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. Chase Jacobson, Vice President of Investor Relations, you may begin your conference.

Thank you, Tim, and good afternoon, everyone. Welcome to Babcock & Wilcox Enterprises second quarter 2018 earnings conference call. I'm Chase Jacobson, Vice President of Investor Relations at B&W. Joining me this afternoon are Leslie Kass, B&W's President and Chief Executive Officer; and Joel Mostrom, Interim Chief Financial Officer, to discuss our second quarter results. During this call, certain statements we make will be forward-looking. These statements are subject to risks and uncertainties, including those set forth in our safe harbor provision for forward-looking statements that can be found at the end of our earnings press release and also in our annual report on Form 10-K and our Form 10-Q that are on file with the SEC and provide further detail about the risks related to our business. Additionally, except as required by law, we undertake no obligation to update any forward-looking statement. We also provide non-GAAP information regarding certain of our historical results as well as our forward outlook to supplement the results provided in accordance with GAAP. This information should not be considered superior to, or as a substitute for, the comparable GAAP measures. A reconciliation of historical non-GAAP measures can be found in our first quarter earnings release, published this afternoon, and in our Company overview presentation on the Investor Relations section of our website at babcock.com. With that, I'll turn the call over to Leslie.

Thank you, Chase. Good afternoon, everyone. During the second quarter, we've taken a number of actions to improve B&W's financial flexibility, which helps us remain in the strong position to continue to serve our customers. These actions along with the financing arrangement we announced this afternoon, should provide us with adequate liquidity to complete our renewable projects and continue to focus on enhancing our product and service offerings for customers and our core power and industrial end markets. I'll discuss a few of these actions with you today. First, in early June, we signed an agreement to sell our MEGTEC and Universal businesses for $130 million. This transaction is expected to close in the next few weeks. And today, we announced an agreement to sell our operations and maintenance business at the Palm Beach Resource Recovery center in Florida to Covanta for $45 million. Also in June, we began implementing additional cost savings actions that are expected to generate $34 million of annual savings. Costs to achieve these savings will be approximately $5.5 million. We expect to recognize $15 million of the savings this year with the remainder being recognized in 2019. As part of our strategic timing process that we will complete in the coming months, we're continuing to evaluate our cost structure and are targeting additional savings of at least $20 million that we expect to implement in the fourth quarter for a total targeted savings of $54 million. Finally, today, we announced a new financing arrangement that demonstrates support for the strength of our underlying business by providing us with the financing commitment that gives us flexibility we need to finish the renewable projects. The combination of these items should provide us with sufficient liquidity and position us for improved profitability and cash flows, once the renewable…

Thanks, Leslie. Our second quarter consolidated revenues were $291 million, down $14.9 million or 5% compared to the prior year, mainly due to lower revenue in the power segment, which was generally in line with our expectations. For the quarter, we reported a GAAP operating loss from continuing operations of $137.4 million, mainly due to the increase in estimated costs to complete the renewable energy contracts in Europe and goodwill impairment charges related to our SPIG business. Adjusted EBITDA for the second quarter which excludes the goodwill impairment of our SPIG business, the loss on extinguishment of our second-lien loan was a $96.2 million loss, primarily due to the loss of a renewable segment and or unfavorable currency impact on the Company's intercompany loans, primarily related to renewable segment. Interest expense in the quarter was $11.8 million compared to $6.2 million last year, reflecting a higher level of borrowings on our revolving credit facilities and the interest associated with the second lien loan into early May of this year. I'd also like to point out there are several major noncash items that are affecting the GAAP results during the quarter including the aforementioned $37.5 million goodwill impairment for SPIG, a $49.2 million loss on the extinguishment of debt, a $20.2 million foreign currency loss related to the intercompany loans, and a $72.3 million impairment charge related to the MEGTEC and Universal sale that is included in the discontinued operations. Turning to our segment results. In the power segment, revenue was $197.8 million, down $16 million or 7% compared to the prior year. This was due mainly to the anticipated lower revenue on retrofit service contracts as a result with fewer projects associated with the cold combustion residual regulations in the U.S. which benefit our business in 2017, as well as…

Thanks, Joel. We've taken several actions in the last few months to position B&W for the future. We've identified asset sales of approximately $190 million, cost cutting activities with the target of $54 million, and are working with our Chief Implementation Officer to complete the strategic review of our entire Company that when fully implemented is expected to streamline our business and improve our profitability and cash flow for the long term. In the near term, we’re focused on executing are work in our backlog, continuing to serve our customers and core power and industrial markets with high quality engineered equipment and services, and driving the renewable project to completion. While it was a challenging quarter, we made progress on the renewable projects, remained focused on delivering for our customers and continued to drive cost control efforts to improve our bottom line. We expect to see improvements next year, led by our core power business that's targeting EBITDA generation in the range of $100 million in 2019. And we'll continue to work to strengthen our business across the board. As I close out our prepared remarks today, I also must note that this is Chase Jacobson's last call with us. On behalf of the leadership team, I'd like to thank Chase for his excellent work to help improve our communications and support of our investors during his time with B&W. We appreciate and admire his professionalism and dedication. With that, I'll turn the call back over to Tim, who will assist us in taking your questions.

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

Hi. Good afternoon. It's Pete Lukas for Bob. In your prepared remarks, you mentioned 2019 goal for power of $100 million adjusted EBITDA. Just wondering how much of that would be related to pension contribution.

Approximately $24 million.

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

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

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

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

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

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

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

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

This concludes today's conference call. You may now disconnect.