BWX Technologies Inc

Previous wording

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 of our 2023 10-K. There have been no material changes to our critical accounting policies and estimates during the three months ended March 31, 2024.

Current wording

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 of our 2023 10-K. There have been no material changes to our critical accounting policies and estimates during the six months ended June 30, 2024.

Previous wording

As we progress on our contracts and the underlying performance obligations, 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. The aggregate impact of changes in estimates decreased our revenue and operating income as follows:

Current wording

As we progress on our contracts and the underlying performance obligations, 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. The aggregate impact of changes in estimates decreased our revenues and operating income as follows:

Previous wording

(1)During the three months ended March 31, 2024 and 2023, no adjustment to any one contract had a material impact on our consolidated financial statements.

Current wording

(1)During the three and six months ended June 30, 2024 and 2023, no adjustment to any one contract had a material impact on our consolidated financial statements.

Previous wording

Results of Operations – Three Months Ended March 31, 2024 vs. Three Months Ended March 31, 2023

Current wording

Results of Operations – Three and Six Months Ended June 30, 2024 vs. Three and Six Months Ended June 30, 2023

Previous wording

Consolidated revenues increased 6.3%, or $35.6 million, to $604.0 million in the three months ended March 31, 2024 compared to $568.4 million for the corresponding period of 2023 due to increases in our Government Operations and Commercial Operations segments of $27.2 million and $8.1 million, respectively.

Current wording

Consolidated revenues increased 11.3%, or $69.0 million, to $681.5 million in the three months ended June 30, 2024 compared to $612.4 million for the corresponding period of 2023 due to increases in our Government Operations and Commercial Operations segments of $48.9 million and $20.6 million, respectively.

Previous wording

Consolidated operating income increased $5.1 million to $93.0 million in the three months ended March 31, 2024 compared to $87.8 million for the corresponding period of 2023. Operating income in our Commercial Operations segment increased $7.1 million and we also experienced lower Unallocated Corporate expenses of $2.9 million. These increases were partially offset by a decrease in operating income in our Government Operations segment of $4.9 million when compared to the corresponding period in the prior year.

Current wording

Consolidated operating income increased $12.1 million to $98.8 million in the three months ended June 30, 2024 compared to $86.7 million for the corresponding period of 2023. Operating income in our Government Operations and Commercial Operations segments increased $10.3 million and $5.6 million, respectively. These increases were partially offset by an increase in Unallocated Corporate expenses of $3.8 million when compared to the corresponding period in the prior year.

Previous wording

Operating income decreased $4.9 million to $85.7 million in the three months ended March 31, 2024 compared to $90.6 million for the corresponding period of 2023. The decrease was due to a shift in product line mix which, when compared to the corresponding period of the prior year, offset the operating income impact of the changes in revenues noted above. In addition, we experienced higher levels of selling, general and administrative expenses primarily related to business development which was caused by the timing of bid and proposal activities.

Current wording

Operating income increased $10.3 million to $92.5 million in the three months ended June 30, 2024 compared to $82.2 million for the corresponding period of 2023, primarily driven by the operating income impact of the changes in revenues noted above. This was partially offset by investments in new digital and transformation related initiatives that caused an increase in selling, general and administrative expenses when compared to the corresponding period of the prior year.

Previous wording

Revenues increased $27.2 million, or 5.9%, to $487.1 million in the three months ended March 31, 2024 compared to $459.9 million for the corresponding period of 2023. The increase was primarily driven by continued growth in design and engineering work executed by our advanced technologies business, particularly in the defense market, which resulted in additional revenues of $23.8 million. We also experienced an increase in revenues associated with higher volume in the manufacture of nuclear components for U.S. Government programs, partially offset by the timing of long-lead material procurements when compared to the corresponding period in the prior year.

Current wording

Revenues increased $76.1 million, or 8.0%, to $1,028.0 million in the six months ended June 30, 2024 compared to $951.9 million for the corresponding period of 2023. The increase was primarily driven by higher volume in the manufacture of nuclear components for U.S. Government programs, partially offset by the timing of long-lead material procurements when compared to the corresponding period in the prior year. Continued growth in design and engineering work executed by our advanced technologies business, particularly in the defense market, resulted in additional revenues of $38.3 million.

Previous wording

Operating income increased $7.1 million to $8.6 million in the three months ended March 31, 2024 compared to $1.5 million for the corresponding period of 2023. The increase was primarily due to higher revenues noted above, a shift in our product mix and a decrease in restructuring related costs of $2.2 million when compared to the corresponding period of the prior year.

Current wording

Operating income increased $5.6 million to $16.6 million in the three months ended June 30, 2024 compared to $11.0 million for the corresponding period of 2023. The increase was primarily due to the increase in revenues noted above as well as a shift in our product mix.

Previous wording

Revenues increased 7.4%, or $8.1 million, to $117.0 million in the three months ended March 31, 2024 compared to $108.9 million for the corresponding period of 2023. The increase was primarily related to higher revenues for in-plant inspection, maintenance, modification, and refurbishment services totaling $9.3 million as well as higher volume in our medical radioisotopes and fuel businesses. These increases were partially offset by lower activity in our nuclear fuel handling, nuclear components and parts manufacturing businesses.

Current wording

Revenues increased 12.5%, or $28.7 million, to $258.5 million in the six months ended June 30, 2024 compared to $229.8 million for the corresponding period of 2023. The increase was primarily related to in-plant inspection, maintenance and modification services totaling $17.8 million as well as higher revenues in our medical radioisotope and fuel fabrication businesses partially offset by lower revenues in our fuel handling and components parts manufacturing businesses.

Previous wording

We primarily operate in the U.S., Canada and the U.K. and recognize our U.S. income tax provision based on the U.S. federal statutory rate of 21%, our Canadian tax provision based on the Canadian local statutory rate of approximately 25%, and our U.K. tax provision based on the U.K. local statutory rate of 25%.

Current wording

We primarily operate in the U.S., Canada, and the U.K. and we recognize our U.S. income tax provision based on the U.S. federal statutory rate of 21%, our Canadian tax provision based on the Canadian local statutory rate of approximately 25%, and our U.K. tax provision based on the U.K. local statutory rate of 25%.

Previous wording

Our effective tax rate for the three months ended March 31, 2024 was 22.5% as compared to 23.4% for the three months ended March 31, 2023. The effective tax rates for the three months ended March 31, 2024 and 2023 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 foreign earnings.

Current wording

Our effective tax rate for the three months ended June 30, 2024 was 20.3% as compared to 24.7% for the three months ended June 30, 2023. Our effective tax rate for the six months ended June 30, 2024 was 21.3% as compared to 24.1% for the six months ended June 30, 2023. The effective tax rates for the three and six months ended June 30, 2024 approximated the U.S. corporate federal income tax rate of 21% due to the revaluation of our Canadian net deferred tax liabilities which was required by the temporary reduction of the Canadian federal tax rate for qualifying nuclear manufacturers for tax years beginning on or after January 1, 2024. The effective tax rates for the three and six months ended June 30, 2023 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 foreign earnings.

Previous wording

As of March 31, 2024, our ending backlog was $3,635.5 million, which included $416.6 million of unfunded backlog related to U.S. Government contracts. We expect to recognize approximately 80% of the revenue associated with our backlog by the end of 2025, with the remainder to be recognized thereafter.

Current wording

As of June 30, 2024, our ending backlog was $3,534.2 million, which included $379.4 million of unfunded backlog related to U.S. Government contracts. We expect to recognize approximately 68% of the revenue associated with our backlog by the end of 2025, with the remainder to be recognized thereafter.

Previous wording

As of March 31, 2024, borrowings under the Term Loan totaled $242.2 million, borrowings and letters of credit issued under the Revolving Credit Facility totaled $195.0 million and $1.7 million, respectively, and we had $553.3 million available under the Revolving Credit Facility for borrowings and to meet letter of credit requirements. As of March 31, 2024, the weighted-average interest rate on outstanding borrowings under the Credit Facility was 6.68%.

Current wording

As of June 30, 2024, borrowings under the Term Loan totaled $240.6 million, borrowings and letters of credit issued under the Revolving Credit Facility totaled $180.0 million and $1.7 million, respectively, and we had $568.3 million available under the Revolving Credit Facility for borrowings and to meet letter of credit requirements. As of June 30, 2024, the weighted-average interest rate on outstanding borrowings under the Credit Facility was 6.69%.

Previous wording

We may redeem the Senior Notes due 2029, in whole or in part, at any time on or after April 15, 2024 at a redemption price equal to (i) 102.063% of the principal amount to be redeemed if the redemption occurs during the 12-month period beginning on April 15, 2024, (ii) 101.031% of the principal amount to be redeemed if the redemption occurs during the 12-month period beginning on April 15, 2025 and (iii) 100.0% of the principal amount to be redeemed if the redemption occurs on or after April 15, 2026, in each case plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

Current wording

We may redeem the Senior Notes due 2028, in whole or in part, at any time at a redemption price equal to (i) 101.031% of the principal amount to be redeemed if the redemption occurs during the 12-month period beginning on June 30, 2024 and (ii) 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.

Previous wording

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 12-month period beginning on June 30, 2023, (ii) 101.031% of the principal amount to be redeemed if the redemption occurs during the 12-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.

Current wording

We may redeem the Senior Notes due 2029, in whole or in part, at any time at a redemption price equal to (i) 102.063% of the principal amount to be redeemed if the redemption occurs during the 12-month period beginning on April 15, 2024, (ii) 101.031% of the principal amount to be redeemed if the redemption occurs during the 12-month period beginning on April 15, 2025 and (iii) 100.0% of the principal amount to be redeemed if the redemption occurs on or after April 15, 2026, in each case plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

Previous wording

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 12 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, 2024, bonds issued and outstanding under these arrangements totaled approximately $114.0 million.

Current wording

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 12 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 June 30, 2024, bonds issued and outstanding under these arrangements totaled approximately $100.8 million.

Previous wording

Similarly, we have provided letters of credit to governmental agencies and contractual counterparties to support regulatory and contractual obligations for certain decommissioning responsibilities, projects and legal matters. We utilize our Revolving Credit Facility and a bilateral letter of credit facility to support such obligations, but the issuance of letters of credit under our bilateral letter of credit facility is at the issuer’s discretion, and our bilateral letter of credit facility generally permits the issuer, in its sole discretion, to demand collateral if the issuer does not otherwise have the benefit of the collateral under our Credit Facility. Although there can be no assurance that we will maintain our bilateral letter of credit facility capacity, we believe our current capacity, together with capacity under our Revolving Credit Facility, is adequate to support our existing requirements for the next 12 months. As of March 31, 2024, letters of credit issued and outstanding under our bilateral letter of credit facility totaled approximately $36.0 million, and such letters of credit are secured by the collateral under our Credit Facility.

Current wording

Similarly, we have provided letters of credit to governmental agencies and contractual counterparties to support regulatory and contractual obligations for certain decommissioning responsibilities, projects and legal matters. We utilize our Revolving Credit Facility and a bilateral letter of credit facility to support such obligations, but the issuance of letters of credit under our bilateral letter of credit facility is at the issuer’s discretion, and our bilateral letter of credit facility generally permits the issuer, in its sole discretion, to demand collateral if the issuer does not otherwise have the benefit of the collateral under our Credit Facility. Although there can be no assurance that we will maintain our bilateral letter of credit facility capacity, we believe our current capacity, together with capacity under our Revolving Credit Facility, is adequate to support our existing requirements for the next 12 months. As of June 30, 2024, letters of credit issued and outstanding under our bilateral letter of credit facility totaled approximately $35.4 million, and such letters of credit are secured by the collateral under our Credit Facility.

Previous wording

As of March 31, 2024, we had underfunded defined benefit pension and postretirement benefit plans with obligations totaling approximately $101.7 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 $3.9 million for the remainder of 2024 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.

Current wording

As of June 30, 2024, we had underfunded defined benefit pension and postretirement benefit plans with obligations totaling approximately $98.7 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 $2.6 million for the remainder of 2024 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.

Previous wording

Our working capital increased by $35.1 million to $477.8 million at March 31, 2024 from $442.8 million at December 31, 2023, primarily attributable to changes in contracts in progress and retainages due to the timing of project cash flows and a decrease in current liabilities associated with the payment of accrued incentives which were partially offset by the timing of accounts payable.

Current wording

Our working capital increased by $58.5 million to $501.3 million at June 30, 2024 from $442.8 million at December 31, 2023, primarily attributable to changes in contracts in progress due to the timing of project cash flows which was partially offset by the timing of vendor payments.

Previous wording

Our net cash provided by operating activities increased by $46.1 million to $33.0 million in the three months ended March 31, 2024, compared to cash used in operating activities of $13.0 million in the three months ended March 31, 2023. The increase in cash provided by operating activities was primarily attributable to the timing of project cash flows.

Current wording

Our net cash provided by operating activities increased by $31.3 million to $98.9 million in the six months ended June 30, 2024, compared to cash provided by operating activities of $67.6 million in the six months ended June 30, 2023. The increase in cash provided by operating activities was primarily attributable to an increase in net income.

Previous wording

Our net cash used in investing activities increased by $0.5 million to $30.3 million in the three months ended March 31, 2024, compared to $29.8 million in the three months ended March 31, 2023 as a result of an increase in purchases of property, plant and equipment.

Current wording

Our net cash used in investing activities decreased by $5.3 million to $60.6 million in the six months ended June 30, 2024, compared to cash used in investing activities $65.9 million in the six months ended June 30, 2023 as a result of a decrease in purchases of property, plant and equipment.

Previous wording

Our net cash used in financing activities increased by $81.5 million to $32.2 million in the three months ended March 31, 2024, compared to cash provided by financing activities of $49.3 million in the three months ended March 31, 2023. The increase in cash used in financing activities was primarily attributable to a reduction in net borrowings of long-term debt of $60.0 million as well as an increase in repurchases of common stock of $20.0 million when compared to the corresponding period of the prior year.

Current wording

Our net cash used in financing activities increased by $61.7 million to $65.0 million in the six months ended June 30, 2024, compared to cash used in financing activities of $3.3 million in the six months ended June 30, 2023. The increase in cash used in financing activities was primarily attributable to a reduction in net borrowings of long-term debt of $45.0 million as well as an increase in repurchases of common stock of $20.0 million when compared to the corresponding period of the prior year.

Previous wording

At March 31, 2024, we had restricted cash and cash equivalents totaling $6.1 million, $3.2 million of which was held for future decommissioning of facilities (which is included in other assets on our condensed consolidated balance sheets) and $2.9 million of which was held to meet reinsurance reserve requirements of our captive insurer.

Current wording

At June 30, 2024, we had restricted cash and cash equivalents totaling $6.3 million, $3.3 million of which was held for future decommissioning of facilities (which is included in other assets on our condensed consolidated balance sheets) and $2.9 million of which was held to meet reinsurance reserve requirements of our captive insurer.

Previous wording

At March 31, 2024, we had long-term investments with a fair value of $10.0 million. Our investment portfolio consists primarily of 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.

Current wording

At June 30, 2024, we had long-term investments with a fair value of $10.2 million. Our investment portfolio consists primarily of 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.