Babcock & Wilcox Enterprises, Inc. [BWSN] Filings

10-Q 1 bw-20230331.htm 10-Q 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	$

Babcock & Wilcox Enterprises, Inc. [BWSN] Filings
Babcock & Wilcox Enterprises, Inc. [BW] Filings
10-Q	[2023-05-10]
10-K	[2023-03-16]
10-Q	[2022-11-08]
10-Q	[2022-08-08]
10-Q	[2022-05-09]
10-K	[2022-03-08]
10-Q	[2021-11-10]
10-Q	[2021-08-12]
10-Q	[2021-05-13]
10-K	[2021-03-08]
10-Q	[2020-11-13]
10-Q	[2020-08-12]
10-Q	[2020-05-15]
10-K	[2020-03-30]
10-Q	[2019-11-07]
10-Q	[2019-08-08]
10-Q	[2019-05-09]
S-1	[2019-04-30]
10-K	[2019-04-02]
10-Q	[2018-11-08]
10-Q	[2018-08-09]
10-Q	[2018-05-08]
10-K	[2018-03-01]
10-Q	[2017-11-08]
10-Q	[2017-08-09]
10-Q	[2017-05-09]
10-K	[2017-02-28]
10-Q	[2016-11-02]
10-Q	[2016-08-09]
10-Q	[2016-05-10]
10-K	[2016-02-25]
10-Q	[2015-11-03]
10-Q	[2015-08-04]
S-1	[2015-06-09]

Babcock & Wilcox Enterprises, Inc. [BWSN] Filings

Babcock & Wilcox Enterprises, Inc. [BW] Filings