Babcock & Wilcox Announces Fourth Quarter 2011 Results

- Earnings per share of $0.54

- Revenues of $800.8 million increased 13.6%

- Ending backlog of more than $5.3 billion

CHARLOTTE, N.C.--()--The Babcock & Wilcox Company (NYSE: BWC) (“B&W” or the “Company”) today reported fourth quarter 2011 revenues of $800.8 million, an increase of $95.6 million, or 13.6%, from the fourth quarter of 2010. Earnings per share for the fourth quarter of 2011 were $0.54, an increase of 20.0% from the $0.45 reported in the fourth quarter of 2010. Revenues for the full year of 2011 were $2,952.0 million, an increase of $263.2 million, or 9.8% from the full year of 2010. Earnings per share for the full year of 2011 were $1.43, an increase of 10.0% from the $1.30 reported in 2010.

Recent Highlights

  • Awarded $600 Million Naval Nuclear Component Contract
  • Awarded $115 Million Naval Nuclear Fuel and Support Contract
  • Awarded $75 Million Environmental Construction Contract for NIPSCO
  • Selected as Preferred Environmental Technology Provider for Luminant and Awarded $65 Million Environmental Technology Supply and Construction Contracts
  • Awarded Environmental Technology Supply Contract for Xcel Energy
  • Awarded $44 Million Environmental Technology Supply Contract for a Midwest Utility
  • Awarded $43 Million Environmental Technology Supply Contract for Interstate Power & Light
  • Awarded Fleet-Wide Nuclear Services Contract for Progress Energy
  • Awarded Preliminary Design Contract for Ohio Class Replacement Nuclear Components
  • Acquired German Material Handling Business; Operating as Loibl Allen-Sherman-Hoff GmbH

Results of Operations

Consolidated revenues for the fourth quarter of 2011 were $800.8 million, an increase of $95.6 million, or 13.6%, from the fourth quarter of 2010. Nuclear Energy segment revenues increased $52.9 million, or 110.5%, primarily due to a significant CANDU nuclear reactor services project started during the quarter. Power Generation segment revenues increased $48.2 million, or 13.3%, primarily due to increased activity for environmental equipment projects and waste-to-energy and biomass new-build steam generation systems. Technical Services segment revenues increased $4.6 million, or 16.7%, principally due to new environmental remediation, decontamination and decommissioning contracts, primarily for the U.S. Department of Energy (DOE), that were ramping up during 2011. Nuclear Operations segment revenues declined $5.5 million, or 2.0%.

Operating income for the fourth quarter of 2011 was $93.3 million, an increase of $18.8 million, or 25.2%, compared to $74.5 million in the fourth quarter of 2010. The increase in operating income was primarily due to improvements in revenues and operating margins in the Power Generation, Technical Services and Nuclear Operations segments, partially offset by an increase in research and development expenses related to the Company’s small modular reactor program.

“Recently, the Company undertook a bottoms-up review of the environmental opportunity given the recent finalization of the Mercury and Air Toxics Rule (MATS) in December of 2011. We believe that our environmental opportunity remains significant over the next several years as the industry is beginning to convert bidding activity noted in prior quarters into awards. In that regard, the Power Generation segment reported environmental bookings during the fourth quarter of approximately $278 million,” said Brandon C. Bethards, President and Chief Executive Officer of B&W. “As we look forward to 2012, on a consolidated basis, we expect double-digit, year-over-year revenue growth. We expect revenues and operating income in our combined government-related segments to remain stable at approximately current record levels. We expect the combined power-related segments to continue to improve, driven principally by the investment cycle related to recent U.S. Environmental Protection Agency rules, strong project execution and further U.S. nuclear services activity. Partially offsetting consolidated growth expectations is a cyclical reduction in equity income from the Company’s Asian joint ventures. Additionally, the Company expects somewhat higher pension expense in 2012 and an effective tax rate in the 32% to 35% range,” Bethards concluded.

Liquidity

The Company’s cash and investments position, net of debt, was $543.7 million at the end of the fourth quarter of 2011, an increase of $186.6 million compared to $357.1 million at the end of the third quarter of 2011. Seasonally, the fourth quarter typically represents the highest cash flow quarter of the year. In the fourth quarter of 2011, free cash flow was the result of strong operating income, the timing of payments from the U.S. Government related to fees earned, dividends received from joint ventures, and an improvement in working capital levels in the Nuclear Operations and Power Generation segments. In addition to net cash, the Company maintains a $700.0 million revolving credit agreement with $488.6 million of availability as of the end of the fourth 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.

Conference Call to Discuss Fourth Quarter 2011 Results

 

Date:

  Thursday, March 1, 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 a meaningful environmental opportunity over the next several years, our expectations regarding 2012 consolidated revenue growth, 2012 revenue and operating income levels for our government-related segments and 2012 improvements for our power-related segments, and our belief that the Company maintains adequate liquidity to fund its operations. 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 demand or competitiveness of nuclear power, government funding for the defense or energy programs in which we are involved and the timing, scope or enforcement of U.S. Environmental Protection Agency environmental rules affecting our customers. 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 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

CONSOLIDATED BALANCE SHEETS
             
December 31,

2011

 

2010

(In thousands)
ASSETS
Current Assets:
Cash and cash equivalents $ 415,209 $ 391,142
Restricted cash and cash equivalents 61,190 12,267
Investments 68,805 234
Accounts receivable – trade, net 305,832 289,374
Accounts receivable – other 77,505 64,231
Contracts in progress 315,286 225,448
Inventories 107,298 100,932
Deferred income taxes 102,022 90,620
Other current assets                   33,929     34,868
 
Total Current Assets                   1,487,076     1,209,116
 
Property, Plant and Equipment 1,017,422 968,712
Less accumulated depreciation                   595,131     550,400
 
Net Property, Plant and Equipment                   422,291     418,312
 
Investments                   3,775     74,863
 
Goodwill                   276,180     269,424
 
Deferred Income Taxes                   241,739     236,504
 
Investments in Unconsolidated Affiliates                   163,568     100,811
 
Other Assets                   194,482     191,480
 
TOTAL                 $ 2,789,111   $ 2,500,510
 

 
THE BABCOCK & WILCOX COMPANY
CONSOLIDATED BALANCE SHEETS
 
December 31,
2011   2010
(In thousands)
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Notes payable and current maturities of long-term debt $ 4,653 $ 4,790
Accounts payable 237,494 185,240
Accrued employee benefits 303,803 235,856
Accrued liabilities – other 71,079 71,242
Advance billings on contracts 438,753 369,644
Accrued warranty expense 97,209 109,588
Income taxes payable   1,816       5,467  
 
Total Current Liabilities   1,154,807       981,827  
 
Long-Term Debt   633       855  
 
Accumulated Postretirement Benefit Obligation   80,663       84,100  
 
Environmental Liabilities   44,069       40,889  
 
Pension Liability   586,045       579,000  
 
Other Liabilities   87,921       100,314  
 
Commitments and Contingencies
 
Stockholders’ Equity:

Common stock, par value $0.01 per share, authorized 325,000,000 shares; issued 118,458,911 and 116,963,664 shares at December 31, 2011 and December 31, 2010, respectively

1,185 1,170

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

-

-

Capital in excess of par value 1,106,971 1,067,414
Retained earnings 266,325 96,671

Treasury stock at cost, 351,876 and 101,649 shares at December 31, 2011 and December 31, 2010, respectively

(10,059 ) (2,397 )
Accumulated other comprehensive loss   (538,628 )     (449,999 )
Stockholders’ Equity – The Babcock & Wilcox Company 825,794 712,859
Noncontrolling interest   9,179       666  
Total Stockholders’ Equity 834,973 713,525
       
TOTAL $ 2,789,111     $ 2,500,510  
 

 
THE BABCOCK & WILCOX COMPANY
CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
 
Three Months Ended Year Ended
December 31, December 31,

2011

 

2010

2011

 

2010

(Unaudited)
(In thousands)
 

Revenues

$ 800,789     $ 705,162    

$

2,952,040

   

$

2,688,811

 
Costs and Expenses:
Cost of operations 589,999 525,497 2,278,208 2,024,034
Research and development costs 31,878 18,458 106,396 69,167

(Gains) losses on asset disposals and Impairments – net

(3,713 ) (50 ) (3,087 ) 38
Selling, general and administrative expenses   111,497       112,405       413,210       405,682  
Total Costs and Expenses   729,661       656,310       2,794,727       2,498,921  
 
Equity in Income of Investees   22,131       25,642       78,655       74,082  
 
Operating Income   93,259       74,494       235,968       263,972  
 
Other Income (Expense):
Interest income 331 295 1,342 1,187
Interest expense (2,021 ) (1,610 ) (4,543 ) (12,939 )
Other income (expense) – net   (1,971 )     (2,914 )     2,168       (16,400 )
Total Other Expense   (3,661 )     (4,229 )     (1,033 )     (28,152 )
 
Income before Provision for Income Taxes 89,598 70,265 234,935 235,820
 
Provision for Income Taxes   27,558       17,231       72,982       82,294  
 

Net Income

$ 62,040     $ 53,034    

$

161,953

   

$

153,526

 
 

Net Loss (Income) Attributable to Noncontrolling Interest

  2,232       (142 )     7,701       (264 )
 
 

Net Income Attributable to The Babcock & Wilcox Company

$ 64,272     $ 52,892    

$

169,654

   

$

153,262

 
 
Earnings per Common Share:
Basic:
Net Income Attributable to
The Babcock & Wilcox Company $ 0.54 $ 0.45 $ 1.44 $ 1.32
Diluted:
Net Income Attributable to
The Babcock & Wilcox Company $ 0.54     $ 0.45     $ 1.43     $ 1.30  
 

Shares used in the computation of earnings per share

Basic 117,998,268 116,615,156 117,560,594 116,260,425
Diluted   118,716,916       118,008,894       118,404,597       117,626,065  
 

 
THE BABCOCK & WILCOX COMPANY
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
 
Year Ended December 31,

2011

 

2010

 

2009

(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 161,953 $ 153,526 $ 147,920
Non-cash items included in net income:
Depreciation and amortization 73,003 71,633 72,712
Income of investees, net of dividends (20,854 ) (20,449 ) (4,450 )
(Gains) losses on asset disposals and impairments – net (3,087 ) 38 1,226
In-kind research and development costs 16,584 - -
Provision for deferred taxes 29,902 33,457 29,535
Amortization of pension and postretirement costs 79,070 79,935 86,637
Stock-based compensation expense 17,927 16,308 25,891
Excess tax benefits from stock-based compensation (4,083 ) (5,276 ) 1,813
Changes in assets and liabilities, net of effects from acquisitions:
Accounts receivable (26,887 ) 101,260 71,316
Accounts payable 48,246 19,882 (40,555 )
Net contracts in progress and advance billings (28,746 ) (153,933 ) (63,879 )
Income taxes 31,961 9,239 10,740
Accrued and other current liabilities (23,106 ) (9,761 ) (52,556 )
Pension liability and accrued postretirement and employee benefits (144,802 ) (85,371 ) (378 )
Other   (33,490 )     (18,082 )     (33,149 )
NET CASH PROVIDED BY OPERATING ACTIVITIES   173,591       192,406       252,823  
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in restricted cash and cash equivalents (48,923 ) 3,038 (8,189 )
Purchases of property, plant and equipment (63,874 ) (63,649 ) (93,725 )
Acquisition of businesses, net of cash acquired (11,907 ) (29,962 ) (8,497 )
Net decrease in available-for-sale securities - - 45,230
Purchases of available-for-sale securities (145,198 ) (135,135 ) -
Sales and maturities of available-for-sale securities 147,288 134,276 -
Proceeds from asset disposals 6,468 753 245
Investments, net of return of capital, in equity and cost method investees (38,176 ) (42,912 ) (2,700 )
Decrease in note receivable from affiliate - 43,277 -
Other   -       -       1  
NET CASH USED IN INVESTING ACTIVITIES   (154,322 )     (90,314 )     (67,635 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of short-term borrowings and long-term debt (1,782 ) (29,914 ) (6,155 )
Payment of debt issuance costs (82 ) (9,994 ) -
Increase in short-term borrowing 1,254 25,000 -
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 ) 2,368
Exercise of stock options 4,463 211 -
Excess tax benefits from stock-based compensation 4,083 5,276 (1,813 )
Other   (401 )     (93 )     -  
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES   7,535       (183,733 )     (5,600 )
EFFECTS OF EXCHANGE RATE CHANGES ON CASH   (2,737 )     3,315       10,234  
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   24,067       (78,326 )     189,822  
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD   391,142       469,468       279,646  
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 415,209     $ 391,142     $ 469,468  
 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest (net of amount capitalized) $ 4,525 $ 3,746 $ 24,728
Income taxes (net of refunds) $ 33,505     $ 27,227     $ (29,663 )
 

 
The Babcock & Wilcox Company
Business Segment Information
For the Periods Ended December 31, 2011 and 2010
(In thousands of U.S. dollars)
   
THREE MONTHS ENDED YEAR ENDED
12/31/11 12/31/10 12/31/11 12/31/10

REVENUES:

Power Generation $ 411,420 $ 363,203 $ 1,541,509 $ 1,424,574
Nuclear Operations 265,703 271,159 1,043,185 995,969
Technical Services 32,113 27,521 119,711 90,147
Nuclear Energy 100,736 47,855 321,406 196,282
Adjustments and Eliminations     (9,183 )   (4,576 )     (73,771 )   (18,161 )
 
 

TOTAL

    $ 800,789   $ 705,162     $ 2,952,040   $ 2,688,811  
 

SEGMENT INCOME:

Power Generation $ 46,372 $ 33,869 $ 140,029 $ 128,278
Nuclear Operations 43,702 38,186 171,554 147,235
Technical Services 20,884 12,465 68,239 45,614
Nuclear Energy       (10,407 )   (2,677 )     (118,748 )   (27,560 )
100,551 81,843 261,074 293,567
Corporate         (7,292 )   (7,349 )     (25,106 )   (29,595 )
 

TOTAL

  $ 93,259   $ 74,494     $ 235,968   $ 263,972  
 

EQUITY IN INCOME OF INVESTEES:

Power Generation $ 5,866 $ 11,665 $ 25,778 $ 30,788
Nuclear Operations 0 0 0 0
Technical Services 16,265 13,977 52,877 43,294
Nuclear Energy       0     0       0     0  
 
  TOTAL     $ 22,131   $ 25,642     $ 78,655   $ 74,082  
 

PENSION EXPENSE:

Power Generation $ 14,901 $ 15,517 $ 60,710 $ 62,047
Nuclear Operations 8,075 9,672 34,219 40,687
Technical Services 617 653 2,468 2,613
Nuclear Energy 1,128 924 4,472 3,547
Corporate         2,031     1,876       7,182     15,326  
 
  TOTAL     $ 26,752   $ 28,642     $ 109,051   $ 124,220  
 

DEPRECIATION AND AMORTIZATION:

Power Generation $ 3,892 $ 5,579 $ 17,264 $ 18,564
Nuclear Operations 9,103 8,400 38,169 36,955
Technical Services 65 65 262 263
Nuclear Energy 1,393 1,246 5,346 4,988
Corporate         3,057     3,343       11,962     10,863  
 
  TOTAL     $ 17,510   $ 18,633     $ 73,003   $ 71,633  
 

RESEARCH AND DEVELOPMENT, NET:

Power Generation $ 6,907 $ 5,903 $ 21,325 $ 25,715
Nuclear Operations 178 123 234 147
Technical Services 1,232 2,953 1,878 4,791
Nuclear Energy       23,561     9,479       82,959     38,514  
 
  TOTAL     $ 31,878   $ 18,458     $ 106,396   $ 69,167  
 

CAPITAL EXPENDITURES:

Power Generation $ 5,173 $ 3,589 $ 15,788 $ 13,627
Nuclear Operations 10,315 7,488 32,082 24,718
Technical Services 0 15 0 15
Nuclear Energy 928 3,032 7,257 4,480
Corporate         3,461     742       8,747     20,809  
 
  TOTAL     $ 19,877   $ 14,866     $ 63,874   $ 63,649  
 

BACKLOG:

Power Generation $ 1,947,274 $ 1,564,351 $ 1,947,274 $ 1,564,351
Nuclear Operations 2,995,364 3,151,353 2,995,364 3,151,353
Technical Services 13,756 1,181 13,756 1,181
Nuclear Energy       382,638     485,005       382,638     485,005  
 
  TOTAL     $ 5,339,032   $ 5,201,890     $ 5,339,032   $ 5,201,890  

Contacts

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

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Contacts

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