- New Renewable execution model introduced in
Europe; reports charge on ongoing Renewable projects
- Solid gross margin performance in Power
- Cross selling and end-market improvements
drive strong Industrial bookings
- New financing arrangements in place;
second-lien term loan and bank credit agreement amendment
Babcock & Wilcox Enterprises, Inc. ("B&W") (NYSE: BW)
announced today second quarter 2017 revenues of $349.8 million, a
decrease of $33.4 million, or 8.7%, compared to the second quarter
of 2016. GAAP earnings per share in second quarter 2017 were a loss
of $3.09 compared to a loss per share of $1.25 in second quarter
2016. Adjusted earnings per share were a loss of $2.56 for the
three months ended June 30, 2017 compared to an adjusted loss
per share of $0.18 in the prior year period. A reconciliation of
non-GAAP results is provided in Exhibit 1.
"Our second quarter financial results reflect a $115.2 million
charge arising from unexpected cost and schedule issues in the
Renewable segment,” said E. James Ferland, Chairman and Chief
Executive Officer. “We have revamped our go-forward business model
for this segment and have also entered into new financing
arrangements. These arrangements provide us the financial
flexibility to focus on completing our U.K. Renewable projects
while executing our three prong business strategy to optimize our
Power business, pursue profitable growth under our new execution
model in Renewable, and grow our Industrial segment."
“As we advanced engineering, and re-estimated overall
productivity levels on six new-build projects in the Renewable
segment, late in the quarter we concluded we would not hit our cost
and schedule targets," Mr. Ferland said. "We are diligently working
with all parties involved to complete these projects within the
revised time lines. Today, construction on the two projects in
Denmark is essentially complete, and we expect construction on the
other four projects, which are located in the U.K., to be largely
complete by mid-2018."
"Within our Industrial segment, bookings improved significantly
in the quarter, driven by our enhanced sales focus, more effective
cross selling throughout the business, and improving end-markets.
In Power, despite tough conditions in the global new-build
coal-fired power market, the proactive actions we initiated in
mid-2016 to control costs, combined with good execution, are
driving continued solid margin performance."
Results of Operations
Consolidated revenues in second quarter 2017 were $349.8
million, a decrease of $33.4 million compared to $383.2 million in
second quarter 2016, as higher revenue in the Industrial segment
was offset by lower volumes in the Power segment, and lower revenue
on new-build projects in the Renewable segment. The GAAP operating
loss in second quarter 2017 was $144.6 million compared to an
operating loss of $72.6 million in second quarter 2016. The
adjusted operating loss in second quarter 2017 was $119.0 million,
compared to an adjusted operating loss of $7.5 million in second
quarter 2016, due mainly to changes in estimated costs to complete
Renewable projects; see Exhibit 1 for a reconciliation of non-GAAP
results.
Second quarter 2017 revenues for the Power segment
decreased 18.4% to $213.8 million compared to $261.8 million in the
prior year period. Revenues decreased as a result of lower
construction activities associated with retrofit and new build
utility and environmental projects. Gross profit in the Power
segment in second quarter 2017 was $49.1 million, compared to $62.5
million in the prior year period. Gross profit margin was 23.0% in
second quarter 2017, compared to 23.9% in second quarter 2016, as
benefits from the proactive restructuring plan introduced in
mid-2016 and good execution mitigated the impact of lower
revenues.
Industrial segment revenues increased 137.4% to $90.2
million in second quarter 2017 compared to $38.0 million in second
quarter 2016, due to the addition of B&W SPIG, which the
Company acquired on July 1, 2016, and Universal Acoustic &
Emission Technologies, Inc. (B&W Universal), which was acquired
on January 11, 2017. The expansion of the Industrial segment's
business portfolio is generating increased cross-selling
opportunities and improving the company's position in non-power
related industrial markets. Gross profit in the Industrial segment
was $9.5 million in second quarter 2017, compared to $11.1 million
in the prior year period. Gross profit margin was 10.5%, compared
to 29.3% last year, as higher volume was offset by overall business
mix and lower profitability on certain cooling systems projects.
During the quarter, the company announced the realignment of its
Industrial Steam Generation business line from the Power segment to
the Industrial segment, effective July 1, 2017, and Leslie Kass was
appointed Senior Vice President, Industrial to lead the
segment.
Revenues in the Renewable segment were $48.1 million for
the second quarter of 2017, versus $85.5 million in the
corresponding period in 2016, a decrease of $37.4 million. The
Renewable segment gross loss was $110.9 million in second quarter
2017, compared to a gross loss of $17.5 million reported in second
quarter 2016, due to the recognition of a $115.2 million, or $2.36
per share, charge for increased estimated costs to complete six
projects in backlog, as the result of lower-than-forecasted
productivity and schedule delays.
"We believe there is a robust market opportunity for our core
boiler, grate, and environmental equipment technologies in the
global Renewable market," said Mr. Ferland, "Going forward, under a
revised business model, we will focus on our core technologies with
balance of plant and civil construction scope being executed by a
partner. We believe this execution model is more consistent with
the company-wide strategy of being an industrial technology
solutions provider, and improves our overall risk profile. Under
this new model, we expect to begin bidding as opportunities allow
in the third quarter."
Liquidity
The Company’s cash and cash equivalents balance, net of
restricted cash, was $67.9 million at June 30, 2017. The
outstanding balances under revolving credit facilities totaled
$131.4 million as of June 30, 2017. The increase in borrowings
under revolving credit facilities was due mainly to increased costs
on projects in the Renewable segment.
On August 9, 2017, the Company entered into a second-lien
term loan agreement with Lightship Capital LLC, an affiliate of
American Industrial Partners, and amended the terms under its
existing revolving credit facility. Under the second-lien term
loan, which matures on December 30, 2020, the Company borrowed $176
million. The second-lien term loan also provides for an additional
$20 million of borrowing capacity subject to conditions in the
agreement.
The Company will use the proceeds to reduce borrowings under its
existing revolving credit facilities, and as a condition of the
second-lien loan agreement, it will repurchase Lightship Capital's
4.8 million share equity stake in the Company. The purchase of
these shares will reduce the Company's shares outstanding
correspondingly. "We appreciate the support of all of our lenders
and are pleased to have American Industrial Partners, a
well-established firm with a history of operating in industrial
markets, as a financial partner," said Jenny L. Apker, Senior Vice
President and Chief Financial Officer.
Revising 2017 Outlook
The company is providing revenue and gross margin guidance by
segment as follows:
- Power: full year 2017 revenue in the
range of $825 million to $875 million with gross margin in the low
20% range
- Renewable: full year 2017 revenue of
approximately $350 million with positive gross margins returning in
second half 2017
- Industrial: full year 2017 revenue in
the range of $400 million to $450 million with gross margin in the
mid-teens
Note: Segment guidance is reflective of the segment structure
prior to the realignment of the Industrial Steam Generation
business line.
Conference Call to Discuss Second Quarter 2017
Results
Date:
Wednesday, August 9, 2017, at 5:00 p.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
our strategic objectives; our business execution model;
management’s expectations regarding the industries in which we
operate; our guidance and forecasts for 2017; our projected tax
rate; our projected operating margin improvements, savings and
restructuring costs; project execution; 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
maintain sufficient sources of liquidity to fund our operations,
including sufficient bonding and surety capacity to meet customer
requirements; our ability to realize anticipated savings and
operational benefits from our restructuring plan; our ability to
successfully integrate B&W SPIG and B&W Universal and
realize the expected synergies from the acquisitions; our ability
to realize the benefits of expected cross-selling opportunities
from the B&W SPIG and B&W Universal acquisitions; our
ability to successfully address productivity and schedule issues in
our Renewable segment, including our efforts to enhance its
resources and infrastructure; timely completion of engineering
work; productivity of subcontractors; our ability to successfully
refine our the execution model of our Renewable segment; our
ability to successfully partner with third parties to win and
execute renewable projects; 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; 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 5,000 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, 2017 GAAP
Impairment ofequity
methodinvestment
Restructuringand
spin-offtransactioncosts
Acquisitionand
integrationcosts
Litigation Non-GAAP
Intangibleamortization
Non-GAAPexcludingintangibleamortization
Operating loss $(144.6) $18.2 $2.1 $0.9
$— $(123.4) $4.4 $(119.0) Other income
(expense) (4.2) — — 3.7 (0.5) — (0.5) Income tax expense (2.0)
— (0.5) (0.3) (1.4) (4.2)
(1.4) (5.6) Net loss $(150.9) $18.2 $1.6 $0.6 $2.3 $(128.1)
$3.1 $(125.1) Net loss attributable to non-controlling interest
(0.1) — — — — (0.1) —
(0.1) Net loss attributable to shareholders $(151.0)
$18.2 $1.6 $0.6 $2.3 $(128.3)
$3.1 $(125.2) Diluted EPS - continuing operations
$(3.09) $0.34 $0.03 $0.01 $0.05 $(2.63) $0.06 $(2.56) Income
tax rate (1.3)% (3.4)% (4.7)%
Three Months Ended
June 30, 2016 GAAP
Restructuringcosts
Pension &OPEB
MTM(gain) / loss
Spin costs
Acquisitionand
integrationcosts
Non-GAAP
Intangibleamortization
Non-GAAPexcludingintangibleamortization
Operating loss $(72.6) $30.5 $29.9 $1.1 $1.9 $(9.1) $1.6 $(7.5)
Other income 0.2 — — — — 0.2 — 0.2 Income tax benefit (expense) 9.0
1.9 (11.0) (0.3) (0.7) (1.1)
(0.5) (1.6) Net loss $(63.4) $32.4 $18.9 $0.8 $1.2
$(10.1) $1.1 $(9.0) Net loss attributable to non-controlling
interest (0.1) — — — — (0.1)
— (0.1) Net loss attributable to shareholders $(63.5)
$32.4 $18.9 $0.8 $1.2 $(10.1)
$1.1 $(9.1) Diluted EPS - continuing
operations $(1.25) $0.64 $0.37 $0.02 $0.02 $(0.20) $0.02 $(0.18)
Income tax rate 12.5% (11.9)% (21.9)%
Six Months
Ended June 30, 2017 GAAP
Impairmentof
equitymethodinvestment
Restructuringand
spin-offtransactioncosts
Acquisitionandintegrationcosts
Pension &OPEB
MTM(gain) / loss
Litigation Non-GAAP
Intangibleamortization
Non-GAAPexcludingintangibleamortization
Operating loss $(153.4) $18.2 $5.1 $2.9
$1.1 $— $(126.2) $10.5 $(115.7) Other
income (expense) (6.3) — — — — 3.7 (2.5) —
(2.5)
Income tax benefit (expense) 2.0 — (1.3) (0.6)
(0.3) (1.4) (1.6) (3.3) (4.9)
Net loss $(157.7) $18.2 $3.8 $2.3 $0.8 $2.3 $(130.3) $7.2 $(123.1)
Net loss attributable to non-controlling interest (0.4) —
— — — — (0.4) —
(0.4) Net loss attributable to shareholders $(158.0) $18.2
$3.8 $2.3 $0.8 $2.3 $(130.7)
$7.2 $(123.5) Diluted EPS - continuing
operations $(3.24) $0.37 $0.08 $0.05 $0.02 $0.05 $(2.68) $0.15
$(2.53) Income tax rate 1.3% (1.2)% (4.1)%
Six
Months Ended June 30, 2016 GAAP
Restructuringcosts
Pension &OPEB
MTM(gain) / loss
Spin costs
Acquisitionand
integrationcosts
Non-GAAP
Intangibleamortization
Non-GAAPexcludingintangibleamortization
Operating income (loss) $(55.3) $32.6 $29.9
$3.0 $1.9 $12.1 $3.1 $15.2 Other income
0.1 — — — — 0.1 — 0.1 Income tax benefit (expense) 2.4 1.1
(11.0) 0.3 (0.7) (7.9) (1.1)
(9.0) Net income (loss) $(52.8) $33.7 $18.9 $3.3 $1.2 $4.4
$2.0 $6.4 Net loss attributable to non-controlling interest (0.2)
— — — — (0.2) —
(0.2) Net income (loss) attributable to shareholders $(53.0)
$33.7 $18.9 $3.3 $1.2 $4.2 $2.0
$6.3 Diluted EPS - continuing operations $(1.04)
$0.66 $0.37 $0.06 $0.02 $0.08 $0.04 $0.58 Income tax rate
4.4% 64.2% 58.8%
(1) Figures may not be clerically accurate due to rounding.
(2) B&W is providing non-GAAP information regarding certain
of its historical results 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 Statements of
Operations(1)
(In millions, except per share
amounts)
Three Months Ended Six Months Ended June
30, June 30, 2017 2016 2017
2016 Revenues $ 349.8 $
383.2 $ 740.9 $ 787.3 Costs and
expenses: Cost of operations 405.7 357.2 733.9 681.1 Selling,
general and administrative expenses 68.6 63.3 135.6 122.1
Restructuring activities and spin-off transaction costs 2.1 31.6
5.1 35.6 Research and development costs 2.9 3.1 5.2 5.9 Losses
(gains) on asset disposals, net 0.0 0.0 0.0
0.0 Total costs and expenses 479.2 455.2 879.8 844.7 Equity
in income (loss) and impairment of investees (15.2 ) (0.6 ) (14.6 )
2.1
Operating income (loss) (144.6 )
(72.6 ) (153.4 ) (55.3 )
Other income (expense): Interest income 0.1 0.3 0.2 0.5 Interest
expense (6.3 ) (0.4 ) (8.1 ) (0.8 ) Other – net 2.0 0.3
1.6 0.4 Total other income (expense) (4.2 )
0.2 (6.3 ) 0.1 Income (loss) before income tax
expense (148.9 ) (72.4 ) (159.7 ) (55.2 ) Income tax expense
(benefit) 2.0 (9.0 ) (2.0 ) (2.4 ) Net income (loss) (150.9
) (63.4 ) (157.7 ) (52.8 ) Net income attributable to
noncontrolling interest (0.1 ) (0.1 ) (0.4 ) (0.2 )
Net income
(loss) attributable to shareholders $ (151.0
) $ (63.5 ) $ (158.0
) $ (53.0 ) Basic earnings
(loss) per share $ (3.09 ) $ (1.25 ) $ (3.24 ) $ (1.04 )
Diluted earnings (loss) per share $ (3.09 ) $ (1.25 ) $ (3.24 ) $
(1.04 ) Shares used in the computation of earnings per
share: Basic 48.9 50.6 48.8 51.1 Diluted 48.9 50.6 48.8 51.1
(1) Figures may not be clerically accurate due to rounding.
Exhibit 3 Babcock & Wilcox Enterprises,
Inc.
Condensed Consolidated Balance
Sheets(1)
(In millions, except per share amount)
June 30, 2017 December 31, 2016 Cash and cash
equivalents $ 67.9 $ 95.9 Restricted cash and cash equivalents 22.8
27.8 Accounts receivable – trade, net 290.8 282.3 Accounts
receivable – other 77.9 73.8 Contracts in progress 202.4 166.0
Inventories 89.6 85.8 Other current assets 53.0 46.0
Total current assets 804.5 777.5 Net property, plant and equipment
144.4 133.6 Goodwill 288.1 267.4 Deferred income taxes 155.4 163.4
Investments in unconsolidated affiliates 84.6 98.7 Intangible
assets 82.9 71.0 Other assets 27.0 17.5
Total
assets $ 1,586.8 $ 1,529.1
Foreign revolving credit facilities $ 13.3 $ 14.2
Accounts payable 258.5 220.7 Accrued employee benefits 38.4 35.5
Advance billings on contracts 251.3 210.6 Accrued warranty expense
45.2 40.5 Other accrued liabilities 115.6 96.0 Total
current liabilities 722.2 617.5 Pension liabilities and accumulated
postretirement benefit obligations 288.5 301.3 United States
revolving credit facility 118.1 9.8 Other noncurrent liabilities
40.4 39.6
Total liabilities 1,169.2
968.2 Commitments and contingencies Stockholders' equity:
Common stock, par value $0.01 per share, authorized 200.0 shares;
issued 48.8 and 48.7 shares at June 30, 2017 and December 31, 2016,
respectively 0.5 0.5 Capital in excess of par value 814.5 806.6
Treasury stock at cost, 5.7 and 5.6 shares
at June 30, 2017 and December 31, 2016, respectively
(104.7 ) (103.8 ) Retained earnings (deficit) (272.7 ) (114.7 )
Accumulated other comprehensive loss (28.2 ) (36.5 ) Stockholders'
equity attributable to shareholders 409.3 552.1 Noncontrolling
interest 8.3 8.8
Total stockholders' equity
417.6 561.0 Total liabilities and
stockholders' equity $ 1,586.8 $
1,529.1
(1) Figures may not be clerically accurate due to rounding.
Exhibit 4 Babcock & Wilcox Enterprises,
Inc.
Condensed Consolidated Statements of
Cash Flows(1)
(In millions)
Six Months Ended June 30, 2017
2016 Cash flows from operating activities: Net income
(loss) $ (157.7 ) $ (52.8 ) Non-cash items included in net income
(loss): Depreciation and amortization of long-lived assets 21.5
12.4 Debt issuance cost amortization 0.8 — Income of equity method
investees (3.6 ) (2.1 ) Other than temporary impairment of
investment in TBWES 18.2 — Gains on asset disposals and impairments
0.1 14.5 Provision for (benefit from) deferred taxes (1.3 ) (6.6 )
Recognition of losses for pension and postretirement plans (0.6 )
30.0 Stock-based compensation, net of associated income taxes 6.5
10.7 Changes in assets and liabilities: Accounts receivable 6.3
49.5 Contracts in progress and advance billings on contracts 6.7
(21.7 ) Inventories 3.4 (4.7 ) Income taxes (0.9 ) (2.4 ) Accounts
payable 25.5 (36.8 ) Accrued and other current liabilities 13.8 3.6
Pension liabilities, accrued postretirement and employee benefits
(13.0 ) (8.7 ) Other, net (7.3 ) (0.7 )
Net cash from operating
activities (81.7 ) (15.8 ) Cash flows from investing
activities: Decrease in restricted cash and cash equivalents 0.9
3.0 Investment in equity method investees — (26.2 ) Purchase of
property plant and equipment (7.7 ) (13.6 ) Acquisition of
businesses, net of cash acquired (52.5 ) — Purchases of
available-for-sale securities (16.3 ) (16.7 ) Sales and maturities
of available-for-sale securities 21.8 11.7 Other (0.1 ) (0.6 )
Net cash from investing activities (53.9 ) (42.4 ) Cash
flows from financing activities: Borrowings under our U.S.
revolving credit facility 423.8 — Repayments of our U.S. revolving
credit facility (315.5 ) — Borrowings under our foreign revolving
credit facilities 0.2 1.1 Repayments of our foreign revolving
credit facilities (2.2 ) — Repurchase of shares of common stock
(0.9 ) (52.3 ) Other (2.0 ) (0.2 )
Net cash from financing
activities 103.5 (51.5 ) Effects of exchange rate
changes on cash 4.0 (4.5 )
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (28.0 ) (114.2 ) CASH AND CASH
EQUIVALENTS AT BEGINNING OF PERIOD 95.9 365.2
CASH
AND CASH EQUIVALENTS AT END OF PERIOD $ 67.9 $ 251.0
(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, 2017 2016
2017 2016 REVENUES: Power
$ 213.8 $ 261.8 $ 410.1 $ 550.5 Renewable 48.1 85.5 153.6 169.2
Industrial 90.2 38.0 182.4 70.5 Eliminations (2.2 ) (2.1 )
(5.2 ) (2.9 ) $ 349.8 $ 383.2
$ 740.9 $ 787.3 GROSS PROFIT:
Power $ 49.1 $ 62.5 $ 92.0 $ 122.0 Renewable (110.9 ) (17.5 )
(100.3 ) (4.1 ) Industrial 9.5 11.1 24.8 18.9 Intangible asset
amortization included in cost of operations (3.5 ) (0.6 ) (8.5 )
(1.1 ) Mark to market adjustment included in cost of operations 0.0
(29.5 ) (1.0 ) (29.5 )
Three Months Ended June 30,
Six Months Ended June 30, 2017 2016
2017 2016 AMORTIZATION EXPENSE Power $
0.3 $ 0.3 $ 0.6 $ 0.6 Renewable 0.2 0.3 0.4 0.5 Industrial 4.0
1.0 9.5 2.1 $ 4.4
$ 1.6 $ 10.5 $ 3.1
DEPRECIATION EXPENSE Power $ 2.3 $ 2.2 $ 4.7 $ 5.0 Renewable 0.6
0.6 1.2 0.7 Industrial 0.7 0.2 1.5 0.5 Corporate 1.8
1.6 3.6 3.1 $ 5.4
$ 4.6 $ 11.0 $ 9.3
BOOKINGS: Three Months Ended June 30, Six Months
Ended June 30, 2017 2016
2017 2016 Power $ 177 $ 161 $ 353 $ 425
Renewable 15 21 51 125 Industrial 155 31 260 64 Other/Eliminations
$ (37 ) $ 0 $ (37 ) $ 0 $ 310
$ 213 $ 627 $ 614
BACKLOG: As of June 30, 2017
2016 Power $ 562 $ 688 Renewable 1,137 1,414 Industrial 317
60 Other/Eliminations $ (37 ) $ (8 ) $ 1,980 $
2,154
(1) Figures may not be clerically accurate due to rounding.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170809006125/en/
Babcock & WilcoxInvestor Contact:Chase Jacobson,
704-625-4944Vice President, Investor
Relationsinvestors@babcock.comorMedia Contact:Ryan Cornell,
330-860-1345Public Relationsrscornell@babcock.com
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