Foster Wheeler Reports Results for Fourth Quarter of 2011; Provides Guidance for Material Increase in Earnings Per Share In 2012

22/02/2012


ZUG, Switzerland--(BUSINESS WIRE)--Feb. 23, 2012-- Foster Wheeler AG (Nasdaq: FWLT) today reported net income for the fourth quarter of 2011 of $39.2 million, or $0.34 per diluted share, compared with $32.8 million, or $0.26 per diluted share, in the fourth 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 fourth quarter of 2011 was $44.8 million, or $0.39 per diluted share, compared with $38.3 million, or $0.31 per diluted share, in the year-ago quarter.

For the full-year 2011, net income was $162.4 million, or $1.35 per diluted share, compared with $215.4 million, or $1.70 per diluted share, for the full-year 2010. The full-year net income for 2011 and 2010 included asbestos-related provisions as detailed in the attached table.

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)     Q4 2011       Qtrly Avg. 2011       Q4 2010       Qtrly Avg. 2010
Net income     $39.2       $40.6       $32.8       $53.9
Net income, as adjusted     $44.8       $43.1       $38.3       $55.2
Consolidated revenues (FW Scope)     $734.4       $655.8       $653.3       $599.1

Foster Wheeler’s Chief Executive Officer, Kent Masters, said, -Net income for the fourth quarter of 2011 was down relative to the average quarter of 2010, due primarily to lower EBITDA in the company’s Global Engineering and Construction Group.”

Global Engineering and Construction (E&C) Group

                                           
(in millions)     Q4 2011         Qtrly Avg. 2011         Q4 2010         Qtrly Avg. 2010  
New orders booked (FW Scope)     $375.8         $361.8         $561.5         $484.8  
Operating revenues (FW Scope)     $453.1         $398.8         $418.8         $421.4  
Segment EBITDA     $55.4         $52.6         $41.5         $74.1  
EBITDA Margin (FW Scope)     12.2%         13.2%         9.9%         17.6%  
  • EBITDA in the fourth quarter of 2011 was below the average quarter of 2010 due to lower realized margins on work executed and the impact of an unfavorable utilization rate.
  • Scope operating revenues in the fourth quarter of 2011 were above the average quarter of 2010 due largely to the mix of contracts executed.
  • New orders booked in Foster Wheeler scope in the fourth quarter of 2011 were below the level of the average quarter of 2010, composed of a mix of small and medium awards.

Global Power Group (GPG)

                                   
(in millions)     Q4 2011       Qtrly Avg. 2011       Q4 2010       Qtrly Avg. 2010
New orders booked (FW Scope)     $460.3       $313.0       $419.8       $298.2
Operating revenues (FW Scope)     $281.3       $257.0       $234.5       $177.7
Segment EBITDA     $55.0       $46.1       $67.1       $35.5*
EBITDA Margin (FW Scope)     19.5%       17.9%       28.6%       20.0%*

*excluding gain from third-party debt payment of $21.9 million; including this payment, EBITDA and EBITDA margin (FW Scope) were $41.0 million and 23.0%, respectively.

  • EBITDA in the fourth quarter of 2011 was well above the average quarter of 2010 due to a higher volume of work, the favorable impact of license fees and increased equity earnings from a partially owned power plant.
  • Scope operating revenues in the fourth quarter of 2011 were above the average quarter of 2010 due largely to the volume impact mentioned above.
  • Scope new orders in the fourth quarter of 2011 were above the average quarter of 2010 due in part to the booking of a large order for the company’s circulating fluidized bed (CFB) technology.

In commenting on the outlook for each group, Masters said, -We expect both our Global E&C Group and our Global Power Group to generate increased scope revenues in 2012 as compared to 2011. We expect E&C to generate a full-year EBITDA margin on scope revenues within a range of 12% to 14%. We expect GPG to generate a full-year EBITDA margin on scope revenues within a range of 16% to 18%.”

Masters said, -Comparing 2012 to 2011, we expect that higher volume combined with the positive impact of a reduced share count will result in a material increase in the company’s earnings per share in 2012.”

Share Repurchase Program

The company repurchased 8,998,475 shares during the fourth quarter of 2011 for approximately $169 million, and an additional 564,100 shares for approximately $10.9 million in January 2012. Yesterday, the company’s board of directors approved an increase in the authorized share repurchase program that raises the total availability to $500 million. Foster Wheeler intends to seek shareholder approval of the increase in the authorization at its next annual general meeting of shareholders in May 2012, although the company has flexibility to utilize a portion of the newly authorized amount prior to receiving shareholder approval.

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, Thursday, February 23, at 4:30 p.m. Central European Time (10:30 a.m. Eastern Daylight Time in the U.S.) to discuss its financial results for the fourth quarter ended December 31, 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 (http://www.fwc.com).

To listen to the call by telephone, dial 973-935-8752 (conference I.D. No. 44557511) approximately ten minutes before the call. The conference call will also be available over the Internet at http://www.fwc.com or through StreetEvents at http://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 http://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 condition;, changes in investment by the oil and gas, oil refining, chemical/petrochemical and power generation industries; changes in the financial condition of our 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 our 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 debt covenants; recoverability of claims against customers and others by the Company and claims by third parties against the Company; and changes in estimates used in our 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 or furnished 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 December 31, Twelve Months Ended December 31,
2011 2010 2011 2010
 
 
Operating revenues $ 1,128,743 $ 1,211,941 $ 4,480,729 $ 4,067,719
Cost of operating revenues   976,219     1,073,017     3,939,274     3,468,933  
Contract profit 152,524 138,924 541,455 598,786
 
Selling, general and administrative expenses 80,666 89,888 309,996 303,330
Other income, net (9,293 ) (24,496 ) (51,607 ) (60,444 )
Other deductions, net 22,192 14,090 43,969 41,221
Interest income (5,657 ) (3,657 ) (18,922 ) (11,581 )
Interest expense 2,491 2,685 12,876 15,610
Net asbestos-related provision   5,514     5,478     9,901     5,410  
Income before income taxes 56,611 54,936 235,242 305,240
Provision for income taxes   15,685     18,819     58,514     74,531  
Net income 40,926 36,117 176,728 230,709
Less: Net income attributable to noncontrolling interests   1,681     3,348     14,345     15,302  
Net income attributable to Foster Wheeler AG $ 39,245   $ 32,769   $ 162,383   $ 215,407  
 
 
Shares Outstanding:

Weighted-average number of shares
  outstanding for basic earnings per share

114,843,970 123,721,667 120,085,704 126,032,130
 

Weighted-average number of shares
  outstanding for diluted earnings per share

114,940,513 124,399,275 120,504,483 126,576,855
 
 
Earnings per share:
Basic $ 0.34   $ 0.26   $ 1.35   $ 1.71  
Diluted $ 0.34   $ 0.26   $ 1.35   $ 1.70  
 

Foster Wheeler AG and Subsidiaries

   

Consolidated Balance Sheet

(in thousands of dollars)

(unaudited)

      December 31,       December 31,
2011 2010
ASSETS
Current Assets:
Cash and cash equivalents $ 718,049 $ 1,057,163
Short-term investments 1,294 -
Accounts and notes receivable, net:
Trade 428,433 577,400
Other 97,495 96,758
Contracts in process 166,648 165,389
Prepaid, deferred and refundable income taxes 62,616 59,977
Other current assets   49,181     37,813  
Total current assets   1,523,716     1,994,500  
Land, buildings and equipment, net 341,987 362,087
Restricted cash 44,094 27,502
Notes and accounts receivable – long-term 6,210 2,648
Investments in and advances to unconsolidated affiliates 211,109 217,071
Goodwill 104,654 88,917
Other intangible assets, net 74,386 66,070
Asbestos-related insurance recovery receivable 157,127 194,570
Other assets 118,178 84,078
Deferred tax assets   25,482     23,034  
TOTAL ASSETS $ 2,606,943   $ 3,060,477  
 
LIABILITIES, TEMPORARY EQUITY AND EQUITY
Current Liabilities:
Current installments on long-term debt $ 12,683 $ 11,996
Accounts payable 250,171 239,071
Accrued expenses 237,089 240,894
Billings in excess of costs and estimated earnings on uncompleted contracts 547,732 684,090
Income taxes payable   39,645     34,623  
Total current liabilities   1,087,320     1,210,674  
 
Long-term debt 136,428 152,574
Deferred tax liabilities 41,349 42,179
Pension, postretirement and other employee benefits 171,065 166,362
Asbestos-related liability 269,520 307,619
Other long-term liabilities 160,596 160,785
Commitments and contingencies    
TOTAL LIABILITIES   1,866,278     2,040,193  
 
Temporary Equity:
Non-vested share-based compensation awards subject to redemption   4,993     4,935  
TOTAL TEMPORARY EQUITY   4,993     4,935  
 
Equity:
Registered shares 321,181 334,052
Paid-in capital 606,053 659,739
Retained earnings 699,971 537,588
Accumulated other comprehensive loss (530,068 ) (464,504 )
Treasury shares   (409,390 )   (99,182 )
TOTAL FOSTER WHEELER AG SHAREHOLDERS’ EQUITY   687,747     967,693  
Noncontrolling interests   47,925     47,656  
TOTAL EQUITY   735,672     1,015,349  
TOTAL LIABILITIES, TEMPORARY EQUITY AND EQUITY $ 2,606,943   $ 3,060,477  
 

Foster Wheeler AG and Subsidiaries

Business Segments

(in thousands of dollars)

(unaudited)

                         
Quarter Ended December 31, Twelve Months Ended December 31,
2011 2010 2011 2010

Global Engineering & Construction Group

Backlog - in future revenues $ 2,420,200 $ 2,937,700 $ 2,420,200 $ 2,937,700
New orders booked - in future revenues 1,052,100 896,600 3,024,900 2,902,100
Operating revenues 845,193 974,656 3,443,079 3,346,050
EBITDA 55,416 41,508 210,541 296,240
 
Foster Wheeler Scope (1):
Backlog - in Foster Wheeler Scope 1,365,900 1,611,300 1,365,900 1,611,300
New orders booked - in Foster Wheeler Scope 375,800 561,500 1,447,200 1,939,100
Operating revenues - in Foster Wheeler Scope 453,052 418,839 1,594,992 1,685,778
 

Global Power Group

Backlog - in future revenues 1,205,900 1,041,800 1,205,900 1,041,800
New orders booked - in future revenues 462,200 422,600 1,260,900 1,203,700
Operating revenues 283,550 237,285 1,037,650 721,669
EBITDA 54,956 67,116 184,467 163,825
 
Foster Wheeler Scope (1):
Backlog - in Foster Wheeler Scope 1,196,400 1,031,900 1,196,400 1,031,900
New orders booked - in Foster Wheeler Scope 460,300 419,800 1,251,800 1,192,900
Operating revenues - in Foster Wheeler Scope 281,301 234,452 1,028,176 710,827
 

Corporate & Finance Group (2)

EBITDA (40,893 ) (37,590 ) (111,779 ) (100,362 )
 

Consolidated

Backlog - in future revenues 3,626,100 3,979,500 3,626,100 3,979,500
New orders booked - in future revenues 1,514,300 1,319,200 4,285,800 4,105,800
Operating revenues 1,128,743 1,211,941 4,480,729 4,067,719
EBITDA 69,479 71,034 283,229 359,703
 
Foster Wheeler Scope (1):
Backlog - in Foster Wheeler Scope 2,562,300 2,643,200 2,562,300 2,643,200
New orders booked - in Foster Wheeler Scope 836,100 981,300 2,699,000 3,132,000
Operating revenues - in Foster Wheeler Scope 734,353 653,291 2,623,168 2,396,605
 
(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 December 31, Twelve Months Ended December 31,
2011 2010 2011 2010

Reconciliation of EBITDA to Net Income (1)

EBITDA:

Global Engineering & Construction Group $ 55,416 $ 41,508 $ 210,541 $ 296,240
Global Power Group 54,956 67,116 184,467 163,825
Corporate & Finance Group   (40,893 )   (37,590 )   (111,779 )   (100,362 )
Consolidated EBITDA 69,479 71,034 283,229 359,703
Less: Interest expense 2,491 2,685 12,876 15,610
Less: Depreciation/amortization (2) 12,058 16,761 49,456 54,155
Less: Provision for income taxes   15,685     18,819     58,514     74,531  
Net income (1) $ 39,245   $ 32,769   $ 162,383   $ 215,407  
 

Reconciliation of Foster Wheeler Scope Operating

Revenues to Operating Revenues

 

Global Engineering & Construction Group

Foster Wheeler Scope operating revenues $ 453,052 $ 418,839 $ 1,594,992 $ 1,685,778
Flow-through revenues   392,141     555,817     1,848,087     1,660,272  
Operating revenues   845,193     974,656     3,443,079     3,346,050  
 

Global Power Group

Foster Wheeler Scope operating revenues 281,301 234,452 1,028,176 710,827
Flow-through revenues   2,249     2,833     9,474     10,842  
Operating revenues   283,550     237,285     1,037,650     721,669  
 

Consolidated

Foster Wheeler Scope operating revenues 734,353 653,291 2,623,168 2,396,605
Flow-through revenues   394,390     558,650     1,857,561     1,671,114  
Operating revenues $ 1,128,743   $ 1,211,941   $ 4,480,729   $ 4,067,719  
 
____________________

(1)Net income attributable to Foster Wheeler AG.

(2)The depreciation / amortization by business segment:

Quarter Ended December 31, Twelve Months Ended December 31,
2011 2010 2011 2010
Global Engineering & Construction Group $ 5,861 $ 10,375 $ 24,867 $ 30,523
Global Power Group 5,569 5,414 22,116 21,273
Corporate & Finance Group   628     972     2,473     2,359  
Total depreciation / amortization $ 12,058   $ 16,761   $ 49,456   $ 54,155  
 

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 December 31,
2011 2010
 

Diluted
Earnings

Diluted
Earnings

EBITDA Net Income* Per Share EBITDA Net Income* Per Share
As adjusted $ 74,993 $ 44,759 $ 0.39 $ 76,512 $ 38,247 $ 0.31
 
Adjustments:

Net asbestos-related
  provision

(5,514 ) (5,514 ) (0.05 ) (5,478 ) (5,478 ) (0.05 )
           
As reported $ 69,479   $ 39,245   $ 0.34   $ 71,034   $ 32,769   $ 0.26  
 
 
Twelve Months Ended December 31,
2011 2010
 

Diluted

Earnings

Diluted

Earnings

EBITDA Net Income* Per Share EBITDA Net Income* Per Share
As adjusted $ 293,130 $ 172,284 $ 1.43 $ 365,113 $ 220,817 $ 1.74
 
Adjustments:

Net asbestos-related
  provision

(9,901 ) (9,901 ) (0.08 ) (5,410 ) (5,410 ) (0.04 )
           
As reported $ 283,229   $ 162,383   $ 1.35   $ 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)

2011

Full Year

2011

Quarterly

Average(1)

 

Consolidated

Operating revenues - in Foster Wheeler Scope $ 2,396,605 $ 599,151 $ 2,623,168 $ 655,792
Net income (2) 215,407 53,852 162,383 40,596
Adjusted net income (2) 220,817 55,204 172,284 43,071
Consolidated EBITDA 359,703 89,926 283,229 70,807
Consolidated EBITDA, as adjusted 365,113 91,278 293,130 73,282
 
 

Global Engineering & Construction Group

New orders booked - in Foster Wheeler Scope $ 1,939,100 $ 484,775 $ 1,447,200 $ 361,800
Operating revenues - in Foster Wheeler Scope 1,685,778 421,445 1,594,992 398,748
Segment EBITDA 296,240 74,060 210,541 52,635
EBITDA margin 17.6% 17.6% 13.2% 13.2%
 
 

Global Power Group

New orders booked - in Foster Wheeler Scope $ 1,192,900 $ 298,225 $ 1,251,800 $ 312,950
Operating revenues - in Foster Wheeler Scope 710,827 177,707 1,028,176 257,044
Segment EBITDA (3) 163,825 40,956 184,467 46,117
Third-party debt payment (21,866) (5,466) - -
Segment EBITDA excluding third-party debt payment 141,959 35,490 184,467 46,117
EBITDA margin (3) 23.0% 23.0% 17.9% 17.9%
EBITDA margin excluding third-party debt payment 20.0% 20.0% 17.9% 17.9%
 
____________________
(1) To calculate the quarterly average dollar amounts, the company divided reported annual figures by four.
(2) Net income attributable to Foster Wheeler AG.

(3) 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.

Source: Foster Wheeler AG

Foster Wheeler AG
Media:
Julie Stanisz, 908 730 4047
julie_stanisz@fwc.com
or
Investor Relations:
Scott Lamb, 908-730-4155
scott_lamb@fwc.com
or
Other Inquiries:
908 730 4000
fw@fwc.com

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