Q3 2019 Earnings Call
Good morning, and welcome ladies and gentlemen to the Gulf Island fabrication Inc. third quarter 2019 earnings Conference call.
All participants will be in a listen only mode for the duration of the presentation.
Coal is being recorded at this time I would like to turn the conference over to Mr., Andy Cook for opening remarks, an introduction Cindy. Please go ahead.
Thank you and good morning, I would like to welcome everyone to Gulf Island third quarter 2019 Telecom.
Our results were released yesterday afternoon, and a copy of the press release is available on our website at <unk> Gulf Island Dot com.
A replay of todays call will be available on our website later today.
Please keep in mind that depressed relieved and certain comment on this call include forward looking statement and actual results may differ materially.
We would like to refer everyone to the cautionary language included in our press release into the risk factors described in our 2018 Form 10-K and subsequent FCC filing.
Please also note that management may reference EBITDA and backlog on this call, which our financial measures not recognized under U.S. gap.
As required by FCC rules and regulation. These non-GAAP financial measures are reconciled to their most comparable GAAP financial measures in our press release issued yesterday afternoon.
Today, we have Mr Cardmatch, President and CEO , and Mr. West Stockton Executive Vice President and Chief Financial Officer Mr., Matt.
Thank you Sandy and good morning to all of our listeners results for the quarter reflect revenue grew on a year over year basis.
Benefits of our cost reduction efforts and improvements in utilization of our facilities, especially the latter part of the quarter.
During the quarter, we were awarded US suddenly vehicle stay away from the Texas to public transportation with delivery schedule for 2021.
Our fabrication division delivered a met tower to an offshore wind customer and our shipyard division completed its fifth former talk.
Well our results continue to realize improvement from the better utilization of our facilities and ongoing cost reduction efforts, our quarterly results when that negatively impacted by several of them.
One thing in hurricane buried affected the entire Gulf coast.
We incurred cost across all our Louisiana facilities and its answer the storm and to get the yards operational after we were clear danger as we ceased operations in advance of injuring the storm.
Our services Division was further impacted as we evacuated our offshore personnel.
While this impact was unfortunate bigger impacts during the quarter were costs increases on our Alberta projects in ice breaker vessel projects within our shipyard division and a charge them our project in our service Division.
I will address each division and a project impacts separately.
With respect to the shipyard division as it relates to our harbor Cogs in the overall Tim talked program.
During the quarter, we completed the fit to work schedules complete the six body in at this moment with the seven talk at the end of this year.
He talk is scheduled to be completed in the first quarter 2025 to two tugs scheduled for completion in the second and third quarters of 2020.
Well I'm proud of the quality that says we have delivered in the progress we will make you know the remaining tugs, we continue to be impacted in our ginnies facility by labor challenges in the Gulf Coast area, including a record use of non optimal contract labor mix.
The labor challenges have not only impacted us on our self perform work, but have also impacted our subcontractors.
Specifically during the quarter the fifth and sixth says were impacted by performance with third party pay subcontractor, requiring us to supplement and re performing the scope of work.
This not only resulted in additional cost for us to repeal famous work, but also caused disruption and delaying.
To address this risk going forward, we have terminated all third party subcontractors for them remaining vessels.
Yeah, I mean, the paint scope in house used in our own paint crews under our own supervision.
The strategy is already showing signs of improvement in our results are trending within our estimated man hours to complete the scope of work.
And in Cogs.
In addition to the impacts of the pain subcontractor on the fifth and sixth tugs during the quarter, our forecast costs were impacted by increasing cost estimates from a subcontractor for the electrical instrumentation work scope in the final two tugs.
The hard cost estimates reflect the previously mentioned ongoing labor challenges facing our subcontractors.
Are you know like cost estimates did not impact the first a tugs as our subcontractors that already committed to the United Scopes.
However, this was not the case, where the final two tugs because execution is not scheduled to later in 2020.
I would like I would now like to note that all remain subcontracts for the tugs have now been fully committed.
Lastly in represent about half the increase in our forecast Cosmo talks with water is a change in our assumption regarding future improvements in productivity.
Specifically, we had anticipated improvement in our productivity as we progress from one talk to the mix, which is consistent with our historical experience when we have contracts for multiple vessels.
However, as we have ramped up the execution of the projects the labor mix and productivity has not improved.
We're still optimistic that our newly installed management team and the changes they have implemented will provide improvement on Atlanta tugs. However, given that we have not yet experienced improvements anticipated. We believe adjusting our forecast calls for many talks to levels that are consistent with results achieved them last completed today to be appropriate.
This time.
Actual results for many times are tracking consistent with these were boss forecast.
Rest assured we're not satisfied with just achieving our revised forecast.
Our management team continues to look for opportunities to improve our execution, including reducing our overhead overall headcount from recent peak levels to improve efficiencies and remaining tugs.
Well I would like to also note that based on our current forecast that schedule delivery dates for the mine and Tim tugs.
We would be entitled to early in the Liberty incentives. If these delivery dates are achieved.
We have not reflected these potential incentives in our estimates.
The other projects in our shipyard division that experienced forecast cost increase was on ice breaker best sooner facilities.
As communicated last quarter. The project was impacted by deficient subcontracted production engineering that resulted in construction labor rework and scheduled extensions.
This extension on schedule resulted in launching the vessel during a period in which the water levels within the navigational can now we're at a lower levels.
Consequently, we have to add additional buoyancy via airbags and incur additional third party third party costs.
Safely launch the vessels.
Further although the project is scheduled for completion the fourth quarter. This year, we required to deliver the best when Canada. So we cannot deliver the best into the first quarter 2020 due to enter due to winter Seaway restrictions.
Thus concurrent additional anticipated cost associated with with the did like.
We'd like to note that this vessel was the deepest draft best we had within our backlogs, we do not anticipate similar launched impacts for any other projects in backlog.
Further the remaining vessels in our home with backlog for deliberate at dockside and accordingly, the risk associated with delivery at other locations is minimized.
Although one clearly disappointed with the charges, especially with these projects the impacts or the result of specific items and we do not anticipate similar impacts one are mainly the remainder of our backlog.
Specifically, 70% about total backlog and over 80% about shipyard backlog is related to the construction of our Threed research vessels and three maybe vessels.
These vessels under construction in a homerun facilities and we are focused on the production engineering risk that affected the ice breaker vessel.
We'd like to point out that the primary reason for the delayed ramp up to these three research vessel projects was a collective decision between us and the customer to spend more time on production engineering to provide assurance that all factors or corporate isn't checked broader production drones being released to the field.
As part of this decision to customer extended the schedules for the projects to account for the engineering delays.
As it relates to the construction of the three Navy vessels, you will recall that the construction do first vessel was impacted by a partial stop work order.
Due to a competitor's challenge at the war.
We received a favorable ruling on this matter and proceeded with construction of the vessels. The important thing to note. However is that during the partial stop work order, we were still allow to progress with production engineering and procurement and the schedules were readjusted after Porsche stop work order was cancelled.
In addition, although resources and labor productivity are always their risk in our business. Please note we have not encountered the same labor challenges in Homo that we were experiencing now Jennings facility.
Further we have customers for these projects that were actively involved throughout all phases of the projects.
Additionally, the proximity of our home location to our other operations enables us to high to have the right resources focused on these very important projects.
We understand the need to execute the projects on schedule and within budget.
Moving onto our service Division, we currently support experiencing more competitive maintenance related PNM work less fabricated products and services work associated with offshore subsea tie backs.
This has resulted in lower margins as subsea tieback services and smaller fabricated products have historically provided our margin opportunities.
We expect a similar mix of work for the fourth quarter 2019, but expect to ship backs more offshore tie backs and fabricated products as we move into 2020.
In addition to the impacts of our lower margin backlog mix for the quarter. The major contributor to loss for the quarter Bar Service Division was associated with the project for a sub sea pipeline structure that will be placed in an extremely corrosive environment.
Do this corrosive nature of the chemicals and products that will flow through the pipeline. The wells for the project were subject to stringent willing procedures and specifications to ensure the wells goes up under these conditions.
The procedure, we anticipated would be used had been used on other subsea structures that had similar but different requirements, which we believed would meet our customers criterion.
As part of our quality processing all projects in the plan review the bid we included cost perform sample wells than had been tested.
Our initial wells passed all requirements and we proceeded with fabrication activities.
However, our initial wells in the structure itself did not pass required to a full investigation as to the root cause of the problem and delay in the project.
As Tom as of the essence, we could not wait for another well tested we performed and determined that the best solution was to invest in existing procedure that required significant and costly third party services and support to meet the customers' requirements.
Had we not implemented this revised plan production would have been further delayed which have would have resulted in additional scheduled lane associated liquidated damages.
With respect to our fabrication division, we continue to make progress on this construction of projects in our backlog.
Rationalize our costs and improve utilization want facilities.
Further we continue to focus our business development efforts on petrochemical industrial fabrication opportunities.
This market continues to be competitive and we are very focused on a risk versus reward equation as we evaluated pursue such opportunities.
Unfortunately, this competitive landscape, our risk evaluation and the delay in talking to several large projects has not resulted in large new project awards.
However, our bidding activity continues at a high level and the value of identified project opportunities that are targeted for award by the owners and contractors through the end of 2020 and into 2021 is approaching $800 million.
Clearly, we will not be successful all these proceeds and the projects may not be awarded the timeframe communicated or at all.
However, this new award pipeline is an indication of the size and market an opportunity baseball fabrication division.
With respect to our pending litigation mediation occurred during the third quarter far previously completed jacket change order dispute.
However, it did not result in any agreement amongst the parties and accordingly, the dispute continues to be hit at the trial in January 20 Twond.
As it relates to our MPSV dispute in May the court denied the customers motion to obtain possession of the vessels.
However, during the quarter the customer filed a second motion for summary judgment re urgent its previously denied request to obtain possession the vessels a.
Hearing on the customers motion to schedule is currently scheduled for today.
With that said, we continue to retain possession of the vessels as we work through legal processes.
With that I will turn the call over to west to provide additional details of results and segment breakdown Wes.
Thanks, Kirk and good morning, everyone. Let me provide some additional details on our results for the quarter.
Consolidated revenue for the third quarter 2019, with 75.8 million with a net loss of 6.8 million or diluted loss per share of 44 cents. This.
This compares to revenue for the second quarter 2019 of 80.5 million and a net loss of 5.3 million or diluted loss per share 34 cents. It's also compares to revenue for the third quarter 2018, 49.7 million and a net loss of 10.9 million or diluted loss per share of 73 cents.
Our decrease in revenue for the quarter relative to the trailing period reflects a decrease for services and fabrication divisions, primarily due to the timing of awards and the increase in revenue relative to the same period of 2018 reflects an increase in activity across all our divisions.
With respect our consolidated operating results.
The loss for the third quarter 2019 was due to charges of 3.9 million related to the previously referenced projects and our shipyard in services divisions.
And impairment of 324000, and our shipyard division for an asset held for sale that was sold last week and the partial under recovery our overhead costs, primarily associated with the under utilization of our fabrication facilities and an approximate 400000 impact from the hurricane from Hurricane Barry do the cost of hurricane preparation.
And the Hurricanes impact on our operations and personnel.
The increase in operating loss for the quarter relative to the trailing period was due to the project and hurricane Barry impacts and the asset impairment.
Offset partially by the trailing period, including charges of 2.3 million for projects in our shipyard Division.
The lower operating loss for the current quarter compared to the same period of 2018 was due to higher revenue increased recoveries of our overhead costs.
A higher margin mix far shipyard division absent the current quarter project impacts.
Lower incentive plan board of directors and legal costs and the prior period, including bad debt expense of 2.8 million for an accounts receivable reserve.
These benefits were offset partially by the current period project impacts a lower margin mix for our services division absent the project impact.
And higher professional fees and other costs related to the evaluation of strategic alternatives and other business initiatives.
Now let me provide some additional details of our quarterly results by operating segment.
For our fabrication Division revenue was 19.5 million for the quarter versus 22.4 million for the trailing period and 3.4 million for the comparable period of 2018.
Operating loss for the quarter was for 848000 compared to an operating loss of 1.2 million for the trailing period and an operating loss of 8.39 for the same period of 2018.
The decrease in revenue relative to the trailing quarter was due to lower activity on our pattern will riverboat project.
A significant increase in revenue relative to the comparable period of 2018.
Was due to progress on our riverboat vehicle ferry and jacket and deck projects, which were not under construction in the prior period.
With respect to operating results the loss for the third quarter 2019 was due to the partial under recovery of our overhead cost. However in spite of this parcel under recovery EBITDA for the current quarter was approximately breakeven.
The decrease in operating loss relative to the trailing period was due to higher recoveries of our overhead costs, a higher margin mix and lower incentive plan cost.
The lower operating loss for the current quarter compared to the same period of 2018 due to higher revenue increased recoveries of our overhead costs.
Lower cost associated with our former EGPC Division.
Lower legal costs related to customer disputes as these costs are reflected within the corporate division and the 2019 period.
And the prior period, including bad debt expense of 2.8 million for an accounts receivable reserve.
For our shipyard Division revenue was 39.4 million for the quarter versus 37.6 million for the trailing period and 24.5 million for the comparable period of 2018.
Operating loss for the quarter was 3.3 million compared to an operating loss of 3.69 for the trailing period and 2.5 million for the same period of 2018.
The slight increase in revenue relative to the trailing quarter and significant increase in revenue relative to the comparable period of 2018 was due to progress on our research vessel projects and our towing salvage and rescue ship projects.
Offset partially by lower revenue for Harvard tug and icebreaker projects.
With respect to operating results the loss for the third quarter 2019 was due to charges of 2.4 million associated with the previously referenced projects.
Parcel under recovery of our overhead costs and the previously mentioned impairment of 324000 related to an asset held for sale.
The decrease in operating loss relative to the trailing period was due to higher recoveries of our overhead cost offset partially by the impairment.
The impact the project charges was not significant between the two periods as the trailing period included comparable project impacts.
The higher operating loss for the current quarter compared to the same period of 2018 was due to the project charges offset partially by higher revenue increased recoveries of our overhead costs and a higher margin mix for the balance of our backlog.
For our services Division revenue was 17.5 million for the quarter versus 24.1 million for the trailing period and 22.6 million for the comparable period of 2018.
Operating loss for the quarter was 407000 compared to operating income of 1.7 million for 7.2% of revenue for the trailing period, and 2.5 million or 11% of revenue for the same period of 2018.
Decrease in revenue relative to both the trailing quarter and comparable period of 2018 is due to the timing of awards and materials, representing a lower percentage of revenue.
With respect to operating results the loss for the third quarter 2019 was due to charge of $1.5 million associated with the previously referenced subsea project and a 200000 impact related to hurricane Barry preparation and the hurricanes impact on the utilization of our facilities in personnel.
Operating loss for the quarter relative to income for both the trailing period and comparable period of 2018 was due in part to the project and Barry impacts and the current quarter.
Aside from these impacts operating income was lower than the trailing period due to lower revenue volume and operating income was lower than the comparable period 2018 due to a lower margin project mix for the reasons previously discussed by Kirk.
Our corporate division operating loss for the quarter was 2.3 million compared to an operating loss of 2.3 million for the trailing period and 2.5 million for the same period of 2018.
Operating loss for the quarter was consistent with the trailing period, however was lower relative to the comparable period of 2018 due to lower cost associated with supporting our former MPC division and lower incentive compensation and board of directors call.
Offset partially by higher legal fees due to changes in the classification of certain legal costs between our corporate operating segments.
And higher professional fees and other costs related to the evaluation of strategic alternatives and other business initiatives.
Now, let me provide a few comments regarding our income taxes and backlog and liquidity as of quarter end.
Consistent with previous quarters, our tax expense for all periods reflect only state income taxes as we have not recorded a federal income tax benefit for our losses.
We will however receive a cash tax benefit on future taxable income.
With respect to backlog at September 2019, our backlog totaled approximately 462 million representing a decrease of 15 million from June 2019, and an increase of 105 million from year end 2018, our quarter end backlog by operating segment was 407 million for our shipyard Division.
40 million for our fabrication division and 15 million for our services Division.
Our backlog excludes customer options on contracts for the U.S. Navy for chip exercise would increase this backlog by an additional 333 million.
With respect to our liquidity, we ended the quarter with cash and short term investments of 71.4 million a decrease of 4.6 million from June 2019, and a decrease of 7.8 million from year end 2018, the decrease in cash investments for the current quarter Masood or operating losses for the period as our working capital.
It was comparable between periods, we anticipate ongoing variability quarterly variability in our project working capital requirements, including any potential increase in working capital in the fourth quarter.
With respect to our overall liquidity at quarter end, we had 10.4 million of outstanding letters of credit and no borrowings on our credit facility, providing 29.6 million of availability for additional letters of credit for borrowings.
As a result of the aforementioned we continued to maintain a healthy liquidity position with total cash investments and availability under our credit facility of approximately 101 million that September 2019.
This current liquidity excludes potential proceeds from the show sale of machinery and equipment.
Totaling 18.5 million remained held for sale at quarter end.
As mentioned previously last week, we so we sold the dry dock that was held for sale for 600000.
Even 17.9 million remaining assets held for sale.
We have had parties inquire about these assets and express varying levels of interest. However, we have not reached in the agreements for sale continue to actually market the assets I.
Ill now turn the call over to Kirk for final comments.
Thanks, Wes as previously stated I'm disappointed with the project impacts during the quarter.
Because the 'cause such impacts or the result of specific circumstances, we do not expect additional charges on the projects going forward and realize the importance of executing our projects once schedule and within budget.
As announced yesterday afternoon. The borders completed as previously announced review of alternative strategies for the company that began in early May 2019.
After careful consideration the board determined that the interest of the company's shareholders or best served the company remains independent and the board focuses on executing the existing business plan, which includes enhancing the companys resources processes and procedures to improve competitiveness and overall project execution.
Okay, and consideration of organic and inorganic opportunities for growth.
Shelby you May now open the lines for questions.
Thanks, Keith the question and answer session will be conducted electronically.
I would like to ask a question. Please do so by pressing to Starkey funded by the digit one on your Touchtone telephone.
If you are using a speakerphone. Please make sure your mute function is turned off.
Your signal to reach our equipment. We will proceed in the order that you're signaling and we'll take as many questions as time permits.
Our first question is from Martin Malloy with Johnson Rice.
Good morning.
Hi, good morning warrant.
Oh Kirk has enjoyed working with you over the years and best of luck and future endeavors.
Thank you Marty I appreciate the support over the years as well.
I, just maybe could you talk a little bit about how you expect.
Next year to ramp up.
As.
The work next year ramp up.
On the research vessels in the Navy vessels and.
Maybe kind of how we should expect to progress through the year.
Yeah. Marty this is west we do expect them to just sequentially increased.
By the time, we get into the fourth quarter of next year, we would expect that the volume of activity flowing through the shipyard.
Well essentially take us to not what I'd call full capacity, but.
Optimal capacity so from a from an absorption perspective fully absorbed in our cost and really hitting on all cylinders that went from a from a.
Volume perspective.
Okay.
And.
Firms of potential.
Organic and inorganic.
Gross.
Do you spoke about can you expand on that at all in terms of.
Types of businesses or types of work that you might be looking for.
Yeah, Marty I don't know that we're in a position to comment on that quite yet, but obviously, we're not going to.
Look at anything that's outside of our core wheel House I think.
Obviously, we need a phone focus first and foremost on on getting profitable.
We're not focused on the topline we're focused on at this point execution and and generating positive operating cash flow, but to the extent, we see opportunities to to step on that what we're doing.
And they make sense, we would look at other opportunities, but it's going to be within the realm of either services business.
From a from a likely perspective, because that's where we see opportunities for growth that we can't necessarily do organically.
Beyond that.
We'll have to see what's out there, but nothing nothing on the horizon.
Great. Thank you.
Hi, good morning.
Again, if you'd like to ask a question. Please press star one we'll take our next question from JP Gagan with global value investment Corp.
Hey, good morning, gentlemen, thank you for the detail on today's call.
Can you quantify the early delivery incentives on the harbor type projects and how you can achieve fees without experiencing further complications on the project.
Yes, it is JP JP I'll answer it this way based on our current.
Forecasted completion dates we would be contractually entitled to incentives.
That number is somewhere in the neighborhood of three to 500000, depending on which which dates we hit and our current forecast as forecasted to be ended the quarter supports that schedule.
Okay.
That I had additional key.
Is that three to 500000 per vessel or in aggregate.
In aggregate.
Okay.
That does so we would.
You wouldn't have to spend I will tell you. This he obviously we have to execute but we don't have to so we won't have to spend anything incrementally to chase those incentives, we just need to hit our forecast as they're currently as as we're currently expecting as at the end of the quarter.
Turning those incentives and hit those delivery dates.
Okay.
What additional detail can you provide about your strategic review process and specifically as it pertains to how the board of directors evaluated your cash balance and how that might be utilized.
Well I'll answer I guess two parts one is as it relates to the future. The board is planning its next strategic planning retreat to coincide with the hiring of <unk> next CEO , where the board will will spend more time reviewing our strategic plans.
As it relates to your other question, which I think essentially is focused on.
An optimal capital allocation, presumably that's where you were going to that question.
One thing to consider clear we are focused on on that on capital allocation and what to do with the cash, but but one thing I would like to point out that there is an intangible element.
And is actually ultimately tangible and having a strong balance sheet and a strong liquidity.
Obviously, we've had losses over the last several quarters in recent years and with that I'm, having a strong balance sheet is very important to our customers as we chase new work and it's also very important to our our surety providers and to our bank. So there's an element of that that that plays into.
Why we are where we are in terms of wanting to maintain that strong balance sheet, but it is something that will continue continue to look at in the board will continue to evaluate.
As it evaluates our overall strategy.
Great. Thank you very tight.
Well take our next question from John Deysher with Pinnacle.
Good morning, everyone.
Hi, John .
It seems like one of the.
Continuing issues is the use of subcontractors both on the production side engineering side, and I realize labor as a problem but.
So where are we at this point in time, where do we actually have sub contractors working for a few highlights some of the.
Or acquire or you're using payroll employees, but where at this point in time do we actually have subcontractors doing work for us.
So this is Kirk.
Primarily in our Jennings facilities.
As you can imagine the pressure in that area that region with all the petrochemical explosion that has happened down there.
In the labor has become very difficult for us to find and so so consequently, we have to go and look for contract labor.
And we had gotten to the point within our Jennings facilities, where the contract labor percentages.
Was nearing near 60, 570% of Labor Force.
As we said we think we're over to peak aspect to that we've had a reduction in workforce and legends facilities, primarily with our contractors.
Contract Labor now represents somewhere is around 40% of the total number of employees, obviously that numbers coming down and again as we said home not only affected us for the subcontractors in that area as well, which.
Related to our painting subcontractors as long as well as our Kenai contractor. So the reason on itself has become very competitive.
In a lot of money in these plants for these guys and so consequently that we had to.
Resort to contract labor as opposed to just pull in labor from our homerun facilities, which as you know has sufficient work there.
We are you also this is west where you also asking about our subcontracted scopes of work as well.
Oh, yes.
As a follow on to that Kirk event, if I might.
As you think about the production engineering challenges that we've had one of the areas, we're still going to need to subcontract.
Portions of that scopes of work on our ship on our ship side. That's just the nature of the business, but one of the areas. We're focused on in terms of minimizing that risk is taking on more responsibility in house in terms of responsibility and oversight overseeing the execution expediting the execution of the engineering to make sure.
It's moving along the way it should so we're for lack of a better term beefing up our our resources to oversee the engineering element and then on the subcontractor side further to Kirks point, we're not seeing the same subcontractor issues in home or that we've been seen recently in Jennings, because they're not suffering from the same or.
Team plagued by the same labor issues that we saw in Jennings.
Okay. So.
Telling us that subsurface sub contracting issues are behind us and will bite us going forward in future quarters.
Well, we certainly hope not shown as we said our our our commitments to the subcontractors.
I have been completed on the ninth and 10th tug.
Again now we're in the process of trying to manage the subcontract.
Flow in the facilities, but certainly we can't can't control, what our current labor force decides to stick with us or not and that's really with varies between the contracting subcontractor labor portion of it but.
I do believe that we do have a handle on it at this point in time as we said two major areas. We had issues with one was painting subcontractors.
We have taken that scope on ourselves as websites that and that.
Subcontractor had an adjustment for life and Tim.
As he was experiencing the same issues we were so.
Yeah, I would hope that new at this point, especially now that we're getting close to delivering tug number six and seven will be shortly thereafter.
I'd like to think that those those issues are behind us, but again, we're always subject to the market itself.
The petrochemical industry decides to do something in terms of raising.
Rates or whatnot, and we could have the same issues going forward, but right now we don't anticipate any issues going forward.
Okay. Okay. That's helpful.
And regarding the CEO transition.
Glad you're sticking around Kirk a two to help with that.
I was just curious.
What the timeframe as I heard something about board meetings. This strategic review.
How soon do you expect or what's the timetable.
Oh for having a new CEO at this point.
I don't know that west and I can can give you a definitive answer at this point on the board is engage has engaged.
It's from and so on.
We don't have any specific information as is released.
Okay.
Good good luck to occur.
Thank you. Thank you.
Well take our next question from Daniel Zhang with Boenning and Scattergood.
Okay. Good morning.
I would like to.
So back to the.
The issue of cash.
And right now if we do not on a per share basis.
It's roughly $5 a share.
And that's where the market is.
Valuing the company.
And slate the market is saying that.
Our valuing our business.
Zero.
I would hope that that.
Or not the case I'm confident it's not the case.
Why wouldnt, we as part of that strategic review and said right. It's time.
Two.
Slide seven of the cash we'll buy back stock odd when it.
In offered to us.
Slide four we kept the company or not.
That's a good that's a good question Andy as you can imagine that's something that is being considered has been considered will continue to be considered but.
Kind of further to something I commented on earlier one of the very important.
Elements as we think about our cash and overall capital allocation is the need to have a strong balance sheet and again with the with the recent period of losses.
Having that balance sheets very important to our customers, it's very important to winning new work.
And it's it's important from a from a security support perspective, and our and our banks as well so.
All that comes into play as we think about on what to do from a stock buyback perspective, but it's something that's clearly be being evaluated.
Thank you.
Again to ask a question please press star one.
Well take our next question from Evan lacks with blacks asset management.
Hi, Good morning, I, just wanted to ask regarding the backlog we expect.
Now in Q4, if we execute start hitting EBITDA positive or if that's something that is more a 2020 sorry.
Evan.
I'll answer it this way I think.
It's likely.
Into 2020, having said that.
During the third quarter, obviously absent the project impacts and some of the other noise.
We would've been approximately breakeven EBITDA this quarter.
That said I think we'll have a few headwinds in the fourth quarter relative to third quarter. The fab business. You'll you'll note. We have noticed that revenue was down just a little bit relative to the trailing period, that's the American count as project coming down.
Prior to some of the other backlog really ramping up so whether or not we get we achieved breakeven EBITDA again in the fourth quarter for fab will be largely on dependent upon that ramp up.
I think we'll still have incurred so mentioned that will still potentially have some softness in our margins on this on services side due to the mix issue that we talked about.
I do think we'll have some higher legal costs in the fourth quarter.
Given this.
Change order I mean change order dispute that is I'm going to go to trial in January so that will impact us as well and then from a shipyard perspective, our utilizations getting close to being there. So so that that shouldn't be a problem, but with that said could we'd be at breakeven to get into fourth quarter. The answer the short answer that is yes, but.
I would look more into the early part of 2020.
Understood and then in terms of those I think you mentioned Kirk $800 million bids outstanding that we have.
On any of those have we been selected pending UNEV I'd or are we still competing with other folks on a lot of those what percentage of those have we been down select and maybe the finalists just curious for a little more color.
Yeah.
But I don't know the processes quite where they select us in than we.
Try to move forward certainly if they select us than we will put some type of announcement out will X with some type of letter of intent or something like that but.
The 800 million was to provide a little color in terms of what we have identified.
And bid on in terms of projects again, we're not going to get all that work, but it is an effort to show the investors. The pipeline of potential is now remember. This doesn't include any type of small work that we typically or awarded.
It may not include other projects associated with wind or other projects that may come along as we continue to move forward with the a little bit of upturn in the Gulf of Mexico. So the primarily these are petrochemical type projects that we have been identified on you know again I think that when you look at some larger projects. It's not a is now.
Got to the point, where it's 10 bidders on this thing I think the use of these companies are going out for.
Competitive bidding from three or four different vendors and so I'll tell you know I'm hopeful that we've got good relations with these guys. We will continue to have relations with them and we hopefully at some point will be the preferred fabricator, but no again, we cautioned everyone. We're not just going to get the first project. It comes along.
We don't want to get a project that Scott you know no margin too much risk and we end up in a position where we're trying to explain to the market. While we took on these projects. So we were cautious in that respect we realized we need work in facilities, but at the same time. If there is sufficient work in our opinion to make sure that we get the right project.
Fits the needs of this company.
Yeah, I couldn't agree more I mean, I'm sick and tired. These write down so it'd be nice to see us when we do when work actually the rewarded and start making money on it.
Hopefully 2020 here that yeah, alright, thanks, guys.
Thanks.
This concludes today's question and answer session. At this time I would like to turn the conference back over to management for any additional comments.
During the quarter I announced my intention to retire effective December 30, Onest 2019, I would like to take this opportunity to thank all the Gulf Island employees, the board of directors and our shareholders. We support over the last 23 years.
I want you to know that I'm committed to assisting the board and the company to ensure a seamless transition for the next CEO .
Thank you for joining us this morning your interest in Gulf Island.
This concludes the Gulf Island fabrication <unk> third quarter 2019 earnings Conference call you may now disconnect.
Yes.
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