FWLT (MM)

Foster Wheeler Ltd. (Nasdaq: FWLT) today reported sharply improved operating results for the second quarter and first six months of 2007 compared with the same periods of 2006. Results for the second quarter of 2007 include the impact of an increase in the reserve for a legacy power project in an after-tax amount of $30 million, or $0.42 per diluted share. Including the impact of the increased reserve, net income for the second quarter of 2007 was $71.9 million, or $0.99 per diluted share. Net income for the year-ago period, adjusted to exclude certain non-operating items, was $41.1 million, or $0.58 per diluted share. For the first six months of 2007, including the impact of the increased reserve, net income was $186.7 million, or $2.59 per diluted share, compared with adjusted net income of $55.9 million, or $0.80 per diluted share for the first six months of 2006. Adjustments to results for the year-ago periods included an asbestos-related gain and a charge relating to debt reduction initiatives, as noted in an attached table. Including the impact of the increased reserve, consolidated EBITDA (earnings before interest expense, income taxes, depreciation and amortization) for the second quarter and six-month periods of 2007 was $118.6 million and $280.9 million, respectively. EBITDA for the year-ago periods, adjusted to exclude certain non-operating items, as noted above and as detailed in an attached table, was $85.2 million and $131.3 million, respectively. �Relative to the year-ago quarter, operating results were up sharply as we continued to witness exceptionally strong demand in all key industry sectors we serve,� said Raymond J. Milchovich, chairman and chief executive officer of Foster Wheeler. �In particular, EBITDA for the second quarter of 2007, relative to the year-ago quarter, increased 43% in our Global Engineering & Construction (E&C) and 55% in our Global Power Group (GPG), excluding the impact of the $30 million increase in reserve. The actions we have taken over the past several years in the pursuit of commercial and operational excellence -- combined with the very significant organic growth that we have achieved -- have enabled us to take full advantage of these robust markets. �In comparison to the year-ago quarter, our operating performance has improved significantly,� said Milchovich. �Consolidated revenues measured in terms of Foster Wheeler scope were up 31%; consolidated EBITDA, excluding the impact of the $30 million increase in reserve, was up 74% compared with the year-ago adjusted EBITDA; E&C EBITDA margins on scope revenue continue to grow and were up 4.7% from the year ago period; GPG EBITDA margins on scope revenue, which were an area of intense focus all of last year, were up 25% excluding the impact of the increased reserve; and consolidated net income, again excluding the impact of the $30 million increase in reserve, was up 148% compared with the year-ago adjusted net income. Milchovich added, �In terms of bookings, GPG enjoyed a very good first half. This business is well-positioned for the balance of 2007 and is building a very nice base for 2008 � with backlog already at its highest level in several years. E&C bookings and backlog have supported the profit performance of the business year-to-date and provide a solid foundation for the balance of 2007. We are expecting very high levels of bookings in E&C in the second half of the year. In part, this is due to our track record of successfully converting front-end design (FEED) awards into contracts for the engineering, procurement and construction phase of major projects.� Foster Wheeler Ltd. is a global company offering, through its subsidiaries, a broad range of engineering, procurement, construction, manufacturing, project development and management, research and plant operation services. Foster Wheeler serves the upstream oil and gas, LNG and gas-to-liquids, refining, petrochemicals, chemicals, power, pharmaceuticals, biotechnology and healthcare industries. The corporation is based in Hamilton, Bermuda, and its operational headquarters are in Clinton, New Jersey, USA. For more information about Foster Wheeler, please visit our Web site at www.fwc.com. Calculation of EBITDA EBITDA is a supplemental financial measure not defined in generally accepted accounting principles ("GAAP"). The Company defines EBITDA as income 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. EBITDA, after adjustment for certain unusual and infrequent items specifically excluded in the terms of the Company's current and prior senior credit agreements, is used for certain covenants under its current and prior senior credit agreements. The Company believes that the line item on its condensed consolidated statement of operations and comprehensive income entitled "net income" 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 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, 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 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; 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. Conference Call Information Foster Wheeler Ltd. plans to hold a conference call today, August 8, 2007, at 9:30 a.m. (Eastern) to discuss its financial results for the second quarter of 2007. 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 web site (www.fwc.com). To listen to the call by telephone in the United States, dial 866-425-6195 (conference I.D. No. 9030798) approximately ten minutes before the call. International access is available by dialing 973-935-8752 (conference I.D. No. 9030798). 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 as well as by telephone. To listen to the replay by telephone, dial 877-519-4471 or 973-341-3080 (replay passcode 9030798# required) starting one hour after the conclusion of the call through 8:00 p.m. (Eastern) on Wednesday, September 5, 2007. The replay can also be accessed on the company's web site for four weeks following the call. Safe Harbor Statement Foster Wheeler 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 regarding 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 Part II, Item 1A �Risk Factors� of the Company�s most recent quarterly report on Form 10-Q and the following, could cause the Company�s business conditions and results to differ materially from what is contained in forward-looking statements: changes in the rate of economic growth in the United States and other major international economies, changes in investment by the oil and gas, oil refining, chemical/petrochemical and power industries, changes in the financial condition of its customers, changes in regulatory environment, 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 our global operations, currency fluctuations, war and/or terrorist attacks on facilities either owned or where equipment or services are or may be provided, interruptions to shipping lanes or other methods of transport, 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 competition by foreign and domestic companies, compliance with its debt covenants, recoverability of claims against its customers and others by the Company and clams by third parties against the Company, 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 the Securities and Exchange Commission. Foster Wheeler Ltd. and Subsidiaries Consolidated Statement of Operations - Summary (in thousands of dollars, except share data and per share amounts) (unaudited) � Three months ended Six months ended June 29, 2007 June 30, 2006 June 29, 2007 June 30, 2006 � Unfilled orders $ 5,543,800 $ 5,002,500 $ 5,543,800 $ 5,002,500 New orders booked � 983,300 � � 998,500 � � 2,399,800 � � 2,527,900 � � Operating revenues $ 1,189,766 $ 745,307 $ 2,341,888 $ 1,391,149 Cost of operating revenues � (1,020,920 ) � (617,365 ) � (1,965,530 ) � (1,182,889 ) Contract profit 168,846 127,942 376,358 208,260 � Selling, general & administrative expenses (62,305 ) (57,888 ) (117,393 ) (108,027 ) Other income 21,691 20,113 33,207 35,868 Other deductions (17,231 ) (10,773 ) (25,403 ) (18,087 ) Interest expense (5,211 ) (6,788 ) (9,936 ) (14,735 ) Minority interest in income of consolidated affiliates (964 ) (1,385 ) (3,273 ) (996 ) Net asbestos-related gain 0 79,590 0 79,590 Loss on debt reduction initiatives 0 (12,318 ) 0 (12,483 ) � � � � Income before income taxes 104,826 138,493 253,560 169,390 Provision for income taxes � (32,976 ) � (30,075 ) � (66,885 ) � (46,341 ) Net income $ 71,850 � $ 108,418 � $ 186,675 � $ 123,049 � � � � Shares Outstanding: Weighted-average number of common shares outstanding for basic earnings per common share � 70,539,288 66,834,931 70,146,582 64,952,184 � Weighted-average number of common shares outstanding for diluted earnings per common share � 72,311,021 70,684,419 72,072,961 70,087,043 � � � � Earnings per common share: Basic $ 1.02 � $ 1.62 � $ 2.66 � $ 1.60 � Diluted $ 0.99 � $ 1.53 � $ 2.59 � $ 1.48 � Foster Wheeler Ltd. and Subsidiaries Condensed Consolidated Balance Sheet (in thousands of dollars) (unaudited) � June 29, December 29, ASSETS 2007 2006 Current Assets: Cash and cash equivalents $ 756,736 $ 610,887 Accounts and notes receivable, net: Trade 454,834 483,819 Other 101,104 83,497 Contracts in process 240,535 159,121 Prepaid, deferred and refundable income taxes 21,761 20,708 Other current assets � 29,886 � 31,288 Total current assets � 1,604,856 � 1,389,320 � Land, buildings and equipment, net 304,031 302,488 Restricted cash 26,130 19,080 Notes and accounts receivable � long-term 3,051 5,395 Investments in and advances to unconsolidated affiliates 169,182 167,186 Goodwill, net 51,731 51,573 Other intangible assets, net 62,044 62,004 Asbestos-related insurance recovery receivable 335,862 350,322 Other assets 91,103 91,081 Deferred income taxes � 123,483 � 127,574 TOTAL ASSETS $ 2,771,473 $ 2,566,023 � LIABILITIES, TEMPORARY EQUITY AND SHAREHOLDERS� EQUITY Current Liabilities: Current installments on long-term debt $ 22,192 $ 21,477 Accounts payable 288,948 263,715 Accrued expenses 297,385 288,658 Billings in excess of costs and estimated earnings on uncompleted contracts 615,029 622,422 Income taxes payable � 76,337 � 51,331 Total current liabilities � 1,299,891 � 1,247,603 � Long-term debt 174,900 181,492 Deferred income taxes 68,983 66,522 Pension, postretirement and other employee benefits 345,918 385,976 Asbestos-related liability 384,824 424,628 Other long-term liabilities and minority interest 205,025 196,092 Commitments and contingencies � � TOTAL LIABILITIES � 2,479,541 � 2,502,313 � Temporary Equity: Non-vested restricted awards subject to redemption � 2,726 � 983 TOTAL TEMPORARY EQUITY � 2,726 � 983 � Shareholders' Equity: Preferred shares 0 0 Common shares 711 690 Paid-in capital 1,374,485 1,349,492 Accumulated deficit (761,794) (944,113) Accumulated other comprehensive loss � (324,196) � (343,342) TOTAL SHAREHOLDERS� EQUITY � 289,206 � 62,727 TOTAL LIABILITIES, TEMPORARY EQUITY AND SHAREHOLDERS� EQUITY $ 2,771,473 $ 2,566,023 Foster Wheeler Ltd. and Subsidiaries Major Business Groups (in thousands of dollars) (unaudited) � Three months ended Six months ended June 29, 2007 June 30, 2006 June 29, 2007 June 30, 2006 Global Engineering & Construction Group Unfilled orders - in future revenues $ 4,164,200 $ 3,710,400 $ 4,164,200 $ 3,710,400 New orders booked - in future revenues 430,500 606,900 1,303,200 1,722,100 Operating revenues 851,245 472,570 1,675,414 895,723 EBITDA 124,999 87,400 266,132 142,359 � Foster Wheeler Scope (1): Unfilled orders 1,437,900 1,564,700 1,437,900 1,564,700 New orders booked 316,200 520,300 849,500 943,000 Operating revenues 483,447 354,000 1,013,078 652,300 � Global Power Group Unfilled orders - in future revenues 1,379,600 1,292,100 1,379,600 1,292,100 New orders booked - in future revenues 552,800 391,600 1,096,600 805,800 Operating revenues 338,521 272,708 666,474 495,368 EBITDA 4,366 22,146 41,390 35,971 � Foster Wheeler Scope (1): Unfilled orders 1,291,500 1,277,900 1,291,500 1,277,900 New orders booked 473,400 388,400 1,014,100 799,600 Operating revenues 334,125 269,500 658,947 489,200 � Corporate & Finance Group (2) Unfilled orders - in future revenues 0 0 0 0 New orders booked - in future revenues 0 0 0 0 Operating revenues 0 29 0 58 EBITDA (10,767) 42,951 (26,627) 20,061 � Consolidated Unfilled orders - in future revenues 5,543,800 5,002,500 5,543,800 5,002,500 New orders booked - in future revenues 983,300 998,500 2,399,800 2,527,900 Operating revenues 1,189,766 745,307 2,341,888 1,391,149 EBITDA 118,598 152,497 280,895 198,391 � Foster Wheeler Scope (1): Unfilled orders 2,729,400 2,842,600 2,729,400 2,842,600 New orders booked 789,600 908,700 1,863,600 1,742,600 Operating revenues 817,572 623,500 1,672,025 1,141,500 � � (1) Foster Wheeler Scope represents that portion of unfilled orders, new orders booked and operating revenues on which profit can be earned. Foster Wheeler Scope excludes revenues relating to third-party costs incurred by us as agent or principal on a reimbursable basis. � (2) Includes intersegment eliminations. Foster Wheeler Ltd. and Subsidiaries Reconciliations of EBITDA and Foster Wheeler Scope (in thousands of dollars) (unaudited) � Three months ended Six months ended June 29, 2007 June 30, 2006 June 29, 2007 June 30, 2006 � Reconciliation of Consolidated EBITDA�to Consolidated Net Income � � EBITDA $ 118,598 $ 152,497 $ 280,895 $ 198,391 Less: Interest expense (5,211) (6,788) (9,936) (14,735) Less: Depreciation/ amortization (1) � (8,561) � (7,216) � (17,399) � (14,266) Income before income taxes 104,826 138,493 253,560 169,390 Provision for income taxes � (32,976) � (30,075) � (66,885) � (46,341) Net income $ 71,850 $ 108,418 $ 186,675 $ 123,049 � Reconciliation of Foster Wheeler Scope Operating�Revenues to Operating Revenues � � Global Engineering & Construction Group � Foster Wheeler Scope operating revenues $ 483,447 $ 354,000 $ 1,013,078 $ 652,300 Flow-through revenues � 367,798 � 118,570 � 662,336 � 243,423 Operating revenues � 851,245 � 472,570 � 1,675,414 � 895,723 � Global Power Group � Foster Wheeler Scope operating revenues 334,125 269,500 658,947 489,200 Flow-through revenues � 4,396 � 3,208 � 7,527 � 6,168 Operating revenues � 338,521 � 272,708 � 666,474 � 495,368 � Corporate & Finance Group � Foster Wheeler Scope operating revenues 0 0 0 0 Flow-through revenues � 0 � 29 � 0 � 58 Operating revenues � 0 � 29 � 0 � 58 � Consolidated � Foster Wheeler Scope operating revenues 817,572 623,500 1,672,025 1,141,500 Flow-through revenues � 372,194 � 121,807 � 669,863 � 249,649 Operating revenues $ 1,189,766 $ 745,307 $ 2,341,888 $ 1,391,149 � Three months ended Six months ended (1) The depreciation / amortization for the major business groups is: June 29, 2007 June 30, 2006 June 29, 2007 June 30, 2006 � Global Engineering & Construction Group $ (3,400) $ (2,015) $ (6,878) $ (3,858) Global Power Group (4,818) (4,860) (9,837) (9,728) Corporate & Finance Group � (343) � (341) � (684) � (680) Total depreciation / amortization $ (8,561) $ (7,216) $ (17,399) $ (14,266) Foster Wheeler Ltd. and Subsidiaries Earnings Per Common Share Reconciliation (in thousands of dollars, except per share amounts) (unaudited) � � Three Months Ended Six Months Ended June 30, 2006 June 30, 2006 � NetEarnings DilutedEarnings/Share NetEarnings DilutedEarnings/Share Net income and earnings per common share, as adjusted $ 41,146 $ 0.58 $ 55,942 $ 0.80 � Add back: Net asbestos-related gain 79,590 1.13 79,590 1.14 Loss on debt reduction initiatives (12,318) (0.18) (12,483) (0.18) Fair value of additional shares issued as part of the warrant offers (impacts earnings per share only) � - � - � - � (0.28) Net income and earnings per common share, as reported $ 108,418 $ 1.53 $ 123,049 $ 1.48