Record backlog of $22.9 billion, Record quarterly operating cash flow of $431.8 million, Record total cash balance of $1.3 billion
- By Stephen Heiser -
The Shaw Group Inc. has reported net income of $7.9 million, or $0.09 per diluted share for the three months ended May 31, 2009. Net income excluding the Westinghouse segment was $48.2 million, or $0.57 per diluted share.
In comparison, the prior year quarterly period results including the Westinghouse segment were net income of $52.0 million, or $0.62 per diluted share, and excluding the Westinghouse segment were net income of $56.7 million, or $0.67 per diluted share.
Earnings before interest expense, income taxes, depreciation and amortization (EBITDA) for the third quarter of fiscal year 2009 including the Westinghouse segment were $71.5 million and excluding the Westinghouse segment were $98.3 million. In comparison, for the third quarter of fiscal year 2008, Shaw reported EBITDA of $113.7 million including the Westinghouse segment and EBITDA of $112.7 million excluding the Westinghouse segment.
Earnings for the third quarter of fiscal year 2009 were negatively impacted by increased costs on two fossil contracts within the company’s Fossil & Nuclear segment.
Revenues during the three months ended May 31, 2009, were $1.8 billion, essentially unchanged from the third quarter in the prior fiscal year.
The company’s backlog of unfilled orders at May 31, 2009, was a record $22.9 billion compared to $19.0 billion for the second quarter of fiscal year 2009 and $15.6 billion at the end of fiscal year 2008. Approximately $5.3 billion, or 23 percent, of the current backlog is expected to be converted to revenues during the next 12 months.
New awards for the quarter totaled $5.7 billion, driven primarily by the addition of the full nuclear engineering, procurement and construction contract for Georgia Power Company’s Vogtle Electric Generating Plant, a maintenance and modification services contract with Entergy Corporation and multiple new awards in the Environmental & Infrastructure segment.
Net cash provided by operating activities totaled a record $431.8 million during the third quarter of fiscal year 2009 compared to net cash provided by operating activities of $34.4 million in the third quarter of fiscal year 2008. Shaw’s total cash balance was a record $1.3 billion, the first time cash balance has exceeded $1 billion in the company’s history.
“While performance was relatively strong across most of our businesses, we are disappointed with two underperforming projects that impacted the results of our Fossil & Nuclear segment. Nonetheless, our record backlog along with record cash flow demonstrates long-term strength throughout our company,” said J.M. Bernhard Jr., chairman, president and chief executive officer of Shaw. “We continue to see momentum with our nuclear projects, and we are anticipating additional growth opportunities in our Environmental & Infrastructure segment through increased funding on existing projects and the potential for additional dollars through the American Recovery and Reinvestment Act of 2009.
“We expect full year 2009 earnings per diluted share, excluding the Westinghouse segment, to be approximately $2.00,” continued Mr. Bernhard. “However, given our strong cash generation in the third quarter, we are increasing our full year 2009 guidance for operating cash flow to approximately $525 million.”
Westinghouse Segment
During the third quarter of fiscal year 2009, Shaw received notice from Toshiba Corporation that Toshiba’s 2008 financial results failed to meet a minimum consolidated net worth threshold, thus creating a “Toshiba Event” as defined in the Put Option Agreements between the companies. These agreements, which were entered into at the time Shaw’s subsidiary invested in Westinghouse and issued bonds to finance the transaction, are part of the security for the bonds outstanding. Under the terms of these agreements, a Toshiba Event allows, under certain circumstances, the bondholders to direct Shaw’s subsidiary to sell all or part of its Westinghouse equity to Toshiba. Proceeds from any sale must be used to repay the bonds.
As a result of the Toshiba Event, Shaw reclassified its investment in Westinghouse and the corresponding outstanding bonds from long-term to current. Due to the reclassification, Shaw was required to expense the unamortized original issuance bond discount of $22.8 million pre-tax, or $13.9 million after tax, as well as the remaining deferred financing costs of $6.6 million pre-tax, or $4.0 million after tax, in the current period. These non-cash charges are included as interest expense in the financial statements.
As of this date, the bondholders have not directed Shaw to exercise the Put Option, and the company has no knowledge of any intent to do so in the future. Exercise of the Put Option will not affect Shaw's or Toshiba’s obligations under the Commercial Relationship Agreement, which provides Shaw with certain exclusive opportunities to bid on projects where the company would provide engineering, procurement and construction services on future Westinghouse AP1000™ nuclear power plants, along with other commercial opportunities such as the supply of piping for those units, during the term of that agreement. Subsequent to quarter end, Toshiba raised approximately $3 billion in equity and may no longer fail to meet the minimum financial criteria that trigger a Toshiba Event.
The results of the Westinghouse segment continue to experience significant volatility from non-cash foreign exchange translation losses resulting from increases in the U.S. dollar equivalent of the limited recourse Japanese yen denominated bonds currently outstanding. The translation losses amounted to $33.2 million pre-tax, or $20.2 million after-tax, in the third quarter of fiscal year 2009.
Conference Call
A conference call to discuss the company’s third quarter financial results was held Thursday, July 9, at 5 p.m. Eastern time (4 p.m. Central time). A slide presentation will be posted on the Investor Relations page of Shaw's Web site at www.shawgrp.com approximately one hour prior to the conference call. Interested parties may dial 1-800-471-6718 to listen live to the conference call or access a live audio webcast on the Investor Relations page of Shaw's Web site at www.shawgrp.com.
A replay of the conference call will be available by telephone, as well as on the company’s Web site, approximately one hour after the conclusion of the call. To listen to a replay of the conference call by telephone, dial 1-888-843-8996 and use pass code 24805390#.
Calculation of EBITDA
The Shaw Group Inc. defines EBITDA as earnings before interest expense, income taxes, depreciation and amortization. EBITDA is an important financial measure used by The Shaw Group Inc. to assess performance. Although it is calculated using components derived from our financial statements prepared under generally accepted accounting principles (GAAP), EBITDA itself is not a GAAP measure. A table reconciling EBITDA to its most directly comparable GAAP measure is included in the summarized financial information within this release. Calculations of EBITDA should not be viewed as a substitute for calculations under GAAP, including net cash provided by operations, operating income and net income. In addition, EBITDA calculations by one company may not be comparable to EBITDA calculations made by another company.
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, chemicals, environmental, infrastructure and emergency response markets. A Fortune 500 company with fiscal year 2008 annual revenues of $7 billion, Shaw is headquartered in Baton Rouge, La., and employs approximately 26,000 people at its offices and operations in North America, South America, Europe, the Middle East and the Asia-Pacific region. Shaw is the power sector industry leader according to Engineering News-Record's list of Top 500 Design Firms. For further information, please visit Shaw's web site at www.shawgrp.com.
The Shaw Group Inc. believes it is important that we discuss our operating results excluding the Investment in Westinghouse segment. We acquired a 20 percent interest in Westinghouse in October 2006. We have classified the Investment in Westinghouse as a separate operating segment. The majority of the activity related to this segment will be recorded below the operating income line. During the quarter, we have recorded interest expense, as well as other significant non-cash charges related to the investment. We believe that presenting our financial results excluding the Investment in Westinghouse segment is important to investors and management to demonstrate the profitability of our other segments, as well as to point out certain non-cash charges related to this investment.
The Shaw Group Inc. defines EBITDA as earnings before interest expense, income taxes, depreciation and amortization. EBITDA is an important financial measure used by The Shaw Group Inc. to assess performance. Although it is calculated using components derived from our GAAP financial statements, EBITDA itself is not a GAAP measure. The following table reflects the company's calculation of EBITDA and EBITDA percentage. Calculations of EBITDA should not be viewed as a substitute for calculations under GAAP, including cash flow from operations, operating income and net income. In addition, EBITDA calculations by one company may not be comparable to EBITDA calculations made by another company.