Babcock & Wilcox Announces First Quarter 2017 Results
May 09, 2017
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- Renewable segment on target
- Maintaining 2017 adjusted EPS guidance
"First quarter results were slightly ahead of our expectations driven by good gross margin performance in Power and disciplined cost control throughout the organization," said Mr.
"We remain committed to our longer-term strategy of optimizing the Power business, broadening the Renewable segment's global footprint under an improved business model, and growing the Industrial segment," continued Mr. Ferland. "Our transformation into a more diversified engineered solutions company is on track, and while our focus is on project execution and integration in the near-term, we look forward to pursuing additional value-added acquisitions in 2018, focusing on industrial companies with good technology and synergy potential, thereby driving value for both our customers and our shareholders."
Results of Operations
Consolidated revenues in first quarter 2017 were
First quarter 2017 revenues for the Power segment decreased 32.0% to
Revenues in the Renewable segment were
The Industrial segment revenue increased 184% to
Universal Acquisition
As previously announced, on
Liquidity
The Company’s cash and cash equivalents balance, net of restricted cash, was
Maintaining Full Year 2017 Outlook
- Revenue to be approximately
$1.8 billion . - Adjusted EPS in the range of
$0.75 to $0.95 . Adjusted EPS excludes intangible asset amortization expense, restructuring expenses, acquisition and integration costs, non-cash mark-to-market adjustments for pension and other post-retirement benefits and spin-off transaction costs. - Adjusted tax rate in the range of 32% to 34%.
As more fully described in Exhibit 1, management is unable to reconcile without unreasonable effort the Company's forecasted range of adjusted EPS for the full year to a comparable GAAP range.
Conference Call to Discuss First Quarter 2017 Results
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Date: |
Wednesday, May 10, 2017, at 8:30 a.m. EDT | |||
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Live Webcast: |
Investor Relations section of website at www.babcock.com |
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Forward-Looking Statements
B&W cautions that this release contains forward-looking statements, including, without limitation, statements relating to our strategic objectives; 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 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; 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
About B&W
Headquartered in
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Exhibit 1 |
||||||||||||||
| Three Months Ended March 31, 2017 | ||||||||||||||
| GAAP |
Restructuring |
Acquisition and |
Pension & |
Non-GAAP |
|
|
||||||||
| Operating_income_(loss) |
$(8.8) | $3.0 | $1.9 | $1.1 | $(2.8) | $6.0 | $3.2 | |||||||
| Other income (expense) | (2.0) | — | — | — |
(2.0) |
— | $(2.0) | |||||||
| Income tax (expense) benefit |
4.0 | (0.8) | (0.3) | (0.3) | 2.6 | (1.9) | $0.7 | |||||||
| Net income (loss) |
$(6.8) | $2.2 | $1.7 | $0.8 | $(2.2) | $4.1 | $1.9 | |||||||
| Net loss attributable to non-controlling interest |
(0.2) | — | — | — | (0.2) | — | $(0.2) | |||||||
| Net income (loss) attributable to shareholders | $(7.0) | $2.2 | $1.7 | $0.8 | $(2.4) | $4.1 | $1.7 | |||||||
| Diluted EPS - continuing operations | $(0.14) | $0.05 | $0.03 | $0.02 | $(0.05) | $0.08 | $0.04 | |||||||
| Income tax rate | 36.7% | 54.6% | (58.1)% | |||||||||||
| Three Months Ended March 31, 2016 | ||||||||||
| GAAP |
Restructuring |
Non-GAAP |
Intangible |
Non-GAAP |
||||||
| Operating income (loss) | $17.3 | $4.0 | $21.3 | $1.5 | $22.8 | |||||
| Other income (expense) | — | — | — | — | — | |||||
| Income tax (expense) benefit | (6.6) | (0.2) | (6.8) | (0.5) | (7.4) | |||||
| Net income (loss) | $10.6 | $3.8 | $14.4 | $1.0 | $15.4 | |||||
| Net loss attributable to non-controlling interest | (0.1) | — | (0.1) | — | (0.1) | |||||
| Net income (loss) attributable to shareholders | $10.5 | $3.8 | $14.3 | $1.0 | $15.3 | |||||
| Diluted EPS - continuing operations | $0.20 | $0.07 | $0.27 | $0.02 | $0.29 | |||||
| Income tax rate | 38.5% | 32.2% | 32.2% | |||||||
| (1) Figures may not be clerically accurate due to rounding. |
| (2) B&W is providing non-GAAP information regarding certain of its historical results and guidance on future earnings per share 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. |
2017 Outlook
Management has provided full year adjusted earnings per diluted share ("adjusted EPS") guidance of
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Exhibit 2 |
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Three Months |
|||||||||
| 2017 | 2016 | ||||||||
| Revenues | $ | 391.1 | $ | 404.1 | |||||
| Costs and expenses: | |||||||||
| Cost of operations | 328.2 | 324.0 | |||||||
| Selling, general and administrative expenses | 67.0 | 58.7 | |||||||
| Restructuring activities and spin-off transaction costs | 3.0 | 4.0 | |||||||
| Research and development costs | 2.3 | 2.8 | |||||||
| Total costs and expenses | 400.5 | 389.5 | |||||||
| Equity in income (loss) of investees | 0.6 | 2.7 | |||||||
| Operating income (loss) | (8.8 | ) | 17.3 | ||||||
| Other income (expense): | |||||||||
| Interest income | 0.1 | 0.3 | |||||||
| Interest expense | (1.8 | ) | (0.4 | ) | |||||
| Other – net | (0.4 | ) | 0.1 | ||||||
| Total other income (expense) | (2.0 | ) | 0.0 | ||||||
| Income (loss) before income tax expense | (10.8 | ) | 17.2 | ||||||
| Income tax expense (benefit) | (4.0 | ) | 6.6 | ||||||
| Net income (loss) | (6.8 | ) | 10.6 | ||||||
| Net income attributable to noncontrolling interest | (0.2 | ) | (0.1 | ) | |||||
| Net income (loss) attributable to shareholders | $ | (7.0 | ) | $ | 10.5 | ||||
| Basic earnings (loss) per share | $ | (0.14 | ) | $ | 0.20 | ||||
| Diluted earnings (loss) per share | $ | (0.14 | ) | $ | 0.20 | ||||
| Shares used in the computation of earnings per share: | |||||||||
| Basic | 48.7 | 51.6 | |||||||
| Diluted | 48.7 | 52.2 | |||||||
| (1) | Figures may not be clerically accurate due to rounding. | |
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Exhibit 3 |
||||||||
| March 31, 2017 | December 31, 2016 | |||||||
| Cash and cash equivalents | $ | 46.3 | $ | 95.9 | ||||
| Restricted cash and cash equivalents | 25.0 | 27.8 | ||||||
| Accounts receivable – trade, net | 311.2 | 282.3 | ||||||
| Accounts receivable – other | 68.4 | 73.8 | ||||||
| Contracts in progress | 161.1 | 166.0 | ||||||
| Inventories | 89.3 | 85.8 | ||||||
| Other current assets | 46.3 | 46.0 | ||||||
| Total current assets | 747.5 | 777.5 | ||||||
| Net property, plant and equipment | 147.0 | 133.6 | ||||||
| Goodwill | 283.7 | 267.4 | ||||||
| Deferred income taxes | 155.8 | 163.4 | ||||||
| Investments in unconsolidated affiliates | 101.6 | 98.7 | ||||||
| Intangible assets | 85.4 | 71.0 | ||||||
| Other assets | 16.8 | 17.5 | ||||||
| Total assets | $ | 1,537.8 | $ | 1,529.1 | ||||
| Foreign revolving credit facilities | $ | 12.6 | $ | 14.2 | ||||
| Accounts payable | 225.0 | 220.7 | ||||||
| Accrued employee benefits | 40.4 | 35.5 | ||||||
| Advance billings on contracts | 158.3 | 210.6 | ||||||
| Accrued warranty expense | 42.8 | 40.5 | ||||||
| Other accrued liabilities | 68.0 | 96.0 | ||||||
| Total current liabilities | 547.2 | 617.5 | ||||||
| Pension liabilities and accumulated postretirement benefit obligations | 296.0 | 301.3 | ||||||
| United States revolving credit facility | 90.0 | 9.8 | ||||||
| Other noncurrent liabilities | 40.6 | 39.6 | ||||||
| Total liabilities | 973.7 | 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 March 31, 2017 and December 31, 2016, respectively | 0.5 | 0.5 | ||||||
| Capital in excess of par value | 812.2 | 806.6 | ||||||
|
Treasury stock at cost, 5.7 and 5.6 shares at March 31, 2017 and December 31, 2016, respectively |
(104.7 | ) | (103.8 | ) | ||||
| Retained earnings (deficit) | (121.7 | ) | (114.7 | ) | ||||
| Accumulated other comprehensive loss | (31.2 | ) | (36.5 | ) | ||||
| Stockholders' equity attributable to shareholders | 555.1 | 552.1 | ||||||
| Noncontrolling interest | 9.0 | 8.8 | ||||||
| Total stockholders' equity | 564.1 | 561.0 | ||||||
| Total liabilities and stockholders' equity | $ | 1,537.8 | $ | 1,529.1 | ||||
| (1) | Figures may not be clerically accurate due to rounding. | |
|
Exhibit 4 |
||||||||
| Three Months Ended March 31, | ||||||||
| 2017 | 2016 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | $ | (6.8 | ) | $ | 10.6 | |||
| Non-cash items included in net income (loss): | ||||||||
| Depreciation and amortization of long-lived assets | 11.6 | 6.3 | ||||||
| Debt issuance cost amortization | 0.3 | 0.3 | ||||||
| Income of equity method investees | (0.6 | ) | (2.7 | ) | ||||
| Gains on asset disposals and impairments | 0.7 | — | ||||||
| Provision for (benefit from) deferred taxes | (1.0 | ) | — | |||||
| Recognition of losses for pension and postretirement plans | 0.2 | — | ||||||
| Stock-based compensation, net of associated income taxes | 4.2 | 4.9 | ||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | (5.8 | ) | 17.5 | |||||
| Contracts in progress and advance billings on contracts | (45.1 | ) | (46.1 | ) | ||||
| Inventories | 1.6 | (1.0 | ) | |||||
| Income taxes | 3.3 | (0.4 | ) | |||||
| Accounts payable | (0.9 | ) | (16.0 | ) | ||||
| Accrued and other current liabilities | (33.7 | ) | 1.3 | |||||
| Pension liabilities, accrued postretirement and employee benefits | (2.5 | ) | (15.0 | ) | ||||
| Other, net | (0.3 | ) | 2.3 | |||||
| Net cash from operating activities | (74.8 | ) | (37.9 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property plant and equipment | (4.5 | ) | (4.0 | ) | ||||
| Acquisition of businesses, net of cash acquired | (52.5 | ) | — | |||||
| Purchases of available-for-sale securities | (10.7 | ) | (8.0 | ) | ||||
| Sales and maturities of available-for-sale securities | 15.7 | 6.5 | ||||||
| Other | (0.2 | ) | (0.7 | ) | ||||
| Net cash from investing activities | (52.2 | ) | (6.2 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Borrowings under our U.S. revolving credit facility | 255.4 | — | ||||||
| Repayments of our U.S. revolving credit facility | (175.2 | ) | — | |||||
| Borrowings under our foreign revolving credit facilities | 0.2 | — | ||||||
| Repayments of our foreign revolving credit facilities | (2.2 | ) | 1.1 | |||||
| Repurchase of shares of common stock | (0.8 | ) | (36.3 | ) | ||||
| Other | (1.3 | ) | — | |||||
| Net cash from financing activities | 76.0 | (35.2 | ) | |||||
| Effects of exchange rate changes on cash | 1.3 | 1.0 | ||||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (49.6 | ) | (78.4 | ) | ||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 95.9 | 365.2 | ||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 46.3 | $ | 286.8 | ||||
| (1) | Figures may not be clerically accurate due to rounding. | |
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Exhibit 5 |
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| SEGMENT RESULTS: | Three Months Ended March 31, | |||||||
| 2017 | 2016 | |||||||
| REVENUES: | ||||||||
| Power | $ | 196.3 | $ | 288.7 | ||||
| Renewable | 105.5 | 83.8 | ||||||
| Industrial | 92.2 | 32.5 | ||||||
| Eliminations | (2.9 | ) | (0.8 | ) | ||||
| $ | 391.1 | $ | 404.1 | |||||
| GROSS PROFIT: | ||||||||
| Power | $ | 43.0 | $ | 59.5 | ||||
| Renewable | 10.6 | 13.4 | ||||||
| Industrial | 15.3 | 7.8 | ||||||
| Intangible asset amortization included in cost of operations | (5.0 | ) | (0.5 | ) | ||||
| Mark to market adjustment included in cost of operations | (1.0 | ) | — | |||||
| Three Months Ended March 31, | ||||||||
| 2017 |
|
2016 | ||||||
| AMORTIZATION EXPENSE | ||||||||
| Power | $ | 0.3 | $ | 0.3 | ||||
| Renewable | 0.2 | 0.2 | ||||||
| Industrial | 5.5 | 1.0 | ||||||
| $ | 6.0 | $ | 1.5 | |||||
| DEPRECIATION EXPENSE | ||||||||
| Power | $ | 2.6 | $ | 2.6 | ||||
| Renewable | 0.6 | 0.4 | ||||||
| Industrial | 0.5 | 0.3 | ||||||
| Corporate | 1.8 | 1.5 | ||||||
| $ | 5.6 | $ | 4.8 | |||||
| BOOKINGS: | Three Months Ended March 31, | |||||||
| 2017 | 2016 | |||||||
| Power | $ | 176 | $ | 264 | ||||
| Renewable | 36 | 104 | ||||||
| Industrial | 105 | 33 | ||||||
| $ | 317 | $ | 401 | |||||
| BACKLOG: | As of March 31, | |||||||
| 2017 | 2016 | |||||||
| Power | $ | 598 | $ | 779 | ||||
| Renewable | 1,171 | 1,479 | ||||||
| Industrial | 252 | 67 | ||||||
| $ | 2,021 | $ | 2,325 | |||||
| (1) | Figures may not be clerically accurate due to rounding. | |
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