BWX Technologies, Inc. - Quarter Report: 2014 June (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended June 30, 2014

OR

For the transition period from                      to                     

Commission File No. 001-34658

THE BABCOCK & WILCOX COMPANY

(Exact name of registrant as specified in its charter)

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.

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 July 31, 2014 was 107,461,329.

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THE BABCOCK & WILCOX COMPANY

I N D E X - F O R M    1 0 - Q

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PART I

THE BABCOCK & WILCOX COMPANY

FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

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THE BABCOCK & WILCOX COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS

See accompanying notes to condensed consolidated financial statements.

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THE BABCOCK & WILCOX COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS’ EQUITY

See accompanying notes to condensed consolidated financial statements.

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THE BABCOCK & WILCOX COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

See accompanying notes to condensed consolidated financial statements.

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THE BABCOCK & WILCOX COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

See accompanying notes to condensed consolidated financial statements.

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THE BABCOCK & WILCOX COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

See accompanying notes to condensed consolidated financial statements.

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THE BABCOCK & WILCOX COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

See accompanying notes to condensed consolidated financial statements.

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THE BABCOCK & WILCOX COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2014

(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 financial statements and notes in our annual report on Form 10-K for the year ended December 31, 2013 (our “2013 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 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 are further described as follows:

Our steam generating equipment operates on a range of traditional fossil fuels including coal, natural gas and oil along with renewable, unconventional and other typical waste fuel streams. We have commercialized many advanced emissions technologies to control nitrogen oxide, sulfur dioxide, sulfur trioxide, coarse and fine particulate matter, mercury, acid gases and other hazardous air emissions.

On June 20, 2014, we completed the acquisition of MEGTEC Holdings, Inc. (“MEGTEC”). MEGTEC designs, engineers, manufactures and services air pollution control systems and coating/drying equipment for a variety of industrial applications and is expected to complement our environmental products and solutions offerings.

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See Note 10 for further information regarding our segments.

Operating results for the three and six months ended June 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. For further information, refer to the consolidated financial statements and the related footnotes included in our 2013 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

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progress and resulting periodic allocation of income. We include revenues and related costs so recorded, plus accumulated contract costs that exceed amounts invoiced to customers under the terms of the contracts, in contracts in progress. We include in advance billings on contracts billings that exceed accumulated contract costs and revenues and costs recognized under the percentage-of-completion method. Most long-term contracts contain provisions for progress payments. Our unbilled receivables do not contain an allowance for credit losses as we expect to invoice customers and collect all amounts for unbilled revenues. We review contract price and cost estimates periodically as the work progresses and reflect adjustments proportionate to the percentage-of-completion in income in the period when those estimates are revised. For all contracts, if a current estimate of total contract cost indicates a loss on a contract, the projected loss is recognized in full when determined.

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

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

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

In the three and six months ended June 30, 2014, we recorded contract losses totaling $4.0 million and $11.6 million, respectively, for additional estimated costs to complete our Power Generation segment’s Berlin Station project, which includes estimated potential letter of credit draws for liquidated damages. These losses are in addition to contract losses recorded for this project during 2013 and 2012. We had previously asserted that substantial completion had been achieved on this project in early 2014 and that any further delays to complete this project, beyond the delays already caused by the customer during construction or otherwise excusable under the contract, are the result of the customer’s failure to supply fuel complying with the contract specifications. The customer has certified that we achieved substantial completion on the project effective July 19, 2014, following which the customer will have no further claims for Delay LDs. See Note 6 for legal proceedings associated with this matter.

Comprehensive Income

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

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

Inventories

The components of inventories are as follows:

Restricted Cash and Cash Equivalents

At June 30, 2014, we had restricted cash and cash equivalents totaling $42.3 million, $3.3 million of which was held in restricted foreign cash accounts, $2.6 million of which was held for future decommissioning of facilities (which is included in other assets on our condensed consolidated balance sheets) and $36.4 million of which was held to meet reinsurance reserve requirements of our captive insurer (in lieu of long-term investments).

Goodwill

Goodwill represents the excess of the cost of our acquired businesses over the fair value of the net assets acquired. We perform testing of goodwill for impairment annually. We may elect to perform a qualitative test when we believe that there is sufficient excess fair value over carrying value based on our most recent quantitative assessment, adjusted for relevant events and circumstances that could affect fair value during the current year. If we conclude based on this assessment that it is more likely than not that the reporting unit is not impaired, we do not perform a quantitative impairment test. In all other circumstances, we utilize a two-step quantitative impairment test to identify potential goodwill impairment and measure the amount of any goodwill impairment. The first step of the test compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount

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of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of the impairment loss, if any. The second step compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill.

The following summarizes the changes in the carrying amount of goodwill:

Intangible Assets

Intangible assets are recognized at fair value when acquired. Intangible assets with definite lives are amortized to operating expense using the straight-line method over their estimated useful lives and tested for impairment when events or changes in circumstances indicate that its carrying amount may not be recoverable. Intangible assets with indefinite lives are not amortized and are subject to annual impairment testing. We may elect to perform a qualitative assessment when testing indefinite lived intangible assets for impairment to determine whether events or circumstances affecting significant inputs related to the most recent quantitative evaluation have occurred, indicating that it is more likely than not that the indefinite lived intangible asset is impaired. Otherwise, we test indefinite lived intangible assets for impairment by quantitatively determining the fair value of the indefinite lived intangible asset and comparing the fair value of the intangible assets to its carrying amount. If the carrying amount of the intangible assets exceeds its fair value, we recognize impairment for the amount of the difference.

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

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

Pension Plans and Postretirement Benefits

We sponsor various defined benefit pension and postretirement plans covering certain employees of our U.S. and international subsidiaries. We utilize actuarial valuations to calculate the cost and benefit obligations of our pension and postretirement benefits. The actuarial valuations utilize significant assumptions in the determination of our benefit cost and obligations, including assumptions regarding discount rates, expected returns on plan assets and health care cost trends. We determine our discount rate based on a review of published financial data and discussions with our actuary regarding rates of return on high-quality, fixed-income investments currently available and expected to be available during the period to maturity of our pension and postretirement plan obligations. The

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expected rate of return on plan assets assumption is based on capital market assumptions of the long-term expected returns for the investment mix of assets currently in the portfolio. The expected rate of return on plan assets is determined to be the weighted average of the nominal returns based on the weightings of the classes within the total asset portfolio. Expected health care cost trends represent expected annual rates of change in the cost of health care benefits and are estimated based on analysis of health care cost inflation.

The components of benefit cost related to service cost, interest cost, expected return on plan assets and prior service cost amortization are recorded on a quarterly basis based on actuarial assumptions. In the fourth quarter of each year, we immediately recognize net actuarial gains and losses into earnings as a component of net periodic benefit cost. Recognized net actuarial gains and losses consist primarily of our reported actuarial gains and losses and the difference between the actual return on plan assets and the expected return on plan assets.

We recognize the funded status of each plan as either an asset or a liability in the consolidated balance sheets. The funded status is the difference between the fair value of plan assets and the present value its benefit obligation, determined on a plan-by-plan basis. Our pension plan assets can include assets that are difficult to value. See Note 7 of our 2013 10-K for a detailed description of our plan assets.

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 research and development costs unrelated to specific contracts as they are 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^™ reactor and the associated mPower Plant.

During the three and six months ended June 30, 2014, we recognized $1.6 million and $5.8 million, respectively, of non-cash in-kind research and development costs as compared to $4.4 million and $7.4 million during the three and six months ended June 30, 2013, respectively, related to services contributed by our minority partner to GmP.

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 SMR design certification and licensing efforts. The DOE will provide cost reimbursement for up to 50% of qualified expenditures incurred from April 1, 2013 to March 31, 2018. The DOE has authorized $105.5 million of funding to B&W for this award program. Congress has allocated and designated an additional $79 million from the 2014 budget to the Cooperative Agreement; however, the DOE has not yet obligated those funds to us. In the six months ended June 30, 2014 and 2013, we recognized $19.8 million and $37.8 million, respectively, associated with the funding award.

On April 14, 2014, we announced our plans to restructure the mPower program to focus on technology development. Beginning in the third quarter of 2014, we expect to slow the pace of development and invest no more than $15 million on an annual basis, net of amounts reimbursed from the Funding Program. We intend to work with the DOE to amend the Funding Program, to include, among other things, mutually agreeable program milestones for continued funding. If a mutually agreeable plan is not identified, future amounts may not be made available to us under the Funding Program.

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 enacted 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.

Our effective tax rate for the three months ended June 30, 2014 was approximately 32.8% as compared to 29.8% for the three months ended June 30, 2013. The effective tax rate for the three months ended June 30, 2014

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was lower than our statutory rate primarily due to the impact of an increase in benefits for amended federal manufacturing deductions and certain amended state return filings, offset by an increase to a valuation allowance against certain state deferred tax assets. The effective tax rate for the three months ended June 30, 2013 was lower than the effective tax rate for the period ended June 30, 2014 primarily due to the impact of settling claims within certain state and foreign jurisdictions in the prior year period.

Our effective tax rate for the six months ended June 30, 2014 was approximately 27.7% as compared to 28.6% for the six months ended June 30, 2013. The effective tax rate for the six months ended June 30, 2014 was lower than our statutory rate primarily due to the receipt of a favorable ruling from the Internal Revenue Service that allows us to amend prior year U.S. income tax returns to exclude distributions of certain of our foreign joint ventures from domestic taxable income. Our effective tax rate for the six months ended June 30, 2013 reflected the impact of certain tax benefits related to the retroactive provisions of the American Taxpayer Relief Act of 2012, which was enacted on January 2, 2013. These 2013 tax benefits relate primarily to research and development tax credits, for which we have not recognized a benefit in 2014 due to the current expiration of the tax credit.

As of June 30, 2014, we have gross unrecognized tax benefits of $5.9 million, which, if recognized, would lower our effective tax rate from continuing operations.

Recently Adopted Accounting Standards

In April 2014, the Financial Accounting Standards Board (“FASB”) issued an update to the Topics Presentation of Financial Statements and Property, Plant and Equipment. This update changes the criteria for reporting discontinued operations such that a disposal of a component of an entity will be required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. We early adopted this pronouncement in the second quarter of 2014. The disposal of our Nuclear Projects business in the second quarter of 2014 did not qualify as a discontinued operation under the new guidance due to its relative insignificance to B&W’s operations and financial results. See Note 2 for additional information related to this disposal.

New Accounting Standards

In May 2014, the FASB issued Revenue from Contracts with Customers, which supersedes the revenue recognition requirements in the Topic Revenue Recognition and most industry specific guidance. The core principle of this guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. This update is effective in 2017, and early adoption is not permitted. The update may be adopted either retrospectively to each prior period or as a cumulative-effect adjustment on the date of adoption. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements.

NOTE 2 – ACQUISITIONS AND DISPOSITIONS

MEGTEC Acquisition

On June 20, 2014, we acquired the outstanding stock of industrial processes solutions provider MEGTEC for $142.2 million, net of cash acquired. MEGTEC designs, engineers, manufactures and services air pollution control systems and coating/drying equipment for a variety of industrial applications and is expected to complement our Power Generation segment’s environmental products and solutions offerings that serves utility markets.

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The purchase price of the acquisition has been allocated among assets acquired and liabilities assumed at preliminary estimates of fair value based on information currently available with the excess purchase price recorded as goodwill. Our preliminary purchase price allocation, as follows, is subject to change upon receipt of additional information and completion of further analysis, including, but not limited to, finalization of long-lived and intangible asset valuations:

The intangible assets included above consist of the following (dollar amounts in thousands):

Our condensed consolidated financial statements for the three and six months ended June 30, 2014 include $3.6 million and $0.2 million of revenues and net income, respectively, related to MEGTEC operations occurring from the acquisition date to June 30, 2014. Additionally, the following unaudited pro forma financial information presents our results of operations for the three and six months ended June 30, 2014 and 2013 had the acquisition of MEGTEC occurred on January 1, 2013. The unaudited pro forma financial information below is not intended to represent or be indicative of our actual consolidated results had we completed the acquisition at January 1, 2013. This information is presented for comparative purposes only and should not be taken as representative of our future consolidated results of operations.

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The unaudited pro forma results include the following pre-tax adjustments to the historical results presented above:

Ebensburg Acquisition

On May 21, 2014, we acquired the remaining outstanding interest in Ebensberg Power Company for a purchase price of $1.3 million. As part of the transaction, we acquired cash of $16.4 million and property, plant and equipment with a fair value of $16.1 million.

Nuclear Projects Business Disposition

In the first quarter of 2014, we announced that we would exit our Nuclear Energy segment’s Nuclear Projects business as it had lower margins and higher financial risks. Run-off operations for remaining projects were completed during the quarter ended June 30, 2014. Income (loss) before provision for income taxes for the Nuclear Projects business was $0.0 million and $(0.1) million in the three and six months ended June 30, 2014, respectively, and $(0.5) million and $(1.0) million in the three and six months ended June 30, 2013, respectively.

At June 30, 2014, assets recorded within the condensed consolidated financial statements for the Nuclear Projects business include $37.5 million in outstanding accounts receivable and $8.2 million in contracts in progress related to unbilled final project closeout activities. Both of those amounts relate to a reimbursable target cost subcontract pursuant to which we performed steam generator replacement installation services for the prime contractor. All work under that subcontract has been completed. The owner has questioned the reasonableness of certain project costs, assessed liquidated damages and has not paid the prime contractor the referenced amounts invoiced under the prime contract. Based upon the terms of the subcontract, the prime contractor has not yet paid us. We filed a mechanic’s lien in the amount of $37.4 million against the owner’s property on July 11, 2014 in order to preserve our statutory legal rights and we have until early March 2015 to file suit against the owner to foreclose on that lien. We contend that the invoiced and unbilled amounts were reasonably incurred under the terms of the subcontract and that project delays and additional costs are attributable to the owner. Payment of all amounts currently due and owing is being sought from the prime contractor through the defined subcontract dispute resolution processes. If those efforts are unsuccessful, we will have the right to initiate collection litigation against the prime contractor.

NOTE 3 – CREDIT FACILITY

On June 24, 2014, B&W entered into a Second Amended and Restated Credit Agreement (the “New 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 June 8, 2012. The New Credit Agreement provides for revolving credit borrowings and issuances of letters of credit in an aggregate amount of up to $1.0 billion and a term loan facility of up to $300 million, $150 million of which was drawn on the closing date of the New Credit Agreement. The remaining $150 million commitment for the term loan remains available under a delayed draw feature through December 31, 2014. The New Credit Agreement is scheduled to mature on June 24, 2019. The proceeds of the New Credit Agreement are available for the issuance of letters of credit, working capital needs and other general corporate purposes. The New Credit Agreement includes provisions that allow for additional financial institutions to become lenders, or for any existing lender to increase its commitment thereunder, subject to an aggregate maximum of $400 million for all incremental term loan, revolving credit borrowings and letter of credit commitments.

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The New Credit Agreement is guaranteed by substantially all of B&W’s wholly owned domestic subsidiaries. Obligations under the New Credit Agreement are secured by first-priority liens on certain assets owned by B&W and the guarantors (other than our 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 New Credit Agreement will be released, subject to reinstatement upon the terms set forth in the New Credit Agreement. B&W’s current corporate family rating from Moody’s is Ba1 and its corporate rating from S&P is BB+.

The New Credit Agreement requires interest payments on revolving loans on a periodic basis until maturity. Beginning with the quarter following that in which the term loan commitment ends, we are required to make quarterly amortization payments on the term loan portion of the New Credit Agreement in an amount equal to 1.25% of the aggregate principal amount of the term loan facility that is utilized. We may prepay all loans under the New Credit Agreement at any time without premium or penalty (other than customary LIBOR breakage costs), subject to notice requirements. We are also required to make certain prepayments on any outstanding term loans under the New Credit Agreement after receipt of cash proceeds from certain asset sales or other events, subject to certain exceptions and our right to reinvest such proceeds in certain circumstances, all as more particularly set forth in the New Credit Agreement.

The New Credit Agreement contains financial covenants relating to leverage and interest coverage and includes covenants that restrict, among other things, debt incurrence, liens, investments, acquisitions, asset dispositions, dividends, prepayments of subordinated debt and mergers. At June 30, 2014, we were in compliance with all of the covenants set forth in the New Credit Agreement.

Loans outstanding under the New Credit Agreement bear interest at our option at either the Eurocurrency rate plus a margin ranging from 1.25% to 2.00% per year or the base rate (the highest of the Federal Funds rate plus 0.50%, the one month Eurocurrency rate plus 1.00%, or the administrative agent’s prime rate) plus a margin ranging from 0.25% to 1.00% per year. The applicable margin for loans varies depending on the credit ratings of the New Credit Agreement. Under the New Credit Agreement, we are charged a commitment fee on the unused portions of the New Credit Agreement, and that fee varies between 0.200% and 0.350% per year depending on the credit ratings of the New Credit Agreement. Additionally, we are charged a letter of credit fee of between 1.250% and 2.000% per year with respect to the amount of each financial letter of credit issued under the New Credit Agreement and a letter of credit fee of between 0.725% and 1.125% per year with respect to the amount of each performance letter of credit issued under the New Credit Agreement, in each case depending on the credit ratings of the New Credit Agreement. We also pay customary fronting fees and other fees and expenses in connection with the issuance of letters of credit under the New Credit Agreement. In connection with entering into the New Credit Agreement, we paid upfront fees to the lenders thereunder, and arrangement and other fees to the arrangers and agents of the New Credit Agreement. At June 30, 2014, borrowings outstanding totaled $150.0 million and $113.8 million under our term loan and revolving line of credit, respectively, and letters of credit issued under the New Credit Agreement totaled $173.0 million, resulting in $863.2 million available for borrowings or to meet letter of credit requirements.

Based on the current credit ratings of the New Credit Agreement, beginning in August 2014 the applicable margin for Eurocurrency rate loans is 1.375%, the applicable margin for base rate loans is 0.375%, the letter of credit fee for financial letters of credit is 1.375%, the letter of credit fee for performance letters of credit is 0.80%, and the commitment fee for unused portions of the New Credit Agreement is 0.225%. The New Credit Agreement does not have a floor for the base rate or the Eurocurrency rate.

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

NOTE 4 – SPECIAL CHARGES FOR RESTRUCTURING ACTIVITIES

Global Competitiveness Initiative

In the third quarter of 2012, we announced the Global Competitiveness Initiative (“GCI”) to enhance competitiveness, better position B&W for growth and improve profitability. In conjunction with GCI, during the six months ended June 30, 2014, we incurred $0.2 million of expenses related to employee termination benefits and $2.2 million of expenses related to facility consolidation. During the six months ended June 30, 2013, we recorded $15.1 million of expenses related to employee termination benefits and $5.6 million of expenses related to consulting and administrative costs.

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Other Restructuring Actions

In the first quarter of 2014, we announced a business optimization project focused on increasing margins in our Power Generation and Nuclear Energy segments. In the six months ended June 30, 2014, we incurred $9.4 million of expenses related to this project, including $8.5 million of expenses related to employee termination benefits, $0.7 million of expenses related to consulting and administrative costs and $0.2 million of expenses related to facility consolidation.

In the six months ended June 30, 2014, we also incurred $7.9 million of expenses related to the restructuring of our mPower program, including $5.7 million of expenses related to employee termination benefits, $2.0 million of expenses related to consulting and administrative costs and $0.2 million of expenses related to facility consolidation.

Additionally, we incurred expenses related to employee termination benefits totaling $0.4 million for the six months ended June 30, 2014 related to the restructuring of our Technical Services segment.

The following summarizes the changes in our restructuring liability for the six months ended June 30, 2014 and 2013:

At June 30, 2014, unpaid restructuring charges totaled $16.3 million for employee termination benefits and $0.2 million for consulting and administrative costs.

NOTE 5 – PENSION PLANS AND POSTRETIREMENT BENEFITS

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