UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 1998
----------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0-22992
The Shaw Group Inc.
(Exact name of registrant as specified in its charter)
Louisiana 72-1106167
(State of Incorporation) (I.R.S. Employer Identification Number)
11100 Mead Road, 2nd Floor, Baton Rouge, Louisiana 70816
(Address of principal executive offices) (Zip Code)
(504) 296-1140
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
The number of shares outstanding of each of the issuer's classes of common stock
as of the latest practicable date, is as follows:
Common stock, no par value, 12,521,143 shares outstanding as
of April 7, 1998.
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FORM 10-Q
TABLE OF CONTENTS
Part I - Financial Information
Item 1. - Financial Statements
Consolidated Balance Sheets - August 31, 1997
and February 28, 1998 3 - 4
Consolidated Statements of Income - For the Three
Months and Six Months Ended February 28, 1997 and 1998 5
Consolidated Statements of Cash Flows - For the Six Months
Ended February 28, 1998 6 - 7
Notes to Consolidated Financial Statements 8 - 13
Item 2. - Management's Discussion and Analysis of Financial 14 - 18
Condition and Results of Operations
Part II - Other Information
Item 4. - Submission of Matters to a Vote of Security Holders 19
Item 6. - Exhibits and Reports on Form 8-K 19 - 20
Signature Page 21
Exhibit Index
2
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<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
THE SHAW GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
ASSETS
<CAPTION>
(UNAUDITED) (UNAUDITED)
August 31, February 28,
1997 1998
----------------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,358 $ 3,987
Accounts receivable, net 85,980 144,748
Receivables from unconsolidated entity 1,453 1,107
Inventories 76,304 91,226
Prepaid expenses 2,352 5,550
Deferred income taxes 2,855 2,818
-------------- ------------
Total current assets 173,302 249,436
Investment in unconsolidated entity 4,005 4,129
Property and equipment:
Transportation equipment 4,984 5,542
Furniture and fixtures 8,456 9,648
Machinery and equipment 48,040 58,899
Buildings and improvements 22,792 28,962
Assets acquired under capital leases 318 215
Land 3,973 5,113
-------------- ----------
88,563 108,379
Less: Accumulated depreciation (including
amortization of assets acquired under capital leases) (18,236) (22,311)
--------- ---------
70,327 86,068
Goodwill, net of accumulated amortization of $493
at August 31, 1997 and $953 at February 28, 1998 11,100 23,644
Other assets, net 3,725 4,639
----------- ----------
$262,459 $367,916
======== ========
</TABLE>
(Continued)
The accompanying notes are an integral part of these statements.
3
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<TABLE>
THE SHAW GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
(UNAUDITED) (UNAUDITED)
August 31, February 28,
1997 1998
---------------- -------------
<S> <C> <C>
Current liabilities:
Outstanding checks in excess of bank balance $ 691 $ 10,126
Accounts payable 31,155 32,630
Accrued liabilities 8,545 21,984
Current maturities of long-term debt 6,366 7,080
Revolving lines of credit 29,146 85,292
Current portion of obligations under capital leases 26 24
Deferred revenue - prebilled 3,582 2,616
Advance billings 834 16,845
----------- ----------
Total current liabilities 80,345 176,597
Long-term debt, less current
maturities 38,933 38,747
Obligations under capital leases,
less current portion 106 34
Deferred income taxes 5,260 5,182
Shareholders' equity:
Preferred stock, no par value,
5,000,000 shares authorized; no
shares issued and outstanding --- ---
Common stock, no par value,
50,000,000 shares authorized;
19,151,309 and 19,177,809 shares issued, respectively;
12,488,393 and 12,514,893 shares outstanding, respectively 104,870 105,195
Retained earnings 39,773 49,815
Cumulative translation adjustments --- (571)
Unearned restricted stock compensation --- (255)
Treasury stock, 6,662,916 shares (6,828) (6,828)
---------- -----------
Total shareholders' equity 137,815 147,356
-------- ----------
$262,459 $367,916
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
4
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<TABLE>
THE SHAW GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
<CAPTION>
(UNAUDITED) (UNAUDITED)
Three-Months Ended Six-Months Ended
February 28, February 28,
1997 1998 1997 1998
------- ---- ------------- ----------
<S> <C> <C> <C> <C>
Income:
Sales $ 85,516 $ 137,457 $ 161,235 $ 237,199
Cost of sales 70,378 114,225 131,527 195,687
---------- --------- --------- -------
Gross profit 15,138 23,232 29,708 41,512
General and administrative expenses 9,213 13,103 17,482 23,784
----------- ---------- --------- ----------
Operating income 5,925 10,129 12,226 17,728
Interest expense (1,779) (2,309) (3,619) ( 3,943)
Other income, net 114 171 148 273
----------- ----------- -------------- --------
(1,665) (2,138) (3,471) (3,670)
--------- ---------- ---------- -------
Income before income taxes 4,260 7,991 8,755 14,058
Provision for income taxes 1,342 2,657 2,841 4,140
--------- ---------- ---------- --------
Income before earnings from
unconsolidated entity 2,918 5,334 5,914 9,918
Earnings from unconsolidated entity 670 4 820 124
----------- ------------ ----------- ----------
Net income $ 3,588 $ 5,338 $ 6,734 $ 10,042
========= ========= =========== ========
Basic earnings per common share $ .31 $ .43 $ .62 $ .80
=========== =========== ============= ===========
Diluted earnings per common share $ .30 $ .42 $ .60 $ .79
=========== =========== ============== ===========
Weighted average number of shares
outstanding - Basic 11,668 12,508 10,808 12,506
======== ======== =========== =========
Weighted average number of shares
outstanding - Diluted 11,971 12,749 11,144 12,746
======== ======== =========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
5
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<TABLE>
THE SHAW GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<CAPTION>
(UNAUDITED)
Six Months Ended
February 28,
1997 1998
------------ ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $6,734 $ 10,042
Net loss not included in reporting period (See
Note 4 to Notes to Consolidated Financial
Statements) (132) ---
Adjustments to reconcile net income
to net cash provided by (used in) operating
activities:
Depreciation and amortization 3,329 4,385
Provision for deferred income taxes 163 ---
(Earnings) from unconsolidated entity (820) (124)
Changes in assets and liabilities:
(Increase) in receivables (8,692) (39,400)
(Increase) in inventories (6,010) ( 3,421)
(Increase) decrease in prepaid expenses 28 ( 3,188)
(Increase) in other assets (418) ( 657)
(Decrease) in accounts payable (3,530) ( 8,186)
Increase (decrease) in deferred revenue - prebilled 1,565 (966)
Increase (decrease) in advance billings (2,288) 10,791
Increase (decrease) in accrued liabilities (2,640) 3,129
------------ -----------
Net cash (used in) operating activities (12,711) ( 27,595)
Cash flows from investing activities:
Investment in unconsolidated entity (1,644) ---
Investment in subsidiaries, net of cash received (10,245) (26,126)
Purchase of property and equipment (10,825) ( 5,610)
Proceeds from notes receivable 87 ---
------------- -----------
Net cash used in investing activities (22,627) (31,736)
</TABLE>
(Continued)
The accompanying notes are an integral part of these statements.
6
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<TABLE>
<CAPTION>
(UNAUDITED)
Six Months Ended
February 28,
1997 1998
---------------- ----------
<S> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in outstanding checks
in excess of bank balance (531) 7,904
Net proceeds (repayment) on revolving credit agreement (4,740) 56,178
Proceeds from issuance of debt 4,279 879
Repayment of debt and leases (8,185) (5,947)
Distribution to members of
Freeport Properties, L.C. (168) ---
Purchase of treasury stock (661) ---
Issuance of common stock 46,996 70
-------------- ------------
Net cash provided by financing activities 36,990 59,084
Effect of exchange rate changes on cash --- (124)
--------------- -----------
Net increase (decrease) in cash and cash equivalents 1,652 (371)
Cash and cash equivalents - beginning of period 2,967 4,358
-------------- ----------
Cash and cash equivalents - end of period $ 4,619 $ 3,987
============== ==========
Supplemental disclosures:
Cash payments for:
Interest $ 3,601 $ 3,998
============== ==========
Income taxes $ 3,354 $ 2,469
============== ==========
Noncash investing and financing activities:
Purchase of inventory and payment of liabilities
through the cancellation of notes receivable $ 538 $ ---
============== ===========
Investment in subsidiaries acquired through
issuance of debt $ --- $ 4,702
============== ===========
Property and equipment acquired through
issuance of debt $ --- $ 85
============== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE>
THE SHAW GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Unaudited Financial Information -
The financial information of The Shaw Group Inc. and its subsidiaries
(collectively, the Company) for the three-month and six-month periods
ended February 28, 1997 and 1998 and as of August 31, 1997 and February
28, 1998 included herein is unaudited; however, such information
reflects, in the opinion of management, all adjustments (consisting
solely of normal recurring adjustments) that are necessary to present
fairly the results of operations for such periods. Results of operations
for the interim periods are not necessarily indicative of results of
operations that will be realized for the fiscal year ending August 31,
1998.
Note 2 - Inventories -
The major components of inventory consist of the following (in
thousands):
(UNAUDITED) (UNAUDITED)
August 31, February 28,
1997 1998
----------- -----------
Finished goods $29,027 $ 31,763
Raw materials 35,257 35,868
Work in process 12,020 23,595
------- ---------
$76,304 $ 91,226
======= ========
Note 3 - Earnings Per Common Share -
Basic earnings per common share were computed by dividing net
income by the weighted average number of shares of common stock
outstanding during the periods presented in the income statements.
Diluted earnings per common share for the periods presented include
the dilution impact of the Company's stock options. The Company
adopted SFAS No. 128, "Earnings per Share," effective December 15,
1997. As a result, the Company's reported earnings per share for prior
periods were restated to conform to the requirements of SFAS 128. The
effect of this adoption on previously reported earnings per share
(EPS) data was not material.
Note 4 - Acquisitions -
Effective October 1, 1996, the Company acquired all of the
outstanding capital stock of Pipe Shields, Inc.(Pipe Shields), an
industrial pipe insulation company located in Vacaville,
8
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California, for approximately $2.5 million in cash, net of cash
received. The purchase method was used to account for the acquisition. The
excess of cost over the estimated fair value of the assets acquired
(goodwill) was approximately $2.0 million, which is being amortized on a
straight-line basis over 20 years. The operating results of Pipe Shields
have been included in the consolidated statements of income of the Company
from the effective date of the acquisition. The pro-forma effect of the
acquisition of Pipe Shields, had it occurred on September 1, 1996, is not
material to the operations of the Company.
On January 27, 1997, the Company completed the acquisition of
NAPTech, Inc., a fabricator of industrial piping systems and engineered
piping modules located in Clearfield, Utah. The Company issued 432,881
shares of its Common Stock in exchange for NAPTech, Inc. and the 335,000
square foot facility that NAPTech, Inc. had leased from a related entity,
Freeport Properties, L.C. (Freeport). The acquisition was accounted for
using the pooling-of-interests method; accordingly, the Company's
financial information for all prior periods presented herein has been
restated to include financial information of NAPTech, Inc. and Freeport,
(collectively, "NAPTech").
Because the fiscal periods of the Company and NAPTech were not the
same, NAPTech's financial statements for the 1996 fiscal year were recast
from the twelve months ended March 31, 1996 to the twelve months ended June
30, 1996. The 1997 fiscal year of NAPTech is the same as the Company's. As
a result, the following July and August, 1996 sales and losses of NAPTech
have been excluded from the statement of income for the fiscal year ended
August 31, 1997 (in thousands):
Sales $ 5,194
=========
Net losses $ (132)
=========
Effective February 1, 1997, the Company purchased all of the
outstanding capital stock of United Crafts, Inc. (UCI), an industrial
construction and maintenance company based in Baton Rouge, Louisiana, for
cash of $7.6 million, net of cash received. Acquisition costs of
approximately $192,000 were incurred by the Company. The purchase method
was used to account for the acquisition. Goodwill was approximately $4.8
million and is being amortized on a straight-line basis over 20 years. The
estimated fair value of the asssets and liabilities of UCI as of February
1, 1997 are as follows (in thousands):
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Accounts Receivable $6,040
Property and Equipment 2,992
Other Assets 4,832
Accounts Payable & Accrued Liabilities (3,502)
Advance Billings (1,277)
Notes Payable (1,101)
Deferred Income Taxes (146)
--------
Purchase Price (net of cash received of $354) $ 7,838
=======
The operating results of UCI have been included in the consolidated
statements of income from the effective date of the acquisition.
On March 20, 1997, the Company, through a newly-formed, wholly-owned
subsidiary, completed the purchase of certain assets and the assumption of
certain liabilities of MERIT Industrial Constructors, Inc. (MERIT), an
industrial construction and maintenance firm based in Baton Rouge, Louisiana,
and certain of its affiliates. Total consideration paid by the Company was
approximately $1.3 million in cash (including acquisition costs), 62,500 shares
of the Company's Common Stock valued at $1.3 million, options to purchase 25,000
shares of the Company's Common Stock at $20.25 per share, as well as the
assumption of approximately $340,000 of debt. The purchase method was used to
account for the acquisition. Goodwill which is being amortized on a
straight-line basis over 20 years, was approximately $1.3 million. The operating
results related to the acquired MERIT assets have been included in the
consolidated statements of income from the date of the acquisition. The
pro-forma effect of the acquisition of the MERIT assets, had it occurred on
September 1, 1996, is not material to the operations of the Company.
On October 8, 1997, the Company purchased the capital stock of Pipework
Engineering and Developments Limited (PED), a pipe fabrication company in
Wolverhampton, United Kingdom, for approximately $539,000 in cash, net of cash
received, and notes payable to former stockholders of approximately $1,078,000.
Acquisition costs of approximately $190,000 were incurred by the Company. The
purchase method was used to account for the acquisition. Goodwill, which is
being amortized over 20 years using the straight-line method, was approximately
$1.7 million. The operating results of PED have been included in the
consolidated statements of income of the Company from the date of acquisition.
The pro-forma effect of the acquisition of PED, had it occurred on September 1,
1996, is not material to the operations of the Company.
On November 14, 1997, the Company purchased all of the capital stock or
substantially all of the assets of the principal operating businesses of
Prospect Industries PLC ("Prospect") of Derby, United Kingdom, for approximately
$15.9 million in cash, net of cash received. Acquisition costs of approximately
$2.2 million were incurred by the Company. Prospect, a mechanical contractor and
provider of turnkey piping systems serving the power generating and process
industries worldwide, operated through several wholly-owned subsidiaries
including Connex Pipe Systems, Inc. ("Connex"), a piping systems fabrication
business located in Troutville, Virginia; CBP Engineering Corp. ("CBP"),
10
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an abrasion and corrosion resistant pipe systems specialist based in
Pennsylvania; Aiton Australia Pty Limited ("Aiton Australia"), a piping
systems, boiler refurbishment and project management company based near
Sydney, Australia; and Prospect Engineering Limited ("PEL"), a mechanical
contractor and a provider of turnkey piping systems located in Derby,
United Kingdom. Prospect also owned a 66% interest in Inflo Control Systems
Limited ("Inflo"), a manufacturer of boiler steam leak detection, acoustic
mill and combustion monitoring equipment and related systems. Under the
terms of the acquisition agreement, the Company acquired all of the
outstanding capital stock of Prospect Industries Overseas Limited, a United
Kingdom holding company that held the entire ownership interest in Connex
and CBP, all of the capital stock of Aiton Australia and certain assets of
PEL, as well as Prospect's entire ownership interest in Inflo. The Company
also assumed certain liabilities of PEL and Prospect relating to its
employees and pension plans. The purchase method was used to account for
the acquisition. Goodwill, which is being amortized over 20 years using the
straight-line method, was approximately $3.4 million. The estimated fair
value of the assets acquired and liabilities assumed as of November 14,
1997 are as follows (in thousands):
Accounts Receivable $17,441
Inventories 11,297
Property and Equipment 10,915
Other Assets 3,541
Outstanding checks in excess of bank balance (1,527)
Accounts Payable & Accrued Liabilities (18,296)
Revolving Line of Credit (422)
Advance Billings (4,833)
-------
Purchase Price (net of cash received of $127) $18,116
========
The operating results of Prospect have been included in the consolidated
statements of income from the date of the acquisition.
In connection with the Prospect acquisition, the Company incurred certain
contingent liabilities. See Note 6 to Notes to Consolidated Financial
Statements.
On January 15, 1998, the Company purchased all of the outstanding capital
stock of Lancas, C.A. (Lancas), a construction company in Punto Fijo, Venezuela
for $2.6 million in cash, net of cash received. The purchase method was used to
account for this acquisition. The operating results of Lancas have been included
in the consolidated statements of income from the date of acquisition. The
pro-forma effect of the acquisition of Lancas, had it occured in September 1,
1996, is not material to the operations of the Company.
On January 19, 1998, the Company completed the acquisition of all of the
outstanding capital stock of Cojafex, B.V. of Rotterdam, Holland (Cojafex) for
$9.5 million, $4.5 million (net of cash received) of which was paid at closing.
The balance of the purchase price will be paid through December 31, 2003.
Acquisition
11
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costs of approximately $.1 million were incurred by the Company. Cojafex
owns the technology for certain induction pipe bending machines used for bending
pipe and other carbon steel and alloy items for industrial, commercial and
agricultural applications, and using such technology, Cojafex designs,
engineers, manufactures, markets and sells such induction bending machines.
Goodwill, which is being amortized over 20 years using the straight-line method,
was approximately $8.6 million. The purchase method was used to account for this
acquisition. The operating results of Cojafex have been included in the
consolidated statements of income from the date of acquisition. The pro-forma
effect of the acquisition of Cojafex, had it occured on September 1, 1996, is
not material to the operations of the Company.
The following summarized unaudited income statement data reflects the
impact the UCI and Prospect acquisitions would have had on the Company's results
of operations if such acquisitions had taken place on September 1, 1996 (in
thousands, except per share data):
Unaudited Pro-forma Results
for the Six-Months Ended February 28,
1997 1998
---- ----
Gross revenue $ 240,492 $ 268,734
============ =========
Net income $ 4,572 $ 9,523
============ =========
Basic earnings per common share $ .42 $ .76
============ =========
Diluted earning per common share $ .41 $ .75
============ =========
Prospect, PED and Cojafex maintain their accounting records in their local
currency (British Sterling and Dutch Guilder). The currencies are converted to
U.S. Dollars with the effect of the foreign currency translation reflected as a
component of shareholders' equity in accordance with SFAS No. 52, "Foreign
Currency Translation." Foreign currency transaction gains or losses are credited
or charged to income. Transaction gains or losses were not material for the
periods presented. Cumulative foreign currency translation adjustments were
approximately $571,000 as of February 28, 1998.
Note 5 - Investment in Unconsolidated Entity -
During the six months ended February 28, 1998, the Company recognized
earnings of approximately $124,000 from Shaw-Nass Middle East, W.L.L., the
Company's Bahrain joint venture (Shaw-Nass). In addition, as of August 31, 1997
and February 28, 1998, the Company had outstanding receivables from Shaw-Nass
totaling $1.5 million and $1.1 million, respectively. These receivables relate
primarily to inventory and equipment sold to the entity.
Note 6 - Revolving Lines of Credit -
During the second quarter of fiscal 1998, the U.S. revolving credit
facility was increased by $7 million from $70 million to $77 million. The
Company also established an additional $13 million unsecured revolving credit
facility.
Note 7 - Commitments and Contingencies-
For the year ended August 31, 1997, 22% of the Company's labor force
was covered by collective bargaining agreements, all of which will expire during
the Company's fiscal year ended August 31, 1998. The Company does not expect
that the renewal of the agreements will have an adverse impact on the Company's
results of operations or financial position.
In connection with the Prospect Sales Agreement (see Note 4 to Notes to
Consolidated Financial Statements), the Company entered into several
indemnification agreements in favor of Prospect, PEL, and Prospect's main lender
("Lender"). The first agreement requires the Company to indemnify Lender for any
losses that Lender may incur in connection with certain letters of credit, bonds
and guarantees
12
<PAGE>
previously issued by Lender relating to projects entered into by PEL, Connex,
CPB, Aiton Australia and other subsidiaries of Prospect. The Company has
determined that its maximum exposure for indemnity under the agreement with
Lender was approximately $9.9 million as of November 14, 1997. However, the
Company believes that its actual exposure is much less, particularly since many
of the projects for which Lender has issued the letters of credit, bonds and
guarantees, are projects the Company procured in connection with the
acquisition.
Additionally, the Company has agreed to indemnify each of Prospect, PEL
and Lender with respect to certain preferential creditors of Prospect and PEL.
Immediately after the closing of the acquisition by the Company of Prospect,
Lender had an administrative receiver appointed for Prospect, PEL and the
subsidiaries not acquired by the Company. The Company is obligated to indemnify
Prospect and PEL for preferential debts of PEL and Prospect in connection with
the receivership proceedings. Further, the Company has agreed to indemnify
Lender for any loss Lender may suffer as a result of the Company's failure to
perform its indemnity obligations under the Company's agreement with Prospect
and PEL concerning preferential creditors. The Company understands that the
aggregate preferential debts of Prospect and PEL as of November 14, 1997 was
approximately $4,605,000.
On August 11, 1997, the Company announced that Shaw Power Services,
Inc., its wholly-owned subsidiary, and China Baoyuan Industry and Trade Company,
a wholly-owned subsidiary of China National Nuclear Corporation, have signed a
letter of intent to establish joint-venture ownership of a piping systems
fabrication facility located in Dalian, Peoples Republic of China (P.R.C.).
Under the terms of the letter of intent, which is expected to be consummated in
the third or fouth quarter of fiscal year 1998, the Company's ownership and
income participation in the joint-venture is contemplated to be at least 60%.
The formation of the joint-venture is subject to, among other things, the
negotiation and execution of a definitive agreement and regulatory approvals by
the P.R.C. It is anticipated that the Company will invest approximately $7
million of cash and equipment, as well as its technology in the joint venture.
It is the intention of the Company for the joint-venture facility to be
operational by the end of fiscal 1998.
13
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Introduction
The following discussion summarizes the financial position of The Shaw
Group Inc. and its subsidiaries (hereinafter referred to collectively, unless
the context otherwise requires, as the "Company" or "Shaw") at February 28,
1998, and the results of its operations for the three-month and six-month
periods then ended, and should be read in conjunction with the financial
statements and notes thereto included elsewhere in this Quarterly Report on Form
10-Q.
On January 27, 1997, the Company completed the acquisition on NAPTech,
Inc. (NAPTech), a fabricator of industrial piping systems and engineered piping
modules located in Clearfield, Utah. The Company issued 432,881 shares of its
Common Stock in exchange for NAPTech and the 335,000 square foot facility that
NAPTech had leased from a related entity. The acquisition was accounted for
using the pooling-of-interests method; accordingly, the Company's financial
information for all prior periods presented herein has been restated to include
financial information of NAPTech. See Note 4 to Notes to Consolidated Financial
Statements.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act
of 1995: The statements in this quarterly report that are not historical facts
may be forward looking statements. The forward looking statements are subject to
certain risks and uncertainties (some of which are beyond the control of the
Company), including without limitation those identified below, which could cause
actual results to differ materially from historical results or those
anticipated. Readers are cautioned not to place undue reliance on these forward
looking statements, which speak only as of their dates. 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. The
following factors could cause actual results to differ materially from
historical results or those anticipated: adverse economic conditions, the impact
of competitive products and pricing, product demand and acceptance risks, the
presence of competitors with greater financial resources, costs and financing
difficulties, the results of financing efforts, delays or difficulties in the
production by the Company or its suppliers, the strength or weakness of the U.S.
dollar relative to foreign currencies, and delivery or installation of products.
Liquidity and Capital Resources:
Net cash used in operations was $27.6 million for the six months ended
February 28, 1998, compared to $12.7 million for the same period of the previous
fiscal year. For the six months ended February 28, 1998, net cash was favorably
impacted by net income of $10.0 million, depreciation and amortization of $4.4
million, and increased advance billings from customers of $10.8 million.
Offsetting
14
<PAGE>
these positive factors were increases in receivables of $39.4 million and
reductions in accounts payable of $8.2 million. The increase in accounts
receivable resulted primarily from a higher level of sales. The $39.4 million
represents a 52% increase over the August 31, 1997 receivable balance, whereas
sales for the six months ended February 28, 1998 increased 59% over sales for
the six months ended August 31, 1997.
Net cash used in investing activities was $31.7 million for the six
months ended February 28, 1998, compared to $22.6 million for the same period of
the last fiscal year. During the six months ended February 28, 1998, the Company
purchased four subsidiaries, PED, Prospect, Lancas, and Cojafex, primarily for
cash amounting to approximately $26.1 million. See Note 4 to Notes to
Consolidated Financial Statements. The Company also purchased approximately $5.6
million of property and equipment, consisting of $1.2 million for a new facility
in Houston, Texas, $1.1 million of cranes for the UCI subsidiary and other
purchases of $3.3 million.
Net cash provided by financing activities was $59.1 million for the
six-month period ended February 28, 1998, compared to $37.0 million provided for
the six months ended February 28, 1997. For the six-month period ended February
28, 1998, $56.2 million of cash was provided from the Company's revolving line
of credit agreements with its commercial lenders. The major revolving line of
credit facility has been used generally to provide working capital and fund
fixed asset purchases and subsidiary acquisitions. During the second quarter of
fiscal 1998, the U.S. revolving credit facility was increased by $7 million from
$70 million to $77 million. The Company also established an additional $13
million unsecured revolving credit facility. Cash was also provided by a $7.9
million increase in outstanding checks in excess of bank balances and $.9
million of new debt, while funds of $5.9 million were used to pay down
outstanding debt.
Results of Operations
The following table sets forth for the periods indicated the percentages
of the Company's net sales that certain income and expense items represent:
15
<PAGE>
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three-Months Ended Six-Months Ended
February 28, February 28,
1997 1998 1997 1998
----- ---- ---------- -------
<S> <C> <C> <C> <C>
Sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 82.3 83.1 81.6 82.5
----- ---- ----- -----
Gross profit 17.7 16.9 18.4 17.5
General and
administrative expenses 10.8 9.5 10.8 10.0
---- --- ---- -----
Operating income 6.9 7.4 7.6 7.5
Interest expense (2.0) (1.7) (2.3) (1.7)
Other income, net .1 .1 .1 .1
---- ------ -------- -------
(1.9) (1.6) (2.2) (1.6)
----- ------ ------- -------
Income before income taxes 5.0 5.8 5.4 5.9
Provision for income taxes 1.6 1.9 1.7 1.7
------- ---- ----- ----
Income before earnings from
unconsolidated entity 3.4 3.9 3.7 4.2
Earnings from unconsolidated
entity .8 --- .5 ---
---- ------- ---- ---
Net income 4.2% 3.9% 4.2% 4.2%
==== ===== ======= ======
</TABLE>
Sales increased 60.7% to $137.5 million for the three months ended
February 28, 1998, as compared to $85.5 million for the same period in the prior
year. Approximately $41 million of the increase relates to sales of subsidiaries
acquired subsequent to November 30, 1996. For the six months ended February 28,
1998, sales were $237.2 million compared to $161.2 million for the first six
months of fiscal 1997, an increase of 47.1%. Approximately $50 million of the
increase relates to sales of subsidiaries acquired since August 31, 1996. The
remaining increases relate primarily to increases in international sales.
Reductions in other domestic projects (primarily for the mining sector) were
offset by additional domestic work.
16
<PAGE>
The Company's sales by geographic region for the periods indicated were
as follows:
<TABLE>
Three-Months Ended February 28,
1997 1998
------------------------- ---------------------------
<CAPTION>
Geographic Region (in millions) % (in millions) %
----------------- ------------- ------ ------------- ----
<S> <C> <C> <C> <C>
U.S.A. $63.7 75% $ 70.5 51%
Far East/Pacific Rim 15.0 17 29.0 21
Middle East 3.2 4 2.8 2
South America 1.8 2 7.7 6
Europe 1.0 1 21.7 16
Other .8 1 5.8 4
------- ----- ----- ----
$85.5 100% $137.5 100%
====== ==== ====== =====
The Company's sales by industry sector for the periods indicated were
as follows:
Three-Months Ended February 28,
1997 1998
------------------------ ---------------------------
Industry Sector (in millions) % (in millions) %
--------------- ------------- ----- ------------- ----
Electric Power $24.4 40% $64.2 47%
Chemical 23.9 39 33.3 24
Refining 8.1 13 15.5 11
Petrochemical * -- 10.7 8
Oil and Gas * -- 5.5 4
Other 5.2 8 8.3 6
----- ----- ------ ----
61.6 100% $137.5 100%
==== ====== ====
Pooled Sales of NAPTech 23.9*
----
$85.5
=====
</TABLE>
* Sales for the Petrochemical and Oil and Gas sectors are not segregated and
are included elsewhere in this chart. NAPTech sales by 1997 industry sector
are not available.
The gross profit percentage for the three-month period ended February 28,
1998 decreased to 16.9% from 17.7% for the same period the prior year. For the
six months ended February 28, 1998, gross profit decreased to 17.5% from 18.4%
for the same period the prior year. Major factors contributing to this decrease
were the higher volume in construction work, which normally produces a lower
gross profit margin, the inclusion of Prospect for the entire quarter ended
February 28, 1998, and the reduced demand for the Company's manufactured
stainless goods. When Prospect was purchased, lower margins were anticipated
until Shaw procedures could be implemented.
General and administrative expenses increased from $9.2 million for the
quarter ended February 28, 1997 to $13.1 million for the quarter ended February
28, 1998. Approximately $1.4 million of this increase relates to general and
administrative expenses of PED and Prospect; the remainder relates to variable
costs associated with increased sales. As a percentage of sales, however,
general and administrative expenses decreased from 10.8% of sales for the three
months ended February 28, 1997 to 9.5% for the three months ended February 28,
1998.
Interest expense for the quarter ended February 28, 1998 was $2.3 million,
compared to $1.8
17
<PAGE>
million for the same period last year. The majority of this increase relates to
increased debt incurred as a result of the Prospect, Cojafex and Lancas
acquisitions. The balance relates to working capital needs to fund additional
sales.
The Company's effective tax rates for the quarter ended February 28,
1997 and 1998 were 31.5% and 33.2%, respectively. The higher tax rate for the
quarter ended February 28, 1998 relates to the mix of foreign versus domestic
work.
Total backlog increased to $280 million at February 28, 1998 compared
to $169 million reported at the end of the second quarter of fiscal 1997 and
$271 million reported at November 30, 1997. The $9 million increase from
November 30, 1997 relates to increased work in the power, chemical and oil and
gas sectors, offset by decreases in petrochemical and refinery work.
Year 2000
The "Year 2000" issue involves computer programs and applications that
were written using two digit date fields instead of four to describe the
applicable year. Computer systems that do not recognize date sensitive
information when the year changes to 2000 could generate erroneous data or fail.
The Company has established a plan pursuant to which all current systems being
used by the Company will be reviewed to (i) establish and document that it is
Year 2000 compliant or (ii) identify the remedial measures that must be
undertaken to render it compliant. The review process should be completed by the
end of the fiscal year (i.e. August 31, 1998).
The Company has to date, however, reviewed its two significant systems and
has determined that they are both Year 2000 compliant. As a result, the Company
does not believe the cost to upgrade or replace its other systems will be
material to the Company's results of operations or financial condition, although
the total estimated cost will not be known until the Company completes its
review process.
18
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On January 23, 1998, the Company held its 1998 Annual Meeting
of Shareholders. The only matter submitted to a vote at the meeting was
the election of six directors.
The results of the vote for election of directors were as follows:
Name For Withheld
---- --- --------
J. M. Bernhard, Jr. 19,019,536 89,100
William H. Grigg 19,018,472 90,164
L. Lane Grigsby 19,019,536 89,100
David W. Hoyle 19,019,336 89,300
Albert McAlister 19,019,536 89,100
John W. Sinders, Jr. 18,969,536 139,100
There were no broker non-votes with respect to the election of
directors.
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
Exhibit Number Description
10.1 Fourth Amendment, dated December 1, 1997,
to the Second Amended Loan and Security
Agreement dated March 29, 1996 among The
Shaw Group Inc., the Borrowing Subsidiaries
listed on Exhibit 1.1 thereto, Mercantile
Business Credit Inc., City National Bank of
Baton Rouge, Hibernia National Bank and
Union Planters Bank of Louisiana
11 Computation of Earnings Per Share
27 Financial Data Schedule
19
<PAGE>
B. Forms 8-K and 8-K/A-1
On December 1, 1997, the Company filed a Current Report on
Form 8-K dated December 1, 1997, reporting the details of the
acquisition by the Company, on November 14, 1997, of all of the capital
stock or substantially all of the assets of the principal operating
businesses of Prospect Industries, plc of Derby, United Kingdom. An
Amendment No. 1 to such report on Form 8-K/A-1 was filed by the Company
on January 29, 1998.
20
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE SHAW GROUP INC.
Dated: April 14, 1998 /S/ Edward L. Pagano
-----------------------
Chief Financial Officer
(Duly Authorized Officer)
21
<PAGE>
THE SHAW GROUP INC.
EXHIBIT INDEX
Form 10-Q Quarterly Report for the Quarterly Period ended February 28,
1998.
Exhibit Number Description
10.1 Fourth Amendment, dated December 1, 1997,
to the Second Amended Loan and Security
Agreement dated March 29, 1996, among The
Shaw Group Inc., the Borrowing Subsidiaries
listed on Exhibit 1.1 thereto, Mercantile
Business Credit Inc., City National Bank of
Baton Rouge, Hibernia National Bank and
Union Planters Bank of Louisiana
11 Computation of Earnings per Share
27 Financial Data Schedule
22
<PAGE>
FOURTH AMENDMENT TO SECOND
AMENDED LOAN AND SECURITY AGREEMENT
THIS FOURTH AMENDMENT TO SECOND AMENDED LOAN AND SECURITY
AGREEMENT (this "Fourth Amendment") made as of this _____ day of December, 1997,
by and between THE SHAW GROUP INC., a Louisiana corporation, B.F.SHAW, INC., a
South Carolina corporation, NATIONAL FABRICATORS, INC., a Louisiana corporation
and FVF, INCORPORATED, a Louisiana corporation, SUNLAND FABRICATORS, INC., a
Louisiana corporation, SHAW-FRONEK FABRICATION, INC., a Texas corporation,
FRONEK ENGINEERING AND CONSULTING, INC., a Delaware corporation, SHAW
INTERNATIONAL, INC., a Louisiana corporation, WORD INDUSTRIES FABRICATORS, INC.,
an Oklahoma corporation, SHAW INDUSTRIAL SUPPLY CO., INC., a Louisiana
corporation, and ALLOY PIPING PRODUCTS, INC., a Louisiana corporation,
MANUFACTURAS SHAW SOUTH AMERICA, C.A., a Venezuela company, FRONEK A/DE, INC., a
Louisiana corporation, WELDING TECHNOLOGY AND SUPPLY INC., an Oklahoma
corporation, PIPE SHIELDS, INC., a California corporation, NAPTECH, INC., a Utah
corporation, NAPTECH PRESSURE SYSTEMS CORPORATION, a Utah corporation, FRONEK -
REN, s.r.o., a corporation organized under the laws of the Czech Republic,
UNITED CRAFTS, INC., a Louisiana corporation, PIPEWORK ENGINEERING AND
DEVELOPMENTS LIMITED, a corporation organized under the laws of the United
Kingdom (collectively, the "Borrowers"), MERCANTILE BUSINESS CREDIT INC., a
Missouri corporation, CITY NATIONAL BANK OF BATON ROUGE, a national bank, UNION
PLANTERS BANK OF LOUISIANA, a Louisiana banking corporation (successor by merger
to Sunburst Bank), and HIBERNIA NATIONAL BANK, a national bank (collectively,
the "Lenders"), and MERCANTILE BUSINESS CREDIT INC., a Missouri corporation, as
agent for Lenders (in such capacity, the "Agent").
WITNESSETH:
WHEREAS, Borrowers and Lenders have heretofore executed a
certain Second Amended Loan and Security Agreement dated as of March 29, 1996,
as amended by an Amendment to Second Amended Loan and Security Agreement dated
as of November ___, 1996 made by and among Borrowers, Lenders and Agent, as
further amended by a Second Amendment to Second Amended Loan and Security
Agreement dated as of November 15, 1996 made by and among Borrowers, Lenders and
Agent, and as further amended by a Third Amendment to Second Amended Loan and
Security Agreement dated as of November ___, 1997 made by and among Borrowers,
Lenders and Agent (as amended, the "Agreement"); and
WHEREAS, Borrowers have requested an increase of the Total
Revolving Loan Facility from $70,000,000.00 to $77,000,000.00 and certain
amendments to the Agreement, which amendments Lenders are willing to make on the
terms and conditions set forth herein; and
<PAGE>
NOW, THEREFORE, in consideration of the above premises and for
other valuable considerations, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do hereby agree as follows:
1. The definition of "Total Revolving Loan Facility" in Section 1 of the
Agreement is hereby deleted in its entirety, and in its place shall be
substituted the following:
Total Revolving Loan Facility shall mean the amount of Seventy-Seven
Million Dollars ($77,000,000.00).
2. The fifth sentence of Section 2.1 of the Agreement is
hereby deleted in its entirety, and in its place shall be substituted the
following:
The face amount of any Letters of Credit issued and outstanding under
this subsection 2.1 at any one time shall not exceed, in the aggregate,
the amount of Fifteen Million Dollars ($15,000,000.00); provided,
however, that no Lenders shall be required to advance any Loan or
accept a risk participation in any Letter of Credit requested by a
Borrower hereunder which, when added to the principal amount of such
Lender's then outstanding Loans and its risk participation in the then
outstanding Letters of Credit under this subsection 2.1, would exceed
the amount of such Lender's Pro Rata Share of the Total Revolving Loan
Facility as set forth on the signature pages of that certain Fourth
Amendment to Second Amended Loan and Security Agreement dated as of
December ___, 1997 made by and among Borrowers, Agent and each of the
Lenders.
3. Lenders' and Agent's agreement to amend the Agreement as
set forth herein is subject to the following preconditions:
(a) Execution by each of the Borrowers of this Fourth
Amendment;
(b) Payment to Agent for the ratable benefit of the
Lenders, of a nonrefundable amendment fee in the
amount of Twenty-Five Thousand Dollars($25,000.00),
which shall be due and payable by Borrowers and
shall be fully earned by Lenders on the date of
this Fourth Amendment; and
(c) Execution and delivery by Borrowers of such other
documents or agreements as Agent and/or Lenders may
reasonably require in order to fully and
effectively carry out the intents and purposes of
the Agreement as amended by this Fourth Amendment.
4. Borrowers hereby represent and warrant to Lenders that:
-2-
<PAGE>
(a) the execution, delivery and performance by Borrowers of this
Fourth Amendment are within the corporate powers of Borrowers, have been
duly authorized by all necessary corporate action and require no action by
or in respect of, or filing with, any governmental or regulatory body,
agency or official. The execution, delivery and performance by Borrowers of
this Fourth Amendment do not conflict with, or result in a breach of the
terms, conditions or provisions of, or constitute a default under or result
in any violation of, and none of the Borrowers is now in default under or
in violation of, the terms of its Articles of Incorporation or Bylaws, any
applicable law, any rule, regulation, order, writ, judgment or decree of
any court or governmental or regulatory agency or instrumentality, or any
agreement or instrument to which any of the Borrowers is a party or by
which any Borrower is bound or to which any Borrower is subject;
(b) this Fourth Amendment has been duly executed and delivered and
constitutes the legal, valid and binding obligation of Borrowers
enforceable in accordance with its terms; and
(c) as of the date hereof, all of the covenants, representations and
warranties of Borrowers set forth in the Agreement are true and correct and
no "Event of Default" (as defined therein) under or within the meaning of
the Agreement has occurred and is continuing.
5. Borrowers hereby release Lenders and Participant and their
successors, assigns, directors, officers, agents, employees, representatives and
attorneys from any and all claims, demands, causes of action, liabilities or
damages, whether now existing or hereafter arising or contingent or
noncontingent, or actions in law or equity of any type or matter, relating to or
in connection with any statements, agreements, action or inaction on the part of
Lenders or Participant occurring at any time prior to the execution of this
Fourth Amendment, with respect to Borrowers or the Agreement.
6. The Agreement, as hereby amended, and any other agreements executed in
connection therewith, are and shall remain the binding obligations of Borrowers,
and all of the provisions, terms, stipulations, conditions, covenants and powers
contained therein shall stand and remain in full force and effect, except only
as the same are herein and hereby specifically varied or amended, and the same
are hereby ratified and confirmed.
7. All references in the Agreement to "this Agreement" and any other
references of similar import shall henceforth mean the Agreement as amended by
this Fourth Amendment.
8. This Fourth Amendment shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, except that
Borrowers may not assign, transfer or delegate any of their rights or
obligations hereunder.
-3-
<PAGE>
9. This Fourth Amendment shall be governed by and construed in
accordance with the internal laws of the State of Missouri.
10. In the event of any inconsistency or conflict between this Fourth
Amendment and the Agreement, the terms, provisions and conditions of this Fourth
Amendment shall govern and control.
11. ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FOREBEAR FROM ENFORCING REPAYMENT OF A DEBT, INCLUDING PROMISES TO EXTEND OR
RENEW SUCH DEBT, ARE NOT ENFORCEABLE. TO PROTECT BORROWERS, AGENT AND LENDERS
FROM ANY MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS REACHED BY
BORROWERS, AGENT AND LENDERS COVERING SUCH MATTERS ARE CONTAINED IN THE
AGREEMENT, AS HEREBY AMENDED, WHICH CONSTITUTES A COMPLETE AND EXCLUSIVE
STATEMENT OF THE AGREEMENTS BETWEEN BORROWERS, AGENT AND LENDERS EXCEPT AS
BORROWERS, AGENT AND LENDERS MAY LATER AGREE IN WRITING TO MODIFY. THE
AGREEMENT, AS HEREBY AMENDED, EMBODIES THE ENTIRE AGREEMENT AND UNDERSTANDING
BETWEEN THE PARTIES HERETO AND SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS
(ORAL OR WRITTEN) RELATING TO THE SUBJECT MATTER HEREOF.
12. This Fourth Amendment is made solely for the benefit of Borrowers and
Lenders as set forth herein, and is not intended to be relied upon or enforced
by any other person or entity.
13. All capitalized terms used and not otherwise defined herein shall have
the respective meanings ascribed to them in the Agreement.
14. This Fourth Amendment may be executed in one or more counterparts by
the parties hereto, and shall constitute one agreement.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Fourth Amendment
as of the day and year first written above on this _____ day of December, 1997.
Agent:
MERCANTILE BUSINESS CREDIT INC.
By:
Title:
Maximum Pro Rata Shares: Lenders:
Revolving Loans: MERCANTILE BUSINESS CREDIT INC.
$24,062,500.00
By:
Title:
Revolving Loans: CITY NATIONAL BANK OF BATON ROUGE
$19,250,000.00
By:
Title:
Revolving Loans: UNION PLANTERS BANK OF LOUISIANA
$14,437,500.00
By:
Title:
Revolving Loans: HIBERNIA NATIONAL BANK
$19,250,000.00
By:
Title:
-5-
<PAGE>
Company:
THE SHAW GROUP INC.
B.F. SHAW, INC.
NATIONAL FABRICATORS, INC.
FVF, INCORPORATED
SUNLAND FABRICATORS, INC.
SHAW-FRONEK FABRICATION, INC.
FRONEK ENGINEERING AND CONSULTING, INC.
SHAW INTERNATIONAL, INC.
WORD INDUSTRIES FABRICATORS, INC.
SHAW INDUSTRIAL SUPPLY CO., INC.
ALLOY PIPING PRODUCTS, INC.
MANUFACTURAS SHAW SOUTH AMERICA, C.A.
FRONEK A/DE, INC.
WELDING TECHNOLOGY AND SUPPLY INC.
PIPE SHIELDS, INC.
NAPTECH, INC.
NAPTECH PRESSURE SYSTEMS CORPORATION
FRONEK - REN, s.r.o.
UNITED CRAFTS, INC.
PIPEWORK ENGINEERING AND
DEVELOPMENTS LIMITED
By:
Edward Pagano, Vice President of
The Shaw Group Inc., Vice
President of B.F. Shaw, Inc.,
Vice President of National
Fabricators, Inc., Vice President
of FVF, Incorporated, Vice
President of Sunland Fabricators,
Inc., Vice President of
Shaw-Fronek Fabrication, Inc.,
Vice President of Fronek
Engineering and Consulting, Inc.,
Vice President of Shaw
International, Inc., Vice
President of Word Industries
Fabricators, Inc., Vice President
of Shaw Industrial Supply Co.,
Inc., Vice President of Alloy
Piping Products, Inc., Vice
President of Manufacturas Shaw
South America, C.A., Vice
President of Fronek A/DE, Inc.,
Vice President of Welding
Technology and Supply Inc., Vice
President of Pipe Shields, Inc.,
Vice President of NAPTech, Inc.,
Vice President of NAPTech
Pressure Systems Corporation,
Vice President of Fronek - REN,
s.r.o., Vice President of United
Crafts, Inc., Vice President of
Pipework Engineering and
Developments Limited
-6-
<PAGE>
DOCUMENT NAME:FOURTH AMENDMENT TO SECOND
AMENDED LOAN AND SECURITY AGREEMENT
AUTHOR/OWNER: MKALTENRIEDER
CLIENT NUMBER: 299 CLIENT NAME: MBSL NON RETAINER
--- -----------------
MATTER NUMBER: 19112 MATTER NAME: SHAW INDUSTRIES
----- ---------------
PC DOCS #: 838557 VERSION: 4
TYPIST/USER'S NAME: NPARSONS APPLICATION: MS WORD
TODAY'S DATE: April 14, 1998/4:10 PM
DOCUMENT HISTORY:
COMMENTS:
DO NOT DISCARD THIS PAGE
-8-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11
Computation of Earnings Per Share
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
February 28, February 28
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average shares outstanding (used
in Basic Earnings per share computation) 11,668 12,508 10,808 12,506
Net effect of dilutive stock options
based on the Treasury Stock method
using average market price 303 241 336 240
------ -------- ------ -------
Weighted average shares outstanding (used
in Diluted Earnings per share computation)
11,971 12,749 11,144 12,746
======== ========== ======== =========
Net income $ 3,588 $ 5,338 6,734 10,042
========= ========== ======== =========
Basic Earnings per share $ .31 $ .43 $ .62 $ .80
=========== =========== ======== =========
Diluted earnings per share $ .30 $ .42 $ .60 $ .79
=========== =========== ======== =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000914024
<NAME> The Shaw Group Inc.
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-Mos
<FISCAL-YEAR-END> Aug-31-1998
<PERIOD-END> Feb-28-1998
<EXCHANGE-RATE> 1.000
<CASH> 3,987
<SECURITIES> 0
<RECEIVABLES> 144,748
<ALLOWANCES> 0
<INVENTORY> 91,226
<CURRENT-ASSETS> 249,691
<PP&E> 108,379
<DEPRECIATION> 22,311
<TOTAL-ASSETS> 368,171
<CURRENT-LIABILITIES> 176,597
<BONDS> 0
0
0
<COMMON> 105,195
<OTHER-SE> 42,416
<TOTAL-LIABILITY-AND-EQUITY> 368,171
<SALES> 237,199
<TOTAL-REVENUES> 237,199
<CGS> 195,687
<TOTAL-COSTS> 195,687
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,943
<INCOME-PRETAX> 14,058
<INCOME-TAX> 4,140
<INCOME-CONTINUING> 10,042
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,042
<EPS-PRIMARY> .80
<EPS-DILUTED> .79
</TABLE>
