DEF 14A: Babcock & Wilcox Seeks Stockholder Approval for Board Declassification and Governance Changes

Babcock & Wilcox is asking stockholders to vote on proposals to declassify the board of directors, remove supermajority voting requirements, elect directors, ratify the appointment of the independent auditor, and approve executive compensation at its upcoming annual meeting.

Summary

• Babcock & Wilcox Enterprises, Inc. is holding its 2024 Annual Meeting of Stockholders virtually on May 15, 2024.
• Stockholders will vote on several proposals, including declassifying the Board of Directors to allow for annual elections of all directors starting in 2026.
• If the board is declassified, stockholders will elect Henry E. Bartoli, Naomi L. Boness, and Philip D. Moeller as Class I directors for a two-year term.
• If the board is not declassified, stockholders will elect Henry E. Bartoli, Naomi L. Boness, and Philip D. Moeller as Class III directors for a three-year term.
• Another proposal seeks to remove provisions requiring an 80% supermajority vote to amend certain parts of the Certificate of Incorporation and Bylaws.
• Stockholders will also vote to ratify the appointment of Deloitte & Touche LLP as the independent registered public accounting firm for the year ending December 31, 2024.
• Additionally, there will be a non-binding advisory vote on the compensation of the company's named executive officers.
• The Board of Directors recommends voting in favor of all proposals.
• In 2023, consolidated revenues were $999.4 million, an 18% increase compared to 2022.
• The net loss in 2023 was $78.6 million, compared to a net loss of $20.0 million in 2022.
• Operating income in 2023 was $19.9 million, compared to $2.3 million in 2022, and adjusted EBITDA was $79.1 million, a 17% increase compared to $67.5 million in 2022.
• Total bookings in 2023 were $878.3 million, a 2% increase compared to 2022, while backlog at the end of the year was $530.5 million, a 3% decrease compared to the prior year.

Sentiment

Score: 6

Explanation: The document presents a mixed sentiment. While revenue and operating income increased, the net loss widened, and backlog decreased. The company is making positive changes to corporate governance, but the financial results are not overwhelmingly positive.

Positives

• The company is proposing corporate governance changes that align with best practices, such as declassifying the board and removing supermajority voting requirements.
• Consolidated revenues in 2023 were $999.4 million, an 18% increase compared to 2022.
• Operating income in 2023 was $19.9 million, compared to $2.3 million in 2022, and adjusted EBITDA was $79.1 million, a 17% increase compared to $67.5 million in 2022.
• Total bookings in 2023 were $878.3 million, a 2% increase compared to 2022.

Negatives

• The net loss in 2023 was $78.6 million, compared to a net loss of $20.0 million in 2022.
• Backlog at the end of 2023 was $530.5 million, a 3% decrease compared to the prior year.

Risks

• The company's future performance is subject to various risks and uncertainties, as detailed in their Annual Report on Form 10-K.
• Failure to achieve the required stockholder votes on the proposals could hinder the company's ability to implement desired governance changes.

Future Outlook

The company believes its 2023 results reflect a strong global demand for its technologies, underpinning its pipeline and outlook for sustained growth in 2024 and beyond.

Management Comments

• Strengthening our Foundation and Accelerating Growth Despite sustained global economic and geopolitical challenges, our traditional businesses returned solid results in 2023, led by our aftermarket parts, services and construction operations that capitalized on the continued strong demand for baseload power generation as customers seek to extend the operational lifespans of their existing power generation and industrial facilities.
• We also accelerated our momentum in the deployment of our patented BrightLoop low-carbon, hydrogen generation technology that can use solid fuels like coal and biomass, as well as others like natural gas, to produce hydrogen while capturing carbon dioxide.
• These accomplishments would not be possible without the outstanding efforts and dedication of B&W employees throughout our global operations.
• They are experienced problem solvers and technology experts and have earned the trust of customers around the world.
• Were excited about the opportunities ahead and for the opportunity to achieve sustained growth in 2024 and beyond.
• Well do that by capitalizing on the strengths of our technology and experienced employees, by driving greater efficiencies throughout our operations and by working together to deliver on our projects safely and profitably.
• Together, we are focused on generating strong, profitable growth, to serving our vast installed base and further expanding our role as a leader and innovator in the energy transition.
• Were looking forward to a bright future and to continuing to deliver products, services and solutions that drive the world toward a cleaner tomorrow.

Industry Context

The company is positioning itself as a leader in the energy transition, focusing on clean energy, decarbonization, and renewable technologies, which aligns with current industry trends and global sustainability initiatives.

Comparison to Industry Standards

• The proxy statement mentions a peer group of companies used for TSR (Total Shareholder Return) comparison, including AMETEK Inc., CECO Environmental Corp., Chart Industries Inc., Crane Co., Curtiss-Wright Corp., Dycom Industries Inc., Enerpac Tool Group Corp., Enviri Corporation, Flowserve Corp., Idex Corp., MasTec Inc., Primoris Services Corp., SPX Technologies, Inc. and Tetra Tech, Inc.
• These companies represent a mix of industrial, engineering, and environmental technology firms, providing a benchmark for B&W's performance.
• The document does not provide a detailed comparison of B&W's financial performance against these specific companies, but it uses the peer group's TSR as a reference point in the 'Pay Versus Performance' section.
• Without specific data on each company's performance, it's difficult to assess B&W's relative standing within the group.

Corporate Governance

Related Party Transactions

• Kenneth M. Young, the Chairman and CEO, is also the President of B. Riley Financial, Inc.
• The services of the Company’s Chief Executive Officer are provided by B. Riley pursuant to a consulting agreement with BRPI Executive Consulting, LLC, an affiliate of B. Riley, which was entered on November 19, 2018 and amended on November 9, 2020 and on December 29, 2023.
• Under the consulting agreement, we make payments of $0.75 million per annum, paid monthly to BRPI Executive Consulting, LLC.

Stakeholder Impact

• Approval of the board declassification proposal could increase the accountability of directors to shareholders.
• Changes to executive compensation practices could impact employee morale and motivation.
• The company's focus on clean energy and decarbonization technologies could benefit the environment and local communities.

Next Steps

• Stockholders need to review the proxy materials and vote on the proposals before the Annual Meeting on May 15, 2024.
• The company will implement the approved proposals, including changes to the Board of Directors and corporate governance policies.

Key Dates

Keywords

corporate governance, proxy statement, annual meeting, board declassification, executive compensation, Deloitte, stockholders, directors, amendments, voting