Gulf Island Fabrication(GIFI) - 2025 Q1 - Quarterly Report

PART I: FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated financial statements for Q1 2025, including balance sheets, income statements, and cash flows, with detailed notes Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $28,636 | $27,284 | | Total current assets | $111,580 | $105,409 | | Total assets | $138,162 | $133,216 | | Total current liabilities | $22,789 | $21,376 | | Total long-term debt | $17,886 | $17,888 | | Total liabilities | $41,457 | $40,114 | | Total shareholders' equity | $96,705 | $93,102 | Consolidated Statement of Operations Highlights (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenue | $40,273 | $42,881 | | Gross profit | $6,615 | $6,124 | | Operating income | $3,280 | $5,708 | | Net income | $3,827 | $6,240 | | Basic income per share | $0.23 | $0.38 | | Diluted income per share | $0.23 | $0.37 | Consolidated Statement of Cash Flows Highlights (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,219 | $7,019 | | Net cash used in investing activities | ($300) | ($12,453) | | Net cash used in financing activities | ($567) | ($273) | | Net increase (decrease) in cash | $1,352 | ($5,707) | Note 1: Organization and Summary of Significant Accounting Policies The company operates through Services, Fabrication, and Corporate segments, completing its Shipyard Division wind-down and applying U.S. GAAP with significant estimates - The company is a leading fabricator of complex steel structures and modules and a provider of specialty services to the industrial and energy sectors, operating through Services, Fabrication, and Corporate divisions[26] - The wind-down of the Shipyard Division was substantially completed in Q4 2023, with final completion in Q1 2025. Effective January 1, 2025, the Shipyard Division is no longer a reportable segment[27] - Significant estimates are used in financial reporting, particularly for revenue recognition on long-term contracts, asset recoverability assessments, and tax provisions[31][37] Note 2: Revenue, Contract Assets and Liabilities This note details Q1 2025 revenue of $40.3 million by segment and contract type, with $9.3 million in remaining performance obligations and increased net contract assets Revenue by Contract Type - Q1 2025 (in thousands) | Contract Type | Services | Fabrication | Total | | :--- | :--- | :--- | :--- | | Fixed-price and unit-rate | $218 | $11,035 | $11,184 | | T&M and cost-reimbursable | $18,189 | $9,659 | $27,848 | | Total | $19,855 | $20,694 | $40,273 | - Remaining performance obligations totaled $9.3 million at March 31, 2025, all of which is expected to be recognized as revenue during 2025[66] - Net contracts in progress (Contract assets less contract liabilities) increased to $9.1 million at March 31, 2025, from $7.3 million at December 31, 2024, mainly due to higher unbilled positions in the Fabrication Division[67][71] Note 3: Loan Receivables and ENGlobal Acquisition The company is acquiring ENGlobal assets, providing a $2.5 million DIP loan and assuming a $2.4 million loan, with the acquisition expected to close in Q2 2025 - Provided a senior secured DIP loan to ENGlobal for up to $2.5 million, with $1.2 million advanced as of March 31, 2025[73][74] - On April 10, 2025, assumed a $2.4 million senior secured loan due from ENGlobal in exchange for a $1.5 million cash payment[75] - Named the successful bidder to acquire the ENGlobal Business, with the consideration being a 'credit bid' of the $2.5 million DIP loan. The acquisition is expected to close in Q2 2025[76] Note 4: Credit Facilities and Debt The company maintains a $10.0 million LC facility with $1.2 million outstanding, $15.6 million in surety bonds, and a $19.0 million promissory note with Zurich - At March 31, 2025, the company had $1.2 million of outstanding letters of credit under its $10.0 million LC Facility and $15.6 million of outstanding surety bonds[79][80] - A promissory note with Zurich requires payment of $20.0 million plus 3.0% interest, payable in 15 annual installments. The outstanding balance at March 31, 2025 was $19.0 million[81] Note 5: Commitments and Contingencies The company faces ongoing litigation for ferry projects, is generally uninsured for property damage due to high premiums, and has indemnification obligations for surety bonds - A lawsuit is ongoing against a customer for the forty-vehicle ferry projects to recover costs from design deficiencies; the customer has filed a counterclaim. Trial is set for February 2026[85] - The company is generally uninsured for exposures resulting from any future damage to its property and equipment after determining the benefits were outweighed by high premiums and deductibles[86] - The company has indemnification obligations for surety bonds, which could require the use of cash to reimburse the Surety in the event of non-performance on a contract[88] Note 6: Income (Loss) Per Share and Shareholders' Equity Q1 2025 basic and diluted EPS were $0.23, with 86,364 shares repurchased for $0.6 million, leaving $3.1 million authorized for future repurchases Earnings Per Share - Q1 2025 vs Q1 2024 | Per Share Data | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Basic income per share | $0.23 | $0.38 | | Diluted income per share | $0.23 | $0.37 | - During Q1 2025, the company repurchased 86,364 shares of common stock for $0.6 million. At March 31, 2025, $3.1 million remained available for repurchase under the program[92] Note 7: Operating Segments Effective January 1, 2025, the company reports through Services, Fabrication, and Corporate segments, with Fabrication generating the highest Q1 2025 operating income of $3.8 million - Effective January 1, 2025, the company's reportable segments are Services, Fabrication, and Corporate, as the Shipyard Division wind-down is complete[93] Segment Operating Income (Loss) - Q1 2025 (in thousands) | Segment | Revenue | Gross Profit | Operating Income (Loss) | | :--- | :--- | :--- | :--- | | Services | $19,855 | $2,283 | $1,583 | | Fabrication | $20,694 | $4,332 | $3,795 | | Corporate | ($276) | $0 | ($2,098) | | Consolidated | $40,273 | $6,615 | $3,280 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 performance, highlighting a revenue decrease to $40.3 million but an improved gross profit margin of 16.4%, with $66.3 million in available liquidity Strategic Transformation The company is shifting its strategy from risk reduction to profitable growth, focusing on workforce expansion, improved utilization, and diversification into new energy and construction markets - The company has shifted its strategic priorities from risk reduction and liquidity preservation to a focus on generating stable, profitable growth[110] - Key strategic initiatives include expanding the skilled workforce, improving resource utilization, strengthening project execution, and diversifying into new end markets[116] - Efforts are underway to reduce reliance on the offshore oil and gas sector by pursuing fabrication for onshore facilities, alternative energy projects, and non-energy construction[117][118] New Project Awards and Backlog New project awards in Q1 2025 decreased to $34.0 million, leading to a backlog reduction from $15.6 million to $9.3 million, all expected to be recognized in 2025 New Project Awards by Segment (in thousands) | Segment | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Services | $19,871 | $25,468 | | Fabrication | $14,385 | $18,272 | | Total | $33,980 | $43,818 | Backlog by Segment (in thousands) | Segment | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Services | $68 | $52 | | Fabrication | $9,190 | $15,499 | | Total | $9,258 | $15,551 | Results of Operations Q1 2025 consolidated revenue decreased to $40.3 million, but gross profit margin improved to 16.4%, while net income fell to $3.8 million due to a prior-year property sale gain - Consolidated revenue decreased primarily due to a $5.7 million decline in the Services Division, partially offset by a $3.6 million increase in the Fabrication Division[126] - Consolidated gross profit margin improved to 16.4% from 14.3% YoY, driven by a higher margin project mix and improved utilization in the Fabrication Division[124][126] - Operating income fell to $3.3 million from $5.7 million, mainly because Q1 2024 results included a $2.9 million gain on the sale of real property[124][127][132] Liquidity and Capital Resources As of March 31, 2025, the company had $66.3 million in available liquidity, with $2.2 million net cash from operations, and anticipates $2.0-$2.5 million in remaining 2025 capital expenditures Available Liquidity at March 31, 2025 (in thousands) | Component | Amount | | :--- | :--- | | Cash and cash equivalents | $28,636 | | Short-term investments | $37,639 | | Available cash, cash equivalents and short-term investments | $66,275 | - Net cash provided by operating activities was $2.2 million in Q1 2025, compared to $7.0 million in Q1 2024[147] - Anticipated capital expenditures for the remainder of 2025 are approximately $2.0 to $2.5 million[156] Item 3. Quantitative and Qualitative Disclosures About Market Risk This item is not applicable for the current reporting period - Not applicable[160] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[161] - There were no changes in internal control over financial reporting during the first quarter of 2025 that have materially affected, or are reasonably likely to materially affect, internal controls[162] PART II: OTHER INFORMATION Item 1. Legal Proceedings The company reported no new material legal proceedings for the current period - None[164] Item 1A. Risk Factors A new risk factor highlights uncertainties regarding the successful completion, anticipated benefits, and loan recovery of the pending ENGlobal acquisition - A new risk factor was added concerning the acquisition of the ENGlobal Business[165][166] - The risk states there is no assurance the acquisition will be consummated, that its anticipated benefits will be realized, or that the DIP Loan and Assumed Loan amounts will be recovered[167] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2025, the company repurchased 86,364 shares of common stock at an average price of $6.57 per share under its repurchase program Issuer Purchases of Equity Securities - Q1 2025 | Period | Total Shares Purchased | Average Price Paid per Share | Approx. Dollar Value Remaining in Program (end of period) | | :--- | :--- | :--- | :--- | | Jan 1-31, 2025 | 0 | N/A | $3,668,000 | | Feb 1-28, 2025 | 0 | N/A | $3,668,000 | | Mar 1-31, 2025 | 86,364 | $6.57 | $3,101,000 | Item 5. Other Information No director or officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q1 2025 - During the first quarter of 2025, no director or officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangement[171] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents and required CEO/CFO certifications - The report includes CEO and CFO certifications pursuant to Rule 13a-14/15d-14 and Section 906 of the Sarbanes-Oxley Act[173]