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 March 31, 2013

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 April 30, 2013 was 112,204,538.

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		3
Condensed Consolidated Balance Sheets March 31, 2013 and December 31, 2012 (Unaudited)		3
Condensed Consolidated Statements of Income Three Months Ended March 31, 2013 and 2012 (Unaudited)		5
Condensed Consolidated Statements of Comprehensive Income Three Months Ended March  31, 2013 and 2012 (Unaudited)		6
Condensed Consolidated Statements of Stockholders’ Equity Three Months Ended March  31, 2013 and 2012 (Unaudited)		7
Condensed Consolidated Statements of Cash Flows Three Months Ended March 31, 2013 and 2012 (Unaudited)		8
Notes to Condensed Consolidated Financial Statements		9
Item  2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations		23
Item 3 – Quantitative and Qualitative Disclosures About Market Risk		31
Item 4 – Controls and Procedures		32
PART II – OTHER INFORMATION
Item 1 – Legal Proceedings		32
Item 1A – Risk Factors		32
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds		33
Item 4 – Mine Safety Disclosures		33
Item 6 – Exhibits		33
SIGNATURES		35

2

PART I

THE BABCOCK & WILCOX COMPANY

FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

THE BABCOCK & WILCOX COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS

	March 31,		December 31,
	2013		2012
	(Unaudited)
	(In thousands)
Current Assets:
Cash and cash equivalents	$	261,116	$	383,547
Restricted cash and cash equivalents		60,601		60,961
Investments		93,382		88,769
Accounts receivable – trade, net		374,296		364,960
Accounts receivable – other		72,312		61,682
Contracts in progress		332,911		316,518
Inventories		117,115		124,218
Deferred income taxes		74,765		78,573
Other current assets		53,590		41,858
Total Current Assets		1,440,088		1,521,086
Property, Plant and Equipment		1,107,273		1,099,040
Less accumulated depreciation		661,902		652,019
Net Property, Plant and Equipment		445,371		447,021
Investments		4,206		4,090
Goodwill		280,289		280,780
Deferred Income Taxes		216,444		227,215
Investments in Unconsolidated Affiliates		189,383		186,354
Intangible Assets		87,367		87,686
Other Assets		86,244		86,123
TOTAL	$	2,749,392	$	2,840,355

See accompanying notes to condensed consolidated financial statements.

3

THE BABCOCK & WILCOX COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS’ EQUITY

	March 31,			December 31,
	2013			2012
	(Unaudited)
	(In thousands)
Current Liabilities:
Notes payable and current maturities of long-term debt	$	4,069		$	4,062
Accounts payable		280,521			264,798
Accrued employee benefits		147,548			186,495
Accrued liabilities – other		77,354			57,991
Advance billings on contracts		417,109			472,287
Accrued warranty expense		82,865			83,682
Income taxes payable		—			9,973
Total Current Liabilities		1,009,466			1,079,288
Long-Term Debt		365			430
Accumulated Postretirement Benefit Obligation		69,299			71,208
Environmental Liabilities		46,790			46,497
Pension Liability		579,334			579,165
Other Liabilities		58,491			60,851
Commitments and Contingencies (Note 5)
Stockholders’ Equity:
Common stock, par value $0.01 per share, authorized 325,000,000 shares; issued 119,951,145 and 119,608,026 shares at March 31, 2013 and December 31, 2012, respectively		1,200			1,196
Preferred stock, par value $0.01 per share, authorized 75,000,000 shares; No shares issued		—			—
Capital in excess of par value		721,289			713,257
Retained earnings		387,087			349,063
Treasury stock at cost, 6,596,570 and 4,372,143 shares at March 31, 2013 and December 31, 2012, respectively		(168,809	)		(109,809	)
Accumulated other comprehensive income		27,780			32,728
Stockholders’ Equity – The Babcock & Wilcox Company		968,547			986,435
Noncontrolling interest		17,100			16,481
Total Stockholders’ Equity		985,647			1,002,916
TOTAL	$	2,749,392		$	2,840,355

See accompanying notes to condensed consolidated financial statements.

4

THE BABCOCK & WILCOX COMPANY CONDENSED CONSOLIDATED

STATEMENTS OF INCOME

	Three Months Ended
	March 31,
	2013			2012
	(Unaudited)
	(In thousands, except share and per share amounts)
Revenues	$	805,423		$	765,892
Costs and Expenses:
Cost of operations		619,697			563,888
Research and development costs		28,346			29,036
Gains on asset disposals and impairments – net		(69	)		(260	)
Selling, general and administrative expenses		103,600			104,165
Special charges for restructuring activities		8,423			—
Total Costs and Expenses		759,997			696,829
Equity in Income of Investees		14,787			17,357
Operating Income		60,213			86,420
Other Income (Expense):
Interest income		332			233
Interest expense		(818	)		(623	)
Other – net		1,406			(1,066	)
Total Other Income (Expense)		920			(1,456	)
Income before Provision for Income Taxes		61,133			84,964
Provision for Income Taxes		16,257			27,895
Net Income	$	44,876		$	57,069
Net Loss Attributable to Noncontrolling Interest		2,298			2,882
Net Income Attributable to The Babcock & Wilcox Company	$	47,174		$	59,951
Earnings per Common Share:
Basic:
Net Income Attributable to The Babcock & Wilcox Company	$	0.41		$	0.51
Diluted:
Net Income Attributable to The Babcock & Wilcox Company	$	0.41		$	0.50
Shares used in the computation of earnings per share (Note 10):
Basic		114,097,313			118,255,346
Diluted		114,737,154			118,859,141

See accompanying notes to condensed consolidated financial statements.

5

THE BABCOCK & WILCOX COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three Months Ended
	March 31,
	2013			2012
	(Unaudited)
	(In thousands)
Net Income	$	44,876		$	57,069
Other Comprehensive Income:
Currency translation adjustments:
Foreign currency translation adjustments		(3,744	)		4,780
Unrealized gains (losses) on derivative financial instruments:
Unrealized (losses) gains on derivative financial instruments		(2,161	)		1,528
Realized losses (gains) on derivative financial instruments		1,047			(431	)
Amortization of benefit plan costs		528			519
Unrealized gains on investments:
Unrealized gains arising during the period		95			228
Realized gains recognized during the period		(714	)		—
Other Comprehensive Income (Loss)		(4,949	)		6,624
Total Comprehensive Income		39,927			63,693
Comprehensive Loss Attributable to Noncontrolling Interest		2,299			2,870
Comprehensive Income Attributable to The Babcock & Wilcox Company	$	42,226		$	66,563

See accompanying notes to condensed consolidated financial statements.

6

THE BABCOCK & WILCOX COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

					Capital In					Accumulated Other									Non-			Total
	Common Stock				Excess of		Retained			Comprehensive			Treasury			Stockholders’			Controlling			Stockholders’
	Shares		Par Value		Par Value		Earnings			Income (Loss)			Stock			Equity			Interest			Equity
			(In thousands, except share amounts)
Balance December 31, 2012		119,608,026	$	1,196	$	713,257	$	349,063		$	32,728		$	(109,809	)	$	986,435		$	16,481		$	1,002,916
Net income		—		—		—		47,174			—			—			47,174			(2,298	)		44,876
Dividends declared ($.08 per share)		—		—		—		(9,150	)		—			—			(9,150	)		—			(9,150	)
Amortization of benefit plan costs		—		—		—		—			528			—			528			—			528
Unrealized gain on investments		—		—		—		—			(619	)		—			(619	)		—			(619	)
Translation adjustments		—		—		—		—			(3,743	)		—			(3,743	)		(1	)		(3,744	)
Unrealized gain on derivatives		—		—		—		—			(1,114	)		—			(1,114	)		—			(1,114	)
Exercise of stock options		39,385		1		808		—			—			—			809			—			809
Contributions to thrift plan		109,405		1		2,952		—			—			—			2,953			—			2,953
Shares placed in treasury		—		—		—		—			—			(59,000	)		(59,000	)		—			(59,000	)
Stock-based compensation charges		194,329		2		4,272		—			—			—			4,274			—			4,274
Contribution of in-kind services		—		—		—		—			—			—			—			3,020			3,020
Distributions to noncontrolling interests		—		—		—		—			—			—			—			(102	)		(102	)
Balance March 31, 2013 (unaudited)		119,951,145	$	1,200	$	721,289	$	387,087		$	27,780		$	(168,809	)	$	968,547		$	17,100		$	985,647
Balance December 31, 2011		118,458,911	$	1,185	$	676,952	$	130,890		$	26,826		$	(10,059	)	$	825,794		$	9,179		$	834,973
Net income		—		—		—		59,951			—			—			59,951			(2,882	)		57,069
Amortization of benefit plan costs		—		—		—		—			519			—			519			—			519
Unrealized gain on investments		—		—		—		—			228			—			228			—			228
Translation adjustments		—		—		—		—			4,768			—			4,768			12			4,780
Unrealized gain on derivatives		—		—		—		—			1,097			—			1,097			—			1,097
Exercise of stock options		146,093		1		2,735		—			—			—			2,736			—			2,736
Contributions to thrift plan		110,231		1		2,859		—			—			—			2,860			—			2,860
Shares placed in treasury		—		—		—		—			—			(2,830	)		(2,830	)		—			(2,830	)
Stock-based compensation charges		305,056		3		3,980		—			—			—			3,983			—			3,983
Contribution of in-kind services		—		—		—		—			—			—			—			3,644			3,644
Distributions to noncontrolling interests		—		—		—		—			—			—			—			(97	)		(97	)
Balance March 31, 2012 (unaudited)		119,020,291	$	1,190	$	686,526	$	190,841		$	33,438		$	(12,889	)	$	899,106		$	9,856		$	908,962

See accompanying notes to condensed consolidated financial statements.

7

THE BABCOCK & WILCOX COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months Ended
	March 31,
	2013			2012
	(Unaudited)
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	44,876		$	57,069
Non-cash items included in net income:
Depreciation and amortization		17,358			17,715
Income of investees, net of dividends		(7,585	)		(6,893	)
Gain on asset disposals – net		(69	)		(260	)
In-kind research and development costs		3,020			3,644
Amortization of pension and postretirement costs		801			779
Stock-based compensation expense		4,274			3,983
Excess tax benefits from stock-based compensation		(13	)		(1,406	)
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable		(13,757	)		(28,497	)
Net contracts in progress and advance billings on contracts		(70,775	)		(30,997	)
Accounts payable		20,305			(10,159	)
Inventories		5,864			(6,066	)
Current and deferred income taxes		3,827			28,844
Accrued and other current liabilities		17,508			4,378
Pension liability, accumulated postretirement benefit obligation and accrued employee benefits		(38,666	)		(118,205	)
Other, net		(13,283	)		(17,163	)
NET CASH USED IN OPERATING ACTIVITIES		(26,315	)		(103,234	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in restricted cash and cash equivalents		360			2,150
Purchases of property, plant and equipment		(18,799	)		(21,441	)
Purchase of intangible assets		(2,200	)		—
Purchases of available-for-sale securities		(47,933	)		(64,802	)
Sales and maturities of available-for-sale securities		43,268			22,015
Investment in equity and cost method investees		(2,730	)		(6,572	)
Proceeds from asset disposals		726			19
NET CASH USED IN INVESTING ACTIVITIES		(27,308	)		(68,631	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of short-term borrowing and long-term debt		(52	)		(52	)
Repurchase of common shares		(57,074	)		—
Dividends paid to common shareholders		(9,145	)		—
Excess tax benefits from stock-based compensation		13			1,406
Exercise of stock options		813			1,329
Other		(102	)		(97	)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(65,547	)		2,586
EFFECTS OF EXCHANGE RATE CHANGES ON CASH		(3,261	)		3,690
NET DECREASE IN CASH AND CASH EQUIVALENTS		(122,431	)		(165,589	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		383,547			415,209
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	261,116		$	249,620
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized)	$	820		$	618
Income taxes (net of refunds)	$	11,239		$	6,853
SCHEDULE OF NONCASH INVESTING ACTIVITY:
Accrued capital expenditures included in accounts payable	$	4,035		$	8,324

See accompanying notes to condensed consolidated financial statements.

8

THE BABCOCK & WILCOX COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013

(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. Certain 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, 2012 (our “2012 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 the ability to exercise 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 March 31, 2013 and for the three months ended March 31, 2013. 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 five reportable segments: Power Generation, Nuclear Operations, Technical Services, Nuclear Energy and mPower. Our reportable segments at March 31, 2013, reflect changes we made during the first quarter of 2013 in the manner in which our segment operating information is reported for purposes of assessing operating performance and allocating resources. Prior to 2013, we reported four segments: Power Generation, Nuclear Operations, Technical Services and Nuclear Energy. Our small modular nuclear reactor business, previously included in our Nuclear Energy segment, is now being reported as a separate segment, mPower. The change in our reportable segments had no impact on our previously reported results of operations, financial condition or cash flows. We have applied the change in reportable segments to previously reported historical financial information and related disclosures included in this report. 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. In addition, our Power Generation segment offers a variety of 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 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;

9

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 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. B&W has supplied the nuclear industry with more than 1,300 large, heavy components worldwide. This segment is the only heavy nuclear component, N-stamped 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.

• Our mPower segment is actively developing the B&W mPower^TM reactor, a small modular reactor design generally based on proven light-water nuclear technology and able to operate for four years without refueling. Through our majority-owned joint venture, Generation mPower LLC (“GmP”), we are developing the associated mPower Plant power generating facility, which uses two B&W mPower reactors to generate 360 MWe within an advanced passively safe and secure plant architecture. As part of this initiative, we have been selected to receive funding and have signed a Cooperative Agreement with the DOE under its Small Modular Reactor Licensing Technical Support Program (“Funding Program”). This Funding Program provides financial assistance for our mPower Plant design engineering and licensing activities supporting the planned first mPower Plant commercial operation date by 2022.

See Note 9 for further information regarding our segments.

Operating results for the three months ended March 31, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. For further information, refer to the consolidated and combined financial statements and the related footnotes included in our 2012 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

10

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.

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.

Some of our contracts contain provisions that require us to pay liquidated damages if we are responsible for the failure to meet specified contractual milestone dates and the applicable customer asserts a claim under these provisions. These contracts define the conditions and timing under which our customers may make claims against us for liquidated damages. In the majority of cases in which we have had potential exposure for liquidated damages, such damages ultimately were determined not to be caused by our actions or were not otherwise asserted by our customers. Accordingly, we do not accrue liabilities for liquidated damages unless probable and estimable. As of March 31, 2013, we had not accrued for approximately $6.0 million of potential liquidated damages that are not currently due under the particular contract but which we believe could be asserted based upon our current expectations of the time to complete a certain project in our Power Generation segment.

Comprehensive Income

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

	March 31,			December 31,
	2013			2012
	(In thousands)
Currency translation adjustments	$	37,156		$	40,899
Net unrealized (loss) gain on investments		(22	)		597
Net unrealized gain on derivative financial instruments		989			2,103
Unrecognized prior service cost on benefit obligations		(10,343	)		(10,871	)
Accumulated other comprehensive income	$	27,780		$	32,728

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The amounts reclassified out of accumulated other comprehensive income by component and the affected consolidated statement of income line items are as follows:

	Three Months Ended March 31,
	2013			2012
Accumulated Other Comprehensive Income Component Recognized	(In thousands)						Line Item Presented
Realized (losses) gains on derivative financial instruments	$	(531	)	$	72		Revenues
		(889	)		614		Cost of operations
		15			(122	)	Other-net
		(1,405	)		564
		(358	)		133		Provision for Income Taxes
	$	(1,047	)	$	431		Net Income
Amortization of benefit plan costs	$	(751	)	$	(747	)	Cost of operations
		(50	)		(33	)	Selling, general and administrative expenses
		(801	)		(780	)
		(273	)		(261	)	Provision for Income Taxes
	$	(528	)	$	(519	)	Net Income
Realized gain on investments	$	714		$	—		Other-net
		—			—		Provision for Income Taxes
	$	714		$	—		Net Income
Total reclassification for the period	$	(861	)	$	(88	)

Inventories

The components of inventories are as follows:

	March 31,		December 31,
	2013		2012
	(In thousands)
Raw materials and supplies	$	92,286	$	98,428
Work in progress		9,136		7,956
Finished goods		15,693		17,834
Total inventories	$	117,115	$	124,218

Restricted Cash and Cash Equivalents

At March 31, 2013, we had restricted cash and cash equivalents totaling approximately $63.5 million, $7.0 million of which was held in restricted foreign accounts, $2.9 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 $1.8 million of which was held in money market funds maintained by our captive insurer.

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 or reductions where we expect the actual warranty costs to significantly differ from the accrued estimates. Such charges could have a material effect on our consolidated financial condition, results of operations and cash flows.

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

	Three Months Ended March 31,
	2013			2012
	(In thousands)
Balance at beginning of period	$	83,682		$	97,209
Additions		4,903			5,976
Expirations and other changes		131			(2,977	)
Payments		(5,279	)		(2,315	)
Translation and other		(572	)		520
Balance at end of period	$	82,865		$	98,413

Research and Development

Our research and development activities are related to the development and improvement of new and existing products and equipment, as well as conceptual and 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 mPower segments, the majority of which are related to the development of our B&W mPower^TM reactor and the associated mPower Plant.

During the three months ended March 31, 2013 and 2012, we recognized $3.0 and 3.6 million, respectively, of noncash in-kind research and development costs related to the services contributed by our minority partner to GmP, our majority-owned subsidiary formed in 2011 to oversee the program to develop the mPower Plant based on B&W mPower^TM technology.

On April 12, 2013, Babcock & Wilcox mPower, Inc., a wholly-owned subsidiary of B&W, entered into a Cooperative Agreement establishing the terms and conditions of a funding award totaling $150 million under the DOE’s Funding Program. This cost-sharing award requires us to use the DOE funds to cover first-of-a-kind engineering costs associated with small modular reactor design certification and licensing efforts. The DOE will provide cost reimbursement for up to 50% of qualified expenditures incurred during the period from April 1, 2013 to March 31, 2018. As of April 1, 2013, the DOE has authorized $78.8 million of funding for this award program. The remaining anticipated DOE funding has not yet been authorized and is subject to Congressional appropriations. The Cooperative Agreement also provides for reimbursement of pre-award costs incurred from October 1, 2012 to March 31, 2013. As of March 31, 2013, we have incurred qualified pre-award costs and will submit approximately $22 million for reimbursement under the program. We will recognize the funding award as a reduction of research and development costs on our condensed consolidated statements of income in the period we recognize the related costs for which we are being reimbursed. The amount to be reimbursed for pre-award costs is expected to be recognized in the second quarter of 2013.

Provision for Income Taxes

We are subject to U.S. federal income tax and income tax of multiple state and international jurisdictions. We provide for income taxes based on the tax laws and rates in the jurisdictions in which we conduct our operations. These jurisdictions may have regimes of taxation that vary with respect to nominal rates and with respect to the basis on which these rates are applied. This variation, along with changes in our mix of income within these jurisdictions, can contribute to shifts in our effective tax rate from period to period. We classify interest and penalties related to taxes (net of any applicable tax benefit) as a component of provision for income taxes on our condensed consolidated statements of income.

For the three months ended March 31, 2013, our provision for income taxes decreased $11.6 million to $16.3 million, as compared to the three months ended March 31, 2012, while our income before provision for income taxes decreased $23.8 million. Our effective tax rate for the three months ended March 31, 2013 was approximately 26.6% as compared to 32.8% for the three months ended March 31, 2012. The effective tax rate for the three months ended March 31, 2013 was lower than the effective tax rate for the comparable period of 2012 primarily due to the impact of certain tax benefits associated with 2012 R&D tax credits and foreign income exclusions, related to the retroactive provisions of the American Taxpayer Relief Act of 2012 which was enacted on January 2, 2013.

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As of March 31, 2013, we had gross unrecognized tax benefits of $5.6 million which, if recognized, would impact our effective tax rate from continuing operations. We believe that within the next 12 months it is reasonably possible that our previously unrecognized tax benefits could decrease by approximately $1.0 million.

There were no significant penalties recorded during the three months ended March 31, 2013.

Recently Adopted Accounting Standards

In February 2013, the Financial Accounting Standards Board issued an update to the topic Liabilities. This update requires an entity to recognize obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date. This update will be effective for us in 2014. We are currently evaluating the impact that the adoption of this update will have on our consolidated financial statements.

Other than as described above, there have been no material changes to the recent pronouncements discussed in our 2012 10-K.

NOTE 2 – BUSINESS ACQUISITIONS AND INVESTMENTS

USEC Inc. Investment

In May 2010, our subsidiary Babcock & Wilcox Investment Company (“BWICO”) entered into an agreement with Toshiba Corporation (“Toshiba”), 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.

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. Execution of the Cooperative Agreement satisfied 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 program. 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.

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

14

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-. In the third quarter of 2012, based on the facts and circumstances disclosed above, we decided that a fair value determination of our cost-method investment in USEC Preferred Stock was warranted. We determined the fair value of our investment in USEC Preferred Stock, with the assistance of a third party valuation firm, resulting in a $27.0 million impairment charge recognized in the third quarter of 2012. This impairment resulted in a remaining book value of our preferred stock investment totaling $19.1 million.

On March 18, 2013 USEC filed its annual report for the period ended December 31, 2012 on Form 10-K with the Securities and Exchange Commission. This report disclosed the recognition of a $1.1 billion impairment charge resulting in a stockholders’ deficit position at December 31, 2012 and USEC further disclosed that it has engaged with advisors and certain stakeholders on alternatives for a possible restructuring of its balance sheet. These events resulted in USEC’s independent registered public accounting firm including an explanatory paragraph in their report stating that these factors raise substantial doubt about USEC’s ability to continue as a going concern. We are engaged in various restructuring discussions with USEC and we will continue to monitor these developments and evaluate our remaining investment in USEC Preferred Stock as new facts become available. We continue to support the American Centrifuge program through the ongoing manufacturing of components and technical support of the development program.

NOTE 3 – GLOBAL COMPETITIVENESS INITIATIVE

In the third quarter of 2012, we launched the Global Competitiveness Initiative (“GCI”) to enhance competitiveness, better position B&W for growth, and improve profitability. In conjunction with GCI, we reduced our workforce in the first quarter of 2013 resulting in employee termination benefits totaling approximately $4.3 million recognized for the three months ended March 31, 2013. We expect these costs to be paid during the second quarter of 2013. In addition, we incurred consulting and GCI administrative costs totaling $4.1 million for the three months ended March 31, 2013. These amounts have been included in special charges for restructuring activities on our condensed consolidated statements of income.

NOTE 4 – PENSION PLANS AND POST-RETIREMENT BENEFITS

In the fourth quarter of 2012, we elected to change our accounting method for recognizing actuarial gains and losses for our pension and other postretirement benefit plans. In connection with our accounting change we have revised previously reported amounts to conform to our current method of accounting.

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

	Pension Benefits Three Months Ended March 31,						Other Benefits Three Months Ended March 31,
	2013			2012			2013			2012
	(In thousands)
Service cost	$	11,578		$	11,546		$	248		$	286
Interest cost		27,788			30,890			905			1,269
Expected return on plan assets		(36,670	)		(33,226	)		(538	)		(482	)
Amortization of prior service cost (credit)		792			814			9			(35	)
Net periodic benefit cost	$	3,488		$	10,024		$	624		$	1,038

NOTE 5 – 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 2012 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. 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. In December 2012, the court issued an order denying the plaintiffs’ motion to amend the original complaint and granting our motion to dismiss, with prejudice, all claims. The plaintiffs did not appeal and the judgment became final in January 2013. The plaintiffs sought 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.

Apollo and Parks Township

In January 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 twelve 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, and the February 4, 2013 filing of an additional 10 primary claims, the suits presently involve approximately 85 primary 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. All of the suits, including the most recent filing, have been consolidated for 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 attorneys 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 judgment is stayed pending ANI’s appeal in the Pennsylvania appellate courts. Pursuant to the agreement among the parties, if the final judgment is affirmed, following the exhaustion of all appeals, ANI must immediately satisfy the judgment and pay an additional liquidated contingency sum of $5 million to the B&W Parties and ARCO. If on appeal the final judgment is 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.

NOTE 6 – 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 condensed 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 income, 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 is immediately recognized in other – net on our condensed consolidated statements of income. 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.

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 March 31, 2013, we had deferred approximately $1.0 million of net gains on these derivative financial instruments in accumulated other comprehensive income. We expect to recognize substantially all of this amount in the next twelve months.

At March 31, 2013, 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 $135.0 million at March 31, 2013, with maturities extending to October 2014. These instruments consist primarily of contracts to purchase or sell Canadian Dollars or Danish Kroner. The fair value of these contracts totaled $0.2 million at March 31, 2013, all of which are 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 March 31, 2013, 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

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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 described under our credit facility.

The following tables summarize our derivative financial instruments at March 31, 2013 and December 31, 2012:

	Asset and Liability Derivatives
	March 31,		December 31,
	2013		2012
	(In thousands)
Derivatives Designated as Hedges:
Foreign Exchange Contracts:
Location
Accounts receivable-other	$	1,232	$	2,251
Other assets	$	2,419	$	3,777
Accounts payable	$	1,983	$	1,893
Other liabilities	$	37	$	29
Derivatives Not Designated as Hedges:
Foreign Exchange Contracts:
Location
Other assets	$	—	$	191
Accounts payable	$	1,356	$	962
Other liabilities	$	72	$	—
Stock Warrants:
Other assets	$	288	$	317

The Effects of Derivative Instruments on our Financial Statements

	Three Months Ended
	March 31,
	2013			2012
	(In thousands)
Derivatives Designated as Hedges:
Cash Flow Hedges:
Foreign Exchange Contracts:
Amount of (loss) gain recognized in other comprehensive income	$	(2,998	)	$	2,129
Income (loss) reclassified from accumulated other comprehensive income into earnings: effective portion
Location
Revenues	$	(531	)	$	72
Cost of operations	$	(889	)	$	614
Other-net	$	15		$	(122	)
Gain (loss) recognized in income: portion excluded from effectiveness testing
Location
Other-net	$	192		$	(531	)
Derivatives Not Designated as Hedges:
Forward Contracts:
Gain (loss) recognized in income
Location
Other-net	$	(676	)	$	3
Stock Warrants:
Loss recognized in income
Location
Other-net	$	(29	)	$	(356	)

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NOTE 7 – FAIR VALUE MEASUREMENTS

Investments

The following is a summary of our available-for-sale securities measured at fair value at March 31, 2013 (in thousands):

	3/31/13		Level 1		Level 2		Level 3
Mutual funds	$	3,750	$	—	$	3,750	$	—
U.S. Government and agency securities		21,324		21,324		—		—
Asset-backed securities and collateralized mortgage obligations		456		—		456		—
Commercial paper		72,058		—		72,058		—
Total	$	97,588	$	21,324	$	76,264	$	—

The following is a summary of our available-for-sale securities measured at fair value at December 31, 2012 (in thousands):

	12/31/12		Level 1		Level 2		Level 3
Mutual funds	$	3,637	$	—	$	3,637	$	—
U.S. Government and agency securities		21,446		21,446		—		—
Asset-backed securities and collateralized mortgage obligations		454		—		454		—
Commercial paper		67,322		—		67,322		—
Total	$	92,859	$	21,446	$	71,413	$	—

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.

Derivatives

Level 2 derivative assets and liabilities 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 March 31, 2013, we had forward contracts outstanding to purchase or sell foreign currencies, primarily Canadian Dollars and Danish Kroner, with a total notional amount of $135.0 million and a total fair value of $0.2 million.

Level 3 derivative assets include warrants to purchase common stock. The value of the warrants are computed using an option pricing model based on unobservable inputs such as a 40% stock price discount for inactive shares, and observable inputs, including interest rates and volatility. At March 31, 2013, the warrants 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 March 31, 2013 (in thousands):

Balance, beginning of the year	$	317
Total realized and unrealized gains (losses):		—
Included in other income (expense)		(29	)
Included in other comprehensive income		—
Purchases, issuances and settlements		—
Principal repayments		—
Balance, end of period	$	288

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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 March 31, 2013 and December 31, 2012.

NOTE 8 – STOCK-BASED COMPENSATION

Total stock-based compensation expense for all of our plans recognized for the three months ended March 31, 2013 and 2012 totaled $4.5 million and $4.0 million, respectively, with associated tax benefit recognized for the three months ended March 31, 2013 and 2012 totaling $1.7 million and $1.5 million, respectively.

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NOTE 9 – SEGMENT REPORTING

As described in Note 1, our operations are assessed based on five segments. In connection with our segment reporting change we have revised historical amounts to conform to our current segment presentation. An analysis of our operations by segment is as follows:

	Three Months Ended
	March 31,
	2013			2012
	(In thousands)
REVENUES:
Power Generation	$	461,463		$	414,273
Nuclear Operations		261,139			250,178
Technical Services		25,229			24,973
Nuclear Energy		63,516			86,557
mPower		304			29
Adjustments and Eliminations(1)		(6,228	)		(10,118	)
	$	805,423		$	765,892
(1)       Segment revenues are net of the following intersegment transfers and other adjustments:
Power Generation Transfers	$	762		$	3,449
Nuclear Operations Transfers		1,277			1,755
Technical Services Transfers		535			418
Nuclear Energy Transfers		3,654			4,496
mPower Transfers		—			—
	$	6,228		$	10,118
OPERATING INCOME:
Power Generation	$	33,330		$	39,505
Nuclear Operations		54,724			54,827
Technical Services		14,179			15,082
Nuclear Energy		2,258			11,735
mPower		(26,947	)		(27,926	)
	$	77,544		$	93,223
Unallocated Corporate(1)		(8,908	)		(6,803	)
Special Charges for Restructuring Activities		(8,423	)		—
Total Operating Income(2)	$	60,213		$	86,420
Other Income (Expense):
Interest income		332			233
Interest expense		(818	)		(623	)
Other – net		1,406			(1,066	)
Total Other Income (Expense)		920			(1,456	)
Income before Provision for Income Taxes	$	61,133		$	84,964
(1)       Unallocated corporate includes general corporate overhead not allocated to segments.
(2)       Included in operating income is the following:
(Gains) Losses on Asset Disposals – Net:
Power Generation	$	(78	)	$	14
Nuclear Operations		—			—
Technical Services		—			(274	)
Nuclear Energy		9			—
mPower		—			—
	$	(69	)	$	(260	)
Equity in Income of Investees:
Power Generation	$	2,107		$	3,822
Nuclear Operations		—			—
Technical Services		12,833			13,535
Nuclear Energy		(153	)		—
mPower		—			—
	$	14,787		$	17,357

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Segment assets based on our current presentation for the periods presented are as follows:

	March 31, 2013		December 31, 2012
	(Unaudited)
	(In thousands)
Power Generation	$	1,063,788	$	1,059,824
Nuclear Operations		715,100		708,607
Technical Services		131,786		125,494
Nuclear Energy		383,783		391,453
mPower		10,999		9,780
Total Segment Assets		2,305,456		2,295,158
Corporate Assets		443,936		545,197
Total Assets	$	2,749,392	$	2,840,355

NOTE 10 – EARNINGS PER SHARE

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

	Three Months Ended
	March 31,
	2013		2012
	(In thousands, except share and per share amounts)
Basic:
Net income attributable to The Babcock & Wilcox Company	$	47,174	$	59,951
Weighted average common shares		114,097,313		118,255,346
Basic earnings per common share	$	0.41	$	0.51
Diluted:
Net income attributable to The Babcock & Wilcox Company	$	47,174	$	59,951
Weighted average common shares (basic)		114,097,313		118,255,346
Effect of dilutive securities:
Stock options, restricted stock and performance shares		639,841		603,795
Adjusted weighted average common shares and assumed exercises of stock options and vesting of stock awards		114,737,154		118,859,141
Diluted earnings per common share	$	0.41	$	0.50

We have excluded from our diluted share calculation at March 31, 2013, 1,852,891 shares related to stock options as their effect would have been antidilutive.

NOTE 11 – SUBSEQUENT EVENT

On May 3, 2013, our board of directors declared a dividend of $0.08 per share payable on June 7, 2013 to shareholders of record on May 17, 2013. 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 the shares from time to time during a two-year period in the open market. This authorized share repurchase is in addition to the share repurchase program previously authorized in November 2012.

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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 of this report 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, 2012 (our “2012 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”).

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 research and development, capital, environmental or maintenance expenditures;

• our beliefs regarding the timing and effects on our businesses of certain environmental and tax 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 maintain appropriate insurance and indemnities;

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

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

• effective date and expected impact of accounting pronouncements;

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

• anticipated benefits, timing and changes associated with cost reduction and efficiency improvement activities.

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;

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• decisions on spending by the U.S. Government, including the automatic budget cuts (or sequestration) established by the Budget Control Act of 2011, and 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;

• 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 and costs, including our efforts to develop the mPower Plant based on B&W mPower^TM technology;

• our ability to obtain funding for our B&W mPower^TM technology under the Cooperative Agreement with the U.S. Department of Energy (“DOE”);

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

• results of tax audits, including a determination by the IRS that the spin-off or certain transactions should be treated as a taxable transaction, and the realization of deferred tax assets;

• our ability to manage 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 obtain and maintain surety bonds, letters of credit, bank guarantees and financing;

• our ability to obtain and 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 and in Item 1A in our 2012 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

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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 five segments: Power Generation, Nuclear Operations, Technical Services, Nuclear Energy and mPower. Prior to 2013, we reported four segments: Power Generation, Nuclear Operations, Technical Services and Nuclear Energy. Our small modular nuclear reactor business previously included in our Nuclear Energy segment is now being reported as a separate segment. The change in our reportable segments had no impact on our previously reported results of operations, financial condition or cash flows. For additional information regarding our change to our segments, see Note 1 to the condensed consolidated financial statements in this report.

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.

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 continue efforts to expand international offerings through planned 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 consortium 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 DOE.

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On April 29, 2013, the Government Accountability Office announced that it sustained the protest filed by our joint venture, Nuclear Production Partners, LLC, regarding the procurement decision for the combined management and operating contract at the Y-12 National Security Complex and Pantex Plant. We will continue to manage these sites under existing contracts through our joint ventures while we await a decision from the National Nuclear Security Administration on the path forward.

Nuclear Energy Segment

Our Nuclear Energy segment’s overall activity depends mainly on the demand and competitiveness of nuclear energy. The activity of this segment depends on capital expenditures and maintenance spending of nuclear utilities.

mPower Segment

This segment is actively developing the B&W mPower^TM reactor and the associated mPower Plant through its majority-owned joint venture, Generation mPower LLC (“GmP”). Its activity is a function of research and development efforts for the B&W mPower^TM reactor and the potential revenues to be generated from various mPower Plant deployment initiatives. As part of this initiative, we have been selected to receive funding and have signed a Cooperative Agreement with the DOE under its Small Modular Reactor Licensing Technical Support Program (“Funding Program”), which is expected to provide financial assistance initially totaling at least $150 million for small modular reactor design engineering and licensing activities supporting a planned commercial operating date for the first mPower Plant by 2022.

The Funding Program is a cost-sharing award which requires us to use the DOE funds to cover first-of-a-kind engineering costs associated with SMR design certification and licensing efforts. The DOE will provide cost reimbursement for up to 50%, subject to the overall size of the award, of qualified expenditures incurred during the period from April 1, 2013 to March 31, 2018. As of April 1, 2013, the DOE has authorized $78.8 million of funding for this award program. The remaining anticipated DOE funding has not yet been authorized and is subject to Congressional appropriations. The Cooperative Agreement also provides for reimbursement of pre-award costs incurred from October 1, 2012 to March 31, 2013. As of March 31, 2013, we have incurred qualified pre-award costs and will submit approximately $22 million for reimbursement under the program, which is less than previously budgeted. We anticipate our 2013 annual B&W mPower spending to remain between $85 and $95 million, net of any cost reimbursement recognized from the Funding Program. We will recognize the funding award as a reduction of research and development costs on our condensed consolidated statements of income in the period we recognize the related costs for which we are being reimbursed. The amount to be reimbursed for pre-award costs is expected to be recognized in the second quarter of 2013.

Global Competitiveness Initiative

The Global Competitiveness Initiative (“GCI”) was launched in the third quarter of 2012 to enhance competitiveness, better position B&W for growth, and improve profitability. We have identified a wide range of cost reduction activities including operational and functional efficiency improvements, organizational design changes, and manufacturing optimization. Once fully executed, these actions are expected to produce a total of $40 million to $50 million in annual savings. Roughly half of the annual savings are expected to result from efficiency improvements that are planned to be completed by the end of 2013. The balance of the cost savings relates to manufacturing initiatives that are expected to be completed by mid-2015. In order to achieve these savings, we expect to incur total restructuring charges (cash and non-cash) not to exceed $60 million. We incurred $8.4 million costs associated with GCI for the three months ended March 31, 2013.

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 2012 10-K. There have been no material changes to these policies during the three months ended March 31, 2013, except as disclosed in Note 1 of the notes to condensed consolidated financial statements included in this report.

Accounting for Contracts

As of March 31, 2013, 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

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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 three months ended March 31, 2013 and 2012, we recognized changes in estimate related to long-term contracts accounted for on the percentage-of-completion basis which increased operating income by approximately $14.2 million and $20.3 million, respectively.

Some of our contracts contain provisions that require us to pay liquidated damages if we are responsible for the failure to meet specified contractual milestone dates and the applicable customer asserts a claim under these provisions. These contracts define the conditions and timing under which our customers may make claims against us for liquidated damages. In the majority of cases in which we have had potential exposure for liquidated damages, such damages ultimately were determined not to be caused by our actions or were not otherwise asserted by our customers. Accordingly, we do not accrue liabilities for liquidated damages unless probable and estimable. As of March 31, 2013, we had not accrued for approximately $6.0 million of potential liquidated damages that are not currently due under the particular contract but which we believe could be asserted based upon our current expectations of the time to complete a certain project in our Power Generation segment.

RESULTS OF OPERATIONS – THREE MONTHS ENDED MARCH 31, 2013 VS. THREE MONTHS ENDED MARCH 31, 2012

The Babcock & Wilcox Company (Consolidated)

Consolidated revenues increased 5.2%, or $39.5 million, to $805.4 million in the three months ended March 31, 2013 compared to $765.9 million for the corresponding period in 2012 due primarily to increases in revenues from our Power Generation and Nuclear Operations segments totaling $47.2 million and $10.9 million, respectively. These increases were partially offset by decreases in revenues in our Nuclear Energy segment totaling $23.1 million.

Consolidated operating income decreased $26.2 million to $60.2 million in the three months ended March 31, 2013 compared to $86.4 million for the corresponding period in 2012 primarily due to decreases in our Power Generation and Nuclear Energy segments totaling $6.2 million and $9.4 million, respectively. In addition, unallocated corporate expenses increased $2.1 million for the 2013 period as compared to 2012. Operating income for the three months ended March 31, 2013 also includes special charges for restructuring activities totaling $8.4 million related to the initiative we launched to enhance competitiveness, better position B&W for growth, and improve profitability. These costs consist of approximately $4.3 million of employee termination benefits and $4.1 million of consulting and other program administrative costs.

Power Generation

Revenues increased 11.4%, or $47.2 million, to $461.5 million in the three months ended March 31, 2013, compared to $414.3 million in 2012, primarily attributable to a $59.7 million increase in our new build environmental equipment business. Revenues in our new build steam generation systems business and our aftermarket services business were down slightly. In our new build environmental equipment business, the increase in revenues was principally driven by ongoing engineering, procurement and construction activities on projects as a result of the previously enacted environmental rules and regulations. The decrease in new build steam generation systems was due to lower domestic utility boiler project activity and aftermarket services was lower primarily due to timing on environmental retrofit and rebuild projects while boiler related aftermarket parts and services were slightly higher. As environmental regulations continue to evolve with the issuance of the Mercury and Air Toxic Standards, and notwithstanding the repeal on the Cross State Air Pollution Rule, we continue to experience environmental bidding opportunities. We expect that our customers will continue to act in response to the changing environmental regulations which may lead to future environmental and aftermarket service orders to achieve environmental compliance and to maintain reliability of their operating units.

Operating income decreased $6.2 million to $33.3 million in the three months ended March 31, 2013 as compared to $39.5 million in the corresponding period of 2012. The decrease in operating income is attributable to the higher revenues discussed above being offset by more competitive profit margins from the current market cycle of environmental projects along with a lower level of project cost improvements and favorable project closeouts as

27

compared to the prior year period. Selling, general and administrative expenses were $2.8 million lower than the corresponding period of 2012 due to ongoing cost control efforts. We also experienced decreases in equity in income of investees totaling $1.7 million, primarily attributable to timing of production and project activities at our joint venture in China.

Nuclear Operations

Revenues increased by 4.4%, or $10.9 million, to $261.1 million in the three months ended March 31, 2013 compared to $250.2 million in the corresponding period of 2012, primarily attributable to increased activity in the manufacturing of nuclear components for US Government programs totaling $7.9 million and increased volume in our naval nuclear fuel and downblending activities totaling $3.0 million.

Operating income of $54.7 million in the three months ended March 31, 2013 was consistent with $54.8 million earned in the corresponding period of 2012. We realized increased income of $3.6 million related to our naval nuclear fuel and downblending activities primarily due to increased profitability on downblending contracts as the contracts performed in the 2012 comparable period experienced lower margins due to productivity and processing issues. This increase was offset by reduced margins earned in our manufacturing activities associated with nuclear components for US Government programs which experienced enhanced margins earned in the corresponding period of 2012 due to realized contract cost savings.

Technical Services

Revenues totaled $25.2 million in the three months ended March 31, 2013, which were consistent with $25.0 million for the corresponding period of 2012.

Operating income decreased $0.9 million to $14.2 million in the three months ended March 31, 2013 compared to $15.1 million in the corresponding period of 2012. This decrease is principally due to lower estimated award fee and increased costs associated with certain NNSA management contracts.

Nuclear Energy

Revenues decreased 26.7%, or $23.1 million, to $63.5 million in the three months ended March 31, 2013 compared to $86.6 million in the corresponding period of 2012, primarily attributable to decreased activity in our nuclear services and nuclear equipment business of $20.2 million associated with the completion of several large contracts that were ongoing in the same period of the prior year.

Operating income decreased $9.4 million to $2.3 million in the three months ended March 31, 2013 compared to $11.7 million in the corresponding period of 2012, primarily attributable to the decrease in activity associated with the completion of several large contracts noted above.

mPower

Operating income increased $1.0 million to a loss of $26.9 million in the three months ended March 31, 2013 compared to a loss of $27.9 million in the corresponding period of 2012, primarily due to reduced research and development costs related to the continued development of the B&W mPower™ reactor and associated mPower Plant, including a $0.6 million decrease in non-cash in-kind research and development services contributed by GmP’s minority partner.

Corporate

Unallocated corporate expenses increased $2.1 million to $8.9 million in the three months ended March 31, 2013, as compared to $6.8 million in the corresponding period of 2012, mainly due to increased costs associated with an outside consultant and infrastructure upgrades relating to cybersecurity matters.

Other Income Statement Items

Other – net increased $2.4 million to income of $0.9 million in the three months ended March 31, 2013, as compared to a loss of $1.5 million for the corresponding period in 2012, primarily due to increased income related to foreign currency exchange gains. This increase was partially offset by reduced dividend income of $1.4 million associated with our USEC Inc. investment.

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Provision for Income Taxes

For the three months ended March 31, 2013, our provision for income taxes decreased $11.6 million to $16.3 million, as compared to the three months ended March 31, 2012, while our income before provision for income taxes decreased $23.8 million. Our effective tax rate for the three months ended March 31, 2013 was approximately 26.6% as compared to 32.8% for the three months ended March 31, 2012. The effective tax rate for the three months ended March 31, 2013 was lower than the effective tax rate for the comparable period of 2012 primarily due to the impact of certain tax benefits associated with 2012 R&D tax credits and foreign income exclusions related to the retroactive provisions of the American Taxpayer Relief Act of 2012 which was enacted on January 2, 2013.

Backlog

Backlog is not a measure recognized by generally accepted accounting principles. 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.

	March 31, 2013		December 31, 2012
	(Unaudited)
	(In millions)
Power Generation	$	2,305	$	2,483
Nuclear Operations		2,931		2,984
Technical Services		9		4
Nuclear Energy		239		276
mPower		3		2
Total Backlog	$	5,487	$	5,749

We do not include the value of our unconsolidated joint venture contracts in backlog. These unconsolidated joint ventures are included in our Power Generation, Technical Services and Nuclear Energy segments.

Of the March 31, 2013 backlog, we expect to recognize revenues as follows:

	2013		2014		Thereafter
	(Unaudited)
	(In approximate millions)
Power Generation	$	800	$	300	$	1,205
Nuclear Operations		880		740		1,311
Technical Services		9		—		—
Nuclear Energy		125		40		74
mPower		3		—		—
Total Backlog	$	1,817	$	1,080	$	2,590

At March 31, 2013, Power Generation backlog with the U.S. Government was $2.9 million, all of which was fully funded.

At March 31, 2013, Nuclear Operations backlog with the U.S. Government was $2.9 billion, of which $183.4 million had not yet been funded.

At March 31, 2013, Technical Services backlog with the U.S. Government was $9.0 million, all of which was fully funded.

At March 31, 2013, Nuclear Energy and mPower had no backlog with the U.S. Government.

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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 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, the level of debt incurrence, liens, investments, acquisitions, asset dispositions, dividends, prepayments of subordinated debt and mergers. At March 31, 2013, 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 portions 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 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 March 31, 2013, there were no borrowings outstanding and letters of credit issued under the Credit Agreement totaled $151.9 million, resulting in $548.1 million available for borrowings or to meet letter of credit requirements. The applicable interest rate at March 31, 2013 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.

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Other Arrangements

Certain foreign subsidiaries in our Power Generation segment 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 March 31, 2013 was $62.1 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 March 31, 2013, bonds issued and outstanding under these arrangements in support of contracts totaled approximately $456.2 million.

Other

In aggregate, our cash and cash equivalents, restricted cash and cash equivalents and investments decreased by $118.1 million to $422.2 million at March 31, 2013 from $540.3 million at December 31, 2012, primarily due to the items discussed below.

Our net cash used in operations was $26.3 million in the three months ended March 31, 2013, compared to $103.2 million for the three months ended March 31, 2012. This decrease in cash used was primarily attributable to changes in accrued employee benefits related to pension plan fundings.

Our net cash used in investing activities decreased by $41.3 million to $27.3 million in the three months ended March 31, 2013 from $68.6 million in the three months ended March 31, 2012. This decrease in net cash used in investing activities was primarily attributable to higher net purchases of available-for-sale securities in the prior period.

Our net cash provided by financing activities decreased by $68.1 million to cash used in financing activities of $65.5 million in the three months ended March 31, 2013 from cash provided by financing activities of $2.6 million for the three months ended March 31, 2012. This decrease in net cash provided by financing activities was attributable to the repurchase of common shares and dividends paid, both in the current period.

At March 31, 2013, we had restricted cash and cash equivalents totaling approximately $63.5 million, $7.0 million of which was held in restricted foreign accounts, $2.9 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 $1.8 million of which was held in money market funds maintained by our captive insurer.

At March 31, 2013, we had investments with a fair value of $97.6 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 $159.5 million or 61% 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.

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 2012 10-K.

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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 March 31, 2013 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 quarter ended March 31, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

For information regarding ongoing investigations and litigation, see Note 5 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, 2012 are some of the factors that could materially affect our business, financial condition or future results.

Obtaining DOE funding for our B&W mPower technology under the Cooperative Agreement is subject to future government appropriations and the ability of Babcock & Wilcox mPower, Inc. (“B&W mPower”) to comply with the terms of the Cooperative Agreement. B&W mPower’s inability to obtain continued funding under the Cooperative Agreement could impair or delay funding of our SMR research and development activities.

On April 12, 2013, B&W mPower, our wholly-owned subsidiary, entered into a Cooperative Agreement establishing the terms and conditions of a funding award expected to initially total at least $150 million under the DOE SMR Licensing Technical Support Program.

Under the Cooperative Agreement, the DOE will provide incremental cost reimbursements for up to 50%, subject to the overall size of the award, of qualified expenditures incurred in connection with the development and commercialization of the SMR technology. The total estimated qualifying project costs during the five-year term of the funding program are approximately $765.8 million. Only a portion of the funding award has been authorized by the DOE, with the remaining amount subject to future Congressional appropriations. Our ability to obtain continued funding under the Cooperative Agreement is also dependant, in part, on our ability to perform our obligations under the Cooperative Agreement (including achieving specified milestones). In addition, the DOE may elect to not extend funding beyond the end of the then-current budget period (which is expected to occur on or about each anniversary of the date of the Cooperative Agreement). Lastly, either the DOE or B&W mPower may terminate the Cooperative Agreement at any time upon defined notice periods. Such a termination would eliminate the DOE’s obligation to continue funding under the award program. If we do not receive, or experience delays in obtaining, continued award program funding due to lack of congressional appropriations or the other reasons described above, funding of our related research and development activities could be impaired or delayed.

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

On November 7, 2012, we announced that our board of directors authorized us to repurchase an indeterminate number of shares of our common stock at an aggregate value of up to $250 million. We may repurchase shares from time to time during a two-year period in the open market. The following table provides information on our purchases of equity securities during the quarter ended March 31, 2013.

Period	Total number of shares purchased(1)		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs		Approximate dollar value of shares that may yet be purchased under the plans or programs (in millions)
January 1, 2013 – January 31, 2013		912,554	$	26.01		912,490	$	129.5
February 1, 2013 – February 28, 2013		741,900	$	26.53		741,900	$	109.8
March 1, 2013 – March 31, 2013		569,973	$	27.34		498,700	$	96.2
Total		2,224,427	$	26.52		2,153,090

⁽¹⁾ Includes 64, 0 and 71,373 shares repurchased during January, February and March, respectively, pursuant to the provisions of employee benefit plans that permit the repurchase of shares to satisfy statutory tax withholding obligations.

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 Wall Street Reform and Consumer Protection Act and this Item is included in exhibit 95 to this quarterly report on Form 10-Q.

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* – Cooperative Agreement, dated as of April 12, 2013, by and between Babcock & Wilcox mPower, Inc. and the U.S. Department of Energy (incorporated by reference to Exhibit 10.1 to The Babcock & Wilcox Company’s Current Report on Form 8-K dated April 12, 2013 (File No. 1-34658)).

Exhibit 10.2⁺ – Form of Non-Employee Director Grant Letter.

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.

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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)

May 7, 2013

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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*	Cooperative Agreement, dated as of April 12, 2013, by and between Babcock & Wilcox mPower, Inc. and the U.S. Department of Energy (incorporated by reference to Exhibit 10.1 to The Babcock & Wilcox Company’s Current Report on Form 8-K dated April 12, 2013 (File No. 1-34658)).
10.2+	Form of Non-Employee Director Grant Letter.
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.