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Babcock & Wilcox Announces Third Quarter 2010 Results.

* Earnings per share increased 40.9%

* Consolidated backlog steady at $4.4 billion

* Power generation systems segment backlog increased 11.3% sequentially

CHARLOTTE, N.C. -- The Babcock & Wilcox Company (NYSE: BWC) ("B&W" or the "Company") today reported earnings per share for the third quarter ended September 30, 2010 of $0.31, an increase of 40.9% from the third quarter of 2009. Revenues for the third quarter of 2010 were $632.8 million, a decrease of $16.2 million or 2.5% from the third quarter of 2009.

Recent Highlights

* Selected to supply B&W's oxy-coal combustion technology as part of the $1 billion Department of Energy (DOE) FutureGen 2.0 Carbon Capture and Sequestration project

* Awarded 10-year, $2.1 billion DOE decontamination and decommissioning contract for the Portsmouth Gaseous Diffusion plant in Ohio, in alliance with Fluor

* Announced contract awarded to Babcock & Wilcox Beijing Company Ltd. to manufacture two 1,000 MW ultra-supercritical coal fired boilers for the domestic Chinese market

* Awarded replacement nuclear steam generator contract with IMPSA in Argentina

* Awarded design and manufacture contract for two nuclear steam generators for the Tennessee Valley Authority (TVA) Bellefonte Plant

* Awarded design, engineering and construction of SCR environmental system for control of nitrogen oxides for Michigan power plant

* Awarded design, engineering and construction of 33 MW multi-fuel waste plant in Sweden

Government Operations Segment

Revenues of $265.1 million increased $5.3 million or 2.1% in the third quarter of 2010 compared to the third quarter of 2009. This increase is principally the result of an increase in activity for nuclear reactor components partially offset by a reduction in revenues for the manufacture of components for a commercial uranium enrichment project.

Operating income of $48.1 million increased $28.3 million, or 143% in the third quarter of 2010 compared to the third quarter of 2009. This increase is principally related to productivity and project execution improvement on the production of nuclear reactor components, an increase in fees earned due to higher funding levels and productivity at the Company's management and operations sites and an improvement in operating results and favorable contingency resolution at the Company's highly enriched uranium nuclear fuel manufacturing facility.

"Our core defense related businesses continue to execute at a high level of proficiency on their existing contracts and we expect this performance to continue in the future. Additionally, we have been successful leveraging our expertise in nuclear technologies and high-consequence, mission-critical defense capabilities to expand our portfolio and sources of revenues and earnings, such as the recent $2.1 billion Portsmouth decontamination and decommissioning contract, and securing our position as program manager for the American Centrifuge Project (ACP)," said Brandon C. Bethards, President and Chief Executive Officer of B&W.

Power Generation Systems Segment

Revenues of $369.0 million for the third quarter of 2010 declined $20.6 million or 5.3% compared to the third quarter of 2009. This decrease was principally related to a decline in demand for new-build coal fired generation systems and services in the U.S., partially offset by increasing volumes in renewable power generation systems. Backlog in the power generation systems segment increased $205.1 million, or 11.3% from the end of the second quarter of 2010. This increase is principally due to our success in the U.S. and international nuclear services market, power and environmental aftermarket services and growth in energy from waste and biomass in Europe.

Operating income was $20.4 million in the third quarter of 2010 compared to $34.2 million in the third quarter of 2009. The decrease in operating income is principally related to improvement in contract execution offset by the decline in market demand for the Company's fossil power generation products and services in the U.S. and an increase in research and development efforts for the Company's modular nuclear reactor (B&W mPower) program. Selling, general and administrative expenses have been reduced over time with market demand, offset by increases related to acquired businesses and the Company's modular nuclear reactor technology program. Research, development and administrative expenses related to the Company's modular nuclear reactor technology program were higher in the third quarter of 2010 by approximately $9.9 million compared to the third quarter of 2009.

"Our U.S. fossil power business continues to achieve the results we would expect at this point in the business cycle with parts and services flattening out and new-build fossil power generation projects continuing to roll-out of backlog. Importantly, the Company is beginning to experience an increase in customer interest related to planning for environmental equipment purchases and installation services in order to achieve compliance with the EPA's new rules and regulations which are expected to be finalized next year," Bethards said.

Research and Development

During the third quarter, the Company incurred approximately $17.4 million of research and development costs. In addition to the ongoing investment in R&D at our state-of-the art environmental and fossil power research facility, the Company has ongoing research programs for small modular nuclear reactor technology and environmental equipment technology. For the first nine months of 2010, total internal research and development expenses were $50.7 million, an increase of $17.6 million over the same period in 2009.

Liquidity

The Company's net cash and investments position was $256.1 million at the end of the third quarter of 2010, a decrease of $67.6 million from the end of the second quarter of 2010. During the quarter, the Company generated approximately $18.1 million of cash flow from operating activities which included a pension contribution of approximately $55.9 million. Also during the quarter the Company made its first tranche investment in USEC of $37.5 million. In addition to net cash, the Company maintains a $700 million revolving credit agreement with approximately $475 million of availability as of the end of the third quarter. The Company continues to maintain adequate liquidity to fund operations, which could include increased working capital requirements, internal growth, and research and development programs, as well as additional product and geographic expansion opportunities.

Outlook

"Underlying business trends in the power generation systems segment during the third quarter were essentially unchanged. We are encouraged by data suggesting continued industrial expansion and increasing electricity consumption, which has led to higher utilization of the U.S. power generation fleet. We expect this to lead utilities to become more constructive towards their maintenance programs for the existing fleet in the short to medium term. Additionally, the multiple EPA regulations expected to be completed in 2011 are leading power generation providers to take a comprehensive look at their entire power generation system to determine the best path to comply with the new rules," Bethards continued. "Assuming that the Government's budget appropriation cycle and customer contract negotiations are completed during the fourth quarter, we expect that the government operations segment will end the fourth quarter with the highest backlog in its history," Bethards concluded.

Basis of Presentation

The Babcock & Wilcox Company operates in two business segments: Power Generation Systems and Government Operations, and was a wholly owned subsidiary of McDermott International, Inc., a Panamanian corporation, ("MII") until July 30, 2010 when MII distributed 100% of our outstanding common stock to the MII shareholders. On and prior to July 30, 2010, our financial position, operating results and cash flows consisted of The Babcock & Wilcox Operations of McDermott International, Inc., ("BWO"), which represented a combined reporting entity comprised of the assets and liabilities in managing and operating the Power Generation Systems and Government Operations segments of MII in addition to two captive insurance companies which have been combined and contributed to B&W in conjunction with the spin-off of B&W by MII. On our condensed consolidated and combined balance sheets, the period ended September 30, 2010 consists of the consolidated results of B&W, while the period ended December 31, 2009 consists of the combined results of BWO. On our condensed consolidated and combined statements of income, the three and nine months ended September 30, 2010, include the combined results of operations for one month and seven months, respectively, of BWO, and two months of the consolidated results of B&W, while the three and nine months ended September 30, 2009 consist entirely of the combined results of BWO. Our condensed consolidated and combined statements of cash flows for the nine months ended September 30, 2010 consist of seven months of combined results for BWO, and two months of consolidated results for B&W, while the nine months ended September 30, 2009 consist entirely of the combined results of BWO.

Conference Call to Discuss Third Quarter 2010 Results

Date: Tuesday, November 9, 2010, 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 expectation of continued high level performance on existing defense related contracts, our expectation that our government operations segment will end the fourth quarter of 2010 with the highest backlog in its history, the timing of final EPA regulations and rules and our expectation that utilities will become more constructive towards their maintenance programs in the short to medium term. 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 for industrial electricity usage, continued uncertainty regarding new environmental regulations and the timing of the Government's budget appropriation cycle. If one or more of these or other risks materialize, actual results may vary materially from those expected. For a more complete discussion of these and other risk factors, please see B&W's filings with the Securities and Exchange Commission, including its registration statement on Form 10, as amended. 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 12,000 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 www.babcock.com .

TABLES TO FOLLOW


THE BABCOCK & WILCOX COMPANY


CONDENSED CONSOLIDATED AND COMBINED BALANCE SHEETS


ASSETS


September 30,


December 31,


2010


2009


(Unaudited)


(In thousands)


Current Assets:


Cash and cash equivalents


$


177,656


$


469,468


Restricted cash and cash equivalents


11,243


15,305


Investments


351


14


Accounts receivable - trade, net


337,216


319,861


Accounts receivable - other


60,539


39,289


Contracts in progress


304,943


245,998


Inventories


101,173


98,644


Deferred income taxes


82,361


96,680


Other current assets


28,183


21,456


Total Current Assets


1,103,665


1,306,715


Property, Plant and Equipment


952,172


945,298


Less accumulated depreciation


537,852


515,237


Net Property, Plant and Equipment


414,320


430,061


Investments


75,054


73,540


Goodwill


275,707


262,866


Deferred Income Taxes


235,559


270,002


Investments in Unconsolidated Affiliates


101,315


68,327


Note Receivable from Affiliate


-


42,573


Other Assets


184,266


149,775


TOTAL


$


2,389,886


$


2,603,859


THE BABCOCK & WILCOX COMPANY


CONDENSED CONSOLIDATED AND COMBINED BALANCE SHEETS


LIABILITIES AND STOCKHOLDER AND PARENT EQUITY


September 30,


December 31,


2010


2009


(Unaudited)


(In thousands)


Current Liabilities:


Notes payable and current maturities of long-term debt


$


7,240


$


6,432


Accounts payable


164,008


178,350


Accounts payable to McDermott International, Inc.


-


112,053


Accrued employee benefits


218,889


198,195


Accrued liabilities - other


78,409


74,700


Advance billings on contracts


392,626


537,448


Accrued warranty expense


111,167


115,055


Income taxes payable


2,566


12,943


Total Current Liabilities


974,905


1,235,176


Long-Term Debt


964


4,222


Accumulated Postretirement Benefit Obligation


100,554


105,484


Environmental Liabilities


40,700


47,795


Pension Liability


472,130


699,117


Notes Payable to Affiliate


-


320,568


Other Liabilities


104,622


70,791


Commitments and Contingencies


Stockholders' and Parent Equity:


Common stock, par value $0.01 per share, authorized 325,000,000 shares; issued 116,743,437 and 0 shares at September 30, 2010 and December 31, 2009, respectively


1,167


-


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


-


Capital in excess of par value


1,056,655


-


Retained earnings


43,779


-


Treasury stock at cost, 92,643 and 0 shares at September 30, 2010 and December 31, 2009, respectively


(2,189


)


-


Accumulated other comprehensive loss


(403,959


)


-


Stockholders' Equity - The Babcock & Wilcox Company


695,453


-


Noncontrolling interest


558


-


Total Stockholders'Equity


696,011


-


Total Parent Equity


-


120,706


TOTAL


$


2,389,886


$


2,603,859


THE BABCOCK & WILCOX COMPANY CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF INCOME


Three Months Ended


Nine Months Ended


September 30,


September 30,


2010


2009


2010


2009


(Unaudited)


(In thousands, except share and per share amounts)


Revenues


$


632,765


$


648,997


$


1,983,649


$


2,166,119


Costs and Expenses:


Cost of operations


485,926


513,803


1,549,246


1,678,206


Losses on asset disposals - net


40


443


88


620


Selling, general and administrative expenses


98,708


102,279


293,277


289,444


Total Costs and Expenses


584,674


616,525


1,842,611


1,968,270


Equity in Income of Investees


16,986


13,646


48,440


34,144


Operating Income


65,077


46,118


189,478


231,993


Other Income (Expense):


Interest income


182


692


892


2,874


Interest expense


(660


)


(5,624


)


(11,329


)


(17,858


)


Other income (expense) - net


(6,451


)


(3,168


)


(13,486


)


(12,711


)


Total Other Expense


(6,929


)


(8,100


)


(23,923


)


(27,695


)


Income before Provision for Income Taxes


58,148


38,018


165,555


204,298


Provision for Income Taxes


22,224


11,697


65,063


75,981


Net Income


35,924


26,321


100,492


128,317


Less: Net Income Attributable to Noncontrolling Interest


(37


)


(36


)


(122


)


(131


)


Net Income Attributable to The Babcock & Wilcox Company


$


35,887


$


26,285


$


100,370


$


128,186


Earnings per Share:


Basic:


Net Income Attributable to The Babcock & Wilcox Company


$


0.31


$


0.23


$


0.86


$


1.10


Diluted:


Net Income Attributable to The Babcock & Wilcox Company


$


0.31


$


0.22


$


0.85


$


1.09


Shares used in the computation of earnings per share:


Basic


116,291,477


116,067,535


116,142,182


116,067,535


Diluted


117,647,749


117,423,807


117,498,454


117,423,807


THE BABCOCK & WILCOX COMPANY CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS


Nine Months Ended


September 30,


2010


2009


(Unaudited)


(In thousands)


CASH FLOWS FROM OPERATING ACTIVITIES:


Net Income


$


100,492


$


128,317


Non-cash items included in net income:


Depreciation and amortization


53,000


54,190


Income of investees, less dividends


(27,104


)


(14,254


)


Loss on asset disposals - net


88


620


Amortization of pension and postretirement costs


62,553


64,716


Excess tax benefits from stock-based compensation


(2,653


)


1,813


Other, net


(17,513


)


(25,427


)


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


Accounts receivable


48,832


88,849


Net contracts in progress and advance billings on contracts


(209,171


)


(93,566


)


Accounts payable


2,502


37,200


Inventories


5,543


14,520


Current and deferred income taxes


11,339


11,852


Accrued and other current liabilities


34


(53,277


)


Pension liability, accumulated postretirement benefit obligation and accrued employee benefits


(104,698


)


(28,870


)


Other, net


38,242


(40,329


)


NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES


(38,514


)


146,354


CASH FLOWS FROM INVESTING ACTIVITIES:


Decrease (increase) in restricted cash and cash equivalents


4,062


(12,987


)


Purchases of property, plant and equipment


(48,783


)


(66,655


)


Acquisition of businesses, net of cash acquired


(30,177


)


(8,497


)


Decrease in note receivable from affiliate


43,277


-


Net (increase) decrease in available-for-sale securities


(1,379


)


48,541


Investment in equity and cost method investees


(37,844


)


(2,700


)


Proceeds from asset disposals


1,016


197


NET CASH USED IN INVESTING ACTIVITIES


(69,828


)


(42,101


)


CASH FLOWS FROM FINANCING ACTIVITIES:


Payment of short-term borrowing and long-term debt


(2,313


)


(5,651


)


Payment of debt issuance costs


(9,865


)


-


Increase in short-term borrowing


-


1,606


Dividend paid to McDermott International, Inc.


(100,000


)


-


Capital contribution from McDermott International, Inc.


12,501


-


Distribution to McDermott International, Inc.


(43,334


)


-


(Decrease) increase in notes payable to affiliates


(43,386


)


861


Excess tax benefits from stock-based compensation


2,653


(1,813


)


Other, net


116


(164


)


NET CASH USED IN FINANCING ACTIVITIES


(183,628


)


(5,161


)


EFFECTS OF EXCHANGE RATE CHANGES ON CASH


158


9,691


NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


(291,812


)


108,783


CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD


469,468


279,646


CASH AND CASH EQUIVALENTS AT END OF PERIOD


$


177,656


$


388,429


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:


Cash paid (received) during the period for:


Interest (net of amount capitalized)


$


2,576


$


333


Income taxes (net of refunds)


$


21,442


$


(33,621


)


The Babcock & Wilcox Company


Business Segment Information


For the Periods Ended September 30, 2010 and 2009


(In thousands of U.S. dollars)


THREE MONTHS ENDED


NINE MONTHS ENDED


REVENUES:


9/30/10


9/30/09


9/30/10


9/30/09


Power Generation Systems


$


369,032


$


389,638


$


1,201,127


$


1,389,212


Government Operations


265,090


259,752


785,516


778,254


Adjustments and Eliminations


(1,357


)


(393


)


(2,994


)


(1,347


)


TOTAL


$


632,765


$


648,997


$


1,983,649


$


2,166,119


SEGMENT INCOME:


Power Generation Systems


$


20,391


$


34,202


$


69,526


$


136,199


Government Operations


48,108


19,798


134,574


123,023


68,499


54,000


204,100


259,222


Corporate


(3,422


)


(7,882


)


(14,622


)


(27,229


)


OPERATING INCOME


$


65,077


$


46,118


$


189,478


$


231,993


EQUITY IN INCOME (LOSS) OF INVESTEES:


Power Generation Systems


$


7,123


$


4,565


$


19,123


$


7,709


Government Operations


9,863


9,081


29,317


26,435


TOTAL


$


16,986


$


13,646


$


48,440


$


34,144


PENSION EXPENSE:


Power Generation Systems


$


17,180


$


16,694


$


49,153


$


47,418


Government Operations


14,142


13,347


37,510


37,664


Corporate


(482


)


5,012


8,915


14,182


TOTAL


$


30,840


$


35,053


$


95,578


$


99,264


DEPRECIATION AND AMORTIZATION:


Power Generation Systems


$


6,586


$


4,444


$


16,727


$


13,398


Government Operations


11,233


16,866


32,359


38,417


Corporate


1,784


940


3,914


2,375


TOTAL


$


19,603


$


22,250


$


53,000


$


54,190


RESEARCH AND DEVELOPMENT, NET


$


17,424


$


12,593


$


50,709


$


33,120


CAPITAL EXPENDITURES:


Power Generation Systems


$


3,513


$


5,030


$


11,486


$


25,201


Government Operations


4,282


11,710


25,438


25,707


Corporate


9,302


9,662


11,859


15,747


TOTAL


$


17,097


$


26,402


$


48,783


$


66,655


BACKLOG:


Power Generation Systems


$


2,021,316


$


2,061,837


Government Operations


2,338,117


2,539,252


TOTAL


$


4,359,433


$


4,601,089
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Comment:Babcock & Wilcox Announces Third Quarter 2010 Results.
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Date:Nov 8, 2010
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