The Shaw Group Announces Financial Results for Third Quarter Fiscal 2006
The Shaw Group Inc. (NYSE: SGR):
-- Quarterly revenues increase to $1.2 billion; 38% over prior
year quarter
-- Record $8.1 billion backlog reflects continued strong end
markets
-- Shaw to restate second quarter results to reduce net income by
$3.5 million, or $0.04 per diluted share, as a result of two
accounting errors
The Shaw Group Inc. (NYSE: SGR) today announced financial results
for the three months ended May 31, 2006. Net loss for the three months
was $16.7 million, or $0.21 per diluted share. In comparison, for the
three months ended May 31, 2005, Shaw reported a net loss of $21.7
million, or $0.31 per diluted share. Revenues were $1,226.1 million
compared to $891.0 million in the prior year period. The third quarter
2006 results include a non-cash charge of approximately $48.2 million,
$29.2 million after taxes, or approximately $0.37 per diluted share,
for the previously announced unfavorable ruling received in the AES
Wolf Hollow project litigation. Excluding the charge, net income would
have been $12.5 million, or $0.16 per diluted share.
Shaw's backlog totaled a record $8.1 billion as of May 31, 2006,
an increase of $1.4 billion from August 31, 2005. Approximately $3.8
billion, or 47%, of the backlog is expected to be converted during the
next 12 months. Over $3.3 billion, or 41%, of the backlog is comprised
of projects for fossil fuel, nuclear and other power generating
plants, and over $2.0 billion, or 25%, of the backlog is made up of
the chemical industry projects. Approximately $2.7 billion, or 33%, of
the backlog is in the environmental and infrastructure sector,
primarily contracts with federal and other governmental agencies,
including emergency response.
J.M. Bernhard, Jr., Chairman and Chief Executive Officer of The
Shaw Group Inc., said, "Our financial results for the third quarter of
fiscal 2006 reflected higher activity compared to the prior year in
each of our business units. However, revenues from emergency response
and disaster relief work were less than anticipated, as certain task
orders totaling in excess of $100 million were cancelled. Our
operating results in the Energy & Chemicals unit were lower than
expected primarily because of adjustments to our cost estimates during
the completion and performance testing phase on a domestic EPC power
plant project which, along with the unfavorable ruling in the AES Wolf
Hollow claim, offset our otherwise overall good results." Mr. Bernhard
continued, "We are pleased to report that in a positive ruling
recently received in the Harquahala project arbitration, we were
awarded $37 million by the arbitration panel. We expect to receive the
funds in the fourth quarter."
Mr. Bernhard concluded, "Lastly, this quarter's record backlog of
$8.1 billion was our fourth consecutive record and reflects the strong
market conditions we are experiencing across all our business lines,
especially the energy and chemicals markets. We expect our revenues to
continue to be strong as revenues from these new major projects begin
to be reflected in our operations. We have begun field work on several
of these new major projects including two coal-fired power plants,
several large FGD scrubber projects and several chemicals projects in
the Middle East."
During the preparation of the financial statements for the third
quarter 2006, management concluded that two errors occurred in the
preparation of Shaw's second quarter financial statements which
require restatement of the second quarter results. One error resulted
from a clerical error in the computation of the amount of revenue to
recognize on a contract accounted for under the
percentage-of-completion method. The other error resulted from the
misapplication of generally accepted accounting principles in
accounting for minority interest in a variable interest entity under
FIN 46. The effect of the errors was that net income for the second
quarter was overstated by $3.5 million or $0.04 per diluted share. Net
income for the second quarter will be restated to $21.8 million or
$0.27 per diluted share from the previously reported $25.3 million, or
$0.31 per diluted share, a reduction in net income of 14%. Shaw will
file an amended quarterly report on Form 10-Q/A to reflect correction
of the errors. Until such filing, the previously filed financial
statements for the second quarter of 2006 should not be relied upon.
If necessary, Shaw will request an extension of the filing date for
its third quarter Form 10Q in order to make the restatement and file
its amended second quarter report.
Mr. Robert L. Belk, Executive Vice President and Chief Financial
Officer, said, "Management has determined that the errors leading to
the restatement are the result of material weaknesses in our internal
controls over financial reporting. We have initiated an assessment of
our internal controls to determine the specific corrective actions to
be taken. We believe that we will be able to take appropriate remedial
actions in the near term to correct the internal control weaknesses."
The Shaw Group Inc. is a leading global provider of technology,
engineering, procurement, construction, maintenance, fabrication,
manufacturing, consulting, remediation, and facilities management
services for government and private sector clients in the energy,
chemical, environmental, infrastructure and emergency response
markets. Headquartered in Baton Rouge, Louisiana, with over $3 billion
in annual revenues, Shaw employs approximately 22,000 people at its
offices and operations in North America, South America, Europe, the
Middle East and the Asia-Pacific region. For further information,
please visit Shaw's website at www.shawgrp.com.
Forward-Looking Statements - The Private Securities Litigation
Reform Act of 1995 provides a "safe harbor" for certain
forward-looking statements. The statements contained herein that are
not historical facts (including without limitation statements to the
effect that the Company or its management "believes," "expects,"
"anticipates," "plans," or other similar expressions) and statements
related to revenues, earnings, backlog, or other financial information
or results are forward-looking statements based on the Company's
current expectations and beliefs concerning future developments and
their potential effects on the Company. There can be no assurance that
future developments affecting the Company will be those anticipated by
the Company. These forward-looking statements involve significant
risks and uncertainties (some of which are beyond our control) and
assumptions and are subject to change based upon various factors.
Should one or more of such risks or uncertainties materialize, or
should any of our assumptions prove incorrect, actual results may vary
in material respects from those projected in the forward-looking
statements. The Company undertakes no obligation to publicly update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise. A description of some of the
risks and uncertainties that could cause actual results to differ
materially from such forward-looking statements can be found in the
Company's reports and registration statements filed with the
Securities and Exchange Commission, including its Form 10-K and Form
10-Q reports, and on the Company's website under the heading
"Forward-Looking Statements". These documents are also available from
the Securities and Exchange Commission or from the Investor Relations
department of Shaw. For more information on the company and
announcements it makes from time to time on a regional basis visit our
website at www.shawgrp.com.
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REVENUE AND BACKLOG BY INDUSTRY AND GEOGRAPHY
(Third Quarter Ended May 31, 2006)
Revenue by Industry
---------------------
(In Millions) Percentage
------------- -------------
Environmental & Infrastructure $ 513.4 42 %
Energy 372.9 30
Chemical 304.4 25
Other Industries 35.4 3
------------- -------------
Total $ 1,226.1 100 %
============= =============
Revenue by Geography
----------------------
(In Millions) Percentage
------------- -------------
United States $ 1,061.3 86 %
Asia/Pacific Rim 45.5 4
Middle East 95.7 8
Canada 3.8 -
Europe 11.2 1
South America & Mexico 6.4 1
Other 2.2 -
------------- -------------
Total $ 1,226.1 100 %
============= =============
Backlog by Industry
---------------------
(In Millions) Percentage
------------- -------------
Environmental & Infrastructure $ 2,660.7 33 %
Energy
Nuclear Power 969.0 12
Fossil Fuel 2,241.7 28
Other Power 127.7 1
Chemical 2,000.6 25
Other Industries 55.3 1
------------- -------------
Total $ 8,055.0 100 %
============= =============
Backlog by Geography
----------------------
(In Millions) Percentage
------------- -------------
Domestic $ 6,182.0 77 %
International 1,873.0 23
------------- -------------
Total $ 8,055.0 100 %
============= =============
THE SHAW GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended Nine Months Ended
May 31, May 31,
----------------------- -----------------------
2006 2005 2006 2005
----------- ----------- ----------- -----------
Revenues $1,226,114 $ 891,017 $3,606,732 $2,447,174
Cost of revenues 1,193,231 812,150 3,368,335 2,227,619
----------- ----------- ----------- -----------
Gross profit 32,883 78,867 238,397 219,555
General and
administrative
expenses 52,320 49,575 162,252 140,559
----------- ----------- ----------- -----------
Operating income (loss) (19,437) 29,292 76,145 78,996
Interest expense (4,897) (7,338) (13,261) (26,683)
Loss on retirement of
debt - (47,772) - (47,772)
Interest income 794 1,338 4,273 3,789
Foreign currency
transaction gain
(loss), net (1,735) 2,572 (918) 414
Other income
(expense), net 589 476 (291) 1,293
----------- ----------- ----------- -----------
(5,249) (50,724) (10,197) (68,959)
Income (loss) before
income taxes, minority
interest, earnings
(loss) from
unconsolidated
entities and income
(loss) from and
impairment of
discontinued
operations (24,686) (21,432) 65,948 10,037
Provision (benefit) for
income taxes (11,805) (813) 21,367 10,102
----------- ----------- ----------- -----------
Income (loss) before
minority interest,
earnings (loss) from
unconsolidated
entities and income
(loss) from and
impairment of
discontinued
operations (12,881) (20,619) 44,581 (65)
Minority interest, net
of income taxes (3,435) (1,190) (7,248) (2,727)
Earnings (loss) from
unconsolidated
entities, net of
income taxes (463) 616 674 2,743
----------- ----------- ----------- -----------
Income (loss) from
continuing operations (16,779) (21,193) 38,007 (49)
Income (loss) from and
impairment of
discontinued
operations, net of
income taxes 106 (556) (129) (1,439)
----------- ----------- ----------- -----------
Net income (loss) $ (16,673) $ (21,749) $ 37,878 $ (1,488)
=========== =========== =========== ===========
Net income (loss) per
common share:
Basic:
Income (loss) from
continuing
operations $ (0.21) $ (0.30) $ 0.48 $ -
Loss from and
impairment of
discontinued
operations, net of
income taxes - (0.01) - (0.02)
----------- ----------- ----------- -----------
Net income (loss) $ (0.21) $ (0.31) $ 0.48 $ (0.02)
=========== =========== =========== ===========
Diluted:
Income (loss) from
continuing
operations $ (0.21) $ (0.30) $ 0.47 $ -
Loss from and
impairment of
discontinued
operations, net of
income taxes - (0.01) - (0.02)
----------- ----------- ----------- -----------
Net income (loss) $ (0.21) $ (0.31) $ 0.47 $ (0.02)
=========== =========== =========== ===========
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