BWX (BWXT) 10-Q 2012 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                    

Commission File No. 001-34658

THE BABCOCK & WILCOX COMPANY

(Exact name of registrant as specified in its charter)

DELAWARE	80-0558025
(State of Incorporation or Organization)	(I.R.S. Employer Identification No.)
THE HARRIS BUILDING 13024 BALLANTYNE CORPORATE PLACE SUITE 700 CHARLOTTE, NORTH CAROLINA	28277
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s Telephone Number, Including Area Code: (704) 625-4900

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The number of shares of the registrant’s common stock outstanding at October 31, 2012 was 119,003,623

THE BABCOCK & WILCOX COMPANY

I N D E X - F O R M 1 0 - Q

	PAGE
PART I - FINANCIAL INFORMATION
Item 1 – Condensed Consolidated Financial Statements		2
Condensed Consolidated Balance Sheets September 30, 2012 and December 31, 2011 (Unaudited)		3
Condensed Consolidated Statements of Income Three and Nine Months Ended September 30, 2012 and 2011 (Unaudited)		5
Condensed Consolidated Statements of Comprehensive Income Three and Nine Months Ended September 30, 2012 and 2011 (Unaudited)		6
Condensed Consolidated Statements of Stockholders’ Equity Nine Months Ended September 30, 2012 and 2011 (Unaudited)		7
Condensed Consolidated Statements of Cash Flows Nine Months Ended September 30, 2012 and 2011 (Unaudited)		8
Notes to Condensed Consolidated Financial Statements		9
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
Item 3 – Quantitative and Qualitative Disclosures About Market Risk		33
Item 4 – Controls and Procedures		33
PART II - OTHER INFORMATION
Item 1 – Legal Proceedings		34
Item 1A – Risk Factors		34
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds		34
Item 4 – Mine Safety Disclosures		34
Item 6 – Exhibits		35
SIGNATURES		36

1

PART I

THE BABCOCK & WILCOX COMPANY

FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

2

THE BABCOCK & WILCOX COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS

	September 30,		December 31,
	2012		2011
	(Unaudited)
	(In thousands)
Current Assets:
Cash and cash equivalents	$	200,299	$	415,209
Restricted cash and cash equivalents		61,942		61,190
Investments		139,156		68,805
Accounts receivable – trade, net		371,186		305,832
Accounts receivable – other		64,780		77,505
Contracts in progress		387,113		315,286
Inventories		131,799		107,298
Deferred income taxes		104,269		102,022
Other current assets		28,281		33,929
Total Current Assets		1,488,825		1,487,076
Property, Plant and Equipment		1,070,944		1,017,422
Less accumulated depreciation		639,422		595,131
Net Property, Plant and Equipment		431,522		422,291
Investments		4,058		3,775
Goodwill		280,165		276,180
Deferred Income Taxes		226,015		241,739
Investments in Unconsolidated Affiliates		198,503		163,568
Other Assets		174,684		194,482
TOTAL	$	2,803,772	$	2,789,111

See accompanying notes to condensed consolidated financial statements.

3

THE BABCOCK & WILCOX COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS’ EQUITY

	September 30,			December 31,
	2012			2011
	(Unaudited)
	(In thousands)
Current Liabilities:
Notes payable and current maturities of long-term debt	$	2,748		$	4,653
Accounts payable		269,480			237,494
Accrued employee benefits		176,415			303,803
Accrued liabilities – other		61,415			71,079
Advance billings on contracts		404,613			438,753
Accrued warranty expense		91,556			97,209
Income taxes payable		9,829			1,816
Total Current Liabilities		1,016,056			1,154,807
Long-Term Debt		475			633
Accumulated Postretirement Benefit Obligation		75,709			80,663
Environmental Liabilities		45,489			44,069
Pension Liability		541,725			586,045
Other Liabilities		66,340			87,921
Commitments and Contingencies (Note 4)
Stockholders’ Equity:
Common stock, par value $0.01 per share, authorized 325,000,000 shares; issued 119,408,084 and 118,458,911 shares at September 30, 2012 and December 31, 2011, respectively		1,194			1,185
Preferred stock, par value $0.01 per share, authorized 75,000,000 shares; No shares issued		—			—
Capital in excess of par value		1,134,324			1,106,971
Retained earnings		417,614			266,325
Treasury stock at cost, 462,577 and 351,876 shares at September 30, 2012 and December 31, 2011, respectively		(13,013	)		(10,059	)
Accumulated other comprehensive loss		(496,443	)		(538,628	)
Stockholders’ Equity – The Babcock & Wilcox Company		1,043,676			825,794
Noncontrolling interest		14,302			9,179
Total Stockholders’ Equity		1,057,978			834,973
TOTAL	$	2,803,772		$	2,789,111

See accompanying notes to condensed consolidated financial statements.

4

THE BABCOCK & WILCOX COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended							Nine Months Ended
	September 30,							September 30,
	2012			2011				2012			2011
	(Unaudited)
	(In thousands, except share and per share amounts)
Revenues	$	807,586		$	707,622			$	2,426,063		$	2,151,251
Costs and Expenses:
Cost of operations		619,104			535,662				1,840,243			1,688,209
Research and development costs		27,893			34,642				91,079			74,518
Losses on asset disposals and impairments – net		2,620			547				1,738			626
Selling, general and administrative expenses		105,208			102,002				319,216			301,713
Total Costs and Expenses		754,825			672,853				2,252,276			2,065,066
Equity in Income of Investees		14,546			22,782				48,590			56,524
							��
Operating Income		67,307			57,551				222,377			142,709
Other Income (Expense):
Interest income		417			247				1,154			1,011
Interest expense		(996	)		(770	)			(2,771	)		(2,522	)
Other – net		(27,343	)		2,708				(24,117	)		4,139
Total Other Income (Expense)		(27,922	)		2,185				(25,734	)		2,628
Income before Provision for Income Taxes		39,385			59,736				196,643			145,337
Provision for Income Taxes		1,051			19,831				53,317			45,424
Net Income		38,334			39,905				143,326			99,913
Net Income Attributable to Noncontrolling Interest		2,187			5,758				7,963			5,469
Net Income Attributable to The Babcock & Wilcox Company	$	40,521		$	45,663			$	151,289		$	105,382
Earnings per Common Share:
Basic:
Net Income Attributable to The Babcock & Wilcox Company	$	0.34		$	0.39			$	1.28		$	0.90
Diluted:
Net Income Attributable to The Babcock & Wilcox Company	$	0.34		$	0.39			$	1.27		$	0.89
Shares used in the computation of earnings per share (Note 9):
Basic		118,843,829			117,773,223				118,582,544			117,414,702
Diluted		119,452,881			118,590,285				119,189,977			118,300,489

See accompanying notes to condensed consolidated financial statements.

5

THE BABCOCK & WILCOX COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
	(Unaudited)
Net Income	$	38,334		$	39,905		$	143,326		$	99,913
Other Comprehensive Income:
Currency translation adjustments:
Foreign currency translation adjustments		10,283			(9,354	)		2,294			1,524
Unrealized gains (losses) on derivative financial instruments:
Unrealized gains (losses) on derivative financial instruments		4,367			(6,377	)		2,595			(3,753	)
Realized gains (losses) on derivative financial instruments		(2,358	)		1,732			(2,074	)		2,146
Gains on benefit obligation:
Amortization of losses included in net income		11,563			11,709			39,014			37,818
Unrealized gains (losses) on investments:
Unrealized gains (losses) arising during the period		172			(411	)		376			(252	)
Realized gains (losses) recognized during the period		(14	)		1			(17	)		5
Other Comprehensive Income (Loss)		24,013			(2,700	)		42,188			37,488
Total Comprehensive Income		62,347			37,205			185,514			137,401
Comprehensive Income Attributable to Noncontrolling Interest		2,169			5,754			7,960			5,418
Comprehensive Income Attributable to The Babcock & Wilcox Company	$	64,516		$	42,959		$	193,474		$	142,819

See accompanying notes to condensed consolidated financial statements.

6

THE BABCOCK & WILCOX COMPANY

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(Unaudited)

	Common Stock				Capital In Excess of		Retained		Accumulated Other Comprehensive			Treasury			Stockholders’			Non- Controlling			Total Stockholders’
	Shares		Par Value		Par Value		Earnings		Loss			Stock			Equity			Interest			Equity
			(In thousands, except share amounts)
Balance December 31, 2011		118,458,911	$	1,185	$	1,106,971	$	266,325	$	(538,628	)	$	(10,059	)	$	825,794		$	9,179		$	834,973
Net income		—		—		—		151,289		—			—			151,289			(7,963	)		143,326
Amortization of benefit plan costs		—		—		—		—		39,014			—			39,014			—			39,014
Unrealized gain on investments		—		—		—		—		359			—			359			—			359
Translation adjustments		—		—		—		—		2,291			—			2,291			3			2,294
Unrealized gain on derivatives		—		—		—		—		521			—			521			—			521
Exercise of stock options		217,848		2		3,913		—		—			—			3,915			—			3,915
Contributions to thrift plan		395,838		4		9,888		—		—			—			9,892			—			9,892
Shares placed in treasury		—		—		—		—		—			(2,954	)		(2,954	)		—			(2,954	)
Stock-based compensation charges		335,487		3		13,552		—		—			—			13,555			—			13,555
Contribution of in-kind services		—		—		—		—		—			—			—			13,477			13,477
Distributions to noncontrolling interests		—		—		—		—		—			—			—			(394	)		(394	)
Balance September 30, 2012		119,408,084	$	1,194	$	1,134,324	$	417,614	$	(496,443	)	$	(13,013	)	$	1,043,676		$	14,302		$	1,057,978

	Common Stock				Capital In Excess of		Retained		Accumulated Other Comprehensive			Treasury			Stockholders’			Non- Controlling			Total Stockholders’
	Shares		Par Value		Par Value		Earnings		Loss			Stock			Equity			Interest			Equity
			(In thousands, except share amounts)
Balance December 31, 2010		116,963,664	$	1,170	$	1,067,414	$	96,671	$	(449,999	)	$	(2,397	)	$	712,859		$	666		$	713,525
Net income		—		—		—		105,382		—			—			105,382			(5,469	)		99,913
Amortization of benefit plan costs		—		—		—		—		37,818			—			37,818			—			37,818
Unrealized loss on investments		—		—		—		—		(247	)		—			(247	)		—			(247	)
Translation adjustments		—		—		—		—		1,473			—			1,473			51			1,524
Unrealized loss on derivatives		—		—		—		—		(1,607	)		—			(1,607	)		—			(1,607	)
Exercise of stock options		356,722		4		8,497		—		—			—			8,501			—			8,501
Contributions to thrift plan		342,342		3		9,318		—		—			—			9,321			—			9,321
Shares placed in treasury		—		—		—		—		—			(6,970	)		(6,970	)		—			(6,970	)
Stock-based compensation charges		533,872		5		12,966		—		—			—			12,971			—			12,971
Contribution of in-kind services		—		—		—		—		—			—			—			10,595			10,595
Distributions to noncontrolling interests		—		—		—		—		—			—			—			(305	)		(305	)
Balance September 30, 2011		118,196,600	$	1,182	$	1,098,195	$	202,053	$	(412,562	)	$	(9,367	)	$	879,501		$	5,538		$	885,039

See accompanying notes to condensed consolidated financial statements.

7

THE BABCOCK & WILCOX COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended
	September 30,
	2012			2011
	(Unaudited)
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	143,326		$	99,913
Non-cash items included in net income:
Depreciation and amortization		52,818			55,493
Income of investees, net of dividends		(26,455	)		(31,028	)
Loss on asset disposals and impairments – net		1,738			626
Impairment of USEC investment		27,000			—
Recognition of uncertain tax positions		(25,305	)		—
In-kind research and development costs		13,477			10,595
Amortization of pension and postretirement costs		61,160			59,376
Stock-based compensation expense		13,555			12,971
Excess tax benefits from stock-based compensation		(1,441	)		(4,169	)
Other, net		(12,701	)		(9,100	)
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable		(61,828	)		(64,037	)
Net contracts in progress and advance billings on contracts		(104,832	)		(27,155	)
Accounts payable		37,631			33,614
Inventories		(24,727	)		(7,908	)
Current and deferred income taxes		22,805			50,631
Accrued warranty and other current liabilities		(19,024	)		(24,765	)
Pension liability, accumulated postretirement benefit obligation and accrued employee benefits		(178,953	)		(169,381	)
Prepaid expenses		5,683			(19,424	)
Other, net		(3,164	)		(11,920	)
NET CASH USED IN OPERATING ACTIVITIES		(79,237	)		(45,668	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in restricted cash and cash equivalents		(752	)		(32,452	)
Purchases of property, plant and equipment		(58,780	)		(43,997	)
Purchases of available-for-sale securities		(234,577	)		(101,369	)
Sales and maturities of available-for-sale securities		163,203			120,065
Proceeds from sale of unconsolidated affiliate		2,091			—
Investments, net of return, in equity and cost method investees		(6,437	)		(31,761	)
Proceeds from asset disposals		149			562
NET CASH USED IN INVESTING ACTIVITIES		(135,103	)		(88,952	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of short-term borrowing and long-term debt		(4,592	)		(1,693	)
Increase in short-term borrowing		2,532			1,254
Payment of debt issuance costs		(4,850	)		(82	)
Excess tax benefits from stock-based compensation		1,441			4,169
Exercise of stock options		2,474			4,332
Other		(395	)		(305	)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		(3,390	)		7,675
EFFECTS OF EXCHANGE RATE CHANGES ON CASH		2,820			(2,614	)
NET DECREASE IN CASH AND CASH EQUIVALENTS		(214,910	)		(129,559	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		415,209			391,142
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	200,299		$	261,583
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid (net of amount capitalized)	$	2,909		$	2,485
Income taxes paid (net of refunds)	$	61,617		$	32,142

See accompanying notes to condensed consolidated financial statements.

8

THE BABCOCK & WILCOX COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012

(UNAUDITED)

NOTE 1 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

We have presented our condensed consolidated financial statements in U.S. Dollars in accordance with the interim reporting requirements of Form 10-Q and Rule 10-01 of Regulation S-X. Financial information and disclosures normally included in our financial statements prepared annually in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted. Readers of these financial statements should, therefore, refer to the consolidated and combined financial statements and notes in our annual report on Form 10-K for the year ended December 31, 2011 (our “2011 10-K”). We have included all adjustments, in the opinion of management, consisting only of normal recurring adjustments, necessary for a fair presentation.

We use the equity method to account for investments in entities that we do not control, but over which we have significant influence. We generally refer to these entities as “joint ventures.” We have eliminated all intercompany transactions and accounts. We have reclassified certain amounts previously reported to conform to the presentation at September 30, 2012 and for the three and nine months ended September 30, 2012. We present the notes to our condensed consolidated financial statements on the basis of continuing operations, unless otherwise stated.

Unless the context otherwise indicates, “we,” “us” and “our” mean The Babcock & Wilcox Company (“B&W”) and its consolidated subsidiaries.

Reporting Segments

We operate in four reportable segments: Power Generation, Nuclear Operations, Technical Services and Nuclear Energy. Our reportable segments are further described as follows:

• Our Power Generation segment supplies boilers fired with fossil fuels, such as coal, oil and natural gas, or renewable fuels such as biomass and municipal solid waste. In addition, we supply environmental equipment and components and related services to customers in different regions around the world. This segment owns or leases manufacturing facilities in the U.S., Canada, Denmark, Germany, Mexico, China and Scotland. We design, engineer, manufacture, supply, construct and service large utility and industrial power generation systems, including boilers used to generate steam in electric power plants, pulp and paper making, chemical and process applications and other industrial uses. We also provide the same complement of services for our renewable portfolio of boiler technology, which includes biomass fired, waste-to-energy and concentrated solar energy for steam generating solutions. In addition, this segment is a technological leader in providing cost-effective and efficient air pollution control solutions and material handling systems. We have successfully developed advanced technologies to control nitrogen oxides, sulfur dioxide, fine particulate, mercury, acid gases and other hazardous air emissions. We continue to advance our carbon capture and sequestration technologies as a solution to reduce carbon dioxide emissions. In addition, our Power Generation segment offers a variety of construction services. Servicing a wide range of industries, this segment provides total construction services for the entire balance of plant, from large steam generation or environmental equipment projects, to cogeneration and combined cycle installations. This segment also offers a full suite of aftermarket services. Our Power Generation segment’s full-scope boiler, environmental and auxiliary equipment retrofits, upgrades and services are designed to improve plant performance and efficiency and extend the life of vital steam generating assets.

• Our Nuclear Operations segment manufactures naval nuclear reactors for the U.S. Department of Energy (“DOE”)/National Nuclear Security Administration’s (“NNSA”) Naval Nuclear Propulsion Program, which in turn supplies them to the U.S. Navy for use in submarines and aircraft carriers. Through this segment, we own and operate manufacturing facilities located in Lynchburg, Virginia; Mount Vernon, Indiana; Euclid, Ohio; Barberton, Ohio; and Erwin, Tennessee. The Barberton and Mount Vernon locations specialize in the design and manufacture of heavy components. These two locations are N-Stamp accredited by the American Society of Mechanical Engineers (“ASME”), making them two of only a few North American suppliers of large, heavy-walled nuclear components and vessels. The Euclid, Ohio facility, which is also ASME N-Stamp certified, fabricates electro-mechanical equipment for the U.S. Government, and performs

9

design, manufacturing, inspection, assembly and testing activities. The Lynchburg, Virginia operations fabricate fuel-bearing precision components that range in weight from a few grams to hundreds of tons. In-house capabilities also include wet chemistry uranium processing, advanced heat treatment to optimize component material properties and a controlled, clean-room environment with the capacity to assemble railcar-size components. Fuel for the naval nuclear reactors is provided by Nuclear Fuel Services, Inc. (“NFS”), one of our wholly owned subsidiaries. Located in Erwin, Tennessee, NFS also converts cold war-era government stockpiles of highly enriched uranium into material suitable for further processing into commercial nuclear reactor fuel.

• Our Technical Services segment provides various services to the U.S. Government, including uranium processing, environmental site restoration services and management and operating services for various U.S. Government-owned facilities. These services are provided to the DOE, including the NNSA, the Office of Nuclear Energy, the Office of Science, the Department of Defense and the Office of Environmental Management, and through this segment we deliver products and management solutions to nuclear operations and high-consequence manufacturing facilities. A significant portion of this segment’s operations are conducted through joint ventures.

• Our Nuclear Energy segment supplies commercial nuclear steam generators and components to nuclear utility customers. In addition, this segment is actively designing the modular and scalable B&W mPower^TM reactor. B&W has supplied the nuclear industry with more than 1,300 large, heavy components worldwide. With manufacturing operations in the U.S. and Canada, this segment is the only heavy nuclear component, N-Stamp certified manufacturer in North America. Our Nuclear Energy segment fabricates pressure vessels, reactors, steam generators, heat exchangers and other auxiliary equipment. This segment also provides specialized engineering services that include structural component design, 3-D thermal-hydraulic engineering analysis, weld and robotic process development and metallurgy and materials engineering. Our Nuclear Energy segment also provides power plant construction and management and maintenance services. In addition, this segment offers services for nuclear steam generators and balance of plant equipment, as well as nondestructive examination and tooling/repair solutions for other plant systems and components.

See Note 8 for further information regarding our segments.

Operating results for the three and nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. For further information, refer to the consolidated and combined financial statements and the related footnotes included in our 2011 10-K.

Contracts and Revenue Recognition

We generally recognize contract revenues and related costs on a percentage-of-completion method for individual contracts or combinations of contracts based on work performed, man hours or a cost-to-cost method, as applicable to the product or activity involved. We recognize estimated contract revenue and resulting income based on the measurement of the extent of progress completion as a percentage of the total project. Certain costs may be excluded from the cost-to-cost method of measuring progress, such as significant costs for materials and major third-party subcontractors, if it appears that such exclusion would result in a more meaningful measurement of actual contract progress and resulting periodic allocation of income. We include revenues and related costs so recorded, plus accumulated contract costs that exceed amounts invoiced to customers under the terms of the contracts, in contracts in progress. We include in advance billings on contracts billings that exceed accumulated contract costs and revenues and costs recognized under the percentage-of-completion method. Most long-term contracts contain provisions for progress payments. Our unbilled receivables do not contain an allowance for credit losses as we expect to invoice customers and collect all amounts for unbilled revenues. We review contract price and cost estimates periodically as the work progresses and reflect adjustments proportionate to the percentage-of-completion in income in the period when those estimates are revised. For all contracts, if a current estimate of total contract cost indicates a loss on a contract, the projected loss is recognized in full when determined.

For contracts as to which we are unable to estimate the final profitability except to assure that no loss will ultimately be incurred, we recognize equal amounts of revenue and cost until the final results can be estimated more precisely. For these deferred profit recognition contracts, we recognize revenue and cost equally and only recognize gross margin when probable and reasonably estimable, which we generally determine to be when the contract is approximately 70% complete. We treat long-term construction contracts that contain such a level of risk and uncertainty that estimation of the final outcome is impractical, except to assure that no loss will be incurred, as deferred profit recognition contracts.

10

Our policy is to account for fixed-price contracts under the completed-contract method if we believe that we are unable to reasonably forecast cost to complete at start-up. Under the completed-contract method, income is recognized only when a contract is completed or substantially complete.

For certain parts orders and aftermarket services activities, we recognize revenues as goods are delivered and work is performed.

Variations from estimated contract performance could result in material adjustments to operating results for any fiscal quarter or year. We include claims for extra work or changes in scope of work to the extent of costs incurred in contract revenues when we believe collection is probable.

In the three and nine months ended September 30, 2011, we recorded additional costs totaling approximately $3.1 million (all in our Nuclear Energy segment) and $61.8 million ($11.1 million in our Nuclear Operations segment and $50.7 million in our Nuclear Energy segment), respectively, to complete certain projects in a loss contract position attributable to changes in estimate due to productivity and scheduling issues. In May 2012, we entered into an agreement with the customer of the Nuclear Energy project to settle contract claims resulting in recognition of revenues totaling approximately $18.4 million for the nine months ended September 30, 2012. The projects in our Nuclear Operations segment, which contributed to the $11.1 million of additional costs referenced above, are substantially complete.

Comprehensive Loss

The components of accumulated other comprehensive loss included in stockholders’ equity are as follows:

	September 30,			December 31,
	2012			2011
	(In thousands)
Currency translation adjustments	$	38,917		$	36,626
Net unrealized gain on investments		560			201
Net unrealized gain on derivative financial instruments		3,238			2,717
Unrecognized losses on benefit obligations		(539,158	)		(578,172	)
Accumulated other comprehensive loss	$	(496,443	)	$	(538,628	)

Inventories

The components of inventories are as follows:

	September 30,		December 31,
	2012		2011
	(In thousands)
Raw materials and supplies	$	106,372	$	77,932
Work in progress		8,781		6,889
Finished goods		16,646		22,477
Total inventories	$	131,799	$	107,298

Restricted Cash and Cash Equivalents

At September 30, 2012, we had restricted cash and cash equivalents totaling approximately $64.7 million, $9.1 million of which was held in restricted foreign accounts, $2.8 million of which was held for future decommissioning of facilities (which we include in other assets on our condensed consolidated balance sheets), $51.8 million of which was held to meet reinsurance reserve requirements of our captive insurer (in lieu of long-term investments) and $1.0 million of which was held in money market funds maintained by our captive insurer.

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Warranty Expense

We accrue estimated expense included in cost of operations on our condensed consolidated statements of income to satisfy contractual warranty requirements when we recognize the associated revenue on the related contracts. In addition, we make specific provisions where we expect the actual warranty costs to significantly exceed the accrued estimates. Such specific provisions could have a material effect on our consolidated financial condition, results of operations and cash flows.

The following summarizes the changes in the carrying amount of our accrued warranty expense:

	Nine Months Ended September 30,
	2012			2011
	(In thousands)
Balance at beginning of period	$	97,209		$	109,588
Additions (reductions) and adjustments		2,450			(1,035	)
Charges		(8,103	)		(14,012	)
Balance at end of period	$	91,556		$	94,541

Research and Development

Our research and development activities are related to development and improvement of new and existing products and equipment, as well as conceptual engineering evaluation for translation into practical applications. We charge to research and development costs the costs of research and development unrelated to specific contracts as incurred. Substantially all of these costs are in our Power Generation and Nuclear Energy segments, the majority of which are related to costs to development of our modular nuclear reactor business, B&W mPower^TM.

During the three and nine months ended September 30, 2012, we recognized $4.8 million and $13.5 million, respectively, of non-cash in-kind research and development costs related to services contributed by our minority partner to Generation mPower LLC (“GmP”), our majority-owned subsidiary formed in 2011 to oversee the program to develop the small modular nuclear power plant based on B&W mPower^TM technology. During the three and nine months ended September 30, 2011, we recognized $10.6 million of these in-kind expenses.

Provision for Income Taxes

Our effective tax rate for the three months ended September 30, 2012 was approximately 2.7% as compared to 33.2% for the three months ended September 30, 2011. Our effective tax rate for the nine months ended September 30, 2012 was approximately 27.1% as compared to 31.3% for the nine months ended September 30, 2011. The decrease in our effective tax rate for the three and nine months ended September 30, 2012 is primarily attributable to the recognition of previously unrecognized tax benefits totaling $25.3 million as a result of the expiration of the statute of limitations in certain jurisdictions. In addition, in the three and nine months ended September 30, 2012, we recognized a $27.0 million impairment charge which had no associated tax benefit recognized. The previously unrecognized tax benefits primarily relate to transfer pricing issues and the deductibility of a loss on financial instruments incurred prior to our spin-off. In the three and nine months ended September 30, 2011, we recognized increased tax benefits and deductions totaling $5.9 million. In addition, in the nine months ended September 30, 2011, we recognized a benefit totaling approximately $4.4 million attributable to changes in uncertain tax positions and a $2.5 million benefit attributable to settlements with tax authorities. We operate in the U.S. taxing jurisdiction and various other taxing jurisdictions outside of the U.S. Each of these jurisdictions has a regime of taxation that varies from the others. The taxation regimes vary not only with respect to nominal rates, but also with respect to the basis on which these rates are applied. These variances, along with variances in our mix of income from these jurisdictions, contribute to shifts in our effective tax rate.

As of September 30, 2012, we had gross unrecognized tax benefits of $7.1 million, which, if recognized, would reduce our effective tax rate from continuing operations. We classify interest and penalties related to unrecognized tax benefits as a component of our income tax provision. There were no significant penalties recorded during the three and nine months ended September 30, 2012.

As a result of the expiration of the statute of limitations in certain jurisdictions, we believe that within the next 12 months it is reasonably possible that our previously unrecognized tax benefits could decrease by approximately $0.9 million to $6.2 million. These previously unrecognized tax benefits relate to transfer pricing issues and tax credits for research activities.

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Recently Issued Accounting Standards

In July 2012, the Financial Accounting Standards Board (“FASB”) issued an update to the topicIntangibles—Goodwill and Other.This update permits an entity to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test currently required under this topic. This update will be effective for us in 2013 and we do not anticipate early adoption. We do not expect the adoption of this update to impact our consolidated financial statements.

Other than as described above, there have been no material changes to the recent pronouncements discussed in our 2011 10-K.

NOTE 2 – BUSINESS ACQUISITIONS AND INVESTMENTS

Anlagenbau und Fördertechnik Arthur Loibl GmbH

In November 2011, our Power Generation segment acquired Anlagenbau und Fördertechnik Arthur Loibl GmbH for approximately $24.2 million. During the nine months ended September 30, 2012, we recorded purchase price adjustments resulting in an increase in goodwill of approximately $3.5 million.

USEC Inc. Investment

In May 2010, our subsidiary Babcock & Wilcox Investment Company (“BWICO”) entered into an agreement with Toshiba Corporation (which was subsequently assigned to one of its subsidiaries) and USEC Inc. (“USEC”) to make a strategic investment in USEC totaling $200 million payable over three phases. In September 2010, following the satisfaction of certain conditions, including the availability to USEC’s American Centrifuge program of at least $2 billion in uncommitted funds under the DOE’s loan guarantee program for front-end nuclear fuel facilities and the establishment of a joint venture between us and USEC for supply by the joint venture of centrifuges and related equipment for the American Centrifuge program, we made a $37.5 million investment in USEC as part of a definitive agreement for us to make a total $100 million strategic investment in USEC.

In connection with our investment, we received 37,500 shares of USEC Series B-1 12.75% Convertible Preferred Stock and Warrants to purchase 3,125,000 shares of USEC Class B Common Stock at an exercise price of $7.50 per share, which are exercisable between January 1, 2015 and December 31, 2016, and a seat on USEC’s board of directors. At September 30, 2012, our total investment in USEC, including in-kind dividends, totaled $46.4 million.

In 2011, we entered into a standstill agreement with USEC and Toshiba when it became apparent that USEC would not be able to satisfy the closing conditions applicable to the second phase of the strategic investment. Pursuant to the standstill agreement, each party agreed not to exercise its right to terminate the strategic investment agreement for a limited standstill period, as subsequently extended. USEC has been unable to satisfy the closing conditions to the second and third phases of the strategic investment and the limited standstill period, as extended, has expired. Currently, BWICO, Toshiba and USEC each have the right to terminate their obligations under the original strategic investment agreement.

On June 12, 2012, USEC entered into a Cooperative Agreement with the DOE to provide funding for a cost-share research, development and demonstration (“RD&D”) program to enhance the technical and financial readiness of centrifuge technology for commercialization. The Cooperative Agreement provides for 80% DOE and 20% USEC cost sharing for work performed during the period from June 1, 2012 through December 31, 2013, with a total estimated cost of $350 million. The Cooperative Agreement will be incrementally funded and DOE funding was initially limited to $87.7 million until the DOE provides authorization for additional funding. Execution of the Cooperative Agreement satisfies the requirement of USEC’s credit facility that USEC shall have entered into a definitive agreement with the DOE for the RD&D program in order to continue spending on the American Centrifuge project. Under the credit facility, USEC can invest its 20% share of the costs under the RD&D program as long as the amount of the expenditures reimbursable to USEC under the RD&D program that have not yet been reimbursed does not exceed $50 million.

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On August 1, 2012 USEC filed its quarterly report for the period ended June 30, 2012 on Form 10-Q with the Securities and Exchange Commission. This report contained several updated risk factors (along with other disclosures) concerning operational and structural issues facing USEC including, but not limited to, the future operations of USEC’s Paducah Gaseous Diffusion Plant, achievement of milestones under the RD&D program discussed above, approved funding for the RD&D program, achievement of milestones under a 2002 DOE-USEC Agreement to develop, demonstrate and deploy the American Centrifuge technology and possible failure to maintain compliance with listing requirements of the New York Stock Exchange which could result in a delisting of USEC’s common stock (which could require USEC to repurchase its convertible notes for cash and trigger a default under its credit facility). In addition, on August 15, 2012 Standard and Poor’s lowered its ratings on USEC, including the corporate credit rating to CCC from CCC+ along with a negative outlook. Standard and Poor’s also lowered its issue-level rating on USEC’s senior convertible notes due October 2014 to CC from CCC-. We determined, based on the facts and circumstances disclosed above, that a fair value determination of our cost-method investment in USEC Preferred Stock was warranted. We have established, with the assistance of a third party valuation firm, that the fair value of our investment in USEC Preferred Stock totals $19.1 million. Fair value was determined using a combination of an option pricing model and a probability of default methodology. We believe the gross unrealized loss on our USEC Preferred Stock investment is other than temporarily impaired, and as a result we have included in other-net on our condensed consolidated statements of income an impairment charge totaling $27.0 million related to our investment in USEC Preferred Stock to write our investment down to its estimated fair value. We continue to support the American Centrifuge program through the ongoing manufacturing of components and technical support of the development program, and are presently exploring various restructuring alternatives with USEC and will continue to monitor these developments and evaluate our remaining investment in USEC Preferred Stock as new facts become available.

NOTE 3 – PENSION PLANS AND POST-RETIREMENT BENEFITS

Components of net periodic benefit cost included in net income are as follows:

	Pension Benefits												Other Benefits
	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	September 30,						September 30,						September 30,						September 30,
	2012			2011			2012			2011			2012			2011			2012			2011
	(In thousands)
Service cost	$	11,987		$	11,969		$	35,090		$	32,876		$	284		$	285		$	853		$	856
Interest cost		30,049			33,147			91,844			101,582			1,279			1,619			3,838			4,341
Expected return on plan assets		(36,086	)		(38,075	)		(102,556	)		(111,468	)		(483	)		(479	)		(1,448	)		(1,439	)
Amortization of prior service cost		1,009			933			2,638			2,795			(35	)		8			(104	)		25
Amortization of transition obligation		—			—			—			—			24			76			72			227
Recognized net actuarial loss		17,038			17,396			58,357			56,514			67			(63	)		200			(190	)
Net periodic benefit cost	$	23,997		$	25,370		$	85,373		$	82,299		$	1,136		$	1,446		$	3,411		$	3,820

In October 2012, we notified employees that, effective December 31, 2015, benefit accruals for those salaried employees covered by, and continuing to accrue service and salary adjusted benefits under our major U.S. and Canadian defined benefit qualified pension plans will cease. Furthermore, effective January 1, 2016, we will make service-based, cash contributions to The Babcock & Wilcox Company Thrift Plan for those employees impacted by the plan freeze.

NOTE 4 – COMMITMENTS AND CONTINGENCIES

Other than as noted below, there have been no material changes during the period covered by this Form 10-Q in the status of the legal proceedings disclosed in Note 10 to the consolidated and combined financial statements in Part II of our 2011 10-K.

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Investigations and Litigation

Nuclear Fuel Services, Inc.

In June 2011, approximately 18 plaintiffs filed a lawsuit styled as a “class action” in the U.S. District Court for the Eastern District of Tennessee against NFS, B&W, Babcock & Wilcox Power Generation Group, Inc. (“B&W PGG”), Babcock & Wilcox Technical Services Group, Inc. (“B&W TSG”), NOG-Erwin Holdings, Inc. and others relating to the operation of the NFS facility in Erwin, Tennessee. The plaintiffs seek compensatory and punitive damages alleging personal injuries and property damage resulting primarily from alleged releases of radioactive and other hazardous materials as a result of operations at the facility. In October 2011, the plaintiffs filed a motion to amend the original complaint increasing the number of plaintiffs to approximately 140, and we filed a motion to dismiss. The hearing on our motion to dismiss was held on June 28, 2012. No ruling has yet been issued by the court. This matter is still in its early stages. No discovery has been conducted and no trial date has been set. The ultimate outcome of these proceedings is uncertain and an adverse ruling, should coverage not be available, could have a material adverse impact on our consolidated financial position, results of operations and cash flow.

Apollo and Parks Township

On January 29, 2010, Michelle McMunn, Cara D. Steele and Yvonne Sue Robinson filed suit against B&W PGG, B&W TSG, formerly known as B&W Nuclear Environmental Services, Inc. (the “B&W Parties”) and Atlantic Richfield Company (“ARCO”) in the United States District Court for the Western District of Pennsylvania. Since January 2010, additional suits have been filed by additional plaintiffs and there are currently ten lawsuits pending in the U.S. District Court for the Western District of Pennsylvania against the B&W Parties and ARCO. Following the dismissal of a number of claims in June 2012, the suits presently involve approximately 74 claimants alleging, among other things, personal injuries and property damage as a result of alleged releases of radioactive material relating to the operation, remediation, and/or decommissioning of two former nuclear fuel processing facilities located in Apollo Borough and Parks Township, Pennsylvania (collectively, the “Apollo and Parks Litigation”). Those facilities previously were owned by Nuclear Materials and Equipment Company, a former subsidiary of ARCO (“NUMEC”), which was acquired by B&W PGG. The plaintiffs in the Apollo and Parks Litigation seek compensatory and punitive damages. The first seven cases have been consolidated for most non-dispositive pre-trial matters. Discovery in the Apollo and Parks Litigation is ongoing and no trial date has been set.

At the time of ARCO’s sale of NUMEC stock to B&W PGG, B&W PGG received an indemnity and hold harmless agreement from ARCO with respect to claims and liabilities arising prior to or as a result of conduct or events predating the acquisition.

Insurance coverage and/or the ARCO indemnity currently provides coverage for the claims alleged in the Apollo and Parks Litigation, although no assurance can be given that insurance and/or the indemnity will be available or sufficient in the event of liability, if any.

The B&W Parties and ARCO were defendants in a prior litigation filed in 1994 relating to the operation of the Apollo and Parks Township facilities in the matter of Donald F. Hall and Mary Ann Hall, et al., v. Babcock & Wilcox Company, et al. (the “Hall Litigation”). In 1998, the B&W Parties settled all then-pending and future punitive damage claims in the Hall Litigation for $8.0 million and sought reimbursement from third parties, including its insurers, American Nuclear Insurers and Mutual Atomic Energy Liability Underwriters (“ANI”). In 2008, ARCO settled the Hall Litigation with the plaintiffs for $27.5 million. The B&W Parties then settled the Hall Litigation in 2009 for $52.5 million, settling approximately 250 personal injury and wrongful death claims, as well as approximately 125 property damage claims, alleging damages as a result of alleged releases involving the facilities. ARCO and the B&W Parties retained their insurance rights against ANI in their respective settlements; however, under a related settlement regarding ARCO’s indemnification of B&W PGG relating to the two facilities, ARCO assigned to the B&W Parties 58.33% of the total of all ARCO’s proceeds/amounts recovered against ANI on account of the Hall Litigation.

The B&W Parties sought recovery from ANI for amounts paid by the B&W Parties to settle the Hall Litigation, along with unreimbursed attorney’s fees, allocated amounts assigned by ARCO to the B&W Parties, and applicable interest based upon ANI’s breach of contract and bad faith conduct in the matter of The Babcock & Wilcox Company et al. v. American Nuclear Insurers, et al. (the “ANI Litigation”). ARCO also sought recovery against ANI in the ANI Litigation, which has been pending before the Court of Common Pleas of Allegheny County, Pennsylvania.

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In September 2011, a jury returned a verdict in the ANI Litigation, finding that the B&W Parties’ settlement of the Hall Litigation for $52.5 million and ARCO’s settlement for $27.5 million were fair and reasonable. Following the verdict, in February 2012, the B&W Parties, ARCO and ANI entered into an agreement in which the parties agreed to the dismissal with prejudice of all remaining claims pending in the ANI Litigation, excluding the B&W Parties’ and ARCO’s claims seeking reimbursement from ANI for the $52.5 million and $27.5 million settlements (plus interest) (the “Settlement Claims”). By agreement, ANI also waived: (1) any and all rights to appeal the September 2011 jury verdict on the basis of the trial court’s evidentiary rulings; and (2) any defenses and arguments of any kind except ANI’s position that it was not required to reimburse the B&W Parties’ and ARCO for their settlements under the provisions of the ANI policies. In February 2012, the Court granted the parties’ proposed order implementing their agreement and entered final judgment in favor of the B&W Parties and ARCO on the Settlement Claims. As part of the final order and judgment, the Court ruled that the B&W Parties and ARCO are entitled to pre-judgment interest on their $52.5 million and $27.5 million settlements, in the amounts of approximately $8.8 million and $6.2 million, respectively. In addition, post-verdict interest from the date of the jury verdict was awarded at 6%. In March 2012, ANI filed a notice of appeal as to the final judgment and a supersedeas appeal bond in the amount of 120% of the total final judgment amount. The parties have filed their respective briefs with the Superior Court and oral arguments were held October 31, 2012. No ruling has yet been issued by the court.

Execution on the final judgments is stayed pending ANI’s appeal in the Pennsylvania appellate courts. Pursuant to the agreement among the parties, if the final judgments are affirmed, following the exhaustion of all appeals, ANI must immediately satisfy those judgments and pay an additional liquidated contingency sum of $5 million to the B&W Parties and ARCO. If on appeal the final judgments are reversed and/or vacated, ANI will not owe the liquidated contingency sum. B&W has not recognized any amounts claimed in the ANI Litigation in its financial statements due to the uncertainty surrounding the ultimate amount to be realized.

Columbia Condenser Contract

On October 21, 2011, Babcock & Wilcox Nuclear Energy, Inc. (“B&W NE”) filed a complaint in U.S. District Court, Eastern District of Washington against Energy Northwest for breach of contract and other claims relating to a contract for the removal and replacement of the main plant condenser and related parts at Energy Northwest’s Columbia Generating Station. B&W NE sought unspecified monetary damages, attorney’s fees and costs against Energy Northwest resulting from its failure to make payments for work B&W NE performed under the contract. Energy Northwest asserted claims against B&W NE alleging claims including breach of contract. The matter was stayed by the U.S. District Court pending a mediation between the parties, which occurred on April 30 and May 1, 2012. At the mediation, the parties negotiated the principal terms of a settlement which resolved all claims between the parties in consideration of a lump sum payment to B&W NE from Energy Northwest in the amount of $19.9 million, which amount is subject to Washington State taxes. The settlement was ratified by Energy Northwest’s Executive Board (a requirement under Washington state law for public entities) on May 10, 2012. On October 18, 2012, the lawsuit was dismissed on the joint request of the parties. We recognized additional revenues totaling approximately $18.4 million (and related expenses of $0.3 million) resulting in a net benefit of $18.1 million in the nine months ended September 30, 2012 related to this settlement.

NOTE 5 – DERIVATIVE FINANCIAL INSTRUMENTS

Our global operations give rise to exposure to market risks from changes in foreign currency exchange rates. We use derivative financial instruments, primarily foreign currency exchange (“FX”) forward contracts, to reduce the impact of changes in FX rates on our operating results. We use these instruments primarily to hedge our exposure associated with revenues or costs on our long-term contracts that are denominated in currencies other than our operating entities’ functional currencies. We do not hold or issue derivative financial instruments for trading or other speculative purposes.

We enter into derivative financial instruments primarily as hedges of certain firm purchase and sale commitments denominated in foreign currencies. We record these contracts at fair value on our consolidated balance sheets. Depending on the hedge designation at the inception of the contract, the related gains and losses on these contracts are either deferred in stockholders’ equity as a component of accumulated other comprehensive loss, until the hedged item is recognized in earnings, or offset against the change in fair value of the hedged firm commitment through earnings. Any ineffective portion of a derivative’s change in fair value and any portion excluded from the assessment of effectiveness are immediately recognized in earnings. The gain or loss on a derivative instrument not designated as a hedging instrument is also immediately recognized in earnings. Gains and losses on derivative financial instruments that require immediate recognition are included as a component of other – net in our condensed consolidated statements of income.

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We have designated all of our FX forward contracts that qualify for hedge accounting as cash flow hedges. The hedged risk is the risk of changes in functional-currency-equivalent cash flows attributable to changes in spot exchange rates of forecasted transactions related to long-term contracts. We exclude from our assessment of effectiveness the portion of the fair value of the forward contracts attributable to the difference between spot exchange rates and forward exchange rates. At September 30, 2012, we had deferred approximately $0.6 million of net gains on these derivative financial instruments in accumulated other comprehensive loss. We expect to recognize substantially this entire amount in the next 12 months.

At September 30, 2012, all of our derivative financial instruments consisted of FX forward contracts and warrants to purchase common stock. The notional value of our FX forward contracts totaled $184.3 million at September 30, 2012, with maturities extending to July 2014. These instruments consist primarily of contracts to purchase or sell Canadian Dollars or Danish Kroner. The fair value of these contracts totaled $4.5 million at September 30, 2012, and all of the contracts were Level 2 in nature. The fair value of our warrants, which are related to our investment in USEC Inc. described in Note 2, totaled $0.3 million at September 30, 2012, and is Level 3 in nature. We are exposed to credit-related losses in the event of nonperformance by counterparties to derivative financial instruments. We attempt to mitigate this risk by using major financial institutions with high credit ratings. The counterparties to all of our FX forward contracts are financial institutions included in our credit facility. Our hedge counterparties have the benefit of the same collateral arrangements and covenants as provided under our credit facility.

The following tables summarize our derivative financial instruments at September 30, 2012 and December 31, 2011:

	Asset and Liability Derivatives
	September 30,		December 31,
	2012		2011
	(In thousands)
Derivatives Designated as Hedges:
Foreign Exchange Contracts:
Location
Accounts receivable-other	$	1,606	$	1,760
Other assets	$	5,101	$	3,792
Accounts payable	$	1,374	$	1,238
Other liabilities	$	28	$	610
Derivatives Not Designated as Hedges:
Foreign Exchange Contracts:
Location
Other assets	$	212	$	—
Accounts payable	$	980	$	520
Other liabilities	$	—	$	664
Stock Warrants:
Other assets	$	332	$	877

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The effects of derivative instruments on our financial statements are as follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
	(In thousands)
Derivatives Designated as Hedges:
Cash Flow Hedges:
Foreign Exchange Contracts:
Amount of gain (loss) recognized in other comprehensive income	$	5,985		$	(8,701	)	$	3,469		$	(5,032	)
Income (loss) reclassified from accumulated other comprehensive loss into income: effective portion
Location
Revenues	$	527		$	1,927		$	(335	)	$	4,290
Cost of operations	$	2,698		$	(110	)	$	3,110		$	(1,745	)
Other-net	$	(69	)	$	541		$	29		$	255
Loss recognized in income: portion excluded from effectiveness testing
Location
Other-net	$	(317	)	$	(2,086	)	$	(618	)	$	(98	)
Derivatives Not Designated as Hedges:
Forward Contracts:
Gain (loss) recognized in income
Location
Other-net	$	(73	)	$	85		$	(251	)	$	1,584
Stock Warrants:
Loss recognized
Location
Other-net	$	(179	)	$	(1,180	)	$	(545	)	$	(933	)

NOTE 6 – FAIR VALUE MEASUREMENTS

The following is a summary of our available-for-sale securities measured at fair value at September 30, 2012 (in thousands):

	9/30/12		Level 1		Level 2		Level 3
Mutual funds	$	3,595	$	—	$	3,595	$	—
U.S. Government and agency securities		63,969		63,969		—		—
Asset-backed securities and collateralized mortgage obligations		463		—		463		—
Commercial paper		75,187		—		75,187		—
Total	$	143,214	$	63,969	$	79,245	$	—

The following is a summary of our available-for-sale securities measured at fair value at December 31, 2011 (in thousands):

	12/31/11		Level 1		Level 2		Level 3
Mutual funds	$	3,312	$	—	$	3,312	$	—
U.S. Government and agency securities		51,322		51,322		—		—
Asset-backed securities and collateralized mortgage obligations		462		—		462		—
Commercial paper		17,484		—		17,484		—
Total	$	72,580	$	51,322	$	21,258	$	—

We estimate the fair value of investments based on quoted market prices. For investments for which there are no quoted market prices, we derive fair values from available yield curves for investments of similar quality and terms.

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Derivatives

Level 2 derivative assets and liabilities primarily include over-the-counter options and forwards. These currently consist of FX rate derivatives. Where applicable, the value of these derivative assets and liabilities is computed by discounting the projected future cash flow amounts to present value using market-based observable inputs, including FX forward and spot rates, interest rates and counterparty performance risk adjustments. At September 30, 2012, we had FX forward contracts outstanding to purchase or sell foreign currencies, primarily Canadian Dollars and Danish Kroner, with a total notional amount of $184.3 million and a total fair value of $4.5 million.

Level 3 derivative assets include warrants to purchase common stock. The value of the warrants is computed using an option pricing model based on unobservable inputs, such as estimated stock price for inactive shares, and observable inputs, including interest rates and volatility. At September 30, 2012, the warrants, which are related to our investment in USEC, had a fair value of $0.3 million. The following is a summary of the changes in our Level 3 instruments measured on a recurring basis for the period ended September 30, 2012 (in thousands):

Balance, beginning of the year	$	877
Total realized and unrealized gains (losses):
Included in other income (expense)		(545	)
Included in other comprehensive income		—
Purchases, issuances and settlements		—
Principal repayments		—
Balance, end of period	$	332

Other Financial Instruments

We used the following methods and assumptions in estimating our fair value disclosures for our other financial instruments, as follows:

Cash and cash equivalents and restricted cash and cash equivalents. The carrying amounts that we have reported in the accompanying condensed consolidated balance sheets for cash and cash equivalents and restricted cash and cash equivalents approximate their fair values due to their highly liquid nature.

Long-term and short-term debt. We base the fair values of debt instruments on quoted market prices. Where quoted prices are not available, we base the fair values on the present value of future cash flows discounted at estimated borrowing rates for similar debt instruments or on estimated prices based on current yields for debt issues of similar quality and terms. The fair value of our debt instruments approximated their carrying value at September 30, 2012 and December 31, 2011.

NOTE 7 – STOCK-BASED COMPENSATION

In June 2012, we established a cash-settled long-term incentive plan for employees of certain subsidiaries and unconsolidated affiliates as selected by the plan committee. The cash-settled plan provides for a number of forms of stock-based compensation, including stock appreciation rights, restricted stock units and performance units, subject to satisfaction of specific performance goals. Stock appreciation rights are granted at not less than 100% of the fair market value closing price of a share of B&W common stock on the date of grant, become exercisable at such time or times as determined when granted and expire not more than seven years after the date of grant. Stock appreciation rights are cash settled for the excess of the market price of B&W common stock on the exercise date minus the exercise price. Restricted stock units and performance units are cash settled upon vesting as determined when granted. We will not issue any shares of B&W common stock under this plan, as all awards are cash settled.

Total stock-based compensation expense for all of our plans recognized for the three months ended September 30, 2012 and 2011 totaled $4.6 million and 3.3 million, respectively, with associated tax benefit recognized for the three months ended September 30, 2012 and 2011 totaling $1.7 million and $1.2 million, respectively. Total stock-based compensation expense for all of our plans recognized for the nine months ended September 30, 2012 and 2011 totaled $13.7 million and 13.0 million, respectively, with associated tax benefit recognized for the nine months ended September 30, 2012 and 2011 totaling $5.0 million and $4.8 million, respectively.

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NOTE 8 – SEGMENT REPORTING

As described in Note 1, our operations are assessed based on four segments. An analysis of our operations by segment is as follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
	(In thousands)
REVENUES:
Power Generation	$	426,363		$	385,262		$	1,337,673		$	1,130,089
Nuclear Operations		284,450			254,402			800,026			777,482
Technical Services		26,023			28,570			79,265			87,598
Nuclear Energy		75,016			61,531			228,994			220,670
Adjustments and Eliminations(1)		(4,266	)		(22,143	)		(19,895	)		(64,588	)
	$	807,586		$	707,622		$	2,426,063		$	2,151,251
(1)      Segment revenues are net of the following intersegment transfers and other adjustments:
Power Generation Transfers	$	1,089		$	17,739		$	6,422		$	51,239
Nuclear Operations Transfers		1,114			1,584			4,640			4,292
Technical Services Transfers		875			394			2,289			1,644
Nuclear Energy Transfers		1,188			2,426			6,544			7,413
	$	4,266		$	22,143		$	19,895		$	64,588
OPERATING INCOME:
Power Generation	$	30,390		$	38,926		$	104,827		$	93,657
Nuclear Operations		51,946			38,113			148,489			127,852
Technical Services		11,332			20,747			44,361			47,355
Nuclear Energy		(18,643	)		(37,521	)		(48,405	)		(108,341	)
	$	75,025		$	60,265		$	249,272		$	160,523
Unallocated Corporate(1)		(7,718	)		(2,714	)		(26,895	)		(17,814	)
Total Operating Income(2)	$	67,307		$	57,551		$	222,377		$	142,709
Other Income (Expense):
Interest income		417			247			1,154			1,011
Interest expense		(996	)		(770	)		(2,771	)		(2,522	)
Other – net		(27,343	)		2,708			(24,117	)		4,139
Total Other Income (Expense)		(27,922	)		2,185			(25,734	)		2,628
Income before Provision for Income Taxes	$	39,385		$	59,736		$	196,643		$	145,337
(1)      Unallocated corporate includes general corporate overhead not allocated to segments.
(2)      Included in operating income is the following:
Losses (Gains) on Asset Disposals and Impairments – Net:
Power Generation	$	2,551		$	458		$	3,187		$	530
Nuclear Operations		69			—			69			—
Technical Services		—			—			(1,517	)		—
Nuclear Energy		—			89			(1	)		96
	$	2,620		$	547		$	1,738		$	626
Equity in Income of Investees:
Power Generation	$	4,214		$	7,872		$	11,090		$	19,912
Nuclear Operations		—			—			—			—
Technical Services		10,332			14,910			37,500			36,612
Nuclear Energy		—			—			—			—
	$	14,546		$	22,782		$	48,590		$	56,524

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NOTE 9 – EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2012		2011		2012		2011
	(In thousands, except share and per share amounts)
Basic:
Net income attributable to The Babcock & Wilcox Company	$	40,521	$	45,663	$	151,289	$	105,382
Weighted average common shares		118,843,829		117,773,223		118,582,544		117,414,702
Basic earnings per common share	$	0.34	$	0.39	$	1.28	$	0.90
Diluted:
Net income attributable to The Babcock & Wilcox Company	$	40,521	$	45,663	$	151,289	$	105,382
Weighted average common shares (basic)		118,843,829		117,773,223		118,582,544		117,414,702
Effect of dilutive securities:
Stock options, restricted stock and performance shares		609,052		817,062		607,433		885,787
Adjusted weighted average common shares and assumed exercises of stock options and vesting of stock awards		119,452,881		118,590,285		119,189,977		118,300,489
Diluted earnings per common share	$	0.34	$	0.39	$	1.27	$	0.89

We have excluded 1,144,849 shares from our diluted share calculation at September 30, 2012 related to stock options as their effect would have been antidilutive.

NOTE 10 – SUBSEQUENT EVENT

On November 5 2012, our board of directors declared a dividend of $0.08 per share payable on December 17, 2012 to shareholders of record on November 19, 2012. In addition, our board authorized us to repurchase an indeterminate number of shares of our common stock at an aggregate purchase price of up to $250 million. The Company may repurchase shares from time to time during a two-year period in the open market.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

The following information should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included under Item 1 and the audited consolidated and combined financial statements and the related notes and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our annual report on Form 10-K for the year ended December 31, 2011 (our “2011 10-K”).

In this quarterly report on Form 10-Q, unless the context otherwise indicates, “we,” “us” and “our” mean The Babcock & Wilcox Company (“B&W”) and its consolidated subsidiaries.

We are including the following discussion to inform our existing and potential security holders generally of some of the risks and uncertainties that can affect our company and to avail ourselves of the “safe harbor” protection for forward-looking statements provided by federal securities law, including Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

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From time to time, our management or persons acting on our behalf make forward-looking statements to inform existing and potential security holders about our company. These statements may include projections and estimates concerning the timing and success of specific projects and our future backlog, revenues, income and capital spending. Forward-looking statements are generally accompanied by words such as “estimate,” “project,” “predict,” “believe,” “expect,” “anticipate,” “plan,” “goal” or other words that convey the uncertainty of future events or outcomes. In addition, sometimes we will specifically describe a statement as being a forward-looking statement and refer to this cautionary statement.

These forward looking statements include, but are not limited to, statements that relate to, or statements that are subject to risks, contingencies or uncertainties that relate to:

• our business strategy;

• future levels of revenues (including our backlog to the extent it may be viewed as an indicator of future revenues), operating margins, income from operations, net income or earnings per share;

• anticipated levels of demand for our products and services;

• future levels of capital, environmental or maintenance expenditures;

• our beliefs regarding the timing and effects on our businesses of certain environmental legislation, rules or regulations;

• the success or timing of completion of ongoing or anticipated capital or maintenance projects;

• expectations regarding the acquisition or divestiture of assets and businesses;

• our ability to obtain and maintain contract security capacity including surety bonds, bank guarantees and letters of credit;

• our ability to maintain appropriate insurance and indemnities;

• the potential effects of judicial or other proceedings on our business or businesses, financial condition, results of operations and cash flows; and

• the anticipated effects of actions of third parties such as competitors, or federal, foreign, state or local regulatory authorities, or plaintiffs in litigation.

• the timing and recognition of unrecognized tax benefits

• effective date and expected impact of accounting pronouncements

• our plans regarding the design, research and development, and deployment of the B&W mPower^TM reactor

In addition, various statements in this quarterly report on Form 10-Q, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements.

These forward-looking statements speak only as of the date of this report; we disclaim any obligation to update these statements unless required by securities law, and we caution you not to rely on them unduly. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks, contingencies and uncertainties relate to, among other matters, the following:

• general economic and business conditions and industry trends;

• general developments in the industries in which we are involved;

• decisions on spending by the U.S. Government and electric power generating companies;

• the highly competitive nature of our businesses;

• cancellations of and adjustments to backlog and the resulting impact from using backlog as an indicator of future earnings;

• our ability to perform projects on time, in accordance with the schedules established by the applicable contracts with customers;

• the ability of our suppliers to deliver raw materials in sufficient quantities and in a timely manner;

• volatility and uncertainty of the credit markets;

• our ability to comply with covenants in our credit agreements and other debt instruments and availability, terms and deployment of capital;

• the impact of our unfunded pension liabilities on liquidity, and our ability to fund such liabilities in the future, including our ability to continue being reimbursed by the U.S. Government for a portion of our pension funding obligations, which is contingent on maintaining our government contracts;

• the continued availability of qualified personnel;

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• the operating risks normally incident to our lines of business, including the potential impact of liquidated damages;

• changes in, or our failure or inability to comply with, government regulations;

• adverse outcomes from legal and regulatory proceedings;

• impact of potential regional, national and/or global requirements to significantly limit or reduce greenhouse gas emissions in the future;

• our ability to successfully manage research and development projects, including our efforts to develop the small modular nuclear power plant based on B&W mPower^TM technology;

• impact of potential regulatory and industry response affecting the timing and cost of future nuclear development as a result of the damage caused by the March 11, 2011 earthquakes and tsunami on certain of Japan’s nuclear facilities;

• changes in, and liabilities relating to, existing or future environmental regulatory matters;

• rapid technological changes;

• the realization of deferred tax assets;

• the consequences of significant changes in interest rates and currency exchange rates;

• a determination by the IRS that the spin-off or certain transactions should be treated as a taxable transaction;

• our ability to maintain our capital structure, including our access to capital, credit ratings, debt and ability to raise additional financing;

• difficulties we may encounter in obtaining regulatory or other necessary approvals of any strategic transactions;

• the risks associated with integrating businesses we acquire;

• our ability to realize adequate returns and related dividends on our investments in unconsolidated affiliates;

• our ability to maintain operational support for our information systems against service outages and data corruption, as well as protection against cyber-based network security breaches and theft of data;

• social, political and economic situations in foreign countries where we do business;

• the possibilities of war, other armed conflicts or terrorist attacks;

• the effects of asserted and unasserted claims;

• our ability to maintain surety bonds, letters of credit and financing;

• our ability to maintain builder’s risk, liability, property and other insurance in amounts and on terms we consider adequate and at rates that we consider economical;

• our ability to successfully develop competitive new technologies and products;

• the aggregated risks retained in our captive insurance subsidiary; and

• the impact of the loss of insurance rights as part of the Chapter 11 Bankruptcy settlement concluded in 2006 involving several of our subsidiaries.

We believe the items we have outlined above are important factors that could cause estimates in our financial statements to differ materially from actual results and those expressed in a forward-looking statement made in this report or elsewhere by us or on our behalf. We have discussed many of these factors in more detail elsewhere in this report, in Item 1A of this report and in our 2011 10-K. These factors are not necessarily all the factors that could affect us. Unpredictable or unanticipated factors we have not discussed in this report could also have material adverse effects on actual results of matters that are the subject of our forward-looking statements. We do not intend to update our description of important factors each time a potential important factor arises, except as required by applicable securities laws and regulations. We advise our security holders that they should (1) be aware that factors not referred to above could affect the accuracy of our forward-looking statements and (2) use caution and common sense when considering our forward-looking statements.

GENERAL

We operate in four segments: Power Generation, Nuclear Operations, Technical Services and Nuclear Energy.

Business Segments

In general, we operate in capital-intensive industries and rely on large contracts for a substantial amount of our revenues. We are currently exploring growth strategies across our segments through acquisitions to expand and complement our existing businesses. As we pursue these opportunities, we expect they would be funded by cash on hand, external financing (including debt), equity or some combination thereof.

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Power Generation Segment

Our Power Generation segment’s overall activity depends mainly on the capital expenditures of electric power generating companies and other steam-using industries. Several factors influence these expenditures, including:

• prices for electricity, along with the cost of production and distribution;

• prices for coal and natural gas and other sources used to produce electricity;

• demand for electricity, paper and other end products of steam-generating facilities;

• availability of other sources of electricity, paper or other end products;

• requirements for environmental improvements;

• impact of potential regional, state, national and/or global requirements to significantly limit or reduce greenhouse gas emissions in the future;

• level of capacity utilization at operating power plants, paper mills and other steam-using facilities;

• requirements for maintenance and upkeep at operating power plants and paper mills to comply with environmental regulations and combat the accumulated effects of wear and tear;

• ability of electric generating companies and other steam users to raise capital; and

• relative prices of fuels used in boilers, compared to prices for fuels used in gas turbines and other alternative forms of generation.

Our Power Generation segment plans to expand into international markets through acquisitions and partnering arrangements.

Nuclear Operations Segment

The revenues of our Nuclear Operations segment are largely a function of defense spending by the U.S. Government. As a supplier of major nuclear components for certain U.S. Government programs, this segment is a significant participant in the defense industry.

Technical Services Segment

The revenues and equity in income of investees of our Technical Services segment are largely a function of spending by the U.S. Government, and the performance scores we and our joint venture partners earn in managing and operating high-consequence operations at U.S. nuclear weapons sites and national laboratories. With its specialized capabilities of full life-cycle management of special nuclear materials, facilities and technologies, our Technical Services segment participates in the cleanup, operation and management of the nuclear sites and weapons complexes maintained by the U.S. Department of Energy (“DOE”).

Nuclear Energy Segment

Our Nuclear Energy segment’s overall activity depends mainly on the demand and competitiveness of nuclear energy. This segment is actively developing the B&W mPower^TM reactor and its activity is also a function of research and development efforts for the B&W mPower^TM reactor and the potential revenues to be generated from the B&W mPower^TM initiative. As part of this initiative, the Nuclear Energy segment has applied for funding from the DOE under its Small Modular Reactor Licensing Technical Support Program (“Funding Program”), which provides financial assistance for small modular reactor designs demonstrating, among other things, the ability to support a commercial operating date for a small modular reactor plant by 2022. The Nuclear Energy segment plans to meet all of the requirements of the Funding Program, including the requirement to deploy this technology by 2022.

For a summary of the critical accounting policies and estimates that we use in the preparation of our unaudited condensed consolidated financial statements, see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2011 10-K. There have been no material changes to these policies during the nine months ended September 30, 2012.

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Outlook Update

Government Operations

In August 2011, Congress enacted the Budget Control Act of 2011, which committed the U.S. Government to significantly reducing the federal deficit over ten years. The Budget Control Act will likely constrain discretionary spending by the federal government for a number of years as it capped discretionary spending through 2021. It also established a Joint Committee of Congress to identify an additional $1.2 to $1.5 trillion in deficit reductions by November 23, 2011. The Joint Committee was unable to meet this deadline, triggering a provision, referred to as “sequestration”, that calls for substantial automatic spending cuts split between defense and non-defense programs scheduled to start in January 2013 and continue over a nine-year period. Federal government spending reductions, including through sequestration, could adversely impact U.S. Government programs for which we provide products or services. There is currently no official planning guidance regarding how sequestration would be implemented, if it were to go into effect. As members of Congress and the Administration continue to discuss various options to prevent or defer sequestration, we cannot predict whether any such efforts will succeed. Additionally, while we believe many of our programs are well aligned with national defense and other strategic priorities, the outcome of efforts underway regarding sequestration is uncertain and it is possible that spending cuts may be applied to U.S. Government programs across the board, regardless of how programs align with those priorities. There are many variables in how the Budget Control Act could be implemented that will determine its specific impact; however, reductions in federal government spending and sequestration, as currently provided for under the Budget Control Act, could have a material adverse impact on the operating results and cash flows of our Nuclear Operations and Technical Services segments.

Through separate joint ventures, we manage and operate for the DOE the Y-12 National Security Complex and Pantex Plant. The management and operating contracts for these sites are currently under a re-bid through the DOE on a combined basis.

In late July 2012, the Y-12 National Security Complex in Oak Ridge, Tennessee experienced a security breach. Nuclear operations at the site were temporarily ceased for approximately two weeks in early August 2012. All operations have now resumed. The Y-12 security force had been managed by another contractor at the time of the incident. The security contract was assigned to our joint venture by the National Nuclear Security Administration (“NNSA”) following the security breach. The contractor responsible for managing the security force at the time of the security breach has been terminated and our joint venture took direct responsibility for security at the Y-12 National Security Complex. Following the security breach, a number of immediate changes and security enhancements were instituted, including the removal and replacement of key leadership personnel, restoration of critical security system elements to service and refining and recalibrating of alarm system components to enhance reliability. Any consequences that may result from this event are uncertain; however, the security breach has and could continue to adversely affect the expected fees earned by our joint venture that manages and operates the site, and we can provide no assurance that the security breach will not adversely affect our current or future proposals to the DOE. These consequences could have a material adverse impact on our consolidated financial position, results of operations or cash flow.

Power Generation

The Environmental Protection Agency (“EPA”) issued proposed final environmental regulations concerning Mercury and Air Toxics Standards (“MATS”) and rules concerning implementation of the Cross State Air Pollution Rule (“CSAPR”) in 2011. On December 30, 2011 the Federal Court of Appeals for the DC Circuit (the “Court”) stayed the CSAPR rules and reinstated EPA regulations from 2005. Oral arguments were held in April of 2012. In August 2012, the Court ruled CSAPR, which set stricter limits on sulfur dioxide and nitrogen oxide emissions from power plants in 28 states, violated the Clean Air Act. The ruling leaves CSAPR’s predecessor, the Clean Air Interstate Rule, in place. In October 2012, the EPA appealed the Court’s decision. We believe it could take years for any regulatory response to develop in response to the Court’s ruling. Due to the uncertainty created by the Court’s ruling on CSPAR, we could experience delays or cancellations in contract awards in our environmental equipment businesses.

Uncertainty concerning final rules and regulations could impact our Power Generation segment. For example, instead of adding environmental equipment, some of our customers may decide to close down their least efficient coal-fired boilers. Future decisions to retire boilers would impact our business in a variety of ways, including the servicing and retrofitting of operating power plants. The need to replace retired generating capacity with cleaner technologies would also create business opportunities for us. To generate energy while minimizing the emission of greenhouse gasses, we are actively researching and developing a range of products, including:

• non-carbon technologies, such as nuclear power plants and solar receivers for concentrating solar power plants;

• low-carbon technologies that enable clean use of fossil fuels, such as oxy-fuel combustion and regenerable solvent absorption technologies to scrub carbon dioxide from exhaust gases; and

• carbon-neutral technologies, such as biomass-fueled boilers and gasifiers, which use a renewable resource where the growing biomass re-absorbs the carbon dioxide emitted during energy production.

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Accounting for Contracts

As of September 30, 2012, in accordance with the percentage-of-completion method of accounting, we have provided for our estimated costs to complete all of our ongoing contracts. However, it is possible that current estimates could change due to unforeseen events, which could result in adjustments to overall contract costs. A principal risk on fixed-priced contracts is that revenue from the customer is insufficient to cover increases in our costs. It is possible that current estimates could materially change for various reasons, including, but not limited to, fluctuations in forecasted labor productivity or steel and other raw material prices. In some instances, we guarantee completion dates related to our projects and provide performance guarantees. Increases in costs on our fixed-price contracts could have a material adverse impact on our consolidated results of operations, financial condition and cash flows. Alternatively, reductions in overall contract costs at completion could materially improve our consolidated results of operations, financial condition and cash flows. In the nine months ended September 30, 2012, and 2011, we recognized changes in estimate related to long-term contracts accounted for on the percentage-of-completion basis which increased operating income by approximately $75.6 million and $4.0 million, respectively. In addition, in the nine months ended September 30, 2012, we recognized revenues totaling $18.4 million attributable to the settlement of a contract claim related to a condenser replacement contract in our Nuclear Energy segment. The nine months ended September 30, 2011 amount includes approximately $61.8 of cost over-runs ($50.7 million in our Nuclear Energy segment and $11.1 million in our Nuclear Operations segment), to complete certain projects attributable to changes in estimate due to productivity and scheduling issues. The project in our Nuclear Energy segment is now complete, and the projects in our Nuclear Operations segment are substantially complete.

RESULTS OF OPERATIONS – THREE MONTHS ENDED SEPTEMBER 30, 2012 VS. THREE MONTHS ENDED SEPTEMBER 30, 2011

The Babcock & Wilcox Company (Consolidated)

Revenues increased approximately 14.1%, or $100.0 million, to $807.6 million in the three months ended September 30, 2012 compared to $707.6 million for the corresponding period in 2011 due to increases in revenues from our Power Generation, Nuclear Operations and Nuclear Energy segments totaling $41.1 million, $30.1 million and $13.5 million, respectively. We also experienced a decrease in revenues in our Technical Services segment totaling $2.6 million.

Operating income increased $9.7 million to $67.3 million in the three months ended September 30, 2012 from $57.6 million for the corresponding period in 2011, due to operating income increases in our Nuclear Energy and Nuclear Operations segments totaling $18.9 million and $13.8 million, respectively. These increases were partially offset by decreases in our Technical Services and Power Generation segments totaling $9.4 million and $8.5 million, respectively. Unallocated corporate expenses increased $5.0 million.

Power Generation

Revenues increased 10.7%, or $41.1 million, to $426.4 million in the three months ended September 30, 2012, compared to $385.3 million in the corresponding period of 2011, primarily attributable to an increase in revenues of $44.7 million from our new-build environmental equipment business principally driven by ongoing engineering, procurement and construction activities on projects as a result of the new environmental rules and regulations. In addition, revenues in our new-build steam generation systems business increased $22.8 million primarily due to increased service and construction activities on waste-to-energy and biomass boiler projects. We also experienced a decrease in revenues of $21.3 million in our aftermarket services business primarily due to lower construction activities on retrofit boiler projects.

Operating income decreased $8.5 million to $30.4 million in the three months ended September 30, 2012 compared to $38.9 million in the corresponding period of 2011. Income associated with the increased revenues discussed above were offset by cost over-runs on certain engineering, procurement and construction projects and more competitive profit margins from the early market cycle environmental projects. We also experienced decreases in equity in income of investees totaling $3.7 million, primarily attributable to lower production and project activities at our joint venture in China. In addition, we experienced an impairment charge totaling $2.6 million in the three months ended September 30, 2012 attributable to the cancellation of an operations and maintenance services contract.

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Nuclear Operations

Revenues increased 11.8%, or $30.1 million, to $284.5 million in the three months ended September 30, 2012 compared to $254.4 million in the corresponding period of 2011, primarily attributable to increased activity in the manufacturing of nuclear components for U.S. Government programs totaling $32.0 million. These increases were partially offset by lower volume in our naval nuclear fuel and downblending activities as compared to the corresponding period of 2011.

Operating income increased $13.8 million to $51.9 million in the three months ended September 30, 2012 compared to $38.1 million in the corresponding period in 2011, primarily attributable to increased activity in the manufacturing of nuclear components for U.S. Government programs.

Technical Services

Revenues decreased 9.1%, or $2.6 million, to $26.0 million in the three months ended September 30, 2012 compared to $28.6 million for the corresponding period of 2011, primarily attributable to the completion of our international contract support services associated with the Fukushima event totaling $3.6 million. This decrease was partially offset by increased revenues associated with government site remediation operations.

Operating income decreased $9.4 million to $11.3 million in the three months ended September 30, 2012 compared to $20.7 million in the corresponding period of 2011, primarily attributable to increased selling, general and administrative expenses totaling $2.9 million associated with higher bid and proposal activity, and reduced income associated with the decreased revenues noted above. We also experienced a decrease in equity in income of investees totaling $4.6 million largely attributable to estimated reduced fee earned by our joint venture at the DOE’s Y-12 site in Oak Ridge, Tennessee due to a security breach, and the previous sale of our interest in two joint ventures that contributed to equity in income of investees in the corresponding period in 2011.

Nuclear Energy

Revenues increased 22.0%, or $13.5 million, to $75.0 million in the three months ended September 30, 2012 compared to $61.5 million in the corresponding period of 2011, primarily attributable to increased project scope completion in our nuclear equipment business totaling $21.0 million and timing of customer outage projects in our nuclear services business totaling $5.8 million. These increases were partially offset by a $12.6 million decrease in our nuclear projects business due to lower project execution compared to the same period in the prior year.

Operating income increased $18.9 million to a loss of $18.6 million in the three months ended September 30, 2012 compared to a loss of $37.5 million in the corresponding period of 2011, as a result of the revenue increases noted above in the nuclear services and nuclear equipment businesses. In the three months ended September 30, 2011 we also recognized $3.1 million of additional project costs to complete the condenser replacement project at Columbia Generating Station. This project was completed in 2011. Additionally, research and development costs related to the continued development of the B&W mPower™ reactor decreased $7.3 million, including a $5.9 million decrease in non-cash in-kind research and development services contributed by Generation mPower LLC’s (“GmP”) minority partner compared to the same period in the prior year.

Corporate

Unallocated corporate expenses increased $5.0 million to $7.7 million for the three months ended September 30, 2012, as compared to $2.7 million for the corresponding period in 2011, mainly due to higher information technology and incentive compensation expenses in 2012 compared to 2011.

Other Income Statement Items

Other—net decreased $30.0 million to a loss of $27.3 million for the three months ended September 30, 2012, as compared to income of $2.7 million for the corresponding period in 2011, primarily due to the impairment of our USEC investment in the current period totaling $27.0 million, and changes in foreign currency exchange rates.

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Provision for Income Taxes

For the three months ended September 30, 2012, our provision for income taxes decreased $18.8 million to $1.1 million, while income before provision for income taxes decreased $20.4 million. Our effective tax rate for the three months ended September 30, 2012 was approximately 2.7% as compared to 33.2% for the three months ended September 30, 2011. The decrease in our effective tax rate is primarily attributable to the recognition of previously unrecognized tax benefits totaling $25.3 million as a result of the expiration of the statute of limitations for certain jurisdictions. The previously unrecognized tax benefits primarily relate to transfer pricing issues and the deductibility of a loss on financial instruments incurred prior to our spin-off. In addition, in-kind research and development expenses, which are non-deductible for tax purposes, were lower by $5.9 million in the three months ended September 30, 2012 as compared to the same period in 2011. Also, in the three months ended September 30, 2012 we recognized an impairment charge on our USEC investment totaling $27.0 million which has no associated tax benefit recognized. In the three months ended September 30, 2011, we recognized increased tax benefits and deductions totaling $5.9 million. We operate in the U.S. taxing jurisdiction and various other taxing jurisdictions outside of the U.S. Each of these jurisdictions has a regime of taxation that varies from the others. The taxation regimes vary not only with respect to nominal rates, but also with respect to the basis on which these rates are applied. These variances, along with variances in our mix of income from these jurisdictions, contribute to shifts in our effective tax rate.

RESULTS OF OPERATIONS – NINE MONTHS ENDED SEPTEMBER 30, 2012 VS. NINE MONTHS ENDED SEPTEMBER 30, 2011

The Babcock & Wilcox Company (Consolidated)

Revenues increased approximately 12.8%, or $274.8 million, to $2,426.1 million in the nine months ended September 30, 2012 compared to $2,151.3 million for the corresponding period in 2011 due to increases in revenues from our Power Generation, Nuclear Operations and Nuclear Energy segments totaling $207.6 million, $22.5 million and $8.3 million, respectively. We also experienced a decrease in revenues in our Technical Services segment totaling $8.3 million.

Operating income increased $79.7 million to $222.4 million in the nine months ended September 30, 2012 from $142.7 million for the corresponding period in 2011, due primarily to increases in our Nuclear Energy, Nuclear Operations and Power Generation segments totaling $59.9 million, $20.6 million and $11.1 million, respectively. These increases were partially offset by a decrease in our Technical Services segment totaling $3.0 million and increased unallocated corporate expenses of $9.1 million.

Power Generation

Revenues increased 18.4%, or $207.6 million, to $1,337.7 million in the nine months ended September 30, 2012, compared to $1,130.1 million in the corresponding period of 2011, primarily attributable to an increase in revenues of $143.5 million from our new-build environmental equipment business principally driven by the ongoing engineering, procurement and construction activities of projects as a result of new environmental rules and regulations. In addition, revenues in our new-build steam generation systems business increased $93.9 million primarily due to increased activities on waste-to-energy and biomass boiler projects. Revenues in our aftermarket services business decreased $22.2 million primarily due to lower construction activities on retrofit boiler projects partially offset by environmental aftermarket equipment upgrades and retrofits.

Operating income increased $11.1 million to $104.8 million in the nine months ended September 30, 2012 compared to $93.7 million in the corresponding period of 2011, mainly due to the increases in revenues discussed above, partially offset by more competitive profit margins from the early market cycle environmental projects. We also experienced decreases in equity in income of investees totaling $8.8 million, primarily attributable to lower production and project activities at our joint venture in China. In addition, we incurred increased research and development expenses totaling $2.5 million for the period in 2012 as compared to the same period in the prior year. We also experienced an impairment charge totaling $2.6 million in the nine months ended September 30, 2012 attributable to the cancellation of an operations and maintenance services contract.

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Nuclear Operations

Revenues increased by 2.9%, or $22.5 million, to $800.0 million in the nine months ended September 30, 2012 compared to $777.5 million in the corresponding period of 2011, primarily due to increased activity in the manufacturing of nuclear components for U.S. Government programs.

Operating income increased $20.6 million to $148.5 million in the nine months ended September 30, 2012 compared to $127.9 million in the corresponding period of 2011, primarily due to improved contract performance for the manufacturing of nuclear components for U.S. Government programs totaling $26.1 million. Our naval nuclear fuel and downblending operating income decreased $5.5 million compared to 2011. Included in operating income for 2011 is a $10.9 million gain resulting from a favorable settlement with the previous owner of NFS. Contract performance associated with naval nuclear fuel and downblending activities improved $5.4 million compared to 2011.

Technical Services

Revenues decreased 9.5%, or $8.3 million, to $79.3 million in the nine months ended September 30, 2012 compared to $87.6 million for the corresponding period of 2011, primarily attributable to a decrease in our specialty manufacturing work scope associated with the American Centrifuge Program totaling $6.2 million and a decrease in our international contract support services associated with the Fukushima event totaling $3.0 million.

Operating income decreased $3.0 million to $44.4 million in the nine months ended September 30, 2012 compared to $47.4 million in the corresponding period of 2011, primarily attributable to increased selling, general and administrative expenses totaling $3.3 million associated with higher bid and proposal activity, as well as, reduced income associated with the decreased revenues noted above. We experienced an increase in equity in income of investees totaling $0.9 million associated largely with increased earnings on new contract awards, partially offset by estimated reduced fee earned by our joint venture at the DOE’s Y-12 site in Oak Ridge, Tennessee due to a security breach, and the previous sale of our interest in two joint ventures that contributed to equity in income of investees in the corresponding period in 2011. Additionally, we recognized a $1.2 million gain in the nine months ended September 30, 2012 from the sale of our interest in a joint venture associated with the management and operations of the Strategic Petroleum Reserve.

Nuclear Energy

Revenues increased 3.8%, or $8.3 million, to $229.0 million in the nine months ended September 30, 2012 compared to $220.7 million in the corresponding period of 2011, primarily attributable to increased activity in our nuclear services business of $29.8 million due to timing of customer outage projects. The revenue increase in our nuclear services business was partially offset by decreased revenue in our nuclear equipment and nuclear projects businesses due to reduced project scope completion when compared to the same period in the prior year. For the nine months ended September 30, 2012, revenues in our nuclear projects business also included $18.4 million as a result of the May 2012 claims settlement agreement reached with Energy Northwest related to a condenser replacement project at Columbia Generating Station in 2011.

Operating income increased $59.9 million to a loss of $48.4 million in the nine months ended September 30, 2012 compared to a loss of $108.3 million in the corresponding period of 2011, due to $50.7 million of project costs to complete the condenser replacement project at Columbia Generating Station recognized during the nine months ended September 30, 2011 and $18.1 million (net of related expenses) income recognized in the nine months ended September 30, 2012 associated with the May 2012 settlement discussed above. In addition, operating income in our nuclear services business increased by $10.2 million associated with the increased revenue discussed above. These increases were partially offset by $13.6 million of increased research and development costs related to the continued development of the B&W mPower™ reactor, including a $2.9 million increase in non-cash in-kind research and development services contributed by GmP’s minority partner. In addition, we experienced increases in selling, general and administrative expenses totaling $5.3 million related to the continued expansion of our presence in the commercial nuclear energy industry.

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Corporate

Unallocated corporate expenses increased $9.1 million to $26.9 million for the nine months ended September 30, 2012, as compared to $17.8 million for the corresponding period in 2011, mainly due to higher information technology and incentive compensation expenses in 2012 compared to 2011.

Other Income Statement Items

Other—net decreased $28.2 million to a loss of $24.1 million for the nine months ended September 30, 2012, as compared to income of $4.1 million for the corresponding period in 2011, primarily due to the impairment of our USEC investment totaling $27.0 million in the current period, and changes in foreign currency exchange rates.

Provision for Income Taxes

For the nine months ended September 30, 2012, our provision for income taxes increased $7.9 million to $53.3 million, while income before provision for income taxes increased $51.3 million. Our effective tax rate for the nine months ended September 30, 2012 was approximately 27.1% as compared to 31.3% for the nine months ended September 30, 2011. The decrease in our effective tax rate is primarily attributable to the recognition of previously unrecognized tax benefits totaling $25.3 million as a result of the expiration of the statute of limitations for certain jurisdictions. The previously unrecognized tax benefits primarily relate to transfer pricing issues and the deductibility of a loss on financial instruments incurred prior to our spin-off. In addition, in the nine months ended September 30, 2012 we recognized a $27.0 million impairment charge associated with our USEC investment which had no associated tax benefit recorded. In the nine months ended September 30, 2011, we recognized increased tax benefits and deductions totaling $5.9 million, a benefit attributable to changes in uncertain tax positions totaling $4.4 million, and a benefit attributable to settlements with tax authorities totaling $2.5 million. In-kind research and development expenses, which are non-deductible for tax purposes, were higher by $2.9 million in the nine months ended September 30, 2012 as compared to the same period in 2011. We operate in the U.S. taxing jurisdiction and various other taxing jurisdictions outside of the U.S. Each of these jurisdictions has a regime of taxation that varies from the others. The taxation regimes vary not only with respect to nominal rates, but also with respect to the basis on which these rates are applied. These variances, along with variances in our mix of income from these jurisdictions, contribute to shifts in our effective tax rate.

Backlog

Backlog is not a measure recognized by generally accepted accounting principles. As a result, it is possible that our methodology for determining backlog may not be comparable to methods used by other companies. We generally include expected revenue in our backlog when we receive written confirmation from our customers. We are subject to the budgetary and appropriation cycle of the U.S. Government as it relates to our Nuclear Operations and Technical Services segments. Backlog may not be indicative of future operating results and projects in our backlog may be cancelled, modified or otherwise altered by customers.

	September 30,		December 31,
	2012		2011
	(Unaudited)
	(In millions)
Power Generation	$	2,488	$	1,947
Nuclear Operations		2,630		2,995
Technical Services		4		14
Nuclear Energy		322		383
Total Backlog	$	5,444	$	5,339

We do not include the value of our unconsolidated joint venture contracts in backlog. These unconsolidated joint ventures are included in our Power Generation and Technical Services segments, and are reported as equity in income of investees on our condensed consolidated statements of income.

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Of the September 30, 2012 backlog, we expect to recognize revenues as follows:

	2012		2013		Thereafter		Total
	(Unaudited)
	(In approximate millions)
Power Generation	$	400	$	940	$	1,148	$	2,488
Nuclear Operations		300		950		1,380		2,630
Technical Services		4		—		—		4
Nuclear Energy		75		150		97		322
Total Backlog	$	779	$	2,040	$	2,625	$	5,444

At September 30, 2012, Power Generation backlog with the U.S. Government was $3.5 million, all of which was fully funded.

At September 30, 2012, Nuclear Operations backlog with the U.S. Government was $2.6 billion, which was substantially fully funded.

At September 30, 2012, Technical Services backlog with the U.S. Government was $4.1 million, all of which was fully funded.

At September 30, 2012, Nuclear Energy had no backlog with the U.S. Government.

Liquidity and Capital Resources

Credit Facility

On June 8, 2012, B&W entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) with a syndicate of lenders and letter of credit issuers, and Bank of America, N.A., as administrative agent which amends and restates our previous Credit Agreement dated May 3, 2010. The Credit Agreement provides for revolving credit borrowings and issuances of letters of credit in an aggregate outstanding amount of up to $700 million and is scheduled to mature on June 8, 2017. The proceeds of the Credit Agreement are available for working capital needs and other general corporate purposes. The Credit Agreement includes procedures for additional financial institutions to become lenders, or for any existing lender to increase its commitment thereunder, subject to an aggregate maximum of $1.0 billion for all revolving loan and letter of credit commitments.

The Credit Agreement is guaranteed by substantially all of B&W’s wholly owned domestic subsidiaries. Obligations under the Credit Agreement are secured by first-priority liens on certain assets owned by B&W and the guarantors (other than subsidiaries comprising our Nuclear Operations and Technical Services segments). If the corporate family rating of B&W and its subsidiaries from Moody’s is Baa3 or better (with a stable outlook or better), the corporate rating of B&W and its subsidiaries from S&P is BBB- or better (with a stable outlook or better), and other conditions are met, the liens securing obligations under the Credit Agreement will be released, subject to reinstatement upon the terms set forth in the Credit Agreement.

The Credit Agreement requires only interest payments on a periodic basis until maturity. We may prepay all loans under the Credit Agreement at any time without premium or penalty (other than customary LIBOR breakage costs), subject to certain notice requirements.

The Credit Agreement contains financial covenants relating to leverage and interest coverage and includes covenants that restrict, among other things, debt incurrence, liens, investments, acquisitions, asset dispositions, dividends, prepayments of subordinated debt and mergers. At September 30, 2012, we were in compliance with all of the covenants set forth in the Credit Agreement.

Loans outstanding under the Credit Agreement bear interest at our option at either the Eurocurrency rate plus a margin ranging from 1.25% to 2.25% per year or the base rate (the highest of the Federal Funds rate plus 0.50%, the one month Eurocurrency rate plus 1.0%, or the administrative agent’s prime rate) plus a margin ranging from 0.25% to 1.25% per year. The applicable margin for revolving loans varies depending on the credit ratings of the Credit Agreement. Under the Credit Agreement, we are charged a commitment fee on the unused portion of the Credit Agreement and that fee varies between 0.225% and 0.350% per year depending on the credit ratings of the Credit Agreement. Additionally, we are charged a letter of credit fee of between 1.25% and 2.25% per year with respect to

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the amount of each financial letter of credit issued under the Credit Agreement and a letter of credit fee of between 0.80% and 1.25% per year with respect to the amount of each performance letter of credit issued under the Credit Agreement, in each case depending on the credit ratings of the Credit Agreement. We also pay customary fronting fees and other fees and expenses in connection with the issuance of letters of credit under the Credit Agreement. In connection with entering into the Credit Agreement, we paid upfront fees to the lenders thereunder, and arrangement and other fees to the arrangers and agents of the Credit Agreement. At September 30, 2012, there were no borrowings outstanding and letters of credit issued under the Credit Agreement totaled $198.3 million, resulting in $501.7 million available for borrowings or to meet letter of credit requirements. The applicable interest rate at September 30, 2012 under this facility was 3.75% per year for revolving loans.

Based on the current credit ratings of the Credit Agreement, the applicable margin for Eurocurrency loans is 1.50%, the applicable margin for base rate loans is 0.50%, the letter of credit fee for financial letters of credit is 1.50%, the letter of credit fee for performance letters of credit is 0.875%, and the commitment fee for unused portions of the Credit Agreement is 0.25%. The Credit Agreement does not have a floor for the base rate or the Eurocurrency rate.

The Credit Agreement generally includes customary events of default for a secured credit facility. If any default occurs under the Credit Agreement, or if we are unable to make any of the representations and warranties in the Credit Agreement, we will be unable to borrow funds or have letters of credit issued under the Credit Agreement.

Other Arrangements

Certain foreign subsidiaries of Babcock & Wilcox Power Generation Group, Inc. have credit arrangements with various commercial banks and other financial institutions for the issuance of bank guarantees in association with contracting activity. The aggregate value of all such bank guarantees as of September 30, 2012 was $44.2 million.

B&W and certain of its subsidiaries have jointly executed general agreements of indemnity in favor of surety underwriters relating to surety bonds those underwriters issue in support of some of our contracting activity. As of September 30, 2012, bonds issued and outstanding under these arrangements in support of contracts totaled approximately $388.6 million.

Other

In aggregate, our cash and cash equivalents, restricted cash and cash equivalents and investments decreased by $142.9 million to $408.2 million at September 30, 2012 from $551.1 million at December 31, 2011 primarily due to cash used in investing and operating activities.

Our net cash used in operating activities increased by $33.5 million to $79.2 million in the nine months ended September 30, 2012, compared to $45.7 million for the nine months ended September 30, 2011. This increase in cash used was primarily attributable to changes in our net contracts in progress and advance billings partially offset by net income.

Our net cash used in investing activities increased by $46.1 million to $135.1 million in the nine months ended September 30, 2012 from $89.0 million in the nine months ended September 30, 2011. This increase in net cash used in investing activities was primarily attributable to additional purchases of investments in the current period, partially offset by higher investments in unconsolidated affiliates in the prior period as well as greater increases in restricted cash in the prior period.

Our net cash provided by (used in) financing activities decreased by $11.1 million to $3.4 million used in financing activities in the nine months ended September 30, 2012 from $7.7 million provided by financing activities for the nine months ended September 30, 2011. This decrease in net cash provided by (used in) financing activities was primarily attributable to increases in debt issuance costs and payments on debt obligations in the current period, as well as less cash from the exercise of stock options in the current period compared to the prior period.

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At September 30, 2012, we had restricted cash and cash equivalents totaling approximately $64.7 million, $9.1 million of which was held in restricted foreign accounts, $2.8 million of which was held for future decommissioning of facilities (which we include in other assets on our condensed consolidated balance sheets), $51.8 million of which was held to meet reinsurance reserve requirements of our captive insurer (in lieu of long-term investments) and $1.0 million of which was held in money market funds maintained by our captive insurer.

At September 30, 2012, we had investments with a fair value of $143.2 million. Our investment portfolio consists primarily of investments in government obligations and short-term commercial paper. Our investments are classified as available for sale and are carried at fair value with unrealized gains and losses, net of tax, reported as a component of other comprehensive loss.

Foreign Operations

Included in our total unrestricted cash and cash equivalents is approximately $106.3 million or 53% related to foreign operations and subsidiaries. In general, these resources are not available to fund our U.S. operations unless the funds are repatriated to the United States, which would expose us to taxes we presently have not accrued in our results of operations. We presently have no plans to repatriate these funds to the U.S. as the liquidity generated by our U.S. operations is sufficient to meet the cash requirements of our U.S. operations.

On November 5 2012, our board of directors declared a dividend of $0.08 per share payable on December 17, 2012 to shareholders of record on November 19, 2012. In addition, our board authorized us to repurchase an indeterminate number of shares of our common stock at an aggregate purchase price of up to $250 million. The Company may repurchase shares from time to time during a two-year period in the open market.

See Note 1 to our unaudited condensed consolidated financial statements included in this report for information on new and recently adopted accounting standards.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our exposures to market risks have not changed materially from those disclosed in Item 7A included in Part II of our 2011 10-K.

Item 4. Controls and Procedures

As of the end of the period covered by this quarterly report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) adopted by the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Our disclosure controls and procedures were developed through a process in which our management applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding the control objectives. You should note that the design of any system of disclosure controls and procedures is based in part upon various assumptions about the likelihood of future events, and we cannot assure you that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Based on the evaluation referred to above, our Chief Executive Officer and Chief Financial Officer concluded that the design and operation of our disclosure controls and procedures are effective as of September 30, 2012 to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and such information is accumulated and communicated to management as appropriate to allow timely decisions regarding disclosure. There has been no change in our internal control over financial reporting during the nine months ended September 30, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1. Legal Proceedings

For information regarding ongoing investigations and litigation, see Note 4 to our unaudited condensed consolidated financial statements in Part I of this report, which we incorporate by reference into this Item.

Item 1A. Risk Factors

In addition to the risk factor below and the other information in this report, the other factors presented in Item 1A. Risk Factors in our annual report on Form 10-K for the year ended December 31, 2011 are some of the factors that could materially affect our business, financial condition or future results.

New regulations related to “conflict minerals” may force us to incur additional expenses, may make our supply chain more complex and may result in damage to our reputation with customers.

On August 22, 2012, under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”), the SEC adopted new requirements for companies that use certain minerals and metals, known as conflict minerals, in their products, whether or not these products are manufactured by third parties. We are currently evaluating whether these requirements apply to us. These requirements will require companies that are subject to the rules to conduct due diligence, and disclose and report whether or not such minerals originate from the Democratic Republic of Congo and adjoining countries. The implementation of these new requirements could adversely affect the sourcing, availability and pricing of minerals used in the manufacture of certain components incorporated in our products. In addition, to the extent the rules apply to us, we will incur additional costs to comply with the disclosure requirements, including costs related to determining the source of any of the relevant minerals and metals used in our products. Since our supply chain is complex, we may not be able to sufficiently verify the origins for these minerals and metals used in our products through the diligence procedures that we implement, which may harm our reputation. In such event, we may also face difficulties in satisfying customers who require that all of the components of our products are certified as conflict mineral free.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information on our purchases of equity securities during the quarter ended September 30, 2012, all of which involved repurchases of common stock pursuant to the provisions of employee benefit plans that permit the repurchase of shares to satisfy statutory tax withholding obligations:

Period	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs		Maximum number of shares that may yet be purchased under the plans or programs
July 1, 2012 – July 31, 2012		54	$	24.83		not applicable		not applicable
August 1, 2012 – August 31, 2012		2,654	$	25.78		not applicable		not applicable
Total		2,708	$	25.76		not applicable		not applicable

Item 4. Mine Safety Disclosures

We own an interest in and manage and operate Ebensburg Power Company, an independent power company that produces alternative electrical energy. Through one of our subsidiaries, Revloc Reclamation Service, Inc., Ebensburg Power Company operates multiple coal refuse sites in Western Pennsylvania (collectively, the “Revloc Sites”). At the Revloc Sites, Ebensburg Power Company utilizes coal refuse from abandoned surface mine lands to produce energy. Beyond converting the coal refuse to energy, Ebensburg Power Company is also taking steps to reclaim the former surface mine lands to make the land and streams more attractive for wildlife and human uses.

The Revloc Sites are subject to regulation by the federal Mine Safety and Health Administration under the Federal Mine Safety and Health Act of 1977. Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Act and this Item is included in exhibit 95 to this quarterly report on Form 10-Q.

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Item 6. Exhibits

Exhibit 2.1* - Master Separation Agreement, dated as of July 2, 2010, between McDermott International, Inc. and The Babcock & Wilcox Company (incorporated by reference to Exhibit 2.1 to The Babcock & Wilcox Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (File No. 1-34658)).

Exhibit 3.1* - Restated Certificate of Incorporation of The Babcock & Wilcox Company (incorporated by reference to Exhibit 3.1 to The Babcock & Wilcox Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (File No. 1-34658)).

Exhibit 3.2* - Amended and Restated Bylaws of The Babcock & Wilcox Company (incorporated by reference to Exhibit 3.2 to The Babcock & Wilcox Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (File No. 1-34658)).

Exhibit 10.1*⁺ - Consulting Agreement by and between Babcock & Wilcox Power Generation Group, Inc. and Richard L. Killion dated as of July 9, 2012 (incorporated by reference to Exhibit 10.1 to The Babcock & Wilcox Company’s Current report on Form 8-K dated July 9, 2012 (File No. 1-34658)).

Exhibit 31.1 - Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer.

Exhibit 31.2 - Rule 13a-14(a)/15d-14(a) certification of Chief Financial Officer.

Exhibit 32.1 - Section 1350 certification of Chief Executive Officer.

Exhibit 32.2 - Section 1350 certification of Chief Financial Officer.

Exhibit 95 - Mine Safety Disclosure

101.INS - XBRL Instance Document

101.SCH - XBRL Taxonomy Extension Schema Document

101.CAL - XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB - XBRL Taxonomy Extension Label Linkbase Document

101.PRE - XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF - XBRL Taxonomy Extension Definition Linkbase Document

* Incorporated by reference to the filing indicated.

⁺  Management or compensatory contract.

.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		THE BABCOCK & WILCOX COMPANY
		/s/ Anthony S. Colatrella
	By:	Anthony S. Colatrella
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer and Duly Authorized
		Representative)
		/s/ David S. Black
	By:	David S. Black
		Vice President and Chief Accounting Officer
		(Principal Accounting Officer and Duly Authorized
		Representative)
November 7, 2012

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EXHIBIT INDEX

Exhibit Number	Description
2.1*	Master Separation Agreement, dated as of July 2, 2010, between McDermott International, Inc. and The Babcock & Wilcox Company (incorporated by reference to Exhibit 2.1 to The Babcock & Wilcox Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (File No. 1-34658)).
3.1*	Restated Certificate of Incorporation of The Babcock & Wilcox Company (incorporated by reference to Exhibit 3.1 to The Babcock & Wilcox Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (File No. 1-34658)).
3.2*	Amended and Restated Bylaws of The Babcock & Wilcox Company (incorporated by reference to Exhibit 3.2 to The Babcock & Wilcox Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (File No. 1-34658)).
10.1*+	Consulting Agreement by and between Babcock & Wilcox Power Generation Group, Inc. and Richard L. Killion dated as of July 9, 2012 (incorporated by reference to Exhibit 10.1 to The Babcock & Wilcox Company’s Current report on Form 8-K dated July 9, 2012 (File No. 1-34658)).
31.1	Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer.
31.2	Rule 13a-14(a)/15d-14(a) certification of Chief Financial Officer.
32.1	Section 1350 certification of Chief Executive Officer.
32.2	Section 1350 certification of Chief Financial Officer.
95	Mine Safety Disclosure
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

^*  Incorporated by reference to the filing indicated.

⁺  Management or compensatory contract.