BWX (BWXT) 8-K Babcock & Wilcox Announces Second Quarter 2014 Results

Exhibit 99.1

Babcock & Wilcox Announces Second Quarter 2014 Results

- Solid International and Renewables Bookings in Power Generation Segment

- Continued Strong Operating Performance by Nuclear Operations Segment

- Year-to-Date Share Repurchases Total $100 Million

CHARLOTTE, N.C.--(BUSINESS WIRE)--August 6, 2014--The Babcock & Wilcox Company (NYSE: BWC) (“B&W” or the “Company”) today reported second quarter 2014 revenues of $686.0 million, a decrease of $200.1 million, or 22.6%, from the second quarter of 2013. GAAP earnings per share for the second quarter of 2014 were $0.24 compared to $0.65 in the second quarter of 2013. Adjusted earnings per share, which excludes a $0.20 per share impact of restructuring and acquisition-related transaction costs for the quarter, were $0.44 compared to $0.72 in the second quarter of 2013.

“Our Nuclear Operations segment continues to produce strong and steady operating performance. In addition, we delivered significantly improved bookings this quarter in our Power Generation segment, particularly in international and renewables projects, which has been an area of strategic focus. Looking forward, we have a number of solid opportunities in the pipeline and expect to be able to announce additional major contract awards in the coming months. Our success in the international marketplace together with completion of the MEGTEC acquisition are important elements of Power Generation’s strategy to expand geographically and provide diversification from our historic reliance on the U.S. coal market,” said E. James Ferland, President and Chief Executive Officer. “Further, as promised, mPower development spending has been reduced to an annual rate of $15 million giving us the ability to develop the core technology while continuing to pursue strategic investors.”

During the second quarter of 2014, the Company repurchased 2.6 million shares of its common stock at a total cost of $84.0 million. During the first six months of 2014, the Company repurchased 3.1 million shares of its common stock at a total cost of $99.7 million. Through June 30, 2014, the Company had repurchased a total of 12.6 million shares at a cost of $353.4 million leaving $396.6 million of capacity remaining under its previously announced $750 million share repurchase authorizations.

Results of Operations

Consolidated revenues for the second quarter of 2014 were $686.0 million, a decrease of $200.1 million, or 22.6%, from the second quarter of 2013. Revenues in the Power Generation segment decreased 30.5%, or $143.8 million, to $327.4 million in the three months ended June 30, 2014, compared to $471.2 million in the second quarter of 2013. The decrease reflects a $70.5 million decline in new build environmental equipment revenue driven by the completion of scrubber projects underway last year and reduced utility spending in 2014, a $49.5 million decrease in aftermarket services revenue principally due to a large boiler retrofit project that was completed last year and reduced utility spending, and a $27.5 million decrease in new build steam generation systems revenue largely attributable to the timing of renewable energy projects. The Nuclear Operations segment revenues decreased 11.4%, or $37.6 million, to $293.4 million, compared to the corresponding period in 2013, primarily due to the timing of long lead time material purchases related to the manufacturing of nuclear components for U.S. Government programs that led to higher revenues in the prior period. Revenues from the Nuclear Energy segment were $44.9 million compared to $63.2 million in the second quarter of 2013, a decrease of $18.3 million, primarily attributable to the completion and delivery of two large steam generators that were ongoing in the prior year period.

GAAP operating income for the second quarter of 2014 was $35.1 million, a decrease of $63.6 million compared to $98.7 million in the same period of 2013. The mPower segment reported a $31.9 million operating loss in the second quarter of 2014 compared to a $1.1 million loss in the corresponding period in 2013, primarily due to a cost-share catch-up payment in the second quarter of 2013 in combination with cost-share expenditures incurred during the mPower slow-down that have not been reimbursed. For the three months ended June 30, 2014, operating income in each of the Power Generation, Nuclear Operations and Nuclear Energy segments was lower than in the prior year quarter, primarily attributable to lower revenue as discussed above.

Operating income for the second quarter of 2014 includes $10.4 million of special charges for restructuring activities related to the continued execution of our cost reduction efforts primarily in the Power Generation and Nuclear Energy segments, $21.3 million of costs related to the restructuring of the mPower program, and $1.5 million of transaction costs attributable to the MEGTEC acquisition. Excluding these charges, adjusted operating income for the second quarter of 2014 was $68.3 million compared to adjusted operating income of $110.9 million in the second quarter of 2013.

“2014 is a transitional year for B&W. We remain focused on addressing the near-term challenges while growing and strengthening the Company for the future,” said Ferland. “The decline in Power Generation revenue this quarter and this year is primarily the result of a reduction in coal-related environmental and service projects due to continuing regulatory uncertainty and lower capital spending by our utility customers. Our cost reduction programs are on track and the momentum we have in the international and renewable markets positions us well for 2015 and beyond. While we expect to realize sequential improvement in Power Generation sales and earnings, the sharp reduction we’ve seen in utility spending on U.S. environmental and service projects will be difficult to overcome for the balance of the year. As a result we are revising 2014 guidance, but are confident we will produce significantly improved results in 2015. ”

Revised Outlook

The Company is narrowing its guidance for 2014 consolidated revenues to between $2.9 billion and $3.0 billion from the previous range of $2.9 billion to $3.1 billion. Guidance for adjusted earnings per share for the full year 2014 is being lowered to between $1.70 and $1.85 from the previous range of $2.00 and $2.20. Adjusted earnings per share exclude any mark-to-market adjustment for pension and post-retirement benefits, acquisition-related transaction costs, and restructuring charges.

Liquidity and Debt

The Company’s cash and investments position, net of restricted cash, was $224.7 million at the end of the second quarter of 2014, a decrease of $136.6 million compared to $361.3 million as of December 31, 2013. Second quarter 2014 cash flow included a net use of cash from investing activities of $146.3 million, primarily attributable to the acquisition of MEGTEC. During the quarter, the Company repurchased common shares totaling $84.0 million, paid dividends of $11.1 million, and contributed $19.5 million to its pension plans.

On June 24, 2014, the Company announced it had entered into a Second Amended and Restated Credit Agreement (the “New Credit Agreement”) that provides for revolving credit borrowings and issuances of letters of credit in an aggregate amount of $1.0 billion and a term loan facility of up to $300 million, $150 million of which was drawn on the closing date to fund the MEGTEC acquisition. The remaining $150 million commitment for the term loan remains available until December 31, 2014 if it is not drawn before then. As of June 30, 2014, outstanding balances under the New Credit Agreement included the $150.0 million term loan, $113.8 million borrowed under the revolving credit facility, and letters of credit issued under the revolving credit facility totaling $173.0 million, resulting in $863.2 million of availability as of the end of the second quarter.

Quarterly Dividend

On August 5, 2014, the Company declared a quarterly cash dividend of $0.10 per common share. The dividend will be payable on September 10, 2014 to shareholders of record on August 20, 2014.

Conference Call to Discuss Second Quarter 2014 Results

Date:	Thursday, August 7, 2014, at 8:30 a.m. EDT
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 additional contract awards, expected Power Generation sales and earnings, our 2014 outlook and 2015 results. These forward-looking statements are based on management’s current expectations and involve a number of risks and uncertainties, including, among other things, our ability to achieve bookings in our business segments, adverse changes in the industries in which we operate and delays, changes or termination of contracts in backlog. If one or more of these risks or other risks materialize, actual results may vary materially from those expressed. For a more complete discussion of these and other risk factors, see B&W’s filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2013 and subsequent 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 of this release, 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 11,000 people, in addition to joint venture employees throughout the world. 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.

EXHIBITS TO FOLLOW

EXHIBIT 1
THE BABCOCK & WILCOX COMPANY
RECONCILIATION OF NON-GAAP OPERATING INCOME AND EARNINGS PER SHARE
	Three Months Ended June 30, 2014
				mPower						Megtec
	GAAP			Restructuring			GCI Impact			Acquisition			Non-GAAP
Operating Income	$	35.1		$	21.3		$	10.4		$	1.5		$	68.3
Other Income / (Expense)		(0.2	)		-			-			-			(0.2	)
Provision for Income Taxes		(11.5	)		(7.2	)		(3.5	)		(0.5	)		(22.8	)
Net Income		23.5			14.1			6.9			1.0			45.4
Net Loss (Income) Attributable to Non-Controlling Interest		2.9			-			-			-			2.9
Net Income Attributable to The Babcock & Wilcox Company	$	26.4		$	14.1		$	6.9		$	1.0		$	48.4
Diluted Earnings per Common Share	$	0.24		$	0.13		$	0.06		$	0.01		$	0.44
Effective Tax Rate		32.8	%											33.4	%
	Three Months Ended June 30, 2013
				mPower						Megtec
	GAAP			Restructuring			GCI Impact			Acquisition			Non-GAAP
Operating Income	$	98.7		$	-		$	12.2		$	-		$	110.9
Other Income / (Expense)		0.5			-			-			-			0.5
Provision for Income Taxes		(29.5	)		-			(4.1	)		-			(33.6	)
Net Income		69.7			-			8.1			-			77.8
Net Loss (Income) Attributable to Non-Controlling Interest		3.2			-			-			-			3.2
Net Income Attributable to The Babcock & Wilcox Company	$	72.9		$	-		$	8.1		$	-		$	81.0
Diluted Earnings per Common Share	$	0.65		$	-		$	0.07		$	-		$	0.72
Effective Tax Rate		29.8	%											30.2	%
	Six Months Ended June 30, 2014
				mPower						Megtec
	GAAP			Restructuring			GCI Impact			Acquisition			Non-GAAP
Operating Income	$	88.8		$	22.1		$	12.3		$	1.5		$	124.7
Other Income / (Expense)		0.7			-			-			-			0.7
Provision for Income Taxes		(24.8	)		(7.5	)		(4.2	)		(0.5	)		(37.0	)
Net Income		64.6			14.6			8.1			1.0			88.4
Net Loss (Income) Attributable to Non-Controlling Interest		6.8			-			-			-			6.8
Net Income Attributable to The Babcock & Wilcox Company	$	71.5		$	14.6		$	8.1		$	1.0		$	95.2
Diluted Earnings per Common Share	$	0.65		$	0.13		$	0.07		$	0.01		$	0.86
Effective Tax Rate		27.7	%											29.5	%
	Six Months Ended June 30, 2013
				mPower						Megtec
	GAAP			Restructuring			GCI Impact			Acquisition			Non-GAAP
Operating Income	$	158.9		$	-		$	20.7		$	-		$	179.6
Other Income / (Expense)		1.5			-			-			-			1.5
Provision for Income Taxes		(45.8	)		-			(7.0	)		-			(52.8	)
Net Income		114.6			-			13.7			-			128.3
Net Loss (Income) Attributable to Non-Controlling Interest		5.5			-			-			-			5.5
Net Income Attributable to The Babcock & Wilcox Company	$	120.0		$	-		$	13.7		$	-		$	133.7
Diluted Earnings per Common Share	$	1.06		$	-		$	0.12		$	-		$	1.18
Effective Tax Rate		28.6	%											29.2	%

*Totals may not foot due to rounding.

B&W is providing non-GAAP information regarding certain of its historical results and guidance on future earnings per share 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.

EXHIBIT 2
THE BABCOCK & WILCOX COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
	June 30,		December 31,
	2014		2013
	(Unaudited)
	(In thousands)
Current Assets:
Cash and cash equivalents	$	215,918	$	346,116
Restricted cash and cash equivalents		39,660		45,945
Investments		4,249		10,748
Accounts receivable – trade, net		381,761		360,323
Accounts receivable – other		64,325		45,480
Contracts in progress		341,019		370,820
Inventories		112,971		113,058
Deferred income taxes		99,123		97,170
Other current assets		70,645		47,764
Total Current Assets		1,329,671		1,437,424
Property, Plant and Equipment		1,178,357		1,126,683
Less accumulated depreciation		708,789		679,604
Net Property, Plant and Equipment		469,568		447,079
Investments		4,503		4,426
Goodwill		396,829		281,708
Deferred Income Taxes		96,811		127,076
Investments in Unconsolidated Affiliates		158,927		184,831
Intangible Assets		119,852		81,521
Other Assets		49,892		45,088
TOTAL	$	2,626,053	$	2,609,153

THE BABCOCK & WILCOX COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS’ EQUITY
	June 30,			December 31,
	2014			2013
	(Unaudited)
	(In thousands, except share and per share amounts)
Current Liabilities:
Notes payable and current maturities of long-term debt	$	7,447		$	4,671
Accounts payable		199,860			319,774
Accrued employee benefits		98,135			163,833
Accrued liabilities – other		79,164			58,192
Advance billings on contracts		244,257			317,771
Accrued warranty expense		58,825			56,436
Income taxes payable		8,000			6,551
Total Current Liabilities		695,688			927,228
Long-Term Debt		260,050			225
Accumulated Postretirement Benefit Obligation		47,411			43,194
Environmental Liabilities		55,342			53,391
Pension Liability		376,159			336,878
Other Liabilities		54,408			65,296
Commitments and Contingencies
Stockholders’ Equity:
Common stock, par value $0.01 per share, authorized 325,000,000 shares; issued 121,287,860 and 120,536,910 shares at June 30, 2014 and December 31, 2013, respectively		1,213			1,205
Preferred stock, par value $0.01 per share, authorized 75,000,000 shares;
No shares issued		-			-
Capital in excess of par value		764,668			747,189
Retained earnings		706,162			656,916
Treasury stock at cost, 13,728,384 and 10,068,731 shares at June 30, 2014 and December 31, 2013, respectively		(373,776	)		(268,971	)
Accumulated other comprehensive income		21,892			28,348
Stockholders’ Equity – The Babcock & Wilcox Company		1,120,159			1,164,687
Noncontrolling interest		16,836			18,254
Total Stockholders’ Equity		1,136,995			1,182,941
TOTAL	$	2,626,053		$	2,609,153

THE BABCOCK & WILCOX COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013
	(Unaudited)
	(In thousands, except share and per share amounts)
Revenues	$	686,006		$	886,136		$	1,348,023		$	1,691,559
Costs and Expenses:
Cost of operations		512,308			686,043			1,014,615			1,305,740
Research and development costs		30,918			837			54,914			29,183
Losses on asset disposals and impairments, net		1,457			156			1,457			87
Selling, general and administrative expenses		101,918			106,937			196,603			210,537
Special charges for restructuring activities		17,470			12,232			20,128			20,655
Total Costs and Expenses		664,071			806,205			1,287,717			1,566,202
Equity in Income of Investees		13,183			18,775			28,452			33,562
Operating Income		35,118			98,706			88,758			158,919
Other Income (Expense):
Interest income		190			323			609			655
Interest expense		(921	)		(789	)		(1,820	)		(1,607	)
Other – net		580			1,005			1,902			2,411
Total Other Income (Expense)		(151	)		539			691			1,459
Income before Provision for Income Taxes		34,967			99,245			89,449			160,378
Provision for Income Taxes		11,475			29,544			24,803			45,801
Net Income	$	23,492		$	69,701		$	64,646		$	114,577
Net Loss Attributable to Noncontrolling Interest		2,945			3,169			6,835			5,467
Net Income Attributable to The Babcock & Wilcox Company	$	26,437		$	72,870		$	71,481		$	120,044
Earnings per Common Share:
Basic:
Net Income Attributable to The Babcock & Wilcox Company	$	0.24		$	0.65		$	0.65		$	1.06
Diluted:
Net Income Attributable to The Babcock & Wilcox Company	$	0.24		$	0.65		$	0.65		$	1.06
Shares used in the computation of earnings per share:
Basic		109,766,237			111,898,819			110,102,826			112,998,066
Diluted		110,116,630			112,662,563			110,501,337			113,699,859

THE BABCOCK & WILCOX COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
	Six Months Ended
	June 30,
	2014			2013
	(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:	(In thousands)
Net Income	$	64,646		$	114,577
Non-cash items included in net income:
Depreciation and amortization		35,053			33,856
Income of investees, net of dividends		(8,517	)		(18,824	)
Losses on asset disposals and impairments		1,457			87
In-kind research and development costs		5,830			7,369
Recognition of losses for pension and postretirement plans		1,189			1,511
Stock-based compensation expense		7,411			9,076
Excess tax benefits from stock-based compensation		(552	)		(3	)
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable		(6,635	)		(37,429	)
Accounts payable		(129,471	)		5,972
Contracts in progress and advance billings on contracts		(52,142	)		(81,571	)
Inventories		5,666			11,608
Income taxes		(7,890	)		4,067
Accrued and other current liabilities		2,674			9,541
Pension liability, accrued postretirement benefit obligation and employee benefits		(35,671	)		(44,056	)
Other, net		9,250			(4,005	)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		(107,702	)		11,776
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in restricted cash and cash equivalents		6,285			12,680
Purchases of property, plant and equipment		(37,822	)		(33,433	)
Acquisition of business, net of cash acquired		(127,098	)		-
Purchase of intangible assets		(722	)		(2,200	)
Purchases of available-for-sale securities		(21,225	)		(72,156	)
Sales and maturities of available-for-sale securities		27,802			91,749
Proceeds from asset disposals		10			454
Investment in equity and cost method investees		(4,900	)		(2,913	)
NET CASH USED IN INVESTING ACTIVITIES		(157,670	)		(5,819	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of short-term borrowing and long-term debt		(1,815	)		(104	)
Increase in short-term borrowing		733			651
Borrowings under Credit Agreement		562,300			-
Repayments under Credit Agreement		(298,500	)		-
Payment of debt issuance costs		(4,929	)		-
Repurchase of common shares		(99,742	)		(125,829	)
Dividends paid to common shareholders		(22,103	)		(18,142	)
Exercise of stock options		3,463			1,888
Excess tax benefits from stock-based compensation		552			3
Other		(409	)		(326	)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		139,550			(141,859	)
EFFECTS OF EXCHANGE RATE CHANGES ON CASH		(4,376	)		(5,440	)
NET DECREASE IN CASH AND CASH EQUIVALENTS		(130,198	)		(141,342	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		346,116			383,547
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	215,918		$	242,205
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes (net of refunds)	$	28,099		$	38,851
SCHEDULE OF NON-CASH INVESTING ACTIVITY:
Accrued capital expenditures included in accounts payable	$	3,938		$	3,445

THE BABCOCK & WILCOX COMPANY
BUSINESS SEGMENT INFORMATION
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013
	(Unaudited)
	(In thousands)
REVENUES:
Power Generation	$	327,379		$	471,191		$	639,457		$	932,654
Nuclear Operations		293,438			330,986			579,652			592,125
Technical Services		26,015			27,432			50,470			52,661
Nuclear Energy		44,927			63,185			92,707			126,701
mPower		0			333			278			637
Adjustments and Eliminations		(5,753	)		(6,991	)		(14,541	)		(13,219	)
TOTAL	$	686,006		$	886,136		$	1,348,023		$	1,691,559
SEGMENT INCOME:
Power Generation	$	15,215		$	30,535		$	25,757		$	63,865
Nuclear Operations		58,682			65,737			118,210			120,461
Technical Services		15,078			15,235			29,867			29,414
Nuclear Energy		1,548			7,922			2,071			10,180
mPower		(31,933	)		(1,104	)		(58,642	)		(28,051	)
SUBTOTAL		58,590			118,325			117,263			195,869
Corporate		(6,002	)		(7,387	)		(8,377	)		(16,295	)
Special Charges for Restructuring Activities		(17,470	)		(12,232	)		(20,128	)		(20,655	)
TOTAL	$	35,118		$	98,706		$	88,758		$	158,919
EQUITY IN INCOME (LOSS) OF INVESTEES:
Power Generation	$	434		$	5,202		$	2,800		$	7,309
Nuclear Operations		0			0			0			0
Technical Services		12,749			13,699			25,650			26,532
Nuclear Energy		0			(126	)		2			(279	)
mPower		0			0			0			0
TOTAL	$	13,183		$	18,775		$	28,452		$	33,562
PENSION EXPENSE:
Power Generation	$	661		$	775		$	1,191		$	1,490
Nuclear Operations		872			1,133			1,744			2,266
Technical Services		48			72			96			144
Nuclear Energy		1,190			1,076			2,482			2,139
mPower		0			0			0			0
Corporate		487			505			975			1,010
TOTAL	$	3,258		$	3,561		$	6,488		$	7,049
DEPRECIATION AND AMORTIZATION:
Power Generation	$	5,740		$	4,945		$	11,307		$	10,799
Nuclear Operations		7,299			6,724			13,657			13,413
Technical Services		0			48			1			96
Nuclear Energy		1,560			1,617			3,354			3,184
mPower		262			121			449			243
Corporate		3,179			3,043			6,285			6,121
TOTAL	$	18,040		$	16,498		$	35,053		$	33,856
RESEARCH AND DEVELOPMENT, NET:
Power Generation	$	4,282		$	5,872		$	8,293		$	11,543
Nuclear Operations		1			13			5			13
Technical Services		6			13			18			39
Nuclear Energy		415			1,029			910			2,200
mPower		26,214			(6,090	)		45,688			15,388
TOTAL	$	30,918		$	837		$	54,914		$	29,183
CAPITAL EXPENDITURES:
Power Generation	$	2,913		$	6,091		$	6,098		$	11,850
Nuclear Operations		8,819			5,696			17,109			13,412
Technical Services		0			0			0			0
Nuclear Energy		2,095			1,556			8,237			2,978
mPower		392			478			1,884			1,414
Corporate		2,389			813			4,494			3,779
TOTAL	$	16,608		$	14,634		$	37,822		$	33,433
BACKLOG:
Power Generation	$	2,214,729		$	2,320,515		$	2,214,729		$	2,320,515
Nuclear Operations		2,578,591			2,831,270			2,578,591			2,831,270
Technical Services		12,246			8,856			12,246			8,856
Nuclear Energy		192,452			202,723			192,452			202,723
mPower		1,392			2,564			1,392			2,564
TOTAL	$	4,999,410		$	5,365,928		$	4,999,410		$	5,365,928
BOOKINGS:
Power Generation	$	471,940		$	489,198		$	691,279		$	771,637
Nuclear Operations		20,564			229,395			784,008			436,714
Technical Services		36,897			23,864			57,632			53,065
Nuclear Energy		61,989			23,771			138,026			48,128
mPower		0			59			0			0
TOTAL	$	591,390		$	766,287		$	1,670,945		$	1,309,544

CONTACT:
The Babcock & Wilcox Company
Investor Contact:
Jenny L. Apker, Vice President, Treasurer and Investor Relations, 704-625-4944
investors@babcock.com
or
Media Contact:
Aimee Mills, Media Relations Lead, 980-365-4583
aemills@babcock.com