The Shaw Group Inc. (SHAW)

F3Q10 (Qtr End 05/31/10) Earnings Call Transcript

July 12, 2010 9:00 am ET


Chris Sammons – VP, IR

Jim Bernhard – Chairman, President and CEO

Brian Ferraioli – EVP and CFO


Steven Fisher – UBS

Robert Conners – Stifel Nicolaus

Scott Levine – JPMorgan

Peter Chang – Credit Suisse

Andrew Kaplowitz – Barclays Capital

Brian Uhlmer – Pritchard Capital

Andrea Wirth – Robert W. Baird

John Rogers – D.A. Davidson

Joe Ritchie – Goldman Sachs

Mark Levin – Davenport



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Welcome to the third quarter 2010 earnings conference call. My name is John and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

I will now turn the call over to Mr. Chris Sammons. Mr. Sammons, you may begin.

Chris Sammons

Good morning, everyone. This is Chris Sammons with The Shaw Group. Thank you for joining us on the call today. We have a presentation on our website as usual with the slides, It's on our homepage, as well as the Investor Relations page. We will reference the slides as we move along today by numbers.

On the call today, Jim Bernhard will lead the call, Chairman of the Board, President and Chief Executive Officer of Shaw. Also, Brian Ferraioli, Executive Vice President and Chief Financial Officer, will review the financial information.

Now I’d like to refer everybody to slide number two which addresses the use of forward-looking statements and also the Regulation G reconciliations for the non-GAAP items. Please consider this cautionary information with respect to today’s presentation and the press release. We’ll have a question and answer as usual and the operator will give us the instructions for the Q&A session.

Now, I will refer you to slide number three and I'll turn the call over to Jim Bernhard, Chairman and CEO.

Jim Bernhard

Thanks, Chris. Turning your attention to slide three, as we are still operating under typical operating segments as you see on that particular slide and let's turn to slide four for our executive summary.

We had a strong operating performance certainly for the quarter in environmental and infrastructure, fossil, renewables, nuclear, and our maintenance group. Our GAAP earnings, again, were volatile. Volatility continues to be reflected in the Westinghouse segment with $34.1 million of pretax translation on the Westinghouse bonds.

The cash balance remains very strong with $1.6 billion and continue to generate positive cash flow of $34.1 million. The quarterly bookings are in line with expectations as awards within our petrochemical and fossil markets remain slow. The major projects, including new nuclear projects, are continuing as planned, as well as the nuclear market as we have projected in the past.

Let me turn it over for the financial review with Brian and then we'll go over the operations review in a little bit more detail. Brian?

Brian Ferraioli

Thank you, Jim. Good morning, everyone. Turning to slide six, looking at our backlog, backlog remains very strong at in excess of $20 billion, led primarily by our fossil and nuclear group.

During the quarter, we booked a fairly large nuclear uprate for Entergy and that's included in the fossil and nuclear group at about – just under $200 million type booking. New awards were relatively slow as expected, nothing unusual in the quarter or really not much from what we had hopefully been signaling for some time.

Turning over to slide seven, looking at the financial results, as typical, we show the as-reported, the U.S. generally accepted accounting principles number. But then the shaded box in the middle, we show the results excluding the Westinghouse activity. As Jim mentioned, we continue to have volatility in that segment for the translation gains and losses associated with the Westinghouse yen-denominated bonds. I'll talk more about the accounting on Westinghouse later.

But if you look at the revenues, relatively flat from a year ago; down a little bit, again, as expected and as we've been signaling for some time. But we don't think there is any significant trend there. Gross profit, again, slightly down a little bit, but if you look at the EBITDA, we are relatively flat. So we picked up some of the benefits of some of the activities we've been doing to reduce our overheads. And you look at the net income, again, flat. And the earnings per share at $0.57, equal to last year's.

As Jim mentioned, the earnings for the quarter were driven primarily by very good execution really across all of the segments. And I wanted to point out that the nuclear power projects here in the U.S. are still less than 5%, but they are starting to contribute to the earnings for the quarter.

Turning to slide eight, looking at the segment results, if you look at revenues in total, in this case, revenues excluding the flow-through costs on E&C – flow-through costs, to remind everyone, are revenues which we do not earn any profit or loss on. They were relatively flat from a year ago and I would say, turned out pretty much again as expected.

Fossil and renewable and nuclear were down from a year ago. That's primarily due to lower activity in the air quality control business. As you might recall, we were very active in the scrubber market a year ago and with the uncertainty around air emissions, that business has slowed throughout the second half of 2009 and so far in 2010.

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