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Northfield Beach is coming back - these are the dates for 2018

Jul 11th, 2018

Get What's On updates directly to your inbox+ SubscribeSee our privacy noticeThank you for subscribing!Could not subscribe, try again laterInvalid Email Been to the seaside yet this summer? Are the kids pestering to play in the sand with their buckets and spades? Well, if you haven't managed to get to the beach yet, the good news is that the beach is coming to Birmingham. Northfield Beach is returning this summer, it's been confirmed. The man-made beach is back with a five-day line-up packed with free entertainment and activities for all ages. Youngsters can build sandcastles and soak up the sun at the urban beach in Price's Square. They'll also be able to mingle with fun characters including Rex the T-Rex and Sid the Shark Families can soak up the sun and enjoy the golden sand beach from July 25 to 29. The beach is open from 10am to 4pm each of those days. People will now be hoping for the heatwave to continue - last year Northfield Beach was hit by miserable weather though youngsters still managed to enjoy it with their anoraks on. There will be daily themed events taking place at Northfield Beach, starting with Dino Dig at Jurassic Beach. Kids will be able to meet Rex the T-Rex and pet some baby dinosaurs at the opening on Wednesday, July 25. On July 26, organisers have planned a No Sharks At The Beach Day to raise awareness in the community of the dangers of using loan sharks. Illegal Money Lending Team mascot Sid the Shark will join local debt agencies and credit unions to speak to families about loan sharks and safe borrowing. There will also be an outdoor cinema screening of Shark Tale and young guests can help create a giant shark and shark mural. Other events include a Sensory Day on July 27 with a climbing wall and other activities and a Back to the Forties day on July 28 with vintage entertainment and arts and crafts with Northfield Arts Forum. The beach will close on July 29 with Reggae At The Beach, featuring music from Trya Radio and Northfield Beach regulars Jonny2Bad. The family event has been organised by Northfield Community Partnership, with help from sponsors, including the Illegal Money Lending Team (IMLT), Awards for all, Arts 50, The Arts Council, Northfield Baptist church, and Northfield Business Improvement District. 8 hidden beaches worth driving to from Birmingham Northfield Community Partnership CEO Rebecca Debenham said: "We are delighted to bring back Northfield Beach and give families the opportunity to enjoy themselves over the summer break. "The event is extremely popular, and we are expecting even more visitors this year with Rex the T-Rex and Sid the Shark on the line-up. "We would like to thank all our funders for their contributions as without their help, this event would not happen. We are expecting warm weather this year, so bring the family down to the beach and get involved in the free activities." Tony Quigley, Head of the Illegal Money Lending Team, said: "We are pleased to be supporting Northfield Community Partnership with the No Sharks at the Beach event. "Loan sharks are a scourge on our communities and use underhand tactics to enforce their illegal debts. "Victims are often subjected to threats, intimidation and violence and forced to pay back far and above what they have borrowed and can afford. "We will be at the event on July 26 to offer advice and help to families affected by loan sharks. "There will also be other debt agencies and credit unions present to speak to guests about safe borrowing and how to start saving for the future."


How to fix rugby league's refereeing crisis in Retro Round: sack everyone

Jul 23rd, 2018

It's Retro Round in the NRL this weekend, which is Fox Sports' initiative to stir interest during the post-Origin lull for those of us who aren't on holidays in Greece or Croatia or Bali and posting Instagram selfies for the benefit of those who aren't on holidays in Greece or Croatia or Bali. Retro Round allows us to reminisce about the good old days of violent all-in brawls and corner posts made out of cardboard and mascara under the eyes for night games and Jack Gibson's kangaroo fur coat and Ian Herron's torpedo shorts and, of course, Rex. Rex Mossop, who once said after being hit in the head by an apple: "It's a sad, sad commentary on the mentality of some of the idiots that follow Australian sport." Given the present witch-hunt that's going on with its match officials, the NRL should embrace Retro Round, taking us back to a simpler time.


T-REX Unlocks Energy Project Finance Capabilities Through DNV GL's Open Industry Platform

Jul 10th, 2018

T-REX overlays unique analytics and services onto Veracity by DNV GL's massive database of renewable energy assets, delivering unprecedented transparency to critical growth markets. New York, NY, July 10, 2018 --(PR.com)-- T-REX, a leading enterprise software solutions provider for the complex financing of renewable energy assets, announced that it has partnered with Veracity by DNV GL to marry the game-changing power of financial technology with big data across the renewable energy sector. T-REX joins DNV GL's rapidly growing marketplace of 130,000 active users from several thousand companies. In the new product partnership, T-REX extends its sophisticated financial modeling and analytics platform to the Veracity marketplace, bringing unparalleled, turnkey energy project finance solutions to this ecosystem of asset owners, asset operators, and analytic providers for the first time. T-REX translates performance data of power-generating assets into financial models for better decision making across the investment lifecycle, from developers to lenders to end investors. Access T-REX on DNV GL's Veracity marketplace and learn more by visiting T-REX's website. Scott Miller, CBDO of T-REX said, "This partnership is an outstanding example of how fintech and big data together have the potential to move markets. Given the highly nuanced nature of renewables, typical project finance tools are unable to provide the analytical precision required to properly assess and price related financing risk. As a result, many high potential projects don't receive adequate funding. T-REX fills this gap by combining renewable energy asset class expertise with SaaS technology. With T-REX, you can efficiently interpret massive quantities of physical asset data to expose the underlying value proposition of renewables projects." Miller continued, "T-REX is pleased to extend our Energy Project Finance solutions to Veracity subscribers to optimize decision making in renewables. We see tremendous opportunity to help unlock liquidity in these markets." Bjørn Tore Markussen, Head of Veracity at DNV GL, said, "We are committed to adding value to subscribers' user experience by continuing to expand our offering of specialty applications. T-REX brings additional value to the marketplace, filling a need for energy project finance solutions. With T-REX onboard, we come that much closer to building a one-stop hub for energy industry solutions that cover the full value chain." Veracity is a secure platform facilitating exchange of datasets, APIs, applications and insights. Through Veracity, DNV GL offers its institutional subscriber base access to a range of specialty applications. About T-REX T-REX is the leading provider of enterprise software and managed data services for renewable energy and other esoteric asset classes. With T-REX, market practitioners access a complete suite of tools and data to analyze, assess, and accurately price the risk associated with issuing and investing in renewable energy and other complex asset classes. By eliminating manual processes and automating workflow, T-REX enhances efficiency, transparency, collaboration, and security across the entire investment lifecycle, from asset owners and developers to investment banks, lenders, accounting firms, through to investors and asset managers. About Veracity by DNV GL To facilitate frictionless connections between different industry players, domain experts and data scientists, DNV GL has built Veracity - an open and secure platform facilitating exchange of services, datasets, APIs, applications and insights. Veracity is designed to help companies unlock, qualify, combine and prepare data for analytics and benchmarking.


BWX Technologies, Inc. (BWXT) CEO Rex Geveden on Q2 2018 Results - Earnings Call Transcript

Aug 7th, 2018

BWX Technologies, Inc. (NYSE:BWXT) Q2 2018 Earnings Conference Call August 7, 2018 9:00 AM ET Executives Alan Nethery - Vice President and Chief Investor Relations Officer Rex Geveden - President and Chief Executive Officer David Black - Senior Vice President and Chief Financial Officer Analysts Robert Labick - CJS Securities, Inc. Sam Pearlstein - Wells Fargo Securities Robert Spingarn - Credit Suisse Peter Arment - Robert W. Baird & Co. Michael Ciarmoli - SunTrust Robinson Humphrey Operator Ladies and gentlemen, thank you for standing by. And welcome to BWX Technologies Inc. Second Quarter Earnings Conference Call and Webcast. At this time, all participants are in listen-only mode. Following the company's prepared remarks, we will conduct a question-and-answer session, and instructions will be given at that time. I would now like to turn the conference over to our host, Mr. Alan Nethery, BWXT's Vice President and Chief Investor Relations Officer. Please go ahead, sir. Alan Nethery Thank you, Cole, and good morning, everyone. We appreciate you joining us to discuss our 2018 second quarter results, which were reported Monday afternoon. We will also be discussing the closure of the acquisition of Sotera Health's Nordion medical isotope business, which we also announced yesterday. Copies of our press releases and investor briefing, including details related to today's call, are available on the Investors section of our website at BWXT.com. It may be beneficial for you to refer to during this call. Joining me this morning are Rex Geveden, President and Chief Executive Officer; and David Black, Senior Vice President and Chief Financial Officer. As always, please understand that certain matters discussed on today's call constitute forward-looking statements under federal securities laws. Forward-looking statements involve risks and uncertainties, including those described in the safe harbor provision at the end of the Monday's press release and the Risk Factors section of our most recent 10-K and 10-Q filings. These risks and uncertainties may cause actual company results to differ materially, and we undertake no obligation to update these forward-looking statements, except where required by law. On today's call, we'll also provide non-GAAP financial measures such as adjusted earnings per share, which are reconciled to GAAP in Monday's earnings release and our investor briefing presentation. BWXT believes that non-GAAP measures provide greater insight and transparency into the company's operational performance, and that these measures help to facilitate comparisons of operating results with prior periods and assist in understanding BWXT's ongoing operations. With that, I will now turn the call over to Rex. Rex Geveden Thank you, Alan, and good morning, everyone. Yesterday, we reported solid second quarter results, with non-GAAP earnings per share of $0.58 on revenue growth of 7% and exceptionally strong bookings in the Nuclear Power Group. Our performance continues to build on the momentum from the first quarter, resulting in a year-over-year revenue increase of 7% and earnings per share increase of 13% for the first half of the year, inclusive of tax benefits. We continued to exhibit our capacity for growth, while maintaining best-in-class margins and superior competitive positioning. And despite facing headwinds in the second half, we are maintaining earnings guidance. Our improving operating performance will be offset by an expected increase in interest expense, resulting from our capital restructuring actions and integration costs associated with the early close of Nordion. Before I turn the call over to David to discuss more financial detail, let me provide you with some highlights from the quarter and a little more color on the business. We continued to see strong demand from the U.S. Navy as reflected by revenue increases in Nuclear Operations in the second quarter and first-half. We anticipate an incremental pickup in the second half, driven somewhat by design and development activity on the lead ship for the Columbia-class submarine and by some uplift and downblending. In the second quarter, we announced the appointment of Joel Duling as President of Nuclear Operations Group. Joel brings to the business proven leadership ability, familiarity with the business and exceptional operating credentials. Joel is taking the helm as this segment enters an inflection point in growth and the beginning of a multiyear transition as we establish the Columbia submarine production line. We are also encouraged by signal for incremental growth beyond Columbia in the future. We continue to respond to customer requests in growth scenario planning that includes likelihood of the additional Virginia propulsion equipment in years that Columbia is not procured, as well as the two-carrier or accelerated carrier procurement. The National Defense Authorization Act Conference wrapped up in late July. And Congress has approved and sent the budget to the President for signature earlier in the cycle than any other budget in more than 40 years. The budget agreement includes the authorization support for the procurement of 3 Virginia-class submarines in 2022 and 2023. Provisions in the congressional appropriation bill set the stage for the administration to request and Congress to fund long-lead material for these additional subs in the FY 2020 budget. All of these incremental scenarios continue to represent upside to our current thinking and guidance. And lastly, we continue to make progress with our customer on the negotiation of our next multiyear pricing agreement and still anticipate a completion in early 2019. The scope of this pricing agreement would meaningfully increase our manufacturing volume over the next few years as compared to the planned volume of the current pricing agreement. I'm also pleased that our Canadian nuclear power business continues to outperform. Year-to-date revenues are up 43%, and I remind you, all organic. Year-to-date segment margins continue to perform better than originally anticipated. On the last call, I mentioned the Bruce Power steam-generator contract. We received this contract in the second quarter. And want to underscore that it was the largest contract in the history of this segment. So even with significant revenue growth, segment backlog is at record levels over C$1 billion. In Nuclear Services, we continue to see solid baseline wins as evidenced by a 5-year, $5 billion extension to the Idaho National Laboratory management and operations contract. We also resubmitted our proposal for the Savannah River liquid waste contract and completed the transition on the Los Alamos Legacy Cleanup Contract, which we won in late 2017. On the new technology front, we continue to make excellent progress on medical radioisotopes. Just last week we closed the Nordion acquisition, about 5 months earlier than anticipated. We will be reporting this business under the Nuclear Power Group segment beginning in the third quarter. And finally, as we pursue a variety of attractive growth opportunities, we have restructured our capital to create better short-term and long-term balance and to allow more flexibility. We expect to utilize that leverage to support the Nordion acquisition and a number of organic growth and other strategic opportunities. Let me now turn the call over to David to discuss segment results, guidance and other financial matters before I close with some comments about medical radioisotopes. David Black Thanks, Rex. Nuclear Operations Group generated revenue of $332 million for the second quarter of 2018, its highest amount in more than three years and a 6.2% increase from the second quarter of 2017. Year-over-year increase was driven by missile tubes and Naval nuclear fuel operations. Operating income for the quarter was $67 million, down about 3% compared to the second quarter of 2017. NOG delivered solid second quarter operating margins inclusive of CAS pension reimbursements of 20.2%. NOG backlog finished the second quarter, as expected, at approximately $2.7 billion. Nuclear Power Group revenues were $76 million for the second quarter of 2018, a 39% increase from the second quarter of 2017, driven by increased service activity due to outages and higher refurbishment activity. Operating income was up 37% to $7.8 million, compared to the prior year period and was driven primarily by higher volume. NPG backlog finished the second quarter a record $883 million, over $400 million more versus the prior year period. And as Rex mentioned, the backlog growth was driven by the C$642 million contract from Bruce Power for steam generators and drums. In the second quarter, the Nuclear Services Group contributed operating income of $3.5 million. The segment is showing surprising strength in the second quarter despite the delay of Savannah River Site liquid waste services contract. We still continue to expect a decision on that contract by the end of September of this year, and we remain optimistic about the pipeline of future bids. The company's second quarter capital expenditures were up 9% to $16 million compared with the second quarter of 2017. Depreciation and amortization totaled $14 million for the second quarter, about flat compared with the prior year period. Half way through the year, CapEx and D&A are on track with our guidance with capital expenditures more heavily weighted in the back half of the year. At the end of the second quarter, the company's cash and short-term investments position, net of restricted cash was $319 million. Second quarter cash flow from operating activities generated $36 million compared to $119 million generated in the second quarter of 2017. Lower year-over-year operating cash flow was driven by an increase in working capital at NOG and higher cash taxes. As Rex mentioned, we believe our repositioned balance sheet allows us to support various growth opportunities, including the recent Nordion acquisition, which we utilize some of this new cash in the third quarter. And while some new fixed debt creates a near-term interest expense headwind our anticipated increased operational performance mitigates this additional cost. In May, we issued $400 million in fixed debt, which we believe is a prudent and balanced move in light of a rising interest rate environment. We also secured a new credit facility and utilized the net proceeds to repay debt under the old credit facility. At the end of the second quarter, the company had gross debt of $691 million, including $400 million in senior notes and $291 million in term loans. We had no borrowings under the revolving line of credit and letters of credit totaling $72 million. As a result, the company had $428 million of remaining availability under our new credit facility. Beyond funding growth initiatives, we continue to look for ways to best utilize cash, including opportunities to derisk our pension plan, particularly during a time, when we can take advantage of onetime benefits and a transitional corporate tax rate environment. We continue to evaluate making discretionary contributions above the $14 million statutory level required in 2018 and effectively annuitize parts of our pension. On August 3, our board declared a cash dividend of $0.16 per common share payable in the third quarter of 2018. Turning now to guidance. As Rex mentioned, we are maintaining our 2018 non-GAAP EPS guidance in the range of $2.45 to $2.55 per diluted share, despite increased interest expense associated with the incremental debt and accelerated integration cost from the earlier closing of Nordion. The Nordion medical isotopes acquisition is currently contemplated in guidance and will be reported in the NPG segment beginning in the third quarter. We expect the acquired isotopes business to begin contributing revenue over the remaining five months of 2018, however, we do not anticipate the business will have a meaningful impact to revenue guidance and will not be dilutive in 2018. We look forward to providing more financial detail about the acquisition during the next quarterly update. All other components of our 2018 and long-term EPS guidance remain unchanged, including capital expenditures, which we still expect to be approximately $150 million for the year. And with that, I will hand the call back over to Rex for some closing remarks. Rex? Rex Geveden Thank you, David. We have made a significant progress on our medial radioisotopes initiative. In the last six months, we have proven the technology at full scale. We have selected Ontario Power Generation as the radiation services provider for BWXT's technetium-99 product line. We have signed an agreement with Bruce Power to cooperate in the development and production of additional new radioisotopes. We have initiated research and development efforts for some entirely new radioisotope products, and as announced yesterday, closed the Nordion acquisition about five months earlier than we originally anticipated further derisking the technetium-99 product industrialization base. Radioisotopes represent a new and exciting business and another growth platform for BWXT. As we integrate Nordion and commercialize new technology to bring technetium-99 to the market, we believe radioisotopes are going to become an increasingly important part of our growth story. We are supremely confident in our technology and channels to market, and although aggressive, we still anticipate bringing the technetium-99 product line to market around the end of 2019. Including the recently approved Indium-111 oxine radioisotope, the Nordion business will be comprised of six active products. In addition, there are opportunities to add new and reactivated dormant isotopes to this product portfolio. In addition to the ongoing business, we see meaningful revenues coming out of our isotopes business over the next few years. Nordion is a growing business today, and we expect it will be slightly accretive in 2019. Once some of our new products are online, we see our isotopes business contributing significantly to earnings per share growth over the long-term. In the meantime, we've hit the ground running, integrating Nordion business. We intend to expand the product portfolio and to advance the commercialization of our breakthrough radioisotope manufacturing technology. And with that, I would like to open the line for questions. Operator? Question-and-Answer Session Operator Thank you. We will now begin the question-and-answer session. [Operator Instructions] And first question comes from Bob Labick from CJS Securities. Please go ahead. Robert Labick Thank you, good morning, on closing the acquisition ahead of schedule. Rex Geveden Thank you, Bob. Robert Labick So, it sounds like - you may not answer this, but I'm going to ask anyway. Could you give us a sense of the revenues and margins of the existing Nordion business? And then, I guess, the price paid would be a great thing to understand as well. I know we'll eventually find out all of this. So, if you can tell us know it would be great, or tell us when we might find that out? David Black Yeah, Bob, this acquisition is similar to the one that we did with GE, Hitachi in December of 2017. And that we're under agreement with the seller not to disclose certain details until we're required to do so, through the normal SEC reporting process. So you'll start to see a lot more detail around that in Q3. Robert Labick Got it. Okay. And you said it's essentially breakeven this year and slightly accretive next year, correct? Rex Geveden Yes, that's how we see it. Robert Labick Okay, great. And then, can you give us just a sense, now that we've accelerated a little bit, for the time line and the steps needed now to enter the technetium generator market? Rex Geveden Yeah, so the big steps are to industrialize the product line, the technetium-99 product line. And the early acquisition, earlier than planned acquisition basically derisks that industrialization phase. That involves putting hot chemistry processing equipment into hot sales, manufacturing and delivering generators, and things like that. I actually believe that's kind of the low risk part of our schedule. It's not a simple thing to do, but it's something we understand well. And the technological risk, it's basically retired at this point. So that's kind of the fundamental aspect of getting it into the Nordion business. Apart from that, we have to go through the irradiation services part of it, which is to build the equipment to have this material irradiated at the reactors, at the Darlington reactors at Ontario Power Generation. And so, there's both an equipment design and then a regulatory approval phase with the Canadian Nuclear Safety Commission for that part of it. So that's on the critical path. And then - and then, we have to run product through the entire system from the irradiation part of it through the hot chemistry processing and through extraction of the product with our generators. And then, that aspect of it has to be approved by the FDA. So, I think, as I see it, the critical path items are the irradiation services and then also the approval of the drug by FDA. So that's how we see it playing out. Robert Labick Great. That was very helpful. I appreciate that. And then, just one last one and I'll jump back in queue. In NPG, obviously, you said performing, I think - I think you said ahead of your expectations a little bit. Could you remind us why the lower margins in the back-half implied in guidance to get 12%? And ex-isotopes going forward, is 12% still the right number long-term? Or is there an opportunity to grow off of that 12% margin in - again, in NPG ex isotopes? Rex Geveden Yeah, I would say, we're not prepared to anticipate what future margins would be in that business. But I think we're all around the table here, very optimistic about that business. It's growing nicely. It is producing good margins, and we expect, in the end, the radioisotope business will be highly accretive to that segment. In terms of second half of the year, I would say, we just are prepared to upgrade the guidance in that segment. I do think there is potential upside there. We like where that segment is running in terms of its revenues. So there is certainly some potential outperformance there. But we are planning to stick to the guidance at this point. Robert Labick Super. All right, thank you very much. Rex Geveden You're welcome. Operator And our next question comes from Sam Pearlstein from Wells Fargo. Please go ahead. Sam Pearlstein Good morning. Rex Geveden Good morning, Sam. David Black Hey, Sam. Sam Pearlstein I wanted to follow up a little bit more on the radioisotopes. It certainly seems like your competitors have certainly been talking to a lot of investors, telling them that your timetable is very aggressive for that late 2019. So can you help just understand, I guess, some of the milestones we should expect to see or we will see along the way for both the Canadian Nuclear and the FDA? And related to that, your competitors have tried about supply agreements already with radiopharmacies, needing the cold kits. Can you just talk about why you're more optimistic than, I'd say, the way they're talking about it? Rex Geveden Okay. Well, certainly the competitors will characterize our business differently than we would. The reason we're optimistic about it, Sam, is because the technological risk is retired. We have produced this product at full scale and it meets all the generic specifications for that drug. So we're optimistic about being able to get an accelerated approval with the FDA. We're certainly well along in the design of our irradiation services equipment, our robotic equipment. We are extremely mature in the hot chemistry processing and generator designs that we need to make. So we are hitting our milestones. As to what you might anticipate in terms of publicly announced milestones, certainly, the regulatory approvals from the CNSC for the irradiation services, and then ultimately, obviously, FDA approval for that. So those are our big milestones. In terms of channels to market, we have a completely clear way about how we're doing that we aren't disclosing that, of course, at this juncture, but we have very clear picture on that. And we have very clear path to significant revenues in this business over the next three, four years. Sam Pearlstein Thank you. And if I can just switch gears in terms of the missile tubes business, there has been some reports out of the Navy about welding issues with some of the missile tubes that you've manufactured. And I guess, is that the issue that you identified in the 10-Q within the rework issues? And just can you help us understand what that cost would? And secondly, does it factor into the next tube decision? Rex Geveden Yeah, that's it, Sam. The discloser that's in the Q is exactly that issue. That's a problem that we self-identified to our clients, our customers at General Dynamics Electric Boat and then ultimately to the Navy. We are working very closely with those customers to try to resolve this problem. Weld quality is - quality is a core value in our business, and this concerns some welded components. We don't - we certainly don't see this as having a material impact on the business. We have self-suspended some welding operations in this area until we get the problem resolved. We have accrued for some additional anticipated costs, and those are reflected in our operating numbers in Q2. And they're also included in our guidance. So we're prepared to address that from a financial and operational aspect, and it's early in the game as to what we'll need to do there in terms of rework, but we are working daily with our client to get that worked out, and we'll hope to resolve it as soon as possible. In terms of how it might impact the future business is just too early to tell. Next significant awards in that business are on the Q1 of 2019, and so that's a bit down the road from here. Sam Pearlstein Great. Thank you. Rex Geveden Thank you. Operator And our next question comes from Rob Spingarn from Credit Suisse. Please go ahead. Robert Spingarn Hi, good morning. Rex Geveden Good morning, Rob. Robert Spingarn How does that welding issue happen? In other words, how do you actually end up there given the track record you got? Rex Geveden Well, it's fundamentally an inspection technique issue. And we're working through that part of it now. The inspection - there is a problem with inspection technique, which meant that some welding indications were not caught in the inspection. So I don't view it as a welding quality issue, I view it as an inspection technique issue. And so because of that, we'll have to go back and reinspect and rework some of those welds. Robert Spingarn So the work is generally okay. It's - this is really paperwork is how you'd be thinking about it that way? Rex Geveden No. No. I wouldn't put it that way either. What I mean is that in the welding process, we normally inspect the welds periodically and make weld repairs, and the inspection technique didn't detect those welding issues. And so there are - there is repair work that will have to be done. Robert Spingarn Okay. And what's the financial implication of this? Rex Geveden Well, it's again too early to tell what that might be. But we certainly don't anticipate it to be material. And as I mentioned earlier, we have accrued for those additional anticipated costs and those are reflected in Q2 numbers and included in our guidance. Robert Spingarn Okay. And then, this might have been touched on earlier, but to get to the full year NPG margin guide of 12%, you'd realistically have to be booking margins at around 7% over the next few quarters. But it doesn't look like you've ever been below 10%. So what would cause the further sequential decline there? Rex Geveden So we had, as you know, an extremely strong quarter in Q1. And so that's sort of let's call it inflated the margin in that business in the first half. And so we're just sort of anticipating a return to normalcy in that business. I will say, as I said earlier, if we've got some upside in the business in the second half in addition to what we expect in Nuclear Operations, it would be in that business. It's moving quite strongly. Robert Spingarn Okay. And then last thing, I just wanted to get back to Savannah River, you mentioned it earlier, and just understand, can you ramp quickly enough to support that $20 million NSG profit guide? Rex Geveden So the - yeah, so the - we had built the Savannah River liquid waste business into our plan for this year, of course, because we didn't anticipate that protest, and protest is pushing out the award - the eventual award by give or take a year. So that's the headwind that is in the Nuclear Services Group business now. We're not changing the outlook there, because we've got some, let's call it, some surprising streams in other aspects of that segment. We're doing very well, for example, in the advanced reactors area. We're doing very well on current contracts in terms of operational performance in the field. And so we've got some ways of making that up, and I think that's a pretty satisfying result of good management and some, let's call that, anticipated competitive strength. Robert Spingarn Well, that's good. So if you do end up seeing a positive result with Savannah River, you've got some upside there? Rex Geveden I don't think there's much there, because we'd have to go through the transition phase, which is - if it's awarded to us in the fall, and that's - that phase doesn't carry profit with it. So where you see the lift is in 2019 and beyond. And it's a very big program. It will put some real lift into that segment, but we won't see much of it this year. Robert Spingarn Okay. Thank you very much for the help. Rex Geveden Thank you, Rob. Operator And our next question comes from Peter Arment from Baird. Please go ahead. Peter Arment Yes, good morning, Rex, David, Alan. Rex Geveden Good morning, Peter. Peter Arment And, Rex, hey, first, I guess, a quick one on Nordion. The 150 employees that are joining or have joined you, how does the employment levels look with all the kind of once you get into production? Do you have to go through a bigger hiring phase to support your efforts? Rex Geveden I can't offer much detail on it yet, but the general answer is no. The - one of the things that we really loved about that business was how much capacity it has. As you may know, if you've researched it, Nordion has been a much bigger business in the past, when it had access to the Chalk River reactor and active product lines, including moly-99 among others. And so what you have there with that business is, it's a very beautiful business from the standpoint of industrial capacity and from the standpoint of workforce knowledge. These workers know how to produce the product, and there is a ton of capacity, many hot sales that are available for use lots of space in both of those facilities in Kanata and Vancouver. And so that's really quite an attractive aspect of it, is that we can scale our production in that facility without having to, let me call it, overinvest. Peter Arment Okay. And then just on capacity question, in general. I mean, given your commentary regarding some of the items that are kind of flagged in the fiscal 2020 budget, how should we be thinking about just kind of still your long-term capacity requirements and the way to think about CapEx trends? Rex Geveden Yeah, so all the CapEx guidance that we've given you including the $150 million that we're doing this year, most of which is for the Naval reactors capacity build. All of that is built around our strategic - long-term strategic plan, which anticipates that two Virginias per year, every year - two Virginias every year regardless of whether there is a Columbia being ordered. So it's that new Navy shipbuilding plan, and also the Fords on their current acquisition tempo. So that's what our capital buildout is related to, and there's very substantial volume increases related to all that. What we haven't capitalized and built into our operating plans and our capital plans are the upside things, such as the additional Virginias in 2022 and 2023, which would hit our books in 2020 and 2021 because of long-lead nature of the equipment that we supply. And then, we also haven't anticipated from a volume or capital perspective, this additional Fords, that the additional Ford volume that could come with either the two Ford buy, which puts a little bit of additional volume into our business or these accelerated procurement schedules that they talk about, where you might alternate ordering the ship that forward carriers on the three and four year intervals, average 3.5. So the capital is built to that strategic baseline of two Virginias per year, but not all this upside stuff would be authorized as having to build. David Black And we also haven't provided a new outlook on what we feel the - after buying the Nordion business, what we will do with capital there in order to get medical radioisotope. So that will be also coming. Peter Arment Got it. Okay. Thanks, David. Operator [Operator Instructions] And our next question comes from David Strauss from Barclays. Please go ahead. Unidentified Analyst Hey, good morning, guys. It's actually Matt on for David. David Black Hey, Matt. Rex Geveden Hey, Matt, good morning... Unidentified Analyst I was wondering if you could touch on just sort of the mix of capital allocation. Obviously, you talked about M&A. But I guess now that Nordion is behind us, is there a chance to move back to more buybacks or is M&A sort of more of the focus now? David Black I think as we've been talking about capital allocation, we said at this point in time for share repurchases that we would be more opportunistic, except that we would be looking to get into the market to offset dilution. So I think still with the acquisition, we just did through the M&A of Nordion, I feel that there is other things we'll continue to look at. And so, from a capital allocation standpoint, plus we talk about de-risking the pension plan, taking advantage of the current tax environment around - between now and September where you can get a larger tax deduction for payments into the pension plan. So I think we've got a lot of things we're looking at still to utilize that capital. Unidentified Analyst Got you. Thanks. And then, I guess, one more - I think the budget, the new budget has support for a two-carrier buy. Is there - I guess, can you talk about the opportunity for you guys on that, is there a chance to move revenue forward or maybe get more efficient or just sort of how you think about that? Rex Geveden Yeah, sure, Matt. I'll take that one. So that one doesn't have a dramatic impact on our business, because the first of those two Fords is already in the existing pricing agreement with our customer. And so, with that two - that sort of two-carrier buy, what that does is that pulls that second one into the next pricing agreement. So it would impact the business from the standpoint of some long-lead materials and some things like that. So we'd see a little bit of lift to it. But that's the limit of it. Unidentified Analyst Okay, great. Thanks. Rex Geveden Thank you. Operator And our next question comes from Michael Ciarmoli from SunTrust. Please go ahead. Michael Ciarmoli Hey, good morning, guys. Thanks for taking the questions. Maybe, Rex, just back to the medical isotope, so just to get a better understanding, does the actual process, your manufacturing process need FDA approval in addition to the drugs? Are we looking for in terms of milestones, FDA approval on both the process and the actual drug? And would those timelines be materially different at all? Rex Geveden So, Michael, those are one and the same. So when you receive an FDA approval, you're receiving approval for the, let's call it, the product characteristics, but also the production characteristics, so those are combined together in the approval. And so, there's no... Michael Ciarmoli Got it. Got it. Okay. And then, Rex, you kind of talked about Nordion, that you're probably going to be adding, I think, some new isotopes. I think you said, potentially they had six active products and you could bring new and dormant products online. Can you talk maybe about some of the costs or risks associated with bringing these new products online and maybe give some incremental color into what types of products they'd be or what they'd be targeted to? Rex Geveden Sure, we haven't certainly laid out any cost numbers for some of that externally. We have built up our own internal estimates. But I would tell you that the way I would want to put it is that the cost that we have incurred, for example, in the development of the Moly-99, technetium-99 product line are actually pretty modest. The R&D and the scaling up of the product as we went through the developmental phases, the R&D part of it is actually a fairly modest investment. And we expect fairly modest investments to bring, let's call it, dormant isotopes back to life in the Nordion portfolio, because those are already approved and licensed in some cases. And so, from the R&D aspect, not so terribly expensive. From a capital side, we have to spend some money, obviously, to stand up these production lines. And you've gotten a little bit of color on that in the past. In terms of what we would target, of course, we put Moly-99, technetium at the centerpiece of our isotope business, because that's the most important and highest revenue producing isotope in the world right now. But where that market is going is that the therapeutic side of isotopes are really the most interesting growth scenario. And we expect to be investigating and investing in therapeutic isotopes in the future in addition to the imagine isotope that we're focused on now. Michael Ciarmoli Got it. That's helpful. And then, just last one for me, shifting gears, on the Nuclear Power, I think you still have a fairly wide revenue range there, $300 million to $350 million. I thought you said in the beginning of the year, you'd wait for some bookings, some potential clarity. What are you looking for in that end market, either from the bookings front or different trends to sort of narrow that guidance or bring us to the high-end or the low-end by the end of the year here? Rex Geveden Yeah, I think we'll end up in the top of that range. As I said earlier, that business is really performing and we're optimistic about what it can do. Michael Ciarmoli Okay, okay. Thanks a lot guys. I'll jump back in. Rex Geveden Thanks, Michael. Operator And this concludes our question-and-answer session. I would now like to turn the conference back over to Mr. Alan Nethery for any closing remarks. Alan Nethery Thank you, Cole, and thank you for joining us this morning. That concludes our conference call. A replay of this call will be posted on our website later today and will be available for a limited time. If you have further questions, please call me at 980-365-4300. Thank you. Operator The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.


Community Bankers Trust Corporation (ESXB) CEO Rex Smith on Q2 2018 Results - Earnings Call Transcript

Jul 28th, 2018

Community Bankers Trust Corporation (NASDAQ:ESXB) Q2 2018 Earnings Conference Call July 26, 2018 10:00 AM ET Executives Rex Smith - President and CEO Bruce Thomas - EVP and CFO Analysts Catherine Mealor - KBW John Rodis - FIG Partners Blair Brantley - Brean Capital Operator Good day and welcome to the Community Bankers Trust Corporation Conference Call and Webcast. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I'd now like to turn the conference over to Mr. Rex Smith. Please go ahead, sir. Rex Smith Good morning and thank you for joining us today as we review the results of the Second Quarter and the First Six Months of 2018 for Community Bankers Trust Corporation, which is the holding company for Essex Bank. Let me start with a reminder that during the course of our remarks today, we may make forward-looking statements within the meaning of applicable securities laws with respect to our operations, performance, future strategy and goals. I remind everyone that our actual results may differ materially from those included in the forward-looking statements due to a number of factors. These factors and additional risks and uncertainties are included in our earnings release, our most recent Form 10-K and other reports that Community Bankers Trust Corporation files with or furnishes to the Securities and Exchange Commission. You can access all these documents through our Web site at www.cbtrustcorp.com. On today's call, I'll give a quick overview of the quarter, and Bruce Thomas, our Chief Financial Officer will cover details selected financial highlights. And then I will share our thoughts on the rest of the year. I am pleased to report that the company has posted a significant increase in earnings year-over-year. Earnings for the first 6 months of 2018 were $6.4 million or $0.29 per share. This is an increase of $949,000 or 17.5% over the same period of 2017. The increase is attributable to numerous positive factors in the cooperating metrics for the company. While slower than expected in the first half of 2018, loan growth excluding PCI loans, increased just over $103 million or 12% year-over-year. For the first 6 months, loans increased $25.3 million or approximately 2.7%. There were both economic and competitive reasons for the lower-than-expected growth, but we're focused on building long-term value rather than taking credit or pricing risk for the sake of growth. The pipeline heading into the third quarter looks strong. And I am confident, our annual growth rate will settle into a range between 7% and 9% for 2018. The bank also continued its growth in demand deposits for the first half of 2018. Non-interest bearing deposits grew $13.5 million or 9.7% year-over-year and now comprise 13.5% of total deposits. NOW and Money Market accounts also increased allowing us to decrease broker deposits by over $26 million or 73.6%. This helps to hold down our cost of funds as the betas [ph] on these deposits are extremely high and have moved rapidly with the increases in short-term rates. The tax equivalent net interest margin was 3.75% for the first 6 months, which was slightly lower than it was for the same time period in 2017. While loan yields increased, deposit cost also rose from the interest rate increases. I expect deposit betas to flatten out in the coming quarters, as we continue to grow our non-interest bearing core deposits and pay down the broker deposits further. Despite the higher funding costs, net interest income increased $1.3 million or 5.8% year-over-year. Noninterest income continue to improve with a 9.9% increase on a linked quarter basis as a result of increases in service charges on deposit accounts, increases in mortgage loan income and increases in financial services fees. Now I would like to turn the call over to our Chief Financial Officer, Bruce Thomas, to discuss the details for the quarter. Bruce Thomas Thank you, Rex, and I would like to thank all of you for joining us on this morning's call. Net income was $3.8 million for the second quarter of 2018 compared with net income of $2.6 million in the first quarter of 2018. Earnings per common share basic and fully diluted were $0.17 per share and $0.12 per share for the 3 months ended June 30, 2018 and March 31, 2018, respectively. The increase of $1.2 million or 45.8% in net income for the second quarter of 2018 compared with the first quarter of 2018 was primarily the result of a $1.2 million decrease in total noninterest expense driven by a decline of $830,000 in salaries and employee benefit. Net interest income after provision for loan losses increased $180,000 and noninterest income increased $102,000. Offsetting these increases was an increase of $273,000 in income tax expense. Interest income on a linked quarter basis increased $431,000 or 3.1% to $14.5 million for the second quarter of 2018. Interest income with respect to loans excluding PCI loans increased $477,000 or 4.4% during the second quarter when compared with the first quarter of 2018. This increase was partially attributed to continued loan growth excluding PCI lines, coupled with higher rates. The yield on loans increased from 4.68% in the first quarter of 2018 to 4.75% in the second quarter of 2018. The average balance of loans excluding PCI loans increased $15.6 million or 1.6% on a linked quarter basis. Also improving in the second quarter was a tax equivalent yield on the securities portfolio, which was 3.11% in the second quarter of 2018 compared with a tax equivalent yield of 2.98% in the first quarter of 2018. Tax equivalent securities income was $2 million for the second quarter. Interest expense of $2.9 million in the second quarter of 2018 was an increase of $251,000 or 9.6% on a linked quarter basis. Interest on deposits increased $212,000 or 9.9%. The cost of deposits increased from 92 basis points in the first quarter of 2018 to 99 basis points in the second quarter 2018, resulting in a 9.9% increase in interest expense. The increased rates paid on interest-bearing deposits and wholesale funding, resulted in an increase in the cost of interest-bearing liabilities from 1% in the first quarter of 2018 to 1.08% in the second quarter of 2018. With the changes in interest income noted above, the tax equivalent net interest margin declined from 3.76% in the first quarter of 2018 to 3.73% in the second quarter of 2018. Noninterest income was $1.1 million for the second quarter of 2018, an increase of $102,000 compared with the $1 million for the first quarter of 2018. The linked quarter change was primarily attributable to an increase of $74,000 in commission income and an increase of $9,000 in dividend income. There was a $53,000 gain on sale of loans within the bank's USDA portfolio in the second quarter of 2018 versus zero in the first quarter of 2018. Noninterest expenses totaled $8.2 million for the second quarter of 2018 as compared with $9.4 million for the first quarter of 2018, a decrease of $1.2 million or 12.6%. Salaries and employee benefits decreased $830,000 or 14.9% on a linked quarter basis. The vast majority of this decrease was related to lower group benefit cost, which decreased by $683,000. Salaries and employee benefits in the second quarter of 2018 were $5 million compared with $5.8 million in the first quarter of 2018. Other operating expenses also declined $336,000 on a linked quarter basis from $1.6 million in the first quarter of 2018 to $1.3 million in the second quarter of 2018. The company converted a phone system in the first quarter of 2018. One-time cost absorbed in the first quarter to terminate the previous vendor relationship began providing a much lower expense beginning with the second quarter of 2018. This decrease on a linked quarter basis was $192,000. With regards to balance sheet changes, total loans, excluding PCI loans, were $967.4 million at June 30, 2018 increasing $25.3 million or 2.7% from year-end 2017 and $103.3 million or 12% from June 30, 2017. The year-over-year changes commercial mortgage loans growing by $35 million or 10.2% followed by growth of $32.8 million or 23.9% in commercial loans, $18.4 million or 18.3% in construction and land development loans, $8.6 million in consumer installment loans, $5.1 million or 2.4% in residential 1-4 family loans, and $3.8 million or 7.6% in multifamily loans. As a result, primarily of new account promotions at the three branches opened during 2017, money market deposit accounts grew $25.5 million or 21.3% from $119.6 million at June 30, 2017 to $145.1 million at June 30, 2018. Now accounts grew $20.1 million or 14.1% since June 30, 2017. These increases have allowed the bank to decrease balances with broker time deposits by $26.5 million over the last year and those balances were only $9.5 million at June 30, 2018. Asset quality remains stable and the bank has realized net recoveries through the first 6 months of 2018 and our allowance for loan losses remains appropriate given our level of nonperforming assets. With that, I will turn it back over to Rex. Rex Smith Thank you, Bruce. I'm pleased with the consistent improvement in the core metrics of the company. We believe that our disciplined approach to growth and pricing helps us develop long-lasting full relationships that continue to grow franchise value. Central Virginia and Eastern Maryland are very competitive banking markets as we've seen new entrants trying by market share. While our approach to pricing and funding has slowed our growth rate, we continue to have sufficient growth necessary to enhance the franchise and therefore earnings. These competitive conditions are temporary as no institution can stay viable if they price irrationally for any length of time. We continue to focus on the most efficient and effective ways to gain profitable market share, which is through a professional and personal approach. The pipeline for loans is not only strong going into the third quarter, but also diverse between loan types and geographic locations. We continue to gain momentum in our newer branch offices and are working to maximize profits in our older ones. Our focus on responsibility level profitability and mix and customer level profitability has allowed us to lower our cost per account and help us grow earnings in a competitive marketplace. The balance sheet remains well-positioned for just about every possible rate scenario in the coming year. I believe this quarter's earnings show that our future is very strong. We continue to gain market share in three of the best growth markets in the mid-Atlantic. I hope that you, our investors, are as pleased as we have been with our results and we look forward to the rest of 2018. I thank all of you who participated in the call today and for your ongoing support of the company. We will now open the call for questions. Question-and-Answer Session Operator Thank you. [Operator Instructions] Our first question comes from Catherine Mealor with KBW. Catherine Mealor Thanks. Good morning. Rex Smith Good morning. Bruce Thomas Hi. Catherine. Catherine Mealor Rex, I may have missed this, so I apologize if you said it, but I truly appreciate that the growth is slowing just given the pricing dynamics. Can you help us think about what an appropriate growth rate is for the back half of the year? Are we now in kind of mid single-digit and then once the pricing returns, you can maybe get back to the high single double-digit growth rate that you've enjoyed historically? Rex Smith Yes. So I think when we look at the year, when we hit 12/31, you're going to like a 7% to 9% total. growth rate range. So I think it will towards the back half of the year start to pick up some. Catherine Mealor Okay. And then how do you -- you mentioned to the deposit data as you think will -- will be better in the back half of the year. And I appreciate some of that's just from the mix on DDAs continuing to grow and the brokered coming down, but how -- I guess, one, does that assume further rate hikes. So if I get another rate hike in the back half of the year, would you think that that guidance will hold true? And then, secondly, how are you thinking about your outlook for your core margin under that assumption? Thanks. Rex Smith Yes. I think you hit the nail on the head. The betas that I'm talking about -- the beta is flattening out. It is because we're going to -- we're continuing to push that non-interest bearing deposit growth in all of those branches and we've got, some of the new branches, the two in Lynchburg, we're opening one over Midlothian at Stonehenge Village at the end of the month. And they're getting a lot of good traction in DDA growth. And I think that change in mix and getting out of that brokered. I think we've done like $9 million in brokered NOW. It's going to help us flatten that out with the rate increase. And the margin, we are just about through all the floors on most of the loans. So when we get the increase, I think Bruce can speak a little more detail to, but I think it's going to be pretty close to where it is. We might see a little bit of change, but I don't think it's going to be dramatic. Bruce Thomas I do think that we're going to see an increase in funding costs, whether prime changes or not in the third and fourth quarter. So with that being said, we would hope for rate increase in both September and December, because if we don't get that, we are going to see continued pinching on our margin and I would anticipate a couple of basis points just as in this quarter, if you do some comparisons year-over-year and 6 months -- versus 6 months and linked quarter, you definitely see that the beta is higher on the liability side than the asset side and that is with increases in all of those comparison periods in prime rate. So we hope for the increases in prime. Catherine Mealor Got it. Okay. So you're saying that even -- so you saw about 7 bps increase in your total interest-bearing deposit costs this quarter. So are you saying right -- you think that linked quarter change will improve as you move to the back half of the year? Bruce Thomas That is our goal because it is all about the mix. So, Catherine, it's -- if we can accomplish the mix change, continued strong growth in DDAs, that's going to keep that beta from going up as much. Rex Smith And we have historically seen greater non-maturity deposit growth in the back half of the year. Catherine Mealor Okay. That's helpful. I would [indiscernible] actually within that [indiscernible] this quarter to begin with, so that's -- w

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