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Babcock & Wilcox Announces Second Quarter 2012 Results
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  • Earnings per share of $0.54, non-GAAP earnings per share of $0.44
  • Revenues of $853 million increased 13.3%

CHARLOTTE, N.C.--(BUSINESS WIRE)--Aug. 7, 2012-- The Babcock & Wilcox Company (NYSE: BWC) ("B&W" or the "Company") today reported second quarter 2012 earnings per share of $0.54 compared to $0.39 in the second quarter of 2011. Included in second quarter 2012 earnings per share was $0.10 related to the recovery of loss contract costs incurred in the prior year on a Nuclear Energy segment condenser replacement project. Included in second quarter 2011 earnings per share were $0.08 of net charges related to loss contracts and an acquisition settlement. Before the impact of these items in both periods, non-GAAP earnings per share of $0.44 in the second quarter of 2012 decreased $0.03 or 6.4% from the $0.47 reported in the second quarter of 2011, primarily due to an increase in research and development spending on the B&W mPowerTM small modular reactor program.

Revenues of $852.6 million increased $100.2 million, or 13.3%, from the second quarter of 2011. Second quarter 2012 ending backlog of $5.7 billion increased $1.1 billion, or 23.4%, from the second quarter of 2011.

Recent Highlights

  • Announced MOU with FirstEnergy for B&W mPower Site Selection and Licensing Study
  • Received 25-Year Nuclear Regulatory Commission Operating License at Nuclear Fuel Services, Inc.
  • Awarded $100 Million Environmental Contract for a Major U.S. Utility
  • Awarded $82 Million in Contracts for Naval Reactor Components and Material Recovery
  • Awarded $73 Million in Contracts for Naval Reactor Technology Development and Manufacturing
  • Awarded $40 Million Boiler Pressure Parts Contract for South Dakota Coal-Fired Power Plant
  • Awarded $30 Million Environmental Upgrade Contract at Pennsylvania Power Plant
  • Awarded Engineering Release for Colombia, South America Boiler Project
  • Closed $700 Million Credit Facility; Extends Maturity to 2017 and Reduces Overall Facility Costs

Results of Operations

Consolidated revenues for the second quarter of 2012 were $852.6 million, an increase of $100.2 million, or 13.3%, from the second quarter of 2011. This increase is principally due to a $108.4 million increase in revenues in the Power Generation segment resulting from strong environmental control equipment and environmental aftermarket services as well as growth in new renewable steam generation systems. This increase was partially offset by the timing of material receipts for a Nuclear Energy segment replacement steam generator project and a 3.2% reduction in combined government segment revenues.

Operating income for the second quarter of 2012 was $89.4 million, an increase of $26.1 million from the second quarter of 2011. Included in second quarter 2012 operating income was $18.1 million related to the recovery of losses incurred in the prior year on a condenser replacement contract at a commercial nuclear site. Included in second quarter 2011 operating income were $15.1 million of net charges related to loss contracts and an acquisition settlement. Excluding the impact of these items in both periods, operating income in the second quarter of 2012 decreased $7.1 million compared to the second quarter of 2011.

The decrease in operating income excluding items was primarily due to an $11.6 million increase in research and development expenses principally related to the Company's investment in the small modular reactor program and lower equity income contributions, as expected, from the Company's unconsolidated steam boiler joint venture in China partially offset by increased revenues and strong execution within the Power Generation segment.

"In the second quarter, the Company continued to perform in-line with expectations and is tracking well for the full year," said E. James Ferland, President and Chief Executive Officer of B&W. "Bookings in the first half of the year have been strong, but volatile on a quarterly basis. Importantly, early in the third quarter, following a similar recommendation by the House Defense Appropriations Subcommittee earlier this year, the Senate Defense Appropriations Subcommittee recommended advanced procurement funding for an additional Virginia Class submarine in the Fiscal Year 2013 Defense Appropriations Bill. Also early in the third quarter, the Company announced an MOU for site selection and licensing studies for B&W mPower small modular reactor units at FirstEnergy and has been awarded a more than $300 million boiler contract in Vietnam through our China joint venture, all positive signals of continuing strength in our business."

Liquidity

The Company's cash and investments position, net of debt, was $417.9 million at the end of the second quarter of 2012, approximately the same level as the $418.7 million at the end of the first quarter of 2012. During the quarter, the Company contributed $94.0 million to its pension plans. The Company does not expect to make additional pension contributions for the remainder of 2012. In addition to net cash, the Company maintains a $700.0 million revolving credit agreement with $491.4 million of availability as of the end of the second 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) *amounts may not foot due to rounding
   
Q2 2012 Q2 2011*
GAAP operating income $ 89.4 $ 63.3
NFS acquisition settlement - (10.9 )
NE Condenser Replacement Project   (18.1 )   26.0  
Non-GAAP operating income $ 71.3   $ 78.4  
 
GAAP earnings per share $ 0.54 $ 0.39
NFS acquisition settlement - (0.06 )
NE Condenser Replacement Project   (0.10 )   0.13  
Non-GAAP earnings per share $ 0.44   $ 0.47  

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 Second Quarter 2012 Results

   

Date:

  Wednesday, August 8, 2012, at 8:30 a.m. ET

Live Webcast:

Investor Relations section of website at http://www.babcock.com

Forward-Looking Statements

B&W cautions that this release contains forward-looking statements, including, without limitation, statements relating to our expectations regarding pension funding and our beliefs regarding liquidity and backlog, to the extent it 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 industries in which we operate 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 http://www.babcock.com.

TABLES TO FOLLOW

 
THE BABCOCK & WILCOX COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
 
ASSETS
   
June 30, December 31,
2012 2011
(Unaudited)
(In thousands)
 
 
Current Assets:
Cash and cash equivalents $ 206,770 $ 415,209
Restricted cash and cash equivalents 56,762 61,190
Investments 155,554 68,805
Accounts receivable - trade, net 339,273 305,832
Accounts receivable - other 75,245 77,505
Contracts in progress 370,021 315,286
Inventories 115,507 107,298
Deferred income taxes 106,358 102,022
Other current assets     33,551     33,929
 
Total Current Assets     1,459,041     1,487,076
 
Property, Plant and Equipment 1,046,510 1,017,422
Less accumulated depreciation     621,485     595,131
 
Net Property, Plant and Equipment     425,025     422,291
 
Investments     3,949     3,775
 
Goodwill     278,737     276,180
 
Deferred Income Taxes     218,374     241,739
 
Investments in Unconsolidated Affiliates     186,800     163,568
 
Other Assets     209,235     194,482
 
TOTAL   $ 2,781,161   $ 2,789,111
 
THE BABCOCK & WILCOX COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
June 30, December 31,
2012 2011
(Unaudited)
(In thousands)
 
 
Current Liabilities:
Notes payable and current maturities of long-term debt $ 4,601 $ 4,653
Accounts payable 247,802 237,494
Accrued employee benefits 201,040 303,803
Accrued liabilities - other 62,789 71,079
Advance billings on contracts 445,447 438,753
Accrued warranty expense 96,055 97,209
Income taxes payable   26,799       1,816  
 
Total Current Liabilities   1,084,533       1,154,807  
 
Long-Term Debt   510       633  
 
Accumulated Postretirement Benefit Obligation   77,370       80,663  
 
Environmental Liabilities   45,057       44,069  
 
Pension Liability   501,253       586,045  
 
Other Liabilities   90,423       87,921  
 
Commitments and Contingencies
 
Stockholders' Equity:      

Common stock, par value $0.01 per share, authorized 325,000,000 shares; issued 119,204,529 and 118,458,911 shares at June 30, 2012 and December 31, 2011, respectively

1,192 1,185

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

-

-

Capital in excess of par value 1,125,268 1,106,971
Retained earnings 377,093 266,325
Treasury stock at cost, 459,869 and 351,876 shares at June 30, 2012 and December 31, 2011, respectively (12,944 ) (10,059 )
Accumulated other comprehensive loss   (520,438 )     (538,628 )
Stockholders' Equity - The Babcock & Wilcox Company 970,171 825,794
Noncontrolling interest   11,844       9,179  

Total Stockholders' Equity

  982,015       834,973  
 
TOTAL $ 2,781,161     $ 2,789,111  
 
THE BABCOCK & WILCOX COMPANY CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
 
Three Months Ended Six Months Ended
June 30, June 30,

2012

2011

2012

2011

(Unaudited)
(In thousands, except share and per share amounts)
 
Revenues $ 852,585   $ 752,352   $ 1,618,477   $ 1,443,629  
 
Costs and Expenses:
Cost of operations 638,400 587,741 1,221,139 1,152,547
Research and development costs 34,150 22,568 63,186 39,876
(Gains) losses on asset disposals and impairments - net (622 ) 89 (882 ) 79
Selling, general and administrative expenses   107,985     97,078     214,008     199,711  
Total Costs and Expenses   779,913     707,476     1,497,451     1,392,213  
 
Equity in Income of Investees   16,687     18,381     34,044     33,742  
 
Operating Income   89,359     63,257     155,070     85,158  
 
Other Income (Expense):
Interest income 504 305 737 764
Interest expense (1,152 ) (1,297 ) (1,775 ) (1,752 )
Other - net   4,328     4,425     3,226     1,431  
Total Other Income   3,680     3,433     2,188     443  
 
Income before Provision for Income Taxes 93,039 66,690 157,258 85,601
 
Provision for Income Taxes   31,909     20,349     52,266     25,593  
 
Net Income   61,130     46,341     104,992     60,008  
 
Net Loss (Income) Attributable to Noncontrolling Interest   2,894     (132 )   5,776     (289 )
 

Net Income Attributable to The Babcock & Wilcox Company

$ 64,024   $ 46,209   $ 110,768   $ 59,719  
 
Earnings per Common Share:
Basic:

Net Income Attributable to The Babcock & Wilcox Company

$

0.54

$

0.39

$

0.94

$

0.51

Diluted:

Net Income Attributable to The Babcock & Wilcox Company

$

0.54

 

$

0.39

 

$

0.93

 

$

0.51

 
 
Shares used in the computation of earnings per share:
Basic 118,648,459 117,502,610 118,451,903 117,235,443
Diluted   119,257,911     118,353,937     119,058,527     118,155,592  
 
THE BABCOCK & WILCOX COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Six Months Ended
June 30,

2012

 

2011

(Unaudited)
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 104,992 $ 60,008
Non-cash items included in net income:
Depreciation and amortization 35,530 37,775
Income of investees, net of dividends (17,757 ) (16,689 )
(Gain) loss on asset disposals and impairments - net (882 ) 79
In-kind research and development costs 8,740 -
Amortization of pension and postretirement costs 43,057 41,021
Stock-based compensation expense 9,047 9,695
Excess tax benefits from stock-based compensation (1,436 ) (4,356 )
Other, net (7,837 ) (8,773 )
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable (42,582 ) (72,281 )
Net contracts in progress and advance billings on contracts (45,882 ) (11,497 )
Accounts payable 18,360 15,941
Inventories (10,031 ) (2,908 )
Current and deferred income taxes 43,534 36,605
Accrued warranty and other current liabilities (11,404 ) (5,755 )
Pension liability, accumulated postretirement benefit obligation and accrued employee benefits (189,882 ) (90,249 )
Prepaid expenses 297 (42,305 )
Other, net   (10,546 )     2,044  
NET CASH USED IN OPERATING ACTIVITIES   (74,682 )     (51,645 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in restricted cash and cash equivalents 4,428 (9,439 )
Purchases of property, plant and equipment (41,548 ) (32,195 )
Proceeds from sale of unconsolidated affiliate 2,091 -
Purchases of available-for-sale securities (155,979 ) (88,746 )
Sales and maturities of available-for-sale securities 68,532 71,211
Investments in equity and cost method investees (6,572 ) (35,467 )
Proceeds from asset disposals   132       714  
NET CASH USED IN INVESTING ACTIVITIES   (128,916 )     (93,922 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of short-term borrowing and long-term debt (101 ) (1,600 )
Payment of debt issuance costs (4,747 ) (82 )
Excess tax benefits from stock-based compensation 1,436 4,356
Proceeds from exercise of stock options 1,424 4,052
Distributions to noncontrolling interests   (284 )     (170 )
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES   (2,272 )     6,556  
EFFECTS OF EXCHANGE RATE CHANGES ON CASH   (2,569 )     6,240  
NET DECREASE IN CASH AND CASH EQUIVALENTS (208,439 ) (132,771 )
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD   415,209       391,142  
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 206,770     $ 258,371  
 
The Babcock & Wilcox Company
Business Segment Information
For the Periods Ended June 30, 2012 and 2011
(In thousands of U.S. dollars)
   
THREE MONTHS ENDED SIX MONTHS ENDED

6/30/12

6/30/11

6/30/12

6/30/11

REVENUES:

Power Generation $ 497,037 $ 388,643 $ 911,310 $ 744,827
Nuclear Operations 265,398 272,625 515,576 523,080
Technical Services 28,269 30,668 53,242 59,028
Nuclear Energy 67,392 93,877 153,978 159,139
Adjustments and Eliminations     (5,511 )   (33,461 )     (15,629 )   (42,445 )
 
  TOTAL   $ 852,585   $ 752,352     $ 1,618,477   $ 1,443,629  
 

SEGMENT INCOME:

Power Generation $ 46,458 $ 28,098 $ 74,437 $ 54,731
Nuclear Operations 48,541 59,289 96,543 89,739
Technical Services 18,411 14,466 33,029 26,608
Nuclear Energy   (12,935 )   (33,342 )     (29,762 )   (70,820 )
SUBTOTAL 100,475 68,511 174,247 100,258
Corporate     (11,116 )   (5,254 )     (19,177 )   (15,100 )
  TOTAL   $ 89,359   $ 63,257     $ 155,070   $ 85,158  
 

EQUITY IN INCOME (LOSS) OF INVESTEES:

Power Generation $ 3,054 $ 6,030 $ 6,876 $ 12,040
Nuclear Operations 0 0 0 0
Technical Services 13,633 12,351 27,168 21,702
Nuclear Energy     0     0       0     0  
 
  TOTAL   $ 16,687   $ 18,381     $ 34,044   $ 33,742  
 

PENSION EXPENSE:

Power Generation $ 16,668 $ 16,139 $ 33,107 $ 32,067
Nuclear Operations 10,372 8,946 20,743 17,892
Technical Services 698 633 1,396 1,267
Nuclear Energy 1,013 1,098 2,238 2,279
Corporate     1,946     1,744       3,892     3,424  
 
  TOTAL   $ 30,697   $ 28,560     $ 61,376   $ 56,929  
 

DEPRECIATION AND AMORTIZATION:

Power Generation $ 4,903 $ 4,399 $ 9,491 $ 9,119
Nuclear Operations 8,414 9,743 16,903 20,134
Technical Services 54 66 128 132
Nuclear Energy 1,463 1,323 3,008 2,504
Corporate     2,981     2,929       6,000     5,886  
 
  TOTAL   $ 17,815   $ 18,460     $ 35,530   $ 37,775  
 

RESEARCH AND DEVELOPMENT, NET:

Power Generation $ 5,810 $ 5,786 $ 10,649 $ 8,780
Nuclear Operations 0 23 119 34
Technical Services 110 646 325 646
Nuclear Energy     28,230     16,113       52,093     30,416  
 
  TOTAL   $ 34,150   $ 22,568     $ 63,186   $ 39,876  
 

CAPITAL EXPENDITURES:

Power Generation $ 4,516 $ 3,895 $ 10,247 $ 8,034
Nuclear Operations 10,582 3,984 23,356 15,750
Technical Services 0 0 0 0
Nuclear Energy 1,735 1,320 2,600 3,783
Corporate     3,274     2,243       5,345     4,628  
 
  TOTAL   $ 20,107   $ 11,442     $ 41,548   $ 32,195  
 

BACKLOG:

Power Generation $ 2,528,575 $ 1,455,575 $ 2,528,575 $ 1,455,575
Nuclear Operations 2,859,748 2,693,961 2,859,748 2,693,961
Technical Services 14,070 12,820 14,070 12,820
Nuclear Energy     310,260     467,896       310,260     467,896  
 
  TOTAL   $ 5,712,653   $ 4,630,252     $ 5,712,653   $ 4,630,252  

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