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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-K
(Mark One)
xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20172022


OR
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to


Commission File No. 001-36876


BABCOCK & WILCOX ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
DELAWAREDelaware47-2783641
(State or other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
THE HARRIS BUILDING1200 East Market Street, Suite 650
13024 BALLANTYNE CORPORATE PLACE, SUITE 700Akron, Ohio44305
CHARLOTTE, NORTH CAROLINA28277
(Address of Principal Executive Offices)(Zip Code)
Registrant's Telephone Number, Including Area Code: (704) 625-4900(330) 753-4511
Securities Registered Pursuantregistered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each Exchangeexchange on which registered
Common Stock, $0.01 par valueBWNew York Stock Exchange
8.125% Senior Notes due 2026BWSNNew York Stock Exchange
6.50% Senior Notes due 2026BWNBNew York Stock Exchange
7.75% Series A Cumulative Perpetual Preferred StockBW PRANew York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    
Exchange Act. Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein
and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

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 filerAccelerated filer
Non-accelerated filerSmaller reporting company
Large accelerated filerxAccelerated filer¨
Non-accelerated filer
¨  (Do not check if a smaller reporting company)
Smaller reporting company¨
Emerging growth company¨
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extensionextended 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    
Yes  ¨    No  x

The aggregate market value of the registrant's common stock held by non-affiliates of the registrant on the last business
day of the registrant's most recently completed second fiscal quarter (based on the closing sales price on the New York Stock
Exchange on June 30, 2017)2022) was approximately $570approximately $259.9 million.

The number of shares of the registrant's common stock outstanding at January 31, 2018March 13, 2023 was 44,084,680.88,731,966.


DOCUMENTS INCORPORATED BY REFERENCE


PortionsIn accordance with General Instruction G(3) of the registrant's proxy statementForm 10-K, certain information required by Part III hereof will either be incorporated into this Form 10-K by reference to our Definitive Proxy Statement for the 2018our Annual Meeting of Stockholders are incorporated by reference
into Part IIIShareholders filed within 120 days of December 31, 2022 or will be included in an amendment to this Form 10-K.10-K filed within 120 days of December 31, 2022.



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BABCOCK & WILCOX ENTERPRISES, INC.
INDEX TO FORM 10-K
TABLE OF CONTENTS
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Table of Contents



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PART I

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

This Annual Report on Form 10-K, 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 Annual 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"), 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 Holdings Corporation ("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. These factors also include the cautionary statements included in this report and the risk factors set forth under Part I, Item 1A of this Annual Report.

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.




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SUMMARY RISK FACTORS

Our business is subject to varying degrees of risk and uncertainty.Investors should consider the risks and uncertainties summarized below, as well as the risks and uncertainties discussed in Part I, Item 1A, “Risk Factors” of this Annual Report on Form 10-K. The summary below is provided for ease of reference, is not intended to reflect a complete explanation of relevant risks and uncertainties and should be read together with the more detailed description of these risks and uncertainties in Part I, Item 1A, “Risk Factors” of this Annual Report on Form 10-K. Additional risks not presently known to us or that we currently deem immaterial may also affect us.If any of these risks occur, our business, financial condition, results of operations or cash flows could be materially and adversely affected, and, as a result, the trading price for our common stock could decline.

Our business is subject to the following principal risks and uncertainties:
Our business, financial condition and results of operations, and those of our customers, suppliers and vendors, have been, and could continue to be, adversely affected by COVID-19 outbreak and may be adversely affected by public health concerns and other similar outbreaks;
We are subject to risks associated with contractual pricing in our industry, including the risk that, if our actual costs exceed the costs we estimate on our fixed-price contracts, our profitability will decline, and we may suffer losses;
Disputes with customers with long-term contracts could adversely affect our financial condition;
Our contractual performance may be affected by third parties' and subcontractors' failure to meet schedule, quality and other requirements in our contracts, which could increase our costs, scope or, technical difficulty or in extreme cases, impede our ability to meet contractual requirements;
A material disruption at one of our manufacturing facilities or a third-party manufacturing facility that we have engaged could adversely affect our ability to generate sales and result in increased costs;
If our co-venturers fail to perform their contractual obligations on a contract or if we fail to coordinate effectively with our co-venturers, we could be exposed to legal liability, damage to reputation, reduced profit, or liquidity challenges;
Our growth strategy includes strategic acquisitions, which we may not be able to consummate or successfully integrate;
Our backlog is subject to unexpected adjustments and cancellations and may not be a reliable indicator of future revenues or earnings;
Our inability to deliver our backlog on time could affect our future sales and profitability, and our relationships with our customers;
Our operations are subject to operating risks, which could expose us to potentially significant professional liability, product liability, warranty and other claims. Our insurance coverage may be inadequate to cover all of our significant risks, our insurers may deny coverage of material losses we incur, or we may be unable to obtain additional insurance coverage in the future, any of which could adversely affect our profitability and overall financial condition;
We may not be able to compete successfully against current and future competitors;
If we fail to develop new products, or customers do not accept our new products, our business could be adversely affected;
We derive substantial revenues from electric power generating companies and other steam-using industries, including coal-fired power plants in particular. Demand for our products and services depends on spending in these historically cyclical industries. Additionally, legislative and regulatory developments relating to clean air legislation are affecting industry plans for spending on coal-fired power plants within the United States and elsewhere;
Demand for our products and services is vulnerable to macroeconomic downturns and industry conditions;
Supply chain issues, including shortages of adequate component supply that increase our costs or cause delays in our ability to fulfill orders, and our failure to estimate customer demand properly could have an adverse impact on our business and operating results and our relationships with customers;
Our ability to maintain adequate bonding and letter of credit capacity is necessary for us to successfully complete, bid on and win various contracts;
Our evaluation of strategic alternatives for certain businesses and non-core assets may not be successful;
Our total assets include goodwill and other indefinite-lived intangible assets. If we determine these have become impaired, our business, financial condition and results of operations could be materially adversely affected;
We are exposed to credit risk and may incur losses as a result of such exposure;
The transition away from LIBOR may negatively impact our operating results;
The financial and other covenants in our debt agreements may adversely affect us;


We must refinance our 8.125% Notes due 2026 and 6.50% Notes due 2026 prior to their maturity;
A disruption in, or failure of Contentsour information technology systems, including those related to cybersecurity, could adversely affect our business operations and financial performance;

Privacy and information security laws are complex, and if we fail to comply with applicable laws, regulations and standards, or if we fail to properly maintain the integrity of our data, protect our proprietary rights to our systems or defend against cybersecurity attacks, we may be subject to government or private actions due to privacy and security breaches, any of which could have a material adverse effect on our business, financial condition and results of operations or materially harm our reputation;
We rely on intellectual property law and confidentiality agreements to protect our intellectual property. We also rely on intellectual property we license from third parties. Our failure to protect our intellectual property rights, or our inability to obtain or renew licenses to use intellectual property of third parties, could adversely affect our business;
We are subject to current and future government regulations that may adversely affect our future operations;
Our business and our customers' businesses are required to obtain, and to comply with, national, state and local government permits and approvals;
Our operations are subject to various environmental laws and legislation that may become more stringent in the future;
Our operations involve the handling, transportation and disposal of hazardous materials, and environmental laws and regulations and civil liability for contamination of the environment or related personal injuries may result in increases in our operating costs and capital expenditures and decreases in our earnings and cash flows;
Our business may be affected by new sanctions and export controls targeting Russia and other responses to Russia's invasion of Ukraine;
We could be adversely affected by violations of the United States Foreign Corrupt Practices Act, the UK Anti-Bribery Act or other anti-bribery laws;
Our international operations are subject to political, economic and other uncertainties not generally encountered in our domestic operations;
International uncertainties and fluctuations in the value of foreign currencies could harm our profitability;
Uncertainty over global tariffs, or the financial impact of tariffs, may negatively affect our results;
The market price and trading volume of our common stock may be volatile;
Substantial sales, or the perception of sales, of our common stock by us or certain of our existing shareholders could cause our stock price to decline and future issuances may dilute our common shareholders' ownership in the Company;
B. Riley has significant influence over us;
We do not currently pay regular dividends on our common stock, so holders of our common stock may not receive funds without selling their shares of our common stock;
We may issue preferred stock that could dilute the voting power or reduce the value of our common stock;
Provisions in our corporate documents and Delaware law could delay or prevent a change in control of the Company, even if that change may be considered beneficial by some shareholders;
We are subject to continuing contingent liabilities of BWXT following the spin-off that occurred in 2015;
We could be subject to changes in tax rates or tax law, adoption of new regulations, changing interpretations of existing law or exposure to additional tax liabilities in excess of accrued amounts that could adversely affect our financial position;
Our ability to use net operating losses (“NOLs”) and certain tax credits to reduce future tax payments could be further limited if we experience an additional “ownership change”;
The loss of the services of one or more of our key personnel, or our failure to attract, recruit, motivate, and retain qualified personnel in the future, could disrupt our business and harm our results of operations;
We outsource certain business processes to third-party vendors and have certain business relationships that subject us to risks, including disruptions in business which could increase our costs;
Negotiations with labor unions and possible work stoppages and other labor problems could divert management's attention and disrupt operations. In addition, new collective bargaining agreements or amendments to existing agreements could increase our labor costs and operating expenses;
Pension and medical expenses associated with our retirement benefit plans may fluctuate significantly depending on a number of factors, and we may be required to contribute cash to meet underfunded pension obligations; and,
Natural disasters or other events beyond our control, such as war, armed conflicts or terrorist attacks could adversely affect our business.
WEBSITE REFERENCES
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In this Annual Report on Form 10-K, we make references to our website at www.babcock.com.References to our website through this Form 10-K are provided for convenience only and the content on our website does not constitute a part of, and shall not be deemed incorporated by reference into, this Annual Report on Form 10-K.


PART 1



ITEM 1. Business


In this annual reportAnnual Report on Form 10-K, or this “Annual Report”, unless the context otherwise indicates, "B“B&W," "we," "us,"” “we,” “us,” “our” or the "Company" and "our"“Company” mean Babcock & Wilcox Enterprises, Inc. and its consolidated subsidiaries.


B&W is a leading technology-basedgrowing, globally-focused renewable, environmental and thermal technologies provider with over 150 years of advanced fossilexperience providing diversified energy and renewable power generation and environmental equipment that includesemissions control solutions to a broad suiterange of boilerindustrial, electrical utility, municipal and other customers. B&W’s innovative products environmental systems, and services are organized into three market-facing segments. Our reportable segments are:

Babcock & Wilcox Renewable: Cost-effective technologies for efficient and environmentally sustainable power and industrial uses. We specialize in technologyheat generation, including waste-to-energy, solar construction and engineeringinstallation, 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 various other industries, including the procurement, erectionreplacement of fossil fuels, while recovering metals and specialty manufacturing of related equipment,reducing emissions. To date, we have installed over 500 waste-to-energy and services, including:

high-pressure equipment for energy conversion, such as boilers fueled by coal, oil, bitumen, natural gas, and renewables including municipal solid waste and biomass fuels;

environmental control systems for both power generation and industrial applications to incinerate, filter, capture, recover and/or purify air, liquid and vapor-phase effluents from a variety of power generation and specialty manufacturing processes;

aftermarket support for the global installed base of operating plants withbiomass-to-energy units at more than 300 facilities in approximately 30 countries which serve a wide variety of productsutility, waste management, municipality and technical services including replacement parts, retrofitinvestment 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 upgrade capabilities, field engineering, construction, inspection, operationsenvironmental technology solutions for utility, waste to energy, biomass, carbon black, and maintenance, condition assessment and other technical support;

custom-engineered comprehensive dry and wet cooling solutions;

gas turbine inlet and exhaust systems, custom silencers, filters and custom enclosures; and

engineered-to-order services, products andindustrial steam generation applications around the world. B&W’s broad experience includes systems for energy conversion worldwidecooling, ash handling, particulate control, nitrogen oxides and related auxiliarysulfur 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, suchaftermarket 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.

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 burners, pulverizers, soot blowerspart 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 ashmanufactures waste heat recovery products for use in power generation, petrochemical, and material handling systems.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 overall activitybusiness depends significantly on the capital, expenditures and operations and maintenance expenditures of global electric power generating companies, other steam-usingincluding renewable and thermal powered heat generation industries and industrial facilities with environmental compliance and noise abatement needs.policy requirements. Several factors may influence these expenditures, including:

climate change initiatives promoting environmental policies including 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;
regulations requiring environmental improvements in various global markets;
expectations regarding 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;
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prices for electricity, along with the cost of production and distribution including the cost of fuelfuels within the United States, or internationally;Europe, Middle East and Asian countries;

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

requirements for environmental and noise abatement improvements;

expectation of future requirements to further limit or reduce greenhouse gas and other emissions in the United States and internationally;

environmental policies which include waste-to-energy or biomass as options to meet legislative requirements and clean energy portfolio standards;

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

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

overall strength of the industrial industry; and

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


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

On June 8, 2015, the board of directors of
Market Update

The Babcock & Wilcox Company (now knownCOVID-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, we experienced negative impacts to our global supply chains as BWX Technologies, Inc.) ("BWC" or the "former Parent") approved the spin-off of B&W through the distribution of shares of B&W common stock to holders of BWC common stock. The distribution of B&W common stock was made on June 30, 2015, and consisted of one share of B&W common stock for every two shares of BWC common stock to holders of BWC common stock as of 5:00 p.m. New York City time on the record date, June 18, 2015. Cash was paid in lieu of any fractional shares of B&W common stock. On June 30, 2015, B&W became a separate publicly traded company, and BWC did not retain any ownership interest in B&W. We filed our Form 10 describing the spin-off with the Securities and Exchange Commission, which was declared effective on June 16, 2015. The spin-off is further described in Note 1 to the consolidated financial statements included in Item 8.

Going Concern Considerations

As a result of additional losses we recognizedCOVID-19, the war in Ukraine, Russia-related supply chain shortages and other factors, including disruptions to the fourth quarter of 2017 related to an increase in structural steel repair costs on onemanufacturing, supply, distribution, transportation and delivery of our European renewable energy contracts, we were not in compliance with certain financial covenants under our United States Revolving Credit Facility (“Revolver”)products. We have also observed significant delays and our Second Lien Term Loan Facility agreement (“Second Lien”) as of December 31, 2017. On March 1, 2018, we obtained an agreement (the “March 1, 2018 Amendment”) to amend our Revolver. The March 1, 2018 Amendment temporarily waived the financial covenant defaults that existed at December 31, 2017 under the Revolver, consented to our planned Rights Offering (as discussed below), permitted up to $35 million of borrowings to be used in conjunction with the proceeds of the Rights Offering (described below) to be used to repay the principal portion of the Second Lien, and made certain other modifications. We face liquidity challenges, primarily related to our non-compliance with the financial covenants under our Second Lien as of December 31, 2017, which may be difficult to resolve in a timely manner. The Second Lien contains a 180 day standstill period beginning on March 1, 2018 to resolve the event of default or repay the loan. The March 1, 2018 Amendment and the Second Lien are further described in Note 19 and Note 20, respectively, to the consolidated financial statements included in Item 8.

On March 1, 2018, we entered into an equity commitment agreement (“Equity Commitment Agreement”) with a groupdisruptions of our existing stockholdersservice providers and negative impacts to fully backstop our planned Rights Offering (“Rights Offering”) for the purposepricing of providing at least $182 million of new capital. We are proposing to undertake a rights offering pursuant to which all of our stockholders will have the ability, on a pro rata basis, to purchase up to at least $182 million of the Company’s common stock. The Equity Commitment Agreement provides for a backstop commitment from a group of our existing stockholders to purchase any unsold portion of the Rights Offering. We plan to use the net proceeds from the sale of the Company’s common stock in the Rights Offering and the permitted borrowing capacity provided by our Revolver to extinguish the outstanding balance of our Second Lien and terminate the associated borrowing agreement. Our plan is designed to provide us with adequate liquidity to meet our obligations for at least the twelve month period following March 1, 2018; however, our remediation plan includes raising additional capital through the Rights Offering and other sources before the end of the standstill period, which will depend on conditions in the capital markets and, with respect to the Rights Offering, an amendment to our existing shelf registration statement that we plan to file in early March 2018 being declared effective by the Securities and Exchange Commission (“SEC”), which are matters that are outside of our control. Accordingly, we cannot be certain of our abilitytheir products. These delays and disruptions have had, and could continue to raise additional capitalhave, an adverse impact on terms acceptable to us which raises substantial doubt about our ability to continue as a going concern. Additionally, our ability to meet the amended covenants associated with our Revolver is dependent on our future financial operating results. While we believe that the actions summarized above and in Note 1customers’ demands. We are continuing to our consolidated financial statements included in Item 8 are more likely than not to addressactively monitor the substantial doubt about the Company’s ability to continue as a going concern, we cannot assert that it is probable that our plans will fully mitigate the conditions identified. If we cannot continue as a going concern, material adjustments to the carrying values and classifications of our assets and liabilities and the reported amounts of income and expense could be required.

Business Segments

Our operations are assessed based on three reportable segments, which are summarized as follows:


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Power segment

Our Power segment focuses on the supply of, and aftermarket services for, steam-generating, environmental, and auxiliary equipment for power generation and other industrial applications. The segment provides a comprehensive mix of aftermarket products and services to support peak efficiency and availability of steam generating and associated environmental and auxiliary equipment, serving large steam generating utility and industrial customers globally. Our products and services include replacement parts, field technical services, retrofit and upgrades, fuel switching and repowering contracts, construction and maintenance services, start-up and commissioning, training programs and plant operations and maintenance for our full complement of boiler, environmental and auxiliary equipment. Our auxiliary equipment includes boiler cleaning equipment and material handling equipment.

Our worldwide new build boiler and environmental products businesses serve large steam generating and industrial customers. The segment provides a full suite of product and service offerings including engineering, procurement, specialty manufacturing, construction and commissioning. The segment's product suite includes utility boilers and industrial boilers fired with coal and natural gas. Our boiler products include advanced supercritical boilers, subcritical boilers, fluidized bed boilers, chemical recovery boilers, industrial power boilers, package boilers, heat recovery steam generators and waste heat boilers.

Our environmental systems offerings include air pollution control products and related equipment for the treatment of nitrogen oxides, sulfur dioxide, fine particulate, mercury, acid gases and other hazardous air emissions. These include wet and dry flue gas desulfurization systems, catalytic and non-catalytic nitrogen oxides reduction systems, low nitrogen oxides burners and overfire air systems, fabric filter baghouses, wet and dry electrostatic precipitators, mercury control systems and dry sorbent injection for acid gas mitigation.

The segment also receives license fees and royalty payments through licensing agreements of our proprietary technologies.

While opportunities to increase revenues in the segment are limited, we are striving to grow margins by:
maintaining our strong service presence in support of our installed fleet of steam generation equipment and expanding support of other OEM equipment;
selectively bidding contracts in emerging international markets needing state-of-the-art technology for fossil power generation and environmental systems;
growing sales of industrial steam generation products in the petrochemical and pulp & paper markets, such as heat recovery, natural gas and oil fired package boilers, due in part to lower fuel prices; and
reducing costs through a focus on operational efficiencies.

Our Power segment generated revenues of $821.1 million, $982.0 million and $1.23 billion in 2017, 2016 and 2015, respectively, which was 52.7%, 62.2% and 70.3% of our total revenues in those years, respectively.

Renewable segment

Our Renewable segment provides steam-generating systems, environmental and auxiliary equipment for the waste-to-energy and biomass power generation industries, and plant operations and maintenance services for our full complement of systems and equipment. We deliver these products and services to a large base of customers primarily in Europe through our extensive network of technical support personnel and global sourcing capabilities. Our customers consist of traditional, renewable and carbon neutral power utility companies that require steam generation and environmental control technologies to enable beneficial use of municipal waste and biomass. This segment's activity is dependent on the demand for electricity and reduced landfill use, and ultimately the capacity utilization and associated operations and maintenance expenditures of waste-to-energy power generating companies and other industries that use steam to generate energy.

In 2017, we redefined our approach to bidding on and executing renewable energy contracts. Under our new model, we are focusing on engineering and supplying our core waste-to-energy and renewable energy technologies - steam generation, combustion grate, environmental equipment, material handling, and cooling condensers - while partnering with other firms to execute the balance of plant and civil construction scope on contracts we pursue. We believe the new market approach is better aligned with our core competencies and risk-profile as a supplier of engineered equipment and technologies and aftermarket services.


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Globally, efforts to reduce the environmental impact of burning fossil fuels may create opportunities for us as existing generating capacity is replaced with cleaner technologies. We expect backlog growth in the future, primarily from renewable waste-to-energy contracts, as we continue to see numerous opportunities around the globe, although the rate of this growth is dependentthese market conditions on many external factors.

Our Renewable segment generated revenues of $347.2 million, $349.2 million and $338.6 million in 2017, 2016 and 2015, respectively, which was 22.3%, 22.1% and 19.3% of our total revenues in those years, respectively.

Industrial segment

At December 31, 2017, our Industrial segment was comprised of our MEGTEC, Universal and SPIG businesses, each as described below. The segment is focused on custom-engineered cooling, environmental, noise abatement and industrial equipment along with related aftermarket services.

Through MEGTEC, we provide environmental products and services to numerous industrial end markets. MEGTEC designs, engineers and manufactures products including oxidizers, solvent recovery and distillation systems, wet electrostatic precipitators, scrubbers and heat recovery systems. MEGTEC also provides specialized industrial process systems, coating lines and equipment. To this product mix, B&W recently added (synergy) technologies including dry electrostatic precipitators, pulse jet fabric filters, selective catalytic reduction systems, and dry and wet scrubbers. These complementary technologies enhance MEGTEC’s ability to offer a full line of environmental products and allow MEGTEC to strategically grow its business by selling solutions (comprehensive equipment trains) to new and existing customers and markets. MEGTEC serves a diverse set of industrial end markets globally with a current emphasis on the chemical, pharmaceutical, energy storage, metals and mining, and engineered wood panel board markets. MEGTEC's activity is dependent primarily on the capacity utilization of operating industrial plants and an increased emphasis on environmental emissions globally across a broad range of industries and markets.

We acquired SPIG S.p.A. ("SPIG") on July 1, 2016. SPIG provides custom-engineered cooling systems, services and aftermarket products. SPIG’s product offerings include air-cooled (dry) cooling systems, mechanical draft wet cooling towers and natural draft wet cooling hyperbolic towers. SPIG also provides end-to-end aftermarket services, including spare parts, upgrades and revamping of existing installations and remote monitoring. SPIG's comprehensive dry and wet cooling solutions and aftermarket products and services are primarily provided to the power generation industry, including natural gas-fired and renewable energy power plants, and downstream oil and gas, petrochemical and other industrial end markets in the Europe, the Middle East and the Americas. SPIG's activity is dependent primarily on global energy demand from utilities and other industrial plants, regulatory requirements, water scarcity and energy efficiency needs.

We acquired Universal Acoustic & Emissions Technology, Inc. ("Universal") on January 11, 2017. Universal provides custom-engineered acoustic, emission and filtration solutions to the natural gas power generation, mid-stream natural gas pipeline, locomotive and general industrial end-markets. Universal’s product offering includes gas turbine inlet and exhaust systems, custom silencers, filters and custom enclosures. Historically, almost all of Universal's activity has been in the United States. With the integration of Universal with the Industrial segment, we expect its business will grow globally with the benefit of B&W's global network of current and future periods and actively manage costs and our liquidity position to provide additional flexibility while still supporting our customers and the evolving needstheir specific needs. The duration and scope of noise abatement controls in the industrial market.these conditions cannot be predicted, and therefore, any anticipated negative financial impact to our operating results cannot be reasonably estimated.


We

Equity Capital Activities

For information regarding our equity activities, see opportunities for growth in revenues in the Industrial segment relating to a variety of factors. Our new equipment customers make purchases as part of major capacity expansions, to replace existing equipment, or in response to regulatory initiatives. Additionally, our significant installed base provides a consistentNotes 17 and recurring aftermarket stream of parts, retrofits and services. Major investments in global industrial markets have strengthened demand for our industrial equipment, while tightening global environmental and noise abatement regulations are creating new opportunities. We foresee long-term trends toward increased environmental and noise abatement controls for industrial manufacturers around the world. Together, the companies that comprise the Industrial segment are well-positioned to capitalize on opportunities in these markets.

To enhance our financial flexibility, in November 2017 we also announced that we are evaluating strategic alternatives for our MEGTEC and Universal businesses. Though our outlook remains favorable for these businesses, we believe it is prudent to explore alternatives for these parts of our company, providing greater optionality if needed.

Our Industrial segment generated revenues of $397.8 million, $253.6 million and $183.7 million in 2017, 2016 and 2015, respectively, which was 25.5%, 16.1% and 10.4% of our total revenues in those years, respectively.

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Joint Ventures

We participate in the ownership of a variety of entities with third parties, primarily through corporations, limited liability companies and partnerships, which we refer to as "joint ventures." We enter into joint ventures primarily for specific market access and to enhance our manufacturing, design and global production operations as well as reduce operating and financial risk profiles. We generally account for our investments in joint ventures under the equity method of accounting. Our unconsolidated joint ventures are described below.

Babcock & Wilcox Beijing Company, Ltd. ("BWBC") Through December 31, 2017, we owned equal interests in this entity with Beijing Jingcheng Machinery Electric Holding Company, Ltd. BWBC was formed in 1986 and is located in Beijing, China. Its main activities include the design, manufacture, production and sale of various power plant steam generators including supercritical and ultra supercritical boilers and aftermarket services that include boiler upgrades and environmental equipment. BWBC also provides engineering services and manufacturing to support B&W's new power boiler business globally. In early 2018, we sold all of our joint venture interest in BWBC for approximately $21 million, resulting in a gain of approximately $4 million, which will be recognized in the first quarter of 2018. Although we will no longer have an equity interest in this joint venture, we will continue a relationship with BWBC through an expanded technology license.

Thermax Babcock & Wilcox Energy Solutions Private Limited ("TBWES") In June 2010, one of our subsidiaries and Thermax Ltd., a boiler manufacturer based in India, formed a joint venture to build subcritical and highly efficient supercritical boilers and pulverizers for the Indian utility boiler market. We have licensed to TBWES our technology for subcritical boilers 300 MW and larger, highly efficient supercritical boilers and coal pulverizers. In 2013, TBWES finalized construction of a facility in India designed to produce parts for up to 3,000 MW of utility boiler capacity per year. During the second quarter of 2017, both we and our joint venture partner decided to make a strategic change in the Indian joint venture due18 to the declineConsolidated Financial Statements included in forecasted market opportunities in India, which reduced the recoverable value of our investment in the joint venture. As a resultPart II, Item 9 of this strategic change, we recognized an $18.2 million other-than-temporary-impairment ofAnnual Report.

Debt Capital Activities

For information regarding our investmentdebt activities, see Note 14 to the Consolidated Financial Statements included in TBWES in the second quarter of 2017. At December 31, 2017, our remaining investment in TBWES was $26.0 million.

Other Project Related Ventures From time to time, we partner with other companies to better meet the needs of our customers, which can result in project-related joint venture entities. ExamplesPart II, Item 8 of this include BWL Energy Ltd., which was formed to complete the construction of a waste wood fired boiler contract in the United Kingdom. This joint venture combines our expertise in the waste-to-energy power plant design, engineering, procurement and construction with our partner's civil construction capability to provide a full turnkey product to our customer.
Annual Report.


Contracts


We execute our contracts through a variety of methods, including fixed-price, cost-plus, target price cost incentive, cost-reimbursable or some combination of these methods. Contracts are usually awarded through a competitive bid process. Factors that customers may consider include price, technical capabilities of equipment and personnel, plant or equipment availability, efficiency, safety record and reputation.


Fixed-price contracts are for a fixed amountselling price to cover all costs and any profit element for a defined scope of work. Fixed-price contracts entail more risk to us because they require us to predetermine both the quantities of work to be performed and the costs associated with executing the work. For further specification see "Risk Factors Related to Our Business – We are subject to risks associated with contractual pricing in our industry, including the risk that, if our actual costs exceed the costs we estimate on our fixed-price contracts, our profitability will decline, and we may suffer losses" as detailed in Item 1A of this report.


We have contracts that extend beyond one year. Most of our long-term contracts have provisions for progress payments. We attempt to cover anticipated increases in labor, material and service costs of our long-term contracts either through an estimate of such changes, which is reflected in the original price, or through risk-sharing mechanisms, such as escalation or price adjustments for items such as labor and commodity prices.

We generally recognize our contract revenues and related costs on a percentage-of-completion basis. Accordingly, we review contract price and cost estimates regularly as the work progresses and reflect adjustments in profit proportionate to the percentage of completion in the period when we revise those estimates. To the extent that these adjustments result in a

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reduction or an elimination of previously reported profits with respect to a contract, we would recognize a charge against current earnings, which could be material.

Our arrangements with customers frequently require us to provide letters of credit, bid and performance bonds or guarantees to secure bids or performance under contracts, which may involve significant amounts for contract security.

In the event of a contract deferral or cancellation without cause, we generally would be entitled to recover costs incurred, settlement expenses and profit on work completed prior to deferral or termination. Significant or numerous cancellations could adversely affect our business, financial condition, results of operations and cash flows.


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From time to time, we partner with other companies to meet the needs of our customers, which can result in project-related joint venture entities or other contractual arrangements. While we carefully select our partners in these arrangements, they can subject us to risks that we may not be able to fully control and may include joint and several liability.

We generally recognize our contract revenues and related costs over time using the cost-to-cost input method that uses costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying our performance obligations. Accordingly, we review contractual sales price and cost estimates regularly as the work progresses and reflect adjustments in profit proportionate to the percentage-of-completion in the period when we revise those estimates. To the extent that these adjustments result in a reduction or an elimination of previously reported profits with respect to a contract, we would recognize a charge against current earnings, which could be material.

See further description of risks related to our contracting in Risks Related to Our Operations in Part I, Item 1A of this Annual Report.

Our arrangements with customers frequently require us to provide letters of credit, bid and performance bonds or guarantees to secure bids or performance under contracts, which may involve providing cash collateral or other contract security that we may not be able to provide.

Other sales, such as parts and certain aftermarket service activities, are not in the form of long-term contracts, and we recognize revenues as goods are delivered and work is performed.

Bookings and Backlog

Bookings and backlog represents the dollar amount of revenue we expect to recognize See further discussion in the future from contracts awarded and in progress. Not all of our expected revenue from a contract award is recorded in backlog for a variety of reasons, including that some contracts are awarded and completed within the same fiscal period.

Bookings and backlog are not measures defined by generally accepted accounting principles. It is possible that our methodology for determining bookings and backlog may not be comparable to methods used by other companies. Backlog may not be indicative of future operating results, and contracts in our backlog may be canceled, modified or otherwise altered by customers. Additionally, because we operate globally, our backlog is also affected by changes in foreign currencies.

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 customer to payment for work performed. Accordingly, we exclude from backlog orders or arrangements that have been awarded but that we have not been authorized to begin performance.

Bookings represent additions to our backlog. 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.

We do not include the value of our unconsolidated joint venture contracts in backlog. See Note 75 to the consolidated financial statementsConsolidated Financial Statements included in Part II, Item 8 of this annual report for financial information on our equity method investments.Annual Report.

Our bookings during the years ended December 31, 2017 and 2016 were as follows:
(In millions)20172016
Power$656
$790
Renewable115
135
Industrial416
222
Other/eliminations(48)(6)
Bookings$1,139
$1,141


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Our backlog at the end of the prior two years was as follows: 
 (in approximate millions)December 31, 2017December 31, 2016
Power segment$453
$618
Renewable segment1,008
1,241
Industrial segment258
216
Other/eliminations(43)(3)
Backlog$1,676
$2,072

Of the December 31, 2017 backlog, we expect to recognize approximate revenues as follows:
 (in approximate millions)20182019ThereafterTotal
Power segment$335
$81
$37
$453
Renewable segment293
111
604
1,008
Industrial segment258


258
Other/eliminations(3)
(40)(43)
Backlog$883
$192
$601
$1,676


Foreign Operations


Our operations in Denmark, including through our recent acquisition of Babcock & Wilcox Renewable Service A/S, provide comprehensive services to companies in the waste-to-energy and biomass to energy sector of the power generation market, currently primarily in Europe. Our operations in Italy provide custom-engineered comprehensive drywet and wetdry cooling solutions and aftermarket parts and services to the power generation industry including natural gas-fired and renewable energy power plants, as well as downstream oil and gas, petrochemical and other industrial end markets.markets in Europe, the Middle East and the Americas. Our operations in Scotland primarily provideboiler cleaning technologies and systems (such as sootblowers). Our operations in Germany provide a variety of ash and material handling solutions, from completely dry bottom ash handlingprimarily to fly ash and petroleum coke processing.Europe.Our Canadian operations serve the Canadian industrial power, oil production and electric utility markets. We also have manufacturing facilities in Mexico to serve global markets.

Historically, our joint ventures in China and India served the power generation needs of their local domestic and other utility markets, and both joint ventures participated as manufacturing partners on certain of our foreign contracts.


The functional currency of our foreign operating entities is not the United States dollar ("USD"), and as a result, we are subject to exchange rate fluctuations that impact our financial position, results of operations and cash flows. Although we do not currently engage in currency hedging activities to limit the risks of currency fluctuations, we evaluate opportunities to engage in hedging in order to limit the risks of currency fluctuations.


For additional information on the geographic distribution of our revenues, see Note 4 to our consolidated financial statementsthe Consolidated Financial Statements included in Part II, Item 8 of this annual report.Annual Report.
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Customers

We provide our products and services to a diverse customer base that includes utilities and other power producers located around the world. We have no customers that individually accounted for more than 10% of our consolidated revenues in the years ended December 31, 2017, 2016 or 2015.


Competition


With over 150 years of experience, we have supplied highly engineered energy and environmental equipment in over 90 countries. We have a competitive advantage in our experience and technical capability to reliably convert a wide range of fuels to steam. We have supplied highly-engineered energy and environmental equipment in more than 90 countries. Our strong, installed base around the globe also yields competitive advantages, although our markets are highly competitive and price sensitive. We compete with a number of domestic and foreign companies specializing in power generation, environmental control equipment, and cooling systems and services. Each segment'ssegment’s primary competitors are summarized as follows:

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Power segmentB&W Renewable segmentIndustrialB&W Environmental segmentB&W Thermal segment
GECNIM GroupB&W MEGTEC primary competitors
Hamon Research-Cottrell, Inc. (1)
GE(2)
DoosanHitachi ZosenDurr, Dustex, CECO, Eisenmann
Babcock PowerEnexioMartinB&W Universal primary competitors
Cleaver-BrooksKeppel SeghersCECO, Innova, Miratech, American Air Filter
Sumitomo SHI-FWValmetB&W SPIG primary competitors
MH Power Systems
Andritz
Hamon, Enexio, Kelvion, Paharpur, Evapco,
SPX Corporation(2)
MartinSeagull
Babcock Power(2)
Keppel SeghersPaharpur
Doosan(2)
ValmetEvapcoClyde Bergemann
AndritzSPG DryEnerfab
SteinmullerRadscan ABTEI Construction
LABAPComPower
Azco, Inc.

(1) On July 28, 2022, the Company acquired certain assets of Hamon Holdings Corporation ("Hamon"), a subsidiary of Hamon Research-Cottrell, Inc. The remaining subsidiaries of Hamon-Research-Cottrell continue to be considered competition of this B&W Environmental Segment.
(2) GE, MH Power Systems, Babcock Power & Doosan are also considered primary competitors of the B&W Environmental Segment.

Across each of our segments, we also compete with a variety of engineering and construction companies related to installation of steam generating systems and environmental control equipment; specialized industrial equipment; and other suppliers of replacement parts, repair and alteration services and other services required to retrofit and maintain existing steam generating systems. The primary bases of competition are price, technical capabilities, quality, timeliness of performance, breadth of products and services and willingness to accept contract risks.


Raw Materials and Suppliers


Our operations use raw materials such as carbon and alloy steels in various forms and components and accessories for assembly, which are available from numerous sources. We generally purchase these raw materials and components as needed for individual contracts. We do not depend on a single source of supply for any significant raw materials. Although shortages of some raw materials have existed from time to time, no serious shortage exists at the present time.


EmployeesHuman Capital Resources


Human Capital Management

At December 31, 2017,2022, we had approximately 4,8002,163 employees worldwide, not including 2,200 joint venture employees. Ofof which approximately 2,100 were full-time. Approximately 491 of our hourly employees approximately 1,300 are union-affiliated, covered by tenfour union agreements related to active facilities in Canada, China, Denmark, Great Britain, Mexico, the United States, the United Kingdom, and United States. Most of ourCanada. We successfully renegotiated two union agreementscontracts in 2021 and have one that will expire in 2018 or 2019,early 2023 and we are actively negotiating new agreements.one that will expire in 2024. We consider our relationships with our employees and unions to be in good standing.


Workforce Engagement

We believe an engaged global workforce is critical to our success as we work to profitably grow our business as a leading supplier of clean and sustainable energy solutions.

B&W is known for having a dedicated, long-tenured workforce and for having some of the best, most experienced employees in the industries we serve. Our ability to attract and retain this exceptional talent requires a commitment to open communication about the company’s business, strategy and results with our employees and a globally diverse, inclusive and
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supportive workplace that provides opportunities for growth and career development. It also requires programs that enhance employees’ overall work experience. We have implemented the Responsible and Flexible Workplace Program (“ReFlex”) in the U.S. that provides employees with flexibility in where they work and various work-from-home policies across many of our global operations. While COVID-19 has continued to impact life throughout the world, our employees have remained diligent, customer focused and resilient, and progressive employment programs like ReFlex have provided us with an important competitive advantage. They allow us to keep our facilities running, deliver on our projects and ensure our customers’ needs are met, while also safeguarding the safety and health of our employees. Through ReFlex, our employees have needed flexibility and autonomy in how they work, particularly during these unprecedented times.

Compensation and Benefits

We also believe it is important to provide competitive compensation and benefits programs for our employees. In addition to salaries, we offer the following benefits, among others, which vary by employee level and by the country where the employees are located:

contributory healthcare, dental and vision benefits
bonuses,
stock awards,
retirement programs (including pension and savings plans),
health savings and flexible spending accounts,
paid time off,
paid parental leave,
disability programs,
and employee assistance programs.

Core Values

At B&W, our values of safety, ethics, quality, integrity, respect and agility are at the foundation of our business, and we are focused on efficiently ingraining new employees into that culture, whether they join through the normal recruiting and hiring process, or as we have grown our company through strategic acquisitions. We also believe in the importance of being a good corporate citizen, providing and supporting opportunities for our employees to make a positive impact in the communities where they live and work.

Our Board is actively engaged with our workforce practices and policies, and regularly receives updates and provides input on key culture topics, including employee engagement, employee development and succession planning.

Patents and Patent Licenses


We currently hold a large number of United States and foreign patents and have patent applications pending. We have acquired patents and technology licenses and granted technology licenses to others when we have considered it advantageous for us to do so. Although in the aggregate our patents and licenses are important to us, we do not regard any single patent or license or group of related patents or licenses as critical or essential to our business as a whole. In general, we depend on our technological capabilities and the application of know-how,thereof, rather than patents and licenses, in the conduct of our various businesses.


Research and Development Activities


Our research and development activities are related to the development and improvement of new and existing products and equipment, as well as conceptual and engineering evaluation for translation into practical applications. Historically, we focused our research dollars on improvingimprove our products forthrough innovations to reduce the markets we serve through: (i) cost reductions resulting in more competitive products in a highly competitive global market and margin improvement; (ii) reduced performance risk assuring our products meet our and our customers' expectations; and (iii) standards development and updates, which results in lower engineering hours consumed on projects and enable us to sublet engineering to low cost engineering centers of excellence. In the future, our research and development activities will be focused primarily on improvements in the reliability and efficiency of our products to make them more competitive and through innovations to reduce performance risk of our products to better meet our customers' needs and enhance our market opportunities and profitability. customer expectations.Research and development costs unrelated to specific contracts are expensed as incurred. Research and development expenses totaled $9.4 million, $10.4 million and $16.5 million in the years ended December 31, 2017, 2016 and 2015, respectively.

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Permits and Licenses


We are required by various governmental and quasi-governmental agencies to obtain certain permits, licenses and certificates with respect to our operations. The kinds of permits, licenses and certificates required in our operations depend upon a number of factors. We are not aware of any material noncompliance and believe our operations and certifications are currently in compliance with all relevant permits, licenses and certifications.
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Environmental


We have been identified as a potentially responsible party at various cleanup sites under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"(“CERCLA”). CERCLA and other environmental laws can impose liability for the entire cost of cleanup on any of the potentially responsible parties, regardless of fault or the lawfulness of the original conduct. Generally, however, where there are multiple responsible parties, a final allocation of costs is made based on the amount and type of wastes disposed of by each party and the number of financially viable parties, although this may not be the case with respect to any particular site. We have not been determined to be a major contributor of wastes to any of these sites. On the basis of our relative contribution of waste to each site, we expect our share of the ultimate liability for the various sites will not have a material adverse effect on our consolidated financial condition, results of operations or cash flows in any given year.


Executive OfficersGovernment Regulations

We are subject to a variety of Registrant

For a listing of our executive officers, see Part III, Item 10 of this annual report, which information is incorporated herein by reference.

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

This annual report, including Management's Discussionlaws and Analysis of Financial Conditionregulations in the United States 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. You should not place undue reliance on these statements. Statements that include the words "expect," "intend," "plan," "believe," "project," "forecast," "estimate," "may," "should," "anticipate" and similar statements of a future or forward-looking nature identify forward-looking statements.

These forward-looking statements address mattersother countries that involve risks and uncertainties and include statements that reflect the current views of our senior management with respect to our financial performance and future events with respectmatters central to our business, including those relating to:

the construction and industry in general. 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. Differences between actual resultsmanufacture of renewable, environmental and any future performance suggested in our forward-looking statements could result from a variety of factors, including the following: our ability to continue as a going concern; our ability to obtain and maintain sufficient financing to provide liquidity to meet our business objectives, surety bonds, letters of credit and similar financing, and to refinance our Second Lien through the Rights Offering, or otherwise; the highly competitive nature of our businesses; general economic and business conditions, including changes in interest rates and currency exchange rates; general developments in the industries in which we are involved; 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 or suppliers to perform their obligations on time and as specified; our ability to realize anticipated savings and operational benefits from our restructuring plans,thermal products;
clean air and other cost-savings initiatives; our ability to successfully integrateenvironmental protection legislation;
taxation of domestic and realize the expected synergies from acquisitions; our ability to successfully address productivityforeign earnings;
tariffs, duties, or trade sanctions and schedule issuesother trade barriers imposed by foreign countries that restrict or prohibit business transactions in our Renewable segment; willingness of customers to waive liquidated damagescertain markets;
user privacy, security, data protection, content, and online-payment services;
intellectual property;
transactions in or agree to bonus opportunities; our ability to successfully partner with third parties to winforeign countries or officials; and execute renewable projects; changes in our effective tax rate and tax positions; our ability to maintain operational support for our information systems against service outages and data corruption, as well as protection against cyber-based network security breaches and theft of data; our ability to protect our intellectual property and renew licenses to use intellectual property of third parties; our
use of the percentage-of-completion method of accounting; the risks associated with integrating businesses we acquire; our ability to successfully manage researchlocal employees 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;suppliers.


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changes in, or our failure or inability to comply with, laws and government regulations; difficulties we may encounter in obtaining regulatory or other necessary permits or approvals; changes in, and liabilities relating to, existing or future environmental regulatory matters; our limited ability to influence and direct the operations of our joint ventures; potential violations of the Foreign Corrupt Practices Act; our ability to successfully compete with current and future competitors; the loss of key personnel and the continued availability of qualified personnel; 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 possibilities of war, other armed conflicts or terrorist attacks; our ability to successfully consummate strategic alternatives for our MEGTEC and Universal businesses if we determine to pursue them; and the other risks set forth underFor further discussion, see Part I, Item 1A, "Risk Factors" in“Risk Factors” of this annual report.Annual Report on Form 10-K.

These factors are not necessarily all the factors that could affect us. We assume no obligation to revise or update any forward-looking statement included in this annual report for any reason, except as required by law.


Available Information


Our website address is www.babcock.com. We make available through the Investor Relations section of this website under "SEC Filings,"“Financial Information,” free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, our proxy statement, statements of beneficial ownership of securities on Forms 3, 4 and 5 and amendments to those reports as soon as reasonably practicable after we electronically file those materials with, or furnish those materials to, the Securities and Exchange Commission (the "SEC"“SEC”). You may read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. You may obtain information regarding the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a website at www.sec.gov that contains reports, proxy and annual reports, and other information regarding issuers that file electronically with the SEC. We have also posted on our website our: Corporate Governance Principles; Code of Business Conduct; Code of Ethics for our Chief Executive Officer and Senior Financial Officers; Board of Directors Conflicts of Interest Policies and Procedures;Related Party Transactions Policy; Management, Board Members and Independent Director Contact Information; Amended and Restated By-laws; charters for the Audit & Finance, Governance, Compensation and Safety & SecurityCompensation Committees of our Board; and our Modern Slavery Transparency Statement. We are not including the information contained in our website as part of or incorporating it by reference into this Annual Report.



Item 1A. Risk Factors


You should carefully consider each of the following risks and all of the other information contained in this annual report. Some of these risks relate principally to our spin-off from our former Parent, while others relate principally to our business and the industry in which we operate or to the securities markets generally and ownership of our common stock.Annual Report. If any of these risks develop into actual or expected events, our business, financial condition, results of operations or cash flows could be materially and adversely affected, by any of these risks, and, as a result, the trading price of our common stock could decline.


The risks discussed below are not the only ones facing our business but do represent those risks that we believe are material to us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also harm our business. Please read the cautionary notice regarding forward-looking statements under the heading “Cautionary Statement Concerning Forward-Looking Information.”

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Risks RelatingRelated to Our IndustryOperations

We are subject to risks associated with contractual pricing in our industry, including the risk that, if our actual costs exceed the costs we estimate on our fixed-price contracts, our profitability will decline, and we may suffer losses.

We are engaged in a highly competitive industry, and we have priced a number of our contracts on a fixed-price basis. Our Businessactual costs could exceed our projections. We attempt to cover the increased costs of anticipated changes in labor, material and service costs of long-term contracts, either through estimates of cost increases, which are reflected in the original contract price, or through price escalation clauses. Despite these attempts, the cost and gross profit we realize on a fixed-price contract could vary materially from the estimated amounts because of supplier, contractor and subcontractor performance, changes in job conditions, variations in labor and equipment productivity and increases in the cost of labor and raw materials, particularly steel, over the term of the contract. These variations and the risks generally inherent in our industry may result in actual revenues or costs being different from those we originally estimated and may result in reduced profitability or losses on contracts. Some of these risks include:

difficulties encountered on our large-scale contracts related to the procurement of materials or due to schedule disruptions, equipment performance failures, engineering and design complexity, unforeseen site conditions, rejection clauses in customer contracts or other factors that may result in additional costs to us, reductions in revenue, claims or disputes;
Asour inability to obtain compensation for additional work we perform or expenses we incur as a result of operating losses and negative cash flows from operations, together with other factors, including the possibility that a covenant defaultour customers or other event of default could cause certainsubcontractors providing deficient design or engineering information or equipment or materials;
requirements to pay liquidated damages upon our failure to meet schedule or performance requirements of our indebtednesscontracts; and
difficulties in engaging third-party subcontractors, equipment manufacturers or materials suppliers or failures by third-party subcontractors, equipment manufacturers or materials suppliers to become immediately dueperform could result in contract delays and payable (after the expiration of any applicable grace period),cause us to incur additional costs.

In prior years, we may not have sufficientexperienced these risks with several large loss contracts in our B&W Renewable and B&W Environmental segments, which resulted in significant losses for our operations, impaired our liquidity to sustain operationsposition and had previously resulted in substantial doubt regarding whether we would be able to continue to operate as a going concern. If we were to experience these risks again in the future, our business, results of operations, financial condition and liquidity may be materially and adversely affected.


Disputes with customers with long-term contracts could adversely affect our financial condition.

We have experienced losses from operations in eachroutinely enter into long-term contracts with customers. Under long-term contracts, we may incur capital expenditures or other costs at the beginning of the past two years, have negative operating cash flowscontract that we expect to recoup through the life of the contract. Some of these contracts provide for advance payments to assist us in covering these costs and expenses. A dispute with a customer during the year ended December 31, 2017 and are dependent onlife of a long-term contract could impact our ability to raise capitalreceive payments or otherwise recoup incurred costs and expenses.

Our contractual performance may be affected by third parties’ and subcontractors’ failure to meet schedule, quality and other requirements on our contracts, which could increase our costs, scope, or technical difficulty or in extreme cases, limit our ability to meet contractual requirements.

We conduct significant portions of our business by engaging in long-term contracts related to highly complex, customized equipment or facilities for electrical generation, industrial processes, and/or environmental compliance. The complexity of these contracts generally necessitates the participation of others, including third-party suppliers, subcontractors, equipment or part manufacturers, partner companies, other companies with whom we do not have contractual relationships, customers, financing organizations, regulators and others. Our reliance on these parties subjects us to the risk of customer dissatisfaction with the quality or performance of the products or services we sell due to supplier or subcontractor failure. Third-party supplier and subcontractor business interruptions could include but are not limited to, interruptions to business operations due to COVID-19 or other health crises, work stoppages, union negotiations, other labor disputes and payment disputes. Current or future economic conditions could also impact the ability of suppliers and subcontractors to access credit and, thus, impair their ability to provide us quality products, materials, or services in a timely manner, or at all.

While we endeavor to limit our liability to matters within our control, not all scenarios can be foreseen, and we may become subject to the risk of others’ performance that may or may not be within our control or influence. Delays, changes or failures
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of others, including third-party suppliers and subcontractors, could subject us to additional costs, delays, technical specification changes, contractual penalties or other matters for which we may be unable to obtain compensation, or compensation may not be sufficient. In extreme cases, the direct or indirect effects of such matters may cause us to be unable to fulfill our contractual requirements.

A material disruption at one of our manufacturing facilities or a third-party manufacturing facility that we have engaged could adversely affect our ability to generate sales and result in increased costs.

Our financial performance could be adversely affected due to our inability to meet customer demand for our products or services in the time frameevent of a material disruption at one of our significant manufacturing or services facilities. Equipment failures, natural disasters, power outages, fires, explosions, terrorism, adverse weather conditions, labor disputes or other influences could create a material disruption. Interruptions to production could increase our cost of sales, harm our reputation and adversely affect our ability to attract or retain our customers. Our business continuity plans may not be sufficient to address disruptions attributable to such risks. Any interruption in production capability could require us to make substantial capital expenditures to remedy the situation, which could adversely affect our financial condition and results of operations.

If our co-venturers fail to perform their contractual obligations on a contract or if we fail to coordinate effectively with our co-venturers, we could be exposed to legal liability, loss of reputation, reduced profit, or liquidity challenges.

We often perform contracts jointly with third parties or execute contracts with partners through joint ventures or other contractual arrangements. For example, we enter into contracting consortia and other contractual arrangements to bid for and perform jointly on large contracts. We may not be able to control the actions of our partners in these arrangements, and influence over the actions of our partners and the contractual outcomes may be limited. Success on these joint contracts depends in part on whether our co-venturers fulfill their contractual obligations satisfactorily. If any one or more of these third parties fail to perform their contractual obligations satisfactorily, we may be required in our United States Revolving Credit Facility ("Revolver")to make additional investments and provide added services in order to avoid an event of default under our lending agreements. Ascompensate for that failure. If we are unable to adequately address any performance issues when and if required, customers may exercise their rights to terminate a result of additional losses we recognized in the fourth quarter of 2017 relatedjoint contract, exposing us to an increase in structural steel repair costs on one of our European renewable energy contracts, we were not in compliance with certain financial covenants under our Revolver and our Second Lien Term Loan Facility ("Second Lien") as of December 31, 2017. On March 1, 2018, we obtained an agreement (the “March 1, 2018 Amendment”) to amend our Revolver. The March 1, 2018 Amendment waived the financial covenant defaults that existed at December 31, 2017 under the Revolver, consentedlegal liability, damage to our planned Rights Offeringreputation, reduced profit or liquidity challenges.

Our collaborative arrangements also involve risks that participating parties may disagree on business decisions and madestrategies. These disagreements could result in delays, additional costs and risks of litigation. In these arrangements, we sometimes have joint and several liabilities with our partners, and we cannot be certain other modifications. The Second Lien contains a 180 day standstill period beginning on March 1, 2018 to resolve the event of default or repay the loan.

Absent additional waivers or cures, continued non-compliance with covenants contained inthat our Second Lien will constitute a

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default under the Second Lien following the expiration of the 180 day standstill period. As a result, all indebtedness under the Second Lien could be declared immediately due and payable upon the occurrence of an event of default after expiration of the 180 day standstill period. It is possible we could obtain waivers from our lenders; however, our current liquidity risks raise substantial doubt about whether we will meet our obligations as they become due within one year after the date of issuance of this report.

As a result of these factors, there exists substantial doubt whether wepartners will be able to satisfy any potential liability that could arise. Our inability to successfully maintain existing collaborative relationships or enter into new collaborative arrangements could have a material adverse effect on our results of operations.

Our growth strategy includes strategic acquisitions, which we may not be able to consummate or successfully integrate.

We have made acquisitions to grow our business, enhance our global market position and broaden our industrial tools product offerings and intend to continue as a going concern. The accompanying consolidatedto make these acquisitions. Our ability to successfully execute acquisitions will be impacted by factors including the availability of financing on terms acceptable to us, the potential reduction of our ability or willingness to incur debt to fund acquisitions due to macroeconomic conditions, our financial statements are prepared on a going concern basis and do not include any adjustments that might result from uncertainty aboutresults, the reluctance of target companies to sell in current markets, our ability to continue as a going concern, other than the reclassificationidentify acquisition candidates that meet our valuation parameters and increased competition for acquisitions. The process of certain long-term debt to current liabilities. The reportintegrating acquired businesses into our existing operations also may result in unforeseen operating difficulties and may require additional financial resources and attention from our independent registered public accounting firm on our consolidated financial statementsmanagement that would otherwise be available for the year ended December 31, 2017 includes a paragraph that summarizes the salient facts and conditions that raise substantial doubt aboutongoing development or expansion of our ability to continue as a going concern.

There can be no assurance that our plan to improve our operating performance and financial position will be successful or thatexisting operations. Although we will be able to obtain additional financing on commercially reasonable terms or at all including, without limitation, our abilityexpect to successfully complete the Rights Offering and refinance our Second Lien. As a result, our liquidity and ability to timely pay our obligations when due could be adversely affected. Furthermore, our creditors may resist renegotiation or lengthening of payment and other terms through legal action or otherwise. If we are not able to timely, successfully or efficiently implement the strategies that we are pursuing to improve our operating performance and financial position,integrate any acquired businesses, we may not have sufficient liquidity to sustain operations and to continue as a going concern.

We derive substantial revenues from electric power generating companies and other steam-using industries, with demand for our products and services depending on spending in these historically cyclical industries. Additionally, recent legislative and regulatory developments relating to clean air legislation are affecting industry plans for spending on coal-fired power plants withinachieve the United States and elsewhere.

The demand for power generation products and services depends primarily on the spending of electric power generating companies and other steam-using industries and expenditures by original equipment manufacturers. These expenditures are influenced by such factors as:

prices for electricity, along with the cost of production and distribution;
prices for natural resources such as coal and natural gas;
demand for electricity and other end products of steam-generating facilities;
availability of other sources of electricity or other end products;
requirements of environmental legislation and regulations, including potential requirements applicable to carbon dioxide emissions;
impact of potential regional, state, national and/or global requirements to significantly limit or reduce greenhouse gas emissionsdesired net benefit in the future;
level of capacity utilizationtimeframe planned and associated operations and maintenance expenditures of power generating companies and other steam-using facilities;
requirements for maintenance and upkeep at operating power plants and other steam-using facilitiesmay not realize the planned benefits from our acquisitions. Failure to combateffectively execute our acquisition strategy or successfully integrate the accumulated effects of wear and tear;
ability of electric generating companies and other steam users to raise capital; and
relative prices of fuels used in boilers, compared to prices for fuels used in gas turbines and other alternative forms of generation.

We estimate that 27%, 47% and 50% ofacquired businesses could have an adverse effect on our consolidated revenues in 2017, 2016 and 2015, respectively, was related to coal-fired power plants. A material decline in spending by electric power generating companies and other steam-using industries over a sustained period of time could materially and adversely affect the demand for our power generation products and services and, therefore, ourcompetitive position, reputation, financial condition, results of operations, cash flows and cash flows. Coal-fired power plants have been scrutinized by environmental groups and government regulators over the emissionsliquidity.

On February 1, 2022, we acquired 100% ownership of potentially harmful pollutants.Fossil Power Systems, Inc. On February 28, 2022, we acquired 100% ownership of Optimus Industries, LLC. The recent economic environment and uncertainty concerning new environmental legislationsuccess of each of these, or replacement rules or regulations in the United States and elsewhere has caused many of our major customers, principally electric utilities, to delay making substantial expenditures for new plants,any future, acquisitions, as well as upgradesour ability to existing power plants.

realize their anticipated benefits, depends in large part on our ability to successfully integrate each business. This integration is complex and time consuming, and failure to successfully integrate either business may prevent us from achieving the anticipated benefits of the acquisitions. Potential difficulties we may encounter as part of the integration process include (i) the inability to successfully integrate transportation networks; (ii) complexities and unanticipated issues associated with integrating the businesses’ complex systems, technologies and operating procedures; (iii) integrating workforces while
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Demand for our productsfaulty assumptions underlying expectations regarding the integration process; and services is vulnerable to economic downturns and industry conditions.

Demand for our products and services has been, and we expect that demand will continue to be, subject to significant fluctuations due to a variety of factors beyond our control, including economic and industry conditions. These factors include, but are not limited to:(vi) the cyclical nature of the industries we serve, inflation, geopolitical issues, the availability and cost of credit, volatile oil and natural gas prices, low business and consumer confidence, high unemployment and energy conservation measures.

Unfavorable economic conditions may lead customers to delay, curtail or cancel proposed or existing contracts, which may decrease the overall demand for our products and services and adversely affect our results of operations.

In addition, our customers may find it more difficult to raise capital in the future due to limitations on the availability of credit, increases in interest rates and other factors affecting the federal, municipal and corporate credit markets. Also, our customers may demand more favorable pricing terms and find it increasingly difficult to timely pay invoices for our products and services, which would impact our future cash flows and liquidity. Inflation or significant changes in interest rates could reduce the demand for our products and services. Any inability to timely collect our invoices may lead to an increase in our accounts receivable and potentially to increased write-offs of uncollectible invoices. If the economy weakens, or customer spending declines, then our backlog, revenues, net income and overall financial condition could deteriorate.improve on historical operating results.


Our backlog is subject to unexpected adjustments and cancellations and may not be a reliable indicator of future revenues or earnings.


There can be no assurance that the revenues projected in our backlog will be realized or, if realized, will result in profits. Because of contract cancellations or changes in scope and schedule, we cannot predict with certainty when or if backlog will be performed. In addition, even where a contract proceeds as scheduled, it is possible that contracted parties may default and fail to pay amounts owed to us or poor contract performance could increase the cost associated with a contract. Delays, suspensions, cancellations, payment defaults, scope changes and poor contract execution could materially reduce or eliminate the revenues and profits that we actually realize from contracts in backlog.


Reductions in our backlog due to cancellation or modification by a customer or for other reasons may adversely affect, potentially to a material extent, the revenues and earnings we actually receive from contracts included in our backlog. Many of the contracts in our backlog provide for cancellation fees in the event customers cancel contracts. These cancellation fees usually provide for reimbursement of our out-of-pocket costs, revenues for work performed prior to cancellation and a varying percentage of the profits we would have realized had the contract been completed. However, we typically have no contractual right upon cancellation to the total revenues reflected in our backlog. Contracts may remain in our backlog for extended periods of time. If we experience significant contract terminations, suspensions or scope adjustments to contracts reflected in our backlog, our financial condition, results of operations and cash flows may be adversely impacted.


We are subjectOur inability to risks associateddeliver our backlog on time could affect our future sales and profitability, and our relationships with contractual pricing in our industry, including the risk that, ifcustomers.

Our backlog was $704 million at December 31, 2022 and $639 million at December 31, 2021. Our ability to meet customer delivery schedules for our actual costs exceed the costs we estimatebacklog is dependent on our fixed-price contracts, our profitability will decline, and we may suffer losses.

We are engaged in a highly competitive industry, and we have priced a number of our contracts on a fixed-price basis. Our actual costs could exceed our projections, as wasfactors including, but not limited to, access to the case recently with several large contracts in the Renewable segment. We attempt to cover the increased costs of anticipated changes in labor, material and service costs of long-term contracts, either through estimates of cost increases, which are reflected in the original contract price, or through price escalation clauses. Despite these attempts, however, the cost and gross profit we realize on a fixed-price contract could vary materially from the estimated amounts because of supplier, contractor and subcontractor performance, changes in job conditions, variations in labor and equipment productivity and increases in the cost of labor and raw materials particularly steel, over the termrequired for production, an adequately trained and capable workforce, project engineering expertise for certain large projects, sufficient internal manufacturing plant capacity, available subcontractors and appropriate planning and scheduling of the contract. These variations and the risks generally inherentmanufacturing resources. Our failure to deliver in our industryaccordance with customer expectations may result in actual revenues or costs being different from those we originally estimateddamage to existing customer relationships and may result in reduced profitability or losses on contracts. Some of these risks include:

difficulties encountered on our large-scale contracts related to the procurement of materials or due to schedule disruptions, equipment performance failures, engineering and design complexity, unforeseen site conditions, rejection clauses in customer contracts or other factors that may result in additional costs to us, reductions in revenue, claims or disputes;

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our inability to obtain compensation for additional work we perform or expenses we incur as a result of our customers or subcontractors providing deficient design or engineering information or equipment or materials;
requirements to pay liquidated damages upon our failure to meet schedule or performance requirements of our contracts; and
difficulties in engaging third-party subcontractors, equipment manufacturers or materials suppliers or failures by third-party subcontractors, equipment manufacturers or materials suppliers to perform could result in contract delays and cause us to incur additional costs.

Our contractual performance may be affected by third parties’ and subcontractors’ failure to meet schedule, quality and other requirements on our contracts, which could increase our costs, scope, technical difficulty or in extreme cases, our ability to meet contractual requirements.

We conduct significant portions of our business by engaging in long-term contracts related to highly complex, customized equipment or facilities for electrical generation, industrial processes, and/or environmental compliance. The complexity of these contracts generally necessitates the participation of others on this contract, including subcontractors, equipment or part manufacturers, partner companies, other companies with whom we do not have contractual relationships, customers, financing organizations, regulators and others. While we endeavor to limit our liability to matters within our control, not all scenarios can be foreseen and we may become subject to the risk of others’ performance that may or may not be within our control or influence. Delays, changes or failures of others, including subcontractors, could subject us to additional costs, delays, technical specification changes, contractual penalties or other matters for which we may be unable to obtain compensation, or compensation may not be sufficient. In extreme cases, the direct or indirect effects of such matters may cause us to be unable to fulfill our contractual requirements.

For example, we have contracts to construct several renewable energy plants in the United Kingdom. These contracts have suffered delays, additional cost and contractual penalties. The complexity of these contracts required us to subcontract matters, such as structural engineering, to other companies that have the appropriate technical expertise. In September 2017, a structural steel issue was discovered at one of these plants, which management believes is the result of an engineering error by a subcontractor. The failure resulted in work being stopped at the plant with the failure and at two other plants under construction where failure had not occurred, but had used a similar design by the same subcontractor. In each case, additional engineering analysis and remediation was required, resulting in additional costs, schedule delays and contractual penalties, all of which were significantly greater at the plant where failure occurred. Through December 31, 2017, $42 million of additional costs had been recorded related to the effects of this engineering error across the three plants. In each case, the engineering assessment, remediation and safety plans required approval of the subcontractor, customer, our contract partner and the respective analysis independent technical experts from each. In the case of the plant where structural failure occurred, this process to agree on the appropriate structural remediation and plan to implement the remediation was lengthy and resulted in a more significant delay. These contracts include rejection clauses that give the customers the option to reject the deliverable, recover all monies paid to us and our partner, and require us to restore the property to its original state if contractual milestones are not met by a certain date. While we expect to be able to accelerate our progress and take other remedial actions if necessary to avoid giving a customer the option to exercise its rejection clause, failure to do so could have a material adverse effect on our liquidity and our ability to satisfy obligations under other contracts or comply with our debt covenants. Any insurance coverage may be insufficient, or the timing of any insurance proceeds may not meet our liquidity requirements.

We are exposed to credit risk and may incur losses as a result of such exposure.

We conduct our business by obtaining orders that generate cash flows in the form of advances, contract progress payments and final balances in accordance with the underlying contractual terms. We are thus exposed to potential losses resulting from contractual counterparties' failure to meet their obligations. As a result, the failure by customers to meet their payment obligations, or a mere delay in making those payments, could reduce our liquidity and increase the need to resort to other sources of financing, with possible adverse effects on our business, financial condition, results of operations and cash flows. In some cases, we have joint and several liability with consortium partners in our projects, such as the renewable energy plants in the United Kingdom, and we may be subject to additional losses if our partners are unable to meet their contractual obligations.

In addition, the deterioration of economic conditions or negative trends in the credit markets could have a negative impact on relationships with customers and our ability to collect on trade receivables, with possible adverse effects on our business, financial condition, results of operations and cash flows.

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Our use of the percentage-of-completion method of accounting could result in volatility in our results of operations.

We generally recognize revenues and profits under our long-term contracts on a percentage-of-completion basis. Accordingly, we review contract price and cost estimates regularly as the work progresses and reflect adjustments proportionate to the percentage of completion in income in the period when we revise those estimates. To the extent these adjustments result in a reduction or an elimination of previously reported profits with respect to a contract, we would recognize a charge against current earnings, which could be material. Our current estimates of our contract costs and the profitability of our long-term contracts, although reasonably reliable when made, could change as a result of the uncertainties associated with these types of contracts, and if adjustments to overall contract costs are significant, the reductions or reversals of previously recorded revenue and profits could be material in future periods.

If our co-venturers fail to perform their contractual obligations on a contract or if we fail to coordinate effectively with our co-venturers, we could be exposed to legal liability, loss of reputation and reduced profit on the contract.

We often perform contracts jointly with third parties. For example, we enter into contracting consortia and other contractual arrangements to bid for and perform jointly on large contracts. Success on these joint contracts depends in part on whether our co-venturers fulfill their contractual obligations satisfactorily. If any one or more of these third parties fail to perform their contractual obligations satisfactorily, we may be required to make additional investments and provide added services in order to compensate for that failure. If we are unable to adequately address any such performance issues, then our customer may exercise its right to terminate a joint contract, exposing us to legal liability, loss of reputation and reduced profit.

Our collaborative arrangements also involve risks that participating parties may disagree on business decisions and strategies. These disagreements could result in delays, additional costs and risks of litigation. Our inability to successfully maintain existing collaborative relationships or enter into new collaborative arrangements could have a material adverse effect on our results of operations.

We could be subject to changes in tax rates or tax law, adoption of new regulations or changing interpretations of existing law or exposure to additional tax liabilities in excess of accrued amounts.

We are subject to income taxes in the United States and numerous foreign jurisdictions. A change in tax laws, treaties or regulations, or their interpretation, in any country in which we operate could result in a higher tax rate on our earnings, which could have a material impact on our earnings and cash flows from operations. Recently enacted tax reform legislation has made substantial changes to United States tax law, including a reduction in the corporate tax rate, a limitation on deductibility of interest expense, a limitation on the use of net operating losses to offset future taxable income, the allowance of immediate expensing of capital expenditures and deemed repatriation of foreign earnings. This legislation has resulted in, and may in the future result in additional effects on us, some of which may be adverse. For example, the reduction in the corporate tax rate has resulted in a revaluation of our existing deferred tax assets, and consequently an increase in our income tax expense for 2017. The magnitude of the net impact remains uncertain at this time and is subject to any other regulatory or administrative developments, including any regulations or other guidance promulgated by the United States Internal Revenue Service.

In addition, significant judgment is required in determining our worldwide provision for income taxes. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain, and we are regularly subject to audit by tax authorities. Although we believe that our tax estimates and tax positions are reasonable, they could be materially affected by many factors including the final outcome of tax audits and related litigation, the introduction of new tax accounting standards, legislation, regulations and related interpretations, our global mix of earnings, the realizability of deferred tax assets and changes in uncertain tax positions. A significant increase in our tax rate could have a material adverse effect on our profitability and liquidity.

Our ability to use net operating losses and certain tax credits to reduce future tax payments could be limited if we experience an "ownership change".

Our NOL carryforwards and certain tax credits may become subject to annual limitation if we experience an "ownership change". In general, an "ownership change" occurs if 5% shareholders increase their collective ownership of our company by more than 50 percentage points during the relevant testing period. If an ownership change occurs, our ability to use NOL carryforwards and certain credits to reduce tax payments is generally limited to an annual amount based on (i) the fair market value of our stock immediately prior to the ownership change multiplied by the long-term tax-exempt interest rate.

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Our business could be negatively impacted by security threats, including physical and cybersecurity threats, and other disruptions.

We face various security threats, including cyber threats, threats to the physical security of our facilities and infrastructure, and threats from terrorist acts, as well as the potential for business disruptions associated with these threats. Although we utilize a combination of tailored and industry standard security measures and technology to monitor and mitigate these threats, we cannot guarantee that these measures and technology will be sufficient to prevent security threats from materializing.

We are increasingly dependent on information technology networks and systems, including the Internet, to process, transmit and store electronic and financial information, to manage and support a variety of business processes and activities and to comply with regulatory, legal and tax requirements. We have been, and will likely continue to be, subject to cyber-based attacks and other attempts to threaten our information technology systems and the software we sell. A cyber-based attack could include attempts to gain unauthorized access to our proprietary information and attacks from malicious third parties using sophisticated, targeted methods to circumvent firewalls, encryption and other security defenses, including hacking, fraud, trickery or other forms of deception. If any of our significant information technology systems suffer severe damage, disruption, or shutdown and our business continuity plans do not effectively resolve the issues in a timely manner, the services we provide to customers, the value of our investment in research and development efforts and other intellectual property, our product sales, financial condition, results of operations and stock price may be materially and adversely affected, and we could experience delays in reporting our financial results. In addition, there is a risk of business interruption, litigation risks, and reputational damage from leakage of confidential information or the software we sell being compromised. The costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by other means.

In order to address risks to our information systems, we continue to make investments in technologies and training of company personnel. From time to time we may replace and/or upgrade current financial, human resources and other information technology systems. These activities subject us to inherent costs and risks associated with replacing and updating these systems, including potential disruption of our internal control structure, substantial capital expenditures, demands on management time and other risks of delays or difficulties in transitioning to new systems or of integrating new systems into our current systems. Our systems implementations and upgrades may not result in productivity improvements at the levels anticipated, or at all. In addition, the implementation of new technology systems may cause disruptions in our business operations. Such disruption and any other information technology system disruptions, and our ability to mitigate those disruptions, if not anticipated and appropriately mitigated, could have a material adverse effect on our financial condition, results of operations and stock price.

We rely on intellectual property law and confidentiality agreements to protect our intellectual property. We also rely on intellectual property we license from third parties. Our failure to protect our intellectual property rights, or our inability to obtain or renew licenses to use intellectual property of third parties, could adversely affect our business.

Our success depends, in part, on our ability to protect our proprietary information and other intellectual property. Our intellectual property could be stolen, challenged, invalidated, circumvented or rendered unenforceable. In addition, effective intellectual property protection may be limited or unavailable in some foreign countries where we operate.

Our failure to protect our intellectual property rights may result in the loss of valuable technologies or adversely affectfuture business. Failure to deliver backlog in accordance with expectations could negatively impact our competitive business position. We rely significantly on proprietary technology, information, processesfinancial performance and know-how that are not subject to patent or copyright protection. We seek to protect this information through trade secret or confidentiality agreements with our employees, consultants, subcontractors or other parties, as well as through other security measures. These agreements and security measures may be inadequate to deter or prevent misappropriation of our confidential information. In the event of an infringement of our intellectual property rights, a breach of a confidentiality agreement or divulgence of proprietary information, we may not have adequate legal remedies to protect our intellectual property. Litigation to determine the scope of intellectual property rights, even if ultimately successful, could be costly and could divert management's attention away from other aspects of our business. In addition, our trade secrets may otherwise become known or be independently developed by competitors.

In some instances, we have augmented our technology base by licensing the proprietary intellectual property of third parties. In the future, we may not be able to obtain necessary licenses on commercially reasonable terms, which could have a materialcause adverse effect on our operations.

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Maintaining adequate bonding and letter of credit capacity is necessary for us to successfully bid on and win various contracts.

In line with industry practice, we are often required to post standby letters of credit and surety bonds to support contractual obligations to customers as well as other obligations. These letters of credit and bonds generally indemnify customers should we fail to perform our obligations under the applicable contracts. If a letter of credit or bond is required for a particular contract and we are unable to obtain it due to insufficient liquidity or other reasons, we will not be able to pursue that contract. We utilize bonding facilities, but, as is typically the case, the issuance of bonds under each of those facilities is at the surety's sole discretion. Moreover, due to events that affect the insurance and bonding and credit markets generally, bonding and letters of credit may be more difficult to obtainchanges in the future or may only be available at significant additional cost. There can be no assurance that letters of credit or bonds from sources outside of our contractually committed Credit Agreement will continue to be available to us on reasonable terms. The inclusion of a "going concern" explanatory paragraph in the auditor's report covering our audited consolidated financial statements contained herein may prevent us from obtaining bonding and letters of credit from sources outside of our contractually committed Credit Agreement on reasonable terms, or at all. Our inability to obtain adequate letters of credit and bonding and, as a result, to bid on new work could have a material adverse effect on our business, financial condition and results of operations. As of December 31, 2017, we had $269.1 million in letters of credit and bank guarantees and $378.8 million in surety bonds outstanding. Of these amounts, $7.4 million of financial letters of credit and $123.7 million of performance letters of credit were outstanding under the United States credit agreement.

Our amended United States credit facility could restrict our operations.

The terms of our amended United States credit agreement impose various restrictions and covenants on us that could have adverse consequences, including limiting our:

flexibility in planning for, or reacting to, changes in our business or economic, regulatory and industry conditions;
ability to invest in joint ventures or acquire other companies;
ability to sell assets;
ability to pay dividends to our stockholders;
ability to repurchase sharesmarket price of our common stock; andstock.
ability to borrow additional funds.

In addition, our amended United States credit facility requires us to satisfy and maintain specified financial ratios. Our ability to meet those financial ratios can be affected by events beyond our control, and we cannot assure you that we will continue to meet the financial ratios.

During the covenant relief period under our amended United States credit facility, we are limited to $300.0 million of borrowings under that facility.

Our ability to comply with the covenants and restrictions contained in our amended United States credit facility may be affected by events beyond our control, including prevailing economic, financial and industry conditions. If market or other economic conditions deteriorate, our ability to comply with these covenants may be impaired. A breach of any of these covenants could result in an event of default under our amended United States credit facility, and we would not be able to access our credit facility for additional borrowings and letters of credit while any default exists. Upon the occurrence of such an event of default, all amounts outstanding under our amended United States credit facility could be declared to be immediately due and payable and all applicable commitments to extend further credit could be terminated. If indebtedness under our amended credit facility is accelerated, there can be no assurance that we will have sufficient assets to repay the indebtedness. The operating and financial restrictions and covenants in our amended credit facility and any future financing agreements may adversely affect our ability to finance future operations or capital needs or to engage in other business activities.

Our evaluation of strategic alternatives for certain businesses and non-core assets may not be successful.

We have initiated a process to evaluate strategic alternatives for business lines, such as MEGTEC and Universal, as well as certain non-core assets. These strategic alternatives are being evaluated as options to improve the company’s capital structure. There can be no assurance that these on-going strategic evaluations will result in the identification or consummation of any transaction. We may incur substantial expenses associated with identifying and evaluating potential strategic alternatives. The

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process of exploring strategic alternatives may be time consuming and disruptive to our business operations, and if we are unable to effectively manage the process, our business, financial condition and results of operations could be adversely affected. We also cannot assure that any potential transaction or other strategic alternative, if identified, evaluated and consummated, will prove to be beneficial to stockholders. Any potential transaction would be dependent upon a number of factors that may be beyond our control, including, among other factors, market conditions, industry trends, the interest of third parties in our business, the availability of financing to potential buyers on reasonable terms, and the consent of our lenders.

In addition, while this strategic evaluation is underway, we are exposed to risks and uncertainties, including potential difficulties in retaining and attracting key employees, distraction of our management from other important business activities, and potential difficulties in establishing and maintaining relationships with customers, suppliers, lenders, sureties and other third parties, all of which could harm our business.

Our business strategy includes development and commercialization of new technologies to support our growth, which requires significant investment and involves various risks and uncertainties. These new technologies may not achieve desired commercial or financial results.

Our future growth will depend, in part, on our ability to continue to innovate by developing and commercializing new product and service offerings. Investments in new technologies involve varying degrees of uncertainties and risk. Commercial success depends on many factors, including the levels of innovation, the development costs and the availability of capital resources to fund those costs, the levels of competition from others developing similar or other competing technologies, our ability to obtain or maintain government permits or certifications, our ability to license or purchase new technologies from third parties, the effectiveness of production, distribution and marketing efforts, and the costs to customers to deploy and provide support for the new technologies. We may not achieve significant revenues from new product and service investments for a number of years, if at all. Moreover, new products and services may not be profitable, and, even if they are profitable, our operating margins from new products and services may not be as high as the margins we have experienced historically. In addition, new technologies may not be patentable and, as a result, we may face increased competition.


Our operations are subject to operating risks, which could expose us to potentially significant professional liability, product liability, warranty and other claims. Our insurance coverage may not be inadequate to cover all of our significant risks, or our insurers may deny coverage of material losses we incur, or we may be unable to obtain additional insurance coverage in the future, any of which could adversely affect our profitability and overall financial condition.


We engineer, construct and perform services in, and provide products for, large industrial facilities where accidents or system failures can have significant consequences. Risks inherent in our operations include:

accidents resulting in injury or the loss of life or property;
environmental or toxic tort claims, including delayed manifestation claims for personal injury or loss of life;
pollution or other environmental mishaps;
adverse weather conditions;
mechanical failures;
property losses;
business interruption due to political action or other reasons; and
labor stoppages.


Any accident or failure at a site where we have provided products or services could result in significant professional liability, product liability, warranty and other claims against us, regardless of whether our products or services caused the incident. We have been, and in the future, we may be, named as defendants in lawsuits asserting large claims as a result of litigation arising from events such as those listed above. Such claims may damage our reputation, regardless of whether we are ultimately deemed responsible.


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We endeavor to identify and obtain in established markets insurance agreements to cover significant risks and liabilities. Insurance against some of the risks inherent in our operations is either unavailable or available only at rates or on terms that we consider uneconomical. Also, catastrophic events customarily result in decreased coverage limits, more limited coverage, additional exclusions in coverage, increased premium costs and increased deductibles and self-insured retentions. Risks that we have frequently found difficult to cost-effectively insure against include, but are not limited to, business interruption, including interruptions related to the COVID-19 pandemic, property losses from wind, flood and earthquake events, war and confiscation or seizure of property in some areas of the

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world, pollution liability, liabilities related to occupational health exposures (including asbestos), the failure, misuse or unavailability of our information systems, the failure of security measures designed to protect our information systems from security breaches,cybersecurity threats, and liability related to risk of loss of our work in progress and customer-owned materials in our care, custody and control. Depending on competitive conditions and other factors, we endeavor to obtain contractual protection against uninsured risks from our customers. When obtained, such contractual indemnification protection may not be as broad as we desire or may not be supported by adequate insurance maintained by the customer. Such insurance or contractual indemnity protection may not be sufficient or effective under all circumstances or against all hazards to which we may be subject. A successful claim for which we are not insured or for which we are underinsured could have a material adverse effect on us. Additionally, disputes with insurance carriers over coverage may affect the timing of cash flows and, if litigation with the carrier becomes necessary, an outcome unfavorable to us may have a material adverse effect on our results of operations. Moreover, certain accidents or failures, including accidents resulting in bodily injury or harm, could disqualify us from continuing business with customers, and any losses arising thereby may not be covered by insurance or other indemnification.


Our wholly ownedwholly-owned captive insurance subsidiary provides workers' compensation, employer's liability, commercial general liability, professional liability and automotive liability insurance to support our operations. We may also have business reasons in the future to have our insurance subsidiary accept other risks which we cannot or do not wish to transfer to outside insurance companies. These risks may be considerable in any given year or cumulatively. Our insurance subsidiary has not provided significant amounts of insurance to unrelated parties. Claims as a result of our operations could adversely impact the ability of our insurance subsidiary to respond to all claims presented.


Additionally, upon the February 22, 2006 effectiveness of the settlement relating to the Chapter 11 proceedings involving several of our subsidiaries, most of our subsidiaries contributed substantial insurance rights to the asbestos personal injury trust, including rights to (1) certain pre-1979 primary and excess insurance coverages and (2) certain of our 1979-1986 excess insurance coverage. These insurance rights provided coverage for, among other things, asbestos and other personal injury claims, subject to the terms and conditions of the policies. The contribution of these insurance rights was made in exchange for the agreement on the part of the representatives of the asbestos claimants, including the representative of future claimants, to the entry of a permanent injunction, pursuant to Section 524(g) of the United States Bankruptcy Code, to channel to the asbestos trust all asbestos-related claims against our subsidiaries and former subsidiaries arising out of, resulting from or attributable to their operations, and the implementation of related releases and indemnification provisions protecting those subsidiaries and their affiliates from future liability for such claims. Although we are not aware of any significant, unresolved claims against our subsidiaries and former subsidiaries that are not subject to the channeling injunction and that relate to the periods during which such excess insurance coverage related, with the contribution of these insurance rights to the asbestos personal injury trust, it is possible that we could have underinsured or uninsured exposure for non-derivative asbestos claims or other personal injury or other claims that would have been insured under these coverages had the insurance rights not been contributed to the asbestos personal injury trust.


We may not be able to compete successfully against current and future competitors.

Some of our competitors or potential competitors have greater financial or other resources than we have and in some cases are government supported. Our operations may be adversely affected if our current competitors or new market entrants introduce new products or services with better features, performance, prices or other characteristics than those of our products and services. Furthermore, we operate in industries where capital investment is critical. We may not be able to obtain as much purchasing and borrowing leverage and access to capital for investment as other companies, which may impair our ability to compete against competitors or potential competitors.

If we fail to develop new products, or customers do not accept our new products, our business could be adversely affected.

Our ability to develop innovative new products can affect our competitive position and often requires the investment of significant resources. Difficulties or delays in research, development, production or commercialization of new products, or failure to gain market acceptance of new products and technologies, may reduce future sales and adversely affect our competitive position. There can be no assurance that we will have sufficient resources to make such investments, that we will
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be able to make the technological advances necessary to maintain competitive advantages or that we can recover major research and development expenses. If we fail to make innovations, launch products with quality problems, experience development cost overruns, or the market does not accept our new products, then our financial condition, results of operations, cash flows and liquidity could be adversely affected.

Our business, financial condition and results of operations, suppliers and vendors, have been, and could continue to be, adversely affected by public health crises, including the COVID-19 pandemic.

Our business has been, and could in the future be, adversely impacted by public health crises, including viral outbreaks such as the COVID-19 pandemic. Measures taken to control the spread of COVID-19 or other future outbreaks of infectious disease, including mandatory closures, work-from-home orders and social distancing protocols have varied widely and have been subject to significant changes from time to time depending on circumstances outside of our control, including changes in the severity of outbreaks in impacted countries and localities. These restrictions, including limitations on travel and curtailment of other activity, negatively impacted our ability to conduct business, to varying degrees, throughout the COVID-19 pandemic, and similar future restrictions in response to other public health crises could have a similar impact. Furthermore, COVID-19 has contributed to significant disruptions in the global supply chain, which negatively impacted our ability to secure raw materials and supplies and resulted in increased costs and the loss of sales and customers. Future public health crises could have a similar impact. The duration and scope of the COVID-19 pandemic or any other future public health crises cannot be predicted, and therefore, any anticipated negative financial impact to the Company’s operating results cannot be reasonably estimated.

Risks Related to Our Industry

We derive substantial revenues from electric power generating companies and other steam-using industries, including coal-fired power plants in particular. Demand for our products and services depends on spending in these historically cyclical industries. Additionally, recent legislative and regulatory developments relating to clean air legislation are affecting industry plans for spending on coal-fired power plants within the United States and elsewhere.

The demand for power generation products and services depends primarily on the spending of electric power generating companies and other steam-using industries and expenditures by original equipment manufacturers. These expenditures are influenced by such factors including, but not limited to:
prices for electricity, along with the cost of production and distribution;
prices for natural resources such as coal and natural gas;
demand for electricity and other end products of steam-generating facilities;
availability of other sources of electricity or other end products;
requirements of environmental legislation and regulations, including potential requirements applicable to carbon dioxide emissions;
investments in renewable energy sources and technology;
impact of potential regional, state, national and/or global requirements to significantly limit or reduce greenhouse gas emissions in the future;
level of capacity utilization and associated operations and maintenance expenditures of power generating companies and other steam-using facilities;
requirements for maintenance and upkeep at operating power plants and other steam-using facilities to combat the accumulated effects of wear and tear;
ability of electric generating companies and other steam users to raise capital; and
relative prices of fuels used in boilers, compared to prices for fuels used in gas turbines and other alternative forms of generation.

We estimate that 38%, 47% and 43% of our consolidated revenues in 2022, 2021 and 2020, respectively, were related to coal-fired power plants. The availability of natural gas in great supply has caused, in part, low prices for natural gas in the United States, which has led to more demand for natural gas relative to energy derived from coal. A material decline in spending by electric power generating companies and other steam-using industries on coal-fired power plants over a sustained period of time could materially and adversely affect the demand for our power generation products and services and, therefore, our financial condition, results of operations and cash flows. Coal-fired power plants have been scrutinized by environmental groups and government regulators over the emissions of potentially harmful pollutants and the disposal of waste ash from the combustion process. This scrutiny and economic incentives including tax advantages, have promoted the growth of nuclear,
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wind and solar power, among others, and a decline in cost of renewable power plant components and power storage. The recent economic environment and uncertainty concerning new environmental legislation or replacement rules or regulations in the United States and elsewhere has caused many of our major customers, principally electric utilities, to delay making substantial expenditures for new plants, and delay upgrades to existing power plants.

Demand for our products and services is vulnerable to macroeconomic downturns and industry conditions.

Demand for our products and services has been, and we expect that demand will continue to be, subject to significant fluctuations due to macroeconomic and industry conditions, including but not limited to, the cyclical nature of the industries we serve, inflation, geopolitical issues, the availability and cost of credit, volatile oil and natural gas prices, low business and consumer confidence, high unemployment and energy conservation measures.

Unfavorable macroeconomic conditions may lead customers to delay, curtail or cancel proposed or existing contracts, which may decrease the overall demand for our products and services and adversely affect our results of operations.

In addition, our customers may find it more difficult to raise capital in the future due to limitations on the availability of credit, increases in interest rates and other factors affecting the federal, municipal and corporate credit markets. Also, our customers may demand more favorable pricing terms and find it increasingly difficult to timely pay invoices for our products and services, which would impact our future cash flows and liquidity. Inflation or significant changes in interest rates could reduce the demand for our products and services. Any inability to timely collect our invoices may lead to an increase in our borrowing requirements, our accounts receivable and potentially to increased write-offs of uncollectible invoices. If the economy weakens, or customer spending declines, then our backlog, revenues, net income and overall financial condition could deteriorate.

Supply chain issues, including shortages of adequate component supply that increase our costs or cause delays in our ability to fulfill orders, and our failure to estimate customer demand properly may result could have an adverse impact on our business and operating results and our relationships with customers.

We are reliant on our supply chain for components and raw materials to manufacture our products and provide services to our customers, and this reliance could have an adverse impact on our business and operating results. A reduction or interruption in supply, including disruptions due to the COVID-19 pandemic, the ongoing conflict in Ukraine, a significant natural disaster, shortages in global freight capacity, significant increases in the price of critical components and raw materials, a failure to appropriately forecast or adjust our requirements for components or raw materials based on our business needs, or volatility in demand for our products could materially adversely affect our business, operating results, and financial condition and could materially damage customer relationships. Our vendors also may be unable to meet our demand, significantly increase lead times for deliveries or impose significant price increases we are unable to offset through alternate sources of supply, price increases to our customers or increased productivity in our operations.

Our operations use raw materials in various forms and components and accessories for assembly, which are available from numerous sources. We generally purchase these raw materials and components as-needed for individual contracts. We do not depend on a single source of supply for any significant raw materials. Although no serious shortage exists at this time, growth or volatility in the global economy may exacerbate pressures on us and our suppliers, which could affect our operating and financial results.

Risks Related to Our Liquidity and Capital Resources

The financial and other covenants in our debt agreements may adversely affect us.

Our Debt Facilities contain financial and other restrictive covenants. These covenants could limit our financial and operating flexibility as well as our ability to plan for and react to market conditions, meet our capital needs and support our strategic priorities and initiatives should we take on additional indebtedness for acquisition or other strategic objectives. Our failure to comply with these covenants also could result in events of default which, if not cured or waived, could require us to repay indebtedness before its due date, and we may not have the financial resources or otherwise be able to arrange alternative financing to do so. Our compliance with the covenants of our Debt Facilities may be adversely affected by severe market contractions or disruptions to the extent they reduce our earnings for a prolonged period and we are not able to reduce our debt levels or cost structure accordingly. Any event that requires us to repay any of our debt before it is due could require us to borrow additional amounts at unfavorable borrowing terms, cause a significant reduction in our liquidity and impair our
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ability to pay amounts due on our indebtedness. Moreover, if we are required to repay any of our debt before it becomes due, we may be unable to borrow additional amounts or otherwise obtain the cash necessary to repay that debt, when due, which could have a material adverse effect on our business, financial condition and liquidity.

We must refinance our 8.125% Notes due 2026 and 6.50% Notes due 2026 prior to their maturity.

As described in Note 14 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report, during 2021, we completed offerings of $151.2 million aggregate principal amount of our 8.125% senior notes due 2026 (“8.125% Senior Notes”) and $151.4 million aggregate principal amount of our 6.50% senior notes due in 2026 (the “6.50% Senior Notes” and, together with the 8.125% Senior Notes, the “Notes Due 2026”). Depending on our future financial condition and results of operations for 2023, we may be unable to refinance our Notes Due 2026 on or prior to their maturity or at all.

There can be no assurance that our efforts to improve our financial position will be successful or that we will be able to obtain additional capital in the future on commercially reasonable terms or at all. If we are unable to refinance our Notes Due 2026 on commercially reasonable terms or at all, it may materially and adversely affect our reputation, liquidity, business, financial condition or results of operations, we may breach our obligations under either of the Notes Due 2026 and it may be necessary for us to reorganize our company in its entirety, including through bankruptcy proceedings.

Maintaining adequate bonding and letter of credit capacity is necessary for us to successfully complete, bid on and win various contracts.

In line with industry practice, we are often required to post standby letters of credit and surety bonds to support contractual obligations to customers as well as other obligations. These letters of credit and bonds generally indemnify customers should we fail to perform our obligations under the applicable contracts. If a letter of credit or bond is required for a particular contract and we are unable to obtain it due to insufficient liquidity or other reasons, we will not be able to pursue that contract, or we could default on contracts that are underway or that have been awarded. We utilize bonding facilities, but, as is typically the case, the issuance of bonds under each of those facilities is at the surety’s sole discretion. Moreover, due to events that affect the insurance and bonding and credit markets generally, bonding and letters of credit may be more difficult to obtain in the future or may only be available at significant additional cost. Our inability to obtain or maintain adequate letters of credit and bonding and, as a result, to bid on new work could have a material adverse effect on our business, financial condition and results of operations. The aggregate value of all such letters of credit and bank guarantees outside of our Letter of Credit Agreement as of December 31, 2022 was $60.3 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 $37.8 million as of December 31, 2022. Of the outstanding letters of credit issued under the Letter of Credit Agreement, $67.5 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 December 31, 2022, bonds issued and outstanding under these arrangements in support of contracts totaled approximately $320.6 million. The aggregate value of the letters of credit backstopping surety bonds was $14.1 million.
Our ability to obtain and maintain sufficient capacity under our 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.

Our evaluation of strategic alternatives for certain businesses and non-core assets may not result in a successful transaction.

We continue to evaluate strategic alternatives for our business lines and assets to improve the Company's capital structure. There can be no assurance that these ongoing strategic evaluations will result in the identification or consummation of any transaction. We may incur substantial expenses associated with identifying and evaluating potential strategic alternatives. The process of exploring strategic alternatives may be time consuming and disruptive to our business operations, and if we are unable to effectively manage the process, our business, financial condition and results of operations could be adversely affected. We cannot assure that any potential transaction or other strategic alternative, if identified, evaluated and
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consummated, will prove to be beneficial to shareholders and that the process of identifying, evaluating and consummating any potential transaction or other strategic alternative will not adversely impact our business, financial condition or results of operations. Any potential transaction would be dependent upon a number of factors that may be beyond our control, including, among other factors, market conditions, industry trends, the interest of third parties in our business, the availability of financing to potential buyers on reasonable terms, and the consent of our lenders.

In addition, while this strategic evaluation continues, we are exposed to risks and uncertainties, including potential difficulties in retaining and attracting key employees, distraction of our management from other important business activities, and potential difficulties in establishing and maintaining relationships with customers, suppliers, lenders, sureties and other third parties, all of which could harm our business.

Our total assets include goodwill and other indefinite-lived intangible assets. If we determine these have become impaired, our business, financial condition and results of operations could be materially adversely affected.

Goodwill represents the excess of cost over the fair market value of net assets acquired in business combinations. Indefinite-lived intangibles are comprised of certain trademarks and tradenames. At December 31, 2022, goodwill and other indefinite-lived intangible assets totaled $217.3 million. We review goodwill and other intangible assets at least annually for impairment and any excess in carrying value over the estimated fair value is charged to the Consolidated Statement of Operations. During the quarter ended September 30, 2022, the Company recorded impairment losses related to the Babcock & Wilcox Solar reporting unit of $7.2 million. No indicators of goodwill impairment were identified for the Company's other reporting units at the measurement date. Future impairment may result from, among other things, deterioration in the performance of an acquired business or product line, adverse market conditions and changes in the competitive landscape, adverse changes in applicable laws or regulations, including changes that restrict the activities of an acquired business or product line, and a variety of other circumstances. If the value of our business were 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.

We are exposed to credit risk and may incur losses as a result of such exposure.

We conduct our business by obtaining orders that generate cash flows in the form of advances, contract progress payments and final balances in accordance with the underlying contractual terms. We are thus exposed to potential losses resulting from contractual counterparties' failure to meet their obligations. As a result, the failure by customers to meet their payment obligations, or a mere delay in making those payments, could reduce our liquidity and increase the need to resort to other sources of financing, with possible adverse effects on our business, financial condition, results of operations and cash flows. In some cases, we have joint and several liability with consortium partners in our projects and we may be subject to additional losses if our partners are unable to meet their contractual obligations.

In addition, the deterioration of macroeconomic conditions or negative trends in the global credit markets could have a negative impact on relationships with customers and our ability to collect on trade receivables, with possible adverse effects on our business, financial condition, results of operations and cash flows.

The transition away from LIBOR may negatively impact our operating results.

The London interbank offered rate ("LIBOR"), is the interest rate benchmark previously used as a reference rate on our variable rate debt. The use of LIBOR is expected to be phased out by June 2023. The Financial Accounting Standards Board (“FASB”) has provided for entities to elect certain optional expedients and exceptions when accounting for certain instruments affected by changes in the interest rates through December 31, 2024.

On March 15, 2022, the Adjustable Interest Rate (LIBOR) Act (the “LIBOR ACT”) was signed into law. Under the LIBOR Act, the Board of Governors of the Federal Reserve System is directed to select the Secured Overnight Financing Rate (“SOFR”), published by the Federal Reserve Bank of New York, as the replacement rate for contracts that reference LIBOR as a benchmark rate and that do not contain either a specified replacement rate or a replacement mechanism after USD LIBOR ceases publication. In addition, recent New York state legislation effectively codified the use of SOFR as the alternative to LIBOR in the absence of another chosen replacement rate, which may affect contracts governed by New York state law, including our Revolving Credit Agreement. SOFR is calculated differently from LIBOR and the inherent differences between LIBOR and SOFR or any other alternative benchmark rate gives rise to many uncertainties, including the
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need to amend existing debt instruments and the need to choose alternative reference rates in new contracts. The consequences of these developments with respect to LIBOR cannot be entirely predicted and span multiple future periods but could result in an increase in the cost of our variable rate debt which may be detrimental to our financial position or operating results.

As of December 31, 2022, no borrowings have occurred under the Revolving Credit Agreement that are currently subject to changes in LIBOR. Our senior notes have fixed interest rates and are not subject to changes in other benchmark borrowing rates.

Any period of interest rate increases may adversely affect the Company’s profitability. As of December 31, 2022, less than 1% of the Company's indebtedness bears interest at rates that float with the market. A higher level of floating rate debt would increase the exposure to changes in interest rates.

Risks Related to Intellectual Property and Information Security

A disruption in, or failure of our information technology systems, including those related to cybersecurity, could adversely affect our business operations and financial performance.

We rely on information technology systems, including the Internet, to process, transmit and store electronic sensitive and confidential information, to manage and support a variety of business processes and activities and to comply with regulatory, legal and tax requirements. While we maintain some of our critical information technology systems, we are also dependent on third parties to provide important information technology services relating to, among other things, human resources, electronic communications and certain finance functions.

We face various threats to our information technology systems, including cyber threats, threats to the physical security of our facilities and infrastructure from natural or man-made incidents or disasters, threats from insider and terrorist acts, as well as the potential for business disruptions associated with these threats. We have been, and will likely continue to be, subject to cyber-based attacks and other attempts to threaten our information technology systems and the software we sell. A cyber-based attack could include attempts to gain unauthorized access to our proprietary information and attacks from malicious third parties using sophisticated, targeted methods to circumvent firewalls, encryption and other security defenses, including hacking, fraud, phishing scams or other forms of deception. Although we utilize a combination of tailored and industry standard security measures and technology to monitor and mitigate these threats, we cannot guarantee that these measures and technology will be sufficient to prevent current and future threats to our information technology networks and systems from materializing. Furthermore, we may have little or no in into security measures employed by third-party service providers, which could ultimately prove to be a vector of a cyber threat.

If these systems are damaged, intruded upon, attacked, shutdown or cease to function properly, whether by misconfiguration, planned upgrades, force majeure events, telecommunication failures, malware or viruses, or other cybersecurity incidents and our business continuity plans do not mitigate the issues in a timely manner, the services we provide to customers, the value of our investment in research and development efforts and other intellectual property, our product sales, our ability to comply with regulations related to information contained on our information technology systems, our financial condition, results of operations and stock price may be materially and adversely affected, and we could experience delays in reporting our financial results. In addition, there is a risk of business interruption, litigation with third parties, reputational damage from loss of confidential information or the software we sell being compromised, and increased cybersecurity protection and remediation costs due to the increasing sophistication and proliferation of threats. The costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by other means.

To address risks to our information technology systems, we continue to invest in our systems and training of company personnel. As necessary, we replace and/or upgrade financial, human resources and other information technology systems. These activities subject us to inherent costs and risks associated with replacing and updating these systems, including potential disruption of our internal control structure, substantial capital expenditures, demands on management time and other risks of delays or difficulties in transitioning to new systems or of integrating new systems into our current systems. Our systems implementations and upgrades may not result in productivity improvements at the levels anticipated, or at all. In addition, the implementation of new technology systems may cause disruptions in our business operations. Such disruption and any other information technology system disruptions, and our ability to mitigate those disruptions, if not anticipated and appropriately mitigated, could have a material adverse effect on our financial condition, results of operations and stock price.

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Privacy and information security laws are complex, and if we fail to comply with applicable laws, regulations and standards, or if we fail to properly maintain the integrity of our data, protect our proprietary rights to our systems or defend against cybersecurity attacks, we may be subject to government or private actions due to privacy and security breaches, any of which could have a material adverse effect on our business, financial condition and results of operations or materially harm our reputation.

We are subject to a variety of laws and regulations in the United States and other countries that involve matters central to our business, including user privacy, security, rights of publicity, data protection, content, intellectual property, distribution, electronic contracts and other communications, competition, protection of minors, consumer protection, taxation, and online-payment services. These laws can be particularly restrictive in countries outside the United States. Both in the United States and abroad, these laws and regulations constantly evolve. In addition, the application and interpretation of these laws and regulations are often uncertain, particularly in the new and rapidly evolving industry in which we operate. Because we store, process, and use data, some of which contains personal information, we are subject to complex and evolving federal, state, and foreign laws and regulations regarding privacy, data protection, content, and other matters. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in investigations, claims, changes to our business practices, increased cost of operations, and declines in user growth, retention, or engagement, any of which could seriously harm our business.

Several proposals have been adopted or are currently pending before federal, state, and foreign legislative and regulatory bodies that could significantly affect our business. The General Data Protection Regulation, or GDPR, in the European Union, which went into effect on May 25, 2018, placed new data protection obligations and restrictions on organizations. If we are not compliant with GDPR requirements, we may be subject to significant fines and our business may be seriously harmed. In addition, the California Consumer Privacy Act and its significant modifications that are effective in 2023 placed additional requirements on the handling of personal data.

We rely on intellectual property law and confidentiality agreements to protect our intellectual property. We also rely on intellectual property we license from third parties. Our failure to protect our intellectual property rights, or our inability to obtain or renew licenses to use intellectual property of third parties, could adversely affect our business.

Our success depends, in part, on our ability to protect our proprietary information and other intellectual property. Our intellectual property could be stolen, challenged, invalidated, circumvented or rendered unenforceable. In addition, effective intellectual property protection may be limited or unavailable in some foreign countries where we operate.

Our failure to protect our intellectual property rights may result in the loss of valuable technologies or adversely affect our competitive business position. We rely significantly on proprietary technology, information, processes and know-how that are not subject to patent or copyright protection. We seek to protect this information through trade secret or confidentiality agreements with our employees, consultants, subcontractors or other parties, as well as through other security measures. These agreements and security measures may be inadequate to deter or prevent misappropriation of our confidential information. In the event of an infringement of our intellectual property rights, a breach of a confidentiality agreement or divulgence of proprietary information, we may not have adequate legal remedies to protect our intellectual property. Litigation to determine the scope of intellectual property rights, even if ultimately successful, could be costly and could divert management's attention away from other aspects of our business. In addition, our trade secrets may otherwise become known or be independently developed by competitors.

In some instances, we have augmented our technology base by licensing the proprietary intellectual property of third parties. In the future, we may not be able to obtain necessary licenses on commercially reasonable terms, which could have a material adverse effect on our operations.

Risks Related to Government Regulation

We are subject to government regulations that may adversely affect our future operations.


Many aspects of our operations and properties are affected by political developments and are subject to both domestic and foreign governmental regulations, including those relating to:

the construction and manufacture of renewable, environmental and thermal products;
constructing and manufacturing power generation products;
currency conversions and repatriation;
clean air and other environmental protection legislation;
taxation of domestic and foreign earnings;
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tariffs, duties, or trade sanctions and other trade barriers imposed by foreign countries that restrict or prohibit business transactions in certain markets or in certain goods;
user privacy, security, data protection, content, and online-payment services;
intellectual property;
transactions in or with foreign countries or officials; and
use of local employees and suppliers.


In addition, a substantial portion of the demand for our products and services is from electric power generating companies and other steam-using customers. The demand for power generation products and services can be influenced by governmental legislation setting requirements for utilities related to operations, emissions and environmental impacts. The legislative process is unpredictable and includes a platform that continuously seeks to increase the restrictions on power producers. Potential legislation limiting emissions from power plants, including carbon dioxide, could affect our markets and the demand for our products and services related to power generation.


We cannot determine the extent to which our future operations and earnings may be affected by new legislation, new regulations or changes in existing regulations.


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Our business and our customers'customers’ businesses are required to obtain, and to comply with, national, state and local government permits and approvals.


Our business and our customers'customers’ businesses are required to obtain, and to comply with, national, state and local government permits and approvals. Any of these permits or approvals may be subject to denial, revocation or modification under various circumstances. Failure to obtain or comply with the conditions of permits or approvals may adversely affect our operations by temporarily suspending our activities or curtailing our work and may subject us to penalties and other sanctions. Although existing licenses are routinely renewed by various regulators, renewal could be denied or jeopardized by various factors, including:including, but not limited to:

failure to comply with environmental and safety laws and regulations or permit conditions;
local community, political or other opposition;
executive action; and
legislative action.


In addition, if new environmental legislation or regulations are enacted or implemented, or existing laws or regulations are amended or are interpreted or enforced differently, we or our customers may be required to obtain additional operating permits or approvals. Our inability or our customers' inability to obtain, and to comply with, the permits and approvals required for our business could have a material adverse effect on us.


Risks Related to Environmental Regulation

Our operations are subject to various environmental laws and legislation that may become more stringent in the future.


Our operations and properties are subject to a wide variety of increasingly complex and stringent foreign, federal, state and local environmental laws and regulations, including those governing discharges into the air and water, the handling and disposal of solid and hazardous wastes, the remediation of soil and groundwater contaminated by hazardous substances and the health and safety of employees. Sanctions for noncompliance may include revocation of permits, corrective action orders, administrative or civil penalties and criminal prosecution. Some environmental laws provide for strict, joint and several liability for remediation of spills and other releases of hazardous substances, as well as damage to natural resources. In addition, companies may be subject to claims alleging personal injury or property damage as a result of alleged exposure to hazardous substances. Such laws and regulations may also expose us to liability for the conduct of or conditions caused by others or for our acts that were in compliance with all applicable laws at the time such acts were performed.


We cannot predict all of the environmental requirements or circumstances that will exist in the future but anticipate that environmental control and protection standards will become increasingly stringent and costly. Based on our experience to date, we do not currently anticipate any material adverse effect on our business or financial condition as a result of future compliance with existing environmental laws and regulations. However, future events, such as changes in existing laws and regulations or their interpretation, more vigorous enforcement policies of regulatory agencies or stricter or different interpretations of existing laws and regulations, may require additional expenditures by us, which may be material. Accordingly, we can provide no assurance that we will not incur significant environmental compliance costs in the future.

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Our operations involve the handling, transportation and disposal of hazardous materials, and environmental laws and regulations and civil liability for contamination of the environment or related personal injuries may result in increases in our operating costs and capital expenditures and decreases in our earnings and cash flows.


Our operations involve the handling, transportation and disposal of hazardous materials. Failure to properly handle these materials could pose a health risk to humans or wildlife and could cause personal injury and property damage (including environmental contamination). If an accident were to occur, its severity could be significantly affected by the volume of the materials and the speed of corrective action taken by emergency response personnel, as well as other factors beyond our control, such as weather and wind conditions. Actions taken in response to an accident could result in significant costs.


Governmental requirements relating to the protection of the environment, including solid waste management, air quality, water quality and cleanup of contaminated sites, have in the past had a substantial impact on our operations. These requirements are complex and subject to frequent change. In some cases, they can impose liability for the entire cost of cleanup on any responsible party without regard to negligence or fault and impose liability on us for the conduct of others or conditions others have caused, or for our acts that complied with all applicable requirements when we performed them. Our compliance with amended, new or more stringent requirements, stricter interpretations of existing requirements or the future discovery of contamination may require us to make material expenditures or subject us to liabilities that we currently do not

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anticipate. Such expenditures and liabilities may adversely affect our business, financial condition, results of operations and cash flows. In addition, some of our operations and the operations of predecessor owners of some of our properties have exposed us to civil claims by third parties for liability resulting from alleged contamination of the environment or personal injuries caused by releases of hazardous substances into the environment.


In our contracts, we seek to protect ourselves from liability associated with accidents, but there can be no assurance that such contractual limitations on liability will be effective in all cases or that our or our customers' insurance will cover all the liabilities we have assumed under those contracts. The costs of defending against a claim arising out of a contamination incident or precautionary evacuation, and any damages awarded as a result of such a claim, could adversely affect our results of operations and financial condition.


We maintain insurance coverage as part of our overall risk management strategy and due to requirements to maintain specific coverage in our financing agreements and in many of our contracts. These policies do not protect us against all liabilities associated with accidents or for unrelated claims. In addition, comparable insurance may not continue to be available to us in the future at acceptable prices, or at all.


Risks Related to Our International Operations

Our business may also be affected by new sanctions and export controls targeting Russia and other responses to Russia's invasion of Ukraine.

As a result of Russia's invasion of Ukraine, the United States, the United Kingdom and the European Union governments, among others, have developed coordinated sanctions and export control measure packages.

Based on the public statements to date, these packages may include:

comprehensive financial sanctions against Russian banks (including SWIFT cut off);
additional designations of Russian individuals with significant business interests and government connections;
designations of individuals and entities involved in Russian military activities;
enhanced export controls and trade sanctions targeting Russia's import of certain goods;
closure of airspace to Russian aircraft.

Moreover, as the Russian invasion of Ukraine continues, there can be no certainty regarding whether such governments or other governments will impose additional sanctions, export controls or other economic or military measures against Russia.

We do not currently have contracts directly with Russian entities or businesses and we currently do not do business in Russia directly. We believe the Company’s only involvement with Russia or Russian-entities, involves sales of our products by a wholly-owned Italian subsidiary of the Company to non-Russian counterparties who may resell our products to Russian entities or perform services in Russia using our products. The economic sanctions and export-control measures and the
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ongoing invasion of Ukraine could impact our subsidiary’s rights and responsibilities under the contracts and could result in potential losses to the Company.

The impact of the invasion of Ukraine, including economic sanctions and export controls or additional war or military conflict, as well as potential responses to them by Russia, is currently unknown and they could adversely affect our business, supply chain, partners or customers. In addition, the continuation of the invasion of Ukraine by Russia could lead to other disruptions, instability and volatility in global markets and industries that could negatively impact our operations.


We could be adversely affected by violations of the United States Foreign Corrupt Practices Act, the UK Anti-Bribery Act or other anti-bribery laws.


The United States Foreign Corrupt Practices Act (the "FCPA"“FCPA”) generally prohibits companies and their intermediaries from making improper payments to non-United States government officials. Our training program, audit process and policies mandate compliance with the FCPA, the UK Anti-Bribery Act (the "UK Act"“UK Act”) and other anti-bribery laws. We operate in some parts of the world that have experienced governmental corruption to some degree, and, in some circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. If we are found to be liable for violations of the FCPA, the UK Act or other anti-bribery laws (either due to our own acts or our inadvertence, or due to the acts or inadvertence of others, including agents, promoters or employees of our joint ventures), we could suffer from civil and criminal penalties or other sanctions.

We conduct a portion of our operations through joint venture entities, over which we may have limited ability to influence.

We currently have equity interests in several significant joint ventures, which contributed income (losses) of $(9.9) million, $16.4 million and $(0.2) million to equity in income (loss) from investees for the years ended December 31, 2017, 2016 and 2015, respectively, and may enter into additional joint venture arrangements in the future. Our influence over some of these entities may be limited. Even in those joint ventures over which we do exercise significant influence, we are often required to consider the interests of our joint venture partners in connection with major decisions concerning the operations of the joint ventures. In any case, differences in views among the joint venture participants may result in delayed decisions or disputes. We also cannot control the actions of our joint venture participants. We sometimes have joint and several liabilities with our joint venture partners under the applicable contracts for joint venture contracts and we cannot be certain that our partners will be able to satisfy any potential liability that could arise. These factors could potentially harm the business and operations of a joint venture and, in turn, our business and operations.

Operating through joint ventures in which we are minority holders results in us having limited control over many decisions made with respect to business practices, contracts and internal controls relating to contracts. These joint ventures may not be subject to the same requirements regarding internal controls and internal control over financial reporting that we follow. As a result, internal control problems may arise with respect to the joint ventures that could adversely affect our ability to respond to requests or contractual obligations to customers or to meet the internal control requirements to which we are otherwise subject.

Our joint ventures located in countries outside of the United States are subject to various risks and uncertainties associated with emerging markets, including bribery and corruption, changes in laws, rules and regulations, fluctuations in demand, labor unrest, and the impact of regional and global business conditions generally. To the extent any of these factors has a material adverse impact on the joint venture or its future operations, our investment may become impaired. With respect to each joint venture, we, or our joint venture partner, may decide to change the strategic direction of the joint venture, which could adversely affect its sales, financial condition, and results of operations. In addition, our arrangements involving joint ventures may restrict us from gaining access to the cash flows or assets of these entities, including when we determine to exit a joint venture. In some cases, our joint ventures have governmentally imposed restrictions on their abilities to transfer funds

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to us. At December 31, 2017, our total investment in joint ventures was $43.3 million, which included $26.0 million related to a joint venture in India and $16.6 million related to a joint venture in China that was sold in the early part of 2018.

We may not be able to compete successfully against current and future competitors.

Some of our competitors or potential competitors have greater financial or other resources than we have and in some cases are government supported. Our operations may be adversely affected if our current competitors or new market entrants introduce new products or services with better features, performance, prices or other characteristics than those of our products and services. Furthermore, we operate in industries where capital investment is critical. We may not be able to obtain as much purchasing and borrowing leverage and access to capital for investment as other companies, which may impair our ability to compete against competitors or potential competitors.
The loss of the services of one or more of our key personnel, or our failure to attract, assimilate and retain trained personnel in the future, could disrupt our operations and result in loss of revenues or profits.

Our success depends on the continued active participation of our executive officers and key operating personnel. The unexpected loss of the services of any one of these persons could adversely affect our operations.

Our operations require the services of employees having the technical training and experience necessary to obtain the proper operational results. As such, our operations depend, to a considerable extent, on the continuing availability of such personnel. If we should suffer any material loss of personnel to competitors, retirement or other reasons, or be unable to employ additional or replacement personnel with the requisite level of training and experience to adequately operate our business, our operations could be adversely affected. While we believe our wage rates are competitive and our relationships with our employees are satisfactory, a significant increase in the wages paid by other employers could result in a reduction in our workforce, increases in wage rates, or both. Additionally, we froze pension plan benefit accruals at the end of 2015, which could also result in incremental turnover in our workforce. If any of these events occurred for a significant period of time, our financial condition, results of operations and cash flows could be adversely impacted.

Negotiations with labor unions and possible work stoppages and other labor problems could divert management's attention and disrupt operations. In addition, new collective bargaining agreements or amendments to existing agreements could increase our labor costs and operating expenses.

A significant number of our employees are members of labor unions. If we are unable to negotiate acceptable new contracts with our unions from time to time, we could experience strikes or other work stoppages by the affected employees. If any such strikes or other work stoppages were to occur, we could experience a significant disruption of operations. In addition, negotiations with unions could divert management attention. New union contracts could result in increased operating costs, as a result of higher wages or benefit expenses, for both union and nonunion employees. If nonunion employees were to unionize, we could experience higher ongoing labor costs.

Pension and medical expenses associated with our retirement benefit plans may fluctuate significantly depending on a number of factors, and we may be required to contribute cash to meet underfunded pension obligations.

A substantial portion of our current and retired employee population is covered by pension and postretirement benefit plans, the costs and funding requirements of which depend on our various assumptions, including estimates of rates of return on benefit-related assets, discount rates for future payment obligations, rates of future cost growth, mortality assumptions and trends for future costs. Variances from these estimates could have a material adverse effect on us. Our policy to recognize these variances annually through mark to market accounting could result in volatility in our results of operations, which could be material. As of December 31, 2017, our defined benefit pension and postretirement benefit plans were underfunded by approximately $258.8 million. In addition, certain of these postretirement benefit plans were collectively bargained, and our ability to curtail or change the benefits provided may be impacted by contractual provisions set forth in the relevant union agreements and other plan documents. We also participate in various multi-employer pension plans in the United States and Canada under union and industry agreements that generally provide defined benefits to employees covered by collective bargaining agreements. Absent an applicable exemption, a contributor to a United States multi-employer plan is liable, upon termination or withdrawal from a plan, for its proportionate share of the plan's underfunded vested liability. Funding requirements for benefit obligations of these multi-employer pension plans are subject to certain regulatory requirements, and we may be required to make cash contributions which may be material to one or more of these plans to satisfy certain

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underfunded benefit obligations. See Note 18 to the consolidated financial statements included in Item 8 in this annual report for additional information regarding our pension and postretirement benefit plan obligations.


Our international operations are subject to political, economic and other uncertainties not generally encountered in our domestic operations.


We derive a substantial portion of our revenues and equity in income of investees from international operations, and we intend to continue to expand our international operationspresence and customer base as part of our growth strategy. Our revenues from sales to customers located outside of the United States represented approximately 51%44%, 46%40% and 41% 45%of total revenues for the years ended December 31, 2017, 20162022, 2021 and 2015,2020, respectively. Operating in international markets requires significant resources and management attention and subjects us to political, economic and regulatory risks that are not generally encountered in our United States operations. These include:include, but are not limited to:

risks of war, terrorism and civil unrest;
expropriation, confiscation or nationalization of our assets;
renegotiation or nullification of our existing contracts;
changing political conditions and changing laws and policies affecting trade and investment;
overlap of different tax structures; and
risk of changes in foreign currency exchange rates.rates; and

tariffs, price controls and trade agreements and disputes.

Various foreign jurisdictions have laws limiting the right and ability of foreign subsidiaries and joint ventures to pay dividends and remit earnings to affiliated companies. Our international operations sometimes face the additional risks of fluctuating currency values, hard currency shortages and controls of foreign currency exchange. If we continue to expand our business globally, our success will depend, in part, on our ability to anticipate and effectively manage these and other risks. These and other factors may have a material impact on our international operations or our business as a whole.


International uncertainties and fluctuations in the value of foreign currencies could harm our profitability.


We have international operations primarily in Europe, Canada, and Canada.Mexico. For the year ended December 31, 2017,2022, international operations accounted for approximately 51%44% of our total revenues. Our significant international subsidiaries may have sales and cost of sales in different currencies as well as other transactions that are denominated in currencies other than their functional currency. WeAlthough we do not currently engage in currency hedging activities, we evaluate opportunities to engage in hedging in order to limit the risks of currency fluctuations. Consequently, fluctuations in foreign currencies could have a negative impact on the profitability of our global operations, which would harm our financial results and cash flows.


Natural disasters or other events beyond our control could adversely impact our business.

Natural disasters, such as earthquakes, tsunamis, hurricanes, floods, tornadoes, or other events could adversely impact demand for or supply of our products. In addition, natural disasters could also cause disruption to our facilities, systems or projects, which could interrupt operational processes and performance on our contracts and adversely impact our ability to manufacture our products and provide services and support to our customers. We operate facilities in areas of the world that are exposed to natural disasters, such as, but not limited to, hurricanes, floods and tornadoes.

War, other armed conflicts or terrorist attacks could have a material adverse effect on our business.
War, terrorist attacks and unrest have caused and may continue to cause instability in the world's financial and commercial markets and have significantly increased political and economic instability in some of the geographic areas in which we operate. Threats of war or other armed conflict may cause further disruption to financial and commercial markets. In addition, continued unrest could lead to acts of terrorism in the United States or elsewhere, and acts of terrorism could be directed against companies such as ours. Also, acts of terrorism and threats of armed conflicts in or around various areas in which we operate could limit or disrupt our markets and operations, including disruptions from evacuation of personnel, cancellation of contractsUncertainty over global tariffs, or the lossfinancial impact of personnel or assets. Armed conflicts, terrorism and their effects on us or our marketstariffs, may significantlynegatively affect our businessresults.

Changes in U.S. domestic and resultsglobal tariff frameworks have increased our costs of operations in the future.


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Risks Relating to our 2015 Spin-Off from our Former Parent

We may be unable to achieve some or all of the benefits that we expect to achieve from our separation from BWC.

As an independent public company, we believe that we are able to more effectively focus on our operations and growth strategies than we could as a segment of BWC prior to the spin-off. However, following our separation from BWC in the spin-off, there is a risk that our results of operations and cash flows may be susceptible to greater volatility due to fluctuations in our business levels and other factors that may adversely affect our operating and financial performance. In addition, as a segment of BWC, we previously benefitted from BWC's financial resources. Because BWC's other operations will no longer be available to offset any volatility in our results of operations and cash flows and BWC's financial and other resources will no longer be available to us, we may not be able to achieve some or all of the benefits that we expect to achieve as an independent public company.

Our historical audited consolidated financial information is not necessarily indicative of our future financial condition, future results of operations or future cash flows nor does it reflect what our financial condition, results of operations or cash flows would have been as an independent public company during the periods presented.

The historical audited consolidated financial information included in this annual report for periods prior to July 1, 2015 does not necessarily reflect what our financial condition, results of operations or cash flows would have been as an independent public company during such periods and is not necessarily indicative of our future financial condition, future results of operations or future cash flows. This is primarily a result of the following factors:

the historical audited consolidated financial results reflect allocations of expenses for services historically provided by BWC, and those allocations may be different than the comparable expenses we would have incurred as an independent company;
our cost of debt and other capitalization may be different from that reflected in our historical audited consolidated financial statements;
the historical audited consolidated financial information does not reflect the changes that will occur in our cost structure, management, financing arrangements and business operations as a result of our separation from BWC, including the costs related to being an independent company; and
the historical audited consolidated financial information does not reflect the effects of some of the liabilities that have been assumed by B&W and does reflect the effects of some of the assets that have been transferred to, and liabilities that have been assumed by, BWC, including the assets and liabilities associated with BWC's Nuclear Energy segment, which were previously part of B&W and were transferred to BWC prior to the spin-off.

Please refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in Part II, Item 7, and the consolidated financial statements included in Item 8 of this annual report.

We are subject to continuing contingent liabilities of BWC following the spin-off.

As a result of the spin-off, there are several significant areas where the liabilities of BWC may become our obligations. For example, under the Internal Revenue Code of 1986, as amended (the "Code") and the related rules and regulations, each corporation that was a member of BWC consolidated tax reporting group during any taxable period or portion of any taxable period ending on or before the completion of the spin-off is jointly and severally liable for the federal income tax liability of the entire consolidated tax reporting group for that taxable period. We entered into a tax sharing agreement with BWCproducing goods, particularly in connection with the spin-off that allocates the responsibility for prior period taxes of BWC consolidated tax reporting group between usimports used in our renewable business, and BWC and its subsidiaries. However, if BWC were unableresulted in additional risks to pay, we could be required to pay the entire amount of such taxes. Other provisions of law establish similar liability for other matters, including laws governing tax-qualified pension plans as well as other contingent liabilities. The other contingent liabilities include personal injury claims or environmental liabilities related to BWC's historical nuclear operations. For example, BWC has agreed to indemnify us for personal injury claims and environmental liabilities associated with radioactive materials related to the operation, remediation, and/or decommissioning of two former nuclear fuel processing facilities located in the Borough of Apollo and Parks Township, Pennsylvania. To the extent insurance providers and third party indemnitors do not cover those liabilities, and BWC was unable to pay, we could be required to pay for them.


our supply chain. We have
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The spin-off could resultdeveloped and implemented strategies to mitigate previously implemented and, in substantial tax liability.

The spin-off was conditioned on BWC's receipt of an opinion of counsel, in form and substance satisfactory to BWC, substantially to the effect that, for United States federal income tax purposes, the spin-off qualifies under Section 355 of the Code, and certain transactions related to the spin-off qualify under Sections 355 and/or 368 of the Code. The opinion relied on, among other things, various assumptions and representations as to factual matters made by BWC and us which, if inaccurate or incomplete in any material respect, would jeopardize the conclusions reached by such counsel in its opinion. The opinionsome cases, proposed tariff increases, but there is not binding on the United States Internal Revenue Service ("IRS") or the courts, and there can be no assurance that the IRS or the courts will not challenge the conclusions stated in the opinion or that any such challenge would not prevail.

We are not aware of any facts or circumstances that would cause the assumptions or representations that were relied on in the opinion to be inaccurate or incomplete in any material respect. If, notwithstanding receipt of the opinion, the spin-off were determined not to qualify under Section 355 of the Code, each United States holder of BWC common stock who received shares of our common stock in the spin-off would generally be treated as receiving a taxable distribution of property in an amount equal to the fair market value of the shares of our common stock received. In addition, if certain related preparatory transactions were to fail to qualify for tax-free treatment, they would be treated as taxable asset sales and/or distributions.

Under the terms of the tax sharing agreement we entered into in connection with the spin-off, we and BWC generally share responsibility for any taxes imposed on us or BWC and its subsidiaries in the event that the spin-off and/or certain related preparatory transactions were to fail to qualify for tax-free treatment. However, if the spin-off and/or certain related preparatory transactions were to fail to qualify for tax-free treatment because of actions or failures to act by us or BWC, we or BWC, respectively, would be responsible for all such taxes. If we are liable for taxes under the tax sharing agreement, that liability could have a material adverse effect on us.

Potential liabilities associated with obligations under the tax sharing agreement cannot be precisely quantified at this time.

Under the terms of the tax sharing agreement we entered into in connection with the spin-off, we are generally responsible for all taxes attributable to us or any of our subsidiaries, whether accruing before, on or after the date of the spin-off. We and BWC generally share responsibility for all taxes imposed on us or BWC and its subsidiaries in the event the spin-off and/or certain related preparatory transactions were to fail to qualify for tax-free treatment. However, if the spin-off and/or certain related preparatory transactions were to fail to qualify for tax-free treatment because of actions or failures to act by us or BWC, we or BWC, respectively would be responsible for all such taxes. Our liabilities under the tax sharing agreement could have a material adverse effect on us. At this time, we cannot precisely quantify the amount of liabilities we may have under the tax sharing agreement and there can be no assurances as to their final amounts.

Under some circumstances, we could be liable for any resulting adverse tax consequences from engaging in significant strategic or capital raising transactions.

Even if the spin-off otherwise qualifies as a tax-free distribution under Section 355 of the Code, the spin-off and certain related transactions may result in significant United States federal income tax liabilities to us under Section 355(e) and other applicable provisions of the Code if 50% or more of BWC's stock or our stock (in each case, by vote or value) is treated as having been acquired, directly or indirectly, by one or more persons as part of a plan (or series of related transactions) that includes the spin-off. Any acquisitions of BWC stock or our stock (or similar acquisitions), or any understanding, arrangement or substantial negotiations regarding such an acquisition of BWC stock or our stock (or similar acquisitions), within two years before or after the spin-off are subject to special scrutiny. The process for determining whether an acquisition triggering those provisions has occurred is complex, inherently factual and subject to interpretation of the facts and circumstances of a particular case.

Under the terms of the tax sharing agreement we entered into in connection with the spin-off, BWC generally is liable for any such tax liabilities. However, we are required to indemnify BWC against any such tax liabilities that result from actions taken or failures to act by us. As a result of these rules and contractual provisions, we may be unable, within the two year period following the spin, to engage in strategic or capital raising transactions that our stockholders might consider favorable, or to structure potential transactions in the manner most favorable to us, without certain adverse tax consequences.


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Potential indemnification liabilities to BWC pursuant to the master separation agreement could materially adversely affect B&W.

The master separation agreement with BWC provides for, among other things, the principal corporate transactions required to effect the spin-off, certain conditions to the spin-off and provisions governing the relationship between B&W and BWC with respect to and resulting from the spin-off. Among other things, the master separation agreement provides for indemnification obligations designed to make B&W financially responsible for substantially all liabilities that may exist relating to our business activities, whether incurred prior to or after the spin-off, as well as those obligations of BWC assumed by us pursuant to the master separation agreement. If we are required to indemnify BWC under the circumstances set forth in the master separation agreement, we may be subject to substantial liabilities.

In connection with our separation from BWC, BWC has agreed to indemnify us for certain liabilities. However, there can be no assurance that the indemnity will be sufficient to insure us against the full amount of such liabilities, or that BWC's ability to satisfy its indemnification obligation will not be impaired in the future.

Pursuant to the master separation agreement, BWC has agreed to indemnify us for certain liabilities. However, third parties could seek to hold us responsible for any of the liabilities that BWC agreed to retain, and there can be no assurance that the indemnity from BWC will be sufficient to protect us against the full amount of such liabilities, or that BWC will be able to fully satisfy its indemnification obligations. Moreover, even if we ultimately succeedcontinue to mitigate prolonged tariffs. Further, uncertainties about future tariff changes could result in recovering from BWC any amounts for which we are held liable, we maymitigation actions that prove to be temporarily requiredineffective or detrimental to bear these losses.our business.

Several members of our board and management may have conflicts of interest because of their ownership of shares of common stock of BWC (now known as BWX Technologies, Inc.).

Several members of our board and management own shares of common stock of BWC and/or options to purchase common stock of BWC because of their current or prior relationships with BWC. In addition, six of the current members of our board of directors were members of the BWC board of directors. This share ownership by these six directors could create, or appear to create, potential conflicts of interest when our directors and executive officers are faced with decisions that could have different implications for B&W and BWC.


Risks RelatingRelated to Ownership of Our Common Stock


The market price and trading volume of our common stock may be volatile.


The market price of our common stock could fluctuate significantly in future periods due to a number of factors, many of which are beyond our control, including:including, but not limited to:

fluctuations in our quarterly or annual earnings or those of other companies in our industry;
failures of our operating results to meet the estimates of securities analysts or the expectations of our stockholdersshareholders or changes by securities analysts in their estimates of our future earnings;
announcements by us or our customers, suppliers or competitors;
the depth and liquidity of the market for B&Wour common stock;
changes in laws or regulations that adversely affect our industry or us;
changes in accounting standards, policies, guidance, interpretations or principles;
general economic, industry and stock market conditions;
future sales of our common stock by our stockholders;shareholders;
the concentration of ownership of our common stock;
future issuances of our common stock by us;
our ability to pay dividends in the future; and
the other risk factors described in these "Risk Factors"set forth under Part I, Item 1A and other parts of this annual report.Annual Report.


Substantial sales, or the perception of sales, of our common stock by us or certain of our existing shareholders could cause our stock price to decline and future issuances by us may dilute our common stockholders'shareholders' ownership in B&W.the Company.


Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. As of December 31, 2017,2022, we havehad an aggregate of approximately 44.188.7 million shares of common stock outstanding. outstanding, approximately 27.3 million shares of which were held by B. Riley. We entered into a registration rights agreement with B. Riley and other shareholder on April 30, 2019, pursuant to which B. Riley has customary demand and piggyback registration rights for all shares of our common stock they beneficially own. We filed a resale shelf registration statement on behalf of the shareholders party to the registration rights agreement permitting the resale of approximately 25.6 million shares of our common stock that were issued to B. Riley and the other shareholders party thereto. We are also required to register for resale any additional shares of our common stock that B. Riley may acquire in the future.

Any sales of substantial amounts of our common stock, or the perception that these sales might occur, could lower the market price of our common stock and impede our ability to raise capital through the issuance of equity securities. Any sales, or perception of sales, by our existing shareholders could also impact the perception of shareholder support for us. which could in turn negatively affect our customer and supplier relationships. Further, if we were to issue additional equity securities (or securities convertible into or exchangeable or exercisable for equity securities) to raise

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additional capital, our stockholders'shareholders' ownership interests in B&Wthe Company will be diluted and the value of our common stock may be reduced.


B. Riley has significant influence over us.

As of December 31, 2022, B. Riley controls approximately 30.8% of the voting power represented by our common stock. B. Riley currently has the right to nominate one member of our board of directors pursuant to the investor rights agreement we entered into with them on April 30, 2019. The investor rights agreement also provides pre-emptive rights to B. Riley with respect to certain future issuances of our equity securities. The services of our Chief Executive Officer are provided to us by B. Riley pursuant to a consulting agreement. In addition, our Chief Executive Officer also serves as our Chairman of the Board. As a result of these arrangements, B. Riley has significant influence over our management and policies and over all matters requiring shareholder approval, including the election of directors, amendment of our certificate of incorporation and approval of significant corporate transactions. If B. Riley were to act together with other shareholders on any matter presented for shareholder approval, they could have the ability to control the outcome of that matter. B. Riley can take actions that have the effect of delaying or preventing a change of control of us or discouraging others from making tender offers for our shares, which could prevent shareholders from receiving a premium for their shares. These actions may be taken even if other shareholders oppose them. In addition, the concentration of voting power with B. Riley may have an adverse effect on
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the price of our common stock, and the interests of B. Riley may not be consistent with the interests of our other shareholders.

We do not currently pay regular dividends on our common stock, so holders of our common stock may not receive funds without selling their shares of our common stock.


We have no current intent to pay a regular dividend and dividend payments are restricted byon our lending agreements.common stock. Our board of directors will determine the payment of future dividends on our common stock, if any, and the amount of any dividends in light of applicable law, contractual restrictions limiting our ability to pay dividends, our earnings and cash flows, our capital requirements, our financial condition, and other factors our board of directors deems relevant. Accordingly, our stockholdersshareholders may have to sell some or all of their shares of our common stock in order to generate cash flow from their investment.

Provisions in our corporate documents and Delaware law could delay or prevent a change in control of B&W, even if that change may be considered beneficial by some stockholders.

The existence of some provisions of our certificate of incorporation and bylaws and Delaware law could discourage, delay or prevent a change in control of B&W that a stockholder may consider favorable.

In addition, we are subject to Section 203 of the Delaware General Corporation Law, which may have an anti-takeover effect with respect to transactions not approved in advance by our board of directors, including discouraging takeover attempts that might result in a premium over the market price for shares of our common stock.

We believe these provisions protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirors to negotiate with our board of directors and by providing our board of directors with more time to assess any acquisition proposal, and are not intended to make B&W immune from takeovers. However, these provisions apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that our board of directors determines is not in the best interests of B&W and our stockholders.


We may issue preferred stock that could dilute the voting power or reduce the value of our common stock.


Our certificate of incorporation authorizes us to issue, without the approval of our stockholders,shareholders, one or more classes or series of preferred stock having such designation, powers, preferences and relative, participating, optional and other special rights, including preferences over our common stock respecting dividends and distributions, as our board of directors generally may determine. The terms of one or more classes or series of preferred stock could dilute the voting power or reduce the value of our common stock. For example, we could grant holders of preferred stock the right to elect some number of our directors in all events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we could assign to holders of preferred stock could affect the residual value of the common stock.


In the year ended December 31, 2021, we issued 7.7 million shares of our 7.75% Series A Cumulative Perpetual Preferred Stock. The Company sold no additional Preferred Stock pursuant to the sales agreement in the year ended December 31, 2022.

Provisions in our corporate documents and Delaware law could delay or prevent a change in control of the Company, even if that change may be considered beneficial by some shareholders.

The existence of some provisions of our certificate of incorporation and bylaws and Delaware law could discourage, delay or prevent a change in control of the Company that a shareholder may consider favorable.

In addition, we are subject to Section 203 of the Delaware General Corporation Law, which may have an anti-takeover effect with respect to transactions not approved in advance by our board of directors, including discouraging takeover attempts that might result in a premium over the market price for shares of our common stock.

We believe these provisions protect our shareholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with our board of directors and by providing our board of directors with more time to assess any acquisition proposal and are not intended to make the Company immune from takeovers. However, these provisions apply even if the offer may be considered beneficial by some shareholders and could delay or prevent an acquisition that our board of directors determines is in the best interests of the Company and our shareholders.

Risks Relating to our 2015 Spin-Off from our Former Parent

We are subject to continuing contingent liabilities of BWXT following the spin-off.

We completed a spin-off from The Babcock & Wilcox Company (now known as BWX Technologies, Inc., or “BWXT”), on June 30, 2015 to become a separate publicly traded company, and BWXT did not retain any ownership interest in the Company. As a result of the spin-off, there are several significant areas where the liabilities of BWXT may become our obligations. For example, under the Internal Revenue Code ("Code") and the related rules and regulations, each corporation that was a member of BWXT consolidated tax reporting group during any taxable period or portion of any taxable period ending on or before the completion of the spin-off is jointly and severally liable for the federal income tax liability of the entire consolidated tax reporting group for that taxable period. We entered into a tax sharing agreement with BWXT in connection with the spin-off that allocates the responsibility for prior period taxes of BWXT consolidated tax reporting group between us and BWXT and its subsidiaries. However, if BWXT were unable to pay, we could be required to pay the entire amount of such taxes. Other provisions of law establish similar liability for other matters, including laws governing tax-
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qualified pension plans as well as other contingent liabilities. The other contingent liabilities include personal injury claims or environmental liabilities related to BWXT's historical nuclear operations. For example, BWXT has agreed to indemnify us for personal injury claims and environmental liabilities associated with radioactive materials related to the operation, remediation, and/or decommissioning of two former nuclear fuel processing facilities located in the Borough of Apollo and Parks Township, Pennsylvania. To the extent insurance providers and third-party indemnitors do not cover those liabilities, and BWXT was unable to pay, we could be required to pay for them.

The spin-off could result in substantial tax liability.

The spin-off was conditioned on BWXT's receipt of an opinion of counsel, in form and substance satisfactory to BWXT, substantially to the effect that, for United States federal income tax purposes, the spin-off qualifies under Section 355 of the Code, and certain transactions related to the spin-off qualify under Sections 355 and/or 368 of the Code. The opinion relied on, among other things, various assumptions and representations as to factual matters made by BWXT and us which, if inaccurate or incomplete in any material respect, would jeopardize the conclusions reached by such counsel in its opinion. The opinion is not binding on the IRS or the courts, and there can be no assurance that the IRS or the courts will not challenge the conclusions stated in the opinion or that any such challenge would not prevail.

We are not aware of any facts or circumstances that would cause the assumptions or representations that were relied on in the opinion to be inaccurate or incomplete in any material respect. If, notwithstanding receipt of the opinion, the spin-off was determined not to qualify under Section 355 of the Code, each United States holder of BWXT common stock who received shares of our common stock in the spin-off would generally be treated as receiving a taxable distribution of property in an amount equal to the fair market value of the shares of our common stock received. In addition, if certain related preparatory transactions were to fail to qualify for tax-free treatment, they would be treated as taxable asset sales and/or distributions.

Under the terms of the tax sharing agreement we entered into in connection with the spin-off, we are generally responsible for all taxes attributable to us or any of our subsidiaries, whether accruing before, on or after the date of the spin-off. We and BWXT generally share responsibility for all taxes imposed on us or BWXT and its subsidiaries in the event the spin-off and/or certain related preparatory transactions were to fail to qualify for tax-free treatment. However, if the spin-off and/or certain related preparatory transactions were to fail to qualify for tax-free treatment because of actions or failures to act by us or BWXT, we or BWXT, respectively would be responsible for all such taxes. Our liabilities under the tax sharing agreement could have a material adverse effect on us. At this time, we cannot precisely quantify the amount of liabilities we may have under the tax sharing agreement and there can be no assurances as to their final amounts.

Under some circumstances, we could be liable for any resulting adverse tax consequences from engaging in certain significant strategic or capital raising transactions.

Even if the spin-off otherwise qualifies as a tax-free distribution under Section 355 of the Code, the spin-off and certain related transactions may result in significant United States federal income tax liabilities to us under Section 355(e) and other applicable provisions of the Code if 50% or more of BWXT's stock or our stock (in each case, by vote or value) is treated as having been acquired, directly or indirectly, by one or more persons as part of a plan (or series of related transactions) that includes the spin-off. The process for determining whether an acquisition triggering those provisions has occurred is complex, inherently factual and subject to interpretation of the facts and circumstances of a particular case.

Under the terms of the tax sharing agreement we entered into in connection with the spin-off, BWXT generally is liable for any such tax liabilities. However, we are required to indemnify BWXT against any such tax liabilities that result from actions taken or failures to act by us. As a result of these rules and contractual provisions, we may be unable to engage in certain strategic or capital raising transactions that our shareholders might consider favorable, or to structure potential transactions in the manner most favorable to us, without certain adverse tax consequences.

Potential indemnification liabilities to BWXT pursuant to the master separation agreement could materially adversely affect the Company.

The master separation agreement with BWXT provides for, among other things, the principal corporate transactions required to effect the spin-off, certain conditions to the spin-off and provisions governing the relationship between us and BWXT with respect to and resulting from the spin-off. Among other things, the master separation agreement provides for indemnification obligations designed to make us financially responsible for substantially all liabilities that may exist relating to our business activities, whether incurred prior to or after the spin-off, as well as those obligations of BWXT assumed by us pursuant to the
27


master separation agreement. If we are required to indemnify BWXT under the circumstances set forth in the master separation agreement, we may be subject to substantial liabilities.

In connection with our separation from BWXT, BWXT has agreed to indemnify us for certain liabilities. However, there can be no assurance that the indemnity will be sufficient to insure us against the full amount of such liabilities, or that BWXT's ability to satisfy its indemnification obligation will not be impaired in the future.

Pursuant to the master separation agreement, BWXT has agreed to indemnify us for certain liabilities. However, third parties could seek to hold us responsible for any of the liabilities that BWXT agreed to retain, and there can be no assurance that the indemnity from BWXT will be sufficient to protect us against the full amount of such liabilities, or that BWXT will be able to fully satisfy its indemnification obligations. Moreover, even if we ultimately succeed in recovering from BWXT any amounts for which we are held liable, we may be temporarily required to bear these losses.

General Risk Factors

Our reported financial results may be adversely affected by new accounting pronouncements or changes in existing accounting standards and practices, which could result in volatility in our results of operations.

We prepare our financial statements in conformity with accounting principles generally accepted in the U.S. These accounting principles are subject to interpretation or changes by the FASB and the SEC. New accounting pronouncements and varying interpretations of accounting standards and practices have occurred in the past and are expected to occur in the future. New accounting pronouncements or a change in the interpretation of existing accounting standards or practices may have a significant effect on our reported financial results and may even affect our reporting of transactions completed before the change is announced or effective.

Any difficulties in adopting or implementing any new accounting standard could result in our failure to meet our financial reporting obligations, which could result in regulatory discipline and harm investors’ confidence in us. Finally, if we were to change our critical accounting estimates, our operating results could be significantly affected.

We could be subject to changes in tax rates or tax law, adoption of new regulations, changing interpretations of existing law or exposure to additional tax liabilities in excess of accrued amounts that could adversely affect our financial position.

We are subject to income taxes in the United States and numerous foreign jurisdictions. A change in tax laws, treaties or regulations, or in their interpretation, in any country in which we operate could result in a higher tax rate on our earnings, which could have a material impact on our earnings and cash flows from operations. Tax reform legislation enacted in December of 2017 has made substantial changes to United States tax law, including a reduction in the corporate tax rate, a limitation on deductibility of interest expense, a limitation on the use of net operating losses to offset future taxable income, the allowance of immediate expensing of capital expenditures and the transition of U.S. international taxation from a worldwide tax system to a more generally territorial system, and a one-time transition tax on the mandatory deemed repatriation of foreign earnings. Generally, future changes in applicable U.S. or foreign tax laws and regulations, or their interpretation and application could have an adverse effect on our business, financial conditions and results of operations.

Significant judgment is required in determining our worldwide provision for income taxes. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain, and we are regularly subject to audit by tax authorities. Although we believe that our tax estimates and tax positions are reasonable, they could be materially affected by many factors including the final outcome of tax audits and related litigation, the introduction of new tax accounting standards, legislation, regulations and related interpretations, our global mix of earnings, the ability to realize deferred tax assets and changes in uncertain tax positions. A significant increase in our tax rate could have a material adverse effect on our profitability and liquidity.

Our ability to use net operating losses (“NOLs”) and certain tax credits to reduce future tax payments could be further limited if we experience an additional “ownership change”.

Some or all of the Company's deferred tax assets, consisting primarily of NOLs and interest carryforwards that are not currently deductible for tax purposes, could expire unused if we are unable to generate sufficient taxable income in the future to take advantage of them or if we enter into transactions that limit our right to use them, which includes transactions that result in an “ownership change” under Section 382 of the Code.
28



Sections 382 and 383 of the Code limits for U.S. federal income tax purposes, the annual use of NOL carryforwards, disallowed interest carryforwards and tax credit carryforwards, respectively, following an ownership change. Under Section 382 of the Code, a company has undergone an ownership change if shareholders owning at least 5% of the company have increased their collective holdings by more than 50% during the prior three-year period. Based on information that is publicly available, the Company determined that a Section 382 ownership change occurred on July 23, 2019 as a result of the Equitization Transactions. If the Company experiences subsequent ownership changes, certain NOL carryforwards (including previously disallowed interest carryforwards) may be subject to more than one section 382 limitation.

The loss of the services of one or more of our key personnel, or our failure to attract, recruit, motivate, and retain qualified personnel in the future, could disrupt our business and harm our results of operations.

We depend on the skills, working relationships, and continued services of key personnel, including our management team and others throughout our organization. We are also dependent on our ability to attract and retain qualified personnel, for whom we compete with other companies both inside and outside our industry. Our business, financial condition or results of operations may be adversely impacted by the unexpected loss of any of our management team or other key personnel, or more generally if we fail to attract, recruit, motivate and retain qualified personnel.

We outsource certain business processes to third-party vendors and have certain business relationships that subject us to risks, including disruptions in business which could increase our costs.

We outsource some of our business processes to third-party vendors. We make a diligent effort to ensure that all providers of these outsourced services are observing proper internal control practices; however, there are no guarantees that failures will not occur. Failure of third parties to provide adequate services or our inability to arrange for alternative providers on favorable terms in a timely manner could disrupt our business, increase our costs or otherwise adversely affect our business and our financial results.

Negotiations with labor unions and possible work stoppages and other labor problems could divert management's attention and disrupt operations. In addition, new collective bargaining agreements or amendments to existing agreements could increase our labor costs and operating expenses.

A significant number of our employees are members of labor unions. If we are unable to negotiate acceptable new contracts with our unions from time to time, we could experience strikes or other work stoppages by the affected employees. If any such strikes, protests or other work stoppages were to occur, we could experience a significant disruption of operations. In addition, negotiations with unions could divert management's attention. New union contracts could result in increased operating costs, as a result of higher wages or benefit expenses, for both union and nonunion employees. If nonunion employees were to unionize, we could experience higher ongoing labor costs.

Pension and medical expenses associated with our retirement benefit plans may fluctuate significantly depending on a number of factors, and we may be required to contribute cash to meet underfunded pension obligations.

A substantial portion of our current and retired employee population is covered by pension and postretirement benefit plans, the costs and funding requirements of which depend on our various assumptions, including estimates of rates of return on benefit-related assets, discount rates for future payment obligations, rates of future cost growth, mortality assumptions and trends for future costs. Variances from these estimates could have a material adverse effect on us. Our policy to recognize these variances annually through mark to market accounting could result in volatility in our results of operations, which could be material. The funding obligations for the Company’s pension plans are impacted by the performance of the financial markets, particularly the equity markets, and interest rates. If the financial markets do not provide the long-term returns that are expected, or discount rates increase the present value of liabilities, the Company could be required to make larger contributions.

As of December 31, 2022, our defined benefit pension and postretirement benefit plans were underfunded by approximately $130.1 million. In addition, certain of these postretirement benefit plans were collectively bargained, and our ability to curtail or change the benefits provided may be impacted by contractual provisions set forth in the relevant union agreements and other plan documents. We also participate in various multi-employer pension plans in the United States and Canada under union and industry agreements that generally provide defined benefits to employees covered by collective bargaining agreements. Absent an applicable exemption, a contributor to a United States multi-employer plan is liable, upon termination
29


or withdrawal from a plan, for its proportionate share of the plan's underfunded vested liability. Funding requirements for benefit obligations of these multi-employer pension plans are subject to certain regulatory requirements, and we may be required to make cash contributions which may be material to one or more of these plans to satisfy certain underfunded benefit obligations. See Note 13 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report for additional information regarding our pension and postretirement benefit plan obligations.

Natural disasters or other events beyond our control, such as war, armed conflicts or terrorist attacks could adversely affect our business.

Matters outside of our control could adversely affect demand for or supply of our products or disrupt our facilities, systems or projects, which could interrupt operational processes and performance on our contracts and adversely impact our ability to manufacture our products and provide services and support to our customers. Insurance for such matters may be unavailable or insufficient. Such matters could include natural disasters, such as earthquakes, tsunamis, hurricanes, floods, tornadoes, war, armed conflicts, or terrorist attacks, among others. We operate facilities in areas of the world that are exposed to such risks, which could be general in nature or targeted at us or our markets.

Item 1B. Unresolved Staff Comments


None

26





Item 2. Properties


The following table provides the primary segment, location and general use of each of our principal properties that we own or lease at December 31, 2017.
2022.
Business Segment and LocationPrincipal Use
Owned/Leased

(Lease Expiration)
PowerB&W Renewable segment
Barberton, OhioCopenhagen, DenmarkAdministrative office / research and development
Owned(1)
Leased (2023)
Lancaster, OhioManufacturing facility
Owned(1)
Copley, OhioWarehouse / service center
Owned(1)
Dumbarton, ScotlandManufacturing facilityOwned
Guadalupe, NL, MexicoManufacturing facilityLeased (2024)
Cambridge, Ontario, CanadaAdministrative office / warehouseLeased (2018)
Jingshan, Hubei, ChinaManufacturing facilityOwned
Renewable segment
Copenhagen, DenmarkAdministrative officeLeased (2022)
Esbjerg, DenmarkManufacturing facility / administrative officeOwned
Straubing, GermanyVejen, DenmarkManufacturing facilityAdministrative officeLeased (2021)(2023)
Industrial segmentFreeport, IllinoisAdministrative officeLeased (2026)
De Pere, WisconsinB&W Environmental segmentManufacturing facility / administrative office
Owned(1)
Stoughton, WisconsinParuzzaro, ItalyAdministrative officeoffices
Owned(1)
Leased (2024)
Arona, ItalyAdministrative offices / research and developmentLeased (2022)
San Diego, CaliforniaAdministrative officeLeased (2024)
Shanghai, ChinaManufacturing facilityOwned
Ding Xiang, Xin Zhou, Shan Xi, ChinaManufacturing facilityLeased (2019/2020)(2023)
Beloit, WisconsinB&W Thermal segmentManufacturing facilityLeased (2026)
Muscoda, WisconsinAkron, OhioManufacturing facilityAdministrative offices
Owned(1)
Leased (2034)
San Luis Potosi, MexicoLancaster, OhioManufacturing facilityOwnedLeased (2041)
Corporate officeCopley, OhioWarehouse / service centerLeased (2033)
Charlotte, North CarolinaDumbarton, ScotlandManufacturing facilityOwned
Guadalupe, NL, MexicoManufacturing facilityLeased (2024)
Cambridge, Ontario, CanadaAdministrative office / warehouseLeased (2019)(2024)
Dartmouth, Nova Scotia, CanadaManufacturing facilityLeased (2024)
Port Coquitlam, BCAdministrative officeLeased (2023)
Tulsa, OklahomaAdministrative officeLeased (2023)
Chanute, Kansas(1)
Manufacturing facilityOwned
Chanute, KansasAdministrative officeLeased (2023)
(1) These properties are encumbered by liens under existing credit facilities.(1) We owned our Chanute, Kansas facility outright until December 16, 2022 when we sold certain real property assets at this location for $8.4 million in proceeds and then simultaneously entered into a lease agreement with the buyer of the property resulting in a sale lease-back. The sale-leaseback is repayable over a 20 year term, with two renewal options of ten years each. Under the terms of the lease agreement, our initial basic rent is of approximately $0.7 million per year with annual increases of 2.25% throughout the life of the agreement.
We believe that our major properties are adequate for our present needs and, as supplemented by planned improvements and construction, expect them to remain adequate for the foreseeable future.
30




Item 3. Legal Proceedings


For information regarding ongoing investigations and litigation, see Note 2122 to the consolidated financial statementsConsolidated Financial Statements included in Part II, Item 8 of this annual report,Annual Report, which we incorporate by reference into this Item.


27Item 4. Mine Safety Disclosures.



Table of ContentsNot Applicable.




Item 4. Mine Safety Disclosures.

Not Applicable.

PART II



Item 5. Market for Registrant's Common Equity Related Stockholder Matters and Issuer Purchases of Equity Securities


Our common stock is traded on the New York Stock Exchange under the symbol BW. High and low common stock prices in the quarterly periods after our spin-off transaction through December 31, 2017 were as follows:
 Share PriceDividends
Quarter endedHighLowPer Share
June 30, 2015$22.31
$17.12
$
September 30, 2015$21.95
$16.40
$
December 31, 2015$21.67
$15.86
$
March 31, 2016$22.17
$17.95
$
June 30, 2016$23.99
$14.32
$
September 30, 2016$17.30
$14.27
$
December 31, 2016$17.72
$12.90
$
March 31, 2017$17.50
$8.54
$
June 30, 2017$11.88
$8.58
$
September 30, 2017$12.06
$1.61
$
December 31, 2017$6.14
$3.28
$


As of January 31, 2018,2023, there were approximately 1,800890 record holders of our common stock.


In August 2015,accordance with the provisions of the employee benefit plans, the we announcedcan acquire shares in connection with the vesting of employee restricted stock that our Boardrequire us to withhold shares to satisfy employee statutory income tax withholding obligations. We did not repurchase any of Directors authorized a share repurchase program. The following table provides information on our purchases of equity securities during the quarter ended December 31, 2017. Any shares purchased that were2022. The Company does not part ofhave a publicly announced plan orgeneral share repurchase program are related to repurchases of common stock pursuant to the provisions of employee benefit plans that permit the repurchase of shares to satisfy statutory tax withholding obligations.at this time.
(
31
Period
Total number of shares purchased (1)
Average
price paid
per share
Total number of
shares purchased as
part of publicly
announced plans  or
programs
Approximate dollar value of shares that may 
yet be purchased under 
the plans or programs
(in thousands) (2)
October 1, 2017 - October 31, 2017 $— $100,000
November 1, 2017 - November 30, 20172,345 $— $100,000
December 1, 2017 - December 31, 20176,544 $— $100,000
Total8,889    
(1)
The shares repurchased during November and December 2017 shown in the table above are those repurchased pursuant to the provisions of employee benefit plans that require us to repurchase shares to satisfy employee statutory income tax withholding obligations.

(2)On August 4, 2016, we announced that our board of directors authorized the repurchase of an indeterminate number of our shares of common stock in the open market at an aggregate market value of up to $100 million over the next twenty-four months. As of March 1, 2018, we have not made any share repurchases under the August 4, 2016 share repurchase authorization.

28



The following graph provides a comparison of our cumulative total shareholder return over five years through December 31, 20172022 to the return of the S&P 500, the Russell 2000 and our custom peer group.
 
(1)Assumes initial investment of $100 on June 30, 2015.
bw-20221231_g1.jpg
Assumes initial investment of $100 on December 31, 2017.
The peer group used for the comparison above is comprised of the following companies:
ActuantAMETEK Inc.Curtiss-Wright Corp.Crane Co.MasTec Inc.Idex Corp.
AMETEKCECO Environmental Corp.Dycom Industries Inc.Curtiss-WrightMasTec Inc.
Chart Industries Inc.Enerpac Tool Group Corp.Primoris Services Corp.
CECO EnvironmentalCIRCOR Int. Inc.Flowserve Corp.Dycom Industries Inc.SPX Corp.
Chart Industries Inc.Crane Co.FlowserveHarsco Corp.Tetra Tech, Inc.
CIRCOR Int. Inc.Harsco Corp.
Covanta Holding Corp.Idex Corp.


29






Item 6. Selected Financial Data[Reserved]


 For the Years Ended
(in thousands, except for per share amounts)2017 2016 2015 2014 2013
Revenues$1,557,735
 $1,578,263
 $1,757,295
 $1,486,029
 $1,767,651
Income (loss) from continuing operations(379,015) (115,082) 16,534
 (11,890) 140,478
Net income attributable to Babcock & Wilcox Enterprises, Inc.(379,824) (115,649) 19,141
 (26,528) 174,527
Basic earnings per common share:         
Income (loss) from continuing operations per common share(8.09) (2.31) 0.30
 (0.23) 2.49
Net income attributable to Babcock & Wilcox Enterprises, Inc.(8.09) (2.31) 0.36
 (0.49) 3.10
Total assets (as of year end)$1,322,229
 $1,529,143
 $1,663,045
 $1,516,554
 $1,290,228

Our Renewable segment's results in each of the past two years were significantly impacted by the performance of an operating unit within the segment which recognized $158.5 million and $141.1 million in charges in the years ended December 31, 2017 and 2016, respectively, related to net changes in the estimated revenues and costs to complete certain renewable energy contracts in Europe.

Our Power segment experienced a decline in sales volume in each of the past two years resulting from the decline in activity related to the coal-fired power and industrial steam generation markets in the United States. Because of our proactive restructuring activities and good contract execution in each of the prior two years, gross margin percentages in the Power segment have remained consistent over the past three years. Also, in each of the annual periods from 2013 through 2015, we recognized contract losses for additional estimated costs to complete our Power segment's Berlin Station project. This project experienced unforeseen worksite conditions and fuel specification issues that caused schedule delays, resulting in us filing suit against the customer in January 2014. The dispute was settled during the third quarter of 2015. The contract losses reduced pre-tax income (or increased pre-tax losses) from continuing operations by $9.6 million, $11.6 million and $35.6 million in 2015, 2014 and 2013, respectively.

Our Industrial segment benefited from the acquisition of Universal during 2017, which contributed $69.1 million of revenue and $14.5 million of gross profit to the Industrial segment. The Industrial segment also benefited from the July 1, 2016 acquisition of SPIG S.p.A., which contributed $181.5 million and $96.3 million of revenue and a gross profit (loss) of $(7.7) million and $7.8 million in the years ended December 31, 2017 and 2016, respectively. Our MEGTEC business, which was purchased on June 20, 2014, generated revenues of $147.2 million, $157.3 million, $183.7 million and $105.4 million and gross profit of $34.9 million, $42.9 million, $54.8 million and $30.4 million in the years ended December 31, 2017, 2016, 2015 and 2014, respectively.

Our 2017 results were also significantly impacted by the revaluation of our deferred taxes as a result of the December 2017 United States tax reform. This resulted in an increase in income tax expense of $64.8 million related primarily to the revaluation of our deferred income tax balances.

Other matters that significantly impacted our results over the past five years include the following:

In 2017, we recorded goodwill impairment charges of $86.9 million ($85.8 million net of tax), which included a $50.0 million charge in the Renewable reporting unit and a $36.9 million charge in the SPIG reporting unit. The reasons for the charges and related assumptions made by management are described in Note 15 to the consolidated financial statements included in Item 8 of this annual report.

Restructuring and spin costs were $15.4 million, $40.8 million, $14.9 million and $20.2 million in 2017, 2016, 2015, and 2014, respectively.

In 2017, as a result of a strategic change in our Indian joint venture due to the decline in forecasted market opportunities in India, we recorded an $18.2 million other-than-temporary-impairment of our investment in TBWES.

30





In 2016, we sold all of our interest in our Australian joint venture, Halley & Mellowes Pty. Ltd., for $18.0 million, resulting in a gain of $8.3 million.

In 2015, we recognized a $14.6 million impairment charge, primarily related to research and development facilities and equipment dedicated to activities that were determined not to be commercially viable.

We recognize actuarial gains (losses) related to our pension and postretirement benefit plans in earnings as a component of net periodic benefit cost. The effect of these adjustments for 2017, 2016, 2015, 2014 and 2013 and on pre-tax income was a gain (loss) of $8.7 million, $(24.1) million, $(40.2) million, $(101.3) million and $92.1 million, respectively.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
32



OVERVIEW OF RESULTSThe 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 8 within this Annual 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. See Cautionary Statement Concerning Forward-Looking Information.


In this annual report, unlessThe following discussion includes a comparison of Results of Operations and Liquidity and Capital Resources for the context otherwise indicates, "B&W," "we," "us," "our"years ended December 31, 2022 and "the Company" mean Babcock & Wilcox Enterprises, Inc. and its consolidated subsidiaries. The presentation2021. For comparisons of the components of our revenues, gross profityears ended December 31, 2021 and operating income on the following pages of this Management's2020, see Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 as filed on March 8, 2022. Our consolidated financial statements are prepared in conformity with U.S. generally accepted accounting principles ("GAAP"). Our discussions of the financial results include non-GAAP measures (e.g., foreign currency impact, EBITDA) to provide additional information concerning our financial results and provide information that we believe is useful to the readers of our financial statements in the assessment of our performance and operating trends.

BUSINESS OVERVIEW

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 2022. The COVID-19 pandemic has continued to create challenges for us in countries that at times throughout the year have had 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.

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, 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.

33


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.

On October 14, 2022, the Company changed the name of Fosler Construction Company, Inc. ("Fosler") to Babcock & Wilcox Solar Energy, Inc ("Babcock & Wilcox Solar").

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 continued 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, 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
34


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–YEARS ENDED DECEMBER 31, 2022 AND 2021

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 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 (Loss) Income

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

Net Income

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

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.
Year ended December 31,
(in thousands)20222021
Revenues:
B&W Renewable segment$330,570 $156,800 
B&W Environmental segment154,393 133,826 
B&W Thermal segment415,104 433,329 
Eliminations(10,252)(592)
$889,815 $723,363 
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Year ended December 31,
(in thousands)20222021
Adjusted EBITDA
B&W Renewable segment (1) (2)
$26,069 $23,219 
B&W Environmental segment9,787 11,773 
B&W Thermal segment56,291 49,143 
Corporate(16,477)(12,467)
Research and development costs(3,319)(1,093)
$72,351 $70,575 
(1) Adjusted EBITDA in our B&W Renewable segment for 2022 includes a $6.2 million non-recurring gain on sale related to development rights of a future solar project that was sold as well as the reduction to Selling, General and Administrative Costs of $9.6 million that resulted from the reversal of the contingent consideration related to an acquisition.

2022 vs 2021 Consolidated Results

Revenues increased by$166.5 millionto $889.8 million in 2022 as compared to $723.4 million in 2021, primarily attributable to a higher level of activity in our Renewable and Environmental segments which were both adversely impacted by COVID-19 in the prior year and the acquisitions of Babcock & Wilcox Solar and Babcock & Wilcox Renewable Service A/S in our Renewable segment. Incremental revenue from current year acquisitions of FPS and Optimus also contributed to the favorable year-over-year change. Segment specific changes are discussed in further detail in the sections below.

Net (loss) income unfavorably changed by $58.1 million to a loss of $26.6 million in 2022 as compared to income of $31.5 million in 2021. Operating (loss) income unfavorably changed by $25.0 million to loss of $4.2 million in 2022 as compared to income of $20.8 million in 2021. The year-over-year change is primarily related to overall increases in costs and expenses, higher interest expense, an increase in foreign exchange losses and goodwill impairment expense. The aforementioned expense increases were partially offset by positive contributions from the current year acquisitions, and as described above, partially offset by a lower level of construction activity in our Thermal segment.Restructuring activities, advisory fees, research and development, depreciation and amortization expense, pension and other postretirement benefit plans, foreign exchange, and income taxes are discussed in further detail in the sections below.

Year-over-year comparisons of our results from net income (loss) were also impacted by:

$0.6 million and $4.9 million of restructuring costs were recognized in 2022 and 2021, respectively, and are more fully described in Note 12 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.
$1.4 million and $2.7 million of financial advisory service fees were recognized in 2022 and 2021, respectively. Financial advisory service fees are included in Advisory fees and settlement costs in our Consolidated Statement of Operations.
$1.5 million and $5.5 million of legal and other advisory fees were recognized in 2022 and 2021, respectively. These fees are related to the contract settlement and liquidity planning and are included in Advisory fees and settlement costsin our Consolidated Statement of Operations.
$6.5 million of gain on debt extinguishment in 2021 that did not recur in 2022.
$1.8 million of loss on sale of business that was recorded in 2021.
$7.7 million and $15.5 million of actuarially determined mark to market (“MTM”) gains (losses) on our pension and other post-retirement benefits in 2022 and 2021, respectively. MTM losses are further described in Note 13 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.
$5.6 million and $4.9 million of litigation legal costs were recognized in 2022 and 2021, respectively. These fees are included in Advisory fees and settlement costs in our Consolidated Statement of Operations.
$7.2 million goodwill impairment charge recorded in 2022 related to our Babcock & Wilcox Solar reporting unit.
$5.5 million of costs related to completed and potential acquisitions were recognized in 2022. These costs are included in Selling, general and administrative expenses in our Consolidated Statement of Operations.

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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.

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.
Year ended December 31,
(In approximate millions)20222021
B&W Renewable(1)
$216 $294 
B&W Environmental176 148 
B&W Thermal516 337 
Other/eliminations— — 
Bookings$908 $779 
(1) B&W Renewable bookings includes the revaluation of backlog denominated in currency other than U.S. dollars. The foreign exchange impact on B&W Renewable bookings in the years ended December 31, 2022 and 2021 was $(8.9) million and $15.0 million, respectively.
(2) B&W Renewable bookings include a reduction of approximately $67.5 million related to the disposal of future unprofitable contracts.

Our backlog as of December 31, 2022 and 2021 was as follows:
As of December 31,
(In approximate millions)20222021
B&W Renewable(1)
$284 $394 
B&W Environmental148 123 
B&W Thermal265 126 
Other/eliminations(4)
Backlog$704 $639 
(1)    B&W Renewable backlog at December 31, 2022, includes $55.6 million related to long-term operation and maintenance contracts for renewable energy plants, with remaining durations extending until 2034. Generally, such contracts have a duration of 10-20 years and include options to extend.

Of the backlog at December 31, 2022, we expect to recognize revenues as follows:
(In approximate millions)20232024ThereafterTotal
B&W Renewable$207 $28 $49 $284 
B&W Environmental114 14 20 148 
B&W Thermal238 20 265 
Other/eliminations— 
Expected revenue from backlog$565 $62 $77 $704 

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
37


EBITDA presented below is consistent with the way ourthe Company's chief operating decision maker reviews the results of operations and makes strategic decisions about the business.

We obtained an Agreement to amend our United States Revolving Credit Facility (described further in Note 19 to the consolidated financial statements included in Item 8) on March 1, 2018 (the “March 1, 2018 Amendment”). The March 1, 2018 Amendment temporarily waived the financial covenant defaults associated with our United States Revolving Credit Facility ("Revolver") that existed at December 31, 2017, consented to the Company's planned Rights Offeringbusiness and allows up to $35 million of borrowings to be used in conjunction with the proceeds of the Rights Offering to be used to repay the principal portion of the Second Lien Term Loan Facility ("Second Lien"). The events of default at December 31, 2017 were due primarily to additionalis calculated as earnings before interest, tax, depreciation and amortization adjusted for items such as gains or losses we recognized in the fourth quarter of 2017 related to an increase in structural steel repair costs on one of our European renewable energy contracts.

On March 1, 2018, we entered into an equity commitment agreement (“Equity Commitment Agreement”) with a group of our existing stockholders to fully backstop our planned Rights Offering (“Rights Offering”) for the purpose of providing at least $182 million of new capital. We are proposing to undertake a rights offering pursuant to which all of our stockholders will have the ability, on a pro rata basis, to purchase up to at least $182 million of the Company’s common stock. The Equity Commitment Agreement provides for a backstop commitment from a group of our existing stockholders to purchase any unsold portion of the Rights Offering.

We plan to use the net proceedsarising from the sale of non-income producing assets, net pension benefits, restructuring costs, 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 Company’s common stocksegment.The Company uses adjusted EBITDA internally to evaluate its performance and in the Rights Offeringmaking financial and operational decisions. When viewed in conjunction with GAAP results and the permitted borrowing capacity provided by our Revolveraccompanying reconciliation in Note 4 to extinguish the outstanding balanceConsolidated Financial Statements, the Company believes that its presentation of our Second Lienadjusted EBITDA provides investors with greater transparency and terminatea greater understanding of factors affecting its financial condition and results of operations than GAAP measures alone.
Year ended December 31,
(in thousands)20222021
(Loss) income from continuing operations$(26,584)$31,538 
Interest expense, net50,766 41,359 
Income tax expense (benefit)11,063 (2,224)
Depreciation & amortization23,992 18,337 
EBITDA59,237 59,237 89,010 
Benefit plans, net(37,528)(48,142)
Gain on sales, net(2,598)(13,984)
Gain on debt extinguishment— (6,530)
Stock compensation8,654 10,476 
Restructuring activities and business services transition costs8,474 10,726 
Advisory fees for settlement costs and liquidity planning1,509 5,480 
Settlement and related legal costs10,734 4,894 
Acquisition pursuit and related costs5,504 4,841 
Product development (1)
4,100 4,713 
Foreign exchange582 4,294 
Financial advisory services1,424 2,709 
Contract step-up purchase price adjustment1,745 — 
Loss from business held for sale— 483 
Loss from a non-strategic business— 116 
Goodwill impairment7,224 — 
Contract disposal2,976 — 
Other - net314 1,489 
Adjusted EBITDA (2)
$72,351 72,351 $70,575 
(1) Costs associated with development of commercially viable products that are ready to go to market.
(2) Adjusted EBITDA for the associated borrowing agreement. Our plan is designedyear ended December 31, 2022 includes a $6.2 million non-recurring gain on sale related to provide us with adequate liquiditydevelopment rights of a future solar project that was sold as well as the reduction to meet our obligations for at leastSelling, General and Administrative Costs of $9.6 million that resulted from the twelve month period following March 1, 2018; however, our remediation plan includes raising additional capital through the Rights Offering and other sources before the endreversal of the standstill period, which will depend on conditions in the capital markets and, with respectcontingent consideration related to the Rights Offering, an amendment to our existing shelf registration statement that we plan to file in early March 2018 being declared effective by the Securities and Exchange Commission (“SEC”), which are matters that are outside of our control. Accordingly, we cannot be certain of our ability to raise additional capital on terms acceptable to us which raises substantial doubt about our ability to continue as a going concern. Additionally, our ability to meet the amended covenants associated with our Revolver is dependent on our future financial operating results. While we believe that the actions summarized above and in Note 1 to our consolidated financial statements included in Item 8 are more likely than not to address the substantial doubt about the Company’s ability to continue as a going concern, we cannot assert that it is probable that our plans will fully mitigate the conditions identified. If we cannot continue as a going concern, material adjustments to the carrying values and classifications of our assets and liabilities and the reported amounts of income and expense could be required.acquisition.

We generally recognize revenues and related costs from long-term contracts on a percentage-of-completion basis. Accordingly, we review contract price and cost estimates regularly as work progresses and reflect adjustments in profit proportionate to the percentage of completion in the periods in which we revise estimates to complete the contract. To the


31
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Year ended December 31,
(in thousands)20222021
Adjusted EBITDA
B&W Renewable segment (1) (2)
$26,069 $23,219 
B&W Environmental segment9,787 11,773 
B&W Thermal segment56,291 49,143 
Corporate(16,477)(12,467)
Research and development benefit (costs)(3,319)(1,093)
$72,351 $70,575 
extent that these adjustments result in a reduction of previously reported profits from a contract, we recognize a charge against current earnings. Changes in the estimated results of our percentage of completion contracts are necessarily based on information available at the time that the estimates are made and are based on judgments that are inherently uncertain as they are predictive in nature. As with all estimates to complete used to measure contract revenue and costs, actual results can and do differ from our estimates made over time.

Our Renewable segment continues to make progress towards completing its portfolio of European renewable energy projects. The segment has significant loss contracts that recognize additional profit or loss only to the extent there are changes in our estimates at completion. Our losses were primarily attributable to $158.5 million and $141.1 million in net losses in 2017 and 2016, respectively, from changes in the estimated cost to complete certain renewable energy contracts in Europe, partially offset by gross profit from our operations and maintenance services and aftermarket parts and services in each year. In 2017, we made substantial management and process changes in our Renewable segment in response to the loss contracts, including changes in top management and strengthening of project management controls and procedures. Although we believe the provisions we made for our six loss contracts at December 31, 2017 are adequate, given that among other things these loss positions are based on estimates of future activities, revenues and costs, there can be no assurance that unanticipated schedule delays in the future will not result in additional contract losses or liquidated damages. Going forward, our Renewable segment will focus primarily on its core technologies, with the balance of plant and civil construction scope being executed by a partner. We believe the new execution model lowers our execution risk and positions us for better profitability(1) Adjusted EBITDA in the Renewable segment for the year ended December 31, 2022 includes a $6.2 million non-recurring gain on sale related to development rights of a future solar project that was sold as well as the reduction to Selling, General and is more consistent with our company-wide strategyAdministrative Costs of being$9.6 million that resulted from the reversal of the contingent consideration related to an industrial and power equipment technology and solutions provider.acquisition.


Our Power segment continued to deliver gross margin percentages consistent with our expectations in 2017. As previously disclosed, we anticipated a decline

B&W Renewable Segment Results
Year ended December 31,
(in thousands)20222021$ Change
Revenues$330,570 $156,800 $173,770 
Adjusted EBITDA$26,069 $23,219 $2,850 

2022 vs 2021 results

Revenues in the coal power generation markets and proactively responded by restructuring theB&W Renewable segment increased $173.8 million, to help us maintain gross margins. Our restructuring activities$330.6 million in each of the past two years has been effective, and the Power segment's gross margin percentage has not significantly changed despite the 16.4% decline in revenues in 2017 compared 2016. The Power segment also continues to benefit from consistent, effective contract execution.

Industrial segment revenues grew in 20172022 compared to 2016$156.8 million in 2021. The increase in revenue is primarily due to higher volumes of new-build projects and revenues from acquisitions which closed on September 30 and November 30, 2021.

Adjusted EBITDA in the $69.1B&W Renewable segment increased $2.9 million, contribution from Universal Acoustic & Emissions Technology, Inc. ("Universal"), which we acquired on January 11, 2017, and the $181.5to $26.1 million increase from the full year contribution of SPIG S.p.A. ("SPIG"), which we acquired on July 1, 2016. The acquisitions benefited the Industrial segment's gross profit in 2017 by $6.82022 compared to $23.2 million which was lower than our expectationsin 2021. This is primarily due to a change in the product mix and challenges related to completing several of the segment's cooling systems contracts. We expect the Industrial segment to benefithigher revenue volume from improvements in international growth, increased capital spending in the United States, and the change in strategy in the SPIG business announced in the third quarter of 2017.

In the second half of 2017, we announced plans to implement restructuring actions to improve our global cost structure and increase our financial flexibility. The restructuring actions included a workforce reduction at both the business segment and corporate levels totaling approximately 9% of our global workforce, selling, general and administrative ("SG&A") expense reductions and new cost control measures, and office closures and consolidations in non-core geographies. These actions include reduction of approximately 30% of B&W Vølund's workforce, in order to right-size its workforce to operate under a new execution model focused on B&W's core boiler, grate and environmental equipment technologies, with the balance-of-plant and civil construction scope being executedbuild products partially offset by a partner. We believe the new B&W Vølund business model provides us with a lower risk profile and aligns with our strategy of being an industrial and power equipment technology and solutions provider. Other actions are focused on productivity and efficiency gains to enhance profitability and cash flows, and to mitigate the impact of lower demandfour solar projects that became loss contracts in 2022 as described in Note 5 to the global coal-fired power market. Total estimated costs associated with these restructuring actions are anticipated to be less than $20 million, $9.1 millionConsolidated Financial Statements. Also partially offsetting the increase was combined the 2021 recognition of which was recognized in the fourth quarter of 2017. The estimated annual savings are expected to be at least $45 million in 2018.

The net decrease in cash in 2017 was $39.2 million. Net borrowings on our Revolver were $84.5 million, which included the repayment of $115.5 million of the revolving credit facility balance with a portion of the net proceeds from the issuance of $195.9 million of Second Lien. Our use of cash in 2017 was primarily to fund progress on our Renewable segment contracts, acquire Universal and repurchase shares of our common stocksettlement from a related party. We expect our operations to use cash through the first half of 2018, particularly in the Renewable segment, as we fund accrued contract losses and work down advanced bill positions. Our forecasted use of cash is expected to be funded in part through borrowings from our Revolver. Additional discussion is included in Liquidity and capital resources.


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Year-over-year comparisons of our results were also affected by:

Goodwill impairment charges totaling $86.9 million were recorded in 2017, of which $50.0 millionsubcontractor that reimbursed us for project costs related to our Renewable reporting unitEPC loss contracts and $36.9 million relateda larger percentage of SG&A expense allocated to our SPIG reporting unitthe segment.


B&W Environmental Segment Results
Year ended December 31,
(In thousands)20222021$ Change
Revenues$154,393 $133,826 $20,567 
Adjusted EBITDA$9,787 $11,773 $(1,986)

2022 vs 2021 results

Revenues in the Industrial segment.

Intangible asset amortization expense was $18.3B&W Environmental segment increased 15%, or $20.6 million and $19.9to $154.4 million in 2017 and 2016, respectively. We expect approximately $12.42022 compared to $133.8 million in 2021. The increase is primarily driven by higher volume of expensenew build projects.

Adjusted EBITDA in the full year 2018.

Restructuring expense totaled $14.2B&W Environmental segment was $9.8 million $37.0 million, and $11.7in 2022 compared to $11.8 million in 2017, 2016 and 2015, respectively. Restructuring2021. The change is primarily driven by higher volume, as described above, which resulted in increased gross profit, which was more than offset by a larger percentage of SG&A expense includes accelerated depreciation and other activities relatedallocated to manufacturing facility consolidation and outsourcing as well as reductionthe segment.


39


B&W Thermal Segment Results
Year ended December 31,
(In thousands)20222021$ Change
Revenues$415,104 $433,329 $(18,225)
Adjusted EBITDA$56,291 $49,143 $7,148 

2022 vs 2021 results

Revenues in force, consulting and other costs. In additionthe B&W Thermal segment decreased 4%, or $18.2 million, to savings already realized, we expect to realize savings of approximately $45.0$415.1 million in 2018.

Asset impairments2022 compared to $433.3 million generated in 2016 totaled $14.9 million and were associated with the long-lived assets at an owned coal-fired power plant. 2021. The non-cash impairment charge was classified in restructuring costs in 2016, and we sold the coal-fired power plant in 2017. B&W no longer owns any coal-fired power plants at December 31, 2017.

Asset impairments in 2015 totaled $14.6 million and were primarily related to research and development facilities and equipment used for activities that were determined not to be commercially viable. The non-cash impairment charge was reflected in loss on disposal of assets in 2015.

The outcome of the Arkansas River Power Authority ("ARPA") litigation on November 21, 2016 resulted in a net $3.2 million charge in our Power segment in the fourth quarter of 2016, which included a $4.2 million revenue reversal, a $2.3 million decrease in cost of operations and a $1.3 million increase in SG&A expenses. On July 21, 2017, the court awarded $3.7 million of pre-judgment interest, which we recorded as an increase in other accrued liabilities and interest expense in the second quarter of 2017. In December 2017, we reached an agreement in arbitration to settle all matters related to the ARPA litigation for $7.0 million. The arbitration agreement resulted in a $1.6 million reduction in our accrual, a $0.8 million increase in revenue and $0.8 million decrease in interest expense in the fourth quarter of 2017.

Litigation settlement charges of $9.6 million were incurred in 2015, including $1.8 million of legal costs and a $7.8 million reversal of Power segment revenues associated with the release of an accrued claims receivable balance as part of the legal settlement related to the Berlin Station project.

Expenses related to the spin-off from our former Parent were $1.2 million, $3.8 million and $3.3 million in 2017, 2016 and 2015, respectively. The costs were primarilyis largely attributable to employee retention awards.

Acquisition and integration costs included in SG&A totaled $2.7 million and $5.1 million in 2017 and 2016, respectively, related to the SPIG and Universal acquisitions .

Actuarially determined mark to market gains (losses) were $8.7 million, $(24.1) million and $(40.2) million in 2017, 2016 and 2015, respectively.

An other-than-temporary-impairment of our investment in TBWES of $18.2 million in 2017 was included in Equity in income of investees, reducing our remaining investment in TBWES to $26.0 million at December 31, 2017.

In 2016, we sold all of our joint venture interest in HMA for $18.0 million, resulting in a gain of $8.3 million that was included in Equity in income of investees.

Enactment of new United States tax legislation in the fourth quarter of 2017 resulted in $62.4 million of income tax expense from the revaluation of deferred tax assets to the newly enacted United States federal income tax rates.

Our segment and other operating results are described in more detail below.

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RESULTS OF OPERATIONS – YEARS ENDED DECEMBER 31, 2017, 2016 and 2015

Consolidated results of operations
 Years ended December 31,
(In thousands)201720162015
Revenues:   
Power segment$821,062
$981,978
$1,234,997
Renewable segment347,198
349,172
338,603
Industrial segment397,791
253,613
183,695
Eliminations(8,316)(6,500)
 1,557,735
1,578,263
1,757,295
Gross profit (loss):   
Power segment191,999
233,550
247,632
Renewable segment(128,204)(68,109)57,682
Industrial segment41,383
50,726
54,826
Intangible amortization expense included in cost of operations(14,272)(15,842)(7,676)
Mark to market gain (loss) included in cost of operations8,972
(21,208)(44,307)
 99,878
179,117
308,157
SG&A expenses(255,545)(240,166)(240,296)
Goodwill impairment charges(86,903)

Restructuring activities and spin-off transaction costs(15,447)(40,807)(14,946)
Research and development costs(9,412)(10,406)(16,543)
Intangible amortization expense included in SG&A(3,980)(4,081)(3,769)
Mark to market gain (loss) included in SG&A(274)(2,902)4,097
Equity in income of investees8,326
16,440
(242)
Impairment of equity method investment(18,193)

Gains (losses) on asset disposals, net(15)32
(14,597)
Operating income (loss)$(281,565)$(102,773)$21,861

The presentation of the components of our revenues and gross profit in the table above is consistent with the way our chief operating decision maker reviews the results of our operations and makes strategic decisions about our business.

2017 vs 2016 Consolidated results

Revenues decreased by $20.5 million to $1.56 billion in 2017 as compared to $1.58 billion in 2016,lower construction project activity, primarily due to the declineone large project that was executed in the coal power generation market, which resultedprior period, partially offset by two acquisitions that closed in a $160.9February 2022.See Note 26 to the Consolidated Financial Statements for details on the FPS and Optimus acquisitions.

Adjusted EBITDA in the B&W Thermal segment increased $7.1 million decline in revenues in our Power segment. Partially offsetting the decline in Power segment revenues were increases in revenues of $144.2to $56.3 million in the Industrial segment resulting from the acquisitions of Universal on January 11, 2017 and SPIG on July 1, 2016.

In 2017, we had consolidated gross profit of $99.9 million, which compares2022 compared to consolidated gross profit of $179.1$49.1 million in 2016,2021, which is mainly attributable to the two acquisitions that closed in February 2022. See Note 26 to the Consolidated Financial Statements for details on the FPS and Optimus acquisitions. The Thermal segment also received a decreaselower percentage share of $79.2 million. The primary drivers of the decrease were the six uncompleted European loss contractsallocated SG&A expense in the Renewable segment (see Note 6 in the consolidated financial statements included in Item 8), the volume impact of the decline in the Power segment's revenues and productivity issues on new build cooling system contracts in the Industrial segment, which2022. These increases were partially offset by the positive gross profit contribution fromlower volume of activity on construction projects in 2022.

Corporate

Corporate costs in adjusted EBITDA include SG&A expenses that are not allocated to the Universal acquisition.

Our consolidated operating losses were $281.6reportable 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 $4.0 million and $102.8to $16.5 million in 2017 and 2016, respectively. In additionyear ended December 31, 2022 as compared to the decrease in gross profit discussed above, the primary drivers of the increase in our consolidated operating loss were $86.9$12.5 million of goodwill impairment chargesincurred in the third quarter of 2017, an $18.2 million other-than-temporary-impairment of our investment in TBWES (a joint venture in India), $15.4 million more SG&A expenses primarily related to acquired

34




businesses, and $8.1 million less income from equity method investees. Partially offsetting these declines were a $25.4 million reduction in restructuring expenses and related savings from these actions.

SG&A expenses, goodwill impairment charges, restructuring expenses, intangible asset amortization expense and income from equity method investees are discussed in further detail in the sections below.

2016 vs 2015 Consolidated results

Revenues decreased $179.0 million to $1.58 billion in 2016 compared to $1.76 billion in 2015 due to a $253.0 million decrease in Power segment revenues, partially offset by increases in revenues of $10.6 million and $69.9 million in our Renewable and Industrial segments, respectively.year ended December 31, 2021. The SPIG acquisition, which was completed on July 1, 2016, contributed revenues of $96.3 million in 2016.

Consolidated gross profit decreased $129.0 million to $179.1 million in 2016 from $308.2 million in 2015. Excluding the mark to market charges, consolidated gross profit in 2016 decreasedincrease is primarily due to the $125.8 million decline in our Renewable segment's gross profit, which was attributablehigher expenses related to losses on four renewable energy projects during 2016.tax and accounting services.

Our consolidated operating income
Advisory Fees and Settlement Costs

Advisory fees and settlement costs decreased $124.6by $4.6 million to a consolidated operating loss of $102.8 million in 2016 compared to consolidated operating income of $21.9 million in 2015. In addition to the gross profit decrease discussed above, the primary drivers of the decrease in our consolidated operating income in 2016 were a $25.9 million increase in restructuring charges primarily related to our Power segment restructuring in June 2016, partially offset by a $14.6 million decrease in loss on asset disposals and impairments compared to 2015, $16.1 million lower mark to market charges compared to 2015 and a $8.3 million gain from the sale of all of our interest in our Australian joint venture in 2016.

SG&A expenses, restructuring expenses, intangible asset amortization expense and income from equity method investees are discussed in further detail in the sections below.

Segment descriptions

Our operations are assessed based on three reportable segments.

Power: Focused on technologies and aftermarket services for steam-generating, environmental, and auxiliary equipment for power generation and other industrial applications.
Renewable: Focused on the supply of steam-generating systems, environmental and auxiliary equipment for the waste-to-energy and biomass power generation industries.
Industrial: Focused on custom-engineered cooling, environmental, acoustic, emission and filtration solutions, other industrial equipment and related aftermarket services.

Power segment

Our Power segment focuses on technologies and aftermarket services for steam-generating, environmental, and auxiliary equipment for power generation and other industrial applications. The segment provides a comprehensive mix of aftermarket products and services to support peak efficiency and availability of steam generating and associated environmental and auxiliary equipment, serving large steam generating utility and industrial customers globally. Our products and services include replacement parts, field technical services, retrofit and upgrades, fuel switching and repowering contracts, construction and maintenance services, start-up and commissioning, training programs and plant operations and maintenance for our full complement of boiler, environmental and auxiliary equipment. Our auxiliary equipment includes boiler cleaning equipment and material handling equipment.

Our worldwide new build boiler and environmental products businesses serve large steam generating and industrial customers. The segment provides a full suite of product and service offerings including engineering, procurement, specialty manufacturing, construction and commissioning. The segment's product suite includes utility boilers and industrial boilers fired with coal and natural gas. Our boiler products include advanced supercritical boilers, subcritical boilers, fluidized bed boilers, chemical recovery boilers, industrial power boilers, package boilers, heat recovery steam generators and waste heat boilers.


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Our environmental systems offerings include air pollution control products and related equipment for the treatment of nitrogen oxides, sulfur dioxide, fine particulate, mercury, acid gases and other hazardous air emissions. These include wet and dry flue gas desulfurization systems, catalytic and non-catalytic nitrogen oxides reduction systems, low nitrogen oxides burners and overfire air systems, fabric filter baghouses, wet and dry electrostatic precipitators, mercury control systems and dry sorbent injection for acid gas mitigation.

The segment also receives license fees and royalty payments through licensing agreements for our proprietary technologies.

While opportunities to increase revenues in the segment are limited, we are striving to grow margins by:
maintaining our strong service presence in support of our installed fleet of steam generation equipment and expanding support of other OEM equipment;
selectively bidding contracts in emerging international markets needing state-of-the-art technology for fossil power generation and environmental systems;
growing sales of industrial steam generation products in the petrochemical and pulp & paper markets, such as heat recovery, natural gas and oil fired package boilers, due in part to lower fuel prices; and
reducing costs through a focus on operational efficiencies.

Power segment results
 Year Ended December 31,  Year Ended December 31, 
(In thousands)20172016$ Change 20162015$ Change
Revenues$821,062
$981,978
$(160,916) $981,978
$1,234,997
$(253,019)
Gross profit$191,999
$233,550
$(41,551) $233,550
$247,632
$(14,082)
Gross margin %23%24%  24%20% 

2017 vs 2016 results

Revenues decreased 16%, or $160.9 million, to $821.1 million in 2017 from $982.0 million in 2016. The revenue decrease is attributable to the anticipated decline in the coal power generation market, which impacted our new build utility, retrofits and aftermarket parts and services businesses. The decline in coal power generation market activity is due primarily to a decrease in construction activity in the United States. We resized our business in anticipation of these declines with our restructuring actions in both 2017 and 2016. Partially offsetting the revenue decrease was an increase in revenues associated with our industrial steam generation repair and maintenance sales. We expect a low single-digit percentage decline in revenue in 2018.

Gross profit decreased 18%, or $41.6 million, to $192.0 million in 2017 from $233.6 million in 2016. We were able to largely maintain our gross margin percentage as a result of the 2017 and 2016 restructuring actions, which partially offset the gross profit effect of lower sales volumes. Compared to 2016, the primary decrease in gross profit in 2017 was attributable to the decrease in gross profit from a lower volume of construction activity associated with our new build utility and retrofits businesses. Also contributing to the decrease were fewer net improvements on contracts that were completed this year versus last year.

2016 vs 2015 results

Revenues decreased 20%, or $253.0 million, to $982.0 million in 2016 from $1.23 billion in 2015. The decrease in the segment's revenues reflect the accelerated decline in activities in the United States coal-fired generation market and a decline in sales of our industrial steam generation products to non-utility customers in North America. These declines resulted in lower revenues in all of our Power segment product lines.

Gross profit decreased $14.1 million to $233.6 million in 2016 from $247.6 million in 2015. While the 2016 decrease in gross profit was in-line with the 20% decrease in revenues, our Power segment's gross margin percentage improved in 2016 across all of our product lines as a result of the restructuring efforts in 2016. Also contributing to the increase in our gross margin percentage is a $41.5 million increase in the gross profit contribution from construction contracts in 2016 as a result of improved contract performance. In 2015, gross profit was negatively impacted by a loss of $11.6 million on the Berlin Station project.


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Effect of new accounting standard on Power segment results

In the first quarter of 2018, we will retrospectively adopt Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Benefit Cost and Net Periodic Postretirement Benefit Cost. The new guidance requires that we classify in our consolidated statement of operations the service cost component of net periodic retirement benefit costs in cost of operations, and all other costs associated with our retirement plans as a component of other income. This will affect not only how we present net periodic benefit cost, but also how we present segment gross profit and operating income upon adoption. Because almost all of our retirement benefit plans are in the Power segment, the reclassification of all of the net periodic retirement benefit components other than service cost from cost of operations to other income in the statement of operations will result in reclassification of $21.0 million, $20.0 million and $17.9 million of net periodic retirement benefit gains from the Power segment's gross profit for 2017, 2016 and 2015, respectively, which will result in restated gross margins of 21%, 22% and 19%, respectively. See Note 29 to the consolidated financial statements included in Item 8 for more information about the new accounting standard.

Renewable segment

Our Renewable segment provides steam-generating systems, environmental and auxiliary equipment for the waste-to-energy and biomass power generation industries, and plant operations and maintenance services for our full complement of systems and equipment. We deliver these products and services to a large base of customers primarily in Europe through our extensive network of technical support personnel and global sourcing capabilities. Our customers consist of traditional, renewable and carbon neutral power utility companies that require steam generation and environmental control technologies to enable beneficial use of municipal waste and biomass. This segment's activity is dependent on the demand for electricity and reduced landfill use, and ultimately the capacity utilization and associated operations and maintenance expenditures of waste-to-energy power generating companies and other industries that use steam to generate energy.

In 2017, we redefined our approach to bidding on and executing renewable energy contracts. Under our new model, we are focusing on engineering and supplying our core waste-to-energy and renewable energy technologies - steam generation, combustion grate, environmental equipment, material handling, and cooling condensers - while partnering with other firms to execute the balance of plant and civil construction scope on contracts we pursue. We also elected to limit bidding any additional Renewable contracts that involved our European resources during 2017 as we worked through our existing contracts.

Globally, efforts to reduce the environmental impact of burning fossil fuels may create opportunities for us as existing generating capacity is replaced with cleaner technologies. We expect backlog growth in the future, primarily from renewable waste-to-energy contracts, as we continue to see numerous opportunities around the globe, although the rate of this growth is dependent on many external factors.

Renewable segment results
 Year Ended December 31,  Year Ended December 31, 
(in thousands, except percentages)20172016$ Change 20162015$ Change
Revenues$347,198
$349,172
$(1,974) $349,172
$338,603
$10,569
Gross profit (loss)$(128,204)$(68,109)$(60,095) $(68,109)$57,682
$(125,791)
% of revenues(37)%(20)%  (20)%17% 

2017 vs 2016 results

Revenues decreased 1%, or $2.0 million to $347.2 million in 2017 from $349.2 million in 2016. Our revenue is comparable in both years primarily due to the activities in our portfolio of renewable energy projects in Europe during both periods.

The segment had losses of $128.2 million and $68.1 million in 2017 and 2016, respectively. Our losses were attributable to $158.5 million and $141.1 million in net losses in 2017 and 2016, respectively, from changes in the estimated cost to complete certain renewable energy contracts in Europe, partially offset by gross profit from our operations and maintenance services and aftermarket parts and services in each year. These $158.5 million of losses in 2017 were primarily a result of scheduling delays, shortcomings in our subcontractors' estimated productivity and the cost of repairing a structural steel beam

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on one of our projects, which were partially offset by contractual bonus opportunities and reduced liquidated damages on certain projects. In September 2017, we identified the failure of a structural steel beam on one of our renewable energy contracts in Europe, which stopped work in the boiler building and other areas pending corrective actions to stabilize the structure that are expected to be complete in the first half of 2018. The engineering, design and manufacturing of the steel structure were the responsibility of our subcontractors. A similar design was also used on two of the other renewable energy contracts in Europe, and although no structural failure occurred on these two other projects, work was also stopped in certain restricted areas while we added reinforcement to the structures. The reinforcements at these two other projects are now complete. The total costs related to the structural steel issues on these three projects, including project delays, are estimated to be approximately $42 million, which is included in the December 31, 2017 estimated losses at completion for these three projects.

Also in the second half of 2017, we adjusted the design of three of our renewable energy projects to increase the guaranteed power output, which will allow us to achieve contractual bonus opportunities for the higher output, and also received contractual reductions in liquidated damages. The bonus opportunities and reduced liquidated damages increased the estimated selling price of the three contracts by approximately $19 million in total, which was recognized in the estimated revenues and costs to complete in 2017 because each were loss contracts.

During 2018, we expect construction will be completed and the units will be operational on each of the six renewable energy loss projects in Europe. We expect customers will take-over five of the facilities in 2018, and one in early 2019. See additional details in Note 6 to the consolidated financial statements included in Item 8 of this annual report.

2016 vs 2015 results

Revenues increased 3.1%, or $10.6 million to $349.2 million in 2016 from $338.6 million in 2015. The increase in revenue in 2016 is primarily attributable to an increase in the level of activity on our renewable energy contracts. Our operations and maintenance services also contributed $2.4 million more to the segment's revenues in 2016.

Gross profit (loss) decreased $125.8 million in 2016 from $57.7 million in 2015 to $(68.1) million in 2016. The decrease is attributable to $141.1 million in losses from changes in the estimated forecasted cost to complete certain renewable energy contracts in Europe, partially offset by an increase in gross profit from our operations and maintenance services. During 2016, four of the segment's renewable energy projects became loss contracts. See additional details in Note 6 to the consolidated financial statements included in Item 8 of this annual report.

Industrial segment

Through December 31, 2016, our Industrial segment was comprised of our MEGTEC and SPIG businesses. Beginning with the first quarter of 2017, Universal was added to the Industrial segment. The segment is focused on custom-engineered cooling, environmental, noise abatement and industrial equipment along with related aftermarket services.

We acquired MEGTEC in 2014. Through MEGTEC, we provide environmental products and services to numerous industrial end markets. MEGTEC designs, engineers and manufactures products including oxidizers, solvent recovery and distillation systems, wet electrostatic precipitators, scrubbers and heat recovery systems. MEGTEC also provides specialized industrial process systems, coating lines and equipment. To this product mix, B&W recently added (synergy) technologies including dry electrostatic precipitators, pulse jet fabric filters, selective catalytic reduction systems, and dry and wet scrubbers. These complementary technologies enhance MEGTEC’s ability to offer a full line of environmental products and allow MEGTEC to strategically grow its business by selling solutions (comprehensive equipment trains) to new and existing customers and markets. MEGTEC serves a diverse set of industrial end markets globally with a current emphasis on the chemical, pharmaceutical, energy storage, metals and mining, and engineered wood panel board markets. MEGTEC's activity is dependent primarily on the capacity utilization of operating industrial plants and an increased emphasis on environmental emissions globally across a broad range of industries and markets.

We acquired SPIG on July 1, 2016. It provides custom-engineered cooling systems, services and aftermarket products. SPIG’s product offerings include air-cooled (dry) cooling systems, mechanical draft wet cooling towers and natural draft wet cooling hyperbolic towers. SPIG also provides end-to-end aftermarket services, including spare parts, upgrades and revamping of existing installations and remote monitoring. SPIG's comprehensive dry and wet cooling solutions and aftermarket products and services are primarily provided to the power generation industry, including natural gas-fired and renewable energy power plants, and downstream oil and gas, petrochemical and other industrial end markets in the Europe,

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the Middle East and the Americas. SPIG's activity is dependent primarily on global energy demand from utilities and other industrial plants, regulatory requirements, water scarcity and energy efficiency needs.

We acquired Universal on January 11, 2017. The business complements the product and service offerings we are able to provide through our Industrial segment. Universal provides custom-engineered acoustic, emission and filtration solutions to the natural gas power generation, mid-stream natural gas pipeline, locomotive and general industrial end-markets. Universal's product offering includes gas turbine inlet and exhaust systems, custom silencers, filters and custom enclosures. Historically, almost all of Universal's activity has been in the United States; however, we expect its business to grow globally with the benefit of B&W's global network of current and future customers and the needs of noise abatement controls for natural gas power generation, natural gas pipelines and other industrial markets.

We see opportunities for growth in revenues in the Industrial segment relating to a variety of factors. Our new equipment customers make purchases as part of major capacity expansions, to replace existing equipment, or in response to regulatory initiatives. Additionally, our significant installed base provides a consistent and recurring aftermarket stream of parts, retrofits and services. Major investments in global industrial markets have strengthened demand for our industrial equipment, while tightening global environmental and noise abatement regulations are creating new opportunities. We foresee long-term trends toward increased environmental and noise abatement controls for industrial manufacturers around the world. Together, the companies that comprise the Industrial segment are well-positioned to capitalize on opportunities in these markets. Additionally, we will continue to seek acquisitions to expand our market presence and technology offerings in our Industrial segment.

In November 2017, we also announced that we are evaluating strategic alternatives for our MEGTEC and Universal businesses in order to enhance our financial flexibility. Though our outlook remains favorable for these businesses, we believe it is prudent to explore alternatives for these parts of our company, providing greater optionality if needed.

Industrial segment results
 Year Ended December 31,  Year Ended December 31, 
(In thousands)20172016$ Change 20162015$ Change
Revenues$397,791
$253,613
$144,178
 $253,613
$183,695
$69,918
Gross profit$41,383
$50,726
$(9,343) $50,726
$54,826
$(4,100)
Gross margin %10%20%

 20%30%

2017 vs 2016 results

Revenues increased 57%, or $144.2 million, to $397.8 million in 2017 from $253.6 million in 2016. The increase in revenues is primarily attributable to the July 1, 2016 acquisition of SPIG and the January 11, 2017 acquisition of Universal, which together comprised $250.6 million of revenue in 2017. In 2016, SPIG contributed $96.3 million of revenue to the Industrial segment. Partially offsetting the increase in revenue is a $9.0 million decline in revenues attributable to sales of engineered products, primarily in the first half of 2017.

Gross profit decreased 18%, or $9.3 million, to $41.4$8.5 million in the year ended December 31, 2017,2022 as compared to $50.7$13.1 million in 2016. In 2017, Universal contributed $14.5the corresponding period of 2021. The change is primarily due to decreased use of external consultants in 2022.

Research and Development

Our research and 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 $3.8 million and $1.6 million in the years ended 2022 and, 2021, respectively. The increase resulted primarily from timing of specific research and increased development efforts and the non-recurring 2021 recognition of approximately $0.9 million in certain credits. 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 $0.6 million and $4.9 million of gross profit.expense in the years ended December 31, 2022 and 2021, respectively. The net decreasecharges primarily consist of severance related to actions taken, including as part of the Company’s strategic, market-focused organizational and re-branding initiatives.

Transition Costs

Transition costs across our corporate and business functions resulted in gross profit$7.9 million and $5.9 million of expense in the gross margin percentage reflects decreased revenuesyears ended December 31, 2022 and 2021, respectively. These charges primarily result from non-recurring 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 Consolidated Statement of Operations,
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Depreciation and Amortization

Depreciation expense was $11.0 million and $9.7 million in the years ended December 31, 2022 and 2021, respectively.

Amortization expense was $13.0 million and $8.6 million for the years ended December 31, 2022 and 2021, respectively.

Pension and Other Postretirement Benefit Plans

We recognize benefits from our MEGTEC businessdefined 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. Pension benefits before MTM were $29.8 million and $32.7 million in the years ended December 31, 2022 and 2021, respectively.

Our pension costs include MTM adjustments from time to time and are primarily a result of changes in product mix, particularly at our SPIG businessthe discount rate, curtailments and settlements. Any MTM charge or gain should not be considered to be representative of future MTM adjustments as new build cooling systems generally have lower margins than other productssuch events are not currently predicted and servicesare in each case subject to market conditions and actuarial assumptions as of the segment. In addition,date of the gross profit in 2017 was negatively affected by productivity issues on new build cooling system contracts. The productivity issues increased estimated costs and resulted in deployment of additional resources to complete the contracts on time. We expect the Industrial segment's gross profit will normalize over the course of 2018 as these legacy new build cooling system contracts are completed and both our productivity and profitability increase.


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2016 vs 2015 results

Revenues increased 38.1%, or $69.9 million, to $253.6 million in 2016 from $183.7 million in 2015. The increase in revenues is primarily the result of our acquisition of SPIG on July 1, 2016, which contributed $96.3 million of revenueevent giving rise to the Industrial segmentMTM adjustment. Total MTM adjustments for our pension benefit plans were gains of $6.4 million for the twelve months ended months ended December 31, 2022. Total MTM adjustments for our other postretirement benefit plans were gains of $1.4 million during the second halftwelve months ended December 31, 2022. Pension benefits, excluding MTM adjustments of 2016. Our MEGTEC business experienced a decline in revenues in 2016 across eachgain of its product lines caused by the decline in demand in the United States.

Gross profit decreased 7.5%, or $4.1$29.8 million, to $50.7were $32.7 million in the year ended December 31, 2016, compared to $54.8 million in 2015. 2021.

The SPIG business contributed gross profit of $7.8 million in 2016, which was partially offset by lower gross profit from MEGTEC in-line with the decrease in revenues during 2016. MEGTEC was able to improve its gross margin percentage in 2016 due to its mix of product revenues despite the overall decline in revenues and gross profit for the business. In addition, SPIG's gross margins have been historically lower than MEGTEC's, resulting in a decline in the 2016 gross margin percentage in the segment.

Goodwill impairment

We recorded goodwill impairment charges of $86.9 million ($85.8 million net of tax) in the third quarter of 2017, which included a $50.0 million charge in the Renewable reporting unit and a $36.9 million charge in the SPIG reporting unit. The reasons for the charges and related assumptions made by management are described in Note 15 to the consolidated financial statements included in Item 8. The third quarter 2017 impairment charges eliminated all of the Renewable reporting unit's goodwill balance at September 30, 2017, and $38.3 million of the SPIG reporting unit's goodwill balance remains after the impairment charge; long-lived assets in the two reporting units were not impaired.

As a result of our annual goodwill impairment tests performed on the first day of the fourth quarter of 2017, 2016 and 2015, we did not record any goodwill impairment charges.

SG&A expenses

SG&A expenses, excluding intangible asset amortization expense and pension mark to market adjustments, increased by $15.4 million to $255.5 million in 2017 from $240.2 million in 2016. The primary reason for the increase is $24.3 million of combined SG&A expenses attributable to the recently acquired SPIG and Universal businesses. In addition, SG&A expenses in our Renewable segment increased by $17.5 million in 2017 to support ongoing renewable energy projects in Europe. These increases are partially offset by the savings from our restructuring initiatives, which provided $30.6 million of benefit to our Power segment in 2017, and reductions in incentive compensation accruals in both 2017 and 2016 based on the company's operating results. SG&A expenses in 2017 and 2016 also include $2.7 million and $5.1 million, respectively, of acquisition and integration related costs related to the acquisitions of Universal and SPIG.

SG&A expenses were $240.2 million in 2016 and $240.3 million in 2015, excluding intangible asset amortization expense and pension mark to market adjustments. SG&A expenses in 2016 were higher primarily due to $5.1 million of acquisition and integration related costs related to the acquisitions of SPIG, $1.3 million of litigation expenses associated with the ARPA trial and the addition of $8.2 million of SG&A expenses associated with SPIG. These 2016 increases were almost entirely offset by savings from our 2016 restructuring actions and reduced incentive compensation accruals.

Research and development expenses

Research and development expenses relate to the development and improvement of new and existing products and equipment, as well as conceptual and engineering evaluation for translation into practical applications. These expenses were $9.4 million, $10.4 million and $16.5 million in 2017, 2016 and 2015, respectively. We continuously evaluate each research and development project and collaborate with our business teams to ensure that we believe we are developing technology and products that are currently desired by the market and will result in future sales. In 2018, we expect our research and development expenses to continue to decline.

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Restructuring

2017 Restructuring activities

In the second half of 2017, we announced plans to implement restructuring actions to improve our global cost structure and increase our financial flexibility. The restructuring actions include a workforce reduction at both the business segment and corporate levels totaling approximately 9% of our global workforce, SG&A expense reductions and new cost control measures, and office closures and consolidations in non-core geographies. These actions include reduction of approximately 30% of B&W Vølund's workforce, which will right-size its workforce to operate under a new execution model focused on B&W's core boiler, grate and environmental equipment technologies, with the balance-of-plant and civil construction scope being executed by a partner. We believe the new B&W Vølund business model provides us with a lower risk profile and aligns with our strategy of being an industrial and power equipment technology and solutions provider. Other actions are focused on productivity and efficiency gains to enhance profitability and cash flows, and to mitigatefollowing sensitivity analysis reflects the impact of lower demanda 25 basis point change in the global coal-fired power market. Total costs associated with these restructuring actions were $9.1 million, most of which was recognized inassumed discount rate and return on assets on our pension plan obligations and expense for the fourth quarter of 2017, and the estimated annual savings are expected to be approximately $45 million in 2018.

Pre-2017 Restructuring activities

Our series of restructuring activities prior to 2017 were intended to help us maintain margins, make our costs more variable and allow our business to be more flexible. We made our manufacturing costs more volume-variable through the closure of manufacturing facilities and development of manufacturing arrangements with third parties. Also, we made our cost of engineering and supply chain more variable by creating a matrix organization capable of delivering products across multiple segments, and developing more volume-variable outsourcing arrangements with our joint venture partners and other third parties to meet fluctuating demand. This new matrix organization and operating model required different competencies and, in some cases, changes in leadership. While primarily applicable to our Power segment, our restructuring actions also benefit the Renewable and Industrial segments to a lesser degree. As demonstrated in our Power segment's gross margin percentages, we have achieved our objective of maintaining gross margins in the segment. Quantification of cost savings, however, is significantly dependent upon volume assumptions that have changed since the restructuring actions were initiated.

On June 28, 2016, we announced actions to restructure our power business in advance of lower projected demand for power generation from coal in the United States. These restructuring actions were primarily in the Power segment. Additionally, we announced leadership changes on December 6, 2016, which included the departure of members of management in our Renewable segment. The costs associated with these restructuring activities totaled $4.2 million and $31.4 million in the yearsyear ended December 31, 20172022:

(In millions)0.25% increase0.25% decrease
Discount rate:
Effect on ongoing net periodic benefit cost (1)
$(16.2)$16.7 
Effect on projected benefit obligation(18.5)19.3 
Return on assets:
Effect on ongoing net periodic benefit cost(2.4)2.4 
(1) Excludes effect of annual MTM adjustment.

A 25 basis point change in the assumed discount rate and 2016, respectively. We do not expect additional restructuring charges related to these activities in 2018.

Other restructuring initiatives announced prior to 2016 were intended to better position usreturn on assets would have no meaningful impact on our other postretirement benefit plan obligations and expense for growth and profitability. They have primarily been related to facility consolidation and organizational efficiency initiatives. Theses costs were $1.0 million, $5.6 million and $11.7 million in 2017, 2016, and 2015, respectively. We do not expect additional restructuring charges related to the pre-2017 restructuring activities in 2018.

Spin-off transaction costs

Spin-off costs were primarily attributable to employee retention awards directly related to the spin-off from our former parent, The Babcock & Wilcox Company (now known as BWX Technologies, Inc.). In the yearsyear ended December 31, 2017, 2016 and 2015,2022 individually or in the aggregate, excluding the impact of any annual MTM adjustments we recognized spin-off costs of $1.2 million, $3.8 million, $3.8 million, respectively. In 2017, we disbursed $1.9 million of the accrued retention awards. Approximately $0.3 million of such costs remain, which we expect will be recognized through June 30, 2018.record annually.


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Equity in income (loss) of investees
 Year Ended December 31,
 201720162015
B&W's share of income from equity method investees$8,326
$8,116
$(242)
Gain on sale of HMA
8,324

Other than temporary impairment of TBWES(18,193)

 $(9,867)$16,440
$(242)

The 2017 increase in our share of income from equity-method investees comparedRefer to 2016 was primarily a result of improved performance and warranty experience at Babcock & Wilcox Beijing Company, Ltd. ("BWBC"), offset by no 2017 contribution from our former Australian joint venture, Halley & Mellowes Pty. Ltd. ("HMA"). Our share of HMA's income from its operations in 2016 and 2015 was $2.2 million and $3.1 million, respectively. At the end of 2016, we sold all of our interest in HMA, resulting in an $8.3 million gain, which was classified in equity income of investees in 2016.

The 2016 increase in contributions from equity-method investees compared to 2015 was primarily dueNote 13 to the performance of BWBC.

During the second quarter of 2017, both we and our joint venture partner decided to make a strategic change in the Indian joint venture due to the decline in forecasted market opportunities in India, which reduced the expected recoverable value of our investment in the joint venture. As a result of this strategic change, we recognized a $18.2 million other-than-temporary-impairment of our investment in TBWES in the second quarter of 2017. The impairment charge was based on the difference in the carrying value of our investment in TBWES and our share of the estimated fair value of TBWES's net assets. Our remaining investment in TBWES at December 31, 2017 was $26.0 million. The winding down of the TBWES joint venture in India isConsolidated Financial Statements for further described in Note 7 to the consolidated financial statements included in Item 8.

In the first quarter of 2018, we sold all of our interest in BWBC to our joint venture partner for approximately $21 million, which will result in a gain of approximately $4 million during the first quarter of 2018. The sale of our BWBC joint venture in China is further described in Note 7 to the consolidated financial statements included in Item 8. BWBC contributed equity in income of investees of $6.1 million, $4.5 million and $4.9 million from its operations in 2017, 2016 and 2015, respectively.

Excluding the gain on the sale of our BWBC joint venture, in 2018, our equity income is expected to relate only to any potential decreases in the recoverable value of our Indian joint venture and from various contract joint ventures, which are not expected to be material.

Intangible asset amortization expense

We recorded $18.3 million, $19.9 million and $11.4 million of expense during the years ended December 31, 2017, 2016 and 2015, respectively. The increase in amortization expense is attributable to our last two business combinations, which increased our intangible assets by $74.7 million. We expect intangible asset amortization expense will be approximately $12.4 million in 2018.

We acquired $55.2 million of intangible assets in the July 1, 2016 acquisition of SPIG. Amortization of the SPIG intangible assets resulted in $9.1 million and $13.3 million of expense during 2017 and 2016, respectively.

We acquired $19.5 million of intangible assets in the January 11, 2017 acquisition of Universal. Amortization of the Universal intangible assets resulted in $3.1 million of expense during 2017.

Mark to market adjustments

We recognize actuarial gains and losses forinformation regarding our pension and other postretirement benefit plansplans.

Foreign Exchange

We translate assets and liabilities of our foreign operations into earningsUnited 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 net periodic benefit cost, which affect both our cost of operationsaccumulated other comprehensive income (loss). We report foreign currency transaction gains and SG&A. These mark to market ("MTM") adjustments for our pension and other postretirement plans resulted in net gains (losses) of $8.7 million, $(24.1) million, and $(40.2)

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million, in 2017, 2016 and 2015, respectively. The effect of the MTM adjustments on cost of operations and SG&A are detailed in Note 18 to the consolidated financial statements included in Item 8.

The MTM gain in 2017 was primarily related to actual returns on plan assets exceeding our expected long-term rate of return assumption, which more than offset the decreaselosses in the discount rate used to measure the pension and other postretirement plan liabilities at December 31, 2017. The MTM gain in 2017Consolidated Statements of Operations.

Foreign exchange was partially offset by lump sum payments from our Canadian pension plan in the first quarter of 2017, which resulted in a plan settlement of $0.4 million and an interim mark to market remeasurement for the Canadian pension plan. The mark to market adjustment in the first quarter of 2017 was $0.7 million.

The MTM loss in 2016 was primarily related to a decrease in the discount rate used to measure our pension plan liabilities, and changes in the demographics of our pension plan participants, partially offset by actual return on assets that exceeded our expected return for the year. The MTM loss in 2016 was partially offset by a curtailment gain in one of our other postretirement benefit plans. We terminated the Babcock & Wilcox Retiree Medical Plan (the "Retiree OPEB plan") effective December 31, 2016. The Retiree OPEB plan was originally established to provide secondary medical insurance coverage for retirees that had reached the age of 65, up to a lifetime maximum cost. In exchange for terminating the Retiree OPEB plan, the participants had the option to enroll in a third-party health care exchange, which B&W agreed to contribute up to $750 a year for each of the next three years (beginning in 2017), provided the plan participant had not yet reached his or her lifetime maximum under the terminated Retiree OPEB plan. Based on the number of participants who did not enroll in the new benefit plan, we recognized a settlement gain of $7.2 million on December 31, 2016 (which is included as part of the MTM adjustment). Also, during the second and third quarters of 2016, we recorded adjustments to our benefit plan liabilities resulting from certain curtailment and settlement events. In April and September 2016, lump sum payments from our Canadian pension plan resulted in pension plan settlement charges of $1.1 million and $0.1 million, respectively. In May 2016, the closure of our West Point, Mississippi manufacturing facility resulted in a $1.8 million curtailment charge in our United States pension plan. These events resulted in interim mark to market accounting for the respective benefit plans in 2016, which totaled $27.5 million.

The net MTM loss in 2015 was primarily related to actual return on assets that fell short of the expected long-term rate of return assumption, offset by an increase in the discount rate used to measure our benefit plans liabilities.

Provision for income taxes
 Year Ended December 31,
(In thousands, except for percentages)201720162015
Income (loss) before income taxes$(314,199)$(108,139)$20,205
Income tax expense (benefit)$64,816
$6,943
$3,671
Effective tax rate(20.6)%(6.4)%18.2%

We operate in numerous countries that have statutory tax rates below that of the United States federal statutory rate of 35% that was in effect through December 31, 2017. 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 20% and approximately 30%. In addition, the jurisdictional mix of our income (loss) before tax can be significantly affected by mark to market adjustments related to our pension and postretirement plans, which have been primarily in the United States, and the impact of discrete items.

In 2017, we had a pretax loss in the United States after MTM adjustments as well as an aggregate pretax loss in our foreign jurisdictions. We had significant losses which were subject to a valuation allowance and therefore did not give rise to a tax benefit in 2017. These losses were primarily attributable to our Renewable Segment, as well as nondeductible goodwill impairment charges. The negative effective tax rate is a result of unfavorable discrete items recorded in 2017, largely attributable to the impact of the newly enacted United States tax legislation.

In 2016, we had a pretax profit in the United States after MTM adjustments as well as an aggregate pretax loss in our foreign jurisdictions. In addition, some of the foreign losses were subject to a valuation allowance and therefore did not give rise to a tax benefit in 2016. Because the jurisdictional mix of our pretax loss was heavily skewed toward relatively low tax jurisdictions, a lower effective tax rate resulted. This low effective tax rate applied against our pretax loss was further reduced due to the impact of unfavorable discrete items recorded in 2016.


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In 2015, the MTM adjustments resulted in a net loss in the United States, which was tax-effected at United States statutory tax rates. When these tax benefits, which are realized in a relatively high tax jurisdiction, are combined with the tax expense generated in foreign jurisdictions with relatively lower statutory tax rates, a low net effective tax rate resulted because we have income before the provision for income taxes.

Income (loss) before provision for income taxes generated in the United Statesof $(0.6) million and foreign locations$(4.3) million for the years ended December 31, 2017, 20162022 and 2015 is presented2021, respectively. Foreign exchange gains and losses are primarily related to unhedged intercompany loans denominated in the table below.European currencies to fund foreign operations.

Income Taxes
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 Year Ended December 31,
(in thousands)201720162015
United States$(44,835)$1,280
$(20,748)
Other than the United States(269,364)(109,419)40,953
Income (loss) before provision for (benefit from) income taxes(314,199)(108,139)20,205
Year ended December 31,
(In thousands, except for percentages)20222021
Income (loss) before income taxes$(15,521)$29,314 
Income tax expense (benefit)11,063 (2,224)
Effective tax rate(71.3)%(7.6)%


As described above, in addition to jurisdictional mix of earnings and the impact of MTM adjustments, our income tax provision and ourOur effective tax rate can also be affected by discrete items that do not occur in each period or jurisdiction and recurring items like foreign tax and research credits, nondeductible expenses and manufacturing tax benefits.

In 2017, we had net unfavorable discrete items of approximately $70.7 million. With2022 reflects a pretax loss in 2017, unfavorable discrete items decreased the effective rate by 22.5%. Our discrete items primarily consist of unfavorable discrete items of $62.4 million related to the enactment of new United States tax legislation in the fourth quarter (see further discussion in Note 10 to the consolidated financial statements included in Item 8), an unfavorable discrete item for withholding tax of $4.5 million on a dividend distribution outside the United States, and unfavorable discrete items related to changes in state deferred taxes due to changes in tax rates and an increase in valuation allowances of $5.0 million.

In 2016, we had net unfavorable discrete items of approximately $32.2 million. With a pretax loss in 2016, unfavorable discrete items decreased the effective tax rate by 29.8%. Our discrete items primarily consist of a $15.7 million increase in the valuation allowance against deferred tax assets in jurisdictions other than Mexico, Canada, Brazil, Finland, Germany, Thailand, the Philippines, Indonesia, the United Kingdom, Sweden and certain United States state jurisdictions.

The increase in our income tax expense in 2022 compared to 2021 is primarily attributable to a prior year reduction in the
valuation allowance of $8.7 million related to one of our foreign businesses that incurred pretaxnet operating losses and temporary deductible benefits in the current year, a $10.8 million increase in the valuation allowance against the deferred tax asset related to our equity investment in a foreign joint venture and a $5.1 million charge related to changes in state deferred taxes due to changes in tax rates and an increase in valuation allowances.certain states.


In 2015, we had net unfavorable discrete items of approximately $2.7 million, primarily related to revaluing our state deferred taxes, which increased the effective tax rate in 2015 by approximately 14%. The recurring items largely offset each other.

Discrete items are dependent on future events that management is unable to reasonably forecast. Consequently, we cannot predict the amount or significance of such items on our effective tax rate in future periods.

See Note 10 to the consolidated financial statements included in Item 8 for explanation of differences between our effective income tax rate and our statutory rate and the impact of the United States Tax Cuts and Jobs Act of 2017.


Liquidity and Capital Resources

Liquidity

Our primary liquidity requirements include debt service, funding dividends on preferred stock and working capital resources

Additional losses we recognizedneeds. We fund our liquidity requirements primarily through cash generated from operations, external sources of financing, including our recent revolving credit agreement, senior notes, and equity offerings, including our Preferred Stock, each of which are described below and in the fourth quarterNotes to our Consolidated Financial Statements included in Part II, Item 8 of 2017 relatedthis Annual Report in further detail along with other sources of liquidity. We believe that our current operating plan and borrowings available under our revolving credit agreement will be sufficient to an increasesatisfy our foreseeable liquidity needs and capital expenditure requirements, including for at least the next twelve months.

During 2022, we executed the following actions:

on February 1, 2022, we acquired 100% ownership of Fossil Power Systems, Inc. for approximately $59.2 million, excluding working capital adjustments;
on February 28, 2022, we acquired 100% ownership of Optimus Industries, LLC ("Optimus") for approximately $19.0 million, excluding working capital adjustments;
we sold $6.8 million aggregate principal of 8.125% Senior Notes and received $6.7 million of net proceeds;
we sold development rights of a future solar project for $8.0 million and recorded a $6.2 million non-recurring gain;
on July 28, 2022, we participated in structural steel repair costs onthe sale process of Hamon Holdings Corporation and acquired certain assets of one of our European renewable energy contracts led to us seeking amendmentits subsidiaries for approximately $2.9 million;
on September 24, 2022, we acquired the remaining 40% ownership stake in Babcock & Wilcox Solar for $12.7 million and will make payments of our lending arrangement. The additional losses we recognized in the fourth quarter$3.0 million, $5.0 million, and $4.7 million on January 16, 2023, June 30, 2023, and January 15, 2024, respectively, for a present value of 2017 caused us to be out of compliance with certain financial covenants in our lending arrangements$12.1 million at December 31, 2017. We obtained an amendment2022;
on October 14, 2022, we changed the name of the company formerly known as Fosler Construction Company, Inc.     to our United States Revolving Credit Facility on March 1, 2018 that temporarily waivedBabcock & Wilcox Solar Energy, Inc. ("Babcock & Wilcox Solar"); and
during the financial covenant defaults that existed atyear ended December 31, 2017. We face liquidity challenges related to our non-compliance with2022, the financial covenants associated with our second lien term loan facility at December 31, 2017, which may be difficult to resolve in a timely manner. Our second lien term loan agreement contains a 180-day standstill period beginning on March 1, 2018 to resolveCompany sold certain real property and then entered into sale lease-back agreements for each sale property. The Company accounted for the event of default or repay the loansale-leasebacks as described in Note 20. Ourthree individual financing plan includes raising additional capital through a rights offeringtransactions aggregating $13.4 million.

See Notes 10, 14, 15, 16, 17, 18 and other sources before the end of the standstill period, which will depend on conditions in the capital markets and, with respect26 to the rights offering, an amendment to our existing shelf registration statement that we plan to fileConsolidated Financial Statements included in early March 2018 being declared effective by the Securities and Exchange Commission ("SEC"), which are matters that are outsidePart II, Item 8 of our control.

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We have initiated steps to remedy the going concern uncertainty, which include, but are not limited to:
secured an equity commitment agreement on March 1, 2018 with a group of our existing stockholders to fully backstop our planned rights offeringthis Annual Report for the purpose of providing approximately $182 million of new capital, in the form of new equity, that together with $35 million of borrowings permitted by our United States revolving credit facility we intend to use to extinguish the outstanding balance of our second lien term loan facility and terminate the associated borrowing agreement;
mitigating, to the extent possible, the adverse impact of our net losses and financial covenant defaults over the past two yearsadditional information on our core operations, customers, vendorsexternal sources of financing and banking relationships (e.g., providers of bank guarantees, letters of creditequity offerings.

Cash and surety bonds);Cash Flows
entered into employee retention agreements with key members of management;
dedicating project management resources to the performance, efficiency and timely completion of our existing and forecasted portfolio of contracts; and
selling certain assets or exiting certain markets, if we believe the opportunity would improve stockholder value and our liquidity outlook.

While we believe that the actions summarized above are more likely than not to address the substantial doubt about our ability to continue as a going concern, we cannot assert that it is probable that our plans will fully mitigate the conditions identified. If we cannot continue as a going concern, material adjustments to the carrying values and classifications of our assets and liabilities and the reported amounts of income and expense could be required.


At December 31, 2017,2022, our cash and cash equivalents, current restricted cash and long-term restricted cash totaled $56.7$113.5 million and we had $263.6total debt of $353.0 million as well as $191.7 million of gross preferred stock outstanding. Our foreign business locations held $46.6 million of our total borrowings ($299.3 million face value before debt discounts).cash and cash equivalents, current restricted cash and long-term restricted cash at December 31, 2022. In general, our foreign cash balances are not available to fund our United StatesU.S. operations unless the funds are repatriated or used to repay intercompany loans made from the United StatesU.S. to foreign entities, which could expose us to
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taxes we presently have not made a provision for in our results of operations. Our foreign business locations held $54.3 million of our $56.7 million of unrestricted cash and cash equivalents at December 31, 2017. We presently have no plans to repatriate these funds to the United States asU.S. In addition, we believe that our United States liquidity is sufficient to meet the anticipated cash requirements of our United States operations.

Historically, our primary sources of liquidity have been cash from operations, borrowings under our United States Revolving Credit Facility ("Revolver") and borrowings under foreign revolving credit facilities. Our borrowing capacity under our Revolver is primarily limited by the financial covenants, which are most significantly affected by our trailing 12 months EBITDA (as defined in the credit agreement governing the facility). The significant loss accruals we recorded in the second quarter and fourth quarters of 2017 reduced our trailing 12 months EBITDA and, in turn, our ability to comply with our financial covenants. Accordingly, we amended our Revolver on February 28, 2017, August 9, 2017 and March 1, 2018 to, among other things, provide covenant relief.

To provide additional liquidity, we entered into a Second Lien Term Loan Facility ("Second Lien") on August 9, 2017 with an affiliate of American Industrial Partners ("AIP"). The Second Lien consists of a second lien term loan in the principal amount of $175.9 million, all of which we borrowed on August 9, 2017, and a delayed draw term loan in the principal amount of $20.0 million, which was drawn in a single draw on December 13, 2017. On August 9, 2017, we used $125.0had $11.2 million of the second lien term loan proceeds to repay borrowings outstanding under our Revolver and pay fees and expenses related to the Second Lien and the amendment of our Revolver, and the balance of the second lien term loan proceeds on August 9, 2017 were used to repurchase approximately 4.8 million shares of our common stock held by an affiliate of AIP for approximately $50.9 million, which was one of the conditions precedent for the Second Lien. As described in Note 20 to the consolidated financial statements included in Item 8, the difference between the price paid for the shares and the estimated fair value of the shares repurchased was treated as a debt discount together with the direct financing costs.

Additionally, to enhance our financial flexibility, we also announced in November 2017 that we are evaluating strategic alternatives for our MEGTEC and Universal businesses. Though our outlook remains favorable for these businesses, we believe it is prudent to explore alternatives for these parts of our company, providing greater optionality if needed.


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After giving effect to the March 1, 2018 amendment, we had approximately $137.4 million of availability under our Revolver as of December 31, 2017. Based on the amended Revolver, we believe we have adequate sources of liquidityrestricted cash at December 31, 2017. Our assessment is based on the Equity Commitment Agreement we entered into on March 1, 2018, our operating forecast, backlog, cash on-hand, borrowing capacity under the Revolver, potential asset sales, planned capital investments and ability2022 related to manage future discretionary cash outflows during the next 12 month period. We expect our operations to use cash over the first halfcollateral for certain letters of 2018 and generate cash flows that will cover our forecasted obligations during the second half of 2018. Our forecasted use of cash during 2018 will primarily be in the Renewable segment as we fund accrued contract losses and work down advanced bill positions. Our forecasted use of cash is expected to be funded in part through borrowings from our Revolver. Our Revolver allows for nearly immediate borrowing of available capacity to fund cash requirements in the normal course of business, meaning that United States cash on hand is minimized to reduce borrowing costs. After giving effect to the the $65.0 million of minimum liquidity required under our financial covenants, we expect to have between $25.0 million and $35.0 million of available borrowing capacity from our Revolver during the next 12 months based on our forecast of the trailing 12 month EBITDA calculation and forecasted borrowings. Our available borrowing capacity will increase if we complete assets sales. We expect cash and cash equivalents, cash flows from operations, and our borrowing capacity under our Revolver to be sufficient to meet our liquidity needs for at least 12 months from the date of this filing.credit.


Our net cash provided by (used)Cash used in operations was $(189.8)$30.6 million in 2017 and $2.3 million in 2016. The changethe year ended December 31, 2022, which is partiallyprimarily attributable to the $263.9 million increase in ourcurrent year net loss in the 2017 compared to 2016. Also,of $26.6 million, partially offset by a $48.1$1.2 million net decrease in operating cash inflowsoutflows associated with changes in accounts receivable, contracts in progress and advanced billings in 2017 compared to 2016 resulted primarily fromworking capital. In the timing of billings and stage of completion of large, ongoing contracts in our Renewable segment. Generally, we try to structure contract milestones to mirror our expected cash outflows over the course of the contract; however, the timing of milestone receipts can greatly affect our overall cash position. Our portfolio of Renewable energy contracts at bothyear ended December 31, 20172021, cash used in operations was $111.2 million which is primarily attributable to the reduction in pension, postretirement and December 31, 2016 included milestone payments from our customers in advance of incurring the contract expenses,employee benefit liabilities and as a result we are in an advance bill position on most of these contracts at both dates. Because of the advanced bill positions, combined with the increase in expected costs to complete the Renewable loss contracts, we expect the use of cashother accrued liabilities, partially offset by the Renewable segment to continue during the first half of 2018 until these contracts are completed. Ourcurrent year net income and operating cash outflows also increased by $56.8 millionflows associated with changes in contract related accounts payable and accrued liabilities in 2017 compared to 2016.working capital.


Our net cashCash flows used in investing activities was $62.1totaled $68.8 million in 2017 and $180.8 million in 2016. The net cash used in investing activities in 2017 wasthe year ended December 31, 2022, primarily attributabledue to the $52.5 million acquisitionbusiness acquisitions of Universal on January 11, 2017, net of $4.4 million cash acquired in the business combination (see Note 5 to the consolidated financial statements included in Item 8). The net cash used in investing activities in 2016 included $145.0 million acquisition of SPIG, net of $26.0 million cash acquired, and a $26.3 million contribution to increase our interest in TBWES, our joint venture in India. Capital expenditures were $14.3$64.9 million and $22.5 million in 2017 and 2016, respectively.

Our net cash provided by financing activities was $206.1 million in 2017, compared to $83.4$13.2 million of cash used in 2016. The cash providedcapital expenditures, partially offset by financing activities in 2017 was a result of net borrowings from our United States revolving credit facility of $84.5 million and proceeds from the issuancesale of business and assets of $5.5 million and sales and maturities of available-for-sale securities of $9.8 million . In the Second Lienyear ended December 31, 2021, cash flows from investing activities used net cash of $161.7$33.5 million, which were usedprimarily due to repurchase $16.7the acquisition of business of $55.3 million and $6.7 million of sharescapital expenditures, offset by proceeds from a related party, fund debt issuance coststhe sale of business and repay a portionassets of our Revolver. The net cash$25.4 million.

Cash flows used in financing activities of $11.2 million during the year ended December 31, 2022, primarily related to repayments of debt of $16.9 million and payments of preferred stock dividends of $14.9 million, partially offset by combined borrowings on loans payable, issuance of senior notes and proceeds from sale-leaseback transactions of $27.4 million. Cash flows from financing activities provided net cash of $302.8 million in 2016 isthe year ended December 31, 2021 primarily attributablerelated to repurchasesthe issuance of $78.4common stock, senior notes and preferred stock offset by $75.4 million of our common stock.

In 2017, we also experienced increased levelsrepayments of cash paid for interest basedthe Last Out Term Loans, a $164.3 million net reduction on higher borrowing levels, which we expect to increase further in 2018.

United Statesthe prior U.S. Revolving Credit Facility ("Revolver")and $24.6 million of financing fees.


On May 11, 2015,Debt Facilities

As described in the Notes to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report, on June 30, 2021, we entered into a credit agreement with a syndicate of lenders ("Credit Agreement") in connection with our spin-off from The Babcock & Wilcox Company. Thethe Reimbursement Agreement, Revolving Credit Agreement which is scheduledand 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 maturethe 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 and general corporate purposes. The Revolving Credit Agreement matures on June 30, 2020, provides for a senior secured revolving credit facility, initially in an aggregate amount2025. As of up to $600 million. The proceeds of loansDecember 31, 2022, no borrowings have occurred under the Credit Agreement are available for working capital needs and other general corporate purposes, and the full amount is available to support the issuance of letters of credit.

On February 24, 2017, August 9, 2017 and March 1, 2018, we entered into amendments to the Credit Agreement (the "Amendments" and the Credit Agreement, as amended to date, the "Amended Credit Agreement") to, among other things: (1) permit us to incur the debt under the second lien term loan facility, (2) modify the definition of EBITDA in the Amended Credit Agreement to exclude: up to $98.1 million of charges for certain Renewable segment contracts for periods including

46




the quarter ended December 31, 2016, up to $115.2 million of charges for certain Renewable segment contracts for periods including the quarter ended June 30, 2017, up to $30.1 million of charges for certain Renewable segment contracts for periods including the quarter ended September 30, 2017, up to $38.7 million of charges for certain Renewable segment contracts for periods including the quarter ended December 31, 2017, up to $4.0 million of aggregate restructuring expenses incurred during the period from July 1, 2017 through September 30, 2018 measured on a consecutive four-quarter basis, realized and unrealized foreign exchange losses resulting from the impact of foreign currency changes on the valuation of assets and liabilities, and fees and expenses incurred in connection with the August 9, 2017 and March 1, 2018 amendments, (3) replace the maximum leverage ratio with a maximum senior debt leverage ratio, (4) decrease the minimum consolidated interest coverage ratio, (5) limit our ability to borrow under the Amended Credit Agreement during the covenant relief period to $250.0 million in the aggregate, (6) reduce commitments under the revolving credit facility from $600.0 million to $450.0 million, (7) require us to maintain liquidity (as defined in the Amended Credit Agreement) of at least $75.0 million as of the last business day of any calendar month, (8) require us to repay outstanding borrowings under the revolving credit facility (without any reduction in commitments) with certain excess cash, (9) increase the pricing for borrowings and commitment fees under the Amended Credit Agreement, (10) limit our ability to incur debt and liens during the covenant relief period, (11) limit our ability to make acquisitions and investments in third parties during the covenant relief period, (12) prohibit us from paying dividends and undertaking stock repurchases during the covenant relief period (other than our share repurchase from an affiliate of AIP), (13) prohibit us from exercising the accordion described below during the covenant relief period, (14) limit our financial and commercial letters of credit outstanding under the Amended Credit Agreement, (15) require us to reduce commitments under the Amended Credit Agreement with the proceeds of certain debt issuances and asset sales, (16) beginning with the quarter ended March 31, 2018, limit to no more than $15.0 million any cumulative net income losses attributable to eight specified Vølund projects, (17) increase reporting obligations and require us to hire a third-party consultant and a chief implementation officer, (18) require us to pledge the equity of certain of our foreign subsidiaries to guarantee and provide collateral for our obligations under the United States credit facility, (19) require us to pay a deferred facility fee as more fully set forth in the March 1, 2018 Amendment, and (20) require us to sell at least $100 million of assets before March 31, 2019. The covenant relief period will end, at our election, when the conditions set forth in the Amended Credit Agreement are satisfied, but in no event earlier than the date on which we provide the compliance certificate for our fiscal quarter ended December 31, 2019.

Other than during the covenant relief period, the Amended Credit Agreement contains an accordion feature that allows us, subject to the satisfaction of certain conditions, including the receipt of increased commitments from existing lenders or new commitments from new lenders, to increase the amount of the commitments under the revolving credit facility in an aggregate amount not to exceed the sum of (1) $200.0 million plus (2) an unlimited amount, so long as for any commitment increase under this subclause (2) our senior leverage ratio (assuming the full amount of any commitment increase under this subclause (2) is drawn) is equal to or less than 2.0:1.0 after giving pro forma effect thereto. During the covenant relief period, our ability to exercise the accordion feature will be prohibited.

The March 1, 2018 Amendment temporarily waived certain defaults and events of default under our Revolver that were breached on December 31, 2017 or that may occur in the future, with certain amendments effective immediately and other amendments effective upon the completion of the Rights Offering and the repayment of the outstanding balance of our Second Lien. If the Rights Offering and the repayment of the outstanding balance of our Second Lien do not occur by April 15, 2018 (subject to extension in certain cases), the temporary waiver will end. The temporary waiver will also end if certain other conditions specified in the March 1, 2018 Amendment occur. Upon any such termination of the waiver, our ability to borrow funds under the Revolver will terminate.

After giving effect to the Amendments, loans outstanding under the Amended Credit Agreement bear interest at our option at either LIBOR rate plus 7.0% per annum or the Base Rate plus 6.0% per annum until we complete the Rights Offering and prepay the Second Lien Term Loan facility and thereafter at our option at either (1) the LIBOR rate plus 5.0% per annum during 2018, 6.0% per annum during 2019 and 7.0% per annum during 2020, or (2) the Base Rate plus 4.0% per annum during 2018, 5.0% per annum during 2019, and 6.0% per annum during 2020. The Base Rate is the highest of the Federal Funds rate plus 0.5%, the one month LIBOR rate plus 1.0%, or the administrative agent's prime rate. A commitment fee of 1.0% per annum is charged on the unused portions of the revolving credit facility. A letter of credit fee of 2.50% per annum is charged with respect to the amount of each financial letter of credit outstanding, and a letter of credit fee of 1.50% per annum is charged with respect to the amount of each performance and commercial letter of credit outstanding. Additionally, an annual facility fee of $1.5 million is payable on the first business day of 2018 and 2019, and a pro rated amount is payable on the first business day of 2020.


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The Amended Credit Agreement includes financial covenants that are tested on a quarterly basis, based on the rolling four-quarter period that ends on the last day of each fiscal quarter. After we complete the Rights Offering and the repayment of the outstanding balance of our Second Lien within the time period required by the March 1, 2018 Amendment, the maximum permitted senior debt leverage ratio as defined in the Amended Credit Agreement is:
8.50:1.0 for the quarter ended December 31, 2017,
7.00:1.0 for the quarter ending March 31, 2018,
6.50:1.0 for the quarters ending June 30, 2018 and September 30, 2018,
4.75:1.0 for the quarter ending December 31, 2018,
3.00:1.0 for the quarter ending March 31, 2019,
2.75:1.0 for the quarters ending June 30, 2019 and September 30, 2019, and
2.50:1.0 for the quarter ending December 31, 2019 and each quarter thereafter.

After we complete the Rights Offering and the repayment of the outstanding balance of our Second Lien within the time period required by the March 1, 2018 Amendment, the minimum consolidated interest coverage ratio as defined in the Credit Agreement is:
1.25:1.0 for the quarter ended December 31, 2017,
1.15:1.0 for the quarter ending March 31, 2018,
1.00:1.0 for the quarter ending June 30, 2018,
0.85:1.0 for the quarter ending September 30, 2018,
1.25:1.0 for the quarter ending December 31, 2018,
1.50:1.0 for the quarter ending March 31, 2019 and
2.00:1.0 for the quarters ending June 30, 2019 and each quarter thereafter.

Beginning with September 30, 2017, consolidated capital expenditures in each fiscal year are limited to $27.5 million.

At December 31, 2017, borrowings under the AmendedRevolving Credit Agreement and foreign facilities totaled $103.5 million at an effective interest rate of 6.89%. Usage under the AmendedLetter of Credit Agreement, usage consisted of $94.3 million of borrowings, $7.4$13.6 million of financial letters of credit and $123.7$100.8 million of performance letters of credit. After giving effect to the March 1, 2018 amendment, atAs of December 31, 2017 we had approximately $221.4 million available for borrowings or to meet letter of credit requirements primarily based on trailing 12 month EBITDA (as defined2022, the Company was in the Amended Credit Agreement), and our leverage and interest coverage ratios (as defined in the Amended Credit Agreement) were 2.59 and 2.50, respectively. We expect to be closest to the minimumcompliance with their Quarterly Fixed Charge Coverage financial covenant thresholds atand received a waiver from MSD and PNC for the period ended September 30, 2018.2022 as described within Note 16.


We plan to execute the actions necessary to enable us to maintain compliance with the financialLetters of Credit, Bank Guarantees and other covenants described above. We believe we will accomplish our plans to maintain compliance with our financial and other covenants, and believe our cash on hand, proceeds from potential future asset sales, cash flows from operations and amounts available under our Revolver will be adequate to enable us to fund our operations. However, there can be no assurance that we will be successful. Our ability to generate cash flows from operations, access funding under reasonable terms, contract business with reasonable terms and conditions and comply with our financial and other covenants may be impacted by a variety of business, economic, regulatory and other factors, which may be outsideSurety Bonds

Certain of our control. Such factors include, but are not limited to: our ability to access capital markets and complete asset dispositions, delay or cancellation of contracts, decreased profitability on our contracts due to matters not reasonably forecasted, changes in the timing of cash flows on our contracts due to the timing of receipts and required payments of liabilities and funding of our loss projects, the timing of approval or settlement of change orders and claims, changes in foreign currency exchange or interest rates, performance of pension plan assets or changes in actuarially determined liabilities. In addition, we could be impacted if our customers experience a material change in their ability to pay us or if the banks associated with our lending facilities were to cease or reduce operations. Also, we have what we believe is adequate capacity to provide letters of credit and secure surety bonds in support of current and future contracts, but there can be no assurance that these will be renewed or available at reasonable commercial terms in the future.

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Second Lien Term Loan ("Second Lien")

On August 9, 2017, we entered into a second lien credit agreement (the "Second Lien Credit Agreement") with an affiliate of AIP governing a second lien term loan facility. The Second Lien consists of a second lien term loan in the principal amount of $175.9 million, all of which we borrowed on August 9, 2017, and a delayed draw term loan facility in the principal amount of up to $20.0 million, which was drawn in a single draw on December 13, 2017. Borrowings under the second lien term loan, other than the delayed draw term loan, bear interest at 10% per annum, and borrowings under the delayed draw term loan bear interest at 12% per annum, in each case payable quarterly. Delayed draw borrowings and the second lien term loan have scheduled maturities of December 30, 2020. In connection with our entry into the second lien term loan facility, we used a portion of the proceeds from the second lien term loan to repurchase approximately 4.8 million shares of our common stock (approximately 10% of our shares outstanding) held by an affiliate of AIP for approximately $50.9 million, which was one of the conditions precedent for the second lien term loan facility.

Borrowings under the Second Lien Credit Agreement are (1) guaranteed by substantially all of our wholly owned domestic subsidiaries but excluding our captive insurance subsidiary, and (2) secured by second-priority liens on certain assets owned by us and the guarantors. The Second Lien Credit Agreement requires interest payments on loans on a quarterly basis until maturity. Voluntary prepayments made during the first year after closing are subject to a make-whole premium, voluntary prepayments made during the second year after closing are subject to a a 3.0% premium and voluntary prepayments made during the third year after closing are subject to a 2.0% premium. The Second Lien Credit Agreement requires us to make certain prepayments on any outstanding loans after receipt of cash proceeds from certain asset sales or other events, subject to certain exceptions and a right to reinvest such proceeds in certain circumstances, and subject to certain restrictions contained in an intercreditor agreement among the lenders under the Amended Credit Agreement and the Second Lien Credit Agreement.

The Second Lien Credit Agreement contains representations and warranties, affirmative and restrictive covenants, financial covenants and events of default substantially similar to those contained in the Amended Credit Agreement, subject to appropriate cushions. The Second Lien Credit Agreement is generally less restrictive than the Amended Credit Agreement.

Foreign revolving credit facilities

Outsideprimarily outside of the United States we have revolving credit facilities in Turkey and India that are used to provide working capital to our operations in each country. These foreign revolving credit facilities allow us to borrow up to $9.2 million in aggregate and each have a one year term. At December 31, 2017, we had $9.2 million in borrowings outstanding under these foreign revolving credit facilities at an effective weighted-average interest rate of 6.07%.

Letters of credit, bank guarantees and surety bonds

Certain subsidiaries have credit arrangements with various commercial banks and other financial institutions for the issuance of letters of credit and bank guarantees associatedin association with contracting activity. The aggregate value of all such letters of credit and bank guarantees not secured by the United States credit facilityoutside of our Letter of Credit Agreement as of December 31, 2017 and December 31, 20162022 was $269.1 million and $255.2 million, respectively. The aggregate value of all such letters of credit and bank guarantees that are partially secured by the Revolver as of December 31, 2017 was $114.2$60.3 million. The aggregate value of the outstanding letters of credit provided byunder the Revolver in supportLetter of Credit Agreement backstopping letters of credit outside of the United Statesor bank guarantees was $40.4$37.8 million as of December 31, 2017.2022. Of the outstanding letters of credit issued under the Letter of Credit Agreement, $67.5 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. Although there can be no assurance that we will maintain our surety bonding capacity, we believe our current capacity is more than adequate to support our existing contract requirements for the next twelve months. In addition, theseThese 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 December 31, 2017,2022, bonds issued and outstanding under these arrangements in support of contracts totaled approximately $378.8$320.6 million. The aggregate value of the letters of credit backstopping surety bonds was $14.1 million.



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Long-term benefit obligations

Our unfunded pensionability to obtain and postretirement benefit obligations totaled $258.8 million at December 31, 2017. Formaintain sufficient capacity under our new Debt Facilities is essential to allow us to support the year ended December 31, 2017, we made required contributions to our pension plans totaling $17.3 million and to our postretirement plansissuance of $1.2 million. In 2018, we expect to make $21 million to $23 million of contributions to our benefit plans. See additional information on our long-term benefit obligations in Note 18 to our consolidated financial statements included in Item 8 of this annual report.

Contractual obligations

Our cash requirements as of December 31, 2017 under current contractual obligations were as follows:
(in thousands)TotalLess than 1 Year1-3 Years3-5 Years
After
5 Years
Operating lease payments$23,803
$6,814
$8,653
$4,999
$3,337
United States revolving credit facility$94,300
$
$94,300
$
$
Second lien notes facility$195,884
$
$195,884
$
$
Foreign revolving credit facility$9,173
$9,173
$
$
$
ARPA litigation settlement$7,000
$2,500
$4,500
$
$

The table above excludes cash payments for self-insured claims, litigation (other than the ARPA settlement) and funding of our pension and postretirement benefit plans because we are uncertain as to the timing and amount of any associated cash payments that will be required. For example, pension contributions may be subject to potential required contributions in connection with dispositions or plan mergers. Also, estimated pension and other postretirement benefit payments are based on actuarial estimates using current assumptions for, among other things, discount rates, expected long-term rates of return on plan assets and health care costs. Additionally, the table above excludes deferred income taxes recorded on our balance sheets because cash payments for income taxes are determined primarily on future taxable income.

Our contingent commitments under letters of credit, bank guarantees and surety bonds outstandingbonds. Without sufficient capacity, our ability to support contract security requirements in the future will be diminished.

Other Indebtedness - Loans Payable

As of December 31, 2022, our Denmark subsidiary has an unsecured interest-free loan of $0.8 million under a local government loan program related to COVID-19 that is payable May 2023. In addition, we recorded a $2.9 million loan payable related to financed insurance premiums payable April 2023, which is included in Current loans payable on our Consolidated Balance Sheets.

B&W Solar has loans, primarily for vehicles and equipment, totaling $0.5 million at December 31, 2017 expire2022. In addition, as follows (in thousands):
TotalLess than 1 Year1-3 Years3-5 YearsThereafter
$779,082$368,357$374,566$35,072$1,088

We do not expect significant cash payments associateddisclosed within Note 10, the Company had approximately $13.3 million in Long Term Loans Payable which is net of debt issuance costs of $0.6 million, of which $0.6 million is classified as current, in finance liabilities as of December 31, 2022 in connection with the contingent commitmentstheir sale-leaseback financing transactions. These loans are included in Notes payable and Long-term loans payables in the table above because we expect to fulfill the performance commitments related to the underlying contracts.Company's Consolidated Balance Sheets.


Off-balance sheet arrangementsOff-Balance Sheet Arrangements


There were no significantThe 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 December 31, 2017.2022.

EFFECTS OF INFLATION AND CHANGING PRICES

Our consolidated financial statements included in Item 8 are prepared in accordance with generally accepted accounting principles in the United States, using historical United States dollar accounting ("historical cost"). Statements based on historical cost, however, do not adequately reflect the cumulative effect of increasing costs and changes in the purchasing power of the United States dollar, especially during times of significant and continued inflation.

In order to minimize the negative impact of inflation on our operations, we attempt to cover the increased cost of anticipated changes in labor, material and service costs, either through an estimate of those changes, which we reflect in the original price, or through price escalation clauses in our contracts. However, there can be no assurance we will be able to cover all changes in cost using this strategy.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES


The consolidated financial statementsConsolidated Financial Statements included in Part II, Item 8 of this Annual Report are prepared in accordance with accounting principles generally accepted in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. These estimates and assumptions are affected by management'smanagement’s application of accounting policies. We believe the following are our most critical accounting policies that we apply in the preparation of our consolidated financial statements. These policies require our most difficult, subjective and complex judgments, often as a result of the need to make estimates of matters that are inherently uncertain.


Contracts and revenue recognition


A significant portion of our revenue is recognized over time using the cost-to-cost input method, which involves significant estimates. This method of revenue recognition uses costs incurred-to-date relative to total estimated costs at completion to measure progress toward satisfying our performance obligations. Incurred cost represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contract costs include labor, material, overhead and warranty expenses. Variable consideration in these contracts includes estimates of liquidated damages, contractual bonuses and penalties, and contract modifications.

We determinereview contract price and cost estimates each reporting period as the appropriate accounting method for each of our long-term contracts before work begins. We generally recognize contract revenuesprogresses and related costs on a percentage-of-completion ("POC") method for individual contracts or combinations of contracts based on a cost-to-cost method, as applicablereflect adjustments proportionate to the product or activity involved. We recognize estimated contract revenues and resulting income based on costs incurredincurred-to-date relative to date as a percentage of total estimated costs.costs at completion in income in the period when those estimates are revised. These changes in estimates can be material. For all contracts, if a current estimate of total contract cost indicates a loss on a contract, the projected contract loss is recognized in full when determined. Itthrough the statement of operations and an accrual for the estimated loss on the uncompleted contract is possible that current estimates could materially change for various reasons, including, but not limited to, fluctuationsincluded in forecasted labor productivity or steel and other raw material prices. We routinely review estimates related to our contracts, and revisions to profitability are reflectedOther accrued liabilities in the quarterlyConsolidated Balance Sheets. In addition, when we determine that an uncompleted contract will not be completed on-time and annual earnings we report. For parts orders and certain aftermarket services activities,the contract has liquidated damages provisions, we recognize revenuesthe estimated liquidated damages we will incur and record them as goodsa reduction of the estimated selling price in the period the change in estimate occurs. Losses accrued in advance of the completion of a contract are delivered and work is performed.included in Other accrued liabilities in our Consolidated Balance Sheets.


InContract modifications are routine in the years ended December 31, 2017, 2016 and 2015, we recognized netperformance of our contracts. Contracts are often modified to account for changes in estimates related to long-term contractsthe contract specifications or requirements. In most instances, contract modifications are for goods or services that are not distinct and, therefore, are accounted for onas part of the POC basis which increased (decreased) operating income by $(153.3) million, $(106.8) million and $0.4 million, respectively. As of December 31, 2017, we have estimated the costsexisting contract, with cumulative adjustment to complete all of our in-process contracts in order to estimate revenues in accordance with the percentage-of-completion method of accounting. However, it is possible that current estimates could change due to contract performance or unforeseen events, which could result in adjustments to overall contract costs. Variations from estimated contract performance could result in material adjustments to operating results for any fiscal quarter or year.revenue.


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We recognize income from contract change orders or claims when agreed with the customer. We regularly assess the collectability of contract revenues and receivables from customers. We recognize accrued claimsreceivable in contract revenues for extra work or changes in scope of work to the extent of costs incurred when we believe we have an enforceable right to the following accountingmodification or claim and the amount can be estimated reliably, and its realization is probable. In evaluating these criteria, have been met:
a)The contract or other evidence provides a legal basis for the claim; or a legal opinion has been obtained, stating that under the circumstances there is a reasonable basis to support the claim.
b)Additional costs are caused by circumstances that were unforeseen at the contract date and are not the result of deficiencies in the contractor's performance.
c)Costs associated with the claim are identifiable or otherwise determinable and are reasonable in view of the work performed.
d)The evidence supporting the claim is objective and verifiable, not based on unsupported representations.

we consider the contractual/legal basis for enforcing the claim, the cause of any additional costs incurred and whether those costs are identifiable or otherwise determinable, the nature and reasonableness of those costs, the objective evidence available to support the amount of the claim, and our relevant history with the counter-party that supports our expectations about their willingness and ability to pay for the additional cost along with a reasonable margin. In our consolidated balance sheets, we had no accruedConsolidated Balance Sheets, claims receivable at December 31, 20172022 and at December 31, 2016.2021 were not significant.


Our revenue recognition policies, assumptions, changes in estimates and significant loss contracts are described in greater detail in Note 2 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.

Business combinationsCombinations


Assets acquired and liabilities assumed in a business combination are recognized and measured based on their estimated fair values at the acquisition date, while the acquisition-related costs are expensed as incurred. Any excess of the purchase consideration when compared to the fair value of the net tangible and intangible assets acquired, if any, is recorded as goodwill. We account for acquisitions in accordanceengaged valuation specialists to assist with Financial Accounting Standards Board ("FASB") Topic Business Combinations. This topic requires us to estimatethe determination of the fair value of assets acquired, liabilities assumed, non-controlling interest, and interests transferredgoodwill, for the acquisitions. If the initial accounting for the business combination is incomplete by the end of the reporting period in which the acquisition occurs, an estimate will be recorded. Subsequent to the acquisition date, and not later than one year from the acquisition date, we will record any material adjustments to the initial estimate based on new information obtained that would have existed as of the date of the acquisition. Any adjustment that arises from information obtained that did not exist as of the date of the acquisition will be recorded in the period the adjustment arises. See Note 26 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report for further discussion.

Goodwill

Goodwill is generally recorded as a result of a business combinations. It also provides disclosure requirements to assist userscombination and represents the excess of the financial statements in evaluating the nature and financial effects of business combinations.

Several valuation methods are used to determinepurchase price over the fair value of the tangible and identifiable net assets acquiredacquired. We perform testing of goodwill for impairment annually on October 1st or when impairment indicators are present. In assessing goodwill for impairment, the Company follows ASC 350, Intangibles – Goodwill and liabilities assumed. For intangible assets, we usedOther, which permits a qualitative assessment of whether it is more likely than not that the income method, which required us to forecast the expected future net cash flows for each intangible asset. These cash flows were then adjusted to presentfair value by applying an appropriate discount rate that reflects the risk factors associated with the projected cash flows. Some of the more significant estimates and assumptions inherent in the income method include the amount and timing of projected future cash flows, the discount rate selected to measure the risks inherent

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in the future cash flows and the assessment of the asset's economic life and the competitive trends impacting the asset, including consideration of any technical, legal, regulatory or economic barriers to entry. Determining the useful life of an intangible asset also require judgment as different types of intangible assets will have different useful lives, or indefinite useful lives.

We accounted for the acquisitions of SPIG and Universal using the acquisition method. All of the assets acquired and liabilities assumed were recognized at their fair value on the acquisition date. Any excess of the purchase price over the estimated fair values of the net assets acquired was recorded as goodwill. Acquisition-related costs were recorded as selling, general and administrative expenses in our consolidated financial statements.

Pension and other postretirement benefit plans

We utilize actuarial and other assumptions in calculating the cost and benefit obligations of our pension and postretirement benefits. The assumptions utilized in the determination of our benefit cost and obligations include assumptions regarding discount rates, expected returns on plan assets, mortality and health care cost trends. The assumptions utilized represent our best estimates based on historical experience and other factors.

Actual experience that differs from these assumptions or future changes in assumptions will affect our recognized benefit obligations and related costs. We recognize net actuarial gains and losses into earnings in the fourth quarter of each year, or as interim remeasurements are required, as a component of net periodic benefit cost. Net actuarial gains and losses occur when actual experience differs from any of the various assumptions used to value our pension and postretirement benefit plans or when assumptions, which are revisited annually through our update of our actuarial valuations, change due to current market conditions or underlying demographic changes. The primary factors contributing to net actuarial gains and losses are changes in the discount rate used to value the obligations as of the measurement date each year, the difference between the actual and expected return on plan assets and changes in health care cost trends. The effect of changes in the discount rate and expected rate of return on plan assets in combination with the actual return on plan assets can result in significant changes in our estimated pension and postretirement benefit cost and our consolidated financial condition.

In 2016, we changed our approach to setting the discount rate from a single equivalent discount rate to an alternative spot rate method. This change in estimate was applied prospectively in developing our annual discount rate, which resulted in $6.8 million lower interest and service cost in 2016. The impact of the change in estimate did not change our pension and other postretirement benefits liability as of December 31, 2016, because any change was completely offset in the net actuarial gain (loss) recorded in the annual mark to market adjustment. This new method was adopted because it more accurately applies each year’s spot rates to the projected cash flows.

The following sensitivity analysis shows the impact of a 25 basis point change in the assumed discount rate and return on assets on our pension plan obligations and expense for the year ended December 31, 2017:
(In millions)0.25% increase 0.25% decrease
Discount rate:
   
Effect on ongoing net periodic benefit cost(1)
$(31.1) $32.4
Effect on projected benefit obligation(32.7) 34.2
Return on assets:
 
Effect on ongoing net periodic benefit cost$(2.2) $2.2
(1) Excludes effect of annual MTM adjustment.

A 25 basis point change in the assumed discount rate, return on assets and health care cost trend rate would have no meaningful impact on our other postretirement benefit plan obligations and expense for the year ended December 31, 2017 individually or in the aggregate, excluding the impact of any annual MTM adjustments we record annually.

Loss contingencies

We estimate liabilities for loss contingencies when it is probable that a liability has been incurred and the amount of loss is reasonably estimable. We provide disclosure when there is a reasonable possibility that the ultimate loss will exceed the recorded provision or if such probable loss is not reasonably estimable. We are currently involved in some significant litigation. See Note 21 to the consolidated financial statements included in Item 8 for a discussion of this litigation. As

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disclosed, we have accrued estimates of the probable losses associated with these matters; however, these matters are typically resolved over long periods of time and are often difficult to estimate due to the possibility of multiple actions by third parties. Therefore, it is possible that future earnings could be affected by changes in our estimates related to these matters.

Goodwill and long-lived asset impairment

Each year, or as circumstances indicate, we evaluate goodwill at each reporting unit to assess recoverability, and impairments, if any, are recognized in earnings. We perform a qualitative analysis when we believe that there is sufficient excess fair value overless than its carrying value based on our most recent quantitativeincluding goodwill. If the qualitative assessment adjusted for relevant facts and circumstances that could affect fair value. Deterioration in macroeconomic, industry and market conditions, cost factors, overall financial performance, share price decline or entity and reporting unit specific events could cause us to believe a qualitative test is no longer appropriate.
When we determinedetermines that it is appropriate to test goodwill for impairment utilizing a quantitative test, the first step of the test comparesnot more likely than not that the fair value of a reporting unit tois less than its carrying amount,value, including goodwill. We utilize bothgoodwill, then no impairment is determined to exist for the income and market valuation approaches to provide inputs into the estimate of the fair value of our reporting units, which would be considered by market participants.

Under the income valuation approach, we employ a discounted cash flow model to estimate the fair value of each reporting unit. This model requiresHowever, if the use of significant estimates and assumptions regarding future revenues, costs, margins, capital expenditures, changes in working capital, terminal year growth rate and cost of capital. Our cash flow models are based on our forecasted results for the applicable reporting units. Actual results could differ materially from our projections. Some assumptions, such as future revenues, costs and changes in working capital are company driven and could be affected by a loss of one orqualitative assessment determines that it is more significant contracts or customers; failure to control costs on certain contracts; or a decline in demand based on changing economic, industry or regulatory conditions. Changes in external market conditions may affect certain other assumptions, such as the cost of capital. Market conditions can be volatile and are outside of our control.

Under the market valuation approach, we employ both the guideline publicly traded company method and the similar transactions method. The guideline publicly traded company method indicateslikely than not that the fair value of the equity of each reporting unit by comparing itis less than its carrying value, including goodwill, or we choose not to publicly traded companies in similar lines of business. The similar transactions method considers recent prices paid for business in our industry or related industries. After identifying and selecting guideline companies and similar transactions,perform the qualitative assessment, then we analyze their business and financial profiles for relative similarity. Factors such as size, growth, risk and profitability are analyzed and compared to each of our reporting units. Assumptions includecompare the selection of our peer companies and use of market multiples, which could deteriorate or increase based on the profitability of our competitors and performance of their stock, which is often dependent on the performance of the stock market and general economy as a whole.

Adverse changes in these assumptions utilized within the first step of our impairment test could cause a reduction or elimination of excess fair value overof that reporting unit with its carrying value, resultingincluding goodwill, in potential recognition of impairment.a quantitative assessment. If the carrying amountvalue of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount ofconsidered impaired with the impairment loss if any.measured as the excess of the reporting unit’s carrying value, including goodwill, over its fair value. The second step compares the impliedestimated fair value of the reporting unit's goodwill with the carrying amount of that goodwill.

Our annual goodwill impairment assessmentunit is performed on October 1 of each year (the "annual assessment" date); however, events during 2017 have required two interim assessments of all six of our reporting units. In the second quarter of 2017, significant charges in our Renewable segment were considered to be a triggering event for the interim assessment as of June 30, 2017, which did not indicate impairment. In the third quarter of 2017, our market capitalization significantly decreased to below our equity value, which was considered to be a trigger for a second interim assessment. Additionally, the forecast was reduced for our SPIG reporting unitderived based on a change invaluation techniques the Company believes market strategy implemented by the new segment management to focus on core geographies and products.

The goodwill impairment test associated with our SPIG reporting unit is the most sensitive to a change in future valuation assumptions. The reporting unit has $38.3 million of goodwill remaining after the $36.9 million impairment charge we recorded at September 30, 2017. Even a marginal increase in the discount rate weparticipants would use to estimate the fair valuefor each of the SPIG reporting unit in the income valuation approach could result in an impairment, assuming no significant change in theunits.


53Warranty



forecasted cash flows. Additionally, a decline in SPIG's forecasted cash flows would result in an impairment, assuming no significant change in the discount rate.

We carry our property, plant and equipment at depreciated cost, reduced by provisions to recognize economic impairment when we determine impairment has occurred. Property, plant and equipment amounts are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset, or asset group, may not be recoverable. An impairment loss would be recognized when the carrying amount of an asset exceeds the estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. The amount of the impairment loss to be recorded is calculated by the excess of the asset carrying value over its fair value. Fair value is generally determined using a discounted cash flow analysis. Our estimates of cash flow may differ from actual cash flow due to, among other things, technological changes, economic conditions or changes in operating performance. Any changes in such factors may negatively affect our business and result in future asset impairments.

In the year ended December 31, 2016, we recognized a $14.9 million impairment charge related primarily to the impairment of long-lived assets at B&W’s one coal-fired power plant located in Ebensburg, Pennsylvania. The impairment charge was determined as the difference between the fair value of the power plant's long-lived assets less the estimated cost to sell and the carrying value of the assets before recording the impairment charge.

In the year ended December 31, 2015, we recognized a $14.6 million impairment charge primarily related to research and development facilities and equipment dedicated to activities that were determined not to be commercially viable. The impairment is included in losses on asset disposals and impairments, net in our consolidated financial statements included in Item 8 of this annual report.

Income taxes

Income tax expense for federal, foreign, state and local income taxes is calculated on pre-tax income based on current tax law and includes the cumulative effect of any changes in tax rates from those used previously in determining deferred tax assets and liabilities.We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. We assess deferred taxes and the adequacy of the valuation allowance on a quarterly basis. Should we conclude in the future that any or all of our deferred tax assets are not more likely than not to be realized, we would establish additional valuation allowances and any changes to our estimated valuation allowance could be material to our consolidated financial statements. In the ordinary course of business there is inherent uncertainty in quantifying our income tax positions. We assess our income tax positions and record tax benefits for all years subject to examination based upon management's evaluation of the facts, circumstances, and information available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, we have recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in the consolidated financial statements. We record interest and penalties (net of any applicable tax benefit) related to income taxes as a component of the provision for income taxes in our consolidated statements of operations.

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law making significant changes to the United States Federal Internal Revenue Code. Changes include: (1) reduction of the United States federal corporate tax rate from 35% to 21%; (2) elimination of the corporate alternative minimum tax; (3) the creation of the base erosion anti-abuse tax, a new minimum tax; (4) a general elimination of United States federal income taxes on dividends from foreign subsidiaries; (5) a new provision designed to tax global intangible low-taxed income ("GILTI"), (6) the creation of an export incentive for United States companies on foreign-derived intangible income; (7) a new limitation on deductible interest expense; (8) the repeal of the domestic production activity deduction; (9) limitations on the deductibility of certain executive compensation; (10) limitations on the use of foreign tax credits to reduce the United States income tax liability; and (11) limitations on net operating losses generated after December 31, 2017, to 80 percent of taxable income, while changing to an unlimited carryforward period. In connection with our initial analysis of the impact of the Tax Act, we have recorded an increase in tax expense in the period ending December 31, 2017; however, we have not completed our accounting for the income tax effects of certain elements of the Tax Act. If we were able to make reasonable estimates of the effects of elements for which our analysis is not yet complete, we recorded provisional adjustments. If we were not yet able to make reasonable estimates of the impact of certain elements, we have not recorded any adjustments related to those elements and have continued accounting for them in accordance with ASC 740 on the basis of the tax laws in effect before the Tax Act. Our accounting for the following elements of the Tax Act is complete: cost recovery and GILTI. Our accounting for the following elements of the Tax Act is incomplete; however, we were able to make reasonable estimates of certain effects and, therefore,

54



recorded provisional adjustments: reduction of United States federal corporate tax rate, deemed repatriation transition tax, valuation allowances, and decrease in deferred taxes related to performance-based compensation. We believe the assumptions and estimates related to the provision for income taxes are critical to our results of operations, and are described in greater detail in Note 10 to the consolidated financial statements included in Item 8.

On December 22, 2017, Staff Accounting Bulletin No. 118 ("SAB 118") was issued to address situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. In accordance with SAB 118, we have determined that the deferred tax expense recorded in connection with the remeasurement of certain deferred tax assets was provisional, and a reasonable estimate at December 31, 2017. Additional work is necessary for a more detailed analysis of our deferred tax assets and liabilities. Any subsequent adjustment will be recorded to current tax expense in the quarter of 2018 when the analysis is complete.

Warranty


We accrue estimated expense included in costCost of operations on our consolidated statementsConsolidated Statements of operationsOperations to satisfy contractual warranty requirements when we recognize the associated revenues on the related contracts. In addition, we record specific provisions or reductions when we expect the actual warranty costs to significantly differ from the accrued estimates. Factors that impact our estimate of warranty costs include prior history of warranty claims and our estimates of future costs of materials and labor. Such changes could have a material effect on our consolidated financial condition, results of operations and cash flows. See Note 11 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report for further discussion.


Loss contingencies

We estimate liabilities for loss contingencies when it is probable that a liability has been incurred and the amount of loss is reasonably estimable. We provide disclosure when there is a reasonable possibility that the ultimate loss will exceed the recorded provision or if such probable loss is not reasonably estimable. We are currently involved in some significant litigation. See Note 22 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report for a discussion of this litigation. As disclosed, we have accrued estimates of the probable losses associated with these matters;
45


however, these matters are typically resolved over long periods of time and are often difficult to estimate due to the possibility of multiple actions by third parties. Therefore, it is possible that future earnings could be affected by changes in our estimates related to these matters.

Income taxes

Income tax expense for federal, foreign, state, and local income taxes are calculated on taxable income based on the income tax law in effect at the latest balance sheet date and includes the cumulative effect of any changes in tax rates from those used previously in determining deferred tax assets and liabilities. We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. We assess the need for valuation allowances on a quarterly basis. In determining the need for a valuation allowance, we consider relevant positive and negative evidence, including carryback potential, reversals of taxable temporary differences, future taxable income, and tax-planning strategies. As of December 31, 2022, we have a valuation allowance on our deferred tax assets in substantially all jurisdictions, as we do not believe it is more likely than not that the deferred tax assets will be realized.

For those tax positions where it is more likely than not that a tax benefit will be sustained, we have recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in our consolidated financial statements. We record interest and penalties (net of any applicable tax benefit) related to income taxes as a component of provision for income taxes on our Consolidated Statements of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk


Our exposures to market risks could change materially from those disclosed under "Quantitative and Qualitative Disclosures About Market Risk" in our Annual Report. Our exposure to market risk from changes in interest rates relates primarily to our cash equivalents and our investment portfolio, which primarily consists of investments in United States GovernmentU.S. government obligations and highly liquid money market instruments denominated in United StatesU.S. dollars. We are averse to principal loss and seek to ensure the safety and preservation of our invested funds by limiting default risk, market risk and reinvestment risk. Our investments are classified as available-for-sale.

Although the consolidated balance sheets do not present debt at fair value, our second lien term loan facility is fixed-rate debt, the fair value of which could fluctuate as a result of changes in prevailing market rates. On December 31, 2017, its principal balance was $195.9 million. Our United States revolving credit facility is variable-rate debt, so its fair value would not be significantly affected by changes in prevailing market rates. On December 31, 2017, its principal balance was $94.3 million.

We have operations in many foreign locations, and, as a result, our financial results could be significantly affected by factors such as changes in foreign currency exchange ("FX"(“FX”) rates or weak economic conditions in those foreign markets. Foreign currency transaction gains and losses on intercompany loans that are not designated as permanent loans are recorded in earnings. Our primary foreign currency exposures are Danish kroner, Greatkrone, British pound, Euro, Canadian dollar, Mexican peso, and Chinese yuan. In orderIf the balances of these intercompany loans at December 31, 2022 were to manage the risks associated withremain constant, a 100 basis point change in FX rate fluctuations, we attempt to hedge those risks with FX derivative instruments, but there can be no assurance that such instruments will be available to us on reasonable terms. Historically, we have hedged those risks with FX forward contracts. We do not enter into speculative derivative positions. During the third quarter of 2017,rates would impact our hedge counterparties removed the lines of credit supporting new FX forward contracts. Subsequently, we have not entered into any new FX forward contracts.earnings by an estimated $0.2 million per year.

55




ITEM 8. Consolidated Financial Statements and Supplemental Data


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Stockholders and the Board of Directors of Babcock & Wilcox Enterprises, Inc.:


Opinion on the Financial Statements


We have audited the accompanying consolidated balance sheets of Babcock & Wilcox Enterprises, Inc. and subsidiaries (the “Company”"Company") as of December 31, 20172022 and 2016,2021, the related consolidated and combined statements of operations, comprehensive (loss) income, (loss), stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2017,2022, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”"financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20172022 and 2016,2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017,2022, in conformity with accounting principles generally accepted in the United States.States of America.


We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”)(PCAOB), the Company's internal control over financial reporting as of December 31, 2017,2022, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 1, 2018,16, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting.

46


The Company’s Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company recognized additional losses in the fourth quarter of 2017 that led to covenant violations associated with its second lien credit facility and does not have sufficient capital to repay such loans. Management's plans in regard to these matters are also described in Note 1. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Spin-Off

The Board of Directors of The Babcock & Wilcox Company (“BWC”) approved the spin-off of the Company through the distribution of common stock of the Company on June 30, 2015 to existing shareholders of BWC. See Note 1 to the consolidated financial statements.


Basis for Opinion


These financial statements are the responsibility of the Company’sCompany's management. Our responsibility is to express an opinion on the Company’sCompany's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.


We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.


Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate to.

Revenue Recognition and Contracts – Refer to Notes 2 and 5 to the financial statements

Critical Audit Matter Description

The Company recognizes fixed price long-term contract revenue over the contract term (“over time”) as the work progresses, either as products are produced or as services are rendered, because transfer of control to the customer over time. Substantially all of the Company’s fixed price long-term contracts represent a single performance obligation as the interdependent nature of the goods and services provided prevents them from being separately identifiable within the contract. Revenue recognized over time primarily relates to customized, engineered solutions and construction services from all three of the Company’s segments. Typically, revenue is recognized over time using the cost-to-cost input method that uses costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying the Company’s performance obligations. The accounting for these contracts involves judgment, particularly as it relates to the process of estimating total costs and profit for the performance obligation. Revenue from fixed price long term contracts for products and services transferred to customer over time accounted for 80% of Company revenue for the year ended December 31, 2022.

We identified revenue on certain fixed price long-term contracts as a critical audit matter because of the judgments necessary for management to estimate total costs and profit for the performance obligations used to recognize revenue for fixed price long-term contracts. This required extensive audit effort due to the volume and complexity of fixed price long-term contracts and required a high degree of auditor judgment when performing audit procedures to audit management’s estimates of total costs and profit and evaluating the results of those procedures.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s estimates of total costs and profit for the performance obligations used to recognize revenue for certain fixed price long-term contracts included the following, among others:

We tested the effectiveness of controls over management’s project contract review evaluation, including those over the review of each significant project’s current financial position and overall job performance and review of contract changes.

We selected a sample of fixed price long-term contracts performed over time and performed the following:
47



Evaluated whether the fixed price contracts were properly included in management’s calculation of fixed price long-term contract revenue based on the terms and conditions of each contract, including whether continuous transfer of control to the customer occurred as progress was made toward fulfilling the performance obligation.

Compared the transaction prices to the consideration expected to be received based on current rights and obligations under the contracts and any modifications that were agreed upon with the customers.

Tested management’s identification of distinct performance obligations by evaluating whether the underlying goods, services, or both were highly interdependent and interrelated.

Tested the accuracy and completeness of the costs incurred to date for the performance obligation.

With the assistance of our capital projects specialists we evaluated the estimates of total cost and profit for the performance obligation by:

Comparing costs incurred to date to the costs which management estimated to be incurred to date.

Evaluating management’s ability to achieve the estimates of total cost and profit by performing corroborating inquiries with the Company’s project managers and engineers, and comparing the estimates to management’s work plans, engineering specifications, and supplier contracts.

Comparing management’s estimates for the selected contracts to costs and profits of similar performance obligations, when applicable.

Performing multiple live and virtual project site visits.

Tested the mathematical accuracy of management’s calculation of revenue for the performance obligation.

Tested management’s retrospective review of each contract’s revenue to determine whether revenue is accurately recognized during the period under audit.

Evaluated the Company’s disclosures related to revenue recognition and contracts to assess their conformity with the applicable accounting standards.


Goodwill – Babcock & Wilcox Solar Reporting Unit - Refer to Notes 2 and 8 to the financial statements

Critical Audit Matter Description

The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value. As described in Note 8 to the consolidated financial statements, the Company's consolidated goodwill balance was $157 million as of December 31, 2022, of which $56.6 million was allocated to the Babcock & Wilcox Solar reporting unit. The Company’s goodwill is tested annually on October 1st or more frequently if events or changes in circumstances indicate that the assets might be impaired. The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of Babcock & Wilcox Solar reporting unit to its carrying value.

As disclosed further within Note 8, the Company identified certain factors, including but not limited to, the acquisition of the remaining 40% ownership stake in Babcock & Wilcox Solar for an amount less than the remaining balance of the non-controlling interest, significant deterioration in operating results from those originally forecast at the date of acquisition primarily as a result of supply chain issues on certain solar product inputs, the recognition of additional contract losses in the third quarter of $8.6 million beyond amounts previously accounted for as measurement period adjustments during the year, the determination that the contingent consideration would not be payable, all of which contributed to the identification of a triggering event, requiring an interim quantitative goodwill impairment assessment of its Babcock & Wilcox Solar reporting unit during the quarter ended September 30, 2022. The Company performed a quantitative analysis and compared the fair value of the Babcock & Wilcox Solar reporting unit to its carrying value and determined that the carrying value of the reporting unit exceeded the fair value as of September 30, 2022. As such, the Company recorded a goodwill impairment loss
48


related to the Babcock & Wilcox Solar reporting unit of $7.2 million in the third quarter of fiscal 2022 which is recognized on the consolidated statements of operations for the twelve months ended December 31, 2022.

The quantitative analysis performed as of September 30, 2022 was updated as of October 1, 2022, the Company’s annual impairment test date, utilizing a qualitative assessment, and the analysis noted that the fair value of the Babcock & Wilcox Solar reporting unit exceeded the carrying value as of the annual impairment test date. Management re-evaluated its Babcock & Wilcox Solar reporting unit at December 31, 2022 and no additional indicators of goodwill impairment were identified.

In the performance of the interim goodwill impairment assessment as of September 30, 2022, the Company determined the fair value of its Babcock & Wilcox Solar reporting unit using a combination of the income approach (discounted cash flows), and the market approach (guideline public company method and the guideline transaction method). The determination of the fair value using the income approach required management to make significant estimates and assumptions related to the Babcock & Wilcox Solar reporting unit’s forecasted future revenues, earnings before interest, taxes, depreciation, and amortization (EBITDA) margins, and discount rate. Changes in these assumptions could have significant impacts on either the fair value, the amount of any goodwill impairment charge, or both.

Given the significant judgments made by management to estimate the fair value of the Babcock & Wilcox Solar reporting unit and the difference between its fair value and carrying value, we identified the goodwill evaluation of the Babcock & Wilcox Solar reporting unit as a critical audit matter. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to selection of the discount rate and forecasts of future revenue and EBITDA margins.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the goodwill evaluation of the Babcock & Wilcox Solar reporting unit included the following, amongst others:

We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value of the Babcock & Wilcox Solar reporting unit.

We evaluated management’s determination and evaluation of triggering events at each of the quarterly and year and reporting periods.

We evaluated management’s ability to accurately forecast future revenues, and EBITDA margins by comparing actual results to management’s historical forecasts.

We evaluated the reasonableness of management’s revenue and EBITDA margin forecasts by comparing the forecasts to (1) historical revenues, and EBITDA margins, (2) internal communications to management and the Board of Directors, (3) inquiry with non-management personnel and (4) forecasted information included in analyst and industry reports for the Company and certain of its peer companies.

With the assistance of our internal fair value specialists, we evaluated the reasonableness of the valuation methods.

With the assistance of our internal fair value specialists, we evaluated the reasonableness of the valuation assumptions, including the discount rate by (1) testing the source information underlying the determination of the discount rate and the mathematical accuracy of the calculation and (2) developing a range of independent estimates and comparing those to the discount rate selected by management.

We evaluated the impact of changes in management’s goodwill assessment from the September 30, 2022 interim quantitative evaluation of goodwill for the Babcock & Wilcox Solar reporting unit to the October 1, 2022 annual measurement date, as well as to December 31, 2022, inclusive of macroeconomic factors.

Acquisition of Babcock & Wilcox Solar - Contingent Consideration Liability and Acquisition of Remaining Ownership Interest – Refer to Note 26 to the financial statements

Critical Audit Matter Description
49



On September 30, 2021, the Company acquired a 60% controlling ownership interest in Illinois-based solar energy contractor Babcock & Wilcox Solar Energy, Inc. (“Babcock & Wilcox Solar”) in a business combination with a total fair value of consideration for the acquisition of $36.0 million, including $27.2 million in cash plus $8.8 million in estimated fair value of the contingent consideration arrangement. In connection with the acquisition, the Company agreed to pay contingent consideration based on the achievement of targeted revenue thresholds for the year ended December 31, 2022. The range of undiscounted amounts the Company could be required to pay under the contingent consideration arrangement was between $0.0 million and $10.0 million. Accordingly, the total purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values. The Company estimated fair values primarily using the discounted cash flow method at September 30, 2021 for the preliminary allocation of consideration to the assets acquired and liabilities assumed during the measurement period and up to September 30, 2022 when the purchase price allocation was finalized.

Prior to the finalization of the measurement period, on September 24, 2022, the Company acquired the remaining 40% ownership interest in Babcock & Wilcox Solar for $12.7 million. In addition to the transfer of the remaining ownership interest, the settlement and share transfer agreement released all parties from the contingent consideration arrangement, as well as other claims known as of the effective date of the agreement, resulting in the fair value of the contingent consideration to be $0 and the removal of the remaining non-controlling interest balance of $20.7 million.

Given the significant judgments made by management to estimate the fair value of the contingent consideration liability and the fair value of the non-controlling interest as of the settlement date, we identified the accounting and valuation for the buyout of the remaining 40% of Babcock & Wilcox Solar as a critical audit matter. There was a high degree of auditor judgment and an increased extent of effort, including the need to involve our National Office – Accounting and Reporting Services (NOARS) group and internal fair value specialists, to audit the accounting treatment of the settlement agreement and the reasonableness of the inputs used in the fair value measurement of the contingent consideration liability and non-controlling interest, including the selection of the discount rate and forecasts of future revenues and EBITDA margins.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the accounting treatment of the settlement agreement and the fair value of the contingent consideration liability and non-controlling interest included the following, among others:

We tested the effectiveness of controls over management’s valuation of the contingent consideration liability and non-controlling interest, such as controls related to management’s selection of the significant valuation assumption (discount rate) and significant business assumptions (forecasts of future revenue and EBITDA margins).

We tested the effectiveness of controls over management’s identification and assessment of significant unusual transactions.

We tested the fair value of the non-controlling interest by evaluating the reasonableness of management’s revenue and EBITDA margin forecasts by comparing the forecasts to (1) historical revenues, and EBITDA margins, (2) internal communications to management and the Board of Directors, (3) inquiry with non-management personnel and (4) forecasted information included in analyst and industry reports for the Company and certain of its peer companies.

With the assistance of our internal fair value specialists, we evaluated the reasonableness of the valuation methods.

With the assistance of our internal fair value specialists, we evaluated the reasonableness of the valuation assumptions, including the discount rate by (1) testing the source information underlying the determination of the discount rate and the mathematical accuracy of the calculation and (2) developing a range of independent estimates and comparing those to the discount rate selected by management.

We analyzed the executed settlement agreement to understand the provisions of the buyout of the remaining 40% interest of the shares in Babcock & Wilcox Solar and the contingent consideration liability provision.

With the assistance of our National Office – Accounting and Reporting Services (NOARS) group, we evaluated the accounting treatment of the agreement.

50


We evaluated the fair value of the non-controlling interest and the contingent consideration liability and the allocation of the consideration transferred to the components of the settlement based upon the relative fair values of the share purchase.

We evaluated the accounting treatment relating to the reduction of the fair value of the contingent consideration liability to $0 as a reduction to selling, general and administrative costs.

We evaluated the accounting treatment of the gain associated with the purchase of the non-controlling interest as an adjustment to capital in excess of par.

Evaluated the Company’s disclosures related to the settlement agreement to assess their conformity with the applicable accounting standards.


/S/s/ DELOITTE & TOUCHE LLP


Charlotte, North CarolinaCleveland, Ohio
March 1, 201816, 2023


We have served as the Company’sCompany's auditor since 2014.

51
56




BABCOCK & WILCOX ENTERPRISES, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
 Year Ended December 31,
(in thousands, except per share amounts)201720162015
Revenues$1,557,735
$1,578,263
$1,757,295
Costs and expenses:   
Cost of operations1,457,857
1,399,146
1,449,138
Selling, general and administrative expenses259,799
247,149
239,968
Goodwill impairment charges86,903


Restructuring activities and spin-off transaction costs15,447
40,807
14,946
Research and development costs9,412
10,406
16,543
Losses (gains) on asset disposals, net15
(32)14,597
Total costs and expenses1,829,433
1,697,476
1,735,192
Equity in income (loss) and impairment of investees(9,867)16,440
(242)
Operating income (loss)(281,565)(102,773)21,861
Other income (expense):   
Interest income510
810
618
Interest expense(26,305)(3,796)(2,338)
Other – net(6,839)(2,380)64
Total other income (expense)(32,634)(5,366)(1,656)
Income (loss) before income tax expense(314,199)(108,139)20,205
Income tax expense64,816
6,943
3,671
Income (loss) from continuing operations(379,015)(115,082)16,534
Income (loss) from discontinued operations, net of tax

2,803
Net income (loss)(379,015)(115,082)19,337
Net income attributable to noncontrolling interest(809)(567)(196)
Net income (loss) attributable to stockholders$(379,824)$(115,649)$19,141
    
Basic earnings (loss) per share - continuing operations$(8.09)$(2.31)$0.31
Basic earnings (loss) per share - discontinued operations

0.05
Basic earnings (loss) per share$(8.09)$(2.31)$0.36
    
Diluted earnings (loss) per share - continuing operations$(8.09)$(2.31)$0.30
Diluted earnings per share - discontinued operations

0.06
Diluted earnings (loss) per share$(8.09)$(2.31)$0.36
    
Shares used in the computation of earnings per share:   
Basic46,935
50,129
53,487
Diluted46,935
50,129
53,709
Year ended December 31,
(in thousands, except per share amounts)202220212020
Revenues$889,815 $723,363 $566,317 
Costs and expenses:
Cost of operations704,192 543,835 400,465 
Selling, general and administrative expenses178,519 154,897 141,746 
Goodwill impairment7,224 — — 
Advisory fees and settlement costs8,532 13,083 12,878 
Restructuring activities560 4,869 11,849 
Research and development costs3,805 1,595 4,379 
Gain on asset disposals, net(8,836)(15,737)(3,263)
Total costs and expenses893,996 702,542 568,054 
Operating (loss) income(4,181)20,821 (1,737)
Other (expense) income:
Interest expense(44,983)(39,393)(59,796)
Interest income641 531 646 
Gain (loss) on debt extinguishment— 6,530 (6,194)
Loss on sale of business— (1,753)(108)
Benefit plans, net37,528 48,142 5,600 
Foreign exchange(582)(4,294)58,799 
Other – net(3,944)(1,270)(1,128)
Total other (expense) income(11,340)8,493 (2,181)
(Loss) income before income tax expense(15,521)29,314 (3,918)
Income tax expense (benefit)11,063 (2,224)8,179 
(Loss) income from continuing operations(26,584)31,538 (12,097)
Income from discontinued operations, net of tax— — 1,800 
Net (loss) income(26,584)31,538 (10,297)
Net loss (income) attributable to non-controlling interest3,723 (644)(21)
Net (loss) income attributable to stockholders(22,861)30,894 (10,318)
Less: Dividends on Series A preferred stock14,860 9,127 — 
Net (loss) income attributable to stockholders of common stock$(37,721)$21,767 $(10,318)
Basic (loss) income per share
Continuing operations$(0.43)$0.26 $(0.25)
Discontinued operations— — 0.04 
Basic (loss) income per share$(0.43)$0.26 $(0.21)
Diluted (loss) income per share
Continuing operations$(0.43)$0.26 $(0.25)
Discontinued operations— — 0.04 
Diluted (loss) income per share$(0.43)$0.26 $(0.21)
Shares used in the computation of (loss) income per share:
Basic88,256 82,391 48,710 
Diluted88,256 83,580 48,710 
See accompanying notes to consolidated financial statements.

Consolidated Financial Statements.
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52




BABCOCK & WILCOX ENTERPRISES, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (LOSS)
 Year Ended December 31,
(in thousands)201720162015
Net income (loss)$(379,015)$(115,082)$19,337
Other comprehensive income (loss):   
Currency translation adjustments, net of taxes16,150
(24,494)(19,459)
    
Derivative financial instruments:   
Unrealized gains on derivative financial instruments3,346
2,208
282
Income taxes142
162
(57)
Unrealized gains on derivative financial instruments, net of taxes3,204
2,046
339
Derivative financial instrument (gains) losses reclassified into net income(2,503)(3,598)1,557
Income taxes(234)(568)424
Reclassification adjustment for (gains) losses included in net income, net of taxes(2,269)(3,030)1,133
    
Benefit obligations:   
Unrealized gains (losses) on benefit obligations(152)12,202
462
Income taxes
4,510
(57)
Unrealized gains (losses) on benefit obligations, net of taxes(152)7,692
519
Amortization of benefit plan costs (benefits)(2,912)(254)1,042
Income taxes43
(404)1,237
Amortization of benefit plan costs (benefits), net of taxes(2,955)150
(195)
    
Other:75
7
(22)
    
Other comprehensive income (loss)14,053
(17,629)(17,685)
Total comprehensive income (loss)(364,962)(132,711)1,652
Comprehensive loss attributable to noncontrolling interest(778)(575)(183)
Comprehensive income (loss) attributable to stockholders$(365,740)$(133,286)$1,469
Year ended December 31,
(in thousands)202220212020
Net (loss) income$(26,584)$31,538 $(10,297)
Other comprehensive (loss) income:
Currency translation adjustments (CTA)(14,834)$(3,412)(53,318)
Reclassification of CTA to net loss— (4,512)— 
Benefit obligations:
Pension and post retirement adjustments, net of tax870 1,492 (998)
Other comprehensive loss(13,964)(6,432)(54,316)
Total comprehensive (loss) income(40,548)25,106 (64,613)
Comprehensive income (loss) attributable to non-controlling interest3,852 (595)(29)
Comprehensive (loss) income attributable to stockholders$(36,696)$24,511 $(64,642)
See accompanying notes to consolidated financial statements.

Consolidated Financial Statements.
58
53




BABCOCK & WILCOX ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amount)December 31, 2017December 31, 2016(in thousands, except per share amount)December 31, 2022December 31, 2021
Cash and cash equivalents$56,667
$95,887
Cash and cash equivalents$76,728 $224,874 
Restricted cash and cash equivalents25,980
27,770
Current restricted cash and cash equivalentsCurrent restricted cash and cash equivalents15,335 1,841 
Accounts receivable – trade, net291,704
282,347
Accounts receivable – trade, net162,461 132,068 
Accounts receivable – other78,970
73,756
Accounts receivable – other38,510 34,553 
Contracts in progress161,220
166,010
Contracts in progress134,939 80,176 
Inventories82,162
85,807
Inventories, netInventories, net102,637 79,527 
Other current assets35,554
45,957
Other current assets27,002 29,395 
Total current assets732,257
777,534
Total current assets557,612 582,434 
Net property, plant and equipment141,931
133,637
Net property, plant and equipment and finance leasesNet property, plant and equipment and finance leases86,363 85,627 
Goodwill204,398
267,395
Goodwill156,993 116,462 
Deferred income taxes97,826
163,388
Investments in unconsolidated affiliates43,278
98,682
Intangible assets76,780
71,039
Intangible assets, netIntangible assets, net60,293 43,795 
Right-of-use assetsRight-of-use assets29,438 30,163 
Long-term restricted cashLong-term restricted cash21,397 — 
Other assets25,759
17,468
Other assets30,559 54,784 
Total assets$1,322,229
$1,529,143
Total assets942,655 913,265 
 
Foreign revolving credit facilities$9,173
$14,241
Second lien term loan facility160,141

Accounts payable225,234
220,737
Accounts payable$139,159 $85,929 
Accrued employee benefits30,153
35,497
Accrued employee benefits12,533 12,989 
Advance billings on contracts181,070
210,642
Advance billings on contracts133,429 68,380 
Accrued warranty expense39,020
40,467
Accrued warranty expense9,568 12,925 
Financing lease liabilitiesFinancing lease liabilities1,180 2,445 
Operating lease liabilitiesOperating lease liabilities3,595 3,950 
Other accrued liabilities99,536
95,954
Other accrued liabilities68,244 54,385 
Loans payableLoans payable4,291 12,380 
Total current liabilities744,327
617,538
Total current liabilities371,999 253,383 
United States revolving credit facility94,300
9,800
Senior notesSenior notes335,498 326,366 
Long term loans payableLong term loans payable13,197 1,543 
Pension and other accumulated postretirement benefit liabilities256,390
301,259
Pension and other accumulated postretirement benefit liabilities136,176 182,730 
Other noncurrent liabilities36,509
39,595
Non-current finance lease liabilitiesNon-current finance lease liabilities27,482 29,369 
Non-current operating lease liabilitiesNon-current operating lease liabilities26,583 26,685 
Deferred tax liabilitiesDeferred tax liabilities10,054 1,399 
Other non-current liabilitiesOther non-current liabilities23,755 33,168 
Total liabilities1,131,526
968,192
Total liabilities944,744 854,643 
Commitments and contingencies Commitments and contingencies
Stockholders' equity: 
Common stock, par value $0.01 per share, authorized 200,000 shares; issued and outstanding 44,065 and 48,688 shares at December 31, 2017 and 2016, respectively499
544
Stockholders' (deficit) equity:Stockholders' (deficit) equity:
Preferred stock, par value $0.01 per share, authorized shares of 20,000; issued and outstanding shares of 7,669 at both at December 31, 2022 and 2021Preferred stock, par value $0.01 per share, authorized shares of 20,000; issued and outstanding shares of 7,669 at both at December 31, 2022 and 202177 77 
Common stock, par value $0.01 per share, authorized shares of 500,000; issued and outstanding shares of 88,700 and 86,286 at December 31, 2022 and 2021, respectivelyCommon stock, par value $0.01 per share, authorized shares of 500,000; issued and outstanding shares of 88,700 and 86,286 at December 31, 2022 and 2021, respectively5,138 5,110 
Capital in excess of par value800,968
806,589
Capital in excess of par value1,537,625 1,518,872 
Treasury stock at cost, 5,681 and 5,592 shares at December 31, 2017 and December 31, 2016, respectively(104,785)(103,818)
Retained deficit(492,150)(114,684)
Treasury stock at cost, 1,868 and 1,525 shares at December 31, 2022 and 2021, respectivelyTreasury stock at cost, 1,868 and 1,525 shares at December 31, 2022 and 2021, respectively(113,753)(110,934)
Accumulated deficitAccumulated deficit(1,358,875)(1,321,154)
Accumulated other comprehensive loss(22,429)(36,482)Accumulated other comprehensive loss(72,786)(58,822)
Stockholders' equity attributable to shareholders182,103
552,149
Stockholders' equity attributable to shareholders(2,574)33,149 
Noncontrolling interest8,600
8,802
Total stockholders' equity190,703
560,951
Non-controlling interestNon-controlling interest485 25,473 
Total stockholders' (deficit) equityTotal stockholders' (deficit) equity(2,089)58,622 
Total liabilities and stockholders' equity$1,322,229
$1,529,143
Total liabilities and stockholders' equity$942,655 $913,265 

See accompanying notes to consolidated financial statements.

Consolidated Financial Statements.
59





























54




BABCOCK & WILCOX ENTERPRISES, INC.
CONSOLIDATED AND COMBINED STATEMENT OF STOCKHOLDERS' EQUITY

 Common StockCapital In
Excess of
Par Value
Treasury StockRetained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Former Parent InvestmentNoncontrolling
Interest
Total
Stockholders’
Equity
 
 SharesPar Value
  (in thousands, except share and per share amounts)
December 31, 2014 Balance
$
$
$
$
$10,374
$676,036
$1,027
$687,437
Net income



965

18,176
196
19,337
Currency translation adjustments




(19,446)
(13)(19,459)
Derivative financial instruments




1,472


1,472
Defined benefit obligations




324


324
Available-for-sale investments




(22)

(22)
Stock-based compensation137
17
7,772
(1,143)

6

6,652
Repurchased shares(1,376)(14) (24,265)



(24,279)
Dividends to noncontrolling interests






(491)(491)
Net transfers from Parent





125,295

125,295
Distribution of Nuclear Energy segment to former Parent




(11,555)(36,284)
(47,839)
Reclassification of former Parent investment to capital in excess of par value and common stock53,720
537
782,692



(783,229)

December 31, 2015 Balance52,481
$540
$790,464
$(25,408)$965
$(18,853)$
$719
$748,427
          
Net income
$
$
$
$(115,649)$
$
$567
$(115,082)
Currency translation adjustments




(24,494)
8
(24,486)
Derivative financial instruments




(984)

(984)
Defined benefit obligations




7,842


7,842
SPIG Acquisition






7,754
7,754
Available-for-sale investments




7


7
Stock-based compensation charges423
46
16,125
(2,731)



13,440
Repurchased shares(4,216)(42)
(75,679)



(75,721)
Dividends to noncontrolling interests






(246)(246)
December 31, 2016 Balance48,688
$544
$806,589
$(103,818)$(114,684)$(36,482)$
$8,802
$560,951
          
Net income
$
$
$
$(379,824)$
$
$809
$(379,015)
Currency translation adjustments




16,150

(31)16,119
Derivative financial instruments




935


935
Defined benefit obligations




(3,107)

(3,107)
Available-for-sale investments




75


75
Stock-based compensation charges212
3
11,005
(967)2,358



12,399
Common stock retirement(4,835)(48)(16,626)




(16,674)
Dividends to noncontrolling interests






(980)(980)
December 31, 2017 Balance44,065
$499
$800,968
$(104,785)$(492,150)$(22,429)$
$8,600
$190,703
Common StockPreferred StockCapital In
Excess of
Par Value
Treasury StockAccumulated DeficitAccumulated
Other
Comprehensive
Loss
Non-controlling
Interest
Total
Stockholders’
Equity (Deficit)
(in thousands, except share and per share amounts)SharesPar 
Value
SharesPar 
Value
Balance at December 31, 201946,374 $4,699 — $— $1,142,614 $(105,707)$(1,332,603)$1,926 $1,417 $(287,654)
Net loss— — — — — — (10,318)— 21 (10,297)
Currency translation adjustments— — — — — — — (53,318)(53,310)
Pension and post retirement adjustments, net of tax— — — — — — — (998)— (998)
Stock-based compensation charges460 — — 4,548 (283)— — — 4,274 
Equitized guarantee fee payment1,713 17 — — 3,883 — — — — 3,900 
Equitized Last Out Term Loan principal payment5,905 59 — — 13,391 — — — — 13,450 
Dividends to non-controlling interest— — — — — — — — (342)(342)
Balance at December 31, 202054,452 4,784 — — 1,164,436 (105,990)(1,342,921)(52,390)1,104 (330,977)
Net income— — — — — — 30,894 — 644 31,538 
Currency translation adjustments— — — — — — — (7,924)(49)(7,973)
Pension and post retirement adjustments, net of tax— — — — — — — 1,492 — 1,492 
Stock-based compensation charges2,347 31 — — 7,770 (4,944)— — — 2,857 
Common stock offering29,487 295 — — 160,546 — — — — 160,841 
Preferred stock offering, net— — 4,752 48 113,227 — — — — 113,275 
Equitized Last Out Term Loan principal payment— — 2,917 29 72,893 — — — — 72,922 
Dividends to preferred stockholders— — — — — — (9,127)— — (9,127)
Non-controlling interest from acquisition— — — — — — — — 23,996 23,996 
Dividends to non-controlling interest— — — — — — — — (222)(222)
Balance at December 31, 202186,286 $5,110 7,669 $77 $1,518,872 $(110,934)$(1,321,154)$(58,822)$25,473 $58,622 
Net income— — — — — — (22,861)— (3,723)(26,584)
Currency translation adjustments— — — — — — — (14,834)(129)(14,963)
Pension and post retirement adjustments, net of tax— — — — — — — 870 — 870 
Stock-based compensation charges2,414 28 — — 9,949 (2,819)— — — 7,158 
Purchase of Babcock & Wilcox Solar and SPIG non-controlling interest— — — — 8,804 — — — (20,735)(11,931)
Dividends to preferred stockholders— — — — — — (14,860)— 0(14,860)
Dividends to non-controlling interest— — — — — — — — (401)(401)
Balance at December 31, 202288,700 5,138 7,669 77 1,537,625 (113,753)(1,358,875)(72,786)485 (2,089)


See accompanying notes to consolidated financial statements.

Consolidated Financial Statements.
60
55




BABCOCK & WILCOX ENTERPRISES, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS

 Year Ended December 31,
(in thousands)201720162015
Cash flows from operating activities:  
Net income (loss)$(379,015)$(115,082)$19,337
Non-cash items included in net income (loss):   
Depreciation and amortization of long-lived assets40,138
39,583
34,932
Amortization of debt issuance costs and debt discount6,407
1,244
622
(Income) loss from equity method investees(8,326)(16,440)242
Goodwill impairment charges86,903


Other than temporary impairment of equity method investment in TBWES18,193


Losses on asset disposals and impairments807
14,938
16,881
Write-off of accrued claims receivable, net

7,832
Provision for (benefit from) deferred income taxes50,304
(9,000)(32,121)
Mark to market losses (gains) and prior service cost amortization for pension and postretirement plans(11,608)36,346
40,611
Stock-based compensation, net of associated income taxes11,813
16,129
7,773
Changes in assets and liabilities, net of effects of acquisitions:   
Accounts receivable9,414
46,755
(54,807)
Dividends from equity method investees50,134
12,160
20,830
Accrued insurance receivable
(15,000)
Contracts in progress and advance billings on contracts(24,001)(13,259)62,971
Inventories11,874
2,869
6,060
Income taxes26,618
22,593
9,275
Accounts payable(14,664)4,542
17,863
Accrued and other current liabilities(12,450)25,110
11,464
Pension liabilities, accrued postretirement benefits and employee benefits(44,584)(46,973)(2,336)
Other, net(7,790)(4,242)2,970
Net cash from operating activities(189,833)2,273
170,399
Cash flows from investing activities:   
Decrease in restricted cash and cash equivalents(2,259)9,374
6,298
Investment in equity method investees
(26,256)(7,424)
Purchase of property, plant and equipment(14,278)(22,450)(35,397)
Acquisition of business, net of cash acquired(52,547)(144,780)
Proceeds from sale of equity method investment in a joint venture
17,995

Purchases of available-for-sale securities(29,252)(45,217)(14,008)
Sales and maturities of available-for-sale securities35,484
29,846
5,266
Other, net708
646
(587)
Net cash from investing activities$(62,144)$(180,842)$(45,852)
    
    
    
    
    
    
    
Year ended December 31,
(in thousands)202220212020
Cash flows from operating activities:
Net (loss) income$(26,584)$31,538 $(10,297)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of long-lived assets23,992 18,337 16,805 
Goodwill impairment7,224 — — 
Change in fair value of contingent consideration(9,567)— — 
Amortization of deferred financing costs and debt discount5,225 7,918 16,743 
Amortization of guaranty fee856 1,832 1,159 
Non-cash operating lease expense7,277 4,154 4,765 
Loss on sale of business— 1,753 108 
(Gain) loss on debt extinguishment— (6,530)6,194 
Gain on asset disposals(8,836)(15,737)(3,262)
Provision for (benefit from) deferred income taxes, including valuation allowances5,897 (7,745)1,791 
Mark to market, prior service cost amortization for pension and postretirement plans(6,848)(15,512)22,156 
Stock-based compensation, net of associated income taxes9,977 7,801 4,557 
Equitized non-cash interest expense— — 13,450 
Foreign exchange582 4,294 (58,799)
Changes in assets and liabilities:
Accounts receivable(28,217)225 21,673 
Contracts in progress(54,108)(20,099)35,850 
Advance billings on contracts62,330 1,641 (13,057)
Inventories(19,002)(3,047)(4,084)
Income taxes(248)(2,142)(2,425)
Accounts payable52,680 7,080 (42,001)
Accrued and other current liabilities(18,921)(47,768)9,146 
Accrued contract loss6,402 (204)(5,557)
Pension liabilities, accrued postretirement benefits and employee benefits(36,543)(60,760)(37,223)
Other, net(4,205)(18,225)(18,498)
Net cash used in operating activities(30,637)(111,196)(40,806)
Cash flows from investing activities:
Purchase of property, plant and equipment(13,238)(6,679)(8,230)
Acquisition of business, net of cash acquired(64,914)(55,341)— 
Proceeds from sale of business and assets, net5,498 25,390 8,000 
Purchases of available-for-sale securities(6,427)(12,605)(29,068)
Sales and maturities of available-for-sale securities9,815 15,694 26,563 
Other, net466 — 4,954 
Net cash (used in) from investing activities(68,800)(33,541)2,219 



61
56



 
BABCOCK & WILCOX ENTERPRISES, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS (CONTINUED)
 
  Year Ended December 31,
 (in thousands)201720162015
 Cash flows from financing activities:   
 Borrowings under our United States revolving credit facility$629,722
$205,600
$
 Repayments of our United States revolving credit facility(545,222)(195,800)
 Proceeds from our second lien term loan facility, net of $34.2 million discount161,674


 Borrowings under our foreign revolving credit facilities273
5,674

 Repayments of our foreign revolving credit facilities(6,597)(20,248)(1,080)
 Common stock repurchase from related party(16,674)

 Net transfers from our former Parent

80,589
 Shares of our common stock returned to treasury stock(967)(78,410)(25,408)
 Debt issuance costs(15,002)

 Other(1,082)(246)(491)
 Net cash from financing activities206,125
(83,430)53,610
 Effects of exchange rate changes on cash6,632
(7,306)(6,407)
 Cash flow from continuing operations(39,220)(269,305)171,750
 Cash flows from discontinued operations:   
 Operating cash flows from discontinued operations, net

(25,194)
 Investing cash flows from discontinued operations, net

(23)
 Net cash flows from discontinued operations

(25,217)
 Net increase (decrease) in cash and equivalents(39,220)(269,305)146,533
 Cash and equivalents, beginning of period95,887
365,192
218,659
 Cash and equivalents, end of period$56,667
$95,887
$365,192

Year ended December 31,
(in thousands)202220212020
Cash flows from financing activities:
Issuance of senior notes6,828 303,324 — 
Borrowings on loan payable7,192 7,145 — 
Repayments on loan payable(16,915)(846)— 
Proceeds from sale-leaseback financing transactions13,339 — — 
Finance lease payments(2,435)(2,366)13 
Borrowings under last out term loans— — 70,000 
Repayments under last out term loans— (75,408)— 
Borrowings under U.S. revolving credit facility— 14,500 158,900 
Repayments of U.S. revolving credit facility— (178,800)(173,600)
Issuance of preferred stock, net— 113,275 — 
Payment of preferred stock dividends(14,860)(9,127)— 
Shares of common stock returned to treasury stock(2,819)(4,944)(283)
Issuance of common stock, net— 160,841 — 
Debt issuance costs(1,447)(24,560)(10,590)
Other, net(48)(222)(342)
Net cash (used in) from financing activities(11,165)302,812 44,098 
Effects of exchange rate changes on cash(2,653)1,217 4,971 
Net (decrease) increase in cash, cash equivalents and restricted cash(113,255)159,292 10,482 
Cash, cash equivalents and restricted cash, beginning of period226,715 67,423 56,941 
Cash, cash equivalents and restricted cash, end of period$113,460 $226,715 $67,423 
Schedule of cash, cash equivalents and restricted cash:
Cash and cash equivalents$76,728 $224,874 $57,338 
Current restricted cash15,335 1,841 10,085 
Long-term restricted cash21,397 $— — 
Cash, cash equivalents and restricted cash at end of period$113,460 $226,715 $67,423 
Income taxes paid, net$7,950 $4,991 $6,960 
Interest paid$25,673 $20,234 $17,815 
See accompanying notes to consolidated financial statements.

Consolidated Financial Statements.
62
57




BABCOCK & WILCOX ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 20172022


NOTE 1 – BASIS OF PRESENTATION AND GOING CONCERN CONSIDERATIONS


BasisThe Consolidated Financial Statements of presentation

Babcock & Wilcox Enterprises, Inc. ("(“B&W", "we", "us" or "our") operates in three business segments and was wholly owned by The Babcock & Wilcox Company ("BWC"&W,” “management,” “we,” “us,” “our” or the "former Parent"“Company”) until June 30, 2015 when BWC distributed 100% of our outstanding common stock to the BWC shareholders through a tax-free spin-off transaction (the "spin-off"). BWC is now known as BWX Technologies, Inc.

We have presented our 2017 and 2016 consolidated financial statements and our 2015 consolidated and combined financial statements (collectively referred to herein as the "consolidated financial statements") in United States dollarsbeen prepared in accordance with accounting principles generally accepted in the United States ("GAAP"(“GAAP”). We use the equity method to account for investments in entities that we do not control, but over which we have the ability to exercise significant influence. We generally refer to these entities as "joint ventures." We haveThe Company has eliminated all intercompany transactions and accounts. We presentaccounts and presents the notes to our consolidated financial statementsthe Consolidated Financial Statements on the basis of continuing operations, unless otherwise stated.


On June 8, 2015, BWC's board of directors approvedOccasionally, it is necessary for reporting entities to reclassify an amount from a prior period from one financial statement caption to another for comparability with the spin-off of B&W throughcurrent period. For the distribution of shares of B&W common stock to holders of BWC common stock (the "spin-off"). On June 30, 2015, B&W becameperiod ended December 31, 2022, the Company added a separate publicly-traded company,balance sheet caption for Deferred tax liability which was previously included in Other non-current liabilities as it is now deemed to be material. As such, a reclassification in the prior period was made to conform to the current period presentation. Balance sheet presentation for year ended December 31, 2021 has been modified to separately disclose the $1.4 million in Deferred tax liability and BWC did not retain any ownership interestOther non-current liabilities has been reduced by the same amount for accurate year-over-year comparability.

Market Update

The COVID-19 pandemic has continued to create challenges for the Company in B&W. Oncountries that have significant outbreak mitigation strategies, namely, countries in our Asia-Pacific region, which led to temporary project postponements and priorhas continued to June 30, 2015 our operatingimpact results and cash flows consisted of The Power Generation Operations of BWC ("BW PGG"), which represented a combined reporting entity comprised ofin this region. Additionally, the assets and liabilities in managing and operating the Power Generation segment of BWC, combined with related captive insurance operations that were contributed in connection with the spin-off by BWCCompany has experienced negative impacts to B&W. In addition, BW PGG also included certain assets and liabilities of BWC's Nuclear Energy ("NE") segment that were transferred to BWC. We have treated the assets, liabilities, operating results and cash flows of the NE businessits global supply chains as a discontinued operationresult of COVID-19, the war in our consolidated financial statements. See Note 26 for further information.

Through June 30, 2015,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 corporateof its products. These delays and generaldisruptions have had, and administrative expenses, including those relatedcould continue to executive management, tax, accounting, legal, information technology, treasury services, and certain employee benefits, have, been allocated by BWCan adverse impact on the Company’s ability to usmeet customers’ demands. The Company is continuing to reflect all costs of doing business related to these operations inactively monitor the financial statements, including expenses incurred by related entities on our behalf. The majorityimpact of these allocations of managementmarket conditions on current and support servicesfuture periods and actively manage costs are based on specific identification methods such as direct usage and level of effort. The remainder is allocated on the basis of a three-factor formula that considered proportional revenue generated, payroll and fixed assets. Management believes such allocations are reasonable. However, the associated expenses reflected in the accompanying 2015 consolidated and combined statements of operations may not be indicative of the actual expenses that would have been incurred had we been operating as an independent public company for the periods presented. Following the spin-off from BWC, we have performed these functions using internal resources or purchased services, certain of which were provided by BWC pursuant to a transition services agreement. Refer to Note 25 for a detailed description of transactions with other affiliates of BWC.

Going concern considerations

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future. The consolidated financial statements do not include any adjustments that might result from the outcome of the going concern uncertainty other than the reclassification of our second lien term loan facility to current liabilities.

Additional losses we recognized in the fourth quarter of 2017 related to an increase in structural steel repair costs on one of our European renewable energy contracts led to us seek an amendment of our lending arrangement. The additional losses we recognized in the fourth quarter of 2017 caused us to be out of compliance with certain financial covenants in our lending arrangements at December 31, 2017. We obtained an amendment to our United States Revolving Credit Facility on March 1, 2018 that temporarily waived the financial covenant defaults that existed at December 31, 2017. We face liquidity challenges related to our non-compliance with the financial covenants associated with our Second Lien Term Loan Facility at December 31, 2017, which may be difficult to resolve in a timely manner. Our Second Lien Term Loan Agreement contains a 180-day standstill period beginning on March 1, 2018 to resolve the event of default or repay the loan as described in Note

63



20. Our financing plan includes raising additional capital through a rights offering and other sources before the end of the standstill period, which will depend on conditions in the capital markets and, with respect to the rights offering, an amendment to our existing shelf registration statement that we plan to file in early March 2018 being declared effective by the Securities and Exchange Commission ("SEC"), which are matters that are outside of our control.

We have initiated steps to remedy the going concern uncertainty, which include, but are not limited to:
secured an equity commitment agreement on March 1, 2018 with a group of our existing stockholders to fully backstop our planned rights offering for the purpose of providing approximately $182 million of new capital, in the form of new equity, that together with $35 million of borrowings permitted by our United States revolving credit facility we intend to use to extinguish the outstanding balance of our second lien term loan facility and terminate the associated borrowing agreement;
mitigating, to the extent possible, the adverse impact of our net losses and financial covenant defaults over the past two years on our core operations, customers, vendors and banking relationships (e.g., providers of bank guarantees, letters of credit and surety bonds);
entered into employee retention agreements with key members of management;
dedicating project management resources to the performance, efficiency and timely completion of our existing and forecasted portfolio of contracts; and
selling certain assets or exiting certain markets, if we believe the opportunity would improve stockholder value and our liquidity outlook.

While we believe that the actions summarized above are more likely than notposition to address the substantial doubt about our ability to continue as a going concern, weprovide additional flexibility while still supplying its customers and their specific needs. The duration and scope of these conditions cannot assert that it is probable that our plans will fully mitigate the conditions identified. If we cannot continue as a going concern, material adjustmentsbe predicted, and therefore, any anticipated negative financial impact to the carrying values and classifications of our assets and liabilities and the reported amounts of income and expense couldCompany’s operating results cannot be required.reasonably estimated.



NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES


Reportable segments


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


Power: Focused onBabcock & Wilcox Renewable: Cost-effective technologies for efficient and aftermarket servicesenvironmentally sustainable power and heat generation, including waste-to-energy, solar construction and installation, biomass energy and black liquor systems for steam-generating, environmental,the pulp and auxiliary equipmentpaper industry. B&W’s leading technologies support a circular economy, diverting waste from landfills to use for power generation and otherreplacing fossil fuels, while recovering metals and reducing emissions.
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 applications.
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.
Renewable: Focused onBabcock & Wilcox Thermal: Steam generation equipment, aftermarket parts, construction, maintenance and field services for plants in the supplypower generation, oil and gas, and industrial sectors. B&W has an extensive global base of steam-generating systems, environmental and auxiliaryinstalled equipment for the waste-to-energyutilities and biomass power generation industries.
general industrial applications including refining, petrochemical, food processing, metals and others.
Industrial: Focused on custom-engineered cooling, environmental, acoustic, emission and filtration solutions, other industrial equipment and related aftermarket services.


For financial information about ourthe Company's segments see Note 4 to our consolidated financial statements.the Consolidated Financial Statements.

58



Use of estimates


We useThe Company uses estimates and assumptions to prepare our consolidated financial statementsits Consolidated Financial Statements in conformity with GAAP.generally accepted accounting principles ("GAAP"). Some of ourthe more significant estimates include ourthe Company's estimate of costs to complete long-term construction contracts, estimates associated with assessing whether goodwill, intangible assets and other long-lived assets are impaired, estimates of costs to be incurred to satisfy contractual warranty requirements, estimates of the value of acquired intangible and tangible assets, estimates associated with the realizability of deferred tax assets, estimates associated with determining the fair value of the transactions with American Industrial Partners (see Note 20) and estimates we makethe Company makes in selecting assumptions related to the valuations of ourits pension and postretirement plans, including the selection of our discount rates, mortality and expected rates of return on our pension plan assets. These estimates and assumptions affect the amounts we reportthe Company reports in our consolidated financial statementsits Consolidated Financial Statements and accompanying notes. OurThe Company's actual results could differ from these estimates. Variances could result in a material effect on ourthe company's financial condition and results of operations in future periods.


Earnings per share


We haveThe Company has computed earnings per common share on the basis of the weighted average number of common shares, and, where dilutive, common share equivalents, outstanding during the indicated periods. We haveThe Company has a number of forms of stock-based

64



compensation, including incentive and non-qualified stock options, restricted stock, restricted stock units, performance shares, and performance units, subject to satisfaction of specific performance goals. We includeThe Company includes the shares applicable to these plans in dilutive earnings per share when related performance criteria have been met. The computation of basic and diluted earnings per share is included in Note 3.


Investments


OurThe Company's investments primarily highly liquid money market instruments, are classified as available-for-sale and are carried at fair value, with the unrealized gains and losses, net of tax, reported as a component of accumulated other comprehensive income (loss). We classifyrelate to its wholly owned insurance subsidiary. The Company classifies investments available for current operations in the consolidated balance sheetsits Consolidated Balance Sheets as currentCurrent assets, while we classify investments held for long-term purposes are classified as noncurrentNon-current assets. We adjustThe Company adjusts the amortized cost of debt securities for amortization of premiums and accretion of discounts to maturity. That amortization is included in interestInterest income. We include realizedRealized gains and losses on ourthe Company's investments are recorded in otherOther - net in our consolidated statementsthe Consolidated Statements of operations.Operations. The cost of securities sold is based on the specific identification method. We includemethod and is included in interest on securities in interest income.Interest income on the Company's Consolidated Statements of Operations.


Foreign currency translation


We translateThe Company translates assets and liabilities of ourits foreign operations into United StatesU.S. dollars at current exchange rates, and we translatetranslates items in our statementthe Consolidated Statement of operationsOperations at average exchange rates for the periods presented. We recordThe Company records adjustments resulting from the translation of foreign currency financial statements as a component of accumulatedAccumulated other comprehensive income (loss). We reportThe Company reports foreign currency transaction gains and losses in income. We haveThe Company has included in other - net transaction gains (losses)losses of $2.9 million, $(5.4)$(0.6) million and $(0.1)$(4.3) million and a transaction gain of $58.8 million in the years ended December 31, 2017, 20162022, 2021, and 2015, respectively.2020, respectively, in Foreign exchange in its Consolidated Statements of Operations. These foreign exchange net gains and losses are primarily related to transaction gains or losses from unhedged intercompany loans when the loan is denominated in a currency different than the participating entity's functional currency.


Contracts and revenueRevenue recognition


WeA 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.

Revenue from goods and services transferred to customers at a point in time, which includes certain aftermarket parts and services, accounted for 20%, 19% and 29% of our revenue for the years ended December 31, 2022, 2021, and 2020, respectively. Revenue on these contracts is recognized when the customer obtains control of the asset, which is generally recognize contract revenuesupon shipment or delivery and relatedacceptance by the customer. Standard commercial payment terms generally apply to these sales.

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Revenue from products and services transferred to customers over time accounted for 80%, 81% and 71% of our revenue for the years ended years ended December 31, 2022, 2021, and 2020, respectively. Revenue recognized over time primarily relates to customized, engineered solutions and construction services. Typically, revenue is recognized over time using the cost-to-cost input method that uses costs on a percentage-of-completion method for individual contracts or combinations of contracts based onincurred to date relative to total estimated costs at completion to measure progress toward satisfying our performance obligations. Incurred cost represents work performed, man hours or a cost-to-cost method, as applicablewhich corresponds with, and thereby best depicts, the transfer of control to the product or activity involved. We recognize estimatedcustomer. Contract costs include labor, material, overhead and, when appropriate, SG&A expenses. Variable consideration in these contracts includes estimates of liquidated damages, contractual bonuses and penalties, and contract modifications. Substantially all of our revenue and resulting income based onrecognized over time under the measurementcost-to-cost input method contains a single performance obligation as the interdependent nature of the extent of progress completion as a percentagegoods and services provided prevents them from being separately identifiable within the contract. Generally, the Company tries to structure contract milestones to mirror its expected cash outflows over the course of the total contract. We include revenues and related costs so recorded, plus accumulated contract costs that exceed amounts invoicedcontract; however, the timing of milestone receipts can greatly affect the overall cash position. Refer to customers under the termsNote 4 for details of the contracts, in contracts in progress. We include in advance billings on contracts invoices that exceed accumulated contract costs and revenues and costs recognized under the percentage-of-completion method. Contracts in progress and advance billings on contracts balances are classified as current assets and liabilities, respectively, in our consolidated balance sheets based on the life cycle of the associated contracts. Most long-term contracts contain provisions for progress payments. Our unbilled receivables do not contain an allowance for credit losses as we expect to invoice customers and collect all amounts for unbilled revenues. We review contract price and cost estimates periodically as the work progresses and reflect adjustments proportionate to the percentage-of-completion in income in the period when those estimates are revised. For all contracts, if a current estimate of total contract cost indicates a loss on a contract, the projected contract loss is recognized in full in the statement of operations and an accrual for the estimated loss on the uncompleted contract is included in other current liabilities in the balance sheet. In addition, when we determine that an uncompleted contract will not be completed on-time and the contract has liquidated damages provisions, we recognize the estimated liquidated damages we will incur and record them as a reduction of the estimated selling price in the period the change in estimate occurs.

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


As of December 31, 2017, we have2022, the Company has estimated the costs to complete all of ourall in-process contracts in order to estimate revenues in accordance with the percentage-of-completion method of accounting.using a cost-to-cost input method. However, it is possible that current estimates could change due to unforeseen events, which could result in adjustments to overall contract costs. The risk on fixed-priced contracts is that revenue from the customer does not cover increases in our costs. It is possible that current estimates could materially change for various reasons, including, but not limited to, fluctuations in forecasted labor productivity, transportation, fluctuations in foreign exchange rates or steel and other raw material prices. Increases in costs on our fixed-price contracts could have a material adverse impact on ourthe Company's consolidated financial condition, results of operations

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and cash flows. Alternatively, reductions in overall contract costs at completion could materially improve ourthe Company's consolidated financial condition, results of operations and cash flows. Variations from estimated contract performance could result in material adjustments to operating results for any fiscal quarter or year.


We recognizeContract modifications are routine in the performance of the Company's contracts. Contracts are often modified to account for changes in the contract specifications or requirements. In most instances, contract modifications are for goods or services that are not distinct and, therefore, are accounted for as part of the existing contract, with cumulative adjustment to revenue.

The Company recognizes accrued claims in contract revenues for extra work or changes in scope of work to the extent of costs incurred when we believeit believes it has an enforceable right to the following accountingmodification or claim and the amount can be estimated reliably, and its realization is probable. In evaluating these criteria, havethe Company considers the contractual/legal basis for enforcing the claim, the cause of any additional costs incurred and whether those costs are identifiable or otherwise determinable, the nature and reasonableness of those costs, the objective evidence available to support the amount of the claim, and the relevant history with the counter-party that supports expectations about their willingness and ability to pay for the additional cost along with a reasonable margin.

The Company generally recognizes sales commissions in equal proportion as revenue is recognized. The Company's sales agreements are structured such that commissions are only payable upon receipt of payment, thus a capitalized asset at contract inception has not been met:recorded for sales commission as a liability has not been incurred at that point.


a)The contract or other evidence provides a legal basis for the claim; or a legal opinion has been obtained, stating that under the circumstances there is a reasonable basis to support the claim.
b)Additional costs are caused by circumstances that were unforeseen at the contract date and are not the result of deficiencies in the contractor's performance.
c)Costs associated with the claim are identifiable or otherwise determinable and are reasonable in view of the work performed.
d)The evidence supporting the claim is objective and verifiable, not based on unsupported representations.

Contract balances

Contracts in progress, a current asset in the Company's Consolidated Balance Sheets, includes revenues and related costs so recorded, plus accumulated contract costs that exceed amounts invoiced to customers under the terms of the contracts. Advance billings, a current liability in the Company's Consolidated Balance Sheets, includes advance billings on contracts invoices that exceed accumulated contract costs and revenues and costs recognized under the cost-to-cost input method. Those balances are classified as current based on the life cycle of the associated contracts. Most long-term contracts contain provisions for progress payments. The Company's unbilled receivables do not contain an allowance for credit losses as the expectation to invoice customers and the collection of all amounts for unbilled revenues is deemed probable. The Company reviews contract price and cost estimates each reporting period as the work progresses and reflect adjustments proportionate to the costs incurred to date relative to total estimated costs at completion in income in the period when those estimates are revised. For all contracts, if a current estimate of total contract cost indicates a loss on a contract, the projected contract loss is recognized in full through the statement of operations and an accrual for the estimated loss on the uncompleted contract is included in Other accrued liabilities in the Company's Consolidated Balance Sheets. In addition, when the Company determines that an uncompleted contract will not be completed on-time and the contract has liquidated damages provisions, it recognizes the estimated liquidated damages at the most likely amount it will incur and record them as a reduction of the
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estimated selling price in the period the change in estimate occurs. Losses accrued in advance of the completion of a contract are included in Other accrued liabilities in the Company's Consolidated Balance Sheets.

Warranty expense


We accrueThe Company accrues estimated expense included in costCost of operations on our consolidated statementsits Consolidated Statements of operationsOperations to satisfy contractual warranty requirements when we recognizeit recognizes the associated revenues on the related contracts.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, we recordthe Company records specific provisions or reductions where we expectit expects the actual warranty costs to significantly differ from the accrued estimates. Such changes could have a material effect on ourthe Company's consolidated financial condition, results of operations and cash flows.


Research and development


OurThe Company's research and development activities are related to improving its products through innovations to reduce the developmentcost of its products to make them more competitive and improvementthrough innovations to reduce performance risk of newits products to better meet its own and existing products, services and equipment. its customers' expectations.Research and development activities totaled $9.4$3.8 million, $10.4$1.6 million and $16.5$4.4 million in the years ended December 31, 2017, 20162022, 2021, and 2015,2020, respectively.

In the twelve months ended December 31, 2015, we recognized a $14.6 million impairment charge primarily related to research and development facilities and equipment dedicated to activities that were determined not to be commercially viable. The impairment is included in losses on asset disposals and impairments in the consolidated statements of operations.


Pension plans and postretirement benefits


We sponsorThe Company sponsors various defined benefit pension and postretirement plans covering certain employees of our United Statesits U.S., Canadian and international subsidiaries. We useU.K. subsidiaries and uses actuarial valuations to calculate the cost and benefit obligations of ourits pension and postretirement benefits. The actuarial valuations use significant assumptions in the determination of ourthe Company's benefit cost and obligations, including assumptions regarding discount rates, expected returns on plan assets, mortality and health care cost trends.


We determine ourThe Company determines its discount rate based on a review of published financial data and discussions with ourits actuary regarding rates of return on high-quality, fixed-income investments currently available and expected to be available during the period to maturity of ourits pension and postretirement plan obligations. In 2016, we changed our approach to developingThe Company uses an alternative spot rate method for discounting the discount rate frombenefit obligation rather than a single equivalent discount rate to an alternative spot rate method. This new method was adopted because it more accurately applies each year's spot rates to the projected cash flows. This change in estimate was applied prospectively in developing our annual discount rate, which resulted in a lower interest and service cost during 2016.


The components of benefit cost related to service cost, interest cost, expected return on plan assets and prior service cost amortization are recorded on a quarterly basis based on actuarial assumptions. In the fourth quarter of each year, or as interim remeasurements are required, we recognizethe Company recognizes net actuarial gains andor losses into earnings as a component of net periodic benefit cost (mark to market (“MTM”) pension adjustment). Recognized net actuarial gains and losses consist primarily of ourthe Company's reported actuarial gains and losses and the difference between the actual return on plan assets and the expected return on plan assets.


We recognizeThe Company recognizes the funded status of each plan as either an asset or a liability in the consolidated balance sheets.Consolidated Balance Sheets. The funded status is the difference between the fair value of plan assets and the present value of its benefit obligation, determined on a plan-by-plan basis. See Note 1813 for a detailed description of our plan assets.


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Income taxes


Income tax expense for federal, foreign, state and local income taxes are calculated on pre-taxtaxable income based on the income tax law in effect at the latest balance sheet date and includes the cumulative effect of any changes in tax rates from those used previously in determining deferred tax assets and liabilities. We recordThe Company records a valuation allowance to reduce ourits deferred tax assets to the amount that is more likely than not to be realized. We assess deferred taxes and the adequacy of the valuation allowance on a quarterly basis. In the ordinary course of business there is inherent uncertainty in quantifying our income tax positions. We assess our income tax positions and record tax benefits for all years subject to examination based upon management's evaluation of the facts, circumstances and information available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, we havethe Company has recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in our consolidated financial statements. We recordConsolidated Financial Statements. The Company records interest and penalties (net of any applicable tax benefit) related to income taxes as a component of provision for income taxesIncome tax expense on our consolidated statementsthe Company's Consolidated Statements of operations.Operations.

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Cash and cash equivalents and restricted cash


OurThe Company's cash equivalents are highly liquid investments, with maturities of three months or less at the time of purchase. The Company records cash and cash equivalents as current or long-term restricted when we purchase them.it is unable to freely use such cash and cash equivalents for its general operating purposes.


Trade accounts receivable and allowance for doubtful accounts


OurThe Company's trade accounts receivable balance is stated at the amount owed by ourits customers, net of allowances for estimated uncollectible balances. We maintainThe Company maintains allowances for doubtful accounts for estimated losses expected to result from the inability of ourits customers to make required payments. These estimates are based on management’smanagement's evaluation of the ability of customers to make payments, with emphasis on historical remittance experience, known customer financial difficulties, and the age of receivable balances.balances and any other known factors specific to a receivable. Accounts receivable are charged to the allowance when it is determined they are no longer collectible. OurThe Company's allowance for doubtful accounts was $11.0$10.8 million and $9.4$11.9 million at December 31, 20172022 and 2016,2021, respectively. Amounts charged to selling, general and administrative expenses or deducted from the allowance were not significant to our statement of operations in$0.2 million, $0.1 million and $0.2 million for the years ended December 31, 2017, 20162022, 2021, and 2015.2020, respectively.


Inventories


We carry ourThe Company carries its inventories at the lower of cost or market. We determinenet realizable value and determines cost principally on the first-in, first-out basis, except for certain materials inventories of our Power segment, for which we use the last-in, first-out ("LIFO") method. We determined the cost of approximately 16%basis. The Company's obsolete inventory reserve was $7.2 million and 18% of our total inventories using the LIFO method$6.5 million at December 31, 20172022 and 2016, respectively, and our total LIFO reserve at December 31, 2017 and 2016 was approximately $7.0 million and $7.0 million,2021, respectively. The components of inventories can be found in Note 13.6.


Property, plant and equipment


We carry ourThe Company carries its property, plant and equipment at depreciated cost, less any impairment provisions. We depreciate ourThe Company depreciates its property, plant and equipment using the straight-line method over estimated economic useful lives of eight to 33 years for buildings and three to 28 years for machinery and equipment. Our depreciationDepreciation expense was $21.9$11.0 million, $19.7$9.7 million and $23.5$11.3 million for the years ended December 31, 2017, 20162022, 2021, and 2015,2020, respectively. We expense theThe costs of maintenance, repairs and renewals that do not materially prolong the useful life of an asset are expensed as we incur them.incurred.


InvestmentsProperty, plant and equipment amounts are reviewed for impairment whenever events or changes in unconsolidated joint ventures

We use the equity method of accounting for investments in joint ventures in which we are able to exert significant influence, but not control. Joint ventures in which our investment ownership is less than 20% and where we are unable to exert significant influence are carried at cost. We assess our investments in unconsolidated joint ventures for other-than-temporary-impairment when significant changes occur in the investee's business or our investment philosophy. Such changes might include a series of operating losses incurred by the investeecircumstances indicate that are deemed other than temporary, the inability of the investee to sustain an earnings capacity that would justify the carrying amount of an asset, or asset group, may not be recoverable. An impairment loss would be recognized when the investmentcarrying amount of an asset exceeds the estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. The amount of the impairment loss to be recorded is calculated by the excess of the asset carrying value over its fair value. Fair value is generally determined using a discounted cash flow analysis. The Company's estimates of cash flow may differ from actual cash flow due to, among other things, technological changes, economic conditions or changes in operating performance. Any changes in such factors may negatively affect the Company and result in future asset impairments.

Investments in consolidated entities

SPIG maintained a change60% ownership interest in the strategic reasons that were important when we originally entered into the joint venture. If an other-than-temporary-impairment were to occur, we would measure our investment in the unconsolidateda joint venture at fair value.entity, which is consolidated within the B&W Environmental segment results. The remaining 40% was purchased for a nominal amount in December 2022.


67On September 30, 2021, the Company acquired a 60% controlling ownership interest in Illinois-based solar energy contractor Babcock & Wilcox Solar (formerly known as Fosler Construction Company, Inc. or Fosler). On September 24, 2022, the Company acquired the remaining 40% ownership stake in Babcock & Wilcox Solar for $12.7 million. See Note 26 to the Company's Consolidated Financial Statements.





Goodwill


Goodwill is generally recorded as a result of a business combination and represents the excess of the cost of our acquired businessespurchase price over the fair value of the tangible and identifiable net assets acquired. We performThe Company performs testing of goodwill for impairment annually. We may elect to performannually on October 1st or if the Company determines that impairment indicators are present. In assessing goodwill for impairment, the Company follows ASC 350, Intangibles – Goodwill and Other, which permits a qualitative test when we believeassessment of whether it is
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more likely than not that there is sufficient excessthe fair value overof the reporting unit is less than its carrying value based on our most recent quantitativeincluding goodwill. If the qualitative assessment adjusted for relevant events and circumstancesdetermines that could affectit is not more likely than not that the fair value duringof a reporting unit is less than its carrying value, including goodwill, then no impairment is determined to exist for the current year. If we conclude based on thisreporting unit. However, if the qualitative assessment determines that it is more likely than not that the fair value of the reporting unit is less than its carrying value, including goodwill, or the Company chooses    not impaired, we do notto perform a quantitative impairment test. In all other circumstances, we utilize a two-step quantitative impairment test to identify potential goodwill impairment and measure the amount of any goodwill impairment. The first step ofqualitative assessment, then the test comparesCompany will compare the fair value of athat reporting unit with its carrying amount,value, including goodwill.goodwill, in a quantitative assessment. If the carrying amountvalue of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount ofconsidered impaired with the impairment loss if any.measured as the excess of the reporting unit’s carrying value, including goodwill, over its fair value. The second step compares the impliedestimated fair value of the reporting unit's goodwill withunit is derived based on valuation techniques the carrying amountCompany believes market participants would use for each of that goodwill.the reporting units.


Intangible assets


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


Derivative financial instrumentsAccounting for Leases


Our global operations expose us to changesThe Company determines if an arrangement is a lease at inception. Operating leases are included in foreign currency exchange ("FX"Right-of-use (“ROU”) rates. We use derivative financial instruments, primarily FX forward contracts, to reduceassets, Operating lease liabilities and Non-current operating lease liabilities in the impactConsolidated Balance Sheets. Finance leases are included in Net property, plant and equipment, and Finance lease, Other accrued liabilities and Other non-current finance liabilities in the Consolidated Balance Sheets. Lease liabilities are recognized based on the present value of changes in FX rates on our operating results. We use these instruments primarily to hedge our exposure associated with revenues or costs on our long-term contracts that are denominated in currencies other than our operating entities' functional currencies. Wethe future minimum lease payments over the lease term at commencement date. Since substantially all of the Company's leases do not holdprovide an implicit rate, the incremental borrowing rate based on the information available at lease commencement date is used to determine the present value of future payments. The Company's incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. The ROU assets also include any prepaid lease payments made and initial direct costs incurred and excludes lease incentives. The Company's lease terms may include options to extend or issue derivative financial instrumentsterminate the lease, which are recognized when it is reasonably certain that the option will be exercised. Lease expense for tradingminimum lease payments is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or other speculative purposes.less are not recorded on the balance sheet.


We enter into derivative financial instruments primarily as hedges of certain firm purchaseFor leases beginning in 2019 and sale commitments and certain intercompany loans denominated in foreign currencies. We record these contracts at fair value on our consolidated balance sheets and deferlater, the related gains and losses in stockholders' equityCompany accounts for lease components (e.g., fixed payments including rent) together with the non-lease components (e.g., common-area maintenance costs) as a single lease component for all classes of accumulated other comprehensive income (loss) until the hedged item is recognized in earnings. Any ineffective portion of a derivative's change in fair value and any portion excluded from the assessment of effectiveness is immediately recognized in other – net on our consolidated statements of operations. The gain or loss on a derivative instrument not designated as a hedging instrument is also immediately recognized in earnings. Gains and losses on derivative financial instruments that require immediate recognition are included as a component of other – net in our consolidated statements of operations.underlying assets.


Self-insurance


We haveThe Company has a wholly owned insurance subsidiary that provides employer's liability, general and automotive liability and workers' compensation insurance and, from time to time, builder's risk insurance (within certain limits) to ourits companies. WeThe Company may also, in the future, have this insurance subsidiary accept other risks that weit cannot or do not wish to transfer to outside insurance companies. Included in otherOther non-current liabilities on our consolidated balance sheetsits Consolidated Balance Sheets are reserves for self-insurance totaling $23.1$8.3 million and $24.1$9.3 million at the years endedas of December 31, 20172022 and 2016,2021, respectively.


Loss contingencies


We estimateThe Company estimates liabilities for loss contingencies when it is probable that a liability has been incurred and the amount of loss is reasonably estimable. We provide disclosureDisclosures are provided when there is a reasonable possibility that the ultimate loss will exceed the recorded provision or if such probable loss is not reasonably estimable. We areThe Company is currently involved in some significant

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some significant litigation, as discussed in Note 21. Our22. The Company's losses are typically resolved over long periods of time and are often difficult to assess and estimate due to, among other reasons, the possibility of multiple actions by third parties; the attribution of damages, if any, among multiple defendants; plaintiffs, in most cases involving personal injury claims, do not specify the amount of damages claimed; the discovery process may take multiple years to complete; during the litigation process, it is common to have multiple complex unresolved procedural and substantive issues; the potential availability of insurance and indemnity coverages; the wide-ranging outcomes reached in similar cases, including the variety of damages awarded; the likelihood of settlements for de minimusminimis amounts prior to trial; the likelihood of success at trial; and the likelihood of success on appeal. Consequently, it is possible future earnings could be affected by changes in ourthe Company's assessments of the probability that a loss has been incurred in a material pending litigation against usthe Company and/or changes in ourits estimates related to such matters.


Loss recoveries

The Company recognizes loss recoveries and provide disclosures only when receipt of the recovery is probable and it is able to reasonably estimate the amount of the recovery. The Company's loss recoveries are typically resolved over long periods of time and are often difficult to assess and estimate due to, among other reasons, the possibility of multiple actions by third parties, multiple complex unresolved procedural and substantive issues; the wide-ranging outcomes reached in similar cases, including the variety of losses incurred. Consequently, it is possible future earnings could be affected by changes in our assessments of the probability that a loss recovery has been recognized and/or changes in the Company's estimates related to such matters. See Note 5 for discussions regarding the project contract cost recovery recognized in 2022 and 2021.

Contingent consideration

The fair values of earn-out arrangements are included as part of the purchase price of the acquired companies on their respective acquisition dates. For each transaction, the Company estimates the fair value of contingent earn-out payments as part of the initial purchase price and records the estimated fair value of contingent consideration as a liability in Other non-current liabilities on its Consolidated Balance Sheets.

The Company reviews and re-assesses the estimated fair value of contingent consideration on a quarterly basis, and the updated fair value could differ materially from the initial estimates. Changes in the estimated fair value of the Company's contingent earn-out liabilities related to the time component of the present value calculation are reported in Interest expense on its Consolidated Statements of Operations. Adjustments to the estimated fair value related to changes in all other unobservable inputs are reported in Other - net on its Consolidated Statements of Operations.

Stock-based compensation


We expense stock-based compensation in accordance with Financial Accounting Standards Board ("FASB") Topic Compensation – Stock Compensation. Under this topic, theThe fair value of equity-classified awards, such as restricted stock, performance shares and stock options, is determined on the date of grant and is not remeasured. The fair value of liability-classified awards, such as cash-settled stock appreciation rights, restricted stock units and performance units, is determined on the date of grant and is remeasured at the end of each reporting period through the date of settlement. Grant date fairFair values for restricted stock, restricted stock units, performance shares and performance units are determined using the closing price of our common stock on the date of grant. Grant date fairFair values for stock options and stock appreciation rights are determined using a Black-Scholes option-pricing model ("Black-Scholes"(“Black-Scholes”). For performance shares or units granted in the years ended December 31, 2017 and 2016 that contain a Relative Total Shareholder Return vesting criteria and for stock appreciation rights, we utilize a Monte Carlo simulation to determine the grant date fair value, which determines the probability of satisfying the market condition included in the award. The determination of the fair value of a share-based payment award using an option-pricing model or a Monte Carlo simulation requires the input of significant assumptions, such as the expected life of the award and stock price volatility.


Under the provisions of this FASB topic, we recognizeThe Company recognizes expense net of an estimated forfeiture rate, for all share-basedstock-based awards granted on a straight-line basis over the requisite service periods of the awards, which is generally equivalent to the vesting term. This topic requires compensation expense to beFor liability-classified awards, changes in fair value are recognized net of an estimate for forfeitures, such that compensation expense is recorded only for those awards expected to vest. We review the estimate for forfeitures periodically and record any adjustments deemed necessary forthrough cumulative catch-ups each reporting period. If our actual forfeiture rate is materially different from our estimate, theExcess tax benefits on stock-based compensation expense couldshould be significantly different from what we have recorded in the current period.

Additionally, this FASB topic amended FASB Topic Statement of Cash Flows, to require excessclassified along with other income tax benefits to be reportedcash flows as a financing cash flow, rather than as a reduction of taxes paid.an operating activity. These excess tax benefits result from tax deductions in excess of the cumulative compensation expense recognized for options exercised and other equity-classified awards.

See Note 920 for a further discussion of stock-based compensation.


Recently adopted accounting standards


DuringThe Company adopted the following accounting standard during the year ended December 31, 2017,2022:
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In August 2020, the Company adoptedFASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-based Payment Accounting2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40). This newThe amendments in this update simplify the accounting standard has affected how we account for share-based payments,certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity by removing major separation models required under current U.S. GAAP. The amendments also improve the most significant impact being theconsistency of diluted earnings per share calculations. The impact of income taxes associatedthis standard had no impact on the Company's Consolidated Financial Statements.

The Company considers the applicability and impact of all issued ASUs. Recently issued ASUs that are not adopted were assessed and determined to be not applicable in the current reporting period. New accounting standards not yet adopted that could affect the Company's Consolidated Financial Statements in the future are summarized as follows:

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with share-based compensation. SubsequentCustomers. The amendment in this update provides an exception to adoption, the income tax effects related to share-based paymentsfair 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 recorded as a component of income tax expense (or benefit) as they occur, rather than being classified as a component of additional paid-in capital. In addition,recognized and measured by the effect of excess tax benefits will now be presentedacquirer in accordance with ASC 606, Revenue from Contracts with Customers. The amendment also improves consistency in revenue recognition in the cash flow statementpost-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 operating activity. We prospectively adoptedadditional year to adopt. Early adoption is permitted; however, if the new accounting standard. See Note 10 for the effect on the statement of operations for the twelve months ended December 31, 2017.

Duringguidance is adopted in an interim period, it is required to be applied retrospectively to all business combinations within the year endedof adoption. This amendment is effective for fiscal years beginning after December 31, 2017,15, 2022, including interim periods within those fiscal years.The impact of the Company prospectively adopted ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. This new accounting standard requires that first-in, first-out inventory be measured at the lower of cost or net realizable value. Under GAAP prior to the adoption of this new accounting standard, inventory was measured at the lower of cost or market, where market was defined as replacement cost, with a ceiling of net realizable value and a floor of net realizable value minus a normal profit margin. Although this new accounting standard raises the threshold on when charges against inventory can occur, it did not significantly impact our consolidated financial statements and related disclosures will depend on the magnitude of future acquisitions.

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 adoptionadoption). 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 Company is currently evaluating the impact of both standards on its Consolidated Financial Statements and we dodoes not expect it will significantly impact our operating results in future periods because we have not had significant inventory charges in the past.

a material impact.
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NOTE 3 – EARNINGS PER SHARE


The following table sets forth the computation of basic and diluted (loss) earnings per share of ourthe Company's common stock, net of noncontrolling interest:non-controlling interest and dividends on preferred stock:
Year ended December 31,
(in thousands, except per share amounts)202220212020
(Loss) income from continuing operations attributable to stockholders of common stock$(37,721)$21,767 $(12,118)
(Loss) income from discontinued operations attributable to stockholders of common stock, net of tax— — 1,800 
Net (loss) income attributable to stockholders of common stock$(37,721)$21,767 $(10,318)
Weighted average shares used to calculate basic (loss) income per share88,256 82,391 48,710 
Dilutive effect of stock options, restricted stock and performance units— 1,189 — 
Weighted average shares used to calculate diluted (loss) income per share88,256 83,580 48,710 
Basic (loss) income per share
Continuing operations$(0.43)$0.26 $(0.25)
Discontinued operations— — 0.04 
Basic (loss) income per share$(0.43)$0.26 $(0.21)
Diluted (loss) income per share
Continuing operations$(0.43)$0.26 $(0.25)
Discontinued operations— — 0.04 
Diluted (loss) income per share$(0.43)$0.26 $(0.21)
 Year Ended December 31,
(in thousands, except per share amounts)201720162015
Income (loss) from continuing operations$(379,824)(115,649)$16,338
Income (loss) from discontinued operations, net of tax

2,803
Net income (loss) attributable to shareholders$(379,824)$(115,649)$19,141
    
Weighted average shares used to calculate basic earnings per share46,935
50,129
53,487
Dilutive effect of stock options, restricted stock and performance shares

222
Weighted average shares used to calculate diluted earnings per share46,935
50,129
53,709
    
Basic earnings (loss) per share:   
Continuing operations$(8.09)$(2.31)$0.31
Discontinued operations

0.05
Basic earnings (loss) per share:$(8.09)$(2.31)$0.36
    
Diluted earnings (loss) per share:   
Continuing operations(8.09)(2.31)0.30
Discontinued operations

0.06
Diluted earnings (loss) per share:$(8.09)$(2.31)$0.36


Because wethe Company incurred a net loss in the years ended December 31, 20172022 and 2016,2020 basic and diluted shares are the same.same.


If wethe Company had net income in the years ended December 31, 20172022 and 2016,2020 diluted shares would include an additional 0.4 million717.6 thousand and 0.5 million610.9 thousand shares, respectively.


We excluded 2.0The Company excluded 2.1 million 3.4, 0.3 million, and 1.3 million shares related to stock options from the diluted share calculation for the years ended December 31, 2017, 20162022, 2021, and 2015,2020 respectively, because their effect would have been anti-dilutive.



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NOTE 4 – SEGMENT REPORTING


OurThe Company's operations are assessed based on three reportable segments which are summarized as follows:

Power segment: focused on the supply of and aftermarket services for steam-generating, environmental and auxiliary equipment for power generation and other industrial applications.
Renewable segment: focused on the supply of steam-generating systems, environmental and auxiliary equipment for the waste-to-energy and biomass power generation industries.
Industrial segment: focused on custom-engineered cooling, environmental and other industrial equipment along with related aftermarket services.

70




described in Note 2. An analysis of ourthe Company's operations by segment is as follows:
Year ended December 31,
(in thousands)202220212020
Revenues:
B&W Renewable segment
B&W Renewable$136,376 $83,639 $89,790 
B&W Renewable Services (1)
78,960 25,852 23,835 
Vølund73,337 34,819 42,562 
B&W Solar41,897 12,490 — 
330,570 156,800 156,187 
B&W Environmental segment
B&W Environmental77,863 58,262 45,186 
SPIG61,017 55,615 52,341 
GMAB15,513 19,949 10,441 
154,393 133,826 107,968 
B&W Thermal segment
B&W Thermal415,104 433,329 304,968 
415,104 433,329 304,968 
Eliminations(10,252)(592)(2,806)
Total Revenues$889,815 $723,363 $566,317 
 Year Ended December 31,
(in thousands)201720162015
REVENUES   
Power segment   
Retrofits & continuous emissions monitoring systems$306,758
$392,854
$427,378
New build utility and environmental155,886
292,302
403,981
Aftermarket parts and field engineering services277,129
292,535
304,923
Industrial steam generation123,127
107,267
219,379
Eliminations(41,838)(102,980)(120,664)
 821,062
981,978
1,234,997
Renewable segment   
Renewable new build and services282,228
284,684
277,326
Operations and maintenance64,970
65,814
63,437
Eliminations
(1,326)(2,160)
 347,198
349,172
338,603
Industrial segment   
Aftermarket parts and services117,970
81,690
61,350
Environmental solutions138,722
74,726
90,343
Cooling systems126,683
73,797

Engineered products14,416
23,400
32,002
 397,791
253,613
183,695
    
Eliminations(8,316)(6,500)
 $1,557,735
$1,578,263
$1,757,295
(1) B&W Renewable Services' 2021 and 2020 revenues were reclassified from Vølund's prior year reported amount for year-over-year comparability.

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.

Year ended December 31,
(in thousands)202220212020
Adjusted EBITDA
B&W Renewable segment (1) (2)
$26,069 $23,219 $24,957 
B&W Environmental segment9,787 11,773 3,503 
B&W Thermal segment56,291 49,143 36,052 
(1)Adjusted EBITDA in our Renewable segment for the year ended December 31, 2022 includes a $6.2 million non-recurring gain on sale related to development rights of a future solar project that was sold as well as $9.6 million that resulted from the reversal of the contingent consideration related to an acquisition.
(2)Adjusted EBITDA in our Renewable segment for the year ended December 31, 2020 includes a $26.0 million non-recurring loss recovery related to certain historical EPC loss contracts.

The segment information presented in the table above reflects the product line revenues that are reviewed by each segment's manager. These gross product line revenues exclude eliminations of revenues generated from sales to other segments or to other product lines within the segment. The primary component of the Power segment elimination is revenue associated with construction services.



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 Year Ended December 31,
(in thousands)201720162015
GROSS PROFIT (LOSS)   
Power segment$191,999
$233,550
$247,632
Renewable segment(128,204)(68,109)57,682
Industrial segment41,383
50,726
54,826
Intangible amortization expense included in cost of operations(14,272)(15,842)(7,676)
Mark to market gain (loss) included in cost of operations8,972
(21,208)(44,307)
 99,878
179,117
308,157
Selling, general and administrative ("SG&A") expenses(255,545)(240,166)(240,296)
Goodwill impairment charges(86,903)

Restructuring activities and spin-off transaction costs(15,447)(40,807)(14,946)
Research and development costs(9,412)(10,406)(16,543)
Intangible amortization expense included in SG&A(3,980)(4,081)(3,769)
Mark to market gain (loss) included in SG&A(274)(2,902)4,097
Equity in income of investees8,326
16,440
(242)
Impairment of equity method investment(18,193)

Gains (losses) on asset disposals, net(15)32
(14,597)
Operating income (loss)$(281,565)$(102,773)$21,861

 Year Ended December 31,
(in thousands)201720162015
DEPRECIATION AND AMORTIZATION   
Power segment$9,222
$11,231
$18,532
Renewable segment3,208
2,711
2,567
Industrial segment20,293
19,073
10,345
Segment depreciation and amortization32,723
33,015
31,444
Corporate7,415
6,568
3,488
Total depreciation and amortization$40,138
$39,583
$34,932

We doCompany does not separately identify or report our Company'sits assets by segment as the majority of our assets are shared by the Power and Renewable segments. Additionally, ourits chief operating decision maker does not consider assets by segment to be a critical measure by which performance is measured.



The Company estimates that 38%, 47% and 43% of its consolidated revenues in 2022, 2021, and 2020, respectively, were related to coal-fired power plants. The availability of natural gas in great supply has caused, in part, low prices for natural gas in the United States, which has led to more demand for natural gas relative to energy derived from coal. A material decline in spending by electric power generating companies and other steam-using industries on coal-fired power plants over a
72
67


sustained period of Contentstime could materially and adversely affect the demand for our power generation products and services and, therefore, our financial condition, results of operations and cash flows. Coal-fired power plants have been scrutinized by environmental groups and government regulators over the emissions of potentially harmful pollutants. This scrutiny and other economic incentives including tax advantages, have promoted the growth of nuclear, wind and solar power, among others, and a decline in cost of renewable power plant components and power storage. The recent economic environment and uncertainty concerning new environmental legislation or replacement rules or regulations in the United States and elsewhere has caused many of the Company's major customers, principally electric utilities, to delay making substantial expenditures for new plants, and to delay upgrades to existing power plants.



Information about our consolidated operations in different geographic areas
areas:
 Year Ended December 31,
(in thousands)201720162015
REVENUES(1)
   
United States$757,159
$851,955
$1,034,653
United Kingdom194,456
201,221
126,285
Canada108,045
74,629
134,276
Denmark82,843
54,722
116,064
China54,883
33,898
41,921
Egypt43,148
35,878

South Korea41,217
44,660
4,358
Sweden39,891
24,809
18,302
Germany28,333
29,559
19,233
Vietnam15,771
55,265
46,803
Dominican Republic15,144
21,366
82,916
Saudi Arabia13,978
2,408
4,220
South Africa12,453
4,097
4,486
Italy11,663
7,862
4,671
Netherlands8,989
3,348
4,651
Finland8,713
5,756
6,113
Bolivia8,694


Oman7,683


Indonesia6,909
6,723
1,730
Nigeria6,766


India6,441
6,856
13,108
Aggregate of all other countries,
each with less than $5 million in revenues
84,556
113,251
93,505
 $1,557,735
$1,578,263
$1,757,295

Year ended December 31,
(in thousands)202220212020
REVENUES (1)
United States$498,431 $431,540 $310,958 
Canada83,727 48,206 43,936 
Denmark50,857 30,310 28,590 
Sweden35,303 22,391 11,430 
United Kingdom30,223 26,722 25,811 
China25,890 10,028 8,461 
Saudi Arabia21,428 12,529 9,545 
Brazil15,049 3,946 5,540 
France12,555 4,539 1,776 
Taiwan12,433 5,776 1,871 
Indonesia11,724 1,853 19,644 
Israel3,082 14,110 1,635 
Hong Kong896 11,056 4,490 
Aggregate of all other countries, each with less than $10 million in revenues88,217 100,357 92,630 
$889,815 $723,363 $566,317 
(1) We allocate The Company allocates geographic revenues based on the location of the customer's operations.


(in thousands)December 31, 2022December 31, 2021
NET PROPERTY, PLANT AND EQUIPMENT, AND FINANCE LEASE
United States$54,408 $52,516 
Mexico16,925 17,071 
Denmark6,672 6,573 
United Kingdom4,729 5,722 
Italy1,545 1,565 
Aggregate of all other countries2,084 2,180 
$86,363 $85,627 
 Year Ended December 31,
(in thousands)201720162015
NET PROPERTY, PLANT AND EQUIPMENT   
United States$79,681
$75,368
$88,840
Mexico26,503
22,594
24,643
China13,373
13,460
13,956
United Kingdom6,604
6,337
8,070
Denmark7,953
6,749
6,265
Aggregate of all other countries, each with less than
$5 million of net property, plant and equipment
7,817
9,129
3,943
 $141,931
$133,637
$145,717

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NOTE 5 – ACQUISITIONSREVENUE RECOGNITION AND CONTRACTS


Universal Acoustic & Emission Technologies, Inc.Revenue Recognition


On January 11, 2017, we acquired Universal Acoustic & Emission Technologies, Inc. ("Universal")The Company generates the vast majority of its revenues from the supply of, and aftermarket services for, approximately $52.5 millionsteam-generating, environmental and auxiliary equipment. The Company also earns revenue from the supply of custom-engineered cooling
68


systems for steam applications along with related aftermarket services. The Company's revenue recognition accounting policy is described in cash, funded primarily by borrowings under our United States revolving credit facility, netmore detail in Note 2.

Contract Balances

The following represents the components of $4.4 million cash acquiredContracts in the business combination. Transaction costsprogress and advance billings on contracts included in the purchase price were approximately $0.2 million. We accounted for the Universal acquisition using the acquisition method, whereby all of the assets acquired and liabilities assumed were recognized at their fair value on the acquisition date, with any excess of the purchase price over the estimated fair value recorded as goodwill. In order to purchase Universal on January 11, 2017, we borrowed approximately $55.0 million under the United States revolving credit facility in 2017.Company's Consolidated Balance Sheets:

(in thousands)December 31, 2022December 31, 2021$ Change% Change
Contract assets - included in contracts in progress:
Costs incurred less costs of revenue recognized$79,421 $35,939 $43,482 121 %
Revenues recognized less billings to customers55,518 44,237 11,281 26 %
Contracts in progress$134,939 $80,176 $54,763 68 %
Contract liabilities - included in advance billings on contracts:
Billings to customers less revenues recognized$113,643 $68,615 $45,028 66 %
Costs of revenue recognized less cost incurred19,786 (235)20,021 (8,520)%
Advance billings on contracts$133,429 $68,380 $65,049 95 %
Net contract balance$1,510 $11,796 $(10,286)(87)%
Accrued contract losses$3,032 $378 $2,654 702 %
Universal provides custom-engineered acoustic, emission and filtration solutions to the natural gas power generation, mid-stream natural gas pipeline, locomotive and general industrial end-markets. Universal's product offering includes gas turbine inlet and exhaust systems, silencers, filters and enclosures. At the acquisition date, Universal employed approximately 460 people, mainly in the United States and Mexico. During 2017, we integrated Universal with our Industrial segment. Universal contributed $69.1 million of revenue and $14.5 million of gross profit to our operating results in the year ended December 31, 2017.


The allocation offollowing amounts represent retainage on contracts:

(in thousands)December 31, 2022December 31, 2021$ Change% Change
Retainage expected to be collected within one year$3,198 $2,575 $623 24 %
Retainage expected to be collected after one year786 1,591 (805)(51)%
Total retainage$3,984 $4,166 $(182)(4)%

The Company has included retainage expected to be collected in 2023 in Accounts receivable – trade, net in its Consolidated Balance Sheets. Retainage expected to be collected after one year are included in Other assets in The Company's Consolidated Balance Sheets. Of the purchase price based on the fair value of assets acquired and liabilities assumed is set forth below. We finalized the purchase price allocation associated with the valuation of certain intangible assets and deferred tax balanceslong-term retainage at December 31, 2017;2022, collection of $0.8 million is anticipated in 2024.

Backlog

On December 31, 2022 the Company had $704.0 million of remaining performance obligations, which are also referred to as a result, the provisional measurementstotal backlog. The Company expects to recognize approximately 80.3%, 8.8% and 10.9% of intangible assets, goodwill its remaining performance obligations as revenue in 2023, 2024 and deferred income tax balances did not change.thereafter, respectively.

69
(in thousands)
Acquisition
date fair values
Cash$4,379
Accounts receivable11,270
Contracts in progress3,167
Inventories4,585
Other assets579
Property, plant and equipment16,692
Goodwill14,413
Identifiable intangible assets19,500
Deferred income tax assets935
Current liabilities(10,833)
Other noncurrent liabilities(1,423)
Deferred income tax liabilities(6,338)
Net acquisition cost$56,926

The intangible assets included above consist of the following:
 Fair value (in thousands)
Weighted average
estimated useful life
(in years)
Customer relationships$10,800
15
Backlog1,700
1
Trade names / trademarks3,000
20
Technology4,000
7
Total amortizable intangible assets$19,500
 


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The acquisition of Universal resulted in an increase in our intangible asset amortization expense during the year ended December 31, 2017 of $3.1 million, which is included in cost of operations in our consolidated statement of operations. Amortization of intangible assets is not allocated to segment results.

Approximately $1.7 million of acquisition and integration related costs of Universal was recorded as a component of our SG&A expenses in the consolidated statement of operations in the year ended December 31, 2017.

The following unaudited pro forma financial information below represents our results of operations for year ended December 31, 2016 had the Universal acquisition occurred on January 1, 2016. The unaudited pro forma financial information below is not intended to represent or be indicative of our actual consolidated results had we completed the acquisition at January 1, 2016. This information should not be taken as representative of our future consolidated results of operations.
 Year Ended
(in thousands)December 31, 2016
Revenues$1,660,986
Net income (loss) attributable to B&W(113,940)
Basic earnings per common share(2.27)
Diluted earnings per common share(2.27)

The unaudited pro forma results included in the table above reflect the following pre-tax adjustments to our historical results:

A net increase in amortization expense related to timing of amortization of the fair value of identifiable intangible assets acquired of $2.8 million in the year ended December 31, 2016.

Elimination of the historical interest expense recognized by Universal of $0.4 million in the year ended December 31, 2016.

Elimination of $2.1 million in transaction related costs recognized in the year ended December 31, 2016.

SPIG S.p.A.

On July 1, 2016, we acquired all of the outstanding stock of SPIG S.p.A. ("SPIG") for €155.0 million (approximately $172.1 million) in an all-cash transaction, which was subject to post-closing adjustments. During September 2016, €2.6 million (approximately $2.9 million) of the transaction price was returned to B&W based on the difference between the actual working capital and pre-close estimates. Transaction costs included in the purchase price associated with closing the acquisition of SPIG on July 1, 2016 were approximately $0.3 million.

Based in Arona, Italy, SPIG is a global provider of custom-engineered comprehensive dry and wet cooling solutions and aftermarket services to the power generation industry including natural gas-fired and renewable energy power plants, as well as downstream oil and gas, petrochemical and other industrial end markets. The acquisition of SPIG was consistent with B&W's goal to grow and diversify its technology-based offerings with new products and services in the industrial markets that are complementary to our core businesses. In the year ended December 31, 2016, SPIG contributed $96.3 million of revenue and $7.8 million of gross profit to the Industrial segment.

We accounted for the SPIG acquisition using the acquisition method. All of the assets acquired and liabilities assumed were recognized at their estimated fair value as of the acquisition date. Any excess of the purchase price over the estimated fair values of the net assets acquired was recorded as goodwill. Several valuation methods were used to determine the fair value of the assets acquired and liabilities assumed. For intangible assets, we used the income method, which required us to forecast the expected future net cash flows for each intangible asset. These cash flows were then adjusted to present value by applying an appropriate discount rate that reflects the risk factors associated with the projected cash flows. Some of the more significant estimates and assumptions inherent in the income method include the amount and timing of projected future cash flows, the discount rate selected to measure the risks inherent in the future cash flows and the assessment of the asset's economic life and the competitive trends impacting the asset, including consideration of any technical, legal, regulatory or economic barriers to entry. Determining the useful life of an intangible asset also required judgment as different types of intangible assets will have different useful lives, or indefinite useful lives.

75




The allocation of the purchase price, based on the fair value of assets acquired and liabilities assumed, is detailed below.
(in thousands)
Acquisition
date fair values
Cash$25,994
Accounts receivable58,843
Contracts in progress61,155
Inventories2,554
Other assets7,341
Property, plant and equipment6,104
Goodwill72,401
Identifiable intangible assets55,164
Deferred income tax assets5,550
Revolving debt(27,530)
Current liabilities(56,323)
Advance billings on contracts(15,226)
Other noncurrent liabilities(379)
Deferred income tax liabilities(17,120)
Noncontrolling interest in joint venture(7,754)
Net acquisition cost$170,774
We finalized the purchase price allocation as of December 31, 2016, which resulted in a $2.5 million increase in goodwill. The goodwill arising from the purchase price allocation of the SPIG acquisition is believed to be a result of the synergies created from combining its operations with B&W's, and the growth it can provide from its wide scope of engineered cooling and service offerings and customer base. None of this goodwill is expected to be deductible for tax purposes. Also, see Note 15 for the results of our subsequent goodwill impairment assessments

The intangible assets included above consist of the following:
(in thousands)Fair value (in thousands) 
Weighted average
estimated useful life
(in years)
Customer relationships$12,217
 9
Backlog17,769
 2
Trade names / trademarks8,885
 20
Technology14,438
 10
Non-compete agreements1,666
 3
Internally-developed software189
 3
Total amortizable intangible assets$55,164
  
The acquisition of SPIG added $9.1 million and $13.3 million of intangible asset amortization expense in the years ended December 31, 2017 and 2016, respectively. Amortization of intangible assets is not allocated to segment results.

Approximately $1.6 million and $3.5 million of acquisition and integration related costs of SPIG was recorded as selling, general and administrative expenses in the consolidated statement of operations for the years ended December 31, 2017 and 2016, respectively.

The following unaudited pro forma financial information below represents our results of operations for years ended December 31, 2016 and 2015 had the SPIG acquisition occurred on January 1, 2015. The unaudited pro forma financial information below is not intended to represent or be indicative of our actual consolidated results had we completed the acquisition at January 1, 2015. This information should not be taken as representative of our future consolidated results of operations.

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  Year Ended December 31,
(in thousands) 2016 2015
Revenues $1,663,126
 $1,941,987
Net income (loss) attributable to B&W (111,500) 12,047
Basic earnings per common share (2.22) 0.23
Diluted earnings per common share (2.22) 0.22

The unaudited pro forma results included in the table above reflect the following pre-tax adjustments to our historical results:

A net increase (decrease) in amortization expense related to timing of amortization of the fair value of identifiable intangible assets acquired of $6.5 million and $18.6 million in the years ended December 31, 2016 and 2015, respectively.

Elimination of the historical interest expense recognized by SPIG of $0.5 million and $0.7 million in the years ended ended December 31, 2016 and 2015, respectively.

Elimination of $3.5 million and $0.2 million in transaction related costs recognized in the years ended December 31, 2016 and 2015, respectively.

NOTE 6 – CONTRACTS AND REVENUE RECOGNITION

We generally recognize revenues and related costs from long-term contracts on a percentage-of-completion basis. Accordingly, we review contract price and cost estimates regularly as work progresses and reflect adjustments in profit proportionate to the percentage of completion in the periods in which we revise estimates to complete the contract. To the extent that these adjustments result in a reduction of previously reported profits from a contract, we recognize a charge against current earnings. If a contract is estimated to result in a loss, that loss is recognized in the current period as a charge to earnings and the full loss is accrued on our balance sheet, which results in no expected gross profit from the loss contract in the future unless there are revisions to our estimated revenues or costs at completion in periods following the accrual of the contract loss. Changes in the estimated results of our percentage-of-completion contracts are necessarily based on information available at the time that the estimates are made and are based on judgments that are inherently uncertain as they are predictive in nature. As with all estimates to complete used to measure contract revenue and costs, actual results can and do differ from our estimates made over time.Contract Estimates


In the years ended December 31, 20172022, 2021 and 2016 and 2015, we2020 the Company recognized changes in estimated gross profit related to long-term contracts accounted for on the percentage-of-completionover time basis, which are summarized as follows:
Year ended December 31,
(in thousands)202220212020
Increases in gross profit for changes in estimates for over time contracts (1)
$15,067 $16,042 $43,597 
Decreases in gross profit for changes in estimates for over time contracts(21,740)(6,531)(17,480)
Net changes in gross profit for changes in estimates for over time contracts$(6,673)$9,511 $26,117 
 Year Ended December 31,
(in thousands)201720162015
Increases in estimates for percentage-of-completion contracts$21,638
$42,368
$36,653
Decreases in estimates for percentage-of-completion contracts(174,906)(149,169)(36,235)
Net changes in estimates for percentage-of-completion contracts$(153,268)$(106,801)$418

We had four renewable energy projects(1) Increases in Europe that weregross profits for changes in estimates for over time contracts reflects a non-recurring loss contracts at December 31, 2016. During 2017, two additional renewable energy projectsrecovery of $26.0 million in Europe became loss contracts. In the yearsyear ended December 31, 2017 and December 31, 2016, we recorded $158.5 million and $141.1 million, respectively, in net losses resulting from changes2020.

B&W Renewable Contracts

During 2022, the Company determined that its Babcock & Wilcox Solar reporting unit had nine projects located in the estimated revenues and costs to complete certain European renewable energy contracts, ofUnited States that existed at the time Babcock & Wilcox Solar was acquired on September 30, 2021 which $34.7 million and $98.1 million were recorded in the three months ended December 31, 2017 and 2016, respectively. These changes in estimates in the years ended December 31, 2017 and December 31, 2016 included an increase in our estimate of anticipated liquidated damagesgenerated losses that reduced revenue associated with these six projects of $41.3 million and $35.8 million, respectively, of which $14.3 million and $35.8 million were recorded in the three months ended December 31, 2017 and December 31, 2016, respectively. The total anticipated liquidated damages associated with these six projects was $77.1 million and $35.8 million at December 31, 2017 and December 31, 2016, respectively.


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The charges recorded in the twelve months ended December 31, 2017 werearose due to revisions in the estimated revenues and costs at completion during the period, primarily as a result of (a) structural steel design issues on the second, fourth and fifth projects (discussed further below) including the anticipated schedule impact, (b) scheduling delays and (c) shortcomings in our subcontractors' estimated productivity. Also included in the charges recorded in the twelve months ended December 31, 2017 were corrections that reduced (increased) estimated contract losses at completion by $1.0 million relating to the three months ended December 31, 2016. Management determined this amount was immaterial to the consolidated financial statements in the previous year. As of December 31, 2017, the status of these six loss contracts was as follows:

The first project became a loss contractcertain construction activities, existing at acquisition date, not adequately disclosed in the second quarter of 2016. As of December 31, 2017, this project is approximately 98% completesales agreement and construction activities are complete asnot recognized in the financial records of the date of this report. The unit became operational during the second quarter of 2017, and turnover activities linked to the customer's operation of the facility are expected to be completed during the second quarter of 2018.seller. During the year ended December 31, 2017, we recognized additional contract losses2022, the Company has recorded an increase in goodwill of $20.8$14.4 million, onprimarily resulting from the project as a resultrecognition of differences in actual and estimated costs and schedule delays, $5.8$14.1 million of which was recordedaccrued liabilities and $0.4 million of warranty accruals in conjunction with the three months ended December 31, 2017. Our estimate at completionfinalization of purchase accounting as measurement period adjustments. The Company has submitted insurance claims to recover a portion of these losses as of December 31, 2017 includes $9.6 million of total expected liquidated damages. As of December 31, 2017, the reserve for estimated contract losses recorded in "other accrued liabilities" in our consolidated balance sheet was $1.6 million. In the year ended December 31, 2016, we recognized charges of $50.3 million (net of accrued insurance proceeds), and as of December 31, 2016, this project had $6.4 million of accrued losses and was 88% complete.2022.


The second project became a loss contract in the fourth quarter of 2016. As of December 31, 2017, this contract was approximately 81% complete, and we expect construction will be completed on this project in mid 2018. During the year ended December 31, 2017,2022, four additional Babcock & Wilcox 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 Babcock & Wilcox Solar loss contracts.

As a normal part of its ongoing business operations, the Company is continuing to pursue other additional potential claims and recoveries from subcontractors and others where appropriate and available.


NOTE 6 – INVENTORIES

The components of inventories are as follows:
(in thousands)December 31, 2022December 31, 2021
Raw materials and supplies$87,554 $56,352 
Work in progress2,518 5,723 
Finished goods12,565 17,452 
Total inventories, net$102,637 $79,527 



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NOTE 7 – PROPERTY, PLANT & EQUIPMENT, & FINANCE LEASES

Property, plant and equipment less accumulated depreciation is as follows:
(in thousands)December 31, 2022December 31, 2021
Land$2,481 $1,489 
Buildings35,326 31,895 
Machinery and equipment153,939 144,325 
Property under construction11,410 12,480 
203,156 190,189 
Less accumulated depreciation141,145 133,137 
Net property, plant and equipment62,011 57,052 
Finance lease30,549 34,159 
Less finance lease accumulated amortization6,197 5,584 
Net property, plant and equipment, and finance leases$86,363 $85,627 

NOTE 8 - GOODWILL

The following summarizes the changes in the net carrying amount of goodwill as of December 31, 2022:
(in thousands)B&W
Renewable
B&W EnvironmentalB&W
Thermal
Total
Goodwill$129,322 $80,145 $31,438 $240,905 
Accumulated impairment losses(49,965)(74,478)— (124,443)
Balance at December 31, 202179,357 5,667 31,438 116,462 
Addition - Fossil Power(1)
— — 35,392 35,392 
Addition - Optimus Industries(1)
— — 11,081 11,081 
Measurement period adjustments - Babcock & Wilcox Solar(2)
10,697 — — 10,697 
Measurement period adjustments - Babcock & Wilcox Renewable Service A/S(2)
(61)— — (61)
Measurement period adjustments - Fossil Power(1)(2)
— — 270 270 
Measurement period adjustments - Optimus Industries(1)(2)
— — (7,273)(7,273)
Goodwill impairment - Babcock & Wilcox Solar(7,224)— — (7,224)
Currency translation adjustments(710)(320)(1,321)(2,351)
Balance at December 31, 2022$82,059 $5,347 $69,587 $156,993 
(1) As described in Note 26, the Company is in the process of completing the purchase price allocation associated with the Fossil Power and Optimus Industries acquisitions and, as a result, the provisional measurements of goodwill associated with these acquisitions are subject to change.
(2) The Company's preliminary and final purchase price allocation changed due to additional information and further analysis.
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.

In assessing goodwill for impairment, the Company follows ASC 350, Intangibles – Goodwill and Other, which permits a qualitative assessment of whether it is more likely than not that the fair value of the reporting unit is less than its carrying value including goodwill. If the qualitative assessment determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying value, including goodwill, then no impairment is determined to exist for the reporting unit. However, if the qualitative assessment determines that it is more likely than not that the fair value of the reporting unit is less than its carrying value, including goodwill, or we recognized contract losseschoose not to perform the qualitative assessment, then we compare the fair value of $47.8 millionthat reporting unit with its carrying value, including goodwill, in a quantitative assessment. If the carrying value
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of a reporting unit exceeds its fair value, goodwill is considered impaired with the impairment loss measured as the excess of the reporting unit’s carrying value, including goodwill, over its fair value. The estimated fair value of the reporting unit is derived based on this projectvaluation techniques the Company believes market participants would use for each of the reporting units.

During the quarter ended September 30, 2022, the Company identified certain factors, including but not limited to, the acquisition of the remaining 40% ownership stake in Babcock & Wilcox Solar for an amount less than the remaining balance of the non-controlling interest, significant deterioration in operating results from those originally forecast at the date of acquisition primarily as a result of supply chain issues on certain solar product inputs, the recognition of additional contract losses in the third quarter of $8.6 million beyond amounts previously accounted for as measurement period adjustments during the year, the determination that the contingent consideration would not be payable, all of which contributed to the identification of a triggering event, requiring an interim quantitative goodwill impairment assessment of its Babcock & Wilcox Solar reporting unit. In addition, in conjunction with the interim goodwill impairment test, the Company performed an impairment analysis of the Babcock & Wilcox Solar asset group's long-lived and intangible assets and noted no impairment.

The quantitative assessment was performed using a combination of the income approach (discounted cash flows), the market approach and the guideline transaction method. The income approach uses the reporting unit’s estimated future cash flows, discounted at the weighted-average cost of capital of a hypothetical third-party buyer to account for uncertainties within the projections. The income approach uses assumptions based on the reporting unit’s estimated revenue growth, operating margin, and working capital turnover. The market approach estimates fair value by applying cash flow multiples to the reporting unit’s operating performance. The multiples are derived from comparable publicly traded companies with similar characteristics to the reporting unit. The guideline transaction method estimates fair value by applying recent observed transaction multiples from transactions involving companies with similar characteristics to the reporting unit’s business.

The Company compared the fair value of the Babcock & Wilcox Solar reporting unit to its carrying value and determined that the carrying value of the reporting unit exceeded the fair value by approximately $7.2 million. As such, the Company recorded goodwill impairment losses related to the Babcock & Wilcox Solar reporting unit of $7.2 million.

The Company re-evaluated its Babcock & Wilcox Solar reporting unit at December 31, 2022 and no additional indicators of goodwill impairment were identified for this or any of the Company's other reporting units at the measurement date of October 1, 2022. The quantitative goodwill impairment test approach was used on the Company's remaining reporting units and there was no evidence that the fair value of each reporting unit would not exceed its carrying value at the October 1, 2021 measurement date.

The Company will continue to evaluate the results of its Babcock & Wilcox Solar reporting unit and conduct interim testing if additional impairment indicators are present in future quarters.

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NOTE 9– INTANGIBLE ASSETS

The Company's intangible assets are as follows:
(in thousands)December 31, 2022December 31, 2021
Definite-lived intangible assets(1)
Customer relationships$68,164 $46,903 
Unpatented technology18,208 15,410 
Patented technology3,635 3,103 
Tradename13,441 12,747 
Acquired backlog3,100 3,100 
All other9,653 9,319 
Gross value of definite-lived intangible assets116,201 90,582 
Customer relationships amortization(26,198)(20,800)
Unpatented technology amortization(10,013)(8,313)
Patented technology amortization(2,891)(2,729)
Tradename amortization(6,154)(5,425)
Acquired backlog(3,100)(1,620)
All other amortization(9,082)(9,205)
Accumulated amortization(57,438)(48,092)
Net definite-lived intangible assets$58,763 $42,490 
Indefinite-lived intangible assets
Trademarks and trade names$1,530 $1,305 
Total intangible assets, net(2)
$60,293 $43,795 
(1) As described in Note 26, we are in the process of completing the purchase price allocation associated with the Fossil Power and Optimus Industries acquisitions and as a result the intangible assets associated with these acquisitions are subject to change.
(2) The Company finalized the purchase price allocation for the Babcock & Wilcox Solar acquisition on September 30, 2022 which resulted in several measurement period adjustments. On November 30, 2022, the Company also finalized the purchase price allocation for the Babcock & Wilcox Renewable Service A/S acquisition with no measurement period adjustments to their intangible assets, excluding goodwill.

The following summarizes the changes in construction cost estimates and schedule delays, $12.4 millionthe carrying amount of which was recordedintangible assets:
Year ended December 31,
(in thousands)20222021
Balance at beginning of period$43,795 $23,908 
Business acquisitions and adjustments(1)
27,412 26,583 
Amortization expense(9,199)(5,128)
Currency translation adjustments(1,715)(1,568)
Balance at end of the period(2)
$60,293 $43,795 
(1) As described in Note 26, we are in the three months ended December 31, 2017. Our estimate at completionprocess of completing the purchase price allocation associated with the Fossil Power and Optimus Industries acquisitions and as a result, the increase in intangible assets associated with these acquisitions are subject to change.
(2) The Company finalized the purchase price allocation for the Babcock & Wilcox Solar acquisition on September 30, 2022 which resulted in several measurement period adjustments. On November 30, 2022, the Company also finalized the purchase price allocation for the Babcock & Wilcox Renewable Service A/S with no measurement period adjustments to their intangible assets, excluding goodwill.

Amortization of December 31, 2017 includes $20.1 millionintangible assets is included in Cost of total expected liquidated damages dueoperations and SG&A in the Company's Consolidated Statement of Operations but is not allocated to schedule delays. Our estimate at completion as of December 31, 2017 also includes contractual bonus opportunitiessegment results.

Definite-lived intangible assets are assessed for guaranteed higher power output (discussed further below). As of December 31, 2017,impairment on an interim basis when impairment indicators exist. See Note 8 regarding the reserveCompany's interim impairment testing process for estimated contract losses recorded in "other accrued liabilities" in our consolidated balance sheet was $12.8 million. In the year ended December 31, 2016, we recognized charges2022.

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Estimated future intangible asset amortization expense, including the preliminary amortization expense resulting from the acquisitions of $28.1Fossil Power and Optimus, during the year ended December 31, 2022 is as follows (in thousands):
Amortization Expense(1)
Twelve months ending December 31, 2023$7,959 
Twelve months ending December 31, 20247,887 
Twelve months ending December 31, 20257,082 
Twelve months ending December 31, 20265,951 
Twelve months ending December 31, 20275,308 
Thereafter24,576 
(1) As described in Note 26, the Company is in the process of completing the purchase price allocation associated with the Fossil Power and Optimus Industries acquisitions and, as a result, the estimated future intangible asset amortization expense associated with these acquisitions are subject to change.
See Note 26 for intangible assets identified in conjunction with the acquisitions of Fossil Power and Optimus, which are subject to change pending the finalization of the purchase price allocation associated with these acquisitions.

NOTE 10– LEASES

Certain real property assets for the Company's Copley, Ohio location were sold on March 15, 2021. In conjunction with the sale, the Company executed a leaseback agreement commencing March 16, 2021 which will expire on March 31, 2033. The lease is classified as an operating lease with total future minimum payments during the initial term of the lease of approximately $5.0 million and as of December 31, 2016, this project had $5.12022. At December 31, 2022, a $3.3 million ROU asset is recorded in Right of use assetswith corresponding liabilities of $3.5 million recorded in Other accrued lossesliabilities and was 67% complete.

The third project became a loss contractNon-current operating lease liabilities in the fourth quarterCompany's Consolidated Balance Sheets.

Certain real property assets the Company's Lancaster, Ohio location were sold on August 13, 2021. In conjunction with the sale, the Company executed a leaseback agreement commencing August 13, 2021 and expiring on August 31, 2041. The lease is classified as an operating lease with total future minimum payments during the initial term of 2016.the lease of approximately $36.6 million as of December 31, 2021. At December 31, 2022, a $16.6 million ROU asset is recorded in Right of use assetsand corresponding liabilities of $17.0 million recorded in Other accrued liabilities and Non-current operating lease liabilities.

In conjunction with the acquisition of Babcock & Wilcox Solar, the Company assumed two leases classified as operating leases with total future minimum payments during the remaining term of the leases of approximately $0.7 million. As of December 31, 2017, this contract was approximately 98% complete2022, a $1.1 million ROU asset is recorded in Right-of-use assets with corresponding liabilities of $1.1 million in Operating lease liabilities and construction activities are complete as ofNon-current operating lease liabilities in the date of this report. The unit became operational during the second quarter of 2017, and turnover activities linked to the customer's operation of the facility are expected to be completed during the first quarter of 2018. Company's Consolidated Balance Sheets.

During the year ended December 31, 2017, we recognized additional contract losses2022, the Company sold certain real property and then entered into sale lease-back agreements with the buyers for each sale transaction. The Company accounted for these sale-leasebacks as financing transactions with the purchasers of $10.2 millionthe assets in accordance with ASC 842 as a result of changes in the estimated costs at completion, $3.0 million of which was recorded in the three months ended December 31, 2017. Our estimate at completion as of December 31, 2017 includes $7.1 million of total expected liquidated damages due to schedule delays. As of December 31, 2017, the reserve for estimated contract losses recorded in "other accrued liabilities" in our consolidated balance sheet was $0.7 million. In the year ended December 31, 2016, we recognized charges of $30.1 million, and as of December 31, 2016, this project had $3.9 million of accrued losses and was 82% complete.

The fourth project became a loss contract in the fourth quarter of 2016. As of December 31, 2017, this contract was approximately 85% complete, and we expect construction will be completed on this project in mid 2018. During the year ended December 31, 2017, we revised our estimated revenue and costs at completion for this loss contract, which resulted in contract losses of $26.0 million, $8.6 million of which was recorded in the three months ended December 31, 2017. Our estimate at completion as of December 31, 2017 includes $13.7 million of total expected liquidated damages due to schedule delays. Our estimate at completion as of December 31, 2017 also includes contractual bonus opportunities for guaranteed higher power output (discussed further below). The changes in the status of this project in 2017lease agreements were primarily attributable to changes in the estimated costs at completion and an increase estimated liquidated damages. As of December 31, 2017, the reserve for estimated contract losses recorded in "other accrued liabilities" in our consolidated balance sheet was $4.7 million. In the year ended December 31, 2016, we recognized charges of $16.4 million, and as of December 31, 2016, this project had $1.6 million of accrued losses and was 61% complete.

The fifth project became a loss contract in the second quarter of 2017. As of December 31, 2017, this contract was approximately 64% complete, and we expect construction will be completed on this project in late 2018. During the year ended December 31, 2017, we revised our estimated revenue and costs at completion for this loss contract, which resulted in additional contract losses of $40.2 million, $4.9 million of which was recorded in the three months ended December 31, 2017. The change in the status of this project in 2017 was primarily attributable to changes in the estimated costs at completion and schedule delays. Our estimate at completion as of December 31, 2017 includes $20.0 million of

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total expected liquidated damages due to schedule delays. As of December 31, 2017, the reserve for estimated contract losses recorded in "other accrued liabilities" in our consolidated balance sheet was $14.3 million. Further, in late February 2018, we became aware that our partner responsible for civil works on this project would be filing for administration in the United Kingdom (similar to bankruptcy protection in the United States). While we are still evaluating the effect on us, we may assume all of their remaining scope on this project. Our preliminary estimate of costs to complete their remaining scope is up to $10 million. We will pursue multiple paths to recover any additional costs we incur as a result of our partner filing for administration, including a performance bond posted by our partner.

The sixth project became a loss contract in the second quarter of 2017. As of December 31, 2017, this contract was approximately 76% complete, and we expect construction will be completed on this project in the second half of 2018. During the year ended December 31, 2017, we revised our estimated revenue and costs at completion for this loss contract, which resulted in additional contract losses of $18.5 million. There was no significant change in estimated revenue of costs at completion on this project in the three months ended December 31, 2017. Our estimate at completion as of December 31, 2017 includes $6.7 million of total expected liquidated damages due to schedule delays. The change in the status of this project in 2017 was primarily attributable to changes in the estimated costs at completion and schedule delays. As of December 31, 2017, the reserve for estimated contract losses recorded in "other accrued liabilities" in our consolidated balance sheet was $2.5 million.

In September 2017, we identified the failure of a structural steel beam on the fifth project, which stopped work in the boiler building and other areas pending corrective actions to stabilize the structure that are expecteddeemed to be complete infinance leases. The Company concluded the first half of 2018. The engineering, design and manufacturing oflease agreements met the steel structure were the responsibility of our subcontractors. A similar design was also used on the second and fourth projects, and although no structural failure occurred on these two other projects, work was also stopped in certain restricted areas while we added reinforcement to the structures, which also resulted in delays that lasted until late January 2018. The total costs related to the structural steel issues on these three projects, including project delays, are estimatedqualifications to be approximately $42 million, which is included in the December 31, 2017 estimated losses at completion for these three projects.

Also during the third quarter of 2017, we adjusted the design of three renewable facilities to increase the guaranteed power output, which will allow us to achieve contractual bonus opportunities for the higher output. In the fourth quarter of 2017, we obtained agreement from certain customers to increase the value of these bonus opportunities and to provide partial relief on liquidated damages. The bonus opportunities and liquidated damages relief increased the estimated selling price of the three contracts by approximately $19 million in total ($4 million in the three months ended December 31, 2017), and this positive change in estimated cost to complete was fully recognized in 2017 because each were loss projects.

During the years ended December 31, 2017 and 2016, we recognized losses of $2.5 million and $14.2 million, respectively, on our other renewable energy projects that are not loss contracts. Accrued liquidated damages associated with these projects was $9.0 million at December 31, 2016.

During the third quarter of 2016, we determined it was probable that we would receive a $15.0 million insurance recovery for a portion of the losses on the first European renewable energy project discussed above. There was no change in the accrued probable insurance recovery at December 31, 2017. The insurance recovery represents the full amount available under the insurance policy, and is recorded in accounts receivable - other in our consolidated balance sheet at December 31, 2017 and 2016.

The following represent the components of our contracts in progress and advance billings on contracts included in our consolidated balance sheets:
 December 31,
(in thousands)20172016
Included in contracts in progress:  
Costs incurred less costs of revenue recognized$80,645
$96,210
Revenues recognized less billings to customers80,575
69,800
Contracts in progress$161,220
$166,010
Included in advance billings on contracts:  
Billings to customers less revenues recognized$177,953
$199,480
Costs of revenue recognized less cost incurred3,117
11,162
Advance billings on contracts$181,070
$210,642

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The following amounts represent retainage on contracts:
 December 31,
(in thousands)20172016
Retainage expected to be collected within one year$14,572
$18,843
Retainage expected to be collected after one year6,112
4,583
Total retainage$20,684
$23,426

We have included retainage expected to be collected in 2018 in "accounts receivable – trade, net." Retainage expected to be collected after one year are included in "other assets." Of the long-term retainage at December 31, 2017, we anticipate collecting $4.3 million, $1.6 million and $0.2 million in 2019, 2020 and 2021, respectively.

NOTE 7 – EQUITY METHOD INVESTMENTS

Our equity method investment in Babcock & Wilcox Beijing Company, Ltd. ("BWBC") contributed $6.1 million, $4.5 million and $4.9 million in income to our results from operations in the years ended December 31, 2017, 2016 and 2015, respectively. BWBC has a manufacturing facility that designs, manufactures, produces and sells various power plant and industrial boilers primarily in China. Our investment in BWBC at December 31, 2017 and 2016 was $16.6 million and $55.5 million, respectively. During the first quarter of 2018, we sold our interest in BWBC to our joint venture partner in China for approximately $21.0 million, resulting in a gain of approximately $4.4 million.

Our equity method investment in Thermax Babcock & Wilcox Energy Solutions Private Limited ("TBWES"), a joint venture in India, contributed $2.2 million, $1.5 million and $(8.2) million in income (losses) to our results from operations (excluding the impairment charge discussed below) in the years ended December 31, 2017, 2016 and 2015, respectively. TBWES has a manufacturing facility that produces boiler parts and equipment intended primarily for new build coal boiler contracts in India. During the second quarter of 2017, both we and our joint venture partner decided to make a strategic change in the Indian joint ventureclassified as finance leases due to the decline in forecasted market opportunities in India, which reducedsignificance of the expected recoverablepresent value of our investment in the joint venture.lease payments, using the appropriate individual discount rate to reflect the Company's incremental borrowing rates, compared to the fair value of the leased property as of the lease commencement dates.

The presence of a finance lease indicates that control of the property has not transferred to the buyer/lessors, and as such, these transactions were deemed to be failed sale-leasebacks and were accounted for as financing arrangements. As a result of this strategic change, we recognized a $18.2 million other-than-temporary-impairment of our investment in TBWESdetermination, the Company is viewed as having received the proceeds from the buyer/lessors in the second quarterform of 2017, which was classifiedhypothetical loans with its leased property considered to be collateral. The hypothetical loans are payable as principal and interest in in equity incomethe form of investees. The impairment charge was based“lease payments” to the buyer/lessors. As such, the property will remain on the differenceCompany's Consolidated Balance Sheets as Net property, plant, equipment and finance leases until the leases end. The Company will depreciate the assets to zero over the shorter of their respective economic lives or lease term.

No gains or losses were recognized related to the Sale-Leasebacks under U.S. GAAP for the fiscal year ended December 31, 2022 for the following transactions:

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On October 5, 2022, the Company sold its corporate aircraft for $3.4 million in proceeds and then simultaneously entered into a lease agreement with the buyer of the property resulting in a sale lease-back. The sale-leaseback is repayable over a 2 year term with payments of approximately $62 thousand per month through July 2024 with a final payment of $2.3 million in August 2024 at the expiration of the lease. The Company concluded the lease agreement met the qualifications to be classified as a finance lease due to the significance of the present value of the lease payments, using a discount rate that reflects the Company’s incremental borrowing rate, compared to the fair value of the leased property as of the lease commencement date.

At December 31, 2022, the carrying value of the financing liability was $3.3 million, of which $0.6 million is classified as current. The current portion is recorded in Loans payable with the remainder recorded in Long-term loans payable on the Company's Consolidated Balance Sheets. The monthly lease payments are split between a reduction of principal and interest expense using the effective interest rate method.

On November 1, 2022, the Company sold certain real property assets at its Monterey, Mexico location for $1.4 million in proceeds and then simultaneously entered into a lease agreement with the buyer of the property resulting in a sale lease-back. The sale-leaseback is repayable over a 4 year term with payments of approximately $0.4 million per year. The Company concluded the lease agreement met the qualifications to be classified as a finance lease due to the significance of the present value of the lease payments, using a discount rate that reflects the Company’s incremental borrowing rate, compared to the fair value of the leased property as of the lease commencement date.

At December 31, 2022, the carrying value of the financing liability was $1.4 million in Long-term loans payable on the Company's Consolidated Balance Sheets. The monthly lease payments are split between a reduction of principal and interest expense using the effective interest rate method.

On December 16, 2022, the Company sold certain real property assets at its Chanute, Kansas location for $8.4 million in proceeds and then simultaneously entered into a lease agreement with the buyer of the property resulting in a sale lease-back. The sale-leaseback is repayable over a 20 year term, with two renewal options of ten years each. Under the terms of the lease agreement, the Company's initial basic rent is of approximately $0.7 million per year with annual increases of 2.25% throughout the life of the agreement. The Company concluded the lease agreement met the qualifications to be classified as a finance lease due to the significance of the present value of the lease payments, using a discount rate that reflects the Company’s incremental borrowing rate, compared to the fair value of the leased property as of the lease commencement date.

At December 31, 2022, the carrying value of the financing liability was $8.7 million, which is net of debt issuance costs of $0.6 million and is recorded in Long-term loans payable on the Company's Consolidated Balance Sheets. The monthly lease payments are split between a reduction of principal and interest expense using the effective interest rate method.

The remaining future cash payments related to the aggregate financing liabilities for the fiscal years ending December 31 are as follows:

2023$1,844 
20243,800 
20251,137 
20261,153 
2027781 
Thereafter14,149 
Total minimum liability requirements22,864 
Imputed interest(8,954)
Total$13,910 

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The components of lease expense included on our investmentConsolidated Statements of Operations were as follows:
Year ended December 31,
(in thousands)Classification202220212020
Operating lease expense:
Operating lease expenseSelling, general and administrative expenses$7,277 $4,974 $5,736 
Operating lease expenseCost of operations— 1,077 — 
Short-term lease expenseSelling, general and administrative expenses3,516 3,541 1,960 
Variable lease expense (1)
Selling, general and administrative expenses484 385 1,973 
Total operating lease expense$11,277 $9,977 $9,669 
Finance lease expense:
Amortization of right-of-use assetsCost of operations$3,527 $3,510 $2,061 
Interest on lease liabilitiesInterest expense2,372 2,502 2,452 
Total finance lease expense$5,899 $6,012 $4,513 
Sublease income (2)
Other – net$(72)$(86)$(86)
Net lease cost$17,104 $15,903 $14,096 
(1) Variable lease expense primarily consists of common area maintenance expenses paid directly to lessors of real estate leases.
(2) Sublease income excludes rental income from owned properties, which is not material.

Other information related to leases is as follows:
Year ended December 31,
(in thousands)202220212020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$6,886 $5,614 $5,603 
Operating cash flows from finance leases2,371 2,502 2,452 
Financing cash flows from finance leases2,435 2,366 (13)

(in thousands)December 31, 2022December 31, 2021
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases$3,256 $24,886 
Finance leases$— $3,608 
Weighted-average remaining lease term:
Operating leases (in years)13.013.6
Finance leases (in years)12.012.7
Weighted-average discount rate:
Operating leases8.22 %8.24 %
Finance leases8.00 %7.93 %

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Amounts relating to leases were presented on our Consolidated Balance Sheets in TBWESthe following line items:
(in thousands)
Assets:ClassificationDecember 31, 2022December 31, 2021
Operating lease assetsRight-of-use assets$29,438 $30,163 
Finance lease assetsNet property, plant and equipment and finance leases24,352 28,575 
Total non-current lease assets$53,790 $58,738 
Liabilities:
Current
Operating lease liabilitiesOperating lease liabilities$3,595 $3,950 
Finance lease liabilitiesFinancing lease liabilities1,180 2,445 
Non-current
Operating lease liabilitiesNon-current operating lease liabilities26,583 26,685 
Finance lease liabilitiesNon-current finance lease liabilities27,482 29,369 
Total lease liabilities$58,840 $62,449 

Future minimum lease payments required under non-cancellable leases as of December 31, 2022 were as follows:
(in thousands)Operating LeasesFinance LeasesTotal
2023$5,872 $3,408 $9,280 
20244,831 3,472 8,303 
20253,740 3,499 7,239 
20263,232 3,568 6,800 
20272,892 3,640 6,532 
Thereafter30,296 27,578 57,874 
   Total$50,863 $45,165 $96,028 
Less imputed interest(20,684)(16,504)(37,188)
Lease liability$30,179 $28,661 $58,840 



NOTE 11 – ACCRUED WARRANTY EXPENSE

The Company may offer assurance type warranties on products and our shareservices in which it sells. Changes in the carrying amount of the Company's accrued warranty expense are as follows:
Year ended December 31,
(in thousands)20222021
Balance at beginning of period$12,925 $25,399 
Additions7,294 7,470 
Expirations and other changes150 (7,808)
Payments(10,634)(12,206)
Translation and other(167)70 
Balance at end of period$9,568 $12,925 

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The Company accrues estimated expense included in Cost of operations on its 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 fair value of TBWES's net assets. Our investment in TBWES at December 31, 2017 and 2016 was $26.0 million and $40.6 million, respectively. The TBWES joint venturewarranty costs is now idle as we and our joint venture partner explore strategic alternatives for its assets.

On December 22, 2016, we sold all of our interest in our former Australian joint venture, Halley & Mellowes Pty. Ltd. ("HMA") for $18.0 million. The sale of HMA resulted in an $8.3 million gain, which was classified in equity income of investees in 2016. HMA contributed income of $2.2 million and $3.1 millionaccrued when the contract becomes a loss contract. In addition, the Company records specific provisions or reductions where it expects the actual warranty costs to oursignificantly differ from the accrued estimates. Such changes could have a material effect on the Company's consolidated financial condition, results from operations in the years ended December 31, 2016 and 2015.

Our investment in equity method investees was not significantly different from our underlying equity in the net assets of those investees based on stated ownership percentages at December 31, 2017. All of our investments in equity method investees are included in our Power segment.


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The undistributed earnings of our equity method investees were $7.9 million and $59.6 million at December 31, 2017 and 2016, respectively. Summarized below is consolidated balance sheet and statement of operations information for investments accounted for under the equity method:and cash flows.
 December 31,
(in thousands)20172016
Current assets$322,956
$335,577
Noncurrent assets137,081
126,958
Total assets460,037
462,535
Current liabilities342,178
231,150
Noncurrent liabilities24,474
40,537
Owners' equity93,385
190,848
Total liabilities and equity$460,037
$462,535
 Year Ended December 31,
(in thousands)201720162015
Revenues$346,459
$488,101
$475,459
Gross profit32,682
76,986
69,021
    
Income before provision for income taxes(10,626)19,529
3,072
Provision for income taxes1,907
3,715
4,500
Net income$(12,533)$15,814
$(1,428)

The provision for income taxes is based on the tax laws and rates in the countries in which our investees operate. The taxation regimes vary not only by their nominal rates, but also by allowable deductions, credits and other benefits. For some of our United States investees, United States income taxes are the responsibility of the respective owners, which is primarily the reason for the provision for income taxes being low in relation to income before provision for income taxes.

Reconciliation of net income in the statement of operations of our investees to equity in income of investees in our consolidated statements of operations is as follows:
 Year Ended December 31,
(in thousands)201720162015
Equity income based on stated ownership percentages$7,530
$7,898
$(542)
TBWES other than temporary impairment(18,193)

Gain on sale of our interest in HMA
8,324

All other adjustments due to amortization of basis differences,
timing of GAAP adjustments and other adjustments
796
218
300
Equity in income of investees$(9,867)$16,440
$(242)

Our transactions with unconsolidated affiliates were as follows:
 Year Ended December 31,
(in thousands)201720162015
Sales to$7,143
$17,220
$18,014
Purchases from12,470
32,490
45,397
Dividends received (1)
50,134
12,160
20,830
Capital contributions (2)

26,256
7,424
(1) includes $48.1 million, $6.0 million and $18.2 million in dividends received from BWBC in 2017, 2016 and 2015, respectively, before taxes.
(2) includes a $26.3 million contribution we made in April 2016 to increase our ownership interest in TBWES for the purpose of extinguishing the joint venture's high-interest third-party debt and avoiding the associated future interest cost (our joint venture partner contributed the same amount to TBWES).

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Our accounts receivable-other includes receivables from these unconsolidated affiliates of $5.8 million and $8.7 million at December 31, 2017 and 2016, respectively.


NOTE 812 – RESTRUCTURING ACTIVITIES AND SPIN-OFF TRANSACTION COSTS


Restructuring liabilitiesThe Company incurred restructuring charges in 2022, 2021 and 2020. The charges primarily consist of severance and related costs of actions taken, including as part of the Company’s strategic, market-focused organizational and re-branding initiative. During 2021 and 2020, these charges also include actions taken to address the impact of COVID-19 on our business.


The following tables summarizes the restructuring activity incurred by segment:

Year ended December 31,
2022
(in thousands)TotalSeverance and related costs
Other (1)
B&W Renewable segment$900 $719 $181 
B&W Environmental segment228 28 200 
B&W Thermal segment589 128 461 
Corporate(1,157)(1,228)71 
$560 $(353)$913 
Cumulative costs to date$45,743 36,898 8,845 
(1) Other amounts consist primarily of exit, relocation and other costs.

Year ended December 31,
2021
(in thousands)TotalSeverance and related costs
Other (1)
B&W Renewable segment$1,876 $1,732 $144 
B&W Environmental segment430 360 70 
B&W Thermal segment2,207 1,734 473 
Corporate356 213 143 
$4,869 $4,039 $830 
(1) Other amounts consist primarily of exit, relocation, COVID-19 related and other costs.

Year ended December 31,
2020
(in thousands)TotalSeverance and related costs
Other (1)
B&W Renewable segment$5,926 $4,537 $1,389 
B&W Environmental segment745 293 452 
B&W Thermal segment4,725 1,962 2,763 
Corporate453 (52)505 
$11,849 $6,740 $5,109 
(1) Other amounts consist primarily of exit, relocation, COVID-19 related and other costs

Restructuring liabilities are included in otherOther accrued liabilitieson our consolidated balance sheets.the Company's Consolidated Balance Sheets. Activity related to the restructuring liabilities is as follows:
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Year ended December 31,Year ended December 31,
(in thousands)20172016(in thousands)20222021
Balance at beginning of period
$2,253
$740
Balance at beginning of period
$6,561 $8,146 
Restructuring expense13,923
21,939
Restructuring expense560 4,869 
Payments(13,857)(20,426)Payments(5,506)(6,454)
Balance at December 31$2,319
$2,253
Balance at end of periodBalance at end of period$1,615 $6,561 


The payments shown above for the years ended December 31, 2022 and 2021 relate primarily to severance. Accrued restructuring liabilities at December 31, 20172022 and 20162021 relate primarily to employee termination benefits.

Excluded from restructuring expense in the table above are non-cash restructuring charges that did not impact the accrued restructuring liability. In the years ended December 31, 2017 and 2016, we recognized $0.3 million and $15.0 million, respectively, in non-cash restructuring expense related to losses (gains) on the disposals of long-lived assets.

Spin-off transaction costs

Spin-off costs were primarily attributable to employee retention awards directly related to the spin-off from our former parent, The Babcock & Wilcox Company (now known as BWX Technologies, Inc.). In the years ended December 31, 2017 and 2016, we recognized spin-off costs of $1.2 million and $3.8 million, respectively. During 2017, we disbursed $1.9 million of the accrued retention awards.

NOTE 9 – STOCK-BASED COMPENSATION

2015 Long-Term Incentive Plan of Babcock & Wilcox Enterprises, Inc.

Prior to the spin-off, executive officers, key employees, members of the board of directors and consultants of B&W were eligible to participate in the 2010 Long-Term Incentive Plan of The Babcock & Wilcox Company (the "BWC Plan"). Effective June 30, 2015, executive officers, key employees, members of the board of directors and consultants of B&W are eligible to participate in the 2015 Long-Term Incentive Plan of Babcock & Wilcox Enterprises, Inc. (the "Plan"). The Plan permits grants of nonqualified stock options, incentive stock options, appreciation rights, restricted stock, restricted stock units, performance shares, performance units, and cash incentive awards. The Plan was amended and restated in 2016 to increase the number of shares available for issuance by 2.5 million shares. The number of shares available for award grants under the Plan, as amended and restated, is 8.3 million, of which 0.2 million remain available as of December 31, 2017.

In connection with the spin-off, outstanding stock options and restricted stock units granted under the BWC Plan prior to 2015 were replaced with both an adjusted BWC award and a new B&W stock award. These awards, when combined, had terms that were intended to preserve the values of the original awards. Outstanding performance share awards originally issued under the BWC Plan granted prior to 2015 were generally converted into unvested rights to receive the value of deemed target performance in unrestricted shares of a combination of BWC common stock and B&W common stock, determined by reference to the ratio of one share of B&W common stock being distributed for every two shares of BWC common stock in the spin-off, in each case with the same vesting terms as the original awards.


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Company stock options

There were no stock options awarded in 2017. The fair value of each option grant awarded in 2016 and 2015 was estimated at the date of grant using Black-Scholes, with the following weighted-average assumptions:
 Year Ended December 31,
 20162015
Risk-free interest rate1.14%1.38%
Expected volatility25%28%
Expected life of the option in years3.95
3.96
Expected dividend yield%%

The risk-free interest rate is based on the implied yield on a United States Treasury zero-coupon issue with a remaining term equal to the expected life of the option. The expected volatility is based on implied volatility from publicly traded options on our common stock, historical volatility of the price of our common stock and other factors. The expected life of the option is based on observed historical patterns. The expected dividend yield is based on the projected annual dividend payment per share divided by the stock price at the date of grant. This amount is zero in 2016 and 2015 because we did not expect to pay dividends on the dates the 2016 and 2015 stock options were awarded.

The following table summarizes activity for our stock options the year ending December 31, 2017:
(share data in thousands)Number of Shares
Weighted-Average
Exercise Price
Weighted-Average
Remaining
Contractual Term
(in years)
Aggregate
Intrinsic Value
(in thousands)
Outstanding at beginning of period2,652
$18.27
  
Granted

  
Exercised(24)15.04
  
Cancelled/expired/forfeited(150)18.50
  
Outstanding at end of period2,478
$18.28
5.46
$
Exercisable at end of period1,844
$18.14
4.69
$

The aggregate intrinsic value included in the table above represents the total pretax intrinsic value that would have been received by the option holders had all option holders exercised their options on December 31, 2017. The intrinsic value is calculated as the total number of option shares multiplied by the difference between the closing price of our common stock on the last trading day of the period and the exercise price of the options. This amount changes based on the price of our common stock.

The weighted-average fair value of the stock options granted in the years ended December 31, 2016 and 2015, was $4.03 and $4.80, respectively.

During the years ended December 31, 2017, 2016 and 2015, the total intrinsic value of stock options exercised was not significant, $0.7 million and $2.3 million, respectively. The actual tax benefits realized related to the stock options exercised during the years ended December 31, 2017 and 2016 were not significant and $0.3 million, respectively.

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Company restricted stock units

Nonvested restricted stock units activity for the year ending December 31, 2017 was as follows:
(share data in thousands)Number of SharesWeighted-Average Grant Date Fair Value
Nonvested at beginning of period712
$19.14
Granted1,902
5.35
Vested(282)18.48
Cancelled/forfeited(105)15.00
Nonvested at end of period2,227
$7.63

The actual tax benefits realized related to the restricted stock units vested during the year ended December 31, 2017 and 2016 were $1.1 million and $2.7 million, respectively.

Company performance-based restricted stock units

During 2017 and 2016, we granted certain B&W employees performance-based restricted stock units ("PSUs") under the Plan, which include both performance and service conditions. PSU awards vest upon satisfying certain service requirements and B&W financial metrics, including return on invested capital (ROIC), earnings per share (EPS) and total shareholder return (TSR), established by the board of directors. The fair value of the TSR portion of each PSU granted was estimated at the date of grant using a Monte Carlo methodology based on market prices and the following weighted-average assumptions:
 Year Ended December 31,Year Ended December 31,
 20172016
Risk-free interest rate1.54%0.96%
Expected volatility42%25%
Expected life of the option in years2.83
2.83
Expected dividend yield%%

PSU activity for the year ending December 31, 2017 was as follows:
(share data in thousands)Number of SharesWeighted-Average Grant Date Fair Value
Nonvested at beginning of period451
$19.29
Granted828
9.74
Vested(3)9.67
Cancelled/forfeited(141)14.07
Nonvested at end of period1,135
$12.75

Company performance-based, cash settled units

In 2017, we granted certain B&W employees cash-settled performance units under the Plan, the value of which is tied to the fair market value of our common stock on the vesting dates, subject to a ceiling of 150% of the grant date share value. The activity for the cash-settled performance units for the year ending December 31, 2017 was as follows:
(share data in thousands)Number of SharesWeighted-Average Grant Date Fair Value
Nonvested at beginning of period32
$18.53
Granted1,908
2.90
Vested(7)
Cancelled/forfeited(134)3.93
Nonvested at end of period1,799
$4.53

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NOTE 1013PROVISION FOR INCOME TAXESPENSION PLANS AND OTHER POSTRETIREMENT BENEFITS


WeThe Company has historically provided defined benefit retirement benefits to domestic employees under the Retirement Plan for Employees of Babcock & Wilcox Commercial Operations (the “U.S. Plan”), a noncontributory plan. As of 2006, the U.S. Plan was closed to new salaried plan entrants. Effective December 31, 2015, benefit accruals for those salaried employees covered by, and continuing to accrue service and salary adjusted benefits under the U.S. Plan ceased. As of December 31, 2022, and 2021, approximately 72 and 73 hourly union employees continue to accrue benefits under the U.S. Plan for the respective years.

Effective January 1, 2012, a defined contribution component was adopted applicable to Babcock & Wilcox Canada, Ltd. (the “Canadian Plans”). Any employee with less than two years of continuous service as of December 31, 2011 was required to enroll in the defined contribution component of the Canadian Plans as of January 1, 2012 or upon the completion of 6 months of continuous service, whichever is later. These and future employees will not be eligible to enroll in the defined benefit component of the Canadian Plans. In 2014, benefit accruals under certain hourly Canadian pension plans were ceased with an effective date of January 1, 2015. As part of the spin-off transaction, the Company split the Canadian defined benefit plans from BWXT, which was completed in 2017. The Company did not present these plans as multi-employer plans because its portion was separately identifiable, and the Company was able to assess the assets, liabilities and periodic expense in the same manner as if it were a separate plan in each period.

The Company also sponsors the Diamond Power Specialty Limited Retirement Benefits Plan (the “U.K. Plan”) through its subsidiary. Benefit accruals under this plan ceased to be effective November 30, 2015. The Company has accounted for the GMP equalization following the U.K. High Court ruling during the fourth quarter of 2018 by recording prior service cost in accumulated other comprehensive income that will be amortized through net periodic pension cost over 15 years, ending December 31, 2033.

The Company does not provide retirement benefits to certain non-resident alien employees of foreign subsidiaries. Retirement benefits for salaried employees who accrue benefits in a defined benefit plan are based on final average compensation and years of service, while benefits for hourly paid employees are based on a flat benefit rate and years of service. The Company's funding policy is to fund the plans as recommended by the respective plan actuaries and in accordance with the Employee Retirement Income Security Act of 1974, as amended, or other applicable law. Funding provisions under the Pension Protection Act accelerate funding requirements to ensure full funding of benefits accrued.

The Company makes available other benefits which include postretirement health care and life insurance benefits to certain salaried and union retirees based on their union contracts, and on a limited basis, to future retirees.

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Obligations and funded status
Pension Benefits
Year Ended December 31,
Other Benefits 
Year Ended December 31,
(in thousands)2022202120222021
Change in benefit obligation:
Benefit obligation at beginning of period$1,199,845 $1,284,019 $10,372 $11,802 
Service cost699 781 20 22 
Interest cost26,676 22,559 182 145 
Plan participants’ contributions— — 125 155 
Amendments— 676 — — 
Actuarial gain(249,945)(28,815)(1,353)(153)
Foreign currency exchange rate changes(4,413)165 (82)
Benefits paid(79,547)(79,540)(1,588)(1,602)
Benefit obligation at end of period$893,315 $1,199,845 $7,676 $10,372 
Change in plan assets:
Fair value of plan assets at beginning of period$1,037,235 $1,047,646 $— $— 
Actual return on plan assets(184,570)42,954 — — 
Employer contribution3,713 26,158 1,463 1,447 
Plan participants' contributions— — 125 155 
Foreign currency exchange rate changes(5,908)17 — — 
Benefits paid(79,547)(79,540)(1,588)(1,602)
Fair value of plan assets at the end of period770,923 1,037,235 — — 
Funded status$(122,392)$(162,610)$(7,676)$(10,372)
Amounts recognized in the balance sheet consist of:
Accrued employee benefits$(1,118)$(1,162)$(1,162)$(1,297)
Accumulated postretirement benefit obligation— — (6,514)(9,075)
Pension liability(129,662)(173,655)— — 
Prepaid pension8,388 12,207 — — 
Accrued benefit liability, net$(122,392)$(162,610)$(7,676)$(10,372)
Amount recognized in accumulated comprehensive income (before taxes):
Prior service cost$966 $1,146 $1,665 $2,355 
Supplemental information:
Plans with accumulated benefit obligation in excess of plan assets
Projected benefit obligation856,546 1,141,706 — — 
Accumulated benefit obligation856,546 1,141,706 7,676 10,372 
Fair value of plan assets725,767 966,889 — — 
Plans with plan assets in excess of accumulated benefit obligation
Projected benefit obligation36,770 58,139 — — 
Accumulated benefit obligation36,770 58,139 — — 
Fair value of plan assets45,158 70,346 — — 


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Components of net periodic benefit cost (benefit) included in net income (loss) are as follows:
Pension BenefitsOther Benefits
Year ended December 31,Year ended December 31,
(in thousands)202220212020202220212020
Interest cost$26,676 $22,559 $33,267 $182 $145 $288 
Expected return on plan assets(57,547)(56,154)(61,322)— — — 
Amortization of prior service cost (credit)189 97 97 691 691 (1,084)
Recognized net actuarial (gain) loss(6,365)(15,327)22,676 (1,354)(153)478 
Benefit plans, net (1)
(37,047)(48,825)(5,282)(481)683 (318)
Service cost included in COS (2)
699 781 792 20 22 19 
Net periodic benefit cost (benefit)$(36,348)$(48,044)$(4,490)$(461)$705 $(299)
(1)    Benefit plans, net, which is presented separately in our 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 our Consolidated Statement of Operations and is allocated to the B&W Thermal segment.

Recognized net actuarial gain consists primarily of the Company's reported actuarial gain and the difference between the actual return on plan assets and the expected return on plan assets. Total net mark to market (“MTM”) adjustments for the Company's pension and other postretirement benefit plans were (gains) losses of $(7.7) million, $(15.5) million and $23.2 million in the years ended, December 31, 2022, 2021 and 2020, respectively. The recognized net actuarial (gain) loss was recorded in Benefit plans, net in the Company's Consolidated Statements of Operations.

Assumptions
 Pension BenefitsOther Benefits
Year ended December 31,Year ended December 31,
 202220212020202220212020
Weighted average assumptions used to determine net periodic benefit obligations:
Comparative single equivalent discount rate5.35%2.81%2.50%5.28%2.50%1.97%
Rate of compensation increase0.06%0.07%0.08%
Weighted average assumptions used to determine net periodic benefit cost:
Comparative single equivalent discount rate2.88%2.52%3.23%5.28%2.50%1.97%
Expected return on plan assets5.90%5.76%6.63%
Rate of compensation increase0.06%0.07%0.08%

The expected rate of return on plan assets is based on the long-term expected returns for the investment mix of assets currently in the portfolio. In setting this rate, the Company uses a building-block approach. Historic real return trends for the various asset classes in the plan's portfolio are combined with anticipated future market conditions to estimate the real rate of return for each asset class. These rates are then adjusted for anticipated future inflation to determine estimated nominal rates of return for each asset class. The expected rate of return on plan assets is determined to be the weighted average of the nominal returns based on the weightings of the asset classes within the total asset portfolio. The Company uses an expected return on plan assets assumption of 6% for the majority of our pension plan assets (approximately 94% of our total pension assets at December 31, 2022).

Investment goals

The overall investment strategy of the pension trusts is to achieve long-term growth of principal, while avoiding excessive risk and to minimize the probability of loss of principal over the long term. The specific investment goals that have been set
81


for the pension trusts in the aggregate are (1) to ensure that plan liabilities are met when due and (2) to achieve an investment return on trust assets consistent with a reasonable level of risk.

Allocations to each asset class for both domestic and foreign plans are reviewed periodically and rebalanced, if appropriate, to assure the continued relevance of the goals, objectives and strategies. The pension trusts for both domestic and foreign plans employ a professional investment advisor and a number of professional investment managers whose individual benchmarks are, in the aggregate, consistent with the plans' overall investment objectives. The goals of each investment manager are (1) to meet (in the case of passive accounts) or exceed (for actively managed accounts) the benchmark selected and agreed upon by the manager and the trust and (2) to display an overall level of risk in its portfolio that is consistent with the risk associated with the agreed upon benchmark.

The investment performance of total portfolios, as well as asset class components, is periodically measured against commonly accepted benchmarks, including the individual investment manager benchmarks. In evaluating investment manager performance, consideration is also given to personnel, strategy, research capabilities, organizational and business matters, adherence to discipline and other qualitative factors that may impact the ability to achieve desired investment results.

Domestic plans: The Company sponsors the U.S. Plan, which is a domestic defined benefit plan. The assets of this plan are held by the Trustee in The Babcock & Wilcox Company Master Trust (the “Master Trust”). For the years ended December 31, 2022 and 2021, the investment return on domestic plan assets of the Master Trust (net of deductions for management fees) was approximately (17.49)% and 4.25%, respectively.

The following is a summary of the asset allocations for the Master Trust by asset category:
Year ended December 31,
20222021
Asset category:
United States government securities12 %17 %
Corporate stocks%%
Venture capital42 %40 %
Hedge funds27 %30 %
Cash and accrued items13 %%
The target asset allocation for the Master Trust as of December 31, 2022 was 50% of alternative, liquid credit and direct lending funds, 20% of fixed income securities, and 30% of equity and other investments. As of December 31, 2021, the target allocation was 50% of alternative, liquid credit and direct lending funds, 20% of fixed income securities, and 30% of equity and other investments. The Company routinely reassesses the target asset allocation with a goal of better aligning the timing of expected cash flows from those assets to the anticipated timing of benefit payments.

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Foreign plans: The Company sponsors various plans through certain of its foreign subsidiaries. These plans are the Canadian Plans and the U.K. Plan. The combined weighted average asset allocations of these plans by asset category were as follows:
Year ended December 31,
20222021
Asset category:
Commingled and mutual funds24 %30 %
Fixed income72 %67 %
Other%%
The target allocation for 2022 for the foreign plans, by asset class, is as follows:
Canadian
Plans
U.K. Plan
Asset class:
United States equity24 %%
Global equity26 %%
Fixed income and other50 %93 %

Fair value of plan assets
See Note 24 for a detailed description of fair value measurements and the hierarchy established for valuation inputs. In accordance with Subtopic 820-10, Fair Value Measurement and Disclosures, certain investments that are measured at fair value using the net asset value ("NAV") per share practical expedient have not been classified in the fair value hierarchy. The investments that are measured at fair value using NAV per share included in the tables below are intended to permit reconciliation of the fair value hierarchy to the fair value of plan assets at the end of each period, which is presented in the first table above titled “obligations and funded status”. The following is a summary of total investments of the Company's plans measured at fair value:
(in thousands)Year ended December 31, 2022Level 1Level 2Level 3
Commingled and mutual funds$12,020 $— $12,020 $— 
United States government securities83,948 83,948 — — 
Fixed income53,258 13,191 32,548 7,519 
Equity41,313 41,137 — 176 
Venture capital250,344 — — 250,344 
Hedge fund83,439 — — 83,439 
Cash and accrued items$76,257 76,257 — — 
Investments measured at fair value$600,579 $214,533 $44,568 $341,478 
Investments measured at net asset value171,441 
Pending trades(1,096)
Total pension and other postretirement benefit assets$770,924 


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(in thousands)Year ended December 31, 2021Level 1Level 2Level 3
Commingled and mutual funds$22,261 $— $22,261 $— 
United States government securities167,328 167,328 — — 
Fixed income65,370 15,196 47,309 2,865 
Equity80,299 74,888 5,243 168 
Venture capital236,730 — — 236,730 
Hedge fund80,711 — — 80,711 
Cash and accrued items30,130 30,130 — — 
Investments measured at fair value$682,829 $287,542 $74,813 $320,474 
Investments measured at net asset value349,798 
Pending trades4,608 
Total pension and other postretirement benefit assets$1,037,235 

Expected cash flows
Domestic PlansForeign Plans
(in thousands)Pension
Benefits
Other
Benefits
Pension
Benefits
Other
Benefits
Expected employer contributions to trusts of defined benefit plans:
2023$1,146 $1,033 $277 $152 
Expected benefit payments (1):
202374,703 1,033 2,495 152 
202473,971 932 2,504 141 
202572,861 847 2,608 127 
202671,658 767 2,674 120 
202770,197 692 2,679 107 
2028-2032324,874 2,509 13,989 384 
(1Pension benefit payments are made from their respective plan's trust.


The Company made contributions to its pension and other postretirement benefit plans totaling $5.2 million and $27.6 million during the years ended December 31, 2022 and 2021.

In accordance with the American Rescue Plan Act of 2021, the Company elected to defer $20.9 million of the estimated Pension Plan contribution payments of $45.6 million that would have been due during 2021. Contributions made during the year ended December 31, 2021 include $0.4 million of interest as required per the CARES Act that was signed into law on March 27, 2020.

Defined contribution plans

The Company provides benefits under The B&W Thrift Plan (the “Thrift Plan”). The Thrift Plan generally provides for matching employer contributions. Beginning in April 2020 and continuing through December 31, 2022, as part of the Company's response to the impact of the COVID-19 pandemic on its business, the Company suspended its 401(k) company match for U.S. employees. The Company resumed its employer contributions beginning in 2022 inclusive of a one-time profit sharing contribution for the 2021 plan year equal to 0.75% of eligible employees' base pay. Employer matching contributions are typically made in cash. Amounts charged to expense for employer contributions under the Thrift Plan totaled approximately $3.1 million, $0.0 million and $1.0 million in the years ended December 31, 2022, 2021 and 2020, respectively.

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Also, the Company's salaried Canadian employees are provided with a defined contribution plan. The amount charged to expense for employer contributions was approximately $0.3 million, $0.3 million and $0.3 million in the years ended December 31, 2022, 2021 and 2020, respectively.

Multi-employer plans

One of the Company's subsidiaries in the B&W Thermal segment contributes to various multi-employer plans. The plans generally provide defined benefits to substantially all unionized workers in this subsidiary. The following table summarizes the Company's contributions to multi-employer plans for the years covered by this report:
Pension FundEIN/PINPension Protection
Act Zone Status
FIP/RP Status
Pending/
Implemented
ContributionsSurcharge ImposedExpiration Date
of Collective
Bargaining
Agreement
202220212020
202220212020(in millions)
Boilermaker-Blacksmith National Pension Trust48-6168020/ 001YellowYellowYellowYes$8.0 $16.6 $4.0 NoDescribed
Below
All other1.0 2.2 0.9 
$9.0 $18.8 $4.9 
The Company's collective bargaining agreements with the Boilermaker-Blacksmith National Pension Trust (the “Boilermaker Plan”) is under a National Maintenance Agreement platform which is evergreen in terms of expiration. However, the agreement allows for termination by either party with a 90-day written notice. The Company's contributions to the Boilermaker Plan constitute less than 5% of total contributions to the Boilermaker Plan. All other contributions expense for all periods included in this report represents multiple amounts to various plans that, individually, are deemed to be insignificant.

NOTE 14 – 2021 SENIOR NOTES OFFERINGS

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 Senior Notes bearing a per annum interest rate of 8.125% 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 interest 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, have the same CUSIP number and are fungible with the initial 8.125% Senior Notes issuance in 2021.

During the year ended December 31, 2022, the Company sold $6.8 million aggregate principal of 8.125% per annum Senior Notes under the sales agreement described above for $6.7 million of net proceeds.

The 8.125% Senior Notes are senior unsecured obligations of the Company and rank equally in right of payment with all of the Company’s other existing and future senior unsecured and unsubordinated indebtedness.

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 with an interest rate of 6.50% per annum. 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 and carry a maturity date of December 31, 2026.
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The public offering of our 6.50% Senior Notes was conducted pursuant to an underwriting agreement dated December 8, 2021, between the Company and B. Riley Securities, Inc., an affiliate of B. Riley, a related party, as representative of several underwriters.

The 6.50% Senior Notes are senior unsecured obligations of the Company and rank equally in right of payment with all of the Company’s other existing and future senior unsecured and unsubordinated indebtedness. The 6.50% Senior Notes are effectively subordinated in right of payment to all of the Company’s existing and future secured indebtedness and structurally subordinated to all existing and future indebtedness of the Company’s subsidiaries, including trade payables.

The components of the Company's senior notes at December 31, 2022 are as follows:

Senior Notes
(in thousands)8.125%6.50%Total
Senior notes due 2026$193,026 $151,440 $344,466 
Unamortized deferred financing costs(4,126)(5,299)(9,425)
Unamortized premium457 — 457 
Net debt balance$189,357 $146,141 $335,498 

NOTE 15– LAST OUT TERM LOANS

Effective with the new debt facilities the Company entered into on June 30, 2021, as described in Note 16 below, the Company has no remaining Last Out Term Loans and no further borrowings thereunder are available.


NOTE 16 – REVOLVING DEBT

Debt Facilities

On June 30, 2021, the Company entered into a Revolving Credit Agreement (the “Revolving Credit Agreement”) with PNC Bank, National Association ("PNC"), as administrative agent 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”). In December 2022, the Company deposited $10.0 million with PNC for Letter of Credit collateral to enable MSD to reduce their collateral requirement by $10.0 million. 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, including to backstop or replace certain letters of credit issued under our previous A&R Credit Agreement, dated as of May 14, 2020 (as amended, restated or otherwise modified from time to time), by and among the Company, as borrower, Bank of America, N.A., as administrative agent, the lenders and the other parties from time to time party thereto, which was repaid and commitments thereunder terminated as of June 30, 2021. The Revolving Credit Agreement matures on June 30, 2025. As of December 31, 2022, no borrowings have occurred under the Revolving Credit Agreement and under the Letter of Credit Agreement, usage consisted of $13.6 million of financial letters of credit and $100.8 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 LIBOR 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 LIBOR plus 7.50%. Under the Letter of Credit Agreement, the
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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, 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.

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%.

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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 Letter of Credit Agreement as of December 31, 2022 was $60.3 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 $37.8 million as of December 31, 2022. Of the outstanding letters of credit issued under the Letter of Credit Agreement, $67.5 million are subject to federal income taxforeign 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 the 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 those underwriters issue in support of some of its contracting activity. As of December 31, 2022, bonds issued and outstanding under these arrangements in support of contracts totaled approximately $320.6 million. The aggregate value of the letters of credit backstopping surety bonds was $14.1 million.
The Company's ability to obtain and maintain sufficient capacity under its new Debt Facilities is essential to enable 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 United States and income taxfuture will be diminished.

Other Indebtedness - Loans Payable

As of multiple state and international jurisdictions. We provide for income taxes based onDecember 31, 2022, the tax laws and ratesCompany's Denmark subsidiary has an unsecured interest-free loan of $0.8 million under a local government loan program related to COVID-19 that is payable May 2023. In addition, the Company had a $2.9 million loan payable related to financed insurance premiums payable April 2023 which is included in Current loans payable in the jurisdictions in which we conduct our operations. These jurisdictions may have regimes of taxation that vary with respect to both nominal ratesCompany's Consolidated Balance Sheets.

B&W Solar has loans, primarily for vehicles and the basis on which these rates are applied. Our consolidated effective income tax rate can vary significantly from period to period due to these variations, changes in jurisdictional mix of our income and valuation allowances in certain jurisdictions that can offset income tax expense or benefit.

We are currently under audit by various domestic and international authorities. With few exceptions, we do not have any returns under examination for years prior to 2013. The United States Internal Revenue Service has completed examinations of the federal tax returns of BWC through 2014, and all matters arising from such examinations have been resolved.

We recognize the effect of income tax positions only if it is more-likely-than-not that those positions will be sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. Unrecognized tax benefits are as follows:
(in thousands)201720162015
Balance at beginning of period$884
$1,141
$3,321
Increases based on tax positions taken in the current year277
178
88
Increases based on tax positions taken in the prior years56
230
248
Decreases based on tax positions taken in the prior years(13)
(1,161)
Decreases due to settlements with tax authorities
(665)(1,355)
Decreases due to lapse of applicable statute of limitation


Balance at end of period$1,204
$884
$1,141

The $1.2equipment, totaling $0.5 million balance of unrecognized tax benefits at December 31, 2017 would decrease expense if recognized. We do not expect any2022. In addition, as disclosed within Note 10, the Company had approximately $13.3 million in Long Term Loans Payable which is net of our unrecognized income tax benefits to be resolveddebt issuance costs of $0.6 million, of which $0.6 million is classified as current, in the next twelve months. We recognize interest and penalties related to unrecognized tax benefits in our provision for income taxes; however, such amounts are not significant to any period presented.

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Deferred income taxes reflect the net tax effects of temporary differences between the financial and tax bases of assets and liabilities. Significant components of deferred tax assets andfinance liabilities as of December 31, 20172022 in connection with their Sale-Leaseback financing transactions. These loans are included in Notes payable and 2016 wereLong-term loans payables in the Company's Consolidated Balance Sheets.

NOTE 17 – PREFERRED STOCK

In May 2021, the Company completed a public offering of our 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 follows: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.

 December 31,
(in thousands)20172016
Deferred tax assets:  
Pension liability$58,810
$105,426
Accrued warranty expense5,262
11,628
Accrued vacation pay996
4,792
Accrued liabilities for self-insurance (including postretirement health care benefits)3,910
6,596
Accrued liabilities for executive and employee incentive compensation4,950
8,334
Investments in joint ventures and affiliated companies10,422
10,742
Long-term contracts6,801
10,318
Accrued Legal Fees1,579
2,110
Inventory Reserve1,842
2,445
Property, plant and equipment
1,587
Net operating loss carryforward95,715
33,187
State tax net operating loss carryforward21,658
15,372
Foreign tax credit carryforward7,150
3,870
Other tax credits5,678
737
Other4,980
7,852
Total deferred tax assets229,753
224,996
Valuation allowance for deferred tax assets(108,105)(40,484)
Net, total deferred tax assets121,648
184,512
   
Deferred tax liabilities:  
Long-term contracts569
3,601
Intangibles21,215
21,892
Property, plant and equipment2,835

Undistributed foreign earnings1,314
500
Goodwill
1,125
Other2,445
2,885
Total deferred tax liabilities28,378
30,003
Net deferred tax assets$93,270
$154,509
On June 1, 2021, the Company and B. Riley, a related party, entered into an agreement (the “Exchange Agreement”) pursuant to which the Company (i) issued B. Riley 2,916,880 shares of its Preferred Stock, representing an exchange price of $25.00 per share and paid $0.4 million in cash, and (ii) paid $0.9 million in cash to B. Riley for accrued interest due, in exchange for a deemed prepayment of $73.3 million of our then existing term loans with B. Riley under the Company’s prior A&R Credit Agreement.


AtOn July 7, 2021, the Company entered into a sales agreement with B. Riley Securities, Inc., a related party, in connection with the offer and to or through B. Riley Securities, Inc., from time to time, additional shares of Preferred Stock up to an aggregate amount of $76.0 million of Preferred Stock. The Preferred Stock will have the same terms and have the same CUSIP number and be fungible with, the Preferred Stock issued during May 2021. As of December 31, 2017, we had2022, the Company sold $7.7 million aggregate principal amount of Preferred Stock for $7.7 million net proceeds.

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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 the Company 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, as 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 valuation allowancerate 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 $108.1Directors will be payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year.

During 2022 and 2021, the Company's Board of Directors approved and paid dividends totaling $14.9 million and $9.1 million, respectively. There are no cumulative undeclared dividends of the Preferred Stock at December 31, 2022 and 2021.


NOTE 18 – COMMON STOCK

On February 12, 2021, the Company completed a public offering of its common stock pursuant to an underwriting agreement dated February 9, 2021, between the Company and B. Riley Securities, Inc., as representative of the several underwriters. At the closing, the Company issued to the public 29,487,180 shares of our common stock and received net proceeds of approximately $163.0 million after deducting underwriting discounts and commissions, but before expenses. The net proceeds of the offering were used to make a prepayment toward the balance outstanding under the Company's U.S. Revolving Credit Facility and to permanently reduce the commitments under our senior secured credit facilities.

On May 19, 2022, at the 2022 annual meeting of stockholders of the Company, 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 deferred tax assets, which we expect may notaward 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 realized through carrybacks, future reversalsavailable for the grant of existing taxable temporary differences and estimates of future taxable income. We believe that our remaining deferred tax assets are more likely than not realizable through carrybacks, future reversals of existing taxable temporary differences and estimates of future taxable income. Should we concludenew awards under the 2021 Plan.

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NOTE 19 –INTEREST EXPENSE AND SUPPLEMENTAL CASH FLOW INFORMATION

Interest expense in the future that any or all of our deferred tax assets are not more likely than not to be realized, we would establish additional valuation allowances and any changes to our estimated valuation allowance could be material to our consolidated financial statements. The following is an analysis of our valuation allowance for deferred tax assets:
(in thousands)
Beginning
balance
Charges to costs
and expenses
Charged to
other accounts
Ending
balance
Year Ended December 31, 2017$(40,484)$(61,021)$(6,600)$(108,105)
Year Ended December 31, 2016(10,077)(29,307)(1,100)(40,484)
Year Ended December 31, 2015(9,216)(861)
(10,077)

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We operate in numerous countries that have statutory tax rates below thatCompany's Consolidated Financial Statements consisted of the 35% federal statutory rate that has been applicable to the United States through December 31, 2017. 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 20% and approximately 30%. Income before the provision for income taxes was as follows:
following components:
 Year Ended December 31,
(in thousands)201720162015
United States$(44,835)$1,280
$(20,748)
Other than the United States(269,364)(109,419)40,953
Income before provision for income taxes$(314,199)$(108,139)$20,205
Year ended December 31,
(in thousands)202220212020
Components associated with borrowings from:
Senior notes$24,962 $13,273 $— 
Last Out Term Loans - cash interest— 4,349 6,140 
Last Out Term Loans - equitized interest— — 13,450 
U.S. Revolving Credit Facility— 1,416 13,988 
24,962 19,038 33,578 
Components associated with amortization or accretion of:
Revolving Credit Agreement4,400 2,735 — 
Senior notes2,612 2,510 — 
Last Out Term Loans - discount and financing fees— — 3,183 
U.S. Revolving Credit Facility - deferred financing fees and commitment fees— 5,995 14,811 
U.S. Revolving Credit Facility - deferred ticking fee for Amendment 16— — 1,660 
7,012 11,240 19,654 
Components associated with interest from:
Lease liabilities2,372 2,502 2,452 
Other interest expense10,637 6,613 4,112 
13,009 9,115 6,564 
Total interest expense$44,983 $39,393 $59,796 

The provision for income taxes consisted of:
 Year Ended December 31,
(in thousands)201720162015
Current:   
United States – federal$100
$284
$24,084
United States – state and local397
(415)3,458
Other than in the United States8,612
4,504
8,250
Total current9,109
4,373
35,792
Deferred:   
United States – Federal58,203
11,512
(35,888)
United States – state and local2,546
6,365
(111)
Other than in the United States(5,042)(15,307)3,878
Total deferred (benefit) provision55,707
2,570
(32,121)
Provision for income taxes$64,816
$6,943
$3,671


The following istable provides a reconciliation of the United States statutory federal tax rate (35%) to the consolidated effective tax rate:
 Year Ended December 31,
 201720162015
United States federal statutory rate35.0 %35.0 %35.0 %
State and local income taxes0.2
(3.5)13.8
Foreign rate differential(9.5)(12.8)(13.1)
Deferred Taxes - Change in Tax Rate(19.9)

Tax credits0.9
3.0
(14.7)
Dividends and deemed dividends from affiliates(1.8)(0.2)1.7
Valuation allowances(17.9)(28.1)4.3
Goodwill impairment(7.0)

Uncertain tax positions
0.3
(6.6)
Non-deductible expenses0.2
(1.8)2.4
Manufacturing deduction

(2.5)
Other(0.8)1.7
(2.1)
Effective tax rate(20.6)%(6.4)%18.2 %

We have foreign net operating loss benefits after tax of $75.0 million available to offset future taxable income in certain foreign jurisdictions. Of the foreign net operating loss benefits, $1.7 million is scheduled to expire in 2019 to 2026. The remaining net operating loss benefits have unlimited lives. We are carrying a valuation allowance of $66.0 million against the deferred tax asset related to the foreign loss carryforwards.

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At December 31, 2017, we have a tax effected United States federal net operating loss of $20.7 million. The United States federal operating loss will begin to expire in 2037, and we expect to fully utilize this net operating loss in future periods. At December 31, 2017, we have foreign tax credit carryovers of $7.2 million, against which we have a full valuation allowance. At December 31, 2017, we have state net operating loss benefits after tax of $21.7 million available to offset future taxable income in various states, against which we have $21.6 million of valuation allowance. Our state net operating loss carryforwards begin to expire in the year 2018.

It has been our practice to reinvest indefinitely, the earnings of our foreign subsidiaries and that position has not changed as a result of the enactment of the U.S. Tax Cuts and Jobs Act. If we were to distribute earnings from certain foreign subsidiaries, we would be subject to withholding taxes of approximately $4.4 million but U.S. income taxes would generally not be imposed upon such distributions. We have not established deferred taxes for these withholding taxes.

During the twelve months ended December 31, 2017, we prospectively adopted Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-based Payment Accounting. Adopting the new accounting standard resulted in a net $0.1 million income tax expense and $1.6 million income tax benefit in the three and twelve months ending December 31, 2017, respectively, associated with the income tax effects of vested and exercised share-based compensation awards.

New Tax Act

The United States Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017 and introduces significant changes to the United States income tax law. Beginning in 2018, the Tax Act reduces the United States statutory corporate income tax rate from 35% to 21% and creates a modified territorial system that will generally allow United States companies a full dividend received deduction for any future dividends from non-U.S. subsidiaries. In connection with the transition to a modified territorial system, the Tax Act also establishes a mandatory one-time deemed repatriation transition tax on currently deferred foreign earnings.
The SEC staff issued Staff Accounting Bulletin ("SAB 118"), which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under Accounting Standards Codification 740 ("ASC 740"). In accordance with SAB 118, we have made reasonable estimates of the effects of the Tax Act and recorded provisional amounts in our financial statements as of December 31, 2017. We will finalize our estimates in 2018 as we collect and analyze necessary data, and interpret additional guidance that becomes available.
Provisional amounts for the following income tax effects of the Tax Act have been recorded as of December 31, 2017:
Deferred tax effects
We remeasured our deferred taxes and recorded a deferred tax expense of $62.4 million. This amount consists of an expense for the corporate rate reduction of $54.4 million, expense of $0.8 million based on a change in our deferred taxes related to executive compensation and an expense of $7.2 million to record a valuation allowance on foreign tax credit carryforwards that are now expected to expire unused. While we are able to make a reasonable estimate of the deferred tax effects, our continued analysis of other aspects of the Tax Act could impact our estimate.
One-time transition tax
The Deemed Repatriation Transition Tax (Transition Tax) is a tax on previously untaxed accumulated and current earnings and profits (E&P) of certain of our foreign subsidiaries. To determine the amount of the Transition Tax, we must determine, in addition to other factors, the amount of post-1986 E&P of the relevant subsidiaries, as well as the amount of non-United States income taxes paid on such earnings. We are able to make a reasonable estimate of the Transition Tax and because we have estimated an E&P deficit, we have not recorded a Transition Tax. We are continuing to gather additional information to more precisely compute final E&P, including the computation of 2017 current year E&P which we will finalize with the 2017 tax return.

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NOTE 11 – COMPREHENSIVE INCOME

Gains and losses deferred in accumulated other comprehensive income (loss) ("AOCI") are reclassified and recognized in the consolidated statements of operations once they are realized. The changes in the components of AOCI, net of tax, for the years ended 2017, 2016 and 2015 were as follows:
(in thousands)Currency translation gain (loss) (net of tax)Net unrealized gain (loss) on investments (net of tax)Net unrealized gain (loss) on derivative instruments (net of tax)Net unrecognized gain (loss) related to benefit plans (net of tax)Total
Balance at December 31, 2014$11,551
$(22)$(123)$(1,032)$10,374
Other comprehensive income (loss) before reclassifications(19,459)(49)339
519
(18,650)
Amounts reclassified from AOCI to net income (loss)
27
1,133
(195)965
Net transfers from Parent(11,585)
437
(394)(11,542)
Net current-period other comprehensive income (loss)(31,044)(22)1,909
(70)(29,227)
Balance at December 31, 2015$(19,493)$(44)$1,786
$(1,102)$(18,853)
Other comprehensive income (loss) before reclassifications(24,494)7
2,046
7,692
(14,749)
Amounts reclassified from AOCI to net income (loss)

(3,030)150
(2,880)
Net current-period other comprehensive income (loss)(24,494)7
(984)7,842
(17,629)
Balance at December 31, 2016(43,987)(37)802
6,740
(36,482)
Other comprehensive income (loss) before reclassifications16,150
99
3,204
(152)19,301
Amounts reclassified from AOCI to net income (loss)
(24)(2,269)(2,955)(5,248)
Net current-period other comprehensive income (loss)16,150
75
935
(3,107)14,053
Balance at December 31, 2017$(27,837)$38
$1,737
$3,633
$(22,429)


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The amounts reclassified out of AOCI by component and the affected consolidated statements of operations line items are as follows (in thousands):
AOCI componentLine items in the Consolidated Statements of Operations affected by reclassifications from AOCIYear Ended December 31,
201720162015
Derivative financial instrumentsRevenues$10,059
$4,624
$546
 Cost of operations(118)195
155
 Other-net(7,438)(1,221)(24)
 Total before tax2,503
3,598
677
 Provision for income taxes234
568
149
 Net income$2,269
$3,030
$528
     
Amortization of prior service cost on benefit obligationsCost of operations$2,912
$254
$(1,475)
 Provision for income taxes(43)404
(1,168)
 Net income (loss)$2,955
$(150)$(307)
     
Realized gain on investmentsOther-net$38
$
$(42)
 Provision for income taxes14

(15)
 Net income (loss)$24
$
$(27)

NOTE 12 – CASH AND CASH EQUIVALENTS

The components of cash and cash equivalents and current and long-term restricted cash reporting within the Company's Consolidated Balance Sheets and in the Consolidated Statements of Cash Flows:
(in thousands)December 31, 2022December 31, 2021December 31, 2020
Held by foreign entities$46,640 $42,070 $38,726 
Held by U.S. entities30,088 182,804 18,612 
Cash and cash equivalents76,728 224,874 57,338 
Reinsurance reserve requirements447 443 4,551 
Restricted foreign accounts— — 2,869 
Project indemnity collateral (1)
5,723 
Bank guarantee collateral2,072 997 2,665 
Letters of credit collateral (2)
11,193 401 — 
Hold-back for acquisition purchase price (3)
5,900 — — 
Escrow for long-term project (4)
11,397 — — 
Restricted cash and cash equivalents36,732 1,841 10,085 
Total cash, cash equivalents and restricted cash shown in the Consolidated Statements of Cash Flows$113,460 $226,715 $67,423 
(1) The Company paid an additional $5.7 million in January, 2022 for project indemnity collateral which is reflected in Current restricted cash on the Company's Consolidated Balance Sheets. The remainder of the letters of credit are reflected within Restricted cash and cash equivalents.
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(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, including a hold-back of $5.9 million which is included in Current restricted cash and cash equivalents and Other accrued liabilities on the Company's Condensed Consolidated Balance Sheets. The hold-back is being held in escrow for potential payment of up to the maximum amount twelve 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 Consolidated Statements of Cash Flows and is included in Net cash used in activities:
Year ended December 31,
(in thousands)202220212020
Income tax payments, net$7,950 $4,991 $6,960 
Interest payments - 8.125% Senior Notes due 202615,365 10,451 — 
Interest payments - 6.50% Senior Notes due 202610,308 — — 
Interest payments on our U.S. Revolving Credit Facility— 5,979 11,675 
Interest payments on our Last Out Term Loans— 3,804 6,140 
Total cash paid for interest$25,673 $20,234 $17,815 

NOTE 20– STOCK-BASED COMPENSATION

Stock options

There were no stock options awarded in 2022. The following table summarizes activity for outstanding stock options for the year ended December 31, 2022:
(share data in thousands)Number of sharesWeighted-average
exercise price
Weighted-average
remaining
contractual term
(in years)
Aggregate
intrinsic value
(in thousands)
Outstanding at beginning of period288 $121.59 
Granted— — 
Exercised— — 
Cancelled/expired/forfeited(1)41.70 
Outstanding at end of period287 $121.70 3.34$103.0 
Exercisable at end of period287 $121.70 3.34$103.0 

The aggregate intrinsic value included in the table above represents the total pretax intrinsic value that would have been received by the option holders had all option holders exercised their options on December 31, 2022. The intrinsic value is calculated as the total number of option shares multiplied by the difference between the closing price of the Company's common stock on the last trading day of the period and the exercise price of the options. This amount changes based on the price of the Company's common stock.

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Restricted stock units

Non-vested restricted stock units activity for the year ended December 31, 2022 was as follows:
(share data in thousands)Number of sharesWeighted-average grant date fair value
Non-vested at beginning of period1,804 $5.79 
Granted1,248 7.71 
Vested(1,027)7.74 
Cancelled/forfeited(131)5.94 
Non-vested at end of period1,894 $7.15 

(in thousands)December 31, 2017December 31, 2016
Held by foreign entities$54,274
$94,415
Held by United States entities2,393
1,472
Cash and cash equivalents$56,667
$95,887
   
Reinsurance reserve requirements$21,061
$21,189
Restricted foreign accounts4,919
6,581
Restricted cash and cash equivalents$25,980
$27,770
As of December 31, 2022, total compensation expense not yet recognized related to non-vested restricted stock units was $10.3 million and the weighted-average period in which the expense is expected to be recognized is 2.75 years.


Our United States revolving credit facility described in Note 19 allowsRestricted stock units with Market Conditions

In July 2022, the Company granted market-based RSUs to certain members of management. The target number of market-based RSUs granted was 960. The RSUs will vest if the Company's closing stock price, on the New York Stock Exchange (NYSE), is equal to or higher than the Stock Price Goal of $12.00 per share during the performance period, which expires on the 5th anniversary of the Grant Date. The $6.70 grant date fair value per market-based RSU was determined using a Monte Carlo simulation approach. Compensation expense for nearly immediate borrowingawards with market conditions is recognized over the derived service period using cost of available capacity to fund cash requirementsequity as the drift rate in the normal coursesimulation for estimating the dividend service period and is not reversed if the market condition is not met.

The Company used the following assumptions to determine the fair value of the restricted stock units with market conditions as of December 31, 2022:

Year ended December 31,
2022
Risk free interest rate2.7 %
Volatility59.0 %
Cost of equity17.4 %
Performance period5 years
Derived service period0.78 years

Restricted stock units with market conditions activity for the year ended December 31, 2022 was as follows:

(share data in thousands)Number of sharesWeighted-average grant date fair value
Non-vested at beginning of period— $— 
Granted960 6.70 
Exercised(75)
Cancelled/forfeited(25)— 
Non-vested at end of period860 $6.70 

As of December 31, 2022, the total unrecognized compensation charge related to these RSU’s is approximately $2.5 million, which is expected to be recognized in fiscal 2023.

Stock Appreciation Rights

In December 2018, the Company granted stock appreciation rights to certain employees (“Employee SARs”) and to a non-employee related party, BRPI Executive Consulting, LLC (“Non-employee SARs”). The Employee SARs and Non-employee
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SARs both expire ten years after the grant date and primarily vest 100% upon completion after the required years of service. Upon vesting, the Employee SARs and Non-employee SARs may be exercised within 10 business meaningdays following the end of any calendar quarter during which the volume weighted average share price is greater than the share price goal. Upon exercise of the SARs, holders receive a cash-settled payment equal to the number of SARs that are being exercised multiplied by the difference between the stock price on the date of exercise minus the SARs base price. Employee SARs were issued under the Fourth Amended and Restated 2015 LTIP, and Non-employee SARs were issued under a Non-employee SARs agreement. The liability method was used to recognize the accrued compensation expense with cumulatively adjusted revaluations to the then current fair value at each reporting date through final settlement.

The Company used the following assumptions to determine the fair value of the SARs granted to employees and non-employee as of December 31, 2022 and 2021:
Year ended December 31,
 20222021
Risk-free interest rate4.00 %1.44 %
Expected volatility59 %53 %
Expected life in years5.656.49
Suboptimal exercise factor2.0x2.0x

In making these assumptions, the Company based estimated volatility on the historical returns of the Company's stock price and selected guideline companies. The Company based risk-free rates on the corresponding U.S. Treasury spot rates for the expected duration at the date of grant, which we convert to a continuously compounded rate. The Company relied upon a suboptimal exercise factor, representing the ratio of the base price to the stock price at the time of exercise, to account for potential early exercise prior to the expiration of the contractual term. With consideration to the executive level of the SARs holders, a suboptimal exercise multiple of 2.0x was selected. Subject to vesting conditions, should the stock price achieve a value of 2.0x above the base price, we assume the holders will exercise prior to the expiration of the contractual term of the SARs. The expected term for the SARs is an output of the Company's valuation model in estimating the time period that the minimum United States cash on handSARs are expected to remain unexercised. The Company's valuation model assumes the holders will exercise their SARs prior to the expiration of the contractual term of the SARs.

As of December 31, 2022, the SARS are fully vested and their total intrinsic value is maintained to minimize borrowing costs.$4.8 million.


NOTE 13 – INVENTORIES

The components of inventories are as follows:
(in thousands)December 31, 2017December 31, 2016
Raw materials and supplies$60,708
$61,630
Work in progress7,867
6,803
Finished goods13,587
17,374
Total inventories$82,162
$85,807

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NOTE 1421 INTANGIBLE ASSETSPROVISION FOR INCOME TAXES


Our intangibleIncome (loss) before income taxes includes the following:
Year ended December 31,
(in thousands)202220212020
United States$(6,563)$30,655 $(65,591)
Other than the United States(8,958)(1,341)61,673 
(Loss) income before income tax expense$(15,521)$29,314 $(3,918)

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Significant components of the provision for income taxes are as follows:
Year ended December 31,
(in thousands)202220212020
Current:
Federal (1)
740 $1,760 $(21)
State166 (141)246 
Foreign5,566 4,649 3,737 
Total current provision6,472 6,268 3,962 
Deferred:
Federal (2)
164 (103)1,084 
State (3) (4)
5,629 (8,772)— 
Foreign(1,202)383 3,133 
Total deferred provision4,591 (8,492)4,217 
Provision for income taxes$11,063 $(2,224)$8,179 
(1) The 2020 amount reflects a benefit of $0.6 million offsetting tax expense of $0.6 million in discontinued operations pursuant to the guidance in paragraph 740-20-45-7 that requires all components, including discontinued operations, be considered when determining the tax benefit from a loss from continuing operations. The 2021 amount reflects estimated withholding taxes on the divestiture of Diamond Power Machine (Hubei) Co.
(2) The 2020 amount reflects $1.1 million of deferred tax expense as a result of the change in indefinite reinvestment assertion related to certain foreign subsidiaries.
(3) The 2021 amount reflects a $8.7 million of deferred tax benefit primarily attributable to a reduction in the valuation allowance on net operating losses and temporary deductible benefits in certain states that are now expected to be recovered.
(4) The 2022 amount is primarily attributable to deferred tax expense associated with nontaxable mark-to-market pension gains in certain states where temporary deductible benefits are expected to be recovered, changes in enacted statutory income tax rates, and changes in apportionment relating to project mix.

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income (loss) before the provision (benefit) for income taxes.

The sources and tax effects of the differences are as follows:
Year ended December 31,
(in thousands)202220212020
Income tax benefit at federal statutory rate$(3,259)$6,156 $(823)
State and local income taxes985 1,054 346 
Foreign rate differential313 132 2,422 
Intra-entity debt restructuring (1)
— — 2,908 
Deferred taxes - change in tax rate1,217 (564)8,512 
Non-deductible (non-taxable) items330 (122)1,963 
Tax credits185 (34)(2,939)
Valuation allowances14,131 (13,136)(17,498)
Luxembourg impairment of investments— — (30,603)
Effect of DPMH sale— (1,090)— 
Expired credits1,691 — — 
Unrecognized tax benefits10 150 37,387 
Withholding taxes1,382 3,881 1,416 
Change in indefinite reinvestment assertion163 (15)1,084 
Disallowed interest deductions— 1,010 11,155 
Return to provision and prior year true-up(7,544)556 (7,855)
Other(58)(202)704 
Babcock & Wilcox Solar goodwill impairment1,517 — — 
Income tax expense (benefit)$11,063 $(2,224)$8,179 
(1) The 2020 amount reflects a restructuring of intercompany debt that resulted in the reduction of certain foreign net operating loss carryforwards.
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Deferred income taxes reflect the tax effects of differences between the financial and tax bases of assets and liabilities.

Significant components of deferred tax assets and liabilities are as follows:
Year ended December 31,
(in thousands)20222021
Deferred tax assets:
     Pension liability$28,644 $41,520 
Other accruals8,596 10,683 
Long-term contracts1,246 — 
Net operating loss carryforward405,640 401,750 
State net operating loss carry forward20,668 23,705 
Interest limitation carryforward49,871 41,104 
Foreign tax credit carryforward3,608 5,381 
Other tax credits3,477 5,336 
Lease liability14,596 15,455 
Capitalized R&D845 — 
Other7,401 4,810 
Total deferred tax assets$544,592 $549,744 
Valuation allowance for deferred tax assets(521,137)(512,803)
Total deferred tax assets, net$23,455 $36,941 
Deferred tax liabilities:
Property, plant and equipment$268 $1,653 
Right of use assets13,421 14,574 
Long-term contracts— 7,045 
Unremitted earnings1,232 1,069 
Intangibles18,588 13,999 
Total deferred tax liabilities33,509 38,340 
Net deferred tax liabilities$(10,054)$(1,399)

At December 31, 2022, the Company has foreign net operating loss ("NOL") carryforward deferred tax assets ("DTAs") of approximately $356.8 million available to offset future taxable income in certain foreign jurisdictions. Of these foreign NOL carryforwards, $184.5 million do not expire. The remaining foreign NOLs will expire between 2023 and 2039.

As December 31, 2022, the Company has U.S. federal NOL carryforward DTAs of approximately $48.9 million. Of this amount, $20.0 million will expire in 2036 and 2037. The remaining amount of U.S. NOL carryforward does not expire. A portion of the net operating loss carryforward is limited under Code Section 382. Approximately $24.7 million of our U.S. federal NOL carryforward is not subject to the Code Section 382 limitation.

At December 31, 2022, the Company has state NOL carryforward DTAs of $20.7 million available to offset future taxable income in various jurisdictions. Of this amount, $20.3 million will expire between 2023 and 2042.

At December 31, 2022, the Company has foreign tax credit carryforwards of $3.6 million. These carryforwards will expire between 2023 and 2026.

At December 31, 2022, the Company has valuation allowances of $521.1 million for deferred tax assets, which we expect will not be realized, through carry-backs, reversals of existing taxable temporary differences, estimates of future taxable income or tax-planning strategies. Deferred tax assets are as follows:evaluated for realizability under ASC 740, considering all positive and negative evidence. At December 31, 2022, our weighting of positive and negative evidence included an assessment of
95


(in thousands)December 31, 2017December 31, 2016
Definite-lived intangible assets  
Customer relationships$59,794
$47,892
Unpatented technology20,160
18,461
Patented technology6,542
2,499
Tradename22,951
18,774
Backlog30,160
28,170
All other7,611
7,430
Gross value of definite-lived intangible assets147,218
123,226
Customer relationships amortization(23,434)(17,519)
Unpatented technology amortization(5,013)(2,864)
Patented technology amortization(2,213)(1,532)
Tradename amortization(5,097)(3,826)
Acquired backlog amortization(28,695)(21,776)
All other amortization(7,291)(5,974)
Accumulated amortization(71,743)(53,491)
Net definite-lived intangible assets$75,475
$69,735
   
Indefinite-lived intangible assets:  
Trademarks and trade names$1,305
$1,305
Total indefinite-lived intangible assets$1,305
$1,305

historical income by jurisdiction adjusted for nonrecurring items, as well as an evaluation of other qualitative factors such as the length and magnitude of pretax losses. The following summarizes the changesvaluation allowances may be reversed in the carrying amountfuture if sufficient positive evidence exists. Any reversal of intangible assets:
our valuation allowance could be material to the income or loss for the period in which our assessment changes.
 Twelve months ended December 31,
(in thousands)20172016
Balance at beginning of period$71,039
$37,844
Business acquisitions19,500
55,438
Amortization expense(18,252)(19,923)
Currency translation adjustments and other4,493
(2,320)
Balance at end of the period$76,780
$71,039


The January 11, 2017 acquisition of Universal resulted in an increase in our intangible asset amortization expensenet change during the year ended December 31, 2017in the total valuation allowance is as follows:
Year ended December 31,
(in thousands)20222021
Balance at beginning of period$(512,803)$(536,251)
Charges to costs and expenses(14,131)13,136 
Charges to other accounts5,797 10,312 
Balance at end of period$(521,137)$(512,803)

Sections 382 and 383 of $3.1 million.

The July 1, 2016 acquisitionthe Code limits, for U.S. federal income tax purposes, the annual use of SPIG, S.p.A. resulted inNOL carryforwards (including previously disallowed interest carryforwards) and tax credit carryforwards, respectively, following an ownership change. Under Code Section 382, a $9.1 million and $13.3 million increase in our intangible asset amortization expensecompany has undergone an ownership change if shareholders owning at least 5% of the company have increased their collective holdings by more than 50% during the year ended December 31, 2017prior three-year period. Based on information that is publicly available, the Company determined that a Section 382 ownership change occurred on July 23, 2019. As a result of this change in ownership, the Company estimated that the future utilization of our federal NOLs (and certain credits and six months ended December 31, 2016, respectively.previously disallowed interest deductions) will become limited to approximately $1.2 million annually ($0.3 million tax effected) The Company maintains a full valuation allowance on the majority of its U.S. deferred tax assets, including the deferred tax assets associated with the federal NOLs, credits and disallowed interest carryforwards.


AmortizationUndistributed earnings of intangible assets is includedcertain foreign subsidiaries amounted to approximately $180.4 million. The Company no longer intends to assert indefinite reinvestment with respect to withholding taxes of $1.2 million that could be assessed on the repatriation of $12.4 million in cost of operations in our consolidated statement of operations, but it is not allocatedundistributed earnings. The Company continues to segment results.


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Estimated future intangible asset amortization expense is as follows (in thousands):
Year endingAmortization expense
December 31, 2018$12,423
December 31, 2019$10,371
December 31, 2020$9,077
December 31, 2021$8,817
December 31, 2022$7,244
Thereafter$27,543

NOTE 15 – GOODWILL

The following summarizes the changesassert indefinite reinvestment in the carrying amountremaining $168.0 million of goodwill:
(in thousands)PowerRenewableIndustrialTotal
Balance at December 31, 2015$47,137
$49,624
$104,308
$201,069
Increase resulting from SPIG acquisition

69,862
69,862
Purchase price adjustment - SPIG acquisition

2,539
2,539
Currency translation adjustments(917)(1,189)(3,969)(6,075)
Balance at December 31, 201646,220
48,435
172,740
267,395
Increase resulting from Universal acquisition

14,413
14,413
Impairment charges(1)

(49,965)(36,938)(86,903)
Currency translation adjustments1,150
1,530
6,813
9,493
Balance at December 31, 2017$47,370
$
$157,028
$204,398

(1) Prior to September 30, 2017, we hadexisting earnings that are not recorded any goodwill impairment charges.

Our annual goodwill impairment assessment is performed on October 1 of each year (the "annual assessment" date); however, events during 2017 have required two interim assessments of all six of our reporting units. In the second quarter of 2017, significant charges in our Renewable segment were consideredexpected to be distributed in the future. Upon repatriation of those earnings, in the form of dividends or otherwise, the Company would be subject to withholding taxes payable to various foreign countries. The Company expects to take the 100% dividends received deduction to offset any US federal taxable income on the undistributed earnings. Withholding taxes of approximately $2.1 million would be payable upon remittance of these previously unremitted earnings.

We recognize the benefit of a triggering event for the interim assessment as of June 30, 2017, which did not indicate impairment. During the third quarter of 2017, our market capitalization significantly decreased to below our equity value, which was consideredtax position when we conclude that a tax position, based solely on its technical merits, is more-likely-than-not to be a trigger for a second interim assessment. Additionally, the forecast was reduced for our SPIG reporting unit based on a change in the market strategy implemented by the new segment management to focus on core geographies and products, which we considered to be another triggering event for an interim assessment during the third quarter of 2017. The second interim assessment as of September 30, 2017 indicated impairment for our Renewable and SPIG reporting units as described below. Our 2017 annual goodwill impairment test as of October 1, 2017 did not indicate additional impairment.

Assessing goodwill for impairment involves a two step test. Step 1 of the test compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, the second step of the test is performed to measure the amount of the impairment loss, if any. Step 2 of the test compares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill, and impairmentsustained upon examination. A recognized tax benefit is measured as the excesslargest amount of the carrying value over the implied value of goodwill. Estimating the fair value of a reporting unit requires significant judgment. The fair value of each reporting unit determined under Step 1 of the goodwill impairment test was basedbenefit, on a 50% weighting of an income approach using a discounted cash flow analysis using forward-looking projections of future operating results, a 30% to 40% weighting of a market approach using multiples of revenue and earnings before interest, taxes, depreciation and amortization ("EBITDA") of guideline companies and a 20% to 10% weighting of a market approach using multiples of revenue and EBITDA from recent, similar business combinations.

We primarily attributed the significant decline in our market capitalization in the third quarter of 2017 to the announcement of significant charges in the Renewable reporting unit. Accordingly, we increased the discount rate applied to future projected cash flows from 15.0% at June 30, 2017 to 23.5% at September 30, 2017. As a result of the increase in the discount rate and an increase in the carrying value of the reporting unit, impairment was indicated at September 30, 2017, which measured

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$50.0 million ($48.9 million net of tax), the full carrying value. Other long-lived assets in the reporting unit were not impaired.

For our SPIG reporting unit,cumulative probability basis, which is included in our Industrial segment, the Step 1 also indicated impairment at September 30, 2017. At June 30, 2017 and October 1, 2016, the fair value exceeded the carrying value by less than 1% and 5%, respectively. At September 30, 2017, the independently obtained fair value estimates decreased under both the income and market valuation approaches duemore likely-than-not to a short-term decrease in profitability attributable to specific current contracts and changes in SPIG's market strategy introduced by segment management during the third quarter. The discount rate applied to future projected cash flows was 14.0% and 12.5% at each of the September 30, 2017 and June 30, 2017 interim tests, respectively. Step 2 of the impairment test at September 30, 2017 measured $36.9 million of impairment (with no income tax impact). The SPIG reporting unit has $38.3 million of goodwill remaining after the September 30, 2017 impairment charge. Our 2017 annual goodwill impairment test as of October 1, 2017 utilized the same assumptions and inputs as the test we performed at September 30, 2017, and it did not indicate additional impairment. Other long-lived assets in the reporting unit were not impaired.

For the remaining four reporting units where impairment was not indicated at September 30, 2017, the goodwill balances at September 30, 2017 (and October 1, 2017) and the Step 1 goodwill impairment test headroom (the estimated fair value less the carrying value) are as follows:
 Power Segment Industrial Segment
(in millions)PowerConstruction MEGTECUniversal
Reporting unit headroom60%98% 12%18%
Goodwill balance$38.5$8.9 $104.3$14.4

NOTE 16 – PROPERTY, PLANT & EQUIPMENT

Property, plant and equipment is stated at cost. The composition of our property, plant and equipment less accumulated depreciation is set forth below:
(in thousands)December 31, 2017December 31, 2016
Land$8,859
$6,348
Buildings122,369
114,322
Machinery and equipment217,791
189,489
Property under construction6,486
22,378
 355,505
332,537
Less accumulated depreciation213,574
198,900
Net property, plant and equipment$141,931
$133,637

NOTE 17 – WARRANTY EXPENSE

be realized upon settlement. Changes in the carrying amount of our accrued warranty expense are as follows:
 Year Ended December 31,
(in thousands)201720162015
Balance at beginning of period$40,467
$39,847
$37,735
Additions23,161
22,472
19,310
Expirations and other changes(13,887)(10,855)(982)
Increases attributable to business combinations1,060
918

Payments(14,110)(11,089)(15,215)
Translation and other2,329
(826)(1,001)
Balance at end of period$39,020
$40,467
$39,847


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During the years ended December 31, 2017 and 2016, our Power segment reduced its accrued warranty expense by $9.1 million and $4.4 million, respectively, to reflect the expiration of warranties, and updated its estimated warranty accrual rate to reflect its warranty claims experience and current contractual warranty obligations. Additions to the warranty accrual include specific provisions on industrial steam contracts totaling $7.9 million and $2.1 million during the years ended December 31, 2017 and 2016, respectively.

NOTE 18 – PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

We have historically provided defined benefit retirement benefits to domestic employees under the Retirement Plan for Employees of Babcock & Wilcox Commercial Operations (the "Company Plan"), a noncontributory plan. As of 2006, the Company Plan was closed to new salaried plan entrants. Effective December 31, 2015, benefit accruals for those salaried employees covered by, and continuing to accrue service and salary adjusted benefits under the Company Plan will cease. Furthermore, beginning on January 1, 2016, we began making service-based, cash contributions to a defined contribution plan for those employees impacted by the plan freeze.

Effective January 1, 2012, a defined contribution component was adopted applicable to Babcock & Wilcox Canada, Ltd. (the "Canadian Plans"). Any employee with less than two years of continuous service as of December 31, 2011 was required to enroll in the defined contribution component of the Canadian Plans as of January 1, 2012recognition or upon the completion of 6 months of continuous service, whichever is later. These and future employees will not be eligible to enroll in the defined benefit component of the Canadian Plans. In 2014, benefit accruals under certain hourly Canadian pension plans were ceased with an effective date of January 1, 2015. As part of the spin-off transaction, we split the Canadian defined benefit plans from BWC, which was completed in 2017. We did not present these plans as multi-employer plans because our portion was separately identifiable and we were able to assess the assets, liabilities and periodic expense in the same manner as if it were a separate plan in each period.

We do not provide retirement benefits to certain non-resident alien employees of foreign subsidiaries. Retirement benefits for salaried employees who accrue benefits in a defined benefit plan are based on final average compensation and years of service, while benefits for hourly paid employees are based on a flat benefit rate and years of service. Our funding policy is to fund the plans as recommended by the respective plan actuaries and in accordance with the Employee Retirement Income Security Act of 1974, as amended, or other applicable law. Funding provisions under the Pension Protection Act accelerate funding requirements to ensure full funding of benefits accrued.

We make available other benefits which include postretirement health care and life insurance benefits to certain salaried and union retirees based on their union contracts, and on a limited basis, to future retirees.


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Obligations and funded status
 
Pension Benefits
Year Ended December 31,
 
Other Postretirement Benefits 
Year Ended December 31,
(in thousands)20172016 20172016
Change in benefit obligation:     
Benefit obligation at beginning of period$1,211,720
$1,205,163
 $11,907
$31,889
Service cost789
1,680
 15
23
Interest cost41,113
40,875
 319
897
Plan participants’ contributions

 219
574
Curtailments
266
 

Settlements509
1,453
 

Amendments
231
 
(10,801)
Actuarial loss (gain)73,403
41,957
 (141)(7,162)
Loss (gain) due to transfer
3,641
 

Foreign currency exchange rate changes6,222
(5,099) 126
50
Benefits paid(78,954)(78,447) (1,416)(3,563)
Benefit obligation at end of period$1,254,802
$1,211,720
 $11,029
$11,907
Change in plan assets:     
Fair value of plan assets at beginning of period$922,868
$923,030
 $
$
Actual return on plan assets149,449
76,570
 

Employer contribution17,307
3,986
 1,197
2,989
Plan participants' contributions

 219
574
Transfers
2,744
 

Foreign currency exchange rate changes(3,668)(5,015) 

Benefits paid(78,954)(78,447) (1,416)(3,563)
Fair value of plan assets at the end of period1,007,002
922,868
 

Funded status$(247,800)$(288,852) $(11,029)$(11,907)
Amounts recognized in the balance sheet consist of:     
Accrued employee benefits$(1,930)$(1,099) $(1,615)$(1,722)
Accumulated postretirement benefit obligation

 (9,414)(10,185)
Pension liability(245,870)(287,753) 

Prepaid pension

 

Accrued benefit liability, net$(247,800)$(288,852) $(11,029)$(11,907)
Amount recognized in accumulated comprehensive income (before taxes):   
Prior service cost (credit)$324
$432
 $(7,792)$(10,801)
Supplemental information:     
Plans with accumulated benefit obligation in excess of plan assets   
Projected benefit obligation$1,254,802
$1,183,345
 $
$
Accumulated benefit obligation$1,272,010
$1,206,056
 $11,029
$11,907
Fair value of plan assets$1,007,002
$894,105
 $
$
Plans with plan assets in excess of accumulated benefit obligation   
Projected benefit obligation$
$28,375
 $
$
Accumulated benefit obligation$
$28,375
 $
$
Fair value of plan assets$
$28,763
 $
$
Components of net periodic benefit cost (benefit) included in net income (loss) are as follows:
 Pension Benefits Other Benefits
(in thousands)201720162015 201720162015
Service cost$789
$1,680
$13,677
 $15
$23
$24
Interest cost41,113
40,875
49,501
 319
897
1,143
Expected return on plan assets(59,409)(61,939)(68,709) 


Amortization of prior service cost103
250
307
 (3,009)

Recognized net actuarial loss (gain)(8,191)31,932
41,574
 (505)(7,822)(1,364)
Net periodic benefit cost (benefit)$(25,595)$12,798
$36,350
 $(3,180)$(6,902)$(197)

95




During the first quarter of 2017, lump sum payments from our Canadian pension plan resulted in a plan settlement of $0.4 million, which also resulted in interim mark to market accounting for the pension plan. The mark to market adjustment in the first quarter of 2017 was $0.7 million. The effect of these charges and mark to market adjustmentsmeasurement are reflected in the "Recognized net actuarial loss (gain)"period in which the table above. There were no significant plan settlements or interim mark to market adjustments after the first quarter of 2017.change in judgment occurs.


We terminated the Babcock & Wilcox Retiree Medical Plan (the "Retiree OPEB plan") effective December 31, 2016. The Retiree OPEB plan was originally established to provide secondary medical insurance coverage for retirees that had reached the age of 65, up toBelow is a lifetime maximum cost. The Retiree OPEB plan had no plan assets, no accumulated other comprehensive income balance and no active participants astabular rollforward of the termination date. In exchange for terminating the Retiree OPEB plan, the participants had the option to enroll in a third-party health care exchange, which B&W agreed to contribute up to $750 a year for eachbeginning and ending aggregate unrecognized tax benefits:

Year ended December 31,
(in thousands)202220212020
Balance at beginning of period$36,448 $39,013 $1,229 
Increases based on tax positions taken in the current year— — 37,900 
Increases based on tax positions taken in prior years1,829 242 — 
Decreases based on tax positions taken in prior years— — (29)
Decreases due to settlements with tax authorities— — — 
Decreases due to lapse of applicable statute of limitation— — (87)
CTA/Translation(2,052)(2,807)— 
Balance at end of period$36,225 $36,448 $39,013 

Unrecognized tax benefits of the next three years (beginning in 2017), provided the plan participant had not yet reached their lifetime maximum under the terminated Retiree OPEB plan. Based on the number of participants who did not enroll in the new benefit plan, we recognized a settlement gain of $7.2 million on December 31, 2016. Based on the number of participants who did enroll in the new benefit plan, we recognized a curtailment gain of $10.8 million on December 31, 2016 for the actuarially determined difference in the liability for these participants in the Retiree OPEB plan and the new plan. The settlement gain is reported in the "Recognized net actuarial loss" in the table above, and the curtailment gain was deferred in accumulated other comprehensive income and $3.0 million waswould, if recognized, in 2017, and we expect to recognize the remainder during the periods of 2018 through 2020.

During 2016, we recorded adjustments to our benefit plan liabilities from pension curtailment and settlement events. Lump sum payments from our Canadian pension plan during 2016 resulted in interim pension plan settlement charges totaling $1.2 million in 2016. Also, in May 2016, the closure of our West Point, Mississippi manufacturing facility resulted in a $1.8 million curtailment charge in the Company Plan. These events also resulted in $27.5 million in interim MTM losses for these pension plans, the effects of which are reflected in the 2016 "Recognized net actuarial loss (gain)" in the table above along with a $1.4 million loss for the annual MTM adjustment of our pension plans at December 31, 2016.

Recognized net actuarial loss (gain) consists primarily of our reported actuarial loss (gain), curtailments and the difference between the actual return on plan assets and the expected return on plan assets. Total net mark to market adjustments for our pension and other postretirement benefit plans were (gains) losses of $(8.7) million, $24.1 million and $40.2 million in the years ended, December 31, 2017, 2016 and 2015, respectively. We have excluded the recognized net actuarial loss from our reportable segments and such amount has been reflected in Note 4 as the mark to market adjustment in the reconciliation of reportable segment income (loss) to consolidated operating losses. The recognized net actuarial (gain) loss was recorded in our consolidated statements of operations in the following line items:
(in thousands)201720162015
Cost of operations$(8,972)$21,208
$44,307
Selling, general and administrative expenses274
2,902
(4,097)
Other2


Total$(8,696)$24,110
$40,210


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Assumptions
 Pension Benefits Other Benefits
 20172016 20172016
Weighted average assumptions used to determine net periodic benefit obligations at December 31:     
Discount rate3.65%4.13% 3.33%3.66%
Rate of compensation increase0.10%2.40% 
Weighted average assumptions used to determine net periodic benefit cost for the years ended December 31:     
Discount rate4.11%4.25% 3.33%3.66%
Expected return on plan assets6.64%6.70% —%—%
Rate of compensation increase0.10%2.40% —%—%

The expected rate of return on plan assets is based on the long-term expected returns for the investment mix of assets currently in the portfolio. In setting this rate, we use a building-block approach. Historic real return trends for the various asset classes in the plan's portfolio are combined with anticipated future market conditions to estimate the real rate of return for each asset class. These rates are then adjusted for anticipated future inflation to determine estimated nominal rates of return for each asset class. The expected rate of return on plan assets is determined to be the weighted average of the nominal returns based on the weightings of the asset classes within the total asset portfolio. We use an expected return on plan assets assumption of 6.89% for the majority of our pension plan assets (approximately 93% of our total pension assets at December 31, 2017).
2016
Assumed health care cost trend rates at December 31
Health care cost trend rate assumed for next year8.50%
Rates to which the cost trend rate is assumed to decline (ultimate trend rate)4.50%
Year that the rate reaches ultimate trend rate2024

During the year ended December 31, 2017, we did not utilize health care cost assumptions as a result of our termination of the Babcock & Wilcox Retiree Medical Plan (the "Retiree OPEB plan") effective December 31, 2016.

Investment goals

The overall investment strategy of the pension trusts is to achieve long-term growth of principal, while avoiding excessive risk and to minimize the probability of loss of principal over the long term. The specific investment goals that have been set for the pension trusts in the aggregate are (1) to ensure that plan liabilities are met when due and (2) to achieve an investment return on trust assets consistent with a reasonable level of risk.

Allocations to each asset class for both domestic and foreign plans are reviewed periodically and rebalanced, if appropriate, to assure the continued relevance of the goals, objectives and strategies. The pension trusts for both our domestic and foreign plans employ a professional investment advisor and a number of professional investment managers whose individual benchmarks are, in the aggregate, consistent with the plans' overall investment objectives. The goals of each investment manager are (1) to meet (in the case of passive accounts) or exceed (for actively managed accounts) the benchmark selected and agreed upon by the manager and the trust and (2) to display an overall level of risk in its portfolio that is consistent with the risk associated with the agreed upon benchmark.

The investment performance of total portfolios, as well as asset class components, is periodically measured against commonly accepted benchmarks, including the individual investment manager benchmarks. In evaluating investment manager performance, consideration is also given to personnel, strategy, research capabilities, organizational and business matters, adherence to discipline and other qualitative factors that may impact the abilityeffective tax rate. The remaining balance of unrecognized tax benefits relates to achieve desired investment results.

Domestic plans: We sponsor the Company Plan, whichdeferred tax assets that, if recognized, would require a full valuation allowance. It is a domestic defined benefit plan. The assets of this plan are held by the Trustee in The Babcock & Wilcox Company Master Trust (the "Master Trust"). For the years ended December 31, 2017

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and 2016, the investment return on domestic plan assets of the Master Trust (net of deductions for management fees) was approximately 17% and 9%, respectively.

The following is a summary of the asset allocations for the Master Trust at December 31, 2017 and 2016 by asset category:
 20172016
Asset Category:  
Fixed Income (excluding United States Government Securities)33%32%
Commingled and Mutual Funds41%38%
United States Government Securities21%20%
Equity Securities3%7%
Derivatives1%1%
Other1%2%

The target asset allocation for the domestic defined benefit plan is 55% fixed income and 45% equities.

Foreign plans: We sponsor various plans through certain of our foreign subsidiaries. These plans are the Canadian Plans and the Diamond Power Specialty Limited Retirement Benefits Plan (the "Diamond United Kingdom Plan").

The combined weighted average asset allocations of these plans at December 31, 2017 and 2016 by asset category were as follows:
 2017 2016
Asset Category:   
Equity Securities and Commingled Mutual Funds41% 44%
Fixed Income58% 55%
Other1% 1%

The target allocation for 2017 for the foreign plans, by asset class, is as follows:
 
Canadian
Plans
 
Diamond
UK Plan
Asset Class:   
United States Equity27% 10%
Global Equity23% 12%
Fixed Income50% 78%

Fair value of plan assets

See Note 23 for a detailed description of fair value measurements and the hierarchy established for valuation inputs. The following is a summary of total investments for our plans measured at fair value at December 31, 2017:
(in thousands)12/31/2017Level 1Level 2
Fixed income$352,484
$
$352,484
Equities33,525
33,525

Commingled and mutual funds413,166

413,166
United States government securities193,249
193,249

Cash and accrued items14,578
12,585
1,993
Total pension and other postretirement benefit assets$1,007,002
$239,359
$767,643

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The following is a summary of total investments for our plans measured at fair value at December 31, 2016:
(in thousands)12/31/2016Level 1Level 2
Fixed income$321,847
$
$321,847
Equities83,441
78,268
5,173
Commingled and mutual funds349,348
4,609
344,739
United States government securities156,599
156,599

Cash and accrued items11,633
9,394
2,239
Total pension and other postretirement benefit assets$922,868
$248,870
$673,998

Expected cash flows
 Domestic Plans Foreign Plans
(in thousands)
Pension
Benefits 1
Other
Benefits
 
Pension
Benefits 1
Other
Benefits
Expected employer contributions to trusts of defined benefit plans:
2018$16,798
$1,400
 $3,126
$167
Expected benefit payments:     
2018$71,881
$1,463
 $3,003
$167
201972,537
1,342
 3,095
167
202073,104
854
 3,175
169
202173,331
802
 3,252
163
202273,434
746
 3,318
146
2023-2027359,308
2,975
 18,576
611

1 Pension benefit payments are made from their respective plan's trust.

Defined contribution plans

We provide benefits under The B&W Thrift Plan (the "Thrift Plan"). The Thrift Plan generally provides for matching employer contributions of 50% of participants' contributions up to 6% of compensation. These matching employer contributions are typically made in cash. We also provide service-based cash contributions under the Thrift Plan to employees not accruing benefits under our defined benefit plans. Amounts charged to expense for employer contributions under the Thrift Plan totaled approximately $14.4 million, $13.4 million and $8.9 million in the years ended December 31, 2017, 2016 and 2015, respectively.

We also provide benefits under the MEGTEC Union Plan, a defined contribution plan. The total employer contribution expense for the Union plan was approximately $0.2 million, $0.3 million and $0.3 million in the years ended December 31, 2017, 2016 and 2015, respectively. Matching employer contributions are made in cash.

We also provide benefits under the Universal Defined Contribution Plan (the "Universal Plan"). The total employer contribution expense for the Universal Plan was approximately $0.5 million in the year ended December 31, 2017. Matching employer contributions are made in cash.

Effective December 31, 2016, we merged the MEGTEC Non-union Plan and SPIG 401(k) defined contribution plans into the Thrift Plan. For the MEGTEC Non-union Plan, amounts charged to expense for our contributions were approximately $1.1 million and $1.1 million in the years ended December 31, 2016 and 2015, respectively. Matching employer contributions were made in cash. The SPIG 401(k) plan contributions were also made in cash, and were not material to our consolidated financial statements in 2016.

Also, our salaried Canadian employees are provided with a defined contribution plan. As of and in the periods following January 1, 2012, we made cash, service-based contributions under this arrangement. The amount charged to expense for

99



employer contributions was approximately $0.3 million, $0.4 million and $0.1 million in the years ended December 31, 2017, 2016 and 2015, respectively.

Multi-employer plans

One of our subsidiaries in the Power segment contributes to various multi-employer plans. The plans generally provide defined benefits to substantially all unionized workers in this subsidiary. The following table summarizes our contributions to multi-employer plans for the years covered by this report:
Pension Fund EIN/PIN 
Pension Protection
Act Zone Status
 
FIP/RP  Status
Pending/
Implemented
 Contributions Surcharge Imposed 
Expiration Date
Of Collective
Bargaining
Agreement
 
2017 2016 2015  
2017 2016 (in millions) 
Boilermaker-Blacksmith National Pension Trust 48-6168020/ 001 Yellow Yellow Yes $7.9
 $17.8
 $20.3
 No Described
Below
All Other         2.0
 3.2
 4.6
    
          $9.9
 $21.0
 $24.9
    

Our collective bargaining agreements with the Boilermaker-Blacksmith National Pension Trust (the "Boilermaker Plan") is under a National Maintenance Agreement platform which is evergreen in terms of expiration. However, the agreement allows for termination by either party with a 90-day written notice. Our contributions to the Boilermaker Plan constitute less than 5% of total contributions to the Boilermaker Plan. All other contributions expense for all periods included in this report represents multiple amounts to various plansexpected that individually, are deemed to be insignificant.

See Note 29 for the future expected effect of FASB ASU 2017-07 on the presentation of benefit and expense related to our pension and post retirement plans.

NOTE 19 – REVOLVING DEBT

The components of our revolving debt are comprised of separate revolving credit facilities in the following locations:
(in thousands)December 31, 2017December 31, 2016
United States$94,300
$9,800
Foreign9,173
14,241
Total revolving debt$103,473
$24,041

United States revolving credit facility

On May 11, 2015, we entered into a credit agreement with a syndicate of lenders ("Credit Agreement") in connection with our spin-off from The Babcock & Wilcox Company. The Credit Agreement, which is scheduled to mature on June 30, 2020, provides for a senior secured revolving credit facility, initially in an aggregate amount of up to $600.0 million. The proceeds from loans under the Credit Agreement are available for working capital needs and other general corporate purposes, and the full amount is available to support the issuance of letters of credit.

On February 24, 2017, August 9, 2017 and March 1, 2018, we entered into amendments to the Credit Agreement (the "Amendments" and the Credit Agreement, as amended to date, the "Amended Credit Agreement") to, among other things: (1) permit us to incur the debt under the second lien term loan facility (discussed further in Note 20), (2) modify the definition of EBITDA in the Amended Credit Agreement to exclude: up to $98.1 million of charges for certain Renewable segment contracts for periods including the quarter ended December 31, 2016, up to $115.2 million of charges for certain Renewable segment contracts for periods including the quarter ended June 30, 2017, up to $30.1 million of charges for certain Renewable segment contracts for periods including the quarter ended September 30, 2017, up to $38.7 million of charges for certain Renewable segment contracts for periods including the quarter ended December 31, 2017, up to $4.0 million of aggregate restructuring expenses incurred during the period from July 1, 2017 through September 30, 2018 measured on a consecutive four-quarter basis, realized and unrealized foreign exchange losses resulting from the impact of foreign currency

100



changes on the valuation of assets and liabilities, and fees and expenses incurred in connection with the August 9, 2017 and March 1, 2018 amendments, (3) replace the maximum leverage ratio with a maximum senior debt leverage ratio, (4) decrease the minimum consolidated interest coverage ratio, (5) limit our ability to borrow under the Amended Credit Agreement during the covenant relief period to $250.0 million in the aggregate, (6) reduce commitments under the revolving credit facility from $600.0 million to $450.0 million, (7) require us to maintain liquidity (as defined in the Amended Credit Agreement) of at least $75.0 million as of the last business day of any calendar month, (8) require us to repay outstanding borrowings under the revolving credit facility (without any reduction in commitments) with certain excess cash, (9) increase the pricing for borrowings and commitment fees under the Amended Credit Agreement, (10) limit our ability to incur debt and liens during the covenant relief period, (11) limit our ability to make acquisitions and investments in third parties during the covenant relief period, (12) prohibit us from paying dividends and undertaking stock repurchases during the covenant relief period (other than our share repurchase from an affiliate of AIP (discussed further in Note 20)), (13) prohibit us from exercising the accordion described below during the covenant relief period, (14) limit our financial and commercial letters of credit outstanding under the Amended Credit Agreement to $30.0 million, (15) require us to reduce commitments under the Amended Credit Agreement with the proceeds of certain debt issuances and asset sales, (16) beginning with the quarter ended March 31, 2018, limit to no more than $15.0 million any cumulative net income losses attributable to eight specified Vølund projects, (17) increase reporting obligations and require us to hire a third-party consultant and a chief implementation officer, (18) require us to pledge the equity of certain of our foreign subsidiaries to guarantee and provide collateral for our obligations under the United States credit facility, (19) require us to pay a deferred facility fee as more fully set forth in the March 1, 2018 Amendment, and (20) require us to sell at least $100 million of assets before March 31, 2019. The covenant relief period will end, at our election, when the conditions set forth in the Amended Credit Agreement are satisfied, but in no event earlier than the date on which we provide the compliance certificate for our fiscal quarter ended December 31, 2019.

Other than during the covenant relief period, the Amended Credit Agreement contains an accordion feature that allows us, subject to the satisfaction of certain conditions, including the receipt of increased commitments from existing lenders or new commitments from new lenders, to increase the amount of unrecognized tax benefits will change significantly during the commitments under the revolving credit facility in an aggregate amount not to exceed the sum of (1) $200.0 million plus (2) an unlimited amount, so long as for any commitment increase under this subclause (2) our senior leverage ratio (assuming the full amount of any commitment increase under this subclause (2) is drawn) is equal to or less than 2.00:1.0 after giving pro forma effect thereto. During the covenant relief period, our ability to exercise the accordion feature will be prohibited.

The Amended Credit Agreement and our obligations under certain hedging agreements and cash management agreements with our lenders and their affiliates are (1) guaranteed by substantially all of our wholly owned domestic subsidiaries, but excluding our captive insurance subsidiary, and (2) secured by first-priority liens on certain assets owned by us and the guarantors. The Amended Credit Agreement requires interest payments on revolving loans on a periodic basis until maturity.next 12 months. We may prepay all loans at any time without premium or penalty (other than customary LIBOR breakage costs), subject to notice requirements. The Amended Credit Agreement requires us to make certain prepayments on any outstanding revolving loans after receipt of cash proceeds from certain asset sales or other events, subject to certain exceptions and a right to reinvest such proceeds in certain circumstances. During the covenant relief period, such prepayments may require us to reduce the commitments under the Amended Credit Agreement by a corresponding amount of such prepayments. Following the covenant relief period, such prepayments will not require us to reduce the commitments under the Amended Credit Agreement.

The March 1, 2018 Amendment temporarily waived certain defaults and events of default under our United States credit facility that were breached on December 31, 2017 or that may occur in the future, with certain amendments effective immediately and other amendments effective upon the completion of the Rights Offering and the repayment of the outstanding balance of our Second Lien Notes Offering. If the Rights Offering and the repayment of the outstanding balance of our Second Lien Notes Offering do not occur by April 15, 2018 (subject to extension in certain cases), the temporary waiver will end. The temporary waiver will also end if certain other conditions specified in the March 1, 2018 Amendment occur. Upon any such termination of the waiver, our ability to borrow funds under the United States credit facility will terminate.

After giving effect to the Amendments, loans outstanding under the Amended Credit Agreement bear interest at our option at either LIBOR rate plus 7.0% per annum or the Base Rate plus 6.0% per annum until we complete the Rights Offering and prepay the Second Lien Term Loan facility and thereafter at our option at either (1) the LIBOR rate plus 5.0% per annum during 2018, 6.0% per annum during 2019 and 7.0% per annum during 2020, or (2) the Base Rate plus 4.0% per annum during 2018, 5.0% per annum during 2019, and 6.0% per annum during 2020. The Base Rate is the highest of the Federal Funds rate plus 0.5%, the one month LIBOR rate plus 1.0%, or the administrative agent's prime rate. Interest expense

recognize
101
96



interest and penalties related to unrecognized tax benefits in our provision for income taxes; however, such amounts are not significant to any period presented.
associated with our United States revolving credit facility loans for the year ended December 31, 2017 was $11.3 million, respectively. Included in interest expense was $6.3 million of non-cash amortization of direct financing costs for the year ended December 31, 2017. A commitment fee of 1.0% per annum is charged on the unused portions of the revolving credit facility. A letter of credit fee of 2.50% per annum is charged with respect
Tax years 2015 through 2021 remain open to the amount of each financial letter of credit outstanding, and a letter of credit fee of 1.50% per annum is charged with respect to the amount of each performance and commercial letter of credit outstanding. Additionally, an annual facility fee of $1.5 million is payable on the first business day of 2018 and 2019, and a pro rated amount is payable on the first business day of 2020.

The Amended Credit Agreement includes financial covenants that are tested on a quarterly basis, based on the rolling four-quarter period that ends on the last day of each fiscal quarter. After we complete the Rights Offering and the repayment of the outstanding balance of our Second Lien Notes Offering within the time period required by the March 1, 2018 Amendment, the maximum permitted senior debt leverage ratio as defined in the Amended Credit Agreement is:
8.50:1.0 for the quarter ended December 31, 2017,
7.00:1.0 for the quarter ending March 31, 2018,
6.50:1.0 for the quarters ending June 30, 2018 and September 30, 2018,
4.75:1.0 for the quarter ending December 31, 2018,
3.00:1.0 for the quarter ending March 31, 2019,
2.75:1.0 for the quarters ending June 30, 2019 and September 30, 2019 and
2.50:1.0 for the quarter ending December 31, 2019 and each quarter thereafter.

After we complete the Rights Offering and the repayment of the outstanding balance of our Second Lien Notes Offering within the time period required by the March 1, 2018 Amendment, the minimum consolidated interest coverage ratio as defined in the Credit Agreement is:
1.25:1.0 for the quarter ended December 31, 2017,
1.15:1.0 for the quarter ending March 31, 2018,
1.00:1.0 for the quarter ending June 30, 2018,
0.85:1.0 for the quarter ending September 30, 2018,
1.25:1.0 for the quarter ending December 31, 2018,
1.50:1.0 for the quarter ending March 31, 2019 and
2.00:1.0 for the quarters ending June 30, 2019 and each quarter thereafter.

Beginning with September 30, 2017, consolidated capital expenditures in each fiscal year are limited to $27.5 million.

At December 31, 2017, borrowings under the Amended Credit Agreement and foreign facilities consisted of $103.5 million at an effective interest rate of 6.89%. Usage under the Amended Credit Agreement consisted of $94.3 million of borrowings, $7.4 million of financial letters of credit and $123.7 million of performance letters of credit. After giving effect to the March 1, 2018 amendment, at December 31, 2017, we had approximately $221.4 million available for borrowings or to meet letter of credit requirements primarily based on trailing 12 month EBITDA (as defined in the Amended Credit Agreement), and our leverage and interest coverage ratios (as defined in the Amended Credit Agreement) were 2.59 and 2.50, respectively. We expect to be closest to the minimum financial covenant thresholds at September 30, 2018.

Foreign revolving credit facilities

Outside of the United States, we have revolving credit facilities in Turkey and India that are used to provide working capital to our operations in each country. These foreign revolving credit facilities allow us to borrow up to $9.2 million in aggregate and each have a one year term. At December 31, 2017, we had $9.2 million in borrowings outstanding under these foreign revolving credit facilities at an effective weighted-average interest rate of 6.07%. Subsequent to December 31, 2017, the foreign facilities were repaid and extinguished.

Letters of credit, bank guarantees and surety bonds

Certain 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 not securedassessment by the United States revolving credit facility asInternal Revenue Service and various state and international tax authorities. We do not have any returns under examination for years prior to 2014.

The Inflation Reduction Act ("IRA") and CHIPS and Science Act ("CHIPS Act") were signed into law in August 2022. The IRA introduced new provisions, including a 15 percent corporate alternative minimum tax for certain large corporations that have at least an average of $1 billion adjusted financial statement income over a consecutive three-tax-year period and a new excise tax on corporate stock buybacks of public US companies. The CHIPS Act, introduces investment tax credits and incentives in semiconductor manufacturing. The corporate minimum tax and excise tax on stock buybacks will be effective for years beginning after December 31, 2017 and 2016 was $269.1 million and $255.2 million, respectively. The aggregate value of all such letters of credit and bank guarantees that are partially secured by the United States revolving credit facility as of December 31, 20172022. There is no impact to our financial position at this time.


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was $114.2 million. The aggregate value of the letters of credit provided by the Company's United States revolving credit facility in support of letters of credit outside of the United States was $40.4 million as of December 31, 2017.

We have 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. Although there can be no assurance that we will maintain our surety bonding capacity, we believe our current capacity is adequate to support our existing contract requirements for the next 12 months. In addition, 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 December 31, 2017, bonds issued and outstanding under these arrangements in support of contracts totaled approximately $378.8 million.

NOTE 20 – SECOND LIEN TERM LOAN FACILITY

On August 9, 2017, we entered into a second lien credit agreement (the "Second Lien Credit Agreement") with an affiliate of American Industrial Partners ("AIP"), governing a second lien term loan facility. The second lien term loan facility consists of a second lien term loan in the principal amount of $175.9 million, all of which was borrowed on August 9, 2017, and a delayed draw term loan facility in the principal amount of up to $20.0 million, which was drawn in a single draw on December 13, 2017.

Borrowings under the second lien term loan, other than the delayed draw term loan, have a coupon interest rate of 10% per annum, and borrowings under the delayed draw term loan have a coupon interest rate of 12% per annum, in each case payable quarterly. Undrawn amounts under the delayed draw term loan accrue a commitment fee at a rate of 0.50%, which was paid at closing. The second lien term loan and the delayed draw term loan have a scheduled maturity of December 30, 2020.

In connection with our entry into the second lien term loan facility, we used $50.9 million of the proceeds to repurchase and retire approximately 4.8 million shares of our common stock (approximately 10% of our shares outstanding) held by an affiliate of AIP, which was one of the conditions precedent for the second lien term loan facility. Based on observable and unobservable market data, we determined the fair value of the shares we repurchased from the related party on August 9, 2017 was $16.7 million. We utilized a discounted cash flow model and estimates of our weighted average cost of capital on the transaction date to derive the estimated fair value of the share repurchase. The $34.2 million difference between the share repurchase price and the fair value of the repurchased shares was recorded as a discount on the second lien term facility borrowing. Non-cash amortization of the debt discount and direct financing costs will be accreted to the carrying value of the loan through interest expense over the term of the second lien term loan facility utilizing the effective interest method and an effective interest rate of 18.11%.

The carrying value of the second lien term loan facility at December 31, 2017 was as follows (in thousands):
Face value
Unamortized debt discount
and direct financing costs
Net carrying value
$195,884$35,743$160,141

Interest expense associated with our second lien credit agreement is comprised of the following:
(in thousands)
Coupon
Interest
Accretion of debt discount and amortization of financing costs
Total
Interest
Expense
For the three months ended September 30, 2017$2,554$1,095$3,649
For the three months ended December 31, 2017$4,657$2,131$6,788
Forecasted for the year ending December 31, 2018$20,266$9,838$30,104

Borrowings under the Second Lien Credit Agreement are (1) guaranteed by substantially all of our wholly owned domestic subsidiaries, but excluding our captive insurance subsidiary, and (2) secured by second-priority liens on certain assets owned by us and the guarantors. The Second Lien Credit Agreement requires interest payments on loans on a quarterly basis until maturity. Voluntary prepayments made during the first year after closing are subject to a make-whole premium, voluntary

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prepayments made during the second year after closing are subject to a 3.0% premium and voluntary prepayments made during the third year after closing are subject to a 2.0% premium. The Second Lien Credit Agreement requires us to make certain prepayments on any outstanding loans after receipt of cash proceeds from certain asset sales or other events, subject to certain exceptions and a right to reinvest such proceeds in certain circumstances, and subject to certain restrictions contained in an intercreditor agreement among the lenders under the Amended Credit Agreement and the Second Lien Credit Agreement.

The Second Lien Credit Agreement contains representations and warranties, affirmative and restrictive covenants, financial covenants and events of default substantially similar to those contained in the Amended Credit Agreement, subject to certain cushions. The Second Lien Credit Agreement is generally less restrictive than the Amended Credit Agreement. At December 31, 2017, we were in default of several financial covenants associated in the Second Lien Credit Agreement, which resulted in our classification of all of the $160.1 million net carrying value as a current liability in our consolidated balance sheet. Under the terms of the intercreditor agreement among the lenders under the United States Revolving Credit Agreement and the Second Lien Credit Agreement, we have a 180 day standstill period after March 1, 2018 to remedy the event of default under the Second Lien Credit Agreement. See Note 1 for our remediation plan.

The March 1, 2018 United States Revolving Credit Facility amendment temporarily waived all events of default, including cross-default provisions, which resulted in the outstanding balance being classified as noncurrent in our consolidated balance sheet at December 31, 2017.

NOTE 2122 – CONTINGENCIES


ARPA litigationLitigation Relating to Boiler Installation and Supply Contract


On February 28, 2014, the Arkansas River Power Authority ("ARPA")December 27, 2019, a complaint was filed suit against Babcock & Wilcox Power Generation Group, Inc. (now known as The Babcock & Wilcoxby P.H. Glatfelter Company and referred to herein as "BW PGG"(“Glatfelter”) in the United States District Court for the Middle District of Colorado (CasePennsylvania, Case No. 14-cv-00638-CMA-NYW)1:19-cv-02215-JPW, alleging breach of contract, negligence, fraud and other claims arising out of BW PGG's delivery of a circulating fluidized bed boiler and related equipment used in the Lamar Repowering Project pursuant to a 2005 contract.

A jury trial took place in mid-November 2016. Some of ARPA's claims were dismissed by the judge during the trial. The jury's verdict on the remaining claims was rendered on November 21, 2016. The jury found in favor of B&W with respect to ARPA's claims of fraudulent concealment and negligent misrepresentation and on one of ARPA's claims of breach of contract.contract, fraud, negligent misrepresentation, promissory estoppel and unjust enrichment (the “Glatfelter Litigation”). The jury foundcomplaint alleges damages in favorexcess of ARPA on the three remaining claims for breach of contract and awarded damages totaling $4.2 million, which exceeded the previous $2.3 million accrual we established in 2012 by $1.9$58.9 million. Accordingly, we increased our accrual by $1.9 million in the fourth quarter of 2016.

ARPA also requested that pre-judgment interest of $4.1 million plus post-judgment interest at a rate of 0.77% compounded annually be added to the judgment, together with certain litigation costs. The court granted ARPA $3.7 million of pre-judgment interest on July 21, 2017, which we recorded in our June 30, 2017 consolidated financial statements in other accrued liabilities and interest expense. B&W commenced an appeal of the judgment on August 18, 2017, and ARPA filed a notice of cross appeal on August 31, 2017.

In December 2017, we reached an agreement in principle to settle all matters related to the ARPA litigation for $7.0 million. The agreement requires us to make payments of $2.5 million, $2.5 million and $2.0 million on July 1, 2018, 2019 and 2020, respectively. We discounted the liability by approximately $0.6 million at December 31, 2017, and $2.5 million and $3.9 million was included in other current accrued liabilities and other noncurrent accrued liabilities, respectively, in our consolidated balance sheets at December 31, 2017. The settlement resulted in a $1.6 million reduction in our accrual in December 2017.

Stockholder litigation

On March 3, 2017 and March 13, 2017,16, 2020 the Company and certain of its officers were named as defendants in two separate but largely identical complaints alleging violations of the federal securities laws. The complaints were brought on behalf of a putative class of investors who purchased the Company's common stock between July 1, 2015 and February 28, 2017 and were filed in the United States District Court for the Western District of North Carolina (collectively, the "Stockholder Litigation"). During the second quarter of 2017, the Stockholder Litigation was consolidated into a single action and a lead

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plaintiff was selected by the Court. During the third quarter of 2017, the plaintiff further amended its complaint. As amended, the complaint now purports to cover investors who purchased shares between June 17, 2015 and August 9, 2017. We filed a motion to dismiss, in late 2017;and on December 14, 2020 the court deniedissued its order dismissing the motion in early 2018.

The plaintifffraud and negligent misrepresentation claims and finding that, in the Stockholder Litigation alleges fraud, misrepresentationevent 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 coursecounterclaim for breach of conduct relatingcontract, seeking damages in excess of $2.9 million. The Company intends to continue to vigorously litigate the facts surrounding certain projects underway inaction. However, given the Company's Renewable segment, which, according to the plaintiff, had the effect of artificially inflating the pricestage of the Company's common stock. The plaintiff further alleges that stockholders were harmed whenlitigation, it is too early to determine if the Company later disclosed that it would incur losses on these projects. The plaintiff seeks an unspecified amount of damages.

On February 16, 2018 and February 22, 2018, the Company and certain of its officers and directors were named as defendants in three separate but substantially similar derivative lawsuits filed in the United States District Court for the District of Delaware (the “Derivative Litigation”). The allegations and claims against defendants are largely the same. Plaintiffs assert a variety of claims against defendants including alleged violationsoutcome of the federal securities laws, gross mismanagement, waste, breach of fiduciary duties and unjust enrichment. Plaintiffs, who all purport to be current shareholders of the Company's common stock, are suing on behalf of the Company to recover costs and unspecified damages, and force implementation of corporate governance changes.

We believe the allegations in the StockholderGlatfelter Litigation and the Derivative Litigation are without merit, and that the respective outcomes of the Stockholder Litigation and the Derivative Litigation will not have a material adverse impact on ourThe Company's consolidated financial condition, results of operations or cash flows, netflows.

Stockholder Derivative and Class Action Litigation

On April 14, 2020, a putative B&W stockholder (the “Plaintiff”) filed a derivative and class action complaint against certain of the Company’s directors (current and former), executives and significant stockholders (collectively, “the Defendants”) and the Company (as a nominal defendant). The action was filed in the Delaware Court of Chancery (“the Court”) 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 coverage.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 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 Consolidated Balance Sheets at December 31, 2022. The Court has scheduled a hearing on July 10, 2023 to consider final approval of the settlement.


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


NOTE 2223DERIVATIVE FINANCIAL INSTRUMENTSCOMPREHENSIVE INCOME


Our foreign currency exchange ("FX") forward contracts that qualify for hedge accounting are designated as cash flow hedges. The hedged risk is the risk of changes in functional-currency-equivalent cash flows attributable to changes in FX spot rates of forecasted transactions related to long-term contracts. We exclude from our assessment of effectiveness the portion of the fair value of the FX forward contracts attributable to the difference between FX spot ratesGains and FX forward rates. At December 31, 2017 and 2016, we hadlosses deferred approximately $1.8 million and $0.8 million, respectively, of net gains on these derivative financial instruments in accumulated other comprehensive income (loss) ("AOCI").

At December 31, 2017, our derivative financial instruments consisted solely of FX forward contracts. The notional value of our FX forward contracts totaled $63.0 million at December 31, 2017 with maturities extending to November 2019. These instruments consist primarily of contracts to purchase or sell euros are generally reclassified and British pounds sterling. We are exposed to credit-related lossesrecognized in the eventConsolidated Statements of nonperformance by counterparties to derivative financial instruments. We attempt to mitigate this risk by using major financial institutions with high credit ratings.Operations once they are realized. The counterparties to allchanges in the components of our FX forward contracts are financial institutions party to our United States revolving credit facility. Our hedge counterparties haveAOCI, net of tax, for the benefityears ended of the same collateral arrangements2022, 2021, and covenants2020 were as described under our United States revolving credit facility. During the third quarter of 2017, our hedge counterparties removed the lines of credit supporting new FX forward contracts. Subsequently, we have not entered into any new FX forward contracts.follows:

(in thousands)Currency translation
loss
Net unrecognized loss
related to benefit plans
(net of tax)
Total
Balance at December 31, 2019$5,743 $(3,817)$1,926 
Other comprehensive income (loss) before reclassifications(53,318)— (53,318)
Reclassified from AOCI to net income (loss)— (998)(998)
Net other comprehensive (loss) income(53,318)(998)(54,316)
Balance at December 31, 2020$(47,575)$(4,815)$(52,390)
Other comprehensive loss before reclassifications(3,412)676 (2,736)
Reclassified from AOCI to net income (loss)(4,512)816 (3,696)
Net other comprehensive (loss) income(7,924)1,492 (6,432)
Balance at December 31, 2021$(55,499)$(3,323)$(58,822)
Other comprehensive income (loss) before reclassifications(14,834)— (14,834)
Reclassified from AOCI to net income (loss)— 870 870 
Net other comprehensive income (loss)(14,834)870 (13,964)
Balance at December 31, 2022$(70,333)$(2,453)$(72,786)

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98




The following tables summarize our derivative financial instruments:amounts reclassified out of AOCI by component and the affected Consolidated Statements of Operations line items are as follows (in thousands):
AOCI componentLine items in the Consolidated Statements of Operations affected by reclassifications from AOCIYear ended December 31,
202220212020
Release of currency translation adjustment with the sale of businessLoss on sale of business$— $4,512 $— 
Pension and post retirement adjustments, net of taxBenefit plans, net(870)(816)998 
Net (loss) income$(870)$3,696 $998 

 Asset and Liability Derivative
(in thousands)December 31, 2017December 31, 2016
Derivatives designated as hedges:  
Foreign exchange contracts:  
Location of FX forward contracts designated as hedges:  
Accounts receivable-other$1,088
$3,805
Other assets312
665
Accounts payable105
1,012
Other liabilities
213
   
Derivatives not designated as hedges:  
Foreign exchange contracts:  
Location of FX forward contracts not designated as hedges:  
Accounts receivable-other$7
$105
Accounts payable1,722
403
Other liabilities12
7

The effects of derivatives on our financial statements are outlined below:
 Year Ended December 31,
(in thousands)20172016
Derivatives designated as hedges:  
Cash flow hedges  
Foreign exchange contracts  
Amount of gain (loss) recognized in other comprehensive income$3,346
2,208
Effective portion of gain (loss) reclassified from AOCI into earnings by location:  
Revenues10,059
4,624
Cost of operations(118)195
Other-net(7,438)(1,221)
Portion of gain (loss) recognized in income that is excluded from effectiveness testing by location:  
Other-net(5,277)4,518
   
Derivatives not designated as hedges:  
Forward contracts  
Loss recognized in income by location:  
Other-net$(3,436)$(872)

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NOTE 2324 – FAIR VALUE MEASUREMENTS


The following tables summarize our 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 securitiesDecember 31, 2022Level 1Level 2
Corporate notes and bonds$4,154 $4,154 $— 
Mutual funds612 — 612 
United States Government and agency securities4,023 4,023 — 
Total fair value of available-for-sale securities$8,789 $8,177 $612 
(in thousands)    
Available-for-sale securitiesDecember 31, 2017Level 1Level 2Level 3
Commercial paper$1,895
$
$1,895
$
Certificates of deposit2,398

2,398

Mutual funds1,331

1,331

Corporate notes and bonds4,447
4,447


United States Government and agency securities5,738
5,738


Total fair value of available-for-sale securities$15,809
$10,185
$5,624
$


(in thousands)
Available-for-sale securitiesDecember 31, 2021Level 1Level 2
Corporate notes and bonds$9,477 $9,477 $— 
Mutual funds714 — 714 
United States Government and agency securities2,017 2,017 — 
Total fair value of available-for-sale securities$12,208 $11,494 $714 

(in thousands)    
Available-for-sale securitiesDecember 31, 2016Level 1Level 2Level 3
Commercial paper$6,734
$
$6,734
$
Certificates of deposit2,251

2,251

Mutual funds1,152

1,152

Corporate notes and bonds750
750


United States Government and agency securities7,104
7,104


Total fair value of available-for-sale securities$17,991
$7,854
$10,137
$
Available-For-Sale Debt Securities


DerivativesDecember 31, 2017December 31, 2016
Forward contracts to purchase/sell foreign currencies$(432)$2,940 

Available-for-sale securities

We estimate the fair value of available-for-sale securities based on quoted market prices. Our investments in available-for-sale debt securities are presented in "other assets"Other assets on our consolidated balance sheets.Consolidated Balance Sheets with contractual maturities ranging from 0-5 years.


DerivativesSenior Notes


Derivative assets and liabilities currently consistSee Note 14 above for a discussion of FX forward contracts. Where applicable, theour recent offerings of senior notes. The fair value of these derivative assets and liabilitiesthe senior notes is computed by discounting the projected future cash flow amounts to present value using market-based observable inputs, including FX forward and spot rates, interest rates and counterparty performance risk adjustments.based on readily available quoted market prices as of December 31, 2022.


(in thousands)December 31, 2022
Senior NotesCarrying ValueEstimated Fair Value
8.125% Senior Notes due 2026 ('"BWSN")$193,026 $185,923 
6.50% Senior Notes due 2026 ("BWNB")$151,440 $125,029 
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Other financial instrumentsFinancial Instruments


We used the following methods and assumptions in estimating our fair value disclosures for our other financial instruments:

Cash and cash equivalents and current and long-term restricted cash and cash equivalents. The carrying amounts that we have reported in the accompanying consolidated balance sheetsConsolidated Balance Sheets for cash and cash equivalents and current and long-term restricted cash and cash equivalents approximate their fair values due to their highly liquid nature.
Revolving debtDebt. We baseThe Company bases the fair values of debt instruments on quoted market prices. Where quoted prices are not available, we basethe 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 our debt instrumentsthe Company's Revolving Debt approximated theirits carrying value at December 31, 2017 and December 31, 2016.
2022.

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Non-recurring fair value measurements

The purchase price allocation associated with the January 11, 2017 acquisition of Universal required significant fair value measurements using unobservable inputs ("Level 3" inputs as defined in the fair value hierarchy established by FASB Topic Fair Value Measurements and Disclosures). Warrants. The fair value of the acquired intangible assetswarrants was determinedestablished using the income approach (see Note 5).Black-Scholes option pricing model value approach.

The other-than-temporary impairment of our equity method investment in TBWES (see Note 7) required significant fair value measurements using unobservable inputs. We determinedContingent consideration: In connection with the impairment charge by first determining an estimate ofBabcock & Wilcox Solar, the price that could be receivedCompany agreed to sell the assets and transfer the liabilities held by TBWES in an orderly transaction between market participants at June 30, 2017. The fair value of TBWES's net assets was determined through a combination of the cost approach, a market approach and an income approach.

Our interim goodwill impairment tests and third quarter impairment charges required significant fair value measurements using unobservable inputs (see Note 15). The fair value of each reporting unit determined under Step 1 of the goodwill impairment test waspay contingent consideration based on an income approach using a discounted cash flow analysis, a market approach using multiplesthe achievement of targeted revenue and EBITDA of guideline companies, and a market approach using multiples of revenue and EBITDA from recent, similar business combinations. The fair value of the assets and liabilities for the Renewable and SPIG reporting units determined under Step 2 of the goodwill impairment test were based on either an income or market approach.

The measurement of the net actuarial gain or loss associated with our pension and other postretirement plans was determined using unobservable inputs (see Note 18). These inputs included the estimated discount rate, expected return on plan assets and other actuarial inputs associated with the plan participants.

The determination of the estimated fair value of the related party share repurchase required significant fair value measurements using unobservable inputs (see Note 20). We utilized a discounted cash flow model and estimates of our weighted average cost of capital on the transaction date to derive the estimated fair value of the share repurchase.

NOTE 24 – SUPPLEMENTAL INFORMATION

During the twelve months ended December 31, 2017, 2016 and 2015, we recognized the following non-cash activity in our consolidated financial statements:
(in thousands)201720162015
Accrued capital expenditures in accounts payable$1,383
$2,751
$568
Accreted interest expense on our second lien term loan facility$3,226
$
$

During the years ended December 31, 2017, 2016 and 2015 we recognized the following cash activity in our consolidated financial statements:
(in thousands)201720162015
Income tax payments (refunds), net$(10,889)$10,781
$15,008
Interest payments on our United States revolving credit facility$4,909
$425
$
Interest payments on our second lien term loan facility$7,044
$
$

During the years ended December 31, 2017, 2016 and 2015, interest expense in our consolidated financial statements consisted of the following components:

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(in thousands)201720162015
Components associated with borrowings from:   
United States revolving credit facility$5,051
$1,669
$1,059
Second lien term loan facility7,211


Foreign revolving credit facilities1,021
847
148
 13,283
2,516
1,207
Components associated with amortization or accretion of:   
United States revolving credit facility deferred financing fees6,270
1,244
1,131
Second lien term loan facility deferred financing fees and discount3,226


 9,496
1,244
1,131
    
Other interest expense3,526
36

    
Total interest expense$26,305
$3,796
$2,338

In the year ended December 31, 2017, other interest expense in the table above is primarily attributable to the $3.0 million of interest expense associated with the ARPA litigation settlement (see Note 21). Interest expense included in our consolidated and combined statement of operationsthresholds for the year ended December 31, 2015 has been corrected2022. The range of undiscounted amounts the Company could be required to reclassify $1.3pay under the contingent consideration arrangement is between $0.0 million and $10.0 million. The Company used the Monte Carlo simulation method to calculate the value of interestthe contingent consideration and it was determined that the value of the liability should be zero as of December 31, 2022. As such, the Company removed $9.6 million from Other current liabilities in the Company's Consolidated Balance Sheets and recorded a reduction of Selling, General and Administrative expense from "other - net"of $9.6 million on the Company's Consolidated Statements of Operations. The fair value measurement of the contingent consideration related to "interest expense."the Babcock & Wilcox Solar acquisition was categorized as a Level 3 liability, as the measurement amount is based primarily on significant inputs not observable in the markets. The Company evaluates the fair value of contingent consideration and the corresponding liability each reporting period using an option pricing framework. The Company estimates projections during the earn-out period and volatility within the option pricing model captures variability in the potential pay-out. The analysis considers a discount rate applicable to the underlying projections and the risk of the Company paying the future liability.




NOTE 25– RELATED PARTY TRANSACTIONS


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

Transactions with B. Riley

Based on its Schedule 13D filings with the SEC, B. Riley beneficially owns 30.8% of our outstanding common stock as of December 31, 2022.

B. Riley currently has the right to nominate one member of the Company’s board of directors pursuant to the investor rights agreement the Company entered into with B. Riley on April 30, 2015, we were2019. The investor rights agreement also provides pre-emptive rights to B. Riley with respect to certain future issuances of the Company’s equity securities. The services of the Company’s Chief Executive Officer are provided by B. Riley pursuant to a consulting agreement with BRPI Executive Consulting, LLC, an affiliate of B. Riley, which was entered on November 19, 2018 and amended on November 9, 2020. The agreement provides for Mr. Kenny Young to serve as the Company’s 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.

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B. Riley was a party to transactionsthe Last Out Term Loans under our prior A&R Credit Agreement, as described in Note 15. Total fees associated with our former Parent and its subsidiaries in the normal course of operations. After the spin-off, we no longer consider the former Parent to be aB. Riley related party. Transactions with our former Parent prior to the spin-off includedLast Out Term Loans and services of Mr. Kenny Young, both as described above, were $2.0 million, $0.8 million and $7.4 million for the following:twelve months ended December 31, 2022, 2021 and 2020, respectively.

(in thousands)Year Ended December 31, 2015
Sales to our former Parent$911
Corporate administrative expenses35,343
On November 13, 2020 the Company entered into an agreement with B. Riley Principal Merger Corp. II, an affiliate of B. Riley, to purchase 200,000 shares of Class A common stock of Eos Energy Storage LLC for an aggregate purchase price of $2.0 million. The shares were sold in January 2021 for which the Company recognized net proceeds of $4.5 million.


Guarantees

Our former Parent had outstanding performance guaranteesThe public offering of the Company's 8.125% Senior Notes in February 2021, as described in Note 14, 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 various contracts executed by us in the normal course of business. As of April 21, 2016, these guarantees had all been terminated.

Net transfers from former Parent

Net transfers from former Parent represent the change in our former Parent's historical investment in us. It primarily includes the net effect ofunderwriting fees and other transaction cost allocations from transactions with our former Parent, sales to our former Parent, and the net transfers of cash and assets to our former Parent priorrelated to the spin-off. After the spin-off transaction on June 30, 2015, there have been no significant transfers to or from our former Parent. These transactions included the following:8.125% Senior Notes offering.

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(in thousands)Year Ended December 31 2015
Sales to former Parent$911
  
Corporate administrative expenses35,343
Income tax allocation11,872
Acquisition of business, net of cash acquired
Cash pooling and general financing activities(91,015)
Cash contribution received at spin-off125,300
Net transfer from former Parent per statement of cash flows$80,589
  
Non-cash items: 
Net transfer of assets and liabilities$44,706
Distribution of Nuclear Energy segment$(47,839)
Net transfer from former Parent per statement of shareholders' equity$77,456

Transactions with AIP


The second lien term loan and related repurchase of sharespublic offering of our common stock, as described in Note 2018, 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 we 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 our existing Tranche A term loan with B. Riley Financial in the Exchange, as described in Note 14.

On March 31, 2021, the Company entered into a sales agreement with B. Riley Securities, Inc., a related party, transaction.in which it 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 14. As of December 31, 2022, we paid B. Riley Securities, Inc. $0.5 million for underwriting fees and other transaction costs related to the offering.


The public offering of our 7.75% Series A Cumulative Perpetual Preferred Stock, as described in Note 17, 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 our Preferred Stock, related to the grant to the underwriters, as described in Note 17, 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 the Company’s 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 our then existing Last Out Term Loans and paid $0.9 million in cash for accrued interest, as described in Note 17.

On June 30, 2021, the Company entered into new Debt Facilities, as described in Note 16. In connection with the Company’s 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 16. 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 million of Preferred Stock to or through B. Riley Securities, Inc., as described in Note 17. As of December 31, 2022, 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 our 6.50% Senior Notes in December 2021, as described in Note 14, 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 us 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
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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 its 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.

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.


NOTE 26 – ACQUISITIONS, ASSETS HELD FOR SALE, DIVESTITURES AND DISCONTINUED OPERATIONS


We received corporate allocations from our former ParentAcquisitions

Babcock & Wilcox Solar (Formerly known as describedFosler Construction Company, Inc.)

On September 30, 2021, the Company acquired a 60% controlling ownership stake in Note 1, which totaled $2.7Illinois-based solar energy contractor Babcock & Wilcox Solar Energy, Inc. (“Babcock & Wilcox Solar”). Babcock & Wilcox Solar was formerly known as Fosler Construction, Company, Inc. ("Fosler") and on October 14, 2022, the Company changed the name of Fosler to Babcock & Wilcox Solar Energy, Inc ("Babcock & Wilcox Solar"). Babcock & Wilcox Solar provides commercial, industrial and utility-scale solar services and owns two community solar projects in Illinois that are being developed under the Illinois Solar for All program. Babcock & Wilcox Solar was founded in 1998 with a track record of successfully completing solar projects profitably with union labor while aligning its model with a growing number of renewable project incentives in the U.S. the Company believes Babcock & Wilcox Solar is positioned to capitalize on the high-growth solar market in the U.S. and that the acquisition aligns with B&W’s aggressive growth and expansion of the Company's clean and renewable energy businesses. Babcock & Wilcox Solar is reported as part of the Company's B&W Renewable segment, and operates under the name Babcock & Wilcox Solar, a Babcock & Wilcox company.

The total fair value of consideration for the acquisition was $36.0 million, including $27.2 million in cash plus $8.8 million in estimated fair value of the contingent consideration arrangement. In connection with the acquisition, the Company agreed to pay contingent consideration based on the achievement of targeted revenue thresholds for the year ended December 31, 2015. Though2022. The range of undiscounted amounts the Company could be required to pay under the contingent consideration arrangement was between $0.0 million and $10.0 million. The Company used the Monte Carlo simulation method to calculate the value of the contingent consideration and it was determined that the value of the liability should be zero at December 31, 2022. See Note 24 for more details.

The Company estimated fair values primarily using the discounted cash flow method at September 30, 2021 for the preliminary allocation of consideration to the assets acquired and liabilities assumed during the measurement period and up to September 30, 2022 when the purchase price allocation was finalized. During the first nine months of 2022, the Company recorded an increase in goodwill of $14.4 million resulting from the initial recognition of $14.1 million of accrued liabilities and $0.4 million of warranty accruals as preliminary measurement period adjustments, as described in Note 5.

During the year ended December 31, 2022, four additional Babcock & Wilcox 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 Babcock & Wilcox Solar loss contracts. The Company has submitted insurance claims to recover a portion of these allocations relatelosses as of December 31, 2022. See Note 5 for more details.

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On September 24, 2022, the Company acquired the remaining 40% ownership stake in Babcock & Wilcox Solar for $12.7 million. In addition to our discontinued NEthe transfer of the remaining ownership stake, the settlement and share transfer agreement released all parties from the aforementioned contingent consideration arrangement, as well as other claims known as of the effective date of the agreement. The Company will make payments of $3.0 million, $5.0 million, and $4.7 million on January 16, 2023, June 30, 2023, and January 15, 2024, respectively, for a present value of $12.1 million at December 31, 2022. The Company has recorded the payments due within one year in the Other accrued liabilities caption and the payment due during a period longer than one year within the Other non-current liabilities caption in the Company’s Consolidated Balance Sheet. As a result of the agreement, the Company removed the remaining non-controlling interest balance of $20.7 million from the Consolidated Balance Sheet and recorded an increase to Capital in Excess of Par Value for the $8.6 million difference.

During the quarter ended September 30, 2022, the Company identified certain factors, including the acquisition of the remaining 40% ownership stake in Babcock & Wilcox Solar., which contributed to the identification of a triggering event, requiring an interim quantitative goodwill impairment assessment and resulted in a goodwill impairment charge at Babcock & Wilcox Solar of $7.2 million.See Note 8 for more details.

Babcock & Wilcox Renewable Service A/S

On November 30, 2021, the Company acquired 100% ownership of Babcock & Wilcox Renewable Service A/S, formerly known as VODA A/S (“VODA”) through its wholly-owned subsidiary, B&W PGG Luxembourg Finance SARL, for approximately $32.9 million. Babcock & Wilcox Renewable Service A/S, a Denmark-based multi-brand aftermarket parts and services provider, focusing on energy-producing incineration plants including waste-to-energy, biomass-to-energy or other fuels, providing service, engineering services, spare parts as well as general outage support and management. Babcock & Wilcox Renewable Service A/S has extensive experience in incineration technology, boiler and pressure parts, SRO, automation, and performance optimization. Babcock & Wilcox Renewable Service A/S is reported as part of the Company's B&W Renewable segment theyand is included in the B&W Renewable Services product line.

The Company finalized the fair values during 2022 primarily using the discounted cash flow method for the assets acquired and liabilities assumed.

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 twelve months from the date of the acquisition if certain conditions of the purchase agreement are includedmet and is recorded on the Company's Consolidated Balance Sheets in Restricted cash and cash equivalents and other accrued liabilities.

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

The Company estimated fair values primarily using the discounted cash flow method at February 1, 2022 for the preliminary allocation of consideration to the assets acquired and liabilities assumed. During the measurement period, the Company will continue to obtain information to assist in finalizing the fair value of assets acquired and liabilities assumed, which may differ materially from these preliminary estimates. Any subsequent changes in the fair values of the assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill.

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 estimated fair values primarily using the discounted cash flow method at February 28, 2022 for the preliminary allocation of consideration to the assets acquired and liabilities assumed. During the measurement period, the Company will continue to obtain information to assist in finalizing the fair value of assets acquired and liabilities assumed, which may differ materially from these preliminary estimates. Any subsequent changes in the fair values of the assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill.

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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 the 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 are detailed in following tables. Specific to the Babcock & Wilcox Solar acquisition, the allocation of consideration to the net tangible and intangible assets acquired and liabilities assumed is based on estimated fair values at September 30, 2021, and was finalized at September 30, 2022. Specific to the Babcock & Wilcox Renewable Service A/S acquisition, the allocation of consideration to the net tangible and intangible assets acquired and liabilities assumed is based on estimated fair values at November 30, 2021, and was finalized at November 30, 2022. The following tables summarize the purchase price allocation to assets acquired and liabilities assumed:

Babcock & Wilcox Solar
(in thousands)Initial Allocation of Consideration
Measurement Period Adjustments(3)
Final Allocation
Accounts receivable$1,904 $121 $2,025 
Contracts in progress1,363 9,433 10,796 
Other current assets1,137 (304)833 
Property, plant and equipment9,527 (7,860)1,667 
Goodwill(1) (4)
43,230 19,447 62,677 
 Investment in subsidiary— 8,784 8,784 
Other assets17,497 (4,600)12,897 
Right of use assets1,093 — 1,093 
Debt(7,625)— (7,625)
Current liabilities(4)
(5,073)(15,364)(20,437)
Advance billings on contracts(1,557)238 (1,319)
Non-current lease liabilities(1,730)— (1,730)
Other non-current liabilities(4,112)(5,566)(9,678)
Non-controlling interest(2)(3)
(22,262)(1,734)(23,996)
Net acquisition cost$33,392 $2,595 $35,987 
(1) Goodwill is calculated as the excess of the purchase price over the net assets acquired. With respect to the Babcock & Wilcox Solar acquisition, goodwill represents Babcock & Wilcox Solar's ability to significantly expand EPC and O&M services among new customers across the U.S. by leveraging B&W's access to capital and geographic reach.
(2) The fair value of the non-controlling interest was derived based on the fair value of the 60% controlling interest acquired by B&W. The transaction price paid by B&W reflects a Level 2 input involving an observable transaction involving an ownership interest in Babcock & Wilcox Solar. Also, as described above, a portion of the purchase consideration relates to the contingent consideration.
(3) The Company's purchase price allocation changed due to additional information and further analysis.
(4) The Company's goodwill and current liabilities adjustments increased $14.1 million, primarily due to additional accrued liabilities recognized attributable to the Babcock & Wilcox Solar projects described in Note 5.

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Babcock & Wilcox Renewable Service A/S
(in thousands)
Initial Allocation of Consideration
Measurement Period Adjustments(2)
Final Allocation
Cash$4,737 $— $4,737 
Accounts receivable5,654 — 5,654 
Contracts in progress258 — 258 
Other current assets825 — 825 
Property, plant and equipment253 — 253 
Goodwill(1)
17,176 (61)17,115 
Other assets14,321 — 14,321 
Right of use assets433 — 433 
Current liabilities(5,181)— (5,181)
Advance billings on contracts(2,036)— (2,036)
Non-current lease liabilities(302)— (302)
Other non-current liabilities(3,264)— (3,264)
Net acquisition cost$32,874 $(61)$32,813 
(1) Goodwill is calculated as the excess of the purchase price over the net assets acquired. With respect to the Babcock & Wilcox Renewable Service A/S acquisition, goodwill represents Babcock & Wilcox Renewable Service A/S's ability to significantly expand within the aftermarket parts and services industries by leveraging B&W's access to capital and existing platform within the renewable service market. Goodwill is not expected to be deductible for U.S federal income tax purposes.
(2)The Company's preliminary purchase price allocation changed due to additional information and further analysis.


Fossil Power Systems
(in thousands)Initial Allocation of Consideration
Measurement Period Adjustments(2)
Updated Preliminary Allocation
Cash$1,869 $— $1,869 
Accounts receivable2,624 — 2,624 
Contracts in progress370 — 370 
Other current assets3,228 — 3,228 
Property, plant and equipment, net178 — 178 
Goodwill(1)
35,392 270 35,662 
Other assets25,092 — 25,092 
Right of use assets1,115 — 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 preliminarypurchase price allocation changed due to additional information and further analysis.


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Optimus Industries
(in thousands)Initial Allocation of Consideration
Measurement Period Adjustments(2)
Updated Preliminary Allocation
Cash$5,338 $— $5,338 
Accounts receivable5,165 — 5,165 
Contracts in progress2,598 — 2,598 
Other current assets2,115 — 2,115 
Property, plant and equipment, net2,441 5,178 7,619 
Goodwill(1)
11,081 (7,274)3,807 
Other assets12 2,319 2,331 
Right of use assets94 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 eligible for inclusion in discontinued operations.place today and recognize general cost synergies.

(2) The Company's preliminary purchase price allocation changed due to additional information and further analysis.

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

Babcock & Wilcox Solar (1)
Babcock & Wilcox Renewable Service A/S (1)
(in thousands)Acquisition Date Fair ValueWeighted Average Estimated Useful LifeAcquisition Date Fair ValueWeighted Average Estimated Useful Life
Customer Relationships$9,400 12 years$13,855 11 years
Tradename— — 228 3 years
Backlog3,100 5 months— — 
Total intangible assets(1)
$12,500 $14,083 
Fossil Power Systems (2)
Optimus Industries (2)
Estimated Acquisition Date Fair ValueWeighted Average Estimated Useful LifeEstimated Acquisition Date Fair ValueWeighted Average Estimated Useful Life
Customer Relationships$20,451 9 years2,100 10 years
Tradename787 14 years220 3 years
Patented Technology578 12 years— — 
Unpatented Technology3,276 12 years— — 
Total intangible assets(1)
$25,092 $2,320 
(1)The following table presents selected financial information regarding the resultsCompany's preliminary purchase price allocation is final as of operations of our former NE segment through June 30, 2015, the date it was discontinued:
 Six Months Ended June 30,
(in thousands)2015
Revenues$53,064
  
Income (loss) before income tax expense3,358
Income tax expense (benefit)555
Income (loss) from discontinued operations, net of tax$2,803

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NOTE 27 – FUTURE MINIMUM PAYMENTS

Operating leases

Future minimum payments required under operating leases that have initial or remaining noncancellable lease terms in excess of one year at December 31, 20172022.
(2) 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 follows (in thousands):level 3 inputs within the fair value hierarchy.

Fiscal Year Ending December 31,Amount
2018$6,814
2019$5,100
2020$3,553
2021$2,741
2022$2,258
Thereafter$3,337


Total rental expense forFor the yearstwelve-month period ended December 31, 2017, 20162022, costs of $1.0 million were incurred related to the acquisitions of Babcock & Wilcox Solar, Babcock & Wilcox Renewable Service A/S, Fossil Power Systems, and 2015, was $10.5 million, $8.3 million and $13.5 million, respectively.

Long-term borrowings

MaturitiesOptimus Industries were recorded as a component of our long-term borrowingsits operating expenses in the five years succeeding December 31, 2017 are as follows (in thousands):Consolidated Statements of Operations.


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Fiscal year ending December 31,Amount
2018$9,173
2019$
2020$290,184
2021$
2022$
Thereafter$
Divestitures


NOTE 28On 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 and recorded an $7.2 million receivable within Accounts receivableQUARTERLY FINANCIAL DATA

The following tables set forth selected unaudited quarterly financial information forother in the yearsCompany's Consolidated Balance Sheet. During the 6 months ended December 31, 20172022, the Company received $2.5 million of proceeds from the sale.

Certain real property assets for the Copley, Ohio location were sold on March 15, 2021 for $4.0 million. The Company received $3.3 million of net proceeds after adjustments and 2016:recognized a gain on sale of $1.9 million. In conjunction with the sale, we executed a leaseback agreement commencing March 16, 2021, which expires on March 31, 2033.

(in thousands, except per share amounts)Quarter ended
 March 31, 2017 June 30, 2017 Sept. 30, 2017 Dec. 31, 2017
Revenues$391,104
 $349,829
 $408,703
 $408,099
Gross profit$62,900
 $(55,822) $47,287
 $45,513
Operating income (loss) (1)
$(8,798) $(144,646) $(104,748) $(23,373)
Equity in income (loss) of investees$618
 $(15,232) $1,234
 $3,513
Net income (loss) attributable to shareholders$(7,045) $(150,999) $(114,302) $(107,478)
Earnings per common share       
Basic$(0.14) $(3.09) $(2.48) $(2.44)
Diluted$(0.14) $(3.09) $(2.48) $(2.44)
(1)
Includes equity in income of investees.

Certain real property assets for the Lancaster, Ohio location were sold on August 13, 2021 for $18.9 million. The Company received $15.8 million of net proceeds after adjustments and expenses and recognized a gain on sale of $13.9 million. In conjunction with the sale, the Company executed a leaseback agreement commencing August 13, 2021, which expires on August 31, 2041.
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(in thousands, except per share amounts)Quarter ended
 March 31, 2016 June 30, 2016 Sept. 30, 2016 Dec. 31, 2016
Revenues$404,116
 $383,208
 $410,955
 $379,984
Gross profit$80,156
 $26,052
 $73,757
 $(848)
Operating income (loss) (1)
$17,266
 $(72,585) $11,133
 $(58,587)
Equity in income (loss) of investees$2,676
 $(616) $2,827
 $11,553
Net income (loss) attributable to shareholders$10,507
 $(63,490) $8,894
 $(71,560)
Earnings per common share       
Basic$0.20
 $(1.25) $0.18
 $(1.47)
Diluted$0.20
 $(1.25) $0.18
 $(1.47)
(1)
Includes equity in income of investees.

Our quarterly results include the following items that significant affect comparability across periods:

Actuarial gainsissued and losses from marking to market our pension and postretirement benefit plan assets and liabilities (see Note 18). Such mark to market adjustments resulted in (charges) gains of: $9.8outstanding capital stock of Diamond Power Machine (Hubei) Co., Inc, for $2.8 million. the Company received $2.0 million in gross proceeds before expenses and recorded an $0.8 million favorable contract asset for the fourth quarter of 2017, $(1.1) million in the first quarter of 2017, $6.4 million in the fourth quarter of 2016, $(0.5) million in the third quarter of 2016, and $(30.0) million in the second quarter of 2016.amortization period from March 8, 2021 through December 31, 2023.

In the third quarter of 2017, $86.9 million of goodwill impairment charges (see Note 15).

In the second and fourth quarters of both 2017 and 2016, significant losses related to changes in the estimates of the forecasted revenues and costs to complete six renewable energy contracts (see Note 6).

In the fourth quarter of 2017, $62.4 million of additional income tax expense resulting from the enactment of new tax legislation in the United States on December 22, 2017 (see Note 10).

NOTE 2927 – NEW ACCOUNTING STANDARDS


Recently adopted accounting standards:

The Company adopted the following accounting standard during the year ended December 31, 2022:

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40). The amendments in this update simplify the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity by removing major separation models required under current U.S. GAAP. The amendments also improve the consistency of diluted earnings per share calculations. The impact of this standard on the Company's Consolidated Financial Statements was immaterial.

New accounting standards to be adopted:

The Company considers the applicability and impact of all issued ASUs. Recently issued ASUs that are not considered were assessed and determined to be not applicable in the current reporting period. New accounting standards not yet adopted that could affect our consolidated financial statementsthe Company's Consolidated Financial Statements in the future are summarized as follows:


In May 2014,October 2021, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. The new accounting standard provides a comprehensive model to use in accounting for revenue from contracts with customers and will replace most existing revenue recognition guidance when it becomes effective. In 2016, the FASB issued accounting standards updates to address implementation issues and to clarify the guidance for identifying performance obligations, licenses; determining if an entity is the principal or agent in a revenue arrangement; and technical corrections and improvements on topics including: contract costs, loss provisions on construction and production contracts and disclosures for remaining and prior-period performance obligations. The new accounting standard also requires more detailed disclosures to enable financial statement users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new accounting standard is effective for interim and annual reporting periods beginning after December 15, 2017, and permits retrospectively applying the guidance to each prior reporting period presented (full retrospective method) or prospectively applying the guidance and providing additional disclosures comparing results to previous guidance, with the cumulative effect of initially applying the guidance recognized in beginning retained earnings at the date of initial application (modified retrospective method). We will adopt the new accounting standard under the modified retrospective method. We have developed a cross-functional team of B&W professionals from across each of our reportable segments and an implementation plan to adopt the new accounting standard during the first quarter of 2018. We have analyzed our primary revenue streams and performed a detailed review of a sample of key contracts representative of our products and services in order to assess potential changes in our processes, systems, internal controls and the timing and method of revenue recognition and related disclosures. Our evaluation included the existing, uncompleted contracts at January 1, 2018. Based on our assessment, we do not expect the timing of revenue recognition to change significantly upon adoption of the new accounting standard, but we do expect our revenue recognition disclosures will be expanded.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. The new accounting standard is effective for us beginning in 2018, but early adoption is

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permitted. The new accounting standard requires investments such as available-for-sale securities to be measured at fair value through earnings each reporting period as opposed to changes in fair value being reported in other comprehensive income. We do not expect the new accounting standard to have a significant impact on our financial results when adopted.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). With adoption of this standard, lessees will have to recognize almost all leases as a right-of-use asset and a lease liability on their balance sheet. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Classification will be based on criteria that are similar to those applied in current lease accounting, but without explicit bright lines. The new accounting standard is effective for us beginning in 2019. We do not expect the new accounting standard to have a significant impact on our financial results when adopted, but will result in new balances in the consolidated balance sheets and new disclosures in the Notes.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The new guidance is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. Of the eight classification-related changes this new standard will require in the statement of cash flows, only two of the classification requirements are relevant to our historical cash flow statement presentation (presentation of debt prepayments and presentation of distributions from equity method investees). However, the new classification requirements would not have changed our historical statement of cash flows. The new standard is effective for us beginning in 2018. We do not plan to early adopt the new accounting standard because the impact is not expected to be material to our consolidated statement of cash flows when adopted.

In January 2017, the FASB issued ASU 2017-01, 2021-08, Business Combinations (Topic 805): Clarifying the Definition of a Business. Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The new guidance clarifies the definition ofamendment in this update provides an exception to fair value measurement for contract assets and contract liabilities (i.e., deferred revenue) acquired in a business in an effort to make the guidance more consistent. The guidance providescombination. As a test for determining when a group ofresult, 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 activities is not a business, specifically, when substantially all of the fair value of the gross assets acquired or disposed of are concentratedcombination. The amendment in a single identifiable asset or group of assets, and if inputs and substantive processes that significantly contribute to the ability to create outputs is not present. The new accounting standardthis update is effective for us beginningpublic business entities in 2018. We do not expectJanuary 2023; all other entities have an additional year to adopt. Early adoption is permitted; however, if the new accounting standardguidance is adopted in an interim period, it is required to have a significant impact on our financial results when we adopted.

In January 2017,be applied retrospectively to all business combinations within the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The new guidance removes the requirement to compare implied fair valueyear of goodwill with the carrying amount, therefore impairment charges would be recognized immediately by the amount which carrying value exceeds fair value. The new accounting standard is effective beginning in 2020. We are currently assessing the impact that adopting this new accounting standard will have on our consolidated financial statements.

In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Benefit Cost and Net Periodic Postretirement Benefit Cost. The new guidance classifies service cost as the only component of net periodic benefit cost presented in cost of operations, whereas the other components will be presented in other income.adoption. This will affect not only how we present net periodic benefit cost, but also how we present segment gross profit and operating income upon adoption. The new accounting standardamendment is effective for usfiscal years beginning in 2018, and we will retrospectively apply the guidance to each prior reporting period presented. We have assessed theafter December 15, 2022, including interim periods within those fiscal years. The impact of adopting the new standard on our consolidated statementfinancial statements and related disclosures will depend on the nature and magnitude of operationsfuture acquisitions.

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 determinedclarifies that operating lease receivables are not within the required reclassificationsscope 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
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debt securities. The provisions of this standard will primarily impact our Power segment's gross profit.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 changesCompany is currently evaluating the impact of both standards on its Consolidated Financial Statements which is not expected to be material.

Note 28 - Subsequent Events

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 classificationSecond Amended Revolving Credit Agreement) to be made on March 31, 2023; and (ii) replace the use of the historical components of net periodic benefit costs are summarized in the following table:LIBOR with Term SOFR throughout.


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Pension & other postretirement benefit costs (benefits)
(in thousands)December 31, 2017
December 31,
2016
December 31,
2015
Current
classification
Future
classification
Service cost$804
$1,703
$13,701
Cost of operationsCost of operations
Interest cost41,432
41,772
50,644
Cost of operationsOther income (expense)
Expected return on plan assets(59,409)(61,939)(68,709)Cost of operationsOther income (expense)
Amortization of prior service cost(2,906)250
307
Cost of operationsOther income (expense)
Recognized net actuarial losses and mark to market adjustments(8,696)24,110
40,210
Cost of operations or SG&A expenseOther income (expense)
Net periodic benefit cost (benefit)$(28,775)$5,896
$36,153
  

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREChanges in and Disagreements with Accountants on Accounting and Financial Disclosure


None


Item 9A. Controls and Procedures


Disclosure controlsControls and proceduresProcedures


As of the end of the period covered by this report, the Company's management, with the participation of our Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as(as that term is defined in Rules 13a-15(e) and 15d-15(e) ofadopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the "Exchange Act")). Disclosure controls and procedures are the controls and processes that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to management, as appropriate, to allow timely decisions regarding required disclosures. Our disclosure controls and procedures, were developed through a process in which our management applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding the control objectives. TheIt 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 we cannot provide absolute assuranceassure 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, management of B&Wour Chief Executive Officer and Chief Financial Officer concluded that as of December 31, 2017 the design and operation of our disclosure controls and procedures are effective as of December 31, 2022 to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SECSecurities and Exchange Commission, and such information is accumulated and communicated to management including its principal executives and principal financial officers or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

On January 11, 2017, we acquired Universal, which would have represented approximately which represented approximately 6% of our consolidated total assets and 4% of our consolidated revenues as of and for the year ended December 31, 2017, respectively. As the acquisition occurred during the last 12 months, the scope of our assessment of the effectiveness of disclosure controls and procedures does not include internal control over financial reporting related to Universal. This exclusion is in accordance with the SEC's general guidance that an assessment of a recently acquired business may be omitted from our internal control over financial reporting scope in the year of acquisition.

Remediation of prior material weakness

The Company's management has concluded the the material weakness in internal control over financial reporting associated with the completeness and accuracy of the information used in the percentage of completion accounting at Vølund, a business

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unit within our Renewable segment, was remediated as of December 31, 2017. As of September 30, 2017, management fully implemented the remediation plan, and we determined through testing that the internal controls at Volund were effective at December 31, 2017.

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Management's Report on Internal Control Over Financial Reporting


B&W's management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended). Our internal control over financial reporting includes, among other things, policies and procedures for conducting business, information systems for processing transactions and an internal audit department. Mechanisms are in place to monitor the effectiveness of our internal control over financial reporting and actions are taken to remediate identified internal control deficiencies. Our procedures for financial reporting include the involvement of senior management, our Audit and Finance Committee and our staff of financial and legal professionals. Our financial reporting process and associated internal controls were designed to provide reasonable assurance to management and the Board of Directors regarding the reliability of financial reporting and the preparation of our consolidated financial statementsConsolidated Financial Statements for external reporting in accordance with accounting principles generally accepted in the United States of America.


On February 2, 2022, we acquired 100% controlling ownership Fossil Power Systems and on February 28, 2022, we acquired 100% ownership of Optimus Industries, as described in Note 26 of the Consolidated Financial Statements in Part I of this report. In accordance with the SEC’s general guidance that an assessment of a recently acquired business may be omitted from our internal control over financial reporting scope in the year of acquisition we excluded the acquired businesses from management’s report on internal control over financial reporting.
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Management, with the participation of our principal executive and financial officers, assessed the effectiveness of our internal control over financial reporting as of December 31, 2017.2022. Management based its assessment on criteria established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance as to its effectiveness and may not prevent or detect misstatements. Further, because of changing conditions, effectiveness of internal control over financial reporting may vary over time. Based on our assessment, management has concluded that B&W's internal control over financial reporting was effective at the reasonable assurance level described above as of December 31, 2017.2022.

On January 11, 2017, we acquired Universal Acoustic & Emission Technologies, Inc. ("Universal"), which represented approximately 6%
Attestation Report of our consolidated total assets and 4% of our consolidated revenues as of and for the year ended December 31, 2017, respectively. As permitted by the Securities and Exchange Commission, management has elected to exclude Universal from its assessment of internal control over financial reporting as of December 31, 2017.Independent Registered Public Accounting Firm


The effectiveness of our internal control over financial reporting as of December 31, 20172022 has been audited by Deloitte & Touche LLP, theour independent registered public accounting firm, who also audited our consolidated financial statementsas stated in their report, which is included in this Annual Report on Form 10-K. Deloitte & Touche LLP’s report onItem 9A below, under the heading “Report of Independent Registered Public Accounting Firm,” and is incorporated herein by reference.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting is includedduring the year ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting, despite the fact that some of our team members are working remotely in this Annual Reportresponse to the COVID-19 pandemic. In addition, during 2022, the Company continued to outsource certain support functions to external service providers of which some were still in transition as of December 31, 2022. We are continually monitoring and assessing these situations on Form 10-K.our internal controls to ensure their operating effectiveness.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Stockholders and the Board of Directors of Babcock & Wilcox Enterprises, Inc.:


Opinion on Internal Control over Financial Reporting


We have audited the internal control over financial reporting of Babcock & Wilcox Enterprises, Inc. and subsidiaries (the “Company”) as of December 31, 2017,2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.


We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated and combined financial statements as of and for the year ended December 31, 20172022, of the Company and our report dated March 1, 2018 16, 2023, expressed an unqualified opinion on those financial statements and includes an explanatory paragraph related to the completion of the spin-off of the Company effective June 30, 2015 by The Babcock and Wilcox Company and an explanatory paragraph related to the Company’s ability to continue as a going concern.statements.


As described in Management’s Report on Internal Control Over Financial Reporting,Item 9A above, management excluded from its assessment the internal control over financial reporting at Universal Acoustic & Emission Technologies, Inc. ("Universal"),Fossil Power Systems and Optimus Industries, which waswere acquired on January 11, 2017February 2, 2022, and February 28, 2022, respectively, and whose financial statements constitute approximately 6%11% of total assets and approximately 4%7% of revenues of the consolidated financial statement amounts as of and for the year ended December 31, 2017.2022. Accordingly, our audit did not include the internal control over financial reporting at Universal.these acquired entities.





Basis for Opinion


The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting.Item 9A. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
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accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.


We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.


Definition and Limitations of Internal Control over Financial Reporting


A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.


Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.



/S/s/ DELOITTE & TOUCHE LLP


Charlotte, North CarolinaCleveland, Ohio

March 1, 201816, 2023


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Changes in internal control over financial reporting

There were no changes in our internal control over financial reporting during the quarter ended December 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. OTHER INFORMATIONOther Information

Amended credit agreement

On May 11, 2015, weAs discussed in Note 28 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report, the Company entered into the Second Amended Revolving Credit Agreement on March 14, 2023, which amended the terms of the Amended Revolving Credit Agreement to (i) waive the senior net leverage ratio test for purposes of enacting a credit agreementPermitted 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 a syndicateTerm SOFR throughout.

The Company paid an amendment fee of $25,000 to PNC in consideration of the Second Amended Revolving Credit Agreement. Certain of the lenders, ("Credit Agreement")as well as certain of their respective affiliates, have performed and may in connection with our spin-off fromthe 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 Babcock & Wilcox Company. Theforegoing description is qualified in its entirety by the complete text of the Amended Revolving Credit Agreement, which is scheduledattached to maturethis Annual Report on June 30, 2020, provides for a senior secured revolving credit facility, initially in an aggregate amount of up to $600.0 million. The proceeds from loans under the Credit Agreement are available for working capital needs and other general corporate purposes, and the full amount is available to support the issuance of letters of credit.Form 10-K as Exhibit 10.78.


On February 24, 2017, August 9, 2017 and March 1, 2018, we entered into amendments to the Credit Agreement (the "Amendments" and the Credit Agreement, as amended to date, the "Amended Credit Agreement") to, among other things: (1) permit us to incur the debt under the second lien term loan facility (discussed further in Note 20), (2) modify the definition of EBITDA in the Amended Credit Agreement to exclude: up to $98.1 million of charges for certain Renewable segment contracts for periods including the quarter ended December 31, 2016, up to $115.2 million of charges for certain Renewable segment contracts for periods including the quarter ended June 30, 2017, up to $30.1 million of charges for certain Renewable segment contracts for periods including the quarter ended September 30, 2017, up to $38.7 million of charges for certain Renewable segment contracts for periods including the quarter ended December 31, 2017, up to $4.0 million of aggregate restructuring expenses incurred during the period from July 1, 2017 through September 30, 2018 measured on a consecutive four-quarter basis, realized and unrealized foreign exchange losses resulting from the impact of foreign currency changes on the valuation of assets and liabilities, and fees and expenses incurred in connection with the August 9, 2017 and March 1, 2018 amendments, (3) replace the maximum leverage ratio with a maximum senior debt leverage ratio, (4) decrease the minimum consolidated interest coverage ratio, (5) limit our ability to borrow under the Amended Credit Agreement during the covenant relief period to $250.0 million in the aggregate, (6) reduce commitments under the revolving credit facility from $600.0 million to $450.0 million, (7) require us to maintain liquidity (as defined in the Amended Credit Agreement) of at least $75.0 million as of the last business day of any calendar month, (8) require us to repay outstanding borrowings under the revolving credit facility (without any reduction in commitments) with certain excess cash, (9) increase the pricing for borrowings and commitment fees under the Amended Credit Agreement, (10) limit our ability to incur debt and liens during the covenant relief period, (11) limit our ability to make acquisitions and investments in third parties during the covenant relief period, (12) prohibit us from paying dividends and undertaking stock repurchases during the covenant relief period (other than our share repurchase from an affiliate of AIP (discussed further in Note 20)), (13) prohibit us from exercising the accordion described below during the covenant relief period, (14) limit our financial and commercial letters of credit outstanding under the Amended Credit Agreement to $30.0 million, (15) require us to reduce commitments under the Amended Credit Agreement with the proceeds of certain debt issuances and asset sales, (16) beginning with the quarter ended March 31, 2018, limit to no more than $15.0 million any cumulative net income losses attributable to eight specified Vølund projects, (17) increase reporting obligations and require us to hire a third-party consultant and a chief implementation officer, (18) require us to pledge the equity of certain of our foreign subsidiaries to guarantee and provide collateral for our obligations under the United States credit facility, (19) require us to pay a deferred facility fee as more fully set forth in the March 1, 2018 Amendment, and (20) require us to sell at least $100 million of assets before March 31, 2019. The covenant relief period will end, at our election, when the conditions set forth in the Amended Credit Agreement are satisfied, but in no event earlier than the date on which we provide the compliance certificate for our fiscal quarter ended December 31, 2019.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Other than during the covenant relief period, the Amended Credit Agreement contains an accordion feature that allows us, subject to the satisfaction of certain conditions, including the receipt of increased commitments from existing lenders or new commitments from new lenders, to increase the amount of the commitments under the revolving credit facility in an aggregate amount not to exceed the sum of (1) $200.0 million plus (2) an unlimited amount, so long as for any commitment increase under this subclause (2) our senior leverage ratio (assuming the full amount of any commitment increase under this subclause (2) is drawn) is equal to or less than 2.00:1.0 after giving pro forma effect thereto. During the covenant relief period, our ability to exercise the accordion feature will be prohibited.

Not Applicable
The Amended Credit Agreement and our obligations under certain hedging agreements and cash management agreements with our lenders and their affiliates are (1) guaranteed by substantially all of our wholly owned domestic subsidiaries, but

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excluding our captive insurance subsidiary, and (2) secured by first-priority liens on certain assets owned by us and the guarantors. The Amended Credit Agreement requires interest payments on revolving loans on a periodic basis until maturity. We may prepay all loans at any time without premium or penalty (other than customary LIBOR breakage costs), subject to notice requirements. The Amended Credit Agreement requires us to make certain prepayments on any outstanding revolving loans after receipt of cash proceeds from certain asset sales or other events, subject to certain exceptions and a right to reinvest such proceeds in certain circumstances. During the covenant relief period, such prepayments may require us to reduce the commitments under the Amended Credit Agreement by a corresponding amount of such prepayments. Following the covenant relief period, such prepayments will not require us to reduce the commitments under the Amended Credit Agreement.

The March 1, 2018 Amendment temporarily waived certain defaults and events of default under our United States credit facility that were breached on December 31, 2017 or that may occur in the future, with certain amendments effective immediately and other amendments effective upon the completion of the Rights Offering and the repayment of the outstanding balance of our Second Lien Notes Offering. If the Rights Offering and the repayment of the outstanding balance of our Second Lien Notes Offering do not occur by April 15, 2018 (subject to extension in certain cases), the temporary waiver will end. The temporary waiver will also end if certain other conditions specified in the March 1, 2018 Amendment occur. Upon any such termination of the waiver, our ability to borrow funds under the United States credit facility will terminate.

After giving effect to the Amendments, loans outstanding under the Amended Credit Agreement bear interest at our option at either LIBOR rate plus 7.0% per annum or the Base Rate plus 6.0% per annum until we complete the Rights Offering and prepay the Second Lien Term Loan facility and thereafter at our option at either (1) the LIBOR rate plus 5.0% per annum during 2018, 6.0% per annum during 2019 and 7.0% per annum during 2020, or (2) the Base Rate plus 4.0% per annum during 2018, 5.0% per annum during 2019, and 6.0% per annum during 2020. The Base Rate is the highest of the Federal Funds rate plus 0.5%, the one month LIBOR rate plus 1.0%, or the administrative agent's prime rate. Interest expense associated with our United States revolving credit facility loans for the year ended December 31, 2017 was $11.3 million, respectively. Included in interest expense was $6.3 million of non-cash amortization of direct financing costs for the year ended December 31, 2017. A commitment fee of 1.0% per annum is charged on the unused portions of the revolving credit facility. A letter of credit fee of 2.50% per annum is charged with respect to the amount of each financial letter of credit outstanding, and a letter of credit fee of 1.50% per annum is charged with respect to the amount of each performance and commercial letter of credit outstanding. Additionally, an annual facility fee of $1.5 million is payable on the first business day of 2018 and 2019, and a pro rated amount is payable on the first business day of 2020.

The Amended Credit Agreement includes financial covenants that are tested on a quarterly basis, based on the rolling four-quarter period that ends on the last day of each fiscal quarter. After we complete the Rights Offering and the repayment of the outstanding balance of our Second Lien Notes Offering within the time period required by the March 1, 2018 Amendment, the maximum permitted senior debt leverage ratio as defined in the Amended Credit Agreement is:
8.50:1.0 for the quarter ended December 31, 2017,
7.00:1.0 for the quarter ending March 31, 2018,
6.50:1.0 for the quarters ending June 30, 2018 and September 30, 2018,
4.75:1.0 for the quarter ending December 31, 2018,
3.00:1.0 for the quarter ending March 31, 2019,
2.75:1.0 for the quarters ending June 30, 2019 and September 30, 2019 and
2.50:1.0 for the quarter ending December 31, 2019 and each quarter thereafter.

After we complete the Rights Offering and the repayment of the outstanding balance of our Second Lien Notes Offering within the time period required by the March 1, 2018 Amendment, the minimum consolidated interest coverage ratio as defined in the Credit Agreement is:
1.25:1.0 for the quarter ended December 31, 2017,
1.15:1.0 for the quarter ending March 31, 2018,
1.00:1.0 for the quarter ending June 30, 2018,
0.85:1.0 for the quarter ending September 30, 2018,
1.25:1.0 for the quarter ending December 31, 2018,
1.50:1.0 for the quarter ending March 31, 2019 and
2.00:1.0 for the quarters ending June 30, 2019 and each quarter thereafter.

Beginning with September 30, 2017, consolidated capital expenditures in each fiscal year are limited to $27.5 million.

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At December 31, 2017, borrowings under the Amended Credit Agreement and foreign facilities consisted of $103.5 million at an effective interest rate of 6.89%. Usage under the Amended Credit Agreement consisted of $94.3 million of borrowings, $7.4 million of financial letters of credit and $123.7 million of performance letters of credit. After giving effect to the March 1, 2018 amendment, at December 31, 2017, we had approximately $221.4 million available for borrowings or to meet letter of credit requirements primarily based on trailing 12 month EBITDA (as defined in the Amended Credit Agreement), and our leverage and interest coverage ratios (as defined in the Amended Credit Agreement) were 2.59 and 2.50, respectively. We expect to be closest to the minimum financial covenant thresholds at September 30, 2018.

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PART III



Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEDirectors, Executive Officers and Corporate Governance


The information required by this item with respect to directors is incorporated by reference to the material appearing under the heading "Election“Election of Directors"Directors” in the Proxy Statement for our 20182022 Annual Meeting of Stockholders. The information
110


required by this item with respect to compliance with section 16(a) of the Securities and Exchange Act of 1934, as amended, is incorporated by reference to the material appearing under the heading "Section“Section 16(a) Beneficial Ownership Compliance"Compliance” in the Proxy Statement for our 20182023 Annual Meeting of Stockholders. The information required by this item with respect to the Audit Committee and Audit and Finance Committee financial experts is incorporated by reference to the material appearing in the "Director Independence"“Director Independence” and "Audit“Audit and Finance Committee"Committee” sections under the heading "Corporate“Corporate Governance – Board–Board of Directors and Its Committees"Committees” in the Proxy Statement for our 20182022 Annual Meeting of Stockholders.


We have adopted a Code of Business Conduct for our employees and directors, including, specifically, our chief executive officer, our chief financial officer, our chief accounting officer, and our other executive officers. Our code satisfies the requirements for a "code“code of ethics"ethics” within the meaning of SEC rules. A copy of the code is posted on our web site, www.babcock.com under "Investor“Investor Relations – Corporate Governance – Highlights." We intend to disclose promptly on our website any amendments to, or waivers of, the code covering our chief executive officer, chief financial officer and chief accounting officer.


EXECUTIVE OFFICERS


Our executive officers and their ages as of March 1, 2018,2023, are as follows:
NameAgePosition
Jenny L. ApkerKenneth Young6059SeniorChairman and Chief Executive Officer
Louis Salamone76Executive Vice President, Chief Financial Officer and Chief Accounting Officer
Jimmy B. Morgan54Executive Vice President and Chief FinancialOperating Officer
Mark A. CaranoJohn J. Dziewisz4857Senior Vice President, Industrial and Corporate Development
J. André Hall52SeniorExecutive Vice President, General Counsel and Corporate Secretary
Daniel W. HoehnJoe Buckler3946Vice President, Controller and Chief Accounting Officer
Mark S. Low61Senior Vice President, PowerClean Energy
Jimmy B. MorganChris Riker4940Senior Vice President, Renewable
Leslie C. Kass47President and Chief Executive Officer
James J. Muckley59Senior Vice President, OperationsThermal


Jenny L. ApkerKenneth Young has served as our Chief Executive Officer since November 2018 and as the Chairman of our Board of Directors since September 2020. Mr. Young also serves as the President of B. Riley Financial, Inc. (“B. Riley”), a provider of collaborative financial services and solutions, since July 2018, and as Chief Executive Officer of B. Riley’s subsidiary, B. Riley Principal Investments, since October 2016. From August 2008 to March 2016, Mr. Young served as the President and Chief Executive Officer of Lightbridge Communications Corporation (f/k/a LCC International, Inc.), a provider of integrated end-to-end solutions for wireless voice and data communications networks. Mr. Young has served as a member of the boards of directors of Globalstar, Inc. since 2015, Orion Energy Systems, Inc. since 2017, Liberty Tax, Inc. since 2018 and bebe stores, inc. since 2018. Mr. Young previously served as a member of the boards of directors of B. Riley from 2015 to 2016 and Standard Diversified Opportunities Inc. from 2015 to 2017.

Louis Salamone has served as our Executive Vice President, Chief Financial Officer and Chief Accounting Officer since August 2019. Before that, Mr. Salamone served as our Chief Financial Officer since February 2019. Prior to that, Mr. Salamone served as the Company's Executive Vice President of Finance since November 2018. Mr. Salamone also served as an advisor to MDx Diagnostics, LLC, a provider of medical devices, from December 2017 until February 2019. From April 2013 until December 2017, Mr. Salamone served as Chief Financial Officer of CityMD, an urgent care provider. Prior to joining CityMD, Mr. Salamone was Vice President and Chief Financial Officer of OpenPeak Inc., a provider of mobile cybersecurity solutions, from April 2009 until March 2013, and Executive Vice President and Chief Financial Officer of LCC, from June 2006 until April 2009.

Jimmy B. Morgan has served as Chief Operating Officer of The Babcock & Wilcox Company since August 2020 and was additionally named Executive Vice President on January 1, 2022. . He has also served as Managing Director of our Babcock & Wilcox Vølund subsidiary since March 2020. Previously, Mr. Morgan served as our Senior Vice President, and Chief Financial Officer. PriorBabcock & Wilcox from January 2019 to the spin-off, Ms. Apker served as Vice President, Treasurer and Investor Relations of BWC since August 2012 and, prior to that time, served as Vice President and Treasurer since joining BWC in June 2010. Previously, Ms. Apker served as Vice President and Treasurer with Dex One Corporation (formerly R.H. Donnelley Corporation), a marketing services company, from May 20032020. From December 2016 until June 2010.

Mark A. Carano serves as our Senior Vice President, Industrial and Corporate Development. Prior to the spin-off,January 2019, Mr. CaranoMorgan served as Senior Vice President, and Chief Corporate Development Officer of BWC since August 2013. Prior to joining BWC in June 2013, Mr. Carano served as a Managing Director in the Investment Banking Group of Bank of America Merrill Lynch since 2006. Mr. Carano also previously held positionsRenewable, with the Investment Banking Group of Deutsche Bank.

J. André Hall serves as our Senior Vice President, General Counsel and Corporate Secretary. Prior to the spin-off, Mr. Hall served as Assistant General Counsel, Transactions and Compliance of BWC since August 2013. Prior to joining BWC, Mr. Hall served in various roles of increasing responsibility with Goodrich Corporation, an aerospace manufacturing company, most recently as Vice President of Business Conduct and Chief Ethics Officer from October 2009 until July 2012 when it was acquired by United Technologies Corporation. For the five years prior to becoming Chief Ethics Officer, Mr. Hall served as the segment general counsel for one of Goodrich Corporation’s multi-billion dollar operating segments.

Daniel W. Hoehn serves as our Vice President, Controller and Chief Accounting Officer. Mr. Hoehn joined BWC in March 2015. From 2013 to 2015, Mr. Hoehn was Vice President and Controller at Chiquita Brands International, Inc., a producer

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and distributor of bananas and other produce, responsible for financial reporting for Chiquita's operations across three continents. From 2010 to 2013, he was Assistant Corporate Controller, after serving as Manager, Financial Reporting, from 2007 to 2010. Prior to joining Chiquita, Mr. Hoehn was a senior manager in the audit practice at KPMG, LLP.

Mark S. Low serves as our Senior Vice President, Power. From July 2015 to June 2016, he served as Senior Vice President, Global Services. Prior to the spinoff, Mr. Low was Vice President and General Manager of BWC’s Global Services Division from 2013 to March 2015. Previously, from 2012 to 2013, he was Vice President and General Manager of BWC’s Environmental Products and Services Division, responsible for all aspects of our environmental products and services business. From 2007 to 2012, he served as BWC's Vice President, Service Projects, in which he led all technical and commercial aspects of our service projects business including project management, forecasting, costing, cost forecasting, and warranty resolution.

Jimmy B. Morgan serves as our Senior Vice President, Renewable since December 2016. He is responsible for the company's renewable energy business, including itscompany’s Babcock & Wilcox VolundVølund subsidiary and for Babcock & Wilcox'sWilcox’s operations and maintenance services businesses. From August 2016 to December 2016, he served as Senior Vice President, Operations. He was Vice President, Operations from May 2016 to August 2016 and was Vice President and General Manager of Babcock & Wilcox Construction Co., Inc. from February 2016 to May 2016. Before joining Babcock & Wilcox, he was President forof Allied Technical Resources, Inc., a technical staffing company, from September 2013 to January 2016. Previous positions included serving as Chief Operating Officer with BHI Energy, Vice President of Installation and Modification Services with Westinghouse Electric Company, and as Managing Director for AREVA T&D. He began his career with Duke Energy.

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Leslie C. Kass was appointed
John J. Dziewisz served as our Senior Vice President and ChiefCorporate Secretary since February 1, 2020. He was additionally named Executive OfficerVice President on January 31, 2018. She previously1, 2022 and the Company’s General Counsel on January 27, 2022.He also serves as the Company’s Chief Compliance Officer. Previously, Mr. Dziewisz served in a varietyas the General Counsel of roles atThe Babcock & Wilcox Company from February 2020 to January 2022, as well as our Vice President, Assistant General Counsel & Chief Compliance Officer from January 2019 to February 2020. From June 2013 until January 2019, Mr. Dziewisz served as Assistant General Counsel, Operations & Intellectual Property. From June 2005 until June 2013, Mr. Dziewisz served as Managing Attorney with the Company. Mr. Dziewisz joined the Company or its predecessor, including as the Senior Vice-President of our Industrial segment from May 2017 until January 2018, Vice President of Retrofits and Continuous Emissions Monitoring for the Power segment from August 2016 to May 2017, Vice President, Investor Relations & Communications from June 2015 to August 2016, and as Vice President of Regulatory Affairs from January 2013 to June 2015. Before joining the Company, Ms. Kass held a number of engineering and project management-related positions of increasing responsibility with Westinghouse Electric Company, Entergy Corporation and Duke Energy Corporation.in 1997.


James J. MuckleyJoe Buckler has served as our Senior Vice President, OperationsClean Energy since December 2016 and is responsibleAugust 2022 with responsibility for the Company's manufacturing operations, Global Project Management, QualityClimateBright portfolio, B&W Renewable Service and Environmental, Health, Safety & Security functions.B&W's environmental and emissions control solutions. Prior to that, he served as Senior Vice President, Sales and Business Development with responsibility for growth of the Company's three business segments. From July 2019 to January 2019, as Vice President, Service Products, Joe held responsibility for all technical and commercial aspects of the Company's Service business. He isfirst joined the Company in 2002 in the Engineering group after serving as Product Engineer for Sonoco Products Company.

Chris Riker has served as Senior Vice President, Thermal since August 2022 with responsibility for the Company's global thermal energy business. He has also responsible for Babcock & Wilcox Construction Co., LLC. From June 2016 to December 2016, he wasserved as Senior Vice President, Global Parts and Field Engineering Services inService from 2018 to 2022, where he led the Company's Power segment.worldwide parts and services business, and Vice President, Industrial Steam Generation from 2016 to 2018 where he had responsibility over the Company's package boiler, pulp and paper and petrochemical businesses. . Prior to that, he was Vice President, Parts from January 2016 to May 2016, Generalled the B&W's Finance organization for B&W's former Global Services segment after serving as Controller for Babcock & Wilcox's Diamond Power International, Inc. subsidiary. Chris first joined Babcock & Wilcox in the role of Manager Replacement Parts from November 2012 to December 2015, and Operations/Alliance Manager, Replacement Parts from March 2002 to October 2012.of Internal Audit in 2010 after serving as a consultant with KPMG, LLP.

Item 11. EXECUTIVE COMPENSATIONExecutive Compensation


The information required by this item is incorporated by reference to the material appearing under the headings "Compensation Discussion“Compensation of Directors” and Analysis," "Compensation of Directors," "Compensation“Compensation of Executive Officers," "Compensation Committee Interlocks and Insider Participation" and "Compensation Committee Report"Officers” in the Proxy Statement for our 20182022 Annual Meeting of Stockholders.


Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurity Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters


The following table provides information on our equity compensation plans as of December 31, 2017:2022:

(share data in thousands)
Equity Compensation Plan Information
Plan CategoryEquity compensation plans approved by security holders
Number of securities to be issued upon exercise of outstanding options and rights1,722
Weighted-average exercise price of outstanding options and rights$6.78
Number of securities remaining available for future issuance2,642
Equity Compensation Plan Information
Plan Category:
Equity compensation plans
approved by security holders
Number of securities to be issued upon exercise of outstanding options and rights5,839,265
Weighted-average exercise price of outstanding options and rights$13.15
Number of securities remaining available for future issuance247,310

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The other information required by this item is incorporated by reference to the material appearing under the headings "Security Ownership of Directors and Executive Officers" and "Securityheading “Security Ownership of Certain Beneficial Owners"Owners and Management” in the Proxy Statement for our 20172023 Annual Meeting of Stockholders.


Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCECertain Relationships and Related Transactions, and Director Independence


Information required by this item is incorporated by reference to the material appearing under the headings "Corporate“Corporate Governance – Director Independence"Independence” and "Certain“Certain Relationships and Related Transactions"Transactions” in the Proxy Statement for our 2018the Company's 2023 Annual Meeting of Stockholders.


Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICESPrincipal Accountant Fees and Services


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The information requiredabout aggregate fees billed to us by this item is incorporated by reference to the material appearingour principal accountant, Deloitte & Touche LLP (PCAOB ID No. 34) will be presented under the headingcaption "Ratification of Appointment of Independent Registered Public Accounting Firm for Year Ending December 31, 2018"2023” in the Proxy Statement for our 20182023 Annual Meeting of Stockholders.

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PART IV



Item 15. Exhibits, Financial Statement Schedules

a) The following documents are filed as part of this Annual Report on Form 10-K:

1) Financial Statements—the consolidated financial statements of Babcock & Wilcox Enterprises, Inc. and its consolidated subsidiaries are included in Part II, Item 8 of this Annual Report on Form 10-K.

2) Exhibits—the exhibit index listed in the exhibit index below are filed with, or incorporated by reference in, this Annual Report on Form 10-K.


EXHIBIT INDEX

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)).
Amended and 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)).
Amended andCertificate of Amendment of the Restated Bylaws (incorporateCertificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Babcock & Wilcox Enterprises, Inc. QuarterlyCurrent Report on Form 10-Q for the quarter ended March 31, 20178-K filed on June 17, 2019 (File No. 001-36876)).
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)).
Amended and Restated Bylaws of the Babcock & Wilcox Enterprises, Inc.
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)).
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)).
Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to Exhibit 4.2 of the Babcock & Wilcox Enterprises, Inc. Annual Report on Form 10-K for the year ended December 31, 2019 (File No. 001-36876)).
Indenture dated February 12, 2021 (incorporated by reference to Exhibit 4.1 to the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed on February 12, 2021 (File No. 001-36876)).
First Supplemental Indenture dated February 12, 2021 (incorporated by reference to Exhibit 4.2 to the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed on February 12, 2021 (File No. 001-36876)).
Second Supplemental Indenture dated December 13, 2021 (incorporated by reference to Exhibit 4.3 to the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed on December 14, 2021 (File No. 001-36876)).
Form of 8.125% Senior Note Due 2026 (included in Exhibit 4.4)
Form of 6.50%% Senior Note Due 2026 (included in Exhibit 4.5)
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Form of Certificate representing 7.75% Series A Cumulative Perpetual Preferred Stock (incorporated by reference to Exhibit 4.1 to the Babcock & Wilcox Enterprises, Inc. Form 8-A filed on May 7, 2021 (File No. 001-36876)).
Tax Sharing Agreement, dated as of June 8, 2015, by and between The Babcock & Wilcox Company and Babcock & Wilcox Enterprises, Inc. (incorporated by reference to Exhibit 10.1 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 001-36876)).
Employee Matters Agreement, dated as of June 8, 2015, by and between The Babcock & Wilcox Company and Babcock & Wilcox Enterprises, Inc. (incorporated by reference to Exhibit 10.2 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 001-36876)).
Transition Services Agreement, dated as of June 8, 2015, between The Babcock & Wilcox Company, as service provider, and Babcock & Wilcox Enterprises, Inc., as service receiver (incorporated by reference to Exhibit 10.3 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 001-36876)).
Transition Services Agreement, dated as of June 8, 2015, between Babcock & Wilcox Enterprises, Inc., as service provider, and The Babcock & Wilcox Company, as service receiver (incorporated by reference to Exhibit 10.4 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 001-36876)).
Assumption and Loss Allocation Agreement, dated as of June 19, 2015, by and among ACE American Insurance Company and the Ace Affiliates (as defined therein), Babcock & Wilcox Enterprises, Inc. and The Babcock & Wilcox Company (incorporated by reference to Exhibit 10.5 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 001-36876)).
Reinsurance Novation and Assumption Agreement, dated as of June 19, 2015, by and among ACE American Insurance Company and the Ace Affiliates (as defined therein), Creole Insurance Company and Dampkraft Insurance Company (incorporated by reference to Exhibit 10.6 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 001-36876)).
Novation and Assumption Agreement, dated as of June 19, 2015, by and among The Babcock & Wilcox Company, Babcock & Wilcox Enterprises, Inc., Dampkraft Insurance Company and Creole Insurance Company (incorporated by reference to Exhibit 10.7 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 001-36876)).
Babcock & Wilcox Enterprises, Inc. Amended and Restated 2015 Long-Term Incentive Plan (Amended and Restated as of June 14, 2019) (incorporated by reference to Appendix G to the Babcock & Wilcox Enterprises, Inc. Definitive Proxy Statement filed with the Securities and Exchange Commission on May 13, 2019).
Babcock & Wilcox Enterprises, Inc. 2021 Long-Term Incentive Plan (incorporated by reference to the Babcock & Wilcox Enterprises, Inc. currentCurrent Report on Form 8-K filed on May 6, 201626, 2021 (File No. 001-36876)).
Babcock & Wilcox Enterprises, Inc. Executive Incentive Compensation Plan (incorporated by reference to Exhibit 10.9 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 001-36876)).

Babcock & Wilcox Enterprises, Inc. Management Incentive Compensation Plan (incorporated by reference to Exhibit 10.10 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 001-36876))

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.

Supplemental Executive Retirement Plan of Babcock & Wilcox Enterprises, Inc. (incorporated by reference to Exhibit 10.11 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 001-36876)).

Babcock & Wilcox Enterprises, Inc. Defined Contribution Restoration Plan (incorporated by reference to Exhibit 10.12 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 001-36876)).

Intellectual Property Agreement, dated as of June 26, 2015, between Babcock & Wilcox Power Generation Group, Inc. and BWXT Foreign Holdings, LLC (incorporated by reference to Exhibit 10.13 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 001-36876)).

Intellectual Property Agreement, dated as of June 27, 2015, between Babcock & Wilcox Technology, Inc. and Babcock & Wilcox Investment Company (incorporated by reference to Exhibit 10.14 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 001-36876)).

Intellectual Property Agreement, dated as of May 29, 2015, between Babcock & Wilcox Canada Ltd. and B&W PGG Canada Corp. (incorporated by reference to Exhibit 10.15 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 001-36876)).
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Intellectual Property Agreement, dated as of May 29, 2015, between Babcock & Wilcox mPower,Power, Inc. and Babcock & Wilcox Power Generation Group, Inc. (incorporated by reference to Exhibit 10.16 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 001-36876)).

Intellectual Property Agreement, dated as of June 26, 2015, between The Babcock & Wilcox Company and Babcock & Wilcox Enterprises, Inc. (incorporated by reference to Exhibit 10.17 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 001-36876)).
Form of Change-in-Control Agreement, by and between Babcock & Wilcox Enterprises, Inc. and certain officers for officers elected prior to August 4, 2016 (incorporated by reference to Exhibit 10.1 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 (File No. 001-36876)).

Form of Restricted Stock Grant Agreement (Spin-off Award) (incorporated by reference to Exhibit 10.1 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2015 (File No. 001-36876)).

Form of Restricted Stock Units Grant Agreement (incorporated by reference to Exhibit 10.2 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2015 (File No. 001-36876)).

Form of Stock Option Grant Agreement (incorporated by reference to Exhibit 10.3 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2015 (File No. 001-36876)).

Form of Performance Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.23 to the Babcock & Wilcox Enterprises, Inc. Annual Report on Form 10-K for the year ended December 31, 2015 (File No. 001-36876)).
Form of Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.24 to the Babcock & Wilcox Enterprises, Inc. Annual Report on Form 10-K for the year ended December 31, 2015 (File No. 001-36876)).

Form of Change-in-Control Agreement, by and between Babcock & Wilcox Enterprises, Inc. and certain officers for officers elected on or after August 4, 2016 (incorporated by reference to Exhibit 10.2 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 (File No. 001-36876)).

Form of Performance Unit Award Grant Agreement (Cash Settled) (incorporated by reference to Exhibit 10.1 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 (File No. 001-36876)).
Form of Special Restricted Stock Unit Award Grant Agreement (incorporated by reference to Exhibit 10.2 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 (File No. 001-36876)).

Babcock & Wilcox Enterprises, Inc., Severance Plan, as revised effective June 1, 2018 (incorporated by reference to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 (File No. 001-36876)).

Consulting Agreement dated November 19, 2018 between Babcock & Wilcox Enterprises, Inc., and BRPI Executive Consulting (incorporated by reference to Exhibit 10.49 of the Babcock & Wilcox Enterprises, Inc. Annual Report on Form 10-K for the year ended December 31, 2018 (File No. 001-36876)).

Executive Employment Agreement dated November 19, 2018 between Babcock & Wilcox Enterprises, Inc. and Louis Salamone (incorporated by reference to Exhibit 10.50 of the Babcock & Wilcox Enterprises, Inc. Annual Report on Form 10-K for the year ended December 31, 2018 (File No. 001-36876)).
Executive Employment Agreement dated November 19, 2018 between Babcock & Wilcox Enterprises, Inc. and Henry Bartoli, as amended (incorporated by reference to Exhibit 10.30 of the Babcock & Wilcox Enterprises, Inc. Annual Report on Form 10-K for the year ended December 31, 2019 (File No. 001-36876)).
Form of Stock Appreciation Right Award Grant Agreement (incorporated by reference to Exhibit 10.52 of the Babcock & Wilcox Enterprises, Inc. Annual Report on Form 10-K for the year ended December 31, 2018 (File No. 001-36876)).

Credit Agreement, dated as of May 11, 2015, among Babcock & Wilcox Enterprises, Inc., as the borrower, Bank of America, N.A., as Administrative Agent, and the Other Lenders Party Thereto (incorporated by reference to Exhibit 10.18 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 001-36876))
Form of Change-in-Control Agreement, by and between Babcock & Wilcox Enterprises, Inc. and certain officers for officers elected prior to August 4, 2016 (incorporated by reference to Exhibit 10.1 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 (File No. 001-36876))
Form of Restricted Stock Grant Agreement (Spin-off Award) (incorporated by reference to Exhibit 10.1 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2015 (File No. 001-36876))
Form of Restricted Stock Units Grant Agreement (incorporated by reference to Exhibit 10.2 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2015 (File No. 001-36876))
Form of Stock Option Grant Agreement (incorporated by reference to Exhibit 10.3 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2015 (File No. 001-36876))
Form of Performance Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.23 to the Babcock & Wilcox Enterprises, Inc. Annual Report on Form 10-K for the year ended December 31, 2015 (File No. 001-36876))
Form of Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.24 to the Babcock & Wilcox Enterprises, Inc. Annual Report on Form 10-K for the year ended December 31, 2015 (File No. 001-36876))

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.
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Form of Change-in-Control Agreement, by and between Babcock & Wilcox Enterprises, Inc. and certain officers for officers elected on or after August 4, 2016 (incorporated by reference to Exhibit 10.2 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 (File No. 001-36876))
Amendment No. 1 dated June 10, 2016 to Credit Agreement, dated May 11, 2015, among Babcock & Wilcox Enterprises, Inc., as the Borrower, Bank of America, N.A., as Administrative Agent, and the other Lenders party thereto (incorporated by reference to Exhibit 10.1 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 (File No. 001-36876)).
Amendment No. 2 dated February 24, 2017 to Credit Agreement, dated May 11, 2015, among Babcock & Wilcox Enterprises, Inc., as the Borrower, Bank of America, N.A., as Administrative Agent, and the other Lenders party thereto.
Form of Performance Unit Award Grant Agreement (Cash Settled)thereto (incorporated by reference to Exhibit 10.1 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30,March 31, 2017 (File No. 001-36876)).
Form of Special Restricted Stock Unit Award Grant Agreement (incorporated by reference to Exhibit 10.2 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 (File No. 001-36876))
Amendment No. 3 dated August 9, 2017, to Credit Agreement dated May 11, 2015, among Babcock & Wilcox Enterprises, Inc., as the Borrower, Bank of America, N.A., as administrative Agent and Lender, and the other Lenders party thereto (incorporated by reference to Exhibit 10.1 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 (File No. 001-36876)).
Second Lien Credit Agreement, dated August 9, 2017, among Babcock & Wilcox Enterprises, Inc., as the Borrower, Lightship Capital LLC, as administrative Agent and Lender, and the other Lenders party thereto (incorporated by reference to Exhibit 10.2 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 (File No. 001-36876))
Amendment No. 4 dated September 30, 2017, to Credit Agreement dated May 11, 2015, among Babcock & Wilcox Enterprises, Inc., as the Borrower, Bank of America, N.A., as administrative Agent and Lender, and the other Lenders party thereto (incorporated by reference to Exhibit 10.3 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 (File No. 001-36876)).
Amendment No. 5 dated March 1, 2018, to Credit Agreement, dated as of January 3, 2018,May 11, 2015, among Babcock & Wilcox Enterprises, Inc., Vintage Capital Management, LLC, Kahn Capital Management, LLC,as the borrower, Bank of America, N.A., as Administrative Agent, and Brian R. Kahnthe other lenders party thereto (incorporated by reference to the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed March 5, 2018 (File No. 001-36876)).
Amendment No. 6 dated April 10, 2018, to Credit Agreement, dated as of May 11, 2015, among Babcock & Wilcox Enterprises, Inc., as the borrower, Bank of America, N.A., as Administrative Agent, and the other lenders party thereto (incorporated by reference to the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed April 11, 2018 (File No. 001-36876)).
Consent and Amendment No. 7 dated May 31, 2018, to Credit Agreement, dated as of May 11, 2015, among Babcock & Wilcox Enterprises, Inc., as the borrower, Bank of America, N.A., as Administrative Agent, and the other lenders party thereto (incorporated by reference to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 (File No. 001-36876)).
Amendment No. 8 dated August 9, 2018, to Credit Agreement, dated as of May 11, 2015, among Babcock & Wilcox Enterprises, Inc., as the borrower, Bank of America, N.A., as Administrative Agent, and the other lenders party thereto (incorporated by reference to the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed August 13, 2018 (File No. 001-36876)).
Amendment No. 9 dated September 14, 2018, to Credit Agreement, dated as of May 11, 2015, among Babcock & Wilcox Enterprises, Inc., as the borrower, Bank of America, N.A., as Administrative Agent, and the other lenders party thereto (incorporated by reference to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 (File No. 001-36876)).
Amendment No. 10 dated September 28, 2018, to Credit Agreement, dated as of May 11, 2015, among Babcock & Wilcox Enterprises, Inc., as the borrower, Bank of America, N.A., as Administrative Agent, and the other lenders party thereto (incorporated by reference to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 (File No. 001-36876)).
Amendment No. 11 dated October 4, 2018, to Credit Agreement, dated as of May 11, 2015, among Babcock & Wilcox Enterprises, Inc., as the borrower, Bank of America, N.A., as Administrative Agent, and the other lenders party thereto (incorporated by reference to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 (File No. 001-36876)).
Amendment No. 12 dated October 31, 2018, to Credit Agreement, dated as of May 11, 2015, among Babcock & Wilcox Enterprises, Inc., as the borrower, Bank of America, N.A., as Administrative Agent, and the other lenders party thereto (incorporated by reference to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 (File No. 001-36876)).
Amendment No. 13 dated December 31, 2018, to Credit Agreement, dated as of May 11, 2015, among Babcock & Wilcox Enterprises, Inc., as the borrower, Bank of America, N.A., as Administrative Agent, and the other lenders party thereto (incorporated by reference to Exhibit 10.47 of the Babcock & Wilcox Enterprises, Inc. Annual Report on Form 10-K for the year ended December 31, 2018 (File No. 001-36876)).
Amendment No. 14 dated January 15, 2019 to Credit Agreement, dated as of May 11, 2015, among Babcock & Wilcox Enterprises, Inc., as the borrower, Bank of America, N.A., as Administrative Agent, and the other lenders party thereto (incorporated by reference to Exhibit 10.48 of the Babcock & Wilcox Enterprises, Inc. Annual Report on Form 10-K for the year ended December 31, 2018 (File No. 001-36876)).
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Amendment No. 15 and Limited Waiver dated March 19, 2019 to Credit Agreement, dated as of May 11, 2015, among Babcock & Wilcox Enterprises, Inc., as the borrower, Bank of America, N.A., as Administrative Agent, and the other lenders party thereto (incorporated by reference to Exhibit 10.53 of the Babcock & Wilcox Enterprises, Inc. Annual Report on Form 10-K for the year ended December 31, 2018 (File No. 001-36876)).
Amendment No. 16, dated April 5, 2019, to Credit Agreement, dated as of May 11, 2015, among Babcock & Wilcox Enterprises, Inc., as the borrower, Bank of America, N.A., as Administrative Agent, and the other lenders party thereto (incorporated by reference to Exhibit 10.1 to the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed January 3, 2018on April 5, 2019 (File No. 001-36876)).
Amendment No. 17, dated August 7, 2019, to Credit Agreement, dated as of May 11, 2015, among Babcock & Wilcox Enterprises, Inc., as the borrower, Bank of America, N.A., as Administrative Agent, and the other lenders party thereto (incorporated by reference to Exhibit 10.49 of the Babcock & Wilcox Enterprises, Inc. Annual Report on Form 10-K for the year ended December 31, 2019 (File No. 001-36876)).
Amendment No. 18, dated December 31, 2019, to Credit Agreement, dated as of May 11, 2015, among Babcock & Wilcox Enterprises, Inc., as the borrower, Bank of America, N.A., as Administrative Agent, and the other lenders party thereto (incorporated by reference to Exhibit 10.50 of the Babcock & Wilcox Enterprises, Inc. Annual Report on Form 10-K for the year ended December 31, 2019 (File No. 001-36876)).
Amendment No. 19, dated January 17, 2020, to Credit Agreement, dated as of May 11, 2015, among Babcock & Wilcox Enterprises, Inc., as the borrower, Bank of America, N.A., as Administrative Agent, and the other lenders party thereto (incorporated by reference to Exhibit 10.51 of the Babcock & Wilcox Enterprises, Inc. Annual Report on Form 10-K for the year ended December 31, 2019 (File No. 001-36876)).
Amendment No. 20, dated January 31, 2020, to Credit Agreement, dated as of May 11, 2015, among Babcock & Wilcox Enterprises, Inc., as the borrower, Bank of America, N.A., as Administrative Agent, and the other lenders party thereto (incorporated by reference to Exhibit 10.52 of the Babcock & Wilcox Enterprises, Inc. Annual Report on Form 10-K for the year ended December 31, 2019 (File No. 001-36876)).
Investor Rights Agreement, dated as of April 30, 2019, by and among Babcock & Wilcox Enterprises, Inc., B. Riley FBR, Inc. and Vintage Capital Management, LLC (incorporated by reference to Exhibit 10.4 of the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 (File No. 001-36876)).
Registration Rights Agreement, dated as of April 30, 2019, by and among Babcock & Wilcox Enterprises, Inc., and certain investors party thereto (incorporated by reference to Exhibit 10.5 of the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 (File No. 001-36876)).
Form of Joinder2019 Restricted Stock Units Director Grant Agreement (incorporated by reference to Exhibit 10.1 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 (File No. 001-36876)).
First Amendment to the Babcock & Wilcox Enterprises, Inc. Defined Contribution Restoration Plan. (incorporated by reference to Exhibit 10.56 of the Babcock & Wilcox Enterprises, Inc. Annual Report on Form 10-K for the year ended December 31, 2019 (File No. 001-36876)).
Backstop Commitment Letter, dated January 31, 2020, between Babcock & Wilcox Enterprises, Inc. and B. Riley Financial, Inc. (incorporated by reference to Exhibit 10.2 to the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed Januaryon February 3, 20182020 (File No. 001-36876)).
Offer Letter,Amendment No. 21, dated March 27, 2020, to Credit Agreement, dated as of May 11, 2015, among Babcock & Wilcox Enterprises, Inc., as the borrower, Bank of America, N.A., as Administrative Agent, and the other lenders party thereto (incorporated by reference to Exhibit 10.58 of the Babcock & Wilcox Enterprises, Inc. Annual Report on Form 10-K for the year ended December 31, 2019 (File No. 001-36876)).
Amendment and Restatement Agreement (attaching the Amended and Restated Credit Agreement), dated as of May 14, 2020, among Babcock & Wilcox Enterprises, Inc., as the borrower, Bank of America, N.A., as Administrative Agent, and the other lenders party thereto (incorporated by reference to Exhibit 10.1 of the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed May 15, 2020 (File No. 001-36876)).
Form of 2021 Long-Term Cash Incentive Award Grant Agreement (incorporated by reference to Exhibit 10.10 to the Babcock & Wilcox Enterprises, Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 (File No. 001-36876)).
Amendment No. 1 to Amended and Restated Credit Agreement, dated as of October 30, 2020, among Babcock & Wilcox Enterprises, Inc., as the borrower, Bank of America, N.A., as Administrative Agent, and the other lenders party thereto (incorporated by reference to Exhibit 10.1 of the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed November 5, 2020 (File No. 001-36876)).
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Second Amendment to Executive Services Agreement between Babcock & Wilcox Enterprises, Inc. and BRPI Executive Consulting, LLC dated November 9, 2020 (incorporated by reference to Exhibit 10.1 of the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed November 10, 2020 (File No. 001-36876)).
Third Amendment to Executive Employment Agreement between Babcock & Wilcox Enterprises, Inc. and Henry Bartoli dated November 5, 2020 (incorporated by reference to Exhibit 10.2 of the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed November 10, 2020 (File No. 001-36876)).
Consultant Agreement by and between The Babcock & Wilcox Company Inc. and Henry Bartoli effective as of January 1, 2021 (incorporated by reference to Exhibit 10.3 of the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed November 10, 2020 (File No. 001-36876)).
Settlement Agreement between Babcock & Wilcox Volund A/S and XL Insurance Company SE dated October 10, 2020 (incorporated by reference to Exhibit 10.65 of the Babcock & Wilcox Enterprises, Inc. Annual Report on Form 10-K for the year ended December 31, 2020 (File No. 001-36876)).
Exchange Agreement by and between Babcock & Wilcox Enterprises Inc. and Leslie C. KassB. Riley Financial, Inc. dated February 12, 2021 (incorporated by reference to Exhibit 1.3 to the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed on February 12, 2021 (File No. 001-36876)).
Amendment No. 2 to Amended and Restated Credit Agreement by and between Babcock & Wilcox Enterprises Inc. and Bank of America, N.A., as of January 31, 2018Administrative Agent, dated February 8, 2021 (incorporated by reference to Exhibit 10.1 to the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed on February 1, 2018 (file no.12, 2021 (File No. 001-36876)).
SupplementAmendment No. 3 to EmploymentAmended and Restated Credit Agreement by and between Babcock & Wilcox Enterprises Inc. and E. James FerlandBank of America, N.A., as Administrative Agent, dated as of January 31, 2018March 4 2021 (incorporated by reference to Exhibit 10.210.68 of the Babcock & Wilcox Enterprises, Inc. Annual Report on Form 10-K for the year ended December 31, 2020 (File No. 001-36876)).
Amendment No. 4 to Amended and Restated Credit Agreement by and between Babcock & Wilcox Enterprises Inc. and Bank of America, N.A., as Administrative Agent, dated March 26, 2021 (incorporated by reference to Exhibit 10.1 to the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed Februaryon April 1, 2018 (file no.2021 (File No. 001-36876)).
Amendment No. 5 to Amended and Restated Credit Agreement dated May 10, 2021 (incorporated by reference to the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed on May 13, 2021 (File No. 001-36876)).
Revolving Credit, Guaranty and Security Agreement, dated as of June 30, 2021, by and among Babcock & Wilcox Enterprises, Inc. and PNC Bank, National Association, as administrative agent, lender and swing loan lender (incorporated by reference to the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed on July 7, 2021 (File No. 001-36876)).
Letter of Credit Issuance and Reimbursement and Guaranty Agreement, dated as of June 30, 2021, by and among Babcock & Wilcox Enterprises, Inc. and PNC Bank, National Association, as issuer (incorporated by reference to the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed on July 7, 2021 (File No. 001-36876))
Reimbursement, Guaranty and Security Agreement, dated as of June 30, 2021, by and among Babcock & Wilcox Enterprises, Inc. and MSD PCOF Partners XLV, LLC, as administrative agent (incorporated by reference to the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed on July 7, 2021 (File No. 001-36876)).
Guaranty Agreement, dated as of June 30, 2021, by B. Riley Financial, Inc. in favor of MSD PCOF Partners XLV, LLC, as administrative agent (incorporated by reference to the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed on July 7, 2021 (File No. 001-36876)).
Amendment No. 1 to Revolving Credit, Guaranty and Security Agreement, dated as of August 8, 2022, by and among Babcock & Wilcox Enterprises, Inc. and PNC Bank, National Association, as administrative agent, lender and swing loan lender, filed on Form 10-Q/A (File No. 001-36876).
Amendment No. 1 to Reimbursement, Guaranty and Security Agreement, dated as of August 8, 2022, by and among Babcock & Wilcox Enterprises, Inc. and MSD PCOF Partners XLV, LLC, as administrative agent, filed on Form 10-Q/A (File No. 001-36876)..
Amendment No. 2 to Reimbursement, Guaranty and Security Agreement, dated as of November 8, 2022, by and among Babcock & Wilcox Enterprises, Inc. and MSD PCOF Partners XLV, LLC, as administrative agent, filed on Form 10-Q/A, filed herein.
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Amendment No. 2 to Revolving Credit, Guaranty and Security Agreement, dated as of March 14, 2023, by and among Babcock & Wilcox Enterprises, Inc. and PNC Bank, National Association, as administrative agent, lender and swing loan lender, filed herein.
Significant Subsidiaries of the RegistrantRegistrant.
Consent of Deloitte & Touche LLPLLP.
Rule 13a-14(a)/15d-14(a) certification of Chief Executive OfficerOfficer.
Rule 13a-14(a)/15d-14(a) certification of Chief Financial OfficerOfficer.
Section 1350 certification of Chief Executive OfficerOfficer.

126



Section 1350 certification of Chief Financial Officer.
101.SCHXBRL Taxonomy Extension Schema Document.
101.CALXBRL Taxonomy Extension Calculation Linkbase Document.
101.LABXBRL Taxonomy Extension Label Linkbase Document.
101.PREXBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF
Section 1350 certification of Chief Financial Officer
101.INSXBRL Instance Document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase DocumentDocument.
104Cover 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.

† Management contract or compensatory plan or arrangement.
‡ The Company has omitted certain information contained in this exhibit pursuant to Rule 601(b)(10) of Regulation S-K. The omitted information is not material and, if publicly disclosed, would likely cause competitive harm to the Company.

119


SCHEDULE II

BABCOCK & WILCOX ENTERPRISES, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS


Allowance for Doubtful Accounts
Year ended December 31,
(in thousands)20222021
Balance at beginning of period$11,828 $17,222 
Charges to costs and expenses187 262 
Deductions(583)(4,207)
Currency translation adjustments and other(600)(1,449)
Balance at end of period$10,832 $11,828 


Inventory Reserves
Year ended December 31,
(in thousands)20222021
Balance at beginning of period$6,534 $7,078 
Charges to costs and expenses533 (655)
Deductions38 14 
Currency translation adjustments and other122 97 
Balance at end of period$7,227 $6,534 

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Item 16. Form 10-K Summary


None.


SIGNATURES

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

BABCOCK & WILCOX ENTERPRISES, INC.
March 16, 2023By:/s/ Leslie C. KassKenneth M. Young
March 1, 2018By:Leslie C. KassKenneth M. Young
PresidentChairman and Chief Executive Officer








































127
121





Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated and on the datedates indicated.
SignatureTitle
/s/ Kenneth M. YoungChairman and Chief Executive Officer
(Principal Executive Officer)
Kenneth M. Young
/s/ Louis SalamoneExecutive Vice President, Chief Financial Officer and Chief Accounting Officer (Principal Financial and Accounting Officer and Duly Authorized Representative)
Louis Salamone
SignatureTitle
/s/ Leslie C. Kass
President, Chief Executive Officer and Director
(Principal Executive Officer)
Leslie C. Kass
/s/ Jenny L. Apker
Senior Vice President and Chief Financial Officer
(Principal Financial Officer and Duly Authorized Representative)
Jenny L. Apker
/s/ Daniel W. Hoehn
Vice President, Controller and Chief Accounting Officer
(Principal Accounting Officer and Duly Authorized Representative)
Daniel W. Hoehn
/s/ E. James FerlandExecutive Chairman
E. James Ferland
/s/ Matthew E. AvrilDirector
Matthew E. Avril
/s/ Henry E. BartoliDirector
Henry E. Bartoli
/s/ Thomas A. ChristopherAlan B. HoweDirector
Thomas A. ChristopherAlan B. Howe
/s/ Cynthia S. DubinPhilip D. MoellerDirector
Cynthia S. DubinPhilip D. Moeller
/s/ Brian K. FerraioliRebecca StahlDirector
Brian K. FerraioliRebecca Stahl
/s/ Stephen G. HanksJoseph A. TatoDirector
Stephen G. HanksJoseph A. Tato
/s/ Brian R. KahnDirector
Brian R. Kahn
/s/ Anne R. PramaggioreDirector
Anne R. Pramaggiore
/s/ Larry L. WeyersDirector
Larry L. Weyers

March 1, 201816, 2023




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