BWX (BWXT) 8-K Babcock & Wilcox Announces Second Quarter 2011 Results

Exhibit 99.1

Babcock & Wilcox Announces Second Quarter 2011 Results

• Earnings per share of $0.39, Non-GAAP earnings per share of $0.47
• Revenues increased 9.3%

CHARLOTTE, N.C.--(BUSINESS WIRE)--August 8, 2011--The Babcock & Wilcox Company (NYSE: BWC) (“B&W” or the “Company”) today reported revenues of $752.4 million, an increase of $63.9 million or 9.3% from the second quarter of 2010. Earnings per share for the second quarter of 2011 were $0.39. Included in earnings per share for the second quarter of 2011 is the impact of net unfavorable adjustments of approximately $0.08. Before the impact of these items, earnings per share for the second quarter ended June 30, 2011 were $0.47 compared to $0.41 in the second quarter of 2010.

Recent Highlights

• Signed Letter of Intent with Tennessee Valley Authority for B&W mPower™ Reactor Project
• Awarded $417 Million Waste Management Contract at Department of Energy (DOE) Facility
• Awarded $333 Million West Valley Demonstration Project Cleanup Contract
• Awarded $81 Million Design and Supply Contracts for Emissions Control Systems
• Awarded $40 Million Nuclear Energy Maintenance Project
• Expanded Commercial Nuclear Capabilities with N-Stamp Certification at Ohio Manufacturing Facility
• Signed Memorandum of Understanding to Collaborate with Toshiba on Power Generation Opportunities
• Cross-State Air Pollution Rule (CSAPR) Finalized by Environmental Protection Agency (EPA)
• Environmental Engineering, Design and Construction Bidding Activity Accelerating

Results of Operations

Consolidated revenues for the second quarter of 2011 were $752.4 million, an increase of $63.9 million or 9.3% from the second quarter of 2010. This increase was across all business segments. Nuclear Energy segment revenues increased $36.2 million, or 62.7% primarily due to beginning a large replacement steam generator project during the second quarter. Revenues in the Nuclear Operations segment increased $25.7 million, or 10.4% primarily as a result of the continuing ramp-up in production of Virginia-class submarine components and higher nuclear fuel production. Power Generation segment revenues increased $19.3 million, or 5.2% primarily due to increased North American construction activity more than offsetting a continuing decline in new-build environmental and power generation systems. Technical Services segment revenues increased $9.8 million, or 46.9% in the second quarter of 2011 compared to the second quarter of 2010. This increase was due principally to the award of nearly $3.6 billion of environmental remediation, decontamination and decommissioning contracts, primarily for the DOE, over the last twelve months.

Operating income for the second quarter of 2011 was $63.3 million compared to $85.7 million in the second quarter of 2010. Included in the second quarter 2011 operating income was the impact of a favorable $10.9 million acquisition related settlement at Nuclear Fuel Services, Inc. (NFS) and a $26.0 million unfavorable adjustment to the estimated cost to complete on a certain Nuclear Energy project. Without the impact of these items, operating income was $78.4 million, a decrease of $7.3 million from the second quarter of 2010.

The decrease in operating income before items was primarily due to the reduction in the volume of new-build power generation and environmental projects as well as the close out of certain Power Generation segment projects in the second quarter of 2010, which had the effect of improving the operating results in that prior quarter. The decrease was partially offset by the improvement in performance and production at NFS, the increase in production of nuclear components for the submarine and aircraft carrier programs and fees earned from new management and operation awards.

Update on Loss Contracts

During the first quarter of 2011, the Company recorded a loss on material downblending contracts at NFS. The processing of the material that resulted in the majority of the first quarter charge has been completed. Additionally at NFS, the Company successfully negotiated a settlement related to the acquisition of NFS, resulting in an increase in operating income and cash during the second quarter of 2011 of approximately $10.9 million. Before the favorable impact of this item, NFS operated profitably on revenues of $48.8 million.

During the first quarter, the Company recorded a loss on a certain Nuclear Energy project. As this project shifted from the demolition phase to reconstruction late in the second quarter, the Company encountered a series of unexpected conditions resulting in further schedule extension and incremental estimated cost to complete. As of today, the remaining scope of work on this project is completion of the final structural welding, which has proceeded well. From an accounting perspective, second quarter operating results include an additional charge of $26.0 million representing the gross estimated incremental cost to complete as of the end of the second quarter of 2011. There have been no offsetting claims or equitable adjustments included in the results for the second quarter. Claims and equitable adjustments that are currently in process are significant in value and may be realized over time. “It is unfortunate that certain unknown and undisclosed conditions at this site required the Company to take extensive measures beyond the original scope of work to complete the project. The Company intends to recover all of the costs to which we are contractually entitled. Additionally, the Company has thoroughly reviewed its backlog and determined there are no other fixed-price nuclear projects,” said Brandon C. Bethards, President and Chief Executive Officer of B&W.

Update on EPA Regulation

On July 7, 2011, the EPA released its final rules for CSAPR, formerly referred to as the Clean Air Transport Rules (CATR), with a compliance period beginning January 1, 2012. Additionally, the comment period for the draft mercury and air toxics rules, or Utility Maximum Achievable Control Technology standards (Utility MACT) ended August 4, 2011. Under court order, the EPA has a deadline of November 16, 2011 to finalize the Utility MACT rules. From the Company’s perspective, EPA rules and regulations continue to move forward and are expected to result in a significant market for environmental compliance through engineering, procurement, and construction of equipment over the next several years. “With the drafting and passage of these regulations, we have seen the pace of customer inquiries and bidding activity intensifying as utilities plan for their capital requirements for compliance. We have recently announced two contracts for the design and supply of emissions control systems and we have been awarded several small environmental engineering and design contracts. We expect to continue to see projects awarded through the balance of the year and into 2012,” Bethards said.

Liquidity

The Company’s cash and investments position, net of debt, was $368.7 million at the end of the second quarter of 2011 compared to $375.3 million at the end of the first quarter of 2011. In addition to net cash, the Company maintains a $700 million revolving credit agreement with approximately $506.2 million of availability as of the end of the second quarter. The Company continues to maintain adequate liquidity to fund operations, which could include increased working capital requirements, internal growth and R&D programs, as well as additional product and geographic expansion opportunities.

Reconciliation of Non-GAAP Earnings Per Share and Operating Income
(in $ millions, except per share amounts*)
	Q2 2011		Q2 2010	YTD 2011		YTD 2010
GAAP operating income	$63.3		$85.7	$85.2		$124.4
NFS acquisition settlement	(10.9	)	-	(10.9	)	-
NFS material processing loss contracts	-		-	11.1		-
Nuclear Energy loss contract	26.0		-	47.6		-
Non-GAAP operating income	$78.4		$85.7	$133.0		$124.4
Reported earnings per share	$0.39		$0.41	$0.51		$0.55
NFS acquisition settlement	(0.06	)	-	(0.06	)	-
NFS material processing loss contracts	-		-	0.06		-
Nuclear Energy loss contract	0.13		-	0.25		-
Non-GAAP earnings per share	$0.47		$0.41	$0.75		$0.55

*- per share amounts may not foot due to rounding

B&W is providing non-GAAP information regarding certain of its historical results to supplement the results provided in accordance with GAAP and it should not be considered superior to, or as a substitute for, the comparable GAAP measures. B&W believes the non-GAAP measures provide meaningful insight in the Company’s operational performance and provides these measures to investors to help facilitate comparisons of operating results with prior periods and to assist them in understanding B&W’s ongoing operations.

Conference Call to Discuss Second Quarter 2011 Results

Date:	Tuesday, August 9, 2011, at 8:30 a.m. ET
Live Webcast:	Investor Relations section of website at www.babcock.com

The Babcock & Wilcox Company 2011 Analyst Day

Date:	Thursday, September 15, 2011, at 9:30 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 as to further charges on our nuclear energy project, our intentions regarding seeking potential recovery of cost overruns on the nuclear energy project, our expectation that the EPA regulations may result in significant market opportunities, and our expectations regarding continued project awards into 2012 and the value of additional projects to come to market for the balance of 2011. 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 industries in which we operate, adjustments, delays and other difficulties executing on contracts in backlog, delays in finalizing the Utility MACT rules or difficulties implementing the CSAPR. 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, see B&W’s filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2010 and quarterly reports on Form 10-Q. 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 BALANCE SHEETS ASSETS
	June 30,		December 31,
	2011		2010
	(Unaudited)
	(In thousands)
Current Assets:
Cash and cash equivalents	$	258,371	$	391,142
Restricted cash and cash equivalents		21,706		12,267
Investments		27,228		234
Accounts receivable – trade, net		353,796		289,374
Accounts receivable – other		75,500		64,231
Contracts in progress		273,713		225,448
Inventories		105,072		100,932
Deferred income taxes		97,175		90,620
Other current assets		77,339		34,868
Total Current Assets		1,289,900		1,209,116
Property, Plant and Equipment		996,737		968,712
Less accumulated depreciation		579,821		550,400
Net Property, Plant and Equipment		416,916		418,312
Investments		65,576		74,863
Goodwill		272,108		269,424
Deferred Income Taxes		195,988		236,504
Investments in Unconsolidated Affiliates		155,220		100,811
Other Assets		182,707		191,480
TOTAL	$	2,578,415	$	2,500,510

THE BABCOCK & WILCOX COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS’ EQUITY
	June 30,			December 31,
	2011			2010
	(Unaudited)
	(In thousands)
Current Liabilities:
Notes payable and current maturities of long-term debt	$	3,376		$	4,790
Accounts payable		199,432			185,240
Accrued employee benefits		245,798			235,856
Accrued liabilities – other		81,255			71,242
Advance billings on contracts		409,683			369,644
Accrued warranty expense		101,315			109,588
Income taxes payable		3,003			5,467
Total Current Liabilities		1,043,862			981,827
Long-Term Debt		810			855
Accumulated Postretirement Benefit Obligation		83,562			84,100
Environmental Liabilities		45,715			40,889
Pension Liability		481,445			579,000
Other Liabilities		91,256			100,314
Commitments and Contingencies
Stockholders’ Equity:
Common stock, par value $0.01 per share, authorized 325,000,000 shares;  issued 117,981,315 and 116,963,664 shares at June 30, 2011 and  December 31, 2010, respectively		1,180			1,170
Preferred stock, par value $0.01 per share, authorized 75,000,000 shares;  No shares issued		-			-
Capital in excess of par value		1,091,485			1,067,414
Retained earnings		156,390			96,671
Treasury stock at cost, 272,895 and 101,649 shares at June 30, 2011 and  December 31, 2010, respectively		(8,264	)		(2,397	)
Accumulated other comprehensive loss		(409,858	)		(449,999	)
Stockholders’ Equity – The Babcock & Wilcox Company		830,933			712,859
Noncontrolling interest		832			666
Total Stockholders’ Equity		831,765			713,525
TOTAL	$	2,578,415		$	2,500,510

THE BABCOCK & WILCOX COMPANY CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
	(Unaudited)
	(In thousands, except share and per share amounts)
Revenues	$	752,352		$	688,496		$	1,443,629		$	1,350,884
Costs and Expenses:
Cost of operations		587,741			502,143			1,152,547			1,030,035
Research and development costs		22,568			16,226			39,876			33,285
Losses on asset disposals – net		89			61			79			48
Selling, general and administrative expenses		97,078			101,846			199,711			194,569
Total Costs and Expenses		707,476			620,276			1,392,213			1,257,937
Equity in Income of Investees		18,381			17,435			33,742			31,454
Operating Income		63,257			85,655			85,158			124,401
Other Income (Expense):
Interest income		305			261			764			710
Interest expense		(1,297	)		(4,676	)		(1,752	)		(10,669	)
Other – net		4,425			(3,945	)		1,431			(7,035	)
Total Other Income (Expense)		3,433			(8,360	)		443			(16,994	)
Income before Provision for Income Taxes		66,690			77,295			85,601			107,407
Provision for Income Taxes		20,349			29,583			25,593			42,839
Net Income		46,341			47,712			60,008			64,568
Less: Net Income Attributable to Noncontrolling Interest		(132	)		(72	)		(289	)		(85	)
Net Income Attributable to The Babcock & Wilcox Company	$	46,209		$	47,640		$	59,719		$	64,483
Earnings per Common Share:
Basic:
Net Income Attributable to The Babcock & Wilcox Company	$	0.39		$	0.41		$	0.51		$	0.56
Diluted:
Net Income Attributable to The Babcock & Wilcox Company	$	0.39		$	0.41		$	0.51		$	0.55
Shares used in the computation of earnings per share:
Basic		117,502,610			116,067,535			117,235,443			116,067,535
Diluted		118,353,937			117,423,807			118,155,592			117,423,807

THE BABCOCK & WILCOX COMPANY CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
	Six Months Ended
	June 30,
	2011			2010
	(Unaudited)
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	60,008		$	64,568
Non-cash items included in net income:
Depreciation and amortization		37,775			33,397
Income of investees, net of dividends		(16,689	)		(16,831	)
Loss on asset disposals – net		79			48
Amortization of pension and postretirement costs		41,021			42,866
Excess tax benefits from stock-based compensation		(4,356	)		(2,295	)
Other, net		922			(13,405	)
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable		(72,281	)		(10,070	)
Net contracts in progress and advance billings on contracts		(11,497	)		(141,405	)
Accounts payable		15,941			41,080
Inventories		(2,908	)		6,973
Current and deferred income taxes		36,605			(326	)
Accrued and other current liabilities		3,305			(280	)
Pension liability, accumulated postretirement benefit obligation and accrued employee benefits		(90,249	)		(64,353	)
Prepaid expenses		(42,305	)		(26,637	)
Other, net		(7,016	)		30,100
NET CASH USED IN OPERATING ACTIVITIES		(51,645	)		(56,570	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in restricted cash and cash equivalents		(9,439	)		(3,891	)
Purchases of property, plant and equipment		(32,195	)		(31,686	)
Acquisition of businesses, net of cash acquired		-			(30,598	)
Purchases of available-for-sale securities		(88,746	)		(123,052	)
Sales and maturities of available-for-sale securities		71,211			127,052
Decrease in note receivable from affiliate		-			43,277
Investments in equity and cost method investees		(35,467	)		600
Proceeds from asset disposals		714			243
NET CASH USED IN INVESTING ACTIVITIES		(93,922	)		(18,055	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of short-term borrowing and long-term debt		(1,600	)		(1,729	)
Payment of debt issuance costs		(82	)		(9,865	)
Dividend paid to McDermott International, Inc.		-			(100,000	)
Increase in notes payable to affiliates		-			(43,386	)
Excess tax benefits from stock-based compensation		4,356			2,295
Exercise of stock options		4,052			-
Distributions to noncontrolling interests		(170	)		(78	)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		6,556			(152,763	)
EFFECTS OF EXCHANGE RATE CHANGES ON CASH		6,240			(1,733	)
NET DECREASE IN CASH AND CASH EQUIVALENTS		(132,771	)		(229,121	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		391,142			469,468
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	258,371		$	240,347

The Babcock & Wilcox Company
Business Segment Information
For the Three and Six Month Periods Ended June 30, 2011 and 2010
(In thousands of U.S. dollars)
		THREE MONTHS ENDED						SIX MONTHS ENDED
		6/30/11			6/30/10			6/30/11			6/30/10
REVENUES:
Power Generation Systems		$	388,643		$	369,320		$	744,827		$	725,264
Nuclear Operations			272,625			246,923			523,080			481,218
Technical Services			30,668			20,920			59,028			40,549
Nuclear Energy			93,877			57,747			159,139			113,712
Adjustments and Eliminations			(33,461	)		(6,414	)		(42,445	)		(9,859	)
	TOTAL	$	752,352		$	688,496		$	1,443,629		$	1,350,884
SEGMENT INCOME:
Power Generation Systems		$	28,098		$	42,115		$	54,731		$	62,818
Nuclear Operations			59,289			40,680			89,739			65,180
Technical Services			14,466			12,604			26,608			23,316
Nuclear Energy			(33,342	)		(2,281	)		(70,820	)		(13,683	)
			68,511			93,118			100,258			137,631
Corporate			(5,254	)		(7,463	)		(15,100	)		(13,230	)
	OPERATING INCOME	$	63,257		$	85,655		$	85,158		$	124,401
EQUITY IN INCOME (LOSS) OF INVESTEES:
Power Generation Systems		$	6,030		$	7,459		$	12,040		$	12,000
Nuclear Operations			0			0			0			0
Technical Services			12,351			9,976			21,702			19,454
Nuclear Energy			0			0			0			0
	TOTAL	$	18,381		$	17,435		$	33,742		$	31,454
PENSION EXPENSE:
Power Generation Systems		$	16,139		$	15,072		$	32,067		$	30,164
Nuclear Operations			8,946			9,724			17,892			19,449
Technical Services			633			609			1,267			1,219
Nuclear Energy			1,098			889			2,279			1,809
Corporate			1,744			6,049			3,424			12,097
	TOTAL	$	28,560		$	32,343		$	56,929		$	64,738
DEPRECIATION AND AMORTIZATION:
Power Generation Systems		$	4,399		$	3,847		$	9,119		$	7,635
Nuclear Operations			9,743			8,851			20,134			17,953
Technical Services			66			66			132			132
Nuclear Energy			1,323			1,243			2,504			2,505
Corporate			2,929			2,578			5,886			5,172
	TOTAL	$	18,460		$	16,585		$	37,775		$	33,397
RESEARCH AND DEVELOPMENT, NET:
Power Generation Systems		$	5,786		$	6,228		$	8,780		$	13,868
Nuclear Operations			23			14			34			18
Technical Services			646			108			646			164
Nuclear Energy			16,113			9,876			30,416			19,235
	TOTAL	$	22,568		$	16,226		$	39,876		$	33,285
CAPITAL EXPENDITURES:
Power Generation Systems		$	3,895		$	3,854		$	8,034		$	6,771
Nuclear Operations			3,984			838			15,750			8,737
Technical Services			0			0			0			0
Nuclear Energy			1,320			1,084			3,783			1,201
Corporate			2,243			7,147			4,628			14,977
	TOTAL	$	11,442		$	12,923		$	32,195		$	31,686
BACKLOG:
Power Generation Systems		$	1,455,575		$	1,487,148		$	1,455,575		$	1,487,148
Nuclear Operations			2,693,961			2,546,287			2,693,961			2,546,287
Technical Services			12,820			7,565			12,820			7,565
Nuclear Energy			467,896			328,982			467,896			328,982
	TOTAL	$	4,630,252		$	4,369,982		$	4,630,252		$	4,369,982

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