Financial Highlights
* New work awards of $819.8 million exceeded revenue for the eleventh
consecutive quarter.
* Backlog at the end of the quarter was $4.8 billion.
* Revenue for the quarter increased 13 percent to $773.2 million.
* A net loss of $0.6 million was due to the impact of a $60.9 million
pre-tax charge ($34.6 million after tax and minority interest) related
to expected cost increases on three road-construction projects.
* No debt was outstanding and cash on hand was $304.0 million at the end
of the quarter.
* The company's Board of Directors authorized a $50.0 million common
stock/warrant buyback program.
BOISE, Idaho, Aug. 8 /PRNewswire-FirstCall/ -- Washington Group
International, Inc. (Nasdaq: WGII) today announced financial results for its
second quarter ended July 1, 2005.
"The majority of our operations performed exceptionally well in the
quarter. Revenue rose 13 percent to $773 million and new awards of
approximately $820 million reflect continued success of our
business-development efforts," said President and Chief Executive Officer
Stephen G. Hanks. "However, our earnings were negatively affected by a charge
related to three fixed-price road-construction projects. Cost increases on
the projects, due to significant client-directed changes and adjustments for
escalation of material costs and labor increases, resulted in a charge of
$34.6 million after tax and minority interest. While we expect significant
recovery through change orders and claim settlements down the road, the charge
negated the company's otherwise strong second-quarter performance."
Company performance for government customers both domestically and in the
Middle East continued to be exceptional in the quarter. The Defense and
Energy & Environment business units continued to turn in outstanding
performance and the award fees reflect this performance. Also, the company
continued to perform very well in the Middle East, resulting in increased
award fees. The Power Business Unit's growth prospects and financial
performance continued to exceed internal expectations. The Industrial/Process
Business Unit also made gains in the oil and gas market including winning a
project to provide design, procurement, and construction services for a new
sulfur-handling facility in Qatar serving the natural-gas-processing market.
The booking of the project will occur in the third quarter of 2005.
"We have also taken steps to improve our capital structure and enhance
shareholder value," Hanks said. "As recently announced, our Board of Directors
authorized the repurchase of up to $50 million of our common stock and
warrants in open-market or negotiated transactions."
Corporate Performance
For the second quarter of 2005, the company reported revenue of
$773.2 million. Revenue grew 13 percent and is beginning to reflect the new
work booked over the past two years in the Mining, Energy & Environment,
Defense, and Power business units.
Operating income during the quarter was unfavorably impacted by a
$60.9 million pre-tax charge ($34.6 million after tax and minority interest)
for three highway projects in the Infrastructure Business Unit. The impact of
this charge was partially offset by strong operating income in the Middle East
totaling $23.8 million, which included $8.5 million of award fees for work
performed through March 2005. The company reported a net loss of $0.6 million,
or $0.02 per basic and diluted share, for the quarter.
New work awarded in the second quarter of 2005 was $819.8 million. New
work exceeded revenue for the eleventh consecutive quarter. Backlog at the end
of the second quarter remained strong at $4.8 billion.
Information regarding the financial results for the second quarter of 2005
is located in the accompanying tables.
Business Unit Performance
* Energy & Environment: For the second quarter of 2005, Energy &
Environment generated revenue of $120.9 million and operating income of
$9.0 million. Revenue increased by 26 percent compared to the second
quarter of 2004 as a result of the start-up of the U.S. Department of
Energy's (DOE) Idaho Cleanup Project at the Idaho National Laboratory.
Performance at all sites continued to exceed customer expectations.
Operating income declined for the quarter by $5.4 million as the result
of payments of $2.7 million to British Nuclear Fuel Limited for its
share of earnings from certain DOE projects being reflected as a charge
to operating income rather than as minority interest expense and also a
$3.3 million loss related to work in the United Kingdom. New awards
include the DOE's River Corridor Closure Project. Under this contract,
the joint venture led by Washington Group will manage approximately $250
million of work annually for the next seven years. However, revenue from
this contract will only include the company's share of the fee for
managing this work, consistent with the company's agency accounting
policy. New work totaled $145.7 million and the backlog at the end of
the quarter was $918.1 million, up $24.2 million from the first quarter.
* Defense: For the second quarter of 2005, Defense generated revenue of
$132.5 million and operating income of $17.3 million. Revenue increased
by 12 percent, highlighted by growth in both domestic and international
threat reduction programs. Operating income for the quarter increased by
$8.1 million compared to the second quarter of 2004, with domestic
chemical demilitarization projects and international threat reduction
projects as the major contributors. Outstanding operational execution
resulted in increased award fees. New work, attributable primarily to
ongoing threat reduction contracts, totaled $159.0 million. Backlog at
the end of the quarter was $895.9 million, up $26.5 million from the
first quarter.
* Mining: For the second quarter of 2005, Mining generated revenue of
$42.8 million and an operating loss of $0.5 million. The operating loss
was due to planned outages at two power plants that purchase coal from
MIBRAG, a mining joint venture in eastern Germany. Both plants are
again running and coal sales have returned to normal levels. Also,
start-up costs on new contract mining projects as well as
weather-related impacts at certain domestic operations negatively
impacted operating income for the quarter. New work in the second
quarter totaled $86.4 million and included a phosphate mining project in
Idaho. Backlog at the end of the quarter increased $42.6 million to
$711.0 million.
* Power: For the second quarter of 2005, Power generated revenue of
$186.8 million and operating income of $25.7 million. Revenue and
operating income benefited from work in the Middle East, with revenue of
$72.6 million and operating income of $13.7 million, compared to $29.5
million and $1.3 million, respectively, for the second quarter in the
prior year. Operating income also included $4.8 million of additional
cash received related to a claim settlement announced in the first
quarter. New work for the quarter totaled $182.0 million and included a
major power plant life extension project in Florida and new task order
releases in the Middle East. Backlog at the end of the quarter was
nominally flat at $885.9 million.
* Infrastructure: For the second quarter of 2005, Infrastructure
generated revenue of $186.2 million and an operating loss of $47.2
million, compared to revenue of $199.4 million and operating income of
$6.3 million for the second quarter of 2004. The operating loss for the
second quarter of 2005 resulted from a $60.9 million pre-tax charge
associated with three road projects. Change orders and claim recoveries
are anticipated, but the timing and amount are uncertain. The charge was
partially offset by strong performance in the Middle East, with revenue
of $49.4 million and operating income of $9.5 million, compared to
revenue of $88.0 million and operating income of $9.6 million last year.
The balance of the operations generated operating income of $4.2 million
compared to a loss of $3.3 million in the prior year due to performance
on new contracts and improvement in engineering services and the
operations and maintenance business. New work for the quarter totaled
$174.8 million including key wins on two toll road operations and
maintenance projects, consistent with the unit's emphasis on
engineering, project management, construction management, operations and
maintenance, and negotiated design-build projects. Backlog declined by
$11.6 million to $1.1 billion.
* Industrial/Process: For the second quarter of 2005, Industrial/Process
generated revenue of $103.3 million and operating income of $1.5
million. New work during the quarter totaled $71.2 million and backlog
decreased by $32.2 million to $282.9 million. Progress was made during
the quarter in the oil and gas markets, including an award of
approximately $190 million for engineering, procurement, and
construction of a sulfur-handling facility in Qatar. This award will be
recorded as new work during the third quarter.
Financial Position and Cash Flow
During the quarter the company used $33.2 million of cash and ended the
quarter with $304.0 million of cash on hand. The cash was primarily used to
fund working capital requirements for increased revenue in the Middle East and
a new cost-reimbursable DOE project, and to purchase mining equipment required
for the start-up of contract mining projects.
"Our financial position is strong and provides us the resources to start
new projects and pursue profitable new business opportunities anywhere in the
world," Hanks said.
The company renegotiated its credit facility during the quarter. As a
result of the re-pricing of the credit facility, interest expense for 2006 is
anticipated to be $7 million to $8 million. There were no borrowings under the
credit facility during the quarter, and there was no outstanding debt at
quarter end.
Guidance
As announced on August 3, 2005, the company is updating its new work and
revenue guidance to reflect increasing awards in the Power, Defense, and
Energy & Environment business units, a portion of which will generate revenue
in 2005.
"Despite the impact of the second-quarter charge, we reaffirm our net
income guidance of $55 million to $60 million in 2005 due to
higher-than-expected results and positive trends in several of our
businesses," Hanks said. "And we are optimistic about the company's potential
for long-term profitable growth as we continue with our diversified portfolio
in the industry's fastest-growing markets."
2005 Financial Guidance
Previous Revised
Backlog $4.6 - 4.9 B $4.6 - 4.9 B
New Work $3.6 - 3.9 B $3.7 - 4.0 B
Revenue $2.9 - 3.2 B $3.0 - 3.3 B
Net Income $55.0 - 60.0 M $55.0 - 60.0 M
EPS-Basic $2.12 - 2.31 $2.11- 2.30
Footnote: Revised guidance for basic EPS is based on estimated average
shares outstanding of 26 million.
Investor Conference Call
Washington Group International will host an investor conference call to
discuss the second quarter 2005 results today, August 8, 2005, at 11 a.m.
(EDT). The company will provide a Webcast of its call live over the Internet
on its corporate Web site at http://www.wgint.com. Participants should allow
approximately five minutes prior to the call's start time to visit the site
and download any streaming media software needed to listen to the Webcast. An
online archive will be made available a few hours following the end of the
live call.
About the Company
Washington Group International, Inc. (http://www.wgint.com) provides the
talent, innovation, and proven performance to deliver integrated engineering,
construction, and management solutions for businesses and governments
worldwide. With approximately 25,000 employees at work in more than 30
countries, the company provides professional, scientific, management, and
development services in more than two dozen major markets including power
generation, transmission and distribution, and clean air solutions;
environmental remediation; heavy civil construction; mining; nuclear services;
defense, homeland security, and global threat reduction; industrial, chemical,
and pharmaceutical processing; manufacturing; facilities operations and
management; transportation; and water resources.
This news release contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995, which are identified
by the use of forward-looking terminology such as may, will, could, should,
expect, anticipate, intend, plan, estimate, or continue or the negative
thereof or other variations thereof. Each forward-looking statement,
including, without limitation, any financial guidance, speaks only as of the
date on which it is made, and Washington Group undertakes no obligation to
update any forward-looking statement to reflect events or circumstances after
the date on which it is made or to reflect the occurrence of anticipated or
unanticipated events or circumstances. The forward-looking statements are
necessarily based on assumptions and estimates of management and are
inherently subject to various risks and uncertainties. Actual results may
vary materially as a result of changes or developments in social, economic,
business, market, legal, and regulatory circumstances or conditions, both
domestically and globally, as well as due to actions by customers, clients,
suppliers, business partners, or government bodies. Performance is subject to
numerous factors, including demand for new power generation and for
modification of existing power facilities, public sector funding, demand for
extractive resources, capital spending plans of customers, and spending levels
and priorities of the U.S., state and other governments. Results may also
vary as a result of difficulties or delays experienced in the execution of
contracts or implementation of strategic initiatives. For additional risks
and uncertainties impacting the forward-looking statements contained in this
news release, please see "Note Regarding Forward-Looking Information" and
"Item 1. Business -- Risk Factors" in Washington Group's annual report on Form
10-K for fiscal year 2004.
WASHINGTON GROUP INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(UNAUDITED)
Three months ended Six months ended
July 1, 2005 July 2, 2004 July 1, 2005 July 2, 2004
Revenue $773,184 $684,484 $1,474,045 $1,438,648
Cost of revenue (769,609) (646,748) (1,424,397) (1,363,523)
Gross profit 3,575 37,736 49,648 75,125
Equity in income of
unconsolidated
affiliates 1,923 7,119 9,266 17,799
General and
administrative
expenses (10,116) (15,792) (25,422) (29,754)
Operating income
(loss) (4,618) 29,063 33,492 63,170
Interest income 2,215 596 4,061 1,190
Interest expense (2,958) (3,602) (6,357) (8,016)
Write-off of deferred
financing fees (3,588) - (3,588) -
Other expense, net (28) (740) (5) (1,269)
Income (loss) before
reorganization items,
income taxes, and
minority interests (8,977) 25,317 27,603 55,075
Reorganization items - 1,245 - 1,245
Income tax benefit
(expense) 6,159 (10,758) (8,473) (22,810)
Minority interests in loss
(income) of consolidated
subsidiaries 2,224 (2,524) (2,494) (7,164)
Net income (loss) $(594) $13,280 $16,636 $26,346
Net income (loss) per share:
Basic $(0.02) $0.53 $0.65 $1.05
Diluted (0.02) 0.49 0.56 0.96
Common shares used to compute
net income (loss) per share:
Basic 25,971 25,216 25,740 25,175
Diluted (a) 25,971 27,111 29,505 27,350
(a) Potential dilutive common share equivalents of 4,252 for the three
months ended July 1, 2005 were not included in the diluted net loss per
share calculation, as their inclusion would have been anti-dilutive.
WASHINGTON GROUP INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(UNAUDITED)
July 1, 2005 December 31, 2004
ASSETS
Current assets
Cash and cash equivalents $303,995 $286,078
Short-term investments - 30,200
Accounts receivable, including
retentions of $15,475 and $14,973,
respectively 245,701 250,251
Unbilled receivables 241,235 214,437
Investments in and advances to
construction joint ventures 39,144 24,321
Deferred income taxes 102,228 94,343
Other 48,254 49,642
Total current assets 980,557 949,272
Investments and other assets
Investments in unconsolidated affiliates 165,870 179,347
Goodwill 219,085 307,817
Deferred income taxes 81,208 64,479
Other assets 39,416 18,078
Total investments and other assets 505,579 569,721
Property and equipment
Construction equipment 106,627 81,432
Other equipment and fixtures 35,482 31,954
Buildings and improvements 12,125 11,543
Land and improvements 2,459 2,491
Total property and equipment 156,693 127,420
Less accumulated depreciation (66,937) (58,207)
Property and equipment, net 89,756 69,213
Total assets $1,575,892 $1,588,206
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and subcontracts
payable, including retentions of
$28,608 and $30,154, respectively $206,302 $206,180
Billings in excess of cost and
estimated earnings on uncompleted
contracts 215,705 204,263
Accrued salaries, wages and benefits,
including compensated absences of
$52,898 and $48,908, respectively 121,687 140,623
Other accrued liabilities 55,764 61,919
Total current liabilities 599,458 612,985
Non-current liabilities
Self-insurance reserves 69,708 67,945
Pension and post-retirement benefit
obligations 107,556 103,398
Other non-current liabilities 36,507 23,037
Total non-current liabilities 213,771 194,380
Contingencies and commitments
Minority interests 3,488 47,920
Stockholders' equity
Preferred stock, par value $.01 per
share, 10,000 shares authorized - -
Common stock, par value $.01 per
share, 100,000 shares authorized;
26,284 and 25,474 shares issued,
respectively 263 255
Capital in excess of par value 569,373 542,514
Stock purchase warrants 27,817 28,167
Retained earnings 147,537 130,901
Treasury stock, 28 shares, at cost (1,086) (1,012)
Unearned compensation -- restricted
stock, 126 shares (4,619) -
Accumulated other comprehensive
income 19,890 32,096
Total stockholders' equity 759,175 732,921
Total liabilities and stockholders'
equity $1,575,892 $1,588,206
WASHINGTON GROUP INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(UNAUDITED)
Six months ended
July 1, 2005 July 2, 2004
Operating activities
Net income $16,636 $26,346
Reorganization items - (1,245)
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Cash paid for reorganization items (742) (1,253)
Depreciation of property and equipment 9,130 8,416
Amortization and write-off of deferred
financing fees 5,197 1,554
Non-cash income tax expense 6,882 20,262
Minority interests in net income of
consolidated subsidiaries 2,494 7,164
Equity in income of unconsolidated
affiliates, less dividends received (2,195) (16,851)
Changes in operating assets and
liabilities and other (28,349) (62,045)
Net cash provided (used) by
operating activities 9,053 (17,652)
Investing activities
Property and equipment additions (30,840) (16,075)
Property and equipment disposals 1,140 17,014
Purchases of short-term investments (74,900) (274,400)
Sales of short-term investments 105,100 294,400
Contributions and advances to
unconsolidated affiliates (740) (3,499)
Other (137) -
Net cash provided (used) by
investing activities (377) 17,440
Financing activities
Payment of financing fees (4,577) (1,524)
Distributions to minority interests, net (1,686) (7,758)
Proceeds from exercise of stock
options and warrants 15,504 4,727
Net cash provided (used) by
financing activities 9,241 (4,555)
Increase (decrease) in cash and
cash equivalents 17,917 (4,767)
Cash and cash equivalents at
beginning of period 286,078 188,835
Cash and cash equivalents at
end of period $303,995 $184,068
Supplemental disclosure of
cash flow information:
Interest paid $4,536 $7,027
Income taxes paid, net 924 3,962
WASHINGTON GROUP INTERNATIONAL, INC.
SEGMENT INFORMATION
(In millions)
(UNAUDITED)
Three months ended Six months ended
REVENUE July 1, 2005 July 2, 2004 July 1, 2005 July 2, 2004
Power $186.8 $146.9 $337.4 $297.1
Infrastructure 186.2 199.4 347.1 477.0
Mining 42.8 25.6 70.3 46.0
Industrial/Process 103.3 99.2 200.6 190.0
Defense 132.5 118.6 285.1 240.8
Energy &
Environment 120.9 95.9 233.0 192.4
Intersegment,
eliminations
and other 0.7 (1.1) 0.5 (4.7)
Total consolidated
revenue $773.2 $684.5 $1,474.0 $1,438.6
OPERATING INCOME (LOSS)
Power $25.7 $5.7 $39.7 $14.0
Infrastructure (47.2) 6.3 (43.7) 12.3
Mining (0.5) 9.4 6.2 20.4
Industrial/Process 1.5 1.5 (0.2) 3.2
Defense 17.3 9.2 32.4 17.8
Energy & Environment 9.0 14.4 25.6 31.5
Intersegment and other
unallocated operating
costs (0.3) (1.7) (1.1) (6.3)
Total segment
operating income 5.5 44.8 58.9 92.9
General and
administrative
expenses,
corporate (10.1) (15.7) (25.4) (29.7)
Total operating
income (loss) $(4.6) $29.1 $33.5 $63.2
NEW WORK
Power $182.0 $57.1 $507.0 $142.5
Infrastructure 174.8 433.9 341.3 718.2
Mining 86.4 12.4 273.3 26.2
Industrial/Process 71.2 121.0 190.3 285.5
Defense 159.0 181.2 311.3 294.1
Energy &
Environment 145.7 78.0 664.4 203.1
Other 0.7 (1.1) 0.5 (4.7)
Total new work $819.8 $882.5 $2,288.1 $1,664.9
BACKLOG July 1, 2005 April 1, 2005 December 31, 2004
Power $885.9 $890.7 $716.4
Infrastructure 1,115.1 1,126.7 1,121.3
Mining 711.0 668.4 516.1
Industrial/Process 282.9 315.1 293.5
Defense 895.9 869.4 869.7
Energy & Environment 918.1 893.9 487.1
Total backlog $4,808.9 $4,764.2 $4,004.1
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")
We view EBITDA as a measure of operating liquidity, and as such we believe
that the GAAP financial measure most directly comparable to it is net cash
provided by operating activities (see reconciliation of EBITDA to net cash
provided by operating activities below). EBITDA is not an alternative to and
should not be considered instead of, or as a substitute for, earnings from
operations, net income or loss, cash flows from operating activities or other
statements of operations or cash flow data prepared in conformity with GAAP,
or as a GAAP measure of profitability or liquidity. In addition, our
calculation of EBITDA may or may not be comparable to similarly titled
measures of other companies.
EBITDA is used by our management as a supplemental financial measure to
evaluate the performance of our business that, when viewed with our GAAP
results and the accompanying reconciliations, we believe provides a more
complete understanding of factors and trends affecting our business than the
GAAP results alone. We also regularly communicate our EBITDA to the public
through this earnings release because it is a financial measure commonly used
by analysts that cover our industry to evaluate our performance as compared to
the performance of other companies that have different financing and capital
structures or effective tax rates. In addition, EBITDA is a financial measure
used in the financial covenants of our credit facility and therefore is a
financial measure to evaluate our compliance with our financial covenants.
Management compensates for the above-described limitations of using a non-GAAP
financial measure by using this non-GAAP financial measure only to supplement
our GAAP results to provide a more complete understanding of the factors and
trends affecting our business.
Components of EBITDA are presented below:
Three months ended Six months ended
(In millions) July 1, 2005 July 2, 2004 July 1, 2005 July 2, 2004
Net income (loss) $(0.6) $13.3 $16.6 $26.3
Interest expense (a) 6.6 3.6 10.0 8.0
Tax expense (benefit) (6.2) 10.7 8.5 22.8
Depreciation and
amortization 4.8 4.3 9.1 8.5
Total $4.6 $31.9 $44.2 $65.6
(a) Includes write-off of deferred financing fees of $3.6 million for the
three and six months ended July 1, 2005.
RECONCILIATION OF EBITDA TO NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES
We believe that net cash provided (used) by operating activities is the
financial measure calculated and presented in accordance with GAAP that is
most directly comparable to EBITDA. The following table reconciles EBITDA to
net cash provided (used) by operating activities for each of the periods for
which EBITDA is presented.
Three months ended Six months ended
(In millions) July 1, 2005 July 2, 2004 July 1, 2005 July 2, 2004
EBITDA $4.6 $31.9 $44.2 $65.6
Interest expense (6.6) (3.6) (10.0) (8.0)
Tax benefit (expense) 6.2 (10.7) (8.5) (22.8)
Reorganization items - (1.2) - (1.2)
Cash paid for
reorganization items (0.4) (0.6) (0.7) (1.2)
Amortization and write-
off of financing fees 4.3 0.8 5.2 1.5
Non-cash income
tax expense (7.2) 9.5 6.9 20.3
Minority interests in
loss (income) of
consolidated
subsidiaries (2.2) 2.5 2.5 7.1
Equity in income of
unconsolidated affiliates,
less dividends received 1.6 (6.6) (2.2) (16.9)
Changes in net operating
assets and liabilities
and other (14.1) 3.7 (28.3) (62.1)
Net cash provided (used)
by operating
activities $(13.8) $25.7 $9.1 $(17.7)
Net cash provided by
operating activities
for the six months
ended July 1, 2005 $9.1
Less: Net cash provided
by operating activities
for the three months
ended April 1, 2005 (22.9)
Net cash used by
operating activities for
the three months
ended July 1, 2005 $(13.8)
Net cash used by
operating activities for
the six months ended
July 2, 2004 $(17.7)
Less: Net cash used
by operating activities
for the three months
ended April 2, 2004 43.4
Net cash provided by
operating activities for
the three months ended
July 2, 2004 $25.7
SOURCE Washington Group International, Inc.
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Related links:
http://www.wgint.com
CONTACT:
Media: Laurie Spiegelberg, +1-208-386-5532,
laurie.spiegelberg@wgint.com, or Investors: Earl Ward,
+1-208-386-5698, earl.ward@wgint.com, both of Washington Group
International, Inc.
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