimates and liquidated damages for a 70-vehicle ferry project and holding costs for the MPSV vessels[155](index=155&type=chunk) Discontinued Operations Results (Three Months, in thousands of U.S. dollars) | Metric | June 30, 2021 | June 30, 2020 | Change Amount | Change Percent | | :--- | :--- | :--- | :--- | :--- | | Revenue | $6,471 | $27,986 | $(21,515) | (76.9)% | | Gross profit (loss) | $65 | $(975) | $1,040 | nm | | Gross profit (loss) percent | 1.0% | (3.5)% | | | | Operating loss | $(1,251) | $(1,327) | $76 | 5.7% | - Revenue from discontinued operations **decreased by 76.9% to $6.5 million**, primarily due to the completion of harbor tug projects and the sale of research and towboat projects in the Shipyard Transaction; gross profit improved from a loss to a **profit of $65 thousand**, mainly due to the absence of prior-year losses on the harbor tug projects[161](index=161&type=chunk)[165](index=165&type=chunk) [Comparison of the Six Months Ended June 30, 2021 and 2020](index=39&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended%20June%2030,%202021%20and%202020) For the first half of 2021, consolidated revenue declined while gross profit turned positive, though a significant loss from discontinued operations led to a substantial net loss Consolidated Results of Operations (Six Months, in thousands of U.S. dollars) | Metric | June 30, 2021 | June 30, 2020 | Change Amount | Change Percent | | :--- | :--- | :--- | :--- | :--- | | New project awards | $29,739 | $39,794 | $(10,055) | (25.3)% | | Revenue | $48,053 | $69,667 | $(21,614) | (31.0)% | | Gross profit (loss) | $1,025 | $(1,196) | $2,221 | nm | | Gross profit (loss) percent | 2.1% | (1.7)% | | | | Operating income (loss) | $(3,946) | $2,156 | $(6,102) | nm | | Income (loss) from continuing operations | $(4,220) | $2,014 | $(6,234) | nm | | Loss from discontinued operations, net of tax | $(17,372) | $(1,646) | $(15,726) | nm | | **Net income (loss)** | **$(21,592)** | **$368** | **$(21,960)** | **nm** | - In the first half of 2021, consolidated revenue **decreased by 31.0% to $48.1 million**; however, gross profit improved from a loss of $1.2 million in 2020 to a **profit of $1.0 million** in 2021, driven by project improvements in the Fabrication & Services division[167](index=167&type=chunk)[169](index=169&type=chunk) Fabrication & Services Division Results of Operations (Six Months, in thousands of U.S. dollars) | Metric | June 30, 2021 | June 30, 2020 | Change Amount | Change Percent | | :--- | :--- | :--- | :--- | :--- | | Revenue | $40,287 | $60,049 | $(19,762) | (32.9)% | | Gross profit | $3,228 | $446 | $2,782 | nm | | Gross profit percent | 8.0% | 0.7% | | | | Operating income | $2,517 | $8,579 | $(6,062) | (70.7)% | - The Fabrication & Services division's revenue **decreased by 32.9%**, but its gross profit increased from $0.4 million to **$3.2 million**, primarily due to project improvements of $2.0 million and a more favorable project mix[175](index=175&type=chunk) Shipyard Division Results of Operations (Six Months, in thousands of U.S. dollars) | Metric | June 30, 2021 | June 30, 2020 | Change Amount | Change Percent | | :--- | :--- | :--- | :--- | :--- | | Revenue | $8,259 | $10,585 | $(2,326) | (22.0)% | | Gross loss | $(2,037) | $(1,524) | $(513) | (33.7)% | | Gross loss percent | (24.7)% | (14.4)% | | | | Operating loss | $(2,370) | $(2,089) | $(281) | (13.5)% | - The Shipyard division's revenue **decreased by 22.0%**, and its gross loss widened from $1.5 million to **$2.0 million**, mainly due to increased cost estimates for a 70-vehicle ferry project and holding costs for the MPSV vessels[179](index=179&type=chunk) Discontinued Operations Results (Six Months, in thousands of U.S. dollars) | Metric | June 30, 2021 | June 30, 2020 | Change Amount | Change Percent | | :--- | :--- | :--- | :--- | :--- | | Revenue | $41,637 | $68,862 | $(27,225) | (39.5)% | | Gross profit (loss) | $7,725 | $(761) | $8,486 | nm | | Gross profit (loss) percent | 18.6% | (1.1)% | | | | Operating loss | $(17,372) | $(1,646) | $(15,726) | nm | - Revenue from discontinued operations **decreased by 39.5% to $41.6 million**; however, gross profit improved from a loss of $0.8 million in 2020 to a **profit of $7.7 million** in 2021, primarily due to a positive impact of **$8.4 million** from change orders on the towing, salvage, and rescue ship projects[184](index=184&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk) - In the first half of 2021, discontinued operations recorded a **$25.3 million loss on impairments and assets held for sale**, including a **$22.8 million** impairment of the Shipyard Division's long-lived assets and **$2.5 million** in transaction costs related to the Shipyard Transaction[187](index=187&type=chunk) [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity position improved due to proceeds from the Shipyard Transaction, which is expected to support near-term operational needs - The company's primary sources of liquidity are its cash, cash equivalents, restricted cash, and maturing short-term investments; as of June 30, 2021, total cash, cash equivalents, and restricted cash was **$74.9 million**[189](index=189&type=chunk) Cash, Cash Equivalents, and Restricted Cash (in thousands of U.S. dollars) | Metric | June 30, 2021 | | :--- | :--- | | Cash and cash equivalents | $64,834 | | Restricted cash, current | $9,637 | | **Total cash, cash equivalents, and current restricted cash** | **$74,471** | | Restricted cash, non-current | $406 | | **Total cash, cash equivalents, and restricted cash** | **$74,877** | - As of June 30, 2021, the company had working capital of **$72.5 million**; excluding cash, short-term investments, assets held for sale, and the current portion of long-term debt, working capital was a **deficit of $2.0 million**[191](index=191&type=chunk) Cash Flow Activities (Six Months, in thousands of U.S. dollars) | Metric | June 30, 2021 | June 30, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(11,369) | $(3,758) | | Net cash provided by (used in) investing activities | $43,195 | $(6,656) | | Net cash (used in) provided by financing activities | $(108) | $9,895 | - In the first half of 2021, cash used in operating activities was **$11.4 million**, primarily due to an increase in contract assets and decreases in contract liabilities and accounts payable; cash provided by investing activities was **$43.2 million**, mainly from the net proceeds of the Shipyard Transaction and the sale of assets held for sale[196](index=196&type=chunk)[197](index=197&type=chunk)[201](index=201&type=chunk) - The company anticipates capital expenditures of **$1.0 million to $2.0 million** for the remainder of 2021 and believes its cash, cash equivalents, and short-term investments are sufficient to meet its operational, working capital, and capital expenditure needs for at least the next twelve months[211](index=211&type=chunk)[212](index=212&type=chunk) [Item 4. Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures and notes no material changes to internal controls - Management concluded that the company's disclosure controls and procedures were **effective** as of the end of the reporting period[213](index=213&type=chunk) - There were **no changes** in the company's internal control over financial reporting during the second quarter of 2021 that have materially affected, or are reasonably likely to materially affect, its financial reporting[214](index=214&type=chunk) [PART II OTHER INFORMATION](index=48&type=section&id=PART%20II%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=48&type=section&id=Item%201.%20Legal%20Proceedings) This section confirms the company is subject to ordinary course legal proceedings and references the detailed discussion of the MPSV dispute - The company is involved in various legal proceedings in the ordinary course of business, which are not expected to have a material adverse effect on its financial condition, results of operations, or cash flows[216](index=216&type=chunk) - A detailed discussion of the MPSV dispute is provided in Note 6 to the financial statements and is incorporated herein by reference[216](index=216&type=chunk) [Item 1A. Risk Factors](index=48&type=section&id=Item%201A.%20Risk%20Factors) This section states that there have been no material changes to the company's risk factors since its last annual and quarterly reports - There have been **no material changes** to the risk factors previously disclosed in the company's 2020 Annual Report and its Form 10-Q for the quarter ended March 31, 2021[217](index=217&type=chunk) [Item 6. Exhibits](index=49&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with or incorporated by reference into the report, including key agreements and certifications - Exhibits include the Asset Purchase Agreement, Articles of Incorporation, employment agreements, Negative Covenants Agreement, Pledge Agreement, stock incentive plans, and certifications by the CEO and CFO[219](index=219&type=chunk) [SIGNATURES](index=50&type=section&id=SIGNATURES) This section contains the official sign-off of the report by the company's authorized officer - This report was signed on August 10, 2021, by Westley S Stockton, Executive Vice President, Chief Financial Officer, Secretary, and Treasurer of GULF ISLAND FABRICATION, INC[223](index=223&type=chunk)[224](index=224&type=chunk)

Gulf Island Fabrication, Inc. (NASDAQ:GIFI) Q1 2021 Earnings Conference Call May 11, 2021 5:00 PM ET Company Representatives Richard Heo - President & Chief Executive Officer West Stockton - Executive Vice President & Chief Financial Officer Cindi Cook - Executive Assistant to CEO Conference Call Participants Jeff Geygan - Global Value Investment Corp Operator Good afternoon ladies and gentlemen and welcome to Gulf Island's conference call to discuss first quarter 2021 results. All participants will be in a ...

Financial Data and Key Metrics Changes - Consolidated revenue for Q4 2020 was $57.6 million, a 5% increase from Q3 2020 but a 28% decrease from Q4 2019 [28] - Consolidated net loss for Q4 2020 was $15.4 million, compared to a net loss of $12.3 million in Q3 2020 and $34.3 million in Q4 2019 [30] - Adjusted EBITDA for Q4 2020 was a loss of $9.2 million, an improvement from a loss of $10 million in Q3 2020 and a loss of $14.9 million in Q4 2019 [31] Business Line Data and Key Metrics Changes - Shipyard division revenue was $37.2 million in Q4 2020, slightly up from $37.1 million in Q3 2020 but down 22% from $47.7 million in Q4 2019 [33] - Fabrication & Services division revenue was $21.2 million in Q4 2020, up 16% from $18.2 million in Q3 2020 but down 36% from $33.2 million in Q4 2019 [39] - Fabrication & Services reported adjusted EBITDA of $1.9 million for Q4 2020, compared to $225,000 in Q3 2020 and a loss of $2.5 million in Q4 2019 [41] Market Data and Key Metrics Changes - Backlog at year-end totaled $372 million, a decrease of 15% from the previous year and 13% from September 2020 [46] - Operating cash flow for Q4 2020 was negative $11.7 million, with capital expenditures of $1 million [46] Company Strategy and Development Direction - The company is consolidating operations to improve resource utilization and reduce costs, including the relocation of the pipe mill to enhance efficiency [8][10] - There is a strategic focus on expanding into green energy markets, including renewable biofuel and hydrogen production [13][71] - The company aims to enhance customer value propositions through strategic partnerships and in-house engineering capabilities [14] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by COVID-19, crude oil volatility, and labor availability, but expressed confidence in the company's long-term foundation and strategic initiatives [7][27] - The company is optimistic about increasing project bidding opportunities in LNG and petrochemical sectors in Texas and Louisiana [12] Other Important Information - The company has submitted a claim to recover costs associated with design deficiencies impacting vessel projects [20] - A change order with the U.S. Navy is expected to result in a benefit of $7 million to $10 million in Q1 2021 [24] Q&A Session Summary Question: What percentage of backlog is in a loss position? - The majority of the backlog in the Shipyard division is in a loss or breakeven position, contributing no incremental profitability [53][54] Question: Outlook for bidding on modular work? - The company is confident in pursuing modular work, particularly in LNG and petrochemical projects, despite previous delays [55][56] Question: Opportunities in offshore wind? - The company is selectively looking at offshore wind opportunities but faces challenges due to the shift towards monopile foundations [61][65] Question: What type of work is being pursued? - The company is winning smaller service work and is focused on engineered equipment for sustainable end markets [67][71] Question: Mitigation of skilled labor challenges? - The company is working with technical schools to improve training and retention of skilled labor [72] Question: Any further consolidation opportunities? - The company has consolidated operations in Houma and is focused on making that footprint efficient [75][78] Question: Timeline for vessel deliveries? - The second 40-vehicle ferry is expected to be delivered in Q2 2021, with the remaining vessels staggered through 2024 [80][84]

Customer Concentration and Revenue Impact - The company derives a significant portion of its revenue from a small number of customers, with two, four, and three customers accounting for 46%, 54%, and 44% of consolidated revenue in 2020, 2019, and 2018 respectively[86]. - The consolidation of primary customers in the oil and gas industry could lead to reduced capital spending and demand for the company's products and services[83]. - One customer filed for Chapter 11 bankruptcy in 2020, impacting ongoing disputes related to two MPSVs[88]. Market and Economic Challenges - The ongoing global pandemic and the contraction in oil demand have resulted in significant challenges, leading to a reduction in capital expenditures by oil and gas companies, which may adversely impact the company's financial condition[72]. - The company has experienced increased volatility in the oil and gas industry since Q1 2020, which has suppressed capital spending and resulted in fewer project awards in traditional markets[78]. - The timing of new project awards is uncertain, and delays or suspensions in bidding activities due to COVID-19 and low oil prices may further reduce future revenue opportunities[84]. - The long-term effectiveness of economic stabilization efforts related to COVID-19 remains uncertain, which could further affect the company's operations and financial condition[72]. Competitive Environment - The company faces competitive pressures from foreign competitors with lower operating costs, which may hinder its ability to successfully bid on projects[81]. - The company operates in a highly competitive environment, with contracts often awarded on a competitively bid basis, making it challenging to maintain its competitive position[80]. - Competitive pricing pressures in the fabrication and marine construction industry may negatively impact operating results[93]. Operational Challenges - The company has seen an increase in employee absenteeism and turnover, impacting project execution and productivity due to COVID-19 related challenges[76]. - The company is facing challenges in hiring and retaining skilled labor, which could negatively affect project quality and profitability[121]. - Adverse weather conditions and seasonal variations can disrupt operations and affect labor hours, particularly in the Gulf Coast region[95]. - The company experienced under-utilization of facilities and personnel, leading to losses due to high fixed costs and the impact of COVID-19[109]. Financial Condition and Capital Needs - The company experienced negative cash flows from operations during 2020, indicating potential ongoing financial challenges[104]. - The backlog of projects is subject to changes due to delays, suspensions, or terminations, which could significantly impact future revenue[96]. - The company may need to raise additional capital for working capital and capital expenditures, which could be challenging under current market conditions[98]. - A $10.0 million PPP Loan was secured, with an application for forgiveness of $8.9 million submitted, pending SBA review[105]. Asset Management and Impairments - The company has provided $7.0 million in collateral for performance bonds related to contracts that are under dispute[102]. - The company has $8.2 million in assets held for sale, primarily consisting of three 660-ton crawler cranes and two drydocks[107]. - During 2020, the company recorded impairments associated with its assets held for sale, indicating potential future losses[107]. - The company closed its Jennings Yard and Lake Charles Yard in Q4 2020, relocating certain assets to improve operational efficiency[108]. Regulatory and Compliance Risks - New tariffs and duties imposed by the federal government on imported materials, including steel, could significantly raise costs for the company's fabrication projects[132]. - Compliance with complex and stringent environmental laws may expose the company to liability and increase operational costs, particularly with potential new regulations under the Biden Administration[134]. - Increased focus on environmental, social, and governance (ESG) factors by institutional investors may adversely affect the company's financing costs and access to capital[131]. Governance and Shareholder Dynamics - Over half of the company's stock is held by institutional investors and pooled investment funds with a history of shareholder activism, which could create uncertainty about future strategic direction[130]. - The company has a Cooperation Agreement with its largest shareholder that is set to expire at the 2021 annual meeting, potentially impacting governance and strategic decisions[130]. Cybersecurity and Insurance Risks - The company may face significant financial losses due to potential cyber incidents or data security breaches[128]. - The company’s insurance coverage may be inadequate to cover claims, exposing it to significant liability and costs[114]. Joint Ventures and Partnerships - The company’s operations through joint ventures may be impacted by limited control over partners, leading to potential non-performance issues[129]. Supply Chain Dependencies - The company relies on third parties for raw materials and services, which could adversely affect its ability to meet customer commitments[123]. - The company is highly dependent on the Houma Navigation Canal for access to open waters, and lack of federal funding for dredging could hinder operations[137].

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from (State or other jurisdiction of incorporation or organization) 16225 PARK TEN PLACE, SUITE 300 HOUSTON, TEXAS 77084 (Address of principal executive offices) (Zip Cod ...

Financial Data and Key Metrics Changes - Consolidated revenue for Q3 2020 was $54.9 million, down 9% sequentially from $60 million in Q2 2020 and down 28% year-over-year from $75.8 million in Q3 2019 [41] - Consolidated net loss for Q3 2020 was $12.3 million, compared to a net loss of $5.5 million in Q2 2020 and $6.8 million in Q3 2019 [42] - EBITDA for Q3 2020 was a loss of $10.1 million, compared to a loss of $3.4 million in the previous quarter and a loss of $4.6 million in the same quarter last year [42] Business Line Data and Key Metrics Changes - Shipyard Division revenue was $37.1 million in Q3 2020, up from $33.9 million in Q2 2020 but down from $43.3 million in Q3 2019 [45] - Fabrication & Services Division revenue was $18.2 million in Q3 2020, down 31% from $26.6 million in Q2 2020 and down 44% from $32.7 million in Q3 2019 [54] - Operating loss for the Shipyard Division was $9.2 million in Q3 2020, compared to a loss of $1.7 million in Q2 2020 and $3.3 million in Q3 2019 [47] Market Data and Key Metrics Changes - Backlog at the end of Q3 2020 totaled $429 million, a decrease of 7% year-over-year and 9% compared to June 2020 [64] - Approximately 94% of the backlog was attributable to the Shipyard Division, excluding customer options for three additional vessels for the U.S. Navy [65] Company Strategy and Development Direction - The company is focusing on improving project execution and management, consolidating divisions, and pursuing opportunities in renewable energy markets [23][38] - Cost-saving initiatives are being implemented in the Fabrication & Services Division, expected to yield results starting in Q4 2020 [76] - The company is transitioning to green energy end markets, including biofuel plant construction and hydrogen production [38] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the significant impact of COVID-19 and Gulf Coast hurricanes on operations, leading to disappointing results [74] - The company is actively discussing equitable resolutions with customers affected by project delays and is focused on preserving cash [75] - There is confidence in the recovery of end markets and the benefits of ongoing initiatives to strengthen the company [77] Other Important Information - The company experienced significant operational disruptions due to hurricanes and COVID-19, leading to project delays and increased costs [7][11] - A crane accident caused damage to a vessel under construction, leading to potential costs ranging from $1 million to $4 million [17][18] Q&A Session Summary Question: What actions is the company taking to mitigate the impact of COVID-19 and hurricanes? - The company is in discussions with customers for equitable resolutions and is focused on improving processes and execution [75] Question: What are the expectations for future capital needs and working capital? - Anticipated capital needs for Q4 2020 are approximately $2 to $3 million, with expected working capital increase of $10 million to $15 million [71][72]