Foster Wheeler AG (Nasdaq: FWLT) today reported net income for
the second quarter of 2011 of $63.3 million, or $0.52 per diluted
share, compared with $58.9 million, or $0.46 per diluted share, in
the second quarter of 2010.
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
second quarter of 2011 was $65.3 million, or $0.53 per diluted
share, compared with $61.2 million, or $0.48 per diluted share, in
the year-ago quarter.
For the first six months of 2011, net income was $86.3 million,
or $0.70 per diluted share, compared with $130.9 million, or $1.02
per diluted share, for the first six months of 2010.
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)
Q2 2011
Qtrly Avg. 2011 Q2 2010
Qtrly Avg. 2010 Net income
$63 $43 $59
$54 Net income, as adjusted
$65 $44 $61
$55
Foster Wheeler’s Interim Chief Executive Officer, Umberto della
Sala, said, “The company reported a 17% increase in net income in
the second quarter of 2011, relative to the average quarter of
2010. The results were attributable to the very strong performance
of the company’s Global Power Group, which reported sharp increases
in scope revenue and scope EBITDA relative to the average quarter
of 2010.”
In addition, net income for the second quarter of 2011 was aided
by the continued benefit of a favorable effective tax rate.
Global Engineering and Construction
(E&C) Group
(in millions)
Q2 2011
Qtrly Avg. 2011 Q2 2010
Qtrly Avg. 2010 New orders booked (FW
Scope) $381 $381
$488 $485 Operating revenues (FW
Scope) $365 $362
$454 $421 Segment EBITDA
$55 $48 $86
$74 EBITDA Margin (FW Scope)
15.0% 13.3% 18.8%
17.6%
- EBITDA in the second quarter of 2011
was lower than the average quarter of 2010 due to a reduced volume
of work executed, lower margins on scope revenues and costs
associated with an unfavorable utilization rate. On a
sequential-quarter basis, EBITDA and EBITDA margin on scope revenue
improved from the first-quarter levels of $41.7 million and 11.6%,
respectively, due in part to favorable timing and mix of work
executed.
- Scope operating revenues in the second
quarter of 2011 were below the average quarter of 2010, primarily
due to a lower volume of work executed.
- New orders booked in Foster Wheeler
scope in the second quarter of 2011 were below the level of the
average quarter of 2010, reflecting the slippage of expected new
awards.
Global Power Group (GPG)
(in millions)
Q2 2011
Qtrly Avg. 2011 Q2 2010
Qtrly Avg. 2010 New orders booked (FW
Scope) $574 $358
$162 $298 Operating revenues (FW
Scope) $289 $250
$160 $178 Segment EBITDA
$68 $47 $26
$41 EBITDA Margin (FW Scope)
23.4% 18.9% 16.5%
23.0%
- EBITDA in the second quarter of 2011
was 65% above the average quarter of 2010 due to higher scope
revenues and margins. EBITDA during the quarter was aided by lower
than expected costs on projects for which the company is providing
on-site erection of boilers. Also contributing to EBITDA in the
second quarter of 2011 was an increase in equity earnings from the
company’s interest in a power plant in Chile, which benefitted from
high electric power rates during the quarter.
- Scope new orders in the second quarter
reached a near-record level -- due mainly to the booking of a
contract for what are expected to be the largest and most advanced
supercritical CFB (circulating fluidized bed) boilers in the
world.
- Scope operating revenues in the second
quarter of 2011 were 62% above the average quarter of 2010,
reflecting the increased volume of boiler work.
In commenting on the market outlook for the company’s two
business units, Mr. della Sala said, “Markets seem to be improving
for both of our business groups, although the pace of that
improvement is slightly better in the power sector. Even so, all of
our end markets remain competitive.”
He added, “We are raising our full-year EBITDA margin guidance
for the Global Power Group (GPG) to 17%-19%. GPG is having a strong
year, and we further expect the group’s 2011 revenues to be sharply
higher than 2010. We are closely tracking firm prospects in a
number of regions. However, the timing of award decisions is
uncertain, and some of these prospects could slip into 2012, which
would likely result in scope backlog at the end of 2011 being
roughly comparable with year-end 2010.”
Mr. della Sala continued, “In our Global E&C Group, we are
maintaining full-year EBITDA margin guidance of 13%-15%, but we
still expect to see quarterly volatility, with the third-quarter
margin likely lower than the second quarter. We expect scope
revenues to trend upward in the second half of 2011, but we now
believe that full-year scope revenues will likely be essentially
flat as compared to full-year 2010. Based on the expected timing of
awards, we expect scope backlog to show growth in 2011 from
year-end 2010 levels.”
Share Repurchase Program
The company repurchased 3,855,847 shares during the second
quarter of 2011 for approximately $131 million. As of June 30,
2011, the company had $341 million remaining under its authorized
share repurchase program.
Net Income Attributable to Foster Wheeler AG
All references to net income in this news release indicate net
income attributable to Foster Wheeler AG.
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 U.S. senior secured 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 U.S. senior secured 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.
Conference Call Information
Foster Wheeler AG plans to hold a conference call today,
Tuesday, August 2, at 4:00 p.m. Central European Time (10:00 a.m.
Eastern Daylight Time in the U.S.) to discuss its financial results
for the second quarter ended June 30, 2011.
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. 76067274) 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.
Foster Wheeler AG is a global engineering and construction
contractor 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 or the relocation of our principal
executive offices to Geneva, Switzerland; the benefits, effects or
results of our 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
and/or terrorist attacks on 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 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 June 30, Six
Months Ended June 30, 2011 2010 2011
2010 Operating revenues $
1,183,878 $ 1,005,496 $
2,220,130 $ 1,951,069 Cost of operating
revenues 1,030,266 857,636
1,967,263 1,631,127
Contract profit 153,612 147,860
252,867 319,942 Selling, general and
administrative expenses 80,402 69,515
154,243 139,820 Other income, net
(21,390 ) (11,419 ) (35,656
) (19,751 ) Other deductions, net
6,721 8,049 12,838 19,737 Interest
income (4,428 ) (2,730 )
(7,703 ) (5,089 ) Interest
expense 3,427 4,044 7,306 8,595
Net asbestos-related provision 2,000
2,344 2,400
1,597 Income before income taxes 86,880
78,057 119,439 175,033 Provision for income
taxes 19,044 15,409
26,327 37,019 Net
income 67,836 62,648 93,112 138,014
Less: Net income attributable to noncontrolling interests
4,527 3,790
6,832 7,096 Net income
attributable to Foster Wheeler AG $ 63,309
$ 58,858 $ 86,280
$ 130,918 Shares
Outstanding: Weighted-average number of shares
outstanding for basic earnings per share 122,331,265
127,519,766 123,499,174 127,497,450
Weighted-average number of shares outstanding for diluted
earnings per share 122,847,005 127,879,276
124,136,890 127,859,878
Earnings per share: Basic $ 0.52
$ 0.46 $ 0.70 $
1.03 Diluted $ 0.52
$ 0.46 $ 0.70 $
1.02
Foster Wheeler AG
and Subsidiaries
Consolidated
Balance Sheet
(in thousands of
dollars)
(unaudited)
June 30,
December 31, 2011 2010
ASSETS Current Assets: Cash and cash
equivalents $ 1,037,233 $ 1,057,163 Accounts
and notes receivable, net: Trade 530,435
577,400 Other 112,788 96,758
Contracts in process 168,017 165,389
Prepaid, deferred and refundable income taxes 60,312
59,977 Other current assets 45,846
37,813 Total current assets 1,954,631
1,994,500 Land, buildings and equipment, net
370,714 362,087 Restricted cash 41,035
27,502 Notes and accounts receivable – long-term
5,835 2,648 Investments in and advances to
unconsolidated affiliates 215,684 217,071
Goodwill 92,860 88,917 Other intangible
assets, net 63,593 66,070 Asbestos-related
insurance recovery receivable 179,388 194,570
Other assets 106,564 84,078 Deferred tax
assets 18,327 23,034 TOTAL ASSETS $
3,048,631 $ 3,060,477 LIABILITIES, TEMPORARY
EQUITY AND EQUITY Current Liabilities: Current
installments on long-term debt $ 13,435 $ 11,996
Accounts payable 284,228 239,071 Accrued
expenses 203,131 240,894 Billings in excess of
costs and estimated earnings on uncompleted contracts
685,037 684,090 Income taxes payable
37,058 34,623 Total current liabilities
1,222,889 1,210,674 Long-term debt
152,241 152,574 Deferred tax liabilities
47,267 42,179 Pension, postretirement and other
employee benefits 135,247 166,362
Asbestos-related liability 290,152 307,619
Other long-term liabilities 168,047 160,785
Commitments and contingencies TOTAL
LIABILITIES 2,015,843 2,040,193
Temporary Equity: Non-vested share-based compensation
awards subject to redemption 7,149 4,935 TOTAL
TEMPORARY EQUITY 7,149 4,935
Equity: Registered shares 335,717
334,052 Paid-in capital 676,719 659,739
Retained earnings 623,868 537,588
Accumulated other comprehensive loss (397,785)
(464,504) Treasury shares (259,268)
(99,182) TOTAL FOSTER WHEELER AG SHAREHOLDERS’ EQUITY
979,251 967,693 Noncontrolling interests
46,388 47,656 TOTAL EQUITY 1,025,639
1,015,349 TOTAL LIABILITIES, TEMPORARY EQUITY AND
EQUITY $ 3,048,631 $ 3,060,477
Foster Wheeler AG
and Subsidiaries
Business
Segments
(in thousands of
dollars)
(unaudited)
Quarter Ended June 30,
Six Months Ended June 30, 2011 2010
2011 2010
Global
Engineering & Construction Group
Backlog - in future revenues $ 2,632,800 $
2,906,600 $ 2,632,800 $ 2,906,600 New orders
booked - in future revenues 664,900 770,800
1,384,700 1,247,100 Operating revenues
892,080 842,461 1,715,823 1,622,145
EBITDA 54,842 85,460 96,510
185,393 Foster Wheeler Scope
(1): Backlog - in Foster Wheeler Scope
1,647,900 1,434,800 1,647,900 1,434,800
New orders booked - in Foster Wheeler Scope 380,800
487,600 762,200 905,800 Operating revenues
- in Foster Wheeler Scope 365,332 454,331
724,104 868,214
Global Power
Group
Backlog - in future revenues 1,288,600 806,700
1,288,600 806,700 New orders booked - in future
revenues 576,000 164,800 719,700
627,000 Operating revenues 291,798
163,035 504,307 328,924 EBITDA
67,735 26,396 94,199 56,279
Foster Wheeler Scope (1): Backlog - in
Foster Wheeler Scope 1,278,700 795,000
1,278,700 795,000 New orders booked - in Foster
Wheeler Scope 573,600 162,200 714,900
621,700 Operating revenues - in Foster Wheeler Scope
289,444 160,351 499,486 323,570
Corporate &
Finance Group (2)
EBITDA (24,291) (21,617) (45,619)
(40,153)
Consolidated
Backlog - in future revenues 3,921,400
3,713,300 3,921,400 3,713,300 New orders
booked - in future revenues 1,240,900 935,600
2,104,400 1,874,100 Operating revenues
1,183,878 1,005,496 2,220,130 1,951,069
EBITDA 98,286 90,239 145,090
201,519 Foster Wheeler Scope
(1): Backlog - in Foster Wheeler Scope
2,926,600 2,229,800 2,926,600 2,229,800
New orders booked - in Foster Wheeler Scope 954,400
649,800 1,477,100 1,527,500 Operating
revenues - in Foster Wheeler Scope 654,776
614,682 1,223,590 1,191,784 (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
June 30, Six Months Ended June 30, Twelve
Months Ended
2011 2010 2011 2010 December 31,
2010
Reconciliation of
EBITDA to Net Income*
EBITDA:
Global Engineering & Construction Group $ 54,842
$ 85,460 $ 96,510 $ 185,393 $ 296,240
Global Power Group 67,735 26,396 94,199
56,279 163,825 Corporate & Finance Group
(24,291) (21,617) (45,619) (40,153)
(100,362) Consolidated EBITDA 98,286
90,239 145,090 201,519 359,703 Less:
Interest expense 3,427 4,044 7,306
8,595 15,610 Less: Depreciation/amortization
(1) 12,506 11,928 25,177 24,987
54,155 Less: Provision for income taxes 19,044
15,409 26,327 37,019 74,531 Net
income* $ 63,309 $ 58,858 $ 86,280 $
130,918 $ 215,407
Reconciliation of
Foster Wheeler Scope Operating
Revenues to
Operating Revenues
Global
Engineering & Construction Group
Foster Wheeler Scope operating revenues $ 365,332
$ 454,331 $ 724,104 $ 868,214 $
1,685,778 Flow-through revenues 526,748
388,130 991,719 753,931 1,660,272
Operating revenues 892,080 842,461
1,715,823 1,622,145 3,346,050
Global Power
Group
Foster Wheeler Scope operating revenues 289,444
160,351 499,486 323,570 710,827
Flow-through revenues 2,354 2,684 4,821
5,354 10,842 Operating revenues 291,798
163,035 504,307 328,924 721,669
Consolidated
Foster Wheeler Scope operating revenues 654,776
614,682 1,223,590 1,191,784 2,396,605
Flow-through revenues 529,102 390,814
996,540 759,285 1,671,114 Operating
revenues $ 1,183,878 $ 1,005,496 $
2,220,130 $ 1,951,069 $ 4,067,719
(1) The depreciation / amortization
by business segment: Quarter Ended June 30, Six
Months Ended June 30, Twelve
Months Ended
2011 2010 2011 2010 December 31,
2010
Global Engineering & Construction Group $ 6,308
$ 6,269 $ 12,947 $ 13,601 $ 30,523
Global Power Group 5,585 5,217 11,015
10,504 21,273 Corporate & Finance Group
613 442 1,215 882 2,359 Total
depreciation / amortization $ 12,506 $ 11,928
$ 25,177 $ 24,987 $ 54,155 * Net
income attributable to Foster Wheeler AG.
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 June 30, 2011 2010
Diluted
Earnings
Diluted
Earnings
EBITDA Net Income* Per Share EBITDA
Net Income* Per Share As adjusted $
100,286 $ 65,309 $ 0.53 $ 92,583 $
61,202 $ 0.48 Adjustments: Net
asbestos-related provision (2,000) (2,000)
(0.01) (2,344) (2,344) (0.02)
As reported $
98,286 $ 63,309 $ 0.52 $ 90,239 $
58,858 $ 0.46 Six Months Ended June
30, 2011 2010 Diluted
Earnings
Diluted
Earnings
EBITDA Net Income* Per Share EBITDA
Net Income* Per Share As adjusted $
147,490 $ 88,680 $ 0.71 $ 203,116 $
132,515 $ 1.03 Adjustments: Net
asbestos-related provision (2,400) (2,400)
(0.01) (1,597) (1,597) (0.01)
As reported $
145,090 $ 86,280 $ 0.70 $ 201,519 $
130,918 $ 1.02 Twelve Months Ended
December 31, 2010 Diluted
Earnings
EBITDA Net Income* Per Share As
adjusted $ 365,113 $ 220,817 $ 1.74
Adjustments: Net asbestos-related provision
(5,410) (5,410) (0.04)
As reported $ 359,703 $ 215,407 $ 1.70
*Net income attributable to Foster Wheeler AG.
Foster Wheeler AG
and Subsidiaries
Average
Calculations
(in thousands of
dollars)
(unaudited)
2010
Full Year
Amount
2010
Quarterly
Average
Amount *
Six Months
Ended
June 30, 2011
2011
Quarterly
Average
Amount **
Consolidated
Net income *** $ 215,407 $ 53,852 $
86,280 $ 43,140 Adjusted net income ***
220,817 55,204 88,680 44,340
Consolidated EBITDA 359,703 89,926
145,090 72,545 Consolidated EBITDA, as
adjusted 365,113 91,278 147,490
73,745
Global
Engineering & Construction Group
New orders booked - in Foster Wheeler Scope $
1,939,100 $ 484,775 $ 762,200 $ 381,100
Operating revenues - in Foster Wheeler Scope
1,685,778 421,445 724,104 362,052
Segment EBITDA 296,240 74,060 96,510
48,255 EBITDA margin 17.6% 17.6%
13.3% 13.3%
Global Power
Group
New orders booked - in Foster Wheeler Scope $
1,192,900 $ 298,225 $ 714,900 $ 357,450
Operating revenues - in Foster Wheeler Scope 710,827
177,707 499,486 249,743 Segment EBITDA
163,825 40,956 94,199 47,100 EBITDA
margin 23.0% 23.0% 18.9% 18.9% *
To calculate the quarterly average dollar amounts, the company
divided reported annual figures by four. ** To calculate the
quarterly average dollar amounts, the company divided reported
six-months figures by two. *** Net income attributable to
Foster Wheeler AG.
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