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

Exhibit 99.1

Babcock & Wilcox Announces Third Quarter 2011 Results

• Earnings per share of $0.39, Non-GAAP earnings per share of $0.44
• Revenues increased 11.8%
• $634 million Power Generation segment bookings

CHARLOTTE, N.C.--(BUSINESS WIRE)--November 7, 2011--The Babcock & Wilcox Company (NYSE: BWC) (“B&W” or the “Company”) today reported third quarter 2011 revenues of $707.6 million, an increase of $74.8 million, or 11.8%, from the third quarter of 2010. Earnings per share for the third quarter of 2011 were $0.39. Included in earnings per share for the third quarter of 2011 are the impact of accounting for non-cash, non-deductible in-kind research and development costs received by Generation mPower LLC (GmP), discussed below, and the finalization of a Nuclear Energy segment loss contract. Before the impact of these items, earnings per share for the third quarter ended September 30, 2011 were $0.44, an increase of 41.9% from the $0.31 reported in the third quarter of 2010.

Recent Highlights

• Awarded $205 Million Renewable Energy Power Plant EPC and O&M Contracts
• Awarded $115 Million Naval Nuclear Fuel and Support Contract (Q4)
• Awarded Contract to Supply Modular Boilers to Kearl Oil Sands Project
• Awarded Fleet-wide Nuclear Maintenance and Project Support Contract for a Large Mid-Atlantic Utility
• Awarded $40 Million Nuclear Reactor Maintenance Contract for Bruce Power
• Awarded $37 Million Environmental Construction Contract at Consumers Energy
• Awarded Preliminary Design Contract for Ohio Class Replacement Nuclear Propulsion System Components (Q4)
• Dedicated Small Modular Reactor Integrated System Test Facility

Results of Operations

Consolidated revenues for the third quarter of 2011 were $707.6 million, an increase of $74.8 million, or 11.8%, from the third quarter of 2010. For the third quarter in a row, this increase was across all business segments. Nuclear Energy segment revenues increased $26.8 million, or 77.2%, primarily due to incremental replacement steam generator component manufacturing and nuclear services and projects. Nuclear Operations segment revenues increased $10.8 million, or 4.4%, primarily as a result of higher sales of naval nuclear fuel. Power Generation segment revenues increased $49.2 million, or 14.6%, primarily due to increased activity in waste-to-energy and biomass new-build steam generation systems and aftermarket services. Technical Services segment revenues increased $6.5 million, or 29.4%, principally due to initiating environmental remediation, decontamination and decommissioning contracts, primarily for the Department of Energy (DOE), awarded over the last 12 months.

Operating income for the third quarter of 2011 was $57.6 million compared to $65.1 million in the third quarter of 2010. Included in the third quarter 2011 operating income was approximately $10.6 million related to the accounting for non-cash, non-deductible in-kind research and development costs received by GmP and $3.1 million related to the finalization of a Nuclear Energy segment loss contract. Without the impact of these items, operating income was $71.3 million, an increase of $6.2 million from the third quarter of 2010. The increase in operating income before these items was primarily due to improvements in revenues and operating income in the Power Generation and Technical Services segments, partially offset by lower operating income in the Nuclear Operations segment and an increase in research and development expenses related to the Company’s modular reactor program.

“Recently, several of the Company’s growth initiatives have taken important steps forward,” said Brandon C. Bethards, President and Chief Executive Officer of B&W. “First, bidding activity for environmental equipment and projects is strong with the early bidding activity beginning to move through the awards stage. We have been awarded a number of environmental projects recently, some of which we have announced publicly, and others are in the late stages of negotiations. Secondly, we were awarded a contract to design certain components of the nuclear propulsion system of the next class of ballistic missile submarine, or the Ohio Class replacement submarine program. This contract is the first in a series that we expect to receive under the current program schedule. Under this schedule, we expect to begin ordering long-lead materials at the end of 2012 and begin component manufacturing in 2014. Lastly, we continue to work with TVA to assist in the construction permit application preparation for submission to the U.S. Nuclear Regulatory Commission (NRC) in 2013. The B&W mPower^TM small modular reactor program continues to move forward towards a goal to complete a power generation facility based on B&W mPower^TM technology by 2020.”

Accounting for In-Kind R&D Received by Generation mPower, LLC

During the third quarter, the Company recognized $10.6 million of additional research and development costs related to the consolidation of GmP, our majority-owned subsidiary overseeing the program to develop and market the small modular nuclear power plant based on B&W mPower^TM technology. The additional costs represent non-cash, non-deductible expenses related to the value of the in-kind research and development services contributed to GmP by its minority partner. For any period, the impact to net income of these in-kind services will depend on the value of the services performed by a minority partner relative to a minority partner’s proportional share of development costs. In this period, the value of in-kind services exceeded the amount of research and development costs allocated to a minority partner. As a result, our net income, after taking into account the non-controlling interest, was negatively impacted in the quarter by $4.7 million. The Company expects to recognize a positive impact to net income in future periods when the value of the in-kind services received is less than the minority partner’s proportional share of development costs for the period. Over the course of the program, the Company expects the cumulative net income impact related to the accounting for these in-kind services will be $0. Based on GmP’s current research and development program, we expect the recognition of this non-cash item will not impact net income by more than $9 million in any future annual periods.

Liquidity

The Company’s cash and investments position, net of debt, was $357.1 million at the end of the third quarter of 2011 compared to $368.7 million at the end of the second quarter of 2011. During the third quarter, the Company contributed $94.5 million to its pension plans. In addition to net cash, the Company maintains a $700.0 million revolving credit agreement with approximately $478.6 million of availability as of the end of the third quarter. The Company believes it maintains 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*)
	Q3 2011	Q3 2010	YTD 2011		YTD 2010
GAAP operating income	$57.6	$65.1	$142.7		$189.5
NFS acquisition settlement	-	-	(10.9	)	-
NFS material processing loss contracts	-	-	11.1		-
Nuclear Energy loss contract	3.1	-	50.7		-
GmP in-kind R&D	10.6	-	10.6		-
Non-GAAP operating income	$71.3	$65.1	$204.2		$189.5
GAAP earnings per share	$0.39	$0.31	$0.89		$0.85
NFS acquisition settlement	-	-	(0.06	)	-
NFS material processing loss contracts	-	-	0.06		-
Nuclear Energy loss contract	0.02	-	0.26		-
GmP in-kind R&D	0.04	-	0.04		-
Non-GAAP earnings per share	$0.44	$0.31	$1.19		$0.85

* 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 Third Quarter 2011 Results
Date:	Tuesday, November 8, 2011, 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 as to future Ohio Class replacement program contract awards and activities, our plans for a submission of a construction permit to the NRC in 2013 and power generation facility based on B&W mPower^TM by 2020 and the expected impact that the value of in-kind services will have on our net income in future periods. 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 or competitiveness of nuclear power, government funding for the defense or energy programs in which we are involved and the relationship with our minority partner in GmP. If one or more of these risks 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
	September 30,		December 31,
	2011		2010
	(Unaudited)
	(In thousands)
Current Assets:
Cash and cash equivalents	$	261,583	$	391,142
Restricted cash and cash equivalents		44,719		12,267
Investments		39,774		234
Accounts receivable – trade, net		345,013		289,374
Accounts receivable – other		71,904		64,231
Contracts in progress		294,677		225,448
Inventories		108,271		100,932
Deferred income taxes		109,190		90,620
Other current assets		54,325		34,868
Total Current Assets		1,329,456		1,209,116
Property, Plant and Equipment		994,625		968,712
Less accumulated depreciation		586,404		550,400
Net Property, Plant and Equipment		408,221		418,312
Investments		16,325		74,863
Goodwill		269,892		269,424
Deferred Income Taxes		169,492		236,504
Investments in Unconsolidated Affiliates		166,443		100,811
Other Assets		185,388		191,480
TOTAL	$	2,545,217	$	2,500,510

THE BABCOCK & WILCOX COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS’ EQUITY
	September 30,			December 31,
	2011			2010
	(Unaudited)
	(In thousands)
Current Liabilities:
Notes payable and current maturities of long-term debt	$	4,631		$	4,790
Accounts payable		213,462			185,240
Accrued employee benefits		235,063			235,856
Accrued liabilities – other		67,646			71,242
Advance billings on contracts		410,144			369,644
Accrued warranty expense		94,541			109,588
Income taxes payable		3,212			5,467
Total Current Liabilities		1,028,699			981,827
Long-Term Debt		708			855
Accumulated Postretirement Benefit Obligation		78,848			84,100
Environmental Liabilities		45,953			40,889
Pension Liability		414,776			579,000
Other Liabilities		91,194			100,314
Stockholders’ Equity:
Common stock, par value $0.01 per share, authorized 325,000,000 shares; issued 118,196,600 and 116,963,664 shares at September 30, 2011 and December 31, 2010, respectively		1,182			1,170
Preferred stock, par value $0.01 per share, authorized 75,000,000 shares; No shares issued		-			-
Capital in excess of par value		1,098,195			1,067,414
Retained earnings		202,053			96,671
Treasury stock at cost, 317,456 and 101,649 shares at September 30, 2011 and December 31, 2010, respectively		(9,367	)		(2,397	)
Accumulated other comprehensive loss		(412,562	)		(449,999	)
Stockholders’ Equity – The Babcock & Wilcox Company		879,501			712,859
Noncontrolling interest		5,538			666
Total Stockholders’ Equity		885,039			713,525
TOTAL	$	2,545,217		$	2,500,510

THE BABCOCK & WILCOX COMPANY
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
	(Unaudited)
	(In thousands, except share and per share amounts)
Revenues	$	707,622		$	632,765		$	2,151,251		$	1,983,649
Costs and Expenses:
Cost of operations		535,662			468,502			1,688,209			1,498,537
Research and development costs		34,642			17,424			74,518			50,709
Losses on asset disposals and impairments – net		547			40			626			88
Selling, general and administrative expenses		102,002			98,708			301,713			293,277
Total Costs and Expenses		672,853			584,674			2,065,066			1,842,611
Equity in Income of Investees		22,782			16,986			56,524			48,440
Operating Income		57,551			65,077			142,709			189,478
Other Income (Expense):
Interest income		247			182			1,011			892
Interest expense		(770	)		(660	)		(2,522	)		(11,329	)
Other – net		2,708			(6,451	)		4,139			(13,486	)
Total Other Income (Expense)		2,185			(6,929	)		2,628			(23,923	)
Income before Provision for Income Taxes		59,736			58,148			145,337			165,555
Provision for Income Taxes		19,831			22,224			45,424			65,063
Net Income		39,905			35,924			99,913			100,492
Net Loss (Income) Attributable to Noncontrolling Interest		5,758			(37	)		5,469			(122	)
Net Income Attributable to The Babcock & Wilcox Company	$	45,663		$	35,887		$	105,382		$	100,370
Earnings per Common Share:
Basic:
Net Income Attributable to The Babcock & Wilcox Company	$	0.39		$	0.31		$	0.90		$	0.86
Diluted:
Net Income Attributable to The Babcock & Wilcox Company	$	0.39		$	0.31		$	0.89		$	0.85
Shares used in the computation of earnings per share (Note 8):
Basic		117,773,223			116,291,477			117,414,702			116,142,182
Diluted		118,590,285			117,647,749			118,300,489			117,498,454

THE BABCOCK & WILCOX COMPANY
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
	Nine Months Ended
	September 30,
	2011			2010
	(Unaudited)
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	99,913		$	100,492
Non-cash items included in net income:
Depreciation and amortization		55,493			53,000
Income of investees, net of dividends		(31,028	)		(27,104	)
Loss on asset disposals and impairments – net		626			88
Amortization of pension and postretirement costs		59,376			62,553
Excess tax benefits from stock-based compensation		(4,169	)		(2,653	)
Other, net		3,871			(17,513	)
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable		(64,037	)		48,832
Net contracts in progress and advance billings on contracts		(27,155	)		(209,171	)
Accounts payable		33,614			2,502
Inventories		(7,908	)		5,543
Current and deferred income taxes		50,631			11,339
Accrued and other current liabilities		(24,765	)		34
Pension liability, accumulated postretirement benefit obligation and accrued employee benefits		(169,381	)		(104,698	)
Other, net		(20,749	)		38,242
NET CASH USED IN OPERATING ACTIVITIES		(45,668	)		(38,514	)
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in restricted cash and cash equivalents		(32,452	)		4,062
Purchases of property, plant and equipment		(43,997	)		(48,783	)
Acquisition of businesses, net of cash acquired		-			(30,177	)
Purchases of available-for-sale securities		(101,369	)		(112,253	)
Sales and maturities of available-for-sale securities		120,065			110,874
Decrease in note receivable from affiliate		-			43,277
Investments, net of return, in equity and cost method investees		(31,761	)		(37,844	)
Proceeds from asset disposals		562			1,016
NET CASH USED IN INVESTING ACTIVITIES		(88,952	)		(69,828	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of short-term borrowing and long-term debt		(1,693	)		(2,313	)
Increase in short-term borrowing		1,254			-
Payment of debt issuance costs		(82	)		(9,865	)
Dividend paid to McDermott International, Inc.		-			(100,000	)
Capital contribution from McDermott International, Inc.		-			12,501
Distribution to McDermott International, Inc.		-			(43,334	)
Increase in notes payable to affiliates		-			(43,386	)
Excess tax benefits from stock-based compensation		4,169			2,653
Exercise of stock options		4,332			211
Other, net		(305	)		(95	)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		7,675			(183,628	)
EFFECTS OF EXCHANGE RATE CHANGES ON CASH		(2,614	)		158
NET DECREASE IN CASH AND CASH EQUIVALENTS		(129,559	)		(291,812	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		391,142			469,468
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	261,583		$	177,656

The Babcock & Wilcox Company
Business Segment Information
For the Periods Ended September 30, 2011 and 2010
(In thousands of U.S. dollars)
(Unaudited)
		THREE MONTHS ENDED						NINE MONTHS ENDED
		9/30/11			9/30/10			9/30/11			9/30/10
REVENUES:
Power Generation		$	385,262		$	336,107		$	1,130,089		$	1,061,371
Nuclear Operations			254,402			243,592			777,482			724,810
Technical Services			28,570			22,077			87,598			62,626
Nuclear Energy			61,531			34,715			220,670			148,427
Adjustments and Eliminations			(22,143	)		(3,726	)		(64,588	)		(13,585	)
	TOTAL	$	707,622		$	632,765		$	2,151,251		$	1,983,649
SEGMENT INCOME:
Power Generation		$	38,926		$	31,591		$	93,657		$	94,409
Nuclear Operations			38,113			43,869			127,852			109,049
Technical Services			20,747			9,833			47,355			33,149
Nuclear Energy			(37,521	)		(11,200	)		(108,341	)		(24,883	)
			60,265			74,093			160,523			211,724
Corporate			(2,714	)		(9,016	)		(17,814	)		(22,246	)
	OPERATING INCOME	$	57,551		$	65,077		$	142,709		$	189,478
EQUITY IN INCOME (LOSS) OF INVESTEES:
Power Generation		$	7,872		$	7,123		$	19,912		$	19,123
Nuclear Operations			0			0			0			0
Technical Services			14,910			9,863			36,612			29,317
Nuclear Energy			0			0			0			0
	TOTAL	$	22,782		$	16,986		$	56,524		$	48,440
PENSION EXPENSE:
Power Generation		$	13,742		$	16,366		$	45,809		$	46,530
Nuclear Operations			8,252			11,566			26,144			31,015
Technical Services			584			741			1,851			1,960
Nuclear Energy			1,065			814			3,344			2,623
Corporate			1,727			1,353			5,151			13,450
	TOTAL	$	25,370		$	30,840		$	82,299		$	95,578
DEPRECIATION AND AMORTIZATION:
Power Generation		$	4,253		$	5,350		$	13,372		$	12,985
Nuclear Operations			8,932			10,602			29,066			28,555
Technical Services			65			66			197			198
Nuclear Energy			1,449			1,237			3,953			3,742
Corporate			3,019			2,348			8,905			7,520
	TOTAL	$	17,718		$	19,603		$	55,493		$	53,000
RESEARCH AND DEVELOPMENT, NET:
Power Generation		$	5,638		$	5,944		$	14,418		$	19,812
Nuclear Operations			22			6			56			24
Technical Services			0			1,674			646			1,838
Nuclear Energy			28,982			9,800			59,398			29,035
	TOTAL	$	34,642		$	17,424		$	74,518		$	50,709
CAPITAL EXPENDITURES:
Power Generation		$	2,581		$	3,267		$	10,615		$	10,038
Nuclear Operations			6,017			8,493			21,767			17,230
Technical Services			0			0			0			0
Nuclear Energy			2,546			247			6,329			1,448
Corporate		$	658		$	5,090		$	5,286		$	20,067
	TOTAL	$	11,802		$	17,097		$	43,997		$	48,783
BACKLOG:
Power Generation		$	1,722,358		$	1,547,184		$	1,722,358		$	1,547,184
Nuclear Operations			2,482,394			2,335,434			2,482,394			2,335,434
Technical Services			15,585			2,683			15,585			2,683
Nuclear Energy			428,042			474,132			428,042			474,132
	TOTAL	$	4,648,379		$	4,359,433		$	4,648,379		$	4,359,433

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