Babcock & Wilcox announces second quarter 2012 results

The Babcock & Wilcox Company (NYSE: BWC) reported second quarter 2012 earnings per share of $0.54 compared to $0.39 in the second quarter of 2011. Included in second quarter 2012 earnings per share was $0.10 related to the recovery of loss contract costs incurred in the prior year on a Nuclear Energy segment condenser replacement project.

Included in second quarter 2011 earnings per share were $0.08 of net charges related to loss contracts and an acquisition settlement. Before the impact of these items in both periods, non-GAAP earnings per share of $0.44 in the second quarter of 2012 decreased $0.03 or 6.4% from the $0.47 reported in the second quarter of 2011, primarily due to an increase in research and development spending on the B&W mPowerTM small modular reactor program.

Revenues of $852.6 million increased $100.2 million, or 13.3%, from the second quarter of 2011. Second quarter 2012 ending backlog of $5.7 billion increased $1.1 billion, or 23.4%, from the second quarter of 2011.

Recent Highlights

  • Announced MOU with FirstEnergy for B&W mPower Site Selection and Licensing Study
  • Received 25-Year Nuclear Regulatory Commission Operating License at Nuclear Fuel Services, Inc.
  • Awarded $100 Million Environmental Contract for a Major U.S. Utility
  • Awarded $82 Million in Contracts for Naval Reactor Components and Material Recovery
  • Awarded $73 Million in Contracts for Naval Reactor Technology Development and Manufacturing
  • Awarded $40 Million Boiler Pressure Parts Contract for South Dakota Coal-Fired Power Plant
  • Awarded $30 Million Environmental Upgrade Contract at Pennsylvania Power Plant
  • Awarded Engineering Release for Colombia, South America Boiler Project
  • Closed $700 Million Credit Facility; Extends Maturity to 2017 and Reduces Overall Facility Costs

Results of Operations

Consolidated revenues for the second quarter of 2012 were $852.6 million, an increase of $100.2 million, or 13.3%, from the second quarter of 2011. This increase is principally due to a $108.4 million increase in revenues in the Power Generation segment resulting from strong environmental control equipment and environmental aftermarket services as well as growth in new renewable steam generation systems. This increase was partially offset by the timing of material receipts for a Nuclear Energy segment replacement steam generator project and a 3.2% reduction in combined government segment revenues.

Operating income for the second quarter of 2012 was $89.4 million, an increase of $26.1 million from the second quarter of 2011. Included in second quarter 2012 operating income was $18.1 million related to the recovery of losses incurred in the prior year on a condenser replacement contract at a commercial nuclear site. Included in second quarter 2011 operating income were $15.1 million of net charges related to loss contracts and an acquisition settlement. Excluding the impact of these items in both periods, operating income in the second quarter of 2012 decreased $7.1 million compared to the second quarter of 2011.

The decrease in operating income excluding items was primarily due to an $11.6 million increase in research and development expenses principally related to the Company’s investment in the small modular reactor program and lower equity income contributions, as expected, from the Company’s unconsolidated steam boiler joint venture in China partially offset by increased revenues and strong execution within the Power Generation segment.

“In the second quarter, the Company continued to perform in-line with expectations and is tracking well for the full year,” said E. James Ferland, President and Chief Executive Officer of B&W. “Bookings in the first half of the year have been strong, but volatile on a quarterly basis. Importantly, early in the third quarter, following a similar recommendation by the House Defense Appropriations Subcommittee earlier this year, the Senate Defense Appropriations Subcommittee recommended advanced procurement funding for an additional Virginia Class submarine in the Fiscal Year 2013 Defense Appropriations Bill. Also early in the third quarter, the Company announced an MOU for site selection and licensing studies for B&W mPower small modular reactor units at FirstEnergy and has been awarded a more than $300 million boiler contract in Vietnam through our China joint venture, all positive signals of continuing strength in our business.”

Liquidity

The Company’s cash and investments position, net of debt, was $417.9 million at the end of the second quarter of 2012, approximately the same level as the $418.7 million at the end of the first quarter of 2012. During the quarter, the Company contributed $94.0 million to its pension plans. The Company does not expect to make additional pension contributions for the remainder of 2012. In addition to net cash, the Company maintains a $700.0 million revolving credit agreement with $491.4 million of availability as of the end of the second quarter. The Company believes it maintains adequate liquidity to fund operations, which could include increased working capital requirements to fund internal growth, R&D programs, and product and geographic expansion opportunities.

 
















Reconciliation of Non-GAAP Earnings Per Share and Operating Income
(in $ millions, except per share amounts) *amounts may not foot due to rounding
         
    Q2 2012   Q2 2011*
GAAP operating income   $ 89.4     $ 63.3  
NFS acquisition settlement           (10.9 )
NE Condenser Replacement Project     (18.1 )     26.0  
Non-GAAP operating income   $ 71.3     $ 78.4  
         
GAAP earnings per share   $ 0.54     $ 0.39  
NFS acquisition settlement           (0.06 )
NE Condenser Replacement Project     (0.10 )     0.13  
Non-GAAP earnings per share   $ 0.44     $ 0.47  

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 in 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.