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Non-Tech : The SHAW Group -- Ignore unavailable to you. Want to Upgrade?

To: Ralph E. Daugherty who wrote (207)	1/6/1998 10:05:00 AM
From: Greg h2o	Respond to of 291

RE:< I heard they were going to sell some of the unwanted assets of the new company they bought.> I would be somewhat surprised if they had very much on the selling block, as it was my understanding they pretty much just bought the assets they desired from the company. I may have misunderstood this aspect, and I'll see if I can find out more. regards, greg

To: Ralph E. Daugherty who wrote (207)	1/7/1998 9:43:00 AM
From: Greg h2o	Read Replies (1) \| Respond to of 291

I'm sure anyone who's interested has seen the #'s by now. But, here they are in a nutshell.... .38 vs expected .35 I'll fill in the details of the conference call after its conclusion. If you haven't bought what you want, you may want to consider it before the news sinks in.... greg

To: Ralph E. Daugherty who wrote (207)	1/7/1998 10:53:00 AM
From: Greg h2o	Respond to of 291

just completed conference call. i have to leave for an appointment. i'm truly sorry, but i'll give details after my meeting. greg

To: Ralph E. Daugherty who wrote (207)	1/7/1998 12:28:00 PM
From: Greg h2o	Respond to of 291

Sorry for the number of posts, but here is what I garnered from the conference call, in the order it was given (which means this will be all over the place, but you can organize it if you wish>: I was wrong about how much of Prospect Industries they planned on selling. They are selling 2 parts of the company for what was considered a good profit. -Very strong project bookings for construction group and maintenance. -International sales $41mil vs. $27mil -General and Administrative expenses 10.6%, down from 11.6$ last qtr., and it's expected to decline. -increased the debt ceiling from $70mil to $100mil -24 1/2% tax rate...there was substantial debate as to whether that would continue and its affect on operating margins (detailed later) -Bahrain showed profit for the first time. -China moving ahead- finalize in 3rd qtr and be fully operational by August 31 of this year. There are 4 outstanding bids in China, as well as the contracts already garnered. -3 bids in England -Booked one contract in Taiwan, bidding on another plus a nuclear bid. -Mid East- expected to be awarded a major contract within the month. -North America power bidding the strongest market they've seen in quite some time. -Less than 10% of power projects are in SE Asia and about 95% are booked in us dollars. -Expanding construction business in South American markets--seen as an excellent opportunity. Answers to questions... from Jeffries: -tax rate outlook? had projected 33.5% but most likely 30% or lower..additional discussion resulted in the conclusion that much of the lower tax rates may stick due to the Reliance project and Prospect contracts which have tax benefits. -gross margin outlook?--same going foward. This became a great debate and it seemed as though management became rather defensive when approached with questions regarding operating margins and ifthey would have actually declined if not for the much lower than expected tax rates. Finally, managment agreed they would have declined, but feel that they are constantly trying to manage the tax aspects of each contract and that these rates didn't happen by mistake. Unfortunately, I don't think the listening analysts chalked up the good fortune to "good management." This is the biggest area of concern during the conference call and I have to say I'm somewhat concerned as well. However, keep in mind they have swallowed some new companies this year and economies of scale may take a while to kick in. -Prospect should be neutral this year and accretive next year to earnings. Donaldson Lufkin... -nice to hear them on the conference call...would like to see them pick up positive coverage on the company. -where is demand coming from? mentioned a major turbine manufacturer in u.s. and a large upturn in combined power plant biz in u.s. -oil and gas is now 10% of backlog and expect to expand this. -Revenue run rates now and a year out? $500-525mil now and $650-700 a year out. Rauscher (sounded a little less excited than in the past) -gross margin debate heated up again and it was mentioned that a major component was a pricing squeeze in the stainless pipe market. However, they felt this was the bottom and there was room for price increases going forward (don't think i'd want to have to call a market bottom in any commodity right now!). This weakness was due mainly to imports (Asia HAS had an affect, even if management doesn't recognize it). -Why hasn't Reliance added more to the overall mix? they are on schedule. Pointed out that Reliance was a major contributor to the lower tax rate and wondered if that shouldn't continue until project completion. others: -additional cuts in Prospect overhead--expect 10.7% G&A to move to about 10.2 in 2nd qtr. -comfortable with current fiscal 98 estimates. -Pricing power? Now have dominant position in power market- 85% of market in US and UK and this will help produce similar position outside of these major markets. -75% of power projects that SGR lost on bids was to Prospect....(what does that say about potential price hikes???) Again, much harping on gross operating margins. I think that concern was WAY overblown during the conference call, but it still warrants monitoring. The other rumor was that the director of public relations (Laurie Schultz) was leaving. I hope not as I feel she's always been very helpful. I didn't get a number for a replay of the call, so I don't think there is one. I'll post analyst responses when I get them. regards, greg