Foster Wheeler Reports Results for Third Quarter of 2011

Wednesday, Nov 02, 2011

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.

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.” 

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. 

Source: Foster Wheeler