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|Babcock & Wilcox Announces Third Quarter 2011 Results|
CHARLOTTE, N.C., Nov 07, 2011 (BUSINESS WIRE) -- The Babcock & Wilcox Company (NYSE: BWC) ("B&W" or the "Company") today reported third quarter 2011 revenues of $707.6 million, an increase of $74.8 million, or 11.8%, from the third quarter of 2010. Earnings per share for the third quarter of 2011 were $0.39. Included in earnings per share for the third quarter of 2011 are the impact of accounting for non-cash, non-deductible in-kind research and development costs received by Generation mPower LLC (GmP), discussed below, and the finalization of a Nuclear Energy segment loss contract. Before the impact of these items, earnings per share for the third quarter ended September 30, 2011 were $0.44, an increase of 41.9% from the $0.31 reported in the third quarter of 2010.
Results of Operations
Consolidated revenues for the third quarter of 2011 were $707.6 million, an increase of $74.8 million, or 11.8%, from the third quarter of 2010. For the third quarter in a row, this increase was across all business segments. Nuclear Energy segment revenues increased $26.8 million, or 77.2%, primarily due to incremental replacement steam generator component manufacturing and nuclear services and projects. Nuclear Operations segment revenues increased $10.8 million, or 4.4%, primarily as a result of higher sales of naval nuclear fuel. Power Generation segment revenues increased $49.2 million, or 14.6%, primarily due to increased activity in waste-to-energy and biomass new-build steam generation systems and aftermarket services. Technical Services segment revenues increased $6.5 million, or 29.4%, principally due to initiating environmental remediation, decontamination and decommissioning contracts, primarily for the Department of Energy (DOE), awarded over the last 12 months.
Operating income for the third quarter of 2011 was $57.6 million compared to $65.1 million in the third quarter of 2010. Included in the third quarter 2011 operating income was approximately $10.6 million related to the accounting for non-cash, non-deductible in-kind research and development costs received by GmP and $3.1 million related to the finalization of a Nuclear Energy segment loss contract. Without the impact of these items, operating income was $71.3 million, an increase of $6.2 million from the third quarter of 2010. The increase in operating income before these items was primarily due to improvements in revenues and operating income in the Power Generation and Technical Services segments, partially offset by lower operating income in the Nuclear Operations segment and an increase in research and development expenses related to the Company's modular reactor program.
"Recently, several of the Company's growth initiatives have taken important steps forward," said Brandon C. Bethards, President and Chief Executive Officer of B&W. "First, bidding activity for environmental equipment and projects is strong with the early bidding activity beginning to move through the awards stage. We have been awarded a number of environmental projects recently, some of which we have announced publicly, and others are in the late stages of negotiations. Secondly, we were awarded a contract to design certain components of the nuclear propulsion system of the next class of ballistic missile submarine, or the Ohio Class replacement submarine program. This contract is the first in a series that we expect to receive under the current program schedule. Under this schedule, we expect to begin ordering long-lead materials at the end of 2012 and begin component manufacturing in 2014. Lastly, we continue to work with TVA to assist in the construction permit application preparation for submission to the U.S. Nuclear Regulatory Commission (NRC) in 2013. The B&W mPowerTM small modular reactor program continues to move forward towards a goal to complete a power generation facility based on B&W mPowerTM technology by 2020."
Accounting for In-Kind R&D Received by Generation mPower, LLC
During the third quarter, the Company recognized $10.6 million of additional research and development costs related to the consolidation of GmP, our majority-owned subsidiary overseeing the program to develop and market the small modular nuclear power plant based on B&W mPowerTM technology. The additional costs represent non-cash, non-deductible expenses related to the value of the in-kind research and development services contributed to GmP by its minority partner. For any period, the impact to net income of these in-kind services will depend on the value of the services performed by a minority partner relative to a minority partner's proportional share of development costs. In this period, the value of in-kind services exceeded the amount of research and development costs allocated to a minority partner. As a result, our net income, after taking into account the non-controlling interest, was negatively impacted in the quarter by $4.7 million. The Company expects to recognize a positive impact to net income in future periods when the value of the in-kind services received is less than the minority partner's proportional share of development costs for the period. Over the course of the program, the Company expects the cumulative net income impact related to the accounting for these in-kind services will be $0. Based on GmP's current research and development program, we expect the recognition of this non-cash item will not impact net income by more than $9 million in any future annual periods.
The Company's cash and investments position, net of debt, was $357.1 million at the end of the third quarter of 2011 compared to $368.7 million at the end of the second quarter of 2011. During the third quarter, the Company contributed $94.5 million to its pension plans. In addition to net cash, the Company maintains a $700.0 million revolving credit agreement with approximately $478.6 million of availability as of the end of the third quarter. The Company believes it maintains adequate liquidity to fund operations, which could include increased working capital requirements, internal growth and R&D programs, as well as additional product and geographic expansion opportunities.
* per share amounts may not foot due to rounding
B&W is providing non-GAAP information regarding certain of its historical results 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.
B&W Cautions that this release contains forward-looking statements, including, without limitation, statements relating to our expectation as to future Ohio Class replacement program contract awards and activities, our plans for a submission of a construction permit to the NRC in 2013 and power generation facility based on B&W mPowerTM by 2020 and the expected impact that the value of in-kind services will have on our net income in future periods. These forward-looking statements are based on current management expectations and involve a number of risks and uncertainties, including, among other things, adverse changes in: the demand or competitiveness of nuclear power, government funding for the defense or energy programs in which we are involved and the relationship with our minority partner in GmP. If one or more of these risks or other risks materialize, actual results may vary materially from those expected. 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, 2010 and 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 hereof, and undertakes no obligation to update or revise any forward-looking statement, except to the extent required by applicable law.
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 10,000 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 http://www.babcock.com.
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SOURCE: The Babcock & Wilcox Company
The Babcock & Wilcox Company