UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________________________________________________________________________________________________
FORM 10-Q
_________________________________________________________________________________________________________________________________
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(Mark One) |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2020.2021.
OR
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission File No. 001-34658
BWX TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
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Delaware | | 80-0558025 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
| | | | |
800 Main Street, 4th Floor | | |
| Lynchburg, | Virginia | | | 24504 |
(Address of principal executive offices) | | (Zip Code) |
Registrant's telephone number, including area code: (980) (980) 365-4300
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Securities registered pursuant to Section 12(b) of the Act: |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, $0.01 par value | BWXT | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | | ☒ | | Accelerated filer | | ☐ |
| | | |
Non-accelerated filer | | ☐ | | Smaller reporting company | | ☐ |
| | | | | | |
Large accelerated filer | | ☒ | | Accelerated filer | | ☐ |
| | | |
Non-accelerated filer | | ☐ | | Smaller reporting company | | ☐ |
| | | | | | |
Emerging growth company | | ☐ | | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares of the registrant's common stock outstanding at April 30, 202029, 2021 was 95,228,613.95,141,155.
BWX TECHNOLOGIES, INC.
INDEX – FORM 10-Q
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| March 31, 20202021 and December 31, 20192020 (Unaudited) | |
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| Three Months Ended March 31, 2021 and 2020 and 2019 (Unaudited) | |
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| Three Months Ended March 31, 2021 and 2020 and 2019 (Unaudited) | |
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| Three Months Ended March 31, 2021 and 2020 and 2018 (Unaudited) | |
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| Three Months Ended March 31, 2021 and 2020 and 2019 (Unaudited) | |
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PART I
FINANCIAL INFORMATION
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Item 1. | Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
BWX TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
| | | | March 31, 2020 | | December 31, 2019 | | March 31, 2021 | | December 31, 2020 |
| | (Unaudited) (In thousands) | | (Unaudited) (In thousands) |
Current Assets: | | | | | Current Assets: | |
Cash and cash equivalents | | $ | 77,627 |
| | $ | 86,540 |
| Cash and cash equivalents | | $ | 57,677 | | | $ | 42,610 | |
Restricted cash and cash equivalents | | 3,066 |
| | 3,056 |
| Restricted cash and cash equivalents | | 3,071 | | | 3,070 | |
Investments | | 3,694 |
| | 5,843 |
| Investments | | 3,827 | | | 3,707 | |
Accounts receivable – trade, net | | 63,051 |
| | 56,721 |
| Accounts receivable – trade, net | | 57,999 | | | 153,368 | |
Accounts receivable – other | | 11,292 |
| | 13,426 |
| Accounts receivable – other | | 17,572 | | | 22,239 | |
Retainages | | 62,385 |
| | 46,670 |
| Retainages | | 81,820 | | | 55,172 | |
Contracts in progress | | 407,854 |
| | 376,037 |
| Contracts in progress | | 497,827 | | | 449,176 | |
Other current assets | | 37,226 |
| | 41,462 |
| Other current assets | | 39,446 | | | 44,256 | |
Assets held for sale | | 20,845 |
| | — |
| |
Total Current Assets | | 687,040 |
| | 629,755 |
| Total Current Assets | | 759,239 | | | 773,598 | |
Property, Plant and Equipment, Net | | 594,157 |
| | 580,241 |
| Property, Plant and Equipment, Net | | 884,000 | | | 816,471 | |
Investments | | 6,291 |
| | 7,620 |
| Investments | | 9,612 | | | 9,356 | |
Goodwill | | 271,593 |
| | 275,502 |
| Goodwill | | 285,992 | | | 283,708 | |
Deferred Income Taxes | | 55,129 |
| | 58,689 |
| Deferred Income Taxes | | 47,861 | | | 49,415 | |
Investments in Unconsolidated Affiliates | | 71,754 |
| | 70,116 |
| Investments in Unconsolidated Affiliates | | 74,216 | | | 71,806 | |
Intangible Assets | | 185,678 |
| | 191,392 |
| Intangible Assets | | 193,015 | | | 192,751 | |
Other Assets | | 94,961 |
| | 95,598 |
| Other Assets | | 97,979 | | | 96,398 | |
TOTAL | | $ | 1,966,603 |
| | $ | 1,908,913 |
| TOTAL | | $ | 2,351,914 | | | $ | 2,293,503 | |
See accompanying notes to condensed consolidated financial statements.
BWX TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
| | | | March 31, 2020 | | December 31, 2019 | | March 31, 2021 | | December 31, 2020 |
| | (Unaudited) (In thousands, except share and per share amounts) | | (Unaudited) (In thousands, except share and per share amounts) |
Current Liabilities: | | | | | Current Liabilities: | |
Current maturities of long-term debt | | $ | 13,924 |
| | $ | 14,711 |
| |
| Bank overdraft | | Bank overdraft | | $ | 0 | | | $ | 88,694 | |
Accounts payable | | 123,975 |
| | 170,678 |
| Accounts payable | | 146,958 | | | 184,392 | |
Accrued employee benefits | | 54,190 |
| | 82,640 |
| Accrued employee benefits | | 59,843 | | | 89,740 | |
Accrued liabilities – other | | 44,825 |
| | 52,213 |
| Accrued liabilities – other | | 91,100 | | | 78,028 | |
Advance billings on contracts | | 80,065 |
| | 75,425 |
| Advance billings on contracts | | 99,218 | | | 83,581 | |
Accrued warranty expense | | 4,873 |
| | 9,042 |
| Accrued warranty expense | | 6,858 | | | 5,292 | |
Income taxes payable | | 18,721 |
| | — |
| |
Liabilities associated with assets held for sale | | 2,585 |
| | — |
| |
| Total Current Liabilities | | 343,158 |
| | 404,709 |
| Total Current Liabilities | | 403,977 | | | 529,727 | |
Long-Term Debt | | 911,312 |
| | 809,442 |
| Long-Term Debt | | 1,018,265 | | | 862,731 | |
Accumulated Postretirement Benefit Obligation | | 22,066 |
| | 23,259 |
| Accumulated Postretirement Benefit Obligation | | 25,506 | | | 25,689 | |
Environmental Liabilities | | 80,634 |
| | 80,368 |
| Environmental Liabilities | | 85,889 | | | 84,153 | |
Pension Liability | | 164,031 |
| | 172,508 |
| Pension Liability | | 133,423 | | | 144,859 | |
Other Liabilities | | 15,890 |
| | 14,515 |
| Other Liabilities | | 28,548 | | | 28,576 | |
Commitments and Contingencies (Note 6) | |
| |
| |
Commitments and Contingencies (Note 5) | | Commitments and Contingencies (Note 5) | | 0 | | 0 |
Stockholders' Equity: | | | | | Stockholders' Equity: | |
Common stock, par value $0.01 per share, authorized 325,000,000 shares; issued 126,888,659 and 126,579,285 shares at March 31, 2020 and December 31, 2019, respectively | | 1,269 |
| | 1,266 |
| |
Preferred stock, par value $0.01 per share, authorized 75,000,000 shares; No shares issued | | — |
| | — |
| |
Common stock, par value $0.01 per share, authorized 325,000,000 shares; issued 127,262,146 and 127,009,536 shares at March 31, 2021 and December 31, 2020, respectively | | Common stock, par value $0.01 per share, authorized 325,000,000 shares; issued 127,262,146 and 127,009,536 shares at March 31, 2021 and December 31, 2020, respectively | | 1,273 | | | 1,270 | |
Preferred stock, par value $0.01 per share, authorized 75,000,000 shares; NaN shares issued | | Preferred stock, par value $0.01 per share, authorized 75,000,000 shares; NaN shares issued | | 0 | | | 0 | |
Capital in excess of par value | | 138,500 |
| | 134,069 |
| Capital in excess of par value | | 159,295 | | | 153,800 | |
Retained earnings | | 1,401,628 |
| | 1,344,383 |
| Retained earnings | | 1,599,526 | | | 1,549,950 | |
Treasury stock at cost, 31,660,046 and 31,266,670 shares at March 31, 2020 and December 31, 2019, respectively | | (1,093,240 | ) | | (1,068,164 | ) | |
Treasury stock at cost, 32,120,991 and 31,698,747 shares at March 31, 2021 and December 31, 2020, respectively | | Treasury stock at cost, 32,120,991 and 31,698,747 shares at March 31, 2021 and December 31, 2020, respectively | | (1,120,146) | | | (1,095,452) | |
Accumulated other comprehensive income (loss) | | (18,645 | ) | | (7,448 | ) | Accumulated other comprehensive income (loss) | | 16,290 | | | 8,198 | |
Stockholders' Equity – BWX Technologies, Inc. | | 429,512 |
| | 404,106 |
| Stockholders' Equity – BWX Technologies, Inc. | | 656,238 | | | 617,766 | |
Noncontrolling interest | | — |
| | 6 |
| Noncontrolling interest | | 68 | | | 2 | |
Total Stockholders' Equity | | 429,512 |
| | 404,112 |
| Total Stockholders' Equity | | 656,306 | | | 617,768 | |
TOTAL | | $ | 1,966,603 |
| | $ | 1,908,913 |
| TOTAL | | $ | 2,351,914 | | | $ | 2,293,503 | |
See accompanying notes to condensed consolidated financial statements.
BWX TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
| | | | Three Months Ended March 31, | | | Three Months Ended March 31, |
| | 2020 | | 2019 | | | | 2021 | | 2020 |
| | (Unaudited) (In thousands, except share and per share amounts) | | | (Unaudited) (In thousands, except share and per share amounts) |
Revenues | | $ | 542,208 |
| | $ | 416,454 |
| Revenues | | | $ | 528,273 | | | $ | 542,208 | |
Costs and Expenses: | | | | | Costs and Expenses: | | | |
Cost of operations | | 392,443 |
| | 303,635 |
| Cost of operations | | | 392,806 | | | 392,443 | |
Research and development costs | | 4,603 |
| | 5,174 |
| Research and development costs | | | 3,116 | | | 4,603 | |
Losses (gains) on asset disposals and impairments, net | | Losses (gains) on asset disposals and impairments, net | | | (8) | | | 0 | |
Selling, general and administrative expenses | | 52,958 |
| | 51,683 |
| Selling, general and administrative expenses | | | 58,261 | | | 52,958 | |
Total Costs and Expenses | | 450,004 |
| | 360,492 |
| Total Costs and Expenses | | | 454,175 | | | 450,004 | |
Equity in Income of Investees | | 6,063 |
| | 7,682 |
| Equity in Income of Investees | | | 8,316 | | | 6,063 | |
Operating Income | | 98,267 |
| | 63,644 |
| Operating Income | | | 82,414 | | | 98,267 | |
Other Income (Expense): | | | | | Other Income (Expense): | | | | | |
Interest income | | 231 |
| | 415 |
| Interest income | | | 132 | | | 231 | |
Interest expense | | (7,967 | ) | | (8,703 | ) | Interest expense | | | (7,039) | | | (7,967) | |
Other – net | | 7,917 |
| | 7,521 |
| Other – net | | | 16,386 | | | 7,917 | |
Total Other Income (Expense) | | 181 |
| | (767 | ) | Total Other Income (Expense) | | | 9,479 | | | 181 | |
Income before Provision for Income Taxes | | 98,448 |
| | 62,877 |
| Income before Provision for Income Taxes | | | 91,893 | | | 98,448 | |
Provision for Income Taxes | | 22,828 |
| | 13,767 |
| Provision for Income Taxes | | | 22,078 | | | 22,828 | |
Net Income | | $ | 75,620 |
| | $ | 49,110 |
| Net Income | | | $ | 69,815 | | | $ | 75,620 | |
Net Income Attributable to Noncontrolling Interest | | (121 | ) | | (132 | ) | Net Income Attributable to Noncontrolling Interest | | | (66) | | | (121) | |
Net Income Attributable to BWX Technologies, Inc. | | $ | 75,499 |
| | $ | 48,978 |
| Net Income Attributable to BWX Technologies, Inc. | | | $ | 69,749 | | | $ | 75,499 | |
Earnings per Common Share: | | | | | Earnings per Common Share: | | | | | |
Basic: | | | | | Basic: | | | |
Net Income Attributable to BWX Technologies, Inc. | | $ | 0.79 |
| | $ | 0.51 |
| Net Income Attributable to BWX Technologies, Inc. | | | $ | 0.73 | | | $ | 0.79 | |
Diluted: | | | | | Diluted: | | | | | |
Net Income Attributable to BWX Technologies, Inc. | | $ | 0.79 |
| | $ | 0.51 |
| Net Income Attributable to BWX Technologies, Inc. | | | $ | 0.73 | | | $ | 0.79 | |
Shares used in the computation of earnings per share (Note 10): | | | | | |
Shares used in the computation of earnings per share (Note 9): | | Shares used in the computation of earnings per share (Note 9): | | | | | |
Basic | | 95,412,351 |
| | 95,255,109 |
| Basic | | | 95,303,728 | | | 95,412,351 | |
Diluted | | 95,756,372 |
| | 95,821,354 |
| Diluted | | | 95,558,863 | | | 95,756,372 | |
See accompanying notes to condensed consolidated financial statements.
BWX TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
| | | | Three Months Ended March 31, | | | Three Months Ended March 31, |
| | 2020 | | 2019 | | | | 2021 | | 2020 |
| | (Unaudited) (In thousands) | | | (Unaudited) (In thousands) |
Net Income | | $ | 75,620 |
| | $ | 49,110 |
| Net Income | | | $ | 69,815 | | | $ | 75,620 | |
Other Comprehensive Income (Loss): | | | | | Other Comprehensive Income (Loss): | | | |
Currency translation adjustments | | (11,940 | ) | | 943 |
| Currency translation adjustments | | | 8,001 | | | (11,940) | |
Derivative financial instruments: | | | | | Derivative financial instruments: | | | |
Unrealized gains (losses) arising during the period, net of tax (provision) benefit of $(109) and $164, respectively | | 313 |
| | (441 | ) | |
Reclassification adjustment for losses (gains) included in net income, net of tax (benefit) provision of $(138) and $49, respectively | | 420 |
| | (141 | ) | |
Amortization of benefit plan costs, net of tax benefit of $(167) and $(136), respectively | | 610 |
| | 511 |
| |
Investments: | | | | | |
Unrealized (losses) gains arising during the period, net of tax provision of $(2) and $(7), respectively | | (600 | ) | | 24 |
| |
Unrealized (losses) gains arising during the period, net of tax benefit (provision) of $139 and $(109), respectively | | Unrealized (losses) gains arising during the period, net of tax benefit (provision) of $139 and $(109), respectively | | | (412) | | | 313 | |
Reclassification adjustment for (gains) losses included in net income, net of tax provision (benefit) of $56 and $(138), respectively | | Reclassification adjustment for (gains) losses included in net income, net of tax provision (benefit) of $56 and $(138), respectively | | | (166) | | | 420 | |
Amortization of benefit plan costs, net of tax benefit of $(157) and $(167), respectively | | Amortization of benefit plan costs, net of tax benefit of $(157) and $(167), respectively | | | 580 | | | 610 | |
Unrealized gains (losses) on investments arising during the period, net of tax provision of $(24) and $(2), respectively | | Unrealized gains (losses) on investments arising during the period, net of tax provision of $(24) and $(2), respectively | | | 89 | | | (600) | |
Other Comprehensive Income (Loss) | | (11,197 | ) | | 896 |
| Other Comprehensive Income (Loss) | | | 8,092 | | | (11,197) | |
Total Comprehensive Income | | 64,423 |
| | 50,006 |
| Total Comprehensive Income | | | 77,907 | | | 64,423 | |
Comprehensive Income Attributable to Noncontrolling Interest | | (121 | ) | | (132 | ) | Comprehensive Income Attributable to Noncontrolling Interest | | | (66) | | | (121) | |
Comprehensive Income Attributable to BWX Technologies, Inc. | | $ | 64,302 |
| | $ | 49,874 |
| Comprehensive Income Attributable to BWX Technologies, Inc. | | | $ | 77,841 | | | $ | 64,302 | |
See accompanying notes to condensed consolidated financial statements.
BWX TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
| | | | Common Stock | | Capital In Excess of Par Value | | Accumulated Other Comprehensive Income (Loss) | | Total Stockholders' Equity |
| | | | Shares | | Par Value | | Retained Earnings | | Treasury Stock | | Stockholders' Equity | | Noncontrolling Interest | |
| | | | | | (In thousands, except share and per share amounts) |
Balance December 31, 2020 | | Balance December 31, 2020 | | 127,009,536 | | | $ | 1,270 | | | $ | 153,800 | | | $ | 1,549,950 | | | $ | 8,198 | | | $ | (1,095,452) | | | $ | 617,766 | | | $ | 2 | | | $ | 617,768 | |
| Net income | | Net income | | — | | | — | | | — | | | 69,749 | | | — | | | — | | | 69,749 | | | 66 | | | 69,815 | |
Dividends declared ($0.21 per share) | | Dividends declared ($0.21 per share) | | — | | | — | | | — | | | (20,173) | | | — | | | — | | | (20,173) | | | — | | | (20,173) | |
Currency translation adjustments | | Currency translation adjustments | | — | | | — | | | — | | | — | | | 8,001 | | | — | | | 8,001 | | | — | | | 8,001 | |
Derivative financial instruments | | Derivative financial instruments | | — | | | — | | | — | | | — | | | (578) | | | — | | | (578) | | | — | | | (578) | |
Defined benefit obligations | | Defined benefit obligations | | — | | | — | | | — | | | — | | | 580 | | | — | | | 580 | | | — | | | 580 | |
Available-for-sale investments | | Available-for-sale investments | | — | | | — | | | — | | | — | | | 89 | | | — | | | 89 | | | — | | | 89 | |
Exercises of stock options | | Exercises of stock options | | 61,260 | | | 0 | | | 1,517 | | | — | | | — | | | — | | | 1,517 | | | — | | | 1,517 | |
Shares placed in treasury | | Shares placed in treasury | | — | | | — | | | — | | | — | | | — | | | (24,694) | | | (24,694) | | | — | | | (24,694) | |
Stock-based compensation charges | | Stock-based compensation charges | | 191,350 | | | 3 | | | 3,978 | | | — | | | — | | | — | | | 3,981 | | | — | | | 3,981 | |
Distributions to noncontrolling interests | | Distributions to noncontrolling interests | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 0 | | | 0 | |
Balance March 31, 2021 (unaudited) | | Balance March 31, 2021 (unaudited) | | 127,262,146 | | | $ | 1,273 | | | $ | 159,295 | | | $ | 1,599,526 | | | $ | 16,290 | | | $ | (1,120,146) | | | $ | 656,238 | | | $ | 68 | | | $ | 656,306 | |
| | | | | Common Stock | | Capital In Excess of Par Value | | | | Accumulated Other Comprehensive Income (Loss) | | | | | | | | Total Stockholders' Equity | |
| | Shares | | Par Value | | Retained Earnings | | Treasury Stock | | Stockholders' Equity | | Noncontrolling Interest | | |
| | | | (In thousands, except share and per share amounts) | | | | | | | | | | | | | | | | | | |
Balance December 31, 2019 | | 126,579,285 |
| | $ | 1,266 |
| | $ | 134,069 |
| | $ | 1,344,383 |
| | $ | (7,448 | ) | | $ | (1,068,164 | ) | | $ | 404,106 |
| | $ | 6 |
| | $ | 404,112 |
| Balance December 31, 2019 | | 126,579,285 | | | $ | 1,266 | | | $ | 134,069 | | | $ | 1,344,383 | | | $ | (7,448) | | | $ | (1,068,164) | | | $ | 404,106 | | | $ | 6 | | | $ | 404,112 | |
| Net income | | — |
| | — |
| | — |
| | 75,499 |
| | — |
| | — |
| | 75,499 |
| | 121 |
| | 75,620 |
| Net income | | — | | | — | | | — | | | 75,499 | | | — | | | — | | | 75,499 | | | 121 | | | 75,620 | |
Dividends declared ($0.19 per share) | | — |
| | — |
| | — |
| | (18,254 | ) | | — |
| | — |
| | (18,254 | ) | | — |
| | (18,254 | ) | Dividends declared ($0.19 per share) | | — | | | — | | | — | | | (18,254) | | | — | | | — | | | (18,254) | | | — | | | (18,254) | |
Currency translation adjustments | | — |
| | — |
| | — |
| | — |
| | (11,940 | ) | | — |
| | (11,940 | ) | | — |
| | (11,940 | ) | Currency translation adjustments | | — | | | — | | | — | | | — | | | (11,940) | | | — | | | (11,940) | | | — | | | (11,940) | |
Derivative financial instruments | | — |
| | — |
| | — |
| | — |
| | 733 |
| | — |
| | 733 |
| | — |
| | 733 |
| Derivative financial instruments | | — | | | — | | | — | | | — | | | 733 | | | — | | | 733 | | | — | | | 733 | |
Defined benefit obligations | | — |
| | — |
| | — |
| | — |
| | 610 |
| | — |
| | 610 |
| | — |
| | 610 |
| Defined benefit obligations | | — | | | — | | | — | | | — | | | 610 | | | — | | | 610 | | | — | | | 610 | |
Available-for-sale investments | | — |
| | — |
| | — |
| | — |
| | (600 | ) | | — |
| | (600 | ) | | — |
| | (600 | ) | Available-for-sale investments | | — | | | — | | | — | | | — | | | (600) | | | — | | | (600) | | | — | | | (600) | |
Exercises of stock options | | 56,431 |
| | 1 |
| | 1,331 |
| | — |
| | — |
| | — |
| | 1,332 |
| | — |
| | 1,332 |
| Exercises of stock options | | 56,431 | | | 1 | | | 1,331 | | | — | | | — | | | — | | | 1,332 | | | — | | | 1,332 | |
Shares placed in treasury | | — |
| | — |
| | — |
| | — |
| | — |
| | (25,076 | ) | | (25,076 | ) | | — |
| | (25,076 | ) | Shares placed in treasury | | — | | | — | | | — | | | — | | | — | | | (25,076) | | | (25,076) | | | — | | | (25,076) | |
Stock-based compensation charges | | 252,943 |
| | 2 |
| | 3,100 |
| | — |
| | — |
| | — |
| | 3,102 |
| | — |
| | 3,102 |
| Stock-based compensation charges | | 252,943 | | | 2 | | | 3,100 | | | — | | | — | | | — | | | 3,102 | | | — | | | 3,102 | |
Distributions to noncontrolling interests | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (127 | ) | | (127 | ) | Distributions to noncontrolling interests | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (127) | | | (127) | |
Balance March 31, 2020 (unaudited) | | 126,888,659 |
| | $ | 1,269 |
| | $ | 138,500 |
| | $ | 1,401,628 |
| | $ | (18,645 | ) | | $ | (1,093,240 | ) | | $ | 429,512 |
| | $ | — |
| | $ | 429,512 |
| Balance March 31, 2020 (unaudited) | | 126,888,659 | | | $ | 1,269 | | | $ | 138,500 | | | $ | 1,401,628 | | | $ | (18,645) | | | $ | (1,093,240) | | | $ | 429,512 | | | $ | 0 | | | $ | 429,512 | |
| | | | | | | | | | | | | | | | | | | |
Balance December 31, 2018 | | 125,871,866 |
| | $ | 1,259 |
| | $ | 115,725 |
| | $ | 1,166,762 |
| | $ | (10,289 | ) | | $ | (1,037,795 | ) | | $ | 235,662 |
| | $ | 39 |
| | $ | 235,701 |
| |
Recently adopted accounting standards | | — |
| | — |
| | — |
| | (1,219 | ) | | 77 |
| | — |
| | (1,142 | ) | | — |
| | (1,142 | ) | |
Net income | | — |
| | — |
| | — |
| | 48,978 |
| | — |
| | — |
| | 48,978 |
| | 132 |
| | 49,110 |
| |
Dividends declared ($0.17 per share) | | — |
| | — |
| | — |
| | (16,323 | ) | | — |
| | — |
| | (16,323 | ) | | — |
| | (16,323 | ) | |
Currency translation adjustments | | — |
| | — |
| | — |
| | — |
| | 943 |
| | — |
| | 943 |
| | — |
| | 943 |
| |
Derivative financial instruments | | — |
| | — |
| | — |
| | — |
| | (582 | ) | | — |
| | (582 | ) | | — |
| | (582 | ) | |
Defined benefit obligations | | — |
| | — |
| | — |
| | — |
| | 511 |
| | — |
| | 511 |
| | — |
| | 511 |
| |
Available-for-sale investments | | — |
| | — |
| | — |
| | — |
| | 24 |
| | — |
| | 24 |
| | — |
| | 24 |
| |
Exercises of stock options | | 58,655 |
| | 1 |
| | 1,275 |
| | — |
| | — |
| | — |
| | 1,276 |
| | — |
| | 1,276 |
| |
Shares placed in treasury | | — |
| | — |
| | — |
| | — |
| | — |
| | (29,027 | ) | | (29,027 | ) | | — |
| | (29,027 | ) | |
Stock-based compensation charges | | 449,275 |
| | 4 |
| | 2,525 |
| | — |
| | — |
| | — |
| | 2,529 |
| | — |
| | 2,529 |
| |
Distributions to noncontrolling interests | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (146 | ) | | (146 | ) | |
Balance March 31, 2019 (unaudited) | | 126,379,796 |
| | $ | 1,264 |
| | $ | 119,525 |
| | $ | 1,198,198 |
| | $ | (9,316 | ) | | $ | (1,066,822 | ) | | $ | 242,849 |
| | $ | 25 |
| | $ | 242,874 |
| |
|
See accompanying notes to condensed consolidated financial statements.
BWX TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | Three Months Ended March 31, | | Three Months Ended March 31, |
| | 2020 | | 2019 | | | 2021 | | 2020 |
| | (Unaudited) (In thousands) | | | (Unaudited) (In thousands) |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | CASH FLOWS FROM OPERATING ACTIVITIES: | | |
Net Income | | $ | 75,620 |
| | $ | 49,110 |
| Net Income | | $ | 69,815 | | | $ | 75,620 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | Adjustments to reconcile net income to net cash provided by operating activities: | |
Depreciation and amortization | | 15,614 |
| | 15,122 |
| Depreciation and amortization | | 15,897 | | | 15,614 | |
Income of investees, net of dividends | | (1,929 | ) | | (2,960 | ) | Income of investees, net of dividends | | (2,414) | | | (1,929) | |
| Recognition of losses for pension and postretirement plans | | 777 |
| | 647 |
| Recognition of losses for pension and postretirement plans | | 737 | | | 777 | |
Stock-based compensation expense | | 3,102 |
| | 2,529 |
| Stock-based compensation expense | | 3,981 | | | 3,102 | |
Other, net | | 283 |
| | (1,663 | ) | Other, net | | 1,168 | | | 283 | |
Changes in assets and liabilities: | | | | | |
Changes in assets and liabilities, net of effects from acquisitions: | | Changes in assets and liabilities, net of effects from acquisitions: | |
Accounts receivable | | (2,092 | ) | | 5,812 |
| Accounts receivable | | 96,449 | | | (2,092) | |
Accounts payable | | (21,158 | ) | | 1,612 |
| Accounts payable | | (12,623) | | | (21,158) | |
Retainages | | (15,760 | ) | | (13,949 | ) | Retainages | | (26,475) | | | (15,760) | |
Contracts in progress and advance billings on contracts | | (35,941 | ) | | (43,735 | ) | Contracts in progress and advance billings on contracts | | (29,541) | | | (35,941) | |
Income taxes | | 20,332 |
| | 7,559 |
| Income taxes | | 17,134 | | | 20,332 | |
Accrued and other current liabilities | | (8,073 | ) | | (10,748 | ) | Accrued and other current liabilities | | 1,751 | | | (8,073) | |
Pension liabilities, accrued postretirement benefit obligations and employee benefits | | (36,761 | ) | | (25,876 | ) | Pension liabilities, accrued postretirement benefit obligations and employee benefits | | (42,584) | | | (36,761) | |
Other, net | | (461 | ) | | (1,183 | ) | Other, net | | 5,119 | | | (461) | |
NET CASH USED IN OPERATING ACTIVITIES | | (6,447 | ) | | (17,723 | ) | |
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | | NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | | 98,414 | | | (6,447) | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | CASH FLOWS FROM INVESTING ACTIVITIES: | | | | |
Purchases of property, plant and equipment | | (64,768 | ) | | (44,519 | ) | Purchases of property, plant and equipment | | (101,932) | | | (64,768) | |
Acquisition of business | | (16,174 | ) | | — |
| Acquisition of business | | 0 | | | (16,174) | |
Purchases of securities | | (1,511 | ) | | (1,786 | ) | Purchases of securities | | (1,384) | | | (1,511) | |
Sales and maturities of securities | | 3,680 |
| | 1,800 |
| Sales and maturities of securities | | 1,252 | | | 3,680 | |
| Other, net | | Other, net | | 32 | | | 0 | |
NET CASH USED IN INVESTING ACTIVITIES | | (78,773 | ) | | (44,505 | ) | NET CASH USED IN INVESTING ACTIVITIES | | (102,032) | | | (78,773) | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | CASH FLOWS FROM FINANCING ACTIVITIES: | | | | |
Borrowings of long-term debt | | 214,000 |
| | 212,500 |
| Borrowings of long-term debt | | 205,800 | | | 214,000 | |
Repayments of long-term debt | | (97,607 | ) | | (113,457 | ) | Repayments of long-term debt | | (50,800) | | | (97,607) | |
Payment of debt issuance costs | | (1,340 | ) | | — |
| Payment of debt issuance costs | | 0 | | | (1,340) | |
Repayment of bank overdraft | | Repayment of bank overdraft | | (88,694) | | | 0 | |
Repurchases of common shares | | (20,000 | ) | | (20,000 | ) | Repurchases of common shares | | (20,007) | | | (20,000) | |
Dividends paid to common shareholders | | (18,596 | ) | | (16,797 | ) | Dividends paid to common shareholders | | (20,322) | | | (18,596) | |
Exercises of stock options | | 1,254 |
| | 823 |
| Exercises of stock options | | 1,672 | | | 1,254 | |
Cash paid for shares withheld to satisfy employee taxes | | (4,998 | ) | | (8,574 | ) | Cash paid for shares withheld to satisfy employee taxes | | (4,687) | | | (4,998) | |
Other, net | | 5,068 |
| | 943 |
| Other, net | | (3,680) | | | 5,068 | |
NET CASH PROVIDED BY FINANCING ACTIVITIES | | 77,781 |
| | 55,438 |
| NET CASH PROVIDED BY FINANCING ACTIVITIES | | 19,282 | | | 77,781 | |
EFFECTS OF EXCHANGE RATE CHANGES ON CASH | | (1,419 | ) | | 104 |
| EFFECTS OF EXCHANGE RATE CHANGES ON CASH | | (542) | | | (1,419) | |
TOTAL DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AND CASH EQUIVALENTS | | (8,858 | ) | | (6,686 | ) | |
TOTAL INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AND CASH EQUIVALENTS | | TOTAL INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AND CASH EQUIVALENTS | | 15,122 | | | (8,858) | |
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | | 92,400 |
| | 36,408 |
| CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | | 48,298 | | | 92,400 | |
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AND CASH EQUIVALENTS AT END OF PERIOD | | $ | 83,542 |
| | $ | 29,722 |
| CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AND CASH EQUIVALENTS AT END OF PERIOD | | $ | 63,420 | | | $ | 83,542 | |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | | | | | SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | | | | |
Cash paid during the period for: | | | | | Cash paid during the period for: | |
Interest | | $ | 14,668 |
| | $ | 14,767 |
| Interest | | $ | 11,438 | | | $ | 14,668 | |
Income taxes (net of refunds) | | $ | 1,327 |
| | $ | 6,191 |
| Income taxes (net of refunds) | | $ | 4,386 | | | $ | 1,327 | |
SCHEDULE OF NON-CASH INVESTING ACTIVITY: | | | | | SCHEDULE OF NON-CASH INVESTING ACTIVITY: | |
Accrued capital expenditures included in accounts payable | | $ | 15,433 |
| | $ | 11,249 |
| Accrued capital expenditures included in accounts payable | | $ | 25,849 | | | $ | 15,433 | |
See accompanying notes to condensed consolidated financial statements.
BWX TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 20202021
(UNAUDITED)
NOTE 1 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
We have presented the condensed consolidated financial statements of BWX Technologies, Inc. ("BWXT" or the "Company") in U.S. dollars in accordance with the interim reporting requirements of Form 10-Q, Rule 10-01 of Regulation S-X and accounting principles generally accepted in the United States ("GAAP"). Certain financial information and disclosures normally included in our financial statements prepared annually in accordance with GAAP have been condensed or omitted. Readers of these financial statements should, therefore, refer to the consolidated financial statements and notes in our annual report on Form 10-K for the year ended December 31, 20192020 (our "2019"2020 10-K"). We have included all adjustments, in the opinion of management, consisting only of normal recurring adjustments, necessary for a fair presentation.
We use the equity method to account for investments in entities that we do not control, but over which we have the ability to exercise significant influence. We generally refer to these entities as "joint ventures." We have eliminated all intercompany transactions and accounts. We have reclassified certain amounts previously reported to conform to the presentation at March 31, 2020 and for the three months ended March 31, 2020. We present the notes to our condensed consolidated financial statements on the basis of continuing operations, unless otherwise stated.
Unless the context otherwise indicates, "we," "us" and "our" mean BWXT and its consolidated subsidiaries.
Reportable Segments
We operate in 3 reportable segments: Nuclear Operations Group, Nuclear Power Group and Nuclear Services Group. Our reportable segments are further described as follows:
•Our Nuclear Operations Group segment manufactures naval nuclear reactors for the U.S. Naval Nuclear Propulsion Program for use in submarines and aircraft carriers. Through this segment, we own and operate manufacturing facilities located in Lynchburg, Virginia; Barberton, Ohio; Mount Vernon, Indiana; Euclid, Ohio; and Erwin, Tennessee. The Lynchburg operations fabricate fuel-bearing precision components that range in weight from a few grams to hundreds of tons. In-house capabilities also include wet chemistry uranium processing, advanced heat treatment to optimize component material properties and a controlled, clean-room environment with the capacity to assemble railcar-size components. The Barberton and Mount Vernon locations specialize in the design and manufacture of heavy components inclusive of development and fabrication activities for submarine missile launch tubes. The Euclid facility fabricates electro-mechanical equipment and performs design, manufacturing, inspection, assembly and testing activities. Fuel for the naval nuclear reactors is provided by Nuclear Fuel Services, Inc. ("NFS"), one of our wholly owned subsidiaries. Located in Erwin, NFS also downblends Cold War-era government stockpiles of high-enriched uranium into material suitable for further processing into commercial nuclear reactor fuel.uranium.
•Our Nuclear Power Group segment fabricates commercial nuclear steam generators, nuclear fuel, fuel handling systems, pressure vessels, reactor components, heat exchangers, tooling delivery systems and other auxiliary equipment, including containers for the storage of spent nuclear fuel and other high-level waste and supplies nuclear-grade materials and precisely machined components for nuclear utility customers. BWXT has supplied the nuclear industry with more than 1,300 large, heavy components worldwide and is the only commercial heavy nuclear component manufacturer in North America. This segment also provides specialized engineering services that include structural component design, 3-D thermal-hydraulic engineering analysis, weld and robotic process development, electrical and controls engineering and metallurgy and materials engineering. In addition, this segment offers in-plant inspection, maintenance and modification services for nuclear steam generators, heat exchangers, reactors, fuel handling systems and balance of plant equipment, as well as specialized non-destructive examination and tooling/repair solutions. This segment is also a leading global manufacturer and supplier of critical medical radioisotopes and radiopharmaceuticals for research, diagnostic and therapeutic uses.
•Our Nuclear Services Group segment provides various services to the U.S. Government and the commercial nuclear industry. Services provided to the U.S. Government includeincluding nuclear materials management and operation, environmental management and administrative and operating services for various U.S. Government-owned facilities. These services are provided to the U.S. Department of Energy ("DOE"), including the National Nuclear Security Administration ("NNSA"), the Office of Nuclear Energy, the Office of Science and the Office of Environmental
Management, and NASA. Through this segment we deliver services and management solutions to nuclear and high-consequence operations. A significant portion of this segment's operations are conducted through joint ventures.
Our Nuclear Services Group segment is also engaged in inspection and maintenance services for the commercial nuclear industry primarily in the U.S. These services include steam generator, heat exchanger and balance of plant inspection and servicing as well as high pressure water lancing, non-destructive examination and the development of customized tooling solutions. This segment also develops technology for a variety of applications, including advanced
nuclear power sources, and offers complete advanced nuclear fuel and reactor design and engineering, licensing and manufacturing services for new advanced nuclear reactors and other nuclear technologies.reactors.
See Note 98 for financial information about our segments. Operating results for the three months ended March 31, 20202021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.2021. For further information, refer to the consolidated financial statements and notes included in our 20192020 10-K.
Divestiture of U.S.-Based Commercial Nuclear Services Business
On May 29, 2020, our subsidiary BWXT Nuclear Energy, Inc. divested its U.S.-based commercial nuclear services business, a component of our Nuclear Services Group segment. In a cashless transaction, we exchanged net assets totaling $18.0 million, consisting primarily of property, plant and equipment and certain warranty obligations, for a manufacturing facility and the associated land of approximately the same value. The acquired assets are reported as part of the Nuclear Services Group segment.
Recently Adopted Accounting Standards
On January 1, 2020, weThere were no accounting standards adopted during the update to the Financial Accounting Standards Board ("FASB") Topic Financial Instruments – Credit Losses. This update requires entities to recognize expected credit losses immediately in the financial statements. We considered our customer base, credit loss history and expected loss rate in our evaluation of expected credit losses. The adoption of the provisions in this update did not have an impact on our financial position, results of operations or cash flows.
On January 1, 2020, we adopted the update to the FASB Topic Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This update simplifies the accounting for goodwill impairment by eliminating the second step from the goodwill impairment test. Goodwill impairment will now be determined by comparing the fair value of a reporting unit with its carrying amount. The adoption of the provisions in this update did not have an impact on our financial position, results of operations or cash flows.
In December 2019, the FASB issued an update to the FASB Topic Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This update simplifies various aspects related to the accounting for income taxes by eliminating certain exceptions to the general principles in Topic 740, simplifies when companies recognize deferred taxes in an interim period and clarifies certain aspects of the current guidance to promote consistent application. We elected to early adopt this update effective January 1, 2020, which did not have a material impact on our financial position, results of operations or cash flows.three months ended March 31, 2021.
Contracts and Revenue Recognition
We generally recognize contract revenues and related costs over time for individual performance obligations based on a cost-to-cost method in accordance with FASB Topic Revenue from Contracts with Customers. We recognize estimated contract revenue and resulting income based on the measurement of the extent of progress toward completion as a percentage of the total project. Certain costs may be excluded from the cost-to-cost method of measuring progress, such as significant costs for uninstalled materials, if such costs do not depict our performance in transferring control of goods or services to the customer. We review contract price and cost estimates periodically as the work progresses and reflect adjustments proportionate to the percentage-of-completion in income in the period when those estimates are revised. Certain of our contracts recognize revenue at a point in time, and revenue on these contracts is recognized when control transfers to the customer. The majority of our revenue that is recognized at a point in time is related to parts and certain medical radioisotopes and radiopharmaceuticals in our Nuclear Power Group segment. For all contracts, if a current estimate of total contract cost indicates a loss on a contract, the projected loss is recognized in full when determined.
Provision for Income Taxes
We are subject to federal income tax in the U.S. and Canada as well as income tax within multiple U.S. state jurisdictions. We provide for income taxes based on the enacted tax laws and rates in the jurisdictions in which we conduct our operations. These jurisdictions may have regimes of taxation that vary with respect to nominal rates and with respect to the basis on which these rates are applied. This variation, along with the changes in our mix of income within these jurisdictions, can contribute to shifts in our effective tax rate from period to period.
Our effective tax rate for the three months ended March 31, 20202021 was 23.2%24.0% as compared to 21.9%23.2% for the three months ended March 31, 2019.2020. The effective tax rates for the three months ended March 31, 20202021 and 20192020 were higher than the U.S. corporate income tax rate of 21% primarily due to state income taxes within the U.S. and the unfavorable rate differential associated with our Canadian earnings. Our effective tax rates for the three months ended March 31, 2021 and 2020 and 2019 were
favorably impacted by benefits recognized for excess tax benefits recognized related to employee share-based payments of $0.7$0.2 million and $1.7$0.7 million, respectively.
As of March 31, 2020,2021, we had gross unrecognized tax benefits of $3.9$5.9 million (exclusive of interest and federal and state benefits), all of which would reduce our effective tax rate if recognized.
Cash and Cash Equivalents and Restricted Cash and Cash Equivalents
At March 31, 2020,2021, we had restricted cash and cash equivalents totaling $5.9$5.7 million, $2.8$2.7 million of which was held for future decommissioning of facilities (which is included in Other Assets on our condensed consolidated balance sheets) and $3.1 million of which was held to meet reinsurance reserve requirements of our captive insurer.
The following table provides a reconciliation of cash and cash equivalents and restricted cash and cash equivalents on our condensed consolidated balance sheets to the totals presented on our condensed consolidated statement of cash flows:
|
| | | | | | | | |
| | March 31, 2020 | | December 31, 2019 |
| | (In thousands) |
Cash and cash equivalents | | $ | 77,627 |
| | $ | 86,540 |
|
Restricted cash and cash equivalents | | 3,066 |
| | 3,056 |
|
Restricted cash and cash equivalents included in Other Assets | | 2,849 |
| | 2,804 |
|
Total cash and cash equivalents and restricted cash and cash equivalents as presented on our condensed consolidated statement of cash flows | | $ | 83,542 |
| | $ | 92,400 |
|
| | | | | | | | | | | | | | |
| | March 31, 2021 | | December 31, 2020 |
| | (In thousands) |
Cash and cash equivalents | | $ | 57,677 | | | $ | 42,610 | |
Restricted cash and cash equivalents | | 3,071 | | | 3,070 | |
Restricted cash and cash equivalents included in Other Assets | | 2,672 | | | 2,618 | |
Total cash and cash equivalents and restricted cash and cash equivalents as presented on our condensed consolidated statement of cash flows | | $ | 63,420 | | | $ | 48,298 | |
Inventories
At March 31, 20202021 and December 31, 2019,2020, Other current assets included inventories totaling $11.6$13.9 million and $17.1$15.0 million, respectively, consisting entirely of raw materials and supplies.
Assets Held for Sale
During the three months ended March 31, 2020, we committed to a plan to sell net assets totaling $18.3 million, which primarily consists of property, plant and equipment. As we believe the fair value less costs to sell for these assets held for sale exceeds their carrying amount, no adjustment to their carrying value has been recorded in the three months ended March 31, 2020.
Property, Plant and Equipment, Net
Property, plant and equipment, net is stated at cost and is set forth below:
|
| | | | | | | | |
| | March 31, 2020 | | December 31, 2019 |
| | (In thousands) |
Land | | $ | 9,338 |
| | $ | 8,919 |
|
Buildings | | 233,544 |
| | 221,462 |
|
Machinery and equipment | | 761,300 |
| | 775,997 |
|
Property under construction | | 271,152 |
| | 265,715 |
|
| | 1,275,334 |
| | 1,272,093 |
|
Less: Accumulated depreciation | | 681,177 |
| | 691,852 |
|
Property, Plant and Equipment, Net | | $ | 594,157 |
| | $ | 580,241 |
|
| | | | | | | | | | | | | | |
| | March 31, 2021 | | December 31, 2020 |
| | (In thousands) |
Land | | $ | 9,591 | | | $ | 9,585 | |
Buildings | | 274,383 | | | 267,808 | |
Machinery and equipment | | 849,960 | | | 827,785 | |
Property under construction | | 451,274 | | | 420,374 | |
| | 1,585,208 | | | 1,525,552 | |
Less: Accumulated depreciation | | 701,208 | | | 709,081 | |
Property, Plant and Equipment, Net | | $ | 884,000 | | | $ | 816,471 | |
Accumulated Other Comprehensive Income (Loss)
The components of Accumulated other comprehensive income (loss) included in Stockholders' Equity are as follows:
| | | | | | | | | | | | | | |
| | March 31, 2021 | | December 31, 2020 |
| | (In thousands) |
Currency translation adjustments | | $ | 32,455 | | | $ | 24,454 | |
Net unrealized loss on derivative financial instruments | | (1,074) | | | (496) | |
Unrecognized prior service cost on benefit obligations | | (15,322) | | | (15,902) | |
Net unrealized gain on available-for-sale investments | | 231 | | | 142 | |
Accumulated other comprehensive income (loss) | | $ | 16,290 | | | $ | 8,198 | |
|
| | | | | | | | |
| | March 31, 2020 | | December 31, 2019 |
| | (In thousands) |
Currency translation adjustments | | $ | (3,171 | ) | | $ | 8,769 |
|
Net unrealized gain on derivative financial instruments | | 797 |
| | 64 |
|
Unrecognized prior service cost on benefit obligations | | (16,004 | ) | | (16,614 | ) |
Net unrealized gain (loss) on available-for-sale investments | | (267 | ) | | 333 |
|
Accumulated other comprehensive income (loss) | | $ | (18,645 | ) | | $ | (7,448 | ) |
The amounts reclassified out of Accumulated other comprehensive income (loss) by component and the affected condensed consolidated statements of income line items are as follows:
|
| | | | | | | | | | |
| | Three Months Ended March 31, | | |
| | 2020 | | 2019 | | |
Accumulated Other Comprehensive Income (Loss) Component Recognized | | (In thousands) | | Line Item Presented |
Realized gain (loss) on derivative financial instruments | | $ | (1 | ) | | $ | (12 | ) | | Revenues |
| | (557 | ) | | 202 |
| | Cost of operations |
| | (558 | ) | | 190 |
| | Total before tax |
| | 138 |
| | (49 | ) | | Provision for Income Taxes |
| | $ | (420 | ) | | $ | 141 |
| | Net Income |
Amortization of prior service cost on benefit obligations | | $ | (777 | ) | | $ | (647 | ) | | Other – net |
| | 167 |
| | 136 |
| | Provision for Income Taxes |
| | $ | (610 | ) | | $ | (511 | ) | | Net Income |
Total reclassification for the period | | $ | (1,030 | ) | | $ | (370 | ) | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, | | |
| | | | | | 2021 | | 2020 | | |
Accumulated Other Comprehensive Income (Loss) Component Recognized | | | | | | (In thousands) | | Line Item Presented |
Realized gain (loss) on derivative financial instruments | | | | | | $ | 227 | | | $ | (1) | | | Revenues |
| | | | | | (5) | | | (557) | | | Cost of operations |
| | | | | | 222 | | | (558) | | | Total before tax |
| | | | | | (56) | | | 138 | | | Provision for Income Taxes |
| | | | | | $ | 166 | | | $ | (420) | | | Net Income |
Amortization of prior service cost on benefit obligations | | | | | | $ | (737) | | | $ | (777) | | | Other – net |
| | | | | | 157 | | | 167 | | | Provision for Income Taxes |
| | | | | | $ | (580) | | | $ | (610) | | | Net Income |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Total reclassification for the period | | | | | | $ | (414) | | | $ | (1,030) | | | |
Derivative Financial Instruments
Our operations give rise to exposure to market risks from changes in foreign currency exchange ("FX") rates. We use derivative financial instruments, primarily FX forward contracts, to reduce the impact of changes in FX rates on our operating results. We use these instruments to hedge our exposure associated with revenues or costs on our long-term contracts and other transactions that are denominated in currencies other than our operating entities' functional currencies. We do not hold or issue derivative financial instruments for trading or other speculative purposes.
We enter into derivative financial instruments primarily as hedges of certain firm purchase and sale commitments and loans between domestic and foreign subsidiaries denominated in foreign currencies. We record these contracts at fair value on our condensed consolidated balance sheets. Based on the hedge designation at the inception of the contract, the related gains and losses on these contracts are deferred in stockholders' equity as a component of Accumulated other comprehensive income until the hedged item is recognized in earnings. The gain or loss on a derivative instrument not designated as a hedging instrument is immediately recognized in earnings. Gains and losses on derivative financial instruments that require immediate recognition are included as a component of Other – net on our condensed consolidated statements of income.
We have designated the majority of our FX forward contracts that qualify for hedge accounting as cash flow hedges. The hedged risk is the risk of changes in functional-currency-equivalent cash flows attributable to changes in FX spot rates of forecasted transactions primarily related to long-term contracts. We exclude from our assessment of effectiveness the portion of the fair value of the FX forward contracts attributable to the difference between FX spot rates and FX forward rates. At March 31, 2020,2021, we had deferred approximately $0.8$1.1 million of net gainslosses on these derivative financial instruments. Assuming market conditions continue, we expect to recognize the majority of this amount in the next 12 months. For the three months ended March 31, 20202021 and 2019,2020, we recognized gains(gains) losses of $5.2$3.6 million and $1.6$(5.2) million, respectively, in Other – net on our condensed consolidated statements of income associated with FX forward contracts not designated as hedges.
At March 31, 2020,2021, our derivative financial instruments consisted of FX forward contracts with a total notional value of $118.2$310.6 million with maturities extending to December 2021.March 2023. These instruments consist primarily of FX forward contracts to purchase or sell Canadian dollars and Euros. We are exposed to credit-related losses in the event of non-performance by
counterparties to derivative financial instruments. We attempt to mitigate this risk by using major financial institutions with high credit ratings. Our counterparties to derivative financial instruments have the benefit of the same collateral arrangements and covenants as described under our credit facility.
NOTE 2 – ACQUISITIONS
Laker Energy Products Ltd.
On January 2, 2020, our subsidiary BWXT Canada Ltd. acquired Laker Energy Products Ltd., which was renamed BWXT Precision Manufacturing Inc. ("Laker Energy Products"Precision Manufacturing"), for CAD 21.123.3 million ($16.217.8 million U.S. dollar equivalent),. We are subject to the payment of contingent consideration totaling CAD 5.0 million, of up to an additionalwhich we have recognized CAD 12.0 million.2.5 million as a component of the purchase price. Our preliminary purchase price allocation resulted in the recognition of $8.3$8.4 million of Property, Plant and Equipment, Net, $6.4$8.2 million of Intangible Assets and $3.5$5.8 million of Goodwill. In addition, we recognized right
right-of-use assets and lease liabilities of $2.7 million. Laker Energy ProductsPrecision Manufacturing is a global supplier of nuclear-grade materials and precisely machined components for CANDU nuclear power utilities, and employs approximately 140 personnel. Laker Energy Productspersonnel and is reported as part of our Nuclear Power Group segment.
NOTE 3 – REVENUE RECOGNITION
Disaggregated Revenues
Revenues by geographical area and customer type were as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2020 | | Three Months Ended March 31, 2019 |
| | Nuclear Operations Group | | Nuclear Power Group | | Nuclear Services Group | | Total | | Nuclear Operations Group | | Nuclear Power Group | | Nuclear Services Group | | Total |
| | (In thousands) |
United States: | | | | | | | | | | | | | | | | |
Government | | $ | 401,066 |
| | $ | — |
| | $ | 24,596 |
| | $ | 425,662 |
| | $ | 297,303 |
| | $ | — |
| | $ | 24,451 |
| | $ | 321,754 |
|
Non-Government | | 20,841 |
| | 9,608 |
| | 11,209 |
| | 41,658 |
| | 5,338 |
| | 9,162 |
| | 4,353 |
| | 18,853 |
|
| | $ | 421,907 |
| | $ | 9,608 |
| | $ | 35,805 |
| | $ | 467,320 |
| | $ | 302,641 |
| | $ | 9,162 |
| | $ | 28,804 |
| | $ | 340,607 |
|
Canada: | | | | | | | | | | | | | | | | |
Non-Government | | $ | — |
| | $ | 74,527 |
| | $ | 960 |
| | $ | 75,487 |
| | $ | — |
| | $ | 68,611 |
| | $ | 290 |
| | $ | 68,901 |
|
Other: | | | | | | | | | | | | | | | | |
Non-Government | | $ | 1,868 |
| | $ | 3,782 |
| | $ | — |
| | $ | 5,650 |
| | $ | 2,160 |
| | $ | 6,626 |
| | $ | — |
| | $ | 8,786 |
|
Segment Revenues | | $ | 423,775 |
| | $ | 87,917 |
| | $ | 36,765 |
| | 548,457 |
| | $ | 304,801 |
| | $ | 84,399 |
| | $ | 29,094 |
| | 418,294 |
|
Adjustments and Eliminations | | | | | | | | (6,249 | ) | | | | | | | | (1,840 | ) |
Revenues | | | | | | | | $ | 542,208 |
| | | | | | | | $ | 416,454 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2021 | | Three Months Ended March 31, 2020 |
| | Nuclear Operations Group | | Nuclear Power Group | | Nuclear Services Group | | Total | | Nuclear Operations Group | | Nuclear Power Group | | Nuclear Services Group | | Total |
| | (In thousands) |
United States: | | | | | | | | | | | | | | | | |
Government | | $ | 379,243 | | | $ | 0 | | | $ | 22,769 | | | $ | 402,012 | | | $ | 401,066 | | | $ | 0 | | | $ | 24,596 | | | $ | 425,662 | |
Non-Government | | 20,666 | | | 10,272 | | | 1,668 | | | 32,606 | | | 20,841 | | | 9,608 | | | 11,209 | | | 41,658 | |
| | $ | 399,909 | | | $ | 10,272 | | | $ | 24,437 | | | $ | 434,618 | | | $ | 421,907 | | | $ | 9,608 | | | $ | 35,805 | | | $ | 467,320 | |
Canada: | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Non-Government | | $ | 0 | | | $ | 91,355 | | | $ | 1,020 | | | $ | 92,375 | | | $ | 0 | | | $ | 74,527 | | | $ | 960 | | | $ | 75,487 | |
| | | | | | | | | | | | | | | | |
Other: | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Non-Government | | $ | 2,159 | | | $ | 5,771 | | | $ | 26 | | | $ | 7,956 | | | $ | 1,868 | | | $ | 3,782 | | | $ | 0 | | | $ | 5,650 | |
| | | | | | | | | | | | | | | | |
Segment Revenues | | $ | 402,068 | | | $ | 107,398 | | | $ | 25,483 | | | 534,949 | | | $ | 423,775 | | | $ | 87,917 | | | $ | 36,765 | | | 548,457 | |
Eliminations | | | | | | | | (6,676) | | | | | | | | | (6,249) | |
Revenues | | | | | | | | $ | 528,273 | | | | | | | | | $ | 542,208 | |
Revenues by timing of transfer of goods or services were as follows:
| | | | Three Months Ended March 31, 2020 | | Three Months Ended March 31, 2019 | | | Three Months Ended March 31, 2021 | | Three Months Ended March 31, 2020 |
| | Nuclear Operations Group | | Nuclear Power Group | | Nuclear Services Group | | Total | | Nuclear Operations Group | | Nuclear Power Group | | Nuclear Services Group | | Total | | Nuclear Operations Group | | Nuclear Power Group | | Nuclear Services Group | | Total | | Nuclear Operations Group | | Nuclear Power Group | | Nuclear Services Group | | Total |
| | (In thousands) | | | (In thousands) |
Over time | | $ | 423,739 |
| | $ | 77,185 |
| | $ | 36,765 |
| | $ | 537,689 |
| | $ | 304,733 |
| | $ | 70,661 |
| | $ | 29,094 |
| | $ | 404,488 |
| Over time | | $ | 402,043 | | | $ | 93,887 | | | $ | 25,483 | | | $ | 521,413 | | | $ | 423,739 | | | $ | 77,185 | | | $ | 36,765 | | | $ | 537,689 | |
Point-in-time | | 36 |
| | 10,732 |
| | — |
| | 10,768 |
| | 68 |
| | 13,738 |
| | — |
| | 13,806 |
| Point-in-time | | 25 | | | 13,511 | | | 0 | | | 13,536 | | | 36 | | | 10,732 | | | 0 | | | 10,768 | |
Segment Revenues | | $ | 423,775 |
| | $ | 87,917 |
| | $ | 36,765 |
| | 548,457 |
| | $ | 304,801 |
| | $ | 84,399 |
| | $ | 29,094 |
| | 418,294 |
| Segment Revenues | | $ | 402,068 | | | $ | 107,398 | | | $ | 25,483 | | | 534,949 | | | $ | 423,775 | | | $ | 87,917 | | | $ | 36,765 | | | 548,457 | |
Adjustments and Eliminations | | | | | | | | (6,249 | ) | | | | | | | | (1,840 | ) | |
Eliminations | | Eliminations | | | | | | | | (6,676) | | | | | | | | | (6,249) | |
Revenues | | | | | | | | $ | 542,208 |
| | | | | | | | $ | 416,454 |
| Revenues | | $ | 528,273 | | | $ | 542,208 | |
Revenues by contract type were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2021 | | Three Months Ended March 31, 2020 |
| | Nuclear Operations Group | | Nuclear Power Group | | Nuclear Services Group | | Total | | Nuclear Operations Group | | Nuclear Power Group | | Nuclear Services Group | | Total |
| | (In thousands) |
Fixed-Price Incentive Fee | | $ | 302,325 | | | $ | 490 | | | $ | 0 | | | $ | 302,815 | | | $ | 284,374 | | | $ | 492 | | | $ | 0 | | | $ | 284,866 | |
Firm-Fixed-Price | | 75,369 | | | 68,057 | | | 5,540 | | | 148,966 | | | 113,337 | | | 70,836 | | | 11,637 | | | 195,810 | |
Cost-Plus Fee | | 24,180 | | | 0 | | | 17,980 | | | 42,160 | | | 25,996 | | | 0 | | | 22,493 | | | 48,489 | |
Time-and-Materials | | 194 | | | 38,851 | | | 1,963 | | | 41,008 | | | 68 | | | 16,589 | | | 2,635 | | | 19,292 | |
Segment Revenues | | $ | 402,068 | | | $ | 107,398 | | | $ | 25,483 | | | 534,949 | | | $ | 423,775 | | | $ | 87,917 | | | $ | 36,765 | | | 548,457 | |
Eliminations | | | | | | | | (6,676) | | | | | | | | | (6,249) | |
Revenues | | | | | | | | $ | 528,273 | | | | | | | | | $ | 542,208 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2020 | | Three Months Ended March 31, 2019 |
| | Nuclear Operations Group | | Nuclear Power Group | | Nuclear Services Group | | Total | | Nuclear Operations Group | | Nuclear Power Group | | Nuclear Services Group | | Total |
| | (In thousands) |
Fixed-Price Incentive Fee | | $ | 284,374 |
| | $ | 492 |
| | $ | — |
| | $ | 284,866 |
| | $ | 245,487 |
| | $ | 273 |
| | $ | — |
| | $ | 245,760 |
|
Firm-Fixed-Price | | 113,337 |
| | 70,836 |
| | 11,637 |
| | 195,810 |
| | 39,343 |
| | 61,998 |
| | 6,168 |
| | 107,509 |
|
Cost-Plus Fee | | 25,996 |
| | — |
| | 22,493 |
| | 48,489 |
| | 19,853 |
| | — |
| | 22,535 |
| | 42,388 |
|
Time-and-Materials | | 68 |
| | 16,589 |
| | 2,635 |
| | 19,292 |
| | 118 |
| | 22,128 |
| | 391 |
| | 22,637 |
|
Segment Revenues | | $ | 423,775 |
| | $ | 87,917 |
| | $ | 36,765 |
| | 548,457 |
| | $ | 304,801 |
| | $ | 84,399 |
| | $ | 29,094 |
| | 418,294 |
|
Adjustments and Eliminations | | | | | | | | (6,249 | ) | | | | | | | | (1,840 | ) |
Revenues | | | | | | | | $ | 542,208 |
| | | | | | | | $ | 416,454 |
|
Performance Obligations
As we progress on our contracts and the underlying performance obligations for which we recognize revenue over time, we refine our estimates of variable consideration and total estimated costs at completion, which impact the overall profitability on our contracts and performance obligations. Changes in these estimates result in the recognition of cumulative catch-up adjustments that impact our revenues and/or costs of contracts. During the three months ended March 31, 20202021 and 2019,2020, we recognized net favorable changes in estimates that resulted in increases in revenues of $9.6$6.5 million and $4.8$9.6 million, respectively.
Contract Assets and Liabilities
We include revenues and related costs incurred, plus accumulated contract costs that exceed amounts invoiced to customers under the terms of the contracts, in Contracts in progress. We include in Advance billings on contracts billings that exceed accumulated contract costs and revenues recognized over time. Amounts that are withheld on our fixed-price incentive fee contracts are classified within Retainages. Certain of these amounts require conditions other than the passage of time to be achieved, with the remaining amounts only requiring the passage of time. Most long-term contracts contain provisions for progress payments. Our unbilled receivables do not contain an allowance for credit losses as we expect to invoice customers and collect all amounts for unbilled revenues. Changes in Contracts in progress and Advance billings on contracts are primarily driven by differences in the timing of revenue recognition and billings to our customers. During the three months ended March 31, 2020,2021, our unbilled receivables increased $32.1$49.3 million primarily as a result of the timing of milestone billings on certain firm-fixed-price contracts within our Nuclear Power Group segment and increases in unbilled receivables on fixed-price incentive fee contracts within our Nuclear Operations Group segment. During the three months ended March 31, 2021, our Advance billings on contracts increased $15.6 million primarily as a result of billings in excess of revenue recognized within our Nuclear Operations Group segment. Our fixed-price incentive fee contracts for our Nuclear Operations Group segment include provisions that result in an increase in retainages on contracts during the first and third quarters of the year, with larger payments madereceived during the second and fourth quarters. Retainages also vary as a result of timing differences between incurring costs and achieving milestones that allow us to recover these amounts.
|
| | | | | | | | |
| | March 31, | | December 31, |
| | 2020 | | 2019 |
| | (In thousands) |
Included in Contracts in progress: | | | | |
Unbilled receivables | | $ | 397,925 |
| | $ | 365,861 |
|
Retainages | | $ | 62,385 |
| | $ | 46,670 |
|
Included in Other Assets: | | | | |
Retainages | | $ | 1,457 |
| | $ | 1,412 |
|
Advance billings on contracts | | $ | 80,065 |
| | $ | 75,425 |
|
| | | | | | | | | | | | | | |
| | March 31, | | December 31, |
| | 2021 | | 2020 |
| | (In thousands) |
Included in Contracts in progress: | | | | |
Unbilled receivables | | $ | 485,621 | | | $ | 436,279 | |
Retainages | | $ | 81,820 | | | $ | 55,172 | |
Included in Other Assets: | | | | |
Retainages | | $ | 1,315 | | | $ | 1,488 | |
Advance billings on contracts | | $ | 99,218 | | | $ | 83,581 | |
During the three months ended March 31, 20202021 and 2019,2020, we recognized $30.2$30.0 million and $33.8$30.2 million of revenues that were in Advance billings on contracts at December 31, 2020 and 2019, and 2018, respectively.
Remaining Performance Obligations
Remaining performance obligations represent the dollar amount of revenue we expect to recognize in the future from performance obligations on contracts previously awarded and in progress. Of the March 31, 2020 remaining performance obligations on our contracts with customers at March 31, 2021, we expect to recognize revenues as follows:
|
| | | | | | | | | | | | | | | | |
| | 2020 | | 2021 | | Thereafter | | Total |
| | (In approximate millions) |
Nuclear Operations Group | | $ | 1,116 |
| | $ | 1,043 |
| | $ | 2,123 |
| | $ | 4,282 |
|
Nuclear Power Group | | 183 |
| | 183 |
| | 412 |
| | 778 |
|
Nuclear Services Group | | 34 |
| | 6 |
| | 11 |
| | 51 |
|
Total Remaining Performance Obligations | | $ | 1,333 |
| | $ | 1,232 |
| | $ | 2,546 |
| | $ | 5,111 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2021 | | 2022 | | Thereafter | | Total |
| | (In approximate millions) |
Nuclear Operations Group | | $ | 1,156 | | | $ | 1,192 | | | $ | 2,100 | | | $ | 4,448 | |
Nuclear Power Group | | 223 | | | 179 | | | 295 | | | 697 | |
Nuclear Services Group | | 45 | | | 3 | | | 0 | | | 48 | |
Total Remaining Performance Obligations | | $ | 1,424 | | | $ | 1,374 | | | $ | 2,395 | | | $ | 5,193 | |
NOTE 4 – LONG-TERM DEBT
Our Long-Term Debt consists of the following:
|
| | | | | | | | |
| | March 31, 2020 | | December 31, 2019 |
| | (In thousands) |
Secured Debt: | | | | |
Senior Notes | | $ | 400,000 |
| | $ | 400,000 |
|
Credit Facility | | 534,115 |
| | 432,159 |
|
Less: Amounts due within one year | | 13,924 |
| | 14,711 |
|
Long-Term Debt, gross | | 920,191 |
| | 817,448 |
|
Less: Deferred debt issuance costs | | 8,879 |
| | 8,006 |
|
Long-Term Debt | | $ | 911,312 |
| | $ | 809,442 |
|
Maturities of long-term debt subsequent to March 31, 2020 are as follows: 2020 – $10.4 million; 2021 – $13.9 million; 2022 – $13.9 million; 2023 – $215.8 million; 2024 – $0.0 million; 2025 – $280.0 million; and thereafter – $400.0 million.
Credit Facility
On March 24, 2020, we entered into an Amendment No. 1 to Credit Agreement (the "Amendment"), which amended the Credit Agreement dated May 24, 2018 (the "Credit Facility") with Wells Fargo Bank, N.A., as administrative agent, and the other lenders party thereto. The Credit Facility originally provided for a $500 million senior secured revolving credit facility (the "Revolving Credit Facility"), a $50 million U.S. dollar senior secured term loan A made available to the Company (the "USD Term Loan") and a $250 million (U.S. dollar equivalent) Canadian dollar senior secured term loan A made available to BWXT Canada Ltd. (the "CAD Term Loan" and together with the USD Term Loan, the "Term Loans").
The Amendment, among other things, (1) provided additional commitments to increase the Revolving Credit Facility by $250 million, such that the Revolving Credit Facility is now $750 million; (2) extended the maturity date of the Revolving Credit Facility to March 24, 2025; (3) removed BWXT Canada Ltd. as a borrower under the Revolving Credit Facility; (4) modified the applicable margin for borrowings under the Revolving Credit Facility to be, at the Company's option, either (i) the Eurocurrency rate plus a margin ranging from 1.0% to 1.75% per year or (ii) the base rate plus a margin ranging from 0.0% to 0.75% per year, in each case depending on the Company's leverage ratio; (5) modified the commitment fee on the unused portion of the Revolving Credit Facility to range from 0.15% to 0.225% per year, depending on the Company's leverage ratio; and (6) modified the letter of credit fee with respect to each financial letter of credit and performance letter of credit issued under the Revolving Credit Facility to range from 1.0% to 1.75% and 0.75% to 1.05% per year, respectively, in each case, depending on the Company's leverage ratio.
The Term Loans are scheduled to mature on May 24, 2023, and all obligations under the Revolving Credit Facility are scheduled to mature on March 24, 2025. The proceeds of loans under the Revolving Credit Facility are available for working capital needs, permitted acquisitions and other general corporate purposes.
The Credit Facility allows for additional parties to become lenders and, subject to certain conditions, for the increase of the commitments under the Credit Facility, subject to an aggregate maximum for all additional commitments of (1) the greater of (a) $250 million and (b) 65% of EBITDA, as defined in the Credit Facility, for the last four full fiscal quarters, plus (2) all
voluntary prepayments of the Term Loans, plus (3) additional amounts provided the Company is in compliance with a pro forma first lien leverage ratio test of less than or equal to 2.50 to 1.00.
The Company's obligations under the Credit Facility are guaranteed, subject to certain exceptions, by substantially all of the Company's present and future wholly owned domestic restricted subsidiaries. The obligations of BWXT Canada Ltd. under the CAD Term Loan are guaranteed, subject to certain exceptions, by substantially all of the Company's present and future wholly owned Canadian and domestic restricted subsidiaries.
The Credit Facility is secured by first-priority liens on certain assets owned by the Company and its subsidiary guarantors (other than its subsidiaries comprising its Nuclear Operations Group segment and a portion of its Nuclear Services Group segment); provided that (1) the Company's domestic obligations are only secured by assets and property of the domestic loan parties and (2) the obligations of BWXT Canada Ltd. and the Canadian guarantors are secured by assets and property of the Canadian guarantors and the domestic loan parties.
The Credit Facility requires interest payments on revolving loans on a periodic basis until maturity. We began making quarterly amortization payments on the Term Loans in amounts equal to 1.25% of the initial aggregate principal amount of each loan in the third quarter of 2018. We may prepay all loans under the Credit Facility at any time without premium or penalty (other than customary Eurocurrency breakage costs), subject to notice requirements.
The Credit Facility includes financial covenants that are tested on a quarterly basis, based on the rolling four-quarter period that ends on the last day of each fiscal quarter. The maximum permitted leverage ratio is 4.00 to 1.00, which may be increased to 4.50 to 1.00 for up to four consecutive fiscal quarters after a material acquisition. The minimum consolidated interest coverage ratio is 3.00 to 1.00. In addition, the Credit Facility contains various restrictive covenants, including with respect to debt, liens, investments, mergers, acquisitions, dividends, equity repurchases and asset sales. As of March 31, 2020, we were in compliance with all covenants set forth in the Credit Facility.
The Term Loans bear interest at our option at either (1) the Eurocurrency rate plus a margin ranging from 1.25% to 2.0% per year or (2) the base rate or Canadian index rate, as applicable (described in the Credit Facility as the highest of (a) with respect to the base rate only, the federal funds rate plus 0.5%, (b) the one-month Eurocurrency rate plus 1.0% and (c) the administrative agent's prime rate or the Canadian prime rate, as applicable), plus, in each case, a margin ranging from 0.25% to 1.0% per year. Outstanding loans under the Revolving Credit Facility bear interest at our option at either (1) the Eurocurrency rate plus a margin ranging from 1.0% to 1.75% per year or (2) the base rate plus a margin ranging from 0.0% to 0.75% per year. We are charged a commitment fee on the unused portion of the Revolving Credit Facility, and that fee ranges from 0.15% to 0.225% per year. Additionally, we are charged a letter of credit fee of between 1.0% and 1.75% per year with respect to the amount of each financial letter of credit issued under the Credit Facility, and a letter of credit fee of between 0.75% and 1.05% per year with respect to the amount of each performance letter of credit issued under the Credit Facility. The applicable margin for loans, the commitment fee and the letter of credit fees set forth above will vary quarterly based on our leverage ratio. Based on the leverage ratio applicable at March 31, 2020, the margin for Eurocurrency rate and base rate or Canadian index rate term loans was 1.375% and 0.375%, respectively, the margin for Eurocurrency rate and base rate revolving loans was 1.25% and 0.25%, respectively, the letter of credit fee for financial letters of credit and performance letters of credit was 1.25% and 0.825%, respectively, and the commitment fee for the unused portion of the Revolving Credit Facility was 0.175%.
As of March 31, 2020, borrowings outstanding totaled $254.1 million and $280.0 million under the Term Loans and Revolving Credit Facility, respectively, and letters of credit issued under the Revolving Credit Facility totaled $65.7 million. As a result, we had $404.3 million available under the Revolving Credit Facility for borrowings or to meet letter of credit requirements as of March 31, 2020. As of March 31, 2020, the weighted-average interest rate on outstanding borrowings under our Credit Facility was 2.40%.
The Credit Facility generally includes customary events of default for a secured credit facility. Under the Credit Facility, (1) if an event of default relating to bankruptcy or other insolvency events occurs with respect to the Company, all related obligations will immediately become due and payable; (2) if any other event of default exists, the lenders will be permitted to accelerate the maturity of the related obligations outstanding; and (3) if any event of default exists, the lenders will be permitted to terminate their commitments thereunder and exercise other rights and remedies, including the commencement of foreclosure or other actions against the collateral.
If any default occurs under the Credit Facility, or if we are unable to make any of the representations and warranties in the Credit Facility, we will be unable to borrow funds or have letters of credit issued under the Credit Facility.
NOTE 54 – PENSION PLANS AND POSTRETIREMENT BENEFITS
We record the service cost component of net periodic benefit cost within Operating income on our condensed consolidated statements of income. For the three months ended March 31, 20202021 and 2019,2020, these amounts were $3.0$3.1 million and $2.6
$3.0 million, respectively. All other components of net periodic benefit cost are included in Other – net within the condensed consolidated statements of income. For the three months ended March 31, 20202021 and 2019,2020, these amounts were $(9.5)$(13.4) million and $(5.2)$(9.5) million, respectively. Components of net periodic benefit cost included in net income were as follows:
|
| | | | | | | | | | | | | | | | |
| | Pension Benefits | | Other Benefits |
| | Three Months Ended March 31, | | Three Months Ended March 31, |
| | 2020 | | 2019 | | 2020 | | 2019 |
| | (In thousands) |
Service cost | | $ | 2,819 |
| | $ | 2,456 |
| | $ | 166 |
| | $ | 145 |
|
Interest cost | | 9,302 |
| | 11,592 |
| | 410 |
| | 585 |
|
Expected return on plan assets | | (19,364 | ) | | (17,436 | ) | | (672 | ) | | (627 | ) |
Amortization of prior service cost (credit) | | 825 |
| | 725 |
| | (48 | ) | | (78 | ) |
Net periodic benefit (income) cost | | $ | (6,418 | ) | | $ | (2,663 | ) | | $ | (144 | ) | | $ | 25 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Pension Benefits | | | | | | Other Benefits |
| | | | Three Months Ended March 31, | | | | Three Months Ended March 31, |
| | | | | | 2021 | | 2020 | | | | | | 2021 | | 2020 |
| | | | | | (In thousands) |
Service cost | | | | | | $ | 2,957 | | | $ | 2,819 | | | | | | | $ | 190 | | | $ | 166 | |
Interest cost | | | | | | 6,754 | | | 9,302 | | | | | | | 282 | | | 410 | |
Expected return on plan assets | | | | | | (20,414) | | | (19,364) | | | | | | | (716) | | | (672) | |
Amortization of prior service cost (credit) | | | | | | 782 | | | 825 | | | | | | | (45) | | | (48) | |
| | | | | | | | | | | | | | | | |
Net periodic benefit income | | | | | | $ | (9,921) | | | $ | (6,418) | | | | | | | $ | (289) | | | $ | (144) | |
NOTE 65 – COMMITMENTS AND CONTINGENCIES
There were no material contingencies during the period covered by this Form 10-Q. For more information regarding commitments and contingencies, refer to Note 10 to the consolidated financial statements in Part II of our 2019 10-K.
NOTE 76 – FAIR VALUE MEASUREMENTS
Investments
The following is a summary of our investments measured at fair value at March 31, 2020:2021:
| | | | Total | | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Unclassified |
| | (In thousands) | | | (In thousands) | | |
Equity securities | | | | | | | | | Equity securities | |
Equities | | Equities | | $ | 800 | | | $ | 0 | | | $ | 0 | | | $ | 800 | | | $ | — | |
Mutual funds | | $ | 4,962 |
| | $ | — |
| | $ | 4,962 |
| | $ | — |
| Mutual funds | | 6,897 | | | 0 | | | 6,897 | | | 0 | | | — | |
Available-for-sale securities | | | | | | | | | Available-for-sale securities | |
U.S. Government and agency securities | | 2,315 |
| | 2,315 |
| | — |
| | — |
| U.S. Government and agency securities | | 2,689 | | | 2,689 | | | 0 | | | 0 | | | — | |
Corporate bonds | | 2,650 |
| | 1,271 |
| | 1,379 |
| | — |
| Corporate bonds | | 2,992 | | | 1,854 | | | 1,138 | | | 0 | | | — | |
Asset-backed securities and collateralized mortgage obligations | | 58 |
| | — |
| | 58 |
| | — |
| Asset-backed securities and collateralized mortgage obligations | | 61 | | | 0 | | | 61 | | | 0 | | | — | |
Total | | $ | 9,985 |
| | $ | 3,586 |
| | $ | 6,399 |
| | $ | — |
| Total | | $ | 13,439 | | | $ | 4,543 | | | $ | 8,096 | | | $ | 800 | | | $ | — | |
The following is a summary of our investments measured at fair value at December 31, 2019:2020:
|
| | | | | | | | | | | | | | | | |
| | Total | | Level 1 | | Level 2 | | Level 3 |
| | (In thousands) |
Equity securities | | | | | | | | |
Equities | | $ | 2,172 |
| | $ | — |
| | $ | 2,172 |
| | $ | — |
|
Mutual funds | | 5,685 |
| | — |
| | 5,685 |
| | — |
|
Available-for-sale securities | | | | | | | | |
U.S. Government and agency securities | | 2,044 |
| | 2,044 |
| | — |
| | — |
|
Corporate bonds | | 3,483 |
| | 1,855 |
| | 1,628 |
| | — |
|
Asset-backed securities and collateralized mortgage obligations | | 79 |
| | — |
| | 79 |
| | — |
|
Total | | $ | 13,463 |
| | $ | 3,899 |
| | $ | 9,564 |
| | $ | — |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Total | | Level 1 | | Level 2 | | Level 3 | | Unclassified |
| | (In thousands) | | |
Equity securities | | | | | | | | | | |
Equities | | $ | 800 | | | $ | 0 | | | $ | 0 | | | $ | 800 | | | $ | — | |
Mutual funds | | 6,755 | | | 0 | | | 6,755 | | | 0 | | | — | |
Available-for-sale securities | | | | | | | | | | |
U.S. Government and agency securities | | 2,314 | | | 2,314 | | | 0 | | | 0 | | | — | |
Corporate bonds | | 3,132 | | | 1,738 | | | 1,394 | | | 0 | | | — | |
Asset-backed securities and collateralized mortgage obligations | | 62 | | | 0 | | | 62 | | | 0 | | | — | |
Total | | $ | 13,063 | | | $ | 4,052 | | | $ | 8,211 | | | $ | 800 | | | $ | — | |
We estimate the fair value of investments based on quoted market prices. For investments for which there are no quoted market prices, we derive fair values from available yield curves for investments of similar quality and terms.
Derivatives
Level 2 derivative assets and liabilities currently consist of FX forward contracts. Where applicable, the value of these derivative assets and liabilities is computed by discounting the projected future cash flow amounts to present value using market-based observable inputs, including FX forward and spot rates, interest rates and counterparty performance risk adjustments. At March 31, 20202021 and December 31, 2019,2020, we had FX forward contracts outstanding to purchase or sell foreign currencies, primarily Canadian dollars and Euros, with a total fair value of $0.3$(1.7) million and $(0.8)$(2.2) million, respectively.
Other Financial Instruments
We used the following methods and assumptions in estimating our fair value disclosures for our other financial instruments, as follows:
Cash and cash equivalents and restricted cash and cash equivalents. The carrying amounts that we have reported in the accompanying condensed consolidated balance sheets for Cash and cash equivalents and Restricted cash and cash equivalents approximate their fair values due to their highly liquid nature.
Long-term and short-term debt. We base the fair values of debt instruments, including our 5.375% senior notes due 2026 (the "Senior Notes"Notes due 2026") and our 4.125% senior notes due 2028 (the "Senior Notes due 2028"), on quoted market prices. Where quoted prices are not available, we base the fair values on the present value of future cash flows discounted at estimated borrowing rates for similar debt instruments or on estimated prices based on current yields for debt issues of similar quality and terms. At March 31, 20202021 and December 31, 2019,2020, the fair value of our Senior Notes due 2026 was $389.5$413.8 million and $423.5$415.5 million, respectively. At March 31, 2021 and December 31, 2020, the fair value of our Senior Notes due 2028 was $405.0 million and $416.7 million, respectively. The fair value of our remaining debt instruments approximated their carrying values at March 31, 20202021 and December 31, 2019.2020.
NOTE 87 – STOCK-BASED COMPENSATION
Stock-based compensation recognized for all of our plans for the three months ended March 31, 2021 and 2020 and 2019 totaled $2.6$4.2 million and $3.6$2.6 million, respectively, with associated tax benefit totaling $0.4$0.7 million and $0.6$0.4 million, respectively.
NOTE 98 – SEGMENT REPORTING
As described in Note 1, our operations are assessed based on 3 reportable segments. An analysis of our operations by reportable segment is as follows:
| | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | | 2021 | | 2020 |
| | | | | | (In thousands) |
REVENUES: | | | | | | | | |
Nuclear Operations Group | | | | | | $ | 402,068 | | | $ | 423,775 | |
Nuclear Power Group | | | | | | 107,398 | | | 87,917 | |
Nuclear Services Group | | | | | | 25,483 | | | 36,765 | |
Eliminations (1) | | | | | | (6,676) | | | (6,249) | |
| | | | | | $ | 528,273 | | | $ | 542,208 | |
(1)Segment revenues are net of the following intersegment transfers:
| | | | | | | | | | | | | | | | | | |
Nuclear Operations Group Transfers | | | | | | $ | (940) | | | $ | (673) | |
Nuclear Power Group Transfers | | | | | | (181) | | | (129) | |
Nuclear Services Group Transfers | | | | | | (5,555) | | | (5,447) | |
| | | | | | $ | (6,676) | | | $ | (6,249) | |
OPERATING INCOME: | | | | | | | | |
Nuclear Operations Group | | | | | | $ | 74,360 | | | $ | 90,359 | |
Nuclear Power Group | | | | | | 10,318 | | | 8,470 | |
Nuclear Services Group | | | | | | 5,747 | | | 6,400 | |
Other | | | | | | (5,886) | | | (5,359) | |
| | | | | | $ | 84,539 | | | $ | 99,870 | |
Unallocated Corporate (2) | | | | | | (2,125) | | | (1,603) | |
Total Operating Income | | | | | | $ | 82,414 | | | $ | 98,267 | |
Other Income (Expense) | | | | | | 9,479 | | | 181 | |
Income before Provision for Income Taxes | | | | | | $ | 91,893 | | | $ | 98,448 | |
(2)Unallocated corporate includes general corporate overhead not allocated to segments.
|
| | | | | | | | |
| | Three Months Ended March 31, |
| | 2020 | | 2019 |
| | (In thousands) |
REVENUES: | | | | |
Nuclear Operations Group | | $ | 423,775 |
| | $ | 304,801 |
|
Nuclear Power Group | | 87,917 |
| | 84,399 |
|
Nuclear Services Group | | 36,765 |
| | 29,094 |
|
Eliminations (1) | | (6,249 | ) | | (1,840 | ) |
| | $ | 542,208 |
| | $ | 416,454 |
|
| |
(1) | Segment revenues are net of the following intersegment transfers: |
|
| | | | | | | | |
Nuclear Operations Group Transfers | | $ | (673 | ) | | $ | (857 | ) |
Nuclear Power Group Transfers | | (129 | ) | | (40 | ) |
Nuclear Services Group Transfers | | (5,447 | ) | | (943 | ) |
| | $ | (6,249 | ) | | $ | (1,840 | ) |
OPERATING INCOME: | | | | |
Nuclear Operations Group | | $ | 90,359 |
| | $ | 57,625 |
|
Nuclear Power Group | | 8,470 |
| | 12,583 |
|
Nuclear Services Group | | 6,400 |
| | 1,571 |
|
Other | | (5,359 | ) | | (6,096 | ) |
| | $ | 99,870 |
| | $ | 65,683 |
|
Unallocated Corporate (2) | | (1,603 | ) | | (2,039 | ) |
Total Operating Income | | $ | 98,267 |
| | $ | 63,644 |
|
Other Income (Expense) | | 181 |
| | (767 | ) |
Income before Provision for Income Taxes | | $ | 98,448 |
| | $ | 62,877 |
|
| |
(2) | Unallocated corporate includes general corporate overhead not allocated to segments. |
NOTE 109 – EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share:
| | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | | 2021 | | 2020 |
| | | | | | (In thousands, except share and per share amounts) |
Basic: | | | | | | | | |
Net Income Attributable to BWX Technologies, Inc. | | | | | | $ | 69,749 | | | $ | 75,499 | |
Weighted-average common shares | | | | | | 95,303,728 | | | 95,412,351 | |
Basic earnings per common share | | | | | | $ | 0.73 | | | $ | 0.79 | |
Diluted: | | | | | | | | |
Net Income Attributable to BWX Technologies, Inc. | | | | | | $ | 69,749 | | | $ | 75,499 | |
Weighted-average common shares (basic) | | | | | | 95,303,728 | | | 95,412,351 | |
Effect of dilutive securities: | | | | | | | | |
Stock options, restricted stock units and performance shares (1) | | | | | | 255,135 | | | 344,021 | |
Adjusted weighted-average common shares | | | | | | 95,558,863 | | | 95,756,372 | |
Diluted earnings per common share | | | | | | $ | 0.73 | | | $ | 0.79 | |
(1)At March 31, 2021 and 2020, we excluded 131,775 and 99,102 shares, respectively, from our diluted share calculation as their effect would have been antidilutive.
|
| | | | | | | | |
| | Three Months Ended March 31, |
| | 2020 | | 2019 |
| | (In thousands, except share and per share amounts) |
Basic: | | | | |
Net Income Attributable to BWX Technologies, Inc. | | $ | 75,499 |
| | $ | 48,978 |
|
Weighted-average common shares | | 95,412,351 |
| | 95,255,109 |
|
Basic earnings per common share | | $ | 0.79 |
| | $ | 0.51 |
|
Diluted: | | | | |
Net Income Attributable to BWX Technologies, Inc. | | $ | 75,499 |
| | $ | 48,978 |
|
Weighted-average common shares (basic) | | 95,412,351 |
| | 95,255,109 |
|
Effect of dilutive securities: | | | | |
Stock options, restricted stock units and performance shares (1) | | 344,021 |
| | 566,245 |
|
Adjusted weighted-average common shares | | 95,756,372 |
| | 95,821,354 |
|
Diluted earnings per common share | | $ | 0.79 |
| | $ | 0.51 |
|
| |
(1) | At March 31, 2020 and 2019, we excluded 99,102 and 181,358 shares, respectively, from our diluted share calculation as their effect would have been antidilutive. |
NOTE 10 – SUBSEQUENT EVENT
On April 13, 2021, we issued $400 million aggregate principal amount of our 4.125% senior notes due 2029 (the "Senior Notes due 2029") pursuant to an indenture dated April 13, 2021 (the "2021 Indenture"), among the Company, certain of our subsidiaries, as guarantors, and U.S. Bank National Association, as trustee. Interest on the Senior Notes due 2029 will be payable semi-annually in cash in arrears on April 15 and October 15 of each year, commencing on October 15, 2021, at a rate of 4.125% per annum. The Senior Notes due 2029 will mature on April 15, 2029. The 2021 Indenture contains customary events of default, including, among other things, payment default, failure to comply with covenants or agreements contained in the 2021 Indenture or the Senior Notes due 2029 and certain provisions related to bankruptcy events. The 2021 Indenture also contains customary negative covenants.
We intend to use the net proceeds from the issuance of the Senior Notes due 2029, together with cash on hand or borrowings under our credit facility, to redeem all of our outstanding Senior Notes due 2026 at the then-applicable redemption price. On and after July 15, 2021, we may redeem the Senior Notes due 2026, in whole or in part, at a redemption price equal to (i) 102.688% of the principal amount to be redeemed if the redemption occurs during the twelve-month period beginning on July 15, 2021, (ii) 101.344% of the principal amount to be redeemed if the redemption occurs during the twelve-month period beginning on July 15, 2022 and (iii) 100.0% of the principal amount to be redeemed if the redemption occurs on or after July 15, 2023, in each case plus accrued and unpaid interest, if any, to, but excluding, the redemption date. As of March 31, 2021, we have deferred financing costs of $4.5 million related to the Senior Notes due 2026.
| |
Item 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
The following information should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included under Item 1 of this quarterly report on Form 10-Q ("Report") and the audited consolidated financial statements and the related notes and Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our annual report on Form 10-K for the year ended December 31, 20192020 (our "2019"2020 10-K").
In this Report, unless the context otherwise indicates, "we," "us" and "our" mean BWX Technologies, Inc. ("BWXT" or the "Company") and its consolidated subsidiaries.
From time to time, our management or persons acting on our behalf make forward-looking statements to inform existing and potential security holders about our Company. Forward-looking statements include those statements that express a belief, expectation or intention, as well as those that are not statements of historical fact, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Statements and assumptions regarding expectations and projections of specific projects, our future backlog, revenues, income and capital spending, strategic investments, acquisitions or divestitures, return of capital activities, margin improvement initiatives or impacts of the COVID-19novel strain of coronavirus ("COVID-19") pandemic are examples of forward-looking statements. Forward-looking statements are generally accompanied by words such as "estimate," "project," "predict," "believe," "expect," "anticipate," "plan," "seek," "goal," "could," "intend," "may," "should" or other words that convey the uncertainty of future events or outcomes. In addition, sometimes we will specifically describe a statement as being a forward-looking statement and refer to this cautionary statement.
We have based our forward-looking statements on information currently available to us and our current expectations, estimates and projections about our industries and our Company. We caution that these statements are not guarantees of future performance and you should not rely unduly on them as they involve risks, uncertainties and assumptions that we cannot predict. In addition, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. For example, the extent to which the COVID-19 outbreak impactspandemic will continue to impact our business will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the length and severity of the COVID-19 health crisis, and the actions to contain its impact, in addition to the potential recurrence or subsequent waves or strains of COVID-19 or similar diseases. While our management considers these statements and assumptions to be reasonable, they are inherently subject to numerous factors, including potentially the risk factors described in the sectionssection labeled Item 1A, "Risk Factors" ofin our 20192020 10-K, and of this Report, most of which are difficult to predict and many of which are beyond our control. Accordingly, our actual results may differ materially from the future performance that we have expressed or forecast in our forward-looking statements.
We have discussed many of these factors in more detail elsewhere in this Report, including under the heading "COVID-19 Assessment" of this Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Item 1A, "Risk Factors", and in Item 1A "Risk Factors" in our 20192020 10-K. These factors are not necessarily all the factors that could affect us. Unpredictable or unanticipated factors we have not discussed in this Report or in our 20192020 10-K could also have material adverse effects on actual results of matters that are the subject of our forward-looking statements. We do not intend to update or review any forward-looking statement or our description of important factors, whether as a result of new information, future events or otherwise, except as required by applicable laws.
GENERAL
We operate in three reportable segments: Nuclear Operations Group, Nuclear Power Group and Nuclear Services Group. In general, we operate in capital-intensive industries and rely on large contracts for a substantial amount of our revenues. We are currently exploring growth strategies across our segments to expand and complement our existing businesses. We would expect to fund these opportunities with cash generated from operations or by raising additional capital through debt, equity or some combination thereof.
Nuclear Operations Group
The revenues of our Nuclear Operations Group segment are largely a function of defense spending by the U.S. Government. Through this segment, we engineer, design and manufacture precision naval nuclear components, reactors and nuclear fuel for the DOE/NNSA'sU.S. Department of Energy ("DOE")/National Nuclear Safety Administration's ("NNSA") Naval Nuclear Propulsion Program. In addition, we perform development and fabrication
activities for missile launch tubes for U.S. Navy submarines. As a
supplier of major nuclear components for certain U.S. Government programs, this segment is a significant participant in the defense industry.
Nuclear Power Group
Through this segment, we design and manufacture commercial nuclear steam generators, heat exchangers, pressure vessels, reactor components, as well as other auxiliary equipment, including containers for the storage of spent nuclear fuel and other high-level nuclear waste. This segment is a leading supplier of nuclear fuel, fuel handling systems, tooling delivery systems, nuclear-grade materials and precisely machined components, and related services for CANDU nuclear power plants. This segment also provides a variety of engineering and in-plant services and is a significant supplier to nuclear power utilities undergoing major refurbishment and plant life extension projects. Additionally, this segment is a leading global manufacturer and supplier of critical medical radioisotopes and radiopharmaceuticals.
Our Nuclear Power Group segment's overall activity primarily depends on the demand and competitiveness of nuclear energy. A significant portion of our Nuclear Power Group segment's operations dependdepends on the timing of maintenance and refueling outages, the cyclical nature of capital expenditures and major refurbishment and life extension projects, as well as the demand for nuclear fuel and fuel handling equipment primarily in the Canadian market, which could cause variability in our financial results.
Nuclear Services Group
Our Nuclear Services Group segment provides various services to the U.S. Government and the commercial nuclear industry primarily in the U.S.Government. The revenues and equity in income of investees under our U.S. Government contracts are largely a function of spending of the U.S. Government and the performance scores we and our consortium partners earn in managing and operating high-consequence operations at U.S. nuclear weapons sites, national laboratories and manufacturing complexes. With its specialized capabilities of full life-cycle management of special materials, facilities and technologies, we believe our Nuclear Services Group segment is well-positioned to continue to participate in the continuing cleanup, operation and management of critical government-owned nuclear sites, laboratories and manufacturing complexes maintained by the DOE, NASA and other federal agencies.
This segment is also engaged in inspection and maintenance services for the commercial nuclear industry primarily in the U.S. These services include steam generator, heat exchanger and balance of plant inspection and servicing as well as high pressure water lancing, non-destructive examination and the development of customized tooling solutions. This segment also develops technology for a variety of applications, including advanced nuclear power sources, and offers complete advanced nuclear fuel and reactor design and engineering, licensing and manufacturing services for new advanced nuclear reactors.
Divestiture of U.S.-Based Commercial Nuclear Services Business
On May 29, 2020, our subsidiary BWXT Nuclear Energy, Inc. divested its U.S.-based commercial nuclear services business, a component of our Nuclear Services Group segment. In a cashless transaction, we exchanged net assets totaling $18.0 million, consisting primarily of property, plant and equipment and certain warranty obligations, for a manufacturing facility and the associated land of approximately the same value. The acquired assets are reported as part of the Nuclear Services Group segment.
Acquisition of Laker Energy Products Ltd.
On January 2, 2020, our subsidiary BWXT Canada Ltd. acquired Laker Energy Products Ltd., which was renamed BWXT Precision Manufacturing Inc. ("Laker Energy Products"Precision Manufacturing"). Laker Energy ProductsPrecision Manufacturing is a global supplier of nuclear-grade materials and precisely machined components for CANDU nuclear power utilities, and employs approximately 140 personnel. Laker Energy Productspersonnel and is reported as part of our Nuclear Power Group segment.
Critical Accounting Policies and Estimates
For a summary of the critical accounting policies and estimates that we use in the preparation of our unaudited condensed consolidated financial statements, see Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 20192020 10-K. There have been no material changes to our critical accounting policies during the three months ended March 31, 2020 with the exception of the adoption of Financial Accounting Standards Board ("FASB") Topic Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment as described in the notes to the condensed consolidated financial statements in Part I of this Report.2021.
Accounting for Contracts
On certain of our performance obligations, we recognize revenue over time. In accordance with FASB Topic Revenue from Contracts with Customers, we are required to estimate the total amount of costs on these performance obligations. As of March 31, 2020,2021, we have provided for the estimated costs to complete all of our ongoing contracts. However, it is possible that current estimates could change due to unforeseen events, which could result in adjustments to overall contract revenues and
costs. A principal risk on fixed-price contracts is that revenue from the customer is insufficient to cover increases in our costs. It
is possible that current estimates could materially change for various reasons, including, but not limited to, fluctuations in forecasted labor productivity or steel and other raw material prices. In some instances, we guarantee completion dates related to our projects or provide performance guarantees. Increases in costs on our fixed-price contracts could have a material adverse impact on our consolidated results of operations, financial condition and cash flows. Alternatively, reductions in overall contract costs at completion could materially improve our consolidated results of operations, financial condition and cash flows. During the three months ended March 31, 20202021 and 2019,2020, we recognized net changes in estimates related to contracts that recognize revenue over time, which increased operating income by approximately $9.6$6.5 million and $4.8$9.6 million, respectively.
COVID-19 Assessment
A global outbreak of a novel strain of coronavirus ("COVID-19") has occurred impacting over 200 countries, including the U.S. and Canada where we maintain our principal operations. Developments have been occurring rapidly with respectGeneral
We continue to the spread of COVID-19 and its impact on human health and businesses, with new and changing government actions occurring on a daily basis. As a result, we have been closely monitoringmonitor the COVID-19 pandemic and its impacts and potential impacts on our business.
We have received notifications from the U.S. and Canadian governments designating BWXT as an essential business given our roles in national security, energy production and medical manufacturing. We continue to operate our facilities and have taken numerous precautions to mitigate exposure and protect the health and well-being of our workforce. The COVID-19 pandemic did not causeworkforce, including arranging for the vaccination of our workforce, where possible.
To date, we have experienced localized operational challenges as a significant disruption to our operations or our supply chain in the first quarterresult of 2020.
employee illness, quarantines and social distancing protocols. Because developments related to the spread of COVID-19 and its impacts have been occurring rapidly, it is difficult to predict any future impact at this time. We have experienced, and may experience materialfurther, disruptions to demand for our products and services and our operations in the future as a result of, among other things, national, state, provincial or local government enforced quarantines, worker illness or absenteeism, and travel and other restrictions. For similar reasons, the COVID-19 pandemic may also adversely impact our supply chain and other manufacturers which could delay our receipt of essential goods and services. For example, certain services scheduled during nuclear power plant outages during which our Nuclear Power Group and Nuclear Services Group segments would operate have been rescheduled. We have also experienced delays in the bidding and contracting process for our U.S. Government businesses due to COVID-19 concerns. Any number of these potential risks could have a material adverse effect on our financial condition, results of operations and cash flows. The extent to which the COVID-19 outbreakpandemic impacts our business will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.
See Item 1A "Risk Factors" in this Quarterly ReportGovernment Assistance
On March 27, 2020, the U.S. Government enacted the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act"), which among other things, provides employers an option to defer payroll tax payments for a limited period. Based on Form 10-Q for an additional discussion of risksour evaluation of the CARES Act, we qualify for the deferral of payroll tax payments and as of March 31, 2021, we have deferred $21.4 million that will be paid beginning in December 2021. Additionally, on April 11, 2020, the Canadian Government enacted the Canada Emergency Wage Subsidy ("CEWS") under the COVID-19 pandemic on our business.Economic Response Plan to prevent large layoffs and help employers offset a portion of their employee salaries and wages for a limited period. During the three months ended March 31, 2021, we recognized $0.9 million of subsidies under the CEWS as an offset to operating expenses. The Canadian Government has extended the CEWS to September 2021 with a number of modifications. These modifications are expected to significantly decrease the amount of future claims for which we may qualify when compared to the prior year.
RESULTS OF OPERATIONS – THREE MONTHS ENDED MARCH 31, 20202021 VS. THREE MONTHS ENDED MARCH 31, 20192020
Selected financial highlights are presented in the table below:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Three Months Ended March 31, | | |
| | | | | | | | 2021 | | 2020 | | $ Change |
| | | | | | | | (In thousands) |
REVENUES: | | | | | | | | | | | | |
Nuclear Operations Group | | | | | | | | $ | 402,068 | | | $ | 423,775 | | | $ | (21,707) | |
Nuclear Power Group | | | | | | | | 107,398 | | | 87,917 | | | 19,481 | |
Nuclear Services Group | | | | | | | | 25,483 | | | 36,765 | | | (11,282) | |
Eliminations | | | | | | | | (6,676) | | | (6,249) | | | (427) | |
| | | | | | | | $ | 528,273 | | | $ | 542,208 | | | $ | (13,935) | |
OPERATING INCOME: | | | | | | | | | | | | |
Nuclear Operations Group | | | | | | | | $ | 74,360 | | | $ | 90,359 | | | $ | (15,999) | |
Nuclear Power Group | | | | | | | | 10,318 | | | 8,470 | | | 1,848 | |
Nuclear Services Group | | | | | | | | 5,747 | | | 6,400 | | | (653) | |
Other | | | | | | | | (5,886) | | | (5,359) | | | (527) | |
| | | | | | | | $ | 84,539 | | | $ | 99,870 | | | $ | (15,331) | |
Unallocated Corporate | | | | | | | | (2,125) | | | (1,603) | | | (522) | |
Total Operating Income | | | | | | | | $ | 82,414 | | | $ | 98,267 | | | $ | (15,853) | |
|
| | | | | | | | | | | | |
| | Three Months Ended March 31, | | |
| | 2020 | | 2019 | | $ Change |
| | (In thousands) |
REVENUES: | | | | | | |
Nuclear Operations Group | | $ | 423,775 |
| | $ | 304,801 |
| | $ | 118,974 |
|
Nuclear Power Group | | 87,917 |
| | 84,399 |
| | 3,518 |
|
Nuclear Services Group | | 36,765 |
| | 29,094 |
| | 7,671 |
|
Eliminations | | (6,249 | ) | | (1,840 | ) | | (4,409 | ) |
| | $ | 542,208 |
| | $ | 416,454 |
| | $ | 125,754 |
|
OPERATING INCOME: | | | | | | |
Nuclear Operations Group | | $ | 90,359 |
| | $ | 57,625 |
| | $ | 32,734 |
|
Nuclear Power Group | | 8,470 |
| | 12,583 |
| | (4,113 | ) |
Nuclear Services Group | | 6,400 |
| | 1,571 |
| | 4,829 |
|
Other | | (5,359 | ) | | (6,096 | ) | | 737 |
|
| | $ | 99,870 |
| | $ | 65,683 |
| | $ | 34,187 |
|
Unallocated Corporate | | (1,603 | ) | | (2,039 | ) | | 436 |
|
Total Operating Income | | $ | 98,267 |
| | $ | 63,644 |
| | $ | 34,623 |
|
Consolidated Results of Operations
Consolidated revenues increased 30.2%decreased 2.6%, or $125.8$13.9 million, to $542.2$528.3 million in the three months ended March 31, 20202021 compared to $416.5$542.2 million for the corresponding period in 2019,2020, due to increasesdecreases in revenues from our Nuclear Operations Group Nuclear Power Group and Nuclear Services Group segments totaling $119.0 million, $3.5$21.7 million and $7.7$11.3 million, respectively. These decreases were partially offset by an increase in revenues in our Nuclear Power Group segment of $19.5 million.
Consolidated operating income increased $34.6decreased $15.9 million to $98.3$82.4 million in the three months ended March 31, 20202021 compared to $63.6$98.3 million for the corresponding period of 2019.2020. Operating income in our Nuclear Operations Group, Nuclear Services Group and Other segments increaseddecreased by $32.7$16.0 million, $4.8$0.7 million and $0.7$0.5 million, respectively. In addition, we experienced lowerhigher Unallocated Corporate expenses of $0.4$0.5 million when compared to the corresponding period of 2019.2020. These increasesdecreases were partially offset by a decreasean increase in operating income in our Nuclear Power Group segment of $4.1$1.8 million.
Nuclear Operations Group
| | | | Three Months Ended March 31, | | | | | | Three Months Ended March 31, | | |
| | 2020 | | 2019 | | $ Change | | | | 2021 | | 2020 | | $ Change |
| | (In thousands) | | | | (In thousands) |
Revenues | | $ | 423,775 |
| | $ | 304,801 |
| | $ | 118,974 |
| Revenues | | | $ | 402,068 | | | $ | 423,775 | | | $ | (21,707) | |
Operating Income | | $ | 90,359 |
| | $ | 57,625 |
| | $ | 32,734 |
| Operating Income | | | $ | 74,360 | | | $ | 90,359 | | | $ | (15,999) | |
% of Revenues | | 21.3% |
| | 18.9% |
| | | % of Revenues | | | 18.5% | | 21.3% | |
Revenues increased 39.0%decreased 5.1%, or $119.0$21.7 million, to $423.8$402.1 million in the three months ended March 31, 20202021 compared to $304.8$423.8 million for the corresponding period of 2019 as we continue to expand production2020. The decrease was primarily related to the Columbia-Class nuclear propulsion system. The increase comprised additional volume in the manufacture of nuclear components for U.S. Government programs and the timing of the procurement of certain long-lead materials when compared to the corresponding period of 2019.2020, which was partially offset by additional volume in the manufacture of nuclear components for U.S. Government programs and in our naval nuclear fuel operations.
Operating income increased $32.7decreased $16.0 million to $90.4$74.4 million in the three months ended March 31, 20202021 compared to $57.6$90.4 million for the corresponding period of 2019.2020. The increasedecrease was due to the operating income impact of the changes in revenue noted above as well as favorable contract adjustments recorded in the corresponding period of the prior year related to our naval nuclear fuel operations.
Nuclear Power Group
| | | | Three Months Ended March 31, | | | | | | Three Months Ended March 31, | | |
| | 2020 | | 2019 | | $ Change | | | | 2021 | | 2020 | | $ Change |
| | (In thousands) | | | | (In thousands) |
Revenues | | $ | 87,917 |
| | $ | 84,399 |
| | $ | 3,518 |
| Revenues | | | $ | 107,398 | | | $ | 87,917 | | | $ | 19,481 | |
Operating Income | | $ | 8,470 |
| | $ | 12,583 |
| | $ | (4,113 | ) | Operating Income | | | $ | 10,318 | | | $ | 8,470 | | | $ | 1,848 | |
% of Revenues | | 9.6% |
| | 14.9% |
| | | % of Revenues | | | 9.6% | | 9.6% | |
Revenues increased 4.2%22.2%, or $3.5$19.5 million, to $87.9$107.4 million in the three months ended March 31, 20202021 compared to $84.4$87.9 million for the corresponding period of 2019.2020. The increase was primarily related to higher levels of in-plant inspection, maintenance and modification services totaling $23.0 million as well as increases in revenues in our parts manufacturing and nuclear fuel handling businesses when compared to the same period in the prior year. This was partially offset by lower activity in our nuclear components business of $9.5$12.3 million, largely attributable to increased activityprimarily associated with a major steam generator design and supply contract as well as the Laker Energy Products acquisition. These increases were partially offset by lower levels of in-plant inspection, maintenance and modification services when compared to the same period in the prior year.contract.
Operating income decreased $4.1increased $1.8 million to $8.5$10.3 million in the three months ended March 31, 20202021 compared to $12.6$8.5 million for the corresponding period of 2019, primarily attributable to a decline in operating margins as a result of a shift in our product line mix when compared to the same period in the prior year.
Nuclear Services Group
|
| | | | | | | | | | | | |
| | Three Months Ended March 31, | | |
| | 2020 | | 2019 | | $ Change |
| | (In thousands) |
Revenues | | $ | 36,765 |
| | $ | 29,094 |
| | $ | 7,671 |
|
Operating Income | | $ | 6,400 |
| | $ | 1,571 |
| | $ | 4,829 |
|
% of Revenues | | 17.4% |
| | 5.4% |
| | |
Revenues increased 26.4%, or $7.7 million, to $36.8 million in the three months ended March 31, 2020, compared to $29.1 million for the corresponding period of 2019. The increase was primarily attributable to an increase in the volume of commercial nuclear inspection and maintenance outage work in the U.S. when compared to the same period in the prior year.
Operating income increased $4.8 million to $6.4 million in the three months ended March 31, 2020 compared to $1.6 million for the corresponding period of 2019 due to the operating income impact of the changes in revenue noted above.
OtherNuclear Services Group
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Three Months Ended March 31, | | |
| | | | | | | | 2021 | | 2020 | | $ Change |
| | | | | | | | (In thousands) |
Revenues | | | | | | | | $ | 25,483 | | | $ | 36,765 | | | $ | (11,282) | |
Operating Income | | | | | | | | $ | 5,747 | | | $ | 6,400 | | | $ | (653) | |
% of Revenues | | | | | | | | 22.6% | | 17.4% | | |
|
| | | | | | | | | | | | |
| | Three Months Ended March 31, | | |
| | 2020 | | 2019 | | $ Change |
| | (In thousands) |
Operating Income | | $ | (5,359 | ) | | $ | (6,096 | ) | | $ | 737 |
|
Operating income increased $0.7Revenues decreased 30.7%, or $11.3 million, to $25.5 million in the three months ended March 31, 2020, primarily due2021 compared to a decrease in research and development related activities related to our medical and industrial radioisotope capabilities and other advanced technologies when compared to$36.8 million for the corresponding period of 2020. The decrease was primarily attributable to the prior year.divestiture of our U.S.-based commercial nuclear services business during the second quarter of 2020 and lower revenues at our Naval Reactor decommissioning and decontamination project due to the completion of several portions of the contract in the third quarter of 2020. These decreases were partially offset by an increase in design and engineering work executed by our advanced technologies business.
Unallocated Corporate
Unallocated corporate expensesOperating income decreased $0.4$0.7 million to $5.7 million in the three months ended March 31, 2021 compared to $6.4 million for the corresponding period of 2020 due to the operating income impact of the changes in revenues noted above, largely offset by higher fee income at several of our sites.
Other
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Three Months Ended March 31, | | |
| | | | | | | | 2021 | | 2020 | | $ Change |
| | | | | | | | (In thousands) |
Operating Income | | | | | | | | $ | (5,886) | | | $ | (5,359) | | | $ | (527) | |
Operating income decreased $0.5 million in the three months ended March 31, 2021, primarily due to a decreasean increase in costs associated with the commercialization of our new medical radioisotope technology. This was partially offset by a decrease in research and development related activities.
Unallocated Corporate
Unallocated corporate expenses increased $0.5 million in the three months ended March 31, 2021, primarily due to an increase in costs associated with salaries and benefits programs when compared to the same period in the prior year, which was partially offset by an increasea decrease in legal and consulting costs associated with due diligence activities conducted in the currentprior year.
Provision for Income Taxes
| | | | Three Months Ended March 31, | | | | | | Three Months Ended March 31, | | |
| | 2020 | | 2019 | | $ Change | | | | 2021 | | 2020 | | $ Change |
| | (In thousands) | | | | (In thousands) |
Income before Provision for Income Taxes | | $ | 98,448 |
| | $ | 62,877 |
| | $ | 35,571 |
| Income before Provision for Income Taxes | | | $ | 91,893 | | | $ | 98,448 | | | $ | (6,555) | |
Provision for Income Taxes | | $ | 22,828 |
| | $ | 13,767 |
| | $ | 9,061 |
| Provision for Income Taxes | | | $ | 22,078 | | | $ | 22,828 | | | $ | (750) | |
Effective Tax Rate | | 23.2% |
| | 21.9% |
| | | Effective Tax Rate | | | 24.0% | | 23.2% | |
We primarily operate in the U.S. and Canada, and we recognize our U.S. income tax provision based on the U.S. federal statutory rate of 21% and our Canadian tax provision based on the Canadian local statutory rate of approximately 25%.
Our effective tax rate for the three months ended March 31, 20202021 was 23.2%24.0% as compared to 21.9%23.2% for the three months ended March 31, 2019.2020. The effective tax rates for the three months ended March 31, 20202021 and 20192020 were higher than the U.S. corporate income tax rate of 21% primarily due to state income taxes within the U.S.U.S and the unfavorable rate differential associated with our Canadian earnings. Our effective tax rates for the three months ended March 31, 20202021 and 20192020 were favorably impacted by benefits recognized for excess tax benefits recognized related to employee share-based payments of $0.7$0.2 million and $1.7$0.7 million, respectively.
Backlog
Backlog represents the dollar amount of revenue we expect to recognize in the future from contracts awarded and in progress. Not all of our expected revenue from a contract award is recorded in backlog for a variety of reasons, including that some projects are awarded and completed within the same fiscal quarter.reporting period.
Our backlog is equal to our remaining performance obligations under contracts that meet the criteria in FASB Topic Revenue from Contracts with Customers, as discussed in Note 3 to our condensed consolidated financial statements included in this Report. It is possible that our methodology for determining backlog may not be comparable to methods used by other companies.
We are subject to the budgetary and appropriations cycle of the U.S. Government as it relates to our Nuclear Operations Group and Nuclear Services Group segments. Backlog may not be indicative of future operating results, and projects in our backlog may be cancelled, modified or otherwise altered by customers.
| | | | March 31, 2020 | | December 31, 2019 | | March 31, 2021 | | December 31, 2020 |
| | (In approximate millions) | | (In approximate millions) |
Nuclear Operations Group | | $ | 4,282 |
| | $ | 4,515 |
| Nuclear Operations Group | | $ | 4,448 | | | $ | 3,659 | |
Nuclear Power Group | | 778 |
| | 730 |
| Nuclear Power Group | | 697 | | | 726 | |
Nuclear Services Group | | 51 |
| | 43 |
| Nuclear Services Group | | 48 | | | 21 | |
Total Backlog | | $ | 5,111 |
| | $ | 5,288 |
| Total Backlog | | $ | 5,193 | | | $ | 4,406 | |
We do not include the value of our unconsolidated joint venture contracts in backlog. These unconsolidated joint ventures are included in our Nuclear Services Group segment.
Of the backlog at March 31, 2020 backlog,2021, we expect to recognize revenues as follows:
| | | | 2020 | | 2021 | | Thereafter | | Total | | 2021 | | 2022 | | Thereafter | | Total |
| | (In approximate millions) | | (In approximate millions) |
Nuclear Operations Group | | $ | 1,116 |
| | $ | 1,043 |
| | $ | 2,123 |
| | $ | 4,282 |
| Nuclear Operations Group | | $ | 1,156 | | | $ | 1,192 | | | $ | 2,100 | | | $ | 4,448 | |
Nuclear Power Group | | 183 |
| | 183 |
| | 412 |
| | 778 |
| Nuclear Power Group | | 223 | | | 179 | | | 295 | | | 697 | |
Nuclear Services Group | | 34 |
| | 6 |
| | 11 |
| | 51 |
| Nuclear Services Group | | 45 | | | 3 | | | — | | | 48 | |
Total Backlog | | $ | 1,333 |
| | $ | 1,232 |
| | $ | 2,546 |
| | $ | 5,111 |
| Total Backlog | | $ | 1,424 | | | $ | 1,374 | | | $ | 2,395 | | | $ | 5,193 | |
At March 31, 2020,2021, our Nuclear Operations Group segment's backlog with the U.S. Government was $3,835.2$4,059.5 million, $429.2$110.4 million of which had not yet been funded.
At March 31, 2020,2021, our Nuclear Power Group segment had no backlog with the U.S. Government.
At March 31, 2020,2021, our Nuclear Services Group segment's backlog with the U.S. Government was $27.5$46.3 million, all of which was funded.
Major new awards from the U.S. Government are typically received following Congressional approval of the budget for the U.S. Government's next fiscal year, which starts October 1, and may not be awarded to us before the end of the calendar year. Due to the fact that most contracts awarded by the U.S. Government are subject to these annual funding approvals, the total values of the underlying programs are significantly larger. In 2019,March 2021, we received awards from the U.S. Government with a combined value in excess of $3.9$2.2 billion, inclusive of unexercised options, approximately $2.9$1.1 billion of which had been added to backlog as of March 31, 2020. 2021.
The value of unexercised options excluded from backlog as of March 31, 20202021, including previous awards, was approximately $1.5 billion. Approximately $1.0 billion which isof these unexercised options are expected to be awarded in 2021, with the remaining balance to be exercised through 2025,2024, subject to annual Congressional appropriations.
Liquidity and Capital Resources
Credit Facility
On March 24, 2020, we entered into an Amendment No. 1 to Credit Agreement, (the "Amendment"), which amended the Credit Agreement dated as of May 24, 2018 (the(as amended, the "Credit Facility") with Wells Fargo Bank, N.A., as administrative agent, and the other lenders party thereto. The Credit Facility originally providedprovides for a $500$750 million senior secured revolving credit facility (the "Revolving Credit Facility"), a $50 million U.S. dollar senior secured term loan A made available to the Company (the "USD Term Loan") and a $250 million (U.S. dollar equivalent) Canadian dollar senior secured term loan A made available to BWXT Canada Ltd. (the "CAD Term Loan" and together with the USD Term Loan, the "Term Loans").
The Amendment, among other things, (1) provided additional commitments to increase the Revolving Credit Facility by $250 million, such that the Revolving Credit Facility is now $750 million; (2) extended the maturity date of the Revolving Credit Facility to March 24, 2025; (3) removed BWXT Canada Ltd. as a borrower under the Revolving Credit Facility; (4) modified the applicable margin for borrowings under the Revolving Credit Facility to be, at the Company's option, either (i) the Eurocurrency rate plus a margin ranging from 1.0% to 1.75% per year or (ii) the base rate plus a margin ranging from 0.0% to 0.75% per year, in each case depending on the Company's leverage ratio; (5) modified the commitment fee on the unused portion of the Revolving Credit Facility to range from 0.15% to 0.225% per year, depending on the Company's leverage ratio; and (6) modified the letter of credit fee with respect to each financial letter of credit and performance letter of credit issued under the Revolving Credit Facility to range from 1.0% to 1.75% and 0.75% to 1.05% per year, respectively, in each case, depending on the Company's leverage ratio.
The Term Loans are scheduled to mature on May 24, 2023, and all All obligations under the Revolving Credit Facility are scheduled to mature on March 24, 2025. The proceeds of loans under the Revolving Credit Facility are available for working capital needs, permitted acquisitions and other general corporate purposes.
The Credit Facility allows for additional parties to become lenders and, subject to certain conditions, for the increase of the commitments under the Credit Facility, subject to an aggregate maximum for all additional commitments of (1) the greater of (a) $250 million and (b) 65% of EBITDA, as defined in the Credit Facility, for the last four full fiscal quarters, plus (2) all voluntary prepayments of the Term Loans,term loans, plus (3) additional amounts provided the Company is in compliance with a pro forma first lien leverage ratio test of less than or equal to 2.50 to 1.00.
The Company's obligations under the Credit Facility are guaranteed, subject to certain exceptions, by substantially all of the Company's present and future wholly owned domestic restricted subsidiaries. The obligations of BWXT Canada Ltd. under
the CAD Term Loan are guaranteed, subject to certain exceptions, by substantially all of the Company's present and future wholly owned Canadian and domestic restricted subsidiaries.
The Credit Facility is secured by first-priority liens on certain assets owned by the Company and its subsidiary guarantors (other than its subsidiaries comprising its Nuclear Operations Group segment and a portion of its Nuclear Services Group segment); provided that (1) the Company's domestic obligations are only secured by assets and property of the domestic loan parties and (2) the obligations of BWXT Canada Ltd. and the Canadian guarantors are secured by assets and property of the Canadian guarantors and the domestic loan parties..
The Revolving Credit Facility requires interest payments on revolving loans on a periodic basis until maturity. We began making quarterly amortization payments on the Term Loans in amounts equal to 1.25% of the initial aggregate principal amount of each loan in the third quarter of 2018. We may prepay all loans under the Credit Facility at any time without premium or penalty (other than customary Eurocurrency breakage costs), subject to notice requirements.
The Credit Facility includes financial covenants that are tested on a quarterly basis, based on the rolling four-quarter period that ends on the last day of each fiscal quarter. The maximum permitted leverage ratio is 4.00 to 1.00, which may be increased to 4.50 to 1.00 for up to four consecutive fiscal quarters after a material acquisition. The minimum consolidated interest coverage ratio is 3.00 to 1.00. In addition, the Credit Facility contains various restrictive covenants, including with
respect to debt, liens, investments, mergers, acquisitions, dividends, equity repurchases and asset sales. As of March 31, 2020,2021, we were in compliance with all covenants set forth in the Credit Facility.
The Term Loans bear interest at our option at either (1) the Eurocurrency rate plus a margin ranging from 1.25% to 2.0% per year or (2) the base rate or Canadian index rate, as applicable (described in the Credit Facility as the highest of (a) with respect to the base rate only, the federal funds rate plus 0.5%, (b) the one-month Eurocurrency rate plus 1.0% and (c) the administrative agent's prime rate or the Canadian prime rate, as applicable), plus, in each case, a margin ranging from 0.25% to 1.0% per year. Outstanding loans under the Revolving Credit Facility bear interest at our option at either (1) the Eurocurrency rate plus a margin ranging from 1.0% to 1.75% per year or (2) the base rate plus a margin ranging from 0.0% to 0.75% per year. We are charged a commitment fee on the unused portion of the Revolving Credit Facility, and that fee ranges from 0.15% to 0.225% per year. Additionally, we are charged a letter of credit fee of between 1.0% and 1.75% per year with respect to the amount of each financial letter of credit issued under the Credit Facility, and a letter of credit fee of between 0.75% and 1.05% per year with respect to the amount of each performance letter of credit issued under the Credit Facility. The applicable margin for loans, the commitment fee and the letter of credit fees set forth above will vary quarterly based on our leverage ratio. Based on the leverage ratio applicable at March 31, 2020, the margin for Eurocurrency rate and base rate or Canadian index rate term loans was 1.375% and 0.375%, respectively,2021, the margin for Eurocurrency rate and base rate revolving loans was 1.25% and 0.25%, respectively, the letter of credit fee for financial letters of credit and performance letters of credit was 1.25% and 0.825%, respectively, and the commitment fee for the unused portion of the Revolving Credit Facility was 0.175%.
As of March 31, 2020,2021, borrowings outstanding totaled $254.1 million and $280.0 million under the Term Loans and Revolving Credit Facility, respectively, and letters of credit issued under the Revolving Credit Facility totaled $65.7 million.$230.0 million and $28.6 million, respectively. As a result, as of March 31, 2021 we had $404.3$491.4 million available under the Revolving Credit Facility for borrowings orand to meet letter of credit requirements as of March 31, 2020.requirements. As of March 31, 2020,2021, the weighted-average interest rate on outstanding borrowings under our Credit Facility was 2.40%1.36%.
The Credit Facility generally includes customary events of default for a secured credit facility. Under the Credit Facility, (1) if an event of default relating to bankruptcy or other insolvency events occurs with respect to the Company, all related obligations will immediately become due and payable; (2) if any other event of default exists, the lenders will be permitted to accelerate the maturity of the related obligations outstanding; and (3) if any event of default exists, the lenders will be permitted to terminate their commitments thereunder and exercise other rights and remedies, including the commencement of foreclosure or other actions against the collateral.
If any default occurs under the Credit Facility, or if we are unable to make any of the representations and warranties in the Credit Facility, we will be unable to borrow funds or have letters of credit issued under the Credit Facility.
Senior Notes due 2026
We issued $400.0$400 million aggregate principal amount of 5.375% senior notes due 2026 (the "Senior Notes"Notes due 2026") pursuant to an indenture dated May 24, 2018 (the "Indenture""2018 Indenture"), among the Company, certain of our subsidiaries, as guarantors, and U.S. Bank National Association, as trustee. The Senior Notes due 2026 are guaranteed by each of the Company's present and future direct and indirect wholly owned domestic subsidiaries that is a guarantor under the Credit Facility.
Interest on the Senior Notes due 2026 is payable semi-annually in cash in arrears on January 15 and July 15 of each year which commenced on July 15, 2018, at a rate of 5.375% per annum. The Senior Notes due 2026 will mature on July 15, 2026.
On and after July 15, 2021, the Companywe may redeem the Senior Notes due 2026, in whole or in part, at a redemption price equal to (i) 102.688% of the principal amount to be redeemed if the redemption occurs during the twelve-month period beginning on July 15, 2021, (ii) 101.344% of the principal amount to be redeemed if the redemption occurs during the twelve-month period beginning on July 15, 2022 and (iii) 100%100.0% of the principal amount to be redeemed if the redemption occurs on or after July 15, 2023, in each case plus accrued and unpaid interest, if any, to, but excluding, the redemption date. At any time prior to July 15, 2021, the Companywe may also redeem up to 40%40.0% of the Senior Notes due 2026 with net cash proceeds of certain equity offerings at a redemption price equal to 105.375% of the principal amount of the Senior Notes due 2026 to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, at any time prior to July 15, 2021, the Companywe may redeem the Senior Notes due 2026, in whole or in part, at a redemption price equal to 100%100.0% of the principal amount of the Senior Notes due 2026 to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date plus an applicable "make-whole" premium.
The 2018 Indenture contains customary events of default, including, among other things, payment default, failure to comply with covenants or agreements contained in the 2018 Indenture or the Senior Notes due 2026 and certain provisions related to bankruptcy events. The 2018 Indenture also contains customary negative covenants. As of March 31, 2020,2021, we were in compliance with all covenants set forth in the 2018 Indenture and the Senior Notes.Notes due 2026.
Senior Notes due 2028
We issued $400 million aggregate principal amount of 4.125% senior notes due 2028 (the "Senior Notes due 2028") pursuant to an indenture dated June 12, 2020 (the "2020 Indenture"), among the Company, certain of our subsidiaries, as guarantors, and U.S. Bank National Association, as trustee. The Senior Notes due 2028 are guaranteed by each of the Company's present and future direct and indirect wholly owned domestic subsidiaries that is a guarantor under the Credit Facility.
Interest on the Senior Notes due 2028 is payable semi-annually in cash in arrears on June 30 and December 30 of each year at a rate of 4.125% per annum. The Senior Notes due 2028 will mature on June 30, 2028.
We may redeem the Senior Notes due 2028, in whole or in part, at any time on or after June 30, 2023 at a redemption price equal to (i) 102.063% of the principal amount to be redeemed if the redemption occurs during the twelve-month period beginning on June 30, 2023, (ii) 101.031% of the principal amount to be redeemed if the redemption occurs during the twelve-month period beginning on June 30, 2024 and (iii) 100.0% of the principal amount to be redeemed if the redemption occurs on or after June 30, 2025, in each case plus accrued and unpaid interest, if any, to, but excluding, the redemption date. At any time prior to June 30, 2023, we may also redeem up to 40.0% of the Senior Notes due 2028 with net cash proceeds of certain equity offerings at a redemption price equal to 104.125% of the principal amount of the Senior Notes due 2028 to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, at any time prior to June 30, 2023, we may redeem the Senior Notes due 2028, in whole or in part, at a redemption price equal to 100.0% of the principal amount of the Senior Notes due 2028 to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date plus an applicable "make-whole" premium.
The 2020 Indenture contains customary events of default, including, among other things, payment default, failure to comply with covenants or agreements contained in the 2020 Indenture or the Senior Notes due 2028 and certain provisions related to bankruptcy events. The 2020 Indenture also contains customary negative covenants. As of March 31, 2021, we were in compliance with all covenants set forth in the 2020 Indenture and the Senior Notes due 2028.
Other Arrangements
We have posted surety bonds to support regulatory and contractual obligations for certain decommissioning responsibilities, projects and legal matters. We utilize bonding facilities to support such obligations, but the issuance of bonds under those facilities is typically at the surety's discretion, and the bonding facilities generally permit the surety, in its sole discretion, to terminate the facility or demand collateral. Although there can be no assurance that we will maintain our surety bonding capacity, we believe our current capacity is adequate to support our existing requirements for the next twelve months. In addition, these bonds generally indemnify the beneficiaries should we fail to perform our obligations under the applicable agreements. We, and certain of our subsidiaries, have jointly executed general agreements of indemnity in favor of surety underwriters relating to surety bonds those underwriters issue. As of March 31, 2020,2021, bonds issued and outstanding under these arrangements totaled approximately $72.9$110.3 million.
Long-term Benefit Obligations
As of March 31, 2020,2021, we had underfunded defined benefit pension and postretirement benefit plans with obligations totaling approximately $190.1$162.9 million. These long-term liabilities are expected to require use of our resources to satisfy future funding obligations. Based largely on statutory funding requirements, we expect to make contributions of approximately $6.7$4.6 million for the remainder of 20202021 related to our pension and postretirement plans. We may also make additional contributions based on a variety of factors including, but not limited to, tax planning, evaluation of funded status and risk mitigation strategies.
Other
Our domestic and foreign cash and cash equivalents, restricted cash and cash equivalents and investments as of March 31, 20202021 and December 31, 20192020 were as follows:
| | | | March 31, 2020 | | December 31, 2019 | | March 31, 2021 | | December 31, 2020 |
| | (In thousands) | | | (In thousands) |
Domestic | | $ | 70,826 |
| | $ | 76,337 |
| Domestic | | $ | 47,706 | | | $ | 31,376 | |
Foreign | | 22,701 |
| | 29,526 |
| Foreign | | 29,153 | | | 29,985 | |
Total | | $ | 93,527 |
| | $ | 105,863 |
| Total | | $ | 76,859 | | | $ | 61,361 | |
Our working capital increased by $118.8$111.4 million to $343.9$355.3 million at March 31, 20202021 from $225.0$243.9 million at December 31, 2019,2020, primarily attributable to changes in contracts in progress, advance billings and retainages due to the timing of project cash flows and a decrease in current liabilities associated with the timing of vendor payments and the payment of accrued incentives during the three months ended March 31, 2020.
2021.
Our net cash provided by operating activities increased by $104.9 million to $98.4 million in the three months ended March 31, 2021, compared to cash used in operating activities decreased by $11.3 million tooperations of $6.4 million in the three months ended March 31, 2020, compared to $17.7 million in the three months ended March 31, 2019.2020. The decreaseincrease in cash used inprovided by operating activities was primarily attributable to an increase in net income partially offset by an increase in working capital needs for the period ended March 31, 2020.timing of project cash flows.
Our net cash used in investing activities increased by $34.3$23.3 million to $102.0 million in the three months ended March 31, 2021, compared to $78.8 million in the three months ended March 31, 2020, compared to $44.5 million in the three months ended March 31, 2019.2020. The increase in cash used in investing activities was primarily attributable to an increase in purchases of property, plant and equipment of $20.2$37.2 million, as well aspartially offset by a $16.2 million decrease attributable to our acquisition of Laker Energy Products for $16.2 millionPrecision Manufacturing in the three months ended March 31, 2020.
Our net cash provided by financing activities increaseddecreased by $22.3$58.5 million to $19.3 million in the three months ended March 31, 2021, compared to $77.8 million in the three months ended March 31, 2020, compared to $55.4 million in the three months ended March 31, 2019.2020. The increasedecrease in cash provided by financing activities was primarily attributable to the repayment of bank overdrafts of $88.7 million, partially offset by an increase in net borrowings of $17.4long-term debt of $38.6 million.
At March 31, 2020,2021, we had restricted cash and cash equivalents totaling $5.9$5.7 million, $2.8$2.7 million of which was held for future decommissioning of facilities (which is included in other assets on our condensed consolidated balance sheets) and $3.1 million of which was held to meet reinsurance reserve requirements of our captive insurer.
At March 31, 2020,2021, we had short-term and long-term investments with a fair value of $10.0$13.4 million. Our investment portfolio consists primarily of U.S. Government and agency securities, corporate bonds and mutual funds. Our debt securities are carried at fair value and are either classified as trading, with unrealized gains and losses reported in earnings, or as available-for-sale, with unrealized gains and losses, net of tax, being reported as a component of other comprehensive income. Our equity securities are carried at fair value with the unrealized gains and losses reported in earnings.
Based on our liquidity position, we believe we have sufficient cash and letter of credit and borrowing capacity to fund our operating requirements for at least the next 12 months.
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Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposures to market risks have not changed materially from those disclosed in Item 7A included in Part II of our 20192020 10-K.
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Item 4. | CONTROLS AND PROCEDURES |
Item 4. CONTROLS AND PROCEDURES
As of the end of the period covered by this quarterly report,Report, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) adopted by the Securities and Exchange Commission ("SEC") under the Exchange Act). This evaluation was conducted under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer. Our disclosure controls and procedures were developed through a process in which our management applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding the control objectives. You should note that the design of any system of disclosure controls and procedures is based in part upon
various assumptions about the likelihood of future events, and we cannot assure you that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Based on the evaluation referred to above, our Chief Executive Officer and Chief Financial Officer concluded that the design and operation of our disclosure controls and procedures are effective as of March 31, 20202021 to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and such information is accumulated and communicated to management as appropriate to allow timely decisions regarding disclosure. There has been no change in our internal control over financial reporting during the three months ended March 31, 20202021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
For information regarding ongoing investigations and litigation, see Note 65 to our unaudited condensed consolidated financial statements in Part I of this Report, which we incorporate by reference into this Item.
Item 1A. RISK FACTORS
In addition to the other information in this Report, the other factors presented in Item 1A "Risk Factors" in our 20192020 10-K are some of the factors that could materially affect our business, financial condition or future results. There have been no material changes to our risk factors from those disclosed in our 2019 10-K, except as noted below:2020 10-K.
Actual or threatened public health epidemics or outbreaks, such as the recent outbreak of the COVID-19 illness, could have a material adverse effect on our business and results of operations.
Actual or threatened public health epidemics or outbreaks, such as the recent global outbreak of the novel coronavirus disease ("COVID-19"), could have a material adverse effect on our business and results of operations. COVID-19, which has been declared by the World Health Organization to be a pandemic, has spread to over 200 countries, including every state in the United States. COVID-19 is impacting worldwide economic activity and has resulted in travel disruption, trade disruption and has affected companies’ operations around the world, including us. A public health epidemic, including COVID-19, poses the risk that we or our employees, contractors, suppliers and other partners may be prevented from conducting business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities. On March 13, 2020, the United States declared a national emergency with respect to COVID-19 and more than 40 states have since issued orders requiring the closing of nonessential businesses and/or requiring residents to stay at home. If significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions, facility closures or other restrictions in connection with the COVID-19 pandemic, our operations will likely be impacted. Although our U.S. and Canadian facilities have to date been deemed "essential" by federal, state and local authorities and currently continue to operate, there can be no assurance that such authorities will not impose restrictions on the operations of our facilities as a result of the COVID-19 pandemic or that our facilities will continue to operate during the pandemic. If our operations or the operations of our suppliers are restricted, we may be unable to perform fully on our contracts and our costs may increase as a result of the COVID-19 outbreak. These cost increases may result in unfavorable changes in estimate which may not be fully recoverable or adequately covered by insurance.
While it is not possible at this time to estimate the impact that COVID-19 could have on our business, the continued spread of COVID-19 and the measures taken by the governments of countries affected, as well as measures taken by state and local authorities in the United States, could disrupt the supply chain and the manufacture or shipment of our products and adversely impact our business, financial condition or results of operations. We have already experienced delays in the bidding and contracting process for our U.S. Government businesses, as well as the rescheduling of certain services that our U.S. and Canadian nuclear service businesses provide during nuclear power plant outages. More widespread or further delays could have a material adverse impact on our results of operations.
The COVID-19 outbreak and mitigation measures may also have an adverse impact on global economic conditions, which could have an adverse effect on our business. The extent to which the COVID-19 outbreak impacts our business will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.
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Item 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Since November 2012, we have periodically announced that our Board of Directors has authorized share repurchase programs. The following table provides information on our purchases of equity securities during the three months ended March 31, 2020.2021. Any shares purchased that were not part of a publicly announced plan or program are related to repurchases of common stock pursuant to the provisions of employee benefit plans that permit the repurchase of shares to satisfy statutory tax withholding obligations.
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Period | | Total number of shares purchased (1) | | Average price paid per share | | Total number of shares purchased as part of publicly announced plans or programs | | Approximate dollar value of shares that may yet be purchased under the plans or programs (in millions) (2) |
January 1, 2021 - January 31, 2021 | | 239,262 | | | $ | 58.70 | | | 239,262 | | | $ | 129.3 | |
February 1, 2021 - February 28, 2021 | | 118,997 | | | $ | 56.82 | | | 105,094 | | | $ | 123.4 | |
March 1, 2021 - March 31, 2021 | | 64,216 | | | $ | 60.42 | | | — | | | $ | 123.4 | |
Total | | 422,475 | | | $ | 58.43 | | | 344,356 | | | |
(1)Includes 13,903 and 64,216 shares repurchased during February and March, respectively, pursuant to the provisions of employee benefit plans that permit the repurchase of shares to satisfy statutory tax withholding obligations.
(2)On November 6, 2018, we announced that our Board of Directors authorized us to repurchase an indeterminate number of shares of our common stock at an aggregate market value of up to $250 million during a three-year period that expires on November 6, 2021.
On April 30, 2021, our Board of Directors authorized us to repurchase an indeterminate number of shares of our common stock at an aggregate market value of up to $500 million with no expiration date. The April 2021 authorization was in addition to the share repurchase amount authorized in November 2018.
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| | | | | | | | | | | | | | |
Period | | Total number of shares purchased (1) | | Average price paid per share | | Total number of shares purchased as part of publicly announced plans or programs | | Approximate dollar value of shares that may yet be purchased under the plans or programs (in millions) (2) |
January 1, 2020 - January 31, 2020 | | 186,639 |
| | $ | 65.41 |
| | 186,639 |
| | $ | 153.1 |
|
February 1, 2020 - February 29, 2020 | | 129,796 |
| | $ | 66.16 |
| | 116,001 |
| | $ | 145.3 |
|
March 1, 2020 - March 31, 2020 | | 77,173 |
| | $ | 55.47 |
| | — |
| | $ | 145.3 |
|
Total | | 393,608 |
| | $ | 63.71 |
| | 302,640 |
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(1) | Includes 0, 13,795 and 77,173 shares repurchased during January, February and March, respectively, pursuant to the provisions of employee benefit plans that permit the repurchase of shares to satisfy statutory tax withholding obligations. |
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(2) | On November 6, 2018, we announced that our Board of Directors authorized us to repurchase an indeterminate number of shares of our common stock at an aggregate market value of up to $250 million during a three-year period that expires on November 6, 2021. |
Item 6. EXHIBITS
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| | | |
Exhibit Number
| | Description |
3.1 | | |
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3.2 | | |
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3.3 | | |
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10.14.1 | | Amendment No. 1 to Credit Agreement,Indenture, dated as of March 24, 2020,April 13, 2021, among BWX Technologies, Inc., each of the guarantors party thereto and U.S. Bank National Association, as administrative borrower, BWXT Canada Ltd., as the Canadian borrower, Wells Fargo Bank, N.A., as administrative borrower and the other lenders party theretotrustee (incorporated by reference to Exhibit 10.14.1 to the Company's Current Report on Form 8-K filed with the SEC on March 25, 2020 (File No. 1-34658))April 13, 2021). |
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10.2*4.2 | | |
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10.3*31.1 | | |
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31.1 | | |
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31.2 | | |
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32.1 | | |
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32.2 | | |
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101.INS | | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
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101.SCH | | XBRL Taxonomy Extension Schema Document |
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101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB | | XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document |
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104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* Management contract or compensatory plan or arrangement.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| | | | BWX TECHNOLOGIES, INC. |
| | |
| | | | /s/ David S. Black |
| | By: | | David S. Black |
| | | | Senior Vice President and Chief Financial Officer |
| | | | (Principal Financial Officer and Duly Authorized |
| | | | Representative) |
| | |
| | | | /s/ Jason S. Kerr |
| | By: | | Jason S. Kerr |
| | | | Vice President and Chief Accounting Officer |
| | | | (Principal Accounting Officer and Duly Authorized |
| | | | Representative) |
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May 4, 20203, 2021 | | | | |