UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d)
of
the Securities Exchange Act of 1934
Date of
Report (Date of earliest event reported): November 5, 2014
|
THE BABCOCK & WILCOX COMPANY |
|
(Exact name of registrant as specified in its charter) |
|
DELAWARE |
001-34658 |
80-0558025 |
|
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
|
13024 BALLANTYNE CORPORATE PLACE |
28277 |
|
|
(Address of principal executive offices) |
(Zip Code) |
Registrant’s Telephone Number,
including Area Code: (704)
625-4900
Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions:
⃞
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
⃞
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
⃞
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
⃞
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
_____________________________________________
|
Item 2.02 |
Results of Operations and Financial Condition. |
On November 5, 2014, we issued a press release announcing our financial results for the third quarter ended September 30, 2014. A copy of the press release is attached as Exhibit 99.1, and the information contained in Exhibit 99.1 is incorporated by reference.
The information furnished pursuant to this Item 2.02, including Exhibit 99.1, shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
|
Item 7.01 |
Regulation FD Disclosure. |
On November 5, 2014, we also issued a press release announcing that our board of directors has unanimously approved pursuing the tax-free spin-off of our Power Generation business to our shareholders. A copy of the press release is attached as Exhibit 99.2, and the information contained in Exhibit 99.2 is incorporated by reference.
The information furnished pursuant to this Item 7.01, including Exhibit 99.2, shall not be deemed to be “filed” for the purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
|
Item 9.01 |
Financial Statements and Exhibits. |
| (d) | Exhibits |
|
99.1 Earnings Release dated November 5, 2014. |
|
|
99.2 Press Release dated November 5, 2014. |
|
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
THE BABCOCK & WILCOX COMPANY |
|||
|
|
|||
|
|
By: |
/s/ David S. Black |
|
|
David S. Black |
|||
|
Vice President and Chief Accounting Officer |
|||
|
November 5, 2014 |
|||
3
Exhibit 99.1
Babcock & Wilcox Announces Third Quarter 2014 Results
CHARLOTTE, N.C.--(BUSINESS WIRE)--November 5, 2014--The Babcock & Wilcox Company (NYSE: BWC) (“B&W” or the “Company”) today reported third quarter 2014 revenues of $737.9 million, a decrease of $36.9 million, or 4.8%, from the third quarter of 2013, while GAAP earnings per share increased $0.03 per share to $0.57 for the third quarter of 2014 compared to $0.54 in the prior year period. Adjusted earnings per share, which excludes a $0.04 per share net impact of a non-recurring investment gain offset by a mid-year pension mark-to-market adjustment and restructuring costs for the quarter, were $0.53 for the three months ended September 30, 2014 compared to $0.57 in the third quarter of 2013.
“Significantly improved third quarter revenue and margin relative to the first half of the year demonstrate that our focus on efficiency, costs, and targeted business development is beginning to positively impact the business,” said Mr. E. James Ferland, President and Chief Executive Officer. “Our Nuclear Operations segment continued its strong performance, recording its highest ever third quarter revenue while maintaining its operating margin. The Power Generation segment produced a solid quarter with improved revenue and operating margins in line with our expectations. We are pleased with these results and believe they represent a step forward for the Company. We are confident that the actions we are taking position B&W for steady improvement in our top and bottom lines in 2015 and beyond.”
In a separate release issued today, the Company also announced that its Board of Directors has unanimously approved pursuing the tax-free spin-off of the Company’s Power Generation business to B&W shareholders. The planned separation of the Power Generation and Government & Nuclear Operations businesses is expected to create two independent, publicly-traded companies equipped with the resources, strategic autonomy, and financial flexibility to enhance long-term shareholder value.
Results of Operations
Consolidated revenues for the third quarter of 2014 were $737.9 million, a decrease of 4.8%, compared to $774.8 million for the third quarter of 2013. The Nuclear Operations segment revenues increased by 5.4%, to $297.5 million, primarily attributable to increased activity in the manufacturing of nuclear components for the U.S. Government programs. Revenues in the Power Generation segment were $402.0 million in the three months, 5.8% below the corresponding period in 2013 but 22.8% higher sequentially compared to the previous quarter. The year-over-year decrease was primarily due to the timing and level of activities related to new build steam generation systems projects together with lower revenue from the new build environmental equipment business. The MEGTEC acquisition contributed $48.9 million of revenues during the third quarter of 2014. Revenues from the Nuclear Energy segment were $21.5 million, compared to $52.5 million in the prior year period, a decrease of $31.0 million primarily attributable to management’s decision earlier in the year to exit the low margin nuclear projects business.
GAAP operating income for the third quarter of 2014 decreased $16.9 million to $65.2 million compared to $82.1 million in the same period of 2013. The mPower segment recorded a $5.1 million loss in the third quarter of 2014 compared to a $25.6 million loss in the corresponding period in 2013, due to the slower pace of development under the restructured mPower program. For the quarter, Technical Services operating income decreased $13.4 million to $5.0 million, primarily attributable to the loss of the Pantex and Y-12 contracts. Operating income in the Power Generation segment was $35.3 million, a $3.0 million decrease from $38.3 million in the 2013 period, primarily due to lower revenues. Operating income in the Nuclear Operations segment decreased $1.9 million in the quarter from last year’s record third quarter profit to $61.9 million, while the Nuclear Energy segment reported a loss of $6.7 million in the period compared to $0.0 million in the same prior year period.
Operating income for the third quarter of 2014 includes an $11.1 million pension mark-to-market adjustment, due to a re-measurement of the Canadian pension plan, as well as $8.7 million of special charges for restructuring activities and $0.6 million of MEGTEC acquisition costs. Excluding these charges, adjusted operating income for the third quarter of 2014 was $85.6 million compared to adjusted operating income of $86.9 million in the third quarter of 2013.
“We are pleased with the progress we’ve made across our different businesses during the period,” said Mr. Ferland. “In addition to the solid results in the Nuclear Operations and Power Generation segments this quarter, the Nuclear Energy segment reported bookings in excess of $100 million. mPower spending was reduced and is pacing to our targeted $15 million annual run rate. Our international business development activities are expanding in markets where there is a healthy pipeline of coal and renewables opportunities. As a result, we expect solid bookings in these areas in the coming months. Our margin improvement programs remain on track and we continue to look for additional opportunities to reduce costs and improve efficiency.”
Liquidity and Debt
The Company’s cash and investments position, net of restricted cash, was $220.5 million at the end of the third quarter of 2014, a decrease of $140.8 million compared to $361.3 million as of December 31, 2013. During the three month period ended September 30, 2014, the Company repurchased common shares totaling $50.0 million, paid dividends of $10.7 million, and contributed $34.1 million to its pension plans. For the first nine months of 2014, the Company returned $182.6 million of capital to shareholders through its share repurchase and dividend programs, acquired MEGTEC for a net $142.8 million, and contributed $58.9 million to its pension plans.
As of September 30, 2014, outstanding balances under the Credit Agreement included a $150.0 million term loan, $154.4 million borrowed under the revolving credit facility, and letters of credit issued under the revolving credit facility totaling $170.2 million, resulting in $825.4 million of availability as of the end of the third quarter.
Quarterly Dividend and Share Repurchase
On October 31, 2014, the Company declared a quarterly cash dividend of $0.10 per common share. The dividend will be payable on December 16, 2014 to shareholders of record on November 20, 2014.
During the third quarter of 2014, the Company repurchased 1.63 million shares of its common stock at a total cost of $50.0 million. Program to date through September 30, 2014, the Company had repurchased a total of 14.22 million shares at a cost of $403.4 million leaving $346.6 million of capacity remaining under its previously announced $750 million share repurchase authorizations.
Outlook
The Company raised the lower end of the range for adjusted earnings per share for the full year 2014 to $1.75 to $1.85, from the previous range of $1.70 to $1.85. Adjusted earnings per share exclude restructuring charges, the mark-to-market adjustments for pension and other post-retirement benefits, and other non-recurring gains and losses. The Company also expects 2014 consolidated revenues to be approximately $2.9 billion, compared to the previous range of $2.9 billion to $3.0 billion.
Conference Call to Discuss Third Quarter 2014 Results and Announcement of Planned Spin-off
|
Date: |
Thursday, November 6, 2014, at 8:30 a.m. EST | ||||
|
Live Webcast: |
Investor Relations section of website at www.babcock.com |
||||
Forward-Looking Statements
B&W cautions that this release contains forward-looking statements, including, without limitation, statements relating to the manner, tax-free nature and expected benefits associated with separating B&W’s power generation business and its government and nuclear operations business into two independent, publicly traded companies; bookings, to the extent they may be viewed as an indicator of future revenues; and our 2014 outlook. These forward-looking statements are based on management’s current expectations and involve a number of risks and uncertainties, including, among other things, the proposed separation not being completed as anticipated or at all; delays or other difficulties in completing the separation, including the inability to satisfy the conditions for its completion; disruptions experienced with customers and suppliers; the inability of either business to successfully operate independently; the inability to retain key personnel; adverse changes in the industries in which we operate and delays, changes or termination of contracts in backlog. 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 Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2013 and subsequent quarterly reports on Form 10-Q. B&W cautions not to place undue reliance on these forward-looking statements, which speak only as of the date of this release, and undertakes no obligation to update or revise any forward-looking statement, except to the extent required by applicable law.
About B&W
The Babcock & Wilcox Company is a leader in clean energy technology and services, primarily for the nuclear, fossil and renewable power markets as well as a premier advanced technology and mission critical defense contractor. B&W has locations worldwide and employs approximately 11,000 people, in addition to joint venture employees throughout the world. A company overview presentation, which will be presented at investor conferences and meetings throughout this quarter, is available on the Investor Relations section of our website. For additional information please visit our website at www.babcock.com.
|
EXHIBIT 1 |
||||||||||||||||||||||
| THE BABCOCK & WILCOX COMPANY | ||||||||||||||||||||||
| RECONCILIATION OF NON-GAAP OPERATING INCOME AND EARNINGS PER SHARE* | ||||||||||||||||||||||
| Three Months Ended September 30, 2014 | ||||||||||||||||||||||
| GAAP |
Gain on |
Pension & |
MEGTEC |
mPower |
GCI Impact | Non-GAAP | ||||||||||||||||
| Operating Income | $ | 65.2 |
$ |
- |
$ | 11.1 | $ | 0.6 | $ | 0.3 | $ | 8.4 | $ | 85.6 | ||||||||
| Other Income / (Expense) | 15.9 | (18.6) | - | - | - | - | (2.7) | |||||||||||||||
| Provision for Income Taxes | (20.7) | - | (2.9) | (0.2) | (0.1) | (2.7) | (26.6) | |||||||||||||||
| Net Income | 60.4 | (18.6) | 8.2 | 0.4 | 0.2 | 5.7 | 56.3 | |||||||||||||||
| Net Loss (Income) Attributable to Non-Controlling Interest | 0.8 | - | - | - | - | - | 0.8 | |||||||||||||||
| Net Income Attributable to The Babcock & Wilcox Company | $ | 61.2 |
$ |
(18.6) |
$ | 8.2 | $ | 0.4 | $ | 0.2 | $ | 5.7 | $ | 57.1 | ||||||||
| Diluted Earnings per Common Share | $ | 0.57 |
$ |
(0.17) |
$ | 0.08 | $ | 0.00 | $ | 0.00 | $ | 0.05 | $ | 0.53 | ||||||||
| Effective Tax Rate | 25.5% | 32.1% | ||||||||||||||||||||
| Three Months Ended September 30, 2013 | ||||||||||||||||||||||
| GAAP |
Gain on |
Pension & |
MEGTEC |
mPower |
GCI Impact | Non-GAAP | ||||||||||||||||
| Operating Income | $ | 82.1 |
$ |
- |
$ | - | $ | - | $ | - | $ | 4.8 | $ | 86.9 | ||||||||
| Other Income / (Expense) | (0.7) | - | - | - | - | - | (0.7) | |||||||||||||||
| Provision for Income Taxes | (24.4) | - | - | - | - | (1.6) | (26.0) | |||||||||||||||
| Net Income | 57.0 | - | - | - | - | 3.2 | 60.2 | |||||||||||||||
| Net Loss (Income) Attributable to Non-Controlling Interest | 3.4 | - | - | - | - | - | 3.4 | |||||||||||||||
| Net Income Attributable to The Babcock & Wilcox Company | $ | 60.4 |
$ |
- |
$ | - | $ | - | $ | - | $ | 3.2 | $ | 63.6 | ||||||||
| Diluted Earnings per Common Share | $ | 0.54 |
$ |
- |
$ | - | $ | - | $ | - | $ | 0.03 | $ | 0.57 | ||||||||
| Effective Tax Rate | 30.0% | 30.2% | ||||||||||||||||||||
| Nine Months Ended September 30, 2014 | ||||||||||||||||||||||
| GAAP |
Gain on |
Pension & |
MEGTEC |
mPower |
GCI Impact | Non-GAAP | ||||||||||||||||
| Operating Income | $ | 153.9 |
$ |
- |
$ | 11.1 | $ | 2.1 | $ | 22.4 | $ | 20.6 | $ | 210.1 | ||||||||
| Other Income / (Expense) | 16.6 | (18.6) | - | - | - | - | (2.0) | |||||||||||||||
| Provision for Income Taxes | (45.5) | - | (2.9) | (0.7) | (7.6) | (7.0) | (63.7) | |||||||||||||||
| Net Income | 125.0 | (18.6) | 8.2 | 1.4 | 14.8 | 13.6 | 144.4 | |||||||||||||||
| Net Loss (Income) Attributable to Non-Controlling Interest | 7.6 | - | - | - | - | - | 7.6 | |||||||||||||||
| Net Income Attributable to The Babcock & Wilcox Company | $ | 132.7 |
$ |
(18.6) |
$ | 8.2 | $ | 1.4 | $ | 14.8 | $ | 13.6 | $ | 152.1 | ||||||||
| Diluted Earnings per Common Share | $ | 1.21 |
$ |
(0.17) |
$ | 0.08 | $ | 0.01 | $ | 0.14 | $ | 0.12 | $ | 1.39 | ||||||||
| Effective Tax Rate | 26.7% | 30.6% | ||||||||||||||||||||
|
Nine Months Ended September 30, 2013 |
||||||||||||||||||||||
|
GAAP |
Gain on |
Pension & |
MEGTEC |
mPower |
GCI Impact | Non-GAAP | ||||||||||||||||
| Operating Income | $ | 241.0 |
$ |
- |
$ | - | $ | - | $ | - | $ | 25.5 | $ | 266.5 | ||||||||
| Other Income / (Expense) | 0.8 | - | - | - | - | - | 0.8 | |||||||||||||||
| Provision for Income Taxes | (70.2) | - | - | - | - | (8.7) | (78.9) | |||||||||||||||
| Net Income | 171.6 | - | - | - | - | 16.8 | 188.4 | |||||||||||||||
| Net Loss (Income) Attributable to Non-Controlling Interest | 8.9 | - | - | - | - | - | 8.9 | |||||||||||||||
| Net Income Attributable to The Babcock & Wilcox Company | $ | 180.5 |
$ |
- |
$ | - | $ | - | $ | - | $ | 16.8 | $ | 197.3 | ||||||||
| Diluted Earnings per Common Share | $ | 1.60 |
$ |
$ - | $ | - | $ | - | $ | - | $ | 0.15 | $ | 1.75 | ||||||||
|
Effective Tax Rate |
29.0% | 29.5% | ||||||||||||||||||||
* 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 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.
|
EXHIBIT 2 |
||||||
| THE BABCOCK & WILCOX COMPANY | ||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
| ASSETS | ||||||
|
|
||||||
| September 30, | December 31, | |||||
| 2014 | 2013 | |||||
| (Unaudited) | ||||||
| (In thousands) | ||||||
| Current Assets: | ||||||
| Cash and cash equivalents | $ | 196,921 | $ | 346,116 | ||
| Restricted cash and cash equivalents | 43,200 | 45,945 | ||||
| Investments | 19,046 | 10,748 | ||||
| Accounts receivable – trade, net | 424,875 | 360,323 | ||||
| Accounts receivable – other | 66,052 | 45,480 | ||||
| Contracts in progress | 350,165 | 370,820 | ||||
| Inventories | 116,533 | 113,058 | ||||
| Deferred income taxes | 97,770 | 97,170 | ||||
| Other current assets | 57,297 | 47,764 | ||||
| Total Current Assets | 1,371,859 | 1,437,424 | ||||
| Property, Plant and Equipment | 1,179,435 | 1,126,683 | ||||
| Less accumulated depreciation | 716,309 | 679,604 | ||||
| Net Property, Plant and Equipment | 463,126 | 447,079 | ||||
| Investments | 4,483 | 4,426 | ||||
| Goodwill | 395,301 | 281,708 | ||||
| Deferred Income Taxes | 117,159 | 127,076 | ||||
| Investments in Unconsolidated Affiliates | 141,914 | 184,831 | ||||
| Intangible Assets | 114,540 | 81,521 | ||||
| Other Assets | 48,388 | 45,088 | ||||
| TOTAL | $ | 2,656,770 | $ | 2,609,153 | ||
| THE BABCOCK & WILCOX COMPANY | ||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
| September 30, | December 31, | |||||
| 2014 | 2013 | |||||
| (Unaudited) | ||||||
| (In thousands, except share and per share amounts) | ||||||
| Current Liabilities: | ||||||
| Notes payable and current maturities of long-term debt | $ | 8,890 | $ | 4,671 | ||
| Accounts payable | 212,069 | 319,774 | ||||
| Accrued employee benefits | 100,690 | 163,833 | ||||
| Accrued liabilities – other | 87,707 | 58,192 | ||||
| Advance billings on contracts | 232,008 | 317,771 | ||||
| Accrued warranty expense | 59,574 | 56,436 | ||||
| Income taxes payable | 10,182 | 6,551 | ||||
| Total Current Liabilities | 711,120 | 927,228 | ||||
| Long-Term Debt | 298,776 | 225 | ||||
| Accumulated Postretirement Benefit Obligation | 46,049 | 43,194 | ||||
| Environmental Liabilities | 55,951 | 53,391 | ||||
| Pension Liability | 346,198 | 336,878 | ||||
| Other Liabilities | 58,709 | 65,296 | ||||
| Stockholders’ Equity: | ||||||
|
Common stock, par value $0.01 per share, authorized 325,000,000 shares; issued 121,417,899 and 120,536,910 shares at September 30, 2014 and December 31, 2013, respectively |
1,214 | 1,205 | ||||
|
Preferred stock, par value $0.01 per share, authorized 75,000,000 shares; No shares issued |
- |
- | ||||
| Capital in excess of par value | 772,842 | 747,189 | ||||
| Retained earnings | 756,572 | 656,916 | ||||
| Treasury stock at cost, 14,910,058 and 10,068,731 shares at September 30, 2014 and December 31, 2013, respectively | (423,821) |
|
(268,971) | |||
| Accumulated other comprehensive income | 17,242 | 28,348 | ||||
| Stockholders’ Equity – The Babcock & Wilcox Company | 1,124,049 | 1,164,687 | ||||
| Noncontrolling interest | 15,918 | 18,254 | ||||
| Total Stockholders’ Equity | 1,139,967 | 1,182,941 | ||||
| TOTAL | $ | 2,656,770 | $ | 2,609,153 | ||
| THE BABCOCK & WILCOX COMPANY | ||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||
| September 30, | September 30, | |||||||||||
|
2014 |
2013 |
2014 |
2013 |
|||||||||
| (Unaudited) | ||||||||||||
| (In thousands, except share and per share amounts) | ||||||||||||
| Revenues | $ | 737,902 | $ | 774,834 |
$ |
2,085,925 |
$ | 2,466,393 | ||||
| Costs and Expenses: | ||||||||||||
| Cost of operations | 554,614 | 578,394 | 1,569,229 | 1,884,134 | ||||||||
| Research and development costs | 8,379 | 23,787 | 63,293 | 52,970 | ||||||||
| Losses (gains) on asset disposals and impairments, net | (605) | 1,258 | 852 | 1,345 | ||||||||
| Selling, general and administrative expenses | 108,987 | 102,576 | 305,590 | 313,113 | ||||||||
| Special charges for restructuring activities | 8,675 | 4,849 | 28,803 | 25,504 | ||||||||
| Total Costs and Expenses | 680,050 | 710,864 | 1,967,767 | 2,277,066 | ||||||||
| Equity in Income of Investees | 7,308 | 18,151 | 35,760 | 51,713 | ||||||||
| Operating Income | 65,160 | 82,121 | 153,918 | 241,040 | ||||||||
| Other Income (Expense): | ||||||||||||
| Interest income | 267 | 480 | 876 | 1,135 | ||||||||
| Interest expense | (2,978) | (631) | (4,798) | (2,238) | ||||||||
| Other – net | 18,625 | (533) | 20,527 | 1,878 | ||||||||
| Total Other Income (Expense) | 15,914 | (684) | 16,605 | 775 | ||||||||
| Income before Provision for Income Taxes | 81,074 | 81,437 | 170,523 | 241,815 | ||||||||
| Provision for Income Taxes | 20,671 | 24,416 | 45,474 | 70,217 | ||||||||
| Net Income | 60,403 | 57,021 | 125,049 | 171,598 | ||||||||
| Net Loss Attributable to Noncontrolling Interest | 811 | 3,425 | 7,646 | 8,892 | ||||||||
| Net Income Attributable to The Babcock & Wilcox Company | $ | 61,214 | $ | 60,446 |
$ |
132,695 |
$ | 180,490 | ||||
| Earnings per Common Share: | ||||||||||||
| Basic: | ||||||||||||
|
Net Income Attributable to The Babcock & Wilcox
Company |
$ |
0.57 |
$ | 0.54 |
$ |
1.22 |
$ |
1.61 |
||||
| Diluted: | ||||||||||||
|
Net Income Attributable to The Babcock & Wilcox
Company |
$ |
0.57 |
$ | 0.54 |
$ |
1.21 |
$ |
1.60 |
||||
|
Shares used in the computation of earnings per share
(Note 10): |
||||||||||||
| Basic | 107,105,986 | 110,931,376 | 109,103,879 | 112,309,170 | ||||||||
| Diluted | 107,444,284 | 111,749,381 | 109,482,318 | 113,049,700 | ||||||||
| THE BABCOCK & WILCOX COMPANY | ||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
| Nine Months Ended | ||||||
| September 30, | ||||||
| 2014 | 2013 | |||||
| (Unaudited) | ||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | (In thousands) | |||||
| Net Income | $ | 125,049 | $ | 171,598 | ||
| Non-cash items included in net income: | ||||||
| Depreciation and amortization | 57,400 | 51,341 | ||||
| Income of investees, net of dividends | 16,920 | (18,419) | ||||
| Losses on asset disposals and impairments | 3,870 | 1,345 | ||||
| Gain on exchange of USEC investment | (18,647) | - | ||||
| In-kind research and development costs | 5,830 | 11,289 | ||||
| Recognition of losses for pension and postretirement plans | 12,952 | 2,265 | ||||
| Stock-based compensation expense | 11,786 | 13,072 | ||||
| Excess tax benefits from stock-based compensation | (568) | (64) | ||||
| Changes in assets and liabilities, net of effects of acquisitions: | ||||||
| Accounts receivable | (62,220) | (44,663) | ||||
| Accounts payable | (115,271) | 5,305 | ||||
| Contracts in progress and advance billings on contracts | (74,214) | (140,862) | ||||
| Inventories | 138 | 10,559 | ||||
| Income taxes | (11,804) | (1,284) | ||||
| Accrued and other current liabilities | 13,206 | (3,588) | ||||
| Pension liability, accrued postretirement benefit obligation and employee benefits | (66,679) | (69,842) | ||||
| Other, net | 17,057 | 5,921 | ||||
| NET CASH USED IN OPERATING ACTIVITIES | (85,195) | (6,027) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
| Decrease in restricted cash and cash equivalents | 2,745 | 14,669 | ||||
| Purchases of property, plant and equipment | (55,877) | (45,288) | ||||
| Acquisition of business, net of cash acquired | (127,705) | - | ||||
| Purchase of intangible assets | (722) | (2,200) | ||||
| Purchases of available-for-sale securities | (21,225) | (79,747) | ||||
| Sales and maturities of available-for-sale securities | 31,663 | 122,677 | ||||
| Investment in equity and cost method investees | (4,900) | (2,807) | ||||
| Proceeds from asset disposals | 846 | 586 | ||||
| NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES | (175,175) | 7,890 | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
| Payment of short-term borrowing and long-term debt | (4,424) | (157) | ||||
| Borrowings under short-term arrangements | 2,855 | 649 | ||||
| Borrowings under Credit Agreement | 809,300 | - | ||||
| Repayments under Credit Agreement | (504,900) | - | ||||
| Payment of debt issuance costs | (5,390) | - | ||||
| Repurchase of common shares | (149,774) | (140,143) | ||||
| Dividends paid to common shareholders | (32,799) | (27,082) | ||||
| Excess tax benefits from stock-based compensation | 568 | 64 | ||||
| Exercise of stock options | 3,854 | 3,756 | ||||
| Other | (202) | (414) | ||||
| NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | 119,088 | (163,327) | ||||
| EFFECTS OF EXCHANGE RATE CHANGES ON CASH | (7,913) | (2,255) | ||||
| NET DECREASE IN CASH AND CASH EQUIVALENTS | (149,195) | (163,719) | ||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 346,116 | 383,547 | ||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 196,921 | $ | 219,828 | ||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||
| Cash paid during the period for: | ||||||
| Interest (net of amount capitalized) | $ | 3,573 | $ | 1,341 | ||
| Income taxes (net of refunds) | $ | 52,845 | $ | 70,602 | ||
| SCHEDULE OF NON-CASH INVESTING ACTIVITY: | ||||||
| Accrued capital expenditures included in accounts payable | $ | 3,201 | $ | 6,040 | ||
| THE BABCOCK & WILCOX COMPANY | ||||||||||||
| BUSINESS SEGMENT INFORMATION | ||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||
| September 30, | September 30, | |||||||||||
|
2014 |
2013 |
2014 |
2013 |
|||||||||
|
(Unaudited) |
||||||||||||
|
(In thousands) |
||||||||||||
|
REVENUES: |
||||||||||||
| Power Generation | $ | 402,016 | $ | 426,960 | $ | 1,041,473 | $ | 1,359,614 | ||||
| Nuclear Operations | 297,489 | 282,120 | 877,141 | 874,245 | ||||||||
| Technical Services | 20,236 | 25,242 | 70,706 | 77,903 | ||||||||
| Nuclear Energy | 21,529 | 52,470 | 114,236 | 179,171 | ||||||||
| mPower | - | 343 | 278 | 980 | ||||||||
| Adjustments and Eliminations | (3,368) | (12,301) | (17,909) | (25,520) | ||||||||
| TOTAL | $ | 737,902 | $ | 774,834 | $ | 2,085,925 | $ | 2,466,393 | ||||
|
SEGMENT INCOME: |
||||||||||||
| Power Generation | $ | 35,260 | $ | 38,348 | $ | 61,017 | $ | 102,213 | ||||
| Nuclear Operations | 61,893 | 63,819 | 180,103 | 184,280 | ||||||||
| Technical Services | 4,951 | 18,398 | 34,818 | 47,812 | ||||||||
| Nuclear Energy | (6,698) | 21 | (4,627) | 10,201 | ||||||||
| mPower | (5,140) | (25,576) | (63,782) | (53,627) | ||||||||
| SUBTOTAL | 90,266 | 95,010 | 207,529 | 290,879 | ||||||||
| Corporate | (5,352) | (8,040) | (13,729) | (24,335) | ||||||||
| Special Charges for Restructuring Activities | (8,675) | (4,849) | (28,803) | (25,504) | ||||||||
| Mark to Market Adjustment | (11,079) | - | (11,079) | - | ||||||||
| TOTAL | $ | 65,160 | $ | 82,121 | $ | 153,918 | $ | 241,040 | ||||
|
EQUITY IN INCOME (LOSS) OF INVESTEES: |
||||||||||||
| Power Generation | $ | 2,859 | $ | 3,287 | $ | 5,659 | $ | 10,596 | ||||
| Nuclear Operations | - | - | - | - | ||||||||
| Technical Services | 4,419 | 15,063 | 30,069 | 41,595 | ||||||||
| Nuclear Energy | 30 | (199) | 32 | (478) | ||||||||
| mPower | - | - | - | - | ||||||||
| TOTAL | $ | 7,308 | $ | 18,151 | $ | 35,760 | $ | 51,713 | ||||
|
PENSION EXPENSE: |
||||||||||||
| Power Generation | $ | 191 | $ | 750 | $ | 1,382 | $ | 2,240 | ||||
| Nuclear Operations | 872 | 1,133 | 2,616 | 3,399 | ||||||||
| Technical Services | 48 | 72 | 144 | 216 | ||||||||
| Nuclear Energy | 1,013 | 899 | 3,495 | 3,038 | ||||||||
| mPower | - | - | - | - | ||||||||
| Corporate | 484 | 505 | 1,459 | 1,515 | ||||||||
| Mark to Market Adjustment | 11,079 | 0 | 11,079 | - | ||||||||
| TOTAL | $ | 13,687 | $ | 3,359 | $ | 20,175 | $ | 10,408 | ||||
|
DEPRECIATION AND AMORTIZATION: |
||||||||||||
| Power Generation | $ | 9,886 | $ | 5,720 | $ | 21,193 | $ | 16,519 | ||||
| Nuclear Operations | 7,380 | 6,769 | 21,037 | 20,182 | ||||||||
| Technical Services | - | 48 | 1 | 144 | ||||||||
| Nuclear Energy | 1,614 | 1,648 | 4,968 | 4,832 | ||||||||
| mPower | 263 | 122 | 712 | 365 | ||||||||
| Corporate | 3,204 | 3,178 | 9,489 | 9,299 | ||||||||
| TOTAL | $ | 22,347 | $ | 17,485 | $ | 57,400 | $ | 51,341 | ||||
|
RESEARCH AND DEVELOPMENT, NET: |
||||||||||||
| Power Generation | $ | 4,502 | $ | 4,585 | $ | 12,795 | $ | 16,128 | ||||
| Nuclear Operations | - | 54 | 5 | 67 | ||||||||
| Technical Services | 6 | 17 | 24 | 56 | ||||||||
| Nuclear Energy | 602 | 879 | 1,512 | 3,079 | ||||||||
| mPower | 3,269 | 18,252 | 48,957 | 33,640 | ||||||||
| TOTAL | $ | 8,379 | $ | 23,787 | $ | 63,293 | $ | 52,970 | ||||
|
CAPITAL EXPENDITURES: |
||||||||||||
| Power Generation | $ | 4,788 | $ | 1,553 | $ | 10,886 | $ | 13,403 | ||||
| Nuclear Operations | 7,101 | 8,187 | 24,210 | 21,599 | ||||||||
| Technical Services | - | 66 | - | 66 | ||||||||
| Nuclear Energy | 4,852 | 1,163 | 13,089 | 4,141 | ||||||||
| mPower | 99 | 331 | 1,983 | 1,745 | ||||||||
| Corporate | 1,215 | 555 | 5,709 | 4,334 | ||||||||
| TOTAL | $ | 18,055 | $ | 11,855 | $ | 55,877 | $ | 45,288 | ||||
|
BACKLOG: |
||||||||||||
| Power Generation | $ | 2,132,985 | $ | 2,176,110 | $ | 2,132,985 | $ | 2,176,110 | ||||
| Nuclear Operations | 2,376,438 | 2,530,159 | 2,376,438 | 2,530,159 | ||||||||
| Technical Services | 4,475 | 15,388 | 4,475 | 15,388 | ||||||||
| Nuclear Energy | 273,415 | 185,632 | 273,415 | 185,632 | ||||||||
| mPower | - | 2,221 | - | 2,221 | ||||||||
| TOTAL | $ | 4,787,313 | $ | 4,909,510 | $ | 4,787,313 | $ | 4,909,510 | ||||
|
BOOKINGS: |
||||||||||||
| Power Generation | $ | 320,079 | $ | 270,214 | $ | 1,011,358 | $ | 1,041,851 | ||||
| Nuclear Operations | 93,426 | (20,476) | 877,434 | 416,238 | ||||||||
| Technical Services | 12,523 | 33,055 | 70,155 | 86,120 | ||||||||
| Nuclear Energy | 100,837 | 34,711 | 238,863 | 82,839 | ||||||||
| mPower | - | - | - | - | ||||||||
| TOTAL | $ | 526,865 | $ | 317,504 | $ | 2,197,810 | $ | 1,627,048 | ||||
CONTACT:
The Babcock & Wilcox Company
Investor Contact:
Jenny
L. Apker, Vice President, Treasurer and Investor Relations, 704-625-4944
investors@babcock.com
or
Media
Contact:
Aimee Mills, Media Relations Lead, 980-365-4583
aemills@babcock.com
Exhibit 99.2
B&W Announces Intention to Spin-off Its Power Generation Business
- Standalone Power Generation and Government & Nuclear Operations Businesses will have Greater Financial Flexibility and Strategic Autonomy to Enhance Shareholder Value
- Details to Be Discussed During Company’s Third Quarter Financial Results Conference Call on November 6, 2014 at 8:30 a.m. EST
CHARLOTTE, N.C.--(BUSINESS WIRE)--November 5, 2014--Consistent with The Babcock & Wilcox Company’s (NYSE: BWC) (“B&W” or the “Company”) strategy and focus on enhancing value for its shareholders, B&W’s Board of Directors has unanimously approved a plan for the tax-free spin-off of the Company’s Power Generation business to B&W’s shareholders.
“Since becoming an independent company in 2010, the B&W Board and management team have pursued and successfully capitalized on a number of opportunities to improve performance and increase value for our shareholders. We believe that separating the Power Generation and Government & Nuclear Operations businesses is the next logical step to unlock even greater value for B&W shareholders,” said Mr. E. James Ferland, President and Chief Executive Officer of B&W. “After an extensive and thorough evaluation of a possible separation, the B&W Board concluded that the standalone businesses will benefit from independent management teams, each equipped with the resources, strategic autonomy and financial flexibility to create significant long-term value for their respective shareholders.”
The spin-off of the Power Generation business is expected to create two independent, publicly traded companies with strong balance sheets:
Babcock & Wilcox, which will comprise the Power Generation business, is a leading technology-based provider of advanced fossil and renewable power generation equipment that includes a broad suite of environmental controls, products, and services for power and industrial uses. This business is project-driven with a solid base of recurring aftermarket services revenues. As a standalone company, the Power Generation business, which will continue to operate under the “Babcock & Wilcox” name, will offer an attractive investment opportunity with significant growth potential, particularly in international markets.
BWX Technologies will comprise the Government & Nuclear Operations business and will consist of the Nuclear Operations, Technical Services, Nuclear Energy and mPower businesses. This business is a leading supplier of nuclear components and fuel to the U.S. government, provides technical, management and site services to aid governments in the operation of complex facilities and environmental remediation activities, and supplies precision manufactured components and services for the commercial nuclear power industry. BWX Technologies will also offer an attractive investment opportunity with a stable backlog and consistent performance in earnings and cash flow, with growth opportunities in existing and adjacent markets.
Benefits
The Company believes that the spin-off will result in material benefits to the standalone companies:
Leadership
Upon completion of the spin-off, Mr. E. James Ferland, currently President and Chief Executive Officer of B&W, will become Chairman and Chief Executive Officer of the new Babcock & Wilcox. Mr. John A. Fees, currently Chairman of B&W, will become Executive Chairman of BWX Technologies. Mr. Peyton S. (Sandy) Baker, currently President of the Company’s Government & Nuclear Operations Group, will become President and Chief Executive Officer of BWX Technologies.
Transaction Details
The spin-off of the Power Generation business and the pro rata distribution of shares of the new Babcock & Wilcox to B&W shareholders are expected to be completed by mid-summer 2015. The contemplated spin-off does not require a shareholder vote, but is subject to various conditions, including the effectiveness of the SEC filings, regulatory review by the Nuclear Regulatory Commission, and final approval by the B&W Board of Directors.
Advisors
JPMorgan is acting as financial advisor and Wachtell, Lipton, Rosen & Katz and Jones Day are acting as legal counsel to B&W.
Conference Call
B&W will discuss the planned spin-off during its previously announced conference call to discuss its third quarter 2014 results:
| Date: | Thursday, November 6, 2014, at 8:30 a.m. EST | ||
| Live Webcast: |
Investor Relations section of website at www.babcock.com |
||
About B&W
The Babcock & Wilcox Company is a leader in clean energy technology and services, primarily for the nuclear, fossil and renewable power markets as well as a premier advanced technology and mission critical defense contractor. B&W has locations worldwide and employs approximately 11,000 people, in addition to joint venture employees throughout the world. A company overview presentation, which will be presented at investor conferences and meetings throughout this quarter, is available on the Investor Relations section of our website. For additional information please visit our website at www.babcock.com.
Forward-Looking Statements
B&W cautions that this release and comments made on our third quarter 2014 earnings call contain forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements relating to the manner, timing, tax-free nature and expected benefits associated with separating B&W’s power generation business and its government and nuclear operations business into two independent, publicly traded companies, as well as the anticipated management teams of the separated companies, 2015 revenue projections for the separated entities, and their ability to create value for their respective shareholders. These forward-looking statements are based on management’s current expectations and involve a number of risks and uncertainties, including, among other things, the proposed separation may not be completed as anticipated or at all, delays or other difficulties in completing the separation, including the inability to satisfy the conditions for completing the spin-off, disruptions experienced with customers and suppliers, the inability of either business to successfully operate independently and the inability to retain key personnel. 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 Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2013 and subsequent quarterly reports on Form 10-Q. B&W cautions not to place undue reliance on these forward-looking statements, which speak only as of the date of this release, and undertakes no obligation to update or revise any forward-looking statement, except to the extent required by applicable law.
CONTACT:
The Babcock & Wilcox Company
Investor Contact:
Jenny
L. Apker, 704-625-4944
Vice President, Treasurer and Investor
Relations
investors@babcock.com
or
Media Contact:
Aimee
Mills, 980-365-4583
Media Relations Lead
aemills@babcock.com