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Babcock & Wilcox Announces First Quarter 2012 Results
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  • Earnings per share of $0.39
  • Revenues of $766 million increased 10.8%
  • Record Backlog of $6.0 billion

CHARLOTTE, N.C.--(BUSINESS WIRE)--May. 9, 2012-- The Babcock & Wilcox Company (NYSE: BWC) (“B&W” or the “Company”) today reported first quarter 2012 revenues of $765.9 million, an increase of $74.6 million, or 10.8%, from the first quarter of 2011. Earnings per share for the first quarter of 2012 were $0.39 compared to $0.11 in the first quarter of 2011. In the first quarter of 2011, earnings per share included approximately $0.17 of charges related to loss contracts. Excluding the impact of these prior year charges, earnings per share in the first quarter of 2012 increased 39.3% compared to the first quarter of 2011.

Recent Highlights

  • Named to MIT Technology Review’s 2012 TR50 List of the World’s Most Innovative Companies
  • Received Full Notice to Proceed on West Palm Beach Waste-to-Energy Facility Contract, Added $676 Million to Backlog
  • Awarded $1.3 Billion, Ten-Year Waste Isolation Pilot Plant Management Contract
  • Awarded $150 Million Environmental Equipment and Construction Contract for Alliant Energy
  • Awarded $130 Million Naval Nuclear Component Contract
  • Awarded $30 Million Design and Engineering Selective Catalytic Reduction (SCR) System Contract for Xcel Energy
  • Awarded $20 Million EPC Industrial Environmental Control Systems Contract
  • Announced Retirement of Brandon C. Bethards and Appointment of E. James Ferland as President and Chief Executive Officer

Results of Operations

Consolidated revenues for the first quarter of 2012 were $765.9 million, an increase of $74.6 million, or 10.8%, from the first quarter of 2011. The Power Generation and Nuclear Energy segments increased 16.3% and 32.6%, respectively, while the combined government segments declined 1.3%. The double-digit growth rate in consolidated revenues is primarily due to strong environmental control equipment and services sales, growth in new renewable steam generation systems, and higher nuclear services revenues.

Operating income for the first quarter of 2012 was $65.7 million, an increase of $43.8 million from the first quarter of 2011. Included in operating earnings in the first quarter of 2011 were charges related to loss contracts totaling $32.7 million. Excluding the impact of these charges in the prior year, operating earnings in the first quarter of 2012 increased $11.1 million or 20.3% compared to the first quarter of 2011.

The increase in operating income (excluding these 2011 charges) was primarily due to improvements in operational performance in the Government segments, partially offset by an increase in research and development expenses related to the Company’s small modular reactor program and lower equity income contributions from the Company’s unconsolidated steam boiler joint venture in China.

“In the first quarter, the Company performed well above prior year levels, and in-line with expectations,” said E. James Ferland, President and Chief Executive Officer of B&W. “Importantly, strong bookings in the first quarter of 2012 resulted in an ending backlog of $6.0 billion, the highest quarter-end backlog the Company has ever reported. Bookings in the quarter include the impact of the full notice to proceed received for the West Palm Beach waste-to-energy plant, $249 million of environmental awards and a new $130 million contract for advanced naval reactor designs. Over the last few quarters, the Company has realized a significant increase in environmental control systems bookings as a result of legislative requirements in the United States to generate electricity with fewer emissions. At the end of the first quarter, the Power Generation segment had more than $4 billion of bids outstanding or in progress, which includes more than $2 billion for environmental control systems and services,” Ferland concluded.

Liquidity

The Company’s cash and investments position, net of debt, was $418.7 million at the end of the first quarter of 2012, a decrease of $125 million compared to $543.7 million at the end of the fourth quarter of 2011. During the quarter, the Company contributed $91.6 million to its pension plans. In addition to net cash, the Company maintains a $700.0 million revolving credit agreement with $483.8 million of availability as of the end of the first quarter. The Company believes it maintains adequate liquidity to fund operations, which could include increased working capital requirements to fund internal growth, R&D programs, and product and geographic expansion opportunities.

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

  Q1 2012   Q1 2011

GAAP operating income

$65.7

$21.9

NFS material processing loss contracts

-

11.1

Nuclear Energy loss contract

-

21.6

Non-GAAP operating income

$65.7

$54.6

 

Reported earnings per share

$0.39

$0.11

NFS material processing loss contracts

-

.06

Nuclear Energy loss contract

-

.11

Non-GAAP earnings per share

$0.39

$0.28

 

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.

Conference Call to Discuss First Quarter 2012 Results

Date:

  Thursday, May 10, 2012, 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 our belief regarding the opportunity from environmental control systems and backlog, it the extent backlog may be viewed as an indicator of future 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 timing, scope or enforcement of U.S. Environmental Protection Agency environmental rules affecting our customers and delays, changes or termination of contracts in backlog. If one or more of these 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, 2011. 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.

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 12,700 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

 
March 31, December 31,
2012 2011
(Unaudited)
(In thousands)
 
 
Current Assets:
Cash and cash equivalents $ 249,620 $ 415,209
Restricted cash and cash equivalents 59,040 61,190
Investments 111,237 68,805
Accounts receivable – trade, net 329,336 305,832
Accounts receivable – other 76,375 77,505
Contracts in progress 336,731 315,286
Inventories 114,025 107,298
Deferred income taxes 88,770 102,022
Other current assets   44,105     33,929
 
Total Current Assets   1,409,239     1,487,076
 
Property, Plant and Equipment 1,038,586 1,017,422
Less accumulated depreciation   611,529     595,131
 
Net Property, Plant and Equipment   427,057     422,291
 
Investments   4,006     3,775
 
Goodwill   276,824     276,180
 
Deferred Income Taxes   236,080     241,739
 
Investments in Unconsolidated Affiliates   178,427     163,568
 
Other Assets   204,864     194,482
 
TOTAL $ 2,736,497   $ 2,789,111
 

THE BABCOCK & WILCOX COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS

   

LIABILITIES AND STOCKHOLDERS’ EQUITY

 
March 31, December 31,
2012 2011
(Unaudited)
(In thousands)
 
 
Current Liabilities:
Notes payable and current maturities of long-term debt $ 4,650 $ 4,653
Accounts payable 224,659 237,494

Accrued employee benefits

236,138 303,803
Accrued liabilities – other 77,820 71,079
Advance billings on contracts 430,789 438,753
Accrued warranty expense 98,413 97,209
Income taxes payable     2,549       1,816  
 
Total Current Liabilities     1,075,018       1,154,807  
 
Long-Term Debt     597       633  
 
Accumulated Postretirement Benefit Obligation     79,031       80,663  
 
Environmental Liabilities     44,857       44,069  
 
Pension Liability     539,225       586,045  
 
Other Liabilities     88,808       87,921  
 
Commitments and Contingencies
 
Stockholders’ Equity:        

Common stock, par value $0.01 per share, authorized 325,000,000 shares; issued 119,020,291 and 118,458,911 shares at March 31, 2012 and December 31, 2011, respectively

1,190 1,185
Preferred stock, par value $0.01 per share, authorized 75,000,000 shares; No shares issued

-

-

Capital in excess of par value 1,116,544 1,106,971
Retained earnings 313,069 266,325
Treasury stock at cost, 457,747 and 351,876 shares at March 31, 2012 and December 31, 2011, respectively (12,889 ) (10,059 )
Accumulated other comprehensive loss     (518,809 )     (538,628 )
Stockholders’ Equity – The Babcock & Wilcox Company 899,105 825,794
Noncontrolling interest     9,856       9,179  

Total Stockholders’ Equity

    908,961       834,973  
 
TOTAL   $ 2,736,497     $ 2,789,111  
 

THE BABCOCK & WILCOX COMPANY CONDENSED CONSOLIDATED
STATEMENTS OF INCOME

 
Three Months Ended
March 31,

2012

 

2011

(Unaudited)

(In thousands, except share and per
share amounts)

 

Revenues

 

$

765,892

   

$

691,277

 

Costs and Expenses:

Cost of operations

582,739

564,806

Research and development costs

29,036

17,308

Gains on asset disposals and impairments – net

(260

)

(10

)

Selling, general and administrative expenses

   

106,023

     

102,633

 

Total Costs and Expenses

   

717,538

     

684,737

 
 

Equity in Income of Investees

   

17,357

     

15,361

 
 

Operating Income

   

65,711

     

21,901

 
 

Other Income (Expense):

Interest income

233

459

Interest expense

(623

)

(455

)

Other expense – net

   

(1,102

)

   

(2,994

)

Total Other Expense

   

(1,492

)

   

(2,990

)

 

Income before Provision for Income Taxes

64,219

18,911

 

Provision for Income Taxes

   

20,357

     

5,244

 
 

Net Income

 

$

43,862

   

$

13,667

 
 

Net Loss (Income) Attributable to Noncontrolling Interest

   

2,882

     

(157

)

 

Net Income Attributable to The Babcock & Wilcox Company

 

$

46,744

   

$

13,510

 
 

Earnings per Common Share:

Basic:

Net Income Attributable to The Babcock & Wilcox Company

$

0.40

$

0.12

Diluted:

Net Income Attributable to The Babcock & Wilcox Company

 

$

0.39

   

$

0.11

 
 

Shares used in the computation of earnings per share:

Basic

118,255,346

116,968,275

Diluted

   

118,859,141

     

117,957,245

 
 

THE BABCOCK & WILCOX COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 
Three Months Ended
March 31,

2012

 

2011

(Unaudited)
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $

43,862

$ 13,667
Non-cash items included in net income:
Depreciation and amortization 17,715 19,315
Income of investees, net of dividends (6,893 ) (3,832 )
Gain on asset disposals – net (260 ) (10 )
In-kind research and development costs 3,644 -
Amortization of pension and postretirement costs 21,524 20,474
Stock-based compensation expense 3,983 4,853
Excess tax benefits from stock-based compensation (1,406 ) (4,031 )

Changes in assets and liabilities, net of effects of acquisitions:

Accounts receivable (28,497 ) (31,213 )
Net contracts in progress and advance billings on contracts (30,997 ) (44,328 )
Accounts payable (10,159 ) 6,016
Inventories (6,066 ) 1,536
Current and deferred income taxes 21,306 21,479

Accrued and other current liabilities

4,378 8,535
Pension liability, accumulated postretirement benefit obligation and accrued employee benefits (118,205 ) (71,633 )
Other, net     (17,163 )     (22,401 )
NET CASH USED IN OPERATING ACTIVITIES     (103,234 )     (81,573 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in restricted cash and cash equivalents 2,150 (284 )
Purchases of property, plant and equipment (21,441 ) (20,753 )
Purchases of available-for-sale securities (64,802 ) (48,791 )
Sales and maturities of available-for-sale securities 22,015 48,577
Investment in equity and cost method investees (6,572 ) (4,716 )
Proceeds from asset disposals     19       17  
NET CASH USED IN INVESTING ACTIVITIES     (68,631 )     (25,950 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of short-term borrowing and long-term debt (52 ) (797 )
Payment of debt issuance costs - (70 )
Excess tax benefits from stock-based compensation 1,406 4,031
Exercise of stock options 1,329 3,105
Other     (97 )     -  
NET CASH PROVIDED BY FINANCING ACTIVITIES     2,586       6,269  
EFFECTS OF EXCHANGE RATE CHANGES ON CASH     3,690       2,293  
NET DECREASE IN CASH AND CASH EQUIVALENTS (165,589 ) (98,961 )
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD     415,209       391,142  
CASH AND CASH EQUIVALENTS AT END OF PERIOD   $ 249,620     $ 292,181  
 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $ 618 $ 892
Income taxes (net of refunds) $ 6,853 $ 13,903
 
The Babcock & Wilcox Company
Business Segment Information
For the Periods Ended March 31, 2012 and 2011
(In thousands of U.S. dollars)
       
THREE MONTHS ENDED

3/31/12

3/31/11

REVENUES:

Power Generation $ 414,273 $ 356,184
Nuclear Operations 250,178 250,455

Technical Services

24,973 28,360

Nuclear Energy

86,586 65,262
Adjustments and Eliminations     (10,118 )     (8,984 )
 
  TOTAL   $ 765,892     $ 691,277  
 

SEGMENT INCOME:

Power Generation $ 27,979 $ 26,633
Nuclear Operations 48,002 30,450
Technical Services 14,618 12,142
Nuclear Energy     (16,827 )     (37,478 )
SUBTOTAL 73,772 31,747
Corporate     (8,061 )     (9,846 )
  TOTAL   $ 65,711     $ 21,901  
 

EQUITY IN INCOME OF INVESTEES:

Power Generation $ 3,822 $ 6,010
Nuclear Operations 0 0
Technical Services 13,535 9,351
Nuclear Energy     0       0  
 
  TOTAL   $ 17,357     $ 15,361  
 

PENSION EXPENSE:

Power Generation $ 16,439 $ 15,928
Nuclear Operations 10,371 8,946
Technical Services 698 634
Nuclear Energy 1,225 1,181
Corporate     1,946       1,680  
 
  TOTAL   $ 30,679     $ 28,369  
 

DEPRECIATION AND AMORTIZATION:

Power Generation $ 4,588 $ 4,720
Nuclear Operations 8,489 10,391
Technical Services 74 66
Nuclear Energy 1,545 1,181
Corporate     3,019       2,957  
 
  TOTAL   $ 17,715     $ 19,315  
 

RESEARCH AND DEVELOPMENT, NET:

Power Generation $ 4,839 $ 2,994
Nuclear Operations 119 11
Technical Services 215 0
Nuclear Energy     23,863       14,303  
 
  TOTAL   $ 29,036     $ 17,308  
 

CAPITAL EXPENDITURES:

Power Generation $ 5,731 $ 4,139
Nuclear Operations 12,774 11,766
Technical Services 0 0
Nuclear Energy 865 2,463
Corporate     2,071       2,385  
 
  TOTAL   $ 21,441     $ 20,753  
 

BACKLOG:

Power Generation $ 2,650,767 $ 1,500,655
Nuclear Operations 2,931,859 2,931,001
Technical Services 21,783 3,009
Nuclear Energy     350,068       471,897  
 
  TOTAL   $ 5,954,477     $ 4,906,562  
 

Source: The Babcock & Wilcox Company

The Babcock & Wilcox Company
Investor Contact:
Michael P. Dickerson, Vice President and Investor Relations Officer, 704-625-4944
investors@babcock.com
or
Media Contact:
Jud Simmons, Public Relations Manager, 434-522-6462
hjsimmons@babcock.com