BASIS OF PRESENTATION

These interim Condensed Consolidated Financial Statements of Babcock & Wilcox Enterprises, Inc. (“B&W,” “management,” “we,” “us,” “our” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States and Securities and Exchange Commission ("SEC") instructions for interim financial information, and should be read in conjunction with our Annual Report. We have included all adjustments, in the opinion of management, consisting only of normal, recurring adjustments, necessary for a fair presentation of the interim financial statements. We have eliminated all intercompany transactions and accounts. We present the notes to our Condensed Consolidated Financial Statements on the basis of continuing operations, unless otherwise stated.

Going Concern Considerations

The accompanying Condensed Consolidated Financial Statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

As of December 31, 2019 and March 30, 2020, the date we issued our 2019 Consolidated Financial Statements, we were in compliance with the terms of the agreements governing our debt and no events of default existed. However, the Company’s uncertainty regarding liquidity and the ability to refinance our credit agreement by May 11, 2020 represented conditions and events that raised substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the 2019 Consolidated Financial Statements were issued, as we were not able to assert that it was probable that our plans when fully implemented would alleviate the events and conditions. However, more fully explained in Note 13 and Note 14 below, on May 14, 2020, among other things, the Company refinanced and extended the term of its revolving credit facility (the "U.S. Revolving Credit Facility") to June 30, 2022 and our last out term loans (the "Last Out Term Loans") to December 30, 2022. Additionally, as described below, the Company took other actions all of which reduced the substantial doubt of the Company’s ability to be considered a going concern.

Since January 1, 2020 and through the issuance of our 2019 Consolidated Financial Statements on March 30, 2020, we took the following actions, among others, and have successfully implemented, or are in the process of implementing the following:


•	entered into several amendments and waivers to avoid default and improve our liquidity under the terms of our credit agreement as described in Note 13 and Note 14, the most recent of which were Amendments No. 19, No. 20 and No. 21 dated January 17, 2020, January 31, 2020 and March 27, 2020, respectively;


•	on January 31, 2020, received $30.0 million of additional gross borrowings from B. Riley Financial, Inc. (together with its affiliates, "B. Riley") under a new Tranche A-4 of Last Out Term Loans, as described in in Note 14;


•	on January 31, 2020, received an incremental Tranche A-5 of Last Out Term Loan commitment to be used in the event certain customer letters of credit are drawn, as described in Note 14;


•	on March 12, 2020, filed for waiver of required minimum contributions to the U.S. Pension Plan as described in Note 12 and subsequently on October 1, 2020 received a letter from the Internal Revenue Service (the "IRS") that the 2019 waiver request had been approved subject to certain conditions; and


•	on March 17, 2020, we fully settled the remaining escrow associated with the sale of Palm Beach Resource Recovery Corporation ("PBRRC") and received $4.5 million in cash.

In addition to the actions taken above, subsequent to March 30, 2020 we have taken the following actions:


•	on April 6, 2020, we fully settled the remaining escrow associated with the sale of the MEGTEC and Universal businesses and received $3.5 million in cash;

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on May 14, 2020, the Company entered into an agreement amending and restating our credit agreement with Bank of America, N.A., as administrative agent (the "Administrative Agent") and lender, and the other lenders party thereto. These amendments to the credit agreement, as amended and restated (the “A&R Credit Agreement”), among other amendments, extend the maturity date on the U.S. Revolving Credit Facility to June 30, 2022 and the maturity date on the Last Out Term Loans to December 30, 2022. Under the A&R Credit Agreement, B. Riley has committed to provide the Company with up to $70.0 million of additional Last Out Term Loans. B. Riley has entered into a limited guaranty (the "B. Riley Guaranty") which provides for the guarantee of all of the Company's obligations with respect to the U.S. Revolving Credit Facility (other than with respect to letters of credit and contingent obligations thereunder), including the obligation to repay outstanding revolving credit loans and pay earned interest and fees. For more information regarding the A&R Credit Agreement and the additional Last Out Term Loans being provided by B. Riley, see Note 13 and Note 14;


•	on May 14, 2020, we received $30.0 million of additional gross borrowings from B. Riley under a new Tranche A- 6 of Last Out Term Loans, as described in Note 14;

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on October 10, 2020, we entered into a settlement agreement with an insurer in connection with five of the six European B&W Renewable EPC loss contracts. In connection with the insured losses recognized in prior years, we recognized this non-recurring loss recovery of $26.0 million as a reduction of our Cost of operations in our Condensed Consolidated Statements of Operations and recorded the insurance receivable in Accounts receivable - other in our Condensed Consolidated Balance Sheets for the quarter ending September 30, 2020 as we determined the loss recovery was probable. On October 23, 2020, we received gross proceeds of $26.0 million for the loss recovery recognized during the third quarter ending September 30, 2020, as described in Note 4; and

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on October 30, 2020, we entered into Amendment No. 1 to our Amended and Restated Credit Agreement (the “A&R Amendment No. 1”) with Bank of America, N.A. A&R Amendment No. 1, among other matters, (i) provides that, under the A&R Credit Agreement, the "Commitment Reduction Amount" shall be an amount equal to (a) for any "Prepayment Event" relating to a "Recovery Event" (each as defined under the A&R Credit Agreement), 50% of the net cash proceeds with respect to such Prepayment Event, and (b) with respect to any other Prepayment Event under the A&R Credit Agreement, the net cash proceeds with respect to such Prepayment Event, and (ii) establishes new financial covenants for (i) interest coverage ratios beginning with a ratio of 0.50:1.00 for the quarter ending December 31, 2020 and up to 1.25:1.00 for the quarter ending March 31, 2022 and the last day of each fiscal quarter ending thereafter and (ii) senior leverage ratios beginning with 7.75:1.00 for the quarter ending December 31, 2020 and down to 2.25:1.00 for the quarter ending March 31, 2022 and the last day of each fiscal quarter ending thereafter.

In December 2019, a novel strain of coronavirus, COVID-19, was identified in Wuhan, China and has subsequently spread globally. This global pandemic has disrupted business operations, trade, commerce, financial and credit markets, and daily life throughout the world. Our business has been, and continues to be, adversely impacted by the measures taken and restrictions imposed in the countries in which we operate and by local governments and others to control the spread of this virus. These measures and restrictions have varied widely and have been subject to significant changes from time to time depending on the changes in the severity of the virus in these countries and localities. These restrictions, including travel and curtailment of other activity, negatively impact our ability to conduct business. Although some of these restrictions have been lifted or scaled back, a recent resurgence of COVID-19 has resulted in the reimposition of certain restrictions and may lead to other restrictions being implemented in response to efforts to reduce the spread of the virus. These varying and changing events have caused many of the projects we anticipated to begin in 2020 to be delayed to later in 2020 and others to be delayed further into 2021 and 2022. Many customers and projects require B&W's employees to travel to customer and project worksites. Certain customers and significant projects are located in areas where travel restrictions have been imposed, certain customers have closed or reduced on-site activities, and timelines for completion of certain projects have, as noted above, been extended into next year and beyond. Additionally, out of concern for our employees, even where restrictions permit employees to return to our offices and worksites, we have advised those who are uncomfortable returning to worksites due to the pandemic that they are not required to do so for an indefinite period of time. The resulting uncertainty concerning, among other things, the spread and economic impact of the virus has also caused significant volatility and, at times, illiquidity in global equity and credit markets.

Beginning in April 2020, as part of the Company’s response to the impact of the COVID-19 pandemic on its business, the Company has taken a number of cash conservation and cost reduction measures which include:


•	temporary unpaid furloughs of certain employees:


•	temporarily deferring the monthly fee paid to BRPI Executive Consulting, LLC for the services of our Chief Executive Officer by 50%;


•	deferrals of the base salaries of our Chief Strategy Officer by 50%, Chief Financial Officer by 30% and our Senior Vice President of The Babcock & Wilcox Company by 30%;


•	suspension of our 401(k) company match for U.S. employees for the remainder of 2020;


•	approval by the Company’s Board for a temporary deferral of 50% of the cash compensation payable to non-employee directors under the Company’s board compensation program to be paid during the first quarter of 2021;


•	temporary rent payment deferrals related to leased facilities located in the U.S., Canada, Italy and Denmark;


•	utilizing options for government loans and programs in the U.S. and abroad that are appropriate and available; and

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deferring, in accordance with the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") signed into law in March 2020, the Pension Plan contribution payments of $5.5 million each for the 2020 Plan year that would have been made on April 15, 2020, July 15, 2020 and October 15, 2020, respectively. In addition, we elected to defer the contribution payments of $1.1 million for the 2018 Plan year and $23.7 million for the 2019 Plan year that were both due on September 15, 2020. Per the 2019 Plan year waiver received on October 1, 2020, the $23.7 million deferred for the 2019 Plan year will now be funded over the next five years.

Based upon the terms of the A&R Credit Agreement and the cash conservation and cost reduction measures taken to date, the Company is projecting sufficient liquidity to fund future operations and to meet its obligations as they become due for at least one year following the date that these Condensed Consolidated Financial Statements are issued. As a result, the Company has concluded that conditions and events, considered in the aggregate, no longer raise substantial doubt about the entity’s ability to continue as a going concern.