Babcock & Wilcox Enterprises (BW)

Chase Jacobson VP, IR
Leslie Kass President and CEO
Joel Mostrom Interim CFO
Pete Lukas CJS Securities
Call transcript
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My name is Tim, and I will be your conference operator today. At this time, I would like to welcome everyone to the Babcock & Wilcox Q2 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. of you President conference. begin Vice Jacobson, Investor may Relations, your Chase

Chase Jacobson

I'm President you, everyone. quarter Enterprises call. afternoon, and XXXX Jacobson, to conference Thank good Wilcox Welcome Tim, at Investor of Relations Babcock & earnings Chase B&W. Vice second

afternoon quarter this B&W's Kass, results. and Leslie Executive Officer, to President Chief Mostrom, Interim are Financial Chief discuss Officer; me Joining and Joel our second

of forth statements statements uncertainties, the at our in our Form call, certain can risks business. related we our our set are provide including to this be with annual and that These are make and that provision and XX-K During file forward-looking. to on the harbor and our Form earnings subject press XX-Q the risks those release statements about for report in detail safe will end forward-looking also SEC found on further be

Additionally, except any law, update by statement. undertake to obligation we no as required forward-looking

non-GAAP as quarter presentation afternoon, historical I'll the be our provide of reconciliation at With non-GAAP Relations website published babcock.com. in GAAP. also We Leslie. not the measures. the This substitute our and results to, as for, call information to GAAP to be accordance a first that, section turn results can information A Investor in our earnings comparable the in provided with or found should on certain our of measures over overview this release, forward Company of outlook our superior supplement considered historical well regarding as

Leslie Kass

afternoon, Chase. Good you, Thank everyone.

B&W's we afternoon, you helps with These remain serve financial we've the of to our core today. along taken a customers. which should in continue During markets. with financing on few continue customers I'll discuss our to provide our of us position a number us our projects to service quarter, arrangement and for adequate this the improve complete enhancing to and actions these announced and second the focus actions offerings strong flexibility, industrial power product liquidity and renewable actions to with end

early and Beach Universal businesses the an announced close achieve June, to weeks. Palm expected center and First, Covanta This $X.X to Resource for actions that maintenance sell million. additional million. sell to annual to we operations savings agreement we in Recovery in these $XX began agreement be our the will in an June, signed generate we today, Florida in savings to for approximately And of million. is transaction next Costs $XX cost to expected business $XXX our at few savings. are million Also implementing MEGTEC

We expect being to in million recognize XXXX. remainder the year of this recognized the $XX savings with

least we're our at process for additional a timing total are structure savings of targeted we to savings of the that evaluate in in fourth we expect cost will million continuing $XX part to implement strategic coming targeting million. complete As that and months, the our $XX of quarter

projects to finish profitability should and these Finally, by need for projects. announced the today, combination with of financing gives demonstrates the for once a business sufficient strength new provide are renewable renewable with our us underlying commitment support position us flexibility of that the arrangement that us providing liquidity items cash financing the and improved fully us we complete. flows, we The

the beam beam repairs. turned to and but quarter, When in have projects our that cost be required a to over continue the were units complete customers most that business the next the complete three to to vendor bids. updated plants months. in expected to were to updated work to towards progress three exposure estimates the nine repairs the on charges delay ensure based to [indiscernible] work came to pricing months the inside construction the the six released The was renewable for equipment the related remaining elements significant was during the and grid moving include and damage four We've estimated of operations and the are generated from be and significant structural projects increases already completion UK, recognized with period. will soon are the unit continuing the projects in In trial the to to Turning in be of four final startup trial be performance. disappointment to One power operations. has

customers. turned follow plants during two sides generate steel issue with the previous and than demonstrated have disclosure the units operational to the finishing in for select margin insurers aftermarket generally third this keeps customer the on guidance XXXX up projects. for which the similar QX is and period. was complete turnover in staffed, QX the are are in fewer bookings grid solid year in expected planned targets to power, challenged working of to on quarter, several expected to two recoveries previously the and and to scheduled with be In month both had year. suppliers, higher to our projects contract Consistent is customers, in construction performed compared half a customers operations. our The The should QX, and in over fully we're We these with in operations we stated warranty others first coming though well, fully lower trial projects. successful Both large Denmark beam close-outs due and seek of that gross with largely good and last the to quarter expense favorable bookings outage with power next others the plant our completing the is for track the weeks, [ph] be the XXXX. to One, and to its few should in contractual The achieve months. process underway turnover other project

XXXX. as technology more this had to EMEA selective it's its have of corvette turn improved economics results. the to with I'll growth. solid While performance With change to our that, on restructuring call currently a of worked the this to Joel and over in and projects strategy a the SPIG underway and and year, more pursue, charms projects aftermarket the business that on B&W financial refocus we expected drive approach backlog significant detail provide has our SPIG now in are quarter, activities continuing to recovery business new are in projects. this region, improved a challenging With Combination we

Joel Mostrom

Leslie. Thanks,

our Our was $XX.X due which compared second in quarter consolidated revenues in the year, were lower prior power line million, million X% mainly or revenue $XXX down the segment, to with expectations. generally to

there a of Company's and major primarily year. million our the quarter, continuing associated of results that several to charges to and loan revolving year, $XX.X early on of for of SPIG lien quarter out we I'd our loss, of contracts renewable this like also to related the impairment on energy interest of SPIG with noncash point discontinued borrowings intercompany $X.X our higher in EBITDA $XX.X compared during affecting the the level loss loss was million the related are to segment. complete our items loan the operating extinguishment Adjusted $XX.X are million reported unfavorable due debt, into to second-lien which in the reflecting second the the extinguishment costs business, renewable goodwill sale credit May business. Europe facilities impairment the second goodwill last a $XX.X the was intercompany million, quarter impairment impairment estimated for is renewable mainly GAAP million $XX.X a included the operations operations. a primarily aforementioned loans, For charge to loss a Interest currency quarter that a the increase loss on the in $XXX.X of loans, impact MEGTEC $XX.X to SPIG, including the the related goodwill segment Universal to a excludes foreign and the million expense million the and due related GAAP from loss on to currency or million in and

$XXX.X results. to X% Turning a segment, mainly business the steam lower the This to in to U.S. lower combustion result prior segment retrofit industrial anticipated was our well down revenue sales million projects million, systems. power on associated or residual XXXX, benefit with as due as In compared was cold contracts the $XX year. the fewer generation as our in in with regulations the which service revenue

X.X%, for year’s million to relate compared of costs quarter. ongoing in in we claim. mitigated XXXX. margin increases year the renewable $XX.X cost renewable a dispute segment, in energy the was expected as last revenue the expected receivable warranty on In Additionally, business. to that power the of third was projects. impacted beam $XX benefited Adjusted last has $XX in mentioned favorable the gross estimated million portion million, second a due actions performance. XX.X% gross steel the of insurance anticipate the previously of power due Nevertheless, and greater Power mainly contracts Europe. are increased and restart costs were current we continue XX.X% warranty commissioning to down the the quarter, year increase and The margin other of coverage related was additional during projects costs on segment XX.X%, period, announced the year-over-year reserve with sale other contract site largest from KVB-Enertec. our business, to the in costs at in monitoring reduction than emissions an by Power’s work of was EBITDA in remainder established to previously XXXX. which booked of The in EBITDA items a to expenses, with roughly adversely by management costs to book comparisons the the Also provider close-outs margin expense benefit the $XX to quarter insurance estimated of loss last costs million in failure the certain employee XX% the

dispute for under and the the recovery merit and to intend policy full have aggressively believe we filed So, without pursue arbitration. is

increase in announced the segment, Because $X.X business, As in the SPIG now goodwill the on we cooling and previously our to to undergoing related business new this subject business, regulatory and estimated an seek legacy a Dürr resulting claims projects flat losses are million quarter. other loss ongoing $XX.X from in was relief $XXX weeks. decline with remaining coming compared expect matter. essentially million, of mainly losses build the our industrial million new in $XX the to as SPIG offset mentioned, pursuing close the segment to agreement transaction will impaired the currently is litigation and charge for The expenses we Universal forecast, in million a adjustments. we its in signed legal of for in to businesses from a that consists due customers year AG sell our impact MEGTEC and EBITDA was Adjusted are to We’ve we Leslie parties. an working related to reviews, our by and where services. system to Revenue potential with systems available also build in aftermarket last was costs complete increases which

Asian Additionally, Selling venture our our as large in and away retrofit we first market joint the our $XX.X our results, opportunities in sold Chinese B&W million, which investment followed with shift our more well ventures consistent strategy our to new earlier monetize sale coal opportunities non-core the quarter towards in year. joint indicated as TBWES, aftermarket for JV Indian power and in fired interest the as is of from international build the assets.

U.S. to our completion cash. cash new was to spending Total million restricted toward due liquidity. ended at flow, the credit We build net cash quarter related facilities June flow were international renewable quarter balances the and million. and related the to operations of of XX in activity and cash $XX $XXX balance equivalents with use our projects. million, a our Turning Free mainly of $XX.X under the continuing sheet to revolving working

from and to the business Palm use the net proceeds to balances. West expect reduce Universal the MEGTEC sales and We these of

few to the Leslie the mentioned the amended relative continue portion to is mentioned, that to the a result of our to new which a the that the incremental amendment be concessions Company million Vintage least The West includes company achieve of lost Last provider a to provision our liquidity the revolving customers today, of facility syndicate informed the the of and Capital must and liquidity bank, in of of Company. commitment, will key credit from requirement reset the we the covenants. at Company that commitment with of also financial also proceeds. subject or A will loan for Company $XX of provide include million the -- by the allows Riley from they retain and reduction that up $XX the receiving to a million covenant that Company to generate Out incremental As elements first-lien Company the consent sale minimum XXth contract renewable FBR, access certain facility Beach they $XX credit incremental prior commitment effectively a all to our intend it terms will benefits backstopped of provides September Inc. in $XX to the net proceeds, agent that B. Palm million liquidity cash our

based is divestitures, XXXX the Finally, the withdrawing asset its no announced strategic I on and guidance number actions guidance. financial a business, Company's review previously of of to overall now the turn recently strategic previous the back relevant stated Company's the longer will Leslie. call and

Leslie Kass

our to the long to backlog, few million, million, driving are strategic flow taken Company work for customers services, our In several near renewable serve asset the activities continuing implemented completion. cost our Chief quality the cutting on are and markets with the entire streamline to approximately fully months of identified and and We've the we’re improve business and for the Joel. sales of B&W last core to future. Thanks, with high focused working expected Implementation when position to engineered review in is power project Officer $XXX actions the industrial and target in our and equipment our complete term. term, cash $XX profitability that with of executing our and We've

quarter, progress to renewable on efforts it was improve challenging made cost delivering focused customers line. a for and projects, bottom we control our remained While to on drive continued our the

by range next $XXX EBITDA that's continue business power million our our to work XXXX. improvements see of business targeting in the to expect across in we'll led generation strengthen to And the We year, board. core

to with of out help the On his our this and remarks like also your us who taking close of I team, call with note to us. prepared for With to is support leadership his work dedication. questions. We professionalism I'll call improve Chase our over must appreciate As excellent Tim, and today, B&W. I admire turn will his communications the assist during that, Jacobson's that our I'd behalf time investors thank Chase and back last in


Thank you. Securities. with CJS of from comes [Operator Bob Instructions] Your question line the Labick first

Your line open. is

Pete Lukas

for EBITDA. afternoon. goal It's In you mentioned Lukas prepared XXXX Good power Bob. remarks, adjusted $XXX your Pete Hi. of for million

Just would contribution. related wondering that pension of how much be to

Joel Mostrom

$XX Approximately million.

Pete Lukas

Thanks. that power, Great. come power, from sticking and fold it the SPIG that? into is then, are their still savings And with expectation can to

Leslie Kass

part complete good options But good we're here So, that that is certainly fit one for overall couple of our nicely. in technology of blends strategic the next the in with we’ll review as power looking the customers and that at of overlap the a in months. is SPIG definitely

Pete Lukas

And that to sticking far margins? gross to on operations as as update Any with get mid-teens SPIG. back timing then,

Leslie Kass


performance. next latter to projects still this stronger trouble we working we're backlog, much results that. trending So, that were it’s expect really down in And see improved half the of having into a year, year,

Pete Lukas

of on there. finishing But the any on the you’ve Thanks. Great. -- a expectations far just renewables, ones cash the And projects? up remaining sorry, burn -- timing expect quick out as as couple laid on projects

Joel Mostrom

said now a we earlier basis. providing a where we’re not as going guidance be that in type to position Bob, we're on forward-looking of really


Thank you. at there now And time. no remarks. [Operator Instructions] closing like Jacobson this turn further for Chase the questions call are over to to I’d

Chase Jacobson

look limited a joining later available Thanks, concludes to with replay many Tim. coming A forward Thanks. and you today. And the everybody, That today, the up time the for call. conference will website our weeks. for of be call in thanks, following on I


today's concludes conference call. This

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