SERVICE SECTOR - EARNINGS / Shaw Industries Ltd. Third Quarter 1998
TORONTO, Nov. 5 /CNW/ - Revenue and net income reached $209.5 million and
$17.8 million, or $0.29 per share, respectively during the third quarter of
1998. These results compare to revenue and net income of $152.2 million and
$14.4 million, or $0.23 per share, during the corresponding period in 1997.
Growth in pipeline segment revenues and earnings substantially accounted for
the marked improvement in comparison to the third quarter of the prior year.
PIPELINE SEGMENT
----------------
The Bredero-Shaw joint venture contributed revenue of $132.3 million and
net income of $11.7 million during the third quarter, representing
year-over-year increases of 66.4% and 44.7% respectively. Pipe coating volumes
in the Middle East and Far East regions were similar to levels achieved during
the two prior quarters, while coating shipments in North America were strong
and European plants were busy completing a number of major offshore pipeline
contracts. Additionally, in Canada, the application of both corrosion and
weight coatings commenced during July, for the 289 km Sable Island offshore
natural gas pipeline, at a new project facility in Sheet Harbour, Nova Scotia.
Small diameter coating volumes for western Canadian oil and gas gathering
systems, which had been strong throughout 1997 but had declined earlier this
year in unison with lower drilling activity, continued at levels close to
those attained during the previous quarter.
Shaw Pipeline Services, which provides ultrasonic and radiographic girth
weld inspection services for worldwide pipeline markets, achieved record
growth through increased use of ultrasonic inspection technology on both
offshore pipe lay barge projects and international land-based pipeline
construction contracts. Canusa-CPS, a global supplier of joint protection
systems and specialty coatings for pipeline applications, recorded its best
quarter in 1998 with new product introductions and continued growth in
international market share accounting for the improvement.
EXPLORATION & PRODUCTION SEGMENT
--------------------------------
The full effect of the decline in upstream oil and gas expenditures began
to influence results at the exploration and production business units during
the third quarter. The decline in worldwide drilling activity, particularly
evident in the North American land drilling sector, depressed the demand for
new drill pipe and for the provision of inspection and refurbishment services
for oilfield tubulars, adversely impacting the receipt of new contracts at
OMSCO Industries and Guardian Oilfield Services. OMSCO Industries' quarterly
shipments were relatively strong, compared with the third quarter of 1997,
however the high rate of shipments and lower order levels reduced the backlog
to its lowest position in two years. Mark Products' third quarter shipments
and new order bookings for seismic products, at both the Canadian and United
States operations, were below the corresponding prior year period and softer
than during the first and second quarters of 1998.
PETROCHEMICAL, UTILITY AND INDUSTRIAL SEGMENT
---------------------------------------------
Canusa-EMI benefited from healthy telecommunications markets, which
underpinned another successful quarter of heat shrinkable tubing and related
products shipments for electrical, electronic and telecommunications
applications. Shawflex maintained a steady level of wire and cable shipments
in comparison to the prior period and current order activity implies a
stronger level of demand in the fourth quarter.
The company's fourth quarter results are expected to reflect the impact
of the current low oil price environment and the reduced level of
international economic activity on the Pipeline and Exploration and Production
segments. While pipecoating for the Alliance project commenced in the Canadian
plants during the third quarter and is scheduled to continue through April
2000, activity at North Sea facilities will decline as several major projects
approach completion. In North America, the rapid decline in the active drill
rig count underscores the downward trend in exploration and production
investment which will be reflected in reduced demand for seismic equipment and
drill string products during the fourth quarter. In the Petrochemical, Utility
and industrial segment, demand for products is expected to be steady to
slightly stronger for the remainder of 1998. While the overall outlook for the
fourth quarter is softer than the results achieved during the first nine
months of the year, we continue to be cautiously optimistic that the strong
fundamentals supporting the energy industry will lead to a gradual improvement
in performance during 1999.
Dresser Industries, Inc., the company's partner in the Bredero-Shaw
pipecoating joint venture, announced on September 29, 1998 that its merger
with the Halliburton Company had been completed. This merger provides Shaw
Industries with an even stronger global partner possessing considerable
industry expertise and resources.
This document contains forward-looking statements, which are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those reflected in such statements.
DIVIDEND
--------
The Board of Directors today declared a semi-annual dividend of 3.67
cents per Class A share and 3.3 cents per Class B share payable on November
30, 1998 to shareholders of record at the close of business on November 17,
1998.
SHAW INDUSTRIES LTD.
INTERIM FINANCIAL INFORMATION (Unaudited)
(in thousands except per share data)
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Nine Months Ended
September 30 September 30
-------------------- --------------------
1998 1997 1998 1997
--------- --------- --------- ---------
Revenue $ 209,486 $ 152,159 $ 608,063 $ 429,968
--------- --------- --------- ---------
Operating expenses 168,632 124,472 488,673 351,037
Depreciation and amortization 6,706 4,724 16,397 12,408
Research and development 1,213 833 3,209 2,584
--------- --------- --------- ---------
176,551 130,029 508,279 366,029
--------- --------- --------- ---------
Income from operations 32,935 22,130 99,784 63,939
Equity in earnings (loss) of
associated company (6) 277 32 742
Interest on deposits 1,034 1,167 2,760 3,023
Interest on bank indebtedness 787 1,115 2,091 2,049
Interest on long-term debt 1,065 783 3,471 783
--------- --------- --------- ---------
Income before income taxes and
minority interest 32,111 21,676 97,014 64,872
Income taxes 13,928 7,575 37,586 22,258
--------- --------- --------- ---------
Income before minority
interest 18,183 14,101 59,428 42,614
Minority interest (345) 282 (575) 554
--------- --------- --------- ---------
Net income for the period $ 17,838 $ 14,383 $ 58,853 $ 43,168
--------- --------- --------- ---------
--------- --------- --------- ---------
Net income per share (Class A
and Class B) for the period
Basic $ 0.29 $ 0.24 $ 0.97 $ 0.72
--------- --------- --------- ---------
--------- --------- --------- ---------
Fully diluted $ 0.29 $ 0.23 $ 0.95 $ 0.70
--------- --------- --------- ---------
--------- --------- --------- ---------
SHAW INDUSTRIES LTD.
INTERIM FINANCIAL INFORMATION (Unaudited)
(in thousands)
CONSOLIDATED STATEMENTS OF CASH FLOW
Three Months Ended Nine Months Ended
September 30 September 30
-------------------- --------------------
1998 1997 1998 1997
--------- --------- --------- ---------
Operating activities:
Net income for the period $ 17,838 $ 14,383 $ 58,853 $ 43,168
Items not requiring an
outlay of cash:
Depreciation and
amortization 6,706 4,724 16,397 12,408
Deferred income taxes 1,316 355 1,359 1,746
Minority interest 345 (282) 575 (554)
Equity in (earnings) loss
of associated company 6 (277) (32) (742)
Change in non-cash working
capital 12,863 786 (25,681) 3,712
--------- --------- --------- ---------
Cash provided by operating
activities 39,074 19,689 51,471 59,738
--------- --------- --------- ---------
Investing activities:
Additions to fixed assets (16,705) (4,626) (44,261) (14,877)
Proceeds on disposal of
fixed assets 737 250 1,328 1,059
Acquisitions, net of cash
acquired (8,294) - (8,294) (7,040)
Purchase of additional
interest in joint venture - (66,048) - (66,048)
--------- --------- --------- ---------
Cash used in investing
activities (24,262) (70,424) (51,227) (86,906)
--------- --------- --------- ---------
Financing activities:
Repayment of long-term debt (12,569) - (12,569) -
Issue of Class A shares on
exercise of stock options - 1,407 1,407 1,448
Purchase of Class B shares
for cancellation (2,095) - (2,826) (161)
Dividends paid - - (2,162) (1,752)
Issue of long-term debt on
purchase of additional
interest in joint venture - 46,067 - 46,067
--------- --------- --------- ---------
Cash (used in) provided by
financing activities (14,664) 47,474 (16,150) 45,602
--------- --------- --------- ---------
Net (decrease) increase in
cash position during the
period 148 (3,261) (15,906) 18,434
Cash position at beginning
of period 31,438 45,333 47,492 23,638
--------- --------- --------- ---------
Cash position at end of
period $ 31,586 $ 42,072 $ 31,586 $ 42,072
--------- --------- --------- ---------
--------- --------- --------- ---------
Cash position includes cash and short-term deposits, net of bank
indebtedness.
SHAW INDUSTRIES LTD.
INTERIM FINANCIAL INFORMATION (Unaudited)
(in thousands)
CONSOLIDATED BALANCE SHEETS
Sept. 30 Dec. 31 Sept. 30
1998 1997 1997
--------- --------- ---------
Assets
Current assets
Cash and short-term deposits $ 74,079 $ 60,057 $ 48,149
Accounts receivable and prepaid
expenses 183,773 136,108 124,124
Inventories 95,519 64,688 60,419
--------- --------- ---------
353,371 260,853 232,692
Fixed assets 136,720 103,624 90,868
Other assets 65,921 67,792 73,208
--------- --------- ---------
$ 556,012 $ 432,269 $ 396,768
--------- --------- ---------
--------- --------- ---------
Liabilities
Current liabilities
Bank indebtedness $ 42,493 $ 12,565 $ 6,077
Accounts payable and accrued
liabilities 162,141 119,778 100,558
Current portion of long-term debt 11,959 11,993 11,517
--------- --------- ---------
216,593 144,336 118,152
Long-term debt 23,447 34,570 34,550
Deferred income taxes 7,181 3,182 2,864
Minority interest 835 1,654 1,940
--------- --------- ---------
$ 248,056 $ 183,742 $ 157,506
--------- --------- ---------
Shareholders' Equity
Capital stock $ 7,371 $ 5,978 $ 5,938
Retained earnings 304,477 250,598 236,880
Cumulative translation account (3,892) (8,049) (3,556)
--------- --------- ---------
307,956 248,527 239,262
--------- --------- ---------
$ 556,012 $ 432,269 $ 396,768
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