UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



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

For the quarterly period ended ~~March 31,~~September 30, 2020



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

For the transition period from to

Commission File No. 001-36876

BABCOCK & WILCOX ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)



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

1200 EAST MARKET STREET, SUITE 650
AKRON, OHIO		44305
(Address of Principal Executive Offices)		(Zip Code)

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

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



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	BW	New York Stock Exchange

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes 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 filer	¨	Accelerated filer	¨

Non-accelerated filer	x	Smaller reporting company	x

		Emerging growth company	¨

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

The number of shares of the registrant's common stock outstanding at ~~May 13,~~November 6, 2020 was ~~46,407,555.~~52,009,498.

TABLE OF CONTENTS



		PAGE
PART I - FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements	3
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended ~~March 31,~~September 30, 2020 and 2019 (Unaudited)	3
	Condensed Consolidated Statements of Comprehensive Income (Loss) ~~Income~~ for the Three and Nine Months Ended ~~March 31,~~September 30, 2020 and 2019 (Unaudited)	4
	Condensed Consolidated Balance Sheets as of ~~March 31,~~September 30, 2020 and December 31, 2019 (Unaudited)	5
	Condensed Consolidated Statement of Stockholders' (Deficit) Equity for each of the Three ~~Months~~Month Periods Ended ~~March 31,~~September 30, 2020 and 2019 (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the ~~Three~~Nine Months Ended ~~March 31,~~September 30, 2020 and 2019 (Unaudited)	78
	Notes to Condensed Consolidated Financial Statements	810
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operation	3741
	Overview	3741
	Results of Operations - Three and Nine Months Ended ~~March 31,~~September 30, 2020 and 2019	3944
	Liquidity and Capital Resources	4653
	Critical Accounting Policies and Estimates	5461
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	5461
Item 4.	Controls and Procedures	5462
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	5662
Item 1A.	Risk Factors	5663
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5663
Item 6.	Exhibits	5663
SIGNATURES		5865

PART I - FINANCIAL INFORMATION

ITEM 1. Condensed Consolidated Financial Statements

BABCOCK & WILCOX ENTERPRISES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three months ended March 31,
(in thousands, except per share amounts) 2020 2019
Revenues $ 148,554
$ 231,936
Costs and expenses:
Cost of operations 114,628
201,067
Selling, general and administrative expenses 37,608
42,399
Advisory fees and settlement costs 4,239
13,610
Restructuring activities and spin-off transaction costs 1,951
6,079
Research and development costs 1,341
743
Gain on asset disposals, net (915 ) —
Total costs and expenses 158,852
263,898
Operating loss (10,298 ) (31,962 )
Other (expense) income:

Interest expense (22,091 ) (11,134 )
Interest income 40
559
Benefit plans, net 7,536
3,030
Foreign exchange (9,326 ) (10,153 )
Other – net (206 ) 420
Total other expense (24,047 ) (17,278 )
Loss before income tax (benefit) expense (34,345 ) (49,240 )
Income tax (benefit) expense (810 ) 626
Loss from continuing operations (33,535 ) (49,866 )
Income from discontinued operations, net of tax 1,913
—
Net loss (31,622 ) (49,866 )
Net income attributable to non-controlling interest 96
101
Net loss attributable to stockholders $ (31,526 ) $ (49,765 )

Basic and diluted loss per share - continuing operations $ (0.72 ) $ (2.71 )
Basic and diluted earnings per share - discontinued operations 0.04
—
Basic and diluted loss per share $ (0.68 ) $ (2.71 )

Shares used in the computation of (loss) earnings per share:

Basic and diluted ⁽¹⁾
46,403
18,359

⁽¹⁾ ~~Basic and diluted shares at March 31, 2019 reflect the bonus element for the 2019 Rights Offering on July 23, 2019 and the one-for-ten reverse stock split on July 24, 2019.~~



	Three months ended September 30,						Nine months ended September 30,
(in thousands, except per share amounts)	2020			2019			2020			2019
Revenues	$	132,513		$	198,644		$	416,464		$	678,695
Costs and expenses:
Cost of operations	75,156			158,273			292,691			563,171
Selling, general and administrative expenses	35,689			35,956			107,876			120,431
Advisory fees and settlement costs	3,846			4,474			10,074			22,862
Restructuring activities	2,396			2,556			6,739			9,571
Research and development costs	1,355			828			3,927			2,281
Gain on asset disposals, net	(3		)	(266		)	(916		)	(224		)
Total costs and expenses	118,439			201,821			420,391			718,092
Operating income (loss)	14,074			(3,177		)	(3,927		)	(39,397		)
Other (expense) income:
Interest expense	(12,203		)	(29,463		)	(49,776		)	(67,434		)
Interest income	167			112			430			872
Loss on debt extinguishment	—			—			(6,194		)	(3,969		)
Loss on sale of business	—			—			(108		)	(3,601		)
Benefit plans, net	7,328			3,571			22,314			9,072
Foreign exchange	24,963			(26,735		)	22,749			(27,382		)
Other – net	(276		)	(255		)	(3,068		)	208
Total other income (expense)	19,979			(52,770		)	(13,653		)	(92,234		)
Income (loss) before income tax (benefit) expense	34,053			(55,947		)	(17,580		)	(131,631		)
Income tax (benefit) expense	(502		)	1,043			(467		)	3,560
Income (loss) from continuing operations	34,555			(56,990		)	(17,113		)	(135,191		)
Income from discontinued operations, net of tax	—			—			1,800			694
Net income (loss)	34,555			(56,990		)	(15,313		)	(134,497		)
Net loss attributable to non-controlling interest	169			35			407			137
Net income (loss) attributable to stockholders	$	34,724		$	(56,955	)	$	(14,906	)	$	(134,360	)

Basic earnings (loss) per share - continuing operations	$	0.70		$	(1.39	)	$	(0.35	)	$	(5.21	)
Basic earnings per share - discontinued operations	—			—			0.04			0.03
Basic earnings (loss) per share	$	0.70		$	(1.39	)	$	(0.31	)	$	(5.18	)

Diluted earnings (loss) per share - continuing operations	$	0.69		$	(1.39	)	$	(0.35	)	$	(5.21	)
Diluted earnings per share - discontinued operations	—			—			0.04			0.03
Diluted earnings (loss) per share	$	0.69		$	(1.39	)	$	(0.31	)	$	(5.18	)

Shares used in the computation of earnings (loss) per share:
Basic	49,478			40,879			47,585			25,950
Diluted	50,056			40,879			47,585			25,950

See accompanying notes to Condensed Consolidated Financial Statements.

BABCOCK & WILCOX ENTERPRISES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) ~~INCOME~~

Three months ended March 31,
(in thousands) 2020 2019
Net loss $ (31,622 ) $ (49,866 )
Other comprehensive income (loss):
Currency translation adjustments (CTA) 2,380
10,260

Derivative financial instruments:
Unrealized (gains) losses on derivative financial instruments —
(1,311 )
Income tax benefit —
(133 )
Unrealized (gains) losses on derivative financial instruments, net of taxes —
(1,178 )
Derivative financial instrument losses (gains) reclassified into net loss —
289
Income tax expense —
65
Reclassification adjustment for losses (gains) included in net loss, net of taxes —
224

Benefit obligations:
Amortization of benefit plan benefits (246 ) (356 )

Other comprehensive income 2,134
8,950
Total comprehensive loss (29,488 ) (40,916 )
Comprehensive income attributable to non-controlling interest 154
122
Comprehensive loss attributable to stockholders $ (29,334 ) $ (40,794 )



	Three months ended September 30,						Nine months ended September 30,
(in thousands)	2020			2019			2020			2019
Net income (loss)	$	34,555		$	(56,990	)	$	(15,313	)	$	(134,497	)
Other comprehensive income (loss):
Currency translation adjustments (CTA)	(22,916		)	21,433			(24,631		)	23,714

Reclassification of CTA to net loss	—			—			—			3,176

Derivative financial instruments:
Unrealized losses on derivative financial instruments	—			—			—			(1,367		)
Derivative financial instrument (losses) gains reclassified into net loss	—			—			—			202

Derivative financial instruments reclassified to advanced billings on contracts	—			(197		)	—			(197		)

Benefit obligations:
Amortization of benefit plan benefits	(246		)	(515		)	(738		)	(1,385		)

Other comprehensive (loss) income	(23,162		)	20,721			(25,369		)	24,143
Total comprehensive loss	11,393			(36,269		)	(40,682		)	(110,354		)
Comprehensive (loss) income attributable to non-controlling interest	175			(88		)	434			341
Comprehensive income (loss) attributable to stockholders	$	11,568		$	(36,357	)	$	(40,248	)	$	(110,013	)

See accompanying notes to Condensed Consolidated Financial Statements.

BABCOCK & WILCOX ENTERPRISES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


(in thousands, except per share amount)	March 31, 2020			December 31, 2019			September 30, 2020			December 31, 2019
Cash and cash equivalents	$	35,384		$	43,772		$	38,934		$	43,772
Restricted cash and cash equivalents	11,001			13,169			9,435			13,169
Accounts receivable – trade, net	139,252			142,201			126,841			142,201
Accounts receivable – other	22,682			23,263			52,137			23,263
Contracts in progress	83,558			91,579			73,882			91,579
Inventories	60,713			63,103			66,966			63,103
Other current assets	24,588			27,044			20,554			27,044
Current assets held for sale	7,038			8,089			4,816			8,089
Total current assets	384,216			412,220			393,565			412,220
Net property, plant and equipment, and finance lease	94,803			97,053			88,645			97,053
Goodwill	46,961			47,160			47,136			47,160
Intangible assets	24,332			25,300			23,691			25,300
Right-of-use assets	12,185			12,498			10,272			12,498
Other assets	26,413			24,966			34,902			24,966
Non-current assets held for sale	7,199			7,322			7,543			7,322
Total assets	$	596,109		$	626,519		$	605,754		$	626,519

Revolving credit facilities	$	—		$	179,000		$	—		$	179,000
Last out term loans	—			103,953			—			103,953
Financing lease liabilities	787			—			852			—
Accounts payable	84,629			109,913			79,983			109,913
Accrued employee benefits	16,068			18,256			17,365			18,256
Advance billings on contracts	68,050			75,287			54,046			75,287
Accrued warranty expense	30,953			33,376			26,803			33,376
Operating lease liabilities	4,346			4,323			3,968			4,323
Other accrued liabilities	75,292			68,848			86,772			68,848
Current liabilities held for sale	8,286			9,538			6,925			9,538
Total current liabilities	288,411			602,494			276,714			602,494
Revolving credit facilities	185,000			—			181,900			—
Last out term loans	136,103			—			173,330			—
Pension and other accumulated postretirement benefit liabilities	251,355			259,272			236,372			259,272
Non-current finance lease liabilities	30,358			30,454			29,917			30,454
Non-current operating lease liabilities	8,092			8,388			6,381			8,388
Other non-current liabilities	20,404			20,850			21,918			20,850
Non-current liabilities held for sale	36			—
Total liabilities	919,759			921,458			926,532			921,458
Commitments and contingencies
Stockholders' deficit:
Common stock, par value $0.01 per share, authorized shares of 500,000; issued and outstanding shares of 46,407 and 46,374 at March 31, 2020 and December 31, 2019, respectively	4,703			4,699
Common stock, par value $0.01 per share, authorized shares of 500,000; issued and outstanding shares of 52,006 and 46,374 at September 30, 2020 and December 31, 2019, respectively							4,760			4,699
Capital in excess of par value	1,143,490			1,142,614			1,157,811			1,142,614
Treasury stock at cost, 619 and 616 shares at March 31, 2020 and December 31, 2019, respectively	(105,716		)	(105,707		)
Treasury stock at cost, 716 and 616 shares at September 30, 2020 and December 31, 2019, respectively							(105,985		)	(105,707		)
Accumulated deficit	(1,371,414		)	(1,339,888		)	(1,354,794		)	(1,339,888		)
Accumulated other comprehensive income	4,060			1,926
Accumulated other comprehensive income (loss)							(23,443		)	1,926
Stockholders' deficit attributable to shareholders	(324,877		)	(296,356		)	(321,651		)	(296,356		)
Non-controlling interest	1,227			1,417			873			1,417
Total stockholders' deficit	(323,650		)	(294,939		)	(320,778		)	(294,939		)
Total liabilities and stockholders' deficit	$	596,109		$	626,519		$	605,754		$	626,519

See accompanying notes to Condensed Consolidated Financial Statements.

BABCOCK & WILCOX ENTERPRISES, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT) EQUITY


	Common Stock			Capital In Excess of Par Value		Treasury Stock			Accumulated Deficit			Accumulated Other Comprehensive (Loss) Income			Non-controlling Interest			Total Stockholders’ Deficit			Common Stock			Capital In Excess of Par Value		Treasury Stock			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Non-controlling Interest			Total Stockholders’ Deficit

	Shares ⁽¹⁾	Par Value																			Shares	Par Value
		(in thousands, except share and per share amounts)																				(in thousands, except share and per share amounts)
Balance at December 31, 2018	16,879	$	1,748	$	1,047,062	$	(105,590	)	$	(1,217,914	)	$	(11,432	)	$	8,829		$	(277,297	)
Balance at December 31, 2019																					46,374	$	4,699	$	1,142,614	$	(105,707	)	$	(1,339,888	)	$	1,926		$	1,417		$	(294,939	)

Net loss	—	—		—		—			(49,765		)	—			(101		)	(49,866		)	—	—		—		—			(31,526		)	—			(96		)	(31,622		)
Currency translation adjustments	—	—		—		—			—			10,260			(21		)	10,239			—	—		—		—			—			2,380			(58		)	2,322
Derivative financial instruments	—	—		—		—			—			(954		)	—			(954		)
Defined benefit obligations	—	—		—		—			—			(356		)	—			(356		)	—	—		—		—			—			(246		)	—			(246		)
Stock-based compensation charges	7	—		404		(22		)	—			—			—			382			33	4		876		(9		)	—			—			—			871
Balance at March 31, 2019	16,886	$	1,748	$	1,047,466	$	(105,612	)	$	(1,267,679	)	$	(2,482	)	$	8,707		$	(317,852	)
Dividends to non-controlling interest																					—	—		—		—			—			—			(36		)	(36		)
Balance at March 31, 2020																					46,407	$	4,703	$	1,143,490	$	(105,716	)	$	(1,371,414	)	$	4,060		$	1,227		$	(323,650	)
Net loss																					—	—		—		—			(18,104		)	—			(142		)	(18,246		)
Currency translation adjustments																					—	—		—		—			—			(4,095		)	37			(4,058		)
Defined benefit obligations																					—	—		—		—			—			(246		)	—			(246		)
Stock-based compensation charges																					—	—		923		(1		)	—			—			—			922
Equitized guarantee fee payment																					1,713	17		3,883		—			—			—			—			3,900
Equitized Last Out Term Loan interest payment																					1,192	12		2,703		—			—			—			—			2,715
Dividends to non-controlling interest																					—	—		—		—			—			—			(37		)	(37		)
Balance at June 30, 2020																					49,312	$	4,732	$	1,150,999	$	(105,717	)	$	(1,389,518	)	$	(281	)	$	1,085		$	(338,700	)
Net income																					—	—		—		—			34,724			—			(169		)	34,555
Currency translation adjustments																					—	—		—		—			—			(22,916		)	(6		)	(22,922		)
Defined benefit obligations																					—	—		—		—			—			(246		)	—			(246		)
Stock-based compensation charges																					360	4		1,520		(268		)	—			—			—			1,256
Equitized Last Out Term Loan interest payment																					2,334	24		5,292		—			—			—			—			5,316
Dividends to non-controlling interest																					—	—		—		—			—			—			(37		)	(37		)
Balance at September 30, 2020																					52,006	$	4,760	$	1,157,811	$	(105,985	)	$	(1,354,794	)	$	(23,443	)	$	873		$	(320,778	)



	Common Stock			Capital In Excess of Par Value		Treasury Stock			Accumulated Deficit			Accumulated Other Comprehensive Loss			Non-controlling Interest			Total Stockholders’ Deficit

	Shares ⁽¹⁾	Par Value
		(in thousands, except share and per share amounts)
Balance at December 31, 2018	16,879	$	1,748	$	1,047,062	$	(105,590	)	$	(1,217,914	)	$	(11,432	)	$	8,829		$	(277,297	)

Net loss	—	—		—		—			(49,765		)	—			(101		)	(49,866		)
Currency translation adjustments	—	—		—		—			—			10,260			(21		)	10,239
Derivative financial instruments	—	—		—		—			—			(954		)	—			(954		)
Defined benefit obligations	—	—		—		—			—			(356		)	—			(356		)
Stock-based compensation charges	7	—		404		(22		)	—			—			—			382
Balance at March 31, 2019	16,886	$	1,748	$	1,047,466	$	(105,612	)	$	(1,267,679	)	$	(2,482	)	$	8,707		$	(317,852	)
Net loss	—	—		—		—			(27,640		)	—			(1		)	(27,641		)
Currency translation adjustments	—	—		—		—			—			(4,803		)	(306		)	(5,109		)
Derivative financial instruments	—	—		—		—			—			(211		)	—			(211		)
Defined benefit obligations	—	—		—		—			—			(514		)	—			(514		)
Stock-based compensation charges	2	—		205		(1		)	—			—			—			204
Issuance of beneficial conversion option of Last Out Term Loan Tranche A-3	—	—		2,022		—			—			—			—			2,022
Warrants	—	—		6,066		—			—			—			—			6,066
Balance at June 30, 2019	16,888	$	1,748	$	1,055,759	$	(105,613	)	$	(1,295,319	)	$	(8,010	)	$	8,400		$	(343,035	)
Net loss	—	—		—		—			(56,955		)	—			(35		)	(56,990		)
Currency translation adjustments	—	—		—		—			—			21,433			123			21,556
Derivative financial instruments	—	—		—		—			—			(197		)	—			(197		)
Defined benefit obligations	—	—		—		—			—			(515		)	—			(515		)
Stock-based compensation charges	66	7		1,225		(21		)	—			—			—			1,211
Rights Offering	13,922	1,392		40,376		—			—			—			—			41,768
Last Out Term Loan principal value exchanged for common stock	15,465	1,547		44,848		—			—			—			—			46,395
Dividends to noncontrolling interest	—	—		—		—			—			—			(270		)	(270		)
Balance at September 30, 2019	46,341	$	4,694	$	1,142,208	$	(105,634	)	$	(1,352,274	)	$	12,711		$	8,218		$	(290,077	)

⁽¹⁾ Common stock shares reflect the one-for-ten reverse stock split on July 24, 2019.

Common Stock Capital In
Excess of
Par Value Treasury Stock Accumulated Deficit Accumulated
Other
Comprehensive
Income (Loss) Non-controlling
Interest Total
Stockholders’
Deficit

Shares Par Value
(in thousands, except share and per share amounts)
Balance at December 31, 2019 46,374
$ 4,699
$ 1,142,614
$ (105,707 ) $ (1,339,888 ) $ 1,926
$ 1,417
$ (294,939 )

Net loss —
—
—
—
(31,526 ) —
(96 ) (31,622 )
Currency translation adjustments —
—
—
—
—
2,380
(58 ) 2,322
Defined benefit obligations —
—
—
—
—
(246 ) —
(246 )
Stock-based compensation charges 33
4
876
(9 ) —
—
—
871
Dividends to non-controlling interest —
—
—
—
—
—
(36 ) (36 )
Balance at March 31, 2020 46,407
$ 4,703
$ 1,143,490
$ (105,716 ) $ (1,371,414 ) $ 4,060
$ 1,227
$ (323,650 )

~~See accompanying notes to Condensed Consolidated Financial Statements.~~

~~BABCOCK & WILCOX ENTERPRISES, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

Three months ended March 31,
(in thousands) 2020 2019
Cash flows from operating activities:
Net loss $ (31,622 ) $ (49,866 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization of long-lived assets 4,208
7,306
Amortization of deferred financing costs, debt discount and payment-in-kind interest 9,877
5,695
Non-cash operating lease expense 1,223
1,543
Gains on asset disposals (915 ) —
Benefit from deferred income taxes, including valuation allowances (424 ) (175 )
Mark to market (gains) losses and prior service cost amortization for pension and postretirement plans (246 ) 42
Stock-based compensation, net of associated income taxes 880
404
Changes in assets and liabilities:
Accounts receivable 10,599
192
Contracts in progress 7,690
8,729
Advance billings on contracts (7,321 ) 1,165
Inventories 1,286
(3,239 )
Income taxes (1,888 ) (49 )
Accounts payable (26,451 ) 4,594
Accrued and other current liabilities 6,110
6,480
Accrued contract loss (2,593 ) (30,903 )
Pension liabilities, accrued postretirement benefits and employee benefits (10,258 ) (594 )
Other, net 4,384
10,980
Net cash used in operating activities (35,461 ) (37,696 )
Cash flows from investing activities:
Purchase of property, plant and equipment (2,394 ) (288 )
Purchases of available-for-sale securities (6,352 ) (6,036 )
Sales and maturities of available-for-sale securities 3,420
957
Other, net 831
95
Net cash used in investing activities (4,495 ) (5,272 )
Cash flows from financing activities:
Borrowings under our U.S. revolving credit facility 70,200
71,200
Repayments of our U.S. revolving credit facility (64,200 ) (40,800 )
Borrowings under Last Out Term Loan Tranche A-2 —
10,000
Borrowings under Last Out Term Loan Tranche A-4 30,000
—
Repayments under our foreign revolving credit facilities —
(600 )
Shares of our common stock returned to treasury stock (9 ) (22 )
Debt issuance costs (5,749 ) (6,675 )
Other, net 550
—
Net cash from financing activities 30,792
33,103
Effects of exchange rate changes on cash (1,392 ) 72
Net decrease in cash, cash equivalents and restricted cash (10,556 ) (9,793 )
Cash, cash equivalents and restricted cash, beginning of period 56,941
60,279
Cash, cash equivalents and restricted cash, end of period $ 46,385
$ 50,486

See accompanying notes to Condensed Consolidated Financial Statements.

BABCOCK & WILCOX ENTERPRISES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



	Nine months ended September 30,
(in thousands)	2020			2019
Cash flows from operating activities:
Net loss	$	(15,313	)	$	(134,497	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization of long-lived assets	12,296			19,123
Amortization of deferred financing costs, debt discount and payment-in-kind interest	16,013			42,185
Amortization of guaranty fee	698			—
Non-cash operating lease expense	3,600			4,134
Loss on sale of business	108			3,601
Loss on debt extinguishment	6,194			3,969
(Gains) losses on asset disposals and impairments	(916		)	(224		)
Benefit from deferred income taxes, including valuation allowances	(788		)	(722		)
Mark to market gains and prior service cost amortization for pension and postretirement plans	(738		)	(107		)
Stock-based compensation, net of associated income taxes	3,327			1,841
Equitized non-cash interest expense	8,031			—
Changes in assets and liabilities:
Accounts receivable	28,577			41,274
Accrued insurance receivable	(26,000		)	—
Contracts in progress	21,633			23,106
Advance billings on contracts	(23,161		)	(68,109		)
Inventories	(4,865		)	(6,571		)
Income taxes	(4,820		)	1,620
Accounts payable	(33,450		)	(71,284		)
Accrued and other current liabilities	13,793			(21,097		)
Accrued contract loss	(5,294		)	(49,820		)
Pension liabilities, accrued postretirement benefits and employee benefits	(25,922		)	(5,750		)
Other, net	(40,299		)	16,211
Net cash used in operating activities	(67,296		)	(201,117		)
Cash flows from investing activities:
Purchase of property, plant and equipment	(2,274		)	(1,634		)
Proceeds from sale of business	8,000			7,445
Purchases of available-for-sale securities	(19,149		)	(3,469		)
Sales and maturities of available-for-sale securities	14,597			5,132
Other, net	784			(382		)
Net cash from investing activities	1,958			7,092



	Nine months ended September 30,
(in thousands)	2020			2019
Cash flows from financing activities:
Borrowings under our U.S. revolving credit facility	126,300			251,917
Repayments of our U.S. revolving credit facility	(123,400		)	(205,117		)
Borrowings under Last Out Term Loans	60,000			151,350
Repayments under Last Out Term Loans	—			(41,766		)
Repayments under our foreign revolving credit facilities	—			(605		)
Shares of our common stock returned to treasury stock	(278		)	(44		)
Proceeds from rights offering	—			40,376
Costs related to rights offering	—			(682		)
Debt issuance costs	(10,343		)	(15,509		)
Issuance of common stock	—			1,392
Other, net	98			(270		)
Net cash from financing activities	52,377			181,042
Effects of exchange rate changes on cash	4,389			(3,951		)
Net decrease in cash, cash equivalents and restricted cash	(8,572		)	(16,934		)
Cash, cash equivalents and restricted cash, beginning of period	56,941			60,279
Cash, cash equivalents and restricted cash, end of period	$	48,369		$	43,345

See accompanying notes to Condensed Consolidated Financial Statements.

BABCOCK & WILCOX ENTERPRISES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~MARCH 31,~~SEPTEMBER 30, 2020

NOTE 1 – BASIS OF PRESENTATION

These interim Condensed Consolidated Financial Statements of Babcock & Wilcox Enterprises, Inc. (“B&W,” “management,” “we,” “us,” “our” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States and Securities and Exchange Commission ("SEC") instructions for interim financial information, and should be read in conjunction with 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 Statements on the basis of continuing operations, unless otherwise stated.

Going Concern Considerations

The accompanying Condensed Consolidated Financial Statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

As of December 31, 2019 and March 30, 2020, the date we issued our 2019 Consolidated Financial Statements, we were in compliance with the terms of the agreements governing our debt and no events of default existed. However, the Company’s uncertainty regarding liquidity and the ability to refinance our credit agreement ~~(as amended, the "Amended Credit Agreement")~~ by May 11, 2020 represented conditions and events that raised substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the 2019 Consolidated Financial Statements were issued, as we were not able to assert that it was probable that our plans when fully implemented would alleviate the events and conditions.

~~In December 2019, a novel strain of coronavirus, COVID-19, was identified~~ However, more fully explained in ~~Wuhan, China~~Note 13 and has subsequently spread globally, with over 180 countries around the world confirming infections, including the United States and countries throughout Europe and Southeast Asia. This global pandemic has disrupted business operations, trade, commerce, financial and credit markets, and daily life throughout the world. Our business has been adversely impacted by the measures taken by local governments and others to control the spread of this virus. While restrictions in some countries have begun to lessen, the Company's headquarters and the headquarters of our Babcock & Wilcox segment in Akron, Ohio, the headquarters of our Vølund & Other Renewable segment in Denmark and the headquarters of our SPIG segment in Italy (among other locations where the Company and its customers, vendors and suppliers operate) are currently subject to lock-down or shelter-in-place orders under local ordinances, with employees continuing to work remotely if possible. While some employees can work remotely, 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 also been extended into next year. Additionally, out of concern for our employees, those who are uncomfortable returning to worksites due to the pandemic are not required to do so. The resulting uncertainty concerning,Note 14 below, on May 14, 2020, among other things, the ~~spread~~Company refinanced and ~~economic impact~~extended the term of its revolving credit facility (the "U.S. Revolving Credit Facility") to June 30, 2022 and our last out term loans (the "Last Out Term Loans") to December 30, 2022. Additionally, as described below, the Company took other actions all of which reduced the substantial doubt of the ~~virus has also caused significant volatility and, at times, illiquidity in global equity and credit markets.~~Company’s ability to be considered a going concern.

Since January 1, 2020 and through the issuance of our 2019 Consolidated Financial Statements on March 30, 2020, we took the following actions, among others, and have successfully implemented, or are in the process of implementing the following:

entered into several amendments and waivers to avoid default and improve our liquidity under the terms of our ~~Amended Credit Agreement~~credit agreement as described in Note 13 and Note 14, the most recent of which were Amendments No. 19, No. 20 and No. 21 dated January 17, 2020, January 31, 2020 and March 27, 2020, respectively;

on January 31, 2020, received $30.0 million of additional gross borrowings from B. Riley Financial, Inc. (together with its affiliates, "B. Riley") under a new Tranche A-4 of Last Out Term Loans, as described in in Note 14;

on January 31, 2020, received an incremental Tranche A-5 of Last Out Term Loan commitment to be used in the event certain customer letters of credit are drawn, as described in Note 14;

~~increase contributions over~~ the ~~following five years. The Company cannot make any assurances that such~~2019 waiver ~~will be granted;~~request had been approved subject to certain conditions; and

on March 17, 2020, we fully settled the remaining escrow associated with the sale of Palm Beach Resource Recovery Corporation ("PBRRC") and received $4.5 million in cash.

In addition to the actions taken above, subsequent to March 30, 2020 we have taken the following actions:

on April 6, 2020, we fully settled the remaining escrow associated with the sale of the MEGTEC and Universal businesses and received $3.5 million in cash;

in April 2020, as part of the Company’s recent response to the impact of the COVID-19 pandemic on its business, the Company has taken the following cash conservation and cost reduction measures which include:

◦~~temporary payroll reductions and unpaid furloughs for certain employees:~~


◦	~~temporarily deferring the monthly fee paid to BRPI Executive Consulting, LLC for the services of our Chief Executive Officer by 50%;~~


◦	~~deferrals of the base salaries of our Chief Strategy Officer by 50%, Chief Financial Officer by 30% and our Senior Vice President of The Babcock & Wilcox Company by 30%;~~

◦~~suspension of our 401(k) match for U.S. employees for the remainder of 2020;~~


◦	approval by the Company’s Board for a temporary deferral of 50% of the cash compensation payable to non-employee directors under the Company’s board compensation program to be paid during the first quarter of 2021;


◦	~~negotiating temporary rent payment deferrals related to leased facilities located in the U.S., Canada, Italy and Denmark;~~


◦	~~exploring options for government loans and programs in the U.S. and abroad that would be appropriate and available;~~

we elected to defer, in accordance with the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") signed into law in March 2020, the contribution payment of $5.5 million for the 2020 Plan year that would have been made on April 15, 2020 related to our Pension Plan; and

on May 14, 2020, the Company entered into an agreement ~~with its lenders~~ amending and restating ~~the Amended Credit Agreement, among the Company,~~our credit agreement with Bank of America, N.A., as administrative agent (the "Administrative Agent") and lender, and the other lenders party thereto. ~~The~~These amendments to the credit agreement, as amended and restated (the “A&R Credit Agreement”), among other amendments, ~~extends~~extend the maturity date on the ~~revolving credit facility~~U.S. Revolving Credit Facility to June 30, 2022 and the maturity date on the ~~last out term loans (the "Last~~Last Out Term ~~Loans")~~Loans to December 30, 2022. Under the A&R Credit Agreement, B. Riley has committed to provide the Company with up to $70.0 million of additional Last Out Term Loans. B. Riley has ~~also agreed to enter~~entered into a

limited guaranty (the "B. Riley Guaranty") which provides for the guarantee of all of the Company's obligations with respect to the ~~revolving credit facility~~U.S. Revolving Credit Facility (other than with respect to letters of credit and contingent ~~obligations)~~obligations thereunder), including the obligation to repay outstanding revolving credit loans and pay earned interest and fees. For more information regarding the A&R Credit Agreement and the additional ~~last out term loans~~Last Out Term Loans being provided by B. Riley, see Note ~~23.~~13 and Note 14;

on May 14, 2020, we received $30.0 million of additional gross borrowings from B. Riley under a new Tranche A- 6 of Last Out Term Loans, as described in Note 14;

on October 10, 2020, we entered into a settlement agreement with an insurer in connection with five of the six European B&W Renewable EPC loss contracts. In connection with the insured losses recognized in prior years, we recognized this non-recurring loss recovery of $26.0 million as a reduction of our Cost of operations in our Condensed Consolidated Statements of Operations and recorded the insurance receivable in Accounts receivable - other in our Condensed Consolidated Balance Sheets for the quarter ending September 30, 2020 as we determined the loss recovery was probable. On October 23, 2020, we received gross proceeds of $26.0 million for the loss recovery recognized during the third quarter ending September 30, 2020, as described in Note 4; and

on October 30, 2020, we entered into Amendment No. 1 to our Amended and Restated Credit Agreement (the “A&R Amendment No. 1”) with Bank of America, N.A. A&R Amendment No. 1, among other matters, (i) provides that, under the A&R Credit Agreement, the "Commitment Reduction Amount" shall be an amount equal to (a) for any "Prepayment Event" relating to a "Recovery Event" (each as defined under the A&R Credit Agreement), 50% of the net cash proceeds with respect to such Prepayment Event, and (b) with respect to any other Prepayment Event under the A&R Credit Agreement, the net cash proceeds with respect to such Prepayment Event, and (ii) establishes new financial covenants for (i) interest coverage ratios beginning with a ratio of 0.50:1.00 for the quarter ending December 31, 2020 and up to 1.25:1.00 for the quarter ending March 31, 2022 and the last day of each fiscal quarter ending thereafter and (ii) senior leverage ratios beginning with 7.75:1.00 for the quarter ending December 31, 2020 and down to 2.25:1.00 for the quarter ending March 31, 2022 and the last day of each fiscal quarter ending thereafter.

In December 2019, a novel strain of coronavirus, COVID-19, was identified in Wuhan, China and has subsequently spread globally. This global pandemic has disrupted business operations, 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 the changes in the severity of the virus in these countries and localities. These restrictions, including travel and curtailment of other activity, negatively impact our ability to conduct business. Although some of these restrictions have been lifted or scaled back, a recent resurgence of COVID-19 has resulted in the reimposition of certain restrictions and may lead to other restrictions being implemented in response to efforts to reduce the spread of the virus. These varying and changing events have caused many of the projects we anticipated to begin in 2020 to be delayed to later in 2020 and others to be delayed further into 2021 and 2022. 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 next year and beyond. Additionally, out of concern for our employees, even where restrictions permit employees to return to our offices and worksites, we have 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.

Beginning in April 2020, as part of the Company’s response to the impact of the COVID-19 pandemic on its business, the Company has taken a number of cash conservation and cost reduction measures which include:

temporary unpaid furloughs of certain employees:

temporarily deferring the monthly fee paid to BRPI Executive Consulting, LLC for the services of our Chief Executive Officer by 50%;

deferrals of the base salaries of our Chief Strategy Officer by 50%, Chief Financial Officer by 30% and our Senior Vice President of The Babcock & Wilcox Company by 30%;

suspension of our 401(k) company match for U.S. employees for the remainder of 2020;

approval by the Company’s Board for a temporary deferral of 50% of the cash compensation payable to non-employee directors under the Company’s board compensation program to be paid during the first quarter of 2021;

temporary rent payment deferrals related to leased facilities located in the U.S., Canada, Italy and Denmark;

utilizing options for government loans and programs in the U.S. and abroad that are appropriate and available; and

deferring, in accordance with the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") signed into law in March 2020, the Pension Plan contribution payments of $5.5 million each for the 2020 Plan year that would have been made on April 15, 2020, July 15, 2020 and October 15, 2020, respectively. In addition, we elected to defer the contribution payments of $1.1 million for the 2018 Plan year and $23.7 million for the 2019 Plan year that were both due on September 15, 2020. Per the 2019 Plan year waiver received on October 1, 2020, the $23.7 million deferred for the 2019 Plan year will now be funded over the next five years.

Based upon the terms of the A&R Credit Agreement and the cash conservation and cost reduction measures taken to date, the Company is projecting sufficient liquidity to fund future operations and to meet its obligations as they become due for at least one year following the date that these Condensed Consolidated Financial Statements are issued. As a result, the Company has concluded that conditions and events, considered in the aggregate, no longer raise substantial doubt about the entity’s ability to continue as a going concern.

NOTE 2 – EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share of our common stock, net of non-controlling interest:

Three months ended March 31,
(in thousands, except per share amounts) 2020 2019
Loss from continuing operations $ (33,439 ) $ (49,765 )
Income from discontinued operations, net of tax 1,913
—
Net loss attributable to stockholders $ (31,526 ) $ (49,765 )

Weighted average shares used to calculate basic and diluted earnings per share ⁽¹⁾
46,403
18,359

Basic and diluted loss per share - continuing operations $ (0.72 ) $ (2.71 )
Basic and diluted earnings per share - discontinued operations 0.04
—
Basic and diluted loss per share $ (0.68 ) $ (2.71 )



	Three months ended September 30,					Nine months ended September 30,
(in thousands, except per share amounts)	2020		2019			2020			2019
Income (loss) from continuing operations	$	34,724	$	(56,955	)	$	(16,706	)	$	(135,054	)
Income (loss) from discontinued operations, net of tax	—		—			1,800			694
Net income (loss) attributable to stockholders	$	34,724	$	(56,955	)	$	(14,906	)	$	(134,360	)

Weighted average shares used to calculate basic earnings (loss) per share ⁽¹⁾	49,478		40,879			47,585			25,950
Dilutive effect of stock options, restricted stock and performance units	578		—			—			—
Weighted average shares used to calculate diluted earnings (loss) per share	50,056		40,879			47,585			25,950

Basic earnings (loss) per share
Continuing operations	$	0.70	$	(1.39	)	$	(0.35	)	$	(5.21	)
Discontinued operations	—		—			0.04			0.03
Basic earnings (loss) per share	$	0.70	$	(1.39	)	$	(0.31	)	$	(5.18	)

Diluted earnings (loss) per share
Continuing operations	$	0.69	$	(1.39	)	$	(0.35	)	$	(5.21	)
Discontinued operations	—		—			0.04			0.03
Diluted earnings (loss) per share	$	0.69	$	(1.39	)	$	(0.31	)	$	(5.18	)

⁽¹⁾ Weighted average shares used to calculate basic and diluted earnings (loss) per share reflect the bonus element for the 2019 Rights Offering on July 23, 2019 as described below and the one-for-ten reverse stock split on July 24, 2019

In July 2019, the Company completed ~~the 2019 Rights Offering~~a rights offering to existing common ~~stockholders.~~stockholders (the "2019 Rights Offering"). Because the rights issuance was offered to all existing stockholders at an exercise price that was less than the fair value of ~~the stock,~~our Common Stock, as of such time, the weighted average shares outstanding and basic and diluted earnings (loss) per share were adjusted retroactively to reflect the bonus element of the rights offering for all periods presented by a factor of 1.0875. Weighted average shares, prior to giving effect to the 2019 Rights Offering, in the three and nine months ended ~~March 31,~~September 30, 2019 was ~~16,881.~~8,140 and 13,938, respectively.

Because we incurred a net loss in the ~~three~~nine months ended ~~March 31,~~September 30, 2020 and in the three and nine months ended September 30, 2019, basic and diluted shares are the same.

If we had net income in the nine months ended September 30, 2020, diluted shares would include an additional 422.3 thousand shares. If we had net income in the three and nine months ended ~~March 31, 2020,~~September 30, 2019, diluted shares would include an additional ~~0.5 million shares.~~141.3 thousand and 71.0 thousand shares, respectively.

We excluded ~~0.5~~1.3 million and 0.3 million shares related to stock options from the diluted share calculation for the nine months ended September 30, 2020 and 2019, respectively, because their effect would have been anti-dilutive. We excluded 1.1 million and 0.3 million shares related to stock options from the diluted share calculation for the three months ended ~~March 31,~~September 30, 2020 and 2019, respectively, because their effect would have been anti-dilutive.

NOTE 3 – SEGMENT REPORTING

Our operations are assessed based on three reportable segments ~~summarized~~which changed in 2020 as ~~follows:~~part of the Company's strategic, market-focused organizational and re-branding initiative to accelerate growth and provide stakeholders improved visibility into our renewable and environmental growth platforms. Segment results for all periods have been restated for comparative purposes.

~~Babcock & Wilcox~~B&W Renewable segment: ~~focused on~~cost-effective technologies for efficient and environmentally sustainable power and heat generation, including waste-to-energy, biomass energy and black liquor systems for the ~~supply of,~~pulp and ~~aftermarket services, for steam-generating, environmental and auxiliary equipment~~paper industry. The segment's leading technologies support a circular economy, diverting waste from landfills to use for power generation and ~~other industrial applications.~~replacing fossil fuels, while recovering metals and reducing emissions.

~~Vølund & Other Renewable~~B&W Environmental segment: ~~focused on~~full suite of best-in-class emissions control and environmental technology solutions for utility and industrial steam generation applications around the ~~supply of steam-generating~~world. The segment's broad experience includes systems ~~environmental~~for cooling, ash handling, particulate control, nitrogen oxides and ~~auxiliary equipment~~sulfur dioxides removal, chemical looping for carbon control, and ~~operations and maintenance services for the waste-to-energy and biomass power generation industries.~~mercury control.

~~SPIG~~B&W Thermal segment: ~~focused on~~steam generation equipment, aftermarket parts, construction, maintenance and field services for plants in the ~~supply~~power generation, oil and gas, and industrial sectors. The segment has an extensive global base of ~~custom-engineered cooling systems~~installed equipment for ~~steam~~utilities and general industrial applications ~~along with related aftermarket services.~~including refining, petrochemical, food processing, metals and others.

Revenues exclude eliminations of revenues generated from sales to other segments or to other product lines within the segment. The primary component of the Babcock & Wilcox segment elimination is revenue associated with construction services. The primary component of total eliminations is associated with Babcock & Wilcox segment construction services provided to the SPIG segment. An analysis of our operations by segment is as follows:

Three months ended March 31,
(in thousands) 2020 2019
Revenues:
Babcock & Wilcox segment
Retrofits $ 29,648
$ 30,674
New build utility and environmental 6,551
68,907
Aftermarket parts and field engineering services 63,690
63,087
Industrial steam generation 23,557
47,010
Eliminations (1,490 ) (21,120 )
121,956
188,558
Vølund & Other Renewable segment
Renewable new build and services 11,813
29,533
Operations and maintenance services 3,498
560
Eliminations (2 ) (561 )
15,309
29,532
SPIG segment
New build cooling systems 7,002
21,006
Aftermarket cooling system services 4,339
8,171
Eliminations (4 ) (275 )
11,337
28,902

Eliminations (48 ) (15,056 )
$ 148,554
$ 231,936



	Three months ended September 30,						Nine months ended September 30,
(in thousands)	2020			2019			2020			2019
Revenues:
B&W Renewable segment
B&W Renewable	$	21,253		$	22,981		$	70,657		$	70,487
Vølund	17,809			28,311			47,913			88,414
	39,062			51,292			118,570			158,901
B&W Environmental segment
B&W Environmental	11,841			31,187			35,289			165,273
SPIG	10,323			9,810			32,510			62,047
GMAB	3,098			4,039			8,555			7,165
	25,262			45,036			76,354			234,485
B&W Thermal segment
B&W Thermal	70,025			108,157			223,920			315,587
	70,025			108,157			223,920			315,587

Eliminations	(1,836		)	(5,841		)	(2,380		)	(30,278		)
	$	132,513		$	198,644		$	416,464		$	678,695

1113

The presentation of the components of our adjusted EBITDA in the table below is consistent with the way our chief operating decision maker reviews the results of our operations and makes strategic decisions about our business. Items such as gains or losses on asset sales, ~~MTM~~mark to market ("MTM") pension adjustments, restructuring and spin-off costs, impairments, losses on debt extinguishment, costs related to financial consulting required under our U.S. Revolving Credit Facility and other costs that may not be directly controllable by segment management are not allocated to the segment.

Adjusted EBITDA for each segment is presented below with a reconciliation to ~~loss before~~net income ~~tax.~~(loss) attributable to stockholders.


	Three months ended March 31,						Three months ended September 30,						Nine months ended September 30,
(in thousands)	2020			2019			2020			2019			2020			2019
Adjusted EBITDA ⁽¹⁾
Babcock & Wilcox segment	$	10,654		$	9,089
Vølund & Other Renewable segment	(3,293		)	(8,789		)
SPIG segment	(1,192		)	658
B&W Renewable segment							$	23,575		$	(615	)	$	22,003		$	(4,185	)
B&W Environmental segment							1,078			1,771			(137		)	2,453
B&W Thermal segment							7,255			12,871			22,676			34,994
Corporate	(4,143		)	(4,591		)	(4,916		)	(3,059		)	(12,864		)	(16,973		)
Research and development costs	(1,341		)	(743		)	(1,355		)	(828		)	(3,927		)	(2,281		)
	685			(4,376		)	25,637			10,140			27,751			14,008

Restructuring activities and spin-off transaction costs	(1,951		)	(6,079		)
Restructuring activities							(2,396		)	(2,556		)	(6,739		)	(9,571		)
Financial advisory services	(929		)	(3,958		)	(1,650		)	(1,213		)	(3,161		)	(8,368		)
Settlement cost to exit Vølund contract ⁽²⁾	—			(6,575		)
Settlement cost to exit B&W Renewable contract ⁽¹⁾							—			—			—			(6,575		)
Advisory fees for settlement costs and liquidity planning	(2,614		)	(3,077		)	(1,387		)	(2,787		)	(5,156		)	(7,445		)
Litigation legal costs	(696		)	—			(809		)	(475		)	(1,757		)	(475		)
Stock compensation	(712		)	(591		)	(1,175		)	(1,271		)	(3,074		)	(2,072		)
Loss from business held for sale	(788		)	—			(93		)	—			(411		)	—
Depreciation & amortization	(4,208		)	(7,306		)	(4,056		)	(5,281		)	(12,296		)	(19,123		)
Gain on asset disposals, net	915			—			3			266			916			224
Operating loss	(10,298		)	(31,962		)
Operating income (loss)							14,074			(3,177		)	(3,927		)	(39,397		)
Interest expense, net	(22,051		)	(10,575		)	(12,036		)	(29,351		)	(49,346		)	(66,562		)
Loss on debt extinguishment							—			—			(6,194		)	(3,969		)
Loss on sale of business							—			—			(108		)	(3,601		)
Net pension benefit before MTM	7,536			3,428			7,328			3,589			22,314			10,350
MTM loss from benefit plans	—			(398		)	—			(18		)	—			(1,278		)
Foreign exchange	(9,326		)	(10,153		)	24,963			(26,735		)	22,749			(27,382		)
Other – net	(206		)	420			(276		)	(255		)	(3,068		)	208
Loss before income tax (benefit) expense	$	(34,345	)	$	(49,240	)
Total other income (expense)							19,979			(52,770		)	(13,653		)	(92,234		)
Income (loss) before income tax (benefit) expense							34,053			(55,947		)	(17,580		)	(131,631		)
Income tax (benefit) expense							(502		)	1,043			(467		)	3,560
Income (loss) from continuing operations							34,555			(56,990		)	(17,113		)	(135,191		)
Income from discontinued operations, net of tax							—			—			1,800			694
Net income (loss)							34,555			(56,990		)	(15,313		)	(134,497		)
Net loss attributable to non-controlling interest							169			35			407			137
Net income (loss) attributable to stockholders							$	34,724		$	(56,955	)	$	(14,906	)	$	(134,360	)

⁽¹⁾Adjusted EBITDA, for the three months ended March 31, 2019, excludes stock compensation that was previously included in segment results and totals $0.1 million in the Babcock & Wilcox segment, $0.1 million in the Vølund & Other Renewable segment, and $0.4 million in Corporate. Beginning in the third quarter of 2019, stock compensation is no longer considered in Adjusted EBITDA for purposes of managing the business, and prior periods have been adjusted to be presented on a comparable basis.


⁽²⁾⁽¹⁾	In March 2019, we entered into a settlement in connection with an additional ~~European~~B&W Renewable waste-to-energy EPC contract, for which notice to proceed was not given and the contract was not started. The settlement ~~eliminates~~eliminated our obligations to act, and our risk related to acting, as the prime EPC should the project have moved forward.

We do not separately identify or report our assets by segment as our chief operating decision maker does not consider assets by segment to be a critical measure by which performance is measured.

NOTE 4 – REVENUE RECOGNITION AND CONTRACTS

Revenue Recognition

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

Revenue from goods and services transferred to customers at a point in time, which includes certain aftermarket parts and services primarily in the ~~Babcock & Wilcox~~B&W Thermal segment, accounted for ~~31%~~34% and ~~18%~~25% for the three months ended September 30, 2020 and 2019, respectively and 32% and 20% of our revenue for the ~~three~~nine months ended ~~March 31,~~September 30, 2020 and 2019, respectively. Revenue on these contracts is recognized when the customer obtains control of the asset, which is generally upon shipment or delivery and acceptance by the customer. Standard commercial payment terms generally apply to these sales.

Revenue from products and services transferred to customers over time accounted for ~~69%~~66% and ~~82%~~75% of our revenue for the three months ended ~~March 31,~~September 30, 2020 and 2019, respectively and 68% and 80% of our revenue for the nine months ended September 30, 2020 and 2019, respectively. Revenue recognized over time primarily relates to customized, engineered solutions and construction services from all three of our segments. Typically, revenue is recognized over time using the cost-to-cost input method that uses costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying our performance obligations. Incurred cost represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contract costs include labor, material, overhead and, when appropriate, SG&A expenses. Variable consideration in these contracts includes estimates of liquidated damages, contractual bonuses and penalties, and contract modifications. Substantially all of our revenue recognized over time under the cost-to-cost input method contains a single performance obligation as the interdependent nature of the goods and services provided prevents them from being separately identifiable within the contract. 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 and have in our ~~Vølund & Other~~B&W Renewable segment. Refer to Note 3 for our disaggregation of revenue by product line.

As of ~~March 31,~~September 30, 2020, we have estimated the costs to complete all of our in-process contracts in order to estimate revenues using a cost-to-cost input method. However, it is possible that current estimates could change due to unforeseen events, which could result in adjustments to overall contract costs. The risk on fixed-priced contracts is that revenue from the customer does not cover increases in our costs. It is possible that current estimates could materially change for various reasons, including, but not limited to, fluctuations in forecasted labor productivity, transportation, fluctuations in foreign exchange rates or steel and other raw material prices. Increases in costs on our fixed-price contracts could have a material adverse impact on our consolidated financial condition, results of operations and cash flows. Alternatively, reductions in overall contract costs at completion could materially improve our consolidated financial condition, results of operations and cash flows. Variations from estimated contract performance could result in material adjustments to operating results for any fiscal quarter or year.

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

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

We generally recognize sales commissions in equal proportion as revenue is recognized. Our sales agreements are structured such that commissions are only payable upon receipt of payment, thus a capitalized asset at contract inception ~~that~~ has not been recorded for sales ~~commission~~commissions as a liability has not been incurred at that point.

1315

Contract Balances

The following represents the components of our contracts in progress and advance billings on contracts included in our Condensed Consolidated Balance Sheets:


(in thousands)	March 31, 2020		December 31, 2019			$ Change			% Change		September 30, 2020		December 31, 2019			$ Change			% Change
Contract assets - included in contracts in progress:
Costs incurred less costs of revenue recognized	$	29,877	$	29,877		$	—		—	%	$	26,359	$	29,877		$	(3,518	)	(12	)%
Revenues recognized less billings to customers	53,681		61,702			(8,021		)	(13	)%	47,523		61,702			(14,179		)	(23	)%
Contracts in progress	$	83,558	$	91,579		$	(8,021	)	(9	)%	$	73,882	$	91,579		$	(17,697	)	(19	)%
Contract liabilities - included in advance billings on contracts:
Billings to customers less revenues recognized	$	66,485	$	76,468		$	(9,983	)	(13	)%	$	52,410	$	76,468		$	(24,058	)	(31	)%
Costs of revenue recognized less cost incurred	1,565		(1,181		)	2,746			(233	)%	1,636		(1,181		)	2,817			(239	)%
Advance billings on contracts	$	68,050	$	75,287		$	(7,237	)	(10	)%	$	54,046	$	75,287		$	(21,241	)	(28	)%

Net contract balance	$	15,508	$	16,292		$	(784	)	5	%	$	19,836	$	16,292		$	3,544		22	%

Accrued contract losses	$	3,545	$	6,139		$	(2,594	)	(42	)%	$	845	$	6,193		$	(5,348	)	(86	)%

Backlog

On ~~March 31,~~September 30, 2020 we had ~~$501.0~~$509.0 million of remaining performance obligations, which we also refer to as total backlog. We expect to recognize approximately ~~35.6%~~18.3%, ~~28.1%~~34.6% and ~~36.3%~~47.1% of our remaining performance obligations as revenue in the remainder of 2020, 2021 and thereafter, respectively.

Changes in Contract Estimates

In the three and nine months ended ~~March 31,~~September 30, 2020 and 2019, we recognized changes in estimated gross profit related to long-term contracts accounted for on the ~~percentage-of-completion~~over time basis, which are summarized as follows:


	Three months ended March 31,						Three months ended September 30,						Nine months ended September 30,
(in thousands)	2020			2019			2020			2019			2020			2019
Increases in gross profits for changes in estimates for over time contracts(1)	$	8,182		$	9,525		$	27,237		$	10,279		$	34,453		$	25,089
Decreases in gross profits for changes in estimates for over time contracts	(4,845		)	(9,396		)	(8,058		)	(13,248		)	(13,003		)	(35,892		)
Net changes in gross profits for changes in estimates for over time contracts	$	3,337		$	129		$	19,179		$	(2,969	)	$	21,450		$	(10,803	)

⁽¹⁾ Increases in gross profits for changes in estimates for over time contracts reflects a non-recurring insurance loss recovery of $26.0 million in the three and nine months ended September 30, 2020.

~~Vølund~~B&W Renewable EPC Loss Contracts

We had six ~~Vølund~~B&W Renewable EPC contracts for renewable energy facilities in Europe that were loss contracts at December 31, 2017. The scope of these EPC (Engineer, Procure and Construct) contracts extended beyond our core technology, products and services. In addition to these loss contracts, we have one remaining extended scope contract in our ~~Vølund~~Babcock & ~~Other Renewables~~Wilcox Renewable segment which turned into a loss contract in the fourth quarter of 2019.

In the three months ended ~~March 31,~~September 30, 2020 and 2019, we recorded ~~$0.1~~$1.1 million and ~~$(4.1)~~$0.7 million in net ~~gains (losses),~~losses, respectively, inclusive of warranty expense as described in Note 10, resulting from changes in the estimated revenues and costs to complete the six European ~~Vølund~~B&W Renewable EPC loss contracts. In the three months ended ~~March 31,~~September 30, 2020 ~~and 2019,~~ we did not change our estimate of liquidated damages on these contracts and in the three months ended September 30, 2019, we reduced our estimate of liquidated damages on these contracts by $1.8 million.

In the nine months ended September 30, 2020 and 2019, we recorded $1.4 million and $8.0 million in net losses, respectively, inclusive of warranty expense as described in Note 10, resulting from changes in the estimated revenues and costs to

complete the six European B&W Renewable EPC loss contracts. In the nine months ended September 30, 2020 we did not change our estimate of liquidated damages on these contracts and in the nine months ended September 30, 2019, we reduced our estimate of liquidated damages on these contracts by $2.2 million. Total anticipated liquidated damages associated with these six contracts were ~~$86.5~~$92.7 million and ~~$88.6~~$86.3 million at ~~March 31,~~September 30, 2020 and ~~March 31,~~September 30, 2019, respectively.

~~£70~~ £70 million ($91.5 million) on April 5, 2019 in exchange for limiting and further defining our obligations under the second and fifth loss contracts, including waiver of the rejection and termination rights on the fifth loss contract that could have resulted in repayment of all monies paid to us and our former civil construction partner (up to approximately $144 million), and requirement to restore the property to its original state if the customer exercised this contractual rejection right. On the fifth loss contract, we agreed to continue to support construction services to complete certain key systems of the plant by May 31, 2019, for which penalty for failure to complete these systems is limited to the unspent portion of our quoted cost of the activities through that date. The settlement eliminated all historical claims and remaining liquidated damages. In accordance with the settlement, we have no further obligation related to the fifth loss contract other than customary warranty of core products if the plant is used as a biomass plant as designed. We estimated the portion of this settlement related to waiver of the rejection right on the fifth loss contract was $81.1 million, which was recorded in the fourth quarter of 2018 as a reduction in the selling price. We are still pursuing insurance recoveries and claims against subcontractors. For the second loss contract, the settlement limited the remaining performance obligations and settled historic claims for nonconformance and delays, and we turned over the plant in May 2019, and subsequently began the operations and maintenance contract to operate this plant.

As of ~~March 31,~~September 30, 2020, the status of these six ~~Vølund~~B&W Renewable EPC loss contracts was as follows:

The first contract, a waste-to-energy plant in Denmark, became a loss contract in the second quarter of 2016. As of ~~March 31,~~September 30, 2020, this contract was approximately ~~99%~~100% complete and construction activities are complete as of the date of this report. The unit became operational during the second quarter of 2017. A settlement was reached with the customer to achieve takeover on January 31, 2019, after which only punch list items and other agreed to remediation items remain, most of which are expected to be performed during the customer's scheduled maintenance outages. As of January 31, 2019, the contract is in the warranty phase. During the three and nine months ended ~~March 31,~~September 30, 2020, we ~~did not recognize~~recognized additional contract ~~losses.~~losses of $1.1 million and $1.9 million, respectively, inclusive of warranty. Our estimate at completion as of ~~March 31,~~September 30, 2020 includes ~~$8.9~~$9.5 million of total estimated liquidated damages. As of ~~March 31,~~September 30, 2020, ~~the~~we expect no future charges due to this contract and, accordingly, have no reserve for estimated contract ~~losses recorded in~~ ~~other accrued liabilities~~ ~~in our Consolidated Balance Sheets was $0.7 million. In~~losses. During the three and nine months ended ~~March 31,~~September 30, 2019, we ~~did not recognize further charges~~recognized additional contract losses of $0.3 million and $2.3 million, respectively, on the ~~contract.~~contract as a result of identifying additional remediation costs in the third quarter of 2019. As of ~~March 31,~~September 30, 2019, this contract had ~~$3.6~~$1.6 million of accrued losses and was ~~97%~~approximately 98% complete.

The second contract, a biomass plant in the United Kingdom, became a loss contract in the fourth quarter of 2016. As of ~~March 31,~~September 30, 2020, this contract was approximately 100% complete. Trial operations began in April 2019 and takeover by the customer occurred effective May 2019. This project is subject to the March 29, 2019 settlement agreement described above. During the three months ended ~~March 31,~~September 30, 2020, we did not recognize additional contract losses and during the nine months ended September 30, 2020, we recognized additional contract losses of $0.1 million on this contract as a result of additional punch list and other commissioning costs. Our estimate at completion as of ~~March 31,~~September 30, 2020 includes ~~$18.7~~$20.0 million of total estimated liquidated damages due to schedule delays. Our estimates at completion as of ~~March 31,~~September 30, 2020 and 2019 also include contractual bonus opportunities for guaranteed higher power output and other performance metrics. As of ~~March 31,~~September 30, 2020, we expect no future charges due to this contract and, accordingly, have no reserve for estimated contract losses. In the three and nine months ended ~~March 31,~~September 30, 2019, we recognized contract losses of ~~$0.8~~$0.7 million and $2.6 million, respectively, on this contract as a result of repairs required during startup commissioning activities, additional expected punch list and other commissioning costs, and changes in construction cost estimates. As of ~~March 31,~~September 30, 2019, this contract had ~~$1.4~~$0.2 million of accrued losses and was ~~98%~~approximately 100% complete.

The third contract, a biomass plant in Denmark, became a loss contract in the fourth quarter of 2016. As of ~~March 31,~~September 30, 2020, this contract was approximately 100% complete. Warranty began in March 2018, when we agreed to a partial takeover with the customer, and we agreed to a full takeover by the customer at the end of

October 2018, when we also agreed to a scheduled timeline for remaining punch list activities to be completed around the customer's future planned outages. During the three and nine months ended ~~March 31,~~September 30, 2020, we did not recognize additional contract losses. Our estimate at completion as of ~~March 31,~~September 30, 2020 includes ~~$6.6~~$7.1 million of total estimated liquidated damages due to schedule delays. As of ~~March 31,~~September 30, 2020, we expect no future charges due to this contract and, accordingly, we have no reserve for estimated contract losses. In the three and nine months ended ~~March 31,~~September 30, 2019, we did not recognize additional contract losses. As of ~~March 31,~~September 30, 2019, this contract had ~~$0.3 million of accrued~~no reserve for estimated contract losses and was ~~99%~~approximately 100% complete.

The fourth contract, a biomass plant in the United Kingdom, became a loss contract in the fourth quarter of 2016. As of ~~March 31,~~September 30, 2020, this contract was approximately 100% complete. Trial operations began in November 2018 and takeover by the customer occurred in February 2019, after which only final performance testing, for which performance metrics have been previously demonstrated, and punch list and other agreed upon items remain, some of which are expected to be performed during the customer's scheduled maintenance outages. During the three

and nine months ended ~~March 31,~~September 30, 2020, we recognized additional contract charges of $0.1 million and $0.3 million, respectively, on this contract due to changes in cost to complete remaining punch list and other close out items. Our estimate at completion as of ~~March 31,~~September 30, 2020 includes ~~$20.4~~$21.8 million of total estimated liquidated damages due to schedule delays. Our estimates at completion as of ~~March 31,~~September 30, 2020 also include contractual bonus opportunities for guaranteed higher power output and other performance metrics. As of ~~March 31,~~September 30, 2020, we expect no future charges due to this contract and, accordingly, we have no reserve for estimated contract losses. In the three and nine months ended ~~March 31,~~September 30, 2019, we recognized additional contract losses of ~~$0.3~~$0.4 million and $4.8 million, respectively, on this contract due to changes in estimated bonus revenue and cost to complete remaining punch list, remediation of certain performance guarantees and other close out items. Our estimates at completion as of ~~March 31,~~September 30, 2019 also ~~include~~included contractual bonus opportunities for guaranteed higher power ~~output.~~output and other performance metrics. As of ~~March 31,~~September 30, 2019, this contract had ~~$0.8~~$0.3 million of accrued losses and was approximately 99% complete.

The fifth contract, a biomass plant in the United Kingdom, became a loss contract in the second quarter of 2017. As of ~~March 31,~~September 30, 2020, this contract was approximately ~~99%~~100% complete. This project is subject to the March 29, 2019 settlement agreement described above. We estimated the portion of this settlement related to waiver of the rejection right on the fifth loss contract was $81.1 million, which was recorded in the fourth quarter of 2018 as a reduction in the selling price. Under the settlement, our remaining performance obligations were limited to construction support services to complete certain key systems of the plant by May 31, 2019. The settlement also eliminated all historical claims and remaining liquidated damages. Remaining items at ~~March 31,~~September 30, 2020 are primarily related to punch list and other finalization items for the key systems under the terms of the settlement and subcontract close outs. During the ~~three~~nine months ended ~~March 31,~~September 30, 2020, our estimated loss on the contract improved by ~~$0.3~~$0.4 million. Our estimate at completion as of ~~March 31,~~September 30, 2020, includes ~~$13.3~~$14.3 million of total estimated liquidated damages due to schedule delays. As of ~~March 31,~~September 30, 2020, ~~the~~we expect no future charges due to this contract and, accordingly, we have no reserve for estimated contract ~~losses recorded in other accrued liabilities in our Consolidated Balance Sheets was $0.9 million.~~losses. During the three and nine months ended ~~March 31,~~September 30, 2019, ~~we recognized~~our estimated loss on the contract ~~losses~~improved by $0.9 million and $2.6 million, respectively, inclusive of ~~$2.3 million due to a change in the estimate for subcontractor close out costs.~~warranty. As of ~~March 31,~~September 30, 2019, this contract had ~~$15.8~~$3.4 million of accrued losses and was ~~90%~~approximately 98% complete.

The sixth contract, a waste-to-energy plant in the United Kingdom, became a loss contract in the second quarter of 2017. As of ~~March 31,~~September 30, 2020, this contract was approximately ~~99%~~100% complete. Trial operations began in December 2018 and customer takeover occurred on January 25, 2019, after which only final performance testing, for which performance metrics have been previously demonstrated, and punch list and other agreed upon items remain, some of which are expected to be performed during the customer's scheduled maintenance outages.2019. The contract is in the warranty phase. During the three and nine months ended ~~March 31,~~September 30, 2020, ~~we did not recognize additional~~our estimated loss on the contract ~~losses.~~improved by $0.1 million and $0.5 million, respectively, inclusive of warranty. Our estimate at completion as of ~~March 31,~~September 30, 2020 includes ~~$18.7~~$20.0 million of total estimated liquidated damages due to schedule delays. As of ~~March 31,~~September 30, 2020, the reserve for estimated contract losses recorded in other accrued liabilities in our Consolidated Balance Sheets was ~~$0.2~~$0.1 million. In the three and nine months ended ~~March 31,~~September 30, 2019, we revised our revenue and costs at completion for this contract, which resulted in additional contract losses of ~~$0.8~~$0.1 million and $1.0 million, respectively, related to matters encountered in completing punch list items. As of ~~March 31,~~September 30, 2019, this contract had ~~$0.6~~$0.1 million of accrued losses and was ~~98%~~approximately 100% complete.

In the fourth quarter of 2019, one of our other ~~Vølund renewable~~B&W Renewable energy contracts turned into a loss contract (estimated loss of $0.2 million) due to the extension of time and other start-up costs associated with the completion of the trial operations run and turnover to the client. This contract was turned over to the client in October 2019. During the three and nine months ended ~~March 31,~~September 30, 2020, we ~~did not recognize~~recognized additional contract ~~losses and during~~charges of $3.0 million on this contract due to increase of

project close out costs. During the three and nine months ended ~~March 31,~~September 30, 2019, we recognized additional charges of ~~$0.2~~$1.5 million and $3.0 million, respectively, on this contract.

In September 2017, we identified the failure of a structural steel beam on the fifth contract, which stopped work in the boiler building and other areas pending corrective actions to stabilize the structure. Provisional regulatory approval to begin structural repairs to the failed beam was obtained on March 29, 2018 (later than previously estimated), and full approval to proceed with repairs was obtained in April 2018. Full access to the site was obtained on June 6, 2018 after completion of the repairs to the structure. 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 contracts, and although no structural failure occurred on these two other contracts, work was also stopped in certain restricted areas while we added reinforcement to the structures, which also resulted in delays that lasted until late January 2018. The total costs related to the structural steel issues on these three contracts, including contract delays, are estimated to be approximately $36 million, which is included in the ~~March 31,~~September 30, 2020 estimated losses at completion for these three contracts. We are continuing to aggressively pursue recovery of this cost ~~under various applicable insurance policies and~~ from responsible subcontractors. In June 2019, we agreed in principle to a settlement agreement under one insurance policy related to recover GBP 2.8 million ($3.5 million) of certain losses on the fifth project; which our insurer paid us in September 2019.

In October 2020, we entered into a settlement agreement with an insurer under which we received a settlement of $26.0 million to settle claims in connection with five of six European B&W Renewable EPC loss contracts disclosed above. We recognized this non-recurring loss recovery of $26.0 million as a reduction of our Cost of operations in our Condensed Consolidated Statements of Operations and recorded the insurance receivable in Accounts receivable - other in our Condensed Consolidated Balance Sheets at September 30, 2020 because we determined the loss recovery was probable as of such date. On October 23, 2020, we received $26.0 million of gross proceeds under the settlement agreement. As required by the Company’s U.S. Revolving Credit Facility, 50% of the net proceeds (gross proceeds less costs) or approximately $8.0 million of the settlement received by the Company was applied as a permanent reduction of the U.S. Revolving Credit Facility in October 2020.

The Company is continuing to pursue other additional potential ~~insurance recoveries and~~ claims where appropriate and available.

Other ~~Vølund~~B&W Renewable Contract Settlement

In March 2019, we entered into a settlement in connection with an additional European waste-to-energy EPC contract, for which notice to proceed was not given and the contract was not started. We made a payment of £5.0 million (approximately $6.6 million) on April 5, 2019 for the settlement which eliminated our obligations to act, and our risk related to acting, as the prime EPC should the project have moved forward.

~~SPIG's~~B&W Environmental Loss Contracts

At ~~March 31,~~September 30, 2020, ~~SPIG~~the B&W Environmental segment had two significant loss contracts, each of which are contracts for a dry cooling system for a gas-fired power plant in the United States. In the three and nine months ended ~~March 31,~~September 30, 2020, ~~and~~we recognized $1.3 million of additional charges on these contracts. In the three months ended September 30, 2019, we did not recognize additional charges on these ~~contracts.~~contracts and in the nine months ended September 30, 2019, our estimated loss on the second contract improved by $0.7 million, respectively, due to recovery of tariffs.

At ~~March 31,~~September 30, 2020, the design and procurement are substantially complete, and construction is nearing completion on the first loss contract. Overall, the contract is approximately 100% complete with only performance testing remaining which ~~will~~is anticipated to be complete in the ~~third~~fourth quarter of 2020. As of ~~March 31,~~September 30, 2020, we have no reserve for estimated contract losses. As of ~~March 31,~~September 30, 2019, this contract had accrued losses of ~~$2.0~~$0.5 million and was ~~86%~~97% complete. Construction is being performed by the ~~Babcock & Wilcox~~B&W Thermal segment, but the contract loss is included in the ~~SPIG~~B&W Environmental segment.

At ~~March 31,~~September 30, 2020, the design and procurement are nearing completion on the second loss contract. Overall, the contract is approximately ~~89%~~97% complete and final completion is expected to be in the ~~third~~fourth quarter of 2020. As of ~~March 31,~~September 30, 2020, the reserve for estimated contract losses recorded in other accrued liabilities in our Condensed Consolidated Balance Sheets was ~~$0.8~~$0.2 million related to this contract. As of ~~March 31,~~September 30, 2019, this contract had accrued losses of $0.1 million and was ~~97%~~98% complete. The percent completion declined at ~~March 31,~~September 30, 2020 compared to the prior year period due to an increase in additional contract charges of $3.3 million recognized in late 2019 due to issues with the seismic design and fans.

NOTE 5 – INVENTORIES

The components of inventories are as follows:


(in thousands)	March 31, 2020		December 31, 2019		September 30, 2020		December 31, 2019
Raw materials and supplies	$	40,659	$	42,685	$	47,349	$	42,685
Work in progress	7,224		7,502		6,710		7,502
Finished goods	12,830		12,916		12,907		12,916
Total inventories	$	60,713	$	63,103	$	66,966	$	63,103

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

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


(in thousands)	March 31, 2020		December 31, 2019		September 30, 2020		December 31, 2019
Land	$	2,994	$	2,998	$	3,053	$	2,998
Buildings	83,548		84,005		84,262		84,005
Machinery and equipment	152,021		154,016		153,592		154,016
Property under construction	7,063		6,204		6,333		6,204
	245,626		247,223		247,240		247,223
Less accumulated depreciation	180,844		180,562		187,587		180,562
Net property, plant and equipment	64,782		66,661		59,653		66,661
Finance lease	30,548		30,405		30,550		30,405
Less finance lease accumulated amortization	527		13		1,558		13
Net property, plant and equipment, and finance lease	$	94,803	$	97,053	$	88,645	$	97,053

NOTE 7 - GOODWILL

Goodwill is tested for impairment annually and when impairment indicators exist. During the third quarter of 2020, the Company completed an organizational and re-branding initiative, eliminating the legacy business unit structure and launching the B&W Renewable, B&W Environmental, and B&W Thermal brands, which we considered to be a triggering event and as a result, the Company reevaluated its operating segments and reporting units. Segment results for all periods have been restated for comparative purposes. Refer to Note 3 - Segment Reporting for further details on these changes.

Effective September 30, 2020, the previous Babcock & Wilcox and Babcock & Wilcox Construction Company reporting units became the B&W Company Thermal and B&W Construction Company reporting units, respectively, within the Babcock & Wilcox Thermal operating segment. The Company also identified the B&W Company Renewable and B&W Company Environmental reporting units related to the transfer of businesses from the former Babcock & Wilcox reporting unit to the Babcock & Wilcox Renewable and Babcock & Wilcox Environmental operating segments. Consequently, the Company re-allocated goodwill between the affected reporting units based on their relative fair values and compared the carrying value to the fair value of each impacted reporting unit.

In conjunction with the changes mentioned above, the Company performed a goodwill impairment test of the impacted reporting units on a before and after basis and based on the assessment, as of September 30, 2020, concluded that the fair value of the impacted reporting units exceeded their carrying values. Accordingly, no impairment was indicated during the third quarter of 2020.

1720

~~NOTE 7 - GOODWILL~~

The following summarizes the changes in the net carrying amount of goodwill as of ~~March~~December 31, ~~2020:~~2019 and September 30, 2020 after giving consideration to the reallocation of goodwill noted above:

(in thousands) Babcock & Wilcox Segment
Balance at December 31, 2019 $ 47,160
Currency translation adjustments (199 )
Balance at March 31, 2020 $ 46,961

Goodwill is tested for impairment annually and when impairment indicators exist. All of our remaining goodwill is related to the Babcock & Wilcox reporting unit and the Babcock & Wilcox Construction Company reporting unit, which are both included in the Babcock & Wilcox segment.



(in thousands)	B&W Renewable			B&W Environmental			B&W Thermal			Total
Balance at December 31, 2019	$	10,169		$	5,652		$	31,339		$	47,160
Currency translation adjustments	(5		)	(3		)	(16		)	(24		)
Balance at September 30, 2020	$	10,164		$	5,649		$	31,323		$	47,136

In the first quarter of 2020, our share price declined significantly, which we considered to be a triggering event for an interim goodwill assessment. We primarily attributed the significant decline in our share price to the current macroeconomic conditions and impacts COVID-19 will have on our operations. InBased on the interim ~~test, we compared the fair value~~assessment, as of the reporting unit to its carrying value as required by ASU 2017-04. Fair value was determined using the combination of a discounted cash flow method (income approach) and the guideline public company method (market comparable approach), weighted equally in determining the fair value. The market comparable approach estimates fair value using market multiples of various financial measures compared to a set of comparable public companies. Key Level 3 unobservable inputs in our valuation included cash flows and long-term growth rates reflective of management's forecasted outlook, and discount rates inclusive of risk adjustments consistent with current market conditions. A discount rate of 11.5% and 15.0% was used for the Babcock & Wilcox and Babcock & Wilcox Construction Company reporting units, respectively, which is based on the weighted average cost of capital using guideline public company data, factoring in current market data and company specific risk factors. As a result of the impairment test,March 31, 2020, no impairment was indicated during the ~~three months ended March 31,~~first quarter of 2020.

NOTE 8 – INTANGIBLE ASSETS

Our intangible assets are as follows:

(in thousands) March 31, 2020 December 31, 2019
Definite-lived intangible assets
Customer relationships $ 24,414
$ 24,440
Unpatented technology 14,884
14,917
Patented technology 2,596
2,598
Tradename 12,350
12,372
All other 9,238
9,225
Gross value of definite-lived intangible assets 63,482
63,552
Customer relationships amortization (18,886 ) (18,616 )
Unpatented technology amortization (5,609 ) (5,245 )
Patented technology amortization (2,507 ) (2,476 )
Tradename amortization (4,400 ) (4,257 )
All other amortization (9,053 ) (8,963 )
Accumulated amortization (40,455 ) (39,557 )
Net definite-lived intangible assets $ 23,027
$ 23,995
Indefinite-lived intangible assets
Trademarks and trade names $ 1,305
$ 1,305
Total intangible assets, net $ 24,332
$ 25,300



(in thousands)	September 30, 2020			December 31, 2019
Definite-lived intangible assets
Customer relationships	$	24,634		$	24,440
Unpatented technology	15,288			14,917
Patented technology	2,625			2,598
Tradename	12,706			12,372
All other	9,255			9,225
Gross value of definite-lived intangible assets	64,508			63,552
Customer relationships amortization	(19,352		)	(18,616		)
Unpatented technology amortization	(6,358		)	(5,245		)
Patented technology amortization	(2,571		)	(2,476		)
Tradename amortization	(4,686		)	(4,257		)
All other amortization	(9,155		)	(8,963		)
Accumulated amortization	(42,122		)	(39,557		)
Net definite-lived intangible assets	$	22,386		$	23,995
Indefinite-lived intangible assets
Trademarks and trade names	$	1,305		$	1,305
Total intangible assets, net	$	23,691		$	25,300

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


	Three months ended March 31,						Nine months ended September 30,
(in thousands)	2020			2019			2020			2019
Balance at beginning of period	$	25,300		$	30,793		$	25,300		$	30,793
Amortization expense	(895		)	(1,187		)	(2,564		)	(3,301		)
Currency translation adjustments and other	(73		)	(490		)	955			(1,060		)
Balance at end of the period	$	24,332		$	29,116		$	23,691		$	26,432

Amortization of intangible assets is included in cost of operations and SG&A in our Condensed Consolidated Statement of Operations but is not allocated to segment results.

Estimated future intangible asset amortization expense is as follows (in thousands):


	Amortization Expense		Amortization Expense
Year ending December 31, 2020	$	2,392	$	827
Year ending December 31, 2021	3,042		3,188
Year ending December 31, 2022	3,012		3,159
Year ending December 31, 2023	3,011		3,158
Year ending December 31, 2024	2,938		3,086
Year ending December 31, 2025	2,454		2,567
Thereafter	6,178		6,401

The circumstances leading to the first quarter interim goodwill assessment as described in Note 7 also triggered an evaluation for long-lived assets, including intangible assets. ~~We have~~The company performed an analysis as required by ASC 360-10-35 to assess the recoverability ~~test~~ of other long-lived assets ~~including intangible assets for the Vølund~~in its B&W Renewable and ~~SPIG~~B&W Environmental asset groups. With respect to these asset groups future cash flows were estimated over the expected remaining life of the assets, and the Company determined that, on an undiscounted basis, expected cash flows exceeded the carrying value of the asset groups, and no impairment was indicated during the ~~three months ended March 31,~~first quarter of 2020.

NOTE 9 – LEASES

The components of lease expense included on our Condensed Consolidated Statements of Operations were as follows:


		Three months ended March 31,							Three months ended September 30,						Nine months ended September 30,
(in thousands)	Classification	2020			2019			Classification	2020			2019			2020			2019
Operating lease expense:
Operating lease expense	Selling, general and administrative expenses	$	1,507		$	1,909		Selling, general and administrative expenses	$	1,433		$	1,569		$	4,329		$	5,067
Short-term lease expense	Selling, general and administrative expenses	188			2,861			Selling, general and administrative expenses	866			1,193			1,346			6,153
Variable lease expense⁽¹⁾	Selling, general and administrative expenses	776			112			Selling, general and administrative expenses	625			121			1,019			682
Total operating lease expense		$	2,471		$	4,882			$	2,924		$	2,883		$	6,694		$	11,902

Finance lease expense:
Amortization of right-of-use assets	Selling, general and administrative expenses	$	515		$	—		Selling, general and administrative expenses	$	517		$	—		$	1,546		$	—
Interest on lease liabilities	Interest expense	615			—			Interest expense	612			—			1,843			—
Total finance lease expense		$	1,130		$	—			$	1,129		$	—		$	3,389		$	—

Sublease income⁽²⁾	Other – net	$	(22	)	$	(10	)	Other – net	$	(22	)	$	(22	)	$	(65	)	$	(46	)
Net lease cost		$	3,579		$	4,872			$	4,031		$	2,861		$	10,018		$	11,856

⁽¹⁾Variable lease expense primarily consists of common area maintenance expenses paid directly to lessors of real estate leases.

⁽²⁾Sublease income excludes rental income from owned properties, which is not material.

1922

Other information related to leases is as follows:


(in thousands)	March 31, 2020			December 31, 2019			September 30, 2020			December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,400		$	6,578		$	4,275		$	6,578
Operating cash flows from finance leases	615			14			1,843			14
Financing cash flows from finance leases	(586		)	(12		)	(208		)	(12		)

Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	$	927		$	3,014		$	1,525		$	3,014
Finance leases	$	146		$	30,404		$	146		$	30,404

Weighted-average remaining lease term:
Operating leases (in years)	3.3			3.4			3.1			3.4
Finance leases (in years)	14.7			15.0			14.2			15.0
Weighted-average discount rate:
Operating leases	9.13		%	9.27		%	9.10		%	9.27		%
Finance leases	8.00		%	8.00		%	8.00		%	8.00		%

Amounts relating to leases were presented on our Condensed Consolidated Balance Sheets in the following line items:


(in thousands)
Assets:	Classification	March 31, 2020		December 31, 2019			Classification	September 30, 2020		December 31, 2019
Operating lease assets	Right-of-use assets	$	12,185	$	12,498		Right-of-use assets	$	10,272	$	12,498
Finance lease assets	Net property, plant and equipment, and finance lease	30,021		30,392			Net property, plant and equipment, and finance lease	28,992		30,392
Total non-current lease assets		$	42,206	$	42,890			$	39,264	$	42,890

Liabilities:
Current
Operating lease liabilities	Operating lease liabilities	$	4,346	$	4,323		Operating lease liabilities	$	3,968	$	4,323
Finance lease liabilities	Financing lease liabilities	787		(38		)	Financing lease liabilities	852		(38		)
Non-current
Operating lease liabilities	Non-current operating lease liabilities	8,092		8,388			Non-current operating lease liabilities	6,381		8,388
Finance lease liabilities	Non-current finance lease liabilities	30,358		30,454			Non-current finance lease liabilities	29,917		30,454
Total lease liabilities		$	43,583	$	43,127			$	41,118	$	43,127

2023

Future minimum lease payments required under non-cancellable leases as of ~~March 31,~~September 30, 2020 were as follows:


(in thousands)	Operating Leases			Finance Leases			Total			Operating Leases			Finance Leases			Total
2020 (excluding the three months ended March 31, 2020)	$	4,516		$	2,410		$	6,926
2020 (excluding the nine months ended September 30, 2020)										$	1,312		$	803		$	2,115
2021	3,946			3,277			7,223			4,246			3,277			7,523
2022	2,736			3,342			6,078			3,003			3,342			6,345
2023	1,832			3,407			5,239			1,992			3,408			5,400
2024	1,113			3,472			4,585			1,151			3,473			4,624
Thereafter	105			38,285			38,390			108			38,285			38,393
Total	$	14,248		$	54,193		$	68,441		$	11,812		$	52,588		$	64,400
Less imputed interest	(1,810		)	(23,048		)	(24,858		)	(1,463		)	(21,819		)	(23,282		)
Lease liability	$	12,438		$	31,145		$	43,583		$	10,349		$	30,769		$	41,118

In connection with the COVID-19 pandemic, the Company has received temporary rent payment deferrals related to leased facilities located in the U.S., Canada, Italy and Denmark. We have elected to account for the deferral in timing of lease payments as if there were no changes to the lease contract, including continued recognition of expense during the deferral period.

NOTE 10 – ACCRUED WARRANTY EXPENSE

We may offer assurance type warranties on products and services we sell. Changes in the carrying amount of our accrued warranty expense are as follows:


	Three months ended March 31,						Nine months ended September 30,
(in thousands)	2020			2019			2020			2019
Balance at beginning of period	$	33,376		$	45,117		$	33,376		$	45,117
Additions	1,350			1,991			4,508			4,793
Expirations and other changes	(517		)	(385		)	(3,523		)	(5,172		)
Payments	(3,119		)	(1,271		)	(8,410		)	(7,848		)
Translation and other	(137		)	(628		)	852			(1,292		)
Balance at end of period	$	30,953		$	44,824		$	26,803		$	35,598

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. In addition, we record specific provisions or reductions where we expect the actual warranty costs to significantly differ from the accrued estimates. Such changes could have a material effect on our consolidated financial condition, results of operations and cash flows. Warranty expense for the nine months ended September 30, 2019 includes $3.9 million of warranty reversal related to developments in the quarter stemming from the March 29, 2019 settlement agreement for the B&W Renewable EPC loss contracts described in Note 4.

NOTE 11 – RESTRUCTURING ACTIVITIES ~~AND SPIN-OFF TRANSACTION COSTS~~

The following tables summarize the restructuring activity ~~and spin-off costs~~ incurred by segment:

Three months ended March 31, Three months ended March 31,
2020 2019
(in thousands) Total Severance and related costs
Other ⁽¹⁾
Severance and related costs
Babcock & Wilcox segment $ 1,323
$ 542
$ 781
$ 3,947
Vølund & Other Renewable segment 559
559
—
578
SPIG segment —
—
—
144
Corporate 69
—
69
1,410
$ 1,951
$ 1,101
$ 850
$ 6,079



	Three months ended September 30,								Three months ended September 30,
	2020								2019
(in thousands)	Total		Severance and related costs		COVID-19 related costs		Other ⁽¹⁾		Severance and related costs
B&W Renewable segment	$	594	$	340	$	23	$	231	$	414
B&W Environmental segment	299		119		52		128		193
B&W Thermal segment	1,370		422		92		856		805
Corporate	133		—		2		131		1,144
	$	2,396	$	881	$	169	$	1,346	$	2,556



	Nine months ended September 30,								Nine months ended September 30,
	2020								2019
(in thousands)	Total		Severance and related costs		COVID-19 related costs		Other ⁽¹⁾		Severance and related costs
B&W Renewable segment	$	2,346	$	1,153	$	657	$	536	$	1,888
B&W Environmental segment	676		330		78		268		2,029
B&W Thermal segment	3,259		1,111		282		1,866		2,986
Corporate	458		—		94		364		2,668
	$	6,739	$	2,594	$	1,111	$	3,034	$	9,571

⁽¹⁾ Other amounts consist primarily of exit, ~~spin-off,~~ relocation and other costs.

Restructuring liabilities are included in other accrued liabilities on our Condensed Consolidated Balance Sheets. Activity related to the restructuring liabilities is as follows:


	Three months ended March 31,						Three months ended September 30,						Nine months ended September 30,
(in thousands)	2020			2019			2020			2019			2020			2019
Balance at beginning of period	$	5,358		$	7,359		$	5,087		$	6,974		$	5,359		$	7,359
Restructuring expense	1,951			6,079			2,396			2,557			6,739			9,572
Payments	(1,968		)	(3,242		)	(2,307		)	(2,957		)	(6,922		)	(10,357		)
Balance at end of period	$	5,341		$	10,196		$	5,176		$	6,574		$	5,176		$	6,574

Accrued restructuring liabilities at ~~March 31,~~September 30, 2020 and 2019 relate primarily to employee termination benefits. Severance payments are expected to extend through the end of 2020.

NOTE 12 – PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

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


	Pension Benefits						Other Benefits						Pension Benefits												Other Benefits
	Three months ended March 31,						Three months ended March 31,						Three months ended September 30,						Nine months ended September 30,						Three months ended September 30,						Nine months ended September 30,
(in thousands)	2020			2019			2020			2019			2020			2019			2020			2019			2020			2019			2020			2019
Interest cost	$	8,261		$	10,860		$	72		$	121		$	8,263		$	10,685		$	24,773		$	32,507		$	88		$	139		$	232		$	378
Expected return on plan assets	(15,641		)	(13,920		)	—			—			(15,452		)	(13,901		)	(46,636		)	(41,700		)	—			—			—			—
Amortization of prior service cost	43			50			(271		)	(539		)	44			28			130			83			(271		)	(540		)	(813		)	(1,618		)
Recognized net actuarial (gain) loss	—			398			—			—			—			18			—			1,278			—			—			—			—
Benefit plans, net ⁽¹⁾	(7,337		)	(2,612		)	(199		)	(418		)	(7,145		)	(3,170		)	(21,733		)	(7,832		)	(183		)	(401		)	(581		)	(1,240		)
Service cost included in COS ⁽²⁾	211			217			5			4			212			346			632			646			5			4			14			12
Net periodic benefit cost (benefit)	$	(7,126	)	$	(2,395	)	$	(194	)	$	(414	)	$	(6,933	)	$	(2,824	)	$	(21,101	)	$	(7,186	)	$	(178	)	$	(397	)	$	(567	)	$	(1,228	)


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


⁽²⁾	Service cost related to a small group of active participants is presented within cost of operations in the Condensed Consolidated Statement of Operations and is allocated to the ~~Babcock & Wilcox~~B&W Thermal segment.

Recognized net actuarial (gain) loss consists primarily of our reported actuarial (gain) loss, curtailments, settlements, and the difference between the actual return on plan assets and the expected return on plan assets. There were no ~~mark to market ("MTM")~~MTM adjustments for our pension and other postretirement benefit plans during the three and nine months ended ~~March 31,~~September 30, 2020 or the third quarter of 2019 and awe incurred losses of $~~0.4~~1.3 million ~~loss~~ in the ~~three~~nine months ended ~~March 31,~~September 30, 2019. We have excluded the recognized net actuarial (gain) loss from our reportable segments and such amount has been reflected in Note 3 as the MTM loss from benefit plans in the reconciliation of Adjusted EBITDA for each segment to consolidated loss before income tax. The recognized net actuarial (gain) loss was recorded in benefit plans, net in our Condensed Consolidated Statements of Operations.

Lump sum payments from our Canadian Plans resulted in an immaterial plan settlement gain during the three months ended March 31, 2019. The settlement also triggered an interim MTM remeasurement of the Canadian Plan's assets and liabilities that was a loss of $0.4 million in the three months ended March 31, 2019. Both the settlement gain and the MTM remeasurement are reflected in the "Recognized net actuarial loss (gain)" in the table above and are included in our Condensed Consolidated Statements of Operations in the ~~benefit plans, net~~ ~~line item.~~

We made contributions to our pension and other postretirement benefit plans totaling ~~$0.4~~$0.5 million and ~~$1.5~~$1.6 million during the three and nine months ended ~~March 31,~~September 30, 2020, respectively, as compared to $0.5 million and $3.3 million during the three and nine months ended September 30, 2019, respectively. Expected employer contributions to trusts of defined benefit plans ~~above~~ assume that relief is granted under U.S. pension contribution waivers, which would defer minimum pension contributions for approximately one year to then be repaid over a five-year period. Related to the 2018 Plan year, we filed a request for waiver with the IRS in January 2019 and obtained a letter on August 27, 2019 that the waiver request had been approved subject to certain conditions.

We filed a temporary hardship waiver request with the IRS on March 12, 2020 related to our contributions for our pension and other postretirement benefit plans for the 2019 Plan ~~year. The~~year and obtained a letter on October 1, 2020 that the waiver request had been approved subject to certain conditions. Pursuant to the provisions of the waiver granted by the IRS related to the 2018 Plan year, the Company was ~~initially~~ required to resume quarterly contributions on April 15, 2020 equal to the required quarterly contributions to the Plan. If

On March 27, 2020, the ~~temporary hardship waiver~~CARES Act was signed into law and among other things, provides deferral of certain U.S. pension plan contributions until January 1, 2021. We elected to defer the contribution payments of $5.5 million each for the 2020 Plan year that were due on April 15, 2020, July 15, 2020 and October 15, 2020, respectively. In addition, we elected to defer the contribution payments of $1.1 million for the 2018 Plan year and $23.7 million for the 2019 Plan year ~~is not fully granted, required minimum employer pension contributions could increase by approximately $25.0~~that were both due on September 15, 2020. Per the 2019 Plan year waiver received on October 1, 2020, the $23.7 million deferred for ~~total pension and other postretirement~~the 2019 Plan year will now be funded over the next five years.

~~benefit funding of approximately $46.0 million or greater in 2020, plus interest and, if assessed, penalties.~~ The total funding contributions of approximately $46.0 million estimated for 2020 that have been deferred includes $1.1 million for the 2018 Plan year, $23.7 million for the 2019 Plan year, $16.5 million for the 2020 Plan year and $4.5 million related to other non-qualified pension plans, non-U.S. pension plans and other postretirement benefits plans. ~~The Company cannot make any assurances that such waiver will be granted.~~

On March 27, 2020, the CARES Act was signed into law and among other things, provides deferral of certain U.S. pension plan contributions until January 1, 2021. We elected to defer the contribution payment of $5.5 million for the 2020 Plan year that would have been made on April 15, 2020.

NOTE 13 – REVOLVING DEBT

Our revolving debt is comprised of ~~a revolving credit facility~~our U.S. Revolving Credit Facility in the U.S. with balances of ~~$185.0~~$181.9 million as of ~~March 31,~~September 30, 2020 and $179.0 million as of December 31, 2019.

~~U.S. Revolving~~A&R Credit ~~Facility~~Agreement

On May 11, 2015, we entered into ~~the Amended Credit Agreement~~an amended credit agreement with a syndicate of lenders in connection with our spin-off from The Babcock & Wilcox Company (now BWX Technologies, Inc. or "BWXT") which governs the U.S. Revolving Credit Facility and the Last Out Term Loans. Since June 2016, we have entered into a number of waivers and

amendments to the ~~Amended Credit Agreement,~~credit agreement, including several to avoid default under the financial and other covenants

specified in the ~~Amended~~credit agreement.

On May 14, 2020, we entered into the A&R Credit Agreement which refinances and extends the maturity of our U.S. Revolving Credit Facility and Last Out Term Loans.

Under the A&R Credit Agreement, B. Riley has committed to provide the Company with up to $70.0 million of additional Last Out Term Loans on the same terms as the term loans extended under the prior credit agreement. An aggregate $30.0 million of this new commitment was funded upon execution of the A&R Credit Agreement. AsOf the remaining commitments, at least $35.0 million will be funded in installments, subject to reduction for the gross proceeds from certain equity offerings conducted by the Company, and $5.0 million will be funded upon request by the Company. The proceeds from the $30.0 million of new Last Out Term Loans will be used to pay transaction fees and expenses and repay outstanding borrowings under the U.S. Revolving Credit Facility. Proceeds from the remaining $40.0 million of Last Out Term Loans will be used to repay outstanding borrowings under the U.S. Revolving Credit Facility, with any remaining amounts used for working capital, capital expenditures, permitted acquisitions and general corporate purposes.

The A&R Credit Agreement also provides that, (i) the U.S. Revolving Credit Facility continues to be available for issuances of existing and new letters of credit, subject to the L/C Sublimit (as defined below), (ii) the $205.0 million sublimit on borrowings under the U.S. Revolving Credit Facility is maintained, and (iii) interest payments on the unpaid principal amount of revolving credit loans incurred during the period from May 14, 2020 through and including August 31, 2020 of $3.8 million are deferred and will be paid in six equal installments on the last business day of each calendar month beginning on January 29, 2021 and through June 30, 2021. No swing line borrowings are permitted under the A&R Credit Agreement.

The A&R Credit Agreement also amends the following terms, among others, as compared with the prior credit agreement:


(i)	the maturity date of the U.S. Revolving Credit Facility is extended to June 30, 2022, and the maturity date of all Last Out Term Loans under the A&R Credit Agreement is extended to December 30, 2022 (six months after the maturity date of the U.S. Revolving Credit Facility);


(ii)	the interest rate for loans under the U.S. Revolving Credit Facility have been reduced to LIBOR plus 7.0% or base rate (as defined in the A&R Credit Agreement) plus 6.0%. These margins have been reduced by 2.0% if commitments under the U.S. Revolving Credit Facility are reduced to less than $200.0 million. The fee for letters of credit will be set at 4.0%;


(iii)	the interest rate for all Last Out Term Loans is set at 12.0%;


(iv)	the commitments under the U.S. Revolving Credit Facility automatically and permanently decrease in the following amounts on the following dates, which match the funding dates and amounts for the committed term loans: (x) $10.0 million on November 30, 2020; and (y) $5.0 million on each of March 31, 2021, June 30, 2021, September 30, 2021, December 31, 2021 and March 31, 2022, respectively;


(v)	the amount of revolving loans and letters of credit available in currencies other than U.S. dollars has been capped at $125.0 million through April 30, 2021 and will step down to $110.0 million on May 1, 2021; and


(vi)	the amount of financial letters of credit has been capped at $75.0 million, and the amount of all letters of credit will be capped at $190.0 million through April 30, 2021 and step down to $175.0 million on May 1, 2021 (the “L/C Sublimit”).

Affirmative and negative covenants under the A&R Credit Agreement are substantially consistent with the prior credit agreement, except that, among other changes: (i) the indebtedness covenant has been modified to permit the incurrence of any governmental assistance in the form of indebtedness in connection with COVID-19 relief in an aggregate principal amount not to exceed $10.0 million; (ii) a third-party letter of credit basket of up to $50.0 million has been added; (iii) certain liens and restricted payments are modified to permit liens and repayments of indebtedness incurred in connection with governmental assistance in connection with COVID-19 relief; and (iv) covenants related to the European B&W Renewable EPC loss projects have been removed. The minimum required liquidity condition of $30.0 million remains constant but was modified to exclude cash of non-loan parties in an amount in excess of $25.0 million. Certain financial covenant testing has been suspended through September 30, 2020, with the Company and the Administrative Agent having agreed to negotiate such covenant levels and related definitions prior to October 31, 2020. See A&R Credit Agreement subsequent event described below for a discussion of the results of the negotiation.

Events of default under the A&R Credit Agreement are substantially consistent with the prior credit agreement, except that: (i) B. Riley’s failure to fund any of its additional Last Out Term Loans committed under the A&R Credit Agreement will constitute an event of default; and (ii) the failure to negotiate and set certain financial covenant testing levels and related definitions prior to October 31, 2020 will constitute an event of default.

In connection with the A&R Credit Agreement, the Company incurred certain customary amendment and commitment fees, a portion of which were deferred pursuant to the terms of the A&R Credit Agreement along with certain previously deferred fees incurred under the amended credit agreement.

A&R Credit Agreement - subsequent event

On October 30, 2020, we entered into A&R Amendment No. 1 with Bank of America, N.A. A&R Amendment No. 1, among other matters, (i) provides that, under the A&R Credit Agreement, the "Commitment Reduction Amount" shall be an amount equal to (a) for any "Prepayment Event" relating to a "Recovery Event" (each as defined under the A&R Credit Agreement), 50% of the net cash proceeds with respect to such Prepayment Event, and (b) with respect to any other Prepayment Event under the A&R Credit Agreement, the net cash proceeds with respect to such Prepayment Event, and (ii) establishes new financial covenants for interest coverage ratios and senior leverage ratios.

Effective October 30, 2020, the minimum interest coverage ratios under our A&R Credit Agreement are as follows:

0.50:1.00 for the quarter ending December 31, 2020

0.50:1.00 for the quarter ending March 31, 2021

0.80:1.00 for the quarter ending June 30, 2021

1.00:1.00 for the quarter ending September 30, 2021

1.10:1.00 for the quarter ending December 31, 2021

1.25:1.00 for the quarter ending March 31, 2022 and the last day of each fiscal quarter ending thereafter

Effective October 30, 2020, the maximum permitted senior leverage ratios under our A&R Credit Agreement are as follows:

7.75:1.00 for the quarter ending December 31, 2020

7.75:1.00 for the quarter ending March 31, 2021

4.25:1.00 for the quarter ending June 30, 2021

3.75:1.00 for the quarter ending September 30, 2021

3.00:1.00 for the quarter ending December 31, 2021

2.25:1.00 for the quarter ending March 31, 2022 and the last day of each fiscal quarter ending thereafter

B. Riley Limited Guaranty

In connection with the Company’s entry into the A&R Credit Agreement, B. Riley entered into the B. Riley Guaranty for the benefit of the Administrative Agent and the lenders under the U.S. Revolving Credit Facility. The B. Riley Guaranty provides for the guarantee of all of the Company’s obligations with respect to the U.S. Revolving Credit Facility (other than with respect to letters of credit and contingent obligations), including the obligation to repay outstanding revolving credit loans and pay earned interest and fees. The B. Riley Guaranty is enforceable in certain circumstances, including, among others: (i) B. Riley’s failure to timely fund in full any of its additional Last Out Term Loans committed under the A&R Credit Agreement; (ii) certain events of default relating to bankruptcy or insolvency occurring with respect to B. Riley; (iii) the acceleration of the Company’s borrowings under the U.S. Revolving Credit Facility; (iv) the Company’s failure to pay any

amount due to the Administrative Agent or any lender under the U.S. Revolving Credit Facility; or (v) any assertion that the B. Riley Guaranty or any portion thereof is not valid, binding or enforceable.

In connection with the B. Riley Guaranty, the Company entered into a fee letter with B. Riley pursuant to which the Company agreed to pay B. Riley a fee of $3.9 million (the “B. Riley Guaranty Fee”). On June 8, 2020, the Company issued 1,712,479 unregistered shares of Common Stock, respectively, to B. Riley and certain of its affiliates in settlement of the B. Riley Guaranty Fee in connection with the Equitization Agreement discussed below.

Fee and Interest Equitization Agreement

In connection with the B. Riley Guaranty, the Company entered into a Fee and Interest Equitization Agreement (the “Equitization Agreement”) with B. Riley and, solely for certain limited purposes under the Equitization Agreement, B. Riley FBR, Inc.

The Equitization Agreement provides that, in lieu of receiving (a) $13.4 million of interest payments with respect to Last Out Term Loans under the A&R Credit Agreement between May 14, 2020 and December 31, 2020 (the “Equitized Interest Payments”) and (b) the B. Riley Guaranty Fee (the “Equitized Fee Payment” and, together with the Equitized Interest Payments, the “Equitized Fees and Interest Payments”), B. Riley will receive unregistered shares of the Company’s Common Stock, calculated as explained below.

Under the Equitization Agreement, B. Riley will receive a number of unregistered shares of common stock equal to (i) the aggregate dollar value of the Equitized Fees and Interest Payments divided by (ii) the Conversion Price. For purposes of the Equitization Agreement, the “Conversion Price” means the average volume weighted average price for the Common Stock over 15 consecutive trading days beginning on and including May 15, 2020 (the “Measurement Period”), subject to customary adjustments. For purposes of the listing requirements of the New York Stock Exchange (the "NYSE"), the Equitization Agreement sets a minimum for the Conversion Price of $1.55 per share of common stock, unless and until approval is obtained from the Company’s stockholders under the rules of the NYSE. On June 5, 2020, the conversion price was calculated at $2.2774 per share.

On September 30, 2020 and June 30, 2020, the Company issued 2,334,002 and 1,192,371 unregistered shares of Common Stock, respectively, to B. Riley and certain of its affiliates in settlement of the quarterly interest payable in connection with the Equitization Agreement discussed above.

The Company is required under the Equitization Agreement to use its reasonable best efforts to take all actions to obtain any necessary stockholder approval under the rules of the NYSE for the issuance of the Shares of Common Stock. B. Riley has agreed to cause all shares of Common Stock beneficially owned by B. Riley to be voted in favor of any proposal presented to the Company’s stockholders seeking approval of the issuance of shares pursuant to the Equitization Agreement. The required stockholder approvals were obtained at the Company’s 2020 annual meeting of stockholders held on June 16, 2020.

U.S. Revolving Credit Facility

As of September 30, 2020, the U.S. Revolving Credit Facility provides for a senior secured revolving credit facility in an aggregate amount of up to ~~$330.3 million, (reduced to~~ $326.9 million, ~~in April 2020 as a result of the settlement of escrow funds related to the sales of MEGTEC and Universal)~~ as amended and adjusted for completed asset sales. The proceeds from loans under the U.S. Revolving Credit Facility are available for working capital needs, capital expenditures, permitted acquisitions and other general corporate purposes, and the full amount is available to support the issuance of letters of credit, subject to the limits specified in the agreement.

As of ~~March 31,~~September 30, 2020, in connection with Amendment No. 16, we have accrued deferred ticking fee costs of $6.7 million due to certain required actions that were not completed by December 15, 2019.

At ~~March 31,~~September 30, 2020, borrowings under the U.S. Revolving Credit Facility consisted of ~~$185.0~~$181.9 million at a weighted average interest rate of ~~8.92%~~7.63%. Usage under the U.S. Revolving Credit Facility consisted of ~~$185.0~~$181.9 million of revolving loan borrowings, ~~$25.5~~$23.0 million of financial letters of credit and ~~$97.6~~$89.6 million of performance letters of credit. At ~~March 31,~~September 30, 2020, we had approximately ~~$22.2~~$32.4 million available to meet letter of credit requirements based on our overall facility size, of which ~~$20.0~~$23.1 million was available for additional borrowings under our ~~sublimit.~~Sublimit.

On ~~May 14,~~October 23, 2020, we ~~entered into an~~received $26.0 million under the settlement agreement ~~amending and restating the Amended Credit Agreement, as more fully~~ described in Note ~~23. On May 14, B. Riley provided~~4. As required by the ~~B. Riley Guaranty~~Company’s U.S. Revolving Credit Facility, 50% of the net proceeds (gross proceeds less costs) or approximately $8.0 million of the settlement received by the Company was applied as a permanent reduction of the U.S. Revolving Credit Facility ~~as more fully described~~ in ~~Note 23.~~

~~Backstop Commitment Letter~~

On January 31, 2020, the Company also entered into a letter agreement with B. Riley (the "Backstop Commitment Letter"), a related party, pursuant to which B. Riley agreed to fund any shortfall in the $200.0 million of new debt or equity financing required as part of the terms of the refinancing to the extent such amounts have not been raised from third parties and convert, or cause its applicable affiliates to convert, term loans into equity to the extent necessary to comply with the indebtedness limit of $275.0 million if the Company was unable to secure third parties to fund a sufficient amount of financing through the issuance of equity. In connection with the Company's entry into the A&R Credit Agreement (including B. Riley's commitment to provide the Company with up to $70.0 million of additional Last Out Term Loans), the B. Riley Guaranty, and the related transactions, the Company and B. Riley agreed to terminate the Backstop Commitment Letter, which letter was intended to support the Company’s efforts to refinance its existing indebtedness. See Note 23 for further details.October 2020.

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 opened outside of the U.S. Revolving Credit Facility as of ~~March 31,~~September 30, 2020 and December 31, 2019 was ~~$82.1~~$80.6 million and $88.5 million, respectively. The aggregate value of the letters of credit provided by the U.S. Revolving Credit Facility backstopping letters of credit or bank guarantees was ~~$31.1~~$31.6 million as of ~~March 31,~~September 30, 2020. Of the letters of credit issued under the U.S. Revolving Credit Facility, ~~$33.8~~$37.5 million are subject to foreign currency revaluation.

We have posted surety bonds to support contractual obligations to customers relating to certain contracts. We utilize bonding facilities to support such obligations, but the issuance of bonds under those facilities is typically at the surety's discretion. These bonds generally indemnify customers should we fail to perform our obligations under the applicable contracts. We, and certain of our subsidiaries, have jointly executed general agreements of indemnity in favor of surety underwriters relating to surety bonds those underwriters issue in support of some of our contracting activity. As of ~~March 31,~~September 30, 2020, bonds issued and outstanding under these arrangements in support of contracts totaled approximately ~~$220.1~~$277.6 million. The aggregate value of the letters of credit provided by the U.S. Revolving Credit facility backstopping surety bonds was ~~$22.7~~$34.7 million.

Our ability to obtain and maintain sufficient capacity under our U.S. Revolving Credit Facility 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.

NOTE 14 – LAST OUT TERM LOANS

The components of the Last Out Term Loans by Tranche are as follows:


	March 31, 2020								September 30, 2020
(in thousands)	A-3			A-4		Total			A-3		A-4		A-6		Total
Proceeds ⁽¹⁾	$	101,660		$	30,000	$	131,660		$	101,660	$	30,000	$	30,000	$	161,660
Discount and fees	8,650			—		8,650			8,650		—		—		8,650
Paid-in-kind interest	3,020			—		3,020			3,020		—		—		3,020
Principal	113,330			30,000		143,330
Unamortized discount and fees	(7,227		)	—		(7,227		)
Net debt balance	$	106,103		$	30,000	$	136,103		$	113,330	$	30,000	$	30,000	$	173,330

⁽¹⁾Tranche A-3 proceeds represent the net proceeds after the $39.7 million principal prepayment of the tranche as of July 23, 2019, the date of the Equitization Transactions.



	December 31, 2019
(in thousands)	A-3
Proceeds ⁽¹⁾	$	101,660
Discount and fees	8,650
Paid-in-kind interest	3,020
Principal	113,330
Unamortized discount and fees	(9,377		)
Net debt balance	$	103,953

⁽¹⁾Tranche A-3 proceeds represent the net proceeds after the $39.7 million principal prepayment of the tranche as of July 23, 2019, the date of the Equitization Transactions.

and a reborrowing of new debt. An extinguishment gain or loss is then recognized based on the fair value of the new debt as compared to the carrying value of the extinguished debt. The Company recognized a loss on debt extinguishment of $6.2 million in the quarter ended June 30, 2020, primarily representing the unamortized value of the original issuance discount and fees on the Tranche A-3 Last Out Term Loan. In connection with ~~Amendment No. 16~~the effectiveness of the ~~Amended~~A&R Credit Agreement, the maturity date for ~~all~~the Last Out Term Loans was extended to December ~~31,~~30, 2022.

On September 30, 2020 and ~~was further extended~~June 30, 2020, the Company issued 2,334,002 and 1,192,371 unregistered shares of common stock, respectively, to ~~December 30, 2022 upon the effectiveness~~B. Riley and certain of its affiliates in settlement of the ~~A&R Credit Agreement.~~quarterly interest payable in connection with the Fee and Interest Equitization Agreement discussed in Note 13.

The total effective interest rate of Tranche A-3, ~~was 20.7% on March 31, 2020. The total effective interest rate of~~ Tranche A-4 and Tranche A-6 was 12.0% on ~~March 31,~~September 30, 2020. The interest rate on the Last Out Term Loans under the A&R Credit Agreement is a fixed rate per annum of 12.0%. Interest expense associated with the Last Out Term Loans is detailed in Note 15.

Tranche A-1

We borrowed $30.0 million of net proceeds under Tranche A-1 of the Last Out Term Loans from B. Riley, a related party, in September and October of 2018. In November 2018, Tranche A-1 was assigned to Vintage, also a related party. As part of the Equitization Transactions in July 2019, the outstanding principal of Tranche A-1 of the Last Out Term Loans including accrued paid-in-kind interest remaining as of March 31, 2019 was exchanged for shares of ~~common stock.~~Common Stock.

Tranche A-2

We borrowed $10.0 million of net proceeds under Tranche A-2 of Last Out Term Loans from B. Riley, a related party in March 2019. Tranche A-2 was fully repaid on July 23, 2019 with proceeds from the 2019 Rights Offering as part of the Equitization Transactions in July 2019.

Tranche A-3

Under Amendment No. 16 to our ~~Amended Credit Agreement,~~credit agreement, we borrowed $150.0 million face value from B. Riley, a related party, under a Tranche A-3 of Last Out Term Loans. The $141.4 million net proceeds from Tranche A-3 were primarily used to pay the amounts due under the settlement agreements covering certain European ~~Vølund~~B&W Renewable loss projects as described in Note 4, with the remainder used for working capital and general corporate purposes.

Interest rates for Tranche A-3 are described above. Tranche A-3 may be prepaid, subject to the subordination provisions under the ~~Amended Credit Agreement~~amended credit agreement as described above, but not re-borrowed. As part of the Equitization Transactions, the total prepayment of principal of Tranche A-3 of the Last Out Term Loans was $39.7 million. ~~The Tranche A-3 maturity date was previously extended to December 31, 2020 and was extended to December 30, 2022 upon the effectiveness of the A&R Credit Agreement.~~

Tranche A-4

On January 31, 2020, we entered into Amendment No. 20 to ~~the Amended Credit Agreement.~~our credit agreement ("Amendment No. 20") Amendment No. 20 provides $30.0 million of additional commitments from B. Riley, a related party, under a new Tranche A-4 of Last Out Term Loans. The proceeds from Tranche A-4 may be used under the terms of Amendment No. 20 to repay revolving credit loans, for working capital and general corporate purposes, and to reimburse certain expenses of B. Riley as specified by Amendment No. 20. The terms of Tranche A-4 are the same as the terms for the Tranche ~~A-3 under the Amended Credit Agreement.~~A-3.

As of January 31, 2020, we borrowed $30.0 million face value of the Tranche A-4 and received net proceeds of $26.3 million after incurring total fees of $3.7 million related to Amendment ~~No,~~No. 20 described above. ~~The Tranche A-4 maturity date was previously extended to December 31, 2020 and was further extended to December 30, 2022 upon the effectiveness of the A&R Credit Agreement.~~

Tranche A-5

~~On January 31, 2020, we entered into~~ Amendment No. 20 ~~to the Amended Credit Agreement. Amendment No. 20~~also provides an incremental Tranche A-5 of Last Out Term Loans to be extended prior to maturity of the Last Out Term Loans under the ~~Amended~~A&R Credit Agreement in the event certain customer letters of credit are drawn. The terms of Tranche A-5 are the same as the terms for the Tranche A-3 under the ~~Amended~~A&R Credit Agreement. As of ~~May 15,~~November 13, 2020, no borrowings ~~have~~ occurred under Tranche A-5.

Tranche A-6

The A&R Credit Agreement provided us with up to ~~$65~~$70.0 million of additional funding in the form of Tranche A-6 Last Out Term Loans from B. Riley, a related party, as ~~more fully~~ described in Note ~~23.~~13. An aggregate ~~$30~~$30.0 million of this new commitment was funded upon execution of the A&R Credit Agreement. The ~~$35~~$35.0 million ~~remaining~~ will be funded in installments, subject to reduction for the gross proceeds from certain ~~equity~~ offerings ~~conducted~~of our Common Stock by the Company. The remaining $5.0 million will be available upon request by the Company.

On May 14, 2020, we borrowed ~~$30~~$30.0 million face value of the Tranche A-6 and received gross proceeds of ~~$30~~$30.0 million related to the entry into the A&R Credit ~~Agreement that is more fully described in Note 23. The Tranche A-6 maturity date is December 30, 2022.~~Agreement.

Tranche A-7

The A&R Credit Agreement provided us with up to $5$50.0 million of additional funding for letters of credit in the form of Tranche A-7 Last Out Term Loans from B. Riley, a related party, as ~~more fully~~ described in Note ~~23.~~13. The $5$50.0 million will be available upon request by the Company, subject to certain limitations. As of ~~May 15,~~November 13, 2020, no borrowings ~~have~~ occurred under Tranche A-7. ~~The Tranche A-7 maturity date is December 30, 2022.~~

NOTE 15 –INTEREST EXPENSE AND SUPPLEMENTAL CASH FLOW INFORMATION

Interest expense in our Condensed Consolidated Financial Statements consisted of the following components:


	Three months ended March 31,				Three months ended September 30,					Nine months ended September 30,
(in thousands)	2020		2019		2020			2019		2020		2019
Components associated with borrowings from:
U.S. Revolving Credit Facility	$	4,039	$	3,550	$	3,382		$	4,292	$	10,830	$	11,644
Last Out Term Loans - cash interest	4,048		513		—			3,613		6,140		7,732
Last Out Term Loans - equitized interest					5,315			—		8,031		—
Last Out Term Loans - paid-in-kind interest	—		1,060		—			1,024		—		5,964
	8,087		5,123		8,697			8,929		25,001		25,340
Components associated with amortization or accretion of:
U.S. Revolving Credit Facility - deferred financing fees and commitment fees	9,035		5,270		1,711			8,836		14,376		22,985
U.S. Revolving Credit Facility - deferred ticking fee for Amendment 16 ⁽¹⁾	1,658		—
U.S. Revolving Credit Facility contingent consent fee for Amendment 16					—			5,011		—		9,686
U.S. Revolving Credit Facility - deferred ticking fee for Amendment 16					—			—		1,660		—
Last Out Term Loans - discount and financing fees	2,150		590		(545		)	6,445		3,183		8,514
	12,843		5,860		1,166			20,292		19,219		41,185

Other interest expense	1,161		151		2,340			242		5,556		909

Total interest expense	$	22,091	$	11,134	$	12,203		$	29,463	$	49,776	$	67,434


⁽¹⁾ 32	An incremental monthly fee of 1.0% of total availability of the U.S. Revolving Credit Facility shall be earned on the 15th day of each month and is payable on the earlier of March 15, 2020 or the last day of the Availability Period with respect to the U.S. Revolving Credit Facility.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reporting within the Condensed Consolidated Balance Sheets that sum to the total of the same amounts in the Condensed Consolidated Statements of Cash Flows:


(in thousands)	March 31, 2020		December 31, 2019		March 31, 2019		December 31, 2018		September 30, 2020		December 31, 2019		September 30, 2019		December 31, 2018
Held by foreign entities	$	27,937	$	38,921	$	26,746	$	35,522	$	36,848	$	38,921	$	30,590	$	35,522
Held by U.S. entities	7,447		4,851		16,781		7,692		2,086		4,851		1,473		7,692
Cash and cash equivalents of continuing operations	35,384		43,772		43,527		43,214		38,934		43,772		32,063		43,214

Reinsurance reserve requirements	5,779		9,318		2,841		11,768		3,443		9,318		8,802		11,768
Restricted foreign accounts	3,107		3,851		4,118		5,297		2,752		3,851		2,480		5,297
Bank guarantee collateral	2,115		—		—		—		3,240		—		—		—
Restricted cash and cash equivalents	11,001		13,169		6,959		17,065		9,435		13,169		11,282		17,065
Total cash, cash equivalents and restricted cash shown in the Condensed Consolidated Statements of Cash Flows	$	46,385	$	56,941	$	50,486	$	60,279	$	48,369	$	56,941	$	43,345	$	60,279

Our U.S. Revolving Credit Facility described in Note 13 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.

The following cash activity is presented as a supplement to our Condensed Consolidated Statements of Cash Flows and is included in Net cash used in activities:


	Three months ended March 31,					Nine months ended September 30,
(in thousands)	2020		2019			2020		2019
Income tax payments (refunds), net	$	793	$	(78	)
Income tax payments, net						$	3,967	$	304

Interest payments on our U.S. Revolving Credit Facility	$	4,150	$	2,403		$	8,280	$	9,748
Interest payments on our Last Out Term Loans	4,038		540			6,140		4,909
Total cash paid for interest	$	8,188	$	2,943		$	14,420	$	14,657

NOTE 16 – PROVISION FOR INCOME TAXES

In the three months ended ~~March 31,~~September 30, 2020, income tax benefit was ~~$0.8~~$0.5 million, resulting in an effective tax rate of ~~2.4%~~(1.5)%.

In the three months ended ~~March 31,~~September 30, 2019, income tax expense was ~~$0.6~~$1.0 million, with an effective tax rate of ~~(1.3)~~(1.9)%.

Our effective tax rate for the three months ended September 30, 2020 and 2019 is not reflective of the U.S. statutory rate primarily due to valuation allowances against our net deferred tax assets. We have unfavorable discrete items of $0.1 million for the three months ended September 30, 2020 and unfavorable discrete items of $0.5 million for the three months ended September 30, 2019.

In the nine months ended September 30, 2020, income tax benefit was $0.5 million, resulting in an effective tax rate of 2.7%. In the nine months ended September 30, 2019, income tax expense was $3.6 million, resulting in an effective tax rate of (2.7)%. Our effective tax rate for the nine months ended September 30, 2020 and 2019 is not reflective of the U.S. statutory rate primarily due to valuation allowances against our net deferred tax assets. We have favorable discrete items of $1.2 million and unfavorable discrete items of $0.6 million in the nine months ended September 30, 2020 and 2019, respectively.

We are subject to federal income tax in the United States and numerous countries that have statutory tax rates different than the ~~U.S.~~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 ~~statutory~~effective tax rates ranging between approximately 19% and ~~approximately~~ 30%. We provide for income taxes based on the tax laws and rates in the jurisdictions ~~in which~~where we conduct ~~our~~ operations.

These jurisdictions may have ~~tax~~ regimes of taxation that vary ~~with respect to~~in both nominal rates and the basis on which ~~those~~these rates are applied. Our consolidated effective income tax rate can vary significantly from period to period due to these variations, changes in ~~the~~ jurisdictional mix of our income, and valuation ~~allowances recognized in jurisdictions that have a net deferred tax asset balance.~~

Our effective tax rate for the three months ended March 31, 2020 is not reflective of the U.S. statutory rate primarily due to valuation allowances against our net deferred tax assets. In jurisdictions where we have available net operating loss carryforwards ("NOLs"), such as the U.S., Denmark and Italy, the existence of tax expense primarily reflects withholding taxes or state and local income taxes in state taxing regimes which impose a taxable income limitation. In the three months ended March 31, 2020, we separately allocated $0.6 million of income tax expense to income from discontinued operations due to the intraperiod allocation rules of ASC 740-20-45-7. Our income tax expense (benefit) also reflects changes in the jurisdictional mix of income and losses. In other profitable jurisdictions, however, we may record income tax expense, even though we have established a full valuation allowance against our net deferred tax assets. We have favorable discrete items of $0.5 million in the three months ended March 31, 2020 and $0.2 million in the three months ended March 31, 2019.allowances.

CARES Act

On March 27, 2020, in response to the ~~President of~~COVID-19 pandemic, the ~~United States~~Coronavirus Aid, Relief, and Economic Security Act (“CARES Act” or “Act”) was signed into ~~law~~law. The Act contains a number of provisions designed to assist companies during the pandemic. Certain provisions may impact the Company’s income tax provision. Management has concluded the CARES ~~Act. The CARES~~ Act ~~among other things, includes modifications to~~will not have an impact on the ~~Internal Revenue Code ("IRC") intended to provide economic relief to those impacted by the COVID-19 pandemic; however, these benefits do not significantly impact the Company's~~Company’s tax ~~provision.~~attributes.

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. We are evaluating Glatfelter’s claims as well as potential counter claims against Glatfelter and intend to vigorously defend against the action. However, given the preliminary 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 condensed consolidated financial condition, results of operations or cash flows.

SEC Investigation

The U.S. SEC is conducting a formal investigation of the Company, focusing on the accounting charges and related matters involving the Company's ~~Vølund and Other~~B&W Renewable segment from 2015-2019. The SEC has served multiple subpoenas on the Company for documents. The Company is cooperating with the SEC related to the subpoenas and investigation. The Company is still in the process of producing documents to the SEC. In addition, the SEC has taken testimony from past and current officers, ~~and~~ directors, and ~~has requested additional testimony from~~ present and former employees. It is reasonably possible that the SEC may bring one or more claims against the Company and certain individuals. Due to the stage of the investigation, we are unable to estimate the amount of loss or range of potential loss of any claim. However, there can be no assurance that such claims will not have a material impact on the Company.

~~Subsequent Event -~~ 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. 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 Company is evaluating Plaintiff’s claims and intends to vigorously defend against the action.

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 condensed consolidated financial condition, results of operations or cash flows.

2834

NOTE 18 – COMPREHENSIVE INCOME

Gains and losses deferred in accumulated other comprehensive income (loss) ("AOCI") are generally reclassified and recognized in the Condensed Consolidated Statements of Operations once they are realized. The changes in the components of AOCI, net of tax, for the ~~three months ended March 31,~~first two quarters of 2020 and 2019 were as follows:


(in thousands)	Currency translation gain		Net unrecognized loss related to benefit plans (net of tax)			Total			Currency translation (loss) gain			Net unrecognized loss related to benefit plans (net of tax)			Total
Balance at December 31, 2019	$	5,743	$	(3,817	)	$	1,926		$	5,743		$	(3,817	)	$	1,926
Other comprehensive income (loss) before reclassifications	2,380		—			2,380			2,380			—			2,380
Reclassified from AOCI to net income (loss)	—		(246		)	(246		)	—			(246		)	(246		)
Net other comprehensive income (loss)	2,380		(246		)	2,134			2,380			(246		)	2,134
Balance at March 31, 2020	$	8,123	$	(4,063	)	$	4,060		$	8,123		$	(4,063	)	$	4,060
Other comprehensive income (loss) before reclassifications									(4,095		)	—			(4,095		)
Reclassified from AOCI to net income (loss)									—			(246		)	(246		)
Net other comprehensive income (loss)									(4,095		)	(246		)	(4,341		)
Balance at June 30, 2020									$	4,028		$	(4,309	)	$	(281	)
Other comprehensive income (loss) before reclassifications									(22,916		)	—			(22,916		)
Reclassified from AOCI to net income (loss)									—			(246		)	(246		)
Net other comprehensive income (loss)									(22,916		)	(246		)	(23,162		)
Balance at September 30, 2020									$	(18,888	)	$	(4,555	)	$	(23,443	)


(in thousands)	Currency translation (loss) gain			Net unrealized gain (loss) on derivative instruments ⁽¹⁾			Net unrecognized loss related to benefit plans (net of tax)			Total			Currency translation (loss) gain			Net unrealized gain (loss) on derivative instruments			Net unrecognized loss related to benefit plans (net of tax)			Total
Balance at December 31, 2018	$	(10,834	)	$	1,362		$	(1,960	)	$	(11,432	)	$	(10,834	)	$	1,362		$	(1,960	)	$	(11,432	)
Other comprehensive income (loss) before reclassifications	10,260			(1,178		)	—			9,082			10,260			(1,178		)	—			9,082
Reclassified from AOCI to net income (loss)	—			224			(356		)	(132		)	—			224			(356		)	(132		)
Net other comprehensive income (loss)	10,260			(954		)	(356		)	8,950			10,260			(954		)	(356		)	8,950
Balance at March 31, 2019	$	(574	)	$	408		$	(2,316	)	$	(2,482	)	$	(574	)	$	408		$	(2,316	)	$	(2,482	)
Other comprehensive loss before reclassifications													(7,979		)	(189		)	—			(8,168		)
Reclassified from AOCI to net income (loss)													3,176			(22		)	(514		)	2,640
Net other comprehensive (loss) income													(4,803		)	(211		)	(514		)	(5,528		)
Balance at June 30, 2019													$	(5,377	)	$	197		$	(2,830	)	$	(8,010	)
Other comprehensive loss before reclassifications													21,433			$	—		$	—		21,433
Reclassified from AOCI to net income (loss)													—			$	—		$	(515	)	(515		)
Amounts reclassified from AOCI to advanced billings on contracts													—			(197		)	—			(197		)
Net other comprehensive (loss) income													21,433			(197		)	(515		)	20,721
Balance at September 30, 2019													$	16,056		$	—		$	(3,345	)	$	12,711

⁽¹⁾~~The remaining unrealized FX gain/(loss) is expected to be recognized over time as the related projects are completed.~~

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


AOCI component	Line items in the Condensed Consolidated Statements of Operations affected by reclassifications from AOCI	Three months ended March 31,					Line items in the Condensed Consolidated Statements of Operations affected by reclassifications from AOCI	Three months ended September 30,				Nine months ended September 30,
AOCI component		2020		2019				2020		2019		2020		2019
Release of currency translation gain with the sale of equity method investment and the sale of business							Loss on sale of business	$	—	$	—	$	—	$	(3,176	)
Derivative financial instruments	Other – net			(289		)	Other – net	—		—		—		(202		)
	Provision for income taxes	—		(65		)
	Net loss	$	—	$	(224	)	Net loss	$	—	$	—	$	—	$	(3,378	)

Amortization of prior service cost on benefit obligations	Benefit plans, net	$	246	$	356		Benefit plans, net	246		515		738		1,385
	Provision for income taxes	—		—			Net income	$	246	$	515	$	738	$	1,385
	Net income	$	246	$	356

NOTE 19 – 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 securities	March 31, 2020		Level 1		Level 2		September 30, 2020		Level 1		Level 2
Corporate notes and bonds	$	8,689	$	8,689	$	—	$	10,612	$	10,612	$	—
Mutual funds	528		—		528		577		—		577
United States Government and agency securities	6,442		6,442		—		6,132		6,132		—
Total fair value of available-for-sale securities	$	15,659	$	15,131	$	528	$	17,321	$	16,744	$	577



(in thousands)
Available-for-sale securities	December 31, 2019		Level 1		Level 2
Corporate notes and bonds	$	8,310	$	8,310	$	—
Mutual funds	587		—		587
United States Government and agency securities	3,868		3,868		—
Total fair value of available-for-sale securities	$	12,765	$	12,178	$	587

Available-For-Sale Securities

Our investments in available-for-sale securities are presented in other assets on our Condensed Consolidated Balance Sheets with contractual maturities ranging from 0-6 years.

Derivatives

Derivative assets and liabilities usually consist of FX forward contracts. Where applicable, the value of these derivative assets and liabilities 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. As of ~~March 31,~~September 30, 2020, we do not hold any derivative assets or liabilities; the last of our derivative contracts were sold during the first quarter of 2019.

Other Financial 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 Sheets for cash and cash equivalents and restricted cash and cash equivalents approximate their fair values due to their highly liquid nature.

Revolving debt and Last Out Term Loans. 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 instruments approximated their carrying value at ~~March 31,~~September 30, 2020 and December 31, 2019.

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

Non-Recurring Fair Value Measurements

The measurement of the net actuarial gain or loss associated with our pension and other postretirement plans was determined using unobservable inputs (see Note 12). These inputs included the estimated discount rate, expected return on plan assets and other actuarial inputs associated with the plan participants.

Tests for impairment annually and when impairment indicators exist require significant fair value measurements using unobservable inputs (see Note 7). The fair values of the reporting units were based on an income approach using a discounted cash flow analysis, a market approach using multiples of revenue and EBITDA of guideline companies, and a market approach using multiples of revenue and EBITDA from recent, similar business combinations.

Property, plant and equipment and definite-lived intangible asset amounts are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset, or asset group, may not be recoverable. An impairment loss would be recognized when the carrying amount of an asset exceeds the estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. The amount of the impairment loss to be recorded is calculated by the excess of the asset carrying value over its fair value. Fair value is generally determined based on an income approach using a discounted cash flow analysis or based on the price that the Company expects to receive upon the sale of these assets. Both of those approaches utilize unobservable inputs (see Note 86 and Note 6)8).

NOTE 20 – RELATED PARTY TRANSACTIONS

The Letter Agreement entered into on April 5, 2019, pursuant to which the parties agreed to use their reasonable best efforts to effect a series of equitization transactions for a portion of the Last Out Term Loans, between B. Riley, Vintage and the Company included agreement to negotiate one or more agreements that provide B. Riley and Vintage with certain governance rights, including (i) the right for B. Riley and Vintage to each nominate up to three individuals to serve on our board of directors, subject to certain continued lending and equity ownership thresholds and (ii) pre-emptive rights permitting B. Riley to participate in future issuances of our equity securities. ~~On April 30, 2019, the Company entered into an Investor Rights Agreement with B. Riley and Vintage providing the governance rights contemplated by the Letter Agreement.~~ The Company also entered into a Registration Rights Agreement with B. Riley and Vintage on April 30, 2019 providing each with certain customary registration rights for the shares of our common stock that they hold. On April 30, 2019, the Company entered into an Investor Rights Agreement with B. Riley and Vintage providing the governance rights contemplated by the Letter Agreement.

Transactions with B. Riley

Based on its Schedule 13D filings, B. Riley beneficially owns ~~17.8%~~29.5% of our outstanding common stock as of ~~March 31,~~September 30, 2020.

B. Riley is party to the Last Out Term Loans as described in Note 14. B. Riley has also provided the B. Riley Guaranty as ~~more fully~~ described in Note ~~23.~~13.

In connection with the B. Riley Guaranty, the Company entered into the Fee and Interest Equitization Agreement described in Note 13. Under the Equitization Agreement the Company issued 1.7 million shares of common stock on June 8, 2020, 1.2 million shares of common stock on June 30, 2020 and 2.3 million shares of common stock on September 30, 2020 to B. Riley

in satisfaction of the B. Riley Guaranty Fee and payment of certain interest payments described in Note 13. All of these issued shares are unregistered.

We entered into an agreement with BRPI Executive Consulting, LLC, an affiliate of B. Riley, on November 19, 2018 for the services of Mr. Kenny Young, to serve as our Chief Executive Officer until November 30, 2020, 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. In June 2019, we granted a total of $2.0 million in cash bonuses to BRPI Executive Consulting LLC for Mr. Young's performance and services. In April 2020, we temporarily deferred the monthly fee paid to BRPI Executive Consulting, LLC for the services of our Chief Executive Officer by 50% as described in Note 1.

Total fees associated with B. Riley related to the Last Out Term Loans and services of Mr. Kenny Young, both as described above, were ~~$4.2~~$0.1 million and ~~$2.1~~$7.6 million for the three and nine months ended ~~March 31,~~September 30, 2020, respectively, and were $0.4 million and $11.9 million for the three and nine months ended September 30, 2019, respectively.

On August 10, 2020, B. Riley Financial, Inc. entered into a project specific indemnity rider (the “Indemnity Rider”) to the General Agreement of Indemnity, dated May 28, 2015, between us and Berkley Insurance Company (the “Surety”). Pursuant to the terms of the Indemnity Rider, 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 Rider, we paid B. Riley a fee of $0.6 million following the issuance of the bond by the Surety, which represents approximately 2.0% of the bonded obligations. Under the A&R Credit Agreement, any draw or claim under the Indemnity Rider will convert into a Tranche A-5 Last Out Term Loan for the benefit of B. Riley.

Refer to Note 2313 for additional related party transactions with B. Riley and its ~~affiliates~~affiliates.

Transactions with B. Riley - subsequent event

On November 9, 2020 we entered into an agreement with BRPI Executive Consulting, LLC, an affiliate of B. Riley to ~~March~~extend the services of Mr. Kenny Young, to serve as our Chief Executive Officer until December 31, ~~2020.~~2023. Other than the term extension, there are no other changes to the agreement with BRPI Executive Consulting, LLC.

Transactions with Vintage Capital Management, LLC

Based on its Schedule 13D filings, Vintage beneficially owns ~~33.9%~~20.6% of our outstanding common stock as of ~~March 31,~~September 30, 2020.

NOTE 21 – ASSETS HELD FOR SALE, DIVESTITURES AND DISCONTINUED OPERATIONS

Assets Held for Sale

In December 2019, we determined that a small business within the ~~Babcock & Wilcox~~B&W Thermal segment met the criteria to be classified as held for sale. Assets and liabilities held for sale are required to be recorded at the lower of carrying value or fair value less any costs to sell. At ~~March 31,~~September 30, 2020, the carrying value of the assets held for sale approximated the estimated fair value less costs to sell, therefore an impairment charge was not ~~recorded.~~required. The divestiture of the business held for sale could result in a gain or loss on sale to the extent the ultimate selling price differs from the current carrying value of the net assets recorded. The sale is expected to occur in 2020.

The following table summarizes the carrying value of the assets and liabilities held for sale at ~~March 31,~~September 30, 2020 and December 31, 2019:


(in thousands)	March 31, 2020		December 31, 2019		September 30, 2020			December 31, 2019
Accounts receivable – trade, net	$	4,133	$	5,472	$	1,527		$	5,472
Accounts receivable – other	143		147		77			147
Contracts in progress	580		586		797			586
Inventories	1,884		1,555		2,292			1,555
Other current assets	298		329		123			329
Current assets held for sale	7,038		8,089		4,816			8,089

Net property, plant and equipment	6,444		6,534		6,793			6,534
Intangible assets	711		725		732			725
Right-of-use-asset	24		63		57			63
Other assets	20		—		(39		)	—
Non-current assets held for sale	7,199		7,322		7,543			7,322

Total assets held for sale	$	14,237	$	15,411	$	12,359		$	15,411

Accounts payable	$	6,340	$	7,898	$	5,352		$	7,898
Accrued employee benefits	495		430		317			430
Advance billings on contracts	353		227		76			227
Accrued warranty expense	509		515		517			515
Operating lease liabilities	3		6		33			6
Other accrued liabilities	586		462		630			462
Current liabilities held for sale	8,286		9,538		6,925			9,538

Non-current liabilities held for sale	36		—

Total liabilities held for sale	$	8,322	$	9,538	$	6,925		$	9,538

Divestitures

On March 17, 2020, we fully settled the remaining escrow associated with the sale of PBRRC and received $4.5 million in cash.

Effective May 31, 2019, we sold all of the issued and outstanding capital stock of Loibl, a material handling business in Germany, to Lynx Holding GmbH for €10.0 million (approximately $11.4 million), subject to adjustment. We received $7.4 million in cash and recognized a $3.6 million pre-tax loss on the sale of this business in the quarter ended September 30, 2019, net of $0.7 million in transaction costs. Proceeds from the transaction were primarily used to reduce outstanding balances under our U.S. Revolving Credit Facility.

Discontinued ~~Operations- subsequent event~~Operations

On April 6, 2020, we fully settled the remaining escrow associated with the sale of the MEGTEC and Universal businesses and received $3.5 million in cash.

NOTE 22 – NEW ACCOUNTING STANDARDS

We adopted the following new accounting standard during the first quarter of 2020:

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service

Contract. The new guidance requires companies acting as the customer in a cloud hosting service arrangement to follow the requirements of ASC 350-40 for capitalizing implementation costs for internal-use software and requires the amortization of these costs over the life of the related service contract. The impact of this standard on our condensed consolidated financial statements was immaterial.

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

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 amendments in this update are effective for public business entities that meet the definition of an SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We are currently evaluating the impact of the standard on our condensed consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform of Financial Reporting. The amendments in this update provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The amendments in this update are effective for all entities upon issuance and may be adopted any date on or after March 12, 2020 up to December 31, 2022. We are currently evaluating the impact of the standard on our condensed consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this update simplify the accounting for income taxes by removing exceptions related to the incremental approach for intra-period tax allocation, certain deferred tax liabilities, and the general methodology for calculating income taxes in an interim period. The amendment also provides simplification related to accounting for franchise (or similar) tax, evaluating the tax basis step up of goodwill, allocation of consolidated current and deferred tax expense, reflection of the impact of enacted tax law or rate changes in annual effective tax rate calculations in the interim period that includes enactment date, and other minor codification improvements. For public business entities, the amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption of the amendments is permitted, including adoption in any interim period for public business entities for periods in which financial statements have not yet been issued. We are currently evaluating the impact of the standard on our condensed consolidated financial statements.

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

~~NOTE 23 – SUBSEQUENT EVENTS~~

~~COVID-19 Response~~

As part of the Company’s recent response to the impact of the COVID-19 pandemic on its business, the Company is taking certain cash conservation and cost reduction measures announced in April 2020. These measures include temporary payroll reductions and unpaid furloughs for certain employees, suspending the Company's 401(k) match for U.S. employees for the remainder of 2020, temporarily deferring the monthly fee paid to BRPI Executive Consulting, LLC for the services of our Chief Executive Officer by 50%, and deferrals of the base salaries of our Chief Strategy Officer by 50%, Chief Financial Officer by 30% and our Senior Vice President of The Babcock & Wilcox Company by 30%. The Company’s Board also approved a temporary deferral of 50% of the cash compensation payable to non-employee directors under the Company’s board compensation program to be paid during the first quarter of 2021. The Company has also negotiated or is in the process of negotiating temporary rent payment deferrals related to leased facilities located in the U.S., Canada, Italy and Denmark and is exploring options for government loans and programs in the U.S. and abroad that would be appropriate and available.

The Company continues to analyze its cost structure and may implement additional cost reduction measures as may be necessary due to the on-going economic challenges resulting from the COVID-19 pandemic.

~~Debt Refinancing~~

~~Entry into A&R Credit Agreement~~

On May 14, 2020, we entered into an agreement with our lenders amending and restating the Amended Credit Agreement. The A&R Credit Agreement refinances and extends the maturity of our revolving credit facility and Last Out Term Loans.

Under the A&R Credit Agreement, B. Riley has committed to provide the Company with up to $70.0 million of additional Last Out Term Loans on the same terms as the term loans extended under the Amended Credit Agreement. An aggregate $30.0 million of this new commitment was funded upon execution of the A&R Credit Agreement. Of the remaining commitments, at least $35.0 million will be funded in installments, subject to reduction for the gross proceeds from certain equity offerings conducted by the Company, and $5.0 million will be funded upon request by the Company. The proceeds from the $30.0 million of new term loans will be used to pay transaction fees and expenses and repay outstanding borrowings under the revolving credit facility governed by the A&R Credit Agreement (the "revolving credit facility"). Proceeds from the additional $40.0 million of term loans will be used to repay outstanding borrowings under the revolving credit facility, with any remaining amounts used for working capital, capital expenditures, permitted acquisitions and general corporate purposes.

The A&R Credit Agreement also provides that, (i) the revolving credit facility continues to be available for issuances of existing and new letters of credit, subject to the L/C Sublimit (as defined below), (ii) the $205 million sublimit on borrowings under the revolving credit facility is maintained, and (iii) interest payments on the unpaid principal amount of revolving credit loans incurred during the period from May 14, 2020 through and including August 31, 2020 are deferred and will be paid in six equal installments on the last business day of each calendar month beginning on January 29, 2021 and through June 30, 2021. No swing line borrowings are permitted under the A&R Credit Agreement.

~~The A&R Credit Agreement also amends the following terms, among others, as compared with the Amended Credit Agreement:~~


~~(i)~~	the maturity date of the revolving credit facility will be extended to June 30, 2022, and the maturity date of all Last Out Term Loans under the A&R Credit Agreement will be extended to December 30, 2022 (six months after the maturity date of the revolving credit facility);


~~(ii)~~	the interest rate for loans under the revolving credit facility will be reduced to LIBOR plus 7.0% or base rate (as defined in the A&R Credit Agreement) plus 6.0%. These margins will be reduced by 2.0% if commitments under the revolving credit facility are reduced to less than $200.0 million. The fee for letters of credit will be set at 4.0%;


~~(iii)~~	~~the interest rate for all Last Out Term Loans will be set at 12.0%;~~


~~(iv)~~	the commitments under the revolving credit facility will automatically and permanently decrease in the following amounts on the following dates, which match the funding dates and amounts for the committed term loans: (x) $10.0 million on November 30, 2020; and (y) $5.0 million on each of March 31, 2021, June 30, 2021, September 30, 2021, December 31, 2021 and March 31, 2022, respectively;


~~(v)~~	the amount of revolving loans and letters of credit available in currencies other than U.S. dollars will be capped at $125.0 million through April 30, 2021 and step down to $110.0 million on May 1, 2021; and


~~(vi)~~	the amount of financial letters of credit will be capped at $75.0 million, and the amount of all letters of credit will be capped at $190.0 million through April 30, 2021 and step down to $175.0 million on May 1, 2021 (the “L/C Sublimit”).

Affirmative and negative covenants under the A&R Credit Agreement are substantially consistent with the Amended Credit Agreement, except that, among other changes: (i) the indebtedness covenant has been modified to permit the incurrence of any governmental assistance in the form of indebtedness in connection with COVID-19 relief in an aggregate principal amount not to exceed $10.0 million; (ii) a third-party letter of credit basket of up to $50.0 million has been added; (iii) certain liens and restricted payments are modified to permit liens and repayments of indebtedness incurred in connection with governmental assistance in connection with COVID-19 relief; and (iv) covenants related to the European Vølund EPC loss projects have been removed. The minimum required liquidity condition of $30.0 million remains constant, but has been modified to exclude cash of non-loan parties in an amount in excess of $25.0 million. Certain financial covenant testing has been suspended through September 30, 2020, with the Company and the Administrative Agent having agreed to renegotiate such covenant levels and related definitions prior to October 31, 2020.

Events of default under the A&R Credit Agreement are substantially consistent with the Amended Credit Agreement, except that: (i) B. Riley’s failure to fund any of its additional Last Out Term Loans committed under the A&R Credit Agreement will constitute an event of default; and (ii) the failure to renegotiate and set certain financial covenant testing levels and related definitions prior to October 31, 2020 will constitute an event of default.

In connection with the A&R Credit Agreement, the Company will incur certain customary amendment and commitment fees, a portion of which will be deferred pursuant to the terms of the A&R Credit Agreement along with certain previously deferred fees incurred under the Amended Credit Agreement.

~~B. Riley Limited Guaranty~~

In connection with the Company’s entry into the A&R Credit Agreement, B. Riley has agreed to enter into the B. Riley Guaranty for the benefit of the Administrative Agent and the lenders under the revolving credit facility. The B. Riley Guaranty provides for the guarantee of all of the Company’s obligations with respect to the revolving credit facility (other than with respect to letters of credit and contingent obligations), including the obligation to repay outstanding revolving credit loans and pay earned interest and fees. The B. Riley Guaranty is enforceable in certain circumstances, including, among others: (i) B. Riley’s failure to timely fund in full any of its additional Last Out Term Loans committed under the A&R Credit Agreement; (ii) certain events of default relating to bankruptcy or insolvency occurring with respect to B. Riley; (iii) the acceleration of the Company’s borrowings under the revolving credit facility; (iv) the Company’s failure to pay any amount due to the Administrative Agent or any lender under the revolving credit facility; or (v) any assertion that the B. Riley Guaranty or any portion thereof is not valid, binding or enforceable.

~~Fee and Interest Equitization Agreement~~

~~Payments, the “Equitized Fees and Interest Payments”), B. Riley will receive shares of the Company’s common stock, par value $0.01 per share (“common stock”).~~

Under the Equitization Agreement, B. Riley will receive a number of shares of common stock equal to (i) the aggregate dollar value of the Equitized Fees and Interest Payments divided by (ii) the Conversion Price. For purposes of the Equitization Agreement, the “Conversion Price” means the average volume weighted average price of the common stock over 15 consecutive trading days beginning on and including May 15, 2020 (the “Measurement Period”), subject to customary adjustments. For purposes of the listing requirements of the New York Stock Exchange (the "NYSE"), the Equitization Agreement sets a minimum for the Conversion Price of $1.55 per share of common stock, unless and until approval is obtained from the Company’s stockholders under the rules of the NYSE.

The Company is required under the Equitization Agreement to use its reasonable best efforts to take all actions to obtain any necessary stockholder approval under the rules of the NYSE for the issuance of the Shares. B. Riley has agreed to cause all shares of common stock beneficially owned by B. Riley to be voted in favor of any proposal presented to the Company’s stockholders seeking approval of the issuance of shares pursuant to the Equitization Agreement.

The issuance of shares pursuant to the Equitization Agreement is subject to customary closing conditions including approval for listing of the shares on the NYSE. Subject to the satisfaction or waiver of such conditions, shares will be issued to B. Riley, in the case of the Equitized Fee Payment, on the first business day following the Measurement Period, and in the case of Equitized Interest Payments, on the scheduled interest payment dates as provided by the A&R Credit Agreement without giving effect to any waiver or deferral contemplated thereby.

To the extent that the Company is unable to issue any shares to B. Riley pursuant to the Equitization Agreement due to the failure to have obtained the required stockholder approval as a result of the Conversion Price not being at least $1.55, the unpaid portion of the Equitized Fees and Interest Payments will be paid in cash at the Last Out Term Loan maturity date under the A&R Credit Agreement.

~~Termination of Backstop Commitment Letter~~

As part of the entry into the A&R Credit Agreement and the related transactions, the Company, B. Riley and the Administrative Agent agreed to terminate the backstop commitment letter provided by B. Riley on January 31, 2020 in connection with Amendment No. 20 to the Amended Credit Agreement.

3640

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

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

This quarterly report, 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. You should not place undue reliance on these statements. Statements that include the words "expect," "intend," "plan," "believe," "project," "forecast," "estimate," "may," "should," "anticipate" and similar statements of a future or forward-looking nature identify forward-looking statements.

These forward-looking statements are based on management’s current expectations and involve a number of risks and uncertainties, including, among other things, the impact of COVID-19 on us and the capital markets and global economic climate generally; 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, ~~the Company’s~~our credit agreement as amended and restated (the "A&R Credit ~~Agreement;~~Agreement"); our ability to obtain waivers of required pension contributions; the highly competitive nature of our ~~businesses;~~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 ~~Vølund & Other~~B&W Renewable ~~segment,~~and B&W Environmental segments, including the ability to complete our B&W Renewable's European EPC projects and B&W Environmental's U.S. loss projects within the expected time frame and the estimated costs; our ability to successfully partner with third parties to win and execute contracts within our ~~SPIG~~B&W Environmental and ~~Vølund & Other~~B&W Renewable 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 maintain operational support for our information systems against service outages and data corruption, as well as protection against cyber-based network security breaches and theft of data; our ability to protect our intellectual property and renew licenses to use intellectual property of third parties; our use of the percentage-of-completion method of accounting to recognize revenue over time; 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; changes in, or our failure or inability to comply with, laws and government regulations; actual or anticipated changes in governmental regulation, including trade and tariff policies; difficulties we may encounter in obtaining regulatory or other necessary permits or approvals; changes in, and liabilities relating to, existing or future environmental regulatory matters; changes in actuarial assumptions and market fluctuations that affect our net pension liabilities and income; potential violations of the Foreign Corrupt Practices Act; our ability to successfully compete with current and future competitors; the loss of key personnel and the continued availability of qualified personnel; our ability to negotiate and maintain good relationships with labor unions; changes in pension and medical expenses associated with our retirement benefit programs; social, political, competitive and economic situations in foreign countries where we do business or seek new business; the possibilities of war, other armed conflicts or terrorist attacks; the willingness of customers and suppliers to continue to do business with us on reasonable terms and conditions; our ability to successfully consummate strategic alternatives for non-core assets, if we determine to pursue them; 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.~~10-K and our quarterly report on Form 10-Q for the quarter ended September 30, 2020. The Company cautions not to place undue reliance on these forward-looking statements, which speak only as of the date of this report, and the Company undertakes no obligation to update or revise any forward-looking statement, except to the extent required by applicable law.

OVERVIEW OF RESULTS

Our assessment of operating results is based on three reportable segments, which changed in the third quarter of 2020 as part of the Company's strategic, market-focused organizational and re-branding initiative to accelerate growth and provide

stakeholders improved visibility into our renewable and environmental growth platforms. Segment results for all periods have been restated for comparative purposes. Our reportable segments are as follows:

B&W Renewable segment: cost-effective technologies for efficient and environmentally sustainable power and heat generation, including waste-to-energy, biomass energy and black liquor systems for the pulp and paper industry. The segment'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.

B&W Environmental segment: full suite of best-in-class emissions control and environmental technology solutions for utility and industrial steam generation applications around the world. The segment'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.

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

In December 2019, a novel strain of coronavirus, COVID-19, was identified in Wuhan, China and has subsequently spread ~~globally, with over 180 countries around the world confirming infections, including the United States and countries throughout Europe and Southeast Asia.~~globally. This global pandemic has disrupted business operations, 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. ~~While~~These measures and restrictions have varied widely and have been subject to significant changes from time to time depending on the changes in ~~some countries have begun to lessen,~~

the ~~Company's headquarters and the headquarters~~severity of the ~~Babcock & Wilcox segment~~virus in ~~Akron, Ohio,~~these countries and localities. These restrictions, including travel and curtailment of other activity, negatively impact our ability to conduct business. Although some of these restrictions have been lifted or scaled back, a recent resurgence of COVID-19 has resulted in the ~~headquarters~~reimposition of certain restrictions and may lead to other restrictions being implemented in response to efforts to reduce the spread of the ~~Vølund & Other Renewable segment in Denmark~~virus. These varying and ~~the headquarters~~changing events have caused many of the ~~SPIG segment~~projects we anticipated to begin in ~~Italy (among other locations where the Company~~2020 to be delayed to later in 2020 and ~~its customers, vendors~~others to be delayed further into 2021 and suppliers operate) are currently subject to lock-down or shelter-in-place orders under local ordinances, with employees continuing to work remotely if possible. While some employees can work remotely, many2022. 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, ~~also~~as noted above, been extended into next ~~year.~~year and beyond. Additionally, out of concern for our employees, even where restrictions permit employees to return to our offices and worksites, we have advised those who are uncomfortable returning to worksites due to the pandemic that they are not required to do ~~so.~~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.

Our operating results for the three and nine months ended September 30, 2020 have been negatively impacted by the COVID-19 pandemic. Because the majority of our revenues are driven by projects, we cannot reasonably estimate the amount of the decreases in our operating results directly caused by COVID-19. We have experienced adverse impacts on our 2020 revenues due to delays in closing new business deals, deferrals or delays in starting new projects, and other product volume decreases due to COVID-19 in 2020 caused by the following, among other reasons:

Customers’ concern regarding the duration and magnitude of COVID-19;

Customers’ hesitance to place large orders;

Certain planned 2020 projects being extended out to next year and beyond;

Field service personnel unable to get to certain site projects;

Travel restrictions impeding our ability to acquire new customers; and

International growth plans hindered by recruitment, training & deployment of new field personnel.

We recorded operating ~~losses~~income of ~~$10.3~~$14.1 million and ~~$32.0~~an operating loss of $3.9 million in the ~~first quarter~~three and nine months ended September 30, 2020, respectively, compared to losses of ~~2020~~$3.2 million and $39.4 million in the three and nine months ended September 30, 2019, respectively and we showed improved results in our ~~Babcock & Wilcox and Vølund & Other~~B&W Renewable ~~segments.~~

Our Babcock & Wilcox segment generated adjusted EBITDA of $10.7 million and $9.1 million in the first quarter of 2020 and 2019, respectively. This improvement is primarily attributable to higher parts margins and the benefits of cost savings from restructuring initiatives that we began to implement in 2018.segment.

Adjusted EBITDA in the ~~Vølund & Other~~B&W Renewable segment was ~~$(3.3)~~$23.6 million and ~~$(8.8)~~$22.0 million in the ~~first~~three and nine months ended September 30, 2020, respectively, compared to $(0.6) million and $(4.2) million in the three and nine months ended September 30, 2019, respectively. The improvement was primarily due to the recognition in the third quarter of the non-recurring loss recovery of $26.0 million under the insurance settlement agreement dated October 10, 2020 ~~and 2019, respectively.~~ partially offset by the divestiture of Loibl, a material handling business in Germany, as well as the impacts of COVID-19, as described above.

In the ~~first quarter of~~three and nine months ended September 30, 2020, we recorded ~~no additional costs~~$1.1 million and $1.4 million in net losses, respectively, inclusive of warranty expense related to the six European ~~Vølund~~B&W Renewable EPC loss contracts as compared to ~~$4.1~~$0.7 million and $8.0 million, in net losses recorded for the ~~first quarter of 2019.~~three and nine months ended September 30, 2019, respectively. Aside from these loss projects, we have one remaining extended scope contract in our ~~Vølund & Other~~B&W Renewable ~~business~~segment which turned into a loss contract in the fourth quarter of 2019 due to an increase in estimate to complete; this contract was turned over to the customer in October 2019.

As of ~~March 31,~~September 30, 2020, five of the six European ~~Vølund~~B&W Renewable EPC loss contracts had been turned over to the customer, with only punch list or agreed remediation items and performance testing remaining, some of which are expected to be performed during the customers' scheduled maintenance outages. Turnover is not applicable to the fifth loss contract under the terms of the March 29, 2019 settlement agreement with the customers of the second and fifth loss contracts, who are related parties to each other. Under that settlement agreement, we limited our remaining risk related to these contracts by paying a combined £70 million ($91.5 million) on April 5, 2019 in exchange for limiting and further defining our obligations under the second and fifth loss contracts, including waiver of the rejection and termination rights on the fifth loss contract that could have resulted in repayment of all monies paid to us and our former civil construction partner (up to approximately $144 million), and requirement to restore the property to its original state if the customer exercised this contractual rejection right. On the fifth loss contract, we agreed to continue to support construction services to complete certain key systems of the plant by May 31, 2019, for which penalty for failure to complete these systems is limited to the unspent portion of our quoted cost of the activities through that date. The settlement eliminated all historical claims and remaining liquidated damages. In accordance with the settlement, we have no further obligation related to the fifth loss contract other than customary warranty of core products if the plant is used as a biomass plant as designed. We estimated the portion of this settlement related to waiver of the rejection right on the fifth loss contract was $81.1 million, which was recorded in the fourth quarter of 2018 as a reduction in the selling price. We are still pursuing insurance recoveries and claims against subcontractors. For the second loss contract, the settlement limited the remaining performance obligations and settled historic claims for nonconformance and delays, and we turned over the plant in May 2019, and subsequently began the operations and maintenance contract to operate this plant. See further discussion of the loss projects in Note 4 to the Condensed Consolidated Financial Statements.

The ~~SPIG~~B&W Environmental segment ~~included operating results~~generated adjusted EBITDA of ~~$(1.2)~~$1.1 million and ~~$0.7~~$(0.1) million ~~of adjusted EBITDA~~ in the ~~first quarter of~~three and nine months ended September 30, 2020, respectively, and $1.8 million and $2.5 million in the three and nine months ended September 30, 2019, respectively. The decline is due to ~~selective bidding in core geographies~~the impacts of COVID-19, as described above. In particular, while the segment was able to mitigate the impact of COVID-19 on project executions, the decision for new investments by several customers has been postponed impacting revenues and ~~products and focus on profitability. At March 31,~~operating results. As of September 30, 2020, ~~SPIG~~the B&W Environmental segment had two significant legacy loss contracts. The first loss contract is a contract to engineer, procure materials and then construct a dry cooling system for a gas-fired power plant in the United States, which continued through the ~~three~~nine months ended ~~March 31,~~September 30, 2020. Final completion of the first loss contract is expected to be in the ~~third~~fourth quarter of 2020. The second loss contract is a contract to engineer and procure materials for a dry cooling system for a gas-fired power plant in the United States, which continued through the ~~three~~nine months ended ~~March 31,~~September 30, 2020. Final completion of the second loss contract is expected to be in the ~~third~~fourth quarter of 2020. ~~SPIG's~~B&W Environmental's two significant loss contracts, as disclosed in Note 4 to the Condensed Consolidated Financial Statements, generated revenues of ~~$0.8~~$0.4 million and ~~$11.5~~$3.6 million in the ~~first quarter of~~three and nine months ended September 30, 2020, respectively, compared to $1.3 million and $20.6 million in the three and nine months ended September 30, 2019, respectively.

38Our B&W Thermal segment generated adjusted EBITDA of $7.3 million and $22.7 million in the three and nine months ended September 30, 2020, respectively, compared to $12.9 million and $35.0 million in the three and nine months ended September 30, 2019, respectively. This decline is primarily attributable to the decrease in revenue volume including the impacts of COVID-19, as described above, partially offset by the results of costs savings and restructuring initiatives.

We have manufacturing facilities in Mexico, China, Unites States, Denmark and Scotland. Many aspects of our operations and properties could be affected by political developments, environmental regulations and operating risks. These and other factors may have a material impact on our international and domestic operations or our business as a whole.

Through our restructuring efforts, we continue to make significant progress to make our cost structure more variable and to reduce costs. We expect our cost-savings 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 ~~Babcock & Wilcox, Vølund~~B&W Renewable, B&W Environmental, and ~~Other Renewable, and SPIG~~B&W Thermal segments globally.

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

Year-over-year comparisons of our results from continuing operations were also ~~affected~~impacted by:

On October 10, 2020, we entered into a settlement agreement with an insurer in connection with five of the six European B&W Renewable EPC loss contracts. In connection with the insured losses recognized in prior years, we recognized this non-recurring loss recovery of $26.0 million as a reduction of our Cost of operations in our Condensed Consolidated Statements of Operations and recorded the insurance receivable in Accounts receivable - other in our Condensed Consolidated Balance Sheets for the period ending September 30, 2020 because we determined the loss recovery was probable as of such date. On October 23, 2020, we received gross proceeds of $26.0 million, as described in Note 4.

$~~2.0~~2.4 million and ~~$6.1~~$6.7 million of restructuring ~~and spin-off~~ costs were recognized in the ~~first quarter~~three and nine months ended September 30, 2020, respectively, compared to $2.6 million and $9.6 million of ~~2020~~restructuring costs recognized in the three and nine months ended September 30, 2019, respectively. The restructuring costs primarily related to severance and other costs in the first ~~quarter~~nine months of 2020 and ~~2019, respectively.~~was primarily related to severance in the first nine months of 2019.

$~~0.9~~1.7 million and ~~$4.0~~$3.2 million of financial advisory service fees were recorded in the ~~first quarter~~three and nine months ended September 30, 2020, respectively, compared to $1.2 million and $8.4 million in the corresponding periods of ~~2020 and 2019, respectively, which~~2019. These services are required under our U.S. Revolving Credit Facility. Financial advisory service fees are included in advisory fees and settlement costs in the Condensed Consolidated Statement of Operations.

$6.6 million of settlement cost was recognized in the first quarter of 2019 in connection with an additional European waste-to-energy EPC contract, for which notice to proceed was not given and the contract was not started and is included in advisory fees and settlement costs in the Condensed Consolidated Statement of Operations. The settlement limits our obligations to our core scope activities and eliminates risk related to acting as the prime EPC should the project have moved forward.

$~~2.6~~1.4 million and ~~$3.1~~$5.2 million of legal and other advisory fees were recognized in the ~~first quarter~~three and nine months ended September 30, 2020, respectively, compared to $2.8 million and $7.4 million in the corresponding periods of ~~2020 and 2019, respectively,~~2019. These fees are related to the contract settlement and ~~for~~ liquidity planning and isare included in advisory fees and settlement costs in the Condensed Consolidated Statement of Operations. The contract settlement is further described above and in Note 4 to the Condensed Consolidated Financial Statements.

$2.0 million and 4.0 million of accelerated depreciation expense infor the ~~first quarter of~~three and nine months ended September 30, 2019, respectively, for fixed assets affected by our September 2018 announcement to consolidate office space and relocate our global headquarters to Akron, Ohio in December 2019.

$~~0.4~~1.3 million of actuarially determined mark to market ("MTM") losses on our pension and other post-retirement benefits inin the ~~first quarter of 2019.~~nine months ended September 30, 2019. MTM losses are further described in Note 12 to the Condensed Consolidated Financial Statements.

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

RESULTS OF OPERATIONS

Condensed Consolidated Results of Operations



	Three months ended September 30,									Nine months ended September 30,
(in thousands)	2020			2019			$ Change			2020			2019			$ Change
Revenues:
B&W Renewable segment	$	39,062		$	51,292		$	(12,230	)	$	118,570		$	158,901		$	(40,331	)
B&W Environmental segment	25,262			45,036			(19,774		)	76,354			234,485			(158,131		)
B&W Thermal segment	70,025			108,157			(38,132		)	223,920			315,587			(91,667		)
Eliminations	(1,836		)	(5,841		)	4,005			(2,380		)	(30,278		)	27,898
	$	132,513		$	198,644		$	(66,131	)	$	416,464		$	678,695		$	(262,231	)

Three months ended March 31,
(In thousands) 2020 2019 $ Change
Revenues:
Babcock & Wilcox segment $ 121,956
$ 188,558
$ (66,602 )
Vølund & Other Renewable segment 15,309
29,532
(14,223 )
SPIG segment 11,337
28,902
(17,565 )
Eliminations (48 ) (15,056 ) 15,008
$ 148,554
$ 231,936
$ (83,382 )



	Three months ended September 30,									Nine months ended September 30,
(in thousands)	2020			2019			$ Change			2020			2019			$ Change
Adjusted EBITDA
B&W Renewable segment	$	23,575		$	(615	)	$	24,190		$	22,003		$	(4,185	)	$	26,188
B&W Environmental segment	1,078			1,771			(693		)	(137		)	2,453			(2,590		)
B&W Thermal segment	7,255			12,871			(5,616		)	22,676			34,994			(12,318		)
Corporate	(4,916		)	(3,059		)	(1,857		)	(12,864		)	(16,973		)	4,109
Research and development costs	(1,355		)	(828		)	(527		)	(3,927		)	(2,281		)	(1,646		)
	$	25,637		$	10,140		$	15,497		$	27,751		$	14,008		$	13,743

Three months ended March 31,
(in thousands) 2020 2019 $ Change
Adjusted EBITDA ⁽¹⁾

Babcock & Wilcox segment $ 10,654
$ 9,089
$ 1,565
Vølund & Other Renewable segment (3,293 ) (8,789 ) 5,496
SPIG segment (1,192 ) 658
(1,850 )
Corporate (4,143 ) (4,591 ) 448
Research and development costs (1,341 ) (743 ) (598 )
$ 685
$ (4,376 ) $ 5,061
Three Months Ended September 30, 2020 and 2019

⁽¹⁾Revenues decreased by~~Adjusted EBITDA, for the three months ended March 31, 2019, excludes stock compensation that was previously included in segment results and totals $0.1~~$66.1 millionto $132.5 million in the ~~Babcock & Wilcox segment, $0.1 million in the Vølund & Other Renewable segment, and $0.4 million in Corporate. Beginning in the~~ third ~~quarter of 2019, stock compensation is no longer considered in Adjusted EBITDA for purposes of managing the business, and prior periods have been adjusted to be presented on a comparable basis.~~

~~Revenues decreased by $83.4 million to $148.6 million in the first~~ quarter of 2020 as compared to ~~$231.9~~$198.6 million in the ~~first~~third quarter of 2019. Revenues for each of our segments have been adversely impacted by COVID-19. Revenue in the Babcock & Wilcox segment decreased by $66.6 million primarily due to the completion of several large construction projects that were actively being worked on during the previous quarter. Revenue in the Vølund & OtherB&W Renewable segment decreased by ~~$14.2~~$12.2 million partially due to the divestiture of Loibl, a materials handling business in Germany, which contributed $7.2 million of revenue in the first quarter of 2019. Revenue was also lower in the Vølund & Other Renewable segment due to a ~~lower~~higher level of ~~EPC project~~ activity ~~partially offset by the startup of two operations and maintenance contracts~~ in the ~~U.K. that followed~~prior year related to the turnover of the EPC loss contracts in addition to new anticipated activities being deferred due to COVID-19. Revenue in the ~~customers. SPIG~~B&W Environmental segment ~~revenue declined $17.6~~decreased by $19.8 million due to ~~selective bidding~~the completion of large construction projects in ~~core geographies~~the prior year in addition to the postponement of new projects by customers as a result of COVID-19. B&W Thermal segment revenue decreased $38.1 million primarily due to the adverse impacts of COVID-19 resulting in customer delays and ~~products~~lower parts, construction, package boilers and ~~focus on profitability.~~international service orders.

Operating ~~losses improved $21.7~~income increased $17.3 million to ~~$(10.3)~~$14.1 million in the ~~first~~third quarter of 2020 from ~~$(32.0)~~$(3.2) million in the ~~first~~third quarter of ~~2019,~~2019. The increase is primarily due to ~~higher parts margins in addition to~~ the ~~impacts~~non-recurring loss recovery of ~~costs savings and restructuring initiatives~~$26.0 million recognized in the ~~Babcock & Wilcox~~third quarter in the B&W Renewable segment ~~and~~under an October 10, 2020 settlement agreement with an insurer in connection with five of the ~~absence of losses on the~~six European B&W Renewable EPC loss contracts, ~~lower levels of direct overhead support, warranty expense and SG&A,~~as described in Note 4. The increase related to the ~~Vølund & Other Renewable segment being partly~~loss recovery is partially offset by ~~the divestiture~~lower volume in each of ~~Loibl in the Vølund & Other Renewable segment~~our segments and customer delays as a ~~decline in overall volume and unfavorable product mix in the SPIG segment.~~result of COVID-19. Restructuring expenses, advisory fees, amortization expense, gains (losses) on dispositions of equity method investees, and impairments are discussed in further detail in the sections below.

Nine Months Ended September 30, 2020 and 2019

Revenues decreased by $262.2 million to $416.5 million in the nine months ended September 30, 2020 as compared to $678.7 million in the nine months ended September 30, 2019. Revenues for each of our segments have been adversely impacted by COVID-19. Revenue in the B&W Renewable segment decreased by $40.3 million partially due to the

4045

divestiture of Loibl, a materials handling business in Germany, which contributed $14.3 million of revenue in the nine months ended September 30, 2019, the advanced completion of activities on the European B&W Renewable EPC loss contracts in the prior year and new anticipated activities being deferred due to COVID-19 all being partially offset by a higher level of activities on two operations and maintenance contracts in the U.K. B&W Environmental segment revenue declined $158.1 million partially due to the completion of large construction projects in addition to the postponement of new projects by several customers as a result of COVID-19. Revenue in the B&W Thermal segment decreased by $91.7 million primarily due to customers' concern regarding the duration and magnitude of COVID-19 resulting in lower parts, construction, package boilers and international service orders.

Operating losses improved $35.5 million to $(3.9) million in the nine months ended September 30, 2020 from $(39.4) million in the nine months ended September 30, 2019, primarily due to the non-recurring insurance loss recovery of $26.0 million, as discussed above and a lower level of losses on the EPC loss contracts being partially offset by the divestiture of Loibl and the impacts of COVID-19 in the B&W Renewable segment , as well as a decline in volume in the B&W Environmental and B&W Thermal segments as described above. Restructuring expenses, advisory fees, amortization expense, gains (losses) on dispositions of equity method investees, and impairments are discussed in further detail in the sections below.

Non-GAAP Financial Measures

The following discussion of our business segment results of operations includes a discussion of adjusted gross profit, a non-GAAP financial measure. Adjusted gross profit differs from the most directly comparable measure calculated in accordance with generally accepted accounting principles ("GAAP"). Amortization expense is not allocated to the segments’ adjusted gross profit. A reconciliation of operating ~~loss,~~income (loss), the most directly comparable GAAP measure, to adjusted gross profit is included in the table 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 September 30,									Nine months ended September 30,
(in thousands)	2020			2019			$ Change			2020			2019			$ Change
Adjusted gross profit (loss) ⁽¹⁾
Operating income (loss)	$	14,074		$	(3,177	)	$	17,251		$	(3,927	)	$	(39,397	)	$	35,470
Selling, general and administrative ("SG&A") expenses	35,611			35,828			(217		)	107,647			120,045			(12,398		)
Advisory fees and settlement costs	3,846			4,474			(628		)	10,074			22,862			(12,788		)
Amortization expense	1,365			972			393			4,110			3,301			809
Restructuring activities	2,396			2,556			(160		)	6,739			9,571			(2,832		)
Research and development costs	1,355			828			527			3,927			2,281			1,646
Losses (gains) on asset disposals, net	(3		)	(266		)	263			(916		)	(224		)	(692		)
	$	58,644		$	41,215		$	17,429		$	127,654		$	118,439		$	9,215

Three months ended March 31,
(in thousands) 2020 2019 $ Change
Adjusted gross profit (loss) ⁽¹⁾

Operating loss $ (10,298 ) $ (31,962 ) $ 21,664
Selling, general and administrative ("SG&A") expenses 37,532
42,269
(4,737 )
Advisory fees and settlement costs 4,239
13,610
(9,371 )
Amortization expense 1,410
1,187
223
Restructuring activities and spin-off transaction costs 1,951
6,079
(4,128 )
Research and development costs 1,341
743
598
Gain on asset disposals, net (915 ) —
(915 )
$ 35,260
$ 31,926
$ 3,334

⁽¹⁾Amortization is not allocated to the segments' adjusted gross profit, but depreciation is allocated to the segments' adjusted gross profit.

Adjusted gross profit by segment is as follows:

Three months ended March 31,
(in thousands) 2020 2019 $ Change
Adjusted gross profit (loss)
Babcock & Wilcox segment $ 32,881
$ 31,106
$ 1,775
Vølund & Other Renewable segment 1,458
(2,856 ) 4,314
SPIG segment 921
3,676
(2,755 )
$ 35,260
$ 31,926
$ 3,334



	Three months ended September 30,							Nine months ended September 30,
(in thousands)	2020		2019		$ Change			2020		2019		$ Change
Adjusted gross profit (loss)
B&W Renewable segment	$	32,092	$	6,571	$	25,521		$	48,401	$	19,297	$	29,104
B&W Environmental segment	5,929		9,030		(3,101		)	15,465		33,613		(18,148		)
B&W Thermal segment	20,623		25,614		(4,991		)	63,788		65,530		(1,742		)
	$	58,644	$	41,215	$	17,429		$	127,654	$	118,440	$	9,214

~~Babcock & Wilcox Segment Results~~

Three months ended March 31,
(In thousands) 2020 2019 $ Change
Revenues $ 121,956
$ 188,558
$ (66,602 )
Adjusted EBITDA $ 10,654
$ 9,089
$ 1,565
Adjusted gross profit $ 32,881
$ 31,106
$ 1,775
Adjusted gross profit % 27.0 % 16.5 %

Revenues in the Babcock & Wilcox segment decreased 35%, or $66.6 million, to $122.0 million in the first quarter of 2020 compared to $188.6 million in the first quarter of 2019. The revenue decrease is attributable to the completion of several large construction projects that were actively being worked on during the comparable prior year's quarter.

Adjusted EBITDA in the Babcock & Wilcox segment increased 17%, or $1.6 million, to $10.7 million in the first quarter of 2020 compared to $9.1 million in the first quarter of 2019, which is mainly attributable to higher parts margins and the results of costs savings and restructuring initiatives partly offset by the decrease in revenue volume as described above.

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Adjusted gross profit in the Babcock & Wilcox segment increased $1.8 million to $32.9 million in the first quarter of 2020 compared to $31.1 million in the first quarter of 2019, which is mainly attributable to higher parts margins and the results of costs savings and restructuring initiatives partly offset by the decrease in revenue volume as described above.

~~Vølund & Other~~B&W Renewable Segment Results


	Three months ended March 31,									Three months ended September 30,									Nine months ended September 30,
(in thousands)	2020			2019			$ Change			2020			2019			$ Change			2020			2019			$ Change
Revenues	$	15,309		$	29,532		$	(14,223	)	$	39,062		$	51,292		$	(12,230	)	$	118,570		$	158,901		$	(40,331	)
Adjusted EBITDA	$	(3,293	)	$	(8,789	)	$	5,496		$	23,575		$	(615	)	$	24,190		$	22,003		$	(4,185	)	$	26,188
Adjusted gross profit (loss)	$	1,458		$	(2,856	)	$	4,314
Adjusted gross profit										$	32,092		$	6,571		$	25,521		$	48,401		$	19,297		$	29,104
Adjusted gross profit (loss) %	9.5		%	(9.7		)%				82.2		%	12.8		%				40.8		%	12.1		%

Three Months Ended September 30, 2020 and 2019

Revenues in the ~~Vølund & Other~~B&W Renewable segment decreased ~~48%~~24%, or ~~$14.2~~$12.2 million to ~~$15.3~~$39.1 million in the ~~first~~third quarter of 2020 compared to ~~$29.5~~$51.3 million in the ~~first~~third quarter of 2019. The reduction in revenue is due to a higher level of activity in the prior year related to the turnover of the EPC loss contracts in addition to new anticipated activities being deferred due to COVID-19.

Adjusted EBITDA in the B&W Renewable segment increased 3,933%, or $24.2 million, to $23.6 million in the third quarter of 2020 compared to $(0.6) million in the third quarter of 2019, The improvement is primarily due to the non-recurring loss recovery of $26.0 million recognized in the third quarter under an October 10, 2020 settlement agreement with an insurer in connection with five of the six European B&W Renewable EPC loss contracts, as described in Note 4, partially offset by lower volume, as discussed above.

Adjusted gross profit in the B&W Renewable segment increased $25.5 million to $32.1 million in the third quarter of 2020 compared to $6.6 million in the third quarter of 2019. The improvement is primarily due to the non-recurring loss recovery of $26.0 million recognized in the third quarter under an October 10, 2020 settlement agreement with an insurer in connection with five of the six European B&W Renewable EPC loss contracts described, as in Note 4, partially offset by lower volume, as discussed above.

Nine Months Ended September 30, 2020 and 2019

Revenues in the B&W Renewable segment decreased 25%, or $40.3 million, to $118.6 million in the nine months ended September 30, 2020 compared to $158.9 million in the nine months ended September 30, 2019. The reduction in revenue is due to the advanced completion of activities on the European B&W Renewable EPC loss contracts in the prior year as well as new anticipated activities being deferred due to COVID-19 being partially offset by a higher level of activities on two operations and maintenance contracts in the U.K. which followed the turnover of the EPC loss contracts to the customers. Additionally, the reduction in revenue partially relates to the divestiture of Loibl, a materials handling business in Germany, that had previously generated annual revenues of approximately $30 million annually and contributed ~~$7.2~~$14.3 million in the ~~first quarter of~~nine months ended September 30, 2019. The reduction in revenue was also due to a lower level of EPC project activity partially offset by the startup of two operations and maintenance contracts in the U.K. that followed turnover of the EPC loss contracts to the customers.

Adjusted EBITDA in the ~~Vølund & Other~~B&W Renewable segment ~~improved $5.5~~increased 626%, or $26.2 million, to ~~$(3.3)~~$22.0 million in the ~~first quarter of~~nine months ended September 30, 2020 compared to ~~$(8.8)~~$(4.2) million in the ~~first quarter of 2019. The improvement was~~nine months ended September 30, 2019, which is primarily due to ~~changes~~the non-recurring loss recovery of $26.0 million recognized in the ~~estimated revenues and~~nine months ending September 30, 2020 under an October 10, 2020 settlement agreement with an insurer in connection with five of the six European B&W Renewable EPC loss contracts, as described in Note 4. Additionally, the divestiture of Loibl was more than offset by lower costs in the current year to complete the six European ~~Vølund~~B&W Renewable EPC loss contracts. In the ~~first quarter of~~nine months ended September 30, 2020 and 2019, we recorded ~~$0.1~~$1.4 million and ~~$(4.1)~~$8.0 million in net ~~gains (losses),~~losses, respectively. Beyond the effect of the loss contracts, Adjusted EBITDA for 2020 included lower levels of direct overhead support, warranty expense and SG&A, reflecting the benefits of restructuring, partially offset by the divestiture of Loibl as mentioned above.

Adjusted gross profit ~~(loss)~~ in the ~~Vølund & Other~~B&W Renewable segment increased ~~$4.3~~$29.1 million to ~~$1.5~~$48.4 million in the ~~first quarter of~~nine months ended September 30, 2020 compared to ~~$(2.9)~~$19.3 million in the ~~first quarter of~~nine months ended September 30, 2019. The improvement ~~was~~ primarily ~~driven by no additional~~due to the non-recurring loss recovery of $26.0 million recognized in the nine months ending September 30, 2020 under an October 10, 2020 settlement agreement with an insurer in connection with five of the six European B&W Renewable EPC loss contracts, as described in Note 4 in addition to the impacts of Loibl and lower costs related to the six European ~~Vølund~~B&W Renewable EPC loss contracts as described in the Adjusted EBITDA section above. Beyond the effect of the loss contracts, adjusted gross profit for the first quarter of 2020 included lower levels of direct overhead support and warranty expense, offset by the absence of adjusted gross profit from Loibl as described above.

~~SPIG~~

B&W Environmental Segment Results


	Three months ended March 31,									Three months ended September 30,									Nine months ended September 30,
(In thousands)	2020			2019			$ Change			2020			2019			$ Change			2020			2019			$ Change
Revenues	$	11,337		$	28,902		$	(17,565	)	$	25,262		$	45,036		$	(19,774	)	$	76,354		$	234,485		$	(158,131	)
Adjusted EBITDA	$	(1,192	)	$	658		$	(1,850	)	$	1,078		$	1,771		$	(693	)	$	(137	)	$	2,453		$	(2,590	)
Adjusted gross profit	$	921		$	3,676		$	(2,755	)	$	5,929		$	9,030		$	(3,101	)	$	15,465		$	33,613		$	(18,148	)
Adjusted gross profit %	8.1		%	12.7		%				23.5		%	20.1		%				20.3		%	14.3		%

Three Months Ended September 30, 2020 and 2019

Revenues in the ~~SPIG~~B&W Environmental segment decreased ~~61%~~44%, or ~~$17.6~~$19.8 million to ~~$11.3~~$25.3 million in the ~~first~~third quarter of 2020 ~~from $28.9~~compared to $45.0 million in the ~~first~~third quarter of 2019. The decrease is primarily due to ~~selective bidding~~the completion of large construction projects in ~~core geographies and products and focus on profitability. SPIG's~~the prior year in addition to the postponement of new projects by customers as a result of COVID-19. B&W Environmental's two significant legacy loss contracts, as disclosed in Note 4 to the Condensed Consolidated Financial Statements, generated revenues of ~~$0.8~~$0.4 million and ~~$11.5~~$1.3 million in the ~~first~~third quarter of 2020 and 2019, respectively.

Adjusted EBITDA in the ~~SPIG~~B&W Environmental segment ~~decreased $1.9 million to $(1.2)~~was $1.1 million in the ~~first~~third quarter of 2020 compared to ~~$0.7~~$1.8 million in the ~~first~~third quarter of ~~2019,~~2019. The decrease is driven primarily by the ~~decrease in revenue~~lower volume, as described above ~~and lower margins, as well as a $0.7 million settlement on a legacy dry cooling project expected to facilitate the collection of related outstanding receivables, partly~~being partially offset by ~~lower overhead fixed costs.~~

the results of cost savings and restructuring initiatives.

Adjusted gross profit in the ~~SPIG~~B&W Environmental segment decreased ~~$2.8~~$3.1 million to ~~$0.9~~$5.9 million in the ~~first~~third quarter of 2020 compared to ~~$3.7~~$9.0 million in the ~~first~~third quarter of 2019. The decline is primarily attributable to the decrease in volume being partially offset by favorable product mix and the results of cost savings and restructuring initiatives.

Nine Months Ended September 30, 2020 and 2019

Revenues in the B&W Environmental segment decreased 67%, or $158.1 million to $76.4 million in the nine months ended September 30, 2020 compared to $234.5 million in the nine months ended September 30, 2019. The decrease is primarily due to the completion of large construction projects in addition to the postponement of new projects by several customers as a result of COVID-19. B&W Environmental's two significant legacy loss contracts, as disclosed in Note 4 to the Condensed Consolidated Financial Statements, generated revenues of $3.6 million and $20.6 million in the nine months ended September 30, 2020 and 2019, respectively.

Adjusted EBITDA in the B&W Environmental segment decreased $2.6 million to $(0.1) million in the nine months ended September 30, 2020 compared to $2.5 million in the nine months ended September 30, 2019. The decline is primarily attributable to the impacts of lower volume, the effects of which were partially offset by a lower percentage of overhead being absorbed by the segment that were not previously absorbed by other segments.

Adjusted gross profit in the B&W Environmental segment decreased $18.1 million to $15.5 million in the nine months ended September 30, 2020 compared to $33.6 million in the nine months ended September 30, 2019. The decrease is primarily attributable to the decrease in volume as described above.

B&W Thermal Segment Results



	Three months ended September 30,									Nine months ended September 30,
(In thousands)	2020			2019			$ Change			2020			2019			$ Change
Revenues	$	70,025		$	108,157		$	(38,132	)	$	223,920		$	315,587		$	(91,667	)
Adjusted EBITDA	$	7,255		$	12,871		$	(5,616	)	$	22,676		$	34,994		$	(12,318	)
Adjusted gross profit	$	20,623		$	25,614		$	(4,991	)	$	63,788		$	65,530		$	(1,742	)
Adjusted gross profit %	29.5		%	23.7		%				28.5		%	20.8		%

Three Months Ended September 30, 2020 and 2019

Revenues in the B&W Thermal segment decreased 35%, or $38.1 million, to $70.0 million in the third quarter of 2020 from $108.2 million in the third quarter of 2019. The revenue ~~volume in addition~~decrease is attributable to the ~~legacy dry cooling project settlement~~adverse impacts of COVID-19 resulting in customer delays and ~~unfavorable product mix~~lower parts, construction, package boilers and international service orders.

Adjusted EBITDA in the B&W Thermal segment decreased $5.6 million to $7.3 million in the third quarter of 2020 compared to $12.9 million in the third quarter of 2019, which is mainly attributable to the decrease in volume as described above being partially offset by the results of costs savings and restructuring initiatives.

Adjusted gross profit in the B&W Thermal segment decreased $5.0 million, to $20.6 million in the third quarter of 2020, compared to $25.6 million in the third quarter of 2019, which ~~resulted~~is consistent with the decrease in revenue as described above offset partially by favorable product mix and the results of costs savings and restructuring initiatives.

Nine Months Ended September 30, 2020 and 2019

Revenues in the B&W Thermal segment decreased 29%, or $91.7 million, to $223.9 million in the nine months ended September 30, 2020 from $315.6 million in the nine months ended September 30, 2019. The revenue decrease is attributable to customers' concern regarding the duration and magnitude of COVID-19 resulting in lower ~~margins.~~parts, construction, package boilers and international service orders.

Adjusted EBITDA in the B&W Thermal segment decreased $12.3 million to $22.7 million in the nine months ended September 30, 2020 compared to $35.0 million in the nine months ended September 30, 2019, which is mainly attributable to lower volume as described above and a higher percentage of overhead being absorbed by the segment that was previously absorbed by other segments, the effects of which were partially offset by favorable product mix and a full period of cost savings and restructuring initiatives benefiting the current year.

Adjusted gross profit in the B&W Thermal segment decreased $1.7 million, to $63.8 million in the nine months ended September 30, 2020, compared to $65.5 million in the nine months ended September 30, 2019, which is mainly attributable to lower volume as described above and partially offset by favorable product mix and the effects of a full period of cost savings and restructuring initiatives benefiting the current year.

Bookings and Backlog

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

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

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


	Three months ended March 31,					Three months ended September 30,						Nine months ended September 30,
(In approximate millions)	2020		2019			2020			2019			2020			2019
Babcock & Wilcox	$	159	$	187
Vølund & Other Renewable ⁽¹⁾	18		19
SPIG	32		12
B&W Renewable⁽¹⁾						$	26		$	27		$	91		$	(27	)
B&W Environmental						41			16			98			139
B&W Thermal						114			48			294			270
Other/eliminations	—		(2		)	(4		)	(5		)	(5		)	(13		)
Bookings	$	209	$	216		$	177		$	86		$	478		$	369

⁽¹⁾~~Vølund & Other~~B&W Renewable bookings includes the revaluation of backlog denominated in currency other than U.S. dollars. The foreign exchange impact on ~~Vølund & Other~~B&W Renewable bookings in the ~~three months ended March 31,~~third quarter of 2020 and 2019 was ~~$0.9~~$(6.4) million and ~~$3.5~~$(6.9) million, respectively. The foreign exchange impact on B&W Renewable bookings in the nine months ended September 30, 2020 and 2019 was $(7.0) million and $(7.4) million, respectively.

Our backlog decline, as expected is primarily driven by the timing of large new build projects in addition to the Company's focus on core technologies and profitability across all segments, as well as resolution of the European EPC loss contracts. Our backlog as of ~~March 31,~~September 30, 2020 and 2019 was as follows:


	Three months ended March 31,						As of September 30,
(In approximate millions)	2020			2019			2020			2019
Babcock & Wilcox	$	257		$	384
Vølund & Other Renewable ⁽¹⁾	190			317
SPIG	60			70
B&W Renewable⁽¹⁾							$	196		$	207
B&W Environmental							107			112
B&W Thermal							208			161
Other/eliminations	(6		)	(5		)	(2		)	(7		)
Backlog	$	501		$	766		$	509		$	473


⁽¹⁾	~~Vølund & Other~~B&W Renewable backlog at ~~March 31,~~September 30, 2020, includes ~~$160.0~~$159.0 million related to long-term operation and maintenance contracts for renewable energy plants, with remaining durations extending until 2034. Generally, such contracts have a duration of 10-20 years and include options to extend.

Of the backlog at ~~March 31,~~September 30, 2020, we expect to recognize revenues as follows:


(In approximate millions)	2020			2021		Thereafter		Total			2020			2021		Thereafter		Total
Babcock & Wilcox	$	130		$	105	$	22	$	257
Vølund & Other Renewable	25			20		145		190
SPIG	29			16		15		60
B&W Renewable											$	15		$	19	$	162	$	196
B&W Environmental											25			43		39		107
B&W Thermal											55			114		39		208
Other/eliminations	(6		)	—		—		(6		)	(2		)	—		—		(2		)
Expected revenue from backlog	$	178		$	141	$	182	$	501		$	93		$	176	$	240	$	509

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 ~~decreased $0.4~~increased $1.9 million to ~~$4.1~~$4.9 million in the ~~three months ended March 31,~~third quarter of 2020 as compared to ~~$4.6~~$3.1 million in the ~~three~~third quarter of 2019, primarily due to the accrual of management bonuses partially offset by the benefits of restructuring and discretionary spend reductions. Corporate costs decreased $4.1 million to $12.9 million in the nine months ended ~~March 31,~~September 30, 2020 as compared to $17.0 million in the nine months ended September 30, 2019, primarily due to the benefits of restructuring and discretionary spend reductions.

Advisory Fees and Settlement Costs

Advisory fees and settlement costs decreased by ~~$9.4~~$0.6 million to ~~$4.2~~$3.8 million in the ~~three months ended March 31,~~third quarter of 2020 as compared to ~~$13.6~~$4.5 million in the ~~three~~third quarter of 2019, primarily due to a decrease in financial advisory fees.

Advisory fees and settlement costs decreased by $12.8 million to $10.1 million in the nine months ended ~~March 31,~~September 30, 2020 as compared to $22.9 million in the nine months ended September 30, 2019, primarily due to settlement costs to exit the fifth ~~Vølund~~B&W Renewable EPC contract in the first quarter of 2019 as described in Note 4 to the Condensed Consolidated Financial Statements and a decrease in ~~legal fees related to liquidity planning and pursuit of insurance recoveries.~~financial advisory fees.

Research and Development

Our research and development activities are related to improving our products through innovations to reduce the cost of our products to make them more competitive and through innovations to reduce performance risk of our products to better meet our and our customers' expectations. Research and development costs unrelated to specific contracts are expensed as incurred. Research and development expenses totaled ~~$1.3~~$1.4 million and ~~$0.7~~$0.8 million for the ~~three~~third quarter of 2020 and 2019, respectively. Research and development expenses totaled $3.9 million and $2.3 million for the nine months ended ~~March 31,~~September 30, 2020 and 2019, respectively. The increase resulted primarily from timing of specific research and development efforts.

Restructuring

Restructuring actions across our business units and corporate functions, including executive severances, resulted in ~~$2.0~~$2.4 million and ~~$6.1~~$2.6 million of expense in the ~~three~~third quarter of 2020 and 2019, respectively. Restructuring actions across our business units and corporate functions, including executive severances, resulted in $6.7 million and $9.6 million of expense in the nine months ended ~~March 31,~~September 30, 2020 and 2019, respectively. Severance expense is recognized over the remaining service periods of affected employees, and as of ~~March 31,~~September 30, 2020, we do not expect additional severance expense to be recognized based on actions taken through that date.

Goodwill Impairment

Goodwill is tested for impairment annually and when impairment indicators exist. ~~All~~During the third quarter of ~~our remaining goodwill is related~~2020, the Company completed an organizational and re-branding initiative, eliminating the legacy business unit structure and launching the B&W Renewable, B&W Environmental, and B&W Thermal brands, which we considered to be a triggering event and as a result, the Company reevaluated its operating segments and reporting units. Segment results for all periods have been restated for comparative purposes.

Effective September 30, 2020, the previous Babcock & Wilcox ~~reporting unit~~ and ~~the~~ Babcock & Wilcox Construction Company reporting ~~unit, which are both included in~~units became the B&W Company Thermal and B&W Construction Company reporting units, respectively, within the Babcock & Wilcox Thermal operating segment. The Company also identified the B&W Company Renewable and B&W Company Environmental reporting units related to the transfer of businesses from the former Babcock & Wilcox reporting unit to the Babcock & Wilcox Renewable and Babcock & Wilcox Environmental operating segments. Consequently, the Company re-allocated goodwill between the affected reporting units based on their relative fair values and compared the carrying value to the fair value of each impacted reporting unit.

Also, as a result of the ~~current~~ conditions associated with COVID-19, including the adverse impacts on our operations, the company performed an analysis as required by ASC 360-10-35 to assess the recoverability of other long-lived assets in its ~~Vølund~~B&W

Renewable and ~~SPIG~~B&W Environmental asset groups. With respect to these asset groups future cash flows were estimated over the expected remaining life of the assets, and the Company determined that, on an undiscounted basis, expected cash flows exceeded the carrying value of the asset groups, and no impairment was indicated during the ~~three months ended March 31,~~first quarter of 2020.

Depreciation and Amortization

Depreciation expense was ~~$2.8~~$2.7 million and ~~$6.1~~$4.3 million in the ~~three months ended March 31,~~third quarter of 2020 and 2019, respectively.

Depreciation expense was $8.2 million and $15.8 million in the nine months ended September 30, 2020 and 2019, respectively. Depreciation expense in the third quarter and nine months ended September 30, 2019 includes $0.7 million and $4.7 million, respectively, of accelerated depreciation of our prior corporate facility.

We recorded amortization expense of $1.4 million and ~~$1.2~~$1.0 million in the ~~three~~third quarter of 2020 and 2019, respectively. We recorded amortization expense of $4.1 million and $3.3 million in the nine months ended ~~March 31,~~September 30, 2020 and 2019, respectively.

Pension and Other Postretirement Benefit Plans

We recognize benefits from our defined benefit and other postretirement benefit plans based on actuarial calculations primarily because our expected return on assets is greater than our service costs. Service cost is low because our plan benefits are frozen except for a small number of hourly participants. Pension benefits were ~~$7.5~~$7.3 million and ~~$3.4~~$3.6 million in the ~~three months ended March 31,~~third quarter of 2020 and 2019, respectively. Pension benefits were $22.3 million and $10.4 million in the nine months ended September 30, 2020 and 2019, respectively. There were no MTM adjustments for our pension and other postretirement benefit plans during the three and nine months ended September 30, 2020 or the third quarter of 2019. The pension benefits for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 ~~excludes a~~exclude MTM adjustment ~~loss~~losses of ~~$0.4~~$1.3 million. Refer to Note 12 to the Condensed Consolidated Financial Statements.

Our pension costs also include MTM adjustments from time to time, as described further in Note 12 to the Condensed Consolidated Financial Statements. Interim MTM charges are a result of curtailments or 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.

Other than service cost of ~~$0.2~~$0.2 million and $0.4 million in the ~~three~~third quarter of 2020 and 2019, respectively, and $0.6 million and$0.7 million in the nine months ended ~~March 31,~~September 30, 2020 and 2019, respectively, which are related to the small number of hourly participants ~~still~~still accruing benefits within the Babcock ~~& Wilcox~~&Wilcox Thermal segment, pension benefit and MTM adjustments are excluded from the results of our segments. Refer toNote 12 to the Condensed Consolidated Financial Statements for further information regarding our pension and other postretirement plans.

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

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 income.

Foreign exchange was a gain of $25.0 million and a loss of ~~$9.3 million and $10.2~~$26.7 million for the three months ended ~~March 31,~~September 30, 2020 and 2019, respectively. Foreign exchange was a gain of $22.7 million and a loss of $27.4 million for the nine months ended September 30, 2020 and 2019, respectively. Foreign exchange gains and losses are primarily related to unhedged intercompany loans denominated in European currencies to fund foreign operations. ~~Foreign exchange losses in 2020 were driven primarily by a strengthening U.S. dollar compared to the underlying European currencies.~~

4552

Income Taxes

Three months ended March 31,
(In thousands, except for percentages) 2020 2019 $ Change
Loss before income taxes $ (34,345 ) $ (49,240 ) $ 14,895
Income tax (benefit) expense $ (810 ) $ 626
$ (1,436 )
Effective tax rate 2.4 % (1.3 )%

We operate in numerous countries that have statutory tax rates different than the U.S. federal statutory tax rate of 21%. The most significant of these foreign operations are located in Canada, Denmark, Germany, Italy, Mexico, Sweden and the United Kingdom with statutory tax rates ranging between 19% and approximately 30%. We have also maintained full valuation allowances against our net deferred tax assets. Changes in valuation allowances may partly or entirely offset any income tax expense or benefit in a given jurisdiction, depending on the deferred tax balance in that jurisdiction. As a result, we expect our effective income tax rate to vary, potentially significantly, from period to period.



	Three months ended September 30,									Nine months ended September 30,
(In thousands, except for percentages)	2020			2019			$ Change			2020			2019			$ Change
Income (loss) before income taxes	$	34,053		$	(55,947	)	$	90,000		$	(17,580	)	$	(131,631	)	$	114,051
Income tax (benefit) expense	$	(502	)	$	1,043		$	(1,545	)	$	(467	)	$	3,560		$	(4,027	)
Effective tax rate	(1.5		)%	(1.9		)%				2.7		%	(2.7		)%

Our income tax expense ~~for~~in the ~~first~~third quarter of 2020 reflects a full valuation allowance against our net deferred tax ~~assets.~~assets, except in Mexico, Canada, the United Kingdom, and Sweden. Deferred tax assets are evaluated each period ~~for realizability and valuation allowances are recorded when the likelihood~~ to ~~realize those deferred tax assets~~determine whether realization is ~~not~~ 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 ~~reversed~~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~~third quarter of 2020 ~~and 2019~~ is not reflective of the ~~U.S.~~United States statutory rate primarily due to a ~~full~~ valuation allowance against certain net deferred tax assets. In certain jurisdictions ~~where we have available net operating loss carryforwards ("NOLs"), such as~~(namely, the ~~U.S.,~~United States, Denmark, and ~~Italy,~~Italy) where the ~~existence~~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 ~~expense~~rate.

Our effective tax rate for the third quarter of 2019 was not reflective of the United States statutory rate primarily reflects withholding taxes or state and local income taxes in state taxing regimes which impose a taxable income limitation. In the three months ended March 31, 2020, we separately allocated $0.6 million of income tax expense to income from discontinued operations due to ~~the intraperiod allocation rules of ASC 740-20-45-7. Our income~~a valuation allowance against certain net deferred tax ~~expense (benefit) also reflects changes in the jurisdictional mix of income and losses.~~

~~See Note 16 for an explanation of differences between our effective income tax rate and our statutory rate.~~assets.

Liquidity and Capital Resources

Liquidity

Our primary liquidity requirements include debt service and working capital needs. We fund our liquidity requirements primarily through cash generated from operations and external sources of financing, including our A&R Credit Agreement (as defined below) that governs the U.S. Revolving Credit Facility and the last out term loans (the "Last Out Term Loans"), each of which are described below in further detail along with other sources of liquidity.

on January 31, 2020, received an incremental Tranche A-5 of Last Out Term Loan commitment to be used in the event certain customer letters of credit are drawn, as described in Note 14;

on March 12, 2020, filed for waiver of required minimum contributions to the U.S. Pension Plan as described in Note 12 and subsequently on October 1, 2020 received a letter from the Internal Revenue Service (the "IRS") that ~~if granted, would reduce cash funding requirements in 2020 by approximately $25.0 million and would increase contributions over~~ the ~~following five years. The Company cannot make any assurances that such~~2019 waiver ~~will be granted;~~request had been approved subject to certain conditions; and

on March 17, 2020, we fully settled the remaining escrow associated with the sale of Palm Beach Resource Recovery Corporation and received $4.5 million in cash.

In addition to the actions taken above, subsequent to March 30, 2020 we have taken the following actions:

on April 6, 2020, we fully settled the remaining escrow associated with the sale of the MEGTEC and Universal businesses and received $3.5 million in cash;

◦~~temporary payroll reductions and unpaid furloughs for certain employees:~~


◦	~~temporarily deferring the monthly fee paid to BRPI Executive Consulting, LLC for the services of our Chief Executive Officer by 50%;~~


◦	~~deferrals of the base salaries of our Chief Strategy Officer by 50%, Chief Financial Officer by 30% and our Senior Vice President of The Babcock & Wilcox Company by 30%;~~

◦~~suspension of our 401(k) match for U.S. employees for the remainder of 2020;~~


◦	approval by the Company’s Board for a temporary deferral of 50% of the cash compensation payable to non-employee directors under the Company’s board compensation program to be paid during the first quarter of 2021;


◦	~~negotiating temporary rent payment deferrals related to leased facilities located in the U.S., Canada, Italy and Denmark;~~


◦	~~exploring options for government loans and programs in the U.S. and abroad that would be appropriate and available;~~

on May 14, 2020, the Company entered into an agreement ~~with its lenders~~ amending and restating ~~the Amended Credit Agreement, among the Company,~~our credit agreement with Bank of America, N.A., as administrative agent (the “Administrative Agent”) and lender, and the other lenders party thereto. ~~The~~These amendments to the credit agreement, as amended and restated (the "A&R Credit Agreement"), among other amendments, extends the maturity date on the ~~revolving credit facility~~U.S. Revolving Credit Facility to June 30, 2022 and the maturity date on the Last Out Term Loans to December 30, 2022. Under the A&R Credit Agreement, B. Riley has committed to provide the Company with up to $70.0 million of additional Last Out Term Loans. B. Riley ~~has also agreed to enter~~entered into a limited guaranty (the "B. Riley Guaranty") which provides for the guarantee of all of the Company's obligations with respect to the ~~revolving credit facility~~U.S. Revolving Credit Facility (other than with respect to letters of credit and contingent ~~obligations)~~obligations thereunder), including the obligation to repay outstanding revolving credit loans and pay earned interest and ~~fees.~~fees;

on May 14, 2020, we received $30.0 million of additional gross borrowings from B. Riley Financial, Inc. (together with its affiliates, "B. Riley") under a new Tranche A-6 of Last Out Term Loans, as described in in Note 14;

on October 10, 2020, we entered into a settlement agreement with an insurer in connection with five of the six European B&W Renewable EPC loss contracts. In connection with the insured losses recognized in prior years, we recognized this non-recurring loss recovery of $26.0 million as a reduction of our Cost of operations in our Condensed Consolidated Statements of Operations for the quarter ending September 30, 2020 because we determined the loss recovery was probable as of such date. On October 23, 2020, we received the gross proceeds of $26.0 million for the loss recovery recognized during the third quarter ending September 30, 2020, as described in Note 4; and

Beginning in April 2020, as part of the Company’s response to the impact of the COVID-19 pandemic on its business, the Company has taken a number of the following cash conservation and cost reduction measures which include:

temporary unpaid furloughs of certain employees:

temporarily deferring the monthly fee paid to BRPI Executive Consulting, LLC for the services of our Chief Executive Officer by 50%;

deferrals of the base salaries of our Chief Strategy Officer by 50%, Chief Financial Officer by 30% and our Senior Vice President of The Babcock & Wilcox Company by 30%;

suspension of our 401(k) company match for U.S. employees for the remainder of 2020;

temporary rent payment deferrals related to leased facilities located in the U.S., Canada, Italy and Denmark;

utilizing options for government loans and programs in the U.S. and abroad that are appropriate and available; and

one year following the date that these Condensed Consolidated Financial Statements are issued. As a result, the Company has concluded that conditions and events, considered in the aggregate, no longer raise substantial doubt about the entity’s ability to continue as a going concern.

Cash and Cash Flows

At ~~March 31,~~September 30, 2020, our unrestricted cash and cash equivalents totaled ~~$35.4~~$38.9 million and we had total debt of ~~$321.1~~$355.2 million. Our foreign business locations held ~~$27.9~~$36.8 million of our total unrestricted cash and cash equivalents at ~~March 31,~~September 30, 2020. Our U.S. Revolving Credit Facility allows for nearly immediate borrowing of available capacity to fund cash requirements in the normal course of business, meaning that U.S. cash on hand is minimized to reduce borrowing costs. In general, our foreign cash balances are not available to fund our U.S. operations unless the funds are repatriated or used to repay intercompany loans made from the U.S. to foreign entities, which could expose us to taxes we presently have not made a provision for in

our results of operations. We presently have no plans to repatriate these funds to the U.S. At ~~March 31,~~September 30, 2020, we had approximately ~~$20.0~~$23.1 million available for borrowings under the U.S. Revolving Credit Facility.

Cash used in operations was ~~$35.5~~$67.3 million in the ~~three~~nine months ended ~~March 31,~~September 30, 2020, which is primarily represented in the net loss of continuing operations, ~~before depreciation~~the increase in accounts receivable - other from recognizing the non-recurring loss recovery insurance settlement of $26.0 million described in Note 4, the change in pension, postretirement and ~~amortization.~~employee benefit liabilities and the impact of fluctuating foreign currency exchange rates. There was also a ~~$10.7~~$2.8 million net ~~increase~~decrease in operating cash outflows associated with changes in working capital. In the ~~three~~nine months ended ~~March 31,~~September 30, 2019, cash used in operations was ~~$37.7~~$201.1 million primarily due to funding settlements related to European B&W Renewable EPC contracts, progress against accrued losses on the six European ~~Vølund~~B&W Renewable EPC loss ~~contracts.~~contracts and working capital build within the B&W Thermal segment related to the timing of and mix of work.

Cash flows from investing activities ~~used~~provided net cash of ~~$4.5~~$2.0 million in the ~~three~~nine months ended ~~March 31,~~September 30, 2020, primarily related to $8.0 million from the settlement of remaining escrows associated with the sale of Palm Beach Resource Recovery Corporation and MEGTEC and Universal businesses, offset by the net change in available-for-sale securities and ~~$2.4~~$2.3 million of capital expenditures. In the ~~three~~nine months ended ~~March 31,~~September 30, 2019, cash flows from investing activities provided net cash ~~used by investing activities was $5.3~~of $7.1 million, primarily from ~~purchases~~proceeds received from the sale of ~~available-for-sale securities.~~Loibl for $7.4 million.

Cash flows from financing activities provided net cash of ~~$30.8~~$52.4 million in the ~~three~~nine months ended ~~March 31,~~September 30, 2020, primarily related to ~~$30.0~~$60.0 million face value borrowings from the Tranche A-4 and Tranche A-6 of the Last Out Term Loans ~~$6.0~~and a $2.9 million ~~of net borrowings from~~change on the U.S. Revolving Credit Facility ~~partly~~primarily offset by ~~$5.7~~$10.3 million of financing fees. ~~Net cash provided by~~Cash flows from financing activities provided net cash of $181.0 million in the ~~three~~nine months ended ~~March 31,~~September 30, 2019, ~~was $33.1 million~~ primarily related to ~~$30.4~~$109.6 million net borrowings from the Last Out Term Loans, $46.8 million of net borrowings from the U.S. Revolving Credit Facility, and ~~the $10.0~~$40.4 million ~~borrowings~~proceeds from the ~~Tranche A-2~~Rights Offering, partly offset by $15.5 million of ~~the Last Out Term Loans for working capital purposes.~~financing fees.

U.S. Revolving Credit Facility

On May 11, 2015, we entered into the ~~Amended Credit Agreement~~amended credit agreement with a syndicate of lenders in connection with our spin-off from The Babcock & Wilcox Company (now BWX Technologies, Inc. or "BWXT") which governs the U.S. Revolving Credit Facility and the Last Out Term Loans. Since June 2016, we have entered into a number of waivers and amendments to the ~~Amended Credit Agreement,~~amended credit agreement, including several to avoid default under the financial and other covenants specified in the ~~Amended Credit Agreement.~~amended credit agreement. As of ~~March 31,~~September 30, 2020, the U.S. Revolving Credit Facility provides for a senior secured revolving credit facility in an aggregate amount of up to ~~$330.3 million, (reduced to~~ $326.9 million, ~~in April 2020 as a result of the settlement of escrow funds related to the sales of MEGTEC and Universal)~~ as amended and adjusted for completed asset sales. The proceeds from loans under the U.S. Revolving Credit Facility are available for working capital needs, capital expenditures, permitted acquisitions and other general corporate purposes, and the full amount is available to support the issuance of letters of credit, subject to the limits specified in the agreement. ~~As of March 31, 2020, we were in compliance with the terms of the Amended Credit Agreement.~~

As of ~~March 31,~~September 30, 2020, in connection with Amendment No. 16, we have accrued deferred ticking fee costs of $6.7 million due to certain actions required that were not completed by December 15, 2019.

approximately ~~$22.2~~$32.4 million available to meet letter of credit requirements based on our overall facility size, of which ~~$20.0~~$23.1 million was available for additional borrowings under our sublimit.

On October 23, 2020, we received $26.0 million of gross proceeds under the settlement agreement representing the non-recurring loss recovery as described in Note 4. As required by the Company’s U.S. Revolving Credit Facility, 50% of the net proceeds (gross proceeds less costs) or approximately $8.0 million of the settlement received by the Company was applied as a permanent reduction of the U.S. Revolving Credit Facility in October 2020.

Under the A&R Credit Agreement, the interest rate for the ~~revolving credit facility~~U.S. Revolving Credit Facility will be reduced to LIBOR plus 7.0% or base rate (as defined in the A&R Credit Agreement) plus 6.0%, which margins will be reduced by 2.0% upon the commitments under such facility being reduced to less than $200.0 million. The interest payments on the unpaid principal amount of revolving credit loans incurred during the period from May 14, 2020 through and including August 31, 2020 of $3.8 million are deferred and will be paid in six equal installments on the last business day of each calendar month beginning on January 29, 2021 and through June 30, 2021. The maturity date under the ~~revolving credit facility~~U.S. Revolving Credit Facility will be extended to June 30, 2022 pursuant to the terms of the A&R Credit Agreement.

~~Backstop Commitment Letter~~

issuance of equity. As part of the entry into the A&R Credit Agreement and the related transactions, the Company, B. Riley and the Administrative Agent agreed to terminate the Backstop Commitment Letter.

Last Out Term Loans

Last Out Term Loans are incurred under our A&R Credit Agreement and are pari passu with the U.S. Revolving Credit Facility except for certain payment subordination provisions. The Last Out Term Loans are subject to the same representations and warranties, covenants and events of default as the U.S. Revolving Credit Facility. Under U.S. GAAP, a debt modification with the same borrower that results in substantially different terms is accounted for as an extinguishment of the existing debt and a reborrowing of new debt. An extinguishment gain or loss is then recognized based on the fair value of the new debt as compared to the carrying value of the extinguished debt. The Company recognized a loss on debt extinguishment of $6.2 million in the quarter ended June 30, 2020, primarily representing the unamortized value of the original issuance discount and fees on the Tranche A-3 Last Out Term Loan. In connection with ~~Amendment No. 16~~the effectiveness of the ~~Amended~~A&R Credit Agreement, the maturity date for ~~all~~the Last Out Term Loans was extended to December ~~31,~~30, 2022.

On September 30, 2020 and ~~was further extended~~June 30, 2020, the Company issued 2,334,002 and 1,192,371 unregistered shares of common stock to ~~December 30, 2022 upon the effectiveness~~B. Riley in settlement of the ~~A&R Credit Agreement.~~quarterly interest payable in connection with the Equitization Agreement discussed in Note 13.

Tranche A-1

Tranche A-2

Tranche A-3

Under Amendment No. 16 to our ~~Amended Credit Agreement,~~credit agreement, we borrowed $150.0 million face value from B. Riley, a related party, under a Tranche A-3 of Last Out Term Loans. The $141.4 million net proceeds from Tranche A-3 were primarily used to pay the amounts due under the settlement agreements covering certain European ~~Vølund~~B&W Renewable EPC loss projects as described in Note 4, with the remainder used for working capital and general corporate purposes.

Interest rates for Tranche A-3 are described above. Tranche A-3 may be prepaid, subject to the subordination provisions under the Amended Credit Agreement as described above, but not re-borrowed. As part of the Equitization Transactions, the total prepayment of principal of Tranche A-3 of the Last Out Term Loans was $39.7 million. ~~The Tranche A-3 maturity date was previously extended to December 31, 2020 and was extended to December 30, 2022 upon the effectiveness of the A&R Credit Agreement.~~

Tranche A-4

On January 31, 2020, we entered into Amendment No. 20 to ~~the Amended Credit Agreement.~~our credit agreement. Amendment No. 20 provides $30.0 million of additional commitments from B. Riley, a related party, under a new Tranche A-4 of Last Out Term Loans. The proceeds from Tranche A-4 may be used under the terms of Amendment No. 20 to repay revolving credit loans, for working capital and general corporate purposes, and to reimburse certain expenses of B. Riley as specified by Amendment No. 20. The terms of Tranche A-4 are the same as the terms for the Tranche ~~A-3 under the Amended Credit Agreement.~~A-3.

As of January 31, 2020, we borrowed $30.0 million face value of the Tranche A-4 and received net proceeds of $26.3 million after incurring total fees of $3.7 million related to Amendment No, 20 described above. ~~The Tranche A-4 maturity date was previously extended to December 31, 2020 and was further extended to December 30, 2022 upon the effectiveness of the A&R Credit Agreement.~~

Tranche A-5

Tranche A-6

The A&R Credit Agreement provided us with up to ~~$65~~$70.0 million of additional funding in the form of Tranche A-6 Last Out Term Loans from B. Riley, a related party, as ~~more fully~~ described ~~below.~~in Note 13. An aggregate ~~$30~~$30.0 million of this new commitment was funded upon execution of the A&R Credit Agreement. The ~~$35~~$35.0 million will be funded in installments, subject to reduction for the gross proceeds from certain offerings of our Common Stock by the Company. The remaining $5.0 million will be available upon request by the Company.

On May 14, 2020, we borrowed $30.0 million face value of the Tranche A-6 and received gross proceeds of $30.0 million related to the entry into the A&R Credit Agreement.

Tranche A-7

The A&R Credit Agreement provided us with up to $50.0 million of additional funding for letters of credit in the form of Tranche A-7 Last Out Term Loans from B. Riley, a related party, as described in Note 13. The $50.0 million will be available upon request by the Company, subject to certain limitations. As of November 13, 2020, no borrowings occurred under Tranche A-7.

Letters of Credit, Bank Guarantees and Surety Bonds

Certain subsidiaries primarily outside of the United States have credit arrangements with various commercial banks and other financial institutions for the issuance of letters of credit and bank guarantees in association with contracting activity. The aggregate value of all such letters of credit and bank guarantees opened outside of the U.S. Revolving Credit Facility as of September 30, 2020 and December 31, 2019 was $80.6 million and $88.5 million, respectively. The aggregate value of the letters of credit provided by the U.S. Revolving Credit Facility backstopping letters of credit or bank guarantees was $31.6 million as of September 30, 2020. Of the letters of credit issued under the U.S. Revolving Credit Facility, $37.5 million are subject to foreign currency revaluation.

We have posted surety bonds to support contractual obligations to customers relating to certain contracts. We utilize bonding facilities to support such obligations, but the issuance of bonds under those facilities is typically at the surety's discretion. 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, 2020, bonds issued and outstanding under these arrangements in support of contracts totaled approximately $277.6 million. The aggregate value of the letters of credit provided by the U.S. Revolving Credit facility backstopping surety bonds was $34.7 million.

A&R Credit Agreement

On May 11, 2015, we entered into the amended credit agreement with a syndicate of lenders in connection with our

spin-off from The Babcock & Wilcox Company (now BWX Technologies, Inc. or "BWXT") which governs the U.S.

Revolving Credit Facility and the Last Out Term Loans. Since June 2016, we have entered into a number of waivers and

amendments to the amended credit agreement, including several to avoid default under the financial and other covenants

specified in the amended credit agreement.

On May 14, 2020, we entered into the A&R Credit Agreement which refinances and extends the maturity of our existing U.S.

Revolving Credit Facility and Last Out Term Loans.

~~On May 14, 2020, we borrowed $30~~Revolving Credit Facility. Proceeds from the remaining $40.0 million ~~face value~~ of Last Out Term Loans will be used to repay outstanding borrowings under the ~~Tranche A-6~~U.S. Revolving Credit Facility, with any remaining amounts used for working capital, capital expenditures, permitted acquisitions and ~~received gross proceeds of $30 million related to the A&R Credit Agreement that is more fully described in Note 23. The Tranche A-6 maturity date is December 30, 2022.~~

~~Tranche A-7~~general corporate purposes.

The A&R Credit Agreement ~~provided us~~also provides that, (i) the U.S. Revolving Credit Facility continues to be available for issuances of existing and new letters of credit, subject to the L/C Sublimit (as defined below), (ii) the $205.0 million sublimit on borrowings under the U.S. Revolving Credit Facility is maintained, and (iii) interest payments on the unpaid principal amount of revolving credit loans incurred during the period from May 14, 2020 through and including August 31, 2020 of $3.8 million are deferred and will be paid in six equal installments on the last business day of each calendar month beginning on January 29, 2021 and through June 30, 2021. No swing line borrowings are permitted under the A&R Credit Agreement.

The A&R Credit Agreement also amends the following terms, among others, as compared with upthe prior credit agreement:


(i)	the maturity date of the U.S. Revolving Credit Facility has been extended to June 30, 2022, and the maturity date of all Last Out Term Loans under the A&R Credit Agreement will be extended to December 30, 2022 (six months after the maturity date of the U.S. Revolving Credit Facility);


(ii)	the interest rate for loans under the U.S. Revolving Credit Facility has been reduced to LIBOR plus 7.0% or base rate (as defined in the A&R Credit Agreement) plus 6.0%. These margins will be reduced by 2.0% if commitments under the U.S. Revolving Credit Facility are reduced to less than $200.0 million. The fee for letters of credit will be set at 4.0%;


(iii)	the interest rate for all Last Out Term Loans has been set at 12.0%;


(iv)	the commitments under the U.S. Revolving Credit Facility automatically and permanently decrease in the following amounts on the following dates, which match the funding dates and amounts for the committed term loans: (x) $10.0 million on November 30, 2020; and (y) $5.0 million on each of March 31, 2021, June 30, 2021, September 30, 2021, December 31, 2021 and March 31, 2022, respectively;


(v)	the amount of revolving loans and letters of credit available in currencies other than U.S. dollars have been capped at $125.0 million through April 30, 2021 and will step down to $110.0 million on May 1, 2021; and


(vi)	the amount of financial letters of credit have been capped at $75.0 million, and the amount of all letters of credit will be capped at $190.0 million through April 30, 2021 and step down to $175.0 million on May 1, 2021 (the “L/C Sublimit”).

Affirmative and negative covenants under the A&R Credit Agreement are substantially consistent with the prior credit agreement, except that, among other changes: (i) the indebtedness covenant has been modified to ~~$5 million~~permit the incurrence of ~~additional funding~~any governmental assistance in the form of ~~Tranche A-7~~indebtedness in connection with COVID-19 relief in an aggregate principal amount not to exceed $10.0 million; (ii) a third-party letter of credit basket of up to $50.0 million has been added; (iii) certain liens and restricted payments are modified to permit liens and repayments of indebtedness incurred in connection with governmental assistance in connection with COVID-19 relief; and (iv) covenants related to the European B&W Renewable EPC loss projects have been removed. The minimum required liquidity condition of $30.0 million remains constant but has been modified to exclude cash of non-loan parties in an amount in excess of $25.0 million. Certain financial covenant testing has been suspended through September 30, 2020, with the Company and the Administrative Agent having agreed to negotiate such covenant levels and related definitions prior to October 31, 2020. See A&R Credit Agreement subsequent event described below for a discussion of the results of the negotiation.

Events of default under the A&R Credit Agreement are substantially consistent with the prior credit agreement, except that: (i) B. Riley’s failure to fund any of its additional Last Out Term Loans ~~from~~committed under the A&R Credit Agreement will constitute an event of default; and (ii) the failure to negotiate and set certain financial covenant testing levels and related definitions prior to October 31, 2020 will constitute an event of default.

In connection with the A&R Credit Agreement, the Company incurred certain customary amendment and commitment fees, a portion of which will be deferred pursuant to the terms of the A&R Credit Agreement along with certain previously deferred fees incurred under the amended credit agreement.

A&R Credit Agreement - subsequent event

On October 30, 2020, we entered into A&R Amendment No. 1 with Bank of America, N.A. A&R Amendment No. 1, among other matters, (i) provides that, under the A&R Credit Agreement, the "Commitment Reduction Amount" shall be an amount equal to (a) for any "Prepayment Event" relating to a "Recovery Event" (each as defined under the A&R Credit Agreement), 50% of the net cash proceeds with respect to such Prepayment Event, and (b) with respect to any other Prepayment Event under the A&R Credit Agreement, the net cash proceeds with respect to such Prepayment Event, and (ii) establishes new financial covenants of interest coverage ratios and senior leverage ratios, as described in Note 13.

Effective October 30, 2020, the minimum interest coverage ratios under our A&R Credit Agreement are as follows:

0.50:1.00 for the quarter ending December 31, 2020

0.50:1.00 for the quarter ending March 31, 2021

0.80:1.00 for the quarter ending June 30, 2021

1.00:1.00 for the quarter ending September 30, 2021

1.10:1.00 for the quarter ending December 31, 2021

1.25:1.00 for the quarter ending March 31, 2022 and the last day of each fiscal quarter ending thereafter

Effective October 30, 2020, the maximum permitted senior leverage ratios under our A &R Credit Agreement are as follows:

7.75:1.00 for the quarter ending December 31, 2020

7.75:1.00 for the quarter ending March 31, 2021

4.25:1.00 for the quarter ending June 30, 2021

3.75:1.00 for the quarter ending September 30, 2021

3.00:1.00 for the quarter ending December 31, 2021

2.25:1.00 for the quarter ending March 31, 2022 and the last day of each fiscal quarter ending thereafter

B. Riley Limited Guaranty

amount due to the Administrative Agent or any lender under the revolving credit facility; or (v) any assertion that the B. Riley Guaranty or any portion thereof is not valid, binding or enforceable.

In connection with the B. Riley Guaranty, the Company entered into a fee letter with B. Riley pursuant to which the Company agreed to pay B. Riley a ~~related party, as more fully described below. The $5~~fee of $3.9 million ~~will be available upon request by~~(the “B. Riley Guaranty Fee”). On June 8, 2020, the Company ~~subject~~issued 1,712,479 unregistered shares of Common Stock, respectively, to B. Riley and certain ~~limitations. As~~ of its affiliates in settlement of the B. Riley Guaranty Fee in connection with the Equitization Agreement discussed below.

Fee and Interest Equitization Agreement

The Company is required under the Equitization Agreement to use its reasonable best efforts to take all actions to obtain any necessary stockholder approval under the rules of the NYSE for the issuance of the Shares. B. Riley has agreed to cause all shares of common stock beneficially owned by B. Riley to be voted in favor of any proposal presented to the Company’s stockholders seeking approval of the issuance of shares pursuant to the Equitization Agreement. The required stockholder

approvals were obtained at the Company’s 2020 annual meeting of stockholders held on June 16, 2020.

Off-Balance Sheet Arrangements

There were no ~~borrowings have occurred under Tranche A-7. The Tranche A-7 maturity date is December~~significant off-balance sheet arrangements at September 30, ~~2022.~~2020.

Equitization Transactions

In connection with Amendment No. 16 to the ~~Amended Credit Agreement~~amended credit agreement and the extension of Tranche A-3 of the Last Out Term Loans, the Company, B. Riley and Vintage, each related parties, entered into the "Letter Agreement" on April 5, 2019, pursuant to which the parties agreed to use their reasonable best efforts to effect a series of equitization transactions for a portion of the Last Out Term Loans, subject to, among other things, stockholder approval. Stockholder approval was received at the Company's annual stockholder meeting on June 14, 2019 and the contemplated transactions (the "Equitization Transactions") occurred on July 23, 2019. The Equitization Transactions included:

The 2019 Rights Offering, for which B. Riley agreed to act as a backstop, by purchasing from us, at a price of $0.30 per share, all unsubscribed shares in the 2019 Rights Offering for cash or by exchanging an equal principal amount of outstanding Tranche A-2 or Tranche A-3 Last Out Term Loans (the "Backstop Commitment"). Under the 2019 Rights Offering, 16,666,666 shares of common stock were issued, of which 12,589,170 shares were purchased through the exercise of rights in the rights offering generating $37.8 million of cash, 1,333,333 shares were issued

through assigned portions of the Backstop Commitment generating an additional $4.0 million of cash, and the final 2,744,163 shares were exchanged for $8.2 million of principal value including accrued paid-in-kind interest of Tranche A-3 Last Out Term Loans.

$10.3 million of the proceeds of the 2019 Rights Offering were used to fully repay Tranche A-2 of the Last Out Term Loans, including accrued paid-in-kind interest.

$31.5 million of the proceeds of the 2019 Rights Offering were used to partially prepay Tranche A-3 of the Last Out Term Loans including paid-in-kind interest. The total prepayment of principal of Tranche A-3 of the Last Out Term Loans was $39.7 million inclusive of the $8.2 million of principal value exchanged for common shares under the Backstop Commitment described above.

All $38.2 million of outstanding principal of Tranche A-1 of the Last Out Term Loans including accrued paid-in-kind interest was exchanged for 12,720,785 shares of common stock (10,720,785 shares to Vintage and 2,000,000 shares to B. Riley) at a price of $0.30 per share (the "Debt Exchange"). Prior to the Debt Exchange, $6.0 million of Tranche A-1 was held by B. Riley and the remainder was held by Vintage.

1,666,667 warrants, each to purchase one share of our common stock at an exercise price of $0.01 per share were issued to B. Riley.

Immediately after completion of the Equitization Transactions, Tranches A-1 and A-2 of the Last Out Term Loans were fully extinguished, and Tranche A-3 of the Last Out Term Loans had a balance of $114.0 million, including accrued paid-in-kind interest, which bears interest at a fixed rate of 12.0% per annum and continues to bear the other terms described in Note 14.

Based on Schedule 13D filings made by B. Riley and Vintage, after completion of the Equitization Transactions, Vintage increased its beneficial ownership in us to 32.8% and B. Riley increased its beneficial ownership in us to 18.4% inclusive of the outstanding warrants held by B. Riley.

~~Letters of Credit, Bank Guarantees and Surety Bonds~~

Certain subsidiaries primarily outside of the United States have credit arrangements with various commercial banks and other financial institutions for the issuance of letters of credit and bank guarantees in association with contracting activity. The aggregate value of all such letters of credit and bank guarantees opened outside of the U.S. Revolving Credit Facility as of March 31, 2020 and December 31, 2019 was $82.1 million and $88.5 million, respectively. The aggregate value of the letters of credit provided by the U.S. Revolving Credit Facility backstopping letters of credit or bank guarantees was $31.1 million as of March 31, 2020. Of the letters of credit issued under the U.S. Revolving Credit Facility, $33.8 million are subject to foreign currency revaluation.

We have posted surety bonds to support contractual obligations to customers relating to certain contracts. We utilize bonding facilities to support such obligations, but the issuance of bonds under those facilities is typically at the surety's discretion. These bonds generally indemnify customers should we fail to perform our obligations under the applicable contracts. We, and certain of our subsidiaries, have jointly executed general agreements of indemnity in favor of surety underwriters relating to surety bonds those underwriters issue in support of some of our contracting activity. As of March 31, 2020, bonds issued and outstanding under these arrangements in support of contracts totaled approximately $220.1 million. The aggregate value of the letters of credit provided by the U.S. Revolving Credit facility backstopping surety bonds was $22.7 million.

2019 Rights Offering

On June 28, 2019, we distributed to holders of our common stock one nontransferable subscription right to purchase 0.986896 common shares for each common share held as of 5:00 p.m., New York City time, on June 27, 2019 at a subscription price of $0.30 per whole share of common stock (the "2019 Rights Offering"). The 2019 Rights Offering expired at 5:00 p.m., New York City time, on July 18, 2019, and settled on July 23, 2019. The Company did not issue fractional rights or pay cash in lieu of fractional rights. The 2019 Rights Offering did not include an oversubscription privilege.

The 2019 Rights Offering resulted in the issuance of 13.9 million common shares as a result of the exercise of subscription rights in the offering. Gross proceeds from the 2019 Rights Offering were $41.8 million, $10.3 million which was used to fully repay Tranche A-2 of the Last Out Term Loans and the remaining $31.5 million was used to reduce outstanding borrowings under Tranche A-3 of the Last Out Term Loans. Concurrently with the closing of the 2019 Rights Offering, and in satisfaction of the Backstop Commitment, the Company issued an aggregate of 2.7 million common shares in exchange for a portion of the Tranche A-3 Last Out Term Loans totaling $8.2 million, to B. Riley, a related party, as described in Note 20. The 2019 Rights Offering was pursuant to the April 5, 2019 Letter Agreement and the Equitization Transactions and was approved by stockholders at the Company's annual stockholder meeting on June 14, 2019.

~~Subsequent Events - Debt Refinancing~~

~~Entry into A&R Credit Agreement~~

from the $30.0 million of new term loans will be used to pay transaction fees and expenses and repay outstanding borrowings under the revolving credit facility governed by the A&R Credit Agreement (the "revolving credit facility"). Proceeds from the additional $40.0 million of term loans will be used to repay outstanding borrowings under the revolving credit facility, with any remaining amounts used for working capital, capital expenditures, permitted acquisitions and general corporate purposes.

~~The A&R Credit Agreement also amends the following terms, among others, as compared with the Amended Credit Agreement:~~


~~(i)~~	the maturity date of the revolving credit facility will be extended to June 30, 2022, and the maturity date of all Last Out Term Loans under the A&R Credit Agreement will be extended to December 30, 2022 (six months after the maturity date of the revolving credit facility);


~~(ii)~~	the interest rate for loans under the revolving credit facility will be reduced to LIBOR plus 7.0% or base rate (as defined in the A&R Credit Agreement) plus 6.0%. These margins will be reduced by 2.0% if commitments under the revolving credit facility are reduced to less than $200.0 million. The fee for letters of credit will be set at 4.0%;


~~(iii)~~	~~the interest rate for all Last Out Term Loans will be set at 12.0%;~~


~~(iv)~~	the commitments under the revolving credit facility will automatically and permanently decrease in the following amounts on the following dates, which match the funding dates and amounts for the committed term loans: (x) $10.0 million on November 30, 2020; and (y) $5.0 million on each of March 31, 2021, June 30, 2021, September 30, 2021, December 31, 2021 and March 31, 2022, respectively;


~~(v)~~	the amount of revolving loans and letters of credit available in currencies other than U.S. dollars will be capped at $125.0 million through April 30, 2021 and step down to $110.0 million on May 1, 2021; and


~~(vi)~~	the amount of financial letters of credit will be capped at $75.0 million, and the amount of all letters of credit will be capped at $190.0 million through April 30, 2021 and step down to $175.0 million on May 1, 2021 (the “L/C Sublimit”).

~~B. Riley Limited Guaranty~~

~~Fee and Interest Equitization Agreement~~

The Equitization Agreement provides that, in lieu of receiving (a) $12.343 million of interest payments with respect to Last Out Term Loans under the A&R Credit Agreement between May 14, 2020 and December 31, 2020 (the “Equitized Interest Payments”) and (b) the B. Riley Guaranty Fee (the “Equitized Fee Payment” and, together with the Equitized Interest Payments, the “Equitized Fees and Interest Payments”), B. Riley will receive shares of the Company’s common stock, par value $0.01 per share (“common stock”).

The Company is required under the Equitization Agreement to use its reasonable best efforts to take all actions to obtain any necessary stockholder approval under the rules of the NYSE for the issuance of the Shares. B. Riley has agreed to cause all shares of common stock beneficially owned by B. Riley to be voted in favor of any proposal presented to the Company’s stockholders seeking approval of the issuance of shares pursuant to the Equitization Agreement.

~~Termination of Backstop Commitment Letter~~

~~Off-Balance Sheet Arrangements~~

~~There were no significant off-balance sheet arrangements at March 31, 2020.~~

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, see "Critical Accounting Policies and Estimates" in our Annual Report. There have been no significant changes to our policies during the ~~three~~nine months ended ~~March 31,~~September 30, 2020.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our exposures to market risks have not changed materially from those disclosed under "Quantitative and Qualitative Disclosures About Market Risk" in our Annual Report on Form 10-K for the year ended December 31, 2019 except for those described below.

to control the spread of this virus. 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.

This outbreak, and any outbreak of a contagious disease or any other adverse public health developments in countries where we operate, could have material and adverse effects on our business, financial condition and results of operations. In addition, any outbreak may result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn or recession that could affect demand for our products or our ability to obtain financing for our business or projects.

The ultimate effect of the COVID-19 outbreak or any other outbreak on our business, financial condition and operations will depend heavily on the future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information that may emerge concerning the severity of the virus and the actions taken to contain the virus or treat its impact, among others. In particular, the actual and threatened spread of the virus could have a material adverse effect on the global economy, could continue to negatively impact financial markets, including the trading price of our common stock, and could cause continued interest rate volatility and movements that could make obtaining financing or refinancing our debt obligations more challenging or more expensive. Any of these developments could have a material adverse effect on our business, liquidity, capital resources and financial results and may result in our inability to continue operating as a going concern or require us to reorganize our company in its entirety, including through bankruptcy proceedings.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of the end of the period covered by this report, the Company's management, with the participation of 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 that term is defined in Rules 13a-15(e) and 15d-15(e) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the "Exchange Act")). Our 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 effective as of ~~March 31,~~September 30, 2020 to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and such information is accumulated and communicated to management as appropriate to allow timely decisions regarding disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended ~~March 31,~~September 30, 2020 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 ~~most~~some of our team members ~~began~~are working remotely ~~in the first quarter of 2020~~ in response to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation 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 17 to the unaudited Condensed Consolidated Financial Statements in Part I of this 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'~~Factors" in our Annual ~~Report.~~Report on Form 10-K for the fiscal year ended December 31, 2019 and

in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2020. There have been no material changes to such risk factors.

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

In accordance with the provisions of the employee benefit plans, the Company acquired the following shares in connection with the vesting of employee restricted stock that require us to ~~repurchase~~withhold shares to satisfy employee statutory income tax withholding obligations. The following table identifies the number of common shares and average ~~purchase~~ price ~~paid by the Company,~~per share for each month during the quarter ended ~~March 31,~~September 30, 2020. The Company does not have a general share repurchase program at this time.

(share data in thousands)
Period
Total number of shares purchased ⁽¹⁾
Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Approximate dollar value of shares that may yet be purchased under the plans or programs
January 2020 —
$ —
—
$ —
February 2020 1,230
$ 3.64
—
$ —
March 2020 1,232
$ 4.17
—
$ —
Total 2,462
$ 3.91
—
$ —



(data in whole amounts)
Period	Total number of shares acquired ⁽¹⁾	Average price per share		Total number of shares purchased as part of publicly announced plans or programs	Approximate dollar value of shares that may yet be purchased under the plans or programs
July 2020	—	$	—	—	$	—
August 2020	96,718	$	2.77	—	$	—
September 2020	108	$	4.30	—	$	—
Total	96,826	$	—	—	$	—

⁽¹⁾ ~~Repurchased~~Acquired shares are recorded in treasury stock in our Condensed Consolidated Balance Sheets.

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Item 6. Exhibits




10.10		Form of 2021 Long-Term Cash Incentive Award Grant Agreement

10.11		Amendment No. 1 to Amended and Restated Credit Agreement, dated as of October 30, 2020, among Babcock & Wilcox Enterprises, Inc., as the borrower, Bank of America, N.A., as Administrative Agent, and the other lenders party thereto (incorporated by reference to Exhibit 10.1 of the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed November 5, 2020 (File No. 001-36876)).

10.12		Second Amendment to Executive Services Agreement between Babcock & Wilcox Enterprises, Inc. and BRPI Executive Consulting, LLC dated November 9, 2020 (incorporated by reference to Exhibit 10.1 of the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed November 10, 2020 (File No. 001-36876)).

10.13		Third Amendment to Executive Employment Agreement between Babcock & Wilcox Enterprises, Inc. and Henry Bartoli dated November 5, 2020 (incorporated by reference to Exhibit 10.2 of the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed November 10, 2020 (File No. 001-36876)).

10.14		Consultant Agreement by and between The Babcock & Wilcox Company Inc. and Henry Bartoli effective as of January 1, 2021 (incorporated by reference to Exhibit 10.3 of the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed November 10, 2020 (File No. 001-36876)).

31.1		Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer.

31.2		Rule 13a-14(a)/15d-14(a) certification of Chief Financial Officer.

32.1		Section 1350 certification of Chief Executive Officer.

32.2		Section 1350 certification of Chief Financial Officer.

~~10.1~~*		Amendment and Restatement Agreement (attaching the Amended and Restated Credit Agreement), dated as of May 14, 2020, among Babcock & Wilcox Enterprises, Inc., as the borrower, Bank of America, N.A., as Administrative Agent, and the other lenders party thereto (incorporated by reference to Exhibit 10.1 of the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed May 15, 2020 (File No. 001-36876)).

~~10.2~~		Fee Letter, dated as of May 14, 2020, among Babcock & Wilcox Enterprises, Inc. and B. Riley Financial, Inc. (incorporated by reference to Exhibit 10.2 of the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed May 15, 2020 (File No. 001-36876)).

~~10.3~~		Fee and Interest Equitization Agreement, dated May 14, 2020, between Babcock & Wilcox Enterprises, Inc., B. Riley Financial, Inc. and, solely for limited purposes under the Equitization Agreement, B. Riley FBR, Inc. (incorporated by reference to Exhibit 10.3 of the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed May 15, 2020 (File No. 001-36876)).

~~10.4~~		Termination Agreement, dated as of May 14, 2020, between Babcock & Wilcox Enterprises, Inc. and B. Riley Financial, Inc. and acknowledged by Bank of America, N.A. (incorporated by reference to Exhibit 10.4 of the Babcock & Wilcox Enterprises, Inc. Current Report on Form 8-K filed May 15, 2020 (File No. 001-36876)).

101.INS		XBRL Instance Document.

101.SCH		XBRL Taxonomy Extension Schema Document.

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB		XBRL Taxonomy Extension Label Linkbase Document.

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.

* The Company has omitted certain information contained in this exhibit pursuant to Rule 601(b)(10) of Regulation S-K. The omitted information is not material and, if publicly disclosed, would likely cause competitive harm to the Company. Certain schedules and annexes to this exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule and/or annex will be furnished to the U.S. Securities and Exchange Commission or its staff upon request.

5764

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		BABCOCK & WILCOX ENTERPRISES, INC.

~~May 15,~~November 13, 2020	By:	/s/ Louis Salamone
		Louis Salamone
		Executive Vice President, Chief Financial Officer and Chief Accounting Officer (Principal Financial and Accounting Officer and Duly Authorized Representative)

5865



(share data in thousands)
Period	Total number of shares purchased ⁽¹⁾	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Approximate dollar value of shares that may yet be purchased under the plans or programs
January 2020	—	$	—	—	$	—
February 2020	1,230	$	3.64	—	$	—
March 2020	1,232	$	4.17	—	$	—
Total	2,462	$	3.91	—	$	—