Foster Wheeler Announces First Quarter Results

Foster Wheeler Ltd. (OTCBB:FWLRF) reported a net loss of $4.3 million for the first quarter of 2004, or $0.10 per diluted share. This compares with a net loss for the same quarter of last year of $19.8 million, or $0.48 per diluted share. Revenues for the first quarter of 2004 totaled $702.3 million compared with $810.9 million in the first quarter of last year. Consolidated earnings before income taxes, interest expense, depreciation and amortization (EBITDA) for the first quarter of 2004 were $42.6 million compared with $19.2 million in the first quarter of 2003.

The quarter's results included a pre-tax, non-cash asbestos gain of $11.7 million, pre-tax charges of $24.6 million for the re-evaluation of the profit estimate on one contract, and pre-tax charges of $9.7 million for professional service expenses and severance benefits driven by the company's balance sheet and operational restructuring process. The quarter's results also included a pre-tax gain of $10.5 million on the sale of certain power project development rights. While the sale of the power project development rights is recorded as a one-time gain, the business in Italy has historically developed and sold such project rights, and is continuing to actively develop other project rights that are expected to be offered for sale in the future. Last year's quarter included a pre-tax gain of $15.3 million on the sale of the assets of the environmental business, pre-tax charges of $16.6 million for professional services and severance benefits, and pre-tax charges of $17.9 million for re-evaluation of contract cost estimates and other provisions. Assuming the successful close of the equity for debt exchange offer, the company anticipates balance sheet and operational restructuring expenses will decline significantly in the second half of the year.

"Overall, I am very pleased with our accomplishments so far this year," said Raymond J. Milchovich, chairman, president and chief executive officer. "We previously announced the structure of our proposed equity for debt exchange and expect that we will begin soliciting security holders within the next two weeks. Completing this recapitalization is essential to provide the balance sheet needed to support our operating companies and to enhance client confidence. Our objective is to close the exchange offer by mid-June."

"With the exception of one contract being managed by our European power unit that resulted in the charge highlighted above, I am very pleased with the operating performance and EBITDA delivered by our operating companies during the quarter, which generally met our expectations and our business plan," continued Mr. Milchovich.

Worldwide Cash and Domestic Liquidity

Worldwide, total cash and short-term investments at the end of the quarter were $453.8 million, compared with $430.2 million at year-end 2003, and $472.9 million at the end of the first quarter of 2003. The quarter-end cash and short-term investments included $355.8 million held by non-U.S. subsidiaries. As of March 26, 2004, the company's indebtedness was $1.0 billion, essentially flat with year-end 2003 and down $83 million from the end of the first quarter of 2003.

"Our domestic liquidity, which includes cash and unused credit line availability, strengthened in the quarter and is forecast to remain sufficient throughout 2004," commented Mr. Milchovich. "A major contributor has been the Oak Ridge waste processing facility we constructed and currently operate for the U.S. Department of Energy. Operations are exceeding our expectations and we have already collected the full capital recovery that was forecast to be received during the first nine months of this year."

Bookings and Segment Performance

New orders booked during the first quarter of 2004 were $629.9 million, compared with $476.3 million in the first quarter of last year. The company's backlog at the end of the first quarter of 2004 was $2.1 billion, compared with $2.3 billion at year-end 2003 and $3.5 billion at the end of the first quarter of 2003.

First-quarter new bookings for the Engineering and Construction (E&C) Group were $473.5 million, up substantially from $262.8 million during the year-ago quarter and at the highest level for our current E&C businesses in over two years. The Group's quarter-end backlog was $1.3 billion, flat with year-end 2003 and down $0.9 billion compared with $2.2 billion at the end of the first quarter of 2003. Revenues for the E&C Group in the first quarter of 2004 were $420.4 million, compared with $482.8 million in the first quarter of 2003. The Group's EBITDA was $33.1 million this quarter, up substantially compared with $12.1 million for the same period last year. Last year's EBITDA included the $15.3 million gain on the sale of the assets of the environmental business, severance costs of $2.8 million and charges of $21.1 million for revisions to the estimates on the environmental contracts that were retained. Included in EBITDA for this quarter was the gain of $10.5 million on the sale of the development rights on a project in Italy.

New bookings in the first quarter for the Energy Group were $156.3 million, compared with $210.1 million in first quarter 2003. Backlog at quarter-end was $813 million, compared with $946 million at year-end 2003 and $1.3 billion at the end of the first quarter of 2003. Energy Group revenues for the quarter were $269.8 million, compared with $326.4 million in the same quarter of 2003. The Group's EBITDA for the quarter was $17.0 million compared with $30.5 million last year. Included in EBITDA for this quarter was a charge of $24.6 million for the re-evaluation of the profit estimate on a fixed price power contract in Europe. The impact of lower revenues was essentially offset by the favorable impact of cost reductions and better execution on existing projects in North America.

Non-Cash Amounts Related to Asbestos

The company settled with additional asbestos insurance carriers during the first quarter of 2004 reversing $11.7 million of a $68.1 million non-cash charge recorded in the fourth quarter of 2003. The company expects to settle with an additional insurance carrier during the second quarter, bringing the total amount of the 2003 charge to be reversed to $15 million, as anticipated. The company plans to continue its strategy of settling with insurance carriers by monetizing policies or arranging coverage in place agreements. This strategy is designed to reduce future cash payments from the company to cover asbestos liabilities. The company continues to project that it will not be required to fund any asbestos liabilities from its cash flow for at least six years.

Calculation of EBITDA

Management uses several financial metrics to measure the performance of the company's business segments. EBITDA is a supplemental, non-generally accepted accounting principle (GAAP) financial measure. EBITDA is defined as earnings (loss) before taxes, interest expense, depreciation and amortization. The company presents EBITDA because it believes it is an important supplemental measure of operating performance.
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