Gulf Island Fabrication, Inc. ("Gulf Island" or the
"Company") (NASDAQ: GIFI) today announced it has sold the
assets and certain long-term vessel construction contracts of the
Shipyard Division to Bollinger Shipyards, L.L.C. (“Bollinger
Shipyards”) for approximately $28.6 million. Net cash proceeds
resulting from the transaction are anticipated to be approximately
$15 million after payment of retained working capital liabilities
associated with the divested construction contracts and transaction
costs and adjustments to account for changes in working capital
from December 31, 2020 through the closing date. The net cash
proceeds are expected to be used to fund net working capital
liabilities associated with retained construction contracts and
other Shipyard Division liabilities and the wind down of the
Shipyard Division operations.
TRANSACTION RATIONALE
- Transforms Gulf Island into
a more focused, specialty fabrication business. Positions
the Company for profitable growth in existing and new higher-margin
markets.
- Improves risk
profile. Removes future risks associated with existing,
long-term contracts that represent ~90% of the Company’s current
backlog that extends through 2024.
- Strengthens
liquidity. Reduces the Company’s bonding, letters of
credit and working capital requirements and is expected to lessen
quarterly working capital fluctuations.
“This is a transformational transaction for Gulf
Island, as it will enable us to accelerate our strategic priorities
by significantly de-risking our business and positioning us to
pursue new, higher-margin opportunities within our Fabrication
& Services Division. We are well-positioned given the strategic
initiatives implemented over the past year and we are excited by
the opportunities for profitable growth that lay ahead,” said
Richard Heo, Gulf Island’s President and Chief Executive
Officer.
“I would like to thank our Shipyard team for
their relentless commitment to quality and safety, while delivering
on our obligations to our customers. We believe this
divestiture is in the best interest of all our stakeholders,
including our shareholders, employees and customers,” continued
Heo.
“This transaction further supports our key
strategic priorities of improving our financial strength and
pursuing growth opportunities. As we focus on diversifying into new
end markets with our Fabrication & Services Division, we will
continue to deliver high-quality fabrication solutions to an
expanded base of customers,” concluded Heo.
TRANSACTION OVERVIEW
The transaction includes the Shipyard Division
property and assets in Houma, Louisiana, including all four of the
Division’s drydocks. In addition, the transaction includes the
long-term contracts and all related obligations for the
construction of three research vessels for Oregon State University
and five towing, salvage and rescue ships for the U.S. Navy.
Excluded from the transaction are certain working capital
liabilities associated with such divested construction contracts.
Also excluded from the transaction are the contracts and related
obligations for the construction of two forty-vehicle ferries for
the North Carolina Department of Transportation, a seventy-vehicle
ferry for the Texas Department of Transportation, and two
multi-purpose service vessels for Hornbeck Offshore Services that
are subject to dispute.
Gulf Island received $26.4 million at closing
and will receive the remainder from Bollinger upon its collection
of certain customer payments associated with the divested
construction contracts. Net cash proceeds resulting from the
transaction are anticipated to be approximately $15 million after
payment of retained working capital liabilities associated with the
divested construction contracts and transaction costs and
adjustments to account for changes in working capital from December
31, 2020 through the closing date. The net cash proceeds are
expected to be used to fund net working capital liabilities
associated with the retained construction contracts and other
Shipyard Division liabilities (which totaled approximately $13
million at December 31, 2020) and the wind down of the Shipyard
Division operations, which is anticipated to occur by mid-2022. The
Company anticipates recording a pre-tax loss of approximately $26
million to $28 million in connection with the transaction.
The Company will retain the $8.8 million payment
received in the first quarter 2021 associated with the previously
announced amendment to the U.S. Navy contracts.
TRANSACTION UPDATE CONFERENCE
CALL
Gulf Island will hold a conference call on
Tuesday, April 20, 2021 at 7:30 a.m. Central Time (8:30 a.m.
Eastern Time) to discuss the transaction. The call will be
available by webcast and can be accessed on Gulf Island’s website
at www.gulfisland.com. Participants may also join the call by
dialing 1.800.437.2398 and requesting the “Gulf Island” conference
call. A replay of the webcast will be available on the Company's
website for seven days after the call.
ADVISORS
Johnson Rice & Company, L.L.C. acted as
financial advisor and Jones Walker LLP acted as legal advisor to
Gulf Island.
ABOUT BOLLINGER SHIPYARDS
Bollinger Shipyards has a 75-year legacy as a
leading designer and builder of high performance military patrol
boats and salvage vessels, research vessels, ocean-going double
hull barges, offshore oil field support vessels, tugboats, rigs,
lift boats, inland waterways push boats, barges, and other steel
and aluminum products from its new construction shipyards as part
of the U. S. industrial base. Bollinger has 11 shipyards, all
strategically located throughout Louisiana with direct access to
the Gulf of Mexico, Mississippi River and the Intracoastal
Waterway. Bollinger is the largest vessel repair company in the
Gulf of Mexico region.
ABOUT GULF ISLAND
Gulf Island is a leading fabricator of complex
steel structures and modules and provider of project management,
hookup, commissioning, repair, maintenance and civil construction
services to the industrial and energy sectors. The Company’s
customers include U.S. and, to a lesser extent, international
energy producers; refining, petrochemical, LNG, industrial and
power operators; and EPC companies. The Company is headquartered in
Houston, Texas and its operating facilities are located in Houma,
Louisiana.
CAUTIONARY NOTE ON FORWARD-LOOKING
STATEMENTS
This Release contains forward-looking statements
in which the Company discusses its potential future performance.
Forward-looking statements, within the meaning of the safe harbor
provisions of the U.S. Private Securities Litigation Reform Act of
1995, are all statements other than statements of historical facts,
such as projections or expectations relating to diversification and
entry into new end markets, improvement of risk profile, oil and
gas prices, operating cash flows, capital expenditures and
liquidity. The words “anticipates,” “may,” “can,” “plans,”
“believes,” “estimates,” “expects,” “projects,” “targets,”
“intends,” “likely,” “will,” “should,” “to be,” “potential” and any
similar expressions are intended to identify those assertions as
forward-looking statements.
The Company cautions readers that
forward-looking statements are not guarantees of future performance
and actual results may differ materially from those anticipated,
projected or assumed in the forward-looking statements. Important
factors that can cause its actual results to differ materially from
those anticipated in the forward-looking statements include: the
duration and scope of, and uncertainties associated with, the
ongoing global pandemic caused by COVID-19 and the corresponding
weakened demand for, and volatility of prices of, oil and the
impact thereof on its business and the global economy, which are
evolving and beyond its control; the potential forgiveness of any
portion of the PPP Loan; its ability to secure new project awards,
including fabrication projects for refining, petrochemical, LNG and
industrial facilities and offshore wind developments; the Company’s
ability to improve project execution; the cyclical nature of the
oil and gas industry; competition; consolidation of its customers;
timing and award of new contracts; reliance on significant
customers; financial ability and credit worthiness of its
customers; nature of its contract terms; competitive pricing and
cost overruns on its projects; adjustments to previously reported
profits or losses under the percentage-of-completion method;
weather conditions; changes in backlog estimates; suspension or
termination of projects; its ability to raise additional capital;
its ability to amend or obtain new debt financing or credit
facilities on favorable terms; its ability to generate sufficient
cash flow; its ability to sell certain assets; any future asset
impairments; utilization of facilities or closure or consolidation
of facilities; customer or subcontractor disputes; its ability to
resolve the dispute with a customer relating to the purported
terminations of contracts to build two multi-purpose service
vessels; operating dangers and limits on insurance coverage;
barriers to entry into new lines of business; its ability to employ
skilled workers; loss of key personnel; performance of
subcontractors and dependence on suppliers; changes in trade
policies of the U.S. and other countries; compliance with
regulatory and environmental laws; lack of navigability of canals
and rivers; systems and information technology interruption or
failure and data security breaches; performance of partners in any
future joint ventures and other strategic alliances; shareholder
activism; focus on environmental, social and governance factors by
institutional investors; and other factors described in
Item 1A “Risk Factors” in the Company’s 2020 Annual Report as
may be updated by subsequent filings with the SEC.
Investors are cautioned that many of the
assumptions upon which the Company’s forward-looking statements are
based are likely to change after the forward-looking statements are
made, which it cannot control. Further, the Company may make
changes to its business plans that could affect its results. The
Company cautions investors that it does not intend to update
forward-looking statements more frequently than quarterly
notwithstanding any changes in its assumptions, changes in business
plans, actual experience or other changes, and undertakes no
obligation to update any forward-looking statements.
COMPANY INFORMATION
Richard W. Heo |
Westley S. Stockton |
Chief Executive Officer |
Chief Financial Officer |
713.714.6100 |
713.714.6100 |
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