Gulf Island Fabrication, Inc.

Deborah Knoblock – IR Coordinator Robin Seibert – CFO, VP Finance & Treasurer Kerry Chauvin – Chairman and CEO

Jim Rollyson – Raymond James Herb Buchbinder – Wachovia Joe Agular – Johnson Rice Katherine Schmidt [ph] – Cecille Mercurier [ph]

I would like to welcome everyone to Gulf Island Fabrication's 2008 fourth quarter teleconference. Please keep in mind that any statements made in this conference that are not statements of historical fact are considered forward-looking statements.

These statements are subject to factors that could cause actual results to differ materially from the results predicted in the forward-looking statements. These factors include the timing and extent of changes in the prices of crude oil and natural gas, the timing of new projects and the company's ability to obtain them, and other details that are described under Cautionary Statements Concerning Forward-looking Information, and elsewhere in the company's 10-K filed March 3, 2008.

The 10-K was included as part of the company's 2007 Annual Report filed with the Securities and Exchange Commission earlier this year. The company assumes no obligation to update these forward-looking statements.

Thank you, Deborah. I would like to review Gulf Island's press release issued for the fourth quarter of 2008.

The press release consists of two pages. Page one is tax, and page two is an income statement.

I'd like to review page two, which is the income statement, first. The following are the results of operations for the three months ended December 31, 2008 compared to the three months ended December 31, 2007.

Revenue was $86.2 million compared to $100.9 million. The cost of revenue was $83.5 million compared to $84.7 million.

Gross margin was $2.7 million, or 3.1% of revenue, compared to $16.2 million, or 16.0% of revenue. As mentioned in previous quarters, certain projects include cost for additions or improvements to our infrastructure that are necessary to fabricate or complete a project.

Since these additions or improvement provide future benefit to us, the cost to build these projects is capitalized. Thus costs removed from project costs and subsequently capitalized directly increases the estimated profit on the project.

Amounts included in project revenue that were capitalized are $63,000 compared to $3.5 million, thus more beneficial to the quarter-ended December 31, 2007. The amounts included in project revenue mentioned above were capitalized net of depreciation expense.

General and administrative expenses were $2.1 million, or 2.4% of revenue, compared to $2.5 million, or 2.5% of revenue. Operating income was $621,000 compared to $13.7 million.

Net interest income was $16,000 compared to $74,000. Income before taxes was $637,000 compared to $13.8 million.

Income tax benefit was $237,000 compared to an expense of $4.9 million. The income tax rates were 37.2% benefit compared to 35.8% expense.

The fourth quarter adjustment for the tax rate was related to the extension and retroactive application of the federal work opportunity tax credits. Basic earnings per share were $0.06 compared to $0.62.

Diluted earnings per share were $0.06 compared to $0.62. Weighted average shares outstanding were 14.3 million shares compared to 14.2 million shares.

Adjusted weighted average shares outstanding were 14.3 million shares compared to 14.3 million shares. Depreciation expense was $4.4 million compared to depreciation expense of $3.7 million.

We declared and paid cash dividends of $0.10 per share for both quarters ended December 31, 2008 and 2007. The following are the results of operations for the 12 months ended December 31, 2008 compared to December 31, 2007.

Revenue was $420.5 million compared to $472.7 million. The cost of revenue was $368.2 million compared to $415.9 million.

Gross margin was $52.3 million, or 12.4% of revenue, compared to $56.8 million, or 12.0% of revenue. Capitalized costs net of depreciation included in project revenue was $5.3 million compared to $8.3 million, again providing a larger benefit for the 12 months ended December 31, 2007.

General and administrative expenses were at $9.5 million, or 2.2% of revenue, compared to $10.4 million, or 2.2% of revenue. Operating income was $42.8 million compared to $46.5 million.

Net interest income was $172,000 compared to $384,000. Interest rates were considerably lower, accompanied with lower cash balances available for investing.

Other income/expense were losses of $97,000 and $10,000 respectively. Losses for both periods were for the sale of miscellaneous equipment.

Income before taxes was $42.9 million compared to $46.9 million. Income tax expense was $13.9 million compared to $15.7 million.

The income tax rates were 32.4% compared to 33.5%. Net income was $29.0 million compared to $31.2 million.

Basic earnings per share were $2.04 compared to $2.20. Diluted earnings per share were $2.03 compared to $2.18.

Weighted average shares outstanding were 14.3 million shares compared to 14.2 million shares. Adjusted weighted average shares outstanding were 14.3 million shares compared to 14.3 million shares.

Depreciation expense was $17.5 million compared to depreciation and amortization expense of $14.1 million. We declared and paid cash dividends of $0.40 per share for the 12 months ended December 31, 2008 and 2007.

Please refer to page one of the press release for review. We had a backlog of $360.2 million and a label backlog of 3.9 million man-hours remaining in the work.

Included in our backlog is approximately $150.4 million and 1.6 million man-hours remaining on the MinDOC II project, in which our customer has announced will be postponed and be utilized at another of their locations sometime in the future. The following represents selected balance sheet information for December 31, 2008 compared to December 31, 2007.

Cash and short-term investments were $13.8 million compared to $24.6 million. Total current assets were $136.4 million compared to $135.7 million.

Property, plant and equipment was $204.7 million compared to $188.8 million. Total assets were $350.9 million compared to $325.2 million.

Total current liabilities were $74.9 million compared to $78.4 million. Long-term debt was zero for both periods.

Shareholders equity was $254.2 million compared to $228.9 million. Total liabilities and shareholders’ equity was $350.9 million compared to $325.2 million.

Other financial information for the three months ended December 31, 2008 compared to December 31, 2007 consists of Past due cost was 44.1% of revenue compared to 38.7% of revenue. Man-hours worked were 903,000 compared to 896,000.

Deepwater revenue represented 67% of revenue compared to 79% of revenue. Foreign revenue represented 18% of revenue compared to 25% of revenue.

Other financial information for the 12 months ended December 31, 2008 compared to December 31, 2007 consist of Past through cost was 41.2% of revenue compared to 52.3% of revenue. Man-hours worked were 3.8 million compared to 3.6 million.

Deepwater revenue represented 67% of revenue compared to 78% of revenue. And foreign revenue represented 20% of revenue compared to 24% of revenue.

Other financial information for December 31, 2008 compared to December 31, 2007 consists of Again, a revenue backlog was $360.2 million compared to $330.4 million. Remaining man-hours to work was 3.9 million compared to 3.7 million.

Revenue backlog for deepwater was $200.8 million or 55.8% compared to $185.4 million or 56.1%. Revenue for foreign locations was $1.5 million or less than 1% compared to $62.6 million or 18.9%.

Other backlog at December 31, 2008, we expect to recognize revenues of approximately $153.9 million during 2009 and approximately $206.3 million in 2010 thereafter. Out of the $150.4 million associated with MinDOC II, we projected at the time, 77% would be related to 2010 and the remaining would be in 2011.

We had approximately 1,835 employees and 145 contract employees compared to 1,830 employees and 530 contract employees. CapEx for 2009 is estimated to be $22.5 million, which includes the purchase of equipment and additional yard and facility infrastructure improvements.

Included in the 2009 capital budget is $10.1 million for the remaining cost to complete the dry dock, and to be incurred as progress payments due in all quarters of 2009, we expect the completion of the dry dock in the fourth quarter of 2009. Also included is $1.3 million to complete the purchase and installation of equipment for a panel line system, which is expected to be completed in the second quarter of 2009.

I would now like to open the call to our analysts.

Jim, this is Robin. In the fourth quarter, we had a couple of things that probably caused the most strain on our margins.

We loaded out the Tombua Landana project, and we have some cost that was incurred that we're currently discussing with our customer. We're negotiating to trying to get reimbursement for that.

We don't want to really give out any numbers on that because we are still negotiating with them.

Okay. Jim, what we're doing is we’re moving up some of the ground water vessels, actually enhancing the schedule on those particular vessels, and we're dealing with our clients on that to move them up.

Instead of delivering in 2010 and possibly 2011, we're moving some of the hulls up to fill in some of those gaps that we may have because of the MinDOC II. Granted, we probably will not be able to fill in all those gaps, but we are bidding additional marine-type work or shipyard work, which seems to be a little more readily available than the fabrication work.

Yes, we delivered our first boat this week, and it's actually working today, hauling some barges around, even though the christening will be formally sometimes in the end of March or April. And the margins were right in line with what we anticipated.

Our panel line, which we have spent about $6 million on, is operational now and should be producing panels for us on these future boats, which should help our productivity and help our profitability on these jobs. It also has given us the opportunity to bid other marine work or panels that will be used in other shipyards that don't have panel lines, where we could sub-fabricate for them, as well as help on our bidding on future work as far as the marine segment of our business.

Okay, I didn't see that. So the dividend has been suspended.

All right.

Okay. Okay, thanks a lot.

Okay.

Hi, good morning, Kerry and Robin.

Hi, Joe.

How are you all doing?

Good.