Babcock & Wilcox Announces Second Quarter 2013 Results

Babcock & Wilcox Announces Second Quarter 2013 Results

- Revenues of $886.1 million, Increased 3.9%
- GAAP Earnings per Share of $0.65, Adjusted Earnings per Share of $0.72
- Quarterly Dividend of $0.08 per share

CHARLOTTE, N.C.--(BUSINESS WIRE)-- The Babcock & Wilcox Company (NYS: BWC) ("B&W" or the "Company") today reported second quarter 2013 revenues of $886.1 million, an increase of $33.5 million, or 3.9%, from the second quarter of 2012. GAAP earnings per share for the second quarter of 2013 were $0.65 compared to $0.65 in the second quarter of 2012. Adjusted earnings per share for the second quarter of 2013, which excludes the impact of $12.2 million of restructuring charges, were $0.72, an increase of $0.07, or 10.8%, versus the second quarter of 2012.


During the second quarter of 2013, the Company repurchased 2.5 million shares of its common stock at a cost of $68.8 million. Through June 30, 2013, the Company has repurchased a total of 8.5 million shares at a cost of $222.4 leaving approximately $277.6 million of capacity remaining under its previously announced $500 million share repurchase authorization.

Recent Highlights

  • Announced $366 Million Contract for Naval Reactors Materials Procurement
  • Awarded Contract for 2nd Virginia Class Submarine in 2013
  • Awarded $154 Million Contract for an Environmental Systems Project for a Western U.S. Utility
  • Project Joint Venture Awarded $110 Million Contract to Replace Equipment at Iowa Power Plant
  • Awarded $40 Million Contract for Denmark Waste-to-Energy Plant

Results of Operations

Consolidated revenues for the second quarter of 2013 were $886.1 million, an increase of $33.5 million, or 3.9%, from the second quarter of 2012. Revenues in the Nuclear Operations segment increased by $65.6 million compared to the prior year period, primarily driven by the timing of activity in the manufacturing of nuclear components for US government programs. Second quarter 2013 revenues of the Power Generation segment decreased by $25.8 million versus the same period in 2012, largely as a result of revised percentage-of-completion estimates for a project on which we recognized contract losses during the quarter. Bookings for the 2013 second quarter totaled $766.2 million, an increase of 25.4% compared to $610.8 million booked in the prior year period.

Operating income for the second quarter of 2013 was $98.7 million, a decrease of $11.4 million from the second quarter of 2012. Compared to the prior year, the mPower and Nuclear Operations segments reported increases in operating income of $31.6 million and $10.3 million, respectively, which were offset by decreases in the operating income of the Power Generation, Nuclear Energy and Technical Services segments of $27.6 million, $12.4 million and $3.7 million, respectively. The mPower segment improvement was attributable to the recognition of the cost-sharing award from the Department of Energy (DOE) under the Cooperative Agreement. The decrease in the Power Generation segment operating income was driven by the recognition of $30.2 million of additional contract losses related to revised estimated costs to complete a biomass boiler project largely due to unforeseen worksite conditions, for which losses previously were recorded in the fourth quarter of 2012. The decrease in operating income of the Nuclear Energy segment was primarily attributable to an $18.1 million gain from a contract settlement agreement recognized in the prior year quarter.

Included in operating income for the second quarter 2013 were $12.2 million of special charges for restructuring activities related to our Global Competitiveness Initiative (GCI). Excluding the restructuring charges, adjusted operating income for the second quarter of 2013 was $110.9 million, an increase of $0.8 million compared to the same period in 2012.

"Overall, B&W's second quarter results reflect solid performances across our business units, highlighted by improved bookings and revenue, as well as the benefit of the DOE grant," said E. James Ferland, President and Chief Executive Officer of B&W. "What would have been an exceptionally strong quarter for operating income and margin was impacted by the recognition of significant losses on a single project. Claims against the customer are substantial in value and any recovery of these additional losses will be realized in future periods."

"In addition, we have made outstanding progress on our GCI initiatives and now believe this program will exceed our initial expectations of $40 million to $50 million in total annual cost savings as we continue to identify opportunities to streamline operations and reduce overhead expenses," Ferland concluded.

Quarterly Dividend

On August 6, 2013, the Company declared a quarterly cash dividend of $0.08 per common share. The dividend will be payable on September 10, 2013 to shareholders of record on August 20, 2013.

Liquidity

The Company's cash and investments position, net of debt, was $358.7 million at the end of the second quarter of 2013, a decrease of $56.2 million compared to $414.9 million at the end of the first quarter of 2013. During the quarter, the Company repurchased common shares totaling $68.8 million, contributed $15.0 million to its pension plans and paid dividends of $9.0 million. In addition to net cash, the Company maintains a $700.0 million revolving credit agreement with $552.2 million of availability as of the end of the second quarter.

Outlook for the Remainder of 2013

The Company now expects 2013 consolidated revenues to be between $3.4 billion and $3.5 billion. The Company reaffirms its expectation that adjusted earnings per share for the full year 2013 will be between $2.25 and $2.45. Adjusted earnings per share exclude GCI restructuring charges and the year-end mark-to-market adjustment for pension and post-retirement benefits.

  

Reconciliation of Non-GAAP Earnings Per Share and Operating Income

(in $ millions, except per share amounts)

 
Three Months Ended June 30, 2013Six Months Ended June 30, 2013
GAAP GCI Impact Non-GAAPGAAP GCI Impact Non-GAAP
Operating Income$98.7 $12.2 $110.9$158.9 $20.7 $179.6
Other Income / (Expense)0.5-0.51.5-1.5
Provision for Income Taxes  (29.5)  (4.1)  (33.6) (45.8)  (7.0)  (52.8)
Net Income69.78.177.8114.613.7128.3
Net Loss (Income) Attributable to Non-Controlling Interest  3.2   -   3.2  5.5   -   5.5 
Net Income Attributable to The Babcock & Wilcox Company $72.9  $8.1  $81.0 $120.0  $13.7  $133.7 
 
Diluted Earnings per Common Share$0.65$0.07$0.72$1.06$0.12$1.18
Effective Tax Rate29.8%34.0% 30.2% 28.6%  34.0%  29.2%
 
  
Three Months Ended June 30, 2012Six Months Ended June 30, 2012
GAAP GCI Impact Non-GAAPGAAP GCI Impact Non-GAAP

Operating Income

$

110.1

 

$

-

 

$ 110.1

$

196.5

 

$

-

 

$

196.5

Other Income / (Expense)

3.7

-

3.7

2.3

-

2.3

Provision for Income Taxes

  

(39.5

)

  

-

 

(39.5

)

 

(67.4

)

  

-

  

(67.4

)

Net Income

74.3

-

74.3

131.4

-

131.4

Net Loss (Income) Attributable to Non-Controlling Interest

  

2.9

   

-

 

2.9

  

5.8

   

-

  

5.8

 

Net Income Attributable to The Babcock & Wilcox Company

 

$

77.2

  

$

-

 

$ 77.2

 

$

137.2

  

$

-

 

$

137.2

 
 

Diluted Earnings per Common Share

$

0.65

$

-

$ 0.65

$

1.15

$

-

$

1.15

Effective Tax Rate

34.7

%

34.7

%

 

33.9

%

    

33.9

%

 

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 Second Quarter 2013 Results

Date: Thursday, August 8, 2013, at 8:30 a.m. ET

Live Webcast: Investor Relations section of website at www.babcock.com

Forward-Looking Statements

The Company cautions that this release contains forward-looking statements, including, without limitation, statements relating to our quarterly dividend; expected revenues and adjusted earnings per share for full-year 2013; our expectations with respect to the savings and benefits associated with our Global Competitiveness Initiative; and claims for project losses, to the extent such claims may be viewed as an indicator of future earnings. 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 our liquidity position or the industries in which we operate, our inability to execute on contracts in backlog, delays or other difficulties implementing our Global Competitiveness Initiative and our inability to obtain recovery on our project claims. 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

 
June 30,December 31,
20132012
(Unaudited)
(In thousands)
 
 
Current Assets:
Cash and cash equivalents$242,205$383,547
Restricted cash and cash equivalents48,28160,961
Investments69,11888,769
Accounts receivable - trade, net407,323364,960
Accounts receivable - other61,77261,682
Contracts in progress344,938316,518
Inventories111,583124,218
Deferred income taxes81,82678,573
Other current assets  50,056  41,858
 
Total Current Assets  1,417,102  1,521,086
 
Property, Plant and Equipment1,114,5001,099,040
Less accumulated depreciation  670,923  652,019
 
Net Property, Plant and Equipment  443,577  447,021
 
Investments  4,196  4,090
 
Goodwill  280,239  280,780
 
Deferred Income Taxes  209,803  227,215
 
Investments in Unconsolidated Affiliates  201,121  186,354
 
Intangible Assets  85,441  87,686
 
Other Assets  83,830  86,123
 
TOTAL $2,725,309 $2,840,355
 

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THE BABCOCK & WILCOX COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
 
June 30,December 31,
20132012
(Unaudited)
(In thousands, except share and per share amounts)
 
 
Current Liabilities:
Notes payable and current maturities of long-term debt$4,764$4,062
Accounts payable265,391264,798
Accrued employee benefits172,809186,495
Accrued liabilities - other77,19657,991
Advance billings on contracts419,013472,287
Accrued warranty expense74,48783,682
Income taxes payable  963   9,973 
 
Total Current Liabilities  1,014,623   1,079,288 
 
Long-Term Debt  319   430 
 
Accumulated Postretirement Benefit Obligation  67,491   71,208