UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 2000
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 0-22992
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The Shaw Group Inc.
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(Exact name of registrant as specified in its charter)
Louisiana 72-1106167
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(State of Incorporation) (I.R.S. Employer Identification Number)
8545 United Plaza Boulevard, Baton Rouge, Louisiana 70809
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(Address of principal executive offices) (Zip Code)
(225) 932-2500
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(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, 17,701,204 shares outstanding as of
September 8, 2000.
<PAGE>
Explanatory Note:
This Form 10-Q/A of The Shaw Group Inc. (the "Company") amends only the
"Results of Operations" section of Part I, Item 2, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" of its Quarterly
Report on Form 10-Q for the quarterly period ended May 31, 2000 (filed on July
14, 2000), for the sole purpose of expanding the discussion therein of the
Company's results of operations for the nine-month periods ended May 31, 2000
and 1999. The statements contained in the discussion below are made as of the
date of the original filing of the Company's Form 10-Q on July 14, 2000.
PART I - FINANCIAL INFORMATION
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
May 31, May 31,
2000 1999 2000 1999
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Income:
Sales 100.0 % 100.0% 100.0 % 100.0 %
Cost of sales 84.2 80.8 83.6 81.0
-------- ------- -------- ---------
Gross profit 15.8 19.2 16.4 19.0
General and administrative expenses 9.1 11.7 9.8 12.2
-------- ------- -------- ---------
Operating income 6.7 7.5 6.6 6.8
Interest expense (.8) (1.8) (1.0) (1.9)
Other income, net .1 .3 .1 .2
-------- ------- -------- ---------
(.7) (1.5) (.9) (1.7)
Income before income taxes, earnings from unconsolidated
entity and cumulative effect of change in accounting
principle 6.0 6.0 5.7 5.1
Provision for income taxes 2.0 2.0 1.8 1.7
-------- ------- -------- ---------
Income before earnings from unconsolidated entity and
cumulative effect of change in accounting principle 4.0 4.0 3.9 3.4
Earnings from unconsolidated entity .2 .2 .2 .1
-------- ------- -------- ---------
Income before cumulative effect of change in accounting principle 4.2 4.2 4.1 3.5
Cumulative effect on prior years of change in accounting for
start-up costs, net of taxes -- -- (.1) --
-------- ------- -------- ---------
Net income 4.2 % 4.2% 4.0 % 3.5 %
======== ======= ======== =========
</TABLE>
Sales increased approximately 40% to $175.0 million for the three
months ended May 31, 2000, as compared to $125.2 million for the same period in
the prior year. Sales increased approximately 41% to $498.8 million for the nine
months ended May 31, 2000 compared to $353.9 million for the same period in the
prior year.
The Company's sales to customers in the following geographic regions
approximated the following:
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended May 31,
2000 1999
--------------------------- --------------------------
Geographic Region (in millions) % (in millions) %
-----------------
-------------- ---------- --------------- ---------
<S> <C> <C> <C> <C>
U.S.A. $ 134.7 77% $ 90.8 72%
Far East/Pacific Rim 7.7 4 12.8 10
Middle East 1.6 1 1.2 1
South America 6.5 4 5.0 4
Europe 17.8 10 14.7 12
Other 6.7 4 .7 1
-------------- ---------- --------------- ---------
$ 175.0 100% $ 125.2 100%
============== ========== =============== =========
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended May 31,
2000 1999
--------------------------- --------------------------
Geographic Region (in millions) % (in millions) %
-----------------
-------------- ---------- --------------- ---------
<S> <C> <C> <C> <C>
U.S.A. $ 391.5 78% $ 261.2 74%
Far East/Pacific Rim 23.4 5 32.4 9
Middle East 3.8 1 8.7 2
South America 22.2 4 10.8 3
Europe 45.0 9 33.5 10
Other 12.9 3 7.3 2
-------------- ---------- --------------- ---------
$ 498.8 100% $ 353.9 100%
============== ========== =============== =========
</TABLE>
Sales for domestic projects increased $43.9 million, or 48%, to $134.7
million for the three months ended May 31, 2000 from $90.8 million for the three
months ended May 31, 1999. Sales for domestic projects increased 50% to $391.5
million for the nine months ended May 31, 2000 from $261.2 million for the nine
months ended May 31, 1999. For the three months ended May 31, 2000, sales to all
domestic industry sectors increased over sales for the three months ended May
31, 1999, with the primary increases being to the power generation and chemical
and petrochemical sectors. For the nine months ended May 31, 2000, all domestic
industry sectors increased over sales for the nine months ended May 31, 1999,
except for a 6% decrease in the chemical and petrochemical sector. The power
generation and crude oil refining sectors accounted for the majority of the
domestic increases for the nine months ended May 31, 2000 compared to May 31,
1999. Sales for international projects increased $5.9 million, or 17%, to $40.3
million for the three months ended May 31, 2000 from $34.4 million for the same
period of the prior year. Sales for international projects increased $14.6
million, or 16%, to $107.3 million for the nine months ended May 31, 2000 from
$92.7 million for the same period of the prior year. Sales remain sluggish in
the Far East/Pacific Rim region, but inquiry activity is starting to pickup.
Even though sales in the South American region for the three months and nine
months ended May 31, 2000 show some improvements and inquiries are active, the
Company's short-term outlook is uncertain in this region due to general economic
conditions and particularly, with respect to Venezuela, political conditions.
For the three and nine months ended May 31, 2000, virtually all European sector
sales were to the United Kingdom. European inquiries remain strong, particularly
in Spain. The Company continues to believe that the Far East/Pacific Rim, Middle
East, South American and European markets present significant long-term
opportunities for the Company.
The Company's sales to customers in the following industry sectors
approximated the following:
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended May 31,
2000 1999
--------------------------- --------------------------
Industry Sector (in millions) % (in millions) %
---------------
-------------- ---------- --------------- ---------
<S> <C> <C> <C> <C>
Power Generation $ 60.6 35% $ 41.6 33%
Chemical and Petrochemical Processing 55.2 31 41.3 33
Crude Oil Refining 39.9 23 26.4 21
Oil and Gas Exploration and Production 6.7 4 6.3 5
Other 12.6 7 9.6 8
-------------- ---------- --------------- ---------
$ 175.0 100% $ 125.2 100%
============== ========== =============== =========
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended May 31,
2000 1999
--------------------------- --------------------------
Industry Sector (in millions) % (in millions) %
---------------
-------------- ---------- --------------- ---------
<S> <C> <C> <C> <C>
Power Generation $ 197.4 40% $ 107.8 30%
Chemical and Petrochemical Processing 116.9 23 129.3 37
Crude Oil Refining 127.3 26 70.2 20
Oil and Gas Exploration and Production 22.2 4 21.3 6
Other 35.0 7 25.3 7
-------------- ---------- --------------- ---------
$ 498.8 100% $ 353.9 100%
============== ========== =============== =========
</TABLE>
The power generation sector had increases in domestic projects, which
were offset by small decreases in international projects, for the three-month
and nine-month periods ended May 31, 2000 compared to May 31, 1999. Sales to the
chemical and petrochemical processing sector reflected a $13.9 million, or 34%,
increase for the three months ended May 31, 2000 compared to the prior period.
This represents an improvement in this sector as sales had been declining prior
to the increase in this quarter. For the nine months ended May 31, 2000, sales
in this sector were $116.9 million compared to $129.3 million for the prior
comparable period. Due to the relatively minor amounts of petrochemical
processing sales, sales to this industry (which in past periods have been
reported separately) have been combined with chemical processing sales. Sales
related to domestic power generation projects increased due to new power
generation projects, including the previously announced $300 million, five-year
contract with General Electric. Crude oil refining industry sales had increases
in both the domestic and international markets for the three-month and
nine-month periods ended May 31, 2000 compared to May 31, 1999. Oil and gas
exploration and production sales, which are almost exclusively domestic, remain
sluggish.
The gross profit margin for the three-month period ended May 31, 2000,
decreased to 15.8% from 19.2% for the same period the prior year. The gross
profit margin for the nine-month period ended May 31, 2000 decreased to 16.4%
from 19.0% for the same period in the prior year. The Company is involved in
numerous projects, all of which affect gross profit in various ways, such as
product mix, pricing strategies, foreign versus domestic work (profit margins
differ, sometimes substantially, depending on where the work is performed), and
constant monitoring of percentage of completion calculations. Gross profit
margin was negatively impacted by the Company's revenues related to erection and
maintenance services, which generally carry lower margins than fabrication work.
General and administrative expenses increased to $15.9 million for the
quarter ended May 31, 2000 from $14.7 million for the quarter ended May 31,
1999. General and administrative expenses increased to $49.1 million from $43.0
million for the nine months ended May 31, 2000 compared to the nine months ended
May 31, 1999. This increase resulted primarily from increases in expenses
related to increased sales and other normal business expenses. As a percentage
of sales, however, general and administrative expenses decreased to 9.1% for the
three months ended May 31, 2000 from 11.7% for the three months ended May 31,
1999 and to 9.8% for the nine months ended May 31, 2000 from 12.2% for the
comparable prior period.
<PAGE>
Interest expense for the quarter ended May 31, 2000 was $1.5 million,
compared to $2.3 million for the same period of the prior fiscal year. For the
nine-month periods ended May 31, 2000 and 1999, interest expense was $4.9
million and $7.0 million, respectively. Interest expense varies from period to
period due to several factors, including the level of borrowings and interest
rate fluctuations on variable rate loans. Even though interest rates increased
on the Company's primary revolving line of credit facility over the prior year's
rates, interest expense on that line of credit facility decreased $646,000 (for
the three-month period ended May 31, 2000 compared to May 31, 1999) and $1.3
million (for the nine-month period ended May 31, 2000 compared to May 31, 1999)
due to lower borrowings, resulting from paydowns utilizing the proceeds from the
Company's public stock offering (see Note 3 of Notes to Condensed Consolidated
Financial Statements).
The Company's effective tax rates for the quarters ended May 31, 2000
and 1999 were 32.6% and 34.2%, respectively. The effective tax rates for the
nine-month periods ended May 31, 2000 and 1999 were 32.6% and 33.1%,
respectively. The tax rates for each period relate primarily to the projected
mix of foreign (including foreign export sales) versus domestic work and the
constant review of year-end estimates for each fiscal year.
Total backlog increased to approximately $878 million at May 31, 2000,
compared to $781 million reported at May 31, 1999 and $818 million reported at
August 31, 1999. Approximately 78% of the backlog relates to domestic projects,
and roughly 47% of the backlog relates to work currently anticipated to be
completed during the 12 months following May 31, 2000. Backlog is not a measure
defined in generally accepted accounting principles and the Company's backlog
may not be comparable to backlog of other companies. The backlog is largely a
reflection of the broader economic trends being experienced by the Company's
customers and while Shaw believes backlog information may be helpful in
understanding its business, it is not necessarily indicative of future sales.
Backlog at May 31, 2000 by industry sector is as follows (in millions):
Power Generation $ 558.3
Chemical and Petrochemical Processing 215.2
Crude Oil Refining 67.8
Oil and Gas Exploration and Production 26.6
Other 9.9
------------
$ 877.8
============
In December 1999, the Company joined with other manufacturers in filing
an Anti-Dumping Duty Petition against foreign producers of certain stainless
pipe fittings. The suit alleges that these foreign producers were dumping
products in the United States in violation of U.S. unfair trade laws and
international trade rules established by the World Trade Organization. In
February 2000, the U.S. International Trade Commission ("ITC") unanimously
reached a preliminary determination that there is a reasonable indication that
these imports are causing material injury to the U.S. industry. A preliminary
ruling from the U.S. Department of Commerce ("DOC") has been moved to late July
2000. The final ruling from the DOC is scheduled for October 2000, subject to
certain possible extensions and delays. The final ruling from the ITC is
scheduled for January 2001. While the Company cannot provide any assurances with
respect to the ultimate outcome of such Petition, management of the Company
believes that a favorable decision in such matter would enhance the long-term
profitability in its manufacturing segment.
In addition, in February 2000, with respect to actions previously
filed, the DOC and ITC extended antidumping duties for imports of certain
stainless pipe fittings from Japan, Taiwan and Korea for another five years.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE SHAW GROUP INC.
Dated: September 15, 2000 /S/ Robert L. Belk
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Chief Financial Officer
(Duly Authorized Officer)
