Item 2.02 Results of Operations and Financial Condition OnMay 15, 2020 ,Babcock & Wilcox Enterprises, Inc. (the "Company") held a conference call to discuss the Company's first quarter 2020 results. A transcript of the call is furnished as Exhibit 99.1 and incorporated herein by reference. The information furnished pursuant to this Item 2.02, including Exhibit 99.1, shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. Item 9.01 Financial Statements and Exhibits (d) Exhibits Exhibit No. Description
99.1 Transcript of
Forward-Looking Statements
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successfully compete with current and future competitors; the loss of key personnel and the continued availability of qualified personnel; the Company's ability to negotiate and maintain good relationships with labor unions; changes in pension and medical expenses associated with the Company's retirement benefit programs; social, political, competitive and economic situations in foreign countries where the Company does business or seeks new business; the possibilities of war, other armed conflicts or terrorist attacks; the willingness of customers and suppliers to continue to do business with the Company on reasonable terms and conditions; the Company's ability to successfully consummate strategic alternatives for noncore assets, if the Company determines to pursue them; and the other factors specified and set forth under "Risk Factors" in the Company's periodic reports filed with theSecurities and Exchange Commission , including the Company's most recent annual report on Form 10-K. If one or more of these risks or other risks materialize, actual results may vary materially from those expressed. The Company cautions not to place undue reliance on these forward-looking statements and undertakes no obligation to update or revise any forward-looking statement, except to the extent required by applicable law. Non-GAAP Financial Measures The Company uses non-GAAP financial measures internally to evaluate its performance and in making financial and operational decisions. When viewed in conjunction with GAAP results and the accompanying reconciliation, the Company believes that its presentation of these measures provides investors with greater transparency and a greater understanding of factors affecting the Company's financial condition and results of operations than GAAP measures alone. The transcript attached presents adjusted gross profit for each business segment and adjusted EBITDA, which are non-GAAP financial measures. Adjusted EBITDA on a consolidated basis is defined as the sum of the adjusted EBITDA for each of the segments, further adjusted for corporate allocations and research and development costs. At a segment level, the adjusted EBITDA presented is consistent with the way the Company's chief operating decision maker reviews the results of operations and makes strategic decisions about the business and is calculated as earnings before interest, tax, depreciation and amortization adjusted for items such as gains or losses on asset sales, mark to market pension adjustments, restructuring and spin costs, impairments, losses on debt extinguishment, costs related to financial consulting required under the Company'sU.S. Revolving Credit Facility and other costs that may not be directly controllable by segment management and are not allocated to the segment. The Company presented consolidated Adjusted EBITDA because it believes it is useful to investors to help facilitate comparisons of the ongoing, operating performance before corporate overhead and other expenses not attributable to the operating performance of the Company's revenue generating segments. The transcript attached also presents adjusted gross profit by segment. The Company believes that adjusted gross profit by segment is useful to investors to help facilitate comparisons of the ongoing, operating performance of the segments by excluding expenses related to, among other things, activities related to the spin-off, activities related to various restructuring activities the Company has undertaken, corporate overhead (such as SG&A expenses and research and development costs) and certain non-cash expenses such as intangible amortization and goodwill impairments that are not allocated by segment.
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Reconciliation of Adjusted EBITDA(3) (In millions) Three months ended March 31, 2020 2019 Adjusted EBITDA (1) Babcock & Wilcox segment $ 10.7 $ 9.1 Vølund & Other Renewable segment (3.3) (8.8) SPIG segment (1.2) 0.7 Corporate (4.1) (4.6) Research and development costs (1.3) (0.7) 0.7 (4.4) Restructuring activities and spin-off transaction costs (2.0) (6.1) Financial advisory services (0.9) (4.0) Settlement cost to exit Vølund contract (2) - (6.6) Advisory fees for settlement costs and liquidity planning (2.6) (3.1) Litigation legal costs (0.7) - Stock compensation (0.7) (0.6) Loss from business held for sale (0.8) - Depreciation & amortization (4.2) (7.3) Gain on asset disposals, net 0.9 - Operating loss (10.3) (32.0) Interest expense, net (22.1) (10.6) Net pension benefit before MTM 7.5 3.4 MTM loss from benefit plans - (0.4) Foreign exchange (9.3) (10.2) Other - net (0.2) 0.4
Loss before income tax (benefit) expense
(1) Adjusted EBITDA, for the three months ended
European waste-to-energy EPC contract, for which notice to proceed was not given and the contract was not started. The settlement eliminates the Company's obligations to act, and the Company's risk related to acting, as the prime EPC should the project have moved forward.
(3) Figures may not be clerically accurate due to rounding.
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Reconciliation of Adjusted Gross Profit (Loss)(2) (In millions) Three months ended March 31, 2020 2019 Adjusted gross profit (loss) (1) Operating income (loss) $ (10.3)$ (32.0) Selling, general and administrative ("SG&A") expenses 37.5 42.3 Advisory fees and settlement costs 4.2 13.6 Amortization expense 1.4 1.2 Restructuring activities and spin-off transaction costs 2.0 6.1 Research and development costs 1.3 0.7 Gain on asset disposals, net (0.9) - Adjusted gross profit (loss) 35.3 31.9
Adjusted gross profit by segment is as follows:
Three months ended March 31, 2020 2019 Adjusted gross profit (loss) (1) Babcock & Wilcox segment 32.9 31.1 Vølund & Other Renewable segment 1.5 (2.9) SPIG segment 0.9 3.7 Adjusted gross profit (loss) 35.3 31.9
(1) Amortization is not allocated to the segments' adjusted gross profit, but depreciation is allocated to the segments' adjusted gross profit. (2) Figures may not be clerically accurate due to rounding.
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