PRESS RELEASES 11/12/2013 4:05:00 PM | Business Wire News

Babcock & Wilcox Announces Third Quarter 2013 Results


CHARLOTTE, N.C.

The Babcock & Wilcox Company (NYSE: BWC) (“B&W” or the “Company”) today reportedGAAP earnings per share for the third quarter of 2013 of $0.54 compared to $0.43 in the third quarter of 2012. Adjusted earnings per share for the third quarter of 2013, which excludes the impact of $4.8 million of restructuring charges, were $0.57, an increase of $0.11, or 23.9%, versus adjusted earnings per share in the third quarter of 2012. Revenue for the third quarter of 2013 was $774.8 million, a decrease of 4.1%, from the third quarter of 2012.

The Company declared a quarterly cash dividend of $0.10 per common share on November 8, 2013. This declaration represents a 25% increase in the quarterly cash dividend, the first increase since a dividend was initiated in November 2012. The dividend will be payable on December 13, 2013 to shareholders of record on November 25, 2013.

During the third quarter of 2013, the Company repurchased nearly 0.5 million shares of its common stock at a cost of $14.3 million. Through September 30, 2013, the Company has repurchased a total of 9.0 million shares at a cost of $236.7 million leaving approximately $263.3 million of capacity remaining under its previously announced $500 million share repurchase authorization. Over the past twelve months, between the dividend and share repurchase programs, B&W has returned to its shareholders more than $273 million, approximately 73% of the free cash flow generated since B&W became a public company in August 2010.

Recent Highlights

  • Selected to the Barron’s 400 Index in September 2013
  • Awarded contract to supply natural gas boilers to a Virginia manufacturing facility
  • Awarded front-end engineering and design work for FutureGen 2.0 carbon capture project
  • Awarded nuclear inspection and repair services contract for a U.S. utility
  • Shipped steam generators to FirstEnergy’s Davis-Besse Nuclear Power Station
  • Announced collaboration with Lightbridge Corporation on metallic nuclear fuel pilot fabrication facility
  • Completed construction of a new “state-of-the-art” manufacturing facility in China for the manufacture of boiler auxiliary equipment

Results of Operations

Consolidated revenues for the third quarter of 2013 were $774.8 million, a decrease of $32.8 million from the third quarter of 2012. Revenues in the Power Generation segment were flat compared to the prior year. Nuclear Operations segment revenues decreased by $2.4 million compared to the third quarter of 2012, primarily attributable to the mix and timing of work related to nuclear components manufacturing, partially offset by increased volume of naval nuclear fuel and downblending activities. Third quarter 2013 revenues for the Nuclear Energy segment decreased by $22.5 million versus the corresponding period of 2012, primarily reflecting the completion of several large nuclear services and equipment contracts that were ongoing in the prior year.

Bookings for the 2013 third quarter totaled $317.0 million, a decrease of 41.2% compared to $538.9 million booked in the prior year period, primarily due to lower environmental bookings in the Power Generation segment, lower services bookings in the Nuclear Energy segment, and favorable contract performance in the Nuclear Operations segment that had the effect of adjusting the value of contracts in the backlog and consequently reducing previous bookings on our cost-reimbursable contracts.

Operating income for the third quarter of 2013 was $82.1 million, a decrease of $2.3 million from the third quarter of 2012. Compared to the prior year, the Nuclear Operations, Technical Services, and mPower segments reported increases in operating income of $6.9 million, $6.7 million, and $2.0 million, respectively, which were offset by decreases in the operating income of the Power Generation and Nuclear Energy segments of $2.3 million and $9.5 million, respectively. The Nuclear Operations segment improvement was primarily attributable to increased income associated with its naval nuclear fuel and downblending business and from improved contract performance associated with contract cost reductions in the manufacturing of nuclear components. Improvement in the Technical Services segment primarily reflects improved contract performance resulting in higher estimated award fees at several managed sites. The decrease in the Power Generation segment operating income was driven by lower margins on construction and outage maintenance services and a lower level of net favorable close-outs as compared to the prior period, largely offset by lower overhead and selling, general, and administrative expenses due to ongoing cost reduction initiatives. The decrease in operating income of the Nuclear Energy segment was primarily attributable to lower revenue, which was partially offset by favorable warranty experience.

Included in operating income for the third quarter 2013 were $4.8 million of special charges for restructuring activities related to our Global Competitiveness Initiative (GCI). Excluding the restructuring charges, adjusted operating income for the third quarter of 2013 was $86.9 million, compared to adjusted operating income of $87.0 million for the same period in 2012.

“B&W’s Government businesses again produced strong results this quarter, reflecting their focus on delivering high quality products and services to our Government customer. Soft bookings in our Commercial segments, primarily due to regulatory uncertainty that continues to delay investment spending for many of our commercial utility customers, impacted revenues and operating income for both our Power Generation and Nuclear Energy segments. Cost reductions from our Global Competitiveness Initiative partially mitigated the impact of lower volume on operating income,” said E. James Ferland, President and Chief Executive Officer of B&W. “We continue to look for ways to drive revenue, reduce costs, and improve operating income across all of our businesses, and in particular in our commercial business units. This will remain an area of intense focus.”

Liquidity

The Company’s cash and investments position, net of debt, was $311.2 million at the end of the third quarter of 2013, a decrease of $47.5 million compared to $358.7 million at the end of the second quarter of 2013. During the quarter, the Company repurchased common shares totaling $14.3 million, contributed $25.5 million to its pension plans, and paid dividends of $8.9 million. In addition to net cash, the Company maintains a $700.0 million revolving credit agreement with $553.8 million of availability as of the end of the third quarter.

Outlook for the Remainder of 2013

The Company narrowed the range of expectations for adjusted earnings per share for the full year 2013 to between $2.30 and $2.40, from the previous range of $2.25 to $2.45. Adjusted earnings per share exclude GCI restructuring charges and the year-end mark-to-market adjustment for pension and other post-retirement benefits. The Company expects 2013 consolidated revenues to be approximately $3.3 billion, a reduction from the previous guidance of $3.4 billion to $3.5 billion.

Reconciliation of Non-GAAP Earnings Per Share and Operating Income
(in $ millions, except per share amounts)

  Three Months Ended September 30, 2013
  Impairment   Tax Benefit    
GAAPChargesRecognizedGCI ImpactNon-GAAP
Operating Income $ 82.1 $ - $ - $ 4.8 $ 86.9
Other Income / (Expense) (0.7 ) - - - (0.7 )
Provision for Income Taxes     (24.4 )     -       -       (1.6 )     (26.0 )
Net Income 57.0 - - 3.2 60.2
Net Loss (Income) Attributable to Non-Controlling Interest     3.4       -       -       -       3.4  
Net Income Attributable to The Babcock & Wilcox Company   $ 60.4     $ -     $ -     $ 3.2     $ 63.6  
 
Diluted Earnings per Common Share $ 0.54 $ - $ - $ 0.03 $ 0.57
Effective Tax Rate 30.0 %   30.2 %
 
Three Months Ended September 30, 2012
ImpairmentTax Benefit
GAAPChargesRecognizedGCI ImpactNon-GAAP
Operating Income $ 84.4 $ 2.6 $ - $ - $ 87.0
Other Income / (Expense) (27.9 ) 27.0 - - (0.9 )
Provision for Income Taxes     (7.3 )     (1.0 )     (25.3 )     -       (33.6 )
Net Income 49.3 28.6 (25.3 ) - 52.5
Net Loss (Income) Attributable to Non-Controlling Interest     2.2       -       -       -       2.2  
Net Income Attributable to The Babcock & Wilcox Company   $ 51.4     $ 28.6     $ (25.3 )   $ -     $ 54.7  
 
Diluted Earnings per Common Share $ 0.43 $ 0.24 $ (0.21 ) $ - $ 0.46
Effective Tax Rate 12.8 %   39.0 %
 
Nine Months Ended September 30, 2013
ImpairmentTax Benefit
GAAPChargesRecognizedGCI ImpactNon-GAAP
Operating Income $ 241.0 $ - $ - $ 25.5 $ 266.5
Other Income / (Expense) 0.8 - - - 0.8
Provision for Income Taxes     (70.2 )     -       -       (8.7 )     (78.9 )
Net Income 171.6 - - 16.8 188.4
Net Loss (Income) Attributable to Non-Controlling Interest     8.9       -       -       -       8.9  
Net Income Attributable to The Babcock & Wilcox Company   $ 180.5     $ -     $ -     $ 16.8     $ 197.3  
 
Diluted Earnings per Common Share $ 1.60 $ - $ - $ 0.15 $ 1.75
Effective Tax Rate 29.0 %   29.5 %
 
Nine Months Ended September 30, 2012
ImpairmentTax Benefit
GAAPChargesRecognizedGCI ImpactNon-GAAP
Operating Income $ 280.9 $ 2.6 $ - $ - $ 283.5
Other Income / (Expense) (25.6 ) 27.0 - - 1.4
Provision for Income Taxes     (74.6 )     (1.0 )     (25.3 )     -       (100.9 )
Net Income 180.7 28.6 (25.3 ) - 183.9
Net Loss (Income) Attributable to Non-Controlling Interest     8.0       -       -       -       8.0  
Net Income Attributable to The Babcock & Wilcox Company   $ 188.6     $ 28.6     $ (25.3 )   $ -     $ 191.9  
 
Diluted Earnings per Common Share $ 1.58 $ 0.24 $ (0.21 ) $ - $ 1.61
Effective Tax Rate 29.2 %   35.4 %
 

B&W is providing non-GAAP information regarding certain of its historical results and guidance on future earnings per share to supplement the financial information provided in accordance with GAAP and it should not be considered superior to, or as a substitute for, the comparable GAAP measures. B&W believes the non-GAAP measures provide meaningful insight in the Company’s operational performance and provides these measures to investors to help facilitate comparisons of operating results with prior periods and to assist them in understanding B&W’s ongoing operations.

Conference Call to Discuss Third Quarter 2013 Results

Date:

  Wednesday, November 13, 2013, at 8:30 a.m. ET

Live Webcast:

Investor Relations section of website at www.babcock.com

Forward-Looking Statements

B&W cautions that this release contains forward-looking statements, including, without limitation, statements relating to expected adjusted earnings per share and revenues. These forward-looking statements are based on management’s current expectations and involve a number of risks and uncertainties, including, among other things, adverse changes in the industries in which we operate, our ability to successfully identify and leverage new business opportunities and our ability to execute on contracts in backlog. If one or more of these risks or other risks materialize, actual results may vary materially from those expressed. For a more complete discussion of these and other risk factors, see B&W’s filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2012 and subsequent quarterly reports on Form 10-Q. B&W cautions not to place undue reliance on these forward-looking statements, which speak only as of the date of this release, and undertakes no obligation to update or revise any forward-looking statement, except to the extent required by applicable law.

About B&W

The Babcock & Wilcox Company is a leader in clean energy technology and services, primarily for the nuclear, fossil and renewable power markets as well as a premier advanced technology and mission critical defense contractor. B&W has locations worldwide and employs approximately 12,000 people, in addition to approximately 10,400 joint venture employees. A company overview presentation, which will be presented at investor conferences and meetings throughout this quarter, is available on the Investor Relations section of our website. For additional information please visit our website at www.babcock.com.

TABLES TO FOLLOW

     
THE BABCOCK & WILCOX COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
 
ASSETS
 
September 30,December 31,
20132012
(Unaudited)
(In thousands)
 
Current Assets:
Cash and cash equivalents $ 219,828 $ 383,547
Restricted cash and cash equivalents 46,292 60,961
Investments 45,837 88,769
Accounts receivable – trade, net 414,984 364,960
Accounts receivable – other 64,356 61,682
Contracts in progress 379,510 316,518
Inventories 113,895 124,218
Deferred income taxes 100,147 78,573
Other current assets     45,312       41,858
 
Total Current Assets     1,430,161       1,521,086
 
Property, Plant and Equipment 1,111,538 1,099,040
Less accumulated depreciation     667,597       652,019
 
Net Property, Plant and Equipment     443,941       447,021
 
Investments     4,288       4,090
 
Goodwill     281,205       280,780
 
Deferred Income Taxes     213,400       227,215
 
Investments in Unconsolidated Affiliates     201,789       186,354
 
Intangible Assets     82,383       87,686
 
Other Assets     82,497       86,123
 
TOTAL   $ 2,739,664     $ 2,840,355
 

   
THE BABCOCK & WILCOX COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
September 30,December 31,
20132012
(Unaudited)
(In thousands, except share and per share amounts)
 
Current Liabilities:
Notes payable and current maturities of long-term debt $ 4,793 $ 4,062
Accounts payable 268,256 264,798
Accrued employee benefits 165,534 186,495
Accrued liabilities – other 72,325 57,991
Advance billings on contracts 395,251 472,287
Accrued warranty expense 67,492 83,682
Income taxes payable     18,113       9,973  
 
Total Current Liabilities     991,764       1,079,288  
 
Long-Term Debt     276       430  
 
Accumulated Postretirement Benefit Obligation     66,364       71,208  
 
Environmental Liabilities     48,186       46,497  
 
Pension Liability     532,805       579,165  
 
Other Liabilities     59,715       60,851  
 
Commitments and Contingencies
 
Stockholders’ Equity:        

Common stock, par value $0.01 per share, authorized 325,000,000 shares; issued 120,361,748 and 119,608,026 shares at September 30, 2013 and December 31, 2012, respectively

1,204 1,196

Preferred stock, par value $0.01 per share, authorized 75,000,000 shares; No shares issued

-

-

Capital in excess of par value 740,143 713,257
Retained earnings 502,468 349,063
Treasury stock at cost, 9,542,087 and 4,372,143 shares at September 30, 2013 and December 31, 2012, respectively (251,997 ) (109,809 )
Accumulated other comprehensive income     30,317       32,728  
Stockholders’ Equity – The Babcock & Wilcox Company 1,022,135 986,435
Noncontrolling interest     18,419       16,481  
Total Stockholders’ Equity     1,040,554       1,002,916  
 
TOTAL   $ 2,739,664     $ 2,840,355  
 

   
THE BABCOCK & WILCOX COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 
Three Months EndedNine Months Ended
September 30,September 30,
2013   20122013   2012
(Unaudited)
(In thousands, except share and per share amounts)
 
Revenues   $ 774,834     $ 807,586     $ 2,466,393     $ 2,426,063  
 
Costs and Expenses:
Cost of operations 578,394 603,876 1,884,134 1,787,311
Research and development costs 23,787 27,893 52,970 91,079
Losses on asset disposals and impairments – net 1,258 2,620 1,345 1,738
Selling, general and administrative expenses 102,576 103,343 313,113 313,629
Special charges for restructuring activities     4,849       -       25,504       -  
Total Costs and Expenses     710,864       737,732       2,277,066       2,193,757  
 
Equity in Income of Investees     18,151       14,546       51,713       48,590  
 
Operating Income     82,121       84,400       241,040       280,896  
 
Other Income (Expense):
Interest income 480 417 1,135 1,154
Interest expense (631 ) (996 ) (2,238 ) (2,771 )
Other – net     (533 )     (27,306 )     1,878       (24,007 )
Total Other Income (Expense)     (684 )     (27,885 )     775       (25,624 )
 
Income before Provision for Income Taxes 81,437 56,515 241,815 255,272
 
Provision for Income Taxes     24,416       7,259       70,217       74,611  
 
Net Income     57,021       49,256       171,598       180,661  
 
Net Loss Attributable to Noncontrolling Interest     3,425       2,187       8,892       7,963  
 
Net Income Attributable to The Babcock & Wilcox Company   $ 60,446     $ 51,443     $ 180,490     $ 188,624  
 
Earnings per Common Share:
Basic:

Net Income Attributable to The Babcock & Wilcox Company

$

0.54

$

0.43

$

1.61

$

1.59

Diluted:

Net Income Attributable to The Babcock & Wilcox Company

 

$

0.54

   

$

0.43

   

$

1.60

   

$

1.58

 
 

Shares used in the computation of earnings per share:

Basic 110,931,376 118,843,829 112,309,170 118,582,544
Diluted     111,749,381       119,452,881       113,049,700       119,189,977  
 

 
THE BABCOCK & WILCOX COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Nine Months Ended
September 30,
2013   2012
(Unaudited)
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 171,598 $ 180,661
Non-cash items included in net income:
Depreciation and amortization 51,341 52,818
Income of investees, net of dividends (18,419 ) (26,455 )
Losses on asset disposals and impairments 1,345 1,738
Impairment of USEC investment - 27,000
Recognition of uncertain tax positions - (25,305 )
In-kind research and development costs 11,289 13,477
Amortization of pension and postretirement costs 2,265 2,531
Stock-based compensation expense 13,072 13,555
Excess tax benefits from stock-based compensation (64 ) (1,441 )
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable (44,663 ) (61,828 )
Contracts in progress and advance billings on contracts (140,862 ) (104,832 )
Accounts payable 5,305 37,631
Inventories 10,559 (24,727 )
Current and deferred income taxes (1,284 ) 44,099
Accrued and other current liabilities (3,588 ) (19,024 )
Pension liability, accumulated postretirement benefit obligation and accrued employee benefits (69,842 ) (178,953 )
Other, net     5,921       (10,182 )
NET CASH USED IN OPERATING ACTIVITIES     (6,027 )     (79,237 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (Increase) in restricted cash and cash equivalents 14,669 (752 )
Purchases of property, plant and equipment (45,288 ) (58,780 )
Proceeds from sale of unconsolidated affiliate - 2,091
Purchase of intangible assets (2,200 ) -
Purchases of available-for-sale securities (79,747 ) (234,577 )
Sales and maturities of available-for-sale securities 122,677 163,203
Investment in equity and cost method investees (2,807 ) (6,437 )
Proceeds from asset disposals     586       149  
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES     7,890       (135,103 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of short-term borrowing and long-term debt (157 ) (4,592 )
Increase in short-term borrowing 649 2,532
Payment of debt issuance costs - (4,850 )
Repurchase of common shares (140,143 ) -
Dividends paid to common shareholders (27,082 ) -
Excess tax benefits from stock-based compensation 64 1,441
Exercise of stock options 3,756 2,474
Other     (414 )     (395 )
NET CASH USED IN FINANCING ACTIVITIES     (163,327 )     (3,390 )
EFFECTS OF EXCHANGE RATE CHANGES ON CASH     (2,255 )     2,820  
NET DECREASE IN CASH AND CASH EQUIVALENTS (163,719 ) (214,910 )
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD     383,547       415,209  
CASH AND CASH EQUIVALENTS AT END OF PERIOD   $ 219,828     $ 200,299  
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes (net of refunds) $ 70,602 $ 61,617
SCHEDULE OF NONCASH INVESTING ACTIVITY:
Accrued capital expenditures included in accounts payable $ 6,040 $ 5,406
 

 
THE BABCOCK & WILCOX COMPANY
BUSINESS SEGMENT INFORMATION
       
Three Months EndedNine Months Ended
September 30,September 30,
2013201220132012

(Unaudited)

(In thousands)

REVENUES:

Power Generation $ 426,960 $ 426,363 $ 1,359,614 $ 1,337,673
Nuclear Operations 282,120 284,450 874,245 800,026
Technical Services 25,242 26,023 77,903 79,265
Nuclear Energy 52,470 75,006 179,171 228,916
mPower 343 39 980 107
Adjustments and Eliminations     (12,301 )     (4,295 )     (25,520 )     (19,924 )
 
TOTAL   $ 774,834     $ 807,586     $ 2,466,393     $ 2,426,063  
 

SEGMENT INCOME:

Power Generation $ 38,348 $ 40,600 $ 102,213 $ 138,210
Nuclear Operations 63,819 56,919 184,280 167,112
Technical Services 18,398 11,657 47,812 45,614
Nuclear Energy 21 9,517 10,201 41,528
mPower     (25,576 )     (27,602 )     (53,627 )     (88,214 )
SUBTOTAL 95,010 91,091 290,879 304,250
Corporate (8,040 ) (6,691 ) (24,335 ) (23,354 )
Special Charges for Restructuring Activities     (4,849 )     0       (25,504 )     0  
TOTAL   $ 82,121     $ 84,400     $ 241,040     $ 280,896  
 

EQUITY IN INCOME (LOSS) OF INVESTEES:

Power Generation $ 3,287 $ 4,214 $ 10,596 $ 11,090
Nuclear Operations 0 0 0 0
Technical Services 15,063 10,332 41,595 37,500
Nuclear Energy (199 ) 0 (478 ) 0
mPower     0       0       0       0  
 
TOTAL   $ 18,151     $ 14,546     $ 51,713     $ 48,590  
 

PENSION EXPENSE:

Power Generation $ 750 $ 2,816 $ 2,240 $ 12,572
Nuclear Operations 1,133 2,834 3,399 10,174
Technical Services 72 178 216 646
Nuclear Energy 899 516 3,038 1,593
mPower 0 0 0 0
Corporate     505       615       1,515       2,031  
 
TOTAL   $ 3,359     $ 6,959     $ 10,408     $ 27,016  
 

DEPRECIATION AND AMORTIZATION:

Power Generation $ 5,720 $ 4,821 $ 16,519 $ 14,312
Nuclear Operations 6,769 7,776 20,182 24,679
Technical Services 48 61 144 189
Nuclear Energy 1,648 1,396 4,832 4,404
mPower 122 158 365 158
Corporate     3,178       3,076       9,299       9,076  
 
TOTAL   $ 17,485     $ 17,288     $ 51,341     $ 52,818  
 

RESEARCH AND DEVELOPMENT, NET:

Power Generation $ 4,585 $ 5,611 $ 16,128 $ 16,260
Nuclear Operations 54 0 67 119
Technical Services 17 14 56 339
Nuclear Energy 879 1,050 3,079 2,728
mPower     18,252       21,218       33,640       71,633  
 
TOTAL   $ 23,787     $ 27,893     $ 52,970     $ 91,079  
 

CAPITAL EXPENDITURES:

Power Generation $ 1,553 $ 5,874 $ 13,403 $ 16,121
Nuclear Operations 8,187 7,146 21,599 30,502
Technical Services 66 0 66 0
Nuclear Energy 1,163 1,314 4,141 3,247
mPower 331 420 1,745 1,087
Corporate     555       2,478       4,334       7,823  
 
TOTAL   $ 11,855     $ 17,232     $ 45,288     $ 58,780  
 

BACKLOG:

Power Generation $ 2,176,110 $ 2,487,822 $ 2,176,110 $ 2,487,822
Nuclear Operations 2,530,159 2,630,206 2,530,159 2,630,206
Technical Services 15,388 4,119 15,388 4,119
Nuclear Energy 185,632 321,307 185,632 321,307
mPower     2,221       1,800       2,221       1,800  
 
TOTAL   $ 4,909,510     $ 5,445,254     $ 4,909,510     $ 5,445,254  

The Babcock & Wilcox Company
Investor Contact:
Jenny L. Apker, Vice President, Treasurer and Investor Relations, 704-625-4944
investors@babcock.com
or
Media Contact:
Aimee Mills, Media Relations Lead, 980-365-4583
aemills@babcock.com