ACQUISITIONS, ASSETS HELD FOR SALE, DIVESTITURES AND DISCONTINUED OPERATIONS

12 Months Ended

Dec. 31, 2021

Discontinued Operations and Disposal Groups [Abstract]

ACQUISITIONS, ASSETS HELD FOR SALE, DIVESTITURES AND DISCONTINUED OPERATIONS

ACQUISITIONS, ASSETS HELD FOR SALE, DIVESTITURES AND DISCONTINUED OPERATIONSAcquisitions

Fosler Construction

On September 30, 2021, we acquired a 60% controlling ownership stake in Illinois-based solar energy contractor Fosler Construction Company Inc. (“Fosler Construction”). Fosler Construction provides commercial, industrial and utility-scale solar services and owns two community solar projects in Illinois being developed under the Illinois Solar for All program. Fosler Construction was founded in 1998 and employs approximately 120 people with a track record of successfully completing solar projects profitably with union labor and aligning its model with a growing number of renewable project incentives in the U.S. We believe Fosler Construction is positioned to capitalize on the high-growth solar market in the U.S. and that the acquisition aligns with B&W’s aggressive growth and expansion of our clean and renewable energy businesses. Fosler Construction is reported as part of our B&W Renewable segment, and will operate under the name Fosler Solar, a Babcock and Wilcox company.

The total fair value of consideration for the acquisition is $36.0 millions, including $27.2 million in cash plus $8.8 million in estimated fair value of the contingent consideration arrangement. In connection with the acquisition, the Company agreed to pay contingent consideration based on the achievement of targeted revenue thresholds for the year ended December 31, 2022. The range of undiscounted amounts the Company could be required to pay under the contingent consideration arrangement is between $0.0 million and $10.0 million.

We estimated fair values primarily using the discounted cash flow method at September 30, 2021 for the preliminary allocation of consideration to the assets acquired and liabilities assumed. During the measurement period, we will continue to obtain information to assist in finalizing the fair value of assets acquired and liabilities assumed, which may differ materially from these preliminary estimates. If we determine any measurement period adjustments are material, we will apply those adjustments, including any related impacts to net income, in the reporting period in which the adjustments are determined.

VODA

On November 30, 2021, we acquired 100% ownership of VODA A/S (“VODA”) through our wholly-owned subsidiary, B&W PGG Luxembourg Finance SARL, for approximately $32.9 million. VODA is a Denmark-based multi-brand aftermarket parts and services provider, focusing on energy-producing incineration plants including waste-to-energy, biomass-to-energy or other fuels, providing service, engineering services, spare parts as well as general outage support and management. VODA has extensive experience in incineration technology, boiler and pressure parts, SRO, automation, and performance optimization. VODA employs approximately 65 people mainly in Denmark and Sweden. We believe VODA will solidify our platform for our renewable service business in Europe and that the acquisition aligns with B&W’s aggressive growth and expansion of our clean and renewable energy businesses. VODA is reported as part of our B&W Renewable segment. We plan to form B&W Renewable Services to integrate VODA and our waste-to-energy and biomass aftermarket services businesses.

The provisional measurements noted in the table below are preliminary and subject to modification in the future. The preliminary purchase price allocation to assets acquired and liabilities assumed in the acquisitions were:

	Purchase Price Allocation at September 30, 2021		Purchase Price Allocation Adjustments since September 30, 2021 (3)		Purchase Price Allocation at December 31, 2021		Purchase Price Allocation at December 31, 2021
(in thousands)	Fosler Construction						VODA
Cash	$	—	$	—	$	—	$	4,737
Accounts receivable	1,904		121		2,025		5,654
Contracts in progress	1,363		(158)		1,205		258
Other current assets	1,137		(835)		302		825
Property, plant and equipment	9,527		(14)		9,513		253
Goodwill(1)	43,230		8,749		51,979		17,176
Other assets	17,497		(4,600)		12,897		14,321
Right of use assets	1,093		—		1,093		433
Debt	(7,625)		—		(7,625)		—
Current liabilities	(5,073)		(390)		(5,463)		(5,181)
Advance billings on contracts	(1,557)		238		(1,319)		(2,036)
Non-current lease liabilities	(1,730)		—		(1,730)		(302)
Other non-current liabilities	(4,112)		1,218		(2,894)		(3,264)
Non-controlling interest(2)	(22,262)		(1,734)		(23,996)		—
Net acquisition cost	$	33,392	$	2,595	$	35,987	$	32,874

(1) Goodwill is calculated as the excess of the purchase price over the net assets acquired. With respect to the Fosler Construction acquisition, goodwill represents Fosler's ability to significantly expand EPC and O&M services among new customers across the U.S. by leveraging B&W's access to capital and geographic reach. With respect to the VODA acquisition, goodwill represents VODA's ability to significantly expand within the aftermarket parts and services industries by leveraging B&W's access to capital and existing platform within the renewable service market. Goodwill is not expected to be deductible for U.S federal income tax purposes.

(2) The fair value of the non-controlling interest was derived based on the fair value of the 60% controlling interest acquired by B&W. The transaction price paid by B&W reflects a Level 2 input involving an observable transaction involving an ownership interest in Fosler Construction. Also, as described above, a portion of the purchase consideration relates to the contingent consideration.

(3) Our preliminary purchase price allocation changed due to additional information and further analysis.

Intangible assets are included in other assets above and consists of the following:

	Fosler Construction			VODA
(in thousands)	Estimated Acquisition Date Fair Value		Weighted Average Estimated Useful Life	Estimated Acquisition Date Fair Value		Weighted Average Estimated Useful Life
Customer Relationships	9,400		12 years	13,855		11 years
Tradename	—		—	228		3 years
Backlog	3,100		5 months	—		—
Total intangible assets(1)	$	12,500		$	14,083

(1) Intangible assets were valued using the income approach, which includes significant assumptions around future revenue growth, profitability, discount rates and customer attrition. Such assumptions are classified as level 3 inputs within the fair value hierarchy.

The Company incurred approximately $0.7 million and $0.4 million of costs related to the acquisitions of VODA and Fosler Construction, respectively, which were recorded as a component of our operating expenses in our Consolidated Statement of Operations for 2021.

Acquisitions - Subsequent Event

On February 1, 2022, we acquired 100% ownership of Fossil Power Systems, Inc, (“FPS”) for approximately $59.1 million, excluding working capital adjustments. FPS is a leading designer and manufacturer of hydrogen, natural gas and renewable pulp and paper combustion equipment including ignitors, plant controls and safety systems based in Dartmouth, Nova Scotia, Canada.

On February 28, 2022, we acquired 100% ownership of Optimus Industries, LLC for approximately $19 million, excluding working capital adjustments. Optimus designs and manufactures waste heat recovery products for use in power generation, petrochemical, and process industries , including package boilers, watertube and firetube waste heat boilers, economizers, superheaters, waste heat recovery equipment and sulfuric acid plants and is based in Tulsa, Oklahoma and Chanute, Kansas. Optimus Industries, LLC will be reported as part of our B&W Thermal segment.

Assets Held for Sale

Certain real property assets for the Copley, Ohio location were sold on March 15, 2021 for $4.0 million. We received $3.3 million of net proceeds after adjustments and recognized a gain on sale of $1.9 million. In conjunction with the sale, we executed a leaseback agreement commencing March 16, 2021 and expiring on March 31, 2033. These assets were treated as assets held for sale on our Consolidated Balance Sheets as of December 31, 2020.

Certain real property assets for the Lancaster, Ohio location were sold on August 13, 2021 for $18.9 million. We received $15.8 million of net proceeds after adjustments and expenses and recognized a gain on sale of $13.9 million. In conjunction with the sale, we executed a leaseback agreement commencing August 13, 2021 and expiring on August 31, 2041. These assets were treated as assets held for sale on our Consolidated Balance Sheets as of December 31, 2020.

In December 2019, we determined that a small business within the B&W Thermal segment met the criteria to be classified as held for sale. At December 31, 2020, the carrying value of the net assets planned to be sold approximated the estimated fair value less costs to sell. Refer to Divestitures below as this sale closed March 5, 2021.

The following table summarizes the carrying value of the assets and liabilities held for sale at December 31, 2020:

(in thousands)	December 31, 2020
Accounts receivable – trade, net	$	2,103
Accounts receivable – other	86
Contracts in progress	458
Inventories	1,676
Other current assets	405
Current assets held for sale	4,728
Net property, plant and equipment	10,365
Intangible assets	759
Right-of-use-asset	32
Non-current assets held for sale	11,156
Total assets held for sale	$	15,884
Accounts payable	$	5,211
Accrued employee benefits	178
Advance billings on contracts	370
Accrued warranty expense	466
Operating lease liabilities	32
Other accrued liabilities	2,048
Current liabilities held for sale	8,305
Total liabilities held for sale	$	8,305

Divestitures

Effective March 5, 2021, we sold all of the issued and outstanding capital stock of Diamond Power Machine (Hubei) Co., Inc, for $2.8 million. We received $2.0 million in gross proceeds before expenses and recorded an $0.8 million favorable contract asset for the amortization period from March 8, 2021 through December 31, 2023. For the twelve months ended December 31, 2021, we recognized a $1.8 million pre-tax loss, inclusive of the recognition of $4.5 million of currency translation adjustment, on the sale of the business and after consideration of certain working capital adjustments that are in dispute. Additional adjustments may be necessary as this is finalized.

On March 17, 2020, we fully settled the remaining escrow associated with the sale of PBRRC and received $4.5 million in cash.

Discontinued Operations

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.

ACQUISITIONS, ASSETS HELD FOR SALE, DIVESTITURES AND DISCONTINUED OPERATIONS

ACQUISITIONS, ASSETS HELD FOR SALE, DIVESTITURES AND DISCONTINUED OPERATIONSAcquisitions

Fosler Construction

On September 30, 2021, we acquired a 60% controlling ownership stake in Illinois-based solar energy contractor Fosler Construction Company Inc. (“Fosler Construction”). Fosler Construction provides commercial, industrial and utility-scale solar services and owns two community solar projects in Illinois being developed under the Illinois Solar for All program. Fosler Construction was founded in 1998 and employs approximately 120 people with a track record of successfully completing solar projects profitably with union labor and aligning its model with a growing number of renewable project incentives in the U.S. We believe Fosler Construction is positioned to capitalize on the high-growth solar market in the U.S. and that the acquisition aligns with B&W’s aggressive growth and expansion of our clean and renewable energy businesses. Fosler Construction is reported as part of our B&W Renewable segment, and will operate under the name Fosler Solar, a Babcock and Wilcox company.

The total fair value of consideration for the acquisition is $36.0 millions, including $27.2 million in cash plus $8.8 million in estimated fair value of the contingent consideration arrangement. In connection with the acquisition, the Company agreed to pay contingent consideration based on the achievement of targeted revenue thresholds for the year ended December 31, 2022. The range of undiscounted amounts the Company could be required to pay under the contingent consideration arrangement is between $0.0 million and $10.0 million.

We estimated fair values primarily using the discounted cash flow method at September 30, 2021 for the preliminary allocation of consideration to the assets acquired and liabilities assumed. During the measurement period, we will continue to obtain information to assist in finalizing the fair value of assets acquired and liabilities assumed, which may differ materially from these preliminary estimates. If we determine any measurement period adjustments are material, we will apply those adjustments, including any related impacts to net income, in the reporting period in which the adjustments are determined.

VODA

On November 30, 2021, we acquired 100% ownership of VODA A/S (“VODA”) through our wholly-owned subsidiary, B&W PGG Luxembourg Finance SARL, for approximately $32.9 million. VODA is a Denmark-based multi-brand aftermarket parts and services provider, focusing on energy-producing incineration plants including waste-to-energy, biomass-to-energy or other fuels, providing service, engineering services, spare parts as well as general outage support and management. VODA has extensive experience in incineration technology, boiler and pressure parts, SRO, automation, and performance optimization. VODA employs approximately 65 people mainly in Denmark and Sweden. We believe VODA will solidify our platform for our renewable service business in Europe and that the acquisition aligns with B&W’s aggressive growth and expansion of our clean and renewable energy businesses. VODA is reported as part of our B&W Renewable segment. We plan to form B&W Renewable Services to integrate VODA and our waste-to-energy and biomass aftermarket services businesses.

The provisional measurements noted in the table below are preliminary and subject to modification in the future. The preliminary purchase price allocation to assets acquired and liabilities assumed in the acquisitions were:

	Purchase Price Allocation at September 30, 2021		Purchase Price Allocation Adjustments since September 30, 2021 (3)		Purchase Price Allocation at December 31, 2021		Purchase Price Allocation at December 31, 2021
(in thousands)	Fosler Construction						VODA
Cash	$	—	$	—	$	—	$	4,737
Accounts receivable	1,904		121		2,025		5,654
Contracts in progress	1,363		(158)		1,205		258
Other current assets	1,137		(835)		302		825
Property, plant and equipment	9,527		(14)		9,513		253
Goodwill(1)	43,230		8,749		51,979		17,176
Other assets	17,497		(4,600)		12,897		14,321
Right of use assets	1,093		—		1,093		433
Debt	(7,625)		—		(7,625)		—
Current liabilities	(5,073)		(390)		(5,463)		(5,181)
Advance billings on contracts	(1,557)		238		(1,319)		(2,036)
Non-current lease liabilities	(1,730)		—		(1,730)		(302)
Other non-current liabilities	(4,112)		1,218		(2,894)		(3,264)
Non-controlling interest(2)	(22,262)		(1,734)		(23,996)		—
Net acquisition cost	$	33,392	$	2,595	$	35,987	$	32,874

(1) Goodwill is calculated as the excess of the purchase price over the net assets acquired. With respect to the Fosler Construction acquisition, goodwill represents Fosler's ability to significantly expand EPC and O&M services among new customers across the U.S. by leveraging B&W's access to capital and geographic reach. With respect to the VODA acquisition, goodwill represents VODA's ability to significantly expand within the aftermarket parts and services industries by leveraging B&W's access to capital and existing platform within the renewable service market. Goodwill is not expected to be deductible for U.S federal income tax purposes.

(2) The fair value of the non-controlling interest was derived based on the fair value of the 60% controlling interest acquired by B&W. The transaction price paid by B&W reflects a Level 2 input involving an observable transaction involving an ownership interest in Fosler Construction. Also, as described above, a portion of the purchase consideration relates to the contingent consideration.

(3) Our preliminary purchase price allocation changed due to additional information and further analysis.

Intangible assets are included in other assets above and consists of the following:

	Fosler Construction			VODA
(in thousands)	Estimated Acquisition Date Fair Value		Weighted Average Estimated Useful Life	Estimated Acquisition Date Fair Value		Weighted Average Estimated Useful Life
Customer Relationships	9,400		12 years	13,855		11 years
Tradename	—		—	228		3 years
Backlog	3,100		5 months	—		—
Total intangible assets(1)	$	12,500		$	14,083

(1) Intangible assets were valued using the income approach, which includes significant assumptions around future revenue growth, profitability, discount rates and customer attrition. Such assumptions are classified as level 3 inputs within the fair value hierarchy.

The Company incurred approximately $0.7 million and $0.4 million of costs related to the acquisitions of VODA and Fosler Construction, respectively, which were recorded as a component of our operating expenses in our Consolidated Statement of Operations for 2021.

Acquisitions - Subsequent Event

On February 1, 2022, we acquired 100% ownership of Fossil Power Systems, Inc, (“FPS”) for approximately $59.1 million, excluding working capital adjustments. FPS is a leading designer and manufacturer of hydrogen, natural gas and renewable pulp and paper combustion equipment including ignitors, plant controls and safety systems based in Dartmouth, Nova Scotia, Canada.

On February 28, 2022, we acquired 100% ownership of Optimus Industries, LLC for approximately $19 million, excluding working capital adjustments. Optimus designs and manufactures waste heat recovery products for use in power generation, petrochemical, and process industries , including package boilers, watertube and firetube waste heat boilers, economizers, superheaters, waste heat recovery equipment and sulfuric acid plants and is based in Tulsa, Oklahoma and Chanute, Kansas. Optimus Industries, LLC will be reported as part of our B&W Thermal segment.

Assets Held for Sale

Certain real property assets for the Copley, Ohio location were sold on March 15, 2021 for $4.0 million. We received $3.3 million of net proceeds after adjustments and recognized a gain on sale of $1.9 million. In conjunction with the sale, we executed a leaseback agreement commencing March 16, 2021 and expiring on March 31, 2033. These assets were treated as assets held for sale on our Consolidated Balance Sheets as of December 31, 2020.

Certain real property assets for the Lancaster, Ohio location were sold on August 13, 2021 for $18.9 million. We received $15.8 million of net proceeds after adjustments and expenses and recognized a gain on sale of $13.9 million. In conjunction with the sale, we executed a leaseback agreement commencing August 13, 2021 and expiring on August 31, 2041. These assets were treated as assets held for sale on our Consolidated Balance Sheets as of December 31, 2020.

In December 2019, we determined that a small business within the B&W Thermal segment met the criteria to be classified as held for sale. At December 31, 2020, the carrying value of the net assets planned to be sold approximated the estimated fair value less costs to sell. Refer to Divestitures below as this sale closed March 5, 2021.

The following table summarizes the carrying value of the assets and liabilities held for sale at December 31, 2020:

(in thousands)	December 31, 2020
Accounts receivable – trade, net	$	2,103
Accounts receivable – other	86
Contracts in progress	458
Inventories	1,676
Other current assets	405
Current assets held for sale	4,728
Net property, plant and equipment	10,365
Intangible assets	759
Right-of-use-asset	32
Non-current assets held for sale	11,156
Total assets held for sale	$	15,884
Accounts payable	$	5,211
Accrued employee benefits	178
Advance billings on contracts	370
Accrued warranty expense	466
Operating lease liabilities	32
Other accrued liabilities	2,048
Current liabilities held for sale	8,305
Total liabilities held for sale	$	8,305

Divestitures

Effective March 5, 2021, we sold all of the issued and outstanding capital stock of Diamond Power Machine (Hubei) Co., Inc, for $2.8 million. We received $2.0 million in gross proceeds before expenses and recorded an $0.8 million favorable contract asset for the amortization period from March 8, 2021 through December 31, 2023. For the twelve months ended December 31, 2021, we recognized a $1.8 million pre-tax loss, inclusive of the recognition of $4.5 million of currency translation adjustment, on the sale of the business and after consideration of certain working capital adjustments that are in dispute. Additional adjustments may be necessary as this is finalized.

On March 17, 2020, we fully settled the remaining escrow associated with the sale of PBRRC and received $4.5 million in cash.

Discontinued Operations

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.