BWX DEFA14A Additional proxy soliciting materials

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

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THE BABCOCK & WILCOX COMPANY
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EXPLANATORY NOTE

The following materials supplement the Definitive Proxy Statement filed by The Babcock & Wilcox Company (the “Company”) with the Securities and Exchange Commission on March 20, 2015. Beginning on April 20, 2015, these materials are being provided to certain stockholders of the Company in connection with the solicitation of proxies for the Company’s 2015 Annual Meeting of Stockholders to be held on May 1, 2015.

April 2015

Shareholder Outreach

2015 Proxy Season

Safe Harbor

B&W cautions that this presentation contains forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private

Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements

relating to the manner, timing, tax-free nature and expected benefits associated with separating B&W’s power generation business and its

government and nuclear operations business into two independent,

publicly traded companies, as well as the anticipated management teams

and 2015 revenue projections of the separated companies and their ability to create value for their respective shareholders. These forward-

looking statements are based on management’s current expectations and involve a number of risks and uncertainties, including, among other

things, the proposed spin-off may not be completed as anticipated or at all, delays or other difficulties in completing the spin-off, including the

inability to satisfy the conditions for completing the spin-off, disruptions experienced with customers and suppliers, the inability of either

business

successfully

operate

independently

and

the

inability

retain

key

personnel.

one

these

risks

other

risks

materialize, actual results may vary materially from those expressed. For a more complete discussion of these and other risk factors, see

B&W’s filings with the Securities and Exchange Commission, including

its annual report on Form 10-K for the year ended December 31, 2014

and the Form 10 filing of Babcock & Wilcox Enterprises, Inc. B&W cautions not to place undue reliance on these forward-looking statements,

which speak only as of the date of this presentation, and undertakes no obligation to update or revise any forward-looking statement, except

to the extent required by applicable law.

•

B&W: A History of Innovation in Energy Technology and Services

•

Sound Operating Performance and Shareholder Value Creation

•

2015 Transition: Spin-Off of the Power Generation Business

•

Compensation Structure Linking Pay and Performance While Driving

Shareholder Value

•

Executive Compensation Governance in Shareholders’

Interests

•

Highly Qualified, Independent Board and Sound Governance

Executive Summary

B&W: A History of Innovation in Energy Technology and Services

The Babcock & Wilcox Co. is a leader in clean energy technology and services,

primarily for the nuclear, fossil and renewable power markets, as well as an

advanced technology and mission critical defense contractor

We Operate Across 5 Segments

BWC is a preferred global leader, excelling in the delivery of advanced energy and operational solutions by:

Being spun-out in 2015

Delivering innovative technologies and solutions to fulfill the needs of our customers.

Providing a challenging, rewarding, and safe work environment for our employees.

Generating increasing value for our stakeholders.

Power Generation

•

Environmental /

emissions control

systems

•

Fossil fuel-fired power

generation

•

Service, operation and

maintenance

•

Renewable power

generation

•

Industrial

environmental

equipment / solutions

Nuclear Energy

•

Nuclear component

design, manufacture and

installation

•

Component inspection,

maintenance and repair

•

Design

services

•

Specialized tooling

design

Nuclear Operations

•

Virginia-Class submarine

program

•

Ford-Class carrier

program

•

Refueling

•

Fuel processing and

fabrication

•

HEU downblending

Technical Services

•

Safe

nuclear operations

management

•

Secure nuclear material

handling, storage and

waste management

•

Leadership of high-

consequence, nuclear

laboratories

mPower

•

Small modular reactor

(SMR) design

Focus on Improving Operating Performance and Transforming

Long-Term Strategy in a Challenging Market Environment

2014 Business and Financial Highlights

•

Nuclear Operations Group segment continued to have strong performance, setting records for revenue and

operating income

•

Challenging Commercial Market Environment

Long-Term Strategic Transformation Underway

•

Restructured mPower (small modular reactor program) to significantly reduce spending

•

Global Competitiveness Initiative (GCI) designed to enhance B&W’s core competitiveness by reducing

complexity, improving efficiency, and aligning operations and structure with competitive landscape

•

Restructure the Nuclear Energy segment by exiting projects business and reducing headcount and

manufacturing footprint

•

Margin improvement program targeting 200 –

300bp improvement in operating margin for PGG

•

Created a global sales organization to drive international growth of new renewable waste to energy and coal

plant sales

•

Acquired MEGTEC to create new growth opportunity in an adjacent market for industrial environmental

controls

•

Decision to spin-off Power Generation business

Low

natural

gas

price

and

increasing

regulatory

pressure

created

headwinds

for

both

nuclear

and

coal

units

Close to achieving total annual savings of approximately $75 million

Dividends Per Share

Adj. EPS Attributed

to B&W, Diluted

Share Repurchases ($M)

Shareholder Value Creation in Challenging Market

Delivering Value to Shareholders Through Dividends and Share Repurchases

Growth in Backlog Will Catalyze Revenue Growth in 2015

See appendix for Reconciliation of Non-GAAP EPS

($ in thousands)

$3,291

$3,269

$2,923

$5,749

$4,590

$5,292

2012

2013

2014

Revenues

Backlog

$96.8

$157.1

$149.8

2012

2013

2014

$2.17

$2.27

$2.03

2012

2013

2014

$0.08

$0.34

$0.40

2012

2013

2014

Driving Shareholder Value Through the Spin-Off

Plans to Spin-Off Power Generation Business

Strategic Benefits of Spin-Off

•

In November 2014, B&W announced plans to spin-off the

company’s Power Generation business

•

Tax-free spin-off to B&W shareholders

•

Post-transaction, shareholders will own 100% of two

independent, publicly traded companies:

–

BWX Technologies, Inc. (“BWXT”

concurrent with

the spin-off will be renamed from “The Babcock &

Wilcox Company”)

–

Babcock & Wilcox Enterprises, Inc.

(currently Power Generation Group)

Tax-free spin-off of the Company’s Power Generation business to B&W’s shareholders is expected to

be completed in mid-2015

Efficient

Capital

Allocation

Independent

Strategies

Equity Market

Alignment

Focused

Management

Flexibility to deploy and execute a focused

capital structure consistent with the

strategic priorities of each business

Increased opportunities to pursue external

growth strategies as independent

companies

Ability to attract an investor base suited to

the particular operational and financial

characteristics of each company

Greater management focus on the distinct

businesses of Power Generation and

Government & Nuclear Operations

Two Publicly Traded Companies in Mid-2015

Government & Nuclear Operations

Headquarters:

Lynchburg, VA

Incorporation:

Delaware

Executive Chairman:

John A. Fees

CEO:

Peyton S. Baker

Projected 2015 revenue:

$1.4B

# of Employees:

~5,300

BWX Technologies, Inc.

Power Generation

Headquarters:

Charlotte, NC

Incorporation:

Delaware

Chairman & CEO:

E. James Ferland

Projected 2015 revenue:

$1.7B

# of Employees:

~5,700

Babcock & Wilcox Enterprises, Inc.

Executive Compensation Program Puts Majority of Pay at Risk

Compensation program is designed to:

Incent and reward annual-

and long-term performance

Align interests of B&W executives with shareholders

Attract and retain well-qualified executives

Base Salary

B&W seeks to provide reasonable and competitive compensation

within

“pay-for-performance”

framework

2014 CEO Target Total Direct Compensation

2014 All Other NEOs Total Direct Compensation

68% of CEO Pay is

Performance Based

56% of NEO Pay is

Performance Based

Base Salary

16%

RSUs 17%

Options 17%

Performance

RSUs 35%

Annual

Incentive 15%

33%

RSUs

12%

Options

12%

Performance

RSUs 23%

Annual

Incentive 21%

2014 Elements of Executive Compensation Program

Long-Term

Incentive

Retirement

Benefits

•

Defined benefit pension plan (closed to new participants in

2006; benefits to be frozen 12/31/15)

•

401(k) plans

•

Supplemental Executive Retirement Plan

Base Salary

•

Annual fixed cash compensation

Annual

Incentive

•

Cash-based compensation

•

Based on a mix of financial, safety and individual goals

•

100% performance-based

Other Benefits

•

Financial planning and executive physical

•

Company-subsidized medical; employee-paid dental,

vision, disability and life insurance

•

Change-in-control agreements and severance plan

•

Long-term (typically 3 years) stock-based compensation

•

Mix of performance-based awards (performance restricted

stock units and stock options) and time-based awards

(restricted stock units)

•

Provide means for participants to build

retirement savings over long B&W careers

•

Attract and retain qualified talent

•

Incent/reward annual performance

•

Promote productivity and well being

•

Incent/reward long-term performance

•

Align interest of executive with stockholders

via opportunities to build stock ownership

Element

Description / Characteristics

Primary Objectives

2014 Incentive Plan Structure Links Executive Compensation

to Financial and Stock Performance

Pay Element

Annual

Incentive

Components

Operating Income

(45% weighting)

Long-Term

Equity Based

Incentives

Performance-Based RSUs

(50%)

RSUs (25%)

Performance Link

Cash

Long-Term Stock

Performance

Three-Year Average ROIC

(40%)

3-Year Relative TSR (20%)

Annual ROIC

(25%)

Stock Options (25%)

Individual (20%)

If Operating Income is

not achieved at

threshold performance,

no bonus plan is paid

Cumulative EPS (40%)

Safety Performance (10%)

Pre-Set Measurable Goals

2014 Pay Outcomes Demonstrate Alignment with Performance

CEO’s 2012-14 long-term performance share grant did not vest after three-year performance

period ended 2014 when performance targets were not achieved

CEO’s 4-year vesting restricted stock, one-time sign-on grant (granted in 2012) is tracking in line

with company’s lower stock price through 2014

Annual bonus pool does not fund if threshold financial metric (operating income) is not achieved

Board has authority to apply negative discretion to the annual bonus program within 162m

framework, and has used it historically including in 2014

Performance targets were selected and set at challenging levels through rigorous process to

reflect rapidly changing markets and company transformation

2012-14 Long-Term Equity Grants Paid Out at Zero After Missing 3-Year Performance Targets on

Average ROIC and Cumulative Adjusted EPS

Bottoms up process that starts with management teams

Top down review by senior management and Board to create challenging targets

Process is aligned and benchmarked with peer group plan structure

Thorough Process for Setting Compensation that Reflects

Challenging Metrics and Rapidly Changing Market

Approach to Setting Executive Compensation

•

Compensation Value –

Broad Peer Group of 300 industrial companies

•

Compensation Structure –

Custom Peer Group of 16 Companies

Why We Choose Financial Metrics

Compensation

Levels

are

Benchmarked

Reasonably

Sized

Peers

Relevant

Industries;

Significantly Larger Peers Are Used for Benchmarking Pay Practices,

And Not For Setting Pay Levels

Total direct compensation for NEOs targeted at median of a broad

survey of over 300 general industrial companies

Data is adjusted using regression analysis based on revenues to account for company size

Supports decisions around pay design and metrics

Includes companies where we compete for talent in the engineering and construction, aerospace and defense, heavy

electrical equipment and industrial machinery industries

Reviewed peer group for 2014; two companies were removed due to higher revenue and/or market cap

Operating Income

Overall profitability of enterprise

Aligned with share price movement

Maximum utilization of company assets

Commonly used performance metric

Correlation to stock price

Return on Invested Capital

Cumulative Earnings per Share

Total Shareholder Return

Prevalent performance measure

Increases alignment with shareholders

Responsive to shareholder input on metric selection

Metrics and process for setting goals are benchmarked

against peer group practices

Metrics Benchmarked to Industry Peers

Executive

Compensation

Governance

Shareholders’

Interests

Align pay with performance

Strong stock ownership guidelines (5x base salary for CEO)

Limited perquisites, each with direct business purpose

Clawback provisions in annual and long-term incentive compensation

Robust anti-hedging and pledging provisions

Double-trigger change-in-control severance arrangements for executives; with

exception for broad-based employee stock program

No tax gross-ups on change-in-control benefits

Fully independent compensation committee and compensation consultant

Highly Qualified, Independent Board and Sound Governance

Majority of Board Independent

Key Governance Attributes

Directors Have Powerful Combined Skill Set

Corporate Governance

Nuclear Power / Fossil

Fuel Generation

Audit

Former CEOs & CFOs

Multinational

Operations

Government Sector

Experience

Focus on Board renewal, 3 new Directors over the past

two years bringing fresh perspective to the boardroom

Strong Lead Independent Director provides additional

independent oversight through a range of responsibilities

All directors own stock in accordance with our ownership

guidelines (5x annual base retainer)

Majority voting policy for the election of directors increases

accountability to shareholders

Engineering

Utility Generation

Corporate Strategy

Manufacturing

Legal

M&A

Appendix

Reconciliation of Non-GAAP EPS and Operating Income

*Note: May not foot due to rounding

GAAP

Spin Costs

Centrus

Gain, net

Impairment

Litigation

Pension &

OPEB MTM

(Gain) / Loss

Restructuring

Acquisitions

Non-GAAP

Operating Income

(2.6)

6.1

16.1

241.2

57.7

318.4

Other Income / (Expense)

8.1

(14.4)

0.5

(5.8)

Income Tax (Expense) / Benefit

16.0

(2.3)

(4.3)

(89.6)

(19.6)

(99.8)

Net Income (Loss)

21.5

3.7

(14.4)

11.8

152.1

38.1

212.8

Net Loss Attributable to Non-Controlling Interest

7.9

Net Income (Loss) Attributable to The Babcock & Wilcox Company

29.4

3.7

(14.4)

11.8

152.1

38.1

220.7

Diluted Earnings per Common Share

0.27

0.03

(0.13)

0.11

1.40

0.35

2.03

Tax Rate

(292.6%)

31.9%

GAAP

One-time tax

(Benefit) /

Charges

Impairment

Charges

Litigation

Pension &

OPEB MTM

(Gain) / Loss

Restructuring

Acquisitions

Non-GAAP

Operating Income

536.4

(222.7)

39.6

353.2

Other Income / (Expense)

(19.2)

19.1

(0.2)

Income Tax (Expense) / Benefit

(184.6)

6.3

80.4

(13.2)

(111.1)

Net Income (Loss)

332.6

6.3

19.1

(142.5)

26.4

241.9

Net Loss Attributable to Non-Controlling Interest

13.5

Net Income (Loss) Attributable to The Babcock & Wilcox Company

346.1

6.3

19.1

(142.5)

26.4

255.3

Diluted Earnings per Common Share

3.07

0.06

0.17

(1.26)

0.23

2.27

Tax Rate

35.7%

31.5%

Twelve Months Ended December 31, 2013

Twelve Months Ended December 31, 2014

Reconciliation of Non-GAAP EPS and Operating Income (Cont’d)

*Note: May not foot due to rounding

Twelve Months Ended December 31, 2012

GAAP

One-time tax

(Benefit) /

Charges

Impairment

Charges

Litigation

Pension &

OPEB MTM

(Gain) / Loss

Restructuring

Acquisitions

Non-GAAP

Operating Income (Loss)

346.6

2.6

31.9

381.1

Other Income / (Expense)

(27.2)

27.0

0.2

(0.0)

Provision for Income Taxes

(101.9)

(18.5)

(1.0)

(11.0)

(132.4)

Net Income (Loss)

217.6

(18.5)

28.6

21.1

248.7

Net Loss Attributable to Non-Controlling Interest

10.1

Net Income Attributable to The Babcock & Wilcox Company

227.7

(18.5)

28.6

21.1

258.8

Diluted Earnings per Common Share

1.91

(0.16)

0.24

0.18

2.17

Tax Rate

31.9%

n/a

3.4%

34.3%

34.7%

Please reach out with any questions

Jenny Apker

VP Treasury & Investor Relations

Office: 704.625.4937

Email: jlapker@babcock.com

BWX (BWXT) DEFA14AAdditional proxy soliciting materials