Table of Contents



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


FORM 10-Q
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017March 31, 2022


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

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

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

The number of shares of the registrant's common stock outstanding at October 31, 2017May 2, 2022 was 44,049,127.86,337,832.

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BABCOCK & WILCOX ENTERPRISES, INC.
FORM 10-Q
TABLE OF CONTENTS
PAGE
Item 1.

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Table of Contents





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

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

These forward-looking statements are based on management’s current expectations and involve a number of risks and uncertainties, including, among other things, the impact of COVID-19 and the invasion of Ukraine by Russia and the capital markets and global economic climate generally; 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 Fosler Construction Company Inc., VODA A/S, Fossil Power Systems, Inc., and Optimus Industries, LLC; 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; 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, and the other factors specified and set forth under "Risk Factors" in our periodic reports filed with the Securities and Exchange Commission, including our most recent annual report on Form 10-K filed on March 8, 2022.

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

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



PART I - FINANCIAL INFORMATION


ITEM 1. Condensed Consolidated Financial Statements
3


BABCOCK & WILCOX ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31,
(in thousands, except per share amounts)20222021
Revenues$204,049 $168,248 
Costs and expenses:
Cost of operations163,060 131,385 
Selling, general and administrative expenses43,044 40,457 
Advisory fees and settlement costs3,935 3,291 
Restructuring activities94 993 
Research and development costs719 588 
Gain on asset disposals, net(20)(2,004)
Total costs and expenses210,832 174,710 
Operating loss(6,783)(6,462)
Other expense:
Interest expense(11,267)(14,223)
Interest income117 109 
Gain on sale of business— 358 
Benefit plans, net7,452 9,098 
Foreign exchange3,085 (1,209)
Other expense – net(58)(278)
Total other expense(671)(6,145)
Loss before income tax expense(7,454)(12,607)
Income tax expense1,230 2,836 
Net loss(8,684)(15,443)
Net loss (income) attributable to non-controlling interest420 (21)
Net loss attributable to stockholders(8,264)(15,464)
Less: Dividend on Series A preferred stock3,715 — 
Net loss attributable to stockholders of common stock$(11,979)$(15,464)
Basic loss per share$(0.14)$(0.22)
Diluted loss per share$(0.14)$(0.22)
Shares used in the computation of loss per share:
Basic87,992 71,396 
Diluted87,992 71,396 
 Three months ended September 30, Nine months ended September 30,
(in thousands, except per share amounts)20172016 20172016
Revenues$408,703
$410,955
 $1,149,636
$1,198,279
Costs and expenses:     
Cost of operations361,416
337,198
 1,095,271
1,018,314
Selling, general and administrative expenses60,241
60,697
 195,847
182,761
Goodwill impairment charges86,903

 86,903

Restructuring activities and spin-off transaction costs3,775
2,395
 8,910
38,021
Research and development costs2,291
2,361
 7,454
8,273
Losses (gains) on asset disposals, net59
(2) 63
(17)
Total costs and expenses514,685
402,649
 1,394,448
1,247,352
Equity in income (loss) and impairment of investees1,234
2,827
 (13,380)4,887
Operating income (loss)(104,748)11,133
 (258,192)(44,186)
Other income (expense):     
Interest income121
115
 359
656
Interest expense(7,468)(379) (15,567)(1,169)
Other – net(7,633)(241) (6,024)113
Total other income (expense)(14,980)(505) (21,232)(400)
Income (loss) before income tax expense(119,728)10,628
 (279,424)(44,586)
Income tax expense (benefit)(5,639)1,617
 (7,644)(790)
Net income (loss)(114,089)9,011
 (271,780)(43,796)
Net income attributable to noncontrolling interest(213)(117) (566)(293)
Net income (loss) attributable to shareholders$(114,302)$8,894
 $(272,346)$(44,089)
      
Basic income (loss) per share$(2.48)$0.18
 $(5.69)$(0.87)
      
Diluted income (loss) per share$(2.48)$0.18
 $(5.69)$(0.87)
      
Shares used in the computation of earnings per share:     
Basic46,149
49,621
 47,905
50,613
Diluted46,149
49,857
 47,905
50,613

See accompanying notes to condensed consolidated financial statements.

Condensed Consolidated Financial Statements.
3
4





BABCOCK & WILCOX ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 Three months ended September 30, Nine months ended September 30,
(in thousands)20172016 20172016
Net income (loss)$(114,089)$9,011
 $(271,780)$(43,796)
Other comprehensive income (loss):     
Currency translation adjustments, net of taxes2,591
2,811
 14,765
(7,015)
      
Derivative financial instruments:     
Unrealized gains (losses) on derivative financial instruments398
1,419
 2,642
5,476
Income taxes130
287
 (9)990
Unrealized gains (losses) on derivative financial instruments, net of taxes268
1,132
 2,651
4,486
Derivative financial instrument (gains) losses reclassified into net income5,679
(1,519) (769)(3,516)
Income taxes2,112
(272) 165
(615)
Reclassification adjustment for (gains) losses included in net income, net of taxes3,567
(1,247) (934)(2,901)
      
Benefit obligations:     
Unrealized gains (losses) on benefit obligations(66)(25) (207)(49)
Income taxes

 

Unrealized gains (losses) on benefit obligations, net of taxes(66)(25) (207)(49)
Amortization of benefit plan costs (benefits)(619)15
 (2,281)(294)
Income taxes11
7
 31
(421)
Amortization of benefit plan costs (benefits), net of taxes(630)8
 (2,312)127
      
Investments:     
Unrealized gains (losses) on investments84
18
 171
53
Income taxes15

 60
24
Unrealized gains (losses) on investments, net of taxes69
18
 111
29
Investment (gains) losses reclassified into net income(6)
 (50)1
Income taxes(2)
 (18)
Reclassification adjustments for (gains) losses included in net income, net of taxes(4)
 (32)1
      
Other comprehensive income (loss)5,795
2,697
 14,042
(5,322)
Total comprehensive income (loss)(108,294)11,708
 (257,738)(49,118)
Comprehensive income (loss) attributable to noncontrolling interest(59)(218) (85)(370)
Comprehensive income (loss) attributable to shareholders$(108,353)$11,490
 $(257,823)$(49,488)
Three Months Ended March 31,
(in thousands)20222021
Net loss$(8,684)$(15,443)
Other comprehensive (loss) income:
Currency translation adjustments ("CTA")(4,285)$(70)
Reclassification of CTA to net loss— (4,512)
Benefit obligations:
Pension and post retirement adjustments, net of tax593 198 
Other comprehensive loss(3,692)(4,384)
Total comprehensive loss(12,376)(19,827)
Comprehensive income attributable to non-controlling interest461 
Comprehensive loss attributable to stockholders$(11,915)$(19,824)
See accompanying notes to condensed consolidated financial statements.

Condensed Consolidated Financial Statements.
4
5





BABCOCK & WILCOX ENTERPRISES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amount)September 30, 2017 December 31, 2016(in thousands, except per share amount)March 31, 2022December 31, 2021
Cash and cash equivalents$48,137
 $95,887
Cash and cash equivalents$108,137 $224,874 
Restricted cash and cash equivalents26,648
 27,770
Restricted cash and cash equivalents8,833 1,841 
Accounts receivable – trade, net320,202
 282,347
Accounts receivable – trade, net170,464 132,068 
Accounts receivable – other67,421
 73,756
Accounts receivable – other39,819 34,553 
Contracts in progress169,182
 166,010
Contracts in progress95,972 80,176 
Inventories91,099
 85,807
Inventories, netInventories, net90,401 79,527 
Other current assets37,339
 45,957
Other current assets27,343 29,395 
Total current assets760,028
 777,534
Total current assets540,969 582,434 
Net property, plant and equipment143,107
 133,637
Net property, plant and equipment, and finance leaseNet property, plant and equipment, and finance lease77,156 85,627 
Goodwill204,105
 267,395
Goodwill174,371 116,462 
Deferred income taxes163,013
 163,388
Investments in unconsolidated affiliates87,417
 98,682
Intangible assets80,000
 71,039
Intangible assets, netIntangible assets, net65,452 43,795 
Right-of-use assetsRight-of-use assets30,500 30,163 
Other assets22,227
 17,468
Other assets66,251 54,784 
Total assets$1,459,897
 $1,529,143
Total assets$954,699 $913,265 
   
Foreign revolving credit facilities$12,398
 $14,241
Accounts payable243,565
 220,737
Accounts payable$97,840 $85,929 
Accrued employee benefits38,009
 35,497
Accrued employee benefits12,245 12,989 
Advance billings on contracts219,822
 210,642
Advance billings on contracts99,910 68,380 
Accrued warranty expense41,230
 40,467
Accrued warranty expense11,873 12,925 
Financing lease liabilitiesFinancing lease liabilities1,973 2,445 
Operating lease liabilitiesOperating lease liabilities4,078 3,950 
Other accrued liabilities92,491
 95,954
Other accrued liabilities75,949 54,385 
Loans payableLoans payable13,433 12,380 
Total current liabilities647,515
 617,538
Total current liabilities317,301 253,383 
United States revolving credit facility58,900
 9,800
Second lien term loan facility138,384
 
Pension and other accumulated postretirement benefit liabilities275,269
 301,259
Other noncurrent liabilities45,046
 39,595
Senior notesSenior notes328,870 326,366 
Long term loans payableLong term loans payable1,476 1,543 
Pension and other postretirement benefit liabilitiesPension and other postretirement benefit liabilities174,873 182,730 
Non-current finance lease liabilitiesNon-current finance lease liabilities29,094 29,369 
Non-current operating lease liabilitiesNon-current operating lease liabilities27,032 26,685 
Other non-current liabilitiesOther non-current liabilities32,111 34,567 
Total liabilities1,165,114
 968,192
Total liabilities910,757 854,643 
Commitments and contingencies   Commitments and contingencies00
Stockholders' equity:   Stockholders' equity:
Common stock, par value $0.01 per share, authorized 200,000 shares; issued and outstanding 44,049 and 48,688 shares at September 30, 2017 and December 31, 2016, respectively499
 544
Preferred stock, par value $0.01 per share, authorized shares of 20,000; issued and outstanding shares of 7,669 and 7,669 at March 31, 2022 and December 31, 2021, respectivelyPreferred stock, par value $0.01 per share, authorized shares of 20,000; issued and outstanding shares of 7,669 and 7,669 at March 31, 2022 and December 31, 2021, respectively77 77 
Common stock, par value $0.01 per share, authorized shares of 500,000; issued and outstanding shares of 86,338 and 86,286 at March 31, 2022 and December 31, 2021, respectivelyCommon stock, par value $0.01 per share, authorized shares of 500,000; issued and outstanding shares of 86,338 and 86,286 at March 31, 2022 and December 31, 2021, respectively5,111 5,110 
Capital in excess of par value800,183
 806,589
Capital in excess of par value1,520,545 1,518,872 
Treasury stock at cost, 5,681 and 5,592 shares at September 30, 2017 and
December 31, 2016, respectively
(104,745) (103,818)
Retained deficit(387,030) (114,684)
Treasury stock at cost, 1,553 and 1,525 shares at March 31, 2022 and December 31, 2021, respectivelyTreasury stock at cost, 1,553 and 1,525 shares at March 31, 2022 and December 31, 2021, respectively(111,155)(110,934)
Accumulated deficitAccumulated deficit(1,333,133)(1,321,154)
Accumulated other comprehensive loss(22,440) (36,482)Accumulated other comprehensive loss(62,514)(58,822)
Stockholders' equity attributable to shareholders286,467
 552,149
Stockholders' equity attributable to shareholders18,931 33,149 
Noncontrolling interest8,316
 8,802
Non-controlling interestNon-controlling interest25,011 25,473 
Total stockholders' equity294,783
 560,951
Total stockholders' equity43,942 58,622 
Total liabilities and stockholders' equity$1,459,897
 $1,529,143
Total liabilities and stockholders' equity$954,699 $913,265 

See accompanying notes to condensed consolidated financial statements.

Condensed Consolidated Financial Statements.
5





























6


BABCOCK & WILCOX ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

Common StockPreferred StockCapital In
Excess of
Par Value
Treasury StockAccumulated DeficitAccumulated
Other
Comprehensive
(Loss)
Non-controlling
Interest
Total
Stockholders’
Equity
(in thousands, except share amounts)SharesPar 
Value
SharesPar 
Value
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 loss— — — — — — (8,264)— (420)(8,684)
Currency translation adjustments— — — — — — — (4,285)(41)(4,326)
Pension and post retirement adjustments, net of tax— — — — — — — 593 — 593 
Stock-based compensation charges52 — — 1,765 (221)— — — 1,545 
Dividends to preferred stockholders— — — — — — (3,715)— — (3,715)
Preferred stock, net— — — — (92)— — — — (92)
Dividends to non-controlling interest— — — — — — — — (1)(1)
Balance at March 31, 202286,338 $5,111 7,669 $77 $1,520,545 $(111,155)$(1,333,133)$(62,514)$25,011 $43,942 

Common StockCapital In
Excess of
Par Value
Treasury StockAccumulated DeficitAccumulated
Other
Comprehensive
(Loss)
Non-controlling
Interest
Total
Stockholders’
Deficit
(in thousands, except share amounts)SharesPar
 Value
Balance at December 31, 202054,452 $4,784 $1,164,436 $(105,990)$(1,350,206)$(52,390)$1,104 $(338,262)
Net loss— — — — (15,464)— 21 (15,443)
Currency translation adjustments— — — — — (4,582)(24)(4,606)
Pension and post retirement adjustments, net of tax— — — — — 198 — 198 
Stock-based compensation charges1,725 22 4,480 (3,308)— — — 1,194 
Common stock offering29,487 295 161,218 — — — — 161,513 
Dividends to non-controlling interest— — — — — — (38)(38)
Balance at March 31, 202185,664 $5,101 $1,330,134 $(109,298)$(1,365,670)$(56,774)$1,063 $(195,444)

See accompanying notes to Condensed Consolidated Financial Statements.
Table of Contents
7




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

Three Months Ended March 31,
(in thousands)20222021
Cash flows from operating activities:
Net loss$(8,684)$(15,443)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of long-lived assets6,202 4,058 
Amortization of deferred financing costs and debt discount834 5,779 
Amortization of guaranty fee231 452 
Non-cash operating lease expense1,174 1,140 
Gain on sale of business— (358)
Gain on asset disposals— (2,005)
(Benefit from) provision for deferred income taxes(689)1,557 
Prior service cost amortization for pension and postretirement plans593 198 
Stock-based compensation, net of associated income taxes1,766 4,502 
Foreign exchange(3,085)1,209 
Changes in assets and liabilities:
Accounts receivable(28,694)(11,629)
Contracts in progress(13,334)(6,911)
Advance billings on contracts27,532 18,226 
Inventories(2,996)(1,863)
Income taxes(7,009)(1,919)
Accounts payable11,297 6,246 
Accrued and other current liabilities(11,290)(17,127)
Accrued contract loss4,274 (129)
Pension liabilities, accrued postretirement benefits and employee benefits(10,048)(33,640)
Other, net(10,073)(6,297)
Net cash used in operating activities(41,999)(53,954)
Cash flows from investing activities:
Purchase of property, plant and equipment(1,004)(1,410)
Acquisition of business, net of cash acquired(64,914)— 
Proceeds from sale of business and assets, net— 3,297 
Purchases of available-for-sale securities(1,125)(3,394)
Sales and maturities of available-for-sale securities1,674 5,495 
Other, net(15)534 
Net cash (used in) from investing activities(65,384)4,522 


8


 Nine months ended September 30,
(in thousands)2017 2016
Cash flows from operating activities: 
Net income (loss)$(271,780) $(43,796)
Non-cash items included in net income (loss):   
Depreciation and amortization of long-lived assets31,037
 27,413
Amortization of debt issuance costs and debt discount3,190
 
Income of equity method investees(4,813) (4,887)
Goodwill impairment charges86,903
 
Other than temporary impairment of equity method investment in TBWES18,193
 
Losses on asset disposals and impairments, net543
 14,906
Provision for (benefit from) deferred income taxes(2,100) (7,613)
Recognition of losses (gains) for pension and postretirement plans(1,219) 30,646
Stock-based compensation, net of associated income taxes8,523
 13,899
Changes in assets and liabilities, net of effects of acquisitions:   
Accounts receivable1,375
 49,082
Accrued insurance receivable
 (15,000)
Contracts in progress and advance billings on contracts6,682
 (53,983)
Inventories2,717
 (7,990)
Income taxes9,196
 6,296
Accounts payable5,514
 (32,390)
Accrued and other current liabilities(16,011) (3,733)
Pension liabilities, accrued postretirement benefits and employee benefits(27,960) (21,206)
Other, net(781) 8,601
Net cash from operating activities(150,791) (39,755)
Cash flows from investing activities:   
Decrease in restricted cash and cash equivalents(2,934) 8,270
Investment in equity method investees
 (26,220)
Purchase of property, plant and equipment(10,666) (20,376)
Acquisition of business, net of cash acquired(52,547) (142,980)
Purchases of available-for-sale securities(22,900) (30,738)
Sales and maturities of available-for-sale securities31,077
 20,986
Other61
 (556)
Net cash from investing activities(57,909) (191,614)
Cash flows from financing activities:   
Borrowings under our United States revolving credit facility511,423
 75,465
Repayments of our United States revolving credit facility(462,323) (42,248)
Proceeds from our second lien term loan facility, net of $34.2 million discount141,674
 
Repayments of our foreign revolving credit facilities(3,313) (18,289)
Common stock repurchase from related party(16,674) 
Shares of our common stock returned to treasury stock(927) (78,391)
Debt issuance costs(14,025) 
Other(298) (1,166)
Net cash from financing activities155,537
 (64,629)
Effects of exchange rate changes on cash5,413
 (4,126)
Net increase (decrease) in cash and equivalents(47,750) (300,124)
Cash and equivalents, beginning of period95,887
 365,192
Cash and equivalents, end of period$48,137
 $65,068

Three Months Ended March 31,
(in thousands)20222021
Cash flows from financing activities:
Issuance of senior notes2,016 125,000 
Borrowings on loan payable1,342 — 
Repayments on loan payable(31)— 
Repayments under last out term loans— (75,000)
Borrowings under U.S. revolving credit facility— 14,500 
Repayments of U.S. revolving credit facility— (178,800)
Preferred stock fees— — 
Payment of preferred stock dividends(3,715)— 
Shares of common stock returned to treasury stock(221)(3,308)
Issuance of common stock, net— 161,513 
Debt issuance costs(119)(7,727)
Other, net(840)(241)
Net cash (used in) from financing activities(1,568)35,937 
Effects of exchange rate changes on cash(794)4,518 
Net decrease in cash, cash equivalents and restricted cash(109,745)(8,977)
Cash, cash equivalents and restricted cash, beginning of period226,715 67,423 
Cash, cash equivalents and restricted cash, end of period$116,970 $58,446 
See accompanying notes to condensed consolidated financial statements.

Condensed Consolidated Financial Statements.
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BABCOCK & WILCOX ENTERPRISES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2017MARCH 31, 2022



NOTE 1 – BASIS OF PRESENTATION


These interim financial statementsCondensed Consolidated Financial Statements of Babcock & Wilcox Enterprises, Inc. ("(“B&W," "we," "us," "our"” “management,” “we,” “us,” “our” or "the Company"the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") and Securities and Exchange Commission (“SEC”) instructions for interim financial information, and should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2016 (“Annual Report”). Accordingly, significant accounting policies and other disclosures normally provided have been omitted since such items are disclosed in our Annual Report. We have included all adjustments, in the opinion of management, consisting only of normal, recurring adjustments, necessary for a fair presentation of the interim financial statements. We have eliminated all intercompany transactions and accounts. We present the notes to our condensed consolidated financial statementsCondensed Consolidated Financial Statements on the basis of continuing operations, unless otherwise stated.


COVID-19

In December 2019, a novel strain of coronavirus, ("COVID-19"), was identified in Wuhan, China and subsequently spread globally. This global pandemic has disrupted business operations, including trade, commerce, financial and credit markets, and daily life throughout the world. Our business has been, and continues to be, adversely impacted by the measures taken and restrictions imposed in the countries in which we operate and by local governments and others to control the spread of this virus. These measures and restrictions have varied widely and have been subject to significant changes from time to time depending on changes in the severity of the virus in these countries and localities. These restrictions, including curtailment of travel and other activity, negatively impact our ability to conduct business.

Disruption to our global supply changes from COVID-19 has included impacts to the manufacturing, supply, distribution, transportation and delivery of our products. We also observed significant disruptions of the operations of our logistics, service providers, delays in shipments and negative impacts to pricing of certain of our products. Disruptions and delays in our supply chains as a result of the COVID-19 pandemic could continue to adversely impact our ability to meet our customers’ demands. Additionally, the prioritization of shipments of certain products as a result of the pandemic could cause delays in the shipment or delivery of our products. Such disruptions could result in reduced sales.

The volatility and variability of the virus has limited our ability to forecast the impact of COVID-19 on our customers and our business. The ongoing impact of COVID-19, including evolving strains such as the delta and omicron variants, has resulted in the reimposition of certain restrictions and may lead to the implementation of other restrictions in response to efforts to reduce the spread of the virus. These varying and changing events have caused many of the projects we had anticipated to begin during the prior two years to be delayed into 2022 and beyond. Many customers and projects require B&W's employees to travel to customer and project worksites. Certain customers and significant projects are located in areas where travel restrictions have been imposed, certain customers have closed or reduced on-site activities, and timelines for completion of certain projects have, as noted above, been extended into 2022 and beyond. Additionally, out of concern for our employees, even where restrictions permit employees to return to our offices and worksites, we incurred additional costs to protect our employees and advised those who are uncomfortable returning to worksites due to the pandemic that they are not required to do so for an indefinite period of time. The resulting uncertainty concerning, among other things, the spread and economic impact of the virus has also caused significant volatility and, at times, illiquidity in global equity and credit markets. The full extent of the impact of COVID-19 and its variants on our operational and financial performance will depend on future developments, including the ultimate duration and spread of the pandemic and related actions taken by the U.S. government, state and local government officials, and international governments to prevent outbreaks, as well as the availability, effectiveness and acceptance of COVID-19 vaccinations in the U.S. and abroad, all of which are uncertain, out of our control, and cannot be predicted.
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NOTE 2 – EARNINGS PER SHARE


The following table sets forth the computation of basic and diluted earningsloss per share of our common stock, net of non-controlling interest and dividends on preferred stock:
Three Months Ended March 31,
(in thousands, except per share amounts)20222021
Net loss attributable to stockholders of common stock$(11,979)$(15,464)
Weighted average shares used to calculate basic and diluted loss per share87,992 71,396 
Basic loss per share$(0.14)$(0.22)
Diluted loss per share$(0.14)$(0.22)
 Three months ended September 30, Nine months ended September 30,
(in thousands, except per share amounts)20172016 20172016
Net income (loss) attributable to shareholders$(114,302)$8,894
 $(272,346)$(44,089)
      
Weighted average shares used to calculate basic earnings per share46,149
49,621
 47,905
50,613
Dilutive effect of stock options, restricted stock and performance shares
236
 

Weighted average shares used to calculate diluted earnings per share46,149
49,857
 47,905
50,613
      
Basic income (loss) per share:$(2.48)$0.18
 $(5.69)$(0.87)
      
Diluted income (loss) per share:$(2.48)$0.18
 $(5.69)$(0.87)

Because we incurred a net loss in the quarter and nine months ended September 30, 2017 and the nine months ended September 30, 2016, basic and diluted shares are the same.


If we hadwere in a net income inposition during the ninethree months ended September 30, 2017March 31, 2022 and 2016,2021, diluted shares would include an additional 0.9 million and 1.6 million shares, respectively.

We excluded 0.4 million and 0.5 million shares, respectively. If we had net income in the quarter ended September 30, 2017, diluted shares would include an additional 0.5 million shares.

We excluded 2.0 million and 0.60.4 million shares related to stock options from the diluted share calculation for the ninethree months ended September 30, 2017March 31, 2022 and 2016,2021, respectively, because their effect would have been anti-dilutive. For the quarter ended September 30, 2017, we excluded 2.3 million shares related to stock options because their effect would have been anti-dilutive.


NOTE 3 – SEGMENT REPORTING


Our operations are assessed based on three3 reportable market-facing segments as part of the Company's strategic, market-focused organizational and re-branding initiative to accelerate growth and provide stakeholders with improved visibility into our renewable and environmental growth platforms. Our reportable segments which are summarized 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 by diverting waste from landfills to use for power generation and replacing 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 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.
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.

Power
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Revenues exclude eliminations of revenues generated from sales to other segments or to other product lines within the segment. An analysis of our operations by segment: focused is as follows:
Three Months Ended March 31,
(in thousands)20222021
Revenues:
B&W Renewable segment
B&W Renewable$19,711 $17,997 
B&W Renewable Services (1)
8,288 5,260 
Vølund16,336 5,554 
Fosler Solar23,626 — 
67,961 28,811 
B&W Environmental segment
B&W Environmental18,185 17,433 
SPIG12,060 11,184 
GMAB4,703 2,543 
34,948 31,160 
B&W Thermal segment
B&W Thermal102,239 108,281 
102,239 108,281 
Eliminations(1,099)(4)
Total Revenues$204,049 $168,248 
(1) B&W Renewable Services' 2021 revenues were reclassed from Vølund's prior year reported amount for year-over-year comparability.

Adjusted EBITDA on a consolidated basis is a non-GAAP metric defined as the sum of the adjusted EBITDA for each of the segments, further adjusted for corporate allocations and research and development costs. At a segment level, the adjusted EBITDA presented below is consistent with the 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 on asset sales, 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 segment.The Company uses adjusted EBITDA internally to evaluate its performance and in making financial and operational decisions. When viewed in conjunction with GAAP results, the Company believes that its presentation of adjusted EBITDA provides investors with greater transparency and a greater understanding of factors affecting its financial condition and results of operations than GAAP measures alone. Prior period results have been revised to conform with the revised definition and present separate reconciling items in our reconciliation.
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Adjusted EBITDA for each segment is presented below with a reconciliation from net loss.
Three Months Ended March 31,
(in thousands)20222021
Net loss$(8,684)$(15,443)
Interest expense12,324 14,509 
Income tax expense1,230 2,836 
Depreciation & amortization6,202 4,058 
EBITDA11,072 5,960 
Benefit plans, net(7,452)(9,098)
Gain on sales, net(20)(2,362)
Stock compensation1,319 7,829 
Restructuring activities and business services transition costs2,688 993 
Advisory fees for settlement costs and liquidity planning1,032 1,978 
Litigation costs2,528 380 
Acquisition pursuit and related costs843 — 
Product development (1)
852 — 
Foreign exchange(3,085)1,209 
Financial advisory services375 933 
Contract step-up purchase price adjustment1,745 — 
Loss from business held for sale— 483 
Other - net123 266 
Adjusted EBITDA$12,020 $8,571 
(1) Costs associated with development of commercially viable products that are ready to go to market.

Three Months Ended March 31,
(in thousands)20222021
Adjusted EBITDA
B&W Renewable segment$1,455 $204 
B&W Environmental segment1,439 1,105 
B&W Thermal segment14,154 10,535 
Corporate(4,373)(2,685)
Research and development costs(655)(588)
$12,020 $8,571 

We do not separately identify or report our assets by segment as our CODM does not consider assets by segment to be a critical measure by which performance is measured.
NOTE 4 – REVENUE RECOGNITION AND CONTRACTS

Revenue Recognition

We generate the vast majority of our revenues from the supply of, and aftermarket services for, steam-generating, environmental and auxiliary equipment for power generation and other industrial applications.
Renewable segment: focused onequipment. We also earn revenue from 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 equipmentsystems for
steam applications along with related aftermarket services.


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Table of Contents




An analysisRevenue from goods and services transferred to customers at a point in time, which includes certain aftermarket parts and services, accounted for 19% and 27% of our operationsrevenue for the three months ended March 31, 2022 and 2021, respectively. Revenue from products and services transferred to customers over time, which primarily relates to customized, engineered solutions and construction services, accounted for 81% and 73% of our revenue for the three months ended March 31, 2022 and 2021, respectively.

Refer to Note 3 for our disaggregation of revenue by segment is as follows:product line.

 Three months ended September 30, Nine months ended 
 September 30,
(in thousands)20172016 20172016
Revenues:     
Power segment$202,222
$211,749
 $612,274
$762,293
Renewable segment108,557
124,344
 262,168
293,593
Industrial segment99,288
76,809
 281,734
147,275
Eliminations(1,364)(1,947) (6,540)(4,882)
 408,703
410,955
 1,149,636
1,198,279
Gross profit:     
Power segment40,629
48,896
 132,653
170,903
Renewable segment181
18,592
 (100,119)14,468
Industrial segment9,461
14,601
 34,240
33,506
Intangible amortization expense included in cost of operations(2,984)(7,752) (11,455)(8,833)
Mark to market loss included in cost of operations
(580) (954)(30,079)
 47,287
73,757
 54,365
179,965
Selling, general and administrative ("SG&A") expenses(59,225)(59,615) (192,742)(179,225)
Goodwill impairment charges(86,903)
 (86,903)
Restructuring activities and spin-off transaction costs(3,775)(2,395) (8,910)(38,021)
Research and development costs(2,291)(2,361) (7,454)(8,273)
Intangible amortization expense included in SG&A(1,016)(1,018) (2,999)(3,071)
Mark to market loss included in SG&A
(64) (106)(465)
Equity in income of investees1,234
2,827
 4,813
4,887
Impairment of equity method investment

 (18,193)
Gains (losses) on asset disposals, net(59)2
 (63)17
Operating income (loss)$(104,748)$11,133
 $(258,192)$(44,186)
Contract Balances


DuringThe following represents the first halfcomponents of 2017, we announced our plan to reclassify the Industrial Steam product line currentlyContracts in progress and Advance billings on contracts included in our Power segment to the Industrial segment beginning with the quarter ended September 30, 2017. We have indefinitely postponed that reorganization. As of September 30, 2017, the Industrial Steam product line remains in the Power segment for all periods presented.Condensed Consolidated Balance Sheets:
(in thousands)March 31, 2022December 31, 2021$ Change% Change
Contract assets - included in contracts in progress:
Costs incurred less costs of revenue recognized$32,101 $35,939 $(3,838)(11)%
Revenues recognized less billings to customers63,871 44,237 19,634 44 %
Contracts in progress$95,972 $80,176 $15,796 20 %
Contract liabilities - included in advance billings on contracts:
Billings to customers less revenues recognized$100,130 $68,615 $31,515 46 %
Costs of revenue recognized less cost incurred(220)(235)15 (6)%
Advance billings on contracts$99,910 $68,380 $31,530 46 %
Net contract balance$(3,938)$11,796 $(15,734)(133)%
Accrued contract losses$4,652 $378 $4,274 1,131 %


NOTE 4 – UNIVERSAL ACQUISITIONBacklog


On January 11, 2017,March 31, 2022 we acquired Universal Acoustic & Emission Technologies, Inc. ("Universal") for approximately $52.5 million in cash, funded primarily by borrowings under our United States revolving credit facility, net of $4.4 million cash acquired in the business combination. Transaction costs 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.

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 $16.0 million and $49.8had $721.0 million of revenueremaining performance obligations, which we also refer to our operating results during the three and nine months ended September 30, 2017, respectively. Universal contributed $3.2 million and $10.0 million of gross profit (excluding intangible asset amortization expense of $0.5 million and $2.6 million) to our operating results in the three and nine months ended

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September 30, 2017, respectively.as total backlog. We expect Universal to contribute over $70.0 million of revenuerecognize approximately 61.4%, 15.4% and be accretive to the Industrial segment's gross profit during 2017.

The allocation of the purchase price based on the estimated fair value of assets acquired and liabilities assumed is set forth below. We are in the process of finalizing the purchase price allocation associated with the valuation of certain intangible assets and deferred tax balances; as a result, the provisional measurements of intangible assets, goodwill and deferred income tax balances are subject to change. Purchase price adjustments are expected to be finalized by December 31, 2017.
(in thousands)
Estimated acquisition
date fair value
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:
 
Estimated
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
  

The acquisition of Universal resulted in an increase in our intangible asset amortization expense during the three and nine months ended September 30, 2017 of $0.5 million and $2.6 million, respectively, which is included in cost of operations in our condensed consolidated statement of operations. Amortization of intangible assets is not allocated to segment results.

Approximately $0.1 million and $1.5 million of acquisition and integration related costs of Universal was recorded as a component23.2% of our operating expensesremaining performance obligations as revenue in the condensed consolidated statement of operations in the three2022, 2023 and nine months ended September 30, 2017, respectively.


9




The following unaudited pro forma financial information below represents our results of operations for the three and nine months ended September 30, 2016 and 12 months 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.
 Three months endedNine months endedTwelve months ended
(in thousands)September 30, 2016September 30, 2016December 31, 2016
Revenues$431,412
$1,259,905
$1,660,986
Net income (loss) attributable to B&W8,903
(43,458)(113,940)
Basic earnings per common share0.18
(0.86)(2.27)
Diluted earnings per common share0.18
(0.86)(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 $0.5 million, $2.4 million and $2.8 million in the three and nine months ended September 30, 2016 and the 12 months ended December 31, 2016,thereafter, respectively.


Elimination of the historical interest expense recognized by Universal of $0.1 million, $0.3 million and $0.4 million in the three and nine months ended September 30, 2016 and the 12 months ended December 31, 2016, respectively.

Elimination of $2.1 million in transaction related costs recognized in the 12 months ended December 31, 2016.

NOTE 5 – 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 project, 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 three and nine months ended September 30, 2017March 31, 2022 and 2016,2021, we 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:
Three months ended March 31,
(in thousands)20222021
Increases in gross profit for changes in estimates for over time contracts$3,341 $3,025 
Decreases in gross profit for changes in estimates for over time contracts(2,862)(1,358)
Net changes in gross profit for changes in estimates for over time contracts$479 $1,667 
 Three months ended September 30, Nine months ended September 30,
(in thousands)20172016 20172016
Increases in estimates for percentage-of-completion contracts$3,040
$7,996
 $15,777
$33,056
Decreases in estimates for percentage-of-completion contracts(12,312)(22,126) (135,445)(65,805)
Net changes in estimates for percentage-of-completion contracts$(9,272)$(14,130) $(119,668)$(32,749)


B&W Renewable Projects
As
During March 2022, we determined that our Fosler Solar reporting unit had 7 projects located in the United States that existed at the time we acquired Fosler on September 30, 2021 which generated losses that arose due to the status of certain construction activities, existing at acquisition date, not adequately disclosed in our Decemberthe sales agreement and not recognized in the financial records of the seller. As of March 31, 2016 consolidated financial statements, we had four renewable energy projects in Europe that were loss contracts at December 31, 2016. During the three months ended June 30, 2017, two additional renewable energy projects in Europe became loss contracts. During the three and nine months ended September 30, 2017,2022, we recorded a totalan increase in goodwill of $11.6$14.9 million and $123.8 million, respectively, in net losses resulting from the
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initial recognition of $14.5 million of accrued liabilities and $0.4 million of warranty accruals during this acquisition's annual measurement period. We have submitted insurance claims to recover a portion of these losses as of March 31, 2022.
NOTE 5 – INVENTORIES

Inventories are stated at the lower of cost or net realizable value. The components of inventories are as follows:
(in thousands)March 31, 2022December 31, 2021
Raw materials and supplies$63,772 $56,352 
Work in progress7,212 5,723 
Finished goods19,417 17,452 
Total inventories$90,401 $79,527 

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

Property, plant and equipment less accumulated depreciation is as follows:
(in thousands)March 31, 2022December 31, 2021
Land$1,533 $1,489 
Buildings32,681 31,895 
Machinery and equipment145,134 144,325 
Property under construction4,877 12,480 
184,225 190,189 
Less accumulated depreciation134,639 133,137 
Net property, plant and equipment49,586 57,052 
Finance leases34,160 34,159 
Less finance lease accumulated amortization6,590 5,584 
Net property, plant and equipment, and finance lease$77,156 $85,627 

NOTE 7 - GOODWILL

The following summarizes the changes in the estimated revenuesnet carrying amount of goodwill as of March 31, 2022:
(in thousands)B&W
Renewable
B&W EnvironmentalB&W
Thermal
Total
Balance at December 31, 2021$79,357 $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 - Fosler(1)(2)
11,163 — — 11,163 
Measurement period adjustments - VODA(1)(2)
(61)— — (61)
Currency translation adjustments57 45 232 334 
Balance at March 31, 2022$90,516 $5,712 $78,143 $174,371 
(1) As described in Note 21, we are in the process of completing the purchase price allocation associated with the Fosler Construction, VODA, Fossil Power and costs to complete these six European renewable energy loss contracts. These changes in estimates include an increase in our estimateOptimus Industries acquisitions and as a result, the provisional measurements of liquidated damagesgoodwill associated with these six projects of $13.2 million and $22.6 million in the three and nine months ended September 30, 2017, respectively,acquisitions are subject to a total of $62.8 million at September 30, 2017. The charges recorded in the nine monthschange.

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ended September 30, 2017 were(2) Our preliminary purchase price allocation changed due to revisions in the estimated revenuesadditional information and costs at completion during the period, primarily as a result of structural steel design issues including the anticipated schedule impact, scheduling delaysfurther analysis.
Goodwill is tested for impairment annually and shortcomings in our subcontractors' estimated productivity. Also included in the charges recorded in the nine months ended September 30, 2017on an interim basis when impairment indicators exist. No impairment indicators were corrections that reduced (increased) estimated contract losses at completion by $1.0 million, $(6.0) million and $1.1 million relating to the three months ended December 31, 2016, March 31, 2017 and June 30, 2017, respectively. Management has determined these amounts are immaterial to the consolidated financial statements in these previous periods. As of September 30, 2017, the status of these six loss contracts was as follows:

The first project became a loss contract in the second quarter of 2016. As of September 30, 2017, this project is approximately 97% complete and construction activities are complete as 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 first quarter of 2018. During the three and nine months ended September 30, 2017, we recognized additional contract losses of $4.6 million and $15.1 million, respectively, on the project as a result of differences in actual and estimated costs and schedule delays. Our estimate at completion as of September 30, 2017 includes $9.4 million of total expected liquidated damages. As of September 30, 2017, the reserve for estimated contract losses recorded in "other accrued liabilities" in our consolidated balance sheet was $2.3 million. In the three and nine months ended September 30, 2016, we recognized charges of $14.0 million and $45.7 million, respectively, and as of September 30, 2016, this project had $7.8 million of accrued losses and was 79% complete.

The second project became a loss contract in the fourth quarter of 2016. As of September 30, 2017, this contract was approximately 75% complete, and we expect this project to be completed in early 2018. During the three and nine months ended September 30, 2017, we recognized contract gains of $2.0 million and contract losses of $35.4 million, respectively, on this project as a result of changes in construction cost estimates and schedule delays. Our estimate at completion as of September 30, 2017 includes $15.5 million of total expected liquidated damages. As of September 30, 2017, the reserve for estimated contract losses recorded in "other accrued liabilities" in our consolidated balance sheet was $13.6 million.

The third project became a loss contract in the fourth quarter of 2016. As of September 30, 2017, this contract was approximately 95% complete and construction activities are complete as 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 fourth quarter of 2017. During the three and nine months ended September 30, 2017, we recognized additional contract losses of $1.6 million and $7.1 million, respectively, as a result of changes in the estimated costs at completion. Our estimate at completion as of September 30, 2017 includes $6.7 million of total expected liquidated damages for schedule delays. As of September 30, 2017, the reserve for estimated contract losses recorded in "other accrued liabilities" in our consolidated balance sheet was $1.7 million.

The fourth project became a loss contract in the fourth quarter of 2016. As of September 30, 2017, this contract was approximately 77% complete, and we expect this project to be completed in early 2018. During the three and nine months ended September 30, 2017, we revised our estimated revenue and costs at completion for this loss contract, which resulted in contract gains of $4.5 million and contract losses of $17.4 million, respectively. Our estimate at completion as of September 30, 2017 includes $8.9 million of total expected liquidated damages due to schedule delays. The changes in the status of this project were primarily attributable to changes in the estimated costs at completion, offset by a $4.8 million reduction in estimated liquidated damages we recognizedidentified during the three months ended March 31, 2017. 2022.

As of September 30, 2017,March 31, 2022, Fosler's goodwill increase of $11.2 million included a $14.9 million increase resulting from the reserve for estimated contract losses recordedinitial recognition of $14.5 million of accrued liabilities and $0.4 million of warranty accruals during this acquisition's annual measurement period, as described in "other accrued liabilities"Note 4.
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NOTE 8– INTANGIBLE ASSETS

Our intangible assets are as follows:
(in thousands)March 31, 2022December 31, 2021
Definite-lived intangible assets(1)
Customer relationships$67,332 $46,903 
Unpatented technology18,591 15,410 
Patented technology3,682 3,103 
Tradename13,383 12,747 
Acquired backlog3,100 3,100 
All other9,128 9,319 
Gross value of definite-lived intangible assets115,216 90,582 
Customer relationships amortization(21,820)(20,800)
Unpatented technology amortization(8,729)(8,313)
Patented technology amortization(2,769)(2,729)
Tradename amortization(5,595)(5,425)
Acquired backlog(3,100)(1,620)
All other amortization(9,056)(9,205)
Accumulated amortization(51,069)(48,092)
Net definite-lived intangible assets$64,147 $42,490 
Indefinite-lived intangible assets
Trademarks and trade names$1,305 $1,305 
Total intangible assets, net$65,452 $43,795 
(1) As described in Note 21, we are in the process of completing the purchase price allocation associated with the Fosler Construction, VODA, Fossil Power and Optimus Industries acquisitions and as a result, the increase in intangible assets associated with these acquisitions are subject to change.

The following summarizes the changes in the carrying amount of intangible assets, net:
Three Months Ended March 31,
(in thousands)20222021
Balance at beginning of period$43,795 $23,908 
Business acquisitions and adjustments(1)
25,092 — 
Amortization expense(2,978)(856)
Currency translation adjustments(457)(843)
Balance at end of the period$65,452 $22,209 
(1) As described in Note 21, we are in the process of completing the purchase price allocation associated with the Fosler Construction, VODA, Fossil Power and Optimus Industries acquisitions and as a result, the increase in intangible assets associated with these acquisitions are subject to change.

Amortization of intangible assets is included in Cost of operations and SG&A in our consolidated balance sheet was $5.2 million.Condensed Consolidated Statement of Operations but is not allocated to segment results.


The fifth project becameIntangible assets are assessed for impairment on an interim basis when impairment indicators exist. No impairment indicators were identified during the three months ended March 31, 2022.

16


Estimated future intangible asset amortization expense as of March 31, 2022 is as follows (in thousands):
Amortization Expense
Year ending December 31, 20225,990 
Year ending December 31, 20237,986 
Year ending December 31, 20247,906 
Year ending December 31, 20257,089 
Year ending December 31, 20265,890 
Year ending December 31, 20275,229 
Thereafter24,057 
See Note 21 for intangible assets identified in conjunction with the acquisitions of Fosler Construction, VODA, Fossil Power and Optimus Industries, which are subject to change pending the finalization of the purchase price allocation associated with these acquisitions.

NOTE 9 – ACCRUED WARRANTY EXPENSE

We may offer assurance type warranties on products and services that we sell. Changes in the carrying amount of our accrued warranty expense are as follows:
Three Months Ended March 31,
(in thousands)20222021
Balance at beginning of period$12,925 $25,399 
Additions1,300 1,475 
Expirations and other changes(1,467)(1,318)
Payments(193)(5,943)
Translation and other(692)(76)
Balance at end of period$11,873 $19,537 

We accrue estimated expense included in Cost of operations on our Condensed Consolidated Statements of Operations to satisfy contractual warranty requirements when we recognize the associated revenues on the related contracts, or in the case of a loss contract, the full amount of the estimated warranty costs is accrued when the contract becomes a loss contract. Additions at March 31, 2022 included $0.4 million related to the Fosler projects, as described in the second quarter of 2017. As of September 30, 2017, this contract was approximately 60% complete, andNote 4. In addition, we record specific provisions or reductions where we expect this projectthe actual warranty costs to be completed insignificantly differ from the second half of 2018. During the three and nine months ended September 30, 2017, we revised our estimated revenue and costs at completion for this loss contract, which resulted in additional contract losses of $12.0 million and $35.3 million, respectively. Our estimate at completion as of September 30, 2017 includes $17.9 million of total expected liquidated damages due to schedule delays. The change in the status of this project was primarily attributable toaccrued estimates. Such changes in the estimated costs at completion and schedule delays. As of September 30, 2017, the reserve for estimated contract losses recorded in "other accrued liabilities" incould have a material effect on our consolidated balance sheet was $14.3 million.financial condition, results of operations and cash flows.


NOTE 10 – RESTRUCTURING ACTIVITIES

The sixth project became a loss contract in the second quarter of 2017. As of September 30, 2017, this contract was approximately 68% complete, and we expect this project to be completed in the first half of 2018. During the nine months ended September 30, 2017, we revised our estimated revenue and costs at completion for this loss contract, which resulted in additional contract losses of $18.5 million. We had no significant change in estimate on this loss contract during the

11




three months ended September 30, 2017. Our estimate at completion as of September 30, 2017 includes $4.3 million of total expected liquidated damages due to schedule delays. The change in the status of this project was primarily attributable to changes in the estimated costs at completion and schedule delays. As of September 30, 2017, the reserve for estimated contract losses recorded in "other accrued liabilities" in our consolidated balance sheet was $3.3 million.

In September 2017, we identified the failure of a structural steel beam on the fifth project, which temporarily stopped work in the boiler building pending corrective actions to stabilize the structure that are expected to be complete in the fourth quarter of 2017. The engineering, design and manufacturing of 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 for a short period of time, and reinforcement of the structure is underway. The costs related to these structural steel issues are estimated to be approximately $20 million, which include the impact of project delays, and is included in the September 30, 2017 estimated losses at completion for these three projects as disclosed in the preceding paragraphs.

AlsoCompany incurred restructuring charges in the three months ended September 30, 2017, we adjusted the designMarch 31, 2022, and 2021. The charges primarily consist of three of these renewable facilitiesseverance and related costs to increase the guaranteed power output, which will allow us to achieve contractual bonus opportunities for the higher output. The bonus opportunities increased the estimated selling priceactions taken as part of the three contractsCompany’s strategic, market-focused organizational and re-branding initiative.

17


The following tables summarizes the restructuring activity incurred by approximately $15 million in total,segment:

Three Months Ended March 31,Three Months Ended March 31,
20222021
(in thousands)TotalSeverance and related costs
Other (1)
TotalSeverance and related Costs
Other(1)
B&W Renewable segment$(193)$(229)$36 $509 $453 $56 
B&W Environmental segment69 10 59 89 35 54 
B&W Thermal segment198 50 148 348 12 336 
Corporate20 — 20 47 — 47 
$94 $(169)$263 $993 $500 $493 
Cumulative costs to date$45,277 37,083 8,194 000
(1) Other amounts consist primarily of exit, relocation, COVID-19 related and this positive change in estimated cost to complete was fully recognized in the third quarter of 2017 because each of these three were loss projects.other costs.


During the three and nine months ended September 30, 2017, we recognized a net loss of $2.3 million on our other renewable energy projects that are not loss contracts, and we expect them to remain profitable at completion.

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 September 30, 2017. The insurance recovery represents the full amount available under the insurance policy, and is recorded in accounts receivable - other in our condensed consolidated balance sheet at September 30, 2017.

NOTE 6 – RESTRUCTURING ACTIVITIES AND SPIN-OFF TRANSACTION COSTS

Restructuring liabilities

Restructuring liabilities are included in otherOther accrued liabilities on our condensed consolidated balance sheets.Condensed Consolidated Balance Sheets. Activity related to the restructuring liabilities is as follows:
Three Months Ended March 31,
(in thousands)20222021
Balance at beginning of period
$6,561 $8,146 
Restructuring expense94 993 
Payments(749)(1,117)
Balance at end of period$5,906 $8,022 
 Three months ended September 30, Nine months ended September 30,
(in thousands)20172016 20172016
Balance at beginning of period (1)
$967
$11,984
 $2,254
$740
Restructuring expense3,428
1,792
 7,285
19,816
Payments(2,399)(10,422) (7,543)(17,202)
Balance at September 30$1,996
$3,354
 $1,996
$3,354


(1) ForThe payments shown above for the three month periodsmonths ended September 30, 2017March 31, 2022 and 2016, the balance at the beginning of the period is as of June 30, 2017 and 2016, respectively. For the nine month periods ended September 30, 2017 and 2016, the balance at the beginning of the period is as of December 31, 2016 and 2015, respectively.

2021 relate primarily to severance. Accrued restructuring liabilities at September 30, 2017March 31, 2022 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 three and nine months ended September 30, 2017, we recognized $0.2 million and $0.6 million, respectively, in non-cash restructuring expense related to losses (gains) on the disposals of long-lived assets. In the three and nine months ended September 30, 2016, we recognized non-cash charges of $0.2 million and $14.8 million, respectively, related to impairments of long-lived assets.


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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 three and nine months ended September 30, 2017, we recognized spin-off costs of $0.2 million and $1.0 million, respectively. In the three and nine months ended September 30, 2016, we recognized spin-off costs of $0.4 million and $3.4 million, respectively. In the nine months ended September 30, 2017, we disbursed $1.9 million of the accrued retention awards.

NOTE 7 – PROVISION FOR INCOME TAXES

We had an income tax benefit of $5.6 million in the three months ended September 30, 2017, which resulted in a 4.7% effective tax rate as compared to $1.6 million of income tax expense in the three months ended September 30, 2016, which resulted in a 15.2% effective tax rate. Our effective tax rate for the three months ended September 30, 2017 was lower than our statutory rate primarily due to nondeductible goodwill impairment charges, foreign losses in our Renewable segment that are subject to a valuation allowance and nondeductible expenses, offset by favorable discrete items of $0.4 million. The discrete items include favorable adjustments to prior year U.S. tax returns and the effect of vested and exercised share-based compensation awards. Our effective tax rate for the three months ended September 30, 2016 was lower than our statutory rate primarily due to changes in the jurisdictional mix of our forecasted full year income and losses and favorable impacts from adjustments related to prior years' tax returns in the United States and foreign jurisdictions.

We had an income tax benefit of $7.6 million in the nine months ended September 30, 2017, which resulted in a 2.7% effective tax rate as compared to an income tax benefit of $0.8 million in the nine months ended September 30, 2016, which resulted in a 1.8% effective tax rate for the nine months ended September 30, 2016. Our effective tax rate for the nine months ended September 30, 2017 was lower than our statutory rate primarily due to the reasons noted above, as well as the second quarter tax benefit associated with the impairment of our equity method investment in India, which was offset by a valuation allowance, second quarter discrete items including withholding tax on a forecasted distribution outside the United States, partly offset by first quarter favorable discrete adjustments to prior year foreign tax returns and nondeductible transaction costs. Our effective tax rate for the nine months ended September 30, 2016 was lower than our statutory rate primarily due to a $13.1 million increase in valuation allowances associated with deferred tax assets related to our equity investment in a foreign joint venture and state net operating losses, and to the jurisdictional mix of our forecasted full year income and losses, as described above.

During the nine months ended September 30, 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 $0.2 million and $1.7 million income tax benefit in the three and nine months ended September 30, 2017, respectively, associated with the income tax effects of vested and exercised share-based compensation awards.

13




NOTE 811COMPREHENSIVE INCOMEPENSION PLANS AND OTHER POSTRETIREMENT BENEFITS


Gains and losses deferredComponents of net periodic cost (benefit) included in accumulated other comprehensivenet (loss) income (loss) ("AOCI") are reclassified and recognized in the condensed consolidated statements of operations once they are realized. The changes in the components of AOCI, net of tax, for the first three quarters in 2017 and 2016 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, 2016$(43,987)$(37)$802
$6,740
$(36,482)
Other comprehensive income (loss) before reclassifications5,417
61
4,587
(44)10,021
Amounts reclassified from AOCI to net income (loss)
(27)(3,843)(882)(4,752)
Net current-period other comprehensive income (loss)5,417
34
744
(926)5,269
Balance at March 31, 2017$(38,570)$(3)$1,546
$5,814
$(31,213)
Other comprehensive income (loss) before reclassifications6,757
(19)(2,204)(97)4,437
Amounts reclassified from AOCI to net income (loss)
(1)(658)(800)(1,459)
Net current-period other comprehensive income (loss)6,757
(20)(2,862)(897)2,978
Balance at June 30, 2017(31,813)(23)(1,316)4,917
(28,235)
Other comprehensive income (loss) before reclassifications2,591
69
268
(66)2,862
Amounts reclassified from AOCI to net income (loss)
(4)3,567
(630)2,933
Net current-period other comprehensive income (loss)2,591
65
3,835
(696)5,795
Balance at September 30, 2017$(29,222)$42
$2,519
$4,221
$(22,440)

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(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, 2015$(19,493)$(44)$1,786
$(1,102)$(18,853)
Other comprehensive income (loss) before reclassifications1,740
18
2,576
(61)4,273
Amounts reclassified from AOCI to net income (loss)
1
(1,003)61
(941)
Net current-period other comprehensive income1,740
19
1,573

3,332
Balance at March 31, 2016$(17,753)$(25)$3,359
$(1,102)$(15,521)
Other comprehensive income (loss) before reclassifications(11,566)(7)778
37
(10,758)
Amounts reclassified from AOCI to net income (loss)

(651)58
(593)
Net current-period other comprehensive income (loss)(11,566)(7)127
95
(11,351)
Balance at June 30, 2016(29,319)(32)3,486
(1,007)(26,872)
Other comprehensive income (loss) before reclassifications2,811
18
1,132
(25)3,936
Amounts reclassified from AOCI to net income (loss)

(1,247)8
(1,239)
Net current-period other comprehensive income (loss)2,811
18
(115)(17)2,697
Balance at September 30, 2016$(26,508)$(14)$3,371
$(1,024)$(24,175)

The amounts reclassified out of AOCI by component and the affected condensed consolidated statements of operations line items are as follows (in thousands):
AOCI componentLine items in the Condensed Consolidated Statements of Operations affected by reclassifications from AOCIThree months ended September 30, Nine months ended September 30,
20172016 20172016
Derivative financial instrumentsRevenues$2,092
$1,940
 $8,094
$4,524
 Cost of operations159
24
 113
57
 Other-net(7,930)(445) (7,438)(1,065)
 Total before tax(5,679)1,519
 769
3,516
 Provision for income taxes(2,112)272
 (165)615
 Net income$(3,567)$1,247
 $934
$2,901
       
Amortization of prior service cost on benefit obligationsCost of operations$619
$(15) $2,281
$294
 Provision for income taxes(11)(7) (31)421
 Net income (loss)$630
$(8) $2,312
$(127)
       
Realized gain on investmentsOther-net$6
$
 $50
$(1)
 Provision for income taxes2

 18

 Net income (loss)$4
$
 $32
$(1)

15





NOTE 9 – CASH AND CASH EQUIVALENTS

The components of cash and cash equivalents are as follows:
Pension BenefitsOther Benefits
Three Months Ended March 31,Three Months Ended March 31,
(in thousands)2022202120222021
Interest cost$6,664 $5,671 $49 $39 
Expected return on plan assets(14,366)(15,009)— — 
Amortization of prior service cost (credit)28 28 173 173 
Benefit plans, net (1)
(7,674)(9,310)222 212 
Service cost included in COS (2)
201 217 
Net periodic benefit cost (benefit)$(7,473)$(9,093)$227 $218 
(in thousands)September 30, 2017December 31, 2016
Held by foreign entities$44,778
$94,415
Held by United States entities3,359
1,472
Cash and cash equivalents$48,137
$95,887
   
Reinsurance reserve requirements$21,456
$21,189
Restricted foreign accounts5,192
6,581
Restricted cash and cash equivalents$26,648
$27,770

Our United States revolving credit facility described in Note 17 allows for nearly immediate borrowing of available capacity to fund cash requirements in the normal course of business, meaning that the minimum United States cash on hand(1)    Benefit plans, net, which is maintained to minimize borrowing costs.

NOTE 10 – INVENTORIES

The components of inventories are as follows:
(in thousands)September 30, 2017December 31, 2016
Raw materials and supplies$66,995
$61,630
Work in progress9,518
6,803
Finished goods14,586
17,374
Total inventories$91,099
$85,807

NOTE 11 – EQUITY METHOD INVESTMENTS

Joint ventures in which we have significant ownership and influence, but not control, are accounted forpresented separately in our consolidated financial statements using the equity methodCondensed Consolidated Statements of accounting. We assess our investments in unconsolidated affiliates 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 investee that are deemed other than temporary, the inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment or a change 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 unconsolidated affiliate at fair value.

Our primary equity method investees include joint ventures in China and India, each of which manufactures boiler parts and equipment. At September 30, 2017 and December 31, 2016, our total investment in these joint ventures was $87.4 million and $98.7 million, respectively.

During the third quarter of 2017, both we and our joint venture partner began the process of scaling back the operations at Thermax Babcock & Wilcox Energy Solutions Private Limited ("TBWES"), our joint venture in India, dueOperations, is not allocated to the decline in forecasted market opportunities in India. Currently, the manufacturing facility in India has been reducedsegments.
(2)    Service cost related to essential personnel only while engineering services are expected to continuea small group of active participants is presented within Cost of operations in our engineering office throughCondensed Consolidated Statements of Operations and is allocated to the end of 2017. These actions are in line withB&W Thermal segment.

There were no mark-to-market ("MTM") adjustments for our change in strategy for the joint venture announced in the second quarter of 2017, which reduced the expected recoverable value of our investment in TBWES. We recognized an $18.2 million other-than-temporary-impairment of our investment in TBWES during the nine months ended September 30, 2017. The impairment charge was based on the difference in the carrying value of our investment in TBWESpension and our share of the estimated fair value of TBWES's net assets.

16





NOTE 12– INTANGIBLE ASSETS

Our intangible assets are as follows:
(in thousands)September 30, 2017December 31, 2016
Definite-lived intangible assets  
Customer relationships$59,683
$47,892
Unpatented technology19,941
18,461
Patented technology6,560
2,499
Tradename22,818
18,774
Backlog30,088
28,170
All other7,550
7,429
Gross value of definite-lived intangible assets146,640
123,225
Customer relationships amortization(21,931)(17,519)
Unpatented technology amortization(4,443)(2,864)
Patented technology amortization(2,043)(1,532)
Tradename amortization(4,749)(3,826)
Acquired backlog amortization(27,814)(21,776)
All other amortization(6,965)(5,974)
Accumulated amortization(67,945)(53,491)
Net definite-lived intangible assets$78,695
$69,734
   
Indefinite-lived intangible assets:  
Trademarks and trade names$1,305
$1,305
Total indefinite-lived intangible assets$1,305
$1,305

The following summarizes the changes in the carrying amount of intangible assets:
 Nine months ended September 30,
(in thousands)20172016
Balance at beginning of period$71,039
$37,844
Business acquisitions19,500
55,438
Amortization expense(14,455)(11,904)
Currency translation adjustments and other3,916
647
Balance at end of the period$80,000
$82,025

The January 11, 2017 acquisition of Universal resulted in an increase in our intangible asset amortization expense during the three and nine months ended September 30, 2017 of $0.5 million and $2.6 million, respectively.

The July 1, 2016 acquisition of SPIG, S.p.A. resulted in an increase in our intangible asset amortization expense during the three and nine months ended September 30, 2017 of $1.9 million and $7.3 million, respectively, and $7.1 million of intangible asset amortization expenseother postretirement benefit plans during the three months ended March 31, 2022 and 2021.


We made contributions to our pension and other postretirement benefit plans totaling $0.4 million and $24.0 million during the three months ended March 31, 2022 and 2021, respectively.
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NOTE 12 – DEBT

Senior Notes

8.125% Senior Notes

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

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

During the first quarter of 2022, the Company sold $2.0 million aggregate principal of 8.125% Senior Notes under the sales agreement described above for $2.0 million of net proceeds.

6.50% Senior Notes

During 2021, we completed sales of $151.4 million aggregate principal amount of our 6.50% senior notes due in 2026 (the “6.50% Senior Notes”) for net proceeds of approximately $145.8 million. Interest on the 6.50% Senior Notes is payable quarterly in arrears on March 31, June 30, September 30 2016.and December 31 of each year, and commenced on March 31, 2022. The 6.50% Senior Notes mature on December 31, 2026.


AmortizationThe components of intangiblethe Company's senior notes at March 31, 2022 are as follows:
Senior Notes
(in thousands)8.125%6.50%Total
Senior notes due 2026$188,200 $151,440 $339,640 
Unamortized deferred financing costs(5,043)(6,297)(11,340)
Unamortized premium570 — 570 
Net debt balance$183,727 $145,143 $328,870 

Revolving Debt

On June 30, 2021, we entered into a Revolving Credit Agreement (the “Revolving Credit Agreement”) with PNC Bank, National Association, as administrative agent (“PNC”) and a letter of credit agreement (the “Letter of Credit Agreement”) with PNC, pursuant to which PNC agreed to issue up to $110 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 our subsidiaries as guarantors, pursuant to which we are obligated to reimburse MSD and any other cash collateral provider to the extent the cash collateral provided by MSD and any other cash collateral provider to secure the Letter of Credit Agreement is drawn to satisfy draws on letters of credit (the “Reimbursement Agreement”) and collectively with the Revolving Credit Agreement and Letter of Credit Agreement, the “Debt Documents” and the facilities thereunder, the “Debt Facilities”). The obligations of the Company under each of the Debt Facilities are guaranteed by certain existing and future domestic and foreign subsidiaries of the Company. B. Riley Financial, Inc. (“B. Riley”), a related party, has provided a guaranty of payment with regard to the Company’s obligations under the Reimbursement Agreement, as described below. The Company expects to use the proceeds and letter of credit availability under the Debt Facilities for working capital purposes and general corporate purposes. The Revolving Credit Agreement matures on June 30, 2025. As of March 31, 2022, no borrowings have occurred under the Revolving Credit Agreement and under the Letter of Credit Agreement, usage consisted of $16.2 million of financial letters of credit and $90.8 million of performance letters of credit.
19



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 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, we are 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.

As of March 31, 2022, a subsidiary has borrowed $1.7 million against a $3.5 million line of credit with a variable interest rate on the line of credit of 5.0% per annum. On April 1, 2022, the line of credit was paid in full and terminated.

Effective with the Revolving Credit Agreement, the Company entered into on June 30, 2021, the Company has no remaining Last Out Term Loans and no further borrowings thereunder are available.

Letters of Credit, Bank Guarantees and Surety Bonds

Certain of our subsidiaries, primarily outside of the United States, have credit arrangements with various commercial banks and other financial institutions for the issuance of letters of credit and bank guarantees in association with contracting activity. The aggregate value of all such letters of credit and bank guarantees outside of our Letter of Credit Agreement as of March 31, 2022 was $48.3 million. The aggregate value of the outstanding letters of credit provided under the Letter of
20


Credit Agreement backstopping letters of credit or bank guarantees was $34.8 million as of March 31, 2022. Of the outstanding letters of credit issued under the Letter of Credit Agreement, $52.0 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 the underwriters issue in support of some of our contracting activity. As of March 31, 2022, bonds issued and outstanding under these arrangements in support of our contracts totaled approximately $221.5 million. The aggregate value of the letters of credit backstopping surety bonds was $9.2 million.
Our ability to obtain and maintain sufficient capacity under our current Debt Facilities is essential to allow us to support the issuance of letters of credit, bank guarantees and surety bonds. Without sufficient capacity, our ability to support contract security requirements in the future will be diminished.

Other Indebtedness - Loans Payable

As of March 31, 2022, our Denmark subsidiary has 3 unsecured interest-free loans totaling $3.3 million under a local government loan program related to COVID-19. The loans of $0.8 million, $1.6 million and $0.9 million are payable in April 2022, May 2022 and May 2023, respectively. The loan payable in May 2023 is included in cost of operations Long term loans payables in our condensed consolidated statementCondensed Consolidated Balance Sheets. Subsequent to March 31, 2022, the loan due April 2022 was repaid on April 1, 2022.

As of operations, but it is not allocated to segment results.March 31, 2022, Fosler Construction has 2 loans totaling $8.9 million. Both loans have a variable interest rate with a minimum rate of 6.0% and are due June 30, 2022. Fosler Construction also has loans, primarily for vehicles and equipment, totaling $0.6 million at March 31, 2022. The vehicle and equipment loans are included in long term loans payables in our Condensed Consolidated Balance Sheets.


17




Estimated future intangible asset amortization expense, including the increase in amortization expense resulting from the January 11, 2017 acquisition of Universal, is as follows (in thousands):
Period endingAmortization expense
Three months ending December 31, 2017$3,582
Twelve months ending December 31, 2018$12,444
Twelve months ending December 31, 2019$10,342
Twelve months ending December 31, 2020$9,042
Twelve months ending December 31, 2021$8,782
Twelve months ending December 31, 2022$7,205
Thereafter$27,298


NOTE 13 – GOODWILLPREFERRED STOCK


In May 2021, we 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 us and B. Riley Securities, Inc.. At the closing, we issued to the public 4,444,700 shares of our Preferred Stock, at an offering price of $25.00 per share for net proceeds of approximately $106.4 million after deducting underwriting discounts, commissions but before expenses. The Preferred Stock has a par value of $0.01 per share and is perpetual and has no maturity date. The Preferred Stock has a cumulative cash dividend, when and as if declared by our Board of Directors, at a rate of 7.75% per year on the liquidation preference amount of $25.00 per share and payable quarterly in arrears.

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

The Preferred Stock has no stated maturity and is not subject to mandatory redemption or any sinking fund. We will pay cumulative cash dividends on the Preferred Stock when, as and if declared by our 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 goodwill:
(in thousands)PowerRenewableIndustrialTotal
Balance at December 31, 2016$46,220
$48,435
$172,740
$267,395
Increase resulting from Universal acquisition

14,413
14,413
Third quarter 2017 impairment charges*

(49,965)(36,938)(86,903)
Currency translation adjustments1,180
1,530
6,490
9,200
Balance at September 30, 2017$47,400
$
$156,705
$204,105

* Prior$25.00 per share of the Preferred Stock at a rate per annum equal to 7.75% (equivalent to $1.9375 per year), payable quarterly in arrears. Dividends on the Preferred Stock declared by our Board of Directors will be payable quarterly in arrears on March 31, June 30, September 30 2017, we had not recorded any goodwill impairment charges.

Our annual goodwill impairment assessment is performed on October 1and December 31 of each yearyear.

During the three months ending March 31, 2022, the Company's Board of Directors approved dividends totaling $3.7 million. There are no cumulative undeclared dividends of the Preferred Stock at March 31, 2022.

On June 1, 2021, the Company and B. Riley, a related party, entered into an agreement (the "annual assessment" date); however, events during 2017 have required two interim assessments of all six“Exchange Agreement”) pursuant to which we (i) issued B. Riley 2,916,880 shares of our reporting units. In the second quarterPreferred Stock, representing an exchange price of 2017, significant charges in our Renewable segment was 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 unit based on a change in the market strategy implemented by the new segment management to focus on core geographies and products.

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 impairment is measured as the excess 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 based on a 50% weighting of an income approach using a discounted cash flow analysis based on 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 $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, which is included in our Industrial segment, the Step 1 also indicated impairment. 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 due

$25.00 per share
18
21




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$73.3 million of impairment (with no income tax impact). The SPIG reporting unit has $38.0our then existing term loans with B. Riley under the Company’s prior A&R Credit Agreement.

On July 7, 2021, we entered into a sales agreement with B. Riley Securities, Inc., a related party, in connection with the offer 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 goodwill remaining afterPreferred Stock. The Preferred Stock has the impairment charge. Other long-lived assets insame terms and have the reporting unit were not impaired.

same CUSIP number and is fungible with, the Preferred Stock issued during May 2021. For the remaining four reporting units where impairment was not indicated at September 30, 2017,three months ending March 31, 2022, the goodwill balances at September 30, 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

Step 1 of the impairment test for our MEGTEC reporting unit, which is included in our Industrial segment, did not indicate impairment, and the fair value exceeded the carrying value by 12% at September 30, 2017 compared to 3.0% at June 30, 2017 and 22% at October 1, 2016. Under both the income and market valuation approaches, the fair value estimates at the interim assessment data and the second interim assessment date decreased comparedCompany has sold no additional Preferred Stock pursuant to the annual assessment date due to lower projectedsales agreement. As of December 31, 2021, the Company sold $7.7 million aggregate principal amount of Preferred Stock for $7.7 million of net sales and EBITDA. Similar to many industrial businesses, the reduction in MEGTEC reporting unit revenues has been the result of a decline in new equipment demand, primarily in the Americas; however, bookings trends have recently improved and backlog at September 30, 2017 is 67% higher than at the same date a year ago. The MEGTEC reporting unit recorded a 15% increase in revenues and a 16% increase in gross profit during the third quarter of 2017. The estimate of fair value of the MEGTEC reporting unit is sensitive to changes in assumptions, particularly assumed discount rates and projections of future operating results under the income approach. The discount rate applied to future projected cash flows was 12.5% and 11.0% at each of the September 30, 2017 and June 30, 2017 interim tests, respectively. Absent any other changes, an increase in the discount rate could result in future impairment of goodwill. Decreases in future projected operating results could also result in future impairment of goodwill.proceeds.



NOTE 14 – PROPERTY, PLANT & EQUIPMENTCOMMON STOCK


Property, plant and equipment is stated at cost. The compositionOn February 12, 2021, we completed a public offering of our property, plantcommon stock pursuant to an underwriting agreement dated February 9, 2021, between us and equipment less accumulated depreciation is set forth below:B. Riley Securities, Inc., as representative of the several underwriters. At the time of closing, we 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 our then existing U.S. Revolving Credit Facility and permanently reduced the commitments under our senior secured credit facilities.
(in thousands)September 30, 2017December 31, 2016
Land$8,802
$6,348
Buildings121,952
114,322
Machinery and equipment206,437
189,489
Property under construction14,218
22,378
 351,409
332,537
Less accumulated depreciation208,302
198,900
Net property, plant and equipment$143,107
$133,637

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NOTE 15 – WARRANTY–INTEREST EXPENSE AND SUPPLEMENTAL CASH FLOW INFORMATION


ChangesInterest expense in our Condensed Consolidated Financial Statements consisted of the following components:
Three Months Ended March 31,
(in thousands)20222021
Components associated with borrowings from:
Senior notes$6,216 $1,733 
Last Out Term Loans - cash interest— 3,513 
U.S. Revolving Credit Facility— 1,416 
6,216 6,662 
Components associated with amortization or accretion of:
Revolving Credit Agreement1,060 — 
Senior notes643 1,468 
U.S. Revolving Credit Facility— 4,400 
1,703 5,868 
Components associated with interest from:
Lease liabilities708 616 
Other interest expense2,640 1,077 
3,348 1,693 
Total interest expense$11,267 $14,223 

22


The following table provides a reconciliation of Cash and cash equivalents and Restricted cash and cash equivalents reporting within the Condensed Consolidated Balance Sheets and in the carryingCondensed Consolidated Statements of Cash Flows:
(in thousands)March 31, 2022December 31, 2021March 31, 2021
Held by foreign entities$35,870 $42,070 $25,169 
Held by U.S. entities72,267 182,804 28,664 
Cash and cash equivalents108,137 224,874 53,833 
Reinsurance reserve requirements584 443 2,053 
Bank guarantee collateral492 997 2,560 
Letters of credit collateral1,858 401 — 
Hold-back for acquisition purchase price (1)
5,899 — — 
Restricted cash and cash equivalents8,833 1,841 4,613 
Total cash, cash equivalents and restricted cash shown in the Condensed Consolidated Statements of Cash Flows$116,970 $226,715 $58,446 
(1) The purchase price for Fossil Power Systems ("FPS") was $59.1 million, including a hold-back of $5.9 million as reflected above. 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. The hold-back amount is included in Restricted cash and cash equivalents and Other accrued liabilities on our accrued warranty expense areCondensed Consolidated Balance Sheets.

The following cash activity is presented as follows:a supplement to our Condensed Consolidated Statements of Cash Flows and is included in Net cash used in operating activities:
Three Months Ended March 31,
(in thousands)20222021
Income tax payments, net$471 $1,499 
Interest payments - 8.125% Senior Notes due 2026$3,783 $— 
Interest payments - 6.50% Senior Notes due 20262,926 — 
Interest payments on our U.S. Revolving Credit Facility— 5,979 
Interest payments on our Last Out Term Loans— 3,560 
Total cash paid for interest$6,709 $9,539 

 Nine months ended September 30,
(in thousands)20172016
Balance at beginning of period$40,467
$39,847
Additions17,818
18,300
Expirations and other changes(9,053)(2,945)
Increases attributable to business combinations1,060
901
Payments(11,126)(10,922)
Translation and other2,064
(217)
Balance at end of period$41,230
$44,964
NOTE 16 – PROVISION FOR INCOME TAXES


DuringIn the ninethree months ended September 30, 2017March 31, 2022, income tax expense was $1.2 million, resulting in an effective tax rate of (16.5)%. In the three months ended March 31, 2021, income tax expense was $2.8 million, resulting in an effective tax rate of (22.5)%.

Our effective tax rate for the three months ended March 31, 2022 and 2016, our Power segment reduced its accrued warranty expense by $4.72021 is not reflective of the U.S. statutory rate due to valuation allowances against certain net deferred tax assets and discrete items. We have unfavorable discrete items of $0.4 million and $2.2 million, respectively, to reflectfor the expirationthree months ended March 31, 2022, which primarily represent withholding taxes. We had unfavorable discrete items of warranties, and updated its estimated warranty accrual rate to reflect its warranty claims experience and current contractual warranty obligations, which reduced the accrued warranty expense by $4.1$2.5 million in the ninethree months ended September 30, 2017. AdditionsMarch 31, 2021, which primarily represented withholding taxes.

We are subject to federal income tax in the United States and numerous countries that have statutory tax rates different than the United States federal statutory rate of 21%. The most significant of these foreign operations are located in Canada, Denmark, Germany, Italy, Mexico, Sweden, and the United Kingdom, with effective tax rates ranging between approximately 19% and 30%. We provide for income taxes based on the tax laws and rates in the jurisdictions where we conduct operations. These jurisdictions may have regimes of taxation that vary in both nominal rates and the basis on which these rates are applied. Our consolidated effective income tax rate can vary from period to period due to these foreign income tax rate variations, changes in the jurisdictional mix of our income and valuation allowances.
23


NOTE 17 – CONTINGENCIES

Litigation Relating to Boiler Installation and Supply Contract

On December 27, 2019, a complaint was filed against Babcock & Wilcox by P.H. Glatfelter Company (“Glatfelter”) in the United States District Court for the Middle District of Pennsylvania, Case No. 1:19-cv-02215-JPW, alleging claims of breach of contract, fraud, negligent misrepresentation, promissory estoppel and unjust enrichment (the “Glatfelter Litigation”). The complaint alleges damages in excess of $58.9 million. On March 16, 2020 we filed a motion to dismiss, and on December 14, 2020 the court issued its order dismissing the fraud and negligent misrepresentation claims and finding that, in the event that parties’ contract is found to be valid, Plaintiffs’ claims for damages will be subject to the warranty accrual include specific provisionscontractual cap on industrial steam projects totaling $7.1liability (defined as the $11.7 million purchase price subject to certain adjustments). On January 11, 2021, we filed our answer and $2.1a counterclaim for breach of contract, seeking damages in excess of $2.9 million. We intend to continue to vigorously litigate the action. However, given the stage of the litigation, it is too early to determine if the outcome of the Glatfelter Litigation will have a material adverse impact on our consolidated financial condition, results of operations or cash flows.

Stockholder Derivative and Class Action Litigation

On April 14, 2020, a putative B&W stockholder (“Plaintiff”) filed a derivative and class action complaint against certain of the Company’s directors (current and former), executives and significant stockholders (“Defendants”) and the Company (as a nominal defendant). The action was filed in the Delaware Court of Chancery and is captioned Parker v. Avril, et al., C.A. No. 2020-0280-PAF ("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. The litigation is currently ongoing and at this time we are unable to determine whether the outcome of the Stockholder Litigation will have a material adverse impact on our consolidated financial condition, results of operations or cash flows, net of any insurance coverage.

Russian Invasion of Ukraine

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 in the amount of approximately $3.1 million duringby a wholly-owned Italian subsidiary of the nine months ended September 30, 2017Company to non-Russian counterparties who may resell our products to Russian entities or perform services in Russia using our products. The economic sanctions and 2016, respectively.export-control measures and the ongoing invasion of Ukraine could impact our subsidiary’s rights and responsibilities under the contracts and could result in potential losses to the Company.


Other

Due to the nature of our business, we are, from time to time, involved in routine litigation or subject to disputes or claims related to our business activities, including, among other things: performance or warranty-related matters under our customer and supplier contracts and other business arrangements; and workers' compensation, premises liability and other claims. Based on our prior experience, we do not expect that any of these other litigation proceedings, disputes and claims will have a material adverse effect on our consolidated financial condition, results of operations or cash flows.
24



NOTE 1618PENSION PLANS AND OTHER POSTRETIREMENT BENEFITSCOMPREHENSIVE INCOME


Components of net periodic benefit cost (benefit) includedGains and losses deferred in netaccumulated other comprehensive income (loss) ("AOCI") are as follows:
 Pension benefits Other benefits
 Three months ended September 30, Nine months ended September 30, Three months ended September 30, Nine months ended September 30,
(in thousands)20172016 20172016 20172016 20172016
Service cost$227
$548
 $756
$1,137
 $3
$6
 $11
$18
Interest cost10,369
10,086
 30,905
30,890
 (106)206
 255
629
Expected return on plan assets(14,936)(15,925) (44,646)(46,107) 

 

Amortization of prior service cost29
81
 80
335
 (561)
 (2,277)
Recognized net actuarial loss
645
 1,062
30,545
 

 

Net periodic benefit cost (benefit)$(4,311)$(4,565) $(11,843)$16,800
 $(664)$212
 $(2,011)$647

Duringgenerally reclassified and recognized in the Condensed Consolidated Statements of Operations once they are realized. The changes in the components of AOCI, net of tax, for the first 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 charges2022 and mark to market adjustments are reflected in the $1.1 million "Recognized net actuarial loss" for the nine months ended September 30, 2017 in the table above. There2021 were no significant plan settlements or interim mark to market adjustments during the second or third quarters of 2017.as follows:

(in thousands)Currency translation lossNet unrecognized loss related to benefit plans (net of tax)Total
Balance at December 31, 2021$(55,499)$(3,323)$(58,822)
Other comprehensive loss before reclassifications(4,285)— (4,285)
Reclassified from AOCI to net loss— 593 593 
Net other comprehensive (loss) income(4,285)593 (3,692)
Balance at March 31, 2022(59,784)(2,730)(62,514)
During the second and third quarters of 2016, we recorded adjustments to our benefit plan liabilities resulting from certain curtailment and settlement events. In September 2016, lump sum payments from our Canadian pension plan resulted in a $0.1 million pension plan settlement charge. 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. In April 2016, lump sum payments from our Canadian pension plan resulted in a $1.1 million plan settlement charge. These events resulted in interim mark to market accounting for the respective benefit plans in 2016. Mark to market charges in the three months ended September 30, 2016 were $0.5 million in our Canadian pension plan. Mark to market charges for our United States and Canadian pension plans were $27.5 million in the nine months ended September 30, 2016. The pension mark to market charges were impacted by higher than expected returns on pension plan assets. The weighted-average discount rate used to remeasure the benefit plan liabilities at September 30, 2016 was 3.88%. The effect of these charges and mark to market adjustments are reflected in the 2016 "Recognized net actuarial loss" in the table above.

(in thousands)Currency translation
loss
Net unrecognized loss
related to benefit plans
(net of tax)
Total
Balance at December 31, 2020$(47,575)$(4,815)$(52,390)
Other comprehensive loss before reclassifications(70)— (70)
Reclassified from AOCI to net (loss) income(4,512)198 (4,314)
Net other comprehensive (loss) income(4,582)198 (4,384)
Balance at March 31, 2021$(52,157)$(4,617)$(56,774)
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We have excluded the recognized net actuarial loss from our reportable segments and such amount has been reflected in Note 3 as the mark to market adjustment in the reconciliation of reportable segment income (loss) to consolidated operating losses. The recognized net actuarial loss during the three and nine months ended September 30, 2017 and 2016 was recorded in our condensed consolidated statements of operations in the following line items:
 Pension benefits
 Three months ended September 30, Nine months ended September 30,
(in thousands)20172016 20172016
Cost of operations$
$580
 $954
$30,079
Selling, general and administrative expenses
64
 106
465
Other

 2

Total$
$644
 $1,062
$30,544

We made contributions to our pension and other postretirement benefit plans totaling $9.8 million and $16.2 million during the three and nine months ended September 30, 2017, respectively, as compared to $1.8 million and $4.4 million during the three and nine months ended September 30, 2016, respectively.

See Note 23 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 17 – REVOLVING DEBT


The componentsamounts reclassified out of our revolving debt are comprised of separate revolving credit facilities in the following locations:
(in thousands)September 30, 2017December 31, 2016
United States$58,900
$9,800
Foreign12,398
14,241
Total revolving debt$71,298
$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,AOCI by component and the full amount is available to support the issuanceaffected Condensed Consolidated Statements of letters of credit.

On February 24, 2017 and August 9, 2017, 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 18), (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 $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 amendment, (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 $500.0 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

21




repurchases during the covenant relief period (other than our share repurchase from an affiliate of AIP (discussed further in Note 18)), (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 during the covenant relief period, (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 September 30, 2017, limit to no more than $25.0 million any cumulative net income losses attributable to certain Vølund projects, and (17) increase reporting obligations and require us to hire a third-party consultant. The covenant relief period will end, at our election, when the conditions set forth in the Amended Credit AgreementOperations line items are satisfied, but in no event earlier than the date on which we provide the compliance certificate for our fiscal quarter ending December 31, 2018.

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.

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. 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.

After giving effect to Amendments, loans outstanding under the Amended Credit Agreement bear interest at our option at either (1) the LIBOR rate plus 5.0% per annum or (2) the base rate (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) plus 4.0% per annum. Interest expense associated with our United States revolving credit facility loans for the three and nine months ended September 30, 2017 was $3.3 million and $7.0 million, respectively. Included in interest expense was $1.3 million and $2.1 million of non-cash amortization of direct financing costs for the three and nine months ended September 30, 2017, respectively. 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. The maximum permitted senior debt leverage ratio as defined in the Amended Credit Agreement is:
6.00:1.0 for the quarter ended September 30, 2017,
8.50:1.0 for each of the quarters ending December 31, 2017 and March 31, 2018,
6.25:1.0 for the quarter ending June 30, 2018,
4.00:1.0 for the quarter ending September 30, 2018,
3.75:1.0 for the quarter ending December 31, 2018,
3.25:1.0 for each of the quarters ending March 31, 2019 and June 30, 2019, and
3.00:1.0 for each of the quarters ending September 30, 2019 and each quarter thereafter.

The minimum consolidated interest coverage ratio as defined in the Credit Agreement is:
1.50:1.0 for the quarter ended September 30, 2017,
1.00:1.0 for each of the quarters ending December 31, 2017 and March 31, 2018,
1.25:1.0 for the quarter ending June 30, 2018,

22




1.50:1.0 for each of the quarters ending September 30, 2018 and December 31, 2018,
1.75:1.0 for each of the quarters ending March 31, 2019 and June 30, 2019, and
2.00:1.0 for each of the quarters ending September 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 September 30, 2017, usage under the Amended Credit Agreement consisted of $58.9 million in borrowings at an effective interest rate of 6.88%, $7.7 million of financial letters of credit and $87.2 million of performance letters of credit. At September 30, 2017, we had $94.7 million available for borrowings or to meet letter of credit requirements primarily based on trailing 12 month EBITDA, and our leverage (as defined in the Amended Credit Agreement) ratio was 3.00 and our interest coverage ratio was 2.59. In addition, through September 30, 2017, we have used $11.6 million of the $25.0 million of permitted net income losses attributable to our Vølund projects. At September 30, 2017, we were in compliance with all of the covenants set forth in the Amended Credit Agreement.

Foreign revolving credit facilities

Outside of the United States, we have revolving credit facilities in Turkey, China and India that are used to provide working capital to our operations in each country. These three foreign revolving credit facilities allow us to borrow up to $14.8 million in aggregate and each have a one year term. At September 30, 2017, we had $12.4 million in borrowings outstanding under these foreign revolving credit facilities at an effective weighted-average interest rate of 5.17%.

Other credit arrangements

Certain subsidiaries have credit arrangements with various commercial banks and other financial institutions for the issuance of letters of credit and bank guarantees in associated with contracting activity. The aggregate value of all such letters of credit and bank guarantees not secured by the United States revolving credit facility as of September 30, 2017 and December 31, 2016 was $279.1 million and $255.2 million, respectively.

We have posted surety bonds to support contractual obligations to customers relating to certain projects. 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 project 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 September 30, 2017, bonds issued and outstanding under these arrangements in support of contracts totaled approximately $472.3 million.

NOTE 18 – 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 may be drawn in a single draw prior to June 30, 2020, subject to certain conditions. Through September 30, 2017, we have not utilized the delayed draw term loan facility.

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 any borrowings we may make under 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 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

23




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 18.64%.

The carrying value of the second lien term loan facility at September 30, 2017 was as follows (in thousands):
AOCI componentLine items in the Condensed Consolidated Statements of Operations affected by reclassifications from AOCIThree Months Ended March 31,
20222021
Release of currency translation adjustment with the sale of businessLoss on sale of business$— $4,512 
Pension and post retirement adjustments, net of taxBenefit plans, net(593)(198)
Net (loss) income$(593)$4,314 
25
Face value
Unamortized debt discount
and direct financing costs
Net carrying value
$175,884$37,500$138,384

Interest expense associated with our second lien credit agreement is comprised of the following:
(in thousands)
Actual for the period
August 9, 2017 through
September 30, 2017
 
Forecasted for the period
October 1, 2017 through
December 31, 2017
Forecasted for the period
January 1, 2018 through
December 31, 2018
Coupon interest (10%)$2,554 $4,433$17,588
Amortization of financing costs and discount$1,095 $2,119$9,678
Total interest expense$3,649 $6,552$27,266

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 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.

NOTE 19 – CONTINGENCIES

ARPA litigation

On February 28, 2014, the Arkansas River Power Authority ("ARPA") filed suit against Babcock & Wilcox Power Generation Group, Inc. (now known as The Babcock & Wilcox Company and referred to herein as “BW PGG”) in the United States District Court for the District of Colorado (Case No. 14-cv-00638-CMA-NYW) 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. The jury found in favor 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 million. We increased our accrual by $1.9 million in the fourth quarter of 2016. At September 30, 2017 and December 31, 2016, $4.2 million was included in other accrued liabilities in our consolidated balance sheet, and we have posted a bond pending resolution of post-trial matters.

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-

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judgment interest on July 21, 2017, which we recorded in our June 30, 2017 condensed 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.

Stockholder litigation

On March 3, 2017 and March 13, 2017, 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 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.

The plaintiff in the Stockholder Litigation alleges fraud, misrepresentation and a course of conduct relating to the facts surrounding certain projects underway in the Company's Renewable segment, which, according to the plaintiff, had the effect of artificially inflating the price of the Company's common stock. The plaintiff further alleges that stockholders were harmed when the Company disclosed on February 28, 2017 and August 9, 2017 that it would incur losses on these projects. The plaintiff seeks an unspecified amount of damages.

We believe the allegations in the Stockholder Litigation are without merit, and that the outcome of the Stockholder Litigation will not have a material adverse impact on our consolidated financial condition, results of operations or cash flows, net of any insurance coverage.

Other

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

NOTE 20 – DERIVATIVE FINANCIAL INSTRUMENTS

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 rates and FX forward rates. At September 30, 2017 and 2016, we had deferred approximately $2.5 million and $3.4 million, respectively, of net gains on these derivative financial instruments in accumulated other comprehensive income ("AOCI").

At September 30, 2017, our derivative financial instruments consisted solely of FX forward contracts. The notional value of our FX forward contracts totaled $121.2 million at September 30, 2017 with maturities extending to November 2019. These instruments consist primarily of contracts to purchase or sell euros and British pounds sterling. We are exposed to credit-related losses in the event of nonperformance by counterparties to derivative financial instruments. We attempt to mitigate this risk by using major financial institutions with high credit ratings. The counterparties to all of our FX forward contracts are financial institutions party to our United States revolving credit facility. Our hedge counterparties have the benefit of the same collateral arrangements and covenants 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.

25





The following tables summarize our derivative financial instruments:
 Asset and Liability Derivative
(in thousands)September 30, 2017December 31, 2016
Derivatives designated as hedges:  
Foreign exchange contracts:  
Location of FX forward contracts designated as hedges:  
Accounts receivable-other$1,694
$3,805
Other assets750
665
Accounts payable542
1,012
Other liabilities183
213
   
Derivatives not designated as hedges:  
Foreign exchange contracts:  
Location of FX forward contracts not designated as hedges:  
Accounts receivable-other$1,238
$105
Accounts payable2,594
403
Other liabilities8
7

The effects of derivatives on our financial statements are outlined below:
 Three months ended September 30, Nine months ended September 30,
(in thousands)20172016 20172016
Derivatives designated as hedges:     
Cash flow hedges     
Foreign exchange contracts     
Amount of gain (loss) recognized in other comprehensive income$398
$1,419
 $2,642
5,476
Effective portion of gain (loss) reclassified from AOCI into earnings by location:     
Revenues2,092
1,940
 8,094
4,524
Cost of operations159
24
 113
57
Other-net(7,930)(445) (7,438)(1,065)
Portion of gain (loss) recognized in income that is excluded from effectiveness testing by location:     
Other-net(7,005)1,607
 (10,524)3.408
      
Derivatives not designated as hedges:     
Forward contracts     
Loss recognized in income by location:     
Other-net$(1,364)$(154) $(1,709)$(567)

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NOTE 2119 – 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 securitiesMarch 31, 2022Level 1Level 2
Corporate notes and bonds$8,218 $8,218 $— 
Mutual funds673 — 673 
United States Government and agency securities2,933 2,933 — 
Total fair value of available-for-sale securities$11,824 $11,151 $673 
(in thousands)     
Available-for-sale securitiesSeptember 30, 2017 Level 1Level 2Level 3
Commercial paper$5,394
 $
$5,394
$
Mutual funds1,286
 
1,286

U.S. Government and agency securities7,243
 7,243


Total fair value of available-for-sale securities$13,923
 $7,243
$6,680
$


(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, 2016 Level 1Level 2Level 3
Commercial paper$6,734
 $
$6,734
$
Certificates of deposit2,251
 
2,251

Mutual funds1,152
 
1,152

Corporate bonds750
 750


U.S. Government and agency securities7,104
 7,104


Total fair value of available-for-sale securities$17,991
 $7,854
$10,137
$
Available-For-Sale Securities


DerivativesSeptember 30, 2017 December 31, 2016
Forward contracts to purchase/sell foreign currencies$355  $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 securities are presented in "other assets"other assets on our condensed consolidated balance sheets.Condensed Consolidated Balance Sheets with contractual maturities ranging from 0-5 years.


DerivativesSenior Notes


Derivative assets and liabilities currently consistSee Note 12 above for a discussion of FX forward contracts. Where applicable, theour 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 March 31, 2022.


(in thousands)March 31, 2022
Senior NotesCarrying ValueEstimated Fair Value
8.125% Senior Notes due 2026 ('BWSN')$188,200 $197,759 
6.50% Senior Notes due 2026 ('BWNB')$151,440 $144,353 

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 restricted cash and cash equivalents. The carrying amounts that we have reported in the accompanying condensed consolidated balance sheetsCondensed Consolidated Balance Sheets for cash and cash equivalents and restricted cash and cash equivalents approximate their fair values due to their highly liquid nature.
Revolving debtDebt. We base the fair values of debt instruments on quoted market prices. Where quoted prices are not available, we base 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 instrumentsRevolving Debt approximated their carrying value at September 30, 2017 and DecemberMarch 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. Warrants. The fair value of the acquired intangible assetswarrants was determinedestablished using the income approach (see Note 4).Black-Scholes option pricing model value approach.

26


Contingent consideration: In connection with the Fosler Construction Company acquisition, the Company agreed to pay contingent consideration based on the achievement of targeted revenue thresholds for the year ended December 31, 2022. The other-than-temporary impairmentrange of undiscounted amounts the Company could be required to pay under the contingent consideration arrangement is between $0.0 million and $10.0 million. As of March 31, 2022, the fair value of the contingent consideration liability is $9.6 million and is classified as a component of other current liabilities in the Company's Condensed Consolidated Balance Sheets. The fair value measurement of the contingent consideration related to the Fosler Construction Company 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 20– RELATED PARTY TRANSACTIONS

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

Transactions with B. Riley

Based on its Schedule 13D filings with the SEC, B. Riley beneficially owns approximately 30.3% of our equity method investmentoutstanding common stock as of March 31, 2022.

We entered into an agreement with BRPI Executive Consulting, LLC, an affiliate of B. Riley, on November 19, 2018 and amended the agreement on November 9, 2020 to retain the services of Mr. Kenny Young, to serve as our Chief Executive Officer until December 31, 2023, unless terminated by either party with thirty days written notice. Under this agreement, payments are $0.75 million per annum, paid monthly. Subject to the achievement of certain performance objectives as determined by the Compensation Committee of the Board, a bonus or bonuses may also be earned and payable to BRPI Executive Consulting, LLC. Total fees associated with B. Riley related to the services of Mr. Kenny Young were $0.2 million and $0.2 million for the three months ended March 31, 2022 and 2021, respectively.

The public offering of our 8.125% Senior Notes in TBWES (seeFebruary 2021, as described in Note 11) required significant12, was conducted pursuant to an underwriting agreement dated February 10, 2021, between us and B. Riley Securities, Inc., an affiliate of B. Riley, as representative of several underwriters. At the closing date on February 12, 2021, we paid B. Riley Securities, Inc. $5.2 million for underwriting fees and other transaction cost related to the 8.125% Senior Notes offering.

The public offering of our common stock, as described in Note 14, was conducted pursuant to an underwriting agreement dated February 9, 2021, between us and B. Riley Securities, Inc., as representative of the several underwriters. Also on February 12, 2021, we 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 12.

On March 31, 2021, we entered into a sales agreement with B. Riley Securities, Inc., a related party, in which we may sell, from time to time, up to an aggregated principal amount of $150.0 million of 8.125% Senior Notes due 2026 to or through B. Riley Securities, Inc., as described in Note 12. As of March 31, 2022, we paid B. Riley Securities, Inc. $0.6 million for underwriting fees and other transaction costs related to the offering of which $0.1 million has been paid for the three months ended March 31, 2022.

The public offering of our 7.75% Series A Cumulative Perpetual Preferred Stock, as described in Note 13, was conducted pursuant to an underwriting agreement dated May 4, 2021, between us and B. Riley Securities, Inc., as representative of several underwriters. At the closing date on May 2021, we paid B. Riley Securities, Inc. $4.3 million for underwriting fees and other transaction cost related to the Preferred Stock offering.
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On May 26, 2021, we completed the additional sale of 444,700 shares of our Preferred Stock, related to the grant to the underwriters, as described in Note 13, and paid B. Riley Securities, Inc. $0.4 million for underwriting fees in conjunction with the transaction.

On June 1, 2021, we 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 13.

On June 30, 2021, we entered into new Debt Facilities, as described in Note 12. 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 12. Under a fee letter with B. Riley, the Company shall pay B. Riley $0.9 million per annum in connection with the B. Riley Guaranty.

On July 7, 2021, we entered into a sales agreement with B. Riley Securities, Inc., a related party, in which we may sell, from time to time, up to an aggregated principal amount of $76.0 million of Preferred Stock to or through B. Riley Securities, Inc., as described in Note 13. As of March 31, 2022, we 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 12, was conducted pursuant to an underwriting agreement dated December 8, 2021, between us and B. Riley Securities, Inc., an affiliate of B. Riley, as representative of several underwriters. At the closing date on December 13, 2021, we 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 result of providing a payment and performance bond in an aggregate amount not to exceed €30.0 million in connection with our proposed performance on a specified project. In consideration of B. Riley's execution of the Indemnity Agreement, we 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, we received a notice that the underwriters of the 6.50% Senior Notes had elected to exercise their overallotment option for an additional $11.4 million in aggregate principal amount of the Senior Notes. At the closing date on December 30, 2021, we paid B. Riley Securities, Inc. $0.5 million for underwriting fees and other transaction cost related to the 6.50% Senior Notes overallotment.

NOTE 21 – ACQUISITIONS AND DIVESTITURES

Acquisitions

Fosler Construction

On September 30, 2021, we acquired a 60% controlling ownership stake in Illinois-based solar energy contractor Fosler Construction Company Inc. (“Fosler Construction”). Fosler Construction provides commercial, industrial and utility-scale solar services and owns 2 community solar projects in Illinois that are being developed under the Illinois Solar for All program. Fosler Construction 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. We believe Fosler Construction 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 our clean and renewable energy businesses. Fosler Construction is reported as part of our B&W Renewable segment, and operates under the name Fosler Solar, a Babcock and Wilcox company.

The total fair value measurementsof consideration for the acquisition is $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 is between $0.0 million and $10.0 million.

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We estimated fair values primarily using unobservable inputs ("Level 3" inputs as definedthe 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, we 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 value hierarchy established by FASB Topic Fair Value Measurements and Disclosures). We determined the impairment charge by first determining an estimatevalues of the price that could be receivedassets acquired and liabilities assumed during the measurement period may result in adjustments to sellgoodwill.

As of March 31, 2022, we recorded an increase in goodwill of $14.9 million resulting from the initial recognition of $14.5 million of accrued liabilities and $0.4 million of warranty accruals during this acquisition's annual measurement period, as described in Note 4.

VODA

On November 30, 2021, we acquired 100% ownership of VODA A/S (“VODA”) through our wholly-owned subsidiary, B&W PGG Luxembourg Finance SARL, for approximately $32.9 million. VODA is 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. VODA has extensive experience in incineration technology, boiler and pressure parts, SRO, automation, and performance optimization. VODA is reported as part of our B&W Renewable segment and is included in the B&W Renewable Services product line.

We estimated fair values primarily using the discounted cash flow method at November 30, 2021 for the preliminary allocation of consideration to the assets acquired and transferliabilities assumed. During the liabilities held by TBWESmeasurement period, we will continue to obtain information to assist in an orderly transaction between market participants at June 30, 2017. Thefinalizing the fair value of TBWES's net assets was determined through a combinationacquired and liabilities assumed, which may differ materially from these preliminary estimates. Any subsequent changes in the fair values of the cost approach,assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill.

Fossil Power Systems

On February 1, 2022, we acquired 100% ownership of Fossil Power Systems, Inc. (“FPS”) for approximately $59.1 million, excluding working capital adjustments. The consideration paid for FPS included a market approachhold-back of $5.9 million, payable twelve months from the date of the acquisition if certain conditions of the purchase agreement are met an is recorded on our Condensed Consolidated Balance Sheets in restricted cash and an income approach.cash equivalents and other accrued liabilities.


Our interim goodwill impairment testFPS is a leading designer and third quarter impairment charge required significantmanufacturer of hydrogen, natural gas and renewable pulp and paper combustion equipment including ignitors, plant controls and safety systems based in Dartmouth, Nova Scotia, Canada and is reported as part of our B&W Thermal segment.

We estimated fair value measurementsvalues primarily using unobservable inputs (see Note 13). Thethe 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, we will continue to obtain information to assist in finalizing the fair value of each reporting unit determined under Step 1assets acquired and liabilities assumed, which may differ materially from these preliminary estimates. Any subsequent changes in the fair values of the goodwill impairment test wasassets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill.

Optimus Industries

On February 28, 2022, we acquired 100% ownership of Optimus Industries, LLC ("Optimus Industries") for approximately $19.0 million, excluding working capital adjustments. 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 on an income approachin Tulsa, Oklahoma and Chanute, Kansas. Optimus Industries is reported as part of our B&W Thermal segment.

The fair values for the Optimus Industries acquisition have not been completed as of the filing date of this Quarterly report.
We will estimate fair values primarily using athe discounted cash flow analysis, a market approach using multiplesmethod at February 28, 2022 for the preliminary allocation of revenueconsideration to the assets acquired and EBITDAliabilities assumed. During the measurement period, we will obtain information to assist in finalizing the fair value of guideline companies,assets acquired and a market approach using multiplesliabilities assumed, which may differ materially from these preliminary estimates. Any subsequent changes in the fair values of revenuethe assets acquired and EBITDA from recent, similar business combinations.liabilities assumed during the measurement period may result in adjustments to goodwill.
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Purchase Price Allocations

The provisional measurements noted in the tables below are preliminary and subject to modification in the future. The preliminary purchase price allocation to assets acquired and liabilities assumed in the acquisitions were:

Fosler Construction
(in thousands)Initial Allocation of ConsiderationMeasurement Period AdjustmentsUpdated Preliminary 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 19,912 63,142 
Other assets17,497 (4,600)12,897 
Right of use assets1,093 — 1,093 
Debt(7,625)— (7,625)
Current liabilities (4)
(5,073)(15,829)(20,902)
Advance billings on contracts(1,557)238 (1,319)
Non-current lease liabilities(1,730)— (1,730)
Other non-current liabilities(4,112)3,218 (894)
Non-controlling interest(2)
(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 Fosler Construction acquisition, goodwill represents Fosler'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 assets and liabilities for the Renewable and SPIG reporting units determined under Step 2 of the goodwill impairment test werenon-controlling interest was derived based on either an income or market approach.

The measurement of the net actuarial loss associated with our Canadian pension plan was determined using unobservable inputs (see Note 16). 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 significant60% 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 Fosler Construction. Also, as described above, a portion of the purchase consideration relates to the contingent consideration.
(3) Our preliminary purchase price allocation changed due to additional information and further analysis.
(4) Our preliminary goodwill and current liabilities adjustments increased $14.5 million due to additional accrued liabilities recognized attributable to the Fosler projects described in Note 4.

VODA
(in thousands)
Initial Allocation of ConsiderationMeasurement Period AdjustmentsUpdated Preliminary 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 
30


(1) Goodwill is calculated as the excess of the purchase price over the net assets acquired. With respect to the VODA acquisition, goodwill represents VODA'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)Our preliminary purchase price allocation changed due to additional information and further analysis.

Purchase Price Allocation at March 31, 2022
(in thousands)Fossil Power Systems
Optimus Industries(2)
Cash$1,869 $5,338 
Accounts receivable2,624 5,165 
Contracts in progress370 2,598 
Other current assets3,228 2,115 
Property, plant and equipment178 2,441 
Goodwill(1)
35,392 11,081 
Other assets25,092 12 
Right of use assets1,115 94 
Current liabilities(1,792)(4,240)
Advance billings on contracts(645)(3,779)
Non-current lease liabilities(989)(2)
Other non-current liabilities(7,384)(1,858)
Net acquisition cost$59,058 $18,965 
(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)With respect to Optimus Industries, the fair value measurementsanalysis has not been completed. We will update the purchase price allocations after the fair value analysis has been completed.


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

Fosler ConstructionVODA
(in thousands)Estimated Acquisition Date Fair ValueWeighted Average Estimated Useful LifeEstimated Acquisition 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
Estimated Acquisition Date Fair ValueWeighted Average Estimated Useful Life
Customer Relationships$20,451 9 years
Tradename787 14 years
Patented Technology578 12 years
Unpatented Technology3,276 12 years
Total intangible assets(1)
$25,092 
(1) Intangible assets were valued using unobservablethe income approach, which includes significant assumptions around future revenue growth, profitability, discount rates and customer attrition. Such assumptions are classified as level 3 inputs (see Note 18). We utilizedwithin the fair value hierarchy.

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Costs related to our acquisitions of Fosler, VODA, Fossil Power Systems, and Optimus Industries, which were recorded as a discounted cash flow model and estimatescomponent of our weighted average costoperating expenses in our Condensed Consolidated Statements of Operations, consists of the following:

For the Three Months Ended
(in thousands)March 31, 2022
Fosler Construction$195 
VODA140 
FPS31 
Optimus Industries69 
Total$435 

Divestitures

Certain real property assets for the Copley, Ohio location were sold on March 15, 2021 for $4.0 million. We received $3.3 million of net proceeds after adjustments and 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.

Certain real property assets for the Lancaster, Ohio location were sold on August 13, 2021 for $18.9 million. We 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, we executed a leaseback agreement commencing August 13, 2021 which expires on August 31, 2041.

Effective March 5, 2021, we sold all of the issued and outstanding capital stock of Diamond Power Machine (Hubei) Co., Inc, for $2.8 million. We received $2.0 million in gross proceeds before expenses and recorded an $0.8 million favorable contract asset for the amortization period from March 8, 2021 through December 31, 2023. For the twelve months ended December 31, 2021, we recognized a $1.8 million pre-tax loss, inclusive of the recognition of $4.5 million of currency translation adjustment, on the transaction date to derive the estimated fair valuesale of the share repurchase.business and after consideration of certain working capital adjustments that are in dispute. Additional adjustments may be necessary as this is finalized.


NOTE 22 – SUPPLEMENTAL CASH FLOW INFORMATION

During the nine months ended September 30, 2017 and 2016, we recognized the following non-cash activity in our condensed consolidated financial statements:
(in thousands)20172016
Accrued capital expenditures in accounts payable$1,118
$2,543

During the nine months ended September 30, 2017 and 2016, we recognized the following cash activity in our condensed consolidated financial statements:
(in thousands)20172016
Income tax payments (refunds), net$(11,190)$11,289
Interest payments on our United States revolving credit facility$2,876
$40
Interest payments on our second lien term loan facility$2,492
$

NOTE 2322 – NEW ACCOUNTING STANDARDS


We adopted the following accounting standard during the first quarter of 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 our Condensed Consolidated Financial Statements was immaterial.

New accounting standards not yet adopted that could affect our consolidated financial statementsCondensed Consolidated Financial Statements in the future are summarized as follows:

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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

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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 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. To date, 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. Based on our preliminary assessment, we do not expect the timing of revenue recognition to change significantly upon adoption of the new accounting standard; however, we are still assessing the impact to process, systems, internal controls and disclosures. We plan to adopt the new accounting standard on January 1, 2018 under the modified retrospective method. The FASB has issued, and may issue in the future, interpretative guidance, which may cause our evaluation to change. Our evaluation will include the existing, uncompleted contracts at that time the new accounting standard is adopted, and as a result, we will not be able to make a final determination about the impact of adopting the new accounting standard until the first quarter of 2018.

In January 2016, the FASB issued ASU 2016-1, 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 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.

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 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 standardadoption. This amendment is effective for fiscal years beginning in 2020.after December 15, 2022, including interim periods within those fiscal years. We are currently assessing the impact that adopting this new accounting standard will have on our 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. 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 standard is effective for us beginning in 2018. We have

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assessedevaluating the impact of adopting the new standard on our consolidated statement of operations and determined the required reclassifications will primarily impact our Power segment's gross profit. The changes in the classification of the historical components of net periodic benefit costs are summarized in the following table:
Pension & other postretirement benefit costs (benefits)
(in thousands)
December 31,
2016
December 31,
2015
Current
classification
Future
classification
Service cost$1,703
$13,701
Cost of operationsCost of operations
Interest cost41,772
50,644
Cost of operationsOther income (expense)
Expected return on plan assets(61,939)(68,709)Cost of operationsOther income (expense)
Amortization of prior service cost250
307
Cost of operationsOther income (expense)
Recognized net actuarial losses -
mark to market adjustments
24,110
40,210
Cost of operations or SG&A expensesOther income (expense)
Net periodic benefit cost (benefit)$5,896
$36,153
  

New accounting standards that were adopted during the nine months ended September 30, 2017 are summarized as follows:

In the nine months ended September 30, 2017, the Company adopted ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-based Payment Accounting. This new accounting standard has affected how we account for share-based payments, with the most significant impact being the impact of income taxes associated with share-based compensation. Subsequent to adoption, the income tax effects related to share-based payments 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, the effect of excess tax benefits will now be presented in the cash flow statement as an operating activity. We prospectively adopted the new accounting standard. See Note 7 for the effect on the statement of operations for the three and nine months ended September 30, 2017.

In the nine months ended September 30, 2017, the Company 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, we do not expect a significant impact because we have not had significant inventory charges in the past. We prospectively adopted the new accounting standard and it had no impact on our condensed consolidated financial statementsstatements.

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 three or nine months ended September 30, 2017.

NOTE 24– SUBSEQUENT EVENT

Incurrent 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 third quarter of 2017 and through the dateimpairment model for available-for-sale debt securities. The provisions of this report,standard will primarily impact the allowance for doubtful accounts on our trade receivables, contracts in progress, and potentially our impairment model for available-for-sale debt securities (to the extent we have 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.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. We believe the new B&W Vølund business model provides the Company with a lower risk profile and aligns with B&W's 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 mitigatecurrently evaluating the impact of lower demand in the global coal-fired power market. Total estimated costs associated with these restructuring actions are anticipated to be approximately $20 million, most of which will be recognized in the fourth quarter of 2017, and the estimated annual savings are expected to be approximately $45 million in 2018.both standards on our Condensed Consolidated Financial Statements.




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


FORWARD-LOOKING STATEMENTS

This reportYou should read the following discussion of our financial condition and results of operations in conjunction with the financial statements and the notes thereto included in Financial Statements under Item 1 within this Quarterly Report. The following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. See Cautionary Statement Concerning Forward-Looking Information.

BUSINESS OVERVIEW

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

Babcock & Wilcox Renewable: Cost-effective technologies for efficient and environmentally sustainable power and heat generation, including waste-to-energy, solar construction and installation, biomass energy and black liquor systems for the pulp and paper industry. B&W’s leading technologies support a circular economy, diverting waste from landfills to use for power generation and replacing 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 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.
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.

On February 1, 2022, we acquired 100% ownership of Fossil Power Systems, Inc. for approximately $59.1 million, excluding working capital adjustments. Fossil Power Systems, Inc., is a leading designer and manufacturer of hydrogen, natural gas and
33


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 $19.0 million, excluding working capital adjustments. Optimus Industries, LLC designs and manufactures waste heat recovery products for use in power generation, petrochemical, and process industries, including package boilers, watertube and firetube waste heat boilers, economizers, superheaters, waste heat recovery equipment and units for sulfuric acid plants and is based in Tulsa, Oklahoma and Chanute, Kansas. Optimus Industries, LLC is reported as part of our B&W Thermal segment.

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

climate change initiatives promoting environmental policies which include renewable energy options utilizing waste-to-energy or biomass to meet legislative requirements and clean energy portfolio standards in the United States, European, Middle East and Asian markets;
requirements for environmental improvements in various global markets;
expectation of future governmental requirements to further limit or reduce greenhouse gas and other emissions in the United States, Europe and other international climate change sensitive countries;
prices for electricity, along with the cost of production and distribution including the cost of fuels within the meaningUnited States, Europe, Middle East and Asian based countries;
demand for electricity and other end products of Section 27Asteam-generating facilities;
level of capacity utilization at operating power plants and other industrial uses of steam production;
requirements for maintenance and upkeep at operating power plants to combat the accumulated effects of usage;
prices of and access to materials, particularly as a result of rising inflation and the impact of the Securities ActRussian invasion of 1933 and 21EUkraine;
overall strength of the Securities Exchange Actindustrial industry; and
ability of 1934. You should not place undue reliance on these statements. These forward-looking statements include statements that reflectelectric power generating companies and other steam users to raise capital.

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

We have manufacturing facilities in Mexico, the United States, Denmark, Scotland and China. Many aspects of our senior management with respect tooperations 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 financial performanceinternational and future events with respect todomestic 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 industry in general. Statements that includeto 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 words "expect," "intend," "plan," "believe," "project," "forecast," "estimate," "may," "should," "anticipate"B&W Renewable, B&W Environmental and similar statements of a future or forward-looking nature identify forward-looking statements. Forward-looking statements address matters that involve risksB&W Thermal segments globally.

We expect to continue to explore other cost saving initiatives to improve cash generation and uncertainties. Accordingly, thereevaluate 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. These factors include the cautionary statements included in this report and the factors set forth under "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2016 ("Annual Report") filed with the Securities and Exchange Commission. 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. We assume no obligation to revise or update any forward-looking statement included in this report for any reason, except as required by law.

OVERVIEW OF RESULTS


In this report, unlessaddition, 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 context otherwise indicates, "B&W," "we," "us," "our" and "the Company" mean Babcock & Wilcox Enterprises, Inc. and its consolidated subsidiaries. The presentationvalue of our business was to decline, or if we were to determine that we were unable to recognize an amount in connection with any proposed disposition in excess of the componentscarrying value of any disposed asset, we may be required to recognize impairments for one or more of our revenues, gross profitassets that may adversely impact our business, financial condition and operating income on the following pages of this Management's Discussion and Analysis of Financial Condition and Results of Operations is consistent with the way our chief operating decision maker reviews the results of operations and makes strategic decisions about the business.operations.

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 project, 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 continued to make progress towards completing its portfolio of European renewable energy projects in the third quarter of 2017, represented by a $60.4 million increase in revenue compared to the second quarter of 2017. Our near break-even gross profit in the Renewable segment in the third quarter of 2017 is a result of recognizing gross profit on our loss contracts only to the extent there are current changes in estimated losses at completion. In September 2017, we identified the failure of a structural steel beam on one of these projects, which temporarily stopped work in the boiler building pending corrective actions to stabilize the structure that are expected to be complete in the fourth quarter of 2017. The engineering, design and manufacturing of the steel structure were the responsibility of subcontractors. A similar design was also used on two of the other projects, and although no structural failure occurred on these other two projects, work was stopped for a short period of time while reinforcement of the structures is completed. The costs related to these structural steel issues is estimated to be approximately $20 million, primarily related to project delays, and is included as a current charge in the third quarter of 2017. Also in the third quarter of 2017, we adjusted the design of three of these renewable facilities to increase the guaranteed power output, which will allow us to achieve contractual bonus opportunities for the higher output. The bonus opportunities increased the estimated selling price of the three contracts by approximately $15 million in total, and this positive change in estimated cost to complete was fully recognized in the third quarter of 2017 because each of these three were loss projects.

Our Power segment continued to deliver gross margins consistent with our expectations in the third quarter of 2017. As previously disclosed, we anticipated a future decline in the coal power generation markets and proactively responded by restructuring our Power segment to help us hold gross margins. Our 2016 restructuring has been effective, and the Power segment's gross margin percentage has not significantly changed despite the 4.5% decline in revenues in the third quarter of 2017 compared to the same quarter in 2016 and the 19.7% decline in revenues in the nine months ended September 30, 2017

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compared to the nine months ended September 30, 2016. The Power segment also continues to benefit from consistent, effective contract execution.

The primary driver of the increase in Industrial segment revenues in the third quarter of 2017 was the $16.0 million contribution from Universal Acoustic & Emissions Technology, Inc. ("Universal"), which was acquired on January 11, 2017. The acquisition benefited the Industrial segment's gross profit in the third quarter of 2017, which helped offset the impact of a change in the product mix and challenges related to completing several cooling systems projects. Our MEGTEC business unit recorded sequential increases in quarterly bookings in 2017, which added to strong 2017 bookings at our SPIG business unit, and we expect continued improvement in the Industrial markets to benefit this segment.

We recorded goodwill impairment charges of $86.9 million in the third quarter of 2017. In the quarter, our market capitalization significantly decreased to below our stockholders' equity, which we attributed to the announcement of our second quarter 2017 results that included significant charges in the Renewable reporting unit. Accordingly, we increased the discount rate applied to future projected cash flows, which resulted in a $50.0 million goodwill impairment charge in our Renewable segment. Additionally in the third quarter of 2017, 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. The forecast reduction in combination with a short-term decrease in profitability attributable to specific current contracts and an increase in the discount rate applied to future projected cash flows resulted in a $36.9 million impairment charge to the SPIG reporting unit within the Industrial segment.

In the third quarter of 2017 and through the date of this report, we have 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, 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, 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 mitigate the impact of lower demand in the global coal-fired power market. Total estimated costs associated with these restructuring actions are anticipated to be less than $20 million, most of which will be recognized in the fourth quarter of 2017, and the estimated annual savings are expected to be at least $45 million in 2018.

We used $19.7 million of cash in the third quarter of 2017. Net borrowings on our United States revolving credit facility were $59.2 million, which included the repayment of $115.5 million of the revolving credit facility balance with net proceeds from the issuance of our second lien term loan on August 9, 2017. Our use of cash was primarily to fund progress on our Renewable segment contracts. We expect our operations to use cash through the fourth quarter of 2017 and first part of 2018, particularly in the Renewable segment, as we fund contract losses and work down advanced bill positions. Our forecasted use of cash is expected to be funded in part through borrowings from our United States revolving credit facility.

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

$4.0 million and $8.8 million of intangible amortization expense in the third quarters of 2017 and 2016, respectively, and $14.5 million and $11.9 million of expense in the nine months ended September 30, 2017 and 2016, respectively. We expect $18.0 million of amortization expense in the full year 2017 compared to $19.9 million of amortization in the full year 2016.
$3.6 million and $7.9 million of restructuring expense was recognized in the third quarter and nine months ended September 30, 2017, respectively, compared to $2.0 million and $34.6 million of restructuring expense in the third quarter and nine months ended September 30, 2016, respectively. The pre-2017 actions restructured our business that serves the power generation market in advance of lower demand projected for power generation from coal in the United States. The 2017 restructuring actions were implemented to help the Power segment continue to manage its fixed costs, align our Renewable segment with the changing business model and achieve SG&A cost savings.
$0.2 million and $1.0 million and of expense related to the spin-off from our former Parent was recognized in the third quarter and nine months ended September 30, 2017, respectively, compared to $0.4 million and $3.4 million in the third quarter and nine months ended September 30, 2016, respectively. The costs were primarily attributable to employee retention awards.

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$3.7 million of interest payable was awarded by the court based on the outcome of our appeal of the November 21, 2016 Arkansas River Power Authority ("ARPA") trial verdict, which was recorded as an increase in interest expense during the nine months ended September 30, 2017.
$0.3 million and $0.8 million of SG&A expenses in the third quarters of 2017 and 2016 associated with acquisition and integration costs related to SPIG and Universal, respectively, and $3.1 million and $1.9 million of acquisition and integration costs in the nine months ended September 30, 2017 and 2016, respectively.
$1.1 million of actuarially determined mark to market losses were recognized in the nine months ended September 30, 2017, which relate to lump sum settlement payments from our Canadian pension plan in the first quarter of 2017.
$0.6 million and $30.5 million of actuarially determined mark to market pension losses in the quarter and nine months ended September 30, 2016, respectively, were triggered by the closure of our West Point, Mississippi manufacturing facility in May 2016 that resulted in a curtailment in our United States pension plan and lump sum payments from our Canadian pension plan in April 2016 that resulted in plan settlements.

Our third quarter and year to date segment and other operating results are described in more detail below.


RESULTS OF OPERATIONS

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 VS. 2016

Selected financial highlights are presented in the table below:
34
 Three months ended September 30, Nine months ended September 30,
(In thousands)20172016$ Change 20172016$ Change
Revenues:       
Power segment$202,222
$211,749
$(9,527) $612,274
$762,293
$(150,019)
Renewable segment108,557
124,344
(15,787) 262,168
293,593
(31,425)
Industrial segment99,288
76,809
22,479
 281,734
147,275
134,459
Eliminations(1,364)(1,947)583
 (6,540)(4,882)(1,658)
 408,703
410,955
(2,252) 1,149,636
1,198,279
(48,643)
Gross profit (loss):       
Power segment40,629
48,896
(8,267) 132,653
170,903
(38,250)
Renewable segment181
18,592
(18,411) (100,119)14,468
(114,587)
Industrial segment9,461
14,601
(5,140) 34,240
33,506
734
Intangible amortization expense included in cost of operations(2,984)(7,752)4,768
 (11,455)(8,833)(2,622)
Mark to market adjustments included in cost of operations
(580)580
 (954)(30,079)29,125
 47,287
73,757
(26,470) 54,365
179,965
(125,600)
Goodwill impairment charges(86,903)
(86,903) (86,903)
(86,903)
SG&A expenses(59,225)(59,615)390
 (192,742)(179,225)(13,517)
Restructuring activities and spin-off transaction costs(3,775)(2,395)(1,380) (8,910)(38,021)29,111
Research and development costs(2,291)(2,361)70
 (7,454)(8,273)819
Intangible amortization expense included in SG&A(1,016)(1,018)2
 (2,999)(3,071)72
Mark to market adjustments included in SG&A
(64)64
 (106)(465)359
Equity in income of investees1,234
2,827
(1,593) 4,813
4,887
(74)
Impairment of equity method investment


 (18,193)
(18,193)
Gains (losses) on asset disposals, net(59)2
(61) (63)17
(80)
Operating income (loss)$(104,748)$11,133
$(115,881) $(258,192)$(44,186)$(214,006)

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Table

Components of ContentsOur Results of Operations



Revenue


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

Operating Income (Loss)

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

Net Income (Loss)

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

Condensed and consolidatedConsolidated Results of Operations

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

Three Months Ended March 31,
(in thousands)20222021
Revenues:
B&W Renewable segment$67,961 $28,811 
B&W Environmental segment34,948 31,160 
B&W Thermal segment102,239 108,281 
Eliminations(1,099)(4)
$204,049 $168,248 
Three Months Ended March 31,
(in thousands)20222021
Adjusted EBITDA
B&W Renewable segment$1,455 $204 
B&W Environmental segment1,439 1,105 
B&W Thermal segment14,154 10,535 
Corporate(4,373)(2,685)
Research and development costs(655)(588)
$12,020 $8,571 


Three months ended September 30, 2017 vs. 2016Months Ended March 31, 2022 and 2021


Revenues decreasedincreased by $2.3$35.8 millionto $408.7$204.0 million in the third quarter of 2017three months ended March 31, 2022 as compared to $411.0$168.2 million in the third quarterthree months ended March 31, 2021. The increase is primarily attributable to higher volume driven by new-
35


build projects and the acquisitions of 2016. Anticipated decreases in construction activities associated with new buildFosler Construction and retrofit projects in the Power segment and a decrease in the revenue recognized in theVODA within our Renewable segment, resulting from ongoing performance challenges onthe acquisitions of Fossil Power Systems and Optimus Industries within our renewable energy contracts wereThermal segment, in addition to a higher level of volume in our Environmental segment partially offset by a lower level of construction activity in our Thermal segment. The negative impacts on the increase in revenue in the Industrial segment resulting from the acquisition of Universal on January 11, 2017.

In the third quarter of 2017, we had consolidated gross profit of $47.3 million, which compares to gross profit of $73.8 million in the third quarter of 2016,global economy as a decrease of $26.5 million. The primary driversresult of the decrease wereongoing Russia-Ukraine military conflict adversely impacted each of our segments causing shortages of supplies and materials and affecting the six uncompleted European loss contracts in the Renewable segment (see Note 5 in the condensed consolidated financial statements), productivity issuestiming of revenue on new build cooling system projects in the Industrial segment and the volume impact of the decline in the Power segment's revenues, which were partially offset by the gross profit contribution from the Universal acquisition. Intangible asset amortization expense isseveral projects. Segment specific changes are discussed in further detail in the sections below.


Our goodwill impairment charges, restructuringNet loss improved by $6.8 million from a net loss of $15.4 million in the three months ended March 31, 2021 to a net loss of $8.7 million in the three months ended March 31, 2022. Operating loss increased $0.3 million to an operating loss of $6.8 million in the three months ended March 31, 2022 as compared to an operating loss of $6.5 million in the three months ended March 31, 2021. The decrease is primarily due to the $1.9 million gain on sale recognized in the prior years quarter related to the sale of certain real property assets at the Copley, Ohio location as described in Note 21 to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report. Restructuring expenses, advisory fees, research and development, depreciation and amortization expense, pension and equity inother postretirement benefit plans, foreign exchange, and income of investeestaxes are discussed in further detail in the sections below.

Nine months ended September 30, 2017 vs. 2016

Revenues decreased by $48.6 million to $1.15 billion in the nine months ended September 30, 2017 as compared to $1.20 billion for the corresponding nine month period in 2016. The primary decreases were in construction activities associated with new build and retrofit projects in the Power segment and a decrease in the revenue recognized in the Renewable segment resulting from ongoing performance challenges on six of our renewable energy contracts. These declines were partially offset by the increase in revenue in the Industrial segment resulting from the acquisitions of SPIG and Universal.

Gross profit decreased by $125.6 million to $54.4 million in the nine months ended September 30, 2017 as compared to $180.0 million in the corresponding period in 2016. The primary drivers of the decrease were the six uncompleted European loss contracts in the Renewable segment (see Note 5 in the condensed consolidated financial statements) and the impact of the decline in the Power segment's revenues, which were partially offset by gross profit contributions from the SPIG and Universal acquisitions. Intangible asset amortization expense is discussed in further detail in the sections below.

Excluding amortization of intangible assets and pension mark to market adjustments, SG&A expenses increased by $13.5 million in the nine months ended September 30, 2017 to $192.7 million as compared to $179.2 million in the corresponding nine month period in 2016, primarily related to adding the SPIG and Universal businesses and ongoing project support activities in the Renewable segment, partially offset by savings from our 2016 restructuring actions. Intangible asset amortization expense and pension mark to market adjustments are discussed in further detail in the sections below.

Equity in income of investees during the nine months ended September 30, 2017 includes a $18.2 million other-than-temporary-impairment of our investment in Thermax Babcock & Wilcox Energy Solutions Private Limited ("TBWES") that we recorded in the second quarter of 2017. The impairment charge was a result of the strategic change we and our joint venture partner have made due to the decline in forecasted market opportunities in India.

Our goodwill impairment charges and restructuring expense are discussed in further detail in the sections below.


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Power
 Three months ended September 30, Nine months ended September 30,
(In thousands)20172016$ Change 20172016$ Change
Revenues$202,222
$211,749
$(9,527) $612,274
$762,293
$(150,019)
Gross profit$40,629
$48,896
$(8,267) $132,653
$170,903
$(38,250)
Gross margin %20%23%  22%22% 

Three months ended September 30, 2017 vs. 2016

Revenues decreased 4%, or $9.5 million, to $202.2 million in the third quarter of 2017, compared to $211.7 million in the corresponding quarter in 2016. The revenue decrease is attributable to the anticipated decline in the coal power generation market, and primarily impacted our new build utility and environmental product and service line due to a decrease in construction activity. We resized our business in anticipation of these declines with our 2016 restructuring actions. Partially offsetting the revenue decrease was an increase in revenues associated with our retrofits product and service line in the third quarter of 2017 compared to the corresponding quarter in 2016.

Gross profit decreased 17%, or $8.3 million, to $40.6 million in the quarter ended September 30, 2017, compared to gross profit of $48.9 million in the corresponding quarter in 2016. We were able to largely maintain our gross margin percentage as a result of the 2016 restructuring actions, which partially offset the gross profit effect of lower sales volumes. Compared to the third quarter of 2016, the primary decrease in gross profit in the third quarter of 2017 was attributable to the decrease in gross profit from a lower volume of construction activity associated with our new build utility and environmental equipment product and service line. Also contributing to the decrease were fewer net improvements on projects that were completed this year versus last year.

Nine months ended September 30, 2017 vs. 2016

Revenues decreased 20%, or $150.0 million, to $612.3 million in the nine months ended September 30, 2017, compared to $762.3 million in the corresponding nine month period in 2016. The revenue decrease is attributable to the anticipated decline in the coal power generation market discussed above. Compared to the nine months ended September 30, 2016, the primary decrease in revenues in the nine months ended September 30, 2017 was attributable to a decline new build utility and environmental equipment and retrofit projects primarily due to a decrease in construction activity. Partially offsetting those declines in revenues was an increase in industrial steam generation revenues in the nine months ended September 30, 2017 compared to the corresponding nine month period in 2016.

Gross profit decreased 22%, or $38.3 million, to $132.7 million in the nine months ended September 30, 2017, compared to $170.9 million in the corresponding nine month period in 2016. We were able to maintain our gross margin percentage as a result of the 2016 restructuring actions, which partially offset the gross profit effect of lower sales volumes. Compared to the nine months ended September 30, 2016, the decrease in gross margins are attributable to the same reasons discussed in the three month explanations above.

Renewable
 Three months ended September 30, Nine months ended September 30,
(In thousands)20172016$ Change 20172016$ Change
Revenues$108,557
$124,344
$(15,787) $262,168
$293,593
$(31,425)
Gross profit (loss)$181
$18,592
$(18,411) $(100,119)$14,468
$(114,587)
Gross margin %%15%
 (38)%5%

Three months ended September 30, 2017 vs. 2016

Revenues decreased 13%, or $15.8 million, to $108.6 million in the third quarter of 2017, compared to $124.3 million in the corresponding quarter in 2016. The number of contracts and level of activity in the segment during the third quarter of 2017 and 2016 were comparable. The $15.8 million decrease in revenue in the third quarter of 2017 was primarily attributable to revisions in our estimates of progress and estimated liquidated damages on six of our renewable energy contracts.

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Gross profit decreased $18.4 million in the third quarter of 2017 to $0.2 million, compared to $18.6 million in the corresponding quarter in 2016. The decrease was primarily a result of six renewable energy loss contracts that remained uncompleted as of September 30, 2017.The loss contracts are not expected to contribute any gross profit to the Renewable segment throughout 2017 unless there are revisions to our estimated revenues or costs at completion in future periods.

Nine months ended September 30, 2017 vs. 2016

Revenues decreased 11% in the nine months ended September 30, 2017 to $262.2 million, compared to $293.6 million in the corresponding nine month period in 2016. The number of contracts and level of activity in the segment during the nine months ended September 30, 2017 and 2016 were comparable. The decrease in revenues in the nine months ended September 30, 2017 is due to the same reasons noted in the three month explanations above.

Gross profit decreased in the nine months ended September 30, 2017 to a loss of $100.1 million, compared to gross profit of $14.5 million in the corresponding nine month period in 2016. Changes in estimates to complete our renewable energy contracts resulted in $123.8 million in charges during the nine months ended September 30, 2017.

See Note 5 in the condensed consolidated financial statements for additional information on the impact of the segment's renewable energy contracts on our results of operations in the third quarters and nine months ended September 30, 2017 and 2016.

Industrial
 Three months ended September 30, Nine months ended September 30,
(In thousands)20172016$ Change 20172016$ Change
Revenues$99,288
$76,809
$22,479
 $281,734
$147,275
$134,459
Gross profit$9,461
$14,601
$(5,140) $34,240
$33,506
$734
Gross margin %10%19%

 12%23%


Three months ended September 30, 2017 vs. 2016

Revenues increased 29%, or $22.5 million, to $99.3 million in the third quarter of 2017, compared to $76.8 million in the corresponding quarter in 2016. The increase in revenues in the Industrial segment is attributable to organic growth from new build cooling systems projects, complemented by the acquisition of Universal on January 11, 2017, which added $16.0 million of revenue in the third quarter of 2017.

Gross profit decreased 35%, or $5.1 million, to $9.5 million in the third quarter of 2017, compared to $14.6 million in the corresponding quarter in 2016. The acquisition of Universal contributed $3.3 million of gross profit in the third quarter of 2017. The year-over-year net decrease in gross margin percentage reflects product mix, as new build cooling system projects generally have lower margins than other products and services in the segment. In addition, the Industrial segment's gross profit in the third quarter of 2017 also was affected by productivity issues on new build cooling system projects. The productivity issues caused us to increase project cost estimates and deploy additional resources to complete the projects on time.

Nine months ended September 30, 2017 vs. 2016

Revenues increased 91%, or $134.5 million, to $281.7 million in the nine months ended September 30, 2017, compared to $147.3 million in the corresponding nine month period in 2016. The increase in revenues in the Industrial segment is primarily attributable to the July 1, 2016 acquisition of SPIG and the January 11, 2017 acquisition of Universal, which together added $193.1 million of revenue in the nine months ended September 30, 2017. Partially offsetting the increase is a $20.4 million decline in revenues attributable to environmental solutions sales in the United States, primarily in the first half of 2017.

Gross profit increased 2%, or $0.7 million, to $34.2 million in the nine months ended September 30, 2017, compared to $33.5 million in the corresponding nine month period in 2016. The acquisitions of SPIG and Universal contributed $12.6 million of

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gross profit in the nine months ended September 30, 2017. The year-over-year decrease in gross margins are attributable to the same reasons discussed in the three month explanations above.


Bookings and backlogBacklog


Bookings and backlog are not measures recognized by generally accepted accounting principles.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 projectscontracts in our backlog may be canceled, modified or otherwise altered by customers. Additionally,Backlog can vary significantly from period to period, particularly when large new build projects or operations and maintenance contracts are booked because they may be fulfilled over multiple years. Because we operate globally, our backlog is also affected by changes in foreign currencies each period. We do not include orders of our unconsolidated joint ventures in backlog.


Bookings represent changes to the backlog. Bookings include additions to our backlog.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 termshorter-term changes in bookings may not necessarily indicate a material trend.
Three Months Ended March 31,
(in approximate millions)20222021
B&W Renewable(1)
$101 $37 
B&W Environmental37 41 
B&W Thermal101 91 
Bookings$239 $169 
(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 three months ended March 31, 2022 and 2021 was $6.0 million and $7.0 million, respectively.

Our backlog as of March 31, 2022 and 2021 was as follows:
As of March 31,
(in approximate millions)20222021
B&W Renewable(1)
$440 $215 
B&W Environmental126 118 
B&W Thermal158 206 
Other/eliminations(3)(4)
Backlog$721 $535 
(1)    B&W Renewable backlog at March 31, 2022, includes $153.2 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.
36


 Three months ended September 30,Nine months ended September 30,
(In millions)2017201620172016
Power$122$198$476$623
Renewable35(2)86124
Industrial10070360133
Other/eliminations(2)(40)
Bookings$255$266$881$880

(In approximate millions)September 30, 2017December 31, 2016September 30, 2016
Power$482$618$668
Renewable1,0641,2411,289
Industrial317216233
Other/eliminations(37)(3)
Backlog$1,826$2,072$2,190


Of the backlog at September 30, 2017,March 31, 2022, we expect to recognize revenues as follows:
(in approximate millions)20222023ThereafterTotal
B&W Renewable$233 $68 $139 $440 
B&W Environmental88 14 24 126 
B&W Thermal125 29 158 
Other/eliminations(3)— — (3)
Expected revenue from backlog$443 $111 $167 $721 

Non-GAAP Financial Measures

Adjusted EBITDA on a consolidated basis is a non-GAAP metric defined as the sum of the adjusted EBITDA for each of the segments, further adjusted for corporate allocations and research and development costs. At a segment level, the adjusted EBITDA presented below is consistent with the way the Company's chief operating decision maker reviews the results of operations and makes strategic decisions about the business and is calculated as earnings before interest, tax, depreciation and amortization adjusted for items such as gains or losses on asset sales, 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 segment.The Company uses adjusted EBITDA internally to evaluate its performance and in making financial and operational decisions. When viewed in conjunction with GAAP results, the Company believes that its presentation of adjusted EBITDA provides investors with greater transparency and a greater understanding of factors affecting its financial condition and results of operations than GAAP measures alone. Additionally, the Company redefined its definition of adjusted EBITDA to eliminate the effects of certain items including business transition costs. Prior period results have been revised to conform with the revised definition and present separate reconciling items in our reconciliation.

Three Months Ended March 31,
(in thousands)20222021
Net loss$(8,684)$(15,443)
Interest expense12,324 14,509 
Income tax expense1,230 2,836 
Depreciation & amortization6,202 4,058 
EBITDA11,072 5,960 
Benefit plans, net(7,452)(9,098)
Gain on sales, net(20)(2,362)
Stock compensation1,319 7,829 
Restructuring activities and business services transition costs2,688 993 
Advisory fees for settlement costs and liquidity planning1,032 1,978 
Litigation costs2,528 380 
Acquisition pursuit and related costs843 — 
Product development (1)
852 — 
Foreign exchange(3,085)1,209 
Financial advisory services375 933 
Contract step-up purchase price adjustment1,745 — 
Loss from business held for sale— 483 
Other - net123 266 
Adjusted EBITDA$12,020 $8,571 
(1) Costs associated with development of commercially viable products that are ready to go to market.


37


(In approximate millions)20172018ThereafterTotal
Power$155$157$170$482
Renewable1292327031,064
Industrial71246317
Other/eliminations6(43)(37)
Backlog$355$641$830$1,826
Three Months Ended March 31,
(in thousands)20222021
Adjusted EBITDA
B&W Renewable segment$1,455 $204 
B&W Environmental segment1,439 1,105 
B&W Thermal segment14,154 10,535 
Corporate(4,373)(2,685)
Research and development costs(655)(588)
$12,020 $8,571 


Goodwill impairmentB&W Renewable Segment Results

Three Months Ended March 31,
(in thousands)20222021$ Change
Revenues$67,961 $28,811 $39,150 
Adjusted EBITDA$1,455 $204 $1,251 
We recorded goodwill impairment charges of $86.9 million ($85.8 million net of tax)
Three Months Ended March 31, 2022 and 2021

Revenues in the third quarter of 2017, which included a $50.0 million charge in theB&W 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 13 to the condensed consolidated financial statements. The third quarter 2017 impairment charges eliminated all of the Renewable reporting unit's goodwill balance at September 30, 2017, and $38.0 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.

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SG&A expenses

SG&A expenses, excluding intangible asset amortization expense and pension mark to market adjustments, decreased by $0.4segment increased $39.2 million, to $59.2$68.0 million in the third quarter of 2017, asthree months ended March 31, 2022 compared to $59.6$28.8 million in the third quarterthree months ended March 31, 2021. The increase in revenue is primarily due to the acquisitions of 2016. The primary reasons for the decrease are the $8.7 millionFosler Construction and VODA and higher volume of SG&A savings from our 2016 restructuring focused on the Power segment and $0.5 million lower acquisition and integration costs, partially offset by $4.1 million of increased costs to support ongoing Renewable projects and a $4.7 million increase resulting from the Universal acquisition and other support activitiesnew-build projects.

Adjusted EBITDA in the Industrial segment.

SG&A expenses, excluding intangible asset amortization expense and pension markB&W Renewable segment increased $1.3 million, to market adjustments, increased by $13.5$1.5 million in the ninethree months ended September 30, 2017 to $192.7 million, asMarch 31, 2022 compared to $179.2$0.2 million in the ninethree months ended September 30, 2016. SG&AMarch 31, 2021. The increase is primarily due to the higher volume, as described above offset partially by mix within the segment.

B&W Environmental Segment Results
Three Months Ended March 31,
(in thousands)20222021$ Change
Revenues$34,948 $31,160 $3,788 
Adjusted EBITDA$1,439 $1,105 $334 

Three Months Ended March 31, 2022 and 2021

Revenues in the B&W Environmental segment increased by $20.2 million from the SPIG and Universal acquisitions, and $13.312%, or $3.8 million to support ongoing Renewable$34.9 million in the three months ended March 31, 2022 compared to $31.2 million in the three months ended March 31, 2021. The increase is primarily driven by higher overall volume in ash handling systems, scrubbers, precipitators and cooling systems.

Adjusted EBITDA in the B&W Environmental segment was $1.4 million in the three months ended March 31, 2022 compared to $1.1 million in the three months ended March 31, 2021. The increase is driven primarily by higher volume, as described above.

B&W Thermal Segment Results
Three Months Ended March 31,
(In thousands)20222021$ Change
Revenues$102,239 $108,281 $(6,042)
Adjusted EBITDA$14,154 $10,535 $3,619 

Three Months Ended March 31, 2022 and 2021
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Revenues in the B&W Thermal segment decreased 6%, or $6.0 million, to $102.2 million in the three months ended March 31, 2022 compared to $108.3 million in the three months ended March 31, 2021. The revenue decrease is attributable to a lower level of activity on construction projects, partially offset by $21.9the acquisitions of Fossil Power Systems and Optimus Industries.

Adjusted EBITDA in the B&W Thermal segment increased $3.6 million to $14.2 million in the three months ended March 31, 2022 compared to $10.5 million in the three months ended March 31, 2021, which is mainly attributable to the acquisitions of Fossil Power Systems and Optimus Industries and continued cost savings from our 2016and restructuring actions focused oninitiatives benefiting the Power segment.current year, which more than offset the overall decrease in volume, as described above.


Corporate

Corporate costs in adjusted EBITDA include SG&A expenses that are not allocated to the reportable segments. These costs include, among others, certain executive, compliance, strategic, reporting and legal expenses associated with governance of the total organization and being an SEC registrant. Corporate costs increased $1.7 million to $4.4 million in three months ended March 31, 2022 as compared to $2.7 million incurred in the three months ended March 31, 2021. The increase is primarily due to increased tax services and audit fees.

Advisory Fees and Settlement Costs

Advisory fees and settlement costs increased $0.6 million to $3.9 million in the three months ended March 31, 2022 as compared to $3.3 million in the corresponding period of 2021. The increase is primarily related to higher legal fees and other costs incurred in the current quarter.

Research and Development

Our research and development expenses

activities are focused on improving our products through innovations to reduce their cost and make them more competitive, as well as to reduce performance risk of our products to better meet our and our customers’ expectations.Research and development expenses relate to the developmentremained relatively unchanged and improvement of new and existing products and equipment, as well as conceptual and engineering evaluation for translation into practical applications. These expenses were $2.3 million and $2.4 million for the quarter ended September 30, 2017 and 2016, respectively, and $7.5 million and $8.3 million for the nine months ended September 30, 2017 and 2016, 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.

Restructuring

2017 Restructuring activities

In the third quarter of 2017 and through the date of this report, we have 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 mitigate the impact of lower demand in the global coal-fired power market. Total estimated costs associated with these restructuring actions are anticipated to be approximately $20 million, most of which will be recognized in the fourth quarter of 2017, and the estimated annual savings are expected to be approximately $45 million in 2018.

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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 segment gross margin percentages, notwithstanding the challenges in our Renewable segment, we have achieved our objective of maintaining gross margins in the Power 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 $0.4 million and $4.0 million in the third quarter and nine months ended September 30, 2017, respectively, and were primarily related to $0.4 million and $2.4 million of employee severance in the third quarter and nine months ended September 30, 2017, respectively. This compares to the $1.4 million of charges in the third quarter and nine months ended September 30, 2016, respectively, which consisted of $0.5 million of employee severance costs, a $0.1 million non-cash impairment of the long-lived assets at B&W's one coal power plant and $0.8 million of costs related to organizational realignment of personnel and processes. We expect additional restructuring charges of up to $0.1 million, primarily related to additional manufacturing facility consolidation initiatives that will extend through the fourth quarter of 2017.

The restructuring initiatives announced prior to 2016 were intended to better position us for growth and profitability. They have primarily been related to facility consolidation and organizational efficiency initiatives. Theses costs were $0.5$0.7 million and $0.6 million in the third quarter of 2017 and 2016, respectively. These costs were $1.0 million and $3.8 million in the ninethree months ended September 30, 2017March 31, 2022 and 2016,2021, respectively. We expect nominal additional restructuring charges during the fourth quarter of 2017, primarily related to facility demolition

Restructuring

Restructuring actions across our business units and consolidation activities.

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 third quarter and nine months ended September 30, 2017, we recognized spin-off costs of $0.2corporate functions resulted in $0.1 million and $1.0 million respectively. Inof expense in the third quarter and ninethree months ended September 30, 2016, we recognized spin-off costsMarch 31, 2022 and 2021, respectively. The decrease of $0.4$0.9 million and $3.4 million, respectively. Infor the second quarterthree months ended March 31, 2022 is due to a lower level of 2017, we disbursed $1.9 millionrestructuring actions compared to the prior year comparable quarter. For the three months ended March 31, 2021, the charges primarily consist of severance related to actions taken, including as part of the accrued retention awards. Approximately $0.5 million of suchCompany’s strategic, market-focused organizational and re-branding initiatives.

Transition Costs

Transition costs remain, which we expect to be recognized through June 30, 2018.

Equity in income (loss) of investees

Our primary equity method investees included joint ventures in Chinaacross our corporate and India, each of which manufactures boiler parts and equipment. Excluding the impairment described below, Equity in income of investees in the third quarter of 2017 decreased $1.6 million to $1.2 million from $2.8 million in the third quarter of 2016. The decrease in equity income of investees in the third quarter of 2017 is primarily attributable to winding down the joint venture in India as described in Note 11 to the condensed consolidated financial statements and to the December 22, 2016 sale of all of our interest in our former Australian joint venture, Halley & Mellowes Pty. Ltd. ("HMA"). HMA contributed $0.6 million and $1.5 million to our equity in income of investees in the third quarter of 2016 and the nine months ended September 30, 2016, respectively.

At September 30, 2017, our total investment in equity method investees was $87.4 million, which included a $58.7 million investment in Babcock & Wilcox Beijing Company, Ltd. ("BWBC"). Based in China, BWBC designs, manufactures and sells various power plant boilers and related aftermarket equipment. BWBC has been profitable historically, and we have determined that no other-than-temporary-impairment has occurred based on the value of its cash on hand, long-lived assets and expected future cash flows.

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Our investment in equity method investees also included a investment in TBWES, which has a manufacturing facility intended primarily for new build coal boiler projects 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 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. After recording the impairment charge, our remaining investment in TBWES at September 30, 2017 was $26.0 million.

We assess our investments in unconsolidated affiliates 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 investee that are deemed other than temporary, the inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment or a change 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 unconsolidated affiliate at fair value.

Intangible asset amortization expense

We recorded $4.0 million and $8.8 million of intangible amortization expense during the third quarters of 2017 and 2016, respectively, and $14.5 million and $11.9 million of expense during the nine months ended September 30, 2017 and 2016, respectively. The increase in amortization expense is attributable to our last two business combinations, which increased our intangible assets by $74.7 million.

We acquired $55.2 million of intangible assets in the July 1, 2016 acquisition of SPIG. Amortization of the SPIG intangible assetsfunctions resulted in $1.9 million and $7.1 million of expense during the third quarter of 2017 and 2016, respectively, and $7.3 million and $7.1 million of expense during the nine months ended September 30, 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 $0.5 million in the third quarter of 2017 and $2.6 million of expense duringin the ninethree months ended September 30, 2017.March 31, 2022. These charges primarily result from actions taken to outsource certain tasks to offshore service providers or to transfer administrative and compliance tasks to global service providers as part of our strategic efforts to reduce future selling, general and administrative costs. Transition costs are included in selling, general and administrative expenses in our Condensed Consolidated Statements of Operations.

We expect total intangible amortization
Depreciation and Amortization

Depreciation expense of $3.6was $2.2 million and $2.7 million in the fourththree months ended March 31, 2022 and 2021, respectively.

Amortization expense was $4.0 million and $1.4 million in the three months ended March 31, 2022 and 2021, respectively.

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

Our pension costs also include mark-to-market ("MTM") adjustments from time to time and are primarily a result of changes in the discount rate, curtailments and settlements. Any MTM charge or gain should not be considered to be representative of future MTM adjustments as such events are not currently predicted and are in each case subject to market conditions and actuarial assumptions as of the date of the event giving rise to the MTM adjustment. There were no MTM adjustments for our other postretirement benefit plans during the three months ended March 31, 2022 and 2021, respectively.

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

Foreign Exchange

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

Foreign exchange was a gain (loss) of $3.1 million and $(1.2) million for the three months ended March 31, 2022 and 2021, respectively. Foreign exchange gains and losses are primarily related to unhedged intercompany loans denominated in European currencies to fund foreign operations.

Income Taxes
Three Months Ended March 31,
(In thousands, except for percentages)20222021
Loss before income taxes$(7,454)$(12,607)
Income tax expense$1,230 $2,836 
Effective tax rate(16.5)%(22.5)%

Our income tax expense in the first quarter of 2017.2022 reflects a full valuation allowance against our net deferred tax assets, except in Mexico, Canada, the United Kingdom, Brazil, Finland, Germany, Thailand, the Philippines, Indonesia, and Sweden. Deferred tax assets are evaluated each period to determine whether realization is more likely than not. Valuation allowances are established when management determines it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. Valuation allowances may be removed in the future if sufficient positive evidence exists to outweigh the negative evidence under the framework of ASC 740, Income Taxes.


Our effective tax rate for the first quarter of 2022 is not reflective of the United States statutory rate primarily due to a valuation allowance against certain net deferred tax assets and unfavorable discrete items.In certain jurisdictions (namely, the United States and Italy) where the Company anticipates a loss for the fiscal year or incurs a loss for the year-to-date period for which a tax benefit cannot be realized in accordance with ASC 740, the Company excludes the loss in that jurisdiction from the overall computation of the estimated annual effective tax rate.
Market

Liquidity and Capital Resources

Liquidity

Our primary liquidity requirements include debt service, funding of dividends on preferred stock and working capital needs. We fund our liquidity requirements primarily through cash generated from operations, external sources of financing, including our, senior notes, equity offerings, including our Preferred Stock, and revolving credit agreement which are described in the Notes to market adjustmentsour Condensed Consolidated Financial Statements included in Part I, Item I of this Quarterly Report in further detail along with other sources of liquidity.


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During the first quarter of 2017, lump sum payments from our Canadian pension plan resulted2022, we executed the following actions:

on February 1, 2022, we acquired 100% ownership of Fossil Power Systems, Inc. for approximately $59.1 million, excluding working capital adjustments as described in a plan settlementNote 21 to the Condensed Consolidated Financial Statements included in Part I, Item I of $0.4this Quarterly Report;
on February 28, 2022, we acquired 100% ownership of Optimus Industries, LLC for approximately $19.0 million, which also resultedexcluding working capital adjustments as described in interim markNote 21 to market accounting for the pension plan. The mark to market adjustmentCondensed Consolidated Financial Statements included in Part I, Item I of this Quarterly Report; and
during the first quarter of 2017 was $0.7 million. The effect2022, the Company sold $2.0 million aggregate principal of these charges8.125% Senior Notes and markreceived $2.0 million of net proceeds as described in Note 12 to market adjustments are reflectedthe Condensed Consolidated Financial Statements included in the $1.1 million "Recognized net actuarial loss." There were no significant plan settlements or interim mark to market adjustments during the second or third quartersPart I, Item I of 2017.this Quarterly Report.

During the second and third quarters of 2016, we recorded adjustments to our benefit plan liabilities resulting from certain curtailment and settlement events. In September 2016, lump sum payments from our Canadian pension plan resulted in a $0.1 million pension plan settlement charge. 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. In April 2016, lump sum payments from our Canadian pension plan resulted in a $1.1 million plan settlement charge. These events resulted in interim mark to market accounting for the respective benefit plans in 2016. Mark to market charges in the three months ended September 30, 2016 were $0.5 million in our Canadian pension plan. Mark to market charges for our United States and Canadian pension plans were $27.5 million in the nine months ended September 30, 2016. The pension mark to market charges were impacted by higher than expected returns on pension plan assets. The weighted-average discount rate used to remeasure the benefit plan liabilities at September 30, 2016 was 3.88%. The effect of these charges and mark to market adjustments are reflected in the "Recognized net actuarial loss."

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Provision for income taxes
 Three months ended September 30, Nine months ended September 30,
(In thousands)20172016$ Change 20172016$ Change
Income (loss) before income taxes$(119,728)$10,628
$(130,356) $(279,424)$(44,586)$(234,838)
Income tax expense (benefit)$(5,639)$1,617
$(7,256) $(7,644)$(790)$(6,854)
Effective tax rate4.7%15.2%  2.7%1.8% 

We operate in numerous countries that have statutory tax rates below that of the United States federal statutory rate of 35%. 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 19% 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.

Income (loss) before the provision for income taxes generated in the United States and foreign locations for the quarters ended September 30, 2017 and 2016 is presented in the table below.
 Three months ended September 30, Nine months ended September 30,
(In thousands)20172016 20172016
United States$(3,653)$8,831
 $(41,070)$(20,611)
Other than United States(116,075)1,797
 (238,354)(23,975)
Income (loss) before income taxes$(119,728)$10,628
 $(279,424)$(44,586)


See Note 712, Note 13, Note 14 and Note 21 to the condensed consolidated financial statementsCondensed Consolidated Financial Statements included in Part I, Item I of this Quarterly Report for explanationadditional information on our external sources of differences between our effective income tax ratefinancing and our statutory rate.equity offerings.


Cash and Cash Flows
Liquidity and capital resources


At September 30, 2017,March 31, 2022, our unrestricted cash and cash equivalents totaled $48.1$108.1 million and we had $209.7total debt of $343.8 million as well as $191.7 million of gross preferred stock outstanding. Our foreign business locations held $35.9 million of our total borrowings ($247.2 million face value before debt discounts).unrestricted cash and cash equivalents at March 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 taxes we presently have not made a provision for in our results of operations. $44.8 million of our $48.1 million of unrestricted cash and cash equivalents at September 30, 2017 was held by foreign entities. 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 and borrowings under foreign revolving credit facilities. Our borrowing capacity under our United States revolving credit facility 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 of 2017 and the fourth quarter of 2016 reduced our trailing 12 months EBITDA and, in turn, our ability to comply with our financial covenants. Accordingly, we amended our credit agreement in February 2017 and August 2017 to, among other things, provide covenant relief.

To provide additional liquidity, we entered into a second lien term loan facility on August 9, 2017 with an affiliate of American Industrial Partners ("AIP"). The second lien term loan facility 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 may be drawn in a single draw prior to June 30, 2020, subject to certain conditions. On August 9, 2017, we used $125.0had $1.9 million of the second lien term loan proceeds to repay borrowings outstanding under our United States revolving credit facility and pay fees and expensesrestricted cash at March 31, 2022 related to the second lien term loan facility and the amendmentcollateral for certain letters of our United States revolving credit facility. The balance of the second lien term loan proceeds 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 term loan facility. As described in Note 18 to thecredit.


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condensed consolidated financial statements, 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.

We had approximately $94.7 million of availability under our United States revolving credit facility as of September 30, 2017. Based on the amended United States revolving credit and second lien term loan facilities, we believe we have adequate sources of liquidity at September 30, 2017 to meet our cash requirements. Our assessment is based on our operating forecast, backlog, cash on-hand, borrowing capacity, planned capital investments and ability to manage future discretionary cash outflows during the next 12 month period. We expect our operations to use cash over the full year of 2017 and into the first half of 2018, particularly in the Renewable segment, as we fund contract losses and work down advanced bill positions. Our forecasted use of cash over the next 12 months is expected to be funded in part through borrowings from our United States revolving credit facility. Our United States revolving credit facility allows for nearly immediate borrowing of available capacity to fund cash requirements in the normal course of business, meaning that the minimum United States cash on hand is maintained to minimize borrowing costs. After giving effect to the $50.0 million of unrestricted cash on hand required under our financial covenants, we expect to have between $73.0 million and $173.0 million of available borrowing capacity from our United States revolving credit facility during the next 12 months based on our forecast of the trailing 12 month EBITDA calculation and forecasted borrowings. We expect cash and cash equivalents, cash flows from operations, and our borrowing capacity under our United States revolving credit facility and second lien term loan facility to be sufficient to meet our liquidity needs for at least 12 months from the date of this filing.

Our net cashCash used in operations was $150.8$42.0 million in the ninethree months ended September 30, 2017, compared to cash used in operations of $39.8 million in the nine months ended September 30, 2016. The changeMarch 31, 2022, which is partiallyprimarily attributable to the $228.3 million increase in our net loss, $10.0 million reduction in the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. Also,pension, postretirement and employee benefit liabilities and a $13.0$13.2 million net decrease in operating cash outflows associated with changes in accounts receivable, contracts in progress and advanced billings inworking capital. In the ninethree months ended September 30, 2017 compared toMarch 31, 2021, cash used in operations was $54.0 million which is primarily the nine months ended September 30, 2016 resulted primarily fromresult of our net loss, the timing of billingschange in pension, postretirement 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 both September 30, 2017 and December 31, 2016 included milestone payments from our customers in advance of incurring the contract expenses, and asemployee benefit liabilities. There was also 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 cash by the Renewable segment to continue during 2017 and into the first half of 2018 until these contracts are completed. Partially offsetting these operating cash outflows was a $25.6$13.2 million decrease in operating cash outflows associated with changes in contract related accounts payable and accrued liabilities in the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016.working capital.


OurCash flows from investing activities used net cash used in investing activities was $57.9of $65.4 million in the ninethree months ended September 30, 2017March 31, 2022, primarily due to the acquisitions of business of $64.9 million and $191.6$1.0 million of capital expenditures. In the three months ended March 31, 2021, cash flows from investing activities provided net cash of $4.5 million, primarily related to $3.3 million proceeds from the sale of business, proceeds from asset disposals and net change in available-for-sale securities, offset by $1.4 million of capital expenditures.

Cash flows from financing activities used net cash of $1.6 million in the ninethree months ended September 30, 2016. TheMarch 31, 2022, primarily related to the payment of the preferred stock dividend of $3.7 million offset by the senior note proceeds of $2.0 million. Cash flows from financing activities provided net cash used in investing activities was primarily attributable to the $52.5 million acquisition of Universal on January 11, 2017, net of $4.4 million cash acquired in the business combination (see Note 4 to the condensed consolidated financial statements). The net cash used in investing activities in the nine months ended September 30, 2016 included $143.0 million acquisition of SPIG, net of $26.0 million cash acquired, and a $26.2 million contribution to increase our interest in TBWES, our joint venture in India. Capital expenditures were $10.7 million and $20.4$35.9 million in the ninethree months ended September 30, 2017March 31, 2021, primarily related to the $125.0 million issuance of senior notes and 2016, respectively.$161.5 million common stock issuance, offset by $75.0 million last out term loans repayments, a $164.3 million net reduction on the U.S. Revolving Credit Facility and $7.7 million of financing fees.


Our net cash provided by financing activities was $155.5 millionDebt Facilities

As described in the nine months ended SeptemberNote 12 to our Condensed Consolidated Financial Statements included in Part I, Item I of this Quarterly Report, on June 30, 2017, compared to $64.6 million2021, we entered into the Reimbursement Agreement, Revolving Credit Agreement and Letter of cash used inCredit Agreement (collectively, the nine months ended September 30, 2016. The cash provided by financing activities in the nine months ended September 30, 2017 was a result of net borrowings from our United States revolving credit facility of $49.1 million, which were used to fund our working capital needs“Debt Documents” and the Universal acquisition. In addition, cash provided by financing activities infacilities thereunder, the nine months ended September 30, 2017 included proceeds from the issuance“Debt Facilities”). The obligations of the second lien term loanCompany under each of $141.7 million, which were used to repurchase $16.7 millionthe Debt Facilities are guaranteed by certain existing and future domestic and foreign subsidiaries of shares fromthe Company. B. Riley, a related party, fund debt issuance costshas provided a guaranty of payment with regard to the Company’s obligations under the Reimbursement Agreement. The Company expects to use the proceeds and repay a portionletter of our United States revolving credit facility.availability under the Debt Facilities for working capital purposes and general corporate purposes. The net cash used in financing activities in the nine months ended September 30, 2016 is primarily attributable to repurchases of $78.4 million of our common stock.


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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. TheRevolving Credit Agreement which is scheduled to maturematures 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 loansMarch 31, 2022, no borrowings have occurred under the Revolving 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 and August 9, 2017, 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 definitionLetter 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 $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 amendment, (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 $500.0 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 to $30.0 million during the covenant relief period, (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 September 30, 2017, limit to no more than $25.0 million any cumulative net income losses attributable to certain Vølund projects, and (17) increase reporting obligations and require us to hire a third-party consultant. 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, 2018.

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.

After giving effect to Amendments, loans outstanding under the Amended Credit Agreement bear interest at our option at either (1) the LIBOR rate plus 5.0% per annum or (2) the base rate (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) plus 4.0% per annum. 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. The maximum permitted senior debt leverage ratio as defined in the Amended Credit Agreement is:
6.00:1.0 for the quarter ended September 30, 2017,
8.50:1.0 for each of the quarters ending December 31, 2017 and March 31, 2018,

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6.25:1.0 for the quarter ending June 30, 2018,
4.00:1.0 for the quarter ending September 30, 2018,
3.75:1.0 for the quarter ending December 31, 2018,
3.25:1.0 for each of the quarters ending March 31, 2019 and June 30, 2019, and
3.00:1.0 for each of the quarters ending September 30, 2019 and each quarter thereafter.

The minimum consolidated interest coverage ratio as defined in the Credit Agreement, is:
1.50:1.0 for the quarter ended September 30, 2017,
1.00:1.0 for each of the quarters ending December 31, 2017 and March 31, 2018,
1.25:1.0 for the quarter ending June 30, 2018,
1.50:1.0 for each of the quarters ending September 30, 2018 and December 31, 2018,
1.75:1.0 for each of the quarters ending March 31, 2019 and June 30, 2019, and
2.00:1.0 for each of the quarters ending September 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 September 30, 2017, usage under the Amended Credit Agreement consisted of $58.9 million in borrowings at an effective interest rate of 6.88%, $7.7$16.2 million of financial letters of credit and $87.2$90.8 million of performance letters of credit. At September 30, 2017, we had approximately $94.7

As of March 31, 2022, a subsidiary has borrowed $1.7 million available for borrowings or to meet letteragainst a $3.5 million line of credit requirements primarily basedwith a variable interest rate on trailing 12 month EBITDA,the line of credit of 5.0% per annum. On April 1, 2022, the line of credit was paid in full and our leverage (as defined in the Amendedterminated.

Letters of Credit, Agreement) ratio was 3.00Bank Guarantees and our interest coverage ratio was 2.59. In addition, through September 30, 2017, we have used $11.6 million of the $25.0 million of permitted net income loss attributable to Vølund projects. At September 30, 2017, we were in compliance with all of the covenants set forth in the Amended Credit Agreement, and we forecast our compliance with the financial covenants to be closest to the minimum thresholds at March 31, 2018.Surety Bonds


We plan to execute the actions necessary to enable us to maintain compliance with the financial 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 United States revolving credit facility 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 outsideCertain 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 projects, decreased profitability on our projects due to matters not reasonably forecasted, changes in the timing of cash flows on our projects 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 projects, but there can be no assurance that these will be renewed or available at reasonable commercial terms in the future.

Second lien term loan

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 term loan facility 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 may be drawn in a single draw prior to June 30, 2020, subject to certain conditions. 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. Undrawn amounts under the delayed draw term loan accrue a commitment fee at a rate of 0.50% per annum. The second lien term loan has a scheduled maturity of December 30, 2020. Any delayed draw borrowings would also have a scheduled maturity 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.


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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 periodic 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, China and India that are used to provide working capital to our operations in each country. These three foreign revolving credit facilities allow us to borrow up to $14.8 million in aggregate and each have a one year term. At September 30, 2017, we had $12.4 million in borrowings outstanding under these foreign revolving credit facilities at an effective weighted-average interest rate of 5.17%.

Other credit arrangements

Certain subsidiaries have credit arrangements with various commercial banks and other financial institutions for the issuance of letters of credit and bank guarantees in associatedassociation with contracting activity. The aggregate value of all such letters of credit and bank guarantees not secured by the United States revolving credit facilityoutside of our Letter of Credit Agreement as of September 30, 2017 and DecemberMarch 31, 20162022 was $279.1$48.3 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 $34.8 million and $255.2as of March 31, 2022. Of the outstanding letters of credit issued under the Letter of Credit Agreement, $52.0 million respectively.are subject to foreign currency revaluation.


We have also posted surety bonds to support contractual obligations to customers relating to certain projects.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 project requirements for the next 12 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 September 30, 2017,March 31, 2022, bonds issued and outstanding under these arrangements in support of contracts totaled approximately $472.3$221.5 million. The aggregate value of the letters of credit backstopping surety bonds was $9.2 million.


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

Other Indebtedness - Loans Payable

As of March 31, 2022, our Denmark subsidiary has three unsecured interest-free loans totaling $3.3 million under a local government loan program related to COVID-19. The loans of $0.8 million, $1.6 million and $0.9 million are payable in April 2022, May 2022 and May 2023, respectively. The loan payable in May 2023 is included in long term loans payables in our Condensed Consolidated Balance Sheets. Subsequent to March 31, 2022, the loan due April 2022 was repaid on April 1, 2022.

As of March 31, 2022, Fosler Construction has two loans totaling $8.9 million. Both loans have a variable interest rate with a minimum rate of 6.0% and are due June 30, 2022. Fosler Construction also has loans primarily for vehicles and equipment totaling $0.6 million at March 31, 2022. The vehicle and equipment loans are included in long term loans payables in our Condensed Consolidated Balance Sheets.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have, or are reasonably expected to have, a material current or future effect on its financial condition, results of operations, liquidity, capital expenditures or capital resources at March 31, 2022.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES


For a summary of the critical accounting policies and estimates that we use in the preparation of our unaudited condensed consolidated financial statements,Condensed Consolidated Financial Statements, see "Critical Accounting Policies"Policies and Estimates" in our Annual Report.Report for the year ended December 31, 2021. There have been no significant changes to our policies during the quarterthree months ended September 30, 2017.March 31, 2022.


Item 3. Quantitative and Qualitative Disclosures About Market Risk


Our exposures to market risks could changehave not changed 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 Government obligations and highly liquid money market instruments denominated in United States dollars. We are averse to principal loss and seek to ensureReport on Form 10-K for 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 condensed and 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 September 30, 2017, its principal balance was $175.9 million. Our United States revolving credit facility is variable-rate debt, so its fair

year ended December 31, 2021.
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value would not be significantly affected by changes in prevailing market rates. On September 30, 2017, its principal balance was $58.9 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") rates or weak economic conditions in those foreign markets. Our primary foreign currency exposures are Danish kroner, Great British pound, Euro, Canadian dollar, and Chinese yuan. In order to manage the risks associated with 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, our hedge counterparties removed the lines of credit supporting new FX forward contracts. Subsequently, we have not entered into any new FX forward contracts.

Item 4. 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")). DisclosureOur disclosure controls and procedures, by their nature, can provide only reasonable assurance regarding the control objectives. It should be noted that the design of any system of disclosure controls and procedures is based in part upon various assumptions about the likelihood of future events, and we cannot assure that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

Based on the evaluation referred to above, our Chief Executive Officer and Chief Financial Officer concluded that the design and operation of our disclosure controls and procedures are the controls and processes that are designedeffective as of March 31, 2022 to ensureprovide 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 SEC's rules and forms. Disclosure controlsforms of the Securities and procedures include, without limitation, controlsExchange Commission, and procedures designed to ensure thatsuch 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. 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 assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.disclosure.

On January 11, 2017, we acquired Universal, which would have represented approximately 3% of our total consolidated assets and consolidated revenues as of and for the year ended December 31, 2016, 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.

Based on the evaluation referred to above, our Chief Executive Officer and Chief Financial Officer concluded the disclosure controls and procedures were not effective due to the material weakness in internal control over financial reporting that we reported for the quarter ended June 30, 2017 at Vølund, a business unit within our Renewable segment, which remains unremediated as of September 30, 2017. Our management has completed all steps designed to remediate the material weakness at September 30, 2017; however, the material weakness at Vølund cannot be remediated until the new processes and procedures have been in place for a sufficient period of time and management has determined through testing that the controls are effective. Management expects the material weakness at Vølund will be remediated at December 31, 2017; however, our remediation plans cannot guarantee the material weakness will be remediated by a specific future date or at all.

We are committed to continuing to improve our internal control over financial reporting and will continue to review our financial reporting processes and internal controls at Vølund. As we continue to evaluate and work to improve our internal control over financial reporting, we may identify additional measures to address the material weakness at Vølund. Our management, with the oversight of the audit and finance committee of our board of directors, will continue to assess and take steps to enhance the overall design and capability of our control environment in the future.


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Changes in internal control over financial reportingInternal Control Over Financial Reporting


During the three months ended September 30, 2017, we finalized the implementation of a new financial consolidation, planning and reporting system. The new system replaces the legacy system we used under a service agreement with our former Parent. In connection with the implementation, we updated the processes that constitute our internal control over financial reporting, as necessary, to accommodate related changes to our accounting procedures and business processes. Although the processes that constitute our internal control over financial reporting have been affected by the system implementation, we do not believe the implementation of the financial consolidation, planning and reporting system has had or will have a material adverse effect on our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Management has taken steps to ensure that appropriate internal controls are designed and implemented. The new system and associated internal controls were subject to testing and data reconciliation during implementation.

Other than the system change described above, thereThere were no changes in our internal control over financial reporting during the quarterthree months ended September 30, 2017March 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 response to the COVID-19 pandemic. We are continually monitoring and assessing these situations on our internal controls to ensure their operating effectiveness.


PART II - OTHER INFORMATION


Item 1. Legal Proceedings


For information regarding ongoing investigations and litigation, see Note 1917 to the unaudited condensed consolidated financial statementsCondensed Consolidated Financial Statements included in Part I, Item I of this report,Quarterly Report, which we incorporate by reference into this Item.


Item 1A. Risk Factors


We are subject to various risks and uncertainties in the course of our business. The discussion of such risks and uncertainties may be found under "Risk Factors"“Risk Factors” in our Annual Report. ThereReport on Form 10-K for the fiscal year ended December 31, 2021. Other than the additional risk factor set forth below there have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2021.

The ongoing invasion of Ukraine by Russia may continue to adversely affect our business and results of operations.

The ongoing invasion of Ukraine by Russia, and the global response to it, may continue to adversely affect our business and results of operations. The military conflict between Russia and Ukraine has caused significant volatility and disruptions to the global markets, including shortages of supplies and materials necessary for our business. For example, the conflict can impact our ability to place orders for materials, such risk factors.as steel, in Europe, and may more broadly impact lead times for materials globally. It is not possible to predict the short- and long-term implications of this conflict, which could include but are not limited to further uncertainty about economic and political stability, delays in access to supplies and materials, increases in inflation rate and energy prices and adverse effects on currency exchange rates and financial markets. As described in our Business Overview and Results of Operations included in Part I, Item II and Note 17 to the Condensed Consolidated Financial Statements included in Part I, Item I of this Quarterly Report, the conflict has resulted in shortages of supplies and materials and delays in the timing of revenue. We continue to monitor the situation closely and are proactively assessing and evaluating alternative sources to bolster our supplies and materials moving forward.


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


In August 2015, we announcedaccordance with the provisions of the employee benefit plans, the Company acquired the following shares in connection with the vesting of employee restricted stock that our Board of Directors authorized a share repurchase program.require us to withhold shares to satisfy employee statutory income tax withholding obligations. The following table provides information on our purchasesidentifies the number of equity securitiescommon shares and average price per share for each month during the quarter ended September 30, 2017. AnyMarch 31, 2022. The Company does not have a general share repurchase program at this time.
(data in whole amounts)
Period
Total number of shares acquired (1)
Average price per shareTotal number of shares purchased as part of
publicly announced plans or programs
Approximate dollar value of shares that may yet be
purchased under the plans or programs
January 202219,734 $8.65 — $— 
February 20226,833 $7.37 — $— 
March 2022— $— — $— 
Total26,567 $8.32 — $— 
(1) Acquired shares purchased that were not part of a publicly announced plan or program are related to repurchases of commonrecorded in treasury stock pursuant to the provisions of employee benefit plans that permit the repurchase of shares to satisfy statutory tax withholding obligations.in our Condensed Consolidated Balance Sheets.
Period  
Total number of shares purchased (1) (2)
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) (3)
July 1, 2017 - July 31, 2017 3,620 $— $100,000
August 1, 2017 - August 31, 2017 4,835,775 $10.52 $100,000
September 1, 2017 - September 30, 2017 944 $— $100,000
Total 4,840,339    

(1)Includes 3,620, 953 and 944 shares repurchased in July, August and September, respectively, pursuant to the provisions of employee benefit plans that require us to repurchase shares to satisfy employee statutory income tax withholding obligations.
(2)Includes 4,834,822 shares repurchased for $50,883,635 on August 9, 2017 from an affiliate of AIP in conjunction with the issuance of our second lien term loan facility.
(3)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 November 8, 2017, we have not made any share repurchases under the August 4, 2016 share repurchase authorization.

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Item 6. Exhibits
Amendment No. 3 dated August 9, 2017,
Second Lien Credit Agreement, dated August 9, 2017, among Babcock & Wilcox Enterprises, Inc.,
Amendment No. 4 dated September 20, 2017 to Credit Agreement, dated May 11, 2015, among
101.INS101.SCHXBRL Instance Document
101.SCHXBRL Taxonomy Extension Schema DocumentDocument.
101.CALXBRL Taxonomy Extension Calculation Linkbase DocumentDocument.
101.LABXBRL Taxonomy Extension Label Linkbase DocumentDocument.
101.PREXBRL Taxonomy Extension Presentation Linkbase DocumentDocument.
101.DEFXBRL Taxonomy Extension Definition Linkbase DocumentDocument.
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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.

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SIGNATURES


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


November 8, 2017BABCOCK & WILCOX ENTERPRISES, INC.
May 9, 2022By:By:/s/ Daniel W. HoehnLouis Salamone
Daniel W. HoehnLouis Salamone
Executive Vice President, Controller &Chief Financial Officer and Chief Accounting Officer

(Principal Financial and Accounting Officer and Duly Authorized Representative)




















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