Babcock Wilcox Enterprises Inc

Liquidity

Our primary liquidity requirements include debt service, funding of dividends on preferred stock and working capital needs. We fund our liquidity requirements primarily through cash generated from operations, external sources of financing, including the Credit Agreement and Senior Notes, and equity offerings, including the Sales Agreement (as defined below) and our Preferred Stock, each of which are described in the Notes to Condensed Consolidated Financial Statements included in Part I, Item I of this Quarterly Report in further detail.

On April 10, 2024, we entered into a sales agreement (the "Sales Agreement") with B. Riley Securities, Inc., Seaport Global Securities LLC, Craig-Hallum Capital Group LLC and Lake Street Capital Markets, LLC (together, the "Agents"), in connection with the offer and sale from time to time of shares of our common stock, having an aggregate offering price of up to $50.0 million, through the Agents. As of September 30, 2024, 2.4 million shares have been sold pursuant to the Sales Agreement. Refer to Note 15 to the Condensed Consolidated Financial Statements for additional discussion of the Sales Agreement.

We have historically incurred losses from operations, primarily due to losses recognized on our B&W Solar business as well as higher debt service costs and recurring cash deficits from operating activities. Our assessment of our ability to fund future operations is inherently subjective, judgment-based and susceptible to change based on future events. Currently, with existing cash on hand and available liquidity, we are projecting insufficient liquidity to fund operations through one year from the date this Quarterly Report is issued. These conditions and events raise substantial doubt about our ability to continue as a going concern. As described below, it is probable that our alternative measures contemplated alleviate the substantial doubt about our ability to continue as a going concern.

In response to the conditions, we are implementing several strategies to obtain the required funding for future operations and are considering other alternative measures to improve cash flow, including suspension of the dividend on our Preferred Stock and delaying development of new products, which together we expect would reduce our annual cash spending by approximately $25 million. The following actions were completed through the issuance date of this Quarterly Report:

•sold our B&W Renewable Service A/S business for net proceeds of $83.5 million on June 28, 2024 (described in Note 3 to the Condensed Consolidated Financial Statements);

•sold our SPIG and GMAB businesses for net proceeds of $33.7 million on October 30, 2024 (described in Note 23 to the Condensed Consolidated Financial Statements);

•completed the sale of a non-core facility for net proceeds of $4.2 million;

•sold 4.3 million common shares pursuant to our At-The-Market Offering (described in Note 15 and Note 23 to the Condensed Consolidated Financial Statements) for net proceeds of $6.7 million;

•negotiated the settlement of a liability to the former owner of B&W Solar at a discount, resulting in future cash savings of $7.2 million;

•received a $6.8 million insurance recovery pursuant to our Representations and Warranties Policy in connection with our purchase of B&W Solar (discussed further in Note 4 to the Condensed Consolidated Financial Statements); and,

•initiated a company-wide cost savings plan with targeted annual savings of $31.5 million, $26.5 million of which has been achieved to date.

•We were granted a preliminary waiver of required minimum contributions to the Retirement Plan for Employees of Babcock & Wilcox Commercial Operations (the "U.S. Plan") by the PBGC, which if approved, is expected to reduce cash funding requirements in 2024 and increase contributions annually over the subsequent 5-year period (described in Note 13 to the Condensed Consolidated Financial Statements).

Based on our ability to raise funds through the actions noted above and our Cash and cash equivalents as of September 30, 2024, we have concluded it is probable that such actions would provide sufficient liquidity to fund operations for the next twelve months following the date of this Quarterly Report.

Cash and Cash Flows

At September 30, 2024, our cash and cash equivalents, current restricted cash and long-term restricted cash totaled $127.9 million and we had total debt of $475.4 million as well as $191.7 million of gross preferred stock outstanding. Our foreign business locations held $21.6 million of our total unrestricted cash and cash equivalents at September 30, 2024. 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 have not made a provision for in our results of operations. We have no plans to repatriate these funds to the U.S. Included in our total cash amount is $97.3 million of restricted cash at September 30, 2024, which is primarily related to collateral for certain letters of credit. We believe our future cash flows will be sufficient to cover debt repayments, other contractual obligations, capital expenditures and dividends for the next 12 months.

Cash used in operations was $96.3 million in the nine months ended September 30, 2024, which is primarily attributable to the year-to-date net income of $3.2 million, offset by the gain on sale of BWRS of $40.1 million and changes in working capital. Cash used in operations was $50.5 million in the nine months ended September 30, 2023, which was primarily attributable to a net loss of $134.2 million, offset by non-cash expenses for depreciation and amortization of long-lived assets of $16.5 million and goodwill impairment of $56.6 million.

Cash provided by investing activities was $78.0 million in the nine months ended September 30, 2024, primarily due to proceeds from the sale of BWRS business, offset by purchases of fixed assets. Cash used in investing activities were $8.6 million in the nine months ended September 30, 2023, primarily related to capital expenditures.

Cash provided by financing activities of $70.8 million in the nine months ended September 30, 2024, primarily related to the increased borrowing on loans of $93.7 million, partially offset by preferred stock dividend payments of $14.9 million and costs associated with the new Axos Credit Agreement. Cash provided by financing activities was $11.9 million in the nine months ended September 30, 2023 and was primarily related to the increased borrowing on loans of $24.6 million, partially offset by preferred stock dividend payments of $7.4 million.

Debt Facilities

As discussed in Note 14 to the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report, we entered into a new Credit Agreement with Axos in January 2024. B. Riley, a related party, has provided a guaranty of payment with regard to our obligations under the Credit Agreement. This agreement substantially replaces the existing Reimbursement Agreement, Revolving Credit Agreement and Letter of Credit Agreement. We completed the transition of letters of credit outstanding under the Letter of Credit Agreement and Reimbursement Agreement to the Credit Agreement in August 2024.

On April 30, 2024, we, along with certain subsidiaries as guarantors, the lenders party to the Credit Agreement , and Axos, as administrative agent, entered into the First Amendment to Credit Agreement (the “First Amendment”). The First Amendment, among other things, amends the terms of the Credit Agreement to increase the amounts available to be borrowed based on inventory in the borrowing base under the Credit Agreement (the "Increased Inventory Period"). In 2024, the Increased Inventory Period commences on April 30 and ends on July 31 and would provide approximately $6.0 million additional available borrowings under the Credit Agreement. The Increased Inventory Period is available to us upon our election in subsequent years (subject to a $75,000 fee if we make such an election), and commences on March 1 and ends on July 31.

On July 3, 2024, we, with certain of our subsidiaries as guarantors, the lenders party to the Credit Agreement, and Axos, as administrative agent, entered into the Second Amendment. Pursuant to the Second Amendment, Axos and the Lenders party to the Credit Agreement consented to the Company’s engagement in the Specified Transactions, and agreed that the consummation of any Specified Transaction would not result in an event of default under the Credit Agreement. As a condition to the forgoing consent and agreements, the Company agreed to apply the net cash proceeds of all three occurrences of the Specified Transactions in the following order, irrespective of the order of consummation of the Specified Transactions: (i) to the repayment of revolving loans under the Credit Agreement, in an aggregate amount equal to $10.0 million (the “Specified Revolver Paydown”); (ii) to the repayment of liabilities in respect of the certain pension plans of the Company and its subsidiaries, in an aggregate amount equal to $15.0 million; (iii) to the repayment of letter of credit borrowings or advances, or if no such amounts are outstanding, to the cash collateralization of existing letter of credit obligations, in an aggregate amount equal to $10.0 million; (iv) to PNC in an amount not exceeding $1.6 million in connection with the repayment and/or cash collateralization of certain existing facilities; (v) to the repayment of revolving loans under the Credit Agreement, in an aggregate amount equal to $54.0 million (which amounts may be reborrowed in whole or in part to the extent permitted under the Credit Agreement at such time and may be used for purposes permitted under the Credit Agreement, including for working capital needs); (vi) to the repayment of the Senior Notes due 2026 or any additional unsecured senior notes issued under the Company’s unsecured notes indenture, in an aggregate amount equal to $193.0 million; and (vii) the remainder to be retained by the Company to finance working capital, capital expenditures and acquisitions and for general corporate purposes (including the payment of fees and expenses).

The Second Amendment further amended the Credit Agreement by sunsetting the option to increase the amounts available to be borrowed based on inventory in the borrowing base under the Credit Agreement following the Specified Revolver Paydown, and extended the maturity date under the agreement from August 30, 2025 to October 31, 2025 in the event that the Indebtedness under any of the Company’s unsecured notes has not been refinanced pursuant to a permitted refinancing under the agreement. The maturity date of the Credit Agreement otherwise remains January 18, 2027.

On August 7, 2024, we, with certain of our subsidiaries as guarantors, the lenders party to the Credit Agreement, and Axos, as administrative agent, entered into the Third Amendment to Credit Agreement ("Third Amendment"). The Third Amendment amended the definition of Consolidated Adjusted EBITDA to (i) exclude certain costs incurred in connection with the settlement of the Glatfelter Litigation; and (ii) add back certain contributions currently required to be made by us or our Subsidiaries to the U.S. Plan, up to an aggregate maximum of $15.0 million.

On November 8, 2024, we, with certain of our subsidiaries as guarantors, the lenders party to the Credit Agreement and Axos, as administrative agent, entered into the Fourth Amendment. The Fourth Amendment, among other things: (i) extends the maturity date from October 31, 2025 to November 28, 2025 in the event that the Indebtedness under any of the Company's unsecured notes has not been refinanced pursuant to a permitted refinancing under the agreement (the maturity date otherwise remains January 28, 2027); (ii) increases the minimum availability amount from $2.0 million to $5.0 million following the earlier of (a) the receipt by the lenders of any cash proceeds from the SPIG/GMAB disposition or (b) November 15, 2024; (iii) amends the definition of Cash Dominion Event to mean a continuing event of default or failure of the Company to maintain availability of the lesser of (x) the minimum availability amount and (y) 15% of the loan cap (previously $7.5 million or 15% of the loan cap); (iv) amends the definition of Consolidated Adjusted EBITDA to add back certain recoveries from a representations and warranties insurance policy claim related to B&W Solar, up to $6.8 million; and (v) provides that the Letter of Credit sublimit shall be reduced on a dollar-for-dollar basis with any Specified L/C Paydown made pursuant to the Second Amendment.

Usage under the Credit Agreement consisted of $22.5 million of financial letters of credit and $59.9 million of performance letters of credit at September 30, 2024.

Letters of Credit, Bank Guarantees and Surety Bonds

Certain of our subsidiaries, that are primarily outside of the United States, have credit arrangements with various commercial banks and other financial institutions for the issuance of letters of credit and bank guarantees in association with contracting activity. The aggregate value of all such letters of credit and bank guarantees outside of our Credit Agreement as of September 30, 2024 was $34.5 million. The aggregate value of the outstanding letters of credit provided under the Credit Agreement backstopping letters of credit or bank guarantees was $14.0 million as of September 30, 2024. Of the outstanding letters of credit issued under the Credit Agreement, $39.9 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 our applicable contracts. We, and certain of our subsidiaries, have jointly executed general agreements of indemnity in favor of surety underwriters relating to surety bonds the underwriters issue in support of some of our contracting activity. As of September 30, 2024, bonds issued and outstanding under these arrangements in support of contracts totaled approximately $179.9 million. The aggregate value of the letters of credit backstopping surety bonds was $13.2 million.

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

Other Indebtedness - Loans Payable

As of September 30, 2024, we had loans payable of $135.7 million, net of debt issuance costs of $0.5 million, of which $3.0 million is classified as current, and $132.7 million as long-term loans payable on the Condensed Consolidated Balance Sheet. This includes $124.2 million drawn on the Credit Agreement, which is comprised of $30.5 million drawn on the revolving credit portion of the facility and $93.7 million drawn on the letter of credit portion, and $11.5 million, net of debt issuance costs of $0.5 million, related to sale-leaseback financing transactions.