Mike Nartker
WC Monitor
5/8/2015

While Babcock and Wilcox’s Technical Services Group is still grappling with the loss of the Y-12 and Pantex managing contracts, B&W President and CEO James Ferland expressed optimism this week about the unit’s future, especially as B&W moves forward with a restructuring to spin-off its power generating unit. In a call with investors, Ferland noted that TSG is pursuing several opportunities, including the new contract to manage Atomic Energy of Canada Limited’s nuclear laboratories, including the Chalk River Laboratories; and the National Nuclear Security Administration’s new contract to manage the Kansas City National Security Campus. “In regard to TSG … we do have an awful lot of bidding going on, which is a good thing for that business. I think it bodes well for that business as we move into 2016 and 2017,” Ferland said.

Concerning Chalk River, where a B&W-led team is one of four entities competing, Ferland said “we continue to feel really good about that project. That project is large enough it has the potential to turn TSG and put it back on the upward path, and so that’s one to keep our eyes on as we move through the next few months.” He went on to say that “I think there’s a lot more upside than downside in TSG, and I know that the new BWXT management team brings an awful lot of expertise in this area, and that will be one of the areas that they focus on as they look to growth post spin.”

TSG Sees Drop in Revenue, Income for First Quarter 2015

Ferland’s remarks came, though, as B&W reported a drop in both revenue and income for the Technical Services Group for the first quarter of 2015. Revenue was approximately $18.6 million, down from approximately $24.5 million for the first quarter of 2014. TSG also reported an income of approximately $1.6 million, down from an income of approximately $14.8 million for the first quarter of last year. B&W attributed the drop in income to the loss of the Y-12 and Pantex contracts, as well as increased business development expenses. “The Technical Services Group is operating at our new expected run rate given our current contract mix. Although operating income for the quarter was below our full-year run rate, TSG remains on target to deliver $15 million to $20 million of operating income for the year,” Ferland said during the investor call. “The pipeline for this business is strong and we are bidding on several promising opportunities that we believe will contribute to solid growth of this segment in 2016.”

However, B&W overall reported increases in both revenue and operating income for the first quarter of 2015. B&W reported first quarter revenues of $730.6 million, a 10.4 percent increase from the same period in 2014. The company also reported an operating income of $70.8 million for the first quarter of this year, a 32.1 percent jump from the same period last year. “The quarter demonstrates the quality and character of the Babcock & Wilcox Company, and more importantly of our employees and leadership team. Even as we prepare for the spinoff of the Power Generation segment, which is no small task, we remain focused on execution in our core operations,” Ferland said. “Our businesses are running well, we are delivering for customers, and we’re creating value for our shareholders.”

Restructuring on Track to be Completed Mid-Summer

Ferland also said that B&W is on track to complete its restructuring by the middle of this summer, which will result in the creation of  BWXT Technologies, consisting of B&W’s nuclear operations, technical services, nuclear energy, and mPower businesses; and Babcock and Wilcox, consisting of the company’s power generation unit. “We’re pleased that this process is progressing smoothly and on plan,” he said. “With two strong balance sheets, solid backlogs, and seasoned management teams, we’re looking forward to introducing you to BWX Technologies and Babcock & Wilcox Enterprises in the coming weeks. Both companies have clear strategies to drive growth and increase shareholder value as independent public companies that are focused on their respective end markets.”