UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
FORM 8-K/A-1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report
April 9, 1997
THE SHAW GROUP INC.
(Exact name of registrant as specified in its charter)
Louisiana 0-22992 72-1106167
(State or other (Commission File Number) (IRS Employer Indentification
jurisdiction of No.)
incorporation)
11100 Mead Road, 2nd Floor, Baton Rouge, Louisiana 70816
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (504) 296-1140
Not Applicable
(Former name or former address, if changed since last report)
AMENDMENT TO APPLICATION OR REPORT
FILED PURSUANT TO SECTION 12, 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
THE SHAW GROUP INC.
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Current Report on Form 8-K filed
on February 11, 1997, as set forth in the pages attached hereto:
Item 7(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
-------------------------------------------
Item 7(b) PRO FORMA FINANCIAL INFORMATION
-------------------------------
Item 7(c) EXHIBITS
--------
SIGNATURES
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 hereunto duly authorized.
THE SHAW GROUP INC.
(Registrant)
Date: 04/09/97 By: /s/ T.A. Barfield, Jr.
------- ----------------------
T.A. Barfield, Jr.
Secretary and General Counsel
Item 7(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
Unaudited Condensed Consolidated Financial Statements of NAPTech, Inc. and
Subsidiary for the six months ended September 30, 1996 and 1995.
Consolidated Financial Statements for NAPTech, Inc. and Subsidiary for the
fiscal years ended March 29, 1996 and March 31, 1995.
Unaudited Financial Statements for Freeport Properties, L.C. for the six
months ended September 30, 1996 and 1995.
Financial Statements of Freeport Properties, L.C. for the years ended
December 31, 1995.
Naptech, Inc. and Subsidiary
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
-------------------------------------------------
as of September 30, 1996 and 1995
ASSETS
1996 1995
---- ----
Current Assets:
Cash and Cash Equivalents $ - $ 9,243
Accounts Receivable 3,408,006 2,086,575
Inventories - Note 2 4,850,986 3,091,191
Other 49,292 67,399
----------- -----------
Total Current Assets 8,308,284 5,254,408
Property and Equipment 7,209,152 7,005,153
Less: Accumulated Depreciation
(Including Amortization of Assets
Acquired Under Capital Leases) (2,823,127) (2,111,162)
----------- -----------
4,386,025 4,893,991
Other Assets, Net 37,348 255,014
----------- ------------
Total Assets $12,731,657 $10,403,413
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (UNAUDITED)
------------------------------------------------
1996 1995
----------- ----------
Current Liabilities:
Outstanding Checks in Excess
of Bank Balance $ 2,544 $ -
Accounts Payable 3,899,813 1,742,704
Accrued Liabilities 632,407 403,417
Current Maturities of Long-Term
Debt 1,300,368 3,116,802
Revolving Line of Credit 4,003,003 2,900,000
--------- ---------
Total Current Liabilities 9,838,135 8,162,923
Long-Term Debt, Less Current Liabilities 2,789,553 247,740
Shareholders' Equity:
Common Stock - $.01 Par Value;
10,000,000 Shares Authorized;
5,124,058 and 4,864,058 Shares
Issued and Outstanding for 1996
and 1995, Respectively 51,241 47,516
Additional Paid-In Capital 6,021,541 5,615,266
Accumulated Deficit (5,968,813) (3,670,032)
----------- -----------
Total Shareholders' Equity 103,969 1,992,750
----------- -----------
Total Liabilities and Shareholders'
Equity $12,731,657 $10,403,413
=========== ===========
See accompanying notes to condensed consolidated financial statements.
Naptech, Inc. and Subsidiary
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
-----------------------------------------------------------
for the six months ended September 30, 1996 and 1995
1996 1995
---- ----
Income:
Sales $13,910,075 $ 8,367,123
Cost of Sales 14,100,968 9,516,960
----------- -----------
Gross Margin (190,893) (1,149,837)
General and Administrative Expenses 754,917 644,497
----------- ----------
Operating Loss (945,810) (1,794,334)
Interest Expense (331,709) (270,646)
----------- ------------
Net Loss $(1,277,519) $(2,064,980)
=========== ============
Loss Per Share $ (.25) $ (.43)
============ ===========
See accompanying notes to condensed consolidated financial statements.
Naptech, Inc. and Subsidiary
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-----------------------------------------------------------
for the six months ended September 30, 1996 and 1995
1996 1995
---- ----
Cash Flows From Operating Activities:
Net Loss $(1,277,519) $(2,064,980)
Adjustments to Reconcile Net Loss
to Net Cash Used in Operating
Activities:
Depreciation and Amortization 355,244 372,002
Provision for Bad Debts and
Contract Adjustments 385,000 -
Changes in Operating Assets and
Liabilities:
(Increase) Decrease in Accounts
Receivable 909,292 1,134,550
(Increase) Decrease in
Inventories (934,250) 1,090,669
(Increase) Decrease in Other
Current Assets 572 (18,381)
Increase (Decrease) in Accounts
Payable (1,988,770) (512,589)
Increase (Decrease) in Accrued
Liabilities 46,911 (194,755)
``````` ---------- ---------
Net Cash Used in Operating
Activities (2,503,520) (193,484)
Cash Flows From Investing Activities:
Purchases of Property, Plant and
Equipment (9,347) (113,617)
Purchases of Other Assets - (153,440)
Decrease in Other Assets 73,456 -
---------- ----------
Net Cash Provided by (Used in)
Investing Activities 64,109 (267,057)
Cash Flows From Financing Activities:
Net Proceeds (Repayments) from Line
of Credit 1,153,003 400,000
Increase (Decrease) in Outstanding
Checks in Excess of Bank Balance 2,544 -
Proceeds from Issuance of Debt 1,075,000 435,000
Repayment of Debt (172,891) (531,540)
Proceeds from Issuance of Common Stock - 160,000
Net Cash Provided by Financing --------- --------
Activities 2,057,656 463,460
(CONTINUED)
See accompanying notes to condensed consolidated financial statements.
1996 1995
----------- -----------
Net Increase (Decrease) in Cash and
Cash Equivalents (381,755) 2,919
Cash and Cash Equivalents -
Beginning of Period 381,755 6,324
----------- ----------
Cash and Cash Equivalents -
End of Period $ - $ 9,243
=========== ==========
Supplemental Disclosure:
Cash Payments for Interest $ 331,709 $ 270,646
========== ==========
See accompanying notes to condensed consolidated financial statements.
Naptech, Inc. and Subsidiary
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
----------------------------------------------------------------
for the six months ended December 31, 1996 and 1995
Note 1 - Unaudited Financial Information -
The financial statements as of September 30, 1996 and 1995 and for the six
month periods then ended included herein are unaudited; however, such
financial statements reflect, in the opinion of man agement, 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 March 31,
1997.
Note 2 - Inventories -
The major components of inventories consist of the following as of September
30, 1996 and 1995:
1996 1995
----------- -----------
Raw Materials $ 1,005,964 $ 1,703,320
Work in Process 3,845,022 1,387,871
----------- -----------
$ 4,850,986 $ 3,091,191
=========== ===========
Note 3 - Earnings Per Common Share -
Earnings per common share is calculated based on the weighted aver age
number of shares outstanding during the periods. The weighted average number
of shares outstanding during the periods ended Sep tember 30, 1996 and 1995
were 5,124,058 and 4,849,058, respectively.
NAPTECH, INC. AND SUBSIDIARY
Consolidated Financia Statements for the Years Ended
March 26, 1996 and March 31, 1995 and Independent
Auditors' Report
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of NAPTech, Inc.:
We have audited the accompanying consolidated balance sheets of NAPTech, Inc.
and subsidiary (the Company) as of March 29, 1996 and March 31, 1995, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of March 29, 1996
and March 31, 1995, and the results of their operations and their cash flows for
the years then ended in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
June 4, 1996
(November 15, 1996 as to the first paragraph of Note 4 and to Note 9)
NAPTECH, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 29, 1996 AND MARCH 31, 1995
- --------------------------------------------------------------------------------
ASSETS 1996 1995
----------- ----------
CURRENT ASSETS:
Cash (Note 1) $ 381,755 $ 6,324
Trade accounts receivable - including retainage of $22,283 and
$277,856 for 1996 and 1995 (less a combined allowance for doubtful
accounts and for contract adjustments of $210,865 and $55,000 4,702,298 3,221,125
for 1996 and 1995) (Note 4)
Costs and estimated earnings in excess of billings on uncompleted
contracts (Notes 1 and 2) 3,489,206 3,493,749
Inventories (Notes 1 and 4) 1,157,500 1,124,767
Other 49,864 49,018
---------- ----------
Total current assets (Note 1) 9,780,623 7,894,983
PROPERTY, PLANT, AND EQUIPMENT - Net (Notes 1, 3, and 4) 4,731,922 5,152,376
DEFERRED INCOME TAX ASSET (Notes 1 and 5) 26,591
OTHER ASSETS 110,804 74,983
----------- ----------
TOTAL $14,623,349 $13,148,933
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 5,888,583 $ 2,255,293
Accrued liabilities (Notes 1 and 4) 585,496 571,581
Line of credit (Notes 1 and 4) 2,500,000
Current portion of long-term debt (Notes 1 and 4) 293,690 3,176,827
Billings in excess of costs and estimated earnings on uncompleted contracts
(Notes 1 and 2) 729,970 436,656
Deferred income tax liability (Notes 1 and 5) 26,591
----------- ------------
Total current liabilities (Note 1) 7,497,739 8,966,948
LONG-TERM DEBT (Notes 1 and 4) 5,744,122 284,255
----------- ------------
Total liabilities 13,241,861 9,251,203
----------- ------------
COMMITMENTS AND CONTINGENCIES (Notes 1, 4, and 6)
STOCKHOLDERS' EQUITY:
Common stock - $.01 par value; 10,000,000 shares authorized; 5,124,058 and
4,774,058 shares issued and outstanding for 1996
and 1995, respectively (Notes 1, 4, and 7) 51,241 47,741
Additional paid-in capital 6,021,541 5,455,041
Accumulated deficit (Notes 1 and 4) (4,691,294) (1,605,052)
----------- ----------
Total stockholders' equity - net 1,381,488 3,897,730
----------- ----------
TOTAL $14,623,349 $13,148,933
=========== ==========
See notes to consolidated financial statements.
-2-
NAPTECH, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 29, 1996 AND MARCH 31, 1995
- --------------------------------------------------------------------------------
1996 1995
NET SALES (Note 1) $ 24,853,722 $ 21,657,126
COST OF GOODS SOLD 25,945,212 20,466,317
----------- ------------
GROSS MARGIN (1,091,490) 1,190,809
----------- ------------
OPERATING EXPENSES:
Selling expense 523,879 701,547
General and administrative expense (Note 6) 849,091 735,774
----------- ------------
Total operating expenses 1,372,970 1,437,321
----------- ------------
OPERATING LOSS (2,464,460) (246,512)
----------- ------------
OTHER INCOME (EXPENSE):
Other income 51,058 8,696
Interest expense (672,840) (476,486)
----------- ------------
Total other (expense) - net (621,782) (467,790)
----------- ------------
LOSS BEFORE EXTRAORDINARY GAIN (3,086,242) (714,302)
EXTRAORDINARY GAIN (Note 4) 490,625
----------- ------------
NET LOSS (Note 1) $(3,086,242) $ (223,677)
=========== ============
See notes to consolidated financial statements.
-3-
NAPTECH, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 29, 1996 AND MARCH 31, 1995
- --------------------------------------------------------------------------------
Common Stock Additional
---------------- Paid-in Accumulated
Shares Amount Capital Deficit Total
BALANCE, APRIL 1, 1994 3,300,000 $33,000 $1,462,500 $(1,381,375) $ 114,125
Issuance of common stock
(Note 1) 1,474,058 14,741 2,684,542 2,699,283
Redeemable preferred stock
cancellation (Note 4) 1,062,690 1,062,690
Cumulative redeemable
preferred stock dividend
cancellation (Note 4) 245,309 245,309
Net loss (223,677) (223,677)
--------- -------- --------- ----------- ----------
BALANCE, MARCH 31, 1995 4,774,058 47,741 5,455,041 (1,605,052) 3,897,730
Issuance of common stock
(Note 1) 350,000 3,500 566,500 570,000
Net loss (3,086,242) (3,086,242)
---------- ------- ---------- ----------- ----------
BALANCE, MARCH 29, 1996 5,124,058 $51,241 $6,021,541 $(4,691,294) $1,381,488
========== ======= ========== =========== ==========
See notes to consolidated financial statements.
-4-
NAPTECH, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 29, 1996 AND MARCH 31, 1995
- --------------------------------------------------------------------------------
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(3,086,242) $ (223,677)
Adjustments to reconcile net loss to net
cash provided by(used in) operating activities:
Depreciation and amortization 728,723 684,377
Provision for bad debts and contract adjustments 169,815 133,152
Extraordinary gain (490,625)
Changes in operating assets and liabilities:
Trade accounts receivable (1,650,988) (455,858)
Costs and estimated earnings in excess of
billings on uncompleted contracts 4,543 (1,288,333)
Inventories (32,733) (242,665)
Other current assets (846) (9,095)
Accounts payable 3,633,290 (45,240)
Accrued liabilities 13,915 64,084
Billings in excess of costs and estimated
earnings on uncompleted contracts 293,314 154,881
---------- ----------
Net cash provided by (used in) operating
activities 72,791 (1,718,999)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant, and equipment (308,269) (1,218,870)
Purchases of other assets (35,821) (7,586)
---------- -----------
Net cash used in investing activities (344,090) (1,226,456)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 59,640 3,578,694
Principal payments on long-term debt (332,910) (3,483,697)
Proceeds from lines of credit borrowings 350,000 1,396,056
Proceeds from issuance of common stock 570,000 1,330,883
---------- ----------
Net cash provided by financing activities 646,730 2,821,936
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 375,431 (123,519)
CASH AND CASH EQUIVALENTS, Beginning of period 6,324 129,843
--------- ----------
CASH AND CASH EQUIVALENTS, End of period $ 381,755 $ 6,324
========= =========
(Continued)
-5-
NAPTECH, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 29, 1996 AND MARCH 31, 1995
- --------------------------------------------------------------------------------
1996 1995
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the year for interest $ 501,886 $ 464,359
============ ============
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
In connection with the cancellation of the note payable to Vinson (see Note 4)
during the year ended March 31, 1995, the Company wrote-off the book value of
the related redeemable preferred stock and cumulative redeemable preferred stock
dividends of $1,062,690 and $245,309, respectively, as a credit to the Company's
additional paid-in capital.
During the years ended March 29, 1996 and March 31, 1995, several notes payable
to individuals were converted into common stock for approximately $35,000 and
$460,000, respectively.
During the year ended March 31, 1995, the Company issued 310,000 shares of its
common stock in exchange for a contract payable of $908,399 (see Note 1).
During the years ended March 29, 1996 and March 31, 1995, the Company acquired
equipment in the amount of approximately $15,300 and $18,600, respectively, by
entering into capital leases.
See notes to consolidated financial statements. (Concluded)
-6-
NAPTECH, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 29, 1996 AND MARCH 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business - NAPTech, Inc. (the Company) was incorporated on
January 10, 1992 and is engaged in the business of forming, fabricating,
and welding steel and alloy piping, building piping sub-assemblies, and
fabricating engineered skids and modules for customers throughout the
world. The Company also bends pipe and structural steel utilizing induction
bending technology. NAPTech Pressure Systems Corp. (NPSC), a wholly-owned
subsidiary of the Company, is engaged in the business of manufacturing
seamless steel pressure vessels.
In March 1995, the Financial Accounting Standards Board (the FASB) issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of" (the Statement). The Statement establishes accounting standards for
long-lived assets, certain identifiable intangibles, and goodwill and
applies to all entities. The Statement is required to be applied for fiscal
years beginning after December 15, 1995, although earlier adoption is
allowed. In the year adopted, the Statement requires that impairment losses
resulting from application shall be reported in the period in which the
recognition criteria are first applied and met. The Company will apply the
Statement effective March 30, 1996; however, management has not determined
the impact the Statement's application will have on the Company's financial
statements.
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" (the Second
Statement). The Second Statement establishes accounting standards for
establishment of a fair value based method of accounting for stock-based
compensation plans. The Second Statement is required to be applied for
fiscal years beginning after December 15, 1995, although earlier adoption
is allowed. The Company will apply the Second Statement effective March 30,
1996; however, management has not determined the impact the Second
Statement's application will have on the Company's financial statements.
The accounting policies of the Company conform to generally accepted
accounting principles. The following is a summary of the more significant
of such policies.
Basis of Presentation - The accompanying consolidated financial statements
have been prepared on a going concern basis, which contemplates the
realization of assets and the satisfaction of liabilities in the normal
course of business. As shown in the consolidated financial statements, the
Company incurred a net loss during the periods ended March 29, 1996 and
March 31, 1995 of $3,086,242 and $223,677, respectively. The Company's
ability to continue as a going concern is dependent upon its ability to
generate sufficient cash flow to meet its obligations on a timely basis,
and ultimately to attain successful operations. Subsequent to March 29,
1996, the Company renegotiated its line of credit and note payable to a
bank (see Note 4) which allowed the Company to reduce the loan payments
required to be made during 1997. Management is of the opinion that a
subsequent infusion of working capital and this renegotiation of its
long-term debt commitments, along with management's plans to improve
operations and reduce costs as well as to generate additional cash during
1997 will enable the Company to continue as a going concern (see Note 9).
-7-
Principles of Consolidation - The consolidated financial statements include
the accounts of the Company and NPSC. All material intercompany accounts
and transactions have been eliminated in consolidation.
Use of Estimates in Preparing Financial Statements - The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Purchase of Assets - On February 10, 1992, the Company purchased certain
assets and assumed certain liabilities from Vinson Supply Company (Vinson).
The Company acquired assets of approximately $5,442,000 and assumed
liabilities of approximately $383,000 in exchange for redeemable preferred
stock of $1,062,690, a note payable of $3,800,000, and $200,000 cash. The
106,269 shares of redeemable preferred stock ($.01 par value) were recorded
at its mandatory redemption price of $10.00 per share. The liquidating
preference of the stock is $10.00 per share plus accrued dividends. The
stock had an annual dividend requirement of $1.00 per share. The
acquisition has been accounted for by the purchase method of accounting.
Accordingly, the purchase price has been allocated to assets acquired and
liabilities assumed based on their fair market value on the date of
acquisition.
On June 13, 1994, the Company entered into an agreement with Vinson to
cancel the aforementioned note payable, redeemable preferred stock, and
cumulative redeemable preferred stock dividends (see Note 4).
Purchase of Assets - On January 20, 1994, NPSC acquired assets of
approximately $1,222,000 and assumed liabilities of approximately $147,000
from Pressure Products International, Inc. (PPI) in exchange for cash of
approximately $143,000 and a contract payable. The Company also granted PPI
an option to purchase 100,000 shares of the Company's common stock at $1.00
per share. This acquisition has been accounted for as a purchase.
During fiscal 1995, the Company issued 310,000 shares of its common stock
in exchange for the contract payable, and PPI has exercised the option to
purchase 100,000 shares of common stock for $1.00 per share.
Fiscal Year - The Company uses a 52-53 week fiscal year which ends on the
Friday nearest to March 31, which was March 29 in 1996 and March 31 in
1995.
Long-term Contracts - Revenues from long-term contracts are recorded on the
basis of the Company's estimates of the percentage of completion of
individual contracts. That portion of the total contract price is accrued
to income that is in proportion to the Company's estimates of the
percentage of completion based on incurred labor costs to date in relation
to estimated total labor costs. At the time a loss on a contract becomes
known, the entire amount of the estimated ultimate loss is accrued.
Inventories - Inventories are stated at the lower of cost (determined on
the first-in, first-out basis), or market.
-8-
Property, Plant, and Equipment - Property, plant, and equipment are stated
at cost. Assets held under capital leases are included with property owned
(see Note 3). Depreciation and amortization are computed using the
straight-line method over the shorter of the estimated lives of the related
assets or the related lease terms as follows:
Machinery 5-10 years
Computer and office equipment 3-5 years
Other 3-5 years
Income Taxes - The Company utilizes an asset and liability approach for
financial accounting and reporting for income taxes.
Statements of Cash Flows - The Company considers all short-term investments
with original maturities of three months or less to be cash equivalents.
Reclassifications - Certain reclassifications to the 1995 amounts have been
made to conform to the 1996 classifications.
2. CONTRACTS IN PROCESS
The following relates to contracts in process for the years ended March 29,
1996 and March 31, 1995:
1996 1995
---- ----
Expenditures on uncompleted contracts $ 15,522,462 $ 8,800,524
Estimated earnings thereon 3,111,577 5,599,998
------------- -----------
Total 18,634,039 14,400,522
Less applicable billings 15,874,803 11,343,429
------------- -----------
Net $ 2,759,236 $ 3,057,093
============= ===========
These amounts are included in the accompanying balance sheets under the
following captions for the years ended March 29, 1996 and March 31, 1995:
1996 1995
---- ----
Costs and estimated earnings in excess
of billings on uncompleted contracts $ 3,489,206 $ 3,493,749
Billings in excess of costs and
estimated earnings on uncompleted
contracts (729,970) (436,656)
----------- -----------
Net $ 2,759,236 $ 3,057,093
============ ===========
-9-
3. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consists of the following as of March 29,
1996 and March 31, 1995:
1996 1995
---- ----
Machinery $ 6,702,302 $ 6,439,132
Computer and office equipment 347,533 307,707
Other 149,970 144,697
---------- ----------
Total 7,199,805 6,891,536
Accumulated depreciation and
amortization (2,467,883) (1,739,160)
---------- ----------
Property, plant, and equipment
- net $ 4,731,922 $5,152,376
=========== ==========
Certain computer and office equipment items are recorded under capital
leases (see Note 4). As of March 29, 1996 and March 31, 1995, the cost of
such equipment was approximately $102,000 and $111,000, respectively, and
the related accumulated amortization was approximately $28,900 and $37,500,
respectively.
4. LINES OF CREDIT AND LONG-TERM DEBT
Line of Credit and Long-Term Debt Refinancing - As of March 29, 1996, the
Company was in violation of certain debt covenants on its line of credit
and note payable to a bank. On May 10, 1996, the Company renegotiated
terms and conditions for a new $3,400,000 line of credit and a $3,037,500
note payable to a bank (collectively, The Refinanced Debt) which
eliminated the violations as of March 29, 1996. The Refinanced Debt
contains certain covenants which include maintaining minimum tangible net
worth and an established debt service ratio, and covenants which prohibit
quarterly losses, payments of dividends, acquisitions of treasury stock,
accelerated long-term debt payments, mergers or acquisitions, and a
covenant which restricts capital expenditures. On June 30, 1996 and
through November 15, 1996, the Company was in violation of certain loan
covenants of The Refinanced Debt. Therefore, on November 15, 1996 the
Company requested and obtained a waiver of all existing covenant
violations through April 14, 1997. Accordingly, the Company has shown the
March 29, 1996 line of credit as long-term debt and the note payable to a
bank as short-term debt and long-term debt in accordance with the terms of
The Refinanced Debt.
Lines of Credit - As of March 29, 1996, the Company had a line of credit
with a bank for $2,850,000 which was increased by $550,000 as of May 10,
1996). The line of credit is collateralized by accounts receivable,
inventory, and equipment and accrues interest at 2% above the bank's prime
(8.25% at March 29, 1996) and expires July 31, 1997. Accordingly, the line
of credit as of March 29, 1996 is presented as a long-term obligation. As
of March 31, 1995, the Company had a line of credit with a bank for
$2,500,000. The line of credit was collateralized by accounts eceivable,
inventory, and equipment and accrued interest at 1.6% above the bank's
prime. As of March 29, 1996 and March 31, 1995, the Company owed $2,850,000
and $2,500,000, respectively, under these lines of credit.
-10-
Long-Term Debt - Long-term debt consists of the following as of March 29,
1996 and March 31, 1995:
1996 1995
---------- -----------
Note payable to a bank, interest at 9.36%, payable in monthly
installments of $39,559 through May 10, 2001, collateralized by
accounts receivable
and equipment. $ 2,853,078 $ 2,917,182
Line of credit payable to a bank, interest as prime plus 2%, payable
in full on July 31, 1997, collateralized by accounts receivable,
inventory and equipment. 2,850,000
Notespayable to individuals not related to the Company, interest at
8.5% payable monthly, principal due July 26, 1996, uncollateralized;
convertible into common stock of the Company at $2.00 per share at
the lender's option or upon notice of prepayment by the Company.
36,000 45,000
Note payable to a leasing company, interest at 8.59%, payable in
monthly installments of $7,606 through September 1999,
collateralized by
equipment. 275,094 339,708
Note payable to a vendor of NPSC to purchase equipment, interest at
6%, payable in full on July 31, 1995,
uncollateralized. 10,000
Note payable to an individual who is
related to the Company, interest at 10%,
payable on demand, uncollateralized. 100,000
Obligations under capital leases,
interest at 13.88%, payable monthly
through January 1999. 23,640 49,192
--------- ---------
Total 6,037,812 3,461,082
Less current portion 293,690 3,176,827
--------- ---------
Long-term portion $ 5,744,122 $ 284,255
=========== ==========
The Company entered into an agreement with Vinson dated June 13, 1994 in
which the Company agreed to pay Vinson $3,000,000 plus $55,000 for accounts
payable to Vinson, and Vinson agreed to cancel the note payable to Vinson
of approximately $3,539,000, cancel the 106,269 shares of redeemable
preferred stock, and cancel the preferred stock dividend liability (see
Note 1). The Company entered into a note payable to a bank in order to fund
this settlement with Vinson.
Based upon the consummation of the aforementioned agreement, in 1995 the
Company recognized an extraordinary gain of $490,625 for the early
retirement of debt and wrote-off the book value relating to the redeemable
preferred stock and redeemable cumulative preferred stock dividend of
$1,062,690 and $245,309, respectively, as a credit to the Company's
additional paid-in capital.
-11-
Principal payments required on these obligations were as follows as of
March 29, 1996:
Year ending:
1997 $ 293,690
1998 3,169,007
1999 348,317
2000 326,874
2001 309,950
Thereafter 1,589,974
----------
Total $6,037,812
==========
The future minimum lease payments for the obligations under capital
leases, included in the annual payments above are as follows as of March
29, 1996:
Year ending:
1997 $ 9,679
1998 9,679
1999 8,065
----------
Total future minimum lease payments 27,423
Less amounts representing interest 3,783
Present value of future minimum lease payments $ 23,640
==========
Since the interest rates of the Company's line of credit and long-term
notes payable approximate the current market rates for comparable financial
instruments, the carrying amounts are considered reasonable estimates of
fair value.
-12-
5. INCOME TAXES
Deferred tax assets and liabilities as of March 29, 1996 and March 31, 1995
consist of the following temporary differences and carryforward items:
1996 1995
------------------- ------------------
Current Long-Term Current Long-Term
DEFERRED INCOME TAX ASSETS:
Inventory adjustments $ 118,568
Allowance for contract
adjustments 54,408
Allowance for doubtful
accounts 24,245 $ 1,865
Accrued vacation 12,719 29,492
Contracts 36,014
Charitable contributions 1,886 4,616
Net operating loss
carryforward $1,916,070 $ 796,382
--------- ---------- -------- ---------
Total 247,840 1,916,070 35,973 796,382
--------- ---------- -------- ---------
DEFERRED INCOME TAX
LIABILITIES:
Depreciation and
amortization (465,553) (243,950)
Contracts (62,564)
--------- ---------- ------- --------
Total (465,553) (62,564) (243,950)
--------- ---------- ------- --------
Net deferred tax asset
(liability) before
valuation allowance 247,840 1,450,517 (26,591) 552,432
Valuation allowance (247,840) (1,450,517) (525,841)
---------- ---------- ------- --------
Net deferred taxes after
valuation allowance NONE NONE $(26,591) $ 26,591
========== ========== ======== ========
As of March 29, 1996 and March 31, 1995, for Federal income tax return
purposes, the Company had approximately $4,913,000 and $2,039,000 of net
operating loss carryforwards available to offset taxable income of future
years. The carryforwards expire beginning in 2008 through 2010.
6. EMPLOYEE BENEFIT PLANS
The Company has a qualified, contributory 401(k) savings plan covering all
employees who belong to the Certified Metal Trades Journeymen collective
bargaining unit. The Company is required to make a contribution of 3% of
participants' compensation on an annual basis. The Company made a
contribution to the plan of approximately $23,900 and $9,000 for the years
ended March 29, 1996 and March 31, 1995, respectively.
The Company has a separate qualified, contributory 401(k) savings plan
covering all non-union employees. The Company may, at its discretion, make
a matching contribution in an amount determinable by the board of
directors. The Company made a contribution to the plan of approximately
$6,600 for the year ended March 29, 1996 and did not make a contribution to
the plan for the year ended March 31, 1995.
-13-
7. STOCK OPTIONS
The Company has issued non-qualified stock options to various individuals
to acquire common stock of the Company at prices ranging from $.01 to $2.00
per share. Options to acquire 477,500 were unexpired as of March 29, 1996
and March 31, 1995.
8. RELATED PARTY TRANSACTIONS
The Company leases a building on a month-to-month basis from an entity
owned by certain of its officers and directors. Lease payments for the
years ended March 29, 1996 and March 31, 1995 to the related entity were
approximately $419,700 and $301,000, respectively.
On March 28, 1996, two senior officers of the Company were appointed
managers of a newly-formed limited liability company (LLC) organized on
behalf of NAPTech and NPSC. The membership interests of the LLC will be
held 50% by NAPTech and 50% by NPSC. Subsequent to March 29, 1996, the LLC
was awarded a substantial contract with amendments totaling approximately
$32,400,000 to provide rubber lined piping spools.
9. SUBSEQUENT EVENTS
On August 5, 1996, the Company signed a Plan and Agreement of Merger to
sell the Company in a stock-for-stock transaction. The purchaser intends to
issue shares of its common stock. Subsequent to March 29, 1996, the Company
received working capital infusions of $1,045,000 which will be recorded as
120-day notes payable.
******
-14-
Freeport Properties, L.C.
BALANCE SHEETS (UNAUDITED)
as of September 30, 1996 and 1995
ASSETS
1996 1995
----------- -----------
Current Assets:
Cash and Cash Equivalents $ 35,498 $ 43,428
Accounts Receivable 74,500 152,637
---------- ----------
Total Current Assets 109,998 196,065
Fixed Assets:
Building 2,000,000 2,000,000
Less: Accumulated Depreciation (227,513) (164,021)
----------- ----------
1,772,487 1,835,979
Land 200,000 200,000
----------- ----------
1,972,487 2,035,979
----------- ----------
Total Assets $ 2,082,485 $ 2,232,044
=========== ===========
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities:
Accounts Payable $ 57,566 $ 103,410
Current Maturities of Long-Term
Debt 51,750 47,550
---------- ----------
Total Current Liabilities 109,316 150,960
Long-Term Debt, Less Current Liabilities 1,788,632 1,840,740
Members' Equity 184,537 240,344
---------- ----------
Total Liabilities and Members'
Equity $ 2,082,485 $ 2,232,044
=========== ===========
See accompanying notes to financial statements.
Freeport Properties, L.C.
STATEMENTS OF OPERATIONS (UNAUDITED)
for the six months ended September 30, 1996 and 1995
1996 1995
----------- -----------
Rental Income $ 210,000 $ 210,000
Operating Expenses 94,816 39,262
---------- ----------
Operating Income 115,184 170,738
Interest Expense (78,708) (80,090)
---------- ----------
Net Income $ 36,476 $ 90,648
=========== ===========
See accompanying notes to financial statements.
Freeport Properties, L.C.
STATEMENTS OF CASH FLOWS (UNAUDITED)
for the six months ended September 30, 1996 and 1995
1996 1995
----------- -----------
Cash Flows From Operating Activities:
Net Income $ 36,476 $ 90,648
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating
Activities:
Depreciation and Amortization 31,746 31,746
Changes in Operating Assets and
Liabilities:
(Increase) Decrease in Accounts
Receivable (35,500) (71,510)
Increase (Decrease) in Accounts
Payable 29,366 77,210
---------- ----------
Net Cash Provided by Operating
Activities 62,088 128,094
Cash Flows From Financing Activities:
Repayment of Debt (28,223) (23,008)
Distributions to Members (45,000) (101,200)
---------- ----------
Net Cash Used in Financing
Activities (73,223) (124,208)
---------- ----------
Net Increase (Decrease) in Cash and
Cash Equivalents (11,135) 3,886
Cash and Cash Equivalents -
Beginning of Period 46,633 39,542
---------- ----------
Cash and Cash Equivalents -
End of Period $ 35,498 $ 43,428
=========== ===========
Supplemental Disclosure:
Cash Payments for Interest $ 78,708 $ 80,090
=========== ===========
See accompanying notes to financial statements.
Freeport Properties, L.C.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
for the six months ended December 31, 1996 and 1995
Note 1 - Unaudited Financial Information -
The financial statements as of September 30, 1996 and 1995 and for the six
month periods then ended included herein are unaudited; however, such
financial statements reflect, in the opinion of man agement, 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 March 31,
1997.
FREEPORT PROPERTIES, L.C.
DECEMBER 31, 1995
CLEARFIELD, UTAH
CONTENTS
Audited Financial Statements:
Independent Auditor's Report......................... Page 1
Balance Sheet........................................ 2
Statement of Income and Members' Equity.............. 3
Statement of Cash Flows.............................. 4
Notes to Financial Statements........................ 5 - 7
March 26, 1997
Independent Auditor's Report
----------------------------
To the Members of
Freeport Properties, L.C.
Clearfield, Utah
We have audited the accompanying Balance Sheet of Freeport Properties, L.C. as
of December 31, 1995, and the related Statements of Income and Members' Equity
and Cash Flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Freeport Properties, L.C. as of
December 31, 1995, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
Respectfully submitted,
/s/ Hannis T. Bourgeois & Co.,L.L.P.
1
Freeport Properties, L.C.
BALANCE SHEET
-------------
as of December 31, 1995
ASSETS
------
Current Assets:
Cash $ 11,140
Receivables - Note 3:
Trade 35,000
Due from Affiliates 149,026
---------
184,026
---------
Total Current Assets 195,166
Fixed Assets - Note 2:
Building 2,000,000
Less: Accumulated Depreciation (179,894)
---------
1,820,106
Land 200,000
---------
2,020,106
---------
Total Assets $2,215,272
==========
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities:
Current Portion of Long-Term
Debt - Note 2 $ 48,564
Accounts Payable - Note 3 22,000
---------
Total Current Liabilities 70,564
Long-Term Liabilities:
Long-Term Debt - Note 2 1,827,852
Deposits Payable - Note 3 23,200
Members' Equity 293,656
---------
Total Liabilities and Members'
Equity $2,215,272
==========
The accompanying notes are an integral part of these financial statements.
2
Freeport Properties, L.C.
STATEMENT OF INCOME AND MEMBERS' EQUITY
for the year ended December 31, 1995
Revenue:
Rent - Note 3 $ 408,200
Operating Expenses:
Bank Fees 47
Depreciation Expense 63,492
Consulting Fees 7,000
Management Fees - Note 3 12,000
Repairs and Maintenance 2,310
--------
Total Operating Expenses 84,849
--------
Operating Income 323,351
Other Income (Expenses):
Interest Income - Note 3 10,883
Interest Expense (160,169)
--------
(149,286)
--------
Net Income 174,065
Members' Equity - Beginning of Year 244,591
Members' Distribution (125,000)
--------
Members' Equity - End of Year $ 293,656
==========
The accompanying notes are an integral part of these financial statements.
3
Freeport Properties, L.C.
STATEMENT OF CASH FLOWS
for the year ended December 31, 1995
Cash Flows From Operating Activities:
Net Income $ 174,065
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating
Activities:
Depreciation 63,492
Changes in Assets and Liabilities:
(Increase) Decrease in Accounts
Receivable (112,899)
Increase (Decrease) in Accounts
Payable (7,000)
--------
Net Cash Provided by Operating
Activities 117,658
Cash Flows From Financing Activities:
Repayment of Debt (46,027)
Distributions to Members (105,000)
---------
Net Cash Used in Financing
Activities (151,027)
---------
Net Decrease in Cash (33,369)
Cash - Beginning of Year 44,509
---------
Cash - End of Year $ 11,140
==========
Supplemental Disclosures of Cash
Flow Information:
Cash Payments for Interest $ 160,169
==========
The accompanying notes are an integral part of these financial statements.
4
Freeport Properties, L.C.
NOTES TO FINANCIAL STATEMENTS
-----------------------------
December 31, 1995
Note 1 - Summary of Significant Accounting Policies -
Nature of Business
------------------
Freeport Properties, L.C. (the Company), a Utah limited liability
company, was formed on December 20, 1992. The Company is engaged in
the rental of a pipe fabrication facility to an affiliated company.
Recognition of Income
---------------------
The Company recognizes income on the accrual basis of accounting for
financial reporting purposes.
Accounts Receivable
-------------------
Management believes that all accounts receivable as of December 31, 1995,
were fully collectible. Therefore, no allowance for doubtful accounts was
recorded.
Fixed Assets
------------
Fixed assets are carried at cost. Additions and improvements are
capitalized. Maintenance and repair expenses are charged to income as
incurred. The cost of property sold or otherwise disposed of and the
accumulated depreciation thereon are eliminated from the property and
related accumulated depreciation accounts, and any gain or loss is credited
or charged to income. Fixed assets owned by the Company as of December 31,
1995 consist of a building valued at $2,000,000 and land valued at $200,000.
The building is being depreciated over an estimated useful life of 31.5
years.
Income Taxes
------------
No provision has been made in the accounts for federal or state income taxes
since the members are taxed individually on profits of the Company (a
limited liability company).
Statement of Cash Flows
-----------------------
For purposes of reporting cash flows, cash includes certificates of deposits
and all highly liquid debt instruments with maturities of three months or
less when purchased.
5
Estimates
---------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Note 2 - Long-Term Debt -
Long-term debt consists of the following at December 31, 1995:
Benchmark, Inc.
---------------
Note with interest at 8.5%, payable in monthly installments of $17,183
through 1999 with the remaining principal balance due on January 1,
2000, secured by land and a building. $1,876,416
Less: Current Portion (48,564)
----------
$1,827,852
==========
Maturities on long-term portion of debt are as follows:
December 31, 1997 $ 52,856
December 31, 1998 57,528
December 31, 1999 62,613
December 31, 2000 and Thereafter 1,654,855
---------
$1,827,852
==========
The Benchmark, Inc. note includes a provision whereby the Company will
receive a retroactive .5% reduction in interest paid if the note is paid off
on or before December 30, 1997, resulting in an effective interest rate of
8%. Due to the uncertainty concerning future financing considerations, the
Company has not recognized any credit for this rebate provision in these
financial statements.
Note 3 - Related Party Transactions -
During the year ended December 31, 1995, the Company received rents of
$408,200 from Naptech, Inc. and Subsidiary (Naptech), a related entity in
which the Company's members collectively own a controlling interest. In
accordance with the lease agreement, the Company maintains a security
deposit of $23,200 payable to Naptech upon the termination of the lease. The
formal lease term expired on February 28, 1996. However, Naptech continued
to lease the facility on a month-to-month basis through January 27, 1997.
See Note 4 to these financial statements.
6
At December 31, 1995, accounts receivable from related parties consisted of
the following:
Rental Payments Due from Naptech $ 35,000
Advance to Naptech 149,026
--------
$184,026
========
In addition, during the year ended December 31, 1995, the Company collected
$10,883 in interest income on funds advanced to Naptech.
During the year ended December 31, 1995, the Company paid $12,000 in
management fees to two of its members for administrative and accounting
services.
At December 31, 1995, the Company had declared but not yet issued a $20,000
distribution to one of its members. This distribution pay able is included
as part of accounts payable in these financial statements.
Note 4 - Subsequent Event -
On January 27, 1997, the land, building and long-term debt of the Company
was acquired by a wholly-owned subsidiary of The Shaw Group Inc. (Shaw) in
exchange for 83,333 shares of Shaw common stock. Concurrent with this
acquisition, the members agreed to dissolve the Company by January 27, 1998.
The acquisition, done in connection with the acquisition by Shaw of Naptech,
Inc. and its subsidiary, was accounted for as a pooling of interest.
Item 7(b) Pro Forma Financial Information
INTRODUCTION TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The accompanying unaudited pro forma condensed consolidated financial
statements of The Shaw Group Inc. (the Company) include the following: (i)
the unaudited pro forma condensed consolidated balance sheet of the Company
at November 30, 1996 and (ii) the unaudited pro forma condensed
consolidated statements of income of the Company for the three months ended
November 30, 1996 and for the year ended August 31, 1996. The unaudited pro
forma condensed consolidated statement of income for the year ended August
31, 1996 is presented giving effect to the acquisition (the Word
Acquisition) of certain assets and the assumption of certain liabilities of
Word Industries Pipe Fabricating, Inc. and certain of its affiliates
(together, Word) as described in the Company's Current Report on Form 8-K
dated January 30, 1996, and the acquisition (the APP Acquisition, and
together with the Word Acquisition, the 1996 Acquisitions) of all the
outstanding capital stock of Alloy Piping Products, Inc. and the assets of
an APP-related entity, Speedline, a Louisiana partnership (together, APP)
as described in the Company's Current Report on Form 8-K dated April 17,
1996, the sale of 2,398,000 shares of common stock, no par value per share
(the Common Stock) by the Company (the public Offering) and, the
acquisition (the NAPTech Acquisition) of NAPTech, Inc. and certain real
estate and improvements from a NAPTech-related entity, Freeport Properties,
L.C., (together, NAPTech) as described in the Company's Current Report on
Form 8-K dated February 11, 1997. The unaudited pro forma condensed
consolidated statement of income for the three months ended November 30,
1996 is presented giving effect to the NAPTech Acquisition. The unaudited
pro forma condensed consolidated balance sheet gives effect to the Offering
and the NAPTech Acquisition. The unaudited pro forma condensed consolidated
statement of income assumes that the 1996 Acquisitions, the NAPTech
Acquisition and the Offering occurred at September 1, 1995, and the
unaudited pro forma condensed consolidated balance sheet assumes that the
NAPTech Acquisition and the Offering occurred at November 30, 1996. The pro
forma financial information reflects that the NAPTech Acquisition is
accounted for using the pooling-of-interests method of accounting, while
the 1996 Acquisitions were accounted for using the purchase method of
accounting.
The accompanying unaudited pro forma condensed consolidated financial
statements of the Company also include pro forma condensed consolidated
statements of income of the Company for the years ended August 31, 1994 and
1995, restated to reflect the NAPTech Acquisition as a pooling of
interests. Such statements of income include NAPTech=s results of
operations for the years ended April 1, 1994 and March 31, 1995,
respectively. The unaudited pro forma condensed consolidated statement of
income for the fiscal year ended August 31, 1996, combines the historical
condensed consolidated statements of income of (i) the Company for the
twelve months ended August 31, 1996, (ii) APP for the six months ended
February 29, 1996 (the period prior to the date of acquisition by the
Company), (iii) Word for the five months ended January 30, 1996 (the period
prior to the date of acquisition by the Company) and (iv) NAPTech for the
twelve months ended June 30, 1996.
The accompanying unaudited pro forma condensed consolidated financial
statements should be read in conjunction with (i) the Consolidated
Financial Statements of the Company and related notes filed with the
Company's Annual Report on Form 10-K for the year ended August 31, 1996,
(ii) the Consolidated Financial Statements (Unaudited) of the Company and
related notes included in the Company's Quarterly Report on Form 10-Q for
the quarter ended November 30, 1996, (iii) the audited historical
consolidated financial statements of Word for the year ended December 31,
1994, and related notes, and the unaudited historical consolidated
financial statements of Word for the year ended December 31, 1995, filed
with the Company's Current Report on Form 8-K/A-1 filed on March 29, 1996,
(iv) the audited historical combined financial
statements of APP for the year ended July 31, 1995, and the unaudited
historical combined financial statements of APP for the six months ended
January 31, 1996, and related notes filed with the Company's Current Report
on Form 8-K/A-1 filed on June 19, 1996, and (v) the audited consolidated
financial statements of NAPTech for the year ended March 31, 1996 included
elsewhere herein.
No provision has been made in the pro forma financial statements for non
recurring charges directly related to the NAPTech Acquisition. Such charges
are estimated to be approximately $600,000.
The following pro forma financial information is not necessarily indicative
of the results that might have occurred had the transactions taken place at
the beginning of any of the periods specified and is not intended to be a
projection of future results.
THE SHAW GROUP INC.
-------------------
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
--------------------------------------------------------
AT NOVEMBER 30, 1996
--------------------
Historical Pro Forma
---------------------------------- -------------------------------
Shaw NAPTech Adjustments As Adjusted
--------------- ------------------ ---------------- ---------------
(In thousands)
------------------
ASSETS
CURRENT ASSETS:
Cash $ 3,837 $ 40 $ - $ 3,877
Accounts receivable, net 76,587 3,051 - 79,638
Receivables from unconsolidated entities 314 - - 314
Inventories 67,662 7,291 - 74,953
Prepaid expenses 2,716 - - 2,716
Other 1,635 122 - 1,757
------------ ------------ ------------ -------------
Total current assets 152,751 10,504 - 163,255
INVESTMENT IN UNCONSOLIDATED ENTITIES 3,715 - - 3,715
PROPERTY AND EQUIPMENT 65,408 9,467 - 74,875
LESS: Accumulated depreciation (including amortization of
assets acquired under capital leases) (11,135) (3,177) - (14,312)
------------ ------------ ------------ -------------
54,273 6,290 - 60,563
NOTE RECEIVABLE FROM RELATED PARTY 625 - - 625
OTHER ASSETS, net 8,698 27 3,072 (p) 11,797
------------ ------------ ------------ -------------
Total assets $ 220,062 $ 16,821 $ 3,072 $ 239,955
========== ========= ======== =========
See notes to unaudited pro forma condensed consolidated financial statements
Historical Pro Forma
---------------------------------- --------------------------------
Shaw NAPTech Adjustments As Adjusted
--------------- ------------------ ---------------- ---------------
(In thousands)
--------------
LIABILITIES AND SHAREHOLDERS = EQUITY
------------------------------------
CURRENT LIABILITIES:
Outstanding checks in excess of bank balance $ 1,953 $ - $ - $ 1,953
Accounts payable 26,809 6,131 - 32,940
Accrued liabilities 9,680 657 - 10,337
Current maturities of long-term debt 3,620 1,300 (1,300) (q) 3,620
Revolving line of credit 61,723 3,830 (41,349) (q) 24,204
Current portion of obligations under capital leases 53 - - 53
Deferred revenue - prebilled 1,918 - - 1,918
Advance billings 217 - - 217
------------ ------------ ---------- -------------
Total current liabilities 105,973 11,918 (42,649) 75,242
LONG-TERM DEBT, less current maturities 33,153 4,591 (4,591) (q) 33,153
OBLIGATIONS UNDER CAPITAL LEASES, less current portion 61 - - 61
DEFERRED INCOME TAXES 4,507 - 465 (p) 4,972
SHAREHOLDERS= EQUITY:
Common stock 50,128 51 657 (p) 102,997
47,240 (r)
Paid in capital - 4,924 (4,924) (s) -
Retained earnings 33,068 (4,663) 1,950 (p) 30,355
Treasury stock (6,828) - - (6,828)
------------ ------------ ---------- -------------
76,368 312 49,847 126,527
------------ ------------ ---------- -------------
Total liabilities and shareholders= equity $ 220,062 $ 16,821 $ 3,072 $ 239,955
============ =========== ============ =============
See notes to unaudited pro forma condensed consolidated financial statements
THE SHAW GROUP INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1996
(In thousands, except per share data)
Historical Pro Forma
------------------------------ --------------------------------
Shaw NAPTech Adjustments As Adjusted
--------------- ------------- --------------- --------------
INCOME:
Sales $ 67,604 $ 8,215 $ - $ 75,819
Cost of sales 53,704 7,452 - 61,156
------------ ------------ --------- ----------
Gross Profit 13,900 763 - 14,663
GENERAL AND ADMINISTRATIVE EXPENSES 8,004 257 - 8,261
------------ ------------ --------- ----------
Operating income 5,896 506 6,402
INTEREST EXPENSE (1,594) (244) 244 (i) (850)
744 (h)
OTHER INCOME, net 31 - - 31
------------ ------------ ---------- ----------
(1,563) (244) 988 (819)
INCOME BEFORE INCOME TAXES 4,333 262 988 5,583
PROVISION FOR INCOME TAXES 1,445 - 346 (j) 1,791
------------ ------------ ---------- ----------
INCOME BEFORE EARNINGS FROM UNCONSOLIDATED
ENTITIES 2,888 262 642 3,792
EARNINGS FROM UNCONSOLIDATED ENTITIES 150 - - 150
------------ ------------ --------- ----------
Net income $ 3,038 $ 262 $ 642 $ 3,942
========== ========= ========== ==========
EARNINGS PER COMMON SHARE $0.31 $0.31
===== =====
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 9,877 12,720(n)
============ ==========
See notes to unaudited pro forma condensed consolidated financial statements
THE SHAW GROUP INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE TWELVE MONTHS ENDED AUGUST 31, 1996
(In thousands, except per share data)
Historical
--------------------------------------------------
1996 Pro Forma
-----------------------------------
Shaw NAPTech Acquisitions Adjustments As Adjusted
----------------- ------------- ----------------- ----------------- -----------------
INCOME:
Sales $ 222,017 $ 27,341 $ 43,268 $ - $292,626
Cost of sales 180,835 28,376 36,119 (163)(a) 245,167
-------------- ---------- ----------- ---------- -----------
Gross profit 41,182 (1,035) 7,149 163 47,459
(9) (a)
9 (b)
(78) (c)
GENERAL AND ADMINISTRATIVE EXPENSES 25,202 1,477 6,080 250 (d) 32,931
-------------- ---------- ----------- ---------- -----------
Operating income 15,980 (2,512) 1,069 (9) 14,528
INTEREST EXPENSE (3,970) (853) (715) (468) (e) (1,996)
468 (f)
715 (g)
1,974 (h)
853 (i)
OTHER INCOME, net 880 43 559 - 1,482
-------------- --------- ----------- --------- -----------
(3,090) (810) (156) 3,542 (514)
INCOME BEFORE INCOME TAXES 12,890 (3,322) 913 3,533 14,014
PROVISION FOR INCOME TAXES 4,216 - 659 (216)(k) 4,659
-------------- --------- ----------- -------- -----------
INCOME BEFORE EARNINGS FROM
UNCONSOLIDATED ENTITIES 8,674 (3,322) 254 3,749 9,355
EARNINGS FROM UNCONSOLIDATED ENTITIES 103 - - - 103
-------------- --------- ----------- --------- -----------
Net Income $ 8,777 $ (3,322) $ 254 $ 3,749 $ 9,458
============== ========== ========== ========= ===========
EARNINGS PER COMMON SHARE $0.94 $0.75
===== =====
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 9,325 12,572 (n)
============== ==========
See notes to unaudited pro forma condensed consolidated financial statements
THE SHAW GROUP INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
---------------------------------------------------------------
FOR THE TWELVE MONTHS ENDED AUGUST 31, 1995
-------------------------------------------
(In thousands, except per share data)
-------------------------------------
Historical Pro Forma
-------------------------------- --------------------------------
Shaw NAPTech Adjustments As Adjusted
--------------- --------------- -------------- --------------
INCOME:
Sales $ 135,265 $ 21,657 $ - $ 156,922
Cost of sales 110,578 20,137 - 130,715
------------ ------------- ------------ -------------
Gross profit 24,687 1,520 - 26,207
GENERAL AND ADMINISTRATIVE EXPENSES 15,023 1,437 - 16,460
------------ ------------- ------------ ------------
Operating income 9,664 83 - 9,747
INTEREST EXPENSE (2,829) (636) - (3,465)
OTHER INCOME, net 236 9 - 245
------------ ------------- ------------ ------------
INCOME BEFORE INCOME TAXES 7,071 (544) - 6,527
PROVISION FOR INCOME TAXES 2,217 - (190) 2,027
------------ ------------- ------------- ------------
INCOME BEFORE EARNINGS FROM UNCONSOLIDATED (1)
ENTITIES 4,854 (544) 190 4,500
LOSSES FROM UNCONSOLIDATED ENTITIES (588) - - (588)
------------- ------------- ------------ -------------
INCOME BEFORE EXTRAORDINARY ITEM 4,266 (544) 190 3,912
EARNINGS PER COMMON SHARE BEFORE
EXTRAORDINARY ITEM $0.50 $0.44
===== ======
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 8,552 8,985 (o)
============ ============
See notes to unaudited pro forma condensed consolidated financial statements
THE SHAW GROUP INC.
-------------------
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
--------------------------------------------------------------
FOR THE TWELVE MONTHS ENDED AUGUST 31, 1994
-------------------------------------------
(In thousands, except per share data)
-------------------------------------
Historical Pro Forma
--------------------------- ------------------------------------------
Shaw NAPTech Adjustments As Adjusted
---------- ---------------- ------------------ ------------------
INCOME:
Sales $ 113,177 $ 17,486 $ - $ 130,663
Cost of sales 96,523 15,482 - 112,005
---------- ----------- ------------ ------------
Gross profit 16,654 2,004 - 18,658
ENERAL AND ADMINISTRATIVE EXPENSES 11,631 986 - 12,617
---------- ----------- ------------- ------------
Operating income 5,023 1,018 - 6,041
INTEREST EXPENSE (1,731) (634) - (2,365)
OTHER INCOME, net 293 11 - 304
----------- ---------- ------------ ------------
(1,438) (623) - (2,061)
INCOME BEFORE INCOME TAXES 3,585 395 - 3,980
PROVISION FOR INCOME TAXES 1,368 2 138 (1) 1,508
----------- --------- ------------ ------------
INCOME BEFORE EARNINGS FROM UNCONSOLIDATED
ENTITIES 2,217 393 (138) 2,472
EARNINGS (LOSSES) FROM UNCONSOLIDATED ENTITIES 792 (41) - 751
----------- --------- ------------ ------------
INCOME BEFORE EXTRAORDINARY ITEM 3,009 352 (138) 3,223
EARNINGS PER COMMON SHARE BEFORE EXTRAORDINARY
ITEM $0.39(m) $0.40 (m)
===== =====
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 7,744 8,177 (o)
=========== ======
See notes to unaudited pro forma condensed consolidated financial statements
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
The following notes set forth the assumptions used in preparing the unaudited
pro forma condensed consolidated financial statements. The pro forma adjustments
are based on estimates made by the Company's management using information
currently available.
The adjustments to the accompanying unaudited pro forma condensed consolidated
statements of income are described below:
(a) To adjust depreciation on the APP assets acquired based on their
adjusted value per the purchase price allocation.
(b) To adjust depreciation on the Word assets acquired based on their
adjusted value per the purchase price allocation.
(c) To eliminate Word intercompany rent expense due to the acquisition of
the plant and office building from an affiliated entity.
(d) To adjust compensation for certain APP employees to conform with
contractual agreements entered into in connection with the acquisition of APP.
(e) To record additional interest expense due to the net increase in debt
resulting from the 1996 Acquisitions.
(f) To record a reduction in interest expense associated with the
application of a portion of the net proceeds of the Offering to pay down debt of
approximately $12 million used to finance the 1996 Acquisitions.
(g) To record a reduction in interest expense associated with the
application of a portion of the net proceeds of this offering to pay down debt
of Word of approximately $0.3 million and APP of approximately $11.9 million
assumed by the Company.
(h) To record a reduction in interest expense associated with the
application of a portion of the net proceeds of the Offering to pay down the
revolving line of credit of the Company.
(i) To record a reduction in interest expense associated with the
application of a portion of the net proceeds of the Offering to pay down all of
the outstanding indebtedness of NAPTech assumed by the Company.
(j) To record the income tax provision related to the effect of pro forma
adjustments.
(k) To record the income tax provision related to the net loss from the
Word Acquisition and the NAPTech Acquisition, the income of an affiliate of APP
and the effect of pro forma adjustments.
(l) To adjust the income tax provision related to the operations of
NAPTech.
(m) Excludes $0.05 per share ($370,455) for the year ended August 31, 1994,
and $0.04 per share on a restated basis for the year ended August 31, 1994,
attributable to a gain on the early retirement of certain debt instruments
(after income tax).
(n) Pro forma common shares outstanding include 385,000 shares of Common
Stock issued in connection with the Word Acquisition; 541,177 shares of Common
Stock issued in connection with the APP Acquisition; 2,398,000 shares of Common
Stock issued in connection with the Offering, and, where appropriate, 432,881
shares of Common Stock issued in connection with the NAPTech Acquisition.
(o) Pro forma common shares outstanding include 432,881 shares of Common
Stock issued in connection with the NAPTech Acquisition.
The adjustments to the accompanying unaudited pro forma condensed consolidated
balance sheet are described below:
(p) To record the deferred tax assets of $3.0 million relating to tax
benefits of NAPTech and to record the deferred tax liability of $465,000
relating to differences in the book and tax basis of the net assets of NAPTech.
(q) To record the assumed net reduction of indebtedness of the Company and
NAPTech through the application of a portion of the net proceeds to the Company
from the Offering.
(r) To record the issuance by the Company of 2,398,000 share of Common
Stock and related net proceeds of $47,240,000 received in the Offering.
(s) To record the issuance by the Company of 432,881 shares of Common Stock
relating to the pooling of interests with NAPTech.
Item 7(c) EXHIBITS
23(a) Consent of Deloitte & Touche LLP
23(b) Consent of Hannis T. Bourgeois & Co., L.L.P.
THE SHAW GROUP INC.
EXHIBIT INDEX
Form 8-K/A-1
April 9, 1997
Exhibit Number Description Page No.
- -------------- ----------- --------
23(a) Consent of Deloitte & Touche LLP
23(b) Consent of Hannis T. Bourgeois & Co., L.L.P.
EXHIBIT 23(a)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-4570 of The Shaw Group Inc. on Form S-3 of our report dated June 4, 1996
(November 15, 1996 as to the first paragraph of Note 4 and to Note 9) on the
consolidated financial statements of NAPTech, Inc. and subsidiary as of March
29, 1996 and March 31, 1995 and for the years then ended, appearing in this
current report on Form 8-K/A-1 dated April 9, 1997 of The Shaw Group Inc.
/s/ Deloitte & Touche LLP
Salt Lake City, Utah
April 9, 1997
EXHIBIT 23(b)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation
by reference of our report dated March 26, 1997, included in this Form 8-K/A-1
of The Shaw Group Inc. (the "Company") dated April 9, 1997, in the Company's
previously filed Form S-3 registration statement File No. 333-4570.
/s/ HANNIS T. BOURGEOIS & CO., L.L.P.
Baton Rouge, Louisiana
April 9, 1997