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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): FEBRUARY 28, 2003
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THE SHAW GROUP INC.
(Exact name of registrant as specified in its charter)
LOUISIANA 1-12227 72-1106167
(State of Incorporation) (Commission File Number) (I.R.S. Employer
Identification Number)
4171 ESSEN LANE
BATON ROUGE, LOUISIANA 70809
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (225) 932-2500
NOT APPLICABLE
(Former name or former address, if changed since last report.)
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ITEM 9. REGULATION FD DISCLOSURE
A. INTRODUCTION
The following information will be used by senior executives of The Shaw Group
Inc. (the "Company") in making presentations to small groups of prospective
investors.
For purposes of the information set forth below, references to "we," "us" and
"our" refer to the Company and its subsidiaries, including the operations of
businesses that we acquired prior to the date of acquisition. For purposes of
the information set forth below, our business segments are presented as follows:
(1) engineering, procurement, construction and maintenance services (EPC&M), (2)
environmental and infrastructure services (E&I) and (3) pipe fabrication,
manufacturing and distribution services (FM&D).
1. HISTORICAL INFORMATION
(a) At November 30, 2002, our approximately $5.0 billion of
backlog consisted of $2.5 billion for the EPC&M segment, $2.3 billion
for the E&I segment and $0.2 billion for the FM&D segment. At that
date, E&I segment backlog was comprised of approximately $1.6 billion
for environmental services, $484 million for infrastructure services
and $158 million for other E&I services.
(b) At November 30, 2002, our backlog by customer type
consisted of approximately $2.9 billion in private customers, $2.0
billion in federal government customers and $79 million in state and
local government customers.
(c) We expect to complete approximately 47% of our November
30, 2002 backlog in the 12 months following November 30, 2002, 20% of
that backlog between 13 and 24 months after November 30, 2002 and the
remaining 33% of that backlog more than 24 months after November 30,
2002.
(d) The following table sets forth certain information
relating to our ten largest contracts, in terms of backlog, at
November 30, 2002:
<Table>
<Caption>
========================================================================================================================
CUSTOMER BACKLOG
UNSECURED 11/30/02 EXPECTED
COMPANY CONTRACT TYPE CREDIT RATING SERVICES CONTRACTED ($ MM) COMPLETION
------------------------------------------------------------------------------------------------------------------------
1. TVA - Browns Ferry Unit 1 Cost-plus AAA Nuclear Restart $ 444 2007
2. TVA Cost-plus AAA Nuclear Maintenance 364 2010
3. BASF - SINOPEC Negotiated BBB Ethylene Plant EPC 296 2005
Fixed-plus
4. FP&L - Marcus Hook Cost-plus A Fossil-Fuel EPC 212 2004
5. Exelon Cost-plus BBB+ Nuclear Maintenance 204 2007
6. Keyspan - Ravenswood Cost-plus A Fossil-Fuel EPC 176 2004
7. USACE Omaha TERC Cost-plus U.S. Government Environmental Remediation 156 2006
8. USACE KC TERC Cost-plus U.S. Government Environmental Remediation 134 2008
9. USACE SAD TERC Cost-plus U.S. Government Environmental Remediation 123 2006
10. Navy - EFA West RAC II Cost-plus U.S. Government Environmental Remediation 115 2005
------------------------------------------------------------------------------------------------------------------------
TOTAL $2,224
% OF BACKLOG 44%
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</Table>
(e) The following table sets forth our percentage of backlog
at November 30, 2002 by end market for the type of contract indicated:
<Table>
<Caption>
Cost-Plus Contract Fixed Price Contract Unit Price Contract
------------------------------------------------------------------------------------------------------
End Market Percentage End Percentage End Percentage
of Backlog Market of Backlog Market of Backlog
------------------------------------------------------------------------------------------------------
Power/Process 42% E&I 9% Pipe Fabrication 4%
------------------------------------------------------------------------------------------------------
E&I 35% BASF - SINOPEC 6% E&I 1%
------------------------------------------------------------------------------------------------------
Pipe
Fabrication 1% Construction 1%
------------------------------------------------------------------------------------------------------
Other 1%
------------------------------------------------------------------------------------------------------
Total 77% Total 17% Total 6%
------------------------------------------------------------------------------------------------------
</Table>
(f) Approximately $1.9 billion to $2.1 billion of our annual
revenue and approximately $130 million to $160 million of our annual
earnings before interest, taxes, depreciation and amortization
("EBITDA") are generated from what we believe to be stable, predictable
revenue streams. The following table sets forth additional detail about
this recurring revenue and EBITDA as it relates to our business
segments:
<Table>
<Caption>
($ in millions)
===================================================================================
SEGMENT REVENUE EBITDA
-----------------------------------------------------------------------------------
E&I $1,250 - $1,350 $ 90 - $100
EPC&M:
Maintenance -- Nuclear 205 - 235
Maintenance -- Petrochemical 95 - 105
Consulting 50 - 75
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Total EPC&M $ 350 - $ 415 $ 10 - $ 20
FM&D 275 - 325 30 - 40
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TOTAL $1,875 - $2,090 $130 - $160
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</Table>
(g) We have a proven record of acquiring companies at
conservative EBITDA multiples. We acquired substantially all of the
assets and businesses of Stone & Webster, Inc. in July 2000 and of The
IT Group, Inc. in May 2002 at multiples of adjusted EBITDA of 1.4x and
1.7x, respectively. For purposes of determining these multiples, the
purchase price for the acquired assets and businesses includes
transaction costs and is net of proceeds of the sale of a major asset,
in the case of Stone & Webster, Inc., and of debtor-in-possession
financing that we provided to The IT Group, Inc., in the case of The IT
Group, Inc. Adjusted EBITDA means the historical EBITDA of the assets
and businesses acquired adjusted for major non-recurring items.
2. FISCAL 2003 AND FISCAL 2004 GUIDANCE
(a) On February 26, 2003, we issued a press release providing
guidance on our fiscal 2003 and fiscal 2004 operating performance. In
that press release, we announced that we expect to generate revenues of
$3.1 billion to $3.3 billion for fiscal 2003 and revenues of $2.4
billion to $2.8 billion for fiscal 2004. We announced also that we
expect EBITDA to range between $160 million and $170 million in fiscal
2003 and between $175 million and $190 million in fiscal 2004.
Of our total projected revenues and EBITDA for fiscal 2003 and
fiscal 2004, we expect to generate approximately $1.9 billion to $2.1
billion in revenues and approximately $130 million to $160 million in
EBITDA during each of fiscal 2003 and fiscal 2004 from stable,
predictable revenue streams.
(b) The following sets forth certain information regarding
certain contingencies in the domestic power market engineering,
construction and procurement projects indicated:
<Table>
<Caption>
($ in millions)
========================================================================================
ASSUMED TIMING OF
RECOVERY BASED ON
MANAGEMENT GUIDANCE
ESTIMATED % ---------------------------------
COMPLETE(1) THROUGH POST-
PROJECT(S) COMPANY AS OF 11/30/02 FISCAL 2004(2) FISCAL 2004
----------------------------------------------------------------------------------------
WOLF HOLLOW AES 87% $0 $27
COVERT & HARQUAHALA NEG 85% $30 $25
PIKE NRG Discontinued $30 $45
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</Table>
(1) Based on total estimated cost to completion.
(2) Fiscal year ending August 31.
Management expects to fully recover all costs to be incurred on these
projects.
(c) In the press release referred to above, we also announced
our expectations for our cash flow for fiscal 2003 and fiscal 2004. The
following table sets forth additional detail about those projections
for each of the periods presented:
<Table>
<Caption>
($ in millions)
=====================================================================================================
Q2 - Q4 2003 FULL YEAR 2004
LTM -------------------- --------------------
11/30/2002 LOW-END HIGH-END LOW-END HIGH-END
-----------------------------------------------------------------------------------------------------
EBITDA $207 $ 115 - $ 125 $175 - $190
Less: Cash Taxes (8) (5) - (3) (17) - (15)
Less: Cash Interest (1) (24) - (21) (32) - (28)
Less: Working Capital (Excl. Recoveries) (6) (190) - (170) (35) - (15)
Plus: Project Contingency Recoveries -- 40 - 40 20 - 20
Less: Capital Expenditures (61) (35) - (25) (25) - (20)
-----------------------------------------------------------------------------------------------------
FREE CASH FLOW $130 $ (90) - $ (70) $105 - $120
PRO FORMA
---------
Net Debt(1) $105 $ 195 - $ 175 $ 90 - $ 55
Net Debt/EBITDA 0.5x 1.2x - 1.0x 0.5x - 0.3x
-----------------------------------------------------------------------------------------------------
</Table>
(1) Includes approximately $97 million of restricted cash in
connection with BASF-SINOPEC project.
(d) On February 27, 2003, we filed a Current Report on Form
8-K containing elective disclosure for purposes of Regulation FD that
updated the risk factor in our Annual Report on Form 10-K for the
fiscal year ended August 31, 2002 entitled, "The Company's repurchase
obligations under its zero-coupon, unsecured, convertible notes due
2021 (LYONs) could result in adverse consequences." Set forth below is
additional information regarding our expected cash availability at and
immediately after May 1, 2004, assuming that we repurchase the maximum
principal amount of LYONs that we offered to purchase for cash in the
tender offer that we announced on February 26, 2003 and that all LYONs
outstanding thereafter are submitted to us for repurchase on May 1,
2004:
<Table>
<Caption>
($ in millions)
===================================================================================
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Pro Forma Unrestricted Cash at 11/30/02 $ 319
(+) Net Proceeds of Proposed Senior Notes 238
(+) Conversion of BASF Restricted Cash(1) 97
(-) LYONs Tendered(2) (250)
(+) Estimated Free Cash Flow Dec. - Aug. 2003 (65)
(+) Estimated Free Cash Flow Aug. - Apr. 2004 70
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ESTIMATED CASH AVAILABLE TO SATISFY LYONs PUT $ 408
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(-) LYONs Remaining at May 2004(3) $(268)
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ESTIMATED REMAINING CASH $ 139
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(+) Anticipated Availability Under Revolver(4) $ 120
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LIQUIDITY FOR OPERATIONS POST-PUT $ 259
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</Table>
(1) Assumes that approximately $60 million of restricted cash is
released by May 2004 put date and that remaining $27 million is
posted against the amended credit facility as a letter of credit.
(2) Represents $385 million in aggregate face amount of LYONs assumed
to be tendered in the tender offer and purchased by us for an
aggregate purchase price of $250 million.
(3) Represents satisfaction of remaining $405 million aggregate face
amount of LYONs outstanding after the tender offer for $268
million.
(4) Assumes outstanding balances on letters of credit of approximately
$130 million at May 2004.
3. Amended Credit Facility
On February 26, 2003, we issued a press release announcing that we had
received commitments from our lenders to amend our existing senior secured
credit facility to extend the term to three years from the date of the closing
of the amended credit facility and to provide for borrowing capacity, including
letters of credit, of $250 million. We also announced that we expect the closing
of the amendment and extension of our existing credit facility to occur
concurrently with the closing of our proposed private placement of senior notes
that we also announced on February 26, 2003. The following is a summary of some
of the expected terms of our amended and restated senior secured credit
facility:
<Table>
<Caption>
SENIOR SECURED CREDIT FACILITY
($ in millions)
============================================================================================
- --------------------------------------------------------------------------------------------
Size $250 MM
Spread(1) L + 200
Maturity March 2006
Expected Closing Simultaneously with proposed senior notes offering
Key Covenants:
- --------------
Minimum EBITDA $135 MM
Total Leverage:
Through 5/31/04 3.50x
Thereafter 2.75x
Fixed Charge Coverage 2.00x
- --------------------------------------------------------------------------------------------
</Table>
(1) Contingent on ratings from S&P & Moody's.
B. LIMITATION ON INCORPORATION BY REFERENCE
In accordance with General Instruction B.2 of Form 8-K, the information set
forth in this Item 9 shall not be deemed to be "filed" for purposes of Section
18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
otherwise subject to the liabilities of that section, nor shall such information
be deemed incorporated by reference in any filing under the Securities Act or
the Exchange Act, except as shall be expressly set forth by specific reference
in such a filing. The information set forth in this Item 9 shall not be deemed
an admission as to the materiality of any information in this report on Form 8-K
that is required to be disclosed solely to satisfy the requirements of
Regulation FD.
C. FORWARD LOOKING INFORMATION
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for certain forward-looking statements. The statements contained in this Current
Report on Form 8-K that are not historical facts (including without limitation
statements to the effect that we "believe," "expect," "anticipate," "plan,"
"intend" or "foresee," and other similar expressions) are forward-looking
statements. These forward-looking statements are based on our current
expectations and beliefs concerning future developments and their potential
effects on us. There can be no assurance that future developments affecting us
will be those anticipated by us. These forward-looking statements involve
significant risks and uncertainties (some of which are beyond our control) and
assumptions. They are subject to change based upon various factors, including
but not limited to the following risks and uncertainties:
o changes in the demand for our products and services;
o changes in general economic conditions, and, specifically, changes
in the rate of economic growth in the United States and other major
international economies;
o the presence of competitors with greater financial resources and
the impact of competitive products, services and pricing;
o the cyclical nature of the individual markets in which our
customers operate;
o the financial strength of our customers and their ability to make
scheduled payments on their contracts with us;
o changes in investment by the energy, power and environmental and
infrastructure industries;
o the availability of qualified engineers, professional staff and
craft labor needed to execute contracts;
o the uncertain timing of awards and contracts;
o the funding of backlog, including government budget constraints,
cost overruns on fixed or unit priced contracts;
o cost overruns which negatively affect fees to be earned or cost
variances to shared on cost-plus contracts;
o changes in laws and regulations and in trade, monetary and fiscal
policies worldwide;
o currency fluctuations;
o the effect of our policies, including but not limited to the amount
and rate of growth of our expenses;
o the continued availability to us of adequate funding sources;
o delays or difficulties in the production, delivery or installation
of products and the provision of services, including in the ability
to recover for changed conditions;
o our ability to successfully integrate acquisitions;
o the protection and validity of patents and other intellectual
property; and
o various other legal, regulatory and litigation risks.
Should one or more of these risks or uncertainties materialize, or should any of
our assumptions prove incorrect, actual results may vary in material respects
from those projected in the forward-looking statements. We undertake no
obligation to publicly update or revise any forward-looking statements contained
in this Current Report on Form 8-K whether as a result of new information,
future events or otherwise. For a more detailed discussion of some of the
foregoing risks and uncertainties, see Section 14 - "Certain Significant
Considerations" of the Offer to Purchase filed as an exhibit to our Schedule TO
filed with the SEC on February 26, 2003 relating to our offer to purchase a
portion of our outstanding LYONs and the "Risk Factors" described in Item 7. -
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of our Annual Report on Form 10-K for the fiscal year ended August
31, 2002.
The information contained in this Current Report on Form 8-K is neither an offer
to sell nor a solicitation of an offer to buy any of the notes proposed to be
issued. The notes to be offered will not be registered under the Securities Act
of 1933, as amended (the "Securities Act"), or applicable state securities laws
and may not be offered or sold in the United States absent registration or an
applicable exemption from the registration requirements of the Securities Act.
The information contained in this Current Report on Form 8-K is not an offer to
purchase, a solicitation of an offer to purchase, or a solicitation of an offer
to sell securities, with respect to any of the LYONs. The offer to purchase
LYONs may only be made pursuant to the terms of Shaw's Offer to Purchase and the
accompanying Letter of Transmittal.
SIGNATURES
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 hereunto duly authorized.
THE SHAW GROUP INC.
(Registrant)
Date: February 28, 2003 /s/ GARY P. GRAPHIA
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Gary P. Graphia
Secretary and General Counsel