Service & Supply | Quarterly / Earnings Reports | Oilfield Services | Third Quarter (3Q) Update
Foster Wheeler Takes Big Income Hit; Down Nearly 50% YOY
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Foster Wheeler AG reported income from continuing operations for the third quarter of 2014 of $25.4 million, or $0.25 per diluted share, compared with $48.9 million, or $0.50 per diluted share, in the third quarter of 2013.
Income from continuing operations in both quarterly periods was impacted by net asbestos-related gains and provisions, as detailed in an attached table. Excluding such items from both quarterly periods, adjusted income from continuing operations in the third quarter of 2014 was $27.4 million, or $0.27 per diluted share, compared with $50.9 million, or $0.52 per diluted share, in the year-ago quarter.
Results for the third quarter of 2014 include the impact of $3.5 million, or $0.04 per share, of third-party transaction costs in connection with the previously announced acquisition of Foster Wheeler by AMEC plc. Excluding the impact of this item and the asbestos provision, income from continuing operations in the third quarter of 2014 was $30.9 million, or $0.31 per diluted share.
For the first nine months of 2014, income from continuing operations was $128.1 million, or $1.27 per diluted share, compared with $134.1 million, or $1.32 per diluted share, for the first nine months of 2013.
The following tables present quarterly and average quarterly data for continuing operations, both as reported and as adjusted to exclude asbestos-related gains and provisions (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, "We experienced a moderate reduction in adjusted income from continuing operations in the third quarter of 2014 compared to the average quarter of 2013, due to increased costs incurred on the AMEC transaction and a higher tax rate. EBITDA from operations in the third quarter of 2014 was comparable to the average quarter of 2013, with higher EBITDA in our Global Engineering and Construction Group (E&C) driven by increased level of activity, offset by lower EBITDA in our Global Power Group (GPG) due to timing of new orders, mix of work executed and reduced margins."
"Both business groups continue to operate very well in a challenging environment. We continue to expect a material increase in scope revenues for E&C in full-year 2014 relative to full-year 2013, with a modest decline in full-year 2014 scope revenues compared to the previous year for GPG due to timing and mix of new orders."
Global Engineering and Construction (E&C) Group
- Lower scope new orders in the third quarter compared to expectations due to delays in prospect awards.
- Scope operating revenues in the third quarter of 2014 continued to remain well above average quarterly 2013 scope revenues due to an increased level of work executed.
- EBITDA in the third quarter of 2014 was materially higher than average quarterly 2013 EBITDA, primarily due to an increased level of activity on stable margins.
Global Power Group (GPG)
- Sequential quarterly increase in scope new orders in the third quarter, with quarterly average new orders in 2014 above average quarterly new orders in the prior year reflecting very strong bookings in the first quarter of 2014.
- Lower scope operating revenues in the third quarter compared to the average quarter of 2013 reflects timing of new orders and weight of engineering in the portfolio mix of projects in execution.
- EBITDA in the third quarter below the average quarter of 2013 due to lower volume of boiler work executed, reduced equity income on a partially-owned power plant and lower margins associated with the mix of projects in execution.
Share Repurchase Program
The company did not purchase any of its shares during the third quarter of 2014.