- Consolidated Revenues up 33.6%
- GAAP EPS of $0.08, Adjusted EPS of $0.27
- Affirms 2015 Guidance
Babcock & Wilcox Enterprises, Inc. (B&W) (NYSE:BW)
announced today second quarter 2015 revenues of $437.5 million, an
increase of $110.1 million, or 33.6%, from the second quarter of
2014. GAAP earnings per share from continuing operations for the
second quarter of 2015 were $0.08 compared to $0.03 in the second
quarter of 2014. Adjusted earnings per share, which excludes the
impact of impairment, restructuring and spin-related costs for the
quarter, were $0.27 for the three months ended June 30, 2015
compared to $0.14 in the prior year period.
“As we begin operations as a stand-alone company, B&W
continues to deliver on our strategy and build a solid track record
of performance,” said Mr. E. James Ferland, Chairman and Chief
Executive Officer. “We are pleased that all three business segments
ended the quarter at or above target with a significant increase in
revenues in Global Power driven by the new international project
awards in line with our growth strategy.”
In addition the Board has authorized a share repurchase program
of up to $100 million over the next two years. “The new program
will allow opportunistic share repurchases as part of our broader
capital allocation strategy,” continued Mr. Ferland.
Results of Operations
Consolidated revenues for the second quarter of 2015 were $437.5
million, an increase of 33.6%, compared to $327.4 million for the
second quarter of 2014. The Global Power segment had the largest
increase with revenues of $157.4 million in the quarter, which was
a 43.5% increase over the $109.7 million in revenues in the prior
year period driven by an increase in new build steam projects.
Revenues in the Global Services segment were $236.7 million in the
three months ending June 30, 2015, versus $214.1 million in the
corresponding period in 2014, an increase of $22.6 million
primarily related to increased activity in service projects and
construction. The Industrial Environmental segment contributed
$43.4 million in revenue this period compared to $3.6 million in
the second quarter of 2014 due to the acquisition of MEGTEC on June
20, 2014.
GAAP operating income for the second quarter of 2015 increased
$1.7 million to $4.9 million compared to $3.2 million in the prior
year period primarily due to increased revenues. GAAP operating
income for the second quarter of 2015 also included $9.0 million of
non-cash facility and equipment impairments primarily related to
the close-out of a carbon capture and storage research program, as
well as $5.3 million of restructuring costs related to margin
improvement and $0.9 million in spin-related costs. Excluding these
charges and a $1.3 million allocation for the discontinued Nuclear
Energy operation that was transferred to BWX Technologies as part
of the spin, adjusted operating income increased 71% in the second
quarter of 2015 to $21.4 million, compared to adjusted operating
income of $12.5 million in the second quarter of 2014.
Second quarter 2015 gross profit in the Global Power segment
increased $7.2 million from the same period last year to $26.7
million, attributable to the increased segment revenues. The Global
Services segment reported a gross profit of $46.3 million in the
second quarter of 2015, which was $2.0 million less than the gross
profit of $48.4 million in the prior year second quarter due to the
effects of operations and maintenance activities. Gross profit in
the Industrial Environmental segment was $8.9 million in the second
quarter of 2015 as a result of the MEGTEC acquisition.
“With the spin behind us, we will increase our focus on
execution of our strategy to improve profitability and grow the
company,” continued Mr. Ferland. “We will continue to drive
margins, expand globally and look for smart acquisitions. We have
teams working each of the three elements of our strategy while our
day-to-day operations work to exceed customer expectations.”
Liquidity and Debt
The Company’s cash and investments position, net of restricted
cash, was $307.6 million at the end of the second quarter of 2015.
This consolidated cash position includes $175.7 million in non-U.S.
cash. On June 30, 2015, the Company closed on a new $600 million
credit facility. At June 30, 2015, we had no borrowings outstanding
under the revolving credit facility, and after giving effect to the
leverage ratio and $109.1 million in letters of credit issued under
the new credit agreement, we had approximately $383.9 million
available for borrowings or to meet letter of credit
requirements.
Share Repurchase Program
As noted above, the Board has authorized the repurchase of up to
$100 million of common stock. The Company may utilize various
methods to effect the repurchases, and the timing of repurchases
will depend upon several factors, including market and business
conditions, and repurchases may be discontinued at any time.
2015 Outlook
The Company affirmed its guidance for key financial benchmarks
for 2015:
- Consolidated revenue is expected to
increase to approximately $1.7 billion through a combination of
core growth and the full year of the MEGTEC acquisition;
- Adjusted EPS of $1.10 to $1.30
excluding mark-to-market adjustment for pension and post-retirement
benefits, spin-related transaction costs and restructuring charges;
and
- Adjusted tax rate for 2015 is expected
to be in the range of 32% to 34%.
Conference Call to Discuss Second Quarter 2015
Results
Date:
Wednesday, August 5, 2015, 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
backlog, to the extent they may be viewed as an indicator of future
revenues; management’s expectations regarding the industries in
which we operate; our guidance and forecasts for 2015; and our
projected operating margin improvements, savings and restructuring
costs. These forward-looking statements are based on management’s
current expectations and involve a number of risks and
uncertainties, including, among other things, disruptions
experienced with customers and suppliers; the inability to
successfully operate independently following the spin-off; the
inability to retain key personnel; adverse changes in the
industries in which we operate and delays, changes or termination
of contracts in backlog; and the timing and amount of repurchases
of our common stock, if any. 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 the information statement on Form 10 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
Headquartered in Charlotte, N.C., Babcock & Wilcox is a
global leader in energy and environmental technologies and services
for the power and industrial markets. B&W companies employ
approximately 6,000 people around the world. Follow us on Twitter
@BabcockWilcox and learn more at www.babcock.com.
Exhibit 1 Babcock & Wilcox Enterprises,
Inc.
Reconciliation of Non-GAAP Operating
Income and Earnings Per Share(1)(2)
(in $ millions, except per share
amounts)
Three Months Ended June 30,
2015 NE Sgmt GAAP Impairments
Restructuring Allocation Spin
Costs Non-GAAP Operating Income (Loss) $
4.9 $ 9.0 $ 5.3 $ 1.3 $ 0.9 $ 21.4 Other Income / (Expense) 0.2 - -
- - 0.2 Income Tax (Expense) / Benefit (0.9 )
(3.4 ) (1.9 ) (0.3 ) (0.3
) (6.9 ) Net Income (Loss) $ 4.1 $ 5.6 $ 3.5 $ 1.0 $
0.6 $ 14.7 Net Loss Attributable to Non-Controlling Interest
(0.1 ) - -
- - (0.1 ) Net Income
from Continuing Operations $ 4.1 $ 5.6
$ 3.5 $ 1.0 $ 0.6 $ 14.6
Diluted EPS - Continuing Operations $ 0.08 $ 0.10 $
0.06 $ 0.02 $ 0.01 $ 0.27 Tax Rate 18.2 % 31.9 %
Three Months Ended June 30, 2014 MEGTEC
NE Sgmt Acquisition GAAP
Restructuring Allocation Costs
Non-GAAP Operating Income (Loss) $ 3.2 $ 7.5 $
1.3 $ 0.5 $ 12.5 Other Income / (Expense) 0.3 - - - 0.3 Income Tax
(Expense) / Benefit (1.8 ) (2.6 )
(0.5 ) (0.2 ) (5.0 ) Net Income
(Loss) $ 1.6 $ 5.0 $ 0.9 $ 0.3 7.8 Net Loss Attributable to
Non-Controlling Interest (0.1 ) -
- - (0.1 )
Net Income from Continuing Operations $ 1.5 $ 5.0
$ 0.9 $ 0.3 7.7
Diluted EPS - Continuing Operations $ 0.03 $ 0.09 $
0.02 $ 0.01 $ 0.14 Tax Rate 53.3 % 39.2 %
Six Months Ended June 30, 2015 NE Sgmt
GAAP Impairments Restructuring
Allocation Spin Costs
Non-GAAP Operating Income (Loss) $ 22.2 $ 9.0 $ 7.7 $
2.7 $ 0.9 $ 42.4 Other Income / (Expense) (0.1 ) - - - - (0.1 )
Income Tax (Expense) / Benefit (6.6 ) (3.4 )
(2.7 ) (0.7 ) (0.3 )
(13.8 ) Net Income (Loss) $ 15.5 $ 5.6 $ 4.9 $ 2.0 $
0.6 $ 28.5 Net Loss Attributable to Non-Controlling Interest
(0.1 ) - -
- - (0.1 ) Net Income
from Continuing Operations $ 15.4 $ 5.6
$ 4.9 $ 2.0 $ 0.6 $ 28.4
Diluted EPS - Continuing Operations $ 0.29 $ 0.10 $
0.09 $ 0.04 $ 0.01 $ 0.53 Tax Rate 29.9 % 32.6 %
Six Months Ended June 30, 2014 MEGTEC
NE Sgmt Acquisition GAAP
Restructuring Allocation Costs
Non-GAAP Operating Income (Loss) $ 7.7 $ 9.0 $
2.7 $ 0.5 $ 19.8 Other Income / (Expense) 2.0 - - - 2.0 Income Tax
(Expense) / Benefit (0.8 ) (3.1 )
(0.9 ) (0.2 ) (5.0 ) Net Income
(Loss) $ 8.9 $ 5.9 $ 1.8 $ 0.3 16.9 Net Loss Attributable to
Non-Controlling Interest (0.2 ) -
- - (0.2 )
Net Income from Continuing Operations $ 8.7 $ 5.9
$ 1.8 $ 0.3 16.7
Diluted EPS - Continuing Operations $ 0.16 $ 0.11 $
0.03 $ 0.01 $ 0.30 Tax Rate 8.6 % 22.7 %
(1) May not foot due to rounding.
(2) 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 into 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.
Exhibit 2 Babcock & Wilcox Enterprises,
Inc. Condensed Consolidated and Combined Statements of
Operations Three Months Ended Six Months
Ended June 30, June 30, 2015
2014 2015 2014
(Unaudited) (In thousands, except per share amounts)
Revenues $ 437,485 $
327,379 $ 834,640 $ 639,457
Costs and expenses: Cost of operations 355,601 258,351 669,359
513,578 Research and development costs 3,962 4,281 8,480 8,293
Losses on asset disposals and impairments, net 9,009 1,457 9,027
1,457 Selling, general and administrative expenses 59,709 53,040
116,802 102,252 Special charges for restructuring activities and
spin-off costs 5,312 7,513
7,666 8,991 Total
costs and expenses 433,593 324,642 811,334 634,571 Equity in income
of investees 967 433
(1,104 ) 2,799
Operating income
4,859
3,170
22,202
7,685
Other income (expense):
Interest income 126 48 282 677 Interest expense (144 ) (84 ) (284 )
(204 ) Other – net 201 323
(110 ) 1,554 Total other
income (expense) 183 287 (112 ) 2,027
Income from continuing operations before
provision for income taxes
5,042
3,457
22,090
9,712
Provision for income taxes 919
1,841 6,611 833
Income from continuing operations 4,123 1,616 15,479 8,879 Income
from discontinued operations, net of tax 1,418
3,397 2,803
7,339 Net income 5,541 5,013 18,282 16,218
Net income attributable to noncontrolling
interest
(54
)
(77
)
(106
)
(193
)
Net Income attributable to Babcock & Wilcox Enterprises,
Inc. $ 5,487 $
4,936 $ 18,176
$ 16,025 Amounts attributable to
Babcock & Wilcox Enterprises, Inc. Income from continuing
operations $ 4,069 $ 1,539 $ 15,373 $ 8,686 Income from
discontinued operations, net of tax 1,418
3,397 2,803
7,339 Net income attributable to Babcock & Wilcox
Enterprises, Inc. $ 5,487 $ 4,936
$ 18,176 $ 16,025 Basic earnings
per common share: Continuing operations $ 0.08 $ 0.03 $ 0.29 $ 0.16
Discontinued operations 0.02
0.06 0.05 0.13
Basic earnings per common share $ 0.10 $ 0.09
$ 0.34 $ 0.29 Diluted earnings
per common share:
Continuing operations $ 0.08
$ 0.03 $ 0.29 $ 0.16
Discontinued operations 0.02
0.06 0.05 0.13
Diluted earnings per common share $ 0.10 $
0.09 $ 0.34 $ 0.29 Shares
used in the computation of earnings per common share: Basic 53,560
54,883 53,474 55,051 Diluted 53,787 55,058 53,680 55,251
Exhibit 3 Babcock & Wilcox Enterprises,
Inc. Condensed Consolidated and Combined Balance Sheets
June 30, December 31, 2015
2014 (Unaudited) (In thousands) ASSETS
Current assets: Cash and cash equivalents $ 307,562 $
218,659 Restricted cash and cash equivalents 35,538 26,311
Investments 5,098 1,607 Accounts receivable – trade, net 233,836
265,456 Accounts receivable – other 40,385 36,147 Contracts in
progress 125,160 107,751 Inventories 97,113 98,711 Deferred income
taxes 36,568 36,601 Other current assets 16,391 11,347 Current
assets of discontinued operations -
46,177 Total current assets 897,651 848,767
Property, plant and equipment 324,165 335,761 Less accumulated
depreciation (179,916 ) (200,525 ) Net
property, plant and equipment 144,249 135,236 Investments
1,111 214 Goodwill 202,398 209,277 Deferred income taxes 123,576
115,111 Investments in unconsolidated affiliates 100,804 109,248
Intangible assets 40,915 50,646 Other assets 26,695 9,227
Non-current assets of discontinued operations -
38,828
TOTAL ASSETS
$ 1,537,399 $ 1,516,554
Exhibit 3 Babcock &
Wilcox Enterprises, Inc. Condensed Consolidated and Combined
Balance Sheets (continued) June 30, December
31, 2015 2014 (Unaudited) (In
thousands, except share and per share amounts)
LIABILITIES AND STOCKHOLDERS’ EQUITY Current
liabilities: Notes payable and current maturities of long-term debt
$ 3,222 $ 3,215 Accounts payable 147,885 160,606 Accrued employee
benefits 41,627 39,464 Advance billings on contracts 168,946
148,098 Accrued warranty expense 36,995 37,735 Accrued liabilities
– other 49,216 54,827 Current liabilities of discontinued
operations - 44,145 Total
current liabilities 447,891 488,090 Accumulated
postretirement benefit obligation 29,103 28,347 Pension liability
246,366 253,763 Other liabilities 40,097 42,929 Non-current
liabilities of discontinued operations -
15,988 Total liabilities $ 763,457 $ 829,117
Commitments and contingencies - - Stockholders’ Equity:
Common stock, par value $0.01 per
share, authorized 200,000,000 shares; issued 53,719,878 and
0 shares at June 30, 2015 and December 31, 2014,
respectively
537 -
Preferred stock, par value $0.01 per
share, authorized 20,000,000 shares; No shares issued
-
- Capital in excess of par value 782,692 - Retained earnings - -
Accumulated other comprehensive income (10,407 ) 10,374 Former net
parent investment - 676,036
Stockholders’ equity – Babcock &
Wilcox Enterprises, Inc.
772,822 686,410
Noncontrolling interest
1,120 1,027 Total Stockholders’
equity 773,942 687,437
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY $
1,537,399 $ 1,516,554
Exhibit 4 Babcock & Wilcox Enterprises,
Inc. Condensed Consolidated and Combined Statements of Cash
Flows Six Months Ended June 30,
2015 2014 (Unaudited) (In
thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net
Income $ 18,282 $ 16,218 Non-cash items included in net income:
Depreciation and amortization 21,458 11,307 Income of equity method
investees, net of dividends 2,292 (240 ) Losses on asset disposals
and impairments 10,607 1,457 Recognition of losses for pension and
postretirement plans 200 250 Excess tax benefits from stock-based
compensation - (12 ) Changes in assets and liabilities, net of
effects of acquisitions: Accounts receivable 31,332 30,400 Accounts
payable (11,369 ) (50,150 ) Contracts in progress and advance
billings on contracts 5,170 (69,580 ) Inventories 663 4,503 Income
taxes (2,075 ) 5,911 Accrued and other current liabilities (7,735 )
4,360 Pension liability, accrued postretirement benefit obligation
and employee benefits (7,237 ) (14,745 ) Other, net
(5,958 ) (2,390 ) NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES $ 55,630 $ (57,931 )
CASH FLOWS FROM INVESTING ACTIVITIES: Decrease in restricted
cash and cash equivalents 1,307 4,420 Purchases of property, plant
and equipment (15,215 ) (5,499 ) Acquisition of business, net of
cash acquired - (127,098 ) Purchase of intangible assets - (722 )
Purchases of available-for-sale securities (4,919 ) (2,844 ) Sales
and maturities of available-for-sale securities 1,647 7,247
Proceeds from asset disposals - (6 ) Investment in equity method
investees - (4,900 ) NET CASH
USED IN INVESTING ACTIVITIES $ (17,180 ) $ (129,402 )
CASH FLOWS FROM FINANCING ACTIVITIES: Payment of short-term
borrowing and long-term debt - (1,815 ) Increase in short-term
borrowing - 733 Net transfers (to) from parent 75,587 215,262
Excess tax benefits from stock-based compensation - 12 Other
(38 ) (223 ) NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES $ 75,549 $ 213,969
EFFECTS OF EXCHANGE RATE CHANGES ON CASH
(4,881 ) (4,123 ) CASH FLOWS FROM CONTINUING
OPERATIONS 109,118 22,513
CASH FLOWS FROM DISCONTINUED
OPERATIONS: Operating cash flows from
discontinued operations, net (20,192 ) (10,302 ) Investing cash
flows from discontinued operations, net (23 )
(115 ) NET CASH FLOWS PROVIDED BY (USED IN) DISCONTINUED
OPERATIONS $ (20,215 ) $ (10,417 )
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 88,903 12,096 CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 218,659 191,318
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 307,562
$ 203,414
Exhibit 5
Babcock & Wilcox Enterprises,
Inc.
Segment Information(1)
Three Months Ended June 30, Six Months Ended June
30, 2015 2014
2015 2014 (Unaudited) (In
thousands) REVENUES: Global Power $ 157,373 $
109,693 $ 281,259 $ 219,985 Global Services 236,720 214,086 468,894
415,872 Industrial Environmental 43,392
3,600 84,487 3,600
$ 437,485 $ 327,379 $ 834,640
$ 639,457 GROSS PROFIT: Global Power $ 26,676 $ 19,472 $
47,104 $ 34,719 Global Services 46,308 48,356 99,595 89,960
Industrial Environmental 8,900 1,200
18,582 1,200
$ 81,884 $ 69,028 $ 165,281
$ 125,879
Three Months Ended June 30,
Six Months Ended June 30, 2015 2014
2015 2014
(Unaudited) (In millions) BOOKINGS: Global Power $
60.3 $ 261.7 $ 514.0 $ 312.1 Global Services 186.9 211.3 408.5
383.3 Industrial Environmental 52.2 N/A
108.0 N/A $
299.4 $ 473.0 $ 1,030.5 $ 695.3
As of June 30, 2015 2014
(Unaudited) (In millions) BACKLOG: Global Power $
1,185.0 $ 868.8 Global Services 1,162.9 $ 1,263.5 Industrial
Environmental 95.7 $ 83.0 $
2,443.5 $ 2,215.3
(1) May not foot due to rounding.
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Babcock & WilcoxInvestor Contact:Leslie Kass, Vice
President Investor Relations and Communications,
704-625-4944investors@babcock.comorBabcock & WilcoxMedia
Contact:Ryan Cornell, Public Relations,
330-860-1345rscornell@babcock.com
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