MRO Magazine

Babcock & Wilcox Announces Second Quarter 2015 Results


August 4, 2015
By Business Wire News

CHARLOTTE, N.C.

Babcock & Wilcox Enterprises, Inc. (B&W) (NYSE:BW) announced today second quarter 2015 revenues of $437.5 million, an increase of $110.1 million, or 33.6%, from the second quarter of 2014. GAAP earnings per share from continuing operations for the second quarter of 2015 were $0.08 compared to $0.03 in the second quarter of 2014. Adjusted earnings per share, which excludes the impact of impairment, restructuring and spin-related costs for the quarter, were $0.27 for the three months ended June 30, 2015 compared to $0.14 in the prior year period.

“As we begin operations as a stand-alone company, B&W continues to deliver on our strategy and build a solid track record of performance,” said Mr. E. James Ferland, Chairman and Chief Executive Officer. “We are pleased that all three business segments ended the quarter at or above target with a significant increase in revenues in Global Power driven by the new international project awards in line with our growth strategy.

In addition the Board has authorized a share repurchase program of up to $100 million over the next two years. “The new program will allow opportunistic share repurchases as part of our broader capital allocation strategy,” continued Mr. Ferland.

Results of Operations

Consolidated revenues for the second quarter of 2015 were $437.5 million, an increase of 33.6%, compared to $327.4 million for the second quarter of 2014. The Global Power segment had the largest increase with revenues of $157.4 million in the quarter, which was a 43.5% increase over the $109.7 million in revenues in the prior year period driven by an increase in new build steam projects. Revenues in the Global Services segment were $236.7 million in the three months ending June 30, 2015, versus $214.1 million in the corresponding period in 2014, an increase of $22.6 million primarily related to increased activity in service projects and construction. The Industrial Environmental segment contributed $43.4 million in revenue this period compared to $3.6 million in the second quarter of 2014 due to the acquisition of MEGTEC on June 20, 2014.

GAAP operating income for the second quarter of 2015 increased $1.7 million to $4.9 million compared to $3.2 million in the prior year period primarily due to increased revenues. GAAP operating income for the second quarter of 2015 also included $9.0 million of non-cash facility and equipment impairments primarily related to the close-out of a carbon capture and storage research program, as well as $5.3 million of restructuring costs related to margin improvement and $0.9 million in spin-related costs. Excluding these charges and a $1.3 million allocation for the discontinued Nuclear Energy operation that was transferred to BWX Technologies as part of the spin, adjusted operating income increased 71% in the second quarter of 2015 to $21.4 million, compared to adjusted operating income of $12.5 million in the second quarter of 2014.

Second quarter 2015 gross profit in the Global Power segment increased $7.2 million from the same period last year to $26.7 million, attributable to the increased segment revenues. The Global Services segment reported a gross profit of $46.3 million in the second quarter of 2015, which was $2.0 million less than the gross profit of $48.4 million in the prior year second quarter due to the effects of operations and maintenance activities. Gross profit in the Industrial Environmental segment was $8.9 million in the second quarter of 2015 as a result of the MEGTEC acquisition.

“With the spin behind us, we will increase our focus on execution of our strategy to improve profitability and grow the company,” continued Mr. Ferland. “We will continue to drive margins, expand globally and look for smart acquisitions. We have teams working each of the three elements of our strategy while our day-to-day operations work to exceed customer expectations.

Liquidity and Debt

The Company’s cash and investments position, net of restricted cash, was $307.6 million at the end of the second quarter of 2015. This consolidated cash position includes $175.7 million in non-U.S. cash. On June 30, 2015, the Company closed on a new $600 million credit facility. At June 30, 2015, we had no borrowings outstanding under the revolving credit facility, and after giving effect to the leverage ratio and $109.1 million in letters of credit issued under the new credit agreement, we had approximately $383.9 million available for borrowings or to meet letter of credit requirements.

Share Repurchase Program

As noted above, the Board has authorized the repurchase of up to $100 million of common stock. The Company may utilize various methods to effect the repurchases, and the timing of repurchases will depend upon several factors, including market and business conditions, and repurchases may be discontinued at any time.

2015 Outlook

The Company affirmed its guidance for key financial benchmarks for 2015:

  • Consolidated revenue is expected to increase to approximately $1.7 billion through a combination of core growth and the full year of the MEGTEC acquisition;
  • Adjusted EPS of $1.10 to $1.30 excluding mark-to-market adjustment for pension and post-retirement benefits, spin-related transaction costs and restructuring charges; and
  • Adjusted tax rate for 2015 is expected to be in the range of 32% to 34%.

Conference Call to Discuss Second Quarter 2015 Results

Date:

  Wednesday, August 5, 2015, at 8:30 a.m. EDT

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 backlog, to the extent they may be viewed as an indicator of future revenues; management’s expectations regarding the industries in which we operate; our guidance and forecasts for 2015; and our projected operating margin improvements, savings and restructuring costs. These forward-looking statements are based on management’s current expectations and involve a number of risks and uncertainties, including, among other things, disruptions experienced with customers and suppliers; the inability to successfully operate independently following the spin-off; the inability to retain key personnel; adverse changes in the industries in which we operate and delays, changes or termination of contracts in backlog; and the timing and amount of repurchases of our common stock, if any. 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 the information statement on Form 10 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

Headquartered in Charlotte, N.C., Babcock & Wilcox is a global leader in energy and environmental technologies and services for the power and industrial markets. B&W companies employ approximately 6,000 people around the world. Follow us on Twitter @BabcockWilcox and learn more at www.babcock.com.

 
Exhibit 1
Babcock & Wilcox Enterprises, Inc.

Reconciliation of Non-GAAP Operating Income and Earnings Per Share(1)(2)

(in $ millions, except per share amounts)

         
Three Months Ended June 30, 2015
NE Sgmt
GAAP  Impairments  Restructuring  Allocation  Spin Costs  Non-GAAP
 
Operating Income (Loss) $ 4.9 $ 9.0 $ 5.3 $ 1.3 $ 0.9 $ 21.4
Other Income / (Expense) 0.2 0.2
Income Tax (Expense) / Benefit   (0.9 )     (3.4 )     (1.9 )     (0.3 )     (0.3 )     (6.9 )
Net Income (Loss) $ 4.1 $ 5.6 $ 3.5 $ 1.0 $ 0.6 $ 14.7
Net Loss Attributable to Non-Controlling Interest   (0.1 )                             (0.1 )
Net Income from Continuing Operations $ 4.1     $ 5.6     $ 3.5     $ 1.0     $ 0.6     $ 14.6  
 
Diluted EPS – Continuing Operations $ 0.08 $ 0.10 $ 0.06 $ 0.02 $ 0.01 $ 0.27
 
Tax Rate 18.2 %   31.9 %
 
 
Three Months Ended June 30, 2014
MEGTEC
NE SgmtAcquisition
GAAP  Restructuring  Allocation  Costs  Non-GAAP
 
Operating Income (Loss) $ 3.2 $ 7.5 $ 1.3 $ 0.5 $ 12.5
Other Income / (Expense) 0.3 0.3
Income Tax (Expense) / Benefit   (1.8 )     (2.6 )     (0.5 )     (0.2 )     (5.0 )
Net Income (Loss) $ 1.6 $ 5.0 $ 0.9 $ 0.3 7.8
Net Loss Attributable to Non-Controlling Interest   (0.1 )                       (0.1 )
Net Income from Continuing Operations $ 1.5     $ 5.0     $ 0.9     $ 0.3       7.7  
 
Diluted EPS – Continuing Operations $ 0.03 $ 0.09 $ 0.02 $ 0.01 $ 0.14
 
Tax Rate 53.3 %   39.2 %
 
 
Six Months Ended June 30, 2015
NE Sgmt
GAAP  Impairments  Restructuring  Allocation  Spin Costs  Non-GAAP
 
Operating Income (Loss) $ 22.2 $ 9.0 $ 7.7 $ 2.7 $ 0.9 $ 42.4
Other Income / (Expense) (0.1 ) (0.1 )
Income Tax (Expense) / Benefit   (6.6 )     (3.4 )     (2.7 )     (0.7 )     (0.3 )     (13.8 )
Net Income (Loss) $ 15.5 $ 5.6 $ 4.9 $ 2.0 $ 0.6 $ 28.5
Net Loss Attributable to Non-Controlling Interest   (0.1 )                             (0.1 )
Net Income from Continuing Operations $ 15.4     $ 5.6     $ 4.9     $ 2.0     $ 0.6     $ 28.4  
 
Diluted EPS – Continuing Operations $ 0.29 $ 0.10 $ 0.09 $ 0.04 $ 0.01 $ 0.53
 
Tax Rate 29.9 %   32.6 %
 
 
Six Months Ended June 30, 2014
MEGTEC
NE SgmtAcquisition
GAAP  Restructuring  Allocation  Costs  Non-GAAP
 
Operating Income (Loss) $ 7.7 $ 9.0 $ 2.7 $ 0.5 $ 19.8
Other Income / (Expense) 2.0 2.0
Income Tax (Expense) / Benefit   (0.8 )     (3.1 )     (0.9 )     (0.2 )     (5.0 )
Net Income (Loss) $ 8.9 $ 5.9 $ 1.8 $ 0.3 16.9
Net Loss Attributable to Non-Controlling Interest   (0.2 )                       (0.2 )
Net Income from Continuing Operations $ 8.7     $ 5.9     $ 1.8     $ 0.3       16.7  
 
Diluted EPS – Continuing Operations $ 0.16 $ 0.11 $ 0.03 $ 0.01 $ 0.30
 
Tax Rate 8.6 %   22.7 %

(1) May not foot due to rounding.

(2) B&W is providing non-GAAP information regarding certain of its historical results and guidance on future earnings per share to supplement the results 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 into 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.

   
Exhibit 2
Babcock & Wilcox Enterprises, Inc.
Condensed Consolidated and Combined Statements of Operations
 
Three Months EndedSix Months Ended
June 30,June 30,
2015  2014  2015  2014
(Unaudited)
(In thousands, except per share amounts)
   
Revenues$437,485$327,379$834,640$639,457
Costs and expenses:
Cost of operations 355,601 258,351 669,359 513,578
Research and development costs 3,962 4,281 8,480 8,293
Losses on asset disposals and impairments, net 9,009 1,457 9,027 1,457
Selling, general and administrative expenses 59,709 53,040 116,802 102,252
Special charges for restructuring activities and spin-off costs     5,312       7,513       7,666       8,991  
Total costs and expenses 433,593 324,642 811,334 634,571
Equity in income of investees     967       433       (1,104 )     2,799  
 

Operating income

4,859

3,170

22,202

7,685

 

Other income (expense):

Interest income 126 48 282 677
Interest expense (144 ) (84 ) (284 ) (204 )
Other – net     201       323       (110 )     1,554  
Total other income (expense) 183 287 (112 ) 2,027
 

Income from continuing operations before provision for income taxes

5,042

3,457

22,090

9,712

Provision for income taxes     919       1,841       6,611       833  
Income from continuing operations 4,123 1,616 15,479 8,879
Income from discontinued operations, net of tax     1,418       3,397       2,803       7,339  
Net income 5,541 5,013 18,282 16,218
 

Net income attributable to noncontrolling interest

   

(54

)

   

(77

)

   

(106

)

   

(193

)

Net Income attributable to Babcock & Wilcox Enterprises, Inc.  $5,487    $4,936    $18,176    $16,025  
 
Amounts attributable to Babcock & Wilcox Enterprises, Inc.
Income from continuing operations $ 4,069 $ 1,539 $ 15,373 $ 8,686
Income from discontinued operations, net of tax     1,418       3,397       2,803       7,339  
Net income attributable to Babcock & Wilcox Enterprises, Inc.   $ 5,487     $ 4,936     $ 18,176     $ 16,025  
 
Basic earnings per common share:
Continuing operations $ 0.08 $ 0.03 $ 0.29 $ 0.16
Discontinued operations     0.02       0.06       0.05       0.13  
Basic earnings per common share   $ 0.10     $ 0.09     $ 0.34     $ 0.29  
Diluted earnings per common share:
Continuing operations$0.08$0.03$0.29$0.16
Discontinued operations     0.02       0.06       0.05       0.13  
Diluted earnings per common share   $ 0.10     $ 0.09     $ 0.34     $ 0.29  
 
Shares used in the computation of earnings per common share:
Basic 53,560 54,883 53,474 55,051
Diluted 53,787 55,058 53,680 55,251
 
   
Exhibit 3
Babcock & Wilcox Enterprises, Inc.
Condensed Consolidated and Combined Balance Sheets
 
June 30,December 31,
2015  2014
(Unaudited)
(In thousands)
ASSETS
 
Current assets:
Cash and cash equivalents $ 307,562 $ 218,659
Restricted cash and cash equivalents 35,538 26,311
Investments 5,098 1,607
Accounts receivable – trade, net 233,836 265,456
Accounts receivable – other 40,385 36,147
Contracts in progress 125,160 107,751
Inventories 97,113 98,711
Deferred income taxes 36,568 36,601
Other current assets 16,391 11,347
Current assets of discontinued operations           46,177  
Total current assets 897,651 848,767
 
Property, plant and equipment 324,165 335,761
Less accumulated depreciation     (179,916 )     (200,525 )
Net property, plant and equipment 144,249 135,236
 
Investments 1,111 214
Goodwill 202,398 209,277
Deferred income taxes 123,576 115,111
Investments in unconsolidated affiliates 100,804 109,248
Intangible assets 40,915 50,646
Other assets 26,695 9,227
Non-current assets of discontinued operations           38,828  
TOTAL ASSETS  $1,537,399    $1,516,554  
 
   
Exhibit 3
Babcock & Wilcox Enterprises, Inc.
Condensed Consolidated and Combined Balance Sheets (continued)
 
June 30,December 31,
2015  2014
(Unaudited)
(In thousands, except share
and per share amounts)
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
Current liabilities:
Notes payable and current maturities of long-term debt $ 3,222 $ 3,215
Accounts payable 147,885 160,606
Accrued employee benefits 41,627 39,464
Advance billings on contracts 168,946 148,098
Accrued warranty expense 36,995 37,735
Accrued liabilities – other 49,216 54,827
Current liabilities of discontinued operations           44,145
Total current liabilities 447,891 488,090
 
Accumulated postretirement benefit obligation 29,103 28,347
Pension liability 246,366 253,763
Other liabilities 40,097 42,929
Non-current liabilities of discontinued operations           15,988
Total liabilities $ 763,457 $ 829,117
 
Commitments and contingencies
 
Stockholders’ Equity:

Common stock, par value $0.01 per share,
 authorized 200,000,000 shares; issued 53,719,878 and 0
 shares at June 30, 2015 and December 31, 2014, respectively

537

Preferred stock, par value $0.01 per share,
 authorized 20,000,000 shares; No shares issued

Capital in excess of par value 782,692
Retained earnings
Accumulated other comprehensive income (10,407 ) 10,374
Former net parent investment           676,036

Stockholders’ equity – Babcock & Wilcox Enterprises, Inc.

772,822 686,410
 

Noncontrolling interest

    1,120       1,027
Total Stockholders’ equity     773,942       687,437
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $1,537,399    $1,516,554
 
 
Exhibit 4
Babcock & Wilcox Enterprises, Inc.
Condensed Consolidated and Combined Statements of Cash Flows
 
Six Months Ended
June 30,
2015  2014
(Unaudited)
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:  
Net Income $ 18,282 $ 16,218
Non-cash items included in net income:
Depreciation and amortization 21,458 11,307
Income of equity method investees, net of dividends 2,292 (240 )
Losses on asset disposals and impairments 10,607 1,457
Recognition of losses for pension and postretirement plans 200 250
Excess tax benefits from stock-based compensation (12 )
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable 31,332 30,400
Accounts payable (11,369 ) (50,150 )
Contracts in progress and advance billings on contracts 5,170 (69,580 )
Inventories 663 4,503
Income taxes (2,075 ) 5,911
Accrued and other current liabilities (7,735 ) 4,360
Pension liability, accrued postretirement benefit obligation and employee benefits (7,237 ) (14,745 )
Other, net     (5,958 )     (2,390 )
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES   $ 55,630     $ (57,931 )
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in restricted cash and cash equivalents 1,307 4,420
Purchases of property, plant and equipment (15,215 ) (5,499 )
Acquisition of business, net of cash acquired (127,098 )
Purchase of intangible assets (722 )
Purchases of available-for-sale securities (4,919 ) (2,844 )
Sales and maturities of available-for-sale securities 1,647 7,247
Proceeds from asset disposals (6 )
Investment in equity method investees           (4,900 )
NET CASH USED IN INVESTING ACTIVITIES   $ (17,180 )   $ (129,402 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of short-term borrowing and long-term debt (1,815 )
Increase in short-term borrowing 733
Net transfers (to) from parent 75,587 215,262
Excess tax benefits from stock-based compensation 12
Other     (38 )     (223 )
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES   $ 75,549     $ 213,969  
 
EFFECTS OF EXCHANGE RATE CHANGES ON CASH     (4,881 )     (4,123 )
CASH FLOWS FROM CONTINUING OPERATIONS     109,118       22,513  
         
CASH FLOWS FROM DISCONTINUED OPERATIONS:        
Operating cash flows from discontinued operations, net (20,192 ) (10,302 )
Investing cash flows from discontinued operations, net     (23 )     (115 )
NET CASH FLOWS PROVIDED BY (USED IN) DISCONTINUED OPERATIONS   $ (20,215 )   $ (10,417 )
         
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 88,903 12,096
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD     218,659       191,318  
CASH AND CASH EQUIVALENTS AT END OF PERIOD   $ 307,562     $ 203,414  
 
       

Exhibit 5

Babcock & Wilcox Enterprises, Inc.

Segment Information(1)

 
Three Months Ended June 30,Six Months Ended June 30,
2015  2014      2015  2014
(Unaudited)
(In thousands)
REVENUES:    
Global Power $ 157,373 $ 109,693 $ 281,259 $ 219,985
Global Services 236,720 214,086 468,894 415,872
Industrial Environmental     43,392     3,600         84,487     3,600
    $ 437,485   $ 327,379       $ 834,640   $ 639,457
GROSS PROFIT:
Global Power $ 26,676 $ 19,472 $ 47,104 $ 34,719
Global Services 46,308 48,356 99,595 89,960
Industrial Environmental     8,900     1,200         18,582     1,200
    $ 81,884   $ 69,028       $ 165,281   $ 125,879
 
 
Three Months Ended June 30,Six Months Ended June 30,
2015  2014      2015  2014
(Unaudited)
(In millions)
BOOKINGS:
Global Power $ 60.3 $ 261.7 $ 514.0 $ 312.1
Global Services 186.9 211.3 408.5 383.3
Industrial Environmental     52.2     N/A         108.0     N/A
    $ 299.4   $ 473.0       $ 1,030.5   $ 695.3
 
 
As of June 30,
20152014
(Unaudited)
(In millions)
BACKLOG:
Global Power $ 1,185.0 $ 868.8
Global Services 1,162.9 $ 1,263.5
Industrial Environmental     95.7   $ 83.0
    $ 2,443.5   $ 2,215.3

(1) May not foot due to rounding.

Babcock & Wilcox
Investor Contact:
Leslie Kass, Vice President Investor Relations and Communications, 704-625-4944
investors@babcock.com
or
Babcock & Wilcox
Media Contact:
Ryan Cornell, Public Relations, 330-860-1345
rscornell@babcock.com