Foster Wheeler AG (Nasdaq: FWLT) today reported net income for
the third quarter of 2011 of $36.9 million, or $0.31 per diluted
share, compared with $51.7 million, or $0.41 per diluted share, in
the third quarter of 2010.
Net income in both quarterly periods was impacted by
asbestos-related gains and provisions as detailed in an attached
table. Excluding such items from both quarterly periods, net income
in the third quarter of 2011 was $38.8 million, or $0.33 per
diluted share, compared with $50.1 million, or $0.40 per diluted
share, in the year-ago quarter.
For the first nine months of 2011, net income was $123.1
million, or $1.01 per diluted share, compared with $182.6 million,
or $1.44 per diluted share, for the first nine 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)
Q3 2011
Qtrly Avg. 2011 Q3 2010 Qtrly
Avg. 2010 Net income $36.9 $41.0
$51.7 $53.9 Net income, as adjusted
$38.8 $42.5 $50.1 $55.2 Consolidated
revenues (FW Scope) $665.2 $629.6
$551.5 $599.1
Foster Wheeler’s Chief Executive Officer, Kent Masters, said,
“Net income for the third quarter of 2011 was down relative to the
average quarter of 2010, primarily due to lower EBITDA margins in
the company’s two business groups. Even so, both groups delivered
strong revenues and continued good operating performance. In
particular, the company reported the highest level of consolidated
scope revenues since the fourth quarter of 2009.”
Global Engineering and Construction
(E&C) Group
(in millions)
Q3 2011
Qtrly Avg. 2011 Q3 2010 Qtrly
Avg. 2010 New orders booked (FW Scope)
$309.2 $357.1 $471.8 $484.8 Operating revenues
(FW Scope) $417.8 $380.6 $398.7
$421.4 Segment EBITDA $58.6
$51.7 $69.3 $74.1 EBITDA Margin (FW Scope)
14.0% 13.6% 17.4% 17.6%
- EBITDA in the third quarter of 2011 was
below the average quarter of 2010 but has trended up since the
first quarter of 2011. The EBITDA margins on scope revenue for the
third quarter and average quarter of 2011 were within the range of
guidance for the full-year 2011.
- Scope operating revenues in the third
quarter of 2011 were below the average quarter of 2010 but have
trended upward since the first quarter of 2011.
- New orders booked in Foster Wheeler
scope in the third quarter of 2011 were below the level of the
average quarter of 2010, reflecting a mix of small and medium
awards.
Global Power Group (GPG)
(in millions)
Q3 2011
Qtrly Avg. 2011 Q3 2010 Qtrly
Avg. 2010 New orders booked (FW Scope)
$76.6 $263.8 $151.4 $298.2 Operating revenues
(FW Scope) $247.4 $249.0 $152.8
$177.7 Segment EBITDA $35.3
$43.2 $40.4 $35.5* EBITDA Margin (FW Scope)
14.3% 17.3% 26.5% 20.0%*
*excluding third-party debt payment of $21.9 million; including
this payment, EBITDA and EBITDA margin (FW Scope) were $41.0 and
23.0%, respectively.
- EBITDA in the third quarter of 2011 was
comparable to the average quarter of 2010, excluding the effect on
the 2010 average quarter of a third-party debt payment. The EBITDA
margin on scope revenue for the average quarter of 2011 was within
the range of guidance for the full-year 2011.
- Scope operating revenues in the third
quarter of 2011 were well above the average quarter of 2010.
- Scope new orders in the third quarter
were below the average quarter of 2010 due to the absence of boiler
orders.
In commenting on the outlook for the company’s two business
groups, Masters said, “In our Global E&C Group, we are
maintaining full-year 2011 EBITDA margin guidance of 13%-15%. We
expect to see a continuation of the trend of sequential-quarter
increases in scope revenues, but we believe full-year scope
revenues will be slightly below full-year 2010. Based on slippage
in the timing of expected new awards, we now believe scope backlog
at year-end 2011 will be below year-end 2010.”
Masters continued, “We are maintaining our full-year 2011 EBITDA
margin guidance of 17% to 19% for the Global Power Group. GPG
remains on track to report full-year scope revenues that are
materially higher than 2010, and we now believe that the Group will
end the year with an increase in scope backlog versus year-end
2010.”
Share Repurchase Program
The company repurchased 3,526,194 shares during the third
quarter of 2011 for approximately $80 million. As of September 30,
2011, the company had approximately $261 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,
Wednesday, November 2, at 4:00 p.m. Central European Time (11:00
a.m. Eastern Daylight Time in the U.S.) to discuss its financial
results for the third quarter ended September 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. 15646794) 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,
terrorist attacks and/or natural 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 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, 2011
2010 2011 2010
Operating revenues $
1,131,856 $ 904,709 $ 3,351,986
$ 2,855,778 Cost of operating revenues
995,792 764,789
2,963,055 2,395,916 Contract
profit 136,064 139,920 388,931
459,862 Selling, general and administrative
expenses 75,087 73,622 229,330
213,442 Other income, net (6,658 )
(16,197 ) (42,314 ) (35,948
) Other deductions, net 8,939 7,394
21,777 27,131 Interest income (5,562
) (2,835 ) (13,265 )
(7,924 ) Interest expense 3,079
4,330 10,385 12,925 Net asbestos-related
provision/(gain) 1,987
(1,665 ) 4,387 (68
) Income before income taxes 59,192
75,271 178,631 250,304 Provision for income
taxes 16,502 18,693
42,829 55,712 Net
income 42,690 56,578 135,802
194,592 Less: Net income attributable to noncontrolling
interests 5,832 4,858
12,664 11,954 Net
income attributable to Foster Wheeler AG $ 36,858
$ 51,720 $ 123,138
$ 182,638 Shares
Outstanding: Weighted-average number of shares
outstanding for basic earnings per
share
118,611,912 125,459,735 121,852,185
126,810,748 Weighted-average number of shares
outstanding for diluted earnings per
share
118,801,481 125,711,232 122,389,634
127,163,049 Earnings per
share: Basic $ 0.31 $
0.41 $ 1.01 $ 1.44
Diluted $ 0.31 $
0.41 $ 1.01 $ 1.44
Foster Wheeler AG
and Subsidiaries
Consolidated
Balance Sheet
(in thousands of
dollars)
(unaudited)
September 30, December 31, 2011
2010 ASSETS Current
Assets: Cash and cash equivalents $
961,739 $ 1,057,163 Short-term
investments 2,699 - Accounts and notes
receivable, net: Trade 445,539 577,400
Other 112,214 96,758 Contracts in
process 167,268 165,389 Prepaid, deferred and
refundable income taxes 57,979 59,977 Other
current assets 43,014 37,813
Total current assets 1,790,452
1,994,500 Land, buildings and equipment,
net 352,749 362,087 Restricted cash
48,090 27,502 Notes and accounts receivable –
long-term 5,916 2,648 Investments in and
advances to unconsolidated affiliates 206,989
217,071 Goodwill 89,268 88,917 Other
intangible assets, net 61,250 66,070
Asbestos-related insurance recovery receivable
162,584 194,570 Other assets 109,293
84,078 Deferred tax assets 17,026
23,034 TOTAL ASSETS $
2,843,617 $ 3,060,477
LIABILITIES, TEMPORARY EQUITY AND EQUITY Current
Liabilities: Current installments on long-term debt
$ 12,599 $ 11,996 Accounts
payable 203,151 239,071 Accrued expenses
198,110 240,894 Billings in excess of costs and
estimated earnings on uncompleted contracts 670,624
684,090 Income taxes payable 34,741
34,623 Total current liabilities
1,119,225 1,210,674
Long-term debt 145,074 152,574
Deferred tax liabilities 47,622 42,179
Pension, postretirement and other employee benefits
130,873 166,362 Asbestos-related liability
280,340 307,619 Other long-term liabilities
165,034 160,785 Commitments and contingencies
TOTAL LIABILITIES 1,888,168
2,040,193 Temporary
Equity: Non-vested share-based compensation awards subject
to redemption 9,998 4,935
TOTAL TEMPORARY EQUITY 9,998
4,935 Equity: Registered
shares 319,992 334,052 Paid-in capital
596,230 659,739 Retained earnings
660,726 537,588 Accumulated other comprehensive
loss (438,559 ) (464,504 )
Treasury shares (240,155 )
(99,182 ) TOTAL FOSTER WHEELER AG SHAREHOLDERS’
EQUITY 898,234 967,693
Noncontrolling interests 47,217
47,656 TOTAL EQUITY
945,451 1,015,349 TOTAL
LIABILITIES, TEMPORARY EQUITY AND EQUITY $
2,843,617 $ 3,060,477
Foster Wheeler AG
and Subsidiaries
Business
Segments
(in thousands of
dollars)
(unaudited)
Quarter Ended September 30, Nine Months Ended
September 30, 2011 2010
2011 2010
Global
Engineering & Construction Group
Backlog - in future revenues $ 2,224,900
$ 3,105,800 $ 2,224,900 $
3,105,800 New orders booked - in future revenues
588,100 758,400 1,972,800 2,005,500
Operating revenues 882,063 749,249
2,597,886 2,371,394 EBITDA 58,615
69,339 155,125 254,732 Foster
Wheeler Scope (1): Backlog - in Foster Wheeler
Scope 1,461,900 1,591,600 1,461,900
1,591,600 New orders booked - in Foster Wheeler Scope
309,200 471,800 1,071,400 1,377,600
Operating revenues - in Foster Wheeler Scope 417,836
398,725 1,141,940 1,266,939
Global Power
Group
Backlog - in future revenues 1,050,900 866,200
1,050,900 866,200 New orders booked - in future
revenues 79,000 154,100 798,700
781,100 Operating revenues 249,793
155,460 754,100 484,384 EBITDA
35,312 40,430 129,511 96,709
Foster Wheeler Scope (1): Backlog - in
Foster Wheeler Scope 1,041,000 854,600
1,041,000 854,600 New orders booked - in Foster
Wheeler Scope 76,600 151,400 791,500
773,100 Operating revenues - in Foster Wheeler Scope
247,389 152,805 746,875 476,375
Corporate &
Finance Group (2)
EBITDA (25,267 ) (22,619 )
(70,886 ) (62,772 )
Consolidated
Backlog - in future revenues 3,275,800
3,972,000 3,275,800 3,972,000 New orders
booked - in future revenues 667,100 912,500
2,771,500 2,786,600 Operating revenues
1,131,856 904,709 3,351,986 2,855,778
EBITDA 68,660 87,150 213,750
288,669 Foster Wheeler Scope
(1): Backlog - in Foster Wheeler Scope
2,502,900 2,446,200 2,502,900 2,446,200
New orders booked - in Foster Wheeler Scope 385,800
623,200 1,862,900 2,150,700 Operating
revenues - in Foster Wheeler Scope 665,225
551,530 1,888,815 1,743,314
____________________________________________
(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)
Twelve
Quarter Ended September 30,
Nine Months Ended September 30,
Months Ended
December 31,
2011 2010
2011 2010
2010
Reconciliation of
EBITDA to Net Income*
EBITDA:
Global Engineering & Construction Group $
58,615 $ 69,339 $ 155,125
$ 254,732 $ 296,240 Global Power
Group 35,312 40,430 129,511 96,709
163,825 Corporate & Finance Group
(25,267 ) (22,619 )
(70,886 ) (62,772 )
(100,362 ) Consolidated EBITDA 68,660
87,150 213,750 288,669 359,703 Less:
Interest expense 3,079 4,330 10,385
12,925 15,610 Less: Depreciation/amortization
(1) 12,221 12,407 37,398 37,394
54,155 Less: Provision for income taxes
16,502 18,693
42,829 55,712
74,531 Net income* $ 36,858
$ 51,720 $ 123,138
$ 182,638 $ 215,407
Reconciliation of
Foster Wheeler Scope Operating
Revenues to
Operating Revenues
Global
Engineering & Construction Group
Foster Wheeler Scope operating revenues $
417,836 $ 398,725 $ 1,141,940
$ 1,266,939 $ 1,685,778 Flow-through
revenues 464,227 350,524
1,455,946 1,104,455
1,660,272 Operating revenues
882,063 749,249
2,597,886 2,371,394
3,346,050
Global Power
Group
Foster Wheeler Scope operating revenues 247,389
152,805 746,875 476,375 710,827
Flow-through revenues 2,404
2,655 7,225 8,009
10,842 Operating revenues
249,793 155,460
754,100 484,384
721,669
Consolidated
Foster Wheeler Scope operating revenues 665,225
551,530 1,888,815 1,743,314 2,396,605
Flow-through revenues 466,631
353,179 1,463,171
1,112,464 1,671,114 Operating
revenues $ 1,131,856 $
904,709 $ 3,351,986 $
2,855,778 $ 4,067,719
(1)The depreciation / amortization by business
segment:
Twelve
Quarter Ended September 30,
Nine Months Ended September 30,
Months Ended December 31, 2011
2010 2011
2010 2010 Global Engineering &
Construction Group $ 6,059 $ 6,547
$ 19,006 $ 20,148 $
30,523 Global Power Group 5,532 5,355
16,547 15,859 21,273 Corporate &
Finance Group 630 505
1,845 1,387
2,359 Total depreciation / amortization
$ 12,221 $ 12,407
$ 37,398 $ 37,394
$ 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 September 30, 2011
2010 Diluted
Earnings
Diluted
Earnings
EBITDA Net Income* Per Share EBITDA
Net Income* Per Share As adjusted $
70,647 $ 38,845 $ 0.33 $
85,485 $ 50,055 $ 0.40
Adjustments: Net asbestos-related
(provision)/gain
(1,987 ) (1,987 ) (0.02 )
1,665 1,665 0.01
As reported $ 68,660
$ 36,858 $ 0.31 $
87,150 $ 51,720 $
0.41 Nine Months Ended September
30, 2011 2010 Diluted
Earnings
Diluted
Earnings
EBITDA Net Income* Per Share EBITDA
Net Income* Per Share As adjusted $
218,137 $ 127,525 $ 1.04
$ 288,601 $ 182,570 $
1.44 Adjustments: Net asbestos-related
(provision)/gain
(4,387 ) (4,387 ) (0.03 )
68 68 0.00
As reported $ 213,750 $
123,138 $ 1.01 $
288,669 $ 182,638 $
1.44 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
2010
Quarterly
Average(1)
Nine Months
Ended
September 30,
2011
2011
Quarterly
Average(2)
Consolidated
Operating revenues - in Foster Wheeler Scope $
2,396,605 $ 599,151 $ 1,888,815
$ 629,605 Net income (3) 215,407
53,852 123,138 41,046 Adjusted net
income (3) 220,817 55,204 127,525
42,508 Consolidated EBITDA 359,703
89,926 213,750 71,250 Consolidated EBITDA,
as adjusted 365,113 91,278 218,137
72,712
Global
Engineering & Construction Group
New orders booked - in Foster Wheeler Scope $
1,939,100 $ 484,775 $ 1,071,400
$ 357,133 Operating revenues - in Foster Wheeler
Scope 1,685,778 421,445 1,141,940
380,647 Segment EBITDA 296,240 74,060
155,125 51,708 EBITDA margin 17.6
% 17.6 % 13.6 % 13.6
%
Global Power
Group
New orders booked - in Foster Wheeler Scope $
1,192,900 $ 298,225 $ 791,500
$ 263,833 Operating revenues - in Foster Wheeler
Scope 710,827 177,707 746,875
248,958 Segment EBITDA (4) 163,825
40,956 129,511 43,170 Third-party debt
payment (21,866 ) (5,466
) - - Segment
EBITDA excluding third-party debt payment 141,959
35,490 129,511
43,170 EBITDA margin (4)
23.0 % 23.0 % 17.3 %
17.3 % EBITDA margin excluding third-party debt
payment 20.0 % 20.0 % 17.3
% 17.3 %
(1)
To calculate the quarterly average
dollar amounts, the company divided reported annual figures by
four.
(2)
To calculate the quarterly average
dollar amounts, the company divided reported nine-months figures by
three.
(3)
Net income attributable to Foster
Wheeler AG.
(4)
The 2010 Full Year and 2010 Quarterly
Average EBITDA balances include the impact of a $21,866 gain
related to a third-party debt payment.
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