Foster Wheeler Reports 3Q Results
Foster Wheeler reported net income for the third quarter of 2008 of $127.9 million, or $0.88 per diluted share, compared with $129.1 million, or $0.89 per diluted share, in the third quarter of 2007.
Net income in the third quarters of 2008 and 2007 included asbestos-related items, as detailed in a table accompanying this release. Excluding such items from both periods, net income in the third quarter of 2008 was $129.6 million, or $0.89 per share, as compared with $120.5 million, or $0.83 per share in the year-ago quarter.
Third-quarter 2008 consolidated EBITDA (earnings before interest expense, income taxes, depreciation and amortization) was $165.2 million, compared with $179.0 million in the third quarter of 2007. Excluding the items cited above, consolidated EBITDA in the third quarter of 2008 was $167.0 million, compared with $170.3 million in the year-ago quarter.
For the first nine months of 2008, net income was $426.7 million, or $2.94 per diluted share, compared with $315.8 million, or $2.18 per diluted share, for the first nine months of 2007. Consolidated EBITDA for the first nine months of 2008 was $581.0 million, compared with $459.9 million for the first nine months of 2007. The nine-month periods of 2008 and 2007 included asbestos-related items, as outlined in the table accompanying this press release.
Foster Wheeler's Chairman and Chief Executive Officer, Raymond J. Milchovich, said, "Our results in the third quarter of 2008 were driven by excellent operating performance in both of the company’s business groups and a lower effective tax rate, partially offset by lower contributions from our equity interests in projects in Chile and Italy."
Global Engineering and Construction (E&C) Group
- Segment EBITDA was $122.8 million in the third quarter of 2008, modestly below the average quarter of 2007, due in part to timing and mix of contracts. In addition, results in the third quarter of 2008 were unfavorably impacted by $5.5 million due to an increase in the tax rate on partially owned Italian power projects, an impairment charge of $2.2 million on a minority interest in a power project development in Italy, and a $6.1 million reversal of previous exchange-rate gains. These factors contributed to a reduction in EBITDA margin on scope revenue, relative to the average margin of 2007.
- New orders booked in Foster Wheeler Scope were $664.3 million in the third quarter of 2008, 24% above the average quarter of 2007.
- Backlog in Foster Wheeler Scope was $1.8 billion at the end of the third quarter of 2008, up modestly compared with the year-ago period.
- At the end of the third quarter of 2008, the number of man-hours in backlog amounted to 14.4 million, an all-time record for this Group.
Global Power Group (GPG)
- Segment EBITDA was $64.8 million in the third quarter of 2008, an 86% increase compared with the average quarter of 2007. The results were driven by strong operating performance on quality contracts in backlog. The EBITDA margin on scope revenue was 15.1% in the third quarter of 2008, as compared to 9.8% for the average quarter of 2007. Excluding the 2007 impact of a $30 million reserve for a legacy power project, the average quarterly EBITDA for that year was $42 million and the average EBITDA margin on scope revenue was 12%.
- Operating revenues in Foster Wheeler Scope were $428.0 million in the third quarter of 2008, an increase of 21% compared with the average quarter of 2007.
- Backlog in Foster Wheeler Scope was $1.4 billion at the end of the third quarter of 2008.
Milchovich noted, "In 2008, Foster Wheeler expects to have its third consecutive year of record-setting net income, with record performance in both of our two business groups.
"In the third quarter, our E&C Group reported that new orders in Foster Wheeler scope were 24% above the average quarter of 2007 – and the Group had a record-level of man-hours in backlog, despite the absence of any mega contracts signed in the quarter. Moreover, in light of the prospects the company is currently tracking, we are cautiously optimistic that E&C could end 2008 with additional growth in the number of man-hours in backlog.
"In our Global Power Group, new orders rebounded from the level of the second quarter of this year, but were 13% below the average quarter of 2007, reflecting ongoing delays in North American prospects and sporadic schedule slippage in some European prospects. We expect GPG to generate a record level of EBITDA in 2008, but current market conditions are likely to challenge EBITDA performance in GPG in 2009," said Milchovich.
Share Repurchase Program
On September 12, 2008, the Company announced that its board of directors had authorized a $750 million program. Under this authorization, the company purchased 1.3 million common shares during the third quarter of 2008, and 9.2 million common shares in October. The Company has approximately $412 million remaining under the existing authorization.
- WorleyParsons and JV Partners Win FEED Contract for LNG Canada Project (May 21)
- Amec Agrees to buy Foster Wheeler for $3B (Jan 13)
- Report: British Engineer Amec Eyeing Foster Wheeler Takeover (Nov 27)