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November 5, 2003

Pay cuts and dump scows at Conrad

"We continue to operate in a depressed market place and have experienced some difficulties on certain major vessel construction projects," noted Kenneth G. "Jerry" Myers, Jr., President and CEO of Conrad Industries, Morgan City, La. in presenting third quarter figures. He noted company had taken several actions to adapt to the changing market conditions including "an aggressive cost reduction plan, designed to achieve approximately $1 million in savings on an annualized basis. The plan includes among other items a 5% salary reduction for management and an increase in employee contributions for health insurance."

Myers also reported that the company's order book now includes an $8.8 million contract for two 5,000 cubic yard dump scows for a commercial customer

Conrad reported a net loss of $827,000 for the quarter ended September 30, 2003 compared to a net loss of $263,000 and loss per diluted share of $0.04 for the third quarter of 2002. The loss for the nine months ended September 30, 2003 was $1.9 million and the loss per diluted share was $0.26 compared to net income before a cumulative effect of a change in accounting principle of $495,000 and earnings before a cumulative effect of a change in accounting principle per diluted share of $0.07 for the first nine months of 2002.

Revenues for the three months ended September 30, 2003 were $6.7 million compared to $9.4 million for the third quarter of 2002. Revenues for the nine months ended September 30, 2003 were $26.5 million compared to $30.4 million for the same period of the prior year.

The company's backlog was $36.3 million at September 30, 2003, as compared to $36.2 million at December 31, 2002, and $32.7 million at September 30, 2002.

The company recorded a gross loss of $7,000 (-0.1% of revenue) for the three months ended September 30, 2003 as compared to gross profit of $1.1 million (11.7% of revenue) for the third quarter of 2002.

Gross profit was $741,000 (2.8% of revenue) for the nine months ended September 30, 2003, as compared to gross profit of $4.9 million (16.2% of revenue) for the first nine months of 2002.

Vessel construction segment revenue for the current quarter decreased 30.6% and 41.0% as compared to vessel construction revenue for the second quarter of 2003 and third quarter of 2002, respectively.

Vessel construction segment revenue for the first nine months of 2003 decreased 20.2% compared to the same period of the prior year. Vessel construction hours for the third quarter and first nine months of 2003 decreased 26.9% and 8.8%, respectively, when compared to the same periods in 2002. The decrease in revenue in the nine month period is primarily a result of changes in the estimates at completion associated with increased production hours encountered during the delivery phase of various contracts.

Kenneth G. "Jerry" Myers, Jr., Conrad's President and CEO commented, "The vessel construction segment of our business continues to be depressed as a result of low volume providing a lower base for overhead absorption. We have now completed and delivered all four of the vessels for the commercial project which negatively impacted our results for the first eight months of 2003. We have recently transitioned from design to production on several major contracts. As a result, we expect new construction revenues and gross profits to improve in the fourth quarter, although we expect most of the impact to occur in the first quarter of 2004 and thereafter. At the end of the quarter, our backlog was $36.3 million and, subsequent to the end of the quarter, the company was awarded an $8.8 million contract for two 5,000 cubic yard dump scows for a commercial customer. In addition, we have seen increased bid activity in the vessel construction segment of our business and we remain cautiously optimistic that ongoing discussions with various customers will result in additional projects that will further add to our backlog in the near future."

Repair segment revenue decreased 22.2% compared to the second quarter of 2003 while repair segment gross profit increased 238.6% compared to the prior quarter. Repair segment revenue and gross profit increased 26.6% and 171.3%, respectively, as compared to repair segment revenue and gross profit in the third quarter of 2002. Repair segment revenue increased 7.9% while repair segment gross profit decreased 45.0% for the first nine months of 2003 when compared to the same period of last year. The repair segment hours for the third quarter and first nine months of 2003 increased 3.6% and 5.0%, respectively, when compared to the same periods in 2002.

Myers added, "The repair segment continues to be difficult due to the continued decreased activity in the offshore oil and gas markets. We have recently seen an increase in repair and conversion activity and are hopeful that it is more than just normal seasonal workload patterns; however, there continues to be little to no visibility at this time into the repair market. We are excited about the opportunities that our newest facility in Amelia, Louisiana provides. The facility was opened in February 2003, and has opened up some markets for the company from which we have historically been limited from participating. We have now moved four of our drydocks to the facility."

"We continue to operate in a depressed market place and have experienced some difficulties on certain major vessel construction projects. As a result, the company has taken several actions in order to adapt to the changing market conditions. First, our current backlog of approximately 99% government contracts demonstrates our ability to maintain flexibility and diversify our product lines. In addition, in the middle of the third quarter, the company implemented an aggressive cost reduction plan, designed to achieve approximately $1 million in savings on an annualized basis. The plan includes among other items a 5% salary reduction for management and an increase in employee contributions for health insurance. Also, the company was able to obtain better rates on some of its insurance programs, and has also increased the deductible on its workers' compensation program to take advantage of the company's excellent safety performance."

During the third quarter, the company completed the financing for its previously announced expansion into the aluminum marine fabrication, repair and construction business and began the development of the new facility. This expansion includes a 37,500 square foot two bay building, six overhead cranes and a 300 ton travel lift.

Myers commented further, "The expansion activities for our new aluminum facility are progressing well, and we expect to be ready to accept repair and conversion work in the next couple of weeks. The new construction building is being erected and should be ready to commence operations late in the fourth quarter of 2003. We have received a number of indications of interest in our expanded aluminum repair capabilities and are in discussions with potential customers for new aluminum construction. Although we do not expect Conrad Aluminum to have a significant impact on our fourth quarter revenues, we are optimistic about our potential for 2004 and beyond."

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