Enhanced Investments - Financial Portal

Published: 2023-05-10 00:00:00 ET

bw-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended March 31, 2023


☐			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. 001-36876

BABCOCK & WILCOX ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)


Delaware						47-2783641
(State or other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

1200 East Market Street, Suite 650
Akron, Ohio						44305
(Address of Principal Executive Offices)						(Zip Code)

Registrant's Telephone Number, Including Area Code: (330) 753-4511

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	BW	New York Stock Exchange
8.125% Senior Notes due 2026	BWSN	New York Stock Exchange
6.50% Senior Notes due 2026	BWNB	New York Stock Exchange
7.75% Series A Cumulative Perpetual Preferred Stock	BW PRA	New York Stock Exchange

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

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

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) 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 ☒

The number of shares of the registrant's common stock outstanding at May 8, 2023 was 88,752,057.

TABLE OF CONTENTS


		PAGE
Cautionary Statement Concerning Forward-Looking Information		3
PART I - FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements	4
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31 , 202 3 and 202 2 (Unaudited)	5
	Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three Months Ended March 31 , 202 3 and 202 2 (Unaudited)	6
	Condensed Consolidated Balance Sheets as of March 31 , 202 3 and December 31, 202 2 (Unaudited)	7
	Condensed Consolidated Statement of Stockholders' (Deficit) Equity for the Three Months Ended March 31, 202 3 , and 202 2 (Unaudited)	8
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31 , 202 3 and 202 2 (Unaudited)	9
	Notes to Condensed Consolidated Financial Statements	11
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operation	34
	Overview	34
	Results of Operations - Three Months Ended March 31 , 202 3 and 2022	36
	Liquidity and Capital Resources	43
	Critical Accounting Policies and Estimates	45
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	45
Item 4.	Controls and Procedures	45
Item 5.	Other Information	46
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 6.	Exhibits	47
SIGNATURES		49

***** Cautionary Statement Concerning Forward-Looking Information *****

This Quarterly Report on Form 10-Q, including Management's Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical or current fact included in this Quarterly Report are forward-looking statements. You should not place undue reliance on these statements. Forward-looking statements include words such as “expect,” “intend,” “plan,” “likely,” “seek,” “believe,” “project,” “forecast,” “target,” “goal,” “potential,” “estimate,” “may,” “might,” “will,” “would,” “should,” “could,” “can,” “have,” “due,” “anticipate,” “assume,” “contemplate,” “continue” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operational performance or other events.

These forward-looking statements are based on management’s current expectations and involve a number of risks and uncertainties, including, among other things, the impact of global macroeconomic conditions, including inflation and volatility in the capital markets; the impact of the ongoing conflict in Ukraine; our ability to integrate acquired businesses and the impact of those acquired businesses on our cash flows, results of operations and financial condition, including our recent acquisitions of Babcock & Wilcox Solar Energy, Inc. ("Babcock & Wilcox Solar", "B&W Solar"), formerly known as Fosler Construction Company Inc. and/or Fosler, Babcock & Wilcox Renewable Service A/S, formerly known as VODA A/S ("VODA"), Fossil Power Systems, Inc. ("FPS"), Optimus Industries, LLC ("Optimus") and certain assets of Hamon Research-Cottrell, Inc. ("Hamon"); our recognition of any asset impairments as a result of any decline in the value of our assets or our efforts to dispose of any assets in the future; our ability to obtain and maintain sufficient financing to provide liquidity to meet our business objectives, surety bonds, letters of credit and similar financing; our ability to comply with the requirements of, and to service the indebtedness under, our debt facility agreements; our ability to pay dividends on our 7.75% Series A Cumulative Perpetual Preferred Stock; our ability to make interest payments on our 8.125% senior notes due 2026 and our 6.50% notes due 2026; the highly competitive nature of our businesses and our ability to win work, including identified project opportunities in our pipeline; general economic and business conditions, including changes in interest rates and currency exchange rates; cancellations of and adjustments to backlog and the resulting impact from using backlog as an indicator of future earnings; our ability to perform contracts on time and on budget, in accordance with the schedules and terms established by the applicable contracts with customers; failure by third-party subcontractors, partners or suppliers to perform their obligations on time and as specified; delays initiated by our customers; our ability to successfully resolve claims by vendors for goods and services provided and claims by customers for items under warranty; our ability to realize anticipated savings and operational benefits from our restructuring plans, and other cost savings initiatives; our ability to successfully address productivity and schedule issues in our B&W Renewable, B&W Environmental and B&W Thermal segments; our ability to successfully partner with third parties to win and execute contracts within our B&W Environmental, B&W Renewable and B&W Thermal segments; changes in our effective tax rate and tax positions, including any limitation on our ability to use our net operating loss carryforwards and other tax assets; our ability to successfully manage research and development projects and costs, including our efforts to successfully develop and commercialize new technologies and products; the operating risks normally incident to our lines of business, including professional liability, product liability, warranty and other claims against us; difficulties we may encounter in obtaining regulatory or other necessary permits or approvals; changes in actuarial assumptions and market fluctuations that affect our net pension liabilities and income; our ability to successfully compete with current and future competitors; our ability to negotiate and maintain good relationships with labor unions; changes in pension and medical expenses associated with our retirement benefit programs; social, political, competitive and economic situations in foreign countries where we do business or seek new business; the impact of COVID-19 or other similar global health crises, and the other factors specified and set forth under "Risk Factors" in our periodic reports filed with the Securities and Exchange Commission, including our most recent annual report on Form 10-K filed on March 16, 2023.

These forward-looking statements are made based upon detailed assumptions and reflect management’s current expectations and beliefs. While we believe that these assumptions underlying the forward-looking statements are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect actual results.

The forward-looking statements included herein are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events, or otherwise, except as required by law.

PART I

ITEM 1. Condensed Consolidated Financial Statements

BABCOCK & WILCOX ENTERPRISES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


	Three Months Ended March 31,
(in thousands, except per share amounts)	2023		2022
Revenues	$	257,247	$	204,049
Costs and expenses:
Cost of operations	203,771		163,060
Selling, general and administrative expenses	51,945		43,044

Advisory fees and settlement costs	(2,463)		3,935
Restructuring activities	384		94
Research and development costs	1,308		719
Loss (gain) on asset disposals, net	941		(20)
Total costs and expenses	255,886		210,832
Operating income (loss)	1,361		(6,783)
Other (expense) income:
Interest expense	(12,662)		(11,267)
Interest income	113		117


Benefit plans, net	(109)		7,452
Foreign exchange	(461)		3,085
Other expense – net	(227)		(58)
Total other expense, net	(13,346)		(671)
Loss before income tax expense	(11,985)		(7,454)
Income tax expense	490		1,230


Net loss	(12,475)		(8,684)
Net (income) loss attributable to non-controlling interest	(21)		420
Net loss attributable to stockholders	(12,496)		(8,264)
Less: Dividend on Series A preferred stock	3,715		3,715
Net loss attributable to stockholders of common stock	$	(16,211)	$	(11,979)

Basic loss per share	$	(0.18)	$	(0.14)




Diluted loss per share	$	(0.18)	(0.14)




Shares used in the computation of loss per share:
Basic	88,733		87,992
Diluted	88,733		87,992

See accompanying notes to Condensed Consolidated Financial Statements.

BABCOCK & WILCOX ENTERPRISES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


	Three Months Ended March 31,
(in thousands)	2023		2022
Net loss	$	(12,475)	$	(8,684)
Other comprehensive income (loss):
Currency translation adjustments ("CTA")	4,592		(4,285)








Benefit obligations:
Pension and post retirement adjustments, net of tax	223		593

Other comprehensive income ( loss)	4,815		(3,692)
Total comprehensive loss	(7,660)		(12,376)
Comprehensive income attributable to non-controlling interest	14		461
Comprehensive loss attributable to stockholders	$	(7,646)	$	(11,915)

See accompanying notes to Condensed Consolidated Financial Statements.

BABCOCK & WILCOX ENTERPRISES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


(in thousands, except per share amount)	March 31, 2023		December 31, 2022
Cash and cash equivalents	$	62,760	$	76,728
Current restricted cash and cash equivalents	6,911		15,335
Accounts receivable – trade, net	173,763		162,461
Accounts receivable – other	37,977		38,510
Contracts in progress	163,916		134,939
Inventories, net	109,739		102,637
Other current assets	30,418		27,002

Total current assets	585,484		557,612
Net property, plant and equipment, and finance leases	84,412		86,363
Goodwill	157,259		156,993
Intangible assets, net	58,830		60,293
Right-of-use assets	28,160		29,438
Long-term restricted cash	21,397		21,397
Other assets	32,878		30,559

Total assets	$	968,420	$	942,655

Accounts payable	$	169,154	$	139,159
Accrued employee benefits	12,259		12,533
Advance billings on contracts	137,225		133,429
Accrued warranty expense	9,901		9,568
Financing lease liabilities	1,221		1,180
Operating lease liabilities	3,831		3,595
Other accrued liabilities	72,510		68,244
Loans payable	4,273		4,291

Total current liabilities	410,374		371,999
Senior notes	335,986		335,498
Long term loans payable	11,395		13,197


Pension and other postretirement benefit liabilities	135,641		136,176
Non-current finance lease liabilities	27,155		27,482
Non-current operating lease liabilities	25,678		26,583
Deferred tax liability	9,767		10,054
Other non-current liabilities	22,630		23,755
Total liabilities	978,626		944,744
Commitments and contingencies
Stockholders' deficit:
Preferred stock, par value $0.01 per share, authorized shares of 20,000; issued and outstanding shares of 7,669 at both March 31, 2023 and December 31, 2022	77		77
Common stock, par value $0.01 per share, authorized shares of 500,000; issued and outstanding shares of 88,745 and 88,700 at March 31, 2023 and December 31, 2022, respectively	5,139		5,138
Capital in excess of par value	1,540,982		1,537,625
Treasury stock at cost, 1,880 and 1,868 shares at March 31, 2023 and December 31, 2022, respectively	(113,817)		(113,753)
Accumulated deficit	(1,375,086)		(1,358,875)
Accumulated other comprehensive loss	(67,971)		(72,786)
Stockholders' deficit attributable to shareholders	(10,676)		(2,574)
Non-controlling interest	470		485
Total stockholders' deficit	(10,206)		(2,089)
Total liabilities and stockholders' deficit	$	968,420	$	942,655

See accompanying notes to Condensed Consolidated Financial Statements.

BABCOCK & WILCOX ENTERPRISES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY


	Common Stock			Preferred Stock			Capital In Excess of Par Value		Treasury Stock		Accumulated Deficit		Accumulated Other Comprehensive (Loss)		Non-controlling Interest		Total Stockholders’ (Deficit) Equity
(in thousands, except share amounts)	Shares	Par Value		Shares	Par Value
Balance at December 31, 2022	88,700	$	5,138	7,669	$	77	$	1,537,625	$	(113,753)	$	(1,358,875)	$	(72,786)	$	485	$	(2,089)
Net loss	—	—		—	—		—		—		(12,496)		—		21		(12,475)
Currency translation adjustments	—	—		—	—		—		—		—		4,592		(35)		4,557

Pension and post retirement adjustments, net of tax	—	—		—	—		—		—		—		223		—		223
Stock-based compensation charges	45	1		—	—		3,357		(64)		—		—		—		3,294
Dividends to preferred stockholders	—	—		—	—		—		—		(3,715)		—		—		(3,715)



Dividends to non-controlling interest	—	—		—	—		—		—		—		—		(1)		(1)
Balance at March 31, 2023	88,745	$	5,139	7,669	$	77	$	1,540,982	$	(113,817)	$	(1,375,086)	$	(67,971)	$	470	$	(10,206)


	Common Stock			Preferred Stock			Capital In Excess of Par Value		Treasury Stock		Accumulated Deficit		Accumulated Other Comprehensive (Loss)		Non-controlling Interest		Total Stockholders’ Equity (Deficit)
(in thousands, except share amounts)	Shares	Par Value		Shares	Par Value
Balance at December 31, 2021	86,286	$	5,110	7,669	$	77	$	1,518,872	$	(110,934)	$	(1,321,154)	$	(58,822)	$	25,473	$	58,622
Net loss	—	—		—	—		—		—		(8,264)		—		(420)		(8,684)
Currency translation adjustments	—	—		—	—		—		—		—		(4,285)		(41)		(4,326)
Pension and post retirement adjustments, net of tax	—	—		—	—		—		—		—		593		—		593
Stock-based compensation charges	52	1		—	—		1,765		(221)		—		—		—		1,545
Dividends to preferred shareholders	—	—		—	—		—		—		(3,715)		—		—		(3,715)
Preferred stock, net	—	—		—	—		(92)		—		—		—		—		(92)
Dividends to non-controlling interest	—	—		—	—		—		—		—		—		(1)		(1)
Balance at March 31, 2022	86,338	$	5,111	7,669	$	77	$	1,520,545	$	(111,155)	$	(1,333,133)	$	(62,514)	$	25,011	$	43,942

See accompanying notes to Condensed Consolidated Financial Statements.

BABCOCK & WILCOX ENTERPRISES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Three Months Ended March 31,
(in thousands)	2023		2022
Cash flows from operating activities:
Net loss	$	(12,475)	$	(8,684)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of long-lived assets	5,365		6,202


Amortization of deferred financing costs and debt discount	1,388		834
Amortization of guaranty fee	231		231
Non-cash operating lease expense	566		1,174


Loss on asset disposals	941		—
Benefit from deferred income taxes	(1,870)		(689)
Prior service cost amortization for pension and postretirement plans	223		593
Stock-based compensation	3,357		1,766

Foreign exchange	461		(3,085)
Changes in operating assets and liabilities:
Accounts receivable - trade, net and other	(5,522)		(28,694)
Contracts in progress	(29,042)		(13,334)
Advance billings on contracts	3,581		27,532
Inventories, net	(7,594)		(2,996)
Income taxes	2,055		(7,009)
Accounts payable	29,639		11,297
Accrued and other current liabilities	2,682		(11,290)
Accrued contract loss	(665)		4,274
Pension liabilities, accrued postretirement benefits and employee benefits	(4,328)		(10,048)
Other, net	(1,874)		(10,073)
Net cash used in operating activities:	(12,881)		(41,999)
Cash flows from investing activities:
Purchase of property, plant and equipment	(2,208)		(1,004)
Acquisition of business, net of cash acquired	—		(64,914)

Purchases of available-for-sale securities	(2,021)		(1,125)
Sales and maturities of available-for-sale securities	2,072		1,674
Other, net	—		(15)
Net cash used in investing activities	(2,157)		(65,384)


	Three Months Ended March 31,
(in thousands)	2023		2022
Cash flows from financing activities:
Issuance of senior notes	8		2,016
Borrowings on loan payable	—		1,342
Repayments on loan payable	(1,658)		(31)






Finance lease payments	(286)		(747)
Payment of preferred stock dividends	(3,715)		(3,715)
Shares of common stock returned to treasury stock	(64)		(221)



Debt issuance costs	(139)		(119)
Other, net			(93)
Net cash used in financing activities	(5,854)		(1,568)
Effects of exchange rate changes on cash	(1,500)		(794)
Net decrease in cash, cash equivalents and restricted cash	(22,392)		(109,745)
Cash, cash equivalents and restricted cash at beginning of period	113,460		226,715
Cash, cash equivalents and restricted cash at end of period	$	91,068	$	116,970

Schedule of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	62,760	$	108,137
Current restricted cash	6,911		8,833
Long-term restricted cash	21,397		—
Total cash, cash equivalents and restricted cash at end of period	$	91,068	$	116,970

Supplemental Cash flow information:
Income taxes paid, net	1,551		471
Interest paid	6,382		6,709

See accompanying notes to Condensed Consolidated Financial Statements.

BABCOCK & WILCOX ENTERPRISES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

NOTE 1 – BASIS OF PRESENTATION

These interim Condensed Consolidated Financial Statements of Babcock & Wilcox Enterprises, Inc. (“B&W,” “management,” “we,” “us,” “our” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") and Securities and Exchange Commission (“SEC”) instructions for interim financial information, and should be read in conjunction with the Company's Annual Report. The Company has included all adjustments, in the opinion of management, consisting only of normal, recurring adjustments, necessary for a fair presentation of the interim financial statements. The Company has eliminated all intercompany transactions and accounts. The Company has presented the notes to its Condensed Consolidated Financial Statements on the basis of continuing operations, unless otherwise stated.

The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. Actual results could differ from these estimates. In the opinion of management, these consolidated financial statements contain all estimates and adjustments, consisting of normal recurring accruals, required to fairly present the financial position, results of operations, and cash flows for the interim periods. Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the full-year ending December 31, 2023.

Non-controlling interests are presented in the Company’s consolidated financial statements as if parent company investors (controlling interests) and other minority investors (non-controlling interests) in partially-owned subsidiaries have similar economic interests in a single entity. As a result, investments in non-controlling interests are reported as equity in the Company’s consolidated financial statements. Additionally, the Company’s consolidated financial statements include 100% of a controlled subsidiary’s earnings, rather than only its share. Transactions between the parent company and non-controlling interests are reported in equity as transactions between stockholders, provided that these transactions do not create a change in control.

Market Update

The COVID-19 pandemic has continued to create challenges for the Company in countries that have significant outbreak mitigation strategies, namely, countries in our Asia-Pacific region, which led to temporary project postponements and has continued to impact results in this region. Additionally, the Company has experienced negative impacts to its global supply chains as a result of COVID-19, the war in Ukraine, Russia-related supply chain shortages and other factors, including disruptions to the manufacturing, supply, distribution, transportation and delivery of its products. The Company has also observed significant delays and disruptions of its service providers and negative impacts to pricing of certain of its products. These delays and disruptions have had, and could continue to have, an adverse impact on the Company’s ability to meet customers’ demands. The Company is continuing to actively monitor the impact of these market conditions on current and future periods and actively manage costs and our liquidity position to provide additional flexibility while still supplying its customers and their specific needs. The duration and scope of these conditions cannot be predicted, and therefore, any anticipated negative financial impact to the Company’s operating results cannot be reasonably estimated.

NOTE 2 – EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted (loss) earnings per share of the Company's common stock, net of non-controlling interest and dividends on preferred stock:


	Three Months Ended March 31,
(in thousands, except per share amounts)	2023		2022


Net loss attributable to stockholders of common stock	$	(16,211)	$	(11,979)



Weighted average shares used to calculate diluted earnings (loss) per share	88,733		87,992

Basic (loss) earnings per share	$	(0.18)	$	(0.14)




Diluted (loss) earnings per share	$	(0.18)	$	(0.14)

Because the Company incurred a net loss in the three-month periods ended March 31, 2023 and March 31, 2022, basic and diluted shares are the same.

If the Company had net income in the three months ended March 31, 2023 and March 31, 2022, diluted shares would include an additional 0.4 million and 0.9 million shares, respectively.

The Company excluded 2.2 million and 0.4 million shares related to stock options from the diluted share calculation for the three-month periods ended March 31, 2023 and 2022, respectively, because their effect would have been anti-dilutive.

NOTE 3 – SEGMENT REPORTING

The Company's operations are assessed based on three reportable market-facing segments as part of its strategic, market-focused organizational and re-branding initiative to accelerate growth and provide stakeholders with improved visibility into its renewable and environmental growth platforms. The Company's three reportable segments are as follows:

•Babcock & Wilcox Renewable: Cost-effective technologies for efficient and environmentally sustainable power and heat generation, including waste-to-energy, solar construction and installation, biomass energy and black liquor systems for the pulp and paper industry. B&W’s leading technologies support a circular economy, diverting waste from landfills to use for power generation and replacement of fossil fuels, while recovering metals and reducing emissions. To date, we have installed over 500 waste-to-energy and biomass-to-energy units at more than 300 facilities in approximately 30 countries which serve a wide variety of utility, waste management, municipality and investment firm customers. Additionally, we have installed more than 100MW of clean solar production.

•Babcock & Wilcox Environmental: A full suite of best-in-class emissions control and environmental technology solutions for utility, waste to energy, biomass, carbon black, and industrial steam generation applications around the world. B&W’s broad experience includes systems for cooling, ash handling, particulate control, nitrogen oxides and sulfur dioxides removal, chemical looping for carbon control, and mercury control. The Company's ClimateBright family of products including SolveBright, OxyBright, BrightLoop and BrightGen, places us at the forefront of carbon dioxide capturing technologies and development with many of the aforementioned products ready for commercial demonstration.

•Babcock & Wilcox Thermal: Steam generation equipment, aftermarket parts, construction, maintenance and field services for plants in the power generation, oil and gas, and industrial sectors. B&W has an extensive global base of installed equipment for utilities and general industrial applications including refining, petrochemical, food processing, metals and others.

An analysis of the Company's operations by segment is as follows:


	Three Months Ended March 31,
(in thousands)	2023		2022
Revenues:
B&W Renewable segment
B&W Renewable	$	49,132	$	19,711
B&W Renewable Services	16,310		8,288
Vølund	18,681		16,336
B&W Solar	15,989		23,626
	100,112		67,961
B&W Environmental segment
B&W Environmental	20,361		18,185
SPIG	16,605		12,060
GMAB	2,474		4,703
	39,440		34,948
B&W Thermal segment
B&W Thermal	119,236		102,239
	119,236		102,239

Eliminations	(1,541)		(1,099)
Total Revenues	$	257,247	$	204,049

At a segment level, the adjusted EBITDA presented below is consistent with the manner in which the Company's chief operating decision maker ("CODM") reviews the results of operations and makes strategic decisions about the business and is calculated as earnings before interest, tax, depreciation and amortization adjusted for items such as gains or losses arising from the sale of non-income producing assets, net pension benefits, restructuring activities, impairments, gains and losses on debt extinguishment, costs related to financial consulting, research and development costs and other costs that may not be directly controllable by segment management and are not allocated to the segment. The following table is provided to reconcile our segment performance metrics to loss before income tax expense.


	Three Months Ended March 31,
(in thousands)	2023		2022

B&W Renewable segment - Adjusted EBITDA	$	4,940	$	1,955
B&W Environmental segment - Adjusted EBITDA	1,906		1,439
B&W Thermal segment - Adjusted EBITDA	13,733		14,154
Corporate	(5,080)		(4,373)
R&D expenses	(1,307)		(655)
Interest Expense	(14,429)		(12,324)
Depreciation & Amortization	(5,365)		(6,202)
Benefit Plans, net	(109)		7,452
Gain on sales, net	(937)		20
Settlement and related legal costs	3,009		(2,528)
Advisory fees for settlement costs and liquidity planning	(546)		(1,032)
Stock Compensation	(3,227)		(1,319)
Restructuring expense and business services transition	(960)		(2,688)
Acquisition pursuit and related costs	(134)		(843)
Product Development	(1,370)		(852)
Foreign exchange	(461)		3,085
Financial advisory services	—		—
Contract Disposal	(1,387)		(875)
Inventory step-up price adjustment	—		(1,745)
Other Net	(261)		(123)
Loss before income tax expense	(11,985)		(7,454)

The Company does not separately identify or report its assets by segment as its CODM does not consider assets by segment to be a critical measure by which performance is measured.

NOTE 4 – REVENUE RECOGNITION AND CONTRACTS

Revenue Recognition

The Company generates the vast majority of its revenues from the supply of, and aftermarket services for, steam-generating, environmental and auxiliary equipment. The Company also earns revenue from the supply of custom-engineered cooling systems for steam applications along with related aftermarket services.

Revenue from goods and services transferred to customers at a point in time, which includes certain aftermarket parts and services, accounted for 25% and 19% of the Company's revenue for the three months ended March 31, 2023 and 2022, respectively. Revenue from products and services transferred to customers over time, which primarily relates to customized, engineered solutions and construction services, accounted for 75% and 81% of the Company's revenue for the three months ended March 31, 2023 and 2022, respectively.

A performance obligation is a contractual promise to transfer a distinct good or service to the customer. A contract's transaction price is allocated to each distinct performance obligation and is recognized as revenue when (point in time) or as (over time) the performance obligation is satisfied.

Contract assets as of March 31, 2023 include approximately $6.1 million for change orders and/or claims in transaction prices for certain contracts that were in the process of being resolved in the ordinary course of business, including through negotiation, arbitration and other proceedings. The Company believes that these amounts are collectible and recoverable under the applicable contracts.

Transaction prices for the Company’s contracts may include variable consideration, which comprises items such as change orders, claims and incentives. Management estimates variable consideration for a performance obligation utilizing estimation methods that it believes best predict the amount of consideration to which the Company will be entitled. Variable consideration is included in the estimated transaction price if it is probable that when the uncertainty associated with the variable consideration is resolved, there will not be a significant reversal of the cumulative amount of revenue that has been recognized. Management’s estimates of variable consideration and the determination of whether to include estimated amounts in transaction prices are based largely on legal advice, past practices with the customer, specific discussions, correspondence or preliminary negotiations with the customer and all other relevant information that is reasonably available at the time of the estimate. The effect of variable consideration on the transaction price of a performance obligation is recognized as an adjustment to revenue, typically on a cumulative catch-up basis, as such variable consideration, which typically pertains to changed conditions and scope, is generally for services encompassed under the existing contract. To the extent unapproved change orders, claims and other variable consideration reflected in transaction prices are not resolved in the Company’s favor, or to the extent incentives reflected in transaction prices are not earned, there could be reductions in, or reversals of, previously recognized revenue.

As of March 31, 2023, the Company included approximately $7.0 million of change orders and/or claims in transaction prices for certain contracts that were in the process of being resolved in the ordinary course of business, including through negotiation, arbitration and other proceedings. For the comparable period of March 31, 2022, the Company did not report material unapproved change orders. These transaction price adjustments, when earned, are included within contract assets or accounts receivable, net of allowance, as appropriate. As of March 31, 2023, these change orders and/or claims primarily related to certain projects in the Company’s B&W Renewable segment and include amounts related to the B&W Solar business. The Company actively engages with its customers to complete the final approval process and generally expects these processes to be completed within one year. Amounts ultimately realized upon final agreement by customers could be higher or lower than such estimated amounts.

Refer to Note 3 for the Company's disaggregation of revenue by product line.

Contract Balances

The following represents the components of the Company's Contracts in progress and Advance billings on contracts included in its Condensed Consolidated Balance Sheets:


(in thousands)	March 31, 2023		December 31, 2022		$ Change		% Change
Contract assets - included in contracts in progress:
Costs incurred less costs of revenue recognized	$	74,112	$	79,421	$	(5,309)	(7)	%
Revenues recognized less billings to customers	89,804		55,518		34,286		62	%
Contracts in progress	$	163,916	$	134,939	$	28,977	21	%
Contract liabilities - included in advance billings on contracts:
Billings to customers less revenues recognized	$	94,808	$	113,643	$	(18,835)	(17)	%
Costs of revenue recognized less cost incurred	42,417		19,786		22,631		114	%
Advance billings on contracts	$	137,225	$	133,429	$	3,796	3	%

Net contract balance	$	26,691	$	1,510	$	25,181	1,668	%

Accrued contract losses	$	3,315	$	3,032	$	283	9	%

Backlog

On March 31, 2023 the Company had $662.9 million of remaining performance obligations, which the Company also refers to as total backlog. The Company expects to recognize approximately 77.7%, 18.1% and 4.2% of its remaining performance obligations as revenue in 2023, 2024 and thereafter, respectively.

Changes in Contract Estimates

During each of the three-month periods ended March 31, 2023 and 2022, the Company recognized changes in estimated gross profit related to long-term contracts accounted for on the over time basis, which are summarized as follows:


	Three Months Ended March 31,
(in thousands)	2023		2022
Increases in gross profit for changes in estimates for over time contracts	$	6,225	$	3,341
Decreases in gross profit for changes in estimates for over time contracts	(5,753)		(2,862)
Net changes in gross profit for changes in estimates for over time contracts	$	472	$	479

B&W Renewable Projects

During 2022, the Company determined that its B&W Solar reporting unit had nine projects located in the United States that existed at the time B&W Solar (formerly Fosler) was acquired on September 30, 2021 which generated losses that arose due to the status of certain construction activities, existing at acquisition date, not adequately disclosed in the sales agreement and not recognized in the financial records of the seller. As a result, the Company recorded an increase in goodwill of $14.4 million, primarily resulting from the recognition of $14.1 million of accrued liabilities and $0.4 million of warranty accruals in conjunction with the finalization of purchase accounting as measurement period adjustments, which was finalized as of September 30, 2022. The Company has submitted insurance claims to recover a portion of these losses as of March 31, 2023. During 2022, four additional B&W Solar projects became loss contracts, as such, the Company recorded $13.2 million in net losses from changes in the estimated costs to complete the thirteen B&W Solar loss contracts. During the three months ended March 31, 2023, one additional B&W Solar project became a loss contract. The related loss incurred during the quarter was immaterial to the Company's consolidated financial statements.

NOTE 5 – INVENTORIES

Inventories are stated at the lower of cost or net realizable value. The components of inventories are as follows:


(in thousands)	March 31, 2023		December 31, 2022
Raw materials and supplies	$	91,668	$	87,554
Work in progress	3,917		2,518
Finished goods	14,154		12,565
Total inventories	$	109,739	$	102,637

NOTE 6 – PROPERTY, PLANT & EQUIPMENT, & FINANCE LEASES

Property, plant and equipment less accumulated depreciation is as follows:


(in thousands)	March 31, 2023		December 31, 2022
Land	$	2,498	$	2,481
Buildings	34,062		35,326
Machinery and equipment	154,919		153,939
Property under construction	13,133		11,410
	204,612		203,156
Less accumulated depreciation	144,036		141,145
Net property, plant and equipment	60,576		62,011
Finance leases	30,549		30,549
Less finance lease accumulated amortization	6,713		6,197
Net property, plant and equipment, and finance lease	$	84,412	$	86,363

NOTE 7 - GOODWILL

The following summarizes the changes in the net carrying amount of goodwill as of March 31, 2023:


(in thousands)	B&W Renewable		B&W Environmental		B&W Thermal		Total
Goodwill	$	139,248	$	79,825	$	69,587	$	288,660
Accumulated impairment losses	$	(57,189)	(74,478)		—		(131,667)
Balance at December 31, 2022	$	82,059	$	5,347	$	69,587	$	156,993







Currency translation adjustments	77		32		157		266
Balance at March 31, 2023	$	82,136	$	5,379	$	69,744	$	157,259

Goodwill represents the excess of the consideration transferred over the fair value of net assets, including identifiable intangible assets, at the acquisition date. Goodwill is assessed for impairment annually on October 1 or more frequently if events or changes in circumstances indicate a potential impairment exists.

There were no indicators of goodwill impairment identified during our quarterly triggering event assessment for the quarter ended March 31, 2023.

NOTE 8 – INTANGIBLE ASSETS

The Company's intangible assets are as follows:


(in thousands)	March 31, 2023		December 31, 2022
Definite-lived intangible assets(1)
Customer relationships	$	68,191	$	68,164
Unpatented technology	18,260		18,208
Patented technology	3,622		3,635
Tradename	13,516		13,441
Acquired backlog	3,100		3,100
All other	9,998		9,653
Gross value of definite-lived intangible assets	116,687		116,201
Customer relationships amortization	(27,465)		(26,198)
Unpatented technology amortization	(10,463)		(10,013)
Patented technology amortization	(2,927)		(2,891)
Tradename amortization	(6,341)		(6,154)
Acquired backlog	(3,100)		(3,100)
All other amortization	(9,091)		(9,082)
Accumulated amortization	(59,387)		(57,438)
Net definite-lived intangible assets	$	57,300	$	58,763
Indefinite-lived intangible assets
Trademarks and trade names	$	1,530	$	1,530
Total intangible assets, net	$	58,830	$	60,293

(1) The Company finalized the purchase price allocation for the B & W Solar and B & W Renewable Service A/S acquisition on September 30, 2022 and November 30, 2022, respectively. The purchase price allocations for FPS and Optimus were finalized on of February 1, 2023 and February 28, 2023, respectively. These allocations resulted in several measurement period adjustments during the year ended December 31, 2022.

The following summarizes the changes in the carrying amount of intangible assets, net:


	Three Months Ended March 31,
(in thousands)	2023		2022
Balance at beginning of period	$	60,293	$	43,795
Business acquisitions and adjustments(1) (2)	—		25,092

Amortization expense	(1,949)		(2,978)
Currency translation adjustments	486		(457)
Balance at end of the period	$	58,830	$	65,452

(1) During the quarter ended March 31, 2022 the Company was still in the process of completing the purchase price allocation associated with the Fosler Construction, VODA, Fossil Power and Optimus Industries acquisitions and as a result, the provisional measurements of goodwill associated with these acquisitions were subject to change.

(2) The purchase price allocations for FPS and Optimus were finalized on of February 1, 2023 and February 28, 2023, respectively. These allocations resulted in several measurement period adjustments during the year ended December 31, 2022.

Amortization of intangible assets is included in Cost of operations and SG&A in the Company's Consolidated Statement of Operations but is not allocated to segment results.

Estimated future intangible asset amortization expense as of March 31, 2023 is as follows (in thousands):


			Amortization Expense
Year ending December 31, 2023			6,020
Year ending December 31, 2024			7,955
Year ending December 31, 2025			7,158
Year ending December 31, 2026			6,010
Year ending December 31, 2027			5,352
Year ending December 31, 2028			5,352
Thereafter			19,453

NOTE 9 – ACCRUED WARRANTY EXPENSE

The Company may offer assurance type warranties on products and services that it sells. Changes in the carrying amount of accrued warranty expense are as follows:


	Three Months Ended March 31,
(in thousands)	2023		2022
Balance at beginning of period	$	9,568	$	12,925
Additions	1,901		1,300
Expirations and other changes	(1,358)		(1,467)
Payments	(253)		(193)
Translation and other	43		(692)
Balance at end of period	$	9,901	$	11,873

The Company accrues estimated expense included in Cost of operations on its Condensed Consolidated Statements of Operations to satisfy contractual warranty requirements when it recognizes the associated revenues on the related contracts, or in the case of a loss contract, the full amount of the estimated warranty costs is accrued when the contract becomes a loss contract. In addition, the Company records specific provisions or reductions where it expects the actual warranty costs to significantly differ from the accrued estimates. Such changes could have a material effect on the Company's consolidated financial condition, results of operations and cash flows.

NOTE 10 – RESTRUCTURING ACTIVITIES

The Company incurred restructuring charges (benefits) in each of the three months ended March 31, 2023 and 2022. The charges (benefits) primarily consist of legal fees and costs related to actions taken as part of the Company’s ongoing strategic, market-focused organizational and re-branding initiative.

The following tables summarizes the restructuring activity incurred by segment:


	Three Months Ended March 31,						Three Months Ended March 31,
	2023						2022
(in thousands)	Total		Severance and related costs (benefit)		Other (1)		Total		Severance and related costs (benefit)		Other(1)
B&W Renewable segment	$	(89)	$	(89)	$	—	$	(193)	$	(229)	$	36
B&W Environmental segment	20		1		19		69		10		59
B&W Thermal segment	3		3		—		198		50		148
Corporate	450		—		450		20		—		20
	$	384	$	(85)	$	469	$	94	$	(169)	$	263
Cumulative costs to date	$	46,127	36,813		9,314

(1) Other amounts consist primarily of relocation and other costs that are not considered as severance.

Restructuring liabilities are included in Other accrued liabilities on the Company's Condensed Consolidated Balance Sheets. Activity related to the restructuring liabilities is as follows:


	Three Months Ended March 31,
(in thousands)	2023		2022
Balance at beginning of period	$	1,615	$	6,561
Restructuring (benefit) expense	384		94
Payments	37		(749)
Balance at end of period	$	2,036	$	5,906

The payments shown above for the three months ended March 31, 2023 and 2022 relate primarily to severance costs. Accrued restructuring liabilities at March 31, 2023 and 2022 relate primarily to employee termination benefits.

NOTE 11 – PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

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


	Pension Benefits				Other Benefits
	Three Months Ended March 31,					Three Months Ended March 31,
(in thousands)	2023		2022				2023		2022
Interest cost	$	11,489	$	6,664			$	92	$	49
Expected return on plan assets	(11,697)		(14,366)				—		—
Amortization of prior service cost	52		28				173		173
Benefit plans, net (1)	(156)		(7,674)				265		222
Service cost included in COS (2)	144		201				4		5
Net periodic benefit cost (benefit)	$	(12)	$	(7,473)			$	269	$	227

(1) Benefit plans, net, which is presented separately in the Company's Condensed Consolidated Statements of Operations, is not allocated to the segments.

(2) Service cost related to a small group of active participants is presented within Cost of operations in the Company's Condensed Consolidated Statements of Operations and is recorded at the B&W Thermal segment level.

There were no mark-to-market ("MTM") adjustments for the Company's pension and other postretirement benefit plans during the three months ended March 31, 2023 and 2022.

The Company made contributions to its pension and other postretirement benefit plans totaling $0.3 million during the three months ended March 31, 2023 as compared to $0.4 million during the three months ended March 31, 2022.

NOTE 12 – DEBT

Senior Notes

8.125% Senior Notes

During 2021, the Company completed sales of $151.2 million aggregate principal amount of its 8.125% senior notes due 2026 (“8.125% Senior Notes”) for net proceeds of approximately $146.6 million. In addition to the completed sales, the Company issued $35.0 million of 8.125% Senior Notes to B. Riley Financial, Inc., a related party, in exchange for a deemed prepayment of its then existing Last Out Term Loan Tranche A-3. The 8.125% Senior Notes bear interest at the rate of 8.125% per annum which is payable quarterly in arrears on January 31, April 30, July 31 and October 31 of each year, commencing on April 30, 2021. The 8.125% Senior Notes mature on February 28, 2026.

On March 31, 2021, the Company entered into a sales agreement with B. Riley Securities, Inc., a related party, in which it may sell to or through B. Riley Securities, Inc., from time to time, additional 8.125% Senior Notes up to an aggregate principal amount of $150.0 million. The 8.125% Senior Notes have the same terms as (other than date of issuance), form a single series of debt securities with and have the same CUSIP number and are fungible with the initial 8.125% Senior Notes issuance in 2021.

6.50% Senior Notes

During 2021, the Company completed sales of $151.4 million aggregate principal amount of its 6.50% senior notes due in 2026 (the “6.50% Senior Notes”) for net proceeds of approximately $145.8 million. Interest on the 6.50% Senior Notes is payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year. The 6.50% Senior Notes mature on December 31, 2026.

The components of the Company's senior notes at March 31, 2023 are as follows:


	Senior Notes
(in thousands)	8.125%		6.50%		Total
Senior notes due 2026	$	193,035	$	151,440	$	344,475
Unamortized deferred financing costs	(3,883)		(5,027)		(8,910)
Unamortized premium	421		—		421
Net debt balance	$	189,573	$	146,413	$	335,986

Revolving Debt

On June 30, 2021, the Company entered into a Revolving Credit Agreement (the “Revolving Credit Agreement”) with PNC Bank, National Association, as administrative agent (“PNC”) and a letter of credit agreement (the “Letter of Credit Agreement”) with PNC, pursuant to which PNC agreed to issue up to $110.0 million in letters of credit that is secured in part by cash collateral provided by an affiliate of MSD Partners, MSD PCOF Partners XLV, LLC (“MSD”), as well as a reimbursement, guaranty and security agreement with MSD, as administrative agent, and the cash collateral providers from time to time party thereto, along with certain of the Company's subsidiaries as guarantors, pursuant to which it is obligated to reimburse MSD and any other cash collateral provider to the extent the cash collateral provided by MSD and any other cash collateral provider to secure the Letter of Credit Agreement is drawn to satisfy draws on letters of credit (the “Reimbursement Agreement”) and collectively with the Revolving Credit Agreement and Letter of Credit Agreement, the “Debt Documents” and the facilities thereunder, the “Debt Facilities”). The obligations of the Company under each of the Debt Facilities are guaranteed by certain existing and future domestic and foreign subsidiaries of the Company. B. Riley Financial, Inc. (“B. Riley”), a related party, has provided a guaranty of payment with regard to the Company’s obligations under the Reimbursement Agreement, as described below. The Company expects to use the proceeds and letter of credit availability under the Debt Facilities for working capital purposes and general corporate purposes. The Revolving Credit Agreement matures on June 30, 2025. As of March 31, 2023, no borrowings have occurred under the Revolving Credit Agreement and under the Letter of Credit Agreement, usage consisted of $13.7 million of financial letters of credit and $93.2 million of performance letters of credit.

Each of the Debt Facilities has a maturity date of June 30, 2025. The interest rates applicable under the Revolving Credit Agreement float at a rate per annum equal to either (i) a base rate plus 2.0% or (ii) 1 or 3 month reserve-adjusted Secured Overnight Financing Rate ("SOFR") rate plus 3.0%. The interest rates applicable to the Reimbursement Agreement float at a rate per annum equal to either (i) a base rate plus 6.50% or (ii) 1 or 3 month reserve-adjusted SOFR plus 7.50%. Under the Letter of Credit Agreement, the Company is required to pay letter of credit fees on outstanding letters of credit equal to (i) administrative fees of 0.75% and (ii) fronting fees of 0.25%. Under the Revolving Credit Agreement, the Company is required to pay letter of credit fees on outstanding letters of credit equal to (i) letter of credit commitment fees of 3.0% and (ii) letter of credit fronting fees of 0.25%. Under each of the Revolving Credit Agreement and the Letter of Credit Agreement, the Company is required to pay a facility fee equal to 0.375% per annum of the unused portion of the Revolving Credit Agreement or the Letter of Credit Agreement, respectively. The Company is permitted to prepay all or any portion of the loans under the Revolving Credit Agreement prior to maturity without premium or penalty. Prepayments under the Reimbursement Agreement shall be subject to a prepayment fee of 2.25% in the first year after closing, 2.0% in the second year after closing and 1.25% in the third year after closing with no prepayment fee payable thereafter.

The Company has mandatory prepayment obligations under the Reimbursement Agreement upon the receipt of proceeds from certain dispositions or casualty or condemnation events. The Revolving Credit Agreement and Letter of Credit Agreement require mandatory prepayments to the extent of an over-advance.

The obligations under the Debt Facilities are secured by substantially all assets of the Company and each of the guarantors, in each case subject to inter-creditor arrangements. As noted above, the obligations under the Letter of Credit Facility are also secured by the cash collateral provided by MSD and any other cash collateral provider thereunder.

The Debt Documents contain certain representations and warranties, affirmative covenants, negative covenants and conditions that are customarily required for similar financings. The Debt Documents require the Company to comply with certain financial maintenance covenants, including a quarterly fixed charge coverage test of not less than 1.00 to 1.00, a quarterly senior net leverage ratio test of not greater than 2.50 to 1.00, a non-guarantor cash repatriation covenant not to exceed $35 million at any one time, a minimum liquidity covenant of at least $30.0 million at all times, a current ratio of not less than 1.25 to 1.00, and an annual cap on maintenance capital expenditures of $7.5 million. The Debt Documents also contain customary events of default (subject, in certain instances, to specified grace periods) including, but not limited to, the failure to make payments of interest or premium, if any, on, or principal under the respective facility, the failure to comply with certain covenants and agreements specified in the applicable Debt Agreement, defaults in respect of certain other indebtedness and certain events of insolvency. If any event of default occurs, the principal, premium, if any, interest and any other monetary obligations on all the then outstanding amounts under the Debt Documents may become due and payable immediately. The Company entered into an amendment to the Revolving Credit Agreement on May 9, 2023 which allowed the Company to exclude certain acquisition related expenses from the calculation of EBITDA under the Revolving Credit Agreement, including for purposes of determining the Company's compliance with certain financial covenants thereunder. Accordingly, as of March 31, 2023 in light of the amendment to the Revolving Credit Agreement, the Company remained in compliance with all financial covenants.

In connection with the Company’s entry into the Debt Documents on June 30, 2021, B. Riley, a related party, entered into a Guaranty Agreement in favor of MSD, in its capacity as administrative agent under the Reimbursement Agreement, for the ratable benefit of MSD, the cash collateral providers and each co-agent or sub-agent appointed by MSD from time to time (the “B. Riley Guaranty”). The B. Riley Guaranty provides for the guarantee of all of the Company’s obligations under the Reimbursement Agreement. The B. Riley Guaranty is enforceable in certain circumstances, including, among others, certain events of default and the acceleration of the Company’s obligations under the Reimbursement Agreement. Under a fee letter with B. Riley, the Company agreed to pay B. Riley $0.9 million per annum in connection with the B. Riley Guaranty. The Company entered into a reimbursement agreement with B. Riley governing the Company’s obligation to reimburse B. Riley to the extent the B. Riley Guaranty is called upon by the agent or lenders under the Reimbursement Agreement.

On November 7, 2022 the Company executed an amendment to its Debt Documents with MSD which modified certain financial maintenance covenants for future periods beginning with fiscal quarters ending on December 31, 2022. The Fixed Charge Coverage Ratio was amended to 0.55:1.0 for the fiscal quarter ending December 31, 2022, 0.65 to 1.00 for the fiscal quarter ending March 31, 2023, 0.80 to 1.00 for the fiscal quarter ending June 30, 2023, 1.15 to 1.00 for the fiscal quarter ending September 30, 2023 and 1.25 to 1.00 for the fiscal quarter ending December 31, 2023 and thereafter. The Senior Net Leverage Ratio was amended to 2.00 to 1.00 for the fiscal quarter ending December 31, 2022, 1.75 to 1.00 for the fiscal quarter ending March 31, 2023, 1.60 to 1.00 for the fiscal quarter ending June 30, 2023, and 1.50 to 1.00 for the fiscal quarter ending September 30, 2023 and thereafter. The amendment also establishes minimum cash flow covenants, as defined, for the fiscal quarter ending December 31, 2022 of $20.0 million and $25.0 million for the fiscal year 2023 and each fiscal year thereafter. In addition, the Company also executed an amendment to its Debt Documents with PNC which modified the calculation of the Fixed Charge Coverage Ratio for the fiscal quarters ending December 31, 2022, March 31, 2023 and June 30, 2023. The calculation of the Fixed Charge Coverage ratio for the fiscal quarter ending September 30, 2023 and thereafter will revert to the original calculation as stated in the original Debt Documents. In addition, the interest rates applicable to the Reimbursement Agreement float at a rate per annum are equal to either (i) a base rate plus 9.0% or (ii) 1 or 3-month reserve-adjusted SOFR plus 10.0%. In December 2022, the Company also deposited $10.0 million with PNC for Letter of Credit collateral to enable MSD to reduce their collateral requirement by $10.0 million.

On March 14, 2023, the Company, with certain subsidiaries of the Company as guarantors, certain lenders from time to time party to the Revolving Credit Agreement, and PNC, as administrative agent and swing loan lender to the Revolving Credit, Guaranty and Security Agreement, dated as of June 30, 2021, as amended (the “Amended Revolving Credit Agreement”), entered into the Second Amendment, Waiver and Consent to the Amended Revolving Credit Agreement (the “Second Amended Revolving Credit Agreement”). The Second Amended Revolving Credit Agreement amends the terms of the Amended Revolving Credit Agreement to (i) waive the senior net leverage ratio test for purposes of enacting a Permitted Restricted Payment on Preferred Shares (each as defined in the Second Amended Revolving Credit Agreement) to be made on March 31, 2023; and (ii) replace the use of LIBOR with Term SOFR throughout.

On May 9, 2023 the Company further amended the Amended Revolving Credit Agreement. See Note 23 for further details.

Letters of Credit, Bank Guarantees and Surety Bonds

Certain of the Company's subsidiaries, primarily outside of the United States, have credit arrangements with various commercial banks and other financial institutions for the issuance of letters of credit and bank guarantees in association with contracting activity. The aggregate value of all such letters of credit and bank guarantees outside of the Company's Letter of Credit Agreement as of March 31, 2023 was $53.0 million. The aggregate value of the outstanding letters of credit provided under the Letter of Credit Agreement backstopping letters of credit or bank guarantees was $32.4 million as of March 31, 2023. Of the outstanding letters of credit issued under the Letter of Credit Agreement, $68.4 million are subject to foreign currency revaluation.

The Company has also posted surety bonds to support contractual obligations to customers relating to certain contracts. The Company utilizes bonding facilities to support such obligations, but the issuance of bonds under those facilities is typically at the surety's discretion. These bonds generally indemnify customers should the Company fail to perform its obligations under its applicable contracts. The Company, and certain of its subsidiaries, have jointly executed general agreements of indemnity in favor of surety underwriters relating to surety bonds the underwriters issue in support of some of its contracting activity. As of March 31, 2023, bonds issued and outstanding under these arrangements in support of its contracts totaled approximately $341.7 million. The aggregate value of the letters of credit backstopping surety bonds was $14.2 million.

The Company's ability to obtain and maintain sufficient capacity under its current Debt Facilities is essential to allow it to support the issuance of letters of credit, bank guarantees and surety bonds. Without sufficient capacity, the Company's ability to support contract security requirements in the future will be diminished.

Other Indebtedness - Loans Payable

As of March 31, 2023, the Company had Loans payable of $15.7 million, net of debt issuance costs of $0.6 million, of which $4.3 million is classified as current and $11.4 million as long term loans payable on the Company's Consolidated Balance Sheet. Included in these amounts, the company had approximately $13.1 million, net of debt issuance costs of $0.6 million, related to sale-leaseback financing transactions.

NOTE 13 – PREFERRED STOCK

In May 2021, the Company completed a public offering of its 7.75% Series A Cumulative Perpetual Preferred Stock (the "Preferred Stock") pursuant to an underwriting agreement (the “Underwriting Agreement”) between the Company and B. Riley Securities, Inc. At the closing, the Company issued to the public 4,444,700 shares of its Preferred Stock, at an offering price of $25.00 per share for net proceeds of approximately $106.4 million after deducting underwriting discounts, commissions but before expenses. The Preferred Stock has a par value of $0.01 per share and is perpetual and has no maturity date. The Preferred Stock has a cumulative cash dividend, when and as if declared by the Company's Board of Directors, at a rate of 7.75% per year on the liquidation preference amount of $25.00 per share and payable quarterly in arrears.

The Preferred Stock ranks, as to dividend rights and rights as to the distribution of assets upon the Company's liquidation, dissolution or winding-up: (1) senior to all classes or series of the Company's common stock and to all other capital stock issued by it expressly designated as ranking junior to the Preferred Stock; (2) on parity with any future class or series of the Company's capital stock expressly designated as ranking on parity with the Preferred Stock; (3) junior to any future class or series of the Company's capital stock expressly designated as ranking senior to the Preferred Stock; and (4) junior to all of the Company's existing and future indebtedness.

The Preferred Stock has no stated maturity and is not subject to mandatory redemption or any sinking fund. The Company will pay cumulative cash dividends on the Preferred Stock when, and if, declared by its Board of Directors, only out of funds legally available for payment of dividends. Dividends on the Preferred Stock will accrue on the stated amount of $25.00 per share of the Preferred Stock at a rate per annum equal to 7.75% (equivalent to $1.9375 per year), payable quarterly in arrears. Dividends on the Preferred Stock declared by the Company's Board of Directors will be payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year.

During the three months ending March 31, 2023, the Company's Board of Directors approved dividends totaling $3.7 million for holders of the Preferred Stock. There were no cumulative undeclared dividends of the Preferred Stock at March 31, 2023.

NOTE 14 – COMMON STOCK

On May 19, 2022, the stockholders of the Company, upon the recommendation of the Company’s Board of Directors, approved an amendment to the Babcock & Wilcox Enterprises, Inc. 2021 Long-Term Incentive Plan. The Plan Amendment became effective upon such stockholder approval. The Plan Amendment increased the total number of shares of the Company’s common stock authorized for award grants under the 2021 Plan from 1,250,000 shares to 5,250,000 shares. The 2021 Plan replaced the Company’s Amended and Restated 2015 Long-Term Incentive Plan. In addition to the 5,250,000 shares available for award grant purposes under the 2021 Plan as described above, any shares of Company common stock underlying any outstanding award granted under the 2015 Plan that, following May 20, 2021, expires, or is terminated, surrendered, or forfeited for any reason without issuance of such shares shall also be available for the grant of new awards under the 2021 Plan.

NOTE 15 –INTEREST EXPENSE AND SUPPLEMENTAL CASH FLOW INFORMATION

Interest expense in the Company's Condensed Consolidated Financial Statements consisted of the following components:


	Three Months Ended March 31,
(in thousands)	2023		2022
Components associated with borrowings from:
Senior notes	$	6,328	$	6,216



Components associated with amortization or accretion of:
Revolving Credit Agreement	984		1,060
Senior notes	619		643

	1,603		1,703

Components associated with interest from:
Lease liabilities	724		708
Other interest expense	4,007		2,640
	4,731		3,348

Total interest expense	$	12,662	$	11,267

The following table provides a reconciliation of Cash, cash equivalents and Short-term and Long-term restricted cash reporting within the Company's Condensed Consolidated Balance Sheets and in the Condensed Consolidated Statements of Cash Flows:


(in thousands)	March 31, 2023		December 31, 2022
Held by foreign entities	$	39,095	$	46,640
Held by U.S. entities	23,665		30,088
Cash and cash equivalents	62,760		76,728

Reinsurance reserve requirements	506		447
Project indemnity collateral (1)	—		5,723
Bank guarantee collateral	2,107		2,072
Letters of credit collateral (2)	11,196		11,193
Hold-back for acquisition purchase price (3)	3,102		5,900
Escrow for long-term project (4)	11,397		11,397
Current and Long-term restricted cash and cash equivalents	28,308		36,732
Total cash, cash equivalents and restricted cash shown in the Condensed Consolidated Statements of Cash Flows	$	91,068	$	113,460

(1) The Company released $5.7 million in project indemnity restricted cash collateral for a letter of credit agreement during the first quarter of 2023.

(2) The Company paid an additional $10.0 million in December, 2022 for letter of credit collateral which is reflected in Long-term restricted cash on the Company's Consolidated Balance Sheets. The remainder of the letters of credit are reflected within Restricted cash and cash equivalents.

(3) The purchase price for Fossil Power Systems ("FPS") was $59.2 million, and included an initial hold-back of $5.9 million which was included in Current restricted cash and cash equivalents and Other accrued liabilities on the Company's Condensed Consolidated Balance Sheets. As of March 31, 2023, the initial payment was made in the amount of $2.8 million and the remainder is being held in escrow for potential payment of up to the maximum amount twenty-four months from the February 1, 2022 date of acquisition if the conditions are met.

(4) On December 15, 2021, the Company entered into an agreement to place $11.4 million in an escrow account as security to ensure project performance. On April 30, 2023, $2.5 million of the total amount held in escrow will be reclassified from Long-Term restricted cash to Current restricted cash in anticipation of the initial payment on April 20, 2024. The remaining amount of $8.9 million will be reclassified from Long-term restricted cash to Current restricted cash on September 30, 2024, with a scheduled final settlement on September 30, 2025.

The following cash activity is presented as a supplement to the Company's Condensed Consolidated Statements of Cash Flows and is included in Net cash used in operating activities:


	Three Months Ended March 31,
(in thousands)	2023		2022
Income tax payments, net	$	1,551	$	471

Interest payments - 8.125% Senior Notes due 2026	$	3,921	$	3,783
Interest payments - 6.50% Senior Notes due 2026	2,461		2,926


Total cash paid for interest	$	6,382	$	6,709

NOTE 16 – PROVISION FOR INCOME TAXES

In the three months ended March 31, 2023, income tax expense was $0.5 million, resulting in an effective tax rate of (4.1)%. In the three months ended March 31, 2022, income tax expense was $1.2 million, resulting in an effective tax rate of (16.5)%.

The Company's effective tax rate for the three months ended March 31, 2023 is not reflective of the U.S. statutory rate due to valuation allowances against certain net deferred tax assets and discrete items. The Company has unfavorable discrete items of $0.2 million for the three months ended March 31, 2023, which primarily represent withholding taxes. The Company had unfavorable discrete items of $0.4 million for the three months ended March 31, 2022, which primarily represented withholding taxes.

The Company is subject to federal income tax in the United States and numerous countries that have statutory tax rates different than the United States federal statutory rate of 21%. The most significant of these foreign operations are located in Canada, Denmark, Germany, Italy, Mexico, Sweden, and the United Kingdom, with effective tax rates ranging between approximately 19% and 30%. The Company provides for income taxes based on the tax laws and rates in the jurisdictions where it conducts operations. These jurisdictions may have regimes of taxation that vary in both nominal rates and the basis on which these rates are applied. The Company's consolidated effective income tax rate can vary from period to period due to these foreign income tax rate variations, changes in the jurisdictional mix of its income, and valuation allowances.

NOTE 17 – CONTINGENCIES

Litigation Relating to Boiler Installation and Supply Contract

On December 27, 2019, a complaint was filed against Babcock & Wilcox by P.H. Glatfelter Company (“Glatfelter”) in the United States District Court for the Middle District of Pennsylvania, Case No. 1:19-cv-02215-JPW, alleging claims of breach of contract, fraud, negligent misrepresentation, promissory estoppel and unjust enrichment (the “Glatfelter Litigation”). The complaint alleges damages in excess of $58.9 million. On March 16, 2020 the Company filed a motion to dismiss, and on December 14, 2020 the court issued its order dismissing the fraud and negligent misrepresentation claims and finding that, in the event that parties’ contract is found to be valid, Plaintiffs’ claims for damages will be subject to the contractual cap on liability (defined as the $11.7 million purchase price subject to certain adjustments). On January 11, 2021, the Company filed its answer and a counterclaim for breach of contract, seeking damages in excess of $2.9 million. The Company intends to continue to vigorously litigate the action. However, given the stage of the litigation, it is too early to determine if the outcome of the Glatfelter Litigation will have a material adverse impact on The Company's consolidated financial condition, results of operations or cash flows.

Stockholder Derivative and Class Action Litigation

On April 14, 2020, a putative B&W stockholder (“Plaintiff”) filed a derivative and class action complaint against certain of the Company’s directors (current and former), executives and significant stockholders (collectively, “Defendants”) and the Company (as a nominal defendant). The action was filed in the Delaware Court of Chancery and is captioned Parker v. Avril, et al., C.A. No. 2020-0280-PAF (the “Stockholder Litigation”). Plaintiff alleges that Defendants, among other things, did not properly discharge their fiduciary duties in connection with the 2019 rights offering and related transactions.

On June 10, 2022, after pursuing private mediation, the parties to the Stockholder Litigation reached a settlement agreement in principle to resolve the Stockholder Litigation. That settlement agreement includes (i) certain corporate governance changes that the Company is willing to implement in the future, (ii) a total payment of $9.5 million, and (iii) other customary terms and conditions. All attorney’s fees, administration costs, and expenses associated with the settlement of this matter will be deducted from the total payment amount, other than the cost of notice, which will be borne by the Company. Of the total settlement amount, the Company will pay $4.75 million on behalf of B. Riley Financial, Inc. and Vintage Capital Management, LLC pursuant to existing contractual indemnification obligations to settle Plaintiff’s direct claims asserted against these entities. This $4.75 million, after the deduction of attorney’s fees and the customary settlement costs and expenses described above, will be paid to shareholders of the Company, excluding any Defendant in the Stockholder Litigation. The remaining $4.75 million of the total settlement amount, after the deduction of attorney’s fees and the customary settlement costs and expenses described above, will be paid to the Company from insurance proceeds and the contribution of certain other parties to the Stockholder Litigation to settle the derivative claims asserted by Plaintiff on behalf of the Company. The proposed settlement, which remains subject to court approval, would resolve all claims that have been, could have been, could now be, or in the future could, can, or might be asserted in the Stockholder Litigation. The settlement of this matter remains subject to court approval and the amount to be paid by the Company is fully accrued and reflected in Other accrued liabilities on the Company's Condensed Consolidated Balance Sheets at March 31, 2023. The Company has also accrued a probable loss recovery related to settlement proceeds of $3.4 million in Other Accounts Receivable on the Company's Condensed Consolidated Balance Sheets and in Advisory fees and settlement costs in the Company's Condensed Consolidated Statements of Operations at March 31, 2023. The Court has scheduled a hearing on July 10, 2023 to consider final approval of the settlement.

Russian Invasion of Ukraine

The Company does not currently have contracts directly with Russian entities or businesses and it currently does not conduct business in Russia directly. It is believed that the Company’s only involvement with Russia or Russian entities, involves sales of its products with a trade receivable in the amount of approximately $3.1 million by a wholly-owned Italian subsidiary of the Company to non-Russian counterparties who may resell the Company's products to Russian entities or perform services in Russia using its products. The Company has implemented a restricted party screening process completed by a third party to monitor compliance with trade restrictions. The economic sanctions and export-control measures and the ongoing invasion of Ukraine could impact the Company's subsidiary’s rights and responsibilities under the contracts and could result in potential losses to the Company.

Other

Due to the nature of B&W's business, the Company is, from time to time, involved in routine litigation or subject to disputes or claims related to its business activities, including, among other things: performance or warranty-related matters under the Company's customer and supplier contracts and other business arrangements; and workers' compensation, premises liability and other claims. Based on prior experience, the Company does not expect that any of these other litigation proceedings, disputes and claims will have a material adverse effect on its consolidated financial condition, results of operations or cash flows.

NOTE 18 – COMPREHENSIVE INCOME

Gains and losses deferred in accumulated other comprehensive income (loss) ("AOCI") are generally reclassified and recognized in the Condensed Consolidated Statements of Operations once they are realized. The changes in the components of AOCI, net of tax, for the first, second and third quarters of 2023 and 2022 were as follows:


(in thousands)	Currency translation loss		Net unrecognized loss related to benefit plans (net of tax)		Total
Balance at December 31, 2022	$	(70,333)	$	(2,453)	$	(72,786)
Other comprehensive income before reclassifications	4,592		223		4,815
Net other comprehensive (loss) income	4,592		223		4,815
Balance at March 31, 2023	$	(65,741)	$	(2,230)	$	(67,971)


(in thousands)	Currency translation loss		Net unrecognized loss related to benefit plans (net of tax)		Total
Balance at December 31, 2021	$	(55,499)	$	(3,323)	$	(58,822)
Other comprehensive loss before reclassifications	(4,285)		—		(4,285)
Reclassified from AOCI to net (loss) income	—		593		593
Net other comprehensive (loss) income	(4,285)		593		(3,692)
Balance at March 31, 2022	$	(59,784)	$	(2,730)	$	(62,514)

The amounts reclassified out of AOCI by component and the affected Condensed Consolidated Statements of Operations line items are as follows (in thousands):


AOCI component	Line items in the Condensed Consolidated Statements of Operations affected by reclassifications from AOCI	Three Months Ended March 31,
		2023		2022


Pension and post retirement adjustments, net of tax	Benefit plans, net	223		593
	Net Income (Loss)	$	223	$	593

NOTE 19 – FAIR VALUE MEASUREMENTS

The following tables summarize the Company's financial assets and liabilities carried at fair value, all of which were valued from readily available prices or using inputs based upon quoted prices for similar instruments in active markets (known as "Level 1" and "Level 2" inputs, respectively, in the fair value hierarchy established by the FASB Topic, Fair Value Measurements and Disclosures).


(in thousands)
Available-for-sale securities	March 31, 2023		Level 1		Level 2
Corporate notes and bonds	$	4,203	$	4,203	$	—
Mutual funds	633		—		633
United States Government and agency securities	4,108		4,108		—
Total fair value of available-for-sale securities	$	8,944	$	8,311	$	633


(in thousands)
Available-for-sale securities	December 31, 2022		Level 1		Level 2
Corporate notes and bonds	$	4,154	$	4,154	$	—
Mutual funds	612		—		612
United States Government and agency securities	4,023		4,023		—
Total fair value of available-for-sale securities	$	8,789	$	8,177	$	612

Available-For-Sale Securities

The Company's investments in available-for-sale securities are presented in Other assets on its Condensed Consolidated Balance Sheets with contractual maturities ranging from 0-5 years.

Senior Notes

See Note 12 above for a discussion of the Company's senior notes. The fair value of the senior notes is based on readily available quoted market prices as of March 31, 2023.


(in thousands)	March 31, 2023
Senior Notes	Carrying Value		Estimated Fair Value
8.125% Senior Notes due 2026 ('BWSN')	$	193,035	$	190,178
6.50% Senior Notes due 2026 ('BWNB')	$	151,440	$	131,268

Other Financial Instruments

The Company used the following methods and assumptions in estimating its fair value disclosures for its other financial instruments:

•Cash and cash equivalents and restricted cash and cash equivalents. The carrying amounts that the Company has 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.

•Revolving Debt. The Company bases the fair values of debt instruments on quoted market prices. Where quoted prices are not available, the Company bases the fair values on Level 2 inputs such as 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 the Company's Revolving Debt approximated their carrying value at March 31, 2023.

•Warrants. The fair value of the warrants was established using the Black-Scholes option pricing model value approach.

NOTE 20 – RELATED PARTY TRANSACTIONS

The Company believes transactions with related parties were conducted on terms equivalent to those prevailing in an arm's length transaction.

Transactions with B. Riley

Based on its Schedule 13D filings with the SEC, B. Riley beneficially owns approximately 30.8% of the Company's outstanding common stock as of March 31, 2023.

On July 20, 2022, BRF Investments, LLC, an affiliate of B. Riley, a related party exercised 1,541,666.7 warrants to purchase 1,541,666 shares of the Company's common stock at a price per share of $0.01 pursuant to the terms of the warrant agreement between the Company and B. Riley dated July 23, 2019.

On July 28, 2022, the Company participated in the sale process of Hamon Holdings Corporation ("Hamon") for which B. Riley Securities, Inc., a related party to the Company, has been engaged as Hamon’s investment banker and to serve as advisor to Hamon through a Chapter 11 363 Asset Sale of Hamon’s entire United States business or potential carve-out of any of its four main subsidiaries. The Company was the successful bidder for the assets of one of those subsidiaries, Hamon Research-Cottrell, Inc. a major provider of air pollution control technology, for approximately $2.9 million.

The Company entered into an agreement with BRPI Executive Consulting, LLC, an affiliate of B. Riley, on November 19, 2018 and amended the agreement on November 9, 2020 to retain the services of Mr. Kenny Young, to serve as its Chief Executive Officer until December 31, 2023, unless terminated by either party with thirty days written notice. Under this agreement, payments are $0.75 million per annum, paid monthly. Subject to the achievement of certain performance objectives as determined by the Compensation Committee of the Board, a bonus or bonuses may also be earned and payable to BRPI Executive Consulting, LLC. Total fees associated with B. Riley related to the services of Mr. Kenny Young were $0.2 million and $0.2 million for the three months ended March 31, 2023 and March 31, 2022, respectively.

As described in Note 17, on June 10, 2022, after pursuing private mediation, the parties to the Stockholder Litigation reached a settlement agreement in principle to resolve the Stockholder Litigation. Of the total $9.5 million settlement amount, the Company will pay $4.75 million on behalf of B. Riley Financial, Inc. and Vintage Capital Management, LLC pursuant to existing contractual indemnification obligations to settle Plaintiff’s direct claims asserted against these entities. This $4.75 million, after the deduction of attorney’s fees and customary settlement costs and expenses, will be paid to shareholders of the Company, excluding any Defendant in the Stockholder Litigation. The settlement of this matter remains subject to court approval and the amount to be paid by the Company is fully accrued at March 31, 2023.

The public offering of the Company's 8.125% Senior Notes in February 2021, as described in Note 12, was conducted pursuant to an underwriting agreement dated February 10, 2021, between the Company and B. Riley Securities, Inc., an affiliate of B. Riley, as representative of several underwriters. At the closing date on February 12, 2021, the Company paid B. Riley Securities, Inc. $5.2 million for underwriting fees and other transaction cost related to the 8.125% Senior Notes offering.

The public offering of the Company's common stock, as described in Note 14, was conducted pursuant to an underwriting agreement dated February 9, 2021, between the Company and B. Riley Securities, Inc., as representative of the several underwriters. Also on February 12, 2021, the Company paid B. Riley Securities, Inc. $9.5 million for underwriting fees and other transaction costs related to the offering.

On February 12, 2021, the Company and B. Riley entered into the Exchange Agreement pursuant to which the Company agreed to issue to B. Riley $35.0 million aggregate principal amount of 8.125% Senior Notes in exchange for a deemed prepayment of $35.0 million of its existing Tranche A term loan with B. Riley Financial in the Exchange, as described in Note 12.

On March 31, 2021, the Company entered into a sales agreement with B. Riley Securities, Inc., a related party, in which the Company may sell, from time to time, up to an aggregated principal amount of $150.0 million of 8.125% Senior Notes due 2026 to or through B. Riley Securities, Inc., as described in Note 12. As of March 31, 2023, the Company paid B. Riley Securities, Inc. $0.6 million for underwriting fees and other transaction costs related to the offering of which $0.1 million has been paid for the three months ended March 31, 2023.

The public offering of the Company's 7.75% Series A Cumulative Perpetual Preferred Stock, as described in Note 13, was conducted pursuant to an underwriting agreement dated May 4, 2021, between the Company and B. Riley Securities, Inc., as representative of several underwriters. At the closing date on May 2021, the Company paid B. Riley Securities, Inc. $4.3 million for underwriting fees and other transaction cost related to the Preferred Stock offering.

On May 26, 2021, the Company completed the additional sale of 444,700 shares of its Preferred Stock, related to the grant to the underwriters, as described in Note 13, and paid B. Riley Securities, Inc. $0.4 million for underwriting fees in conjunction with the transaction.

On June 1, 2021, the Company issued 2,916,880 shares of its 7.75% Series A Cumulative Perpetual Preferred Stock and paid $0.4 million in cash due to B. Riley, a related party, in exchange for a deemed prepayment of $73.3 million of the Company's then existing Last Out Term Loans and paid $0.9 million in cash for accrued interest, as described in Note 13.

On June 30, 2021, the Company entered into new Debt Facilities, as described in Note 12. In connection with the its entry into the Debt Facilities, B. Riley Financial, Inc., an affiliate of B. Riley, has provided a guaranty of payment with regard to the Company’s obligations under the Reimbursement Agreement, as describe in Note 12. Under a fee letter with B. Riley, the Company shall pay B. Riley $0.9 million per annum in connection with the B. Riley Guaranty.

On July 7, 2021, the Company entered into a sales agreement with B. Riley Securities, Inc., a related party, in which the Company may sell, from time to time, up to an aggregated principal amount of $76.0 million of Preferred Stock to or through B. Riley Securities, Inc., as described in Note 13. As of March 31, 2023, the Company paid B. Riley Securities, Inc. $0.2 million for underwriting fees and other transaction costs related to the offering.

The public offering of the Company's 6.50% Senior Notes in December 2021, as described in Note 12, was conducted pursuant to an underwriting agreement dated December 8, 2021, between the Company and B. Riley Securities, Inc., an affiliate of B. Riley, as representative of several underwriters. At the closing date on December 13, 2021, the Company paid B. Riley Securities, Inc. $5.5 million for underwriting fees and other transaction cost related to the 6.50% Senior Notes offering.

On December 17, 2021, B. Riley Financial, Inc. entered into a General Agreement of Indemnity (the "Indemnity Agreement"), between the Company and AXA-XL and or its affiliated associated and subsidiary companies (collectively the “Surety”). Pursuant to the terms of the Indemnity Agreement, B. Riley will indemnify the Surety for losses the Surety may incur as a result of providing a payment and performance bond in an aggregate amount not to exceed €30.0 million in connection with the Company's proposed performance on a specified project. In consideration of B. Riley's execution of the Indemnity Agreement, the Company paid B. Riley a fee of $1.7 million following the issuance of the bond by the Surety, which represents approximately 5.0% of the bonded obligations, to be amortized over the term of the agreement.

On December 28, 2021, the Company received a notice that the underwriters of the 6.50% Senior Notes had elected to exercise their overallotment option for an additional $11.4 million in aggregate principal amount of the Senior Notes. At the closing date on December 30, 2021, the Company paid B. Riley Securities, Inc. $0.5 million for underwriting fees and other transaction cost related to the 6.50% Senior Notes overallotment.

NOTE 21 – ACQUISITIONS AND DIVESTITURES

Acquisitions

Fossil Power Systems

On February 1, 2022, the Company acquired 100% ownership of Fossil Power Systems, Inc. (“FPS”) for approximately $59.2 million. The consideration paid for FPS included a hold-back of $5.9 million, payable twenty-four months from the date of the acquisition if certain conditions of the purchase agreement are met and is recorded on the Company's Condensed Consolidated Balance Sheets in Restricted cash and cash equivalents and other accrued liabilities. Of the $5.9 million hold-back, $2.8 million was paid during the quarter ended March 31, 2023.

FPS is a leading designer and manufacturer of hydrogen, natural gas and renewable pulp and paper combustion equipment including ignitors, plant controls and safety systems based in Dartmouth, Nova Scotia, Canada and is reported as part of the Company's B&W Thermal segment.

The Company finalized the fair values during the quarter primarily using the discounted cash flow method for the assets acquired and liabilities assumed.

Optimus Industries

On February 28, 2022, the Company acquired 100% ownership of Optimus Industries, LLC ("Optimus Industries") for approximately $19.2 million. Optimus Industries designs and manufactures waste heat recovery products for use in power generation, petrochemical, and process industries, including package boilers, watertube and firetube waste heat boilers, economizers, superheaters, waste heat recovery equipment and units for sulfuric acid plants and is based in Tulsa, Oklahoma and Chanute, Kansas. Optimus Industries is reported as part of the Company's B&W Thermal segment.

The Company finalized the fair values during the quarter primarily using the discounted cash flow method for the assets acquired and liabilities assumed.

Hamon Holdings Corporation Industries

On July 28, 2022, the Company acquired certain assets of Hamon Holdings Corporation ("Hamon Holdings") through a competitive sale process, in connection with B. Riley Securities, Inc., a related party to the Company, had been engaged as Hamon Holdings’ investment banker and to serve as advisor to Hamon Holdings through a Chapter 11 363 Asset Sale of Hamon Holdings’ entire United States business or potential carve-out of any of its four main subsidiaries. B&W was the successful bidder for certain assets of one of those subsidiaries, Hamon Research-Cottrell, Inc., ("Hamon") a major provider of air pollution control technology, for approximately $2.9 million.

Purchase Price Allocations

The purchase price allocation to assets acquired and liabilities assumed in the acquisitions of Fossil Power Systems and Optimus Industries are detailed in following tables.


	Fossil Power Systems
(in thousands)	Estimated Acquisition Date Fair Value		Measurement Period Adjustments		Final Allocation(2)
Cash	$	1,869	$	—	$	1,869
Accounts receivable	2,624		—		2,624
Contracts in progress	370		—		370
Other current assets	3,228		—		3,228
Property, plant and equipment, net	178		—		178
Goodwill(1)	35,392		270		35,662
Other assets	25,092		—		25,092
Right of use assets	1,115		—		1,115
Current liabilities	(1,792)		(18)		(1,810)
Advance billings on contracts	(645)		—		(645)
Non-current lease liabilities	(989)		—		(989)
Non-current liabilities	(7,384)		(106)		(7,490)
Net acquisition cost	$	59,058	$	146	$	59,204

(1) Goodwill is calculated as the excess of the purchase price over the net assets acquired. With respect to the FPS acquisition, goodwill represents

FPS's ability to significantly expand services among new customers by leveraging cross-selling opportunities and recognizing general cost synergies.

(2) The Company's purchase price allocation was final as of March 31, 2023.


	Optimus Industries
(in thousands)	Estimated Acquisition Date Fair Value		Measurement Period Adjustments		Final Allocation(2)
Cash	$	5,338	$	—	$	5,338
Accounts receivable	5,165		—		5,165
Contracts in progress	2,598		—		2,598
Other current assets	2,115		—		2,115
Property, plant and equipment, net	2,441		5,178		7,619
Goodwill(1)	11,081		(7,274)		3,807
Other assets	12		2,319		2,331
Right of use assets	94		11		105
Current liabilities	(4,240)		—		(4,240)
Advance billings on contracts	(3,779)		—		(3,779)
Non-current lease liabilities	(2)		—		(2)
Non-current liabilities	(1,858)		—		(1,858)
Net acquisition cost	$	18,965	$	234	$	19,199

(1) Goodwill is calculated as the excess of the purchase price over the net assets acquired. With respect to the Optimus Industries acquisition, goodwill represents Optimus Industries ability to significantly expand future customer relationships which are not in place today and recognize general cost synergies.

(2) The Company's purchase price allocation was final as of March 31, 2023.

Intangible assets are included in other assets above and consists of the following:


	Fossil Power Systems			Optimus Industries
	Estimated Acquisition Date Fair Value		Weighted Average Estimated Useful Life	Estimated Acquisition Date Fair Value		Weighted Average Estimated Useful Life
Customer Relationships	$	20,451	9 years	2,100		10 years
Tradename	787		14 years	220		3 years
Patented Technology	578		12 years	—		—
Unpatented Technology	3,276		12 years	—		—
Total intangible assets(1)	$	25,092		$	2,320

(1) Intangible assets were valued using the income approach, which includes significant assumptions around future revenue growth, profitability, discount rates and customer attrition. Such assumptions are classified as level 3 inputs within the fair value hierarchy.

Divestitures

On June 30, 2022 the Company sold development rights related to a future solar project for $8.0 million. In conjunction with the sale, the Company recognized a $6.2 million gain on sale. The Company recorded $4.7 million in outstanding receivables related to the transaction within Accounts receivable – other in the Company's Condensed Consolidated Balance Sheets at March 31, 2023.

NOTE 22 – NEW ACCOUNTING PRONOUNCEMENTS AND STANDARDS

The Company adopted the following accounting standard during the first three months of 2023:

In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326: Financial Instruments - Credit Losses. This update is an amendment to the new credit losses standard, ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, that was issued in June 2016 and clarifies that operating lease receivables are not within the scope of Topic 326. The new credit losses standard changes the accounting for credit losses for certain instruments. The new measurement approach is based on expected losses, commonly referred to as the current expected credit loss ("CECL") model, and applies to financial assets measured at amortized cost, including loans, held-to-maturity debt securities, net investment in leases, and reinsurance and trade receivables, as well as certain off-balance sheet credit exposures, such as loan commitments. The standard also changes the impairment model for available-for-sale debt securities. The provisions of this standard will primarily impact the allowance for doubtful accounts on the Company's trade receivables, contracts in progress, and potentially its impairment model for available-for-sale debt securities (to the extent we have any upon adoption). For public, smaller reporting companies, this standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The impact of adopting this standard on the Company's Consolidated Financial Statements was immaterial.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendment in this update provides an exception to fair value measurement for contract assets and contract liabilities (i.e., deferred revenue) acquired in a business combination. As a result, contract assets and contract liabilities will be recognized and measured by the acquirer in accordance with ASC 606, Revenue from Contracts with Customers. The amendment also improves consistency in revenue recognition in the post-acquisition period for acquired contracts as compared to contracts entered into after the business combination. The amendment in this update is effective for public business entities in January 2023; all other entities have an additional year to adopt. Early adoption is permitted; however, if the new guidance is adopted in an interim period, it is required to be applied retrospectively to all business combinations within the year of adoption. This amendment is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The impact of adopting this standard on the Company's Consolidated Financial Statements was immaterial.

There were no new accounting standards not yet adopted that during the quarter ended March 31, 2023.

NOTE 23 – SUBSEQUENT EVENTS

On May 9, 2023 the Company entered into Amendment No. 3 to the Revolving Credit Agreement which allowed the Company to exclude certain expenses from the calculation of EBITDA under the Revolving Credit Agreement, including for purposes of determining the Company’s compliance with certain financial covenants thereunder.

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

The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto included in Financial Statements under Item 1 within this Quarterly Report. The following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements as a result of many factors, including those described in more detail under "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2021. See also "Cautionary Statement Concerning Forward-Looking Information" herein.

First Quarter 2023 Update

Management continues to adapt to macroeconomic conditions, including rising inflation, higher interest rates, foreign exchange rate fluctuations and the impact of the ongoing conflict in Ukraine and the COVID-19 pandemic, all of which impacted the Company during the first three months of 2023. The COVID-19 pandemic has continued to create challenges for us in countries that have significant outbreak mitigation strategies, namely, countries in our Asia-Pacific region, which led to temporary project postponements and has continued to impact results in this region. Additionally, the Company has experienced negative impacts to its global supply chains as a result of COVID-19, the war in Ukraine, Russia-related supply chain shortages and other factors, including disruptions to the manufacturing, supply, distribution, transportation and delivery of its products. The Company has also observed significant delays and disruptions of its service providers and negative

impacts to pricing of certain of its products. These delays and disruptions have had, and could continue to have, an adverse impact on the Company’s ability to meet customers’ demands. We are continuing to actively monitor the impact of these market conditions on current and future periods and actively manage costs and our liquidity position to provide additional flexibility while still supporting our customers and their specific needs. The duration and scope of these conditions cannot be predicted, and therefore, any anticipated negative financial impact to the Company’s operating results cannot be reasonably estimated.

BUSINESS OVERVIEW

B&W is a growing, globally-focused renewable, environmental and thermal technologies provider with over 150 years of experience providing diversified energy and emissions control solutions to a broad range of industrial, electrical utility, municipal and other customers. B&W’s innovative products and services are organized into three market-facing segments. Our reportable segments are as follows:

•Babcock & Wilcox Renewable: Cost-effective technologies for efficient and environmentally sustainable power and heat generation, including waste-to-energy, solar construction and installation, biomass energy and black liquor systems for the pulp and paper industry. B&W’s leading technologies support a circular economy, diverting waste from landfills to use for power generation and replacement of fossil fuels, while recovering metals and reducing emissions. To date, the Company has installed over 500 waste-to-energy and biomass-to-energy units at more than 300 facilities in approximately 30 countries which serve a wide variety of utility, waste management, municipality and investment firm customers. Additionally, the Company has installed more than 100MW of clean solar production.

On February 1, 2022, we acquired 100% ownership of Fossil Power Systems, Inc. for approximately $59.2 million. Fossil Power Systems, Inc., is a leading designer and manufacturer of hydrogen, natural gas and renewable pulp and paper combustion equipment including ignitors, plant controls and safety systems based in Dartmouth, Nova Scotia, Canada. Fossil Power Systems, Inc. is reported as part of our B&W Thermal segment.

On February 28, 2022, we acquired 100% ownership of Optimus Industries, LLC for approximately $19.2 million. Optimus Industries, LLC designs and manufactures waste heat recovery products for use in power generation, petrochemical, and process industries, including package boilers, watertube and firetube waste heat boilers, economizers, superheaters, waste heat recovery equipment and units for sulfuric acid plants and is based in Tulsa, Oklahoma and Chanute, Kansas. Optimus Industries, LLC is reported as part of our B&W Thermal segment.

Our business depends significantly on the capital, operations and maintenance expenditures of global electric power generating companies, including renewable and thermal powered heat generation industries and industrial facilities with environmental compliance policy requirements. Several factors may influence these expenditures, including:

•climate change initiatives promoting environmental policies which include renewable energy options utilizing waste-to-energy or biomass to meet legislative requirements and clean energy portfolio standards in the United States, European, Middle East and Asian markets;

•requirements for environmental improvements in various global markets;

•expectation of future governmental requirements to further limit or reduce greenhouse gas and other emissions in the United States, Europe and other international climate change sensitive countries;

•prices for electricity, along with the cost of production and distribution including the cost of fuels within the United States, Europe, Middle East and Asian based countries;

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

•level of capacity utilization at operating power plants and other industrial uses of steam production;

•requirements for maintenance and upkeep at operating power plants to combat the accumulated effects of usage;

•prices of and access to materials, particularly as a result of rising inflation and the impact of the Russian invasion of Ukraine;

•overall strength of the industrial industry; and

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

Customer demand is heavily affected by the variations in our customers' business cycles and by the overall economies and energy, environmental and noise abatement needs of the countries in which they operate.

We have manufacturing facilities in Mexico, the United States, Denmark, the United Kingdom and China. Many aspects of our operations and properties could be affected by political developments, including the ongoing Russian-Ukrainian conflict, environmental regulations and operating risks. These and other factors may have a material impact on our international and domestic operations or our business as a whole.

Through our restructuring efforts, we continue to make significant progress to make our cost structure more variable and to reduce costs. We expect our cost saving measures to continue to translate to bottom-line results, with top-line growth driven by opportunities for our core technologies and support services across the B&W Renewable, B&W Environmental and B&W Thermal segments globally.

We expect to continue to explore other cost saving initiatives to improve cash generation and evaluate additional non-core asset sales to continue to strengthen our liquidity. There are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate.

In addition, we continue to evaluate further dispositions, opportunities for additional cost savings and opportunities for subcontractor recoveries and other claims where appropriate and available. If the value of our business was to decline, or if we were to determine that we were unable to recognize an amount in connection with any proposed disposition in excess of the carrying value of any disposed asset, we may be required to recognize impairments for one or more of our assets that may adversely impact our business, financial condition and results of operations.

RESULTS OF OPERATIONS

Components of Our Results of Operations

Revenue

Our revenue is the total amount of income generated by our business and consists primarily of income from our renewable, environmental and thermal technology solutions that we provide to a broad range of industrial electric utility and other customers. Revenue from our operations is assessed based on our three market-facing segments, Babcock & Wilcox Renewable, Babcock & Wilcox Environmental and Babcock & Wilcox Thermal.

Operating Income (Loss)

Operating Income (loss) consists primarily of our revenue minus costs and expenses, including cost of operations, SG&A, and advisory fees and settlement costs.

Net (Loss) Income

Net (loss) Income consists primarily of operating income minus other income and expenses, including interest income, foreign exchange and expense related to our benefit plans.

Condensed Consolidated Results of Operations

The following discussion of our business segment results of operations includes a discussion of adjusted EBITDA, which when used on a consolidated basis is a non-GAAP financial measure. Adjusted EBITDA differs from the most directly comparable measure calculated in accordance with generally accepted accounting principles (“GAAP”). A reconciliation of net income (loss), the most directly comparable GAAP measure, to adjusted EBITDA is included in “Non-GAAP Financial Measures” below. Management believes that this financial measure is useful to investors because it excludes certain expenses, allowing investors to more easily compare our financial performance period to period.


	Three Months Ended March 31,
(in thousands)	2023		2022		$ Change
Revenues:
B&W Renewable segment	$	100,112	$	67,961	$	32,151
B&W Environmental segment	39,440		34,948		4,492
B&W Thermal segment	119,236		102,239		16,997
Eliminations	(1,541)		(1,099)		(442)
	$	257,247	$	204,049	$	53,198


	Three Months Ended March 31,
(in thousands)	2023		2022		$ Change

B&W Renewable segment - Adjusted EBITDA	$	4,940	$	1,955	$	2,985
B&W Environmental segment - Adjusted EBITDA	1,906		1,439		467
B&W Thermal segment - Adjusted EBITDA	13,733		14,154		(421)
Corporate	(5,080)		(4,373)		(707)
Research and development costs	(1,307)		(655)		(652)
	$	14,192	$	12,520	$	1,672

Three Months Ended March 31, 2023 and 2022

Revenues increased by $53.2 million to $257.2 million in the three months ended March 31, 2023 as compared to $204.0 million in the three months ended March 31, 2022. The increase is primarily attributable to higher volumes in our Renewable segment due to B&W Renewable Services and our project-based business, higher overall volume in our

Environmental segment and due to Thermal segment volume increasing due to Optimus Industries and a higher level of construction activity. Segment specific changes are discussed in further detail in the sections below.

Net (loss) income decreased by $3.8 million to $(12.5) million in the three months ended March 31, 2023 as compared to net (loss)/income of $(8.7) million in the three months ended March 31, 2022. Operating income (loss) decreased by $8.1 million in the comparable three-month periods ended March 31, 2023 and March 31, 2022. Operating income for the three-month period ended March 31, 2023 was $1.4 million as compared to operating loss of $(6.8) million in the three months ended March 31, 2022.

Bookings and Backlog

Bookings and backlog are our measure of remaining performance obligations under our sales contracts. It is possible that our methodology for determining bookings and backlog may not be comparable to methods used by other companies.

We generally include expected revenue from contracts in our backlog when we receive written confirmation from our customers authorizing the performance of work and committing the customers to payment for work performed. Backlog may not be indicative of future operating results, and contracts in our backlog may be canceled, modified or otherwise altered by customers. Backlog can vary significantly from period to period, particularly when large new build projects or operations and maintenance contracts are booked because they may be fulfilled over multiple years. Because we operate globally, our backlog is also affected by changes in foreign currencies each period. We do not include orders of our unconsolidated joint ventures in backlog.

Bookings represent changes to the backlog. Bookings include additions from booking new business, subtractions from customer cancellations or modifications, changes in estimates of liquidated damages that affect selling price and revaluation of backlog denominated in foreign currency. We believe comparing bookings on a quarterly basis or for periods less than one year is less meaningful than for longer periods, and that shorter-term changes in bookings may not necessarily indicate a material trend.


	Three Months Ended March 31,
(in approximate millions)	2023		2022
B&W Renewable	$	98	$	101
B&W Environmental	65		37
B&W Thermal	103		101

Bookings	$	266	$	239

Our backlog as of March 31, 2023 and 2022 was as follows:


	As of March 31,
(in approximate millions)	2023		2022
B&W Renewable(1)	$	231	$	293
B&W Environmental	173		126
B&W Thermal	252		158
Other/eliminations	7		(3)
Backlog	$	663	$	574

(1) B&W Renewable backlog has been adjusted downward $53 million and $147 million as of March 31, 2023 and March 31, 2022 respectively to remove O&M contracts that are recognized as disposed.

Of the backlog at March 31, 2023, we expect to recognize revenues as follows:


(in approximate millions)	2023		2024		Thereafter		Total
B&W Renewable	$	184	$	41	$	7	$	232
B&W Environmental	124		31		18		173
B&W Thermal	200		48		3		251
Other/eliminations	7		—		—		7
Expected revenue from backlog	$	515	$	120	$	28	$	663

Changes in Contract Estimates

During the three-month periods ended March 31, 2023 and 2022, the Company recognized changes in estimated gross profit related to long-term contracts accounted for on the over time basis, which are summarized as follows:


	Three Months Ended March 31,
(in thousands)	2023		2022
Increases in gross profit for changes in estimates for over time contracts	$	6,225	$	3,341
Decreases in gross profit for changes in estimates for over time contracts	(5,753)		(2,862)
Net changes in gross profit for changes in estimates for over time contracts	$	472	$	479

Non-GAAP Financial Measures

Adjusted EBITDA on a consolidated basis is a non-GAAP metric defined as the sum of the adjusted EBITDA for each of the segments, further adjusted for corporate allocations and research and development costs. At a segment level, the adjusted EBITDA presented below is consistent with the way the Company's chief operating decision maker reviews the results of operations and makes strategic decisions about the business and is calculated as earnings before interest, tax, depreciation and amortization adjusted for items such as gains or losses arising from the sale of non-income producing assets, net pension benefits, restructuring activities, impairments, gains and losses on debt extinguishment, costs related to financial consulting, research and development costs and other costs that may not be directly controllable by segment management and are not allocated to the segment. The Company uses adjusted EBITDA internally to evaluate its performance and in making financial and operational decisions. When viewed in conjunction with GAAP results, the Company believes that its presentation of adjusted EBITDA provides investors with greater transparency and a greater understanding of factors affecting its financial condition and results of operations than GAAP measures alone. Prior period results have been revised to conform with the revised definition and present separate reconciling items in our reconciliation, including business transition costs.


	Three Months Ended March 31,
(in thousands)	2023		2022
Net (loss) income	(12,475)		$	(8,684)
Interest expense	14,429		12,324
Income tax expense	490		1,230
Depreciation & amortization	5,365		6,202
EBITDA	7,809		11,072

Benefit plans, net	109		(7,452)
(Gain) loss on sales, net	937		(20)
Stock compensation	3,227		1,319
Restructuring activities and business services transition costs	960		2,688
Settlement and related legal costs	(3,009)		2,528
Advisory fees for settlement costs and liquidity planning	546		1,032

Acquisition pursuit and related costs	134		843
Product development (1)	1,370		852
Foreign exchange	461		(3,085)

Contract Disposal (2)	1,387		875
Contract step-up purchase price adjustment	—		1,745


Other - net	261		123

Adjusted EBITDA	$	14,192	$	12,520

(1) Costs associated with development of commercially viable products that are ready to go to market.

(2) Impacts of the disposal of our O&M contracts has been adjusted in the prior period to ensure uniform presentation with the current period


	Three Months Ended March 31,
(in thousands)	2023		2022
Adjusted EBITDA
B&W Renewable segment - Adjusted EBITDA	$	4,940	$	1,955
B&W Environmental segment - Adjusted EBITDA	1,906		1,439
B&W Thermal segment - Adjusted EBITDA	13,733		14,154
Corporate	(5,080)		(4,373)
Research and development costs	(1,307)		(655)
	$	14,192	$	12,520

B&W Renewable Segment Results


	Three Months Ended March 31,
(in thousands)	2023		2022		$ Change
Revenues	$	100,112	$	67,961	$	32,151
Adjusted EBITDA	$	4,940	$	1,955	$	2,985

Three Months Ended March 31, 2023 and 2022

Revenues in the B&W Renewable segment increased 47% or $32.2 million, to $100.1 million in the three months ended March 31, 2023 compared to $68.0 million in the three months ended March 31, 2022. The increase in revenue is primarily due to higher volume of new-build projects and revenues associated with our Renewable Service business.

Adjusted EBITDA in the B&W Renewable segment increased $3.0 million, to $4.9 million in the three months ended March 31, 2023 compared to income of $2.0 million in the three months ended March 31, 2022 due to a higher volume of revenue as described above offset primarily by an increase in expenses. The higher revenue levels also increased shared overhead and SG&A allocations to the segment based on revenue.

B&W Environmental Segment Results


	Three Months Ended March 31,
(in thousands)	2023		2022		$ Change
Revenues	$	39,440	$	34,948	$	4,492
Adjusted EBITDA	$	1,906	$	1,439	$	467

Three Months Ended March 31, 2023 and 2022

Revenues in the B&W Environmental segment increased 13%, or $4.5 million to $39.4 million in the three months ended March 31, 2023 compared to $34.9 million in the three months ended March 31, 2022. The increase is primarily driven by higher overall volume of dry cooling technology projects across the Environmental segment.

Adjusted EBITDA in the B&W Environmental segment was $1.9 million in the three months ended March 31, 2023 compared to $1.4 million in the three months ended March 31, 2022. The increase is primarily driven by higher revenue volume described above offset with higher levels of shared overhead and SG&A allocated to the segment.

B&W Thermal Segment Results


	Three Months Ended March 31,
(In thousands)	2023		2022		$ Change
Revenues	$	119,236	$	102,239	$	16,997
Adjusted EBITDA	$	13,733	$	14,154	$	(421)

Three Months Ended March 31, 2023 and 2022

Revenues in the B&W Thermal segment increased 17%, or $17.0 million to $119.2 million in the three months ended March 31, 2023 compared to $102.2 million in the three months ended March 31, 2022. The revenue increase is attributable to higher level of volume in our construction project business and our package boiler business.

Adjusted EBITDA in the B&W Thermal segment decreased $0.4 million to $13.7 million in the three months ended March 31, 2023 compared to $14.2 million in the three months ended March 31, 2022, primarily attributable higher expenses related to business growth offset partially by higher revenues.

Corporate

Corporate costs in adjusted EBITDA include SG&A expenses that are not allocated to the reportable segments. These costs include, among others, certain executive, compliance, strategic, reporting and legal expenses associated with governance of the total organization and being an SEC registrant. Corporate costs increased $0.7 million to $5.1 million in three months ended March 31, 2023 as compared to $4.4 million incurred in the three months ended March 31, 2022.

Expenses related to restricted stock units "("RSU's") are recorded at the Corporate level and are recognized on a straight-line basis over a 3-year vesting period, except for Market Based restricted stock units which are recognized over a derived service period. As of March 31, 2023, the total aggregate unrecognized compensation expense related to the RSUs is approximately $9.1 million, which is expected to be recognized through fiscal 2025.

(Gain) Loss on sales of certain assets

The company at times will sell or dispose of certain assets that are unrelated to the operations of the Company, therefore, the Company believes it is useful to exclude these gains and losses from our non-GAAP financial measures in order to highlight the performance of the business.

Advisory Fees and Settlement Costs

Advisory fees totaling $0.5 million and settlement costs totaling $(3.0) million together decreased $6.4 million to resulting in a benefit of $2.5 million in the three months ended March 31, 2023 as compared to $3.9 million of expense in the comparable period of 2022 primarily due to the Parker loss recovery that was recorded during the quarter. See Note 17 for more details.

Product Development

Our product development activities are focused on improving our products through innovations to reduce their cost and improve competitiveness, reduce performance risk of our products to better meet our and our customers’ expectations and to further develop our ClimateBright portfolio. Research and development expenses totaled $1.3 million and $0.7 million in the three months ended March 31, 2023 and 2022, respectively. The increase resulted primarily from timing of specific research and increased development efforts. These expenses do not include our activities related to our BrightLoop commercialization plant.

Restructuring

Restructuring actions across our business units and corporate functions resulted in $0.4 million and $0.1 million of expense in the three months ended March 31, 2023 and 2022, respectively. The negligible increase for the three months ended March 31, 2023 compared to the prior year comparable period is related to legal fees and costs related to actions taken as part of the Company’s ongoing strategic, market-focused organizational and re-branding initiative.

Transition Costs

Transition costs across our corporate and business functions resulted in $0.1 million and $2.6 million of expense in the three months ended March 31, 2023 and 2022, respectively. These charges primarily result from actions taken to outsource certain tasks to offshore service providers or to transfer administrative and compliance tasks to global service providers as part of our strategic efforts to reduce future selling, general and administrative costs. Transition costs are included in selling, general and administrative expenses in our Condensed Consolidated Statements of Operations.

Depreciation and Amortization

Depreciation expense was $3.0 million and $2.2 million in the three months ended March 31, 2023 and 2022, respectively.

Amortization expense was $2.4 million and $4.0 million in the three months ended March 31, 2023 and 2022, respectively.

Pension and Other Postretirement Benefit Plans

We recognize benefits from our defined benefit and other postretirement benefit plans based on actuarial calculations primarily because our expected return on assets is greater than our service cost. Service cost is low because our plan benefits are frozen except for a small number of hourly participants.

Our pension costs also include mark-to-market ("MTM") adjustments from time to time and are primarily a result of changes in the discount rate, curtailments and settlements. Any MTM charge or gain should not be considered to be representative of future MTM adjustments as such events are not currently predicted and are in each case subject to market conditions and actuarial assumptions as of the date of the event giving rise to the MTM adjustment. There were no MTM adjustments for our other postretirement benefit plans during the three and nine months ended March 31, 2023 and 2022, respectively.

Refer to Note 11 to the Condensed Consolidated Financial Statements for further information regarding our pension and other postretirement plans.

Contract Disposal

The Company is in the process of exiting its only remaining fixed fee Operational and Maintenance Contract in our Renewable segment. A similar contract was exited as of December 31, 2022. For the period ended March 31, 2023 the net loss on this contract totaled $1.4 million. The company believes it is useful to exclude the impact of this contract on our operating results as well as our backlog in order to highlight the performance of the business. Impacts of the disposal of our O&M contracts has been adjusted in the prior period to ensure uniform presentation with the current period.

Stock Compensation

Although stock-based compensation is an important aspect of the compensation paid to our employees, the grant date fair value varies based on the derived stock price at the time of grant, varying valuation methodologies, subjective assumptions, and the variety of award types. This makes the comparison of our current financial results to previous and future periods difficult to interpret; therefore, the Company believes it is useful to exclude stock-based compensation from our non-GAAP financial measures in order to highlight the performance of the business and to be consistent with the way many investors evaluate our performance and compare our operating results to peer companies

Foreign Exchange

We translate assets and liabilities of our foreign operations into United States dollars at current exchange rates, and we translate items in our statement of operations at average exchange rates for the periods presented. We record adjustments resulting from the translation of foreign currency financial statements as a component of accumulated other comprehensive income (loss). We report foreign currency transaction gains and losses in the Condensed Consolidated Statements of Operations.

Foreign exchange was a loss of $0.5 million and a gain of $3.1 million for the three months ended March 31, 2023 and 2022, respectively.

Income Taxes


	Three Months Ended March 31,
(In thousands, except for percentages)	2023			2022			$ Change
(Loss) income before income taxes	$	(11,985)		$	(7,454)		$	(4,531)
Income tax (benefit) expense	$	490		$	1,230		$	(740)
Effective tax rate	(4.1)		%	(16.5)		%

Our income tax expense in the first quarter of 2023 reflects a full valuation allowance against our net deferred tax assets, except in Mexico, Canada, the United Kingdom, Brazil, Finland, Germany, Thailand, the Philippines, Indonesia, and Sweden. Deferred tax assets are evaluated each period to determine whether realization is more likely than not. Valuation allowances are established when management determines it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. Valuation allowances may be removed in the future if sufficient positive evidence exists to outweigh the negative evidence under the framework of ASC 740, Income Taxes ("ASC 740").

Our effective tax rate for the first quarter of 2023 is not reflective of the United States statutory rate primarily due to a valuation allowance against certain net deferred tax assets and unfavorable discrete items. In certain jurisdictions (namely, Italy) where the Company anticipates a loss for the fiscal year or incurs a loss for the year-to-date period for which a tax benefit cannot be realized in accordance with ASC 740, the Company excludes the loss in that jurisdiction from the overall computation of the estimated annual effective tax rate.

Liquidity and Capital Resources

Liquidity

Our primary liquidity requirements include debt service, funding of dividends on preferred stock and working capital needs. We fund our liquidity requirements primarily through cash generated from operations, external sources of financing, including our, senior notes, equity offerings, including our Preferred Stock, and revolving credit agreement which are

described in the Notes to our Condensed Consolidated Financial Statements included in Part I, Item I of this Quarterly Report in further detail along with other sources of liquidity.

Cash and Cash Flows

At March 31, 2023, our cash and cash equivalents, current restricted cash and long-term restricted cash totaled $91.1 million and we had total debt of $351.7 million as well as $191.7 million of gross preferred stock outstanding. Our foreign business locations held $39.1 million of our total unrestricted cash and cash equivalents at March 31, 2023. In general, our foreign cash balances are not available to fund our U.S. operations unless the funds are repatriated or used to repay intercompany loans made from the U.S. to foreign entities, which could expose us to taxes we presently have not made a provision for in our results of operations. We presently have no plans to repatriate these funds to the U.S. In addition, we had $11.2 million of restricted cash at March 31, 2023 related to collateral for certain letters of credit. We believe our future operating cash flows will be more than sufficient to cover debt repayments, other contractual obligations, capital expenditures and dividends for the next 12 months and thereafter for the foreseeable future.

Cash used in operations was $12.9 million in the three months ended March 31, 2023, which is primarily attributable to the year-to-date net loss of $12.5 million. Cash used in operations was $42.0 million in the three months ended March 31, 2022, which is primarily represented in the $10.0 million change in postretirement and employee benefit liabilities and the remaining $13.2 million of net increase in operating cash outflows associated with unfavorable changes in working capital.

Cash flows from investing activities used net cash of $2.2 million in the three months ended March 31, 2023, primarily due to capital expenditures. Cash flows from investing activities used net cash of $65.4 million in the three months ended March 31, 2022, primarily related to the acquisitions of Fossil Power Systems and Optimus Industries of $64.9 million combined with $1.0 million of capital expenditures.

Cash flows used in financing activities of $5.9 million in the three months ended March 31, 2023, primarily related to the payment of the preferred stock dividend of $3.7 million and loan payments of $1.7 million. Cash flows from financing activities used $1.6 million in the three months ended March 31, 2022 and were primarily due to the payment of the preferred stock dividend of $3.7 million, partially offset by the issuance of common stock of $2.0 million.

Debt Facilities

As described in the Note 12 to our Condensed Consolidated Financial Statements included in Part I, Item I of this Quarterly Report, on March 31, 2023, we entered into the Reimbursement Agreement, Revolving Credit Agreement and Letter of Credit Agreement (collectively, the “Debt Documents” and the facilities thereunder, the “Debt Facilities”). The obligations of the Company under each of the Debt Facilities are guaranteed by certain existing and future domestic and foreign subsidiaries of the Company. B. Riley, a related party, has provided a guaranty of payment with regard to the Company’s obligations under the Reimbursement Agreement. The Company expects to use the proceeds and letter of credit availability under the Debt Facilities for working capital purposes and general corporate purposes. The Revolving Credit Agreement matures on June 30, 2025. As of March 31, 2023, no borrowings have occurred under the Revolving Credit Agreement and under the Letter of Credit Agreement, usage consisted of $13.7 million of financial letters of credit and $93.2 million of performance letters of credit.

Letters of Credit, Bank Guarantees and Surety Bonds

Certain of our subsidiaries primarily outside of the United States have credit arrangements with various commercial banks and other financial institutions for the issuance of letters of credit and bank guarantees in association with contracting activity. The aggregate value of all such letters of credit and bank guarantees outside of our Letter of Credit Agreement as of March 31, 2023 was $53.0 million. The aggregate value of the outstanding letters of credit provided under the Letter of Credit Agreement backstopping letters of credit or bank guarantees was $32.4 million as of March 31, 2023. Of the outstanding letters of credit issued under the Letter of Credit Agreement, $68.4 million are subject to foreign currency revaluation.

We have also posted surety bonds to support contractual obligations to customers relating to certain contracts. We utilize bonding facilities to support such obligations, but the issuance of bonds under those facilities is typically at the surety's discretion. These bonds generally indemnify customers should we fail to perform our obligations under the applicable contracts. We, and certain of our 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, 2023, bonds issued and outstanding under these arrangements in support of contracts totaled approximately $341.7 million. The aggregate value of the letters of credit backstopping surety bonds was $14.2 million.

Our ability to obtain and maintain sufficient capacity under our current Debt Facilities is essential to allow us to support the issuance of letters of credit, bank guarantees and surety bonds. Without sufficient capacity, our ability to support contract security requirements in the future will be diminished.

Other Indebtedness - Loans Payable

As of March 31, 2023, the Company had Loans payable of $15.7 million, net of debt issuance costs of $0.6 million, of which $4.3 million is classified as current, and $11.4 million as long term loans payable on the Company's Consolidated Balance Sheet. Included in these amounts, the company had approximately $13.1 million, net of debt issuance costs of $0.6 million, related to sale-leaseback financing transactions.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have, or are reasonably expected to have, a material current or future effect on its financial condition, results of operations, liquidity, capital expenditures or capital resources at March 31, 2023.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

For a summary of the critical accounting policies and estimates that we use in the preparation of the Company's unaudited Condensed Consolidated Financial Statements, see "Critical Accounting Policies and Estimates" in the Company's Annual Report for the year ended December 31, 2022. There have been no significant changes to the Company's policies during the three months ended March 31, 2023.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company's exposures to market risks have not changed materially from those disclosed under "Quantitative and Qualitative Disclosures About Market Risk" in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of the end of the period covered by this report, the Company's management, with the participation of its Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the "Exchange Act")). The Company's disclosure controls and procedures, by their nature, can provide only reasonable assurance regarding the control objectives. It should be noted 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 cannot assure 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, the Company's Chief Executive Officer and Chief Financial Officer concluded that the design and operation of its disclosure controls and procedures are effective as of March 31, 2023 to provide reasonable assurance that information required to be disclosed by us in the reports that the Company files or submits 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.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company's internal control over financial reporting during the three months ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting. The Company has not experienced any material impact to its internal controls over financial reporting, despite the fact that some of its team members are working remotely in response to the COVID-19 pandemic. The Company is continually monitoring and assessing these situations on its internal controls to ensure their operating effectiveness.

Inherent Limitations in Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures, or our internal controls, will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake or fraud. Additionally, controls can be circumvented by individuals or groups of persons or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements in our public reports due to error or fraud may occur and not be detected.

Item 5. Other Information

As discussed in Note 23 to the Consolidated Financial Statements included in Part I, Item 1 of this Report, the Company entered into Amendment No. 3 to the Revolving Credit Agreement (the “Third Amended Revolving Credit Agreement“) on May 9, 2023, which amended the terms of the Amended Revolving Credit Agreement to permit the exclusion of certain expenses from the calculation of EBITDA under the Revolving Credit Agreement, including for purposes of determining the Company’s compliance with certain financial covenants thereunder.

The Company paid an amendment fee of twenty-five thousand dollars to PNC in consideration of the Third Amended Revolving Credit Agreement. Certain of the lenders, as well as certain of their respective affiliates, have performed and may in the future perform for the Company and its subsidiaries, various commercial banking, investment banking, lending, underwriting, trust services, financial advisory and other financial services, for which they have received and may in the future receive customary fees and expenses. The foregoing description is qualified in its entirety by the complete text of the Third Amended Revolving Credit Agreement, which is attached to this Report as Exhibit 10.1.

PART II

Item 1. Legal Proceedings

For information regarding ongoing investigations and litigation, see Note 17 to the Condensed Consolidated Financial Statements included in Part I, Item I of this Quarterly Report, which the Company incorporates by reference into this Item.

Item 1A. Risk Factors

The Company is subject to various risks and uncertainties in the course of its business. The discussion of such risks and uncertainties may be found under “Risk Factors” in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022. Other than the additional risk factor set forth below there have been no material changes to the risk factors set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

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

In accordance with the provisions of the employee benefit plans, the Company acquired the following shares in connection with the vesting of employee restricted stock that require us to withhold shares to satisfy employee statutory income tax withholding obligations. The following table identifies the number of common shares and average price per share for each month during the quarter ended March 31, 2023. The Company does not have a general share repurchase program at this time.


(data in whole amounts)
Period	Total number of shares acquired (1)	Average price 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
January 2023	—	$	—	—	$	—
February 2023	—	$	—	—	$	—
March 2023	11,845	$	5.58	—	$	—
Total	11,845	$	5.58	—	$	—

(1) Acquired shares are recorded in treasury stock in the Company's Condensed Consolidated Balance Sheets.

Item 6. Exhibits


2.1*						Master Separation Agreement, dated as of June 8, 2015, between The Babcock & Wilcox Company and Babcock & Wilcox Enterprises, Inc. (incorporated by reference to Exhibit 2.1 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 001-36876)).

3.1						Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 001-36876)).

3.2						Certificate of Amendment of the Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed on June 17, 2019 (File No. 001-36876)).

3.3						Certificate of Amendment of the Restated Certificate of Incorporation, as amended (incorporated by reference to Exhibit 3.1 to the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed on July 24, 2019 (File No. 001-36876)).

3.4						Amended and Restated Bylaws of the Babcock & Wilcox Enterprises, Inc.

3.5						Certificate of Designations with respect to the 7.75% Series A Cumulative Perpetual Preferred Stock, dated May 6, 2021, filed with the Secretary of State of Delaware and effective on May 6, 2021 (incorporated by reference to Exhibit 3.4 to the Babcock & Wilcox Enterprises, Inc. Form 8-A filed on May 7, 2021 (File No. 001-36876)).

3.6						Certificate of Increase in Number of Shares of 7.75% Series A Cumulative Perpetual Preferred Stock, dated June 1, 2021 (incorporated by reference to Exhibit 3.1 to the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed on July 7, 2021 (File No. 001-36876)).

10.1#						Amendment No. 3 to Revolving Credit, Guaranty and Security Agreement, dated as of May 9, 2023, by and among Babcock & Wilcox Enterprises, Inc. and PNC Bank, National Association, as administrative agent, lender and swing loan lender, filed herein.










































































































































































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.

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.

104						Cover Page Interactive Data File (embedded within the inline XBRL document)

*Certain schedules and exhibits to this agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the SEC upon request.

# As permitted by Regulation S-K, Item 601(b)(10)(iv) of the Securities Exchange Act of 1934, as amended, certain confidential portions of this exhibit have been redacted from the publicly filed document.

SIGNATURES

Pursuant to the requirements of the Section 13 or 15(d) of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		BABCOCK & WILCOX ENTERPRISES, INC.

May 10, 2023	By:	/s/ Louis Salamone
		Louis Salamone
		Executive Vice President, Chief Financial Officer and Chief Accounting Officer (Principal Financial and Accounting Officer and Duly Authorized Representative)