BWX (BWXT) 8-K Babcock & Wilcox Announces Third Quarter 2010 Results

Exhibit 99.1

Babcock & Wilcox Announces Third Quarter 2010 Results

• Earnings per share increased 40.9%
• Consolidated backlog steady at $4.4 billion
• Power generation systems segment backlog increased 11.3% sequentially

CHARLOTTE, N.C.--(BUSINESS WIRE)--November 8, 2010--The Babcock & Wilcox Company (NYSE: BWC) (“B&W” or the “Company”) today reported earnings per share for the third quarter ended September 30, 2010 of $0.31, an increase of 40.9% from the third quarter of 2009. Revenues for the third quarter of 2010 were $632.8 million, a decrease of $16.2 million or 2.5% from the third quarter of 2009.

Recent Highlights

• Selected to supply B&W’s oxy-coal combustion technology as part of the $1 billion Department of Energy (DOE) FutureGen 2.0 Carbon Capture and Sequestration project
• Awarded 10-year, $2.1 billion DOE decontamination and decommissioning contract for the Portsmouth Gaseous Diffusion plant in Ohio, in alliance with Fluor
• Announced contract awarded to Babcock & Wilcox Beijing Company Ltd. to manufacture two 1,000 MW ultra-supercritical coal fired boilers for the domestic Chinese market
• Awarded replacement nuclear steam generator contract with IMPSA in Argentina
• Awarded design and manufacture contract for two nuclear steam generators for the Tennessee Valley Authority (TVA) Bellefonte Plant
• Awarded design, engineering and construction of SCR environmental system for control of nitrogen oxides for Michigan power plant
• Awarded design, engineering and construction of 33 MW multi-fuel waste plant in Sweden

Government Operations Segment

Revenues of $265.1 million increased $5.3 million or 2.1% in the third quarter of 2010 compared to the third quarter of 2009. This increase is principally the result of an increase in activity for nuclear reactor components partially offset by a reduction in revenues for the manufacture of components for a commercial uranium enrichment project.

Operating income of $48.1 million increased $28.3 million, or 143% in the third quarter of 2010 compared to the third quarter of 2009. This increase is principally related to productivity and project execution improvement on the production of nuclear reactor components, an increase in fees earned due to higher funding levels and productivity at the Company’s management and operations sites and an improvement in operating results and favorable contingency resolution at the Company’s highly enriched uranium nuclear fuel manufacturing facility.

“Our core defense related businesses continue to execute at a high level of proficiency on their existing contracts and we expect this performance to continue in the future. Additionally, we have been successful leveraging our expertise in nuclear technologies and high-consequence, mission-critical defense capabilities to expand our portfolio and sources of revenues and earnings, such as the recent $2.1 billion Portsmouth decontamination and decommissioning contract, and securing our position as program manager for the American Centrifuge Project (ACP),” said Brandon C. Bethards, President and Chief Executive Officer of B&W.

Power Generation Systems Segment

Revenues of $369.0 million for the third quarter of 2010 declined $20.6 million or 5.3% compared to the third quarter of 2009. This decrease was principally related to a decline in demand for new-build coal fired generation systems and services in the U.S., partially offset by increasing volumes in renewable power generation systems. Backlog in the power generation systems segment increased $205.1 million, or 11.3% from the end of the second quarter of 2010. This increase is principally due to our success in the U.S. and international nuclear services market, power and environmental aftermarket services and growth in energy from waste and biomass in Europe.

Operating income was $20.4 million in the third quarter of 2010 compared to $34.2 million in the third quarter of 2009. The decrease in operating income is principally related to improvement in contract execution offset by the decline in market demand for the Company’s fossil power generation products and services in the U.S. and an increase in research and development efforts for the Company’s modular nuclear reactor (B&W mPower) program. Selling, general and administrative expenses have been reduced over time with market demand, offset by increases related to acquired businesses and the Company’s modular nuclear reactor technology program. Research, development and administrative expenses related to the Company’s modular nuclear reactor technology program were higher in the third quarter of 2010 by approximately $9.9 million compared to the third quarter of 2009.

“Our U.S. fossil power business continues to achieve the results we would expect at this point in the business cycle with parts and services flattening out and new-build fossil power generation projects continuing to roll-out of backlog. Importantly, the Company is beginning to experience an increase in customer interest related to planning for environmental equipment purchases and installation services in order to achieve compliance with the EPA’s new rules and regulations which are expected to be finalized next year,” Bethards said.

Research and Development

During the third quarter, the Company incurred approximately $17.4 million of research and development costs. In addition to the ongoing investment in R&D at our state-of-the art environmental and fossil power research facility, the Company has ongoing research programs for small modular nuclear reactor technology and environmental equipment technology. For the first nine months of 2010, total internal research and development expenses were $50.7 million, an increase of $17.6 million over the same period in 2009.

Liquidity

The Company’s net cash and investments position was $256.1 million at the end of the third quarter of 2010, a decrease of $67.6 million from the end of the second quarter of 2010. During the quarter, the Company generated approximately $18.1 million of cash flow from operating activities which included a pension contribution of approximately $55.9 million. Also during the quarter the Company made its first tranche investment in USEC of $37.5 million. In addition to net cash, the Company maintains a $700 million revolving credit agreement with approximately $475 million of availability as of the end of the third quarter. The Company continues to maintain adequate liquidity to fund operations, which could include increased working capital requirements, internal growth, and research and development programs, as well as additional product and geographic expansion opportunities.

Outlook

“Underlying business trends in the power generation systems segment during the third quarter were essentially unchanged. We are encouraged by data suggesting continued industrial expansion and increasing electricity consumption, which has led to higher utilization of the U.S. power generation fleet. We expect this to lead utilities to become more constructive towards their maintenance programs for the existing fleet in the short to medium term. Additionally, the multiple EPA regulations expected to be completed in 2011 are leading power generation providers to take a comprehensive look at their entire power generation system to determine the best path to comply with the new rules,” Bethards continued. “Assuming that the Government’s budget appropriation cycle and customer contract negotiations are completed during the fourth quarter, we expect that the government operations segment will end the fourth quarter with the highest backlog in its history,” Bethards concluded.

Basis of Presentation

The Babcock & Wilcox Company operates in two business segments: Power Generation Systems and Government Operations, and was a wholly owned subsidiary of McDermott International, Inc., a Panamanian corporation, (“MII”) until July 30, 2010 when MII distributed 100% of our outstanding common stock to the MII shareholders. On and prior to July 30, 2010, our financial position, operating results and cash flows consisted of The Babcock & Wilcox Operations of McDermott International, Inc., (“BWO”), which represented a combined reporting entity comprised of the assets and liabilities in managing and operating the Power Generation Systems and Government Operations segments of MII in addition to two captive insurance companies which have been combined and contributed to B&W in conjunction with the spin-off of B&W by MII. On our condensed consolidated and combined balance sheets, the period ended September 30, 2010 consists of the consolidated results of B&W, while the period ended December 31, 2009 consists of the combined results of BWO. On our condensed consolidated and combined statements of income, the three and nine months ended September 30, 2010, include the combined results of operations for one month and seven months, respectively, of BWO, and two months of the consolidated results of B&W, while the three and nine months ended September 30, 2009 consist entirely of the combined results of BWO. Our condensed consolidated and combined statements of cash flows for the nine months ended September 30, 2010 consist of seven months of combined results for BWO, and two months of consolidated results for B&W, while the nine months ended September 30, 2009 consist entirely of the combined results of BWO.

Conference Call to Discuss Third Quarter 2010 Results

Date: Tuesday, November 9, 2010, at 8:30 a.m. ET

Live Webcast: Investor Relations section of website at www.babcock.com

Forward-Looking Statements

B&W cautions that this release contains forward-looking statements, including, without limitation, statements relating to our expectation of continued high level performance on existing defense related contracts, our expectation that our government operations segment will end the fourth quarter of 2010 with the highest backlog in its history, the timing of final EPA regulations and rules and our expectation that utilities will become more constructive towards their maintenance programs in the short to medium term. These forward-looking statements are based on current management expectations and involve a number of risks and uncertainties, including, among other things, adverse changes in the demand for industrial electricity usage, continued uncertainty regarding new environmental regulations and the timing of the Government’s budget appropriation cycle. If one or more of these or other risks materialize, actual results may vary materially from those expected. For a more complete discussion of these and other risk factors, please see B&W’s filings with the Securities and Exchange Commission, including its registration statement on Form 10, as amended. B&W cautions not to place undue reliance on these forward-looking statements, which speak only as of the date hereof, and undertakes no obligation to update or revise any forward-looking statement, except to the extent required by applicable law.

About B&W

The Babcock & Wilcox Company is a leader in clean energy technology and services, primarily for the nuclear, fossil and renewable power markets as well as a premier advanced technology and mission critical defense contractor. B&W has locations worldwide and employs approximately 12,000 people, in addition to approximately 10,000 joint venture employees. A company overview presentation, which will be presented at investor conferences and meetings throughout this quarter, is available on the Investor Relations section of our website. For additional information please visit our website at www.babcock.com.

TABLES TO FOLLOW

THE BABCOCK & WILCOX COMPANY
CONDENSED CONSOLIDATED AND COMBINED BALANCE SHEETS
ASSETS
	September 30,		December 31,
	2010		2009
	(Unaudited)
	(In thousands)
Current Assets:
Cash and cash equivalents	$	177,656	$	469,468
Restricted cash and cash equivalents		11,243		15,305
Investments		351		14
Accounts receivable – trade, net		337,216		319,861
Accounts receivable – other		60,539		39,289
Contracts in progress		304,943		245,998
Inventories		101,173		98,644
Deferred income taxes		82,361		96,680
Other current assets		28,183		21,456
Total Current Assets		1,103,665		1,306,715
Property, Plant and Equipment		952,172		945,298
Less accumulated depreciation		537,852		515,237
Net Property, Plant and Equipment		414,320		430,061
Investments		75,054		73,540
Goodwill		275,707		262,866
Deferred Income Taxes		235,559		270,002
Investments in Unconsolidated Affiliates		101,315		68,327
Note Receivable from Affiliate		-		42,573
Other Assets		184,266		149,775
TOTAL	$	2,389,886	$	2,603,859

THE BABCOCK & WILCOX COMPANY
CONDENSED CONSOLIDATED AND COMBINED BALANCE SHEETS
LIABILITIES AND STOCKHOLDER AND PARENT EQUITY
	September 30,			December 31,
	2010			2009
	(Unaudited)
	(In thousands)
Current Liabilities:
Notes payable and current maturities of long-term debt	$	7,240		$	6,432
Accounts payable		164,008			178,350
Accounts payable to McDermott International, Inc.		-			112,053
Accrued employee benefits		218,889			198,195
Accrued liabilities – other		78,409			74,700
Advance billings on contracts		392,626			537,448
Accrued warranty expense		111,167			115,055
Income taxes payable		2,566			12,943
Total Current Liabilities		974,905			1,235,176
Long-Term Debt		964			4,222
Accumulated Postretirement Benefit Obligation		100,554			105,484
Environmental Liabilities		40,700			47,795
Pension Liability		472,130			699,117
Notes Payable to Affiliate		-			320,568
Other Liabilities		104,622			70,791
Commitments and Contingencies
Stockholders’ and Parent Equity:
Common stock, par value $0.01 per share, authorized 325,000,000 shares;  issued 116,743,437 and 0 shares at September 30, 2010 and  December 31, 2009, respectively		1,167			-
Preferred stock, par value $0.01 per share, authorized 75,000,000 shares;  No shares issued		-
Capital in excess of par value		1,056,655			-
Retained earnings		43,779			-
Treasury stock at cost, 92,643 and 0 shares at September 30, 2010 and  December 31, 2009, respectively		(2,189	)		-
Accumulated other comprehensive loss		(403,959	)		-
Stockholders’ Equity – The Babcock & Wilcox Company		695,453			-
Noncontrolling interest		558			-
Total Stockholders’Equity		696,011			-
Total Parent Equity		-			120,706
TOTAL	$	2,389,886		$	2,603,859

THE BABCOCK & WILCOX COMPANY CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2010			2009			2010			2009
	(Unaudited)
	(In thousands, except share and per share amounts)
Revenues	$	632,765		$	648,997		$	1,983,649		$	2,166,119
Costs and Expenses:
Cost of operations		485,926			513,803			1,549,246			1,678,206
Losses on asset disposals – net		40			443			88			620
Selling, general and administrative expenses		98,708			102,279			293,277			289,444
Total Costs and Expenses		584,674			616,525			1,842,611			1,968,270
Equity in Income of Investees		16,986			13,646			48,440			34,144
Operating Income		65,077			46,118			189,478			231,993
Other Income (Expense):
Interest income		182			692			892			2,874
Interest expense		(660	)		(5,624	)		(11,329	)		(17,858	)
Other income (expense) – net		(6,451	)		(3,168	)		(13,486	)		(12,711	)
Total Other Expense		(6,929	)		(8,100	)		(23,923	)		(27,695	)
Income before Provision for Income Taxes		58,148			38,018			165,555			204,298
Provision for Income Taxes		22,224			11,697			65,063			75,981
Net Income		35,924			26,321			100,492			128,317
Less: Net Income Attributable to Noncontrolling Interest		(37	)		(36	)		(122	)		(131	)
Net Income Attributable to The Babcock & Wilcox Company	$	35,887		$	26,285		$	100,370		$	128,186
Earnings per Share:
Basic:
Net Income Attributable to The Babcock & Wilcox  Company	$	0.31		$	0.23		$	0.86		$	1.10
Diluted:
Net Income Attributable to The Babcock & Wilcox  Company	$	0.31		$	0.22		$	0.85		$	1.09
Shares used in the computation of earnings per share:
Basic		116,291,477			116,067,535			116,142,182			116,067,535
Diluted		117,647,749			117,423,807			117,498,454			117,423,807

THE BABCOCK & WILCOX COMPANY CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
	Nine Months Ended
	September 30,
	2010			2009
	(Unaudited)
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	100,492		$	128,317
Non-cash items included in net income:
Depreciation and amortization		53,000			54,190
Income of investees, less dividends		(27,104	)		(14,254	)
Loss on asset disposals – net		88			620
Amortization of pension and postretirement costs		62,553			64,716
Excess tax benefits from stock-based compensation		(2,653	)		1,813
Other, net		(17,513	)		(25,427	)
Changes in assets and liabilities, net of effects of acquisitions and divestitures:
Accounts receivable		48,832			88,849
Net contracts in progress and advance billings on contracts		(209,171	)		(93,566	)
Accounts payable		2,502			37,200
Inventories		5,543			14,520
Current and deferred income taxes		11,339			11,852
Accrued and other current liabilities		34			(53,277	)
Pension liability, accumulated postretirement benefit obligation and accrued employee benefits		(104,698	)		(28,870	)
Other, net		38,242			(40,329	)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		(38,514	)		146,354
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in restricted cash and cash equivalents		4,062			(12,987	)
Purchases of property, plant and equipment		(48,783	)		(66,655	)
Acquisition of businesses, net of cash acquired		(30,177	)		(8,497	)
Decrease in note receivable from affiliate		43,277			-
Net (increase) decrease in available-for-sale securities		(1,379	)		48,541
Investment in equity and cost method investees		(37,844	)		(2,700	)
Proceeds from asset disposals		1,016			197
NET CASH USED IN INVESTING ACTIVITIES		(69,828	)		(42,101	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of short-term borrowing and long-term debt		(2,313	)		(5,651	)
Payment of debt issuance costs		(9,865	)		-
Increase in short-term borrowing		-			1,606
Dividend paid to McDermott International, Inc.		(100,000	)		-
Capital contribution from McDermott International, Inc.		12,501			-
Distribution to McDermott International, Inc.		(43,334	)		-
(Decrease) increase in notes payable to affiliates		(43,386	)		861
Excess tax benefits from stock-based compensation		2,653			(1,813	)
Other, net		116			(164	)
NET CASH USED IN FINANCING ACTIVITIES		(183,628	)		(5,161	)
EFFECTS OF EXCHANGE RATE CHANGES ON CASH		158			9,691
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(291,812	)		108,783
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		469,468			279,646
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	177,656		$	388,429
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest (net of amount capitalized)	$	2,576		$	333
Income taxes (net of refunds)	$	21,442		$	(33,621	)

The Babcock & Wilcox Company
Business Segment Information
For the Periods Ended September 30, 2010 and 2009
(In thousands of U.S. dollars)
		THREE MONTHS ENDED						NINE MONTHS ENDED
REVENUES:		9/30/10			9/30/09			9/30/10			9/30/09
Power Generation Systems		$	369,032		$	389,638		$	1,201,127		$	1,389,212
Government Operations			265,090			259,752			785,516			778,254
Adjustments and Eliminations			(1,357	)		(393	)		(2,994	)		(1,347	)
	TOTAL	$	632,765		$	648,997		$	1,983,649		$	2,166,119
SEGMENT INCOME:
Power Generation Systems		$	20,391		$	34,202		$	69,526		$	136,199
Government Operations			48,108			19,798			134,574			123,023
			68,499			54,000			204,100			259,222
Corporate			(3,422	)		(7,882	)		(14,622	)		(27,229	)
	OPERATING INCOME	$	65,077		$	46,118		$	189,478		$	231,993
EQUITY IN INCOME (LOSS) OF INVESTEES:
Power Generation Systems		$	7,123		$	4,565		$	19,123		$	7,709
Government Operations			9,863			9,081			29,317			26,435
	TOTAL	$	16,986		$	13,646		$	48,440		$	34,144
PENSION EXPENSE:
Power Generation Systems		$	17,180		$	16,694		$	49,153		$	47,418
Government Operations			14,142			13,347			37,510			37,664
Corporate			(482	)		5,012			8,915			14,182
	TOTAL	$	30,840		$	35,053		$	95,578		$	99,264
DEPRECIATION AND AMORTIZATION:
Power Generation Systems		$	6,586		$	4,444		$	16,727		$	13,398
Government Operations			11,233			16,866			32,359			38,417
Corporate			1,784			940			3,914			2,375
	TOTAL	$	19,603		$	22,250		$	53,000		$	54,190
RESEARCH AND DEVELOPMENT, NET		$	17,424		$	12,593		$	50,709		$	33,120
CAPITAL EXPENDITURES:
Power Generation Systems		$	3,513		$	5,030		$	11,486		$	25,201
Government Operations			4,282			11,710			25,438			25,707
Corporate			9,302			9,662			11,859			15,747
	TOTAL	$	17,097		$	26,402		$	48,783		$	66,655
BACKLOG:
Power Generation Systems								$	2,021,316		$	2,061,837
Government Operations									2,338,117			2,539,252
	TOTAL							$	4,359,433		$	4,601,089

CONTACT:
The Babcock & Wilcox Company
Investor Contact:
Michael P. Dickerson, 704-625-4944
Vice President and Investor Relations Officer
investors@babcock.com
or
Media Contact:
Jud Simmons, 434-522-6462
Public Relations Manager
hjsimmons@babcock.com