Babcock & Wilcox(BW) - 2022 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements Acquisitions drove revenue growth, but higher costs, impairment, and interest expenses led to a net loss and equity deficit Condensed Consolidated Statements of Operations Q3 2022 revenues rose to $214.9 million, but goodwill impairment and higher costs led to a $20.6 million net loss Condensed Consolidated Statements of Operations (Unaudited) | (in thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $214,870 | $159,960 | $639,938 | $531,068 | | Operating (loss) income | $(10,318) | $14,761 | $(13,433) | $11,083 | | Goodwill impairment | $7,224 | — | $7,224 | — | | Net (loss) income | $(20,566) | $13,648 | $(32,244) | $1,346 | | Net (loss) income attributable to common stock | $(21,481) | $9,962 | $(39,742) | $(4,107) | | Diluted (loss) earnings per share | $(0.24) | $0.11 | $(0.45) | $(0.05) | Condensed Consolidated Balance Sheets Total assets decreased to $881.6 million due to reduced cash, resulting in a $17.1 million stockholders' deficit Condensed Consolidated Balance Sheet Highlights (Unaudited) | (in thousands) | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $48,471 | $224,874 | | Total current assets | $498,593 | $582,434 | | Total assets | $881,567 | $913,265 | | Total current liabilities | $319,533 | $253,383 | | Total liabilities | $898,695 | $854,643 | | Total stockholders' (deficit) equity | $(17,128) | $58,622 | Condensed Consolidated Statements of Cash Flows Net cash used in operations was $67.4 million, while investing activities used $67.6 million, primarily for acquisitions Cash Flow Summary (Unaudited) | (in thousands) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(67,380) | $(107,834) | | Net cash used in investing activities | $(67,570) | $(5,878) | | Net cash (used in) provided by financing activities | $(19,081) | $159,218 | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(157,217) | $48,324 | Notes to Condensed Consolidated Financial Statements Notes detail segment performance, goodwill impairment, debt covenant waivers, litigation settlement, and acquisition impacts - The company operates in three segments: B&W Renewable, B&W Environmental, and B&W Thermal. For the nine months ended Sep 30, 2022, the Renewable segment's revenue more than doubled to $224.9 million, while the Thermal segment's revenue decreased to $309.9 million[38][40] - Total backlog was $730.0 million as of September 30, 2022. The company expects to recognize approximately 32.5% of this in the remainder of 2022, 46.4% in 2023, and 21.1% thereafter[47] - The company recorded a $7.2 million goodwill impairment loss related to the Fosler Construction reporting unit during Q3 2022 due to significant deterioration in operating results and other factors[56][57][59] - As of September 30, 2022, the company was not in compliance with its quarterly fixed charge coverage test covenant and received a waiver. Subsequent to the quarter end, on November 7, 2022, the company amended its debt documents to modify certain financial covenants for future periods[88][181] - The company reached a settlement agreement in principle for stockholder litigation with a total payment of $9.5 million. The company will pay $4.75 million on behalf of other defendants, and the remaining $4.75 million will be paid to the company from insurance proceeds and other contributions[116] - On September 24, 2022, the company acquired the remaining 40% ownership stake in Fosler Construction for $12.7 million[153] Management's Discussion and Analysis of Financial Condition and Results of Operations Acquisitions drove Q3 2022 revenue growth, but supply chain issues and higher costs led to a net loss and reduced liquidity Results of Operations Acquisition-driven revenue growth in Q3 and YTD was offset by increased costs, resulting in net losses for both periods Revenues by Segment (in thousands) | Segment | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | B&W Renewable | $81,687 | $38,000 | $224,875 | $105,155 | | B&W Environmental | $44,626 | $38,249 | $111,186 | $97,767 | | B&W Thermal | $91,331 | $83,819 | $309,875 | $328,416 | | Total Revenues | $214,870 | $159,960 | $639,938 | $531,068 | Adjusted EBITDA by Segment (in thousands) | Segment | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | B&W Renewable | $4,522 | $11,399 | $14,846 | $15,030 | | B&W Environmental | $3,082 | $3,476 | $5,112 | $7,286 | | B&W Thermal | $10,761 | $9,329 | $41,276 | $32,436 | | Total Adjusted EBITDA | $13,055 | $18,851 | $45,684 | $42,644 | - Total company backlog increased to $730 million at September 30, 2022, up from $540 million at the same time in 2021[211] - Net changes in gross profit from contract estimates were negative $8.7 million in Q3 2022, a significant reversal from a positive $5.5 million in Q3 2021, largely due to losses on Fosler Solar projects[214][51] Liquidity and Capital Resources Liquidity tightened significantly due to cash used in operations and acquisitions, with total cash falling to $69.5 million - Total cash, cash equivalents, and restricted cash was $69.5 million at September 30, 2022, down from $226.7 million at December 31, 2021[257] - Cash used in operations was $67.4 million, and cash used in investing activities was $67.6 million for the nine months ended September 30, 2022, mainly due to acquisitions[258][259] - As of September 30, 2022, the company had $333.9 million in outstanding surety bonds and $109.4 million in letters of credit usage under its Debt Facilities[262][264] - The company was not in compliance with its Quarterly Fixed Charge Coverage financial covenant as of September 30, 2022, and received a waiver from its lenders[262] Quantitative and Qualitative Disclosures About Market Risk No material changes to market risk exposures were reported since the 2021 Annual Report - There have been no material changes to the company's market risk exposures since the 2021 year-end report[271] Controls and Procedures Disclosure controls and procedures were effective as of September 30, 2022, with no material changes in internal controls - The CEO and CFO concluded that disclosure controls and procedures are effective as of September 30, 2022[273] - No changes in internal control over financial reporting occurred during Q3 2022 that have materially affected, or are reasonably likely to materially affect, internal controls[274] PART II - OTHER INFORMATION Legal Proceedings Details on ongoing legal proceedings and litigation settlements are provided in Note 17 of the financial statements - For details on legal proceedings, the report refers to Note 17 of the Condensed Consolidated Financial Statements[280] Risk Factors No material changes to risk factors, except for a new risk concerning the Ukraine-Russia conflict's impact on operations - A new risk factor has been added regarding the adverse effects of the ongoing invasion of Ukraine by Russia on the company's business, including supply chain disruptions for materials like steel in Europe[282] Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase shares during Q3 2022 and has no general share repurchase program - The company did not repurchase any shares during the third quarter of 2022 and does not have a share repurchase program[283] Exhibits This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and XBRL data files