- Closed acquisition of SPIG S.p.A. on July 1,
2016
- Announces Additional $100 Million Share
Repurchase Authorization
Babcock & Wilcox Enterprises, Inc. (B&W) (NYSE:BW)
announced today second quarter 2016 revenues of $383.2 million, a
decrease of $54.3 million, or 12%, compared to the second quarter
of 2015. The GAAP loss per share for the second quarter of 2016 was
$(1.25) compared to earnings per share of $0.08 for the second
quarter of 2015. Our adjusted loss per share, which excludes
non-cash mark-to-market adjustments for pension and other
post-retirement benefits as well as the impacts of restructuring
activities, acquisition and integration costs, and spin-off
transaction costs, was $(0.20) for the three months ended
June 30, 2016 compared to adjusted earnings per share of $0.27
in the prior year period.
”Although the previously announced isolated issue on a European
renewable energy contract is weighing on this quarter's adjusted
results, our recent acquisition, continued focus on international
market development, and proactive restructuring of the U.S. power
business have set us up for much improved results in 2017," said
Mr. E. James Ferland, Chairman and Chief Executive Officer.
Results of Operations
Consolidated revenues for the second quarter of 2016 were $383.2
million, a decrease of 12%, compared to $437.5 million for the
second quarter of 2015, due primarily to $26.4 million lower
revenue related to a change in the estimated cost to complete a
European renewable energy contract and decreases in volumes in our
Global Services and Industrial Environmental segments. The GAAP
operating loss for the second quarter of 2016 was $72.6 million as
compared to operating income of $4.9 million in the second quarter
of 2015. The decrease was driven by a $31.7 million change in the
estimated cost to complete a European renewable energy contract, a
$29.9 million non-cash mark-to-market adjustment for pension and
other post-retirements benefits and $31.6 million of restructuring
activity and spin-off transaction costs. The adjusted operating
loss in the second quarter of 2016 was $9.1 million, a decrease of
$30.5 million compared to adjusted operating income of $21.4
million in the second quarter of 2015, which is primarily related
to a charge on a European renewable energy contract.
Second quarter 2016 revenues for the Global Power segment
decreased 19% to $127.2 million in the quarter compared to $157.4
million in revenues in the prior year period. Gross profit (loss)
in the Global Power segment was $(9.1) million, compared to $26.7
million in the prior year period. Both changes were primarily due
to a charge on a European renewable energy contract.
Revenues in the Global Services segment were $218.0 million for
the second quarter of 2016, versus $236.7 million in the
corresponding period in 2015, a decrease of $18.8 million driven by
lower parts revenue and a decrease in revenue from our Canadian oil
sands contract, which was delayed due to wildfires in the region.
The Global Services segment gross profit of $53.6 million in the
second quarter of 2016 was $7.3 million higher than the $46.3
million gross profit reported in the prior year second quarter
primarily due to favorable project performance and margin
improvement efforts.
The Industrial Environmental segment contributed $38.0 million
in revenues for the second quarter of 2016 compared to $43.4
million in the second quarter of 2015, a decrease of $5.4 million
primarily due to weakness in the North American industrial market.
Gross profit in the Industrial Environmental segment was $11.0
million in the second quarter of 2016, a $2.1 million increase
compared to $8.9 million in the prior year period primarily due to
lower amortization expense and solid project execution.
SPIG Acquisition closed on July 1
As previously announced, on May 20, 2016, B&W entered into a
Sale and Purchase Agreement with the shareholders of SPIG S.p.A.
(“SPIG”), pursuant to which the Company agreed to acquire all of
the outstanding shares of SPIG for an aggregate purchase price of
€155 million (or approximately $174 million), subject to certain
working capital and other adjustments. On July 1, 2016, the Company
closed the acquisition pursuant to the terms of the Sale and
Purchase Agreement. SPIG, which is based in Arona, Italy, is a
global provider of custom-engineered cooling systems and services.
2016 annual revenue is expected to be approximately $200 million.
SPIG will be reported as a component of our Industrial segment
beginning in the third quarter of 2016.
Liquidity
The Company’s cash and cash equivalents balance, net of
restricted cash, decreased $35.8 million for the quarter to $251.0
million at the end of the second quarter of 2016, reflecting the
repayment of our Indian joint venture's high-interest third party
debt and our continuing share repurchase program. The outflows were
partially offset by $22.1 million of positive cash flows from
operations in the quarter. Our consolidated cash position includes
$189.9 million in non-U.S. cash.
Share Repurchase Program
The Company repurchased 0.7 million shares of our common stock
for $15.1 million during the second quarter of 2016 under a $100
million share repurchase program that was authorized in 2015 by the
Board of Directors. As of August 9th, we have $18.8 million of
remaining capacity under the original authorization, which we
expect to complete by the end of the third quarter of 2016.
In addition, the Board has approved a new authorization for up
to $100 million in share repurchases over the next 24 months. 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. The pace of the share repurchase program
beyond the third quarter of 2016 will be determined based on the
status of potential acquisitions as well as market conditions.
2016 Outlook
The Company reaffirms its revenue guidance of $1.8 billion and
adjusted EPS guidance of $0.63 to $0.83. Adjusted EPS excludes
mark-to-market adjustments for pension and other post-retirement
benefits as well as the impact of restructuring activities,
acquisition and integration costs, and spin-off transaction costs.
As more fully described in Exhibit 1, Management is unable to
reconcile without unreasonable effort the Company's forecasted
range of adjusted EPS for the full year to a comparable GAAP
range.
Conference Call to Discuss Second Quarter 2016
Results
Date: Wednesday, August 10, 2016, at 8:30 a.m. ESTLive
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 strategic objectives; management’s expectations regarding the
industries in which we operate; our guidance and forecasts for
2016; our projected operating margin improvements, savings and
restructuring costs; our projected tax rate; and growth through
acquisitions. These forward-looking statements are based on
management’s current expectations and involve a number of risks and
uncertainties, including, among other things, our ability to
realize anticipated savings and operational benefits from our
restructuring plan; our ability to successfully integrate SPIG and
realize the expected synergies from the acquisition; our ability to
realize the benefits of expected cross-selling opportunities from
the SPIG acquisition; changes in the jurisdictional mix of our
income and losses; disruptions experienced with customers and
suppliers; the inability to retain key personnel; adverse changes
in the industries in which we operate and delays, changes or
termination of contracts in backlog; the timing and amount of
repurchases of our common stock, if any; and the inability to grow
and diversify through acquisitions. 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 our most recent annual report on
Form 10-K 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 5,700 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, 2016
Acquisition Pension & and
Spin OPEB MTM Integration GAAP
Restructuring Costs (Gain) /
Loss Costs Non-GAAP Operating
income (loss) $ (72.6 ) $ 30.5 $ 1.1 $ 29.9 $ 1.9 $ (9.1 ) Other
income (expense) 0.2 — — — — 0.2 Income tax (expense) benefit
9.0 1.9 (0.3 )
(11.0 ) (0.7 ) (1.1 ) Net income
(loss) $ (63.4 ) $ 32.4 $ 0.8 $ 18.9 $ 1.2 $ (10.1 ) Net loss
attributable to non-controlling interest (0.1 )
— — —
— (0.1 ) Net income (loss) attributable
to shareholders $ (63.5 ) $ 32.4 $ 0.8
$ 18.9 $ 1.2 $ (10.1 ) Diluted
EPS - continuing operations $ (1.25 ) $ 0.64 $ 0.02 $ 0.37 $ 0.02 $
(0.20 ) Income tax rate 12.5 % (11.9 )%
Three Months Ended June 30, 2015 NE
segment 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
(loss) attributable to shareholders $ 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 Income tax rate 18.2
% 31.9 %
Six Months Ended June 30, 2016
Pension & Acquisition and
OPEB MTM Integration GAAP
Restructuring Spin Costs (Gain) /
Loss Costs Non-GAAP Operating
income (loss) $ (55.3 ) $ 32.6 $ 3.0 $ 29.9 $ 1.9 $ 12.1 Other
income (expense) 0.1 — — — — 0.1 Income tax (expense) benefit
2.4 1.1 0.3
(11.0 ) (0.7 ) (7.9 ) Net income (loss)
$ (52.8 ) $ 33.7 $ 3.3 $ 18.9 $ 1.2 $ 4.4 Net loss attributable to
non-controlling interest (0.2 ) —
— — —
(0.2 ) Net income (loss) attributable to shareholders $
(53.0 ) $ 33.7 $ 3.3 $ 18.9 $
1.2 $ 4.2 Diluted EPS - continuing
operations $ (1.04 ) $ 0.66 $ 0.06 $ 0.37 $ 0.02 $ 0.08
Income tax rate 4.4 % 64.2 %
Six Months Ended June
30, 2015 NE segment
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 (loss)
attributable to shareholders $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 Income tax
rate 29.9% 32.6%
(1)
Figures may not be clerically accurate 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.
2016 Outlook
Management has provided full year adjusted earnings per diluted
share ("adjusted EPS") guidance of $0.63 to $0.83. It is not
possible for management to identify the amount or significance of
future adjustments associated with potential mark to market
adjustments to our pension and other postretirement benefit plan
liabilities or other non-routine costs that we adjust in our
presentation of adjusted EPS guidance. These items are dependent on
future events and/or market inputs that are not reasonably
estimable at this time. Accordingly, management is unable to
reconcile without unreasonable effort the Company's forecasted
range of adjusted EPS for the full year included in the 2016
Outlook section of this earnings release to a comparable GAAP
range. However, items excluded from our adjusted EPS guidance
include the historical adjustments noted in the tables above, and
our adjusted EPS guidance also excludes future estimable adjusting
items, including charges relating to previously announced
restructuring initiatives of $0.20-$0.40 per share, additional spin
costs of approximately $0.02 per share and additional acquisition
and integration costs of approximately $0.01 per share.
Exhibit 2
Babcock & Wilcox Enterprises,
Inc.
Condensed Consolidated and Combined
Statements of Operations (1)
(In millions, except per share
amounts)
Three Months Ended June 30, Six Months Ended June
30, 2016 2015 2016
2015
Revenues
$ 383.2 $ 437.5 $
787.3 $ 834.6 Costs and expenses: Cost
of operations 357.2 355.6 681.1 669.4 Research and development
costs 3.1 4.0 5.9 8.5 Losses on asset disposals and impairments,
net — 9.0 — 9.0 Selling, general and administrative expenses 63.3
58.8 122.1 115.9 Restructuring activities and spin-off transaction
costs 31.6 6.2 35.6 8.6
Total costs and expenses 455.2 433.6 844.7 811.3 Equity in
income (loss) of investees (0.6 ) 1.0 2.1
(1.1 )
Operating income (loss) (72.6
) 4.9 (55.3 ) 22.2 Other income
(expense): Interest income 0.3 0.1 0.5 0.3 Interest expense (0.4 )
(0.1 ) (0.8 ) (0.3 ) Other – net 0.3 0.2
0.4 (0.1 ) Total other income (expense) 0.2
0.2 0.1 (0.1 ) Income
(loss) before income tax expense (72.4 ) 5.0 (55.2 ) 22.1 Income
tax expense (benefit) (9.0 ) 0.9 (2.4 )
6.6 Income from continuing operations (63.4 ) 4.1 (52.8 )
15.5 Income from discontinued operations, net of tax —
1.4 — 2.8 Net income
(63.4 ) 5.5 (52.8 ) 18.3 Net income attributable to noncontrolling
interest (0.1 ) (0.1 ) (0.2 ) (0.1 )
Net
Income attributable to shareholders $ (63.5
) $ 5.5 $
(53.0 ) $ 18.2
Amounts attributable to shareholders: Income from continuing
operations $ (63.5 ) $ 4.1 $ (53.0 ) $ 15.4 Income from
discontinued operations, net of tax — 1.4
— 2.8 Net Income attributable to
shareholders $ (63.5 ) $ 5.5 $ (53.0 )
$ 18.2 Basic earnings per share - continuing
operations $ (1.25 ) $ 0.08 $ (1.04 ) $ 0.29 Basic earnings per
share - discontinued operations — 0.02
— 0.05 Basic earnings per share $ (1.25 )
$ 0.10 $ (1.04 ) $ 0.34
Diluted earnings per share - continuing operations $ (1.25 ) $ 0.08
$ (1.04 ) $ 0.29 Diluted earnings per share - discontinued
operations — 0.02 — 0.05
Diluted earnings per share $ (1.25 ) $ 0.10
$ (1.04 ) $ 0.34 Shares used in the
computation of earnings per share: Basic 50.6 53.6 51.1 53.5
Diluted 50.6 53.8 51.1 53.7
(1) Figures may not be clerically accurate
due to rounding.
Exhibit 3
Babcock & Wilcox Enterprises,
Inc.
Condensed Consolidated and Combined
Balance Sheets (1)
(In millions, except per share amount)
June 30, 2016 December 31, 2015 Cash and cash
equivalents $ 251.0 $ 365.2 Restricted cash and cash equivalents
34.1 37.1 Accounts receivable – trade, net 243.1 291.2 Accounts
receivable – other 48.1 44.8 Contracts in progress 137.3 128.2
Inventories 93.6 90.1 Other current assets 36.7 21.5
Total current assets 843.9 978.2 Property, plant and equipment -
gross 323.1 330.0 Accumulated depreciation (187.9 ) (184.3 ) Net
property, plant and equipment 135.1 145.7 Goodwill 200.7 201.1
Deferred income taxes 189.3 190.7 Investments in unconsolidated
affiliates 113.7 92.2 Intangible assets 35.0 37.8 Other assets 13.8
17.4
Total assets $ 1,531.6
$ 1,663.0 Short-term line of
credit $ 3.0 $ 2.0 Accounts payable 141.8 175.2 Accrued employee
benefits 52.1 51.5 Advance billings on contracts 216.2 229.4
Accrued warranty expense 42.7 39.8 Other accrued liabilities 64.0
63.5 Total current liabilities 519.8 561.4
Accumulated postretirement benefit obligations 28.4 27.8 Pension
liabilities 299.7 282.1 Other liabilities 38.0 43.4
Total liabilities 885.9 914.6 Commitments and
contingencies Stockholders' equity: Common stock, par value $0.01
per share, authorized 200.0 shares; issued 50.4 and 52.5 shares at
June 30, 2016 and December 31, 2015, respectively 0.5 0.5 Capital
in excess of par value 801.1 790.5
Treasury stock at cost, 3.9 and 1.4 shares
at June 30, 2016 and December 31, 2015, respectively
(77.7 ) (25.4 ) Retained earnings (deficit) (52.0 ) 1.0 Accumulated
other comprehensive income (loss) (26.9 ) (18.9 ) Stockholders'
equity attributable to shareholders 645.1 747.7 Noncontrolling
interest 0.6 0.7
Total stockholders' equity
645.7 748.4 Total liabilities and
stockholders' equity $ 1,531.6 $
1,663.0
(1) Figures may not be clerically accurate
due to rounding.
Exhibit 4
Babcock & Wilcox Enterprises,
Inc.
Condensed Consolidated and Combined
Statements of Cash Flows (1)
(In millions)
Six Months Ended June 30, 2016
2015 Cash flows from operating activities: Net Income
$ (52.8 ) $ 18.3 Non-cash items included in net income:
Depreciation and amortization 12.4 21.5 (Income) loss of equity
method investees, net of dividends (2.1 ) 2.3 Losses on asset
disposals and impairments 14.5 10.6 Provision for (benefit from)
deferred taxes (6.6 ) — Recognition of (gains) losses for pension
and postretirement plans 30.0 0.2 Stock-based compensation charges
and excess tax benefits 10.7 — Changes in assets and liabilities:
Accounts receivable 49.5 31.3 Contracts in progress and advance
billings on contracts (21.7 ) 5.2 Inventories (4.7 ) 0.7 Income
taxes (2.4 ) (2.1 ) Accounts payable (36.8 ) (11.4 ) Accrued and
other current liabilities 3.6 (7.7 ) Pension, accrued
postretirement and employee benefits (8.7 ) (7.2 ) Other, net (0.7
) (6.0 ) Net cash from operating activities (15.8 ) 55.6
Cash flows from investing activities: Decrease (increase) in
restricted cash and cash equivalents 3.0 1.3 Investment in equity
method investees (26.2 ) — Purchases of property, plant and
equipment (13.6 ) (15.2 ) Purchases of available-for-sale
securities (16.7 ) (4.9 ) Sales and maturities of
available-for-sale securities 11.7 1.6 Other (0.6 ) — Net
cash from investing activities (42.4 ) (17.2 ) Cash flows from
financing activities Increase in short-term borrowing 1.1 — Net
transfers from former Parent — 80.6 Repurchase of shares of common
stock (52.3 ) — Other (0.2 ) — Net cash from financing
activities (51.5 ) 80.6 Effects of exchange rate changes on
cash (4.5 ) (4.9 ) Cash flows from continuing operations (114.2 )
114.1 Operating cash flows from discontinued operations —
(25.2 ) Net increase (decrease) in cash and equivalents (114.2 )
88.9 Cash and equivalents, beginning of period 365.2 218.7
Cash and equivalents, end of period $ 251.0 $ 307.6
(1) Figures may not be clerically accurate
due to rounding.
Exhibit 5
Babcock & Wilcox Enterprises,
Inc.
Segment Information(1)
(In millions)
SEGMENT RESULTS: Three Months Ended June 30,
Six Months Ended June 30, 2016 2015
2016 2015 REVENUES:
Global Power $ 127.2 $ 157.4 $ 257.7 $ 281.3 Global Services
218.0 236.7 459.1 468.9 Industrial Environmental 38.0 43.4
70.5 84.5 383.2 437.5 787.3
834.6 GROSS PROFIT: Global Power (9.1 ) 26.7 15.3 47.1
Global Services 53.6 46.3 101.8 99.6 Industrial Environmental 11.0
8.9 18.6 18.6 Mark to market adjustment included in cost of
operations (29.5 ) — (29.5 ) —
BOOKINGS: Three
Months Ended June 30, Six Months Ended June 30,
2016 2015 2016
2015 Global Power $ 38.5 $ 60.3 $ 234.0 $ 514.0 Global
Services 143.2 186.9 315.7 408.5 Industrial Environmental 31.1
52.2 63.6 108.0 $ 212.8
$ 299.4 $ 613.3 $ 1,030.5
BACKLOG: As of June 30, 2016
2015 Global Power $ 1,094 $ 1,185 Global Services 1,000
1,163 Industrial Environmental 60 96 $ 2,154
$ 2,444
(1) Figures may not be clerically accurate
due to rounding.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160809006404/en/
Babcock & WilcoxInvestors:Jude BroussardVice
President, Investor
Relations704-625-4944investors@babcock.comorMedia:Ryan
CornellPublic Relations330-860-1345rscornell@babcock.com
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