Foster Wheeler Reports Results for Third Quarter of 2014

Foster Wheeler AG (Nasdaq:FWLT) today 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.”

Masters said, “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.

Pending Offer by AMEC plc

On October 7, 2014, AMEC plc launched an exchange offer to acquire all the issued and to be issued registered shares of the company. This exchange offer is being made pursuant to the terms and conditions of an Implementation Agreement, which the company and AMEC originally entered into on February 13, 2014. In connection with the exchange offer, AMEC filed a registration statement on Form F-4 and a Tender Offer statement on Schedule TO and the company filed a Solicitation/Recommendation Statement on Schedule 14D-9, each as amended from time to time. The exchange offer is scheduled to expire at 11:59 PM New York City time on Tuesday, November 4, 2014, unless it is extended.

For additional information about the terms of the exchange offer and the Implementation Agreement, please see the following documents which are available at www.sec.gov: (i) the company’s Solicitation/Recommendation Statement on Schedule 14D-9, filed with the U.S. Securities and Exchange Commission (SEC) on October 7, 2014, as amended by Amendment No. 1 to the Schedule 14D-9, filed with the SEC on October 23, 2014 and (ii) the prospectus dated October 7, 2014, as amended or supplemented from time to time, which is part of the Registration Statement on Form F-4 filed by AMEC with the SEC on October 2, 2014.

Definitions

Income from Continuing Operations

All references to income from continuing operations in this news release refer to “Income from continuing operations attributable to Foster Wheeler AG” as reported in our consolidated financial statements.

Adjusted Income from Continuing Operations and Adjusted Earnings per Share from Continuing Operations

The company believes that adjusted income from continuing operations and adjusted earnings per share from continuing operations are important measures of performance because such adjusted figures exclude the variable impact of periodic asbestos-related gains and provisions. The company believes that the line item on its consolidated statement of operations entitled "Net Income attributable to Foster Wheeler AG" and “diluted earnings per share attributable to Foster Wheeler AG” are the most directly comparable GAAP (generally accepted accounting principles) financial measures to adjusted income from continuing operations and adjusted earnings per share from continuing operations.

Calculation of EBITDA

EBITDA is a supplemental financial measure not defined in GAAP. The company defines EBITDA as net income attributable to Foster Wheeler AG before interest expense, income taxes, depreciation and amortization. The company has presented EBITDA because it believes it is an important supplemental measure of operating performance. Certain covenants under our senior unsecured credit agreement use EBITDA, as defined in such agreement, in the covenant calculations, which is different from EBITDA as presented herein . The company believes that the line item on its consolidated statement of operations entitled "Net Income attributable to Foster Wheeler AG" is the most directly comparable GAAP financial measure to EBITDA. Since EBITDA is not a measure of performance calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, net income attributable to Foster Wheeler AG as an indicator of operating performance or any other GAAP financial measure.

EBITDA, as calculated by the company, may not be comparable to similarly titled measures employed by other companies. In addition, this measure does not necessarily represent funds available for discretionary use, and is not necessarily a measure of the company's ability to fund its cash needs. As EBITDA excludes certain financial information that is included in net income attributable to Foster Wheeler AG, users of this financial information should consider the type of events and transactions that are excluded.

The company's non-GAAP performance measure, EBITDA, has certain material limitations as follows:

• It does not include interest expense. Because the company has borrowed money to finance some of its operations, interest is a necessary and ongoing part of its costs and has assisted the company in generating revenue. Therefore, any measure that excludes interest expense has material limitations;

• It does not include taxes. Because the payment of taxes is a necessary and ongoing part of the company's operations, any measure that excludes taxes has material limitations; and

• It does not include depreciation and amortization. Because the company must utilize property, plant and equipment and intangible assets in order to generate revenues in its operations, depreciation and amortization are necessary and ongoing costs of its operations. Therefore, any measure that excludes depreciation and amortization has material limitations.

Calculation of EBITDA Margin

Segment EBITDA margin is calculated by dividing business unit operating revenues in Foster Wheeler Scope into business unit EBITDA.

Foster Wheeler Scope

Foster Wheeler Scope represents that portion of backlog, new orders booked and operating revenues on which profit can be earned. Foster Wheeler Scope excludes revenues relating to third-party costs incurred by the company as agent or principal on a reimbursable basis.

Foster Wheeler AG is a global engineering and construction company and power equipment supplier delivering technically advanced, reliable facilities and equipment. The company employs approximately 13,000 talented professionals with specialized expertise dedicated to serving its clients through one of its two primary business groups. The company’s Global Engineering and Construction Group designs and constructs leading-edge processing facilities for the upstream oil and gas, LNG and gas-to-liquids, refining, chemicals and petrochemicals, power, minerals and metals, environmental, pharmaceuticals, biotechnology and healthcare industries. The company’s Global Power Group is a world leader in combustion and steam generation technology that designs, manufactures and erects steam generating and auxiliary equipment for power stations and industrial facilities and also provides a wide range of aftermarket services. The company is based in Zug, Switzerland, and its operational headquarters office is in Reading, United Kingdom. For more information about Foster Wheeler, please visit our website at www.fwc.com.

Safe Harbor Statement

Foster Wheeler AG communication materials may contain forward-looking statements that are based on management’s assumptions, expectations and projections about the Company and the various industries within which the Company operates. These include statements regarding the Company’s expectations about revenues (including as expressed by its backlog), its liquidity, the outcome of litigation and legal proceedings and recoveries from customers for claims and the costs of current and future asbestos claims and the amount and timing of related insurance recoveries. Such forward-looking statements by their nature involve a degree of risk and uncertainty. The Company cautions that a variety of factors, including but not limited to the factors described in the Form 10-K for the year ended December 31, 2013, filed with the SEC on February 27, 2014, and the following, could cause the Company’s business conditions and results to differ materially from what is contained in forward-looking statements: the timing and success of the pending offer and acquisition of the Company by AMEC plc (“AMEC”), the risk that the Company’s business will be adversely impacted during the pending offer and acquisition of the Company by AMEC, benefits, effects or results of the Company’s redomestication to Switzerland, deterioration in global economic conditions, changes in investment by the oil and gas, oil refining, chemical/petrochemical and power generation industries, changes in the financial condition of its customers, changes in regulatory environments, changes in project design or schedules, contract cancellations, the changes in estimates made by the Company of costs to complete projects, changes in trade, monetary and fiscal policies worldwide, compliance with laws and regulations relating to the Company’s global operations, currency fluctuations, war, terrorist attacks and/or natural disasters affecting facilities either owned by the Company or where equipment or services are or may be provided by the Company, interruptions to shipping lanes or other methods of transit, outcomes of pending and future litigation, including litigation regarding the Company’s liability for damages and insurance coverage for asbestos exposure, protection and validity of the Company’s patents and other intellectual property rights, increasing global competition, compliance with its debt covenants, recoverability of claims against the Company’s customers and others by the Company and claims by third parties against the Company, and changes in estimates used in its critical accounting policies. Other factors and assumptions not identified above were also involved in the formation of these forward-looking statements and the failure of such other assumptions to be realized, as well as other factors, may also cause actual results to differ materially from those projected. Most of these factors are difficult to predict accurately and are generally beyond the Company’s control. You should consider the areas of risk described above in connection with any forward-looking statements that may be made by the Company. The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any additional disclosures the Company makes in proxy statements, quarterly reports on Form 10-Q, annual reports on Form 10-K and current reports on Form 8-K filed with or furnished to the SEC.

Important information

In connection with the pending offer by AMEC to acquire all of Foster Wheeler’s issued and to be issued registered shares which commenced on October 7, 2014 (the “Offer”), AMEC filed a registration statement on Form F-4 and a Tender Offer statement on Schedule TO and the Company filed a Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the Offer. These documents contain important information about the Offer that should be read carefully before any decision is made with respect to the Offer. These materials will be made available to the shareholders of the Company at no expense to them. Investors and security holders may obtain the documents free of charge at the SEC’s website, www.sec.gov. Any materials filed by the Company with the SEC may also be obtained without charge at the Company's website, www.fwc.com.

This announcement is for informational purposes only and does not constitute or form part of an offer to sell or the solicitation of an offer to buy or subscribe to any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. This announcement is not an offer of securities for sale into the United States. No offering of securities shall be made in the United States except pursuant to registration under the U.S. Securities Act of 1933, or an exemption therefrom.