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Babcock & Wilcox Announces First Quarter 2014 Results

Companies mentioned in this article: The Babcock & Wilcox Company

CHARLOTTE, N.C. -- (BUSINESS WIRE) -- The Babcock & Wilcox Company (NYSE: BWC) (“B&W” or the “Company”) today reported first quarter 2014 revenues of $662.0 million, a decrease of $143.4 million, or 17.8% from the first quarter of 2013. GAAP earnings per share for the first quarter of 2014 were $0.41 unchanged from $0.41 in the first quarter of 2013. Adjusted earnings per share for the first quarter 2014, which excludes the impact of $2.7 million of restructuring charges, were $0.42, a decrease of 8.7% from adjusted earnings per share of $0.46 for the first quarter of 2013.

During the first quarter of 2014, the Company repurchased 0.5 million shares of its common stock at a total cost of $15.7 million. Through March 31, 2014, the Company had repurchased a total of 10.0 million shares at a cost of $269.3 million, leaving $480.7 million of capacity remaining under its previously announced $750 million share repurchase authorizations.

Recent Highlights

  • Awarded $195 Million in Naval Reactors Contracts and Orders
  • Awarded Steam Generator Services Contract from American Electric Power
  • Awarded $302 Million in Contracts for Naval Reactors Fuel and Materials Services
  • Awarded U.S. Department of Energy Funding for Carbon Dioxide Capture Technology
  • Received Extension of Management and Operating Contract at Idaho National Laboratory
  • Announced Plans to Restructure mPower Small Modular Reactor Program

Results of Operations

Consolidated revenues for the first quarter of 2014 were $662.0 million, a decrease of $143.4 million, or 17.8%, from the first quarter of 2013. The Nuclear Operations segment revenues were $286.2 million, an increase of $25.1 million over the corresponding period in 2013, primarily due to strong execution and increased activity in the manufacturing of nuclear components for U.S. Government programs. Revenues in the Power Generation segment decreased by $149.4 million, to $312.1 million in the first quarter of 2014 compared to $461.5 million in 2013, primarily attributable to an $85.7 million decrease in new build environmental revenue due to lower levels of activity as projects related to the previously enacted environmental rules and regulations near completion and uncertainties continued regarding the outcome of other environmental regulations. Power Generation segment revenues from the new build steam and aftermarket services businesses decreased by $25.0 million and $34.6 million, respectively, primarily due to completion of several large projects in the past year. Revenues from the Nuclear Energy segment were $47.8 million compared to $63.5 million in the first quarter of 2013, a decrease of $15.7 million, due in part to the decision to discontinue the U.S. projects business.

Operating income for the first quarter of 2014 was $53.6 million, a decrease of $6.6 million compared to $60.2 million in the first quarter of 2013. Nuclear Operations segment operating income was $59.5 million in the first quarter of 2014, compared with $54.7 million in the same period last year. Power Generation segment operating income was $10.5 million in the first quarter of 2014, a decrease of $22.8 million from $33.3 million in the prior year period. Results included an additional $7.6 million charge related to a biomass power plant project, all of which we expect will be added to the customer claim. Operating income in the Technical Services segment during the first quarter 2014 increased by $0.6 million, to $14.8 million, compared to $14.2 million in the first quarter of 2013. Nuclear Energy segment operating income in the first quarter of 2014 decreased by $1.8 million, to $0.5 million, compared to $2.3 million in the corresponding period of 2013. The $26.7 million operating loss in the mPower segment in the first quarter of 2014 compares to a $26.9 million loss in the corresponding period in 2013.

Operating income for the first quarter of 2014 includes $2.7 million of special charges for restructuring activities related to the Global Competitiveness Initiative (GCI) and other cost reduction efforts. Excluding the restructuring charges, adjusted operating income for the first quarter of 2014 was $56.3 million, a 17.9% decrease compared adjusted operating income of $68.6 million in the first quarter of 2013.

“With strong performance in both the nuclear components and fuels businesses, the Nuclear Operations segment posted record first quarter revenue and earnings this period,” said E. James Ferland, President and Chief Executive Officer of B&W. “Healthy bookings in the Nuclear Energy segment in the first quarter reflect several important awards in Canada and the U.S. While bookings in our Power Generation segment were modest this quarter, we expect to book a couple of significant international boiler projects over the next three or four months and are seeing improvement in the domestic bid pipeline, particularly for environmental activity. We’ve had a slow start in Power Generation this year, but we expect performance will improve sequentially as the year progresses.”

Ferland continued, “We are making significant progress on the key objectives we set forth for 2014. Actions have been initiated to reduce mPower spending to an annual rate of approximately $15 million and we continue to work with the Department of Energy and our other stakeholders to confirm the best path forward for this technology. Plans to drive the improvement of operating margins in our commercial businesses are underway, with more than $50 million of additional opportunities identified and the end of 2015 target still sharply in focus. We also remain committed to increasing share buyback activity in the balance of 2014.”

Quarterly Dividend

On May 9, 2014, the Company declared a regular quarterly cash dividend of $0.10 per common share. The dividend will be payable on June 13, 2014 to shareholders of record on May 23, 2014.

Liquidity

The Company’s cash and investments position, net of debt, was $234.4 million at the end of the first quarter of 2014, a decrease of $167.9 million compared to $402.3 million at the end of the fourth quarter of 2013. First quarter 2014 net cash flow from operations was a use of $113.5 million, primarily due to a decrease in accounts payable and an increase in net work in progress due largely to timing of project milestones. During the quarter, the Company repurchased common shares totaling $15.7 million, paid dividends of $11.1 million, and contributed $5.3 million to its pension plans. In addition to net cash, the Company maintains a $700.0 million revolving credit agreement with $527.0 million of availability as of the end of the first quarter.

Outlook for the Remainder of 2014

The Company reaffirms its guidance that 2014 consolidated revenues will be between $2.90 billion and $3.10 billion and adjusted earnings per share for the full year 2014 will be between $2.00 and $2.20. Adjusted earnings per share exclude any mark-to-market adjustment for pension and post-retirement benefits and restructuring charges.

Reconciliation of Non-GAAP Operating Income and Earnings Per Share

        Q1 2014 GAAP*    

GCI & Other
Restructuring
Charges

   

Q1 2014
Adjusted*

Operating Income $ 53.6     $ 2.7     $ 56.3
Other Income 0.8 - 0.8
Provision for Income Taxes           (13.3 )       (1.0 )       (14.3 )
Net Income 41.2 1.7 42.9
Net Loss Attributable to Non-Controlling Interest           3.9         -         3.9  
Net Income Attributable to The Babcock & Wilcox Company         $ 45.0       $ 1.7       $ 46.7  
 
Diluted Earnings per Common Share $ 0.41 $ 0.02 $ 0.42
Effective Tax Rate 24.5 %   25.0 %
 
Q1 2013 GAAP*    

GCI & Other
Restructuring
Charges

   

Q1 2013
Adjusted*

Operating Income $ 60.2 $ 8.4 $ 68.6
Other Income 0.9 - 0.9
Provision for Income Taxes           (16.3 )       (2.9 )       (19.2 )
Net Income 44.9 5.5 50.4
Net Loss Attributable to Non-Controlling Interest           2.3         -         2.3  
Net Income Attributable to The Babcock & Wilcox Company         $ 47.2       $ 5.5       $ 52.7  
 
Diluted Earnings per Common Share $ 0.41 $ 0.05 $ 0.46
Effective Tax Rate 26.6 %   27.6 %
 
* Amounts may not foot due to rounding
 

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 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 First Quarter 2014 Results

       

Date:

    Tuesday, May 13, 2014, 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 expected performance and bookings in our Power Generation Segment, to the extent bookings may be viewed as an indicator of future revenues, and our 2014 outlook. 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 and delays, changes or termination of 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, 2013 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 11,000 people, in addition to approximately 10,200 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.

           
 

THE BABCOCK & WILCOX COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

 

ASSETS

 
March 31, December 31,
2014 2013
(Unaudited)
(In thousands)
 
 
Current Assets:
Cash and cash equivalents $ 208,055 $ 346,116
Restricted cash and cash equivalents 35,667 45,945
Investments 6,348 10,748
Accounts receivable – trade, net 328,197 360,323
Accounts receivable – other 66,906 45,480
Contracts in progress 425,202 370,820
Inventories 109,544 113,058
Deferred income taxes 97,401 97,170
Other current assets           61,724       47,764
 
Total Current Assets           1,339,044       1,437,424
 
Property, Plant and Equipment 1,138,908 1,126,683
Less accumulated depreciation           690,878       679,604
 
Net Property, Plant and Equipment           448,030       447,079
 
Investments           4,424       4,426
 
Goodwill           281,701       281,708
 
Deferred Income Taxes           119,018       127,076
 
Investments in Unconsolidated Affiliates           185,814       184,831
 
Intangible Assets           80,081       81,521
 
Other Assets           41,518       45,088
 
TOTAL         $ 2,499,630     $ 2,609,153
 

 
 

THE BABCOCK & WILCOX COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

           
March 31, December 31,
2014 2013
(Unaudited)

(In thousands, except share
and per share amounts)

 
 
Current Liabilities:
Notes payable and current maturities of long-term debt $ 5,083 $ 4,671
Accounts payable 233,765 319,774
Accrued employee benefits 157,072 163,833
Accrued liabilities – other 64,496 58,192
Advance billings on contracts 288,317 317,771
Accrued warranty expense 54,524 56,436
Income taxes payable           5,196         6,551  
 
Total Current Liabilities           808,453         927,228  
 
Long-Term Debt           15,000         225  
 
Accumulated Postretirement Benefit Obligation           45,022         43,194  
 
Environmental Liabilities           54,753         53,391  
 
Pension Liability           320,093         336,878  
 
Other Liabilities           59,169         65,296  
 
Commitments and Contingencies
 
Stockholders’ Equity:                
Common stock, par value $0.01 per share, authorized 325,000,000 shares; issued 121,090,224 and 120,536,910 shares at March 31, 2014 and December 31, 2013, respectively 1,211 1,205
Preferred stock, par value $0.01 per share, authorized 75,000,000 shares; No shares issued - -
Capital in excess of par value 754,274 747,189
Retained earnings 690,840 656,916
Treasury stock at cost, 10,682,307 and 10,068,731 shares at March 31, 2014 and December 31, 2013, respectively (289,425 ) (268,971 )
Accumulated other comprehensive income           21,822         28,348  
Stockholders’ Equity – The Babcock & Wilcox Company 1,178,722 1,164,687
Noncontrolling interest           18,418         18,254  
Total Stockholders’ Equity           1,197,140         1,182,941  
 
TOTAL         $ 2,499,630       $ 2,609,153  
 

 
 

THE BABCOCK & WILCOX COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

       
Three Months Ended
March 31,
2014     2013
(Unaudited)

(In thousands, except share
and per share amounts)

 
Revenues         $ 662,017       $ 805,423  
Costs and Expenses:
Cost of operations 502,307 619,697
Research and development costs 23,996 28,346
Gains on asset disposals and impairments, net - (69 )
Selling, general and administrative expenses 94,685 103,600
Special charges for restructuring activities           2,658         8,423  
Total Costs and Expenses           623,646         759,997  
 
Equity in Income of Investees           15,269         14,787  
 
Operating Income           53,640         60,213  
 
Other Income (Expense):
Interest income 419 332
Interest expense (899 ) (818 )
Other – net           1,322         1,406  
Total Other Income           842         920  
 
Income before Provision for Income Taxes 54,482 61,133
 
Provision for Income Taxes           13,328         16,257  
 
Net Income         $ 41,154       $ 44,876  
 
Net Loss Attributable to Noncontrolling Interest           3,890         2,298  
 
Net Income Attributable to The Babcock & Wilcox Company         $ 45,044       $ 47,174  
 
Earnings per Common Share:
Basic:
Net Income Attributable to The Babcock & Wilcox Company $ 0.41 $ 0.41
Diluted:
Net Income Attributable to The Babcock & Wilcox Company         $ 0.41       $ 0.41  
 
Shares used in the computation of earnings per share:
Basic 110,439,415 114,097,313
Diluted           110,886,043         114,737,154  
 

 
 

THE BABCOCK & WILCOX COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

       
Three Months Ended
March 31,
2014     2013
(Unaudited)
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 41,154 $ 44,876
Non-cash items included in net income:
Depreciation and amortization 17,013 17,358
Income of investees, net of dividends (4,694 ) (7,585 )
Gains on asset disposals - (69 )
In-kind research and development costs 4,173 3,020
Recognition of losses for pension and postretirement plans 594 801
Stock-based compensation expense 1,704 4,274
Excess tax benefits from stock-based compensation (760 ) (13 )
Changes in assets and liabilities:
Accounts receivable 17,528 (13,757 )
Accounts payable (82,164 ) 20,305
Contracts in progress and advance billings on contracts (83,797 ) (70,775 )
Inventories 3,082 5,864
Income taxes (6,766 ) 3,827
Accrued and other current liabilities (31 ) 17,508
Pension liability, accrued postretirement benefit obligation and employee benefits (20,913 ) (38,666 )
Other, net           360         (13,283 )
NET CASH USED IN OPERATING ACTIVITIES           (113,517 )       (26,315 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in restricted cash and cash equivalents 10,278 360
Purchases of property, plant and equipment (21,214 ) (18,799 )
Purchase of intangible assets - (2,200 )
Purchases of available-for-sale securities (19,926 ) (47,933 )
Sales and maturities of available-for-sale securities 24,390 43,268
Proceeds from asset disposals 3 726
Investment in equity and cost method investees           (4,900 )       (2,730 )
NET CASH USED IN INVESTING ACTIVITIES           (11,369 )       (27,308 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of short-term borrowing and long-term debt (441 ) (52 )
Increase in short-term borrowing 733 -
Borrowings under the Credit Agreement 15,000 -
Repurchase of common shares (15,665 ) (57,074 )
Dividends paid to common shareholders (11,099 ) (9,145 )
Exercise of stock options 2,191 813
Excess tax benefits from stock-based compensation 760 13
Other           (112 )       (102 )
NET CASH USED IN FINANCING ACTIVITIES           (8,633 )       (65,547 )
EFFECTS OF EXCHANGE RATE CHANGES ON CASH           (4,542 )       (3,261 )
NET DECREASE IN CASH AND CASH EQUIVALENTS (138,061 ) (122,431 )
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD           346,116         383,547  
CASH AND CASH EQUIVALENTS AT END OF PERIOD         $ 208,055       $ 261,116  
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes (net of refunds) $ 15,088 $ 11,239
SCHEDULE OF NON-CASH INVESTING ACTIVITY:
Accrued capital expenditures included in accounts payable $ 4,854 $ 4,035
 

 
 
THE BABCOCK & WILCOX COMPANY
BUSINESS SEGMENT INFORMATION
           
Three Months Ended
March 31,
2014 2013
(Unaudited)
(In thousands)

REVENUES:

Power Generation $ 312,078 $ 461,463
Nuclear Operations 286,214 261,139
Technical Services 24,455 25,229
Nuclear Energy 47,780 63,516
mPower 278 304
Adjustments and Eliminations           (8,788 )       (6,228 )
 
TOTAL         $ 662,017       $ 805,423  
 

SEGMENT INCOME:

Power Generation $ 10,542 $ 33,330
Nuclear Operations 59,528 54,724
Technical Services 14,789 14,179
Nuclear Energy 523 2,258
mPower           (26,709 )       (26,947 )
SUBTOTAL 58,673 77,544
Unallocated Corporate (2,375 ) (8,908 )
Special Charges for Restructuring Activities           (2,658 )       (8,423 )
TOTAL         $ 53,640       $ 60,213  
 

EQUITY IN INCOME (LOSS) OF INVESTEES:

Power Generation $ 2,366 $ 2,107
Nuclear Operations 0 0
Technical Services 12,901 12,833
Nuclear Energy 2 (153 )
mPower           0         0  
 
TOTAL         $ 15,269       $ 14,787  
 

PENSION EXPENSE:

Power Generation $ 530 $ 715
Nuclear Operations 872 1,133
Technical Services 48 72
Nuclear Energy 1,292 1,063
mPower 0 0
Corporate           488         505  
 
TOTAL         $ 3,230       $ 3,488  
 

DEPRECIATION AND AMORTIZATION:

Power Generation $ 5,567 $ 5,854
Nuclear Operations 6,358 6,689
Technical Services 1 48
Nuclear Energy 1,794 1,567
mPower 187 122
Corporate           3,106         3,078  
 
TOTAL         $ 17,013       $ 17,358  
 

RESEARCH AND DEVELOPMENT, NET:

Power Generation $ 4,011 $ 5,671
Nuclear Operations 4 0
Technical Services 12 26
Nuclear Energy 495 1,171
mPower           19,474         21,478  
 
TOTAL         $ 23,996       $ 28,346  
 

CAPITAL EXPENDITURES:

Power Generation $ 3,185 $ 5,759
Nuclear Operations 8,290 7,716
Technical Services 0 0
Nuclear Energy 6,142 1,422
mPower 1,492 936
Corporate           2105         2,966  
 
TOTAL         $ 21,214       $ 18,799  
 

BACKLOG:

Power Generation $ 1,982,373 $ 2,304,783
Nuclear Operations 2,849,585 2,931,322
Technical Services 1,363 9,010
Nuclear Energy 172,758 239,237
mPower           1,392         2,897  
 
TOTAL         $ 5,007,471       $ 5,487,249  
 

BOOKINGS:

Power Generation $ 219,339 $ 282,439
Nuclear Operations 763,444 207,319
Technical Services 20,735 29,201
Nuclear Energy 76,037 24,357
mPower           0         (59 )
 
TOTAL         $ 1,079,555       $ 543,257  
 


Copyright © Business Wire 2014
Contact:

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