– The Babcock & Wilcox segment increased revenues by 18.5% and adjusted
EBITDA by 115%
-The SPIG segment returned to profitability and
increased adjusted EBITDA by $8 million
– Consolidated operating
loss was $74.5 million lower, and adjusted EBITDA improved by $72.7
million
BARBERTON, Ohio–(BUSINESS WIRE)–lt;a href=”https://twitter.com/search?q=%24BW&src=ctag” target=”_blank”gt;$BWlt;/agt; lt;a href=”https://twitter.com/hashtag/BabcockWilcox?src=hash” target=”_blank”gt;#BabcockWilcoxlt;/agt;–Babcock & Wilcox Enterprises, Inc. (“B&W Enterprises”) (NYSE: BW)
announced today first quarter 2019 revenues of $231.9 million, a
decrease of $21.2 million, or 8.4%, compared to the first quarter of
2018. The decrease was primarily the result of several EPC contracts
being in the final stages of completion in the first quarter of 2019.
GAAP net loss from continuing operations in first quarter 2019 improved
to $49.9 million compared to $116.8 million in first quarter 2018.
Adjusted EBITDA also improved by $72.7 million to negative $5.0 million
compared to negative $77.6 million in the prior year period. All amounts
referred to in this release are on a continuing operations basis, unless
otherwise noted. A reconciliation of adjusted EBITDA to the most
directly comparable GAAP measure is provided in the exhibits to this
release.
“Our performance in the first quarter of 2019 reflects the impact of the
strategic actions we have taken over the past several months. Combined
with the settlements we reached in March 2019 and our additional
financing, we have momentum on our path to profitability,” said Kenneth
Young, Chief Executive Officer. “Our Babcock & Wilcox segment continues
to perform well, and our change in strategy for the SPIG segment is
beginning to drive results. As 2019 progresses, we expect the core
strengths of our businesses to continue to become more visible to our
customers and shareholders. We are also making progress on our
cost-savings initiatives, and looking forward, we continue to target a
run-rate adjusted EBITDA of approximately $100 million as we exit 2020,
not including corporate overhead.”
“Over the past six months, our customers and employees have seen a major
transformation at Babcock & Wilcox Enterprises and are responding
positively as we have made significant changes to improve our business
and have shared new information about our strategic path to
profitability,” Young continued. “We are optimistic as we see new
opportunities emerging as a result of our recent efforts. Going forward,
we expect to see improvement each quarter as our cost-savings
initiatives continue to impact bottom-line results and as we minimize
EPC contract losses under the terms of the settlements we achieved in
March 2019. Our dedicated employees continue to deliver world-class
products and services that reflect the strengths of our more than
150-year heritage. We are laser-focused on delivering high-quality
technologies that provide solutions for our customers and strong results
for our shareholders.”
Results of Operations
Consolidated revenues in first quarter 2019 were $231.9 million, down
8.4% compared to first quarter 2018 primarily due to several EPC
contracts being in the final stages of completion in the first quarter
of 2019 The GAAP operating loss in first quarter 2019 was $32.0 million
compared to an operating loss of $106.4 million in first quarter 2018.
Prior to the first quarter of 2019, the most significant drivers of the
Company’s operating losses were the charges for the six European
engineering, procurement and construction (EPC) loss contracts. In the
first quarter of 2019, the most significant drivers of our operating
losses were settlement costs, restructuring activities, and advisory
fees. Adjusted EBITDA was negative $5.0 million compared to negative
$77.6 million in first quarter 2018.
In the first quarter of 2019, the Company changed its calculation of
adjusted EBITDA to exclude net pension benefit, foreign currency
exchange effects and other income (expense); all references to adjusted
EBITDA in this release exclude these items on a consistent basis. Net
pension benefit before mark-to-market adjustments was $3.4 million in
the first quarter of 2019, compared to $7.0 million in the prior-year
quarter; foreign exchange impact was negative $10.2 million in the first
quarter of 2019, compared to positive $2.5 million in the prior-year
quarter.
Babcock & Wilcox segment revenues increased 18.5% to
$188.6 million in the first quarter of 2019 compared to $159.1 million
in the prior-year period, mainly driven by large construction new build
and industrial projects, partially offset by a decrease in parts sales.
Gross profit in the Babcock & Wilcox segment in first quarter 2019 was
$31.1 million, compared to $30.9 million in the prior-year period,
reflecting the increase in lower-margin construction revenue as a
percentage of total revenue including construction services at no margin
for the SPIG segment on its single loss project in the U.S. Gross profit
margin was 16.5%, compared to 19.4% in the same period last year.
Adjusted EBITDA in first quarter 2019 increased 115% to $9.0 million,
compared to $4.2 million in last year’s quarter; this increase is mainly
attributable to the impact of cost-savings initiatives partially offset
by an approximately $2.3 million increase in the level of corporate
overhead being absorbed by the segment compared to the prior-year
quarter. Adjusted EBITDA margin was 4.8% compared to 2.6% in the same
period last year.
SPIG segment revenues decreased 21.3% to $28.9 million in
first quarter 2019 compared to $36.7 million in first quarter 2018,
mainly due to lower volume of new build cooling system projects as
expected following the change in strategy to improve profitability by
more selectively bidding and focusing on core geographies and products,
and a lower volume of aftermarket services. Gross profit improved to a
positive $3.7 million in first quarter 2019, compared to a gross profit
of negative $2.8 million in the prior-year period. This improvement was
primarily due to the effects of the new strategy and to continued
progress made on the small number of remaining legacy new build cooling
systems contracts in the quarter without significant increases in
estimated costs, compared to the first quarter of 2018 when higher
estimated costs to complete were incurred. Adjusted EBITDA improved by
$8.0 million to positive $0.7 million compared to negative $7.3 million
in the same period last year, driven by the improvement in gross profit
and the benefits of cost-savings initiatives.
Vølund & Other Renewable segment revenues in the
segment were $29.5 million for first quarter 2019, compared to $60.0
million in first quarter 2018. First quarter revenues were lower
compared to the prior year quarter as several of the European EPC loss
contracts were in the final stages of completion in 2019, resulting in
lower construction revenue being recognized than in 2018. The
quarter-over-quarter variance was also driven by the sale of Palm Beach
Resource Recovery Corporation (PBRRC) in September 2018 and the previous
decision to limit bidding on Vølund renewable energy contracts. The
segment gross profit improved $47.6 million to negative $2.9 million in
first quarter 2019, compared to negative $50.4 million reported in first
quarter 2018. In the first quarter of 2018, the segment recorded $52.6
million in net losses resulting from changes in the estimated revenues
and costs to complete the six European EPC loss contracts, compared to
$4.1 million of equivalent losses recorded in the first quarter of 2019.
Beyond the effect of the EPC loss contracts, the first quarter 2019
gross profit also included lower levels of direct overhead support and
warranty expense, offset by the absence of gross profit from PBRRC.
Adjusted EBITDA in the quarter was negative $8.9 million compared to
negative $61.8 million in the first quarter last year, mainly due to
improved gross profit as well as lower SG&A, reflecting the benefits of
restructuring and cost reductions.
European EPC Loss Projects
As of March 2019, four of the six European EPC loss contracts had been
turned over to the customers, with only punch list or agreed remediation
items remaining, some of which are expected to be performed during the
customers’ scheduled maintenance outages. This applies to the first,
third, fourth and sixth projects. On March 29, 2019, the Company reached
settlements with the customers for the second and fifth European EPC
projects, which significantly limited the Company’s remaining
obligations related to these projects. The Company also reached an
agreement to terminate its obligations on an additional European
waste-to-energy EPC contract which had not yet reached the project
phase. The settlements became binding on April 5, 2019 upon payment
using a portion of the proceeds from Tranche A-3 of the last-out-term
loans described below. A more detailed project status summary is
contained in the Company’s 10-Q.
Financing, Liquidity and Balance Sheet
In the first quarter of 2019, the Company entered into several
amendments to its revolving credit facility. On March 19, 2019, the
Company borrowed $10.0 million of additional funding under Tranche A-2
of the last-out term loans from B. Riley Financial, Inc. (a related
party, and collectively with its affiliates “B. Riley”) to support
working capital needs. On April 5, 2019, the Company’s most recent
amendment to its credit agreement was completed to provide $150.0
million of Tranche A-3 last-out term loans from B. Riley as well as an
uncommitted incremental facility of up to $15.0 million. The proceeds
from the last-out term loans were used to pay amounts due under the EPC
loss project settlement agreements and debt placement fees and expenses;
the remainder is available for future working capital needs.
As part of the most recent amendment, and in connection with the Tranche
A-3 last-out term loans, the Company agreed to seek shareholder approval
to execute a $50 million rights offering at $0.30 per share within six
months; exchange all of the principal ($37.1 million as of April 2,
2019) of the last-out term loan held by Vintage Capital Management, LLC
for common stock at $0.30 per share; issue approximately 16.7 million
warrants, each to purchase one share of common stock at $0.01 per share
to B. Riley or its designee as further consideration under Tranche A-3
of the last-out term loans; and execute a reverse stock split. The
amendment permits the Company to repay up to $86 million of the last-out
term loans using the proceeds from the rights offering.
The most recent amendment also, among other things, increases the
Company’s borrowing capacity by reducing the Company’s required minimum
liquidity to $30 million from $40 million. It allows for issuance of up
to $20 million of new letters of credit with respect to any future
Vølund projects, permits letters of credit to expire one year after the
maturity date of the revolving credit facility, and creates a new event
of default for the failure to terminate the existing credit facility on
or prior to March 15, 2020. The Company intends to refinance the
revolving credit facility as required.
After giving effect to the proceeds received under the last-out term
loans borrowed on April 5, 2019, making the EPC loss project settlement
payments, and repaying a portion of the existing revolver debt, the
Company had a cash and cash equivalents balance of approximately $41
million and borrowing availability of approximately $35 million.
Continuing Cost-Savings Measures Targeting $100 Million In Annual
Savings
The Company continues to target approximately $100 million in annualized
savings through its cost savings initiatives. Roughly three quarters of
these savings measures have been implemented to date with the balance to
be implemented in 2019 and a small amount in 2020. Cost savings have
been identified across all segments and at the Corporate level, and the
implementation plan and savings are progressing in line with
expectations. The Company continues to evaluate dispositions and
additional opportunities for cost savings.
NYSE Listing Standards
On November 27, 2018, the Company received notification from the New
York Stock Exchange (NYSE) that the Company has fallen below its
continued listing criteria based on the price of the Company’s common
stock. The Company intends to ask its shareholders to approve a
resolution to, among other things, effect a reverse stock split of the
Company’s shares of common stock at its annual shareholders meeting.
Based on the expected timing of the annual shareholder meeting, the
Company is permitted under NYSE rules to go beyond the six-month cure
period to request required shareholder approval on a corporate action.
Forward-Looking Statements
B&W Enterprises cautions that this release contains forward-looking
statements, including, without limitation, statements relating to our
strategic objectives; our business execution model; management’s
expectations regarding the industries in which the Company operates; our
guidance and forecasts; our projected operating margin improvements,
savings and restructuring costs; our U.S. revolving credit facility; and
project execution. These forward-looking statements are based on
management’s current expectations and involve a number of risks and
uncertainties, including, among other things, our ability to continue as
a going concern; our ability to obtain and maintain sufficient financing
to provide liquidity to meet our business objectives, surety bonds,
letters of credit and similar financing; our ability to satisfy the
liquidity and other requirements under our revolving credit facility as
recently amended; our ability to refinance said facility in a timely
manner, if at all; our ability to obtain all stockholder and regulatory
approvals for the rights offering, issuance of warrants, reverse stock
split and related transactions; our ability to complete said
transactions in a timely manner, if at all; the highly competitive
nature of our businesses; general economic and business conditions,
including changes in interest rates and currency exchange rates; general
developments in the industries in which the Company is involved;
cancellations of and adjustments to backlog and the resulting impact
from using backlog as an indicator of future earnings; our ability to
perform contracts on time and on budget, in accordance with the
schedules and terms established by the applicable contracts with
customers; failure by third-party subcontractors, joint venture partners
or suppliers to perform their obligations on time and as specified; 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 and
Other Renewable segment, including the ability to complete our European
EPC projects within the expected time frame and the estimated costs; our
ability to successfully partner with third parties to win and execute
renewable contracts; changes in our effective tax rate and tax
positions; our ability to maintain operational support for our
information systems against service outages and data corruption, as well
as protection against cyber-based network security breaches and theft of
data; our ability to protect our intellectual property and renew
licenses to use intellectual property of third parties; our use of the
percentage-of-completion method of accounting; 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 the Company 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 the Company does 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 the Company
determines to pursue them; and our ability to maintain the listing of
our common stock on the NYSE. If one or more of these risks or other
risks materialize, actual results may vary materially from those
expressed. For a more complete discussion of these and other risk
factors, see B&W Enterprise’s filings with the Securities and Exchange
Commission, including our most recent annual report on Form 10-K. B&W
Enterprises cautions not to place undue reliance on these
forward-looking statements, which speak only as of the date of this
release, and undertakes no obligation to update or revise any
forward-looking statement, except to the extent required by applicable
law.
About B&W Enterprises
Headquartered in Barberton, Ohio, Babcock & Wilcox Enterprises is a
global leader in energy and environmental technologies and services for
the power and industrial markets. Follow us on Twitter @BabcockWilcox
and learn more at www.babcock.com.
|
Exhibit 1 |
||||||||||
|
Babcock & Wilcox Enterprises, Inc. |
||||||||||
|
Condensed Consolidated Statements of Operations(1) |
||||||||||
|
(In millions, except per share amounts) |
||||||||||
| Three months ended | ||||||||||
| March 31, | ||||||||||
| 2019 | 2018 | |||||||||
| Revenues | $ | 231.9 | $ | 253.2 | ||||||
| Costs and expenses: | ||||||||||
| Cost of operations | 201.1 | 277.3 | ||||||||
| Selling, general and administrative expenses | 42.4 | 59.4 | ||||||||
| Advisory fees and settlement costs | 13.6 | 3.1 | ||||||||
| Restructuring activities and spin-off transaction costs | 6.1 | 6.9 | ||||||||
| Research and development costs | 0.7 | 1.1 | ||||||||
| Total costs and expenses | 263.9 | 347.8 | ||||||||
| Equity in income and impairment of investees | — | (11.8 | ) | |||||||
| Operating loss | (32.0 | ) | (106.4 | ) | ||||||
| Other income (expense): | ||||||||||
| Interest expense | (11.1 | ) | (13.5 | ) | ||||||
| Interest income | 0.6 | 0.2 | ||||||||
| Benefit plans, net | 3.0 | 7.0 | ||||||||
| Foreign exchange | (10.2 | ) | 2.5 | |||||||
| Other – net | 0.4 | 0.4 | ||||||||
| Total other expense | (17.3 | ) | (3.4 | ) | ||||||
| Loss before income tax expense | (49.2 | ) | (109.9 | ) | ||||||
| Income tax expense | 0.6 | 7.0 | ||||||||
| Loss from continuing operations | (49.9 | ) | (116.8 | ) | ||||||
| Loss from discontinued operations, net of tax | — | (3.5 | ) | |||||||
| Net loss | (49.9 | ) | (120.3 | ) | ||||||
| Net income (loss) attributable to noncontrolling interest | 0.1 | (0.1 | ) | |||||||
| Net loss attributable to stockholders | $ | (49.8 | ) | $ | (120.4 | ) | ||||
| Basic and diluted loss per common share: | ||||||||||
| Continuing operations | $ | (0.29 | ) | $ | (2.65 | ) | ||||
| Discontinued operations | — | (0.08 | ) | |||||||
| Basic and diluted loss per common share | $ | (0.29 | ) | $ | (2.73 | ) | ||||
| Shares used in the computation of earnings per share: | ||||||||||
| Basic and Diluted | 168.8 | 44.2 | ||||||||
| (1) | Figures may not be clerically accurate due to rounding. | |
|
Exhibit 2 |
||||||||
|
Babcock & Wilcox Enterprises, Inc. |
||||||||
|
Condensed Consolidated Balance Sheets(1) |
||||||||
| (In millions, except per share amount) | March 31, 2019 | December 31, 2018 | ||||||
| Cash and cash equivalents | $ | 43.5 | $ | 43.2 | ||||
| Restricted cash and cash equivalents | 7.0 | 17.1 | ||||||
| Accounts receivable – trade, net | 203.2 | 197.2 | ||||||
| Accounts receivable – other | 57.0 | 44.7 | ||||||
| Contracts in progress | 136.4 | 144.7 | ||||||
| Inventories | 63.8 | 61.3 | ||||||
| Other current assets | 45.9 | 41.4 | ||||||
| Total current assets | 556.8 | 549.6 | ||||||
| Net property, plant and equipment | 85.0 | 90.9 | ||||||
| Goodwill | 47.1 | 47.1 | ||||||
| Intangible assets | 29.1 | 30.8 | ||||||
| Right-of-use assets | 15.1 | — | ||||||
| Other assets | 31.8 | 27.1 | ||||||
| Total assets | $ | 764.9 | $ | 745.5 | ||||
| Revolving credit facilities | 175.3 | 145.5 | ||||||
| Last out term loans | 42.4 | 30.6 | ||||||
| Accounts payable | 202.9 | 199.9 | ||||||
| Accrued employee benefits | 23.1 | 19.3 | ||||||
| Advance billings on contracts | 155.3 | 149.4 | ||||||
| Accrued warranty expense | 44.8 | 45.1 | ||||||
| Lease liabilities | 4.9 | — | ||||||
| Other accrued liabilities | 117.2 | 122.1 | ||||||
| Total current liabilities | 765.9 | 712.0 | ||||||
| Pension and other accumulated postretirement benefit liabilities | 277.8 | 281.6 | ||||||
| Noncurrent lease liabilities | 10.0 | — | ||||||
| Other noncurrent liabilities | 29.1 | 29.2 | ||||||
| Total liabilities | 1,082.7 | 1,022.8 | ||||||
| Commitments and contingencies | — | — | ||||||
| Stockholders’ (deficit) equity: | ||||||||
|
Common stock, par value $0.01 per share, authorized 200,000 shares; issued and outstanding 168,862 and 168,791 shares at March 31, 2019 and December 31, 2018, respectively |
1.7 | 1.7 | ||||||
| Capital in excess of par value | 1,047.5 | 1,047.1 | ||||||
|
Treasury stock at cost, 5,924 and 5,872 shares at March 31, 2019 and December 31, 2018, respectively |
(105.6 | ) | (105.6 | ) | ||||
| Accumulated deficit | (1,267.7 | ) | (1,217.9 | ) | ||||
| Accumulated other comprehensive loss | (2.5 | ) | (11.4 | ) | ||||
| Stockholders’ deficit attributable to shareholders | (326.6 | ) | (286.1 | ) | ||||
| Noncontrolling interest | 8.7 | 8.8 | ||||||
| Total stockholders’ deficit | (317.9 | ) | (277.3 | ) | ||||
| Total liabilities and stockholders’ deficit | $ | 764.9 | $ | 745.5 | ||||
| (1) | Figures may not be clerically accurate due to rounding. |
|
Exhibit 3 |
||||||||
|
Babcock & Wilcox Enterprises, Inc. |
||||||||
|
Condensed Consolidated Statements of Cash Flows(1) |
||||||||
|
(In millions) |
||||||||
| Three months ended March 31, | ||||||||
| 2019 | 2018 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (49.9 | ) | $ | (120.3 | ) | ||
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
||||||||
| Depreciation and amortization of long-lived assets | 7.3 | 9.1 | ||||||
|
Amortization of deferred financing costs, debt discount and payment-in-kind interest |
5.7 | 5.0 | ||||||
| Amortization of right of use assets | 1.5 | — | ||||||
| Income from equity method investees | — | (6.6 | ) | |||||
| Other-than-temporary impairment of equity method investment in TBWES | — | 18.4 | ||||||
| Losses on asset disposals and impairments | — | 0.5 | ||||||
|
Provision for (benefit from) deferred income taxes, including valuation allowances |
(0.2 | ) | 1.1 | |||||
|
Mark to market losses (gains) and prior service cost amortization for pension and postretirement plans |
— | (0.4 | ) | |||||
| Stock-based compensation, net of associated income taxes | 0.4 | 0.2 | ||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | 0.2 | 17.3 | ||||||
| Contracts in progress and advance billings on contracts | 9.9 | (18.3 | ) | |||||
| Inventories | (3.2 | ) | 4.3 | |||||
| Income taxes | — | 10.1 | ||||||
| Accounts payable | 4.6 | (3.0 | ) | |||||
| Accrued and other current liabilities | 6.5 | (3.8 | ) | |||||
| Accrued contract loss | (30.9 | ) | 6.9 | |||||
|
Pension liabilities, accrued postretirement benefits and employee benefits |
(0.6 | ) | (9.6 | ) | ||||
| Other, net | 11.0 | 4.6 | ||||||
| Net cash (used) from operating activities | (37.7 | ) | (84.8 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property, plant and equipment | (0.3 | ) | (3.2 | ) | ||||
| Proceeds from sale of business | — | 5.1 | ||||||
| Proceeds from sale of equity method investments in joint venture | — | 21.1 | ||||||
| Purchases of available-for-sale securities | (6.0 | ) | (9.6 | ) | ||||
| Sales and maturities of available-for-sale securities | 1.0 | 9.5 | ||||||
| Other, net | 0.1 | 0.2 | ||||||
| Net cash (used) from investing activities | (5.3 | ) | 23.0 | |||||
| Cash flows from financing activities: | ||||||||
| Borrowings under our U.S. revolving credit facility | 71.2 | 157.1 | ||||||
| Repayments of our U.S. revolving credit facility | (40.8 | ) | (74.4 | ) | ||||
| Borrowings under our last out term loan from related party | 10.0 | — | ||||||
| Repayments under our foreign revolving credit facilities | (0.6 | ) | (5.0 | ) | ||||
| Shares of our common stock returned to treasury stock | — | (0.7 | ) | |||||
| Debt issuance costs | (6.7 | ) | (5.4 | ) | ||||
| Other, net | — | (0.1 | ) | |||||
| Net cash from financing activities | 33.1 | 71.5 | ||||||
| Effects of exchange rate changes on cash | 0.1 | (5.2 | ) | |||||
|
Net (decrease) increase in cash, cash equivalents and restricted cash |
(9.8 | ) | 4.4 | |||||
|
Less net increase in cash and cash equivalents of discontinued operations |
— | 1.3 | ||||||
|
Net (decrease) increase in cash, cash equivalents and restricted cash of continuing operations |
(9.8 | ) | 3.1 | |||||
|
Cash, cash equivalents and restricted cash of continuing operations, beginning of period |
60.3 | 69.7 | ||||||
|
Cash, cash equivalents and restricted cash of continuing operations, end of period |
$ | 50.5 | $ | 72.8 | ||||
Contacts
Investor Contact:
Megan Wilson
Vice President,
Corporate Development & Investor Relations
Babcock & Wilcox
Enterprises
704.625.4944 | [email protected]
Media Contact:
Ryan Cornell
Public Relations
Babcock
& Wilcox Enterprises
330.860.1345 | [email protected]
