Foster Wheeler Reports Results for Third Quarter of 2012

  • Fully diluted earnings per share of $0.54
  • 43% increase in net income compared with average quarter of 2011
  • Record-level of scope new orders in Global E&C Group
  • 31% sequential-quarter increase in scope backlog in Global E&C Group, to $1.7 billion
  • Very strong EBITDA margin on scope revenues in Global Power Group

ZUG, Switzerland--()--Foster Wheeler AG (Nasdaq: FWLT) today reported net income for the third quarter of 2012 of $58.2 million, or $0.54 per diluted share, compared with $36.9 million, or $0.31 per diluted share, in the third quarter of 2011.

Net income in both quarterly periods was impacted by asbestos-related provisions as detailed in an attached table. Excluding such items from both quarterly periods, net income in the third quarter of 2012 was $60.2 million, or $0.56 per diluted share, compared with $38.8 million, or $0.33 per diluted share, in the year-ago quarter.

For the first nine months of 2012, net income was $129.7 million, or $1.20 per diluted share, compared with $123.1 million, or $1.01 per diluted share, for the first nine months of 2011.

The following tables present quarterly and average quarterly data, both as reported and as adjusted (as detailed in an attached table). The company believes that quarterly averages provide meaningful comparative relevance for certain key metrics in light of the significant quarter-to-quarter variability that is inherent in the company’s financial results.

                                 
(in millions)       Q3 2012       Qtrly Avg. 2012       Q3 2011       Qtrly Avg. 2011
Net income       $58       $43       $37       $41
Net income, as adjusted       $60       $46       $39       $43
                       

Foster Wheeler’s Chief Executive Officer, Kent Masters, said, “The company’s net income increased 43% in the third quarter of 2012 as compared with the average quarter of 2011 due largely to the performance of our Global Power Group, which reported a sharp increase in EBITDA and very strong margins. Additionally, our Global Engineering and Construction Group booked a record-level of scope new orders, which generated a 31% sequential-quarter increase in scope backlog to more than $1.7 billion.”

Also contributing to the improvement in adjusted net income in the third quarter of 2012 was an effective tax rate that was below the average 2011 rate.

Global Engineering and Construction (E&C) Group

                                 
(dollars in millions)       Q3 2012       Qtrly Avg. 2012       Q3 2011       Qtrly Avg. 2011
New orders booked (FW Scope)       $769       $510       $309       $362
Operating revenues (FW Scope)       $380       $387       $418       $399
Segment EBITDA       $52       $46       $59       $53
EBITDA Margin (FW Scope)       13.7%       11.9%       14.0%       13.2%
  • Scope new orders in the third quarter of 2012 reached a record level due to a robust mix of bookings that included two large contracts for projects in Brazil and Venezuela.
  • Scope operating revenues in the third quarter of 2012 were below the average quarter of 2011 due to delays in contract awards during the first half of 2012.
  • EBITDA in the third quarter of 2012 was comparable to the average quarter of 2011 as increased profit on work executed was partially offset by the impact of an unfavorable utilization rate and higher sales pursuit costs.

Global Power Group (GPG)

                                 
(dollars in millions)       Q3 2012       Qtrly Avg. 2012       Q3 2011       Qtrly Avg. 2011
New orders booked (FW Scope)       $184       $153       $77       $313
Operating revenues (FW Scope)       $223       $253       $247       $257
Segment EBITDA       $65       $54       $35       $46
EBITDA Margin (FW Scope)       29.2%       21.3%       14.3%       17.9%
  • Scope new orders in the third quarter of 2012 were below the average quarter of 2011, reflecting slippage of award dates for committed key prospects.
  • Scope operating revenues in the third quarter of 2012 were below the average quarter of 2011, primarily as a result of delays in contract awards.
  • EBITDA in the third quarter of 2012 was well above the average quarter of 2011, aided by profit enhancement opportunities and royalty fees.

Outlook/Guidance

Masters said, “In our Global Power Group, we are raising our full-year 2012 EBITDA margin guidance to 20% to 22%. We are maintaining our previous guidance on full-year scope revenues in GPG, specifically that we expect them to be essentially flat in 2012 as compared to 2011.”

He continued, “In our Global E&C Group, we are maintaining our full-year 2012 EBITDA margin guidance at 11% to 13%, but we are lowering our expectation regarding full-year scope revenues in our E&C Group, now expecting that they will be essentially flat in 2012 as compared to 2011.”

Masters said, “We continue to expect that our full-year earnings per share in 2012 will be materially higher than 2011.”

Share Repurchase Program

The company repurchased 1,944,210 shares during the third quarter of 2012 for approximately $40 million. As of September 30, 2012, the company had approximately $460 million remaining under its authorized share repurchase program.

Conference Call Information

Foster Wheeler AG plans to hold a conference call today, Friday, November 9, at 4:00 p.m. Central European Time (10:00 a.m. Eastern Standard Time in the U.S.) to discuss its financial results for the third quarter ended September 30, 2012. The call will be accessible to the public by telephone or webcast, and the company will post an accompanying slide presentation in the investor relations section of its website (www.fwc.com). To listen to the call by telephone, dial 973-935-8752 (conference I.D. No. 33934876) approximately ten minutes before the call. The conference call will also be available over the Internet at www.fwc.com or through StreetEvents at www.streetevents.com. A replay of the call will be available on the company's web site for four weeks following the call.

Net Income

All references to net income in this news release refer to “Net income attributable to Foster Wheeler AG” as reported in our consolidated financial statements.

Calculation of EBITDA

EBITDA is a supplemental financial measure not defined in generally accepted accounting principles, or GAAP. The company defines EBITDA as net income attributable to Foster Wheeler AG before interest expense, income taxes, depreciation and amortization. The company has presented EBITDA because it believes it is an important supplemental measure of operating performance. Certain covenants under our senior credit agreement use an adjusted form of EBITDA such that in the covenant calculations the EBITDA as presented herein is adjusted for certain unusual and infrequent items specifically excluded in the terms of our senior credit agreement. The company believes that the line item on its consolidated statement of operations entitled "net income attributable to Foster Wheeler AG" is the most directly comparable GAAP financial measure to EBITDA. Since EBITDA is not a measure of performance calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, net income attributable to Foster Wheeler AG as an indicator of operating performance or any other GAAP financial measure.

EBITDA, as calculated by the company, may not be comparable to similarly titled measures employed by other companies. In addition, this measure does not necessarily represent funds available for discretionary use, and is not necessarily a measure of the company's ability to fund its cash needs. As EBITDA excludes certain financial information that is included in net income attributable to Foster Wheeler AG, users of this financial information should consider the type of events and transactions that are excluded.

The company's non-GAAP performance measure, EBITDA, has certain material limitations as follows:

  • It does not include interest expense. Because the company has borrowed money to finance some of its operations, interest is a necessary and ongoing part of its costs and has assisted the company in generating revenue. Therefore, any measure that excludes interest expense has material limitations;
  • It does not include taxes. Because the payment of taxes is a necessary and ongoing part of the company's operations, any measure that excludes taxes has material limitations; and
  • It does not include depreciation and amortization. Because the company must utilize property, plant and equipment and intangible assets in order to generate revenues in its operations, depreciation and amortization are necessary and ongoing costs of its operations. Therefore, any measure that excludes depreciation and amortization has material limitations.

Calculation of EBITDA Margin

Segment EBITDA margin is calculated by dividing business unit operating revenues in Foster Wheeler Scope into business unit EBITDA.

Foster Wheeler Scope

Foster Wheeler Scope represents that portion of backlog, new orders booked and operating revenues on which profit can be earned. Foster Wheeler Scope excludes revenues relating to third-party costs incurred by the company as agent or principal on a reimbursable basis.

Foster Wheeler AG is a global engineering and construction company and power equipment supplier delivering technically advanced, reliable facilities and equipment. The company employs approximately 12,000 talented professionals with specialized expertise dedicated to serving its clients through one of its two primary business groups. The company’s Global Engineering and Construction Group designs and constructs leading-edge processing facilities for the upstream oil and gas, LNG and gas-to-liquids, refining, chemicals and petrochemicals, power, mining and metals, environmental, pharmaceuticals, biotechnology and healthcare industries. The company’s Global Power Group is a world leader in combustion and steam generation technology that designs, manufactures and erects steam generating and auxiliary equipment for power stations and industrial facilities and also provides a wide range of aftermarket services. The company is based in Zug, Switzerland, and its operational headquarters office is in Geneva, Switzerland. For more information about Foster Wheeler, please visit our Web site at www.fwc.com.

Safe Harbor Statement

Foster Wheeler AG news releases may contain forward-looking statements that are based on management’s assumptions, expectations and projections about the Company and the various industries within which the Company operates. These include statements regarding the Company’s expectations about revenues (including as expressed by its backlog), its liquidity, the outcome of litigation and legal proceedings and recoveries from customers for claims and the costs of current and future asbestos claims and the amount and timing of related insurance recoveries. Such forward-looking statements by their nature involve a degree of risk and uncertainty. The Company cautions that a variety of factors, including but not limited to the factors described in the Company’s most recent Annual Report on Form 10-K, which was filed with the U.S. Securities and Exchange Commission, and the following, could cause the Company’s business conditions and results to differ materially from what is contained in forward-looking statements: benefits, effects or results of the Company’s redomestication to Switzerland, the benefits, effects or results of its strategic renewal initiative, further deterioration in global economic conditions, changes in investment by the oil and gas, oil refining, chemical/petrochemical and power generation industries, changes in the financial condition of its customers, changes in regulatory environments, changes in project design or schedules, contract cancellations, changes in estimates made by the Company of costs to complete projects, changes in trade, monetary and fiscal policies worldwide, compliance with laws and regulations relating to its global operations, currency fluctuations, war , terrorist attacks on and/or disasters affecting facilities either owned by the Company or where equipment or services are or may be provided by the Company, interruptions to shipping lanes or other methods of transit, outcomes of pending and future litigation, including litigation regarding the Company’s liability for damages and insurance coverage for asbestos exposure, protection and validity of its patents and other intellectual property rights, increasing global competition, compliance with its debt covenants, recoverability of claims against its customers and others by the Company and claims by third parties against the Company, and changes in estimates used in its critical accounting policies. Other factors and assumptions not identified above were also involved in the formation of these forward-looking statements and the failure of such other assumptions to be realized, as well as other factors, may also cause actual results to differ materially from those projected. Most of these factors are difficult to predict accurately and are generally beyond the Company’s control. You should consider the areas of risk described above in connection with any forward-looking statements that may be made by the Company. The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any additional disclosures the Company makes in proxy statements, quarterly reports on Form 10-Q, annual reports on Form 10-K and current reports on Form 8-K filed with or furnished to the Securities and Exchange Commission.

               

Foster Wheeler AG and Subsidiaries

Consolidated Statement of Operations

(in thousands of dollars, except share data and per share amounts)

(unaudited)

 
Quarter Ended September 30, Nine Months Ended September 30,
2012 2011 2012 2011
 
Operating revenues $ 803,232 $ 1,131,856 $ 2,679,354 $ 3,351,986
Cost of operating revenues   649,369     995,792     2,246,608     2,963,055  
Contract profit 153,863 136,064 432,746 388,931
 
Selling, general and administrative expenses 77,631 75,087 246,339 229,330
Other income, net (14,388 ) (6,658 ) (33,143 ) (42,314 )
Other deductions, net 8,824 8,939 25,162 21,777
Interest income (2,470 ) (5,562 ) (8,588 ) (13,265 )
Interest expense 3,197 3,079 10,862 10,385
Net asbestos-related provision   2,000     1,987     7,710     4,387  
Income before income taxes 79,069 59,192 184,404 178,631
Provision for income taxes   16,790     16,502     43,965     42,829  
Net income 62,279 42,690 140,439 135,802
Less: Net income attributable to noncontrolling interests   4,057     5,832     10,712     12,664  
Net income attributable to Foster Wheeler AG $ 58,222   $ 36,858   $ 129,727   $ 123,138  
 
 
Shares Outstanding:
Weighted-average number of shares
outstanding for basic earnings per share 107,065,999 118,611,912 107,558,489 121,852,185
Weighted-average number of shares

outstanding for diluted earnings per share

107,319,962 118,801,481 107,857,368 122,389,634
 
 
Earnings per share:

Basic

$ 0.54   $ 0.31   $ 1.21   $ 1.01  

Diluted

$ 0.54   $ 0.31   $ 1.20   $ 1.01  
 
       

Foster Wheeler AG and Subsidiaries

Consolidated Balance Sheet

(in thousands of dollars)

(unaudited)

 

September 30,

December 31,
2012 2011

ASSETS

Current Assets:

Cash and cash equivalents

$ 709,370 $ 718,049

Short-term investments

- 1,294

Accounts and notes receivable, net:

Trade

530,818 427,984

Other

94,152 97,495

Contracts in process

246,414 166,648

Prepaid, deferred and refundable income taxes

65,101 62,616

Other current assets

  43,244     49,101  

Total current assets

  1,689,099     1,523,187  
Land, buildings and equipment, net 340,100 341,987
Restricted cash 78,962 44,094
Notes and accounts receivable – long-term 5,488 6,210
Investments in and advances to unconsolidated affiliates 202,717 211,109
Goodwill 112,767 112,120
Other intangible assets, net 65,206 74,386
Asbestos-related insurance recovery receivable 126,421 157,127
Other assets 134,943 118,178
Deferred tax assets   28,749     25,482  

TOTAL ASSETS

$ 2,784,452   $ 2,613,880  

LIABILITIES, TEMPORARY EQUITY AND EQUITY

Current Liabilities:

Current installments on long-term debt

$ 12,874 $ 12,683

Accounts payable

321,100 250,821

Accrued expenses

232,689 237,089

Billings in excess of costs and estimated earnings on uncompleted contracts

573,815 550,746

Income taxes payable

  45,848     39,645  

Total current liabilities

  1,186,326     1,090,984  
Long-term debt 129,082 136,428
Deferred tax liabilities 45,347 44,622
Pension, postretirement and other employee benefits 163,736 171,065
Asbestos-related liability 245,317 269,520
Other long-term liabilities 167,556 160,596
Commitments and contingencies    

TOTAL LIABILITIES

  1,937,364     1,873,215  
Temporary Equity:
Non-vested share-based compensation awards subject to redemption   9,645     4,993  

TOTAL TEMPORARY EQUITY

  9,645     4,993  
Equity:
Registered shares 269,122 321,181
Paid-in capital 261,108 606,053
Retained earnings 829,698 699,971
Accumulated other comprehensive loss (518,004 ) (530,068 )
Treasury shares   (50,921 )   (409,390 )

TOTAL FOSTER WHEELER AG SHAREHOLDERS’ EQUITY

  791,003     687,747  
Noncontrolling interests   46,440     47,925  

TOTAL EQUITY

  837,443     735,672  

TOTAL LIABILITIES, TEMPORARY EQUITY AND EQUITY

$ 2,784,452   $ 2,613,880  
 
               

Foster Wheeler AG and Subsidiaries

Business Segments

(in thousands of dollars)

(unaudited)

 
Quarter Ended September 30, Nine Months Ended September 30,
2012 2011 2012

2011

Global Engineering & Construction Group

Backlog - in future revenues $ 2,485,800 $ 2,224,900 $ 2,485,800 $ 2,224,900
New orders booked - in future revenues 838,000 588,100 2,007,500 1,972,800
Operating revenues 578,072 882,063 1,915,087 2,597,886
EBITDA 51,964 58,615 138,809 155,125
 

Foster Wheeler Scope(1):

Backlog - in Foster Wheeler Scope 1,706,800 1,461,900 1,706,800 1,461,900
New orders booked - in Foster Wheeler Scope 768,600 309,200 1,531,100 1,071,400
Operating revenues - in Foster Wheeler Scope $ 380,482 $ 417,836 $ 1,162,328 $ 1,141,940
 

Global Power Group

Backlog - in future revenues $ 917,800 $ 1,050,900 $ 917,800 $ 1,050,900
New orders booked - in future revenues 185,900 79,000 463,800 798,700
Operating revenues 225,160 249,793 764,267 754,100
EBITDA 65,148 35,312 161,314 129,511
 

Foster Wheeler Scope(1):

Backlog - in Foster Wheeler Scope 908,300 1,041,000 908,300 1,041,000
New orders booked - in Foster Wheeler Scope 183,800 76,600 457,500 791,500
Operating revenues - in Foster Wheeler Scope $ 222,940 $ 247,389 $ 757,902 $ 746,875
 

Corporate & Finance Group(2)

EBITDA $ (25,528 ) $ (25,267 ) $ (76,398 ) $ (70,886 )
 

Consolidated

Backlog - in future revenues $ 3,403,600 $ 3,275,800 $ 3,403,600 $ 3,275,800
New orders booked - in future revenues 1,023,900 667,100 2,471,300 2,771,500
Operating revenues 803,232 1,131,856 2,679,354 3,351,986
EBITDA 91,584 68,660 223,725 213,750
 

Foster Wheeler Scope(1):

Backlog - in Foster Wheeler Scope 2,615,100 2,502,900 2,615,100 2,502,900
New orders booked - in Foster Wheeler Scope 952,400 385,800 1,988,600 1,862,900
Operating revenues - in Foster Wheeler Scope $ 603,422 $ 665,225 $ 1,920,230 $ 1,888,815
 
(1)   Foster Wheeler Scope represents the portion of backlog, new orders booked and operating revenues on which profit can be earned.

Foster Wheeler Scope excludes revenues relating to third-party costs incurred by the company as agent or principal on a reimbursable basis.

 
(2) Includes intersegment eliminations.
 
                   

Foster Wheeler AG and Subsidiaries

Reconciliations of EBITDA and Foster Wheeler Scope

(in thousands of dollars)

(unaudited)

 
Quarter Ended September 30, Nine Months Ended September 30, Twelve

Months Ended

2012 2011 2012 2011 December 31,

2011

Reconciliation of EBITDA to Net Income(1)

EBITDA:

Global Engineering & Construction Group

$ 51,964 $ 58,615 $ 138,809 $ 155,125 $ 210,541

Global Power Group

65,148 35,312 161,314 129,511 184,467

Corporate & Finance Group

  (25,528 )   (25,267 )   (76,398 )   (70,886 )   (111,779 )

Consolidated EBITDA

91,584 68,660 223,725 213,750 283,229

Less: Interest expense

3,197 3,079 10,862 10,385 12,876

Less: Depreciation/amortization(2)

13,375 12,221 39,171 37,398 49,456

Less: Provision for income taxes

  16,790     16,502     43,965     42,829     58,514  

Net income(1)

$ 58,222   $ 36,858   $ 129,727   $ 123,138   $ 162,383  
 

Reconciliation of Foster Wheeler Scope Operating

Revenues to Operating Revenues

 

Global Engineering & Construction Group

Foster Wheeler Scope operating revenues

$ 380,482 $ 417,836 $ 1,162,328 $ 1,141,940 $ 1,594,992

Flow-through revenues

  197,590     464,227     752,759     1,455,946     1,848,087  

Operating revenues

$ 578,072   $ 882,063   $ 1,915,087   $ 2,597,886   $ 3,443,079  
 

Global Power Group

Foster Wheeler Scope operating revenues

$ 222,940 $ 247,389 $ 757,902 $ 746,875 $ 1,028,176

Flow-through revenues

  2,220     2,404     6,365     7,225     9,474  

Operating revenues

$ 225,160   $ 249,793   $ 764,267   $ 754,100   $ 1,037,650  
 

Consolidated

Foster Wheeler Scope operating revenues

$ 603,422 $ 665,225 $ 1,920,230 $ 1,888,815 $ 2,623,168

Flow-through revenues

  199,810     466,631     759,124     1,463,171     1,857,561  

Operating revenues

$ 803,232   $ 1,131,856   $ 2,679,354   $ 3,351,986   $ 4,480,729  
 
____________________

(1) Net income attributable to Foster Wheeler AG.

(2) The depreciation / amortization by business segment:

Quarter Ended September 30, Nine Months Ended September 30, Twelve

Months Ended

2012

2011

2012 2011 December 31,

2011

Global Engineering & Construction Group

$ 5,845 $ 6,059 $ 16,752 $ 19,006 $ 24,867

Global Power Group

6,874 5,532 20,468 16,547 22,116

Corporate & Finance Group

  656     630     1,951     1,845     2,473  

Total depreciation / amortization

$ 13,375   $ 12,221   $ 39,171   $ 37,398   $ 49,456  
 
                             

Foster Wheeler AG and Subsidiaries

EBITDA, Net Income* and Diluted Earnings Per Share Reconciliation

(in thousands of dollars, except per share amounts)

(unaudited)

 
 
Quarter Ended September 30,
2012 2011
 
Diluted Diluted
Earnings Earnings
EBITDA Net Income* Per Share EBITDA Net Income* Per Share
As adjusted $ 93,584 $ 60,222 $ 0.56 $ 70,647 $ 38,845 $ 0.33
Adjustments:
Net asbestos-related
provision (2,000 ) (2,000 ) (0.02 ) (1,987 ) (1,987 ) (0.02 )
           
As reported $ 91,584   $ 58,222   $ 0.54   $ 68,660   $ 36,858   $ 0.31  
 
 
Nine Months Ended September 30,
2012 2011
Diluted Diluted
Earnings Earnings
EBITDA Net Income* Per Share EBITDA Net Income* Per Share
 
As adjusted $ 231,435 $ 137,000 $ 1.27 $ 218,137 $ 127,525 $ 1.04
Adjustments:
Net asbestos-related
provision (7,710 ) (7,273 ) (0.07 ) (4,387 ) (4,387 ) (0.03 )
           
As reported $ 223,725   $ 129,727   $ 1.20   $ 213,750   $ 123,138   $ 1.01  
 
 

Twelve Months Ended

December 31, 2011

Diluted
Earnings
EBITDA Net Income* Per Share
 
As adjusted $ 293,130 $ 172,284 $ 1.43
Adjustments:
Net asbestos-related
provision (9,901 ) (9,901 ) (0.08 )
     
As reported $ 283,229   $ 162,383   $ 1.35  
 
____________________
*Net income attributable to Foster Wheeler AG.
 
               

Foster Wheeler AG and Subsidiaries

Average Calculations

(in thousands of dollars)

(unaudited)

 

Nine Months

 

2011

Ended

2012

2011

Quarterly

September 30,

Quarterly

Full Year

Average(1)

2012

Average(2)

Consolidated

Operating revenues - in Foster Wheeler Scope $ 2,623,168 $ 655,792 $ 1,920,230 $ 640,077

Net income(3)

$ 162,383 $ 40,596 $ 129,727 $ 43,242

Adjusted net income(3)

$ 172,284 $ 43,071 $ 137,000 $ 45,667
Consolidated EBITDA $ 283,229 $ 70,807 $ 223,725 $ 74,575
Consolidated EBITDA, as adjusted $ 293,130 $ 73,283 $ 231,435 $ 77,145
 
 

Global Engineering & Construction Group

New orders booked - in Foster Wheeler Scope $ 1,447,200 $ 361,800 $ 1,531,100 $ 510,367
Operating revenues - in Foster Wheeler Scope $ 1,594,992 $ 398,748 $ 1,162,328 $ 387,443
Segment EBITDA $ 210,541 $ 52,635 $ 138,809 $ 46,270
EBITDA margin 13.2% 13.2% 11.9% 11.9%
 
 

Global Power Group

New orders booked - in Foster Wheeler Scope $ 1,251,800 $ 312,950 $ 457,500 $ 152,500
Operating revenues - in Foster Wheeler Scope $ 1,028,176 $ 257,044 $ 757,902 $ 252,634
Segment EBITDA $ 184,467 $ 46,117 $ 161,314 $ 53,771
EBITDA margin 17.9% 17.9% 21.3% 21.3%
____________________
(1) To calculate the 2011 quarterly average dollar amounts, the company divided reported annual figures by four.
(2) To calculate the 2012 quarterly average dollar amounts, the company divided reported nine-months figures by three.
(3) Net income attributable to Foster Wheeler AG.
 

Contacts

Foster Wheeler AG
Media
Julie Stanisz, 908-730-4047
julie_stanisz@fwc.com
or
Investor Relations
Scott Lamb, 908-730-4155
scott_lamb@fwc.com
or
Other Inquiries
908-730-4000
fw@fwc.com

Sharing

Contacts

Foster Wheeler AG
Media
Julie Stanisz, 908-730-4047
julie_stanisz@fwc.com
or
Investor Relations
Scott Lamb, 908-730-4155
scott_lamb@fwc.com
or
Other Inquiries
908-730-4000
fw@fwc.com