Babcock & Wilcox Announces First Quarter 2015 Results

CHARLOTTE, N.C.--(BUSINESS WIRE)--

The Babcock & Wilcox Company BWC ("B&W" or the "Company") today reported first quarter 2015 revenues of $730.6 million, an increase of $68.5 million, or 10.4%, from the first quarter of 2014, while GAAP earnings per share increased $0.01 per share to $0.42 for the first quarter of 2015 compared to $0.41 in the prior year period. Adjusted (Non-GAAP) earnings per share, which excludes the impact of spin-related and restructuring costs for the quarter, were $0.47 for the three months ended March 31, 2015 compared to $0.42 in the first quarter of 2014.

"Our Nuclear Operations segment delivered continued robust revenue and operating income in the first quarter," said Mr. E. James Ferland, President and Chief Executive Officer. "In the Nuclear Operations Group, all of the facilities for component manufacturing and fuel fabrication, including Nuclear Fuel Services, were on or ahead of target and the segment delivered a solid bookings quarter in line with our expectations. The Power Generation segment produced a solid quarter with revenue, operating income, bookings and backlog slightly exceeding our expectations. As anticipated, we saw robust Power Generation segment cash flow in the quarter due to the impact of stronger operating earnings, significant advanced billings on new contracts and timing of costs incurred on major projects."

Results of Operations

Consolidated revenues for the first quarter of 2015 were $730.6 million, an increase of 10.4%, compared to $662.0 million for the first quarter of 2014. The Nuclear Operations segment revenues were relatively flat at $284.4 million in the first quarter of 2015 compared to $286.2 million in the same quarter in 2014. Revenues in the Power Generation segment were $397.2 million in the three months ended March 31, 2015, 27.3% above the corresponding period in 2014. This year-over-year increase was primarily due to the contribution of revenues from the MEGTEC acquisition and strong aftermarket service projects activities. Revenues from the Nuclear Energy segment were $33.0 million compared to $47.8 million in the prior year period, a decrease of $14.8 million primarily attributable to a decrease in our nuclear services business driven by the timing of maintenance outages in the Canadian nuclear market.

GAAP operating income for the first quarter of 2015 increased $17.2 million or an increase of 32.1% to $70.8 million compared to $53.6 million in the same period of 2014. For the quarter, operating income in the Power Generation segment was $23.0 million, a $12.5 million increase from $10.5 million in the same 2014 period, primarily due to higher revenues and improved margin performance. Operating income in the Nuclear Operations segment increased $8.5 million in the quarter from last year's record first quarter profit to $68.0 million primarily due to contract improvements in our naval nuclear fuel and downblending businesses. Our Technical Services segment operating income decreased $13.1 million in the quarter to $1.6 million, primarily attributable to the loss of the Y12 National Security Complex and Pantex Plant contracts and the termination of work on the American Centrifuge Manufacturing Program. Our Nuclear Energy segment reported a loss of $3.7 million in the period compared to a $0.5 million profit in the prior year period. Our results include a significant improvement in the mPower operating loss by $21.5 million to a loss of $(5.2) million in the three months ended March 31, 2015 compared to a loss of $(26.7) million in the same period of 2014.

GAAP operating income for the first quarter of 2015 includes $2.5 million of special charges for restructuring activities and $5.0 million of spin-related costs. Excluding these charges, adjusted operating income for the first quarter of 2015 was $78.4 million or an increase of 39.3% compared to adjusted operating income of $56.3 million in the first quarter of 2014.

"Our first quarter results clearly show that our business units have remained focused on delivering value to our customers and our shareholders even while the Company prepares for the planned spin-off of the Power Generation business," said Mr. Ferland. "Both BWX Technologies and Babcock & Wilcox Enterprises are well positioned to deliver shareholder value in the years ahead. We are on course to complete the separation of these two core businesses by mid-summer."

Liquidity and Debt

In a historically cash negative first quarter, the Company generated $5.0 million of cash from operations compared with $113.5 million net cash used in operating activities in the first quarter of 2014, driven by improvement in the contracts in progress and advance billings on contracts in the Power Generation segment. For the first quarter, the Company's cash and investments position, net of restricted cash, was $293.1 million at the end of the first quarter of 2015 compared to $325.4 million as of December 31, 2014.

As of March 31, 2015, outstanding balances under the Credit Agreement included a $296.3 million term loan, $0 outstanding under the revolver and letters of credit issued under the revolving credit facility totaling $174.8 million, resulting in $825.2 million of availability as of the end of the first quarter.

Quarterly Dividend

On May 1, 2015, the Company declared a quarterly cash dividend of $0.10 per common share. The dividend will be payable on June 4, 2015 to shareholders of record on May 14, 2015.

Outlook

Segment guidance provided for 2015 remains largely unchanged at the business unit level with a shift in the timing to expect 45%, rather than 40%, of full year operating income to be realized in the first half of the year. Additional guidance for the two separate entities will be provided in the weeks preceding the spin-off planned for mid-summer 2015.

Conference Call to Discuss First Quarter 2015 Results

Date:				Thursday, May 7, 2015, at 8:30 a.m. EST
Live Webcast:				Investor Relations section of website at www.babcock.com

Forward-Looking Statements

B&W cautions that this release contains forward-looking statements, including, without limitation, statements relating to the timing of and expected benefits associated with the planned spin-off of our Power Generation business; bookings, to the extent they may be viewed as an indicator of future revenues; and our 2015 outlook for B&W's segments. 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 not being completed as anticipated or at all; delays or other difficulties in completing the spin-off, including the inability to satisfy the conditions for its completion; disruptions experienced with customers and suppliers; the inability of either business to successfully operate independently; the inability to retain key personnel; adverse changes in the industries in which we operate and delays, changes or termination of contracts in backlog. If one or more of these risks or other risks materialize, actual results may vary materially from those expressed. For a more complete discussion of these and other risk factors, see B&W's filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2014 and subsequent quarterly reports on Form 10-Q. B&W cautions not to place undue reliance on these forward-looking statements, which speak only as of the date of this release, and undertakes no obligation to update or revise any forward-looking statement, except to the extent required by applicable law.

About B&W

The Babcock & Wilcox Company is a leader in clean energy technology and services, primarily for the nuclear, fossil and renewable power markets as well as a premier advanced technology and mission critical defense contractor. B&W has locations worldwide and employs approximately 11,000 people, in addition to joint venture employees throughout the world. A company overview presentation, which will be presented at investor conferences and meetings throughout this quarter, is available on the Investor Relations section of our website. For additional information please visit our website at www.babcock.com.

EXHIBIT 1
THE BABCOCK & WILCOX COMPANY
RECONCILIATION OF NON-GAAP OPERATING INCOME AND EARNINGS PER SHARE(1)(2)
		Three Months Ended March 31, 2015
						Restructuring
		Q1 2015				& Acquisitions				Spin Costs				Q1 2015
Operating Income		$	70.8			$	2.5			$	5.0			$	78.4
Other Income / (Expense)			(3.9	)			-				-				(3.9	)
Income Tax (Expense) / Benefit			(21.9	)			(0.9	)			(1.9	)			(24.7	)
Net Income (Loss)			45.0				1.6				3.1				49.7
Net Loss Attributable to Non-Controlling Interest			0.2				-				-				0.2
Net Income (Loss) Attributable to
The Babcock & Wilcox Company		$	45.3			$	1.6			$	3.1			$	49.9
Diluted Earnings per Common Share		$	0.42			$	0.01			$	0.03			$	0.47
Tax Rate			32.7	%											33.2	%
		Three Months Ended March 31, 2014
						Restructuring
		Q1 2014				& Acquisitions				Spin Costs				Q1 2014
Operating Income		$	53.6			$	2.7			$	-			$	56.3
Other Income / (Expense)			0.8				-				-				0.8
Income Tax (Expense) / Benefit			(13.3	)			(1.0	)			-				(14.3	)
Net Income (Loss)			41.2				1.7				-				42.9
Net Loss Attributable to Non-Controlling Interest			3.9				-				-				3.9
Net Income (Loss) Attributable to
The Babcock & Wilcox Company		$	45.0			$	1.7			$	-			$	46.7
Diluted Earnings per Common Share		$	0.41			$	0.02			$	-			$	0.42
Tax Rate			24.5	%											25.0	%

(1)		May not foot due to rounding.
(2)		B&W is providing non-GAAP information regarding certain of its historical results and guidance on future earnings per share to supplement the results provided in accordance with GAAP and it should not be considered superior to, or as a substitute for, the comparable GAAP measures. B&W believes the non-GAAP measures provide meaningful insight into the Company's operational performance and provides these measures to investors to help facilitate comparisons of operating results with prior periods and to assist them in understanding B&W's ongoing operations.

EXHIBIT 2
THE BABCOCK & WILCOX COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
		March 31,			December 31,
		2015			2014
		(Unaudited)
		(In thousands)
Current Assets:
Cash and cash equivalents		$	274,394		$	312,969
Restricted cash and cash equivalents			50,670			54,497
Investments			10,469			4,837
Accounts receivable – trade, net			404,941			430,600
Accounts receivable – other			51,448			44,299
Contracts in progress			395,542			398,373
Inventories			109,659			108,637
Deferred income taxes			73,892			73,479
Other current assets			49,820			46,111
Total Current Assets			1,420,835			1,473,802
Property, Plant and Equipment			1,171,347			1,167,581
Less accumulated depreciation			742,704			730,946
Net Property, Plant and Equipment			428,643			436,635
Investments			8,263			7,606
Goodwill			376,478			379,192
Deferred Income Taxes			250,221			245,766
Investments in Unconsolidated Affiliates			133,691			140,504
Intangible Assets			105,573			110,873
Other Assets			68,430			62,558
TOTAL		$	2,792,134		$	2,856,936

THE BABCOCK & WILCOX COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
		March 31,				December 31,
		2015				2014
		(Unaudited)
		(In thousands, except share and per
		share amounts)
Current Liabilities:
Notes payable and current maturities of long-term debt		$	18,219			$	18,215
Accounts payable			199,349				247,629
Accrued employee benefits			86,673				124,897
Accrued liabilities – other			101,512				97,207
Advance billings on contracts			254,844				255,535
Accrued warranty expense			53,722				53,624
Income taxes payable			19,421				22,529
Total Current Liabilities			733,740				819,636
Long-Term Debt			281,250				285,000
Accumulated Postretirement Benefit Obligation			56,939				58,213
Environmental Liabilities			56,548				56,259
Pension Liability			558,763				563,990
Other Liabilities			57,970				59,637
Commitments and Contingencies
Stockholders' Equity:
Common stock, par value $0.01 per share, authorized 325,000,000 shares;
issued 121,908,073 and 121,604,332 shares at March 31, 2015 and
December 31, 2014, respectively			1,219				1,216
Preferred stock, par value $0.01 per share, authorized 75,000,000 shares;
No shares issued			-				-
Capital in excess of par value			784,076				775,393
Retained earnings			676,913				642,489
Treasury stock at cost, 14,967,834 and 14,915,776 shares at March 31, 2015
and December 31, 2014, respectively			(425,586	)			(423,990	)
Accumulated other comprehensive income (loss)			(4,896	)			3,596
Stockholders' Equity – The Babcock & Wilcox Company			1,031,726				998,704
Noncontrolling interest			15,198				15,497
Total Stockholders' Equity			1,046,924				1,014,201
TOTAL		$	2,792,134			$	2,856,936

THE BABCOCK & WILCOX COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
		Three Months Ended
		March 31,
		2015				2014
		(Unaudited)
		(In thousands, except share and per
		share amounts)
Revenues		$	730,565			$	662,017
Costs and Expenses:
Cost of operations			539,921				502,307
Research and development costs			8,346				23,996
Losses on asset disposals and impairments, net			15				-
Selling, general and administrative expenses			108,751				94,685
Special charges for restructuring activities			2,502				2,658
Total Costs and Expenses			659,535				623,646
Equity in Income (Loss) of Investees			(219	)			15,269
Operating Income			70,811				53,640
Other Income (Expense):
Interest income			174				419
Interest expense			(2,363	)			(899	)
Other – net			(1,715	)			1,322
Total Other Income (Expense)			(3,904	)			842
Income before Provision for Income Taxes			66,907				54,482
Provision for Income Taxes			21,866				13,328
Net Income		$	45,041			$	41,154
Net Loss Attributable to Noncontrolling Interest			216				3,890
Net Income Attributable to The Babcock & Wilcox Company		$	45,257			$	45,044
Earnings per Common Share:
Basic:
Net Income Attributable to The Babcock & Wilcox Company		$	0.42			$	0.41
Diluted:
Net Income Attributable to The Babcock & Wilcox Company		$	0.42			$	0.41
Shares used in the computation of earnings per share:
Basic			106,775,916				110,439,415
Diluted			107,146,494				110,886,043

THE BABCOCK & WILCOX COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
		Three Months Ended
		March 31,
		2015				2014
		(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:		(In thousands)
Net Income		$	45,041			$	41,154
Non-cash items included in net income:
Depreciation and amortization			26,443				17,013
Income of investees, net of dividends			525				(4,694	)
Losses on asset disposals and impairments, net			15				-
In-kind research and development costs			-				4,173
Recognition of losses for pension and postretirement plans			510				594
Stock-based compensation and thrift plan expense			6,981				4,634
Excess tax benefits from stock-based compensation			44				(760	)
Changes in assets and liabilities:
Accounts receivable			17,336				17,528
Accounts payable			(41,448	)			(82,164	)
Contracts in progress and advance billings on contracts			2,557				(83,797	)
Inventories			(2,941	)			3,082
Income taxes			(10,793	)			(6,766	)
Accrued and other current liabilities			7,357				(31	)
Pension liability, accrued postretirement benefit obligation and employee benefits			(43,364	)			(20,913	)
Other, net			(3,219	)			(2,570	)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES			5,044				(113,517	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in restricted cash and cash equivalents			3,827				10,278
Purchases of property, plant and equipment			(21,349	)			(21,214	)
Purchases of securities			(6,593	)			(19,926	)
Sales and maturities of securities			410				24,390
Proceeds from asset disposals			(27	)			3
Investment in equity method investees			-				(4,900	)
NET CASH USED IN INVESTING ACTIVITIES			(23,732	)			(11,369	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of short-term borrowing and long-term debt			-				(441	)
Borrowings under short-term arrangements			-				733
Borrowings under the Credit Agreement			-				15,000
Repayments under Credit Agreement			(3,750	)			-
Repurchase of common shares			-				(15,665	)
Dividends paid to common shareholders			(10,782	)			(11,099	)
Exercise of stock options			1,740				2,191
Excess tax benefits from stock-based compensation			(44	)			760
Other			(101	)			(112	)
NET CASH USED IN FINANCING ACTIVITIES			(12,937	)			(8,633	)
EFFECTS OF EXCHANGE RATE CHANGES ON CASH			(6,950	)			(4,542	)
NET DECREASE IN CASH AND CASH EQUIVALENTS			(38,575	)			(138,061	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			312,969				346,116
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	274,394			$	208,055
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest		$	1,749			$	288
Income taxes (net of refunds)		$	30,981			$	15,088
SCHEDULE OF NON-CASH INVESTING ACTIVITY:
Accrued capital expenditures included in accounts payable		$	3,342			$	4,854

THE BABCOCK & WILCOX COMPANY
BUSINESS SEGMENT INFORMATION
		Three Months Ended
		March 31,
		2015					2014
		(Unaudited)
		(In thousands)
REVENUES:
Power Generation		$	397,155			$	312,078
Nuclear Operations			284,438				286,214
Technical Services			18,584				24,455
Nuclear Energy			32,957				47,780
Other			-				278
Adjustments and Eliminations			(2,569	)			(8,788	)
TOTAL		$	730,565			$	662,017
SEGMENT INCOME:
Power Generation		$	22,996			$	10,542
Nuclear Operations			68,012				59,528
Technical Services			1,645				14,789
Nuclear Energy			(3,666	)			523
Other			(5,168	)			(26,709	)
SUBTOTAL			83,819				58,673
Unallocated Corporate			(10,506	)			(2,375	)
Special Charges for Restructuring Activities			(2,502	)			(2,658	)
TOTAL		$	70,811			$	53,640
EQUITY IN INCOME (LOSS) OF INVESTEES:
Power Generation		$	(2,071	)		$	2,366
Nuclear Operations			-				-
Technical Services			1,852				12,901
Nuclear Energy			-				2
TOTAL		$	(219	)		$	15,269
PENSION EXPENSE:
Power Generation		$	(1,233	)		$	530
Nuclear Operations			192				872
Technical Services			11				48
Nuclear Energy			(143	)			1,292
Corporate			424				488
TOTAL		$	(749	)		$	3,230
DEPRECIATION AND AMORTIZATION:
Power Generation		$	11,333			$	5,567
Nuclear Operations			9,802				6,358
Technical Services			1				1
Nuclear Energy			1,634				1,794
Other			275				187
Corporate			3,398				3,106
TOTAL		$	26,443			$	17,013
RESEARCH AND DEVELOPMENT, NET:
Power Generation		$	4,518			$	4,011
Nuclear Operations			5				4
Technical Services			10				12
Nuclear Energy			104				495
Other			3,709				19,474
TOTAL		$	8,346			$	23,996
CAPITAL EXPENDITURES:
Power Generation		$	5,546			$	3,185
Nuclear Operations			9,609				8,290
Technical Services			-				-
Nuclear Energy			1,968				6,142
Other			-				1,492
Corporate			4,226				2,105
TOTAL		$	21,349			$	21,214
BACKLOG:
Power Generation		$	2,580,829			$	1,982,373
Nuclear Operations			2,845,894				2,849,585
Technical Services			21,439				1,363
Nuclear Energy			236,164				172,758
Other			-				1,392
TOTAL		$	5,684,326			$	5,007,471
BOOKINGS:
Power Generation		$	730,713			$	219,339
Nuclear Operations			351,792				763,444
Technical Services			37,331				20,735
Nuclear Energy			4,053				76,037
TOTAL		$	1,123,889			$	1,079,555